SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
March 6, 2002
Date of Report (Date of earliest event reported)
Discovery Laboratories, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 000-26422 94-3171943
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
350 Main Street, Suite 307
Doylestown, Pennsylvania 18901
(Address of principal executive offices)
(215) 340-4699
(Registrant's telephone number, including area code)
(Former name or former address, if changed since last report)
Item 5. Other Events
On March 7, 2002, Discovery Laboratories, Inc., a Delaware corporation
("Discovery"), issued a press release to announce that it had entered into a
collaboration arrangement (the "Collaboration") effective as of March 6, 2002,
with Laboratorios Del Dr. Esteve, S.A. ("Esteve"). This collaboration
arrangement supersedes the existing sublicense and supply agreements between
Discovery and Esteve and expands the territory covered by those original
agreements to all of Europe, including the Russian Federation, and Central
America and South America. In connection with this transaction, Discovery raised
$4.5 million in gross proceeds and issued 821,862 shares of its common stock,
par value $.001 per share ("Common Stock"). After payment of fees and associated
expenses, Discovery intends to use the net proceeds of approximately $4.455
million, for working capital and general corporate purposes, including further
development of Discovery's platform technology, based on humanized lung
surfactants, in an effort to develop potential novel respiratory therapies, such
as an aerosol spray for the treatment of asthma, and pulmonary drug delivery
products with the potential to deliver other pharmaceutical products to the
lungs.
Transaction Overview
In connection with the Collaboration, Discovery entered into a series of
agreements with Esteve, which include a sublicense and collaboration agreement
(the "Collaboration Agreement"), a supply agreement (the "Supply Agreement") and
a common stock purchase agreement (the "Purchase Agreement"). As further
discussed below and subject to the terms and conditions set forth in these
agreements, Esteve agreed to provide certain commercialization services
throughout Europe, Central America and South America for Discovery's lead
product candidate, Surfaxin(R), for the treatment of idiopathic respiratory
distress syndrome in premature infants ("IRDS"), meconium aspiration syndrome in
full-term infants ("MAS"), acute respiratory distress syndrome in adult patients
("ARDS") and acute lung injury in adult patients ("ALI", ARDS and ALI are
sometimes referred to herein collectively as "ALI/ARDS"). Discovery and Esteve
have agreed to an exclusive supply agreement which provides that Esteve will
purchase all of its Surfaxin drug product requirements from Discovery at an
established transfer price based on sales of Surfaxin by Esteve and/or its
sublicensee(s). Esteve has also agreed to sponsor certain clinical trial costs
related to obtaining European Agency for Medicinal Products (EMEA) approval for
commercialization of Surfaxin in Europe for the ALI/ARDS indications. In
addition to a $4.0 million equity investment in Discovery, Esteve also agreed to
pay to Discovery an up-front license fee of $500,000 and to make certain
milestone payments to Discovery upon the attainment of certain corporate
milestones that are discussed in greater detail below.
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Collaboration Arrangements
Pursuant to the Collaboration Agreement, Esteve will provide
commercialization services for the promotion of Surfaxin for IRDS, MAS and
ALI/ARDS throughout Europe, including the Russian Federation, Central America
and South America and will pay for certain clinical trial costs. The
commercialization services to be provided by Esteve will include customary
pre-launch, launch and post-launch marketing activities including retaining
marketing and sales personnel for commercialization of Surfaxin in the
aforementioned territory. Under the Supply Agreement, Discovery will manufacture
Surfaxin for distribution and sale by Esteve in the territory covered by the
Collaboration. Subject to the approval of Discovery and certain limitations and
requirements set forth in the Collaboration Agreement, Esteve may sublicense its
commercialization rights to third parties. Esteve has agreed to pay certain
clinical trial costs related to obtaining EMEA approval for commercialization of
Surfaxin for the ALI/ARDS indications. In general, Discovery will be responsible
for regulatory activities relating to Surfaxin, including with respect to EMEA
filings, however, Esteve will be responsible for regulatory activities relating
to specific countries in the territory covered by the Collaboration.
Moreover, subject to prior termination of this right as provided in the
Collaboration Agreement, Esteve has been granted a right of first negotiation
until March 6, 2009, regarding possible collaborative licenses or other suitable
arrangements that would provide for the clinical development and marketing of
other products that may be developed by Discovery, whether related to Surfaxin
or otherwise, in the territory covered by the Collaboration. In addition, the
Collaboration Agreement specifies that any such future collaborative agreements
would provide for suitable up-front cash payments and cash milestones and shared
responsibility for clinical development work and expenses related to the new
technology. Further, Esteve would be responsible for customary commercialization
activities and costs and Discovery would supply any such future products.
In addition to the monies received by Discovery in connection with
Esteve's equity investment in Discovery and payment of the up-front license fee
discussed in greater detail below, upon receipt of EMEA marketing regulatory
approval of Surfaxin for sale in Europe for each of the IRDS and MAS indications
and the first to be approved of the ARDS or ALI indications, Esteve has agreed
to make certain cash milestone payments to Discovery.
The management of the overall strategic relationship between Esteve and
Discovery and marketing and sales activities of Collaboration will be managed
and governed by a joint steering committee (the "Joint Steering Committee")
which will be comprised of representatives appointed by Esteve and Discovery. In
addition, a separate joint development committee (the "Joint Development
Committee") will be formed to oversee development of Surfaxin in the territory
covered by the Collaboration. The Joint Development Committee will be comprised
of four members consisting of two executives to be appointed by each of
Discovery and Esteve. Each committee will be chaired alternately by a
representative of Discovery and Esteve with each such chairperson serving for a
one-year period.
Equity Investment and Licensing Fee
Pursuant to the Purchase Agreement, Esteve purchased 821,862 shares of
Common Stock at a price of $4.867 per share, representing a total equity
investment of $4 million. In
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addition, Esteve paid to Discovery an up-front licensing fee of $500,000. Under
the Purchase Agreement, Esteve has agreed to certain limitations on its trading
of, and purchase of additional shares of, Common Stock, as well as certain
prescriptions regarding the voting of its shares.
The shares of Common Stock purchased by Esteve have not been registered
under the Securities Act of 1933 (the "1933 Act") and may not be offered or sold
in the United States absent registration or an applicable exemption from the
registration requirements of the 1933 Act. In addition, all such shares of
Common Stock are subject to certain restrictions on transfer as set forth in the
Purchase Agreement. Esteve will have up to two "demand" registration rights that
require Discovery to register shares of Common Stock held by Esteve for resale
under the 1933 Act. In addition, subject to certain limitations, Esteve has
customary "piggyback" rights to include such shares of Common Stock in other
registrations of securities filed by Discovery for resale under the 1933 Act.
A copy of the press release announcing the execution of the agreements
relating to the Collaboration is attached as an exhibit hereto. The descriptions
of the Collaboration contained in the attached press release and in this Item 5
do not purport to be complete and are qualified in their entirety by reference
to the agreements and instruments attached as exhibits hereto.
To the extent that statements in this report are not strictly historical,
including statements as to Discovery's business strategy, outlook, objectives,
plans, intentions, goals, future financial conditions, future collaboration
agreements, the success of Discovery's product development, or otherwise as to
future events, such statements are forward-looking, and are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
The forward-looking statements contained in this report are subject to certain
risks and uncertainties that could cause actual results to differ materially
from the statements made. Among the factors which could affect Discovery's
actual results and could cause results to differ from those contained in the
forward-looking statements contained herein are the risk that financial
conditions may change, the risk that Discovery will not be able to raise
additional capital or enter into additional collaboration agreements, risks that
any collaborators may not perform their obligations under any such agreements,
risks relating to the progress of Discovery's research and development and the
development of competing therapies and/or technologies by other companies. Those
associated risks and others are further described in Discovery's periodic
filings with the Securities and Exchange Commission including its reports on
Forms 10-KSB, 8-K and 10-QSB, and amendments thereto.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits
(c) Exhibits:
*10.1 Sublicense and Collaboration Agreement
*10.2 Supply Agreement
10.3 Common Stock Purchase Agreement
99.1 Press Release dated March 7, 2002.
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* Confidential treatment has been requested with respect to certain
portions of these exhibits. Such portions have been separately filed with the
Securities and Exchange Commission and redacted herein.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Discovery Laboratories, Inc.
By: /s/ Robert J. Capetola
-----------------------------
Name: Robert J. Capetola, Ph.D.
Title: President and
Chief Executive Officer
Date: March 8, 2001
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EXHIBIT 10.1
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [***], have been
separately filed with the Securities and Exchange Commission.
================================================================================
SUBLICENSE AND COLLABORATION AGREEMENT
between
DISCOVERY LABORATORIES, INC.
and
LABORATORIOS DEL DR. ESTEVE, S.A.
Concerning Sinapultide (Lucinactant)
March 6, 2002
================================================================================
1
SUBLICENSE AND COLLABORATION AGREEMENT
THIS SUBLICENSE AND COLLABORATION AGREEMENT (this "Agreement" or
"Collaboration Agreement") is made as of March 6, 2002 (the "Effective
Date"), between DISCOVERY LABORATORIES, INC. ("Licensor"), a Delaware
corporation, and laboratorios del dr. esteve, s.a., a corporation
organized and existing under the laws of Spain ("Licensee").
WHEREAS, Licensor has the exclusive worldwide right, under a license
from Johnson & Johnson, Inc., to sublicense certain technology, including
certain technology relating to synthetic pulmonary surfactant peptides and
proteins, one of which is known as sinapultide;
WHEREAS, Licensor owns certain technology and patent rights relating
to synthetic pulmonary surfactant formulations;
WHEREAS, Licensor and Licensee have entered into a Sublicense
Agreement, as amended, and a Supply Agreement dated October 26, 1999, for the
commercialization of Licensed Products (as such term is defined therein) in
Spain, Andorra, Portugal, Greece, Central and South America, with an option for
Italy;
WHEREAS, Licensor and Licensee desire to replace the aforementioned
agreements by a new Sublicense and Collaboration Agreement and a new Supply
Agreement, in order to extend the collaborative relationship between the parties
and the territories where Licensee shall be entitled to commercialize the
Licensed Products (as such term is hereinafter defined).
NOW, THEREFORE, in consideration of the promises and the performance
of the covenants herein contained, the parties agree as follows:
ARTICLE 1
DEFINITIONS
For the purposes of this Agreement, the following terms shall have
the following meanings:
"Affiliate(s)" of a Person shall mean any Person which directly or
indirectly Controls, is Controlled by or is under common Control with such
Person.
"Business Day" shall mean any day on which banking institutions are
open or authorized to be open in the Commonwealth of Pennsylvania and in
Barcelona, Spain.
"Control" shall mean direct or indirect beneficial ownership of at
least fifty percent (50%) of the voting stock of a Person having outstanding
voting securities, or a fifty
2
percent (50%) or greater interest in the income of a Person not having
outstanding securities, or, in either case, the power to direct or cause the
direction of the management or policies of such Person.
"Development" shall refer to all activities relating to formulation,
process development, manufacturing scale-up, quality assurance/quality control,
clinical studies and regulatory affairs in connection with a Licensed Product.
"EMEA" shall mean the European Medicines Evaluation Agency.
"FDA" shall mean the United States Food and Drug Administration.
"Field" shall mean the use of Licensed Products for the Indication;
provided, however, that Field shall not include the use of a Licensed Product in
any manner whatsoever where its significant purpose in such use is that of a
respiratory drug delivery mechanism.
"Indication" shall solely mean any use of Licensed Products for the
treatment or prophylaxis of patients suffering or potentially suffering from
acute lung injury or acute respiratory distress syndrome ("ALI/ARDS"), meconium
aspiration syndrome ("MAS") or idiopathic respiratory distress syndrome
("IRDS").
"Initial Period" shall mean, on a country by country basis, the
period beginning on the Effective Date and ending on that date that is the
latest of the following dates:
(i) the expiration of the last Patent Rights containing a Valid Claim
covering a Licensed Product in such country;
(ii) the first commercial sale of the first to appear generic formulation
of the subject Licensed Product in such country; or
(iii) the tenth (10th) anniversary of the first commercial sale of a
Licensed Product in such country.
"Key Markets" shall mean France, Germany, Italy, Mexico, Spain and
the United Kingdom and any other country of the Licensed Territory in which the
market for Licensed Products shall develop to be comparable in size to any Key
Market country.
"Licensed Know-how" shall mean all know-how, data, information or
technology arising before or during the course of this Agreement which are
proprietary to the Licensor and/or with respect to which Licensor has the power
and right to grant the licenses provided for herein and which relate to the
development or therapeutic use of Licensed Products.
"Licensed Methods" shall mean the methods for treating respiratory
distress syndromes that are covered by one or more claims of issued and pending
patents as set forth on Schedule I hereto.
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"Licensee Proprietary Information" shall mean any scientific and
technical information or data developed, possessed or acquired by Licensee
relating to Licensed Products, Patent Rights or Licensed Know-how which Licensee
is free to disclose other than such information that is generally available to
the public.
"Licensed Products" shall mean any surfactant pharmaceutical
compositions for use in the Field which are formulations of lipids and solely
the polypeptide (lucinactant), whether in suspension for pulmonary instillation
or in aerosol form that have been developed by Licensor or that may be developed
by Licensor during the term of this Agreement (including, but not limited to,
the product that is now known as "Surfaxin"(R)).
"Licensed Rights" shall mean collectively the Patent Rights, the
Licensed Methods, the Trademarks and the Licensed Know-how.
"Licensed Territory" shall mean Albania, Andorra, Austria, Belarus,
Benelux (Belgium, Luxembourg and The Netherlands), Bosnia and Herzegovina,
Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, France, Germany, Greece,
Hungary, Ireland, Italy (including the Republic of San Marino and the Vatican
City), Latvia, Liechtenstein, Lithuania, Macedonia, Malta, Moldova, Monaco,
Poland, Portugal, Romania, Scandinavia (Denmark, Finland, Iceland, Norway and
Sweden), Slovak Republic, Slovenia, Spain, Switzerland, The Russian Federation,
Turkey, Ukraine, United Kingdom, Yugoslavia and Latin America (defined as the
countries in the continent of South America and the region generally known as
Central America and including Mexico).
"Major Indication" shall mean the use of Licensed Products solely
for the treatment of patients suffering from ALI/ARDSor IRDS
"Marketing Regulatory Approvals" shall mean all permissions and
applications for such permissions from the regulatory and/or governmental health
authorities in the Licensed Territory which are necessary for the importation of
the Licensed Products and their marketing, use, distribution and sale in the
Licensed Territory.
"NDA" shall mean a New Drug Application or Product License
Application filed with the United States Food and Drug Administration under 21
USC 355(b) (FDCA Section 505(b)) or its equivalent filed with the EMEA or with
any regulatory authority of any country within the Licensed Territory.
"Original License" shall mean the Sublicense Agreement dated as of
October 28, 1996 between the Original Licensor and Licensor.
"Original Licensor" shall mean Johnson & Johnson, Inc.
"Patent Rights" shall mean (i) the patents and patent applications
set forth on Schedule I hereto; (ii) any other patents or patent applications
covering the surfactant pharmaceutical compositions referenced in the patents
and patent applications in Schedule I or their use or administration owned by
Licensor or under which Licensor has the right, at any time
4
while this Agreement is in effect, to license to Licensee; and (iii) with
respect to the foregoing letters patent and patent applications, all
corresponding national patents and patent applications, Patent Cooperation
Treaty and European Patent Convention filings and applications and filings and
applications under similar administrative international conventions, together
with any divisional, continuation, continuation-in-part, substitution, reissue,
extension, supplementary protection certificate or other application based
thereon. Notwithstanding the foregoing, "Patent Rights" shall not include any
patents or patent applications, filings, or applications under any treaty, or
any divisional, continuation, continuation-in-part, substitution, reissue,
extension, supplementary protection certificate or other application relating in
whole or in part to the use or administration of any of the surfactant
pharmaceutical compositions on Schedule I or any Licensed Product, alone or
together with other active or inactive components, outside the Field.
"Person" shall mean any natural person, corporation, limited
liability company, unincorporated association, partnership, joint venture or
other entity.
"Pricing Approvals" shall mean approvals by the regulatory and/or
governmental health authorities in the Licensed Territory granting the prices of
the Licensed Products and reimbursement conditions for the sale thereof.
"Product Failure" shall mean, with respect to the Licensed Products
or any Replacement Product, the earlier to occur of (i) a determination by the
EMEA that the Licensed Product or such Replacement Product may not be
commercialized for a Major Indication, or that further clinical trials of the
Licensed Products or such Replacement Product should not be conducted for a
Major Indication or (ii) a good faith determination by the Steering Committee
(as defined in Section 5.5) that the continued development of the Licensed
Products or such Replacement Product for a Major Indication is not economically
justifiable or is unlikely to result in the receipt of Marketing Regulatory
Approvals from the EMEA within time frames that will permit Licensor and
Licensee to achieve the anticipated benefits of this Agreement.
"Replacement Product" shall mean a formulation of lipids with one of
the surfactant peptides or proteins (other than sinapultide) for the Major
Indication that is covered, in whole or in part, by one or more Valid Claim of
the issued patents listed on Schedule I.
"Scripps Patent Rights" shall mean the Patent Rights identified in
part (a) of Schedule I.
"Stock Purchase Agreement" shall mean the Common Stock Purchase
Agreement dated as of the date hereof between Licensor, as the seller, and
Licensee, as the purchaser.
"Trademark" shall mean Surfaxin(R) and such other trademarks owned
by Licensor that are selected by the Development Committee (as defined in
Section 5.6) for use within the Licensed Territory in connection with one or
more Licensed Products.
"Valid Claim" shall mean a claim of an unexpired patent within the
Patent Rights which has matured into an issued patent or a claim being
prosecuted in a pending application
5
within the Patent Rights. In each case a claim shall be presumed to be valid
unless and until it has been held to be invalid by a final, unappealable
judgment of a court of competent jurisdiction.
ARTICLE 2
GRANT
Section 2.1. Grant of License. Licensor hereby grants to Licensee,
and Licensee hereby accepts from Licensor, upon the terms and conditions herein
specified, an exclusive license under the Patent Rights, the Licensed Know-how
and the Trademark, and the right to practice Licensed Methods, solely in
connection with the importation, promotion, distribution, use and sale of
Licensed Products under the Trademark in the Licensed Territory in the Field.
Licensor hereby agrees that it shall not grant any other licenses to exploit the
Licensed Rights or the Licensed Products in the Licensed Territory to any third
party (including, without limitation, its Affiliates) during the term of this
Agreement. The license granted hereunder does not include any right or license
of Licensee to make or have made Licensed Products, all such right and license
being hereby retained by Licensor. The license granted under this Article 2
shall be subject to the terms and conditions of this Agreement and the following
terms:
(a) The rights of the Original Licensor of the Scripps Patent
Rights to use the Scripps Patent Rights for educational and research
purposes;
(b) To the extent applicable, the rights of the United States
Government pursuant to 35 U.S.C. 202 et seq. and 37 C.F.R. 401.1 et seq.
which may have arisen or resulted from federal funding of research
relating to the Scripps Patent Rights, including the non-exclusive right
of the United States Government to practice the inventions covered by the
Scripps Patent Rights;
(c) The reserved right of Licensor, to use the Licensed Rights
for research and development purposes and, to the extent permitted by
Section 6.2, for publication purposes subject to approval by Licensee,
which approval shall not be unreasonable withheld; and
(d) The Standard of Diligence (as such term is set forth in
Section 5.9).
Licensee shall have no right to sublicense or otherwise share its rights
hereunder with any other Person other than (i) Affiliates of Licensee (provided
that Licensee shall not be relieved of any of its obligations under this
Agreement), as provided for in Section 14.9, and (ii) third parties pursuant to
a sublicense or distribution agreement complying with Section 2.3.
Section 2.2 No Active Sales Outside Licensed Territory. Licensee
shall neither directly nor indirectly carry out any active sales of or actively
seek customers for the Licensed Products outside the Licensed Territory and it
shall not advertise the Licensed Products or maintain branches for the
distribution of the Licensed Products outside the Licensed Territory.
6
Section 2.3. Sublicense Agreements. Licensee shall be entitled to
sublicense its rights and obligations under this Agreement in any country of the
Licensed Territory, provided that (i) any such sublicense agreement shall be
under terms no less stringent than the ones contained in this Agreement
including, without limitation, Licensee's performance requirements set forth in
Section 5.9; (ii) the effect of such sublicense shall not be an assignment of
all of Licensee's rights and a delegation of all of its obligations under this
Agreement; and (iii) Licensee obtains Licensor's prior approval for such
sublicense, which shall not be unreasonably withheld or delayed. Licensee hereby
warrants and represents that any such sublicensee will comply with all
applicable terms of this Agreement and, further, guarantees performance of this
Agreement by any such sublicensee.
Section 2.4. Consideration for Licensed Products. Licensee shall not
accept as consideration for the sale or transfer of Licensed Products any
consideration other than cash except as consented to by Licensor following
agreement between Licensor and Licensee on the methodology for valuing such
non-cash consideration.
Section 2.5. Right of First Negotiation on New Products. For a
period of seven (7) years from the Effective Date, subject, however, to prior
termination as hereinafter provided in Article 7, Licensor shall grant to
Licensee an exclusive right of first negotiation to all future products
developed by Licensor (each a "New Product"), solely to the extent to which
Licensor is not legally restricted or prevented from licensing any such rights
within the Licensed Territory, in accordance with the following terms and
conditions:
(a) Within sixty (60) days of completion of Licensor's written
clinical study report(s) for all Phase 2 clinical trials with respect to
any such product opportunity, Licensor shall present in writing, including
a copy of the relevant Phase II clinical study final report(s), such
product opportunity to Licensee together with any additional information
which, at Licensor's judgment, is reasonably necessary for Licensee to
evaluate its possible interest in the New Product in a manner that is
reasonably intended to provide a basis for Licensee's decision as to
whether to exercise its option hereunder (a "New Product Presentation").
At Licensee's request, Licensor shall provide Licensee with any additional
information solely to the extent that such additional information is
reasonably necessary for Licensee to evaluate its possible interest in the
New Product.
(b) Within sixty (60) days from the date of any such New Product
Presentation, Licensee shall notify Licensor in writing of Licensee's
intention to enter into negotiations to license the rights to any such
product. Licensee and Licensor hereby expressly agree that such license or
any other similar grant of rights in respect thereto shall contain, among
other customary terms and conditions, the following:
(i) up-front cash payment(s) to be paid by Licensee to Licensor in
o amounts that are consistent with customary pharmaceutical
industry practices and appropriate with reference to the
technology value and potential product value of such New
Product;
7
(ii) Licensor, Licensee and other sublicensees of the Licensor
shall share all future clinical development work and or
expenses with respect to any such New Product opportunity, in
relation with Phase 3 clinical trials necessary to obtain
and/or maintain the Marketing Regulatory Approvals in the
Licensed Territory, on a proportional basis using the relevant
IMS annual global pharmaceutical data relative to the
aggregate pharmaceutical market size of the proposed licensed
territory for all pharmaceutical products as the basis of
determining the amount of such costs to be borne by each of
the parties at the time. Licensee and its sublicensees shall
be responsible for the work and costs associated with any and
all clinical development activities that is conducted in the
Licensed Territory for the New Product that are not necessary
to obtain or maintain Marketing Regulatory Approval for any
such New Product;
(iii) payment to Licensor of cash milestones in amounts that are
consistent with customary pharmaceutical industry practices
and are reflective of the value of such New Product created
during the development process and which amounts take into
account Licensee's contribution to development of any such
value;
(iv) Licensee shall be responsible for customary commercialization
costs associated with the New Product including, without
limitation, sales, marketing, distribution, and safety and
medical affairs expenses, in a manner similar to that set
forth in this Agreement with respect to Licensed Products; and
(v) Licensor shall be responsible for the manufacture of any such
New Product. The supply price for the New Product, which shall
duly take into account the development expenses and cash
milestones paid by Licensee for any such New Product, shall
ensure a reasonable profit for Licensee in the light of the
prevailing and expected market conditions at that time.
(c) Should Licensee fail to exercise its option to negotiate in
accordance with this Section, or should the parties fail to enter into
definitive agreements within hundred and twenty (120) days of the date of
Licensee's notice, delivered to Licensor in accordance with Section
2.5(b), Licensor shall have the right to offer the New Product opportunity
to any other third party offeree(s) at terms and conditions that are in
substance no more favorable for such other third party offeree(s) than
those last offered to Licensee in writing , provided, however, that
Licensor shall not execute any agreement on the New Product with any such
third party offeree(s) without previously offering Licensee the right to
enter into an agreement on substantially similar terms than those
contained in the final agreement with the relevant third party offeree.
(d) Should senior executive officers of Licensor become aware of the
possible interest of any third party to enter into an agreement in
relation with any New Product prior to completion of all Phase 2 clinical
trials, then Licensor shall promptly notify
8
Licensee of such possible interest of a third party. In such event, and
notwithstanding Section 2.5(a) hereinabove, Licensor and Licensee agree to
initiate good faith negotiations with respect of such New Product with a
view to enter into an agreement for the development and commercialization
of such New Product prior to the completion of the Phase 2 development for
that New Product; provided, however, that in any such event the parties
agree that any negotiations hereunder shall be performed within timeframes
similar to those as set forth in Section 2.5 and shall encompass terms and
conditions similar to those set forth in Sections 2.5(b) and (c).
Section 2.6. Product Failure. In the case of a Product Failure, the
Steering Committee shall seek to identify a single Replacement Product for
development by Licensee and Licensor for such Product Failure. In the event a
Replacement Product has not been identified for development in writing by the
Steering Committee within six (6) months of such Product Failure, or within such
other time-limit that may be agreed by the Chief Executive Officers (or
equivalent position) of Licensor and Licensee, either party shall have, within
thirty (30) days following expiration of such period by written notice to the
other party, the right to terminate this Agreement with respect to such Major
Indication in those countries where the Product Failure has occurred. The
Steering Committee shall prepare a written development plan with respect to each
Replacement Product that has been identified for development by the Steering
Committee as promptly as practicable following its identification, which shall
include provisions for the funding of development with respect to such
Replacement Product by Licensor, Licensee and other Licensor's licensees in
countries outside the Licensed Territory where Licensor or its licensees intend
to commercialize such Replacement Product. In the event the Steering Committee
has not reached agreement upon such development plan, including the funding of
development in connection with the Replacement Product, within ninety (90) days
after identification of a Replacement Product for development hereunder, then
either party shall have the right to terminate this Agreement with respect to
such Major Indication in those countries where a Marketing Regulatory Approval
for such Major Indication has not been obtained, by written notice to the other
within the thirty (30) days following expiration of such ninety (90) day period;
provided, however, that in such event, Licensor shall not enter into any
agreement relating to the development, distribution, marketing and sale of the
same product in the Licensed Territory with a third party on terms which, taken
as a whole, are more favorable to such third party than those last offered to
Licensee in writing by Licensor for such product.
For the avoidance of doubt, this Section 2.6 shall not limit in any
respect whatsoever Licensee's rights under Section 2.5 and under Section 7.3.
9
ARTICLE 3
GRANT BACK
In consideration for Licensor (i) making the Licensed Know-how
(including any improvements thereto and solely to the extent provided for in
Section 2.1) available to Licensee on a continuing basis for the duration of
this Agreement and (ii) procuring, and making available to Licensee the benefit
of, equivalent grants from Licensor's other licensees for the Licensed Products
outside the Licensed Territory, Licensee hereby grants to Licensor and such
other licensees as Licensor may designate a royalty-free, nonexclusive license
outside the Licensed Territory and limited to the Field, with the right to grant
sublicenses, under any and all inventions and Licensee Proprietary Information
(whether patentable or not) hereafter during the term of this Agreement,
developed, possessed or acquired by Licensee related to the Licensed Products,
Patent Rights, Licensed Know-how or Licensed Methods; provided that Licensee is
not legally restricted or prevented from granting such rights in connection with
the relevant invention. Licensee shall provide Licensor with a written enabling
disclosure of each invention (such as a patent application or internal docket
reference) unambiguously identifying it as an invention governed by this Article
3 prior to filing a patent application or taking any other action disclosing or
potentially disclosing the same to third parties.
Licensee shall promptly disclose all Licensee Proprietary
Information to Licensor and, subject to the execution of confidentiality
undertakings comparable to those set forth in Article 6, to Licensor's other
licensees (and or Affiliates and permitted sublicensees) of Patent Rights
outside the Licensed Territory on a continuing basis during the term of this
Agreement. Licensee hereby grants to Licensor and such licensees a royalty-free
nonexclusive license, with the right to grant sublicenses, to use the Licensee
Proprietary Information outside the Licensed Territory and limited to the Field.
Licensee shall not disclose any such invention and or Licensee Proprietary
Information under circumstances that would reasonably be expected to result in
the loss of the protectible status of any such invention and or Licensee
Proprietary Information without the prior written consent of Licensor, which
consent shall not be unreasonably withheld or delayed.
ARTICLE 4
CONSIDERATION
Section 4.1. Common Stock Purchase. Within twenty-four (24) hours
after the execution of this Agreement, Licensee shall purchase of a number of
shares of common stock, of the Licensor, par value $.001 per share for an
aggregate purchase price of $4,000,000 and otherwise in accordance with the
terms and conditions as set forth in the Stock Purchase Agreement.
Section 4.2. License Fee. Upon the execution of this Agreement,
Licensee shall pay to Licensor, as soon as practicable but in no event later
than ten (10) Business Days after receipt of Licensor's invoice, a
non-refundable license fee of $500,000.
10
Section 4.3 Supply Agreement. Concurrently with the execution of
this Agreement, Licensor and Licensee shall enter into a supply agreement for
Licensed Products (the "Supply Agreement").
Section 4.4 Additional Cash Payments Upon EMEA Approval. Licensee
shall pay to Licensor the following cash amounts upon the receipt of the
relevant EMEA Marketing Regulatory Approval, as soon as practicable but in no
event later than ten (10) Business Days after receipt of Licensor's invoice , as
indicated below:
---------------------------------------------- ---------------------
Indication Amount
---------------------------------------------- ---------------------
MAS [***]
---------------------------------------------- ---------------------
IRDS [***]
---------------------------------------------- ---------------------
ARDS /ALI (first to occur) [***]
---------------------------------------------- ---------------------
Section 4.5 Manner of Payment. The amounts provided for in Sections
4.2 and 4.4 shall be paid to Licensor in United States Dollars. Any and all
taxes that are levied on license fees accruing under this Agreement in a country
in which provision is made in the law or by regulation for withholding may be
deducted by the payor from such amounts and paid to the proper taxing authority
and evidence of such payment shall be secured and sent to Licensor as promptly
as possible. The parties shall do all such lawful acts and things and sign all
such lawful deeds and documents as either party may reasonably request from the
other party to enable Licensee or Licensor, or their respective Affiliates
and/or sublicensees to take advantage of any applicable legal provision or any
double taxation treaties with the object of paying the sums due to Licensor
hereunder without withholding any tax or as promptly as practicable recovering
any such withheld tax.
ARTICLE 5
SCOPE OF THE COLLABORATION
Section 5.1. Goals of the Collaboration. The parties hereto desire
to collaborate in a strategic relationship with regard to a product Development
and commercialization program with the following goals and in the following
manner:
(a) the Development and clinical testing of Licensed Products;
(b) Marketing Regulatory Approval of Licensed Products in the
Licensed Territory in the Field; and
- ----------
Information marked by [***] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.
11
(c) the manufacturing by Licensor and the marketing, sale, and
distribution by Licensee of Licensed Products in the Licensed Territory in
the Field.
In performance of the foregoing, Licensor and Licensee agree to
collaborate diligently in the overall strategic relationship and in the
Development and commercialization of Licensed Products in the Licensed Territory
in the Field in accordance with the terms and conditions contained in this
Agreement including, without limitation, the respective roles and
responsibilities of the parties as set forth in this Article 5.
Section 5.2. Roles and Responsibilities. The principal mechanism by
which the parties contemplate coordinating their respective clinical Development
and sales and marketing activities will be through consensus-based
decision-making through a joint Development Committee established and governed
pursuant to Section 5.6 of this Agreement that shall be under the oversight of a
joint Steering Committee established and governed pursuant to Section 5.5 of
this Agreement, provided, that the parties expressly acknowledge and agree that
the following shall apply:
(a) Conduct of Clinical Investigations. The Development Committee
(as such term is defined in Section 5.6) shall be responsible for the
Development of Licensed Products in the Licensed Territory; provided,
however, that
(i) Licensor shall at its own cost and expense conduct the Phase 3
clinical trials and other Development activities necessary for
obtaining and maintaining Marketing Regulatory Approvals for the
IRDS and MAS indications,
(ii) Licensee shall be responsible for paying up to [***] of the costs
related to the clinical Development activities necessary for
obtaining Marketing Regulatory Approvals for the ARDS and or ALI
indications regardless of whether such trials are conducted in or
outside of the Licensed Territory in part or in whole, it being
understood that any costs related to the clinical Development
activities necessary for obtaining Marketing Regulatory Approvals
for the ARDS and or ALI indications in excess of [***] as well as
any cost not related to clinical Development activities shall be
borne by Licensor, and
(iii) Licensor and Licensee shall co-sponsor all clinical trials conducted
in the Territory and which are necessary for obtaining and
maintaining Marketing Regulatory Approvals for the ARDS and or ALI
indications.
In the event that Licensor should fail to receive EMEA Marketing
Regulatory Approval for the IRDS indication by December 31, 2004, Licensee
shall have the right on sixty (60) days advance written notice to Licensor
to suspend Licensee's obligation to pay for clinical Development costs
incurred subsequent to such suspension date related to obtaining Marketing
Regulatory Approvals for the ARDS and/or ALI indications. Such
- ----------
Information marked by [***] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.
12
suspension of Licensee's obligation of payment shall not affect the full
validity and enforceability of the remaining provisions of this Agreement;
provided, however, that upon the receipt by Licensor of EMEA Marketing
Regulatory Approval for the IRDS indication should Licensee choose to
promptly pay to Licensor the cash amount set forth in Section 4.4 of this
Agreement, Licensee's obligations under Section 5.2(a)(ii) hereinabove
shall be reinstated without obligation to pay any costs that may have been
incurred thereunder during such suspension period.
Licensee shall be responsible for the costs associated with any and all
clinical activities that are conducted in the Licensed Territory for the
Indications that are not necessary to obtain or maintain Marketing
Regulatory Approval for any such Indication. Licensor and Licensee shall
keep each other fully informed on the progress of all clinical trials of
Licensed Products and shall promptly provide the other with copies of all
submissions to regulatory authorities in connection therewith, all
significant communications received from such regulatory authorities and
reasonably detailed descriptions (in English) of all meetings with and
verbal communications with such regulatory authorities which are of
significance.
Each of Licensor and Licensee shall use its best efforts to complete all
clinical trials for which it is responsible within the parameters
established by the Development Committee (as such term is defined in
Section 5.6).
(b) Commercialization Activities. Through the governance mechanism
of the Steering Committee (as such term is defined in Section 5.6),
Licensor and Licensee shall actively participate in the strategic
marketing activities for Licensed Products in the Licensed Territory.
Without prejudice to Section 2.1 and 2.3, Licensee shall be responsible
for activities and associated costs and expenses involved in the
marketing, sales, and distribution of Licensed Products in the Licensed
Territory including, without limitation, (i) providing country-specific
marketing resources including, but not limited to, personnel, marketing
materials and other customary marketing tools and methods; (ii) furnishing
sufficient sales personnel to adequately detail Licensed Products in the
Licensed Territory and achieve insertion of Licensed Products into
hospital formularies; (iii) managing and conducting order taking, storage
and distribution of Licensed Product in the Licensed Territory; (iv)
performing country-specific regulatory affairs activities and price and
reimbursement negotiations during the Regulatory Marketing Approval
process; and (v) managing local medical affairs and reporting of drug
safety issues to Licensor and appropriate regulatory authorities.
Licensee, shall develop a sales and marketing plan, which shall be subject
to review and approval of the Steering Committee as provided hereunder,
comprised of individual sales and marketing plans for Key Markets in the
Licensed Territory (the "Marketing Plan").
Section 5.3 Submission for Regulatory Approvals. (a) Subject to the
completion of requisite clinical investigations, Licensor shall prepare and
submit to the regulatory authorities in the Licensed Territory applications for
Marketing Regulatory Approvals as soon as practicable and shall use its diligent
efforts to obtain and maintain all Marketing Regulatory Approvals that are
obtained by Licensor for the term of this Agreement, all at the
13
cost and expense of Licensor, except as may otherwise be provided for in Section
5.2. When filing for Marketing Regulatory Approvals, Licensor shall designate
Licensee or such Licensee's Affiliates or permitted sublicensees designated by
Licensee as its distributors or local representatives for the Licensed Products
in the Licensed Territory. Licensor shall, upon the granting of each Marketing
Regulatory Approval obtained by Licensor, promptly supply Licensee with a copy
of such approval.
Without prejudice to the foregoing, if in any jurisdiction of the
Licensed Territory it is not legally permissible that Licensor submits a
Marketing Regulatory Approval, Licensee (or, as the case may be, its Affiliates
or sublicensees) shall submit, at Licensee's expense, the application to obtain
the appropriate Marketing Regulatory Approvals in such jurisdiction, and
Licensor and Licensee shall diligently cooperate to obtain the same as
expeditiously as possible. Upon the granting of each such Marketing Regulatory
Approval obtained by Licensee (or, as the case may be, its Affiliates or
sublicensees), Licensee shall promptly supply, or shall cause its Affiliates
and/or sublicensees to promptly supply, Licensor with a copy of such approval.
(b) Subject to receipt of the Marketing Regulatory Approvals,
Licensee, where appropriate, shall prepare and submit to the regulatory
authorities in the Licensed Territory applications for Pricing Approvals
as soon as practicable and shall use its diligent efforts to obtain and
maintain all Pricing Approvals that are obtained by Licensee for the term
of this Agreement, all at the cost and expense of Licensee. Licensee
shall, upon the granting of each Pricing Approval obtained by Licensee,
promptly supply Licensor with a copy of such approval.
Section 5.4 Access of Licensee to Marketing Regulatory Approvals.
Licensor shall, in connection with any Marketing Regulatory Approval obtained by
it in the Licensed Territory, grant Licensee an irrevocable right of access and
reference thereto and shall effect such notifications to regulatory authorities
as shall be reasonably necessary to accomplish the foregoing. To the extent that
the Marketing Regulatory Approval is obtained by Licensee (or as the case may
be, by its Affiliates or sublicensees), Licensee shall maintain, or cause its
Affiliates or sublicensees to maintain, such Marketing Regulatory Approvals at
its cost and expense. Licensor shall assist Licensee in maintaining such
Marketing Regulatory Approvals including supplying to Licensee any information
in connection therewith.
Section 5.5 Joint Steering Committee. (a) Licensee and Licensor
shall jointly form an oversight committee (the "Steering Committee") that shall
(i) manage the overall strategic relationship and the strategic marketing and
sales activities for Licensed Products in the Licensed Territory, (ii) to review
and approve the pre- and post-launch Marketing Plan as well as any other matters
required for the sales and promotion of Licensed Products in the Licensed
Territory, except to the extent that certain matters are solely the
responsibility of a single party under this Agreement; (iii) to advise, provide
input and determine strategy for future clinical and/or marketing studies; (iv)
have overall responsibility for the success of such matters as established by
this Agreement, and (v) be charged with promptly resolving disputes of the
parties, if any, subject to Section 14.4.
14
(b) The Steering Committee will be comprised of a number
of Licensor and Licensee representatives, not exceeding three
representatives of each party unless otherwise mutually agreed, that shall
be senior executives of such party who shall functionally have
responsibility for commercialization and/or business development
activities within their respective organizations. The Steering Committee
shall be chaired alternatively by a designee of Licensor and by a designee
of Licensee, with any such designee serving as chairperson for a one year
period. The initial members of the Steering Committee shall be designated
by the parties hereto not later than thirty (30) days after the Effective
Date and the first Chairperson shall be a designee of Licensor. The
representatives of Licensor shall collectively be entitled to one (1) vote
and the representatives of Licensee shall collectively be entitled to one
(1) vote. The Steering Committee shall to the extent practicable seek to
operate by consensus. In the event of any deadlock or other inability of
the Steering Committee to reach a determination with respect to any matter
within the authority of the Steering Committee, the issue shall be
referred to the respective Chief Executive Officers (or equivalent
position) of each party who shall use their best endeavors to agree in
good faith to a resolution of the dispute within thirty (30) days of their
receipt of notice as to such dispute. If they are unable to resolve the
dispute within such thirty (30)-day period, it shall be referred to the
decision of an external expert suitably qualified to resolve such dispute
which is mutually acceptable to both parties, whose decision shall be
final. In resolving the dispute, the appointed expert shall take into
account development and marketing practices and procedures common in the
pharmaceutical industry and appropriate with reference to the specific
Indication.
Either party may appoint, substitute or replace members
of the Steering Committee to serve as their representatives upon notice to
the other party.
(c) The Steering Committee shall meet within sixty (60) days after
the Effective Date and thereafter at least every twelve (12) months. The
location of such meetings shall alternate between Doylestown,
Pennsylvania, United States and Barcelona, Spain, unless otherwise agreed
to by Licensor and Licensee. The Steering Committee may also meet by means
of a telephone or video conference call with the consent of each of
Licensor and Licensee. Licensee and Licensor shall use reasonable efforts
to cause their representatives to attend the meetings of the Steering
Committee. If a representative of either of the parties hereto is unable
to attend a meeting, such party may designate an alternate to attend such
meeting in place of the absent representative. In addition, each party
may, with the consent of the other party, invite consultants or scientific
advisors to attend meetings of the Steering Committee, subject to
confidentiality obligations.
Section 5.6 Joint Development Committee. (a) Licensee and Licensor
shall jointly form a development committee (the "Development Committee") to
oversee the Development of Licensed Products within the Licensed Territory. The
Development Committee shall have functional responsibility for the success of
the matters related to the Development of the Licensed Products in the Licensed
Territory as established by this Agreement, including
15
without limitation: (i) to determine and oversee the overall strategy for
Development, of Licensed Products in the Licensed Territory, as well as in other
countries; (ii) to plan and coordinate the parties' activities hereunder related
to Development activities of Licensed Products in the Licensed Territory; and
(iii) to facilitate the flow of information among the Parties, including
coordinating Development activities with manufacturing schedules and
distribution.
(b) The Development Committee shall be comprised of four
members, two members to be executives appointed by, and to be
representatives of, each of Licensee and Licensor. Either party from time
to time may designate Ad Hoc members (subject to confidentiality
obligations), as necessary, to address specific issues related to
Development activities. The Development Committee shall be chaired
alternatively by a designee of Licensor and a designee of Licensee, with
any such designee serving as chairperson for a one (1) year period. The
initial members of the Development Committee shall be designated by the
parties hereto not later than (thirty) 30 days after the Effective Date.
Upon resignation by or removal of any member of the Development Committee,
Licensee or Licensor, as appropriate, shall have the sole right to appoint
a successor. The representatives of Licensor shall collectively be
entitled to one (1) vote and the representatives of Licensee shall
collectively be entitled to one (1) vote. The Development Committee shall
to the extent practicable seek to operate by consensus. In the event of
any deadlock or other inability of the Development Committee to reach a
determination with respect to any matter within the authority of the
Development Committee, the issue shall be submitted to the Steering
Committee. In the case the Steering Committee is unable to resolve the
issue within thirty (30) days, the question shall be referred to the
respective Chief Executive Officers (or equivalent position) of each party
who shall use their best endeavours to agree in good faith on a resolution
of the dispute within thirty (30) days of their receipt of notice as to
such dispute. If they are unable to resolve the dispute within such thirty
(30)-day period, it shall be referred to the decision of an external
expert suitably qualified to resolve such dispute which is mutually
acceptable to both parties, whose decision shall be final. In resolving
the dispute, the appointed expert shall take into account clinical
development practices and procedures common in the pharmaceutical industry
and appropriate with reference to the specific Indication.
(c) The Development Committee shall meet within sixty (60) days
after the Effective Date and thereafter at least every six months. The
location of such meetings shall alternate between Doylestown,
Pennsylvania, United States and Barcelona, Spain, unless otherwise agreed
to by Licensor and Licensee. The Development Committee may also meet by
means of a telephone or video conference call with the consent of each of
Licensor and Licensee. Licensee and Licensor shall use reasonable efforts
to cause their representatives to attend the meetings of the Development
Committee. If a representative of either of the parties hereto is unable
to attend a meeting, such party may designate an alternate to attend such
meeting in place of the absent representative. In addition, each party
may, with the consent of the other party, invite consultants or scientific
advisors to attend meetings of the Development Committee, subject to
confidentiality obligations.
16
(d) The Development Committee will report to the Steering Committee
semi-annually in an appropriately detailed manner and shall provide the
Steering Committee annually with a written comprehensive report on the
execution of the clinical development programs contemplated hereunder.
Section 5.7 Commencement of Marketing. Licensee shall consummate its
first commercial sale of each Licensed Product in each country of the Licensed
Territory within ninety (90) days after official publication of the obtaining of
Pricing Approval (or if Pricing Approval is not applicable, within ninety (90)
days of Marketing Regulatory Approval in such country); provided, however, that
if Licensee has failed to meet such deadlines in any country because of reasons
beyond the control of Licensee, Licensor and Licensee shall discuss in good
faith a new deadline for such country. In the event Licensee does not consummate
a sale within such period, Licensor may notify Licensee of a default under this
Section 5.7 and, in the event such default is not cured within thirty (30) days
from such notice of default, Licensor shall have the right to terminate the
license granted to Licensee hereunder with respect to such Licensed Product in
such country.
Section 5.8. Post-Authorization Studies. Licensee shall be
responsible for conducting, at its own cost and expense such post-authorization
studies activities as may be useful or necessary for the better knowledge and
use of the Licensed Products in the Licensed Territory provided that the
protocol shall be approved in accordance with Section 5.2(a) in advance of its
commencement. The Development Committee shall monitor and supervise the conduct
thereof. Licensor shall provide Licensed Product for any such clinical trials at
no expense to the Licensee.
Section 5.9. Standard of Diligence. (a) Licensee shall determine in
good faith, after consultation with Licensor, the annual sales targets for the
Licensed Products applicable in each Key Market. Licensee shall inform Licensor
of the annual sales targets for each country of the Licensed Territory at least
three (3) months prior to the commercial launch of the Licensed Products and
shall update such sales targets on an annual basis.
Should Licensee fail to satisfy 75% of the annual sales targets with respect to
the Licensed Products in a country of the Licensed Territory for two (2)
consecutive years, Licensor shall have the right to terminate the exclusivity
character of the rights granted hereunder with respect to the relevant
country(ies) where such failure has occurred with a prior notice of ninety (90)
days addressed to Licensee; provided, however, that such notice shall be sent,
in order to be valid and enforceable, within sixty (60) days after Licensor
becoming aware of Licensee's failure.
Should Licensee fail to satisfy 50% of the annual sales targets with respect to
the Licensed Products in a country of the Licensed Territory for two (2)
consecutive years, Licensor shall have the right to terminate this Agreement
with respect to the relevant country(ies) where such failure has occurred with a
prior notice of ninety (90) days addressed to Licensee; provided, however, that
such notice shall be sent, in order to be valid and enforceable, within sixty
(60) days after Licensor becoming aware of Licensee's failure.
17
For the avoidance of doubt, the annual sales targets referred to in this
Section 5.9.(a) shall be, for each specific country, the aggregate of the
sales for all the indications included in the Indication. (b) Licensee
shall use commercially reasonable efforts to commercialize the Licensed
Products in the Licensed Territory throughout the term of this Agreement
in accordance with all applicable legal and regulatory requirements,
including promoting the Licensed Products by accepted promotional
practices consistent with those used (i) by Licensee in connection with
the promotion of its other products and (ii) in the critical care
pharmaceutical industry generally.
(c) From and after the date that an new drug application with
respect to any Licensed Product is filed with the EMEA or the applicable
regulatory authority in the Licensed Territory, Licensee shall provide
Licensor regularly with summary reports on its plans for launch of
Licensed Products in the countries within the Licensed Territory that are
member countries of the European Union (in the case of the EMEA) and of
the anticipated commercial potential therefor in such countries.
Section 5.10. Marketing Plan. Licensee, shall submit to the Steering
Committee the Marketing Plan (as such term is defined in Section 5.2(b)
hereinabove) for the Licensed Products within ninety (90) days prior to the
planned launch date in each of the Key Markets, such Marketing Plan to be
updated by Licensee before the end of each calendar year.
Section 5.11. Reports; Record-keeping. (a) Licensee shall, as
promptly as practicable, submit written reports to Licensor as follows: (i)
quarterly statements showing the amount of sales of Licensed Products in terms
of units and currency of the Licensed Territory on a country-by-country basis;
and (ii) annual statements by no later than February 28 of each year detailing
the marketing activities carried out by Licensee during the previous calendar
year in the Key Markets.
(b) Licensor shall maintain complete and accurate records for such
periods as may be required by applicable law, but in no event less than
three (3) years, of all Licensed Products sold by it, including
distribution data.
Section 5.12. Promotional Material. Licensor shall supply free of
charge Licensee with samples of all training aids and literature used by
Licensor and its Affiliates and distributors and sublicensees thereof for
training their sales representatives and samples of all promotional and sales
material used by Licensor or its Affiliates and distributors and sublicensees
thereof for the Licensed Products.
Section 5.13. Promotional Claims. All technical and scientific
information and therapeutic claims referred to by Licensee in promotional
advertisements, promotional literature, sales aids, training aids and literature
and the like with respect to each Licensed Product shall be consistent with any
Marketing Regulatory Approval and the information and claims made by Licensor
with respect thereto insofar as the latter are consistent with Marketing
Regulatory Approvals or permitted practices in the Licensed Territory. Licensee
shall not employ any sales practice or display any advertisement which the
Steering Committee determines is detrimental to
18
Licensor's interests and Licensor shall be entitled to require licensee to
promptly cease any such practice or withdraw any such advertisement.
Section 5.14. Samples of Licensee's Promotional Material. Licensee
shall supply free of charge Licensor with samples of product labeling, packages
and/or cartons and the like and of all advertisements, promotional literature,
sales aids, training material for salesmen, used by Licensee in connection with
the promotion and sale of the Licensed Products.
Section 5.15. Adverse Event Reporting. The parties shall establish a
procedure for the handling of adverse events as soon as is practicable after the
Effective Date, which procedure shall be in conformance with all applicable
laws, rules and regulations; provided, however, that Licensor shall be the
central contact for adverse event reporting in the Licensed Territory and in
connection therewith agrees to implement and maintain, at its sole cost and
expense, a central adverse event reporting database for the Licensed Product in
the Licensed Territory. Each party shall advise the other, by telephone or
facsimile, within twenty-four (24) hours after it becomes aware of any serious
adverse event arising in connection with the use of any Licensed Products and
shall include the following information: a description of the patient (which
shall be made in compliance with any applicable data protection regulations),
the Licensed Product, the reporting source and a description of the event and/or
such other information as may be required by the relevant regulatory authorities
in the Licensed Territory at the time the serious adverse event occurs. No later
than five (5) days after its initial report, the party informing of a serious
adverse event shall provide the other with a written report delivered by
confirmed facsimile of any reported serious adverse event stating the full facts
known to it, including but not limited to such information as may be required by
the relevant regulatory authorities in the Licensed Territory at the time the
serious adverse event occurs. The Adverse Event Reporting to the EMEA and other
regulatory agencies shall be made by Licensor, unless this responsibility may be
assumed by Licensee (or as the case may be its Affiliates and/or sublicensees)
pursuant to any applicable law. In any event, Licensor and Licensee shall
promptly provide each other with a copy of any Adverse Event notice that they
may address to any regulatory agency (including, without limitation, the FDA) in
connection with the Licensed Products.
ARTICLE 6
TRANSFER OF LICENSED KNOW-HOW; CONFIDENTIALITY; PUBLICATION
Section 6.1. Transfer of Licensed Know-How. Promptly after the
Effective Date and from time to time as it becomes available during the term of
this Agreement, Licensor shall provide Licensee with the Licensed Know-How,
subject, however, to the terms and conditions contained herein including,
without limitation, those set forth in Article 2 of this Agreement.
Section 6.2. Confidentiality. Any information disclosed by either
party, its Affiliates or permitted licensees to the other party hereunder shall
be safeguarded by the recipient, shall not be disclosed to third parties and
shall be made available only to recipient's
19
employees, Affiliates, licensees for the Licensed Products, independent
contractors or external counsels who agree to or are bound by equivalent
conditions and who have a need to know the information for the purposes
specified under this Agreement. Subject to the license granted under Article 2,
all confidential information shall remain the property of and shall be
immediately returned to the disclosing party, upon request, after any
termination of this Agreement. These mutual obligations of confidentiality shall
apply during and for a period of ten (10) years after the term of this
Agreement, but such obligations shall not apply to any information that can be
established by competent evidence:
(a) is or hereafter becomes generally available to the public other
than by reason of any default with respect to a confidentiality obligation
under this Agreement; or
(b) was already known to the recipient as evidenced by prior written
documents in its possession; or
(c) is disclosed to the recipient by a third party who is not in
default of any confidentiality obligation to the disclosing party
hereunder; or
(d) is developed by or on behalf of the receiving party, without
reliance on confidential information received hereunder; or
(e) is provided to third parties under appropriate terms and
conditions including confidentiality provisions equivalent to those in
this Agreement for Development purposes including, without limitation,
consulting, manufacturing Development, manufacturing, external testing and
marketing trials with respect to the Licensed Products; or
(f) is used with the consent of the disclosing party (which consent
shall not be unreasonably withheld) in applications for patents or
copyrights under the terms of this Agreement; or
(g) has been approved in writing for publication by each of the
parties; or
(h) is required to be disclosed in compliance with applicable laws
or regulations in connection with the manufacture or sale of Licensed
Products; or
(i) is otherwise required to be disclosed in compliance with
applicable laws or regulations or order by a court or other regulatory
body having competent jurisdiction; or
(j) is product-related information which is reasonably required to
be disclosed in connection with marketing of Licensed Products.
Section 6.3. Procedures for Obtaining Permission for Disclosure. In
the event that either party (the "Disclosing Party") desires to publish or
disclose, by written, oral or other presentation, any confidential information
or other information regarding the Licensed Rights,
20
the Disclosing Party shall notify the other party (the "Nondisclosing Party") in
accordance with Section 14.2 at least sixty (60) days before any written or
other publication or disclosure. The Disclosing Party shall include with such
notice a description of any proposed oral presentation or, in any proposed
written or other disclosure, a current draft of such proposed disclosure or
abstract. The Nondisclosing Party may, no later than thirty (30) days following
the receipt of such notice, notify the Disclosing Party that the Nondisclosing
Party will not consent to such disclosure of confidential information. If the
Disclosing Party does not receive any such objection to the proposed disclosure
of confidential information or other information regarding the Licensed Rights
within such 30-day period, the Disclosing Party shall be free to make such
disclosure in substantially the manner and form proposed at the time notice was
given to the Nondisclosing Party.
21
ARTICLE 7
TERMINATION
Section 7.1. Term. Unless otherwise terminated by operation of law
or by acts of the parties in accordance with the provisions of this Agreement,
this Agreement shall be in force from the Effective Date and shall remain in
effect with respect to each Licensed Product in each country of the Licensed
Territory for the duration of the Initial Period. Upon expiry of the Initial
Period with respect to each country in the Licensed Territory, the license
granted under Section 2.1 shall become fully paid up in such country.
In such case and in relation with each of such countries, the
following shall apply:
(a) Licensee shall be entitled to continue to market the Licensed
Products in the relevant country under the Trademark and the Marketing
Regulatory Approval;
(b) Should Licensee decide not to purchase the Licensed Products
from Licensor, Licensee shall pay a running royalty of [***] of the Base
Integrated Price (as such term is defined in the Supply Agreement) per unit of
Licensed Product so purchased and sold under the Trademark in consideration of
the use of the Trademark;
(c) Should Licensee decide not to purchase the Licensed Products
from Licensor, Licensor shall promptly transfer free of charge the Marketing
Regulatory Approval of the relevant country to Licensee or to the third party
that may be indicated by Licensee, the transfer expenses being borne by
Licensee; provided, however, that the EMEA Marketing Regulatory Approval shall
only be transferred to Licensee upon expiry of the Initial Period in all the
countries of the European Union;
(d) Should Licensee decide not to purchase the Licensed Products
from Licensor, Licensor shall transfer free of charge to Licensee all such
know-how that is necessary to enable Licensee to manufacture and/or have
manufactured the Licensed Products, and Licensee shall pay a running royalty of
[***] of the Base Integrated Price (as such term is defined in the Supply
Agreement) per unit of Licensed Product manufactured under such know-how, it
being understood that Sections 6.2 and 6.3 hereof shall continue to apply with
respect to the use of such know-how by Licensee or its subcontractors.
(e) Should Licensee decide to continue purchasing the Licensed
Products from Licensor, Licensor shall maintain the Marketing Regulatory
Approvals in force;
(f) Licensor shall take all appropriate steps and shall timely and
diligently cooperate with Licensee so as to avoid any possible discontinuation
in the commercialization of the Licensed Products in each country of the
Licensed Territory upon the expiry of the Initial Period; and
- ----------
Information marked by [***] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.
22
(g) Should Licensee decide not to purchase the Licensed Products
from Licensor, Licensee shall ensure that such purchased products conform with
the Specifications (as such term is defined in the Supply Agreement) and all
relevant regulatory authority requirements.
Section 7.2. Termination by Breach. Upon any material breach of or
default under this Agreement (including, without limitation, as provided for in
Section 7.2 of the Supply Agreement) by either party, the non-infringing party
may terminate this Agreement upon ninety (90) days written notice to the
infringing party. Said notice shall become effective at the end of said period,
unless during said period the infringing party shall cure such breach or
default.
In the event that this Agreement is terminated by Licensee pursuant
to Section 7.2 of this Agreement, subsections (a) to (f) of Section 7.1 shall
apply and, in addition, (i) Licensor shall transfer free of charge to Licensee
all such know-how that is necessary to enable Licensee to manufacture and/or
have manufactured the Licensed Products, and (ii) Licensor shall promptly return
and cease to use any Licensee Proprietary Information and any other information
provided by Licensee to Licensor under Article 3 hereinabove.
Section 7.3. Termination by Licensee. Licensee may terminate this
Agreement hereunder as follows:
(a) Prior to the date of receipt of first Marketing Regulatory
Approval, Licensee may terminate this Agreement on sixty (60) days advance
written notice to Licensor for any reason, whereupon Licensee shall not be
obligated to make any further payments to Licensor other than those
payments accruing prior to such termination; and
(b) After and including the date of receipt of first Marketing
Regulatory Approval, Licensee may terminate this Agreement upon written
notice to Licensor of such intention to terminate, provided that (i)
Licensee hereby agrees that in any such event, in order to minimize
disruption of the availability of Licensed Product in the Licensed
Territory, Licensee shall negotiate with Licensor and or Licensor's
designee mutually agreeable terms and conditions providing for the
transfer of Licensee's rights and obligations hereunder to Licensor and or
appropriate third parties and a mutually determined date of termination in
accordance therewith provided, however, that failing an agreement on the
date of termination, this Agreement will terminate six (6) months after
the date of Licensee's termination notice sent under this Section7.3.(b)
and (ii) Licensee shall not be obligated to make any further payments to
Licensor other than those payments accruing prior to such termination.
Section 7.4. Termination Upon Bankruptcy Event. If (i)
Licensee files a petition in bankruptcy or for the appointment of a
receiver or trustee, (ii) Licensee proposes a written agreement of
composition or extension of its debts or makes an assignment for the
benefit of its creditors, or (iii) an involuntary petition against
Licensee is filed in any insolvency proceeding and such petition is
not dismissed within sixty (60) days after filing, Licensor may
immediately terminate this Agreement.
23
Section 7.5. No Automatic Termination upon Licensor's Bankruptcy. If
(i) Licensor files a petition in bankruptcy or for the appointment of a receiver
or trustee; (ii) Licensor proposes a written agreement of composition or
extension of its debts or makes an assignment for the benefit of its creditors;
or (iii) an involuntary petition against Licensor is filed in any insolvency
proceeding and such petition is not dismissed within sixty (60) days after
filing, Licensee shall have the option, as permitted by applicable law, to
either:
(a) Immediately terminate this Agreement; or
(b) Continue to market the Licensed Products under the Licensed
Know-How, Patent Rights, Marketing Regulatory Approvals and the Trademark,
in which case the license granted hereunder to Licensee pursuant to
Section 2.1 shall become a license to "make, have made, import, use, offer
to sell and sell Licensed Products", provided that such license to make or
have made Licensed Products shall be nonexclusive and that Licensor shall
be entitled to a royalty in an amount equal to the sum of (i) any and all
royalties owed by Licensor to third parties (including without limitation,
Original Licensor) with respect to sales of Licensed Products and (ii)
five percent (5%) of such Licensed Product sales. Licensee shall be solely
responsible for payment of the third party royalty obligations under such
circumstances; provided, however, that any royalties to be paid under this
Section 7.5 (b) shall be due only to the extent that Licensee's cost of
the Licensed Product in finished, packaged and labeled form, quality
controlled and ready for resale to the ultimate customer plus the
royalties hereinabove established shall not exceed the Transfer Price
established in Section 2.2 of the Supply Agreement. In addition the
parties agree that in such event the intellectual property delivered to
Licensee shall include all know-how necessary or useful to give Licensee
the capability of manufacturing the Licensed Products and such know-how
shall be delivered to Licensee in such a way as to communicate it to
Licensee promptly, effectively and economically.
Section 7.6. Termination With Respect to Competitive Activities.
During the term of this Agreement, in the event Licensee acquires marketing
rights in the Licensed Territory for a surfactant product suitable for use in
treating any Indication (including off-label use)(a "Competitive Product"), or
in the event Licensee becomes an Affiliate of a Person whose product line
includes a Competitive Product (an "Affiliation"), Licensee shall notify
Licensor within thirty (30) days of such acquisition or Affiliation and of its
intention to either (a) divest such Competitive Product or Affiliation or (b)
terminate this Agreement and the Supply Agreement. Any such termination shall be
effective sixty (60) days after such notice becomes effective in accordance with
Section 14.2. Alternatively, Licensee may notify Licensor that it intends to
retain such Competitive Product in its portfolio but does not wish to terminate
this Agreement, in which event Licensor can in its sole discretion, within
ninety (90) days after receipt of such notice, advise Licensee of its intent to
terminate this Agreement, provided that (i) Licensee hereby agrees that in any
such event, in order to minimize disruption of the availability of Licensed
Product in the Licensed Territory, Licensee shall negotiate with Licensor and or
Licensor's designee mutually agreeable terms and conditions providing for the
transfer of Licensee's rights and obligations hereunder to Licensor and or
appropriate third parties and (ii) Licensee shall not be obligated to make any
further payments to Licensor other than those
24
payments accruing prior to such termination (including, without limitation, any
payments owed by Licensee pursuant to Sections 4.4 and 5.2(a)(ii), or pursuant
to Section 7.8.
Section 7.7. Reversion upon certain Early Termination Cases. Upon
termination of this Agreement for any reason, other than expiry of the Initial
Period (which shall be governed by Section 7.1 hereinabove) or the breach of
this Agreement by Licensor (which shall be governed by Section 7.2 hereinabove),
all rights granted to Licensee hereunder shall revert to Licensor and Licensee
undertakes:
(a) to deliver to Licensor all copies of any Licensed Know-how in
its possession,
(b) not to use the Licensed Know-how as long as it has to be kept
confidential under Article 6 hereof;
(c) to transfer to Licensor, at Licensor's request, a single copy
of all Licensee Proprietary Information and, at Licensor's
expense, all health regulatory approvals and regulatory
filings relating to Licensed Products in Licensee's
possession;
(d) to the extent requested by Licensor, to transfer to Licensor
or its designee responsibility for and control of ongoing
Licensed Products Development work, including control over
contracts with third parties for such work, where permissible
in accordance with such contracts, in an expeditious and
orderly manner with the costs for such work to be assumed by
Licensor or its designee as of the date of such transfer; and
(e) to the extent requested by Licensor, to transfer to Licensor
or its designee all inventory of Licensed Products at a price
equal to Licensee's fully amortized standard cost.
Section 7.8. Survival. Upon any termination of this Agreement,
Articles 3, 6, 9, 10 and 11 and Sections 5.15, 7.1, 7.2, 7.7 and 7.9, shall
survive such termination and continue in force and effect to the extent
necessary to effectuate such provisions.
Section 7.9. Disposition. Upon termination of this Agreement (other
than by expiration of the Initial Period), subject to Sections 7.4 and 7.6,
Licensee shall have no right under the Patent Rights to import, use or sell
Licensed Products, except that Licensee shall have the right for one hundred
twenty (120) days following termination to dispose of Licensed Products on hand
and complete any existing contracts requiring rights under the Patent Rights
which can be completed within the one hundred twenty (120) days.
25
ARTICLE 8
INFRINGEMENT
Section 8.1. Notice. (a) In the event that Licensee believes that
there is an infringement of the Licensed Rights by a third party hereto selling
material quantities of products in the Licensed Territory in competition with
Licensee's sale of Licensed Products hereunder, Licensee shall promptly provide
Licensor with written notice that such infringement is occurring. In the event
that Licensee believes that such infringement is to Licensee's substantial
detriment, Licensee shall provide Licensor with reasonable evidence of the
infringement.
(b) Licensor shall have the right, at Licensor's sole expense
(subject to Section 8.5(a)), to bring suit against the infringer for
infringement of the Licensed Rights. However, if after six (6) months from
the date of receipt of evidence of infringement from Licensee, Licensor
has not initiated suit against the infringer, Licensee shall have the
right, at Licensee's sole expense (subject to Section 8.5(b)), to bring
such suit provided that the Original Licensor has consented to Licensee
bringing such suit. Licensor shall make its best efforts to obtain the
Original Licensor's consent in favor of Licensee.
Section 8.2. Assistance. In the event either party hereto shall
initiate or carry on legal proceedings to enforce the Licensed Rights against an
alleged infringer, as provided herein, the other party hereto shall render
reasonable assistance to and cooperate with the party initiating or carrying on
such proceedings.
Section 8.3. Legal Proceedings. In the event that either party shall
institute legal proceedings to enforce the Licensed Rights, it shall have sole
control of such suit and the other party shall be entitled to be represented in
any such suit by counsel of its choosing, at its sole expense.
Section 8.4. Discontinuance. Neither party hereto shall discontinue
or settle any such proceedings brought by it without obtaining the concurrence
of the other party if such action would impose any obligations on such other
party or affect the exercise of the rights granted hereunder to such other party
(which concurrence shall not be unreasonably withheld).
Section 8.5. Recoveries. All damages, settlements and awards made or
obtained in connection with any suit or other legal proceeding under this
Article 8 shall be distributed as follows:
(a) If Licensor initiated the suit and prosecuted it to its
conclusion, Licensor shall be entitled to retain the balance of any
damages, settlements and awards, provided that Licensee may elect (within
thirty (30) days of initiation of such suit) to fund up to twenty-five
percent (25%) of Licensor's litigation costs and to share in the same
proportion of net recoveries.
26
(b) If the Licensee initiated the suit and prosecuted it to its
conclusion, Licensee shall be entitled to retain the balance of any
damages, settlements and awards; provided that Licensor may elect (within
thirty (30) days of initiation of such suit) to fund up to twenty-five
percent (25%) of Licensee's litigation costs and to share in the same
proportion of net recoveries received by Licensee.
ARTICLE 9
NON-USE OF NAMES
Section 9.1. Non-Use. Subject to the licenses expressly granted
hereunder with respect to the Trademark, nothing contained in this Agreement
shall be construed as granting to Licensor or Licensee any right to use in
advertising, publicity, or other promotional activities any name, trade name,
trademark, or other designation of the other (including contraction,
abbreviation or simulation of any of the foregoing) without the prior, written
consent of the other.
Section 9.2. Relationship. Nothing herein shall be deemed to
establish a relationship of principal and agent between Licensor and Licensee,
nor any of their agents or employees for any purpose whatsoever. This Agreement
shall not be construed as constituting Licensor and Licensee as partners, or as
creating any other form of legal association or arrangement which would impose
liability upon one party for the act or failure to act of the other party.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
Section 10.1 Representations of Licensor. Licensor represents and
warrants to Licensee that:
(a) it has the right to grant the license granted and the Right of
First Negotiation of New Products granted under Sections 2.1. and 2.5,
respectively, of this Agreement and that it has full power and authority
to execute, deliver and perform this Agreement, the Supply Agreement and
the Stock Purchase Agreement and the obligations hereunder and thereunder.
(b) to Licensor's knowledge, there are no claims or potential claims
by any third parties (other than the Original Licensor and Scripps) to an
ownership interest in the Licensed Rights licensed to Licensee under this
Agreement.
(c) Licensor has obtained any required third-party consents under
contracts to which Licensor or any of its Affiliates is a party to
Licensor's entry into this Agreement,
27
the Supply Agreement and the Stock Purchase Agreement and the performance
of its obligations hereunder and thereunder.
(d) To Licensor's knowledge, based solely on a review of the records
of the United States Patent and Trademark Office and the corresponding
offices in countries other than the United States, the patents listed on
Schedule I are valid.
(e) No third party has served on Licensor or any of its Affiliates
any claim, lawsuit, charge, complaint or other action alleging that the
Licensed Rights are invalid or unenforceable or that the Licensed Rights
infringe any patent or other proprietary or property rights of any third
parties or advised Licensor or any of its Affiliates that it intends to
pursue any such claim, lawsuit, charge, complaint or other action.
Licensor has not, prior to the date hereof, entered into any compulsory
license with a third party with respect to the Patent Rights.
(f) The rights of the Original Licensor and of any subsequent
licensor (excluding the Licensor) of the Scripps Patent Rights do not
prevent the grant of the license made hereunder nor do such rights permit
any such person to sell (directly or indirectly) or license for sale
surfactant pharmaceutical preparations based on or embodying the Patent
Rights in the Licensed Territory or enable such person to demand any
indemnity, royalty or compensation of whatever nature from Licensee as a
result of Licensee's sales of Licensed Products in the Licensed Territory
in accordance with the terms of this Agreement.
(g) Licensor is not in breach of any of its material obligations
under the Original License as of the date hereof.
(h) All of Licensor's employees having access to any confidential
information with respect to the Licensed Rights are subject to written
confidentiality obligations with respect to the disclosure of such
information.
(i) Prior to the execution of this Agreement it has disclosed to
Licensee all material information pertaining to the Licensed Products and
the Patent Rights reasonably relevant to Licensee in order to assess its
interest in entering into this Agreement, and that no material information
pertaining to the Licensed Products and the Patent Rights actually known
to Licensor as of the Effective Date regarding the foregoing has been
withheld from Licensee by Licensor.
Section 10.2. Mutual Representation. Each party hereby warrants that
the execution, delivery and performance of this Agreement, the Supply Agreement
and the Stock Purchase Agreement has been duly approved and authorized by all
necessary corporate actions of both parties; does not require any shareholder
approval which has not been obtained or the approval and consent of any trustee
or the holders of any indebtedness of either party; does not contravene any law,
regulation rules or order binding on either party, and does not contravene the
provisions of or constitute a default under any indenture, mortgage contract or
other agreement or instrument to which either party is a signatory.
28
Section 10.3. Validity. Subject to the foregoing provisions of this
Article 10, nothing in this Agreement shall be construed as a representation or
a warranty by Licensor that any process practiced or anything imported, used or
sold under any license granted under this Agreement is or will be free from
infringement of patents of third parties.
Section 10.4. No Consequential Damages. IN NO EVENT WILL EITHER
PARTY BE LIABLE TO THE OTHER FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL
DAMAGES RESULTING FROM THE PERFORMANCE OF THIS AGREEMENT.
ARTICLE 11
INDEMNIFICATION
Section 11.1. Indemnification by Licensee. Subject to Section 10.4
and to the extent not covered by Licensor's indemnity under Section 11.2,
Licensee agrees to indemnify and hold harmless Licensor and its Affiliates and
their respective officers, directors, employees and agents from and against any
and all claims, damages and liabilities, including reasonable attorneys fees and
expenses, asserted by third parties, both government and private (collectively,
"Claims"), arising from Licensee's or its Affiliates' or sublicensees' import,
use, offer to sell or sale of Licensed Products pursuant to this Agreement,
including without limitation any claim for breach of warranty, negligence or
strict liability with respect to any Licensed Product. This Section shall apply
to the Supply Agreement. In the event of any contradiction between the Supply
Agreement and any of the terms contained in this Agreement, the terms of this
Agreement shall prevail.
Section 11.2. Indemnification by Licensor. Subject to Section 10.4,
Licensor agrees to indemnify and hold harmless Licensee, its Affiliates and
sublicensees and their respective officers, directors, employees and agents from
and against any and all Claims arising from (a) any infringement of any patent
or other intellectual property interest in the Licensed Territory by any Person
other than the parties to this Agreement relating to the Licensed Products; (b)
any breach by Licensor of its representations and warranties set forth in this
Agreement; (c) any negligent act or omission of Licensor and (d) any intrinsic
or manufacturing defect of the Licensed Products existing when the Licensed
Products are placed by Licensor in the custody of the carrier for transport to
Licensee. This Section shall apply to the Supply Agreement. In the event of any
contradiction between the Supply Agreement and any of the terms contained in
this Agreement, the terms of this Agreement shall prevail.
Section 11.3. Insurance. Licensor and Licensee shall maintain during
the term of this Agreement insurance policies covering their respective
obligations under this Article 11, issued by reputable insurance companies under
ordinary terms and conditions in the pharmaceutical industry and will prove the
existence thereof to the other party if so requested.
29
ARTICLE 12
TRADEMARK MATTERS; PATENT MARKING
Section 12.1. Trademarks Used in Connection With Licensed Products.
(a) Licensed Products shall be marketed under the Trademark. Licensee admits the
validity of the Trademark and agrees that it shall not challenge the same in the
Licensed Territory or elsewhere.
(b) Licensor shall be responsible, at its own cost and expense, to
register, maintain and renew registrations of the Trademark in the
Licensed Territory, to the extent that it is necessary for the purposes of
obtaining Marketing Regulatory Approval and for the marketing of the
Licensed Products in the Licensed Territory. Licensee agrees not to take
any actions (including without limitation effecting any trademark
registrations) inconsistent with the foregoing and not to register
anywhere in the world any trademark confusingly similar to Surfaxin(R) or
any derivative thereof.
(c) Licensee agrees to take such actions as may be reasonably
requested by Licensor to assist Licensor to register, maintain or renew
any Trademark at the sole cost and expense of Licensor.
Section 12.2. Patent Marking. Licensee shall mark all Licensed
Products made, used, or sold under the terms of this Agreement, or their
containers, in accordance with the applicable patent marking laws.
ARTICLE 13
PATENT PROSECUTION AND MAINTENANCE
Section 13.1. Maintenance of Patent Rights. Licensor has obtained
certain commitments from the Original Licensor of the Scripps Patent Rights and
the patent rights listed in Section (b) of Schedule I (collectively, the "Third
Party Patent Rights") that the Original Licensor will maintain the Third Party
Patent Rights or, in the event that the Original Licensor does not do so, that
Licensor shall be given the right to do so. Licensor undertakes to enforce its
rights with respect to maintenance of the Third Party Patent Rights against the
Original Licensor and, to the extent Licensor succeeds to the maintenance of the
Third Party Patent Rights, to use all commercially reasonable efforts to do so.
Licensor further undertakes to maintain the Patent Rights owned by Licensor as
well as to carry out any and all necessary steps in order to enable such Patent
Rights be enforced and applicable in each country of the Licensed Territory.
Licensor shall provide Licensee with copies of all written materials received by
Licensor from the Original Licensor, the Original Licensor's or Licensor's
counsel, or any governmental agency or instrumentality relating to prosecution
and/or maintenance of Patent Rights and shall afford Licensee the opportunity to
review and comment upon any filings to be made with respect to the Patent Rights
(in the case of the Third Party Patent Rights, to the same extent Licensor is
entitled to do so).
30
Section 13.2. Cooperation By Parties. Licensor and Licensee agree to
cooperate in order to avoid loss of any rights which may be available to
Licensor or the Original Licensor under the U.S. Drug Price Competition and
Patent Term Restoration Act of 1984, the Supplementary Certificate of Protection
of Member States of the European Community and other similar measures in any
country. Without limiting the foregoing, Licensee agrees to timely supply
Licensor with all information reasonably requested by Licensor to file or have
filed (or to permit the Original Licensor to file or have filed) an application
for patent term extension within the 60-day period following U.S. NDA approval.
The same shall apply with respect to the approval by health regulatory
authorities in a country of the European Community or approval by the
appropriate authorities in any other country in the Licensed Territory.
ARTICLE 14
GENERAL
Section 14.1. Entire Agreement. This Agreement, including the
Schedules, Annexes and Exhibits hereto, constitutes the entire agreement and
understanding between the parties as to the subject matter hereof. All prior
negotiations, representations, agreements, contracts, offers and earlier
understandings of whatsoever kind, whether written or oral between Licensor and
Licensee in respect of the subject matter of this Agreement including, without
limitation, the Sublicense Agreement dated October 26, 1999, the Supply
Agreement and the Securities Agreement of even date between Licensee and
Licensor, are superseded by, merged into, extinguished by and completely
expressed by this Agreement. No aspect, part or wording of this Agreement may be
modified except by mutual agreement between the Licensor and Licensee taking the
form of an instrument in writing signed and dated by duly authorized
representatives of both Licensor and Licensee.
Section 14.2. Notices. Any notice or communication or permitted to
be given by this Agreement shall be given by post-paid, first class, registered
or certified mail or by reputable courier service addressed to:
In the case of Licensor: Discovery Laboratories, Inc.
350 South Main Street, Suite 307
Doylestown, Pennsylvania 18901
Attention: Robert J. Capetola, Ph.D.
Chief Executive Officer
With a copy to: Roberts, Sheridan & Kotel
The New York Practice of
Dickstein Shapiro's Corporate &
Finance Group
1177 Avenue of the Americas, 41st Floor
New York, NY 10036-2714
Attn: Ira L. Kotel
Facsimile: (212) 997-9880
31
In the case of Licensee: Laboratorios del Dr. Esteve, S.A.
Av. Mare de Deu de Montserrat, 221
08041 Barcelona (Spain)
Attention: Development Director
Facsimile: (34) 93 433 00 72
Such addresses may be altered by notice so given. If no time limit
is specified for a notice required or permitted to be given by this Agreement,
the time limit therefor shall be ten (10) Business Days, not including the day
of mailing. Notice shall be considered made as of the date of deposit with the
appropriate post office or courier service.
Section 14.3. Governing Law. This Agreement and its effect are
subject and shall be construed and enforced in accordance with the laws of the
State of New York, United States (without giving effect to the principles of
conflict of laws), except as to any issue which depends upon the validity, scope
or enforceability of any patent within the Patent Rights, which issue shall be
determined in accordance with the applicable patent laws of the country of such
patent.
Section 14.4 Dispute Resolution.
(a) Internal Review. In the event that a dispute, difference, claim,
action, demand, request, investigation, controversy, threat, discovery
request or request for testimony or information or other question arises
pertaining to any matters which arise under, out of, in connection with,
or in relation to this Agreement (a "Dispute") and either party so
requests in writing, prior to the initiation of any formal legal action,
the Dispute will be submitted to the Chief Executive Officers (or
equivalent position) of Licensee and Licensor. For all Disputes referred
to the Chief Executive Officers (or equivalent position), the Chief
Executive Officers (or equivalent position) shall use their good faith
efforts to meet in person and to resolve the Dispute within two weeks
after such referral.
(b) Arbitration. If, pursuant to Section 14.4(a), within two weeks
or such other period as may be agreed upon between the parties
following such reference, the dispute remains unresolved, it shall
be settled on application by either party by arbitration conducted
in the English language, in Stockholm (Sweden) in accordance with
the Rules of Arbitration of the International Chamber of Commerce by
one or more arbitrators appointed in accordance with the said rules.
The parties expressly agree to abide the award rendered. This
provision shall not prevent either party from addressing any
competent court or tribunal in order to seek for interim measures.
(c) Costs. The parties shall bear their own costs in preparing for
and participating in the resolution of any Dispute, and the costs of
mediator(s) and arbitrator(s) shall be equally divided between the
parties.
32
Section 14.5. Conflicts. Nothing in this Agreement shall be
construed so as to require the commission of any act contrary to law, and
whenever there is any conflict between any provision of this Agreement or
concerning the legal right of the parties to contract and any statute, law,
ordinance or treaty, the latter shall prevail, but in such event the affected
provisions of this Agreement shall be curtailed and limited only to the extent
necessary to bring it within the applicable legal requirements.
Section 14.6. Registration. Licensee shall take all reasonable and
necessary steps to register this Agreement in any country where such is required
to permit the transfer of funds and/or payment of royalties to Licensor
hereunder or is otherwise required by the government or law of such country to
effectuate or carry out this Agreement. Notwithstanding anything contained
herein, Licensee shall not be relieved of any of its obligations under this
Agreement by any failure to register this Agreement in any country, and,
specifically, Licensee shall not be relieved of its obligation to make any
payment due to Licensor hereunder at Licensor's address specified in Article
14.2 hereof, where such payment is blocked due to any failure to register this
Agreement.
Section 14.7. Headings. As used in this Agreement, singular includes
the plural and plural includes the singular, wherever so required by the
context. The headings appearing at the beginning of the numbered Articles and
Sections hereof have been inserted for convenience only and do not constitute a
part of this Agreement.
Section 14.8. Force Majeure. Notwithstanding any other provisions of
this Agreement, neither of the parties hereto shall be liable in damages for any
delay or default in performing hereunder if such delay or default is caused by
conditions beyond its control including but not limited to acts of God,
governmental restrictions, wars, or insurrections, strikes, floods, work
stoppages and/or lack of materials; provided, however, that the party suffering
such delay or default shall notify the other party in writing of the reasons for
the delay or default. If such reasons for delay or default continuously exist
for six (6) months and the parties are unable to reasonably agree upon
alternatives, this Agreement may be terminated by either party.
Section 14.9. Assignment. Except as otherwise set forth in Sections
2.1 and 2.3 of this Agreement with respect to Licensor's right to grant
sublicenses, neither party hereto may assign or transfer this Agreement or any
rights or obligations hereunder without the prior written consent of the other,
except that a party may make such an assignment without the other party's
consent to Affiliates or to a successor to substantially all of the business of
such party, whether in a merger, sale of stock, sale of assets or other
transaction. Any permitted successor or assignee of rights and/or obligations
hereunder shall, in a writing to the other party, expressly assume performance
of such rights and/or obligations. Any permitted assignment shall be binding on
the successors of the assigning party. Any assignment or attempted assignment by
either party in violation of the terms of this Section 14.9 shall be null and
void and of no legal effect.
Section 14.10. Successors and Assigns. Subject to Section 14.9, this
Agreement shall be binding upon and inure to the benefit of the permitted
successors or permitted assigns of Licensor and Licensee respectively.
33
Section 14.11. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 14.12. Announcements. Neither party shall make any public
announcement or press release regarding the content or signature of this
Agreement without the other party's prior written consent other than as may be
required by law or any stock exchange rules. If such public announcement or
press release is required by law or any stock exchange rules the parties shall
use their reasonable endeavors to agree to the text and content thereof prior to
making such public announcement or press release.
[THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
34
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and duly executed this Agreement on the date(s) indicated below, to be effective
the day and year first above written.
DISCOVERY LABORATORIES, INC.
By: /s/ Robert J. Capetola
-----------------------------------------
Name: Robert J Capetola, Ph.D.
Title: President and Chief Executive Officer
LABORATORIOS DEL DR. ESTEVE, S.A.
By: /s/ Joan Esteve
------------------------------------------
Name: Mr. Joan Esteve
Title: Vice-President
35
EXHIBIT 10.2
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [***], have been
separately filed with the Securities and Exchange Commission.
SUPPLY AGREEMENT
SUPPLY AGREEMENT dated as of March 6, 2002, by and between
DISCOVERY LABORATORIES, INC. ("Seller") and LABORATORIOS DEL DR. ESTEVE,
S.A., a company organized and existing under the laws of Spain ("Buyer").
WHEREAS, Seller and Buyer are parties to a Sublicense and
Collaboration Agreement (the "Collaboration Agreement") dated as of the date
hereof pursuant to which Buyer and Seller have agreed to collaborate in a
product development, commercialization and marketing effort for the Licensed
Products (such term and other capitalized terms used and not otherwise defined
herein having the meanings assigned to them in the Collaboration Agreement); and
WHEREAS, Buyer hereby agrees to purchase one hundred percent (100%)
of its requirements of Licensed Products from Seller, and Seller hereby agrees
to supply one hundred percent (100%) of Buyer's requirements of Licensed
Products, pursuant to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises and covenants set forth below, Seller and Buyer mutually agree
as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Current Good Manufacturing Practices" or "cGMP" shall mean (i) with
respect to the United States, the good manufacturing practices required by the
FDA and set forth in the Federal Food, Drugs and Cosmetics Act or FDA
regulations, policies or guidelines in effect at a particular time for the
manufacture, testing and quality control of pharmaceutical materials and (ii)
with respect to any other country of the Licensed Territory, the standards for
the manufacture and testing of pharmaceutical materials that are imposed by any
regulatory authority having jurisdiction.
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"Facility" means an Owned Facility or a Contract Facility (in each
case as defined in Section 3.1).
"First Commercial Sale" shall mean the first commercial sale by
Buyer, its Affiliates or sublicensees of any Licensed Product following final
EMEA or other regulatory approval required to market such Licensed Product
commercially in the Licensed Territory for use in humans.
"Specifications" shall mean the Licensed Product specifications
contained in the registration dossier of the Licensed Product as approved by the
EMEA and the other regulatory authorities having jurisdiction in the Licensed
Territory, as the same may be amended from time to time in accordance with
applicable regulatory procedures.
"Transfer Price" shall mean the price for each Licensed Product
established in accordance with the pricing system as set forth in Section 2.2.
"Unrelated Third Parties" shall mean Persons other than Buyer and
Seller and Affiliates and sublicensees of Buyer and Seller or any other related
Persons and shall include hospital formularies and other similar critical and
therapeutic care providers who typically purchase and administer products and
therapies such as the Licensed Products.
ARTICLE II
PURCHASE AND SALE OF PRODUCTS
Section 2.1. Purchase and Sale; Delivery; Acceptance or Rejection.
(a) Seller agrees to sell to Buyer such quantities of
Licensed Products, manufactured in conformity with cGMP and meeting the
Specifications, as Buyer may order in accordance with the terms and
conditions of this Agreement. Subject to the provisions of Section 7.2
hereof, so long as this Agreement shall remain in effect, Buyer agrees,
for itself and its Affiliates and sublicensees, to satisfy solely through
the purchase of Licensed Products from Seller under this Agreement one
hundred percent (100%) of Buyer's and its Affiliates' and sublicensees'
requirements for Licensed Products.
(b) Purchase orders issued by Buyer to Seller with
respect to purchases of Licensed Products shall be subject to, and
governed exclusively by, the terms of this Agreement. Buyer agrees not to
issue to Seller any purchase order containing terms different from those
set forth herein and further agrees that no shipment of Licensed Product
by Seller in accordance with a nonconforming purchase order shall be
deemed to be acceptance of any terms of such purchase order conflicting
with the terms of this Agreement except to the extent such conflicting
terms are initialed by Seller with the words "change
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accepted" written thereon by Seller. Except as aforesaid, this Agreement
shall override all other conflicting terms of purchase and/or sale
contained in any purchase and/or sale document generated by Seller or
Buyer.
(c) Subject to paragraph (d) below, all Licensed Product
sold to Buyer hereunder shall be delivered FCA Seller's Facility or
distribution warehouse (Incoterms 2000). Seller shall assist Buyer in
arranging transportation in the manner specified by Buyer, in accordance
with applicable regulatory requirements, to any destinations specified in
writing from time to time by Buyer; provided that all costs and expenses
relating to such transportation and delivery (including without limitation
customs, duties, taxes, insurance premiums and all expenses relating to
validation of temperature-controlled shipment conditions) shall be at
Buyer's expense.
(d) Seller will include with each shipment copies of all
applicable quality and testing records, which shall be in a form
acceptable for any applicable EMEA or other regulatory submission in the
Licensed Territory. Product shipments for sale by Buyer in European
countries of the Licensed Territory shall originate from such European
Union member state and shall be accompanied, as required, by a certificate
of analysis made in such state. Seller shall certify in writing, to
Buyer's reasonable satisfaction, that each delivery of Licensed Product
was produced and tested in compliance with (i) the Specifications, (ii)
cGMP requirements and (iii) all applicable regulatory documents.
(e) Buyer may reject any portion of any shipment of
Licensed Product which does not conform with the Specifications. In order
to reject a shipment, Buyer must (i) give notice to Seller of Buyer's
intent to reject the shipment within thirty (30) days of receipt together
with a detailed written indication of the reasons for such possible
rejection, and (ii) as promptly as reasonably possible thereafter, but in
any event within an additional thirty (30) days, provide Seller with
notice of final rejection and the full basis therefor. After notice of
intent to reject is given, Buyer shall cooperate with Seller in
determining whether rejection is necessary or justified. If such notices
of intent to reject and final rejection are not timely received, Buyer
shall be deemed to have accepted such delivery of Licensed Product and to
have waived all claims for non-conformity with the Specifications, damage,
defect or shortage, other than claims for latent defects not capable of
discovery by Buyer upon physical examination. In the event of latent
defects not capable of discovery by Buyer upon physical examination, Buyer
shall inform Seller within fifteen (15) days of discovering any such
defect. Buyer shall be entitled to a refund of the purchase price
(together with insurance, freight charges and, where applicable, custom
duties) of properly rejected Licensed Products at the time they are
ultimately rejected, provided that if Seller disputes the rejection,
refund shall be made, if at all, at the time the dispute is finally
resolved. Seller shall notify Buyer as promptly as reasonably possible
(but in any event no later than thirty (30) days after receipt of Buyer's
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final rejection notice) whether it accepts Buyer's basis for any
rejection. In the event Seller disputes Buyer's rejection, the parties
will select a mutually agreeable independent third party laboratory which
shall determine whether the rejected Licensed Products meet the applicable
Specifications and shall confirm or dissent from Buyer's rejection of
Licensed Products. If the parties are unable to agree on a laboratory firm
within thirty (30) days after receipt of Buyer's final rejection notice,
the laboratory shall be appointed by computer generation of a random
number, with an even number signifying Seller's right to designate the
laboratory and an odd number designating Buyer's right to designate the
laboratory. If the independent tester confirms Buyer's rejection, Seller
will pay the fees of the tester, and if the tester dissents from Buyer's
rejection, Buyer will pay the fees.
(f) Whether or not Seller accepts Buyer's basis for
rejection, promptly on receipt of a notice of rejection, Seller shall use
its commercially reasonable efforts, at Buyer's request, to provide
replacement Licensed Product, which shall be purchased by Buyer as
provided in this Agreement as soon as reasonably practicable.
(g) Unless Seller requests the return to it of a
rejected batch within sixty (60) days of receipt of Buyer's final notice
of rejection, Buyer shall, at Seller's cost, destroy such batch promptly
and provide Seller with certification of such destruction. Buyer shall,
upon receipt of Seller's request for return, promptly dispatch said batch
to Seller, at Seller's cost.
(h) No change to the Specifications shall be effective
unless the same shall be required or permitted by any regulatory agency
having jurisdiction over (i) any country in the Licensed Territory, (ii)
Buyer or (iii) the Licensed Products (and if not required, shall be agreed
to in writing by Buyer and Seller). Seller shall give Buyer advance notice
of any change to the Specifications required by a regulatory agency.
2.2 Transfer Price; Method of Payment. (a) Buyer shall purchase
Licensed Products from Seller hereunder at the applicable Transfer Price. The
Transfer Price for each unit of Licensed Product shall equal [***] of the Base
Integrated Price (as such term is hereinafter defined) for any such Licensed
Product in the Licensed Territory, subject to paragraph (d) below. The "Base
Integrated Price" shall mean, with respect to each unit of Licensed Product
purchased by Licensee, that price that is determined prior to the first
commercial sale of any such Licensed Product in any country of the Licensed
Territory by mutual agreement between Buyer and Seller in their best good faith
efforts (and as such price may be amended from time to time by mutual agreement
of the parties); provided, however, that should the parties fail to agree on any
such price prior to the first commercial sale of any such Licensed Product in
the Licensed Territory such price shall equal the gross amount invoiced to
Unrelated Third Parties for such Licensed Product in the Licensed Territory,
less: (i) trade and reasonable and customary cash
- ----------
Information marked by [***] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.
4
discounts allowed; (ii) refunds, rebates, chargebacks, retroactive price
adjustments and any other allowances which effectively reduce the net
selling price; (iii) returns, credits and allowances and (iv) sales taxes
paid or absorbed by Buyer in respect of such sales. Except as set forth in
subsections (i)-(iv) in the immediately preceding sentence, no deductions
or offsets shall be made against any such gross amount invoiced including,
without limitation, on account of any commissions paid to employees of
Buyer, its Affiliates or sublicensees, cost of collections, bad debts or
sales, marketing and promotional expenses of any kind. Such amounts shall
be determined from books and records maintained in accordance with
generally accepted accounting principles applied in each country of the
Licensed Territory, consistently applied.
(b) Seller shall invoice Buyer for each shipment of Licensed
Products delivered by Seller to Buyer, its Affiliates or sublicensees at
the Transfer Price converted into U.S. Dollars at the exchange rate of the
last Business Day of the calendar month immediately preceding the month
when the Licensed Product is shipped to Buyer, as quoted by the Wall
Street Journal.
(c) Buyer shall pay Seller's invoices in U.S. Dollars not
later than ninety (90) days following the date of the applicable invoice
by wire transfer to the bank account designated by Seller.
(d) For the avoidance of doubt, the parties hereby acknowledge
and agree that the Base Integrated Transfer Price for Licensed Products
shall be determined by the parties in good faith and shall be based upon a
mutually agreeable pricing schedule for such Licensed Products that is
intended to ensure that both Buyer and Seller achieve reasonable profits
with respect to sales thereof.
(e) All payments under this Section 2.2 shall be free of all
withholdings of any nature whatsoever (including, without limitation,
withholding taxes, monetary transfer fees, or similar taxes and charges),
and in the event any withholding is required, Buyer shall pay the same
together with such additional amount as is required so that each such
payment shall be, under any circumstances and in any event, in the amount
as set forth or referred to herein.
ARTICLE III
PRODUCTION OF PRODUCTS
Section 3.1. Manufacturing of Licensed Products.
(a) Until such time, if any, as a Seller-owned manufacturing
facility (an "Owned Facility") is qualified for the manufacture of
Licensed Products sold to Buyer hereunder, Seller shall manufacture or
have manufactured the Licensed Products sold to Buyer hereunder at a
contract manufacturing facility
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(a "Contract Facility") selected by Seller and reasonably acceptable to
Buyer. Commencing sixty (60) days prior to the First Commercial Sale of
any Licensed Product in a country of the Licensed Territory (provided that
such date of First Commercial Sale has been communicated to Seller at
least one hundred and eighty (180) days in advance) Seller shall maintain
at least one alternate production site for Licensed Products sold to Buyer
hereunder, which alternate production site, if a Contract Facility, shall
also be selected by Seller and reasonably acceptable to Buyer. Seller's
obligation to maintain an alternate manufacturing facility may also be
satisfied through a sublicensing arrangement complying with Section 3.2.
(b) Seller shall be responsible for obtaining and maintaining
all necessary licenses, registrations, authorizations and approvals (other
than such licenses, registrations, authorizations and approvals that are
required to be obtained or made by an owner or operator of a Contract
Facility) which are necessary to manufacture, handle, store, label,
package, transport and ship Licensed Products under cGMP conditions and in
accordance with other regulatory requirements.
(c) Seller shall provide Buyer with copies of any
correspondence sent from Seller to governmental entities relating to the
manufacturing, handling, storage, labeling, packaging, transportation or
shipment of Licensed Products at the time such correspondence is sent by
Seller, purged of Seller proprietary and/or confidential information and
trade secrets. Seller shall provide Buyer with copies of any comments,
responses, notices or other correspondence received by Seller from any
governmental entity relating to the foregoing matters within five (5)
Business Days of receipt of such correspondence by Seller, purged of any
Seller proprietary information and/or trade secrets.
(d) Seller shall furnish to Buyer (i) a summary of any report
or correspondence issued by a governmental entity (or a third party
authorized by a governmental entity) in connection with a visit or inquiry
relating to any Owned Facility or, to the extent Seller is provided with
such information, any Contract Facility, including but not limited to, any
FDA Form 483 or warning letter and (ii) not later than ten (10) Business
Days after the time Seller provides such to a governmental entity,
summaries of any and all proposed responses or explanations relating
thereto, in each case purged of trade secrets or other confidential or
proprietary information of Seller. After the filing of a response with the
appropriate governmental entity, Seller will notify Buyer of any further
oral and/or written contacts with a governmental entity (or a third party
authorized by a governmental entity) relating to the manufacturing,
handling, storage, labeling, packaging, transportation or shipment of
Licensed Products.
(e) If requested in writing by Buyer, Seller shall permit
Buyer to inspect, once per year, during normal business hours, Seller's
Facilities and
6
manufacturing records to the extent Buyer deems it reasonably necessary to
enable Buyer to verify compliance with any statutory or regulatory
requirements to which Buyer is subject and which are applicable to the
manufacture and/or packaging of Licensed Products. Notwithstanding the
foregoing, Buyer shall have the right to inspect Seller's Facilities and
manufacturing records at any time, in the event that there is a quality or
regulatory problem with any Licensed Product. If, as a result of any such
inspection, Buyer reasonably and in good faith concludes that Seller is
not in compliance with any regulatory obligations or requirements
applicable to Buyer, Buyer shall so notify Seller in writing, specifying
such areas of noncompliance in reasonable detail and Seller shall remedy
the problems identified.
(f) Seller agrees to use all reasonable efforts to promptly
rectify or resolve any deficiencies noted by a governmental entity (or
third party authorized by a governmental entity) in a report or
correspondence issued to Seller with respect to an Owned Facility or a
Contract Facility.
Section 3.2. Subcontracting.
It is understood and agreed that Seller shall have the right in
connection with its performance hereunder to contract with such third parties as
Seller deems advisable to manufacture Licensed Products, provided that (i)
manufacture and/or quality control by any such third party has been authorized
by the competent regulatory authorities in the Licensed Territory, (ii) Seller
shall provide Buyer with not less than fifteen (15) Business Days' advance
notice of its intent to contract with any third party and shall identify such
third party to Buyer, (iii) Buyer may audit Seller's contractor's qualifications
and (iv) Seller shall remain fully liable for its performance hereunder to the
same extent as if such contractor had not been engaged.
Section 3.3. Exclusivity.
On a country-by country basis, for so long as the Collaboration
Agreement remains in effect with respect to any such country in the Licensed
Territory, until such time as Buyer has a fully paid-up license in such country
in accordance with the terms of the Collaboration Agreement, Seller shall supply
Licensed Products only to Buyer for distribution within such country.
Section 3.4. Allocation of Supplied Licensed Products
In the event of shortage or inability to timely supply the required
Licensed Product, Licensor undertakes and agrees that the amounts of
Licensed Products available shall be allocated on an equitable basis
according to forecasts received and that Licensee shall not be treated
less favorably than Licensor, its Affiliates and other distributors and/or
sublicensees.
7
ARTICLE IV
QUANTITY FORECASTS; ORDERS
Section 4.1. Forecasts.
(a) In order to assist Seller in planning its production, commencing sixty
(60) days prior to the calendar month in which the First Commercial Sale
of Licensed Products takes place in any country in the Licensed Territory,
Buyer shall provide Seller with a twelve (12) month rolling forecast of
the quantities of such Licensed Product required by Buyer, by month, for
the following twelve (12) months. The first three (3) months of such
projections shall constitute a binding commitment to order the quantity of
such Licensed Product forecast for such period, provided that with respect
to the first twelve (12) months following such First Commercial Sale of
Licensed Products in any country in the Licensed Territory, only the first
month's forecast with respect to such country shall be binding provided
that the portion of such forecast relating to such country is separately
stated and is so indicated. Projections for months four (4) through twelve
(12) (or, as provided above with respect to product launches in the
Licensed Territory, months two (2) through twelve (12)) shall be made in
good faith and shall constitute Buyer's best estimates of future orders,
but shall not be binding on Buyer. Updated twelve (12) month forecasts
will be provided at the beginning of each succeeding calendar month for
the twelve (12) month period commencing sixty (60) days thereafter.
Buyer's forecast shall also describe anticipated regulatory modifications
to any English language version of Licensed Product labeling proposed by
Seller. Seller shall, no later than fifteen (15) Business Days after
receipt of each such forecast, notify Buyer in writing of any prospective
problems of which Seller is aware of that might prevent Seller from
meeting Buyer's forecast order quantities or estimated delivery dates.
(b) Notwithstanding Buyer's obligation to provide forecasts as set
forth in Section 4.1(a), Buyer hereby agrees that it shall provide Seller
with its firm purchase orders for Licensed Product in accordance with the
lead-times and batch size increments to be specified by Seller in writing
as soon as reasonably practicable but in any event before Buyer places its
first order for Licensed Products, such lead-times and batch sizes to be
applicable during the term of this Agreement unless otherwise agreed in
writing by the parties; provided, however, that Buyer shall have the
right, up to the date of manufacture, to issue binding change orders to
increase or decrease such purchase orders with the consent of Seller,
which shall not be unreasonably withheld so long as Buyer agrees to
compensate Seller for any damages suffered by Seller as a consequence of
such change order (including damages attributable to loss of allocable
overhead recoupment, but excluding loss of profit), provided that Seller
shall advise Buyer before carrying out any change order of Seller's
estimated increased cost of doing so. Buyer agrees to accept partial
shipments of Licensed Products should, for any reason, it become necessary
to ship in advance of order completion, provided that
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Seller shall (i) give advance written notice to Buyer of such shipment and
(ii) bear any additional cost to Buyer of receiving Licensed Products in
partial shipments. Seller shall make all commercially reasonable efforts
to comply with any revisions to purchase order requirements consistent
with the provisions of Section 4.1(a) and this Section 4.1(b). Seller,
within ten (10) Business Days after the date that a purchase order is
issued to it, shall acknowledge receipt of Buyer's order and confirm in
writing that the order can be supplied. For purposes hereof, a purchase
order will be deemed issued on the earlier of (i) the date that Seller
receives the purchase order via mail and (ii) the date of receipt of the
telecopied purchase order.
Section 4.2. Purchase Order Contents.
(a) Each purchase order shall specify the quantity,
concentration and container size of Licensed Product ordered within the
Specifications, and the required delivery schedule. Seller shall use
reasonable commercial efforts to deliver each shipment of Licensed Product
within five (5) days of the delivery dates specified in the delivery
schedule set forth in Buyer's purchase order relating thereto (provided
that in no event shall any such delivery dates be less than the lead time
established pursuant to Section 4.1(b), unless otherwise consented to by
Seller) using carriers mutually agreeable to Buyer and Seller. Seller
shall use commercially reasonable efforts to accommodate "Rush" orders
from Buyer.
(b) When all appropriate validation and quality control
release criteria for a particular shipment of Licensed Product have been
met (the "Release Date"), Seller shall notify Buyer in writing of the
expected delivery dates (including details of destination, date and time)
to enable delivery and receipt to be coordinated. Title and risk of loss
to Licensed Products shall pass to Buyer upon delivery of Licensed
Products by Seller to the carrier.
Section 4.3. Packaging.
(a) Licensed Products shall be delivered to Buyer as
finished goods in final packaged and labeled form, quality controlled in
accordance with Section 2.1 (d) and ready for resale to the ultimate
customer and in accordance with the packaging requirements set forth in
the Marketing Regulatory Approvals.
(b) Buyer shall distribute all Licensed Products as
packaged by Seller in accordance with Section 4.3(a). In no event shall
any Licensed Products be repackaged or reconfigured by Buyer without
Seller's prior written consent.
9
Section 4.4. Labeling.
With respect to each country in the Licensed Territory, prior to
distribution of a Licensed Product, Buyer shall provide Seller with evidence of
the regulatory approval of labeling specifications for such Licensed Product in
such country and any variations required by the applicable regulatory agency.
All such materials shall be provided to Seller together with a proper English
translation. Seller shall distribute Licensed Products bearing only labeling
supplied or approved by Buyer and in accordance with such regulatory
requirements.
ARTICLE V
CERTAIN OBLIGATIONS OF BUYER
Buyer agrees to ascertain and comply with all applicable laws and
regulations and standards of industry or professional conduct in connection with
the use, distribution or promotion of the Licensed Products, including without
limitation, those applicable to product claims, labeling, approvals,
registrations and notifications, and also to obtain Seller's prior written
consent to all claims, labels, instructions, packaging or the like, which
consent shall not be unreasonably withheld.
ARTICLE VI
REGULATORY MATTERS
Section 6.1. Information Regarding Regulatory Approvals. Seller
shall promptly advise Buyer in matters pertaining to U.S. regulatory
requirements relating to Seller's activities hereunder. Seller shall also
provide to Buyer reasonable advance notice of any regulatory submission
containing information or data provided by Buyer to Seller which Seller intends
to disclose to regulatory agencies under this Agreement.
Section 6.2. Quality Control Program; Additional Testing Programs.
Seller shall maintain a quality control program consistent with cGMP, as
required by the FDA and/or any other governmental entity in the Licensed
Territory, with respect to Seller's manufacture of Licensed Products hereunder.
In addition, Seller will perform such additional testing programs, and provide
Buyer with documentation arising from such testing programs, as may be agreed to
by Buyer and Seller or required by any applicable regulatory authority.
Section 6.3. Retention of Samples. Seller shall retain as samples
such quantities of Licensed Products from each batch of Licensed Product as
Buyer shall reasonably request. Retained samples shall be maintained in a
suitable storage facility for one (1) year past the product's expiration date.
All such samples shall be available for inspection and testing by Buyer at
reasonable times and upon reasonable notice.
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Section 6.4. Recalls. Buyer shall notify Seller promptly if any
Licensed Product is the subject of a recall, market withdrawal or correction
within the Licensed Territory (a "Recall"), and Buyer and/or its designee shall
have sole responsibility for the handling and disposition of such Recall. Buyer
and/or its designee shall bear the costs of all Recalls of Licensed Products
except to the extent that such Recall shall have been the result of Seller's
breach of any of the warranties set forth in this Agreement and/or the
Collaboration Agreement, in which case Seller will promptly reimburse Buyer to
such extent for actual, direct costs sustained as a result of the Recall. In the
event that Seller disputes Buyer's determination that the fault is due to Seller
and/or to its agent, the Parties will select a mutually agreeable outside
consulting firm which will be instructed to review the applicable information
and data and to confirm or dissent from Buyer's determination. If the consulting
firm confirms Buyer's determination, Seller will pay the fees of such consulting
firm. Buyer and/or its designee shall maintain records of all sales of Licensed
Products and customers sufficient to adequately administer a Recall, market
withdrawal or correction for a period of three (3) years after termination or
expiration of this Agreement. Except as required by law, Buyer and/or its
designee shall serve as the sole point of contact with the applicable
governmental entity concerning any Recall within the Licensed Territory with
respect to Licensed Products and Seller shall serve as the sole point of contact
with the FDA with respect to any Recall. In the event that Seller is required to
communicate with the FDA with respect to Recall of Licensed Products, Seller
shall within one (1) Business Day notify Buyer of such communication.
ARTICLE VII
TERMINATION; RIGHTS AND OBLIGATIONS UPON
TERMINATION
Section 7.1. Term. This Agreement shall commence on the date hereof
and shall continue in effect with respect to each Licensed Product in each
country in the Licensed Territory, unless the parties mutually agree to extend
such term, for so long as the Collaboration Agreement remains in effect with
respect to such Licensed Product in such country(ies).
Section 7.2. Termination for Default. If either party materially
defaults in the performance of any material agreement, condition or covenant of
this Agreement and such default or noncompliance shall not have been remedied,
or steps initiated to remedy the same to the other party's reasonable
satisfaction, within ninety (90) days (or thirty(30) days in the case of
non-payment) after receipt by the defaulting party of a notice thereof from the
other party, the party not in default may terminate this Agreement. A material
breach or default of this Agreement shall be considered as a material breach or
default under the Collaboration Agreement, and Section 7.2 of the Collaboration
Agreement shall apply.
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Section 7.3 Rights and Obligations on Expiration or Termination.
Except to the extent expressly provided to the contrary, the following
provisions shall survive the termination of this Agreement: Sections 6.3 and 6.4
and Articles I and VIII through X. Any rights of Seller to payments accrued
through termination as well as obligations of the parties under firm orders for
purchase and delivery of Licensed Products at the time of such termination shall
remain in effect, except that in the case of termination under Section 7.2, the
terminating party may elect whether obligations under firm orders will remain in
effect and except that Seller will have no obligation with respect to delivery
dates more than three (3) months after termination.
ARTICLE VIII
WARRANTIES; REPLACEMENT OF PRODUCTS; INSURANCE
Section 8.1. Warranties. Seller warrants to Buyer for itself and on
behalf of its subcontractors and agents who assume any of Seller's obligations
hereunder that (i) when shipped to Buyer by Seller, the Licensed Products will
conform to the Specifications, as then in effect, and will not be (A)
adulterated or misbranded within the meaning of the Food, Drugs & Cosmetic Act
or (B) be an article which may not, under the provisions of the Food, Drugs &
Cosmetic Act, be introduced into interstate commerce, and (ii) any Facility used
by Seller will remain in compliance with cGMP at all times during the term of
this Agreement and (iii) Seller shall obtain and maintain all necessary permits,
registrations and licenses necessary to carry out its obligations pursuant to
this Agreement. The foregoing warranties are the only warranties made by Seller
with respect to the Licensed Products delivered hereunder, and may only be
modified or amended by a written instrument signed by a duly authorized officer
of Seller and duly authorized officer of Buyer. THE EXPRESS WARRANTIES CONTAINED
IN THIS ARTICLE 8 ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTIBILITY OR FITNESS FOR A
PARTICULAR USE.
Section 8.2. Replacement of Licensed Products. Any Licensed Products
delivered to Buyer by Seller which do not conform to the Specifications and are
properly rejected as set forth in Article 2, or which are otherwise not in
compliance with the warranties made in Section 8.1, shall be replaced, or
Buyer's account may be credited, at Buyer's election. The remedy of replacement
or credit shall not be available if and to the extent that such nonconformance
was caused by Buyer's misuse, unauthorized modification, neglect, improper
testing or improper storage, including without limitation storage at
inappropriate temperatures, transportation, use beyond any dating provided, by
accident, fire or other hazard. THE EXPRESS OBLIGATIONS STATED IN THIS SECTION
8.2 AND IN SECTIONS 2.1 AND 8.3 ARE IN LIEU OF ALL OTHER LIABILITIES OR
OBLIGATIONS OF SELLER FOR DAMAGES, INCLUDING BUT NOT LIMITED TO DIRECT OR
CONSEQUENTIAL DAMAGES, ARISING OUT OF
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OR IN CONNECTION WITH THE DELIVERY, USE OR PERFORMANCE OF THE PRODUCTS.
Section 8.3. Insurance.
Buyer and Seller shall maintain during the term of this Agreement
products liability insurance policies, covering their respective obligations
under this Agreement, issued by reputable insurance companies under ordinary
terms and conditions in the pharmaceutical industry and will prove the existence
thereof to the other party if so requested.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Entire Agreement This Agreement constitutes the entire
agreement and understanding between the parties as to the subject matter hereof.
All prior negotiations, representations, agreements, contracts, offers and
earlier understandings of whatsoever kind, whether written or oral between
Seller and Buyer in respect of the subject matter of this Agreement, are
superseded by, merged into, extinguished by and completely expressed by this
Agreement (including, without limitation, the Supply Agreement dated October 26,
1999, between Buyer and Seller). No aspect, part or wording of this Agreement
may be modified except by mutual agreement between the Seller and Buyer taking
the form of an instrument in writing signed and dated by duly authorized
representatives of both Seller and Buyer. The representation and warranties made
by Licensor (i.e. Seller) in the Collaboration Agreement are incorporated herein
by reference, provided that no breach of such representations and warranties
shall be the basis for the termination of this Agreement unless the
Collaboration Agreement is terminated simultaneously.
Section 9.2. Notices Any notice or communication or permitted to be
given by this Agreement shall be given by post-paid, first class, registered or
certified mail or reputable courier service addressed to:
In the case of Seller: Discovery Laboratories, Inc.
350 South Main Street, Suite 307
Doylestown, Pennsylvania 18901
Attention: Robert J. Capetola, Ph.D.
Chief Executive Officer
With a copy to: Roberts, Sheridan & Kotel
The New York Practice of
Dickstein Shapiro's Corporate & Finance Group
1177 Avenue of the Americas, 41st Floor
New York, NY 10036-2714
13
Attn: Ira L. Kotel
Facsimile: (212) 997-9880
In the case of Buyer: Laboratorios del Dr. Esteve, S.A.
Av. Mare de Deu de Montserrat, 221
08041 Barcelona (Spain)
Attention: Development Director
Facsimile: (34) 93 433 00 72
Such addresses may be altered by notice so given. If no time limit
is specified for a notice required or permitted to be given by this Agreement,
the time limit therefor shall be ten (10) Business Days, not including the day
of mailing. Notice shall be considered made as of the date of deposit with the
appropriate Post Office or courier service.
Section 9.3. Governing Law. This Agreement and its effect are
subject and shall be construed and enforced in accordance with the laws of the
State of New York, United States (without giving effect to the principles of
conflict of laws), except as to any issue which depends upon the validity, scope
or enforceability of any patent within the Patent Rights, which issue shall be
determined in accordance with the applicable patent laws of the country of such
patent.
Section 9.4. Representations regarding Authorization; Organization;
Corporate Action; No Conflicts. Each party hereto severally represents and
warrants that it is a duly organized and validly existing corporation and/or
partnership under the laws of its jurisdiction of incorporation, and has taken
all required corporate action to authorize the execution, delivery and
performance of this Agreement, the Collaboration Agreement and the Stock
Purchase Agreement and perform all of its obligations hereunder and thereunder;
the execution and delivery of this Agreement the Collaboration Agreement and the
Stock Purchase Agreement and the consummation of the transactions contemplated
herein and therein do not violate, conflict with, or constitute a default under
its charter or similar organization document, its by-laws or the terms or
provisions of any material agreement or other instrument to which it is a party
or by which it is bound, or any order, award, judgment or decree to which it is
a party or by which it is bound; and upon execution and delivery, this Agreement
the Collaboration Agreement and the Stock Purchase Agreement will constitute the
legal, valid and binding obligation of it. The persons signing on behalf of each
of the parties hereby warrant and represent that they have the authority to
execute this Agreement the Collaboration Agreement and the Stock Purchase
Agreement on behalf of the party for whom they have signed.
Section 9.5. Registration. Buyer shall take all reasonable and
necessary steps to register this Agreement in any country where such is required
to permit the transfer of funds and/or payment of royalties to Seller hereunder
or is otherwise required by the government or law of such country to effectuate
or carry out this Agreement.
14
Notwithstanding anything contained herein but subject to Section 9.4 hereof,
Buyer shall not be relieved of any of its obligations under this Agreement by
any failure to register this Agreement in any country, and, specifically, Buyer
shall not be relieved of its obligation to make any payment due to Seller
hereunder at Seller's address specified in Section 9.2 hereof, where such
payment is blocked due to any failure to register this Agreement.
Section 9.6. Headings. As used in this Agreement, singular includes
the plural and plural includes the singular, wherever so required by the
context. The headings appearing at the beginning of the numbered Articles and
Sections hereof have been inserted for convenience only and do not constitute a
part of this Agreement.
Section 9.7. Agency. Nothing herein shall be deemed to create an
agency, joint venture or partnership between the parties hereto.
Section 9.8 Dispute Resolution.
(a) Internal Review. In the event that a dispute, difference,
claim, action, demand, request, investigation, controversy, threat, discovery
request or request for testimony or information or other question arises
pertaining to any matters which arise under, out of, in connection with, or in
relation to this Agreement (a "Dispute") and either party so requests in
writing, prior to the initiation of any formal legal action, the Dispute will be
submitted to the Steering Committee, which will use its good faith efforts to
resolve the Dispute within ten (10) Business Days. If the Steering Committee is
unable to resolve the Dispute in such period, the Steering Committee will refer
the Dispute to the Chief Executive Officers or equivalent position of Buyer and
Seller. For all Disputes referred to the Chief Executive Officers (or equivalent
position), the Chief Executive Officers (or equivalent position) shall use their
good faith efforts to meet in person and to resolve the Dispute within ten (10)
Business Days after such referral.
(b) Arbitration.
If, pursuant to Section 9.8(a), within such ten (10) Business Days or such
other period as may be agreed upon between the parties, the dispute remains
unresolved, it shall be settled on application by either party by arbitration
conducted in the English language, in Stockholm (Sweden) in accordance with the
Rules of Arbitration of the International Chamber of Commerce by one or more
arbitrators appointed in accordance with the said rules. The parties expressly
agree to abide the award rendered. This provision shall not prevent either party
from addressing any competent court or tribunal in order to seek interim
measures.
(c) Costs. The parties shall bear their own costs in preparing
for and participating in the resolution of any Dispute, and the costs of
mediator(s) and arbitrator(s) shall be equally divided between the parties.
15
Section 9.9. Force Majeure. Notwithstanding any other provisions of
this Agreement, neither of the parties hereto shall be liable in damages for any
delay or default in performing hereunder if such delay or default is caused by
conditions beyond its control including but not limited to acts of God,
governmental restrictions, wars, or insurrections, strikes, floods, work
stoppages and/or lack of materials; provided, however, that the party suffering
such delay or default shall notify the other party in writing of the reasons for
the delay or default. If such reasons for delay or default continuous exist for
six (6) months, this Agreement may be terminated by either party.
Section 9.10. Assignment. Except as otherwise set forth in Sections
2.1 and 2.3 of the Collaboration Agreement with respect to Buyer's right to
grant sublicenses, neither party hereto may assign or transfer this Agreement or
any rights or obligations hereunder without the prior written consent of the
other, except that a party may make such an assignment without the other party's
consent to Affiliates or to a successor to substantially all of the business of
such party, whether in a merger, sale of stock, sale of assets or other
transaction. Any permitted successor or assignee of rights and/or obligations
hereunder shall, in a writing to the other party, expressly assume performance
of such rights and/or obligations. Any permitted assignment shall be binding on
the successors of the assigning party. Any assignment or attempted assignment by
either party in violation of the terms of this Section 9.10 shall be null and
void and of no legal effect.
Section 9.11. Successors and Assigns. Subject to Section 9.10, this
Agreement shall be binding upon and inure to the benefit of the permitted
successors or permitted assigns of Seller and Buyer respectively.
Section 9.12. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
ARTICLE X
BASIS OF BARGAIN
EACH PARTY RECOGNIZES AND AGREES THAT THE WARRANTY DISCLAIMERS AND
LIABILITY AND REMEDY LIMITATIONS IN THIS AGREEMENT ARE MATERIAL, BARGAINED FOR
BASES OF THIS AGREEMENT AND THAT THEY HAVE BEEN TAKEN INTO ACCOUNT AND REFLECTED
IN DETERMINING THE CONSIDERATION TO BE GIVEN BY EACH PARTY UNDER THIS AGREEMENT
AND IN THE DECISION BY EACH PARTY TO ENTER INTO THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first written above.
16
DISCOVERY LABORATORIES, INC.
By: /s/ Robert J. Capetola
-----------------------------------------
Name: Robert J. Capetola, Ph.D.
Title: President and Chief Executive Officer
LABORATORIOS DEL DR. ESTEVE, S.A.
By: /s/ Joan Esteve
------------------------------------------
Name: Mr. Joan Esteve
Title: Vice-President
17
EXHIBIT 10.3
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated and
entered into as of March 6, 2002, by and between DISCOVERY LABORATORIES,
INC., a Delaware corporation (the "Company"), and LABORATORIOS DEL DR.
ESTEVE S.A., a corporation organized and existing under the laws of Spain
("Purchaser").
WHEREAS, the Company and Purchaser, have entered into a (i) Sublicense and
Collaboration Agreement (the "Collaboration Agreement") and (ii) a Supply
Agreement (the "Supply Agreement," both dated as of the date hereof, and
collectively with this Agreement, the "Transaction Agreements"); and
WHEREAS, in connection with the foregoing, the Company wishes to issue and
sell and Purchaser desires to purchase a number of shares (the "Shares") of
common stock, par value $.001 per share, of the Company ("Common Stock"),
determined by dividing $4,000,000 by the Purchase Price (as defined below). The
"Purchase Price" shall mean the average Closing Sales Price for the 30
consecutive trading days immediately preceding March 5, 2002, multiplied by 1.5,
i.e., 150% of such number. The "Closing Sales Price" shall be the reported per
share closing sales price of the Common Stock on the Nasdaq SmallCap Market (the
"SmallCap Market") at 4PM on the applicable trading day.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties, the parties agree
as follows:
1. Purchase and Sale of Shares and Warrants.
1.1 At the Closing (as hereinafter defined), subject to the terms
and conditions contained in this Agreement, in payment of the full purchase
price for the Shares, Purchaser shall provide a wire transfer of immediately
available funds to the Company in an amount equal to Four Million Dollars
($4,000,000) using the following wire transfer instructions (all amounts
referred to in this Agreement shall be in United Stated Dollars):
Bank Name: First Union Bank
401 Tryon Street
Charlotte, NC (USA) 28288
ABA No.: 053000219
Beneficiary: Discovery Laboratories, Inc
Account No.: 9070293484
Swift Code: PNBPUS3NNYC
2. Closing; Deliveries at Closing.
2.1 Closing. The purchase and sale of the Shares shall take place at
a closing (the "Closing") to be held at the offices of Roberts, Sheridan &
Kotel, The New York Practice of Dickstein Shapiro's Corporate & Finance Group at
1177 Avenue of the Americas, 41st Floor, New York, NY 10036-2714 within twenty
four (24) hours after the date of this Agreement, or at such other location,
time and date as may be mutually agreed upon by the parties (the "Closing
Date").
2.2 Deliveries at Closing. After the Closing, the Company shall
deliver a stock certificate evidencing the Shares, all issued in the name of
Purchaser and dated as of the Closing Date.
3. Conditions to Closing.
3.1 Conditions to Purchaser's Obligations at Closing. The obligation
of Purchaser to purchase and pay for the Shares at the Closing is subject to
each of the following conditions precedent:
(a) Officer's Certificate. Purchaser shall have received at the
Closing, a certificate, executed by the appropriate officer of the Company and
dated as of the Closing Date, together with and certifying: (i) the names of the
officers of the Company authorized to sign this Agreement together with the true
signatures of such officers; (ii) a copy of the certificate of incorporation of
the Company, as amended and in effect as of the Closing Date; (iii) a copy of
the bylaws of the Company, as amended and in effect as of the Closing Date; (iv)
that the representations and warranties contained in Section 4 hereof are true
and correct as of the Closing Date; and (v) that the Company has complied with
all the agreements and satisfied all the conditions herein on its part to be
performed or satisfied on or prior to the Closing Date;
(b) Transaction Agreements. Purchaser shall have received at the
Closing the Transaction Agreements, duly executed by an authorized officer of
the Company; and
(c) Instruction Letter. The Company shall have transmitted an
instruction letter to its stock transfer agent directing it to issue to
Purchaser the stock certificate for the Shares, and Purchaser shall have
received a copy of such letter.
3.2 Conditions to Company's Obligations at Closing. The obligation
of the Company to issue and sell the Shares at the Closing is subject to each of
the following additional conditions precedent:
(a) Transaction Agreements. The Company shall have received at the
Closing the Transaction Agreements, duly executed by an authorized officer of
Purchaser; and
(b) Payment. Purchaser shall have delivered Four Million Dollars
($4,000,000) in immediately available funds to Company's specified account in
accordance with Section 1.1.
2
4. Representations and Warranties by the Company. The Company represents
and warrants to the Purchaser as of the date hereof that:
4.1 Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. The
Company is qualified to do business and is in good standing as a foreign
corporation in every jurisdiction in which the failure to so qualify would have
a material adverse effect on the financial condition or business of the Company.
4.2 No Actions. There are no legal or governmental actions, suits,
proceedings or investigations pending or, to the Company's knowledge, threatened
to which the Company is or may be a party or of which property owned or leased
by the Company is or may be the subject, or related to environmental or
discrimination matters, which actions, suits, proceedings or investigations,
individually or in the aggregate, might prevent or might reasonably be expected
to have a material adverse affect on the transactions contemplated by this
Agreement. The Company is not a party to or subject to the provisions of any
material injunction, judgment, decree or order of any court, regulatory body,
administrative agency or other governmental body.
4.3 Compliance with Other Instruments. Except for such matters
which, either individually or in the aggregate, would not have a material
adverse effect on the financial condition or business of the Company, the
execution and delivery of, and the performance and compliance with this
Agreement and the transactions contemplated hereby, with or without the giving
of notice, will not (i) result in any breach of, or constitute a default under,
or result in the imposition of any lien or encumbrance upon any asset or
property of the Company pursuant to any agreement or other instrument to which
the Company is a party or by which it or any of its properties, assets or rights
is bound or affected, (ii) violate the Certificate of Incorporation or Bylaws of
the Company, or, subject to the accuracy of the representations and warranties
of the Purchasers contained in Article 5 of this Agreement, any law, rule,
regulation, judgment, order or decree or (iii) except for the registration of
the Shares under the Securities Act of 1933 (the "Securities Act"), the listing
of the Shares on the SmallCap Market and such consents, notifications,
approvals, authorizations, registrations or qualifications as may be required
under the Securities Exchange Act of 1934 (the "Exchange Act") and applicable
state securities or "blue sky" laws in connection with the purchase of the
Shares by the Purchaser, require any consent, notification, approval,
authorization or order of or filing with any court or governmental agency or
body. The Company is not in violation of its Certificate of Incorporation or
Bylaws nor in violation of, or in default under, any lien, mortgage, lease,
agreement or instrument, except for such defaults which would not, individually
or in the aggregate, have a material adverse effect on the financial condition
or business of the Company. The Company is not subject to any restriction which
would prohibit the Company from entering into or performing its obligations
under this Agreement, except for such restrictions which would not, individually
or in the aggregate, have a material adverse effect on the ability of the
Company to perform its obligations under this Agreement.
4.4 Shares. The Shares, when issued and paid for pursuant to the
terms of this Agreement, will be duly and validly authorized, issued and
outstanding, fully paid, nonassessable and free and clear of all pledges, liens,
encumbrances and restrictions (other than arising herein
3
or under federal or state securities or "blue sky" laws). The issuance of the
Shares shall not be subject to any preemptive or other similar rights.
4.5 Securities Laws. Subject to the accuracy of the representations
and warranties of the Purchasers contained in Section 5 of this Agreement, the
offer, sale and issuance of the Shares as contemplated by this Agreement is
exempt from the registration requirements of the Securities Act, and from the
registration or qualifications requirements of the laws, rules and regulations
of any applicable state or other U.S. jurisdiction.
4.6 Authorized Capital Stock.
(a) As of the Closing Date, 25,563,818 shares of Common Stock and no
shares of the Company's preferred stock, par value $.001 per share ("Preferred
Stock"), were issued and outstanding. All of the outstanding shares of the
Company's capital stock are duly authorized, validly issued, fully paid and
nonassessable.
(b) Except as set forth on Schedule 4.6(b) and in Section 5.12,
there are no outstanding subscriptions, options, warrants, rights, calls,
contracts, demands, commitments, conversion rights or other agreements or
arrangements of any character or nature whatever under which the Company is or
may be obligated (x) to issue or sell shares of its Common Stock or Preferred
Stock or (y) to register shares of its Common Stock or Preferred Stock. No
holder of any security of the Company is entitled to any preemptive or similar
rights to purchase any securities of the Company.
4.7 Corporate Acts and Proceedings. This Agreement has been duly
authorized by the requisite corporate action and has been duly executed and
delivered by an authorized officer of the Company, and is a valid and binding
obligation of the Company, enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and as to limitations on the enforcement of the remedy of
specific performance and other equitable remedies. The requisite corporate
action necessary to the authorization, issuance and delivery of the Shares has
been taken by the Company.
4.8 No Implied Representations. All of the Company's representations
and warranties are contained in this Agreement, and no other representations or
warranties by the Company shall be implied.
4.9 Filing of Reports. Since the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 2000, the Company has filed with
the SEC all reports and other material required to be filed by it therewith
pursuant to Section 13, 14 or 15(d) of the Exchange Act and the Company is
eligible to register the offer and resale of the Shares and the Warrant Shares
on a Registration Statement on Form S-3, or a successor form.
4.10 Compliance with Laws. The business and operations of the
Company have been conducted in accordance with all applicable laws, rules and
regulations of all governmental authorities, except for such violations which
would not, individually or in the aggregate, have a material adverse effect on
the financial condition or business of the Company.
4
4.11 Proprietary Rights. The Company does not have any actual
knowledge of, and the Company has not given or received any notice of, any
pending conflicts with or infringement of the rights of others with respect to
any patents, patent applications, inventions, trademarks, trade names,
applications for registration of trademarks, service marks, service mark
applications, copyrights, know-how, manufacturing processes, formulae, trade
secrets, licenses and rights in any thereof and any other intangible property
and assets (herein called the "Proprietary Rights") which are material to the
business of the Company, as now conducted or as proposed to be conducted. To the
Company's actual knowledge, no action, suit, arbitration, or legal,
administrative or other proceeding or investigation is pending or threatened
which involves any Proprietary Rights. To the Company's knowledge, the Company
is not subject to any judgment, order, writ, injunction or decree of any court
or any Federal, state, local, foreign or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
any arbitrator, and the Company has not entered into and is not a party to any
contract which restricts or impairs the use of any such Proprietary Rights in a
manner which would have a material adverse effect on the financial condition or
business of the Company. The Company has not received written notice of any
pending conflict with or infringement upon any third-party proprietary rights by
the Company.
4.12 Closing Date. Except as to representations and warranties that
speak of a specific date or period, all the representations and warranties made
by the Company in this Section 4 shall be true and complete from the date of
this Agreement through the Closing Date.
4.13 Permits, Licenses, Etc. The Company owns, possesses or has
obtained, and is operating in compliance with, all governmental, administrative
and third party licenses, permits, certificates, registrations, approvals,
consents and other authorizations (collectively, "Permits") necessary to own or
lease (as the case may be) and operate its properties, whether tangible or
intangible, and to conduct its businesses or operations as currently conducted,
except such Permits the failure of which to obtain would not have a material
adverse effect on the business, properties, operations, financial condition or
results of operations of the Company, and the Company has not received any
notice of proceedings relating to the revocation, modification or suspension of
any Permits), if such proceedings would have a material adverse effect on the
Company, or any circumstance which would lead it to believe that such
proceedings are reasonably likely.
4.14 Insurance. The Company maintains insurance of the type and in
the amount reasonably adequate for its business, including, but not limited to,
insurance covering all real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against by similarly situated companies, all of which
insurance is in full force and effect.
4.15 Changes. Since the Company last filed its Current Report on
Form 8-K on January 14, 2002, the Company has not, to the extent material to the
Company, (i) incurred any debts obligations or liabilities, absolute, accrued or
contingent, whether due or to become due, other than in the ordinary course of
business, (ii) mortgaged, pledged or subjected to lien, charge, security
interest or other encumbrance any of its assets, tangible or intangible, (iii)
waived any debt owed to the Company or its subsidiaries, (iv) satisfied or
discharged any lien, claim, or encumbrance or paid any obligation other than in
the ordinary course of business, (v) declared or
5
paid any dividends or (vi) entered into any transaction other than in the usual
and ordinary course of business.
4.16. Reports and Financial Statements. Prior to the execution
hereof, the Company has delivered to the Purchasers true and complete copies of
the Company's most recently filed Form 10-KSB, as amended, and the Proxy
Statement in connection with the Company's most recent Annual Meeting of
Stockholders and all Forms 10-QSB, 8-K and 8-K/A filed by the Company with the
Securities and Exchange Commission (collectively, the "SEC") after January 1,
2001, in each case without exhibits thereto (the "SEC Reports"). As of their
respective filing dates, the SEC Reports were prepared in all material respects
in accordance with the requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations of the SEC thereunder
applicable to such SEC Reports. The SEC Reports, when read as a whole, as they
may be updated or amended, do not contain any untrue statements of a material
fact and do not omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and unaudited interim
financial statements of the Company included in the SEC Reports have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis (except as may be indicated therein or
in the notes thereto) and fairly present, in all material respects, the
financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments and any
other adjustments described in such financial statements.
5. Representations and Warranties by, and Covenants of, the Purchaser.
The Purchaser represents and warrants to, and covenants and agrees with,
the Company, as of the Closing Date, as follows:
5.1 Authorization. Purchaser is duly organized and in good standing
in the jurisdiction of its organization and has all requisite legal and
corporate or other power and capacity and has taken all requisite corporate or
other action to execute and deliver the Agreement, to purchase the Shares to be
purchased by it and to carry out and perform all of its obligations under the
Agreement. This Agreement has been duly authorized, executed and delivered and
constitutes the legal, valid and binding obligation of Purchaser, enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and as to limitations
on the enforcement of the remedy of specific performance and other equitable
remedies. If Purchaser is an entity, the person(s) signing on behalf of such
entity hereby warrant and represent that they have the authority to execute this
Agreement on behalf of each party for whom they have signed.
5.2 Investor Status. Purchaser is an "Accredited Investor" as
defined in Rule 501 of Regulation D promulgated under the Securities Act.
Purchaser acknowledges receiving and reviewing the documents comprising the SEC
Reports, including the documents filed with the SEC included as exhibits
thereto. Purchaser is aware of the Company's business affairs and financial
condition and has had access to and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to acquire the
Shares. Purchaser has such business and financial experience as is required to
give it the capacity to utilize the
6
information received, to evaluate the risks involved in purchasing the Shares,
to make an informed decision about purchasing the Shares and to protect its own
interests in connection with the purchase of the Shares and is able to bear the
risks of an investment in the Shares. Purchaser is not itself a "broker" or a
"dealer" as defined in the Exchange Act and is not an "affiliate" of the Company
as defined in Rule 405 promulgated under the Securities Act.
5.3 Investment Intent. Purchaser is purchasing the Shares for its
own account as principal, for investment purposes only and not with a present
view to or for resale, distribution or fractionalization thereof, in whole or in
part, within the meaning of the Securities Act. Purchaser understands that its
acquisition of the Shares has not been registered under the Securities Act or
registered or qualified under any state securities or "blue sky" laws in
reliance on specific exemptions therefrom, which exemptions may depend upon,
among other things, the bona fide nature of Purchaser's investment intent as
expressed herein. Purchaser has, in connection with its decision to purchase the
number of Shares set forth in this Agreement, relied solely upon the SEC Reports
and the representations and warranties of the Company contained herein.
Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Shares, except in compliance with the
Securities Act and the rules and regulations promulgated thereunder and under
this Agreement.
5.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the Shares may not be resold or otherwise
transferred except in a transaction registered under the Securities Act or
unless an exemption from such registration is available. Purchaser is able to
bear the economic risk of holding the Shares for an indefinite period of time
and can afford a complete lost of its investment. Purchaser understands that
until the Shares have been registered for resale by the Purchasers in compliance
with applicable securities laws, the certificates evidencing the Shares will be
imprinted with the legend set forth in Section 5.5 that prohibits the transfer
of the Shares unless (a) such transaction is registered or such registration is
not required or (b) if the transfer is pursuant to an exemption from
registration, an opinion of counsel reasonably satisfactory to the Company is
obtained to the effect that the transaction is not required to be registered or
is so exempt.
5.5 Legend. Until and unless the Registrable Securities (as such
term is hereinafter defined) are registered under the Securities Act and any
applicable state securities or "blue sky" laws and regulations, and as permitted
by law, each certificate representing the Registrable Securities shall bear
substantially the following legend (in addition to any legends required under
applicable state securities or "blue sky" laws):
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, OR ANY APPLICABLE STATE SECURITIES OR
"BLUE-SKY" LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER SUCH ACT
OR UNDER SUCH LAWS, OR PURSUANT TO AN EXEMPTION FROM SUCH
REGISTRATION, AND ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE
COMMON STOCK PURCHASE AGREEMENT DATED MARCH __, 2002, BETWEEN
7
DISCOVERY LABORATORIES, INC., AND LABORATORIOS DEL Dr. esteve S.A.,
A COPY OF WHICH IS AVAILABLE UPON WRITTEN REQUEST OF THE CORPORATE
SECRETARY OF DISCOVERY LABORATORIES, INC."
"Registrable Securities" shall mean (i) the Shares and (ii) any
Common Stock issued as a dividend or other distribution with respect to, or in
exchange for or in replacement of, the Shares; provided, however, that
"Registrable Securities" shall not include any securities sold by a person
either pursuant to a registration statement or Rule 144 as promulgated by the
SEC under the Securities Act, as such Rule may be amended from time to time, or
any similar successor rule that may be promulgated by the SEC.
5.6 No Legal, Tax Or Investment Advice. Purchaser understands that
nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of the Shares constitutes legal, tax or
investment advice. Purchaser has consulted, at its own risk and expense, such
legal, tax and investment advisors as it, in its sole discretion, has deemed
necessary or appropriate in connection with its purchase of the Shares.
5.7 Closing Date. All the representations and warranties made by the
Purchaser in this Section 5 shall be true and complete from the date of this
Agreement through the Closing Date and the Purchaser shall provide the Company,
before the Closing, with any documents or information necessary for such
representations and warranties to remain true and complete as of the Closing
Date.
5.8 Compliance with Other Instruments. The execution and delivery of
this Agreement, the purchase of the Shares and the performance by the Purchaser
of all other obligations of the Purchaser contemplated hereby will not (i)
violate any law, rule, regulation, judgment, order or decree applicable to
Purchaser or (ii) require any consent, approval, authorization or order of, or
filing with, any court or governmental agency or body. Purchaser is not subject
to any restriction which would prohibit it from entering into or performing its
obligations under this Agreement, except for such restrictions which would not,
individually or in the aggregate, have a material adverse effect on the ability
of Purchaser to perform its obligations under this Agreement.
5.9 Compliance with Insider Trading Rules. Purchaser acknowledges
and agrees that it is aware, and that it will advise each of its affiliates and
representatives that is provided any confidential information of the Company
that the United States securities laws provide that any person who has received
directly or indirectly from an issuer such as the Company material, non-public
information is prohibited from purchasing or selling securities of such issuer
or from communicating such information to any other person under circumstances
in which it is reasonably foreseeable that such person is likely to purchase or
sell such securities, and that violation of such prohibition may involve severe
civil and criminal penalties. Accordingly, Purchaser will not directly or
indirectly, through related parties or otherwise, purchase, trade, offer,
pledge, sell, contract to sell or to purchase or sell or "short" or "short
against the box" (as those terms are generally understood in the securities
markets), or otherwise dispose of or acquire, any securities of the Company or
options in respect of such securities. Purchaser further agrees not to provide
any person with material, nonpublic information, received from the Company or
its representatives, including any relative, associate, or other
8
individual who intends to, or may, (a) trade securities with respect to the
Company which is the subject of such information or (b) otherwise directly or
indirectly benefit from such information.
5.10 No Brokers. Purchaser represents and warrants that it has not
"engaged," "consented to" or "authorized" any broker, finder or intermediary to
act on its behalf, directly or indirectly, as a broker, finder or intermediary
in connection with the transactions contemplated by this Agreement. Purchaser
agrees to indemnify and hold the Company harmless from and against all fees,
commissions or other payments owing to any such person or firm acting on behalf
of such Purchaser hereunder.
5.11 Reliance on Representations. Purchaser acknowledges that the
Company and its counsel are entitled to rely on the representations and
warranties made above.
5.12 Pre-existing Registration Rights. Purchaser acknowledges that
1,765,608 shares of Common Stock (subject to adjustment in the case of a stock
split or recapitalization of the Company and, potentially additional shares that
shall be issuable upon the exercise of certain warrants which are issuable upon
the certain contractual obligations of the Company) that have been previously
issued by the Company, or are issuable by the Company upon the exercise of
certain warrants, are subject to "piggyback" registration rights and that the
holder(s) thereof may elect to exercise such rights in connection with any
registration statement to be filed by the Company pursuant to Section 6, and
that the exercise of any such rights, and the performance by the Company of its
obligations in connection therewith shall not be a violation of the terms of
this Agreement.
6. Registration Rights, Indemnification. As used herein, "Holder" shall
mean the Purchaser or any subsequent valid transferee of the Registrable
Securities of the Purchaser in accordance with the terms of this Agreement.
6.1 Required Registration.
(a) At any time following one hundred eighty (180) days after the
date of this Agreement, the Holders of Registrable Securities who hold and
propose to sell Registrable Securities with an aggregate value of at least
$500,000 shall have the right to require the Company to register under the
Securities Act on Form S-3, or other comparable or successor form, such shares
by delivering written notice thereof to the Company. All such registrations
shall be non-underwritten. For so long as the Company may be obligated to effect
a registration statement pursuant to this Section 6.1, the Company shall use
reasonable efforts to be and remain eligible to use Form S-3 or other
appropriate comparable or successor form under the Securities Act.
(b) The Company shall be obligated to register Registrable
Securities pursuant to this Section 6.1 on not more than one occasion during any
twelve-month rolling period, or on more than two occasions in the aggregate;
provided, however, that such obligation shall be deemed satisfied only when a
registration statement covering all shares of Registrable Securities requested
to be included in such registration statement by the Holders thereof, for sale
in accordance with the method of disposition specified by the requesting
Holders, shall have become effective or if the Holders participating in the
registration withdraw from the registration.
9
(c) The Company shall be entitled to include in any registration
statement referred to in this Section 6.1, for sale in accordance with the
method of disposition specified by requesting holders, shares of Common Stock to
be sold by the Company for its own account or for the account of other security
holders of the Company, but, with respect to shares to be sold by the Company,
only to the extent that such inclusion will not adversely affect, in the
Company's good faith determination, the offering for the account of the Holders
of Registrable Securities.
(d) If, in the event of an offering pursuant to this Section 6.1,
the Company, in its good faith discretion, or, in the event the offering is
underwritten, the managing underwriter, shall be of the opinion that the
inclusion of the Registrable Securities would adversely affect the marketing of
the securities to be sold pursuant to such registration statement or would
otherwise have a material adverse effect on the Company, the number of shares of
Registrable Securities to be included in such registration statement may be
limited and the number of shares of securities that are entitled to be included
in the registration and underwriting shall be allocated in the following manner:
(I) first, pro rata among the holders of Registrable Securities demanded to be
registered therein by the Holders in proportion, as nearly as practicable, to
the respective amounts of shares of Common Stock requested to be registered
therein by such holders at the time of filing the registration statement; and
(II) second, other securities requested to be registered in such registration,
including, without limitation, securities requested to be registered therein by
the Company and by any holders of "piggyback" registrations rights.
6.2 Incidental Registration. If the Company at any time (other than
pursuant to Section 6.1) proposes to register any of its securities under the
Securities Act for sale to the public, whether for its own account or for the
account of other security holders or both (except with respect to registration
statements on Forms S-4, S-8 or another form not available for registering the
Registrable Securities for sale to the public, or which relate to employee
benefit plans or with respect to corporate reorganizations or other transactions
subject to Rule 145 of the Securities Act), each such time it will give written
notice to all Holders of outstanding Registrable Securities of its intention so
to do. Upon the written request of any such Holder, received by the Company
within thirty (30) days after the giving of any such notice by the Company, to
register any of its Registrable Securities, the Company will use its reasonable
efforts to cause such Registrable Securities to be included in the registration
statement proposed to be filed by the Company, all to the extent requisite to
permit the sale or other disposition of such Registrable Securities so
registered. If, in the event of an offering pursuant to this Section 6.2, the
Company, in its good faith discretion, or, in the event the offering is
underwritten, the managing underwriter, shall be of the opinion that the
inclusion of the Registrable Securities would adversely affect the marketing of
the securities to be sold pursuant to such registration statement or would
otherwise have a material adverse effect on the Company, the number of shares of
Registrable Securities to be included in such registration statement may be
limited and the number of shares of securities that are entitled to be included
in the registration and underwriting shall be allocated in the following manner:
(I) first, the securities requested to be registered therein by the Company
shall be included; (II) second, the securities demanded to be registered therein
by the holders of "demand" registration rights; (III) third, pro rata among the
other holders of shares of Common Stock, including the Registrable Securities,
in proportion, as nearly as practicable, to the respective amounts of shares of
Common Stock requested to be registered by such holders at the time of filing
the registration statement.
10
6.3 Registration Procedures. If and whenever the Company is required
by the provisions of Section 6.1 or 6.2 to effect the registration of any
Registrable Securities under the Securities Act, the Company will, as
expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement with
respect to such securities as soon as reasonably practicable after delivery of
the applicable notice, and in any event within thirty (30) days thereof, and use
reasonable efforts to cause such registration statement to become effective
within ninety (90) days after delivery of such notice and remain effective for
the period of the distribution contemplated thereby (determined as hereinafter
provided); provided, however, that that Company's obligation to file a
registration statement, or cause such registration statement to become and
remain effective, shall be suspended for a period not to exceed ninety (90) days
in any twelve-month period if in the reasonable judgment of the Company's Board
of Directors it would be detrimental to the Company to effect a registration at
such time;
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the related prospectus as may be necessary to
keep such registration statement effective for the period specified in paragraph
(a) above and comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities covered by such registration
statement in accordance with the sellers' intended method of disposition set
forth in such registration statement for such period; provided, however, the
Holders hereby acknowledge that the Company may notify the Holders of the
suspension of the use of the prospectus forming a part of the registration
statement until such time as an amendment to such registration statement has
been filed by the Company and declared effective by the SEC or until the Company
has otherwise amended or supplemented such prospectus, and upon receipt of such
notice the Holders shall immediately suspend the use of the prospectus and shall
not offer or sell any securities pursuant to said prospectus during the period
commencing at the time at which the Company gives the Holders notice of the
suspension of the use of said prospectus and ending at the time the Company
gives the Holders notice that Holders may thereafter effect sales pursuant to
said prospectus. Notwithstanding anything herein to the contrary, the Company
(i) shall not suspend use of the registration statement by Holders unless such
suspension is in the good faith opinion of the Company and its counsel advisable
under the federal securities laws and the rules and regulations promulgated
thereunder; and (ii) shall use its best efforts to amend to such registration
statement or amend or supplement such prospectus as soon as practicable to again
permit sales pursuant to said prospectus;
(c) furnish to each seller of Registrable Securities and to each
underwriter, if applicable, such number of copies of the registration statement
and the prospectus included therein (including each preliminary prospectus) as
such persons reasonably may request in order to facilitate the public sale or
other disposition of the Registrable Securities covered by such registration
statement;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the sellers of Registrable Securities or, in
the case of an underwritten public offering, the managing underwriter reasonably
shall request; provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any
11
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;
(e) promptly notify each seller of Registrable Securities and each
underwriter, if applicable, under such registration statement, at any time when
a prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event of which the Company has knowledge as a
result of which the prospectus contained in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing; and
(f) if the offering is underwritten and at the request of any seller
of Registrable Securities, use its best efforts to furnish on the date that
Registrable Securities are delivered to the underwriters for sale pursuant to
such registration: (i) an opinion dated such date of counsel representing the
Company for the purposes of such registration, addressed to the underwriters and
to such seller, in form and substance as is customarily given in an underwritten
public offering; and (ii) a letter dated such date from the independent public
accountants retained by the Company, addressed to the underwriters and to such
seller, in form and substance as is customarily given in an underwritten public
offering.
For purposes of Section 6.3(a) and (b), the period of distribution
of Registrable Securities in any registration shall be deemed to extend until
the earlier of the sale of all Registrable Securities covered thereby and one
hundred twenty (120) days after the effective date thereof (the "Registration
Period").
6.4 Expenses. All expenses incurred by the Company in complying with
Sections 6.1 and 6.3 (to the extent applicable), including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses
(including counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the NASD, transfer taxes, fees of
transfer agents and registrars, but excluding Selling Expenses, are called
"Registration Expenses". All underwriting discounts and selling commissions
applicable to the sale of Registrable Securities are called "Selling Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement under Section 6.1. All (i) Selling Expenses, (ii) fees
and disbursements of counsel for the sellers of Registrable Securities and (iii)
any expenses incurred in complying with Section 6.2, in connection with each
such registration statement shall be borne by the participating sellers on a pro
rata basis based on the number of Registrable Securities included in such
registration statement.
6.5 Indemnification and Contribution.
(a) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Section 6.1 or 6.2, to the
extent permitted by applicable law, the Company will indemnify and hold harmless
each seller of such Registrable Securities thereunder, each underwriter of such
Registrable Securities thereunder and each other person, if any, who controls
such seller or underwriter within the meaning of Section 15 of the Securities
Act, against any losses, claims, damages, actions or liabilities, joint or
several, to which such seller, underwriter or controlling person may become
subject under the Securities Act or other
12
applicable Federal or State securities or "blue sky" laws, to the extent that
such losses, claims, damages, actions or liabilities arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Registrable Securities
were registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein or any amendment or supplement thereof, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each such seller, each such
underwriter and each such controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company will not be liable, to any such indemnitee if and to the extent that any
such loss, claim, damage, action or liability arises out of or is based upon an
(i) untrue statement or alleged untrue statement or omission or alleged omission
so made in conformity with information furnished by or on behalf of such
indemnitee in writing or (ii) such untrue statement or alleged untrue statement
or omission or alleged omission was contained in a preliminary or earlier
effective prospectus and corrected in a final or amended prospectus, and such
indemnitee failed to deliver a copy of the final or amended prospectus at or
prior to the confirmation of the sale of the Registrable Securities to the buyer
of such Registrable Securities; provided, further, that the indemnity agreement
contained in this Section 6.5(a) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Company, which consent shall not be
unreasonably withheld.
(b) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Section 6.1 or 6.2, to the
extent permitted by applicable law, each seller of such Registrable Securities
thereunder, severally and not jointly, will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act, each officer of the Company, each director of
the Company, each underwriter and each person who controls any underwriter
within the meaning of the Securities Act, against all losses, claims, damages,
actions or liabilities, joint or several, to which the Company or such officer,
director, underwriter or controlling person may become subject under the
Securities Act or other applicable Federal or State securities or "blue sky"
laws, to the extent that such losses, claims, damages, actions or liabilities
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the registration statement under which such
Registrable Securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Company and each
such officer, director, underwriter and controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that such seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage, action or liability arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with information
pertaining to such seller, as such, furnished in writing to the Company by or on
behalf of such seller specifically for use in such registration statement or
prospectus; provided, further, that the indemnity agreement contained in this
Section 6.5(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of such seller, which consent shall not be
13
unreasonably withheld; provided, that such consent shall not be required if the
settlement shall include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect of such claim or litigation.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 6.5 and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 6.5 if and to the extent the indemnifying party is prejudiced by
such omission. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel reasonably
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 6.5 for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected;
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have provided the Company with a legal opinion of counsel reasonably
satisfactory to the Company and its counsel that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified party shall have the right to select a separate counsel
and to assume such legal defenses and otherwise to participate in the defense of
such action, with the reasonable expenses and fees of such separate counsel and
other expenses related to such participation to be reimbursed by the
indemnifying party as incurred; provided, further, that the Company shall not
have any reimbursement obligation for the expenses and fees of more than one
such separate counsel for all indemnitees.
(d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any Holder of
Registrable Securities exercising rights under this Agreement, or any
controlling person of any such Holder, makes a claim for indemnification
pursuant to this Section 6.5 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 6.5 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such selling Holder
or any such controlling person in circumstances for which indemnification is
provided under this Section 6.5; then, and in each such case, the Company and
such Holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other, as
well as any other relevant equitable considerations. The relative fault of the
parties shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
14
information and opportunity to correct or prevent such statement or omission;
provided, however, that, in any such case, (A) no such Holder will be required
to contribute any amount in excess of the public offering price of all such
Registrable Securities offered by it pursuant to such registration statement;
and (B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.
6.6 Changes in Common Stock. If, and as often as, there is any
change in the Common Stock by way of a stock split, stock dividend, combination
or reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the rights and privileges granted hereby shall
continue with respect to the Common Stock as so changed.
6.7 Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the SEC that may at any time permit the sale
of the Registrable Securities to the public without registration, the Company
agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use commercially reasonable efforts to file with the SEC in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each Holder of Registrable Securities forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 and of the Securities Act and the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents so filed by the Company as such Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing such Holder to sell any Registrable Securities without registration.
6.8 Certain Holder Obligations. (a) As a condition to the inclusion
of its Registrable Securities in a registration effected pursuant to Section 6.1
or 6.2, the Holders will promptly provide the Company with such information as
the Company shall reasonably request in order to prepare the applicable
registration statement for such registration, including, but not limited to,
information regarding the Holders, the securities of the Company owned
beneficially or of record by the Holders, the distribution proposed by the
Holders, a customary selling securityholders questionnaire and, upon the
Company's request, the Holders shall provide such information in writing and
signed by the Holders and stated to be specifically for inclusion in the
applicable registrations. In the event that the distribution of the Common Stock
covered by the applicable registration statement shall be effected pursuant to
an underwritten offering as contemplated by Section 6.2, the inclusion of the
Registrable Securities shall be conditioned on the Holders' execution and
delivery of a customary underwriting agreement with terms and conditions
reasonably satisfactory to the Company with respect thereto.
(b) The Holders shall not take any action with respect to any
distribution deemed to be made pursuant to any registration statement pursuant
to Section 6.1 or 6.2, which would constitute a violation of Regulation M under
the Exchange Act.
15
(c) If, at the end of the Registration Period, the Holders have
Registrable Securities which were included in such registration statement, the
Holders shall discontinue sales of such securities pursuant to the registration
statement and prospectus upon receipt of notice from the Company of its
intention to remove from registration the shares covered by registration
statement which remain unsold (as permitted under the provisions of this Section
6), and the Holders shall notify the Company of the number of shares registered
which remain unsold promptly upon receipt of such notice from the Company.
(d) The Holders shall have no right to take any action to restrain,
enjoin or otherwise delay any registration as a result of any controversy that
may arise with respect to the interpretation or implementation of the terms of
this Section 6.
(e) The Registrable Securities shall not be transferable in the
absence of registration under the Securities Act and any applicable state
securities or "blue sky" laws and regulations or an exemption therefrom or in
the absence of compliance with any term of the Agreement.
(f) Purchaser hereby covenants with the Company not to make any sale
of the Registrable Securities except either (i) a sale of Registrable Securities
in accordance with the Registration Statement, in which case the Purchaser
covenants to comply with the requirement of delivering a current prospectus,
(ii) a sale of Registrable Securities in accordance with Rule 144, in which case
the Purchaser covenants to comply with Rule 144 and to deliver such additional
certificates and documents as the Company may reasonably request or (iii) in
accordance with another exemption from the registration requirements of the
Securities Act. The legend set forth in Section 5.5 will be removed from a
certificate representing Registrable Securities following and in connection with
any sale of Registrable Securities or pursuant to subsection (i) or (ii) hereof
but not in connection with any sale of Registrable Securities pursuant to
subsection (iii) hereof.
6.9 Termination of Registration Rights. Notwithstanding Section 6.3,
the obligations of the Company to register shares of Registrable Securities
under Section 6.1 or 6.2 for a Holder of Registrable Securities shall terminate
on the date on which such Holder can, in the reasonable opinion of counsel to
the Company, sell all shares of its Registrable Securities in a three-month
period without registration under the Securities Act pursuant to Rule 144 under
the Securities Act.
7. Additional Agreements.
7.1 Short Sales, etc. Purchaser represents and agrees that, during
the period from February 1, 2002 through the date of this Agreement, Purchaser
and its Affiliates (as hereinafter defined) did not and, from the date hereof
until the second anniversary of the date of this Agreement, Purchaser will not,
and shall cause its Affiliates not to, execute or effect or cause to be executed
or effected any "short sale" (as defined in Rule 3b-3 of the Exchange Act) of
Common Stock or any hedging transaction in which the other party to such
transaction is reasonably likely to engage in such a short sale as a direct
result of such transaction. For the purposes of this Agreement, "Affiliate"
shall have the meaning given such term in Rule 12b of the Exchange Act.
16
7.2 Restriction on Purchase of Common Stock. Until the expiration or
termination of the Collaboration Agreement, Purchaser will not, and shall cause
its Affiliates not to, purchase or become the beneficial owner of any shares of
Common Stock which results in Purchaser and its Affiliates beneficially owning
more than nineteen percent (19%) of the issued and outstanding shares of Common
Stock; provided, however, that (a) nothing in this Section shall prevent
Purchaser and its Affiliates from acquiring Common Stock contemplated by the
Transaction Agreements and (b) Purchaser shall not be deemed to violate this
Section as a result of any reorganization, recapitalization, stock repurchase,
stock combination or other similar transaction effected by the Company with
respect to the Common Stock if Purchaser and its Affiliates beneficially owned
less than 19% of the issued and outstanding shares of Common Stock before giving
effect to such transaction. For the purposes of this Section 7.2, "beneficial
ownership" shall be determined in accordance with Rule 13d-3 promulgated under
the Exchange Act.
7.3 Restrictions on Sale of Shares.
(a) Until one hundred eighty (180) days after the date of this
Agreement, Purchaser will not sell or otherwise transfer the Shares.
(b) If, at any time prior to the third anniversary of the date of
this Agreement, Purchaser proposes to sell Shares constituting one percent
(1.0%) or more of the outstanding shares of Common Stock, then Purchaser shall
first offer to sell such Shares of the Company, and the parties agree to
negotiate in good faith to reach an agreement on the purchase price and other
terms of the sale of such Shares to the Company. If the parties are not able to
reach such an agreement within 30 business days (a business day shall be any day
other than a Saturday, Sunday or legal holiday on which banks in New York and
Spain are open for the conduct of their banking business), then Purchaser shall
be free to proceed with such sale to a third party so long as it complies with
any other applicable terms of this Agreement.
(c) Until the expiration or termination of the Collaboration
Agreement, Purchaser will not knowingly sell the Shares to a person or entity
which actively sells, distributes, markets, develops, or produces a
pharmaceutical product which directly competes with the Company. In any event,
this subsection (c) shall not prevent Purchaser from selling the Shares in
open-market transactions.
(d) The restrictions under this Section shall not be applicable to
any transfers of the Shares to any Affiliate of Purchaser, so long as such
Affiliate agrees in advance of such transfer in an enforceable written
instrument to be bound by all the terms and conditions of this Agreement as if
it were Purchaser and a party hereto, which instrument shall be delivered a
reasonably practicable time prior to such sale or transfer.
7.4 Voting Agreement. Until the earlier of (i) such time that
Purchaser beneficially owns less than 1.5% of the issued and outstanding shares
of Common Stock of the Company, and (ii) the completion of the Company's annual
meeting of shareholders for the calendar year 2003, at each annual meeting of
the shareholders of the Company or in connection with any other meeting or
action by written consent in lieu of a meeting of the shareholders of the
Company, Purchaser shall vote or act with respect to all shares of Common Stock
beneficially owned by it (x) in favor of all persons nominated by the then
current Board of
17
Directors of the Company for election to the Board of Directors of the Company
and (y) in accordance with the recommendations of the Board of Directors with
respect to any other issue; provided, that this clause (y) shall not apply to
any issue that is directly related to the matters which are subject to the
Transaction Agreements. The voting agreement contained in this Section 7.4 is
irrevocable to the extent permitted by applicable law and is coupled with an
interest. Until the earlier of (i) such time that Purchaser beneficially owns
less than 2.5% of the issued and outstanding shares of Common Stock of the
Company, and (ii) three years after the date of this Agreement, at and in
relation to each annual meeting of the shareholders of the Company or in
connection with any other meeting or action by written consent in lieu of a
meeting of shareholders of the Company, Purchaser will not actively oppose any
items referred to in clauses (x) and (y) above.
7.5 Continuation of Certain Restrictions. If at any time prior to
the third anniversary of the date of this Agreement, Purchaser transfers Shares
in accordance with the provisions of this Agreement, Purchaser shall not effect
such transfer unless the transferee agrees in an enforceable written instrument
to be bound by the terms and conditions of Sections 7.1, 7.3(c), and 7.4;
provided, however, that (i) such transferee shall not be bound to any greater
extent as to duration of time or otherwise than Purchaser is bound under such
Sections on the date of this Agreement and (ii) this Section 7.5 shall not apply
to any transfer by Purchaser to a transferee that will own one-half of one
percent (.5%) or less of the Company's outstanding shares of Common Stock after
giving effect to such transfer.
8. Miscellaneous.
8.1 Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and do not constitute a part of
this Agreement.
8.2 Choice of Law; Venue. (a) Notwithstanding the place where this
Agreement may be executed by any of the parties hereto, the parties expressly
agree that all the terms and provisions hereof shall be construed in accordance
with and governed by the laws of the State of New York without regard to
principles of conflicts of law. In the event that a judicial proceeding is
necessary, the sole forum for resolving disputes arising out of or relating to
this Agreement is the Supreme Court of the State of New York in and for the
County of New York or the Federal Courts for such state and county, and all
related appellate courts (collectively, the "New York Courts"). The parties
hereby irrevocably and unconditionally consent to the jurisdiction of such
courts.
(b) Each of the parties hereby irrevocably and unconditionally
consents to venue in the New York Courts, and hereby irrevocably and
unconditionally waives any objection to the laying of venue of any judicial
proceeding in the New York Courts, and agrees not to plead or claim in any such
New York Court that any such judicial proceeding brought in any such court has
been brought in an inconvenient forum.
(c) Each of the parties waives the right to a trial by jury in any
action under this Agreement or any judicial proceeding arising out of the
transactions contemplated hereby, regardless of which party initiates such
judicial proceeding.
18
8.3 Counterparts. This Agreement may be executed concurrently in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.4 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the Company and Purchaser and their respective
successors and assigns, provided that neither the Company nor Purchaser may
assign or transfer any or all of its rights or obligations under this Agreement
without the prior written consent of the other party and any attempted
assignment without such consent shall be null and void.
8.5 Amendments. No amendment, modification, waiver, discharge or
termination of any provision of this Agreement nor consent to any departure by
the Purchasers or the Company therefrom shall in any event be effective unless
the same shall be in writing and signed by the party to be charged with
enforcement, and then shall be effective only in the specific instance and for
the purpose for which given. No course of dealing between the parties hereto
shall operate as an amendment of, or a waiver of any right under, this
Agreement.
8.6 Severability. The holding of any provision of this Agreement to
be invalid or unenforceable by a court of competent jurisdiction shall not
affect any other provision of this Agreement, which shall remain in full force
and effect. If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced in
whole or in part, such provision shall be interpreted so as to remain
enforceable to the maximum extent permissible consistent with applicable law and
the remaining conditions and provisions or portions thereof shall nevertheless
remain in full force and effect and enforceable to the extent they are valid,
legal and enforceable, and no provisions shall be deemed dependent upon any
other covenant or provision unless so expressed herein.
8.7 Notices. All notices and other communications provided for
hereunder shall be in writing, shall specifically refer to this Agreement, shall
be addressed to the receiving party's address set forth below or to such other
address as a party may designate by notice hereunder, and shall be deemed to
have been sufficiently given for all purposes if (a) mailed by first class
certified or registered mail, postage prepaid, (b) sent by nationally recognized
overnight courier for next Business Day delivery, (c) personally delivered, or
(d) made by telecopy or facsimile transmission with confirmed receipt.
If to Company: Discovery Laboratories, Inc.
350 South Main Street, Suite 307
Doylestown, PA 18901-4874
Attn: President
Facsimile: (215) 340-3940
with a copy to: Roberts, Sheridan & Kotel
The New York Practice of
Dickstein Shapiro's Corporate & Finance Group
1177 Avenue of the Americas, 41st Floor
New York, NY 10036-2714
Attn: Ira L. Kotel
Facsimile: (212) 997-9880
19
In the case of Buyer: Laboratorios del Dr. Esteve, S.A.
Av. Mare de Deu de Montserrat, 221
08041 Barcelona (Spain)
Attention: Development Director
Facsimile: 34.93.433.00.72
8.8 Waiver. It is agreed that a waiver by either party of a breach
of any provision of this Agreement shall not operate, or be construed, as a
waiver of any subsequent breach by that same party.
8.9 Other Documents. The parties agree to execute and deliver all
such further documents, agreements and instruments and take such other and
further action as may be necessary or appropriate to carry out the purposes and
intent of this Agreement.
8.10 Publicity. Except as otherwise required by applicable law or by
obligations pursuant to any listing agreement with or rules of any securities
exchange or automated quotation system, neither party shall, and shall cause its
respective Affiliates not to, not, issue any press release or make any other
public statement relating to, connected with or arising out of this Agreement or
the matters contained herein without the other parties' prior written approval
of the contents and the manner of presentation and publication thereof (which
approval shall not be unreasonably withheld or delayed).
8.11 No Third Party Beneficiaries. Nothing in this Agreement shall
create or be deemed to create any rights in any person or entity not a party to
this Agreement, except for the Holders of Registrable Securities and certain
indemnitees.
8.12 Survival. The representations, warranties, covenants and
agreements made herein by the Company and Purchaser shall survive the Closing.
8.13 HSR Filings. Purchaser acknowledges and agrees that if any of
the transactions contemplated by this Agreement or any other Transaction
Agreement shall require compliance with any applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act"), and the antitrust,
competition, foreign investment or similar laws of any foreign countries or
supranational commissions or boards that require pre-merger notifications or
filings by either the Company or Purchaser, neither party shall have breached in
any material respect its obligations under this Agreement if the closing of any
such transaction is delayed to allow the parties to comply with any such laws,
rules and regulations, and any waiting periods required thereunder, including,
but not limited to compliance with any "Second Requests" as provided for, and
defined in, the HSR Act.
8.14 Entire Agreement. This Agreement and the other Transaction
Agreements embody the entire agreement and understanding between the parties
hereto with respect to the subject matter thereof and supersede all prior oral
or written agreements and understandings relating to the subject matter thereof.
No statement, representation, warranty, covenant or agreement of any kind not
expressly set forth in the Transaction Agreements shall affect, or be
20
used to interpret, change or restrict, the express terms and provisions of the
Transaction Agreements.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
21
IN WITNESS WHEREOF, Company and Purchaser have caused this Common Stock
Purchase Agreement to be executed in their names by their duly authorized
officers or representatives effective as of the date first above written.
DISCOVERY LABORATORIES, INC.
By: /s/ Robert J. Capetola
-----------------------------------------
Name: Robert J Capetola, Ph.D.
Title: President and Chief Executive Officer
LABORATORIOS DEL DR. ESTEVE S.A.
By: /s/ Joan Esteve
-----------------------------------------
Name: Mr. Joan Esteve
Title: Vice-President
22
SCHEDULE 4.6(b)
Options:
ATI Plan, available & unexercised 157,040
1996 Plan, available & unexercised 58,374
1998 Plan, available & unexercised 3,931,926
Non-Plan, issued & unavailable 120,000
Common Placement Warrants 55,621
Common Placement Warrants 164,911
Preferred B Placement Warrants 654,911
Unit Options 394,959
Common Placement Warrants 348,341
Class C Warrants 56,907
Class E Warrants 580,569
Class F Warrants 712,552
Class G Warrants 357,143
Class H Warrants* 564,706
Other Warrants:
Leerink Swann 65,000
Shipley Raidy 50,000
---------
8,272,960
=========
*Includes 244,706 Class H Warrants that may be issued in conjunction with the
PharmaBio Development Inc. Class H Warrant Agreement.
23
[LOGO]
DISCOVERY LABORATORIES, INC.
EXHIBIT 99.1
FOR IMMEDIATE RELEASE:
Company Contact: Investor Contact:
John G. Cooper Harvey Goralnick/Brad Meyer
SVP/CFO FOCUS Partners LLC
215-340-4699 212-752-9445
Info@discoverylabs.com dsco@focuspartners.com
Discovery Laboratories & Esteve Expand Relationship to Develop
and Commercialize Surfaxin(R) in Europe
Doylestown, PA -- March 7, 2002 -- Discovery Laboratories, Inc. (Nasdaq: DSCO),
a late-stage specialty pharmaceutical company leveraging its platform technology
in humanized lung surfactants to develop potential novel respiratory therapies
and pulmonary drug delivery products, today announced a significantly expanded
alliance with Laboratorios Del Dr. Esteve S.A ("Esteve") for the development,
marketing and sales of Surfaxin throughout Europe, Central America and South
America. This expanded collaboration supersedes existing sublicense and supply
agreements between Discovery and Esteve in October 1999, which limited the
European territory to Southern Europe.
Through the alliance, Esteve will market Surfaxin for respiratory distress
syndrome (RDS) in premature infants, meconium aspiration syndrome (MAS) in full
term babies, and acute lung injury/acute respiratory distress syndrome
(ALI/ARDS) in adults. Currently, Discovery is conducting two phase 3 clinical
trials for RDS, a phase 3 trial for MAS and a Phase 2 trial for ARDS. In
addition, the new arrangement anticipates an opportunity for Esteve to negotiate
licenses for the development and marketing of future Discovery products in the
above territories.
The agreement provides for an up-front licensing fee to Discovery of $500,000, a
purchase by Esteve of $4 million of Discovery's common stock at $4.867 per share
(a 50% premium to the trailing 30 day average determined as of March 4, 2002),
and milestone payments to be made to Discovery tied to attaining specific
regulatory approvals for Surfaxin. Additionally, Esteve will sponsor clinical
trial costs for ALI/ARDS to obtain European Agency for the Evaluation of
Medicinal Products (EMEA) approval for marketing in Europe. Under the prior
arrangement, Esteve had provided support for Discovery's multinational clinical
trials for RDS and MAS in Europe. Discovery retains manufacturing rights and, as
part of the collaboration, Esteve has agreed to an exclusive supply agreement,
whereby, they will purchase Surfaxin drug product from Discovery. Discovery will
receive, as a potential ongoing revenue stream, a transfer price based on sales
of Surfaxin by Esteve and/or its sublicensee(s).
- more-
Antoni Esteve, Ph.D., Esteve's Director of Scientific and Commercial Operations,
commented, "Esteve is very proud to expand our collaboration with Discovery.
Over the last several years, we have increased our confidence in the significant
potential of humanized surfactants to improve therapies for the treatment of
babies suffering from respiratory disorders, adults suffering from acute
respiratory distress syndrome, and the downstream possibility of aerosolized
surfactants treating a broader range of respiratory diseases and as a drug
delivery platform. Our additional investment in Discovery supports this
confidence and gives Esteve the opportunity to broaden our product portfolio for
the medical communities we serve."
"We have worked closely with Esteve since 1999 and they have been an excellent
partner," said Robert J. Capetola, Ph.D., President and Chief Executive Officer
of Discovery. "Expanding our relationship to now include all of Europe was a
natural progression for us. Esteve has a superb reputation of marketing
innovative pharmaceuticals, and we are pleased to be represented by their
professional team to effectively market and distribute Surfaxin to the critical
care hospital community. In combination with our recent Quintiles Transnational
collaboration, Discovery now has in place the sales and marketing infrastructure
to bring Surfaxin to the critical care markets in Europe, the United States and
Latin America. Discovery will establish and maintain the global brand strategy
for Surfaxin, while our collaborators will be responsible for regional
implementation. Our objective is to have a uniform, recognizable
Discovery/Surfaxin image visible to the critical care markets throughout the
world. Meanwhile, Discovery will record a significant share of the revenues, and
in the case of the United States, Discovery should generate margins typical of a
fully-integrated specialty pharmaceutical company."
Human lung surfactants are substances naturally present in the lung tissue and
are essential to the lungs' ability to absorb oxygen. Discovery's Surfaxin is
the first humanized peptide-based surfactant that mimics the human surfactant
protein B, considered physiologically the most important of the four major
proteins found in human lung surfactants.
RDS in premature infants is a breathing disorder in which the lungs of infants
do not stay open due to an insufficient amount of surfactant, which is produced
naturally in normally developing infants as their lungs mature. Approximately
270,000 cases of RDS in premature infants occur in the developed world annually.
MAS results when a full-term baby inhales meconium, a material produced in the
intestine of a full-term baby before birth. Severe respiratory distress is a
result and there are currently no approved therapies anywhere in the world.
Approximately 60,000 cases of MAS occur in the developed world annually.
ALI/ARDS is a life-threatening disorder for which there are currently no
approved therapies anywhere in the world. ALI/ARDS is characterized by an excess
of fluid in the lungs and decreased oxygen levels in the patient. One prominent
characteristic is the destruction of surfactants. These conditions are caused by
events such as smoke inhalation, near drowning, industrial accidents and other
traumas and illnesses including pneumonia and septic shock. Because there are no
approved treatments, the mortality rate can range from 35% to 50%. There are
estimated to be between 150,000 and 250,000 ALI/ARDS patients per year in each
of the U.S. and Europe. The current standard of care includes placing patients
on mechanical ventilators in intensive care units. Surfaxin is intended to
re-establish the lung's capacity to absorb oxygen.
25
About Esteve
Privately owned, Esteve is one of the largest pharmaceutical corporations in
Southern Europe. With a turnover of EURO 561 million in 2001, its own products
distributed in more than 80 markets worldwide, patents granted in more than 40
countries, and employing more than 2,000 people, it is committed to research and
international expansion as a key to its future and continued growth.
About Discovery Laboratories
Discovery Laboratories, Inc. is a specialty pharmaceutical company leveraging
its platform technology in humanized lung surfactants to develop potential novel
respiratory therapies and pulmonary drug delivery products. Surfaxin, the
Company's lead product, is currently in two pivotal Phase 3 multi-national
clinical trials for Respiratory Distress Syndrome (RDS) in premature infants, a
Phase 3 clinical trial for Meconium Aspiration Syndrome (MAS) in full-term
infants, and a Phase 2 clinical trial for Acute Lung Injury/Acute Respiratory
Distress Syndrome (ALI/ARDS) in adults. Aerosol formulations of the Company's
surfactant technology are being developed in an effort to treat other
respiratory conditions, including asthma and chronic obstructive pulmonary
disease, and as a novel pulmonary drug delivery vehicle to efficiently deliver
drugs to the respiratory tract that are currently delivered orally or by
injection. To serve the critical care marketplace, the Company is developing a
dedicated sales and marketing capability through a collaboration with Quintiles
Transnational Corp for the US, and has a commercialization alliance with
Laboratorios Del Dr. Esteve S.A for Europe and Latin America. Interested parties
can receive corporate updates by sending their email addresses to
dsco@focuspartners.com. More information about Discovery Laboratories is
available on the Company's Web site at www.discoverylabs.com.
This press release shall not constitute an offer to sell or a solicitation of an
offer to buy any securities of the Company. To the extent that statements in
this press release are not strictly historical, including statements as to the
Company's business strategy, outlook, objectives, plans intentions, goals,
future financial conditions, future collaboration agreements, the success of the
Company's product development, or otherwise as to future events, such statements
are forward-looking, and are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The forward-looking statements
contained in this release are subject to certain risks and uncertainties that
could cause actual results to differ materially from the statements made. Among
the factors which could affect the Company's actual results and could cause
results to differ from those contained in the forward-looking statements
contained herein are the risk that financial conditions may change, the risk
that the Company will not be able to raise additional capital or enter into
additional collaboration agreements, risks relating to the progress of the
Company's research and development and the development of competing therapies
and/or technologies by other companies. Those associated risks and others are
further described in the Company's periodic filings with the Securities and
Exchange Commission including the most recent reports on Form 10-KSB, 8-K and
10-QSB, and amendments thereto.
Statements in this press release regarding Esteve and Discovery have been made
by each respective company and are that company's sole responsibility.
# # #