[*CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN PORTIONS OF THIS
DOCUMENT. EACH SUCH PORTION, WHICH HAS BEEN OMITTED HEREIN AND REPLACED WITH AN
ASTERISK [*], HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.]
LICENSE, DEVELOPMENT AND DISTRIBUTION AGREEMENT
THIS LICENSE, DEVELOPMENT AND DISTRIBUTION AGREEMENT is made
and entered into this 20th day of September, 2002, by and between VYTERIS, INC.
("VYTERIS"), a Delaware corporation, and X. XXXXX MEDICAL INC. ("B. ------- ---
Xxxxx"), a Pennsylvania corporation.
BACKGROUND
A. Vyteris is engaged in the business of, among other
things, the manufacture and development of novel transdermal drug delivery
systems.
B. (i) Vyteris is the owner or licensee of certain patent
and related intellectual property rights that pertain to, among other things, a
transdermal lidocaine delivery system and possesses the manufacturing facilities
to produce such transdermal lidocaine delivery system; and (ii) X. Xxxxx
possesses the facilities and ability to distribute such transdermal lidocaine
delivery system.
X. X. Xxxxx desires to obtain from Vyteris, and Vyteris
desires to grant to X. Xxxxx, exclusive worldwide distribution rights and
certain license rights to (i) use the patent and related intellectual property
rights pertaining to such transdermal lidocaine delivery system, and (ii)
market, sell and distribute such transdermal lidocaine delivery system, all of
the foregoing on the terms and subject to the conditions contained in this
Agreement.
TERMS AND CONDITIONS
NOW, THEREFORE, in consideration of the premises and covenants
contained herein, and intending to be legally bound, it is hereby agreed as
follows:
SECTION 1. GENERAL PROVISIONS; DEFINITIONS.
1.1 INTERPRETATIONS OF AGREEMENT. Unless expressly provided
otherwise in this Agreement or unless the context requires otherwise:
(a) This Agreement has been jointly negotiated by the
parties and is to be interpreted according to its fair meaning as if the parties
had prepared it together and not strictly for or against either party.
(b) The gender includes the neuter, feminine and masculine
and the number includes the singular and the plural.
(c) Any references to parties, Sections, Exhibits or
Schedules shall be to the parties hereto and the relevant Sections, Exhibits or
Schedules of this Agreement, as appropriate.
(d) The word "OR" is inclusive and shall also mean "AND."
(e) The words "HEREIN," "HEREOF" and "HEREUNDER" and other
words of similar import refer to this Agreement as a whole and not to any
particular Section of this Agreement.
(f) The words "INCLUDES" and "INCLUDING" shall mean by way
of example and not by way of limitation.
(g) References in this Agreement to provisions of this
Agreement refer to the terms, conditions and covenants contained in this
Agreement taken as a whole.
1.2 DEFINITIONS. For purposes of this Agreement, the following
terms shall have the meanings hereinafter set forth in this Section 1.2:
"ADR" shall mean, collectively, the regulations
pertaining to the postmarketing reporting of adverse drug experiences codified
in Title 21, Section 314.80 of the CFR.
"AFFILIATE" shall mean, with respect to any applicable
Person, any Person which is, directly or indirectly owned, controlled by, under
common control with, or controlling such Person.
"AGENCY" and "AGENCIES" shall mean, individually or
collectively, as appropriate, any applicable governmental regulatory authority
or all applicable governmental regulatory authorities involved in regulating or
granting approval or clearance for the manufacture, marketing, sale and/or
distribution of the Products (including, without limitation, the FDA).
"AGREEMENT" shall mean this License, Development and
Distribution Agreement, together with all Exhibits hereto, and any amendments,
restatements, modifications or supplements hereof or hereto.
"AVERAGE SELLING PRICE" shall mean for and with respect
to any applicable Measurement Period, the average price at which the disposable
iontophoretic patch Products described in EXHIBIT 1.2(H) is sold by X. Xxxxx and
its Affiliates to end user customers in the USA Territory.
"BANKRUPTCY CODE" shall mean the United States
Bankruptcy Code, Title 11 of the United States Code, as amended, or any
successor law thereto, and any rules promulgated in connection therewith.
"BBM AG" shall mean X. Xxxxx Melsungen AG, the parent
company of X. Xxxxx.
"X. XXXXX" shall have the meaning ascribed to it in the
heading of this Agreement.
-2-
"X. XXXXX NET SALES REPORT" shall have the meaning
ascribed to it in Section 3.5(b) hereof.
"X. XXXXX PARTIES" shall have the meaning ascribed to it
in Section 6.1(b) hereof.
"X. XXXXX REVENUE SHARE PAYMENT" shall have the meaning
ascribed to it in Section 3.5(a) hereof.
"X. XXXXX REVENUE SHARE PERCENTAGE" shall mean: (i)
sixty percent (60%) for the first and second Contract Year; and (ii) fifty
percent (50%) for subsequent Contract Years.
"X. XXXXX REVENUE SHARE PERCENTAGE ADJUSTMENT" shall
mean have the meaning assigned to it in Section 3.5(e) hereof.
"BD&C" shall mean Becton, Xxxxxxxxx and Company, a New
Jersey corporation, from which Vyteris has been granted the License Rights.
"BD&C LICENSE AGREEMENT" shall mean the Transaction
Agreement dated as of November 10, 2000 among BD&C, Xxxxxxx Xxxxx Specialty
Group, LLC, Xxxxxxx Xxxxx Ventures, Inc. and Vyteris, as licensee, pursuant to
which BD&C granted the License Rights to Vyteris.
"CFR" shall mean the Code of Federal Regulations, as in
effect from time to time.
"CGMP" shall mean current good manufacturing practice
for finished pharmaceuticals as set forth in Title 21, Parts 210 and 211 of the
CFR.
"CHANGE IN CONTROL TRANSACTION" shall mean, with respect
to Vyteris, the occurrence of any of the following events: (i) a merger,
consolidation or other reorganization involving Vyteris or its parent in which
Vyteris or its parent, as the case may be, is not the surviving entity; (ii) the
occurrence of a Liquidity Event; (iii) any Person or "GROUP" (as such terms are
defined in Sections 13(d) and 14(d) of the Exchange Act) becomes the "BENEFICIAL
OWNER" (as defined in Rule 13d-5 under the Exchange Act, except that a person
shall be deemed to have "BENEFICIAL OWNERSHIP" of all securities that such
person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of more than fifty
percent (50%) of the total voting power of the issued and outstanding voting
capital stock of Vyteris normally entitled to vote in the election of directors
of Vyteris; (iv) during any consecutive two (2) year period, individuals who at
the beginning of such period constituted the Board of Directors of Vyteris
(together with any new directors whose election by the stockholders of Vyteris
was approved by a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors of Vyteris then in office; or (v) a sale,
exchange, transfer or other disposition, whether voluntary or involuntary, to
another Person of all or substantially all (A) the assets of Vyteris or (B) the
assets relating to the manufacture, marketing, sale or distribution of the
-3-
Products; PROVIDED, HOWEVER, for purposes of clause (v) of this definition,
"sale, exchange, transfer or other disposition" shall not include (1) the
Permitted Encumbrance, or (2) the granting by Vyteris of a lien, security
interest, pledge or other encumbrance in favor of a bona-fide lender as security
for indebtedness for borrowed money of Vyteris to such lender so long as Vyteris
complies with the provisions of Section 2.2(a)(ix) hereof.
"CLAIM" shall have the meaning ascribed to it in Section
6.1(b) hereof.
"COMMERCIAL START DATE" shall mean the first to occur
of: (a) the date of the first commercial sale of the Product by X. Xxxxx or its
Affiliates to a third party in the USA Territory for commercial use with humans;
or (b) ninety (90) days after (i) Vyteris has the obtained the necessary Agency
approvals and clearances for the manufacture, marketing, distribution and/or
sale of the Products in the USA Territory and (ii) an authorized officer of
Vyteris shall have delivered a written certification to X. Xxxxx indicating that
Vyteris is able to manufacture and supply Products to X. Xxxxx pursuant to and
in accordance with the provisions of Section 3 hereof.
"COMMON STOCK" shall mean shares of common stock of
Vyteris, having a par value of $.0001 per share, established under and pursuant
to the Certificate of Incorporation of Vyteris in effect as of the date hereof.
"COMPETITIVE PRODUCT" shall mean, collectively, any
transdermal topical anesthesia product, the primary purpose of which is to
prevent or eliminate pain resulting from dermal penetration or incision.
"CONFIDENTIAL INFORMATION" shall mean and include,
collectively, all intellectual property such as, but not limited to, algorithms,
approvals, certifications, chemical compounds, conceptual expressions,
copyrights, data, designs, developments, formulae, ideas, improvements,
inventions, know-how, patent applications, and all related foreign applications,
continuations, continuations-in-part and divisional applications, prototypes,
supply sources, tests and test results and trade secrets, as well as any and all
information that is received by either party hereto (which, for purposes of this
definition and the provisions of Section 7.2 hereof, shall be referred to herein
as the "RECEIVING PARTY") from the disclosing party hereto (which, for purposes
of this definition and the provisions of Section 7.2 hereof, shall be referred
to herein as the "DISCLOSING PARTY"), that is designated by the disclosing party
as confidential and, if in written form or otherwise embodied in a tangible
article, is marked "CONFIDENTIAL" or is designated as being confidential in
writing by the disclosing party within thirty (30) days of the disclosing
party's disclosure to the receiving party, or if disclosed orally is confirmed
to be confidential in a writing marked "CONFIDENTIAL" by the disclosing party
within thirty (30) days from the date of such oral disclosure; PROVIDED,
HOWEVER, notwithstanding the foregoing, Confidential Information shall not
include information of the type described in Section 7.2(c) hereof.
"CONTRACT YEAR" shall mean the period beginning on the
first day of the first calendar month after the Commercial Start Date and
continuing until the last day of the twelfth (12th) calendar month thereafter
(i.e. the first Contract Year) and each subsequent twelve (12) calendar month
period during the Term.
-4-
"CONTRACTED CUSTOMER" shall have the meaning ascribed to
it in Section 6.4(c).
"DEFAULT" shall have the meaning ascribed to it in
Section 6.3(b) hereof.
"DELIVERY DATE" shall mean the date on which the
Products are received by X. Xxxxx at the United States facility designated by X.
Xxxxx in a purchase order submitted pursuant hereto.
"DEVELOPMENT PLAN" shall mean a description of the work
to be performed by Vyteris in connection with, among other things, the
development of the Products (including, without limitation, the preparation and
submission of the NDA Filing and the 510(k) Filing) and the obtaining of all
Agency approvals and clearances for the manufacture, marketing, distribution
and/or sale of the Products in the USA Territory, all as described on EXHIBIT
"1.2(A)" attached hereto and made a part hereof, which Development Plan may be
modified and amended from time to time upon the mutual written agreement of the
parties hereto.
"DOLLARS" and "$" shall mean Dollars in lawful currency
of the USA.
"EFFECTIVE DATE" shall mean the date of this Agreement.
"EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
"EXCUSABLE DEVELOPMENT FAILURE" shall mean any failure
by Vyteris to perform any of the Product development obligations set forth in
the Development Plan within the time period required thereby that is directly
attributable to: (i) normal and customary delays encountered by Vyteris in
connection with its efforts to obtain all Agency approvals required in order to
manufacture, market, sell and distribute Products in the USA, provided that
Vyteris has exercised reasonable diligence in connection therewith including,
without limitation delays associated with (A) responding to questions, comments
and inquiries from the FDA with respect to the NDA Filing, and (B) receipt of
the FDA's response to the NDA Filing that are not caused by Vyteris; or (ii) a
fact or circumstance beyond the direct control of Vyteris and not within the
reasonable contemplation of Vyteris as of the Effective Date or addressed in the
Development Plan; PROVIDED, HOWEVER, an Excusable Development Failure shall not
include a failure by Vyteris to perform Product development obligations
resulting from Vyteris having insufficient capital, whether equity or debt, to
perform such obligations.
"EXCUSABLE SUPPLY FAILURE" shall have the meaning
ascribed to it in Section 6.3(b)(i) hereof.
"EXCUSABLE SUPPLY FAILURE NOTICE" shall have the meaning
ascribed to it in Section 6.3(b)(i) hereof.
"FDA" shall mean the United States Food and Drug
Administration, and any successor agency.
-5-
"FDCA" shall mean the Federal Food, Drug and Cosmetic
Act, as amended from time to time.
"510(K) CLEARANCE" shall mean the FDA cleared 510(k)
Filing and all modifications, amendments or supplements thereto.
"510(K) FILING" shall mean the premarket notification
submitted to the FDA for and with respect to the Product, including any and all
information and documents included therein, attached thereto or incorporated by
reference therein, as well as all correspondence to and/or from the FDA related
thereto.
"FORCE MAJEURE EVENT" shall have the meaning ascribed to
it in Section 7.3(a) hereof.
"FOREIGN SHORTFALL AMOUNT" shall have the meaning
ascribed to it in Section 3.1(e) hereof.
"FOREIGN TERRITORY" shall mean, collectively, the
territory comprising the entire world, other than the USA Territory.
"INDUSTRIAL PROPERTY" shall mean and include,
collectively, all intellectual property rights (whether or not patented or
patentable) such as, but not limited to, algorithms, approvals, certifications,
chemical compounds, conceptual expressions, copyrights, data, designs, formulae,
ideas, improvements, inventions, know-how (whether or not publicly known or a
trade secret), patents and patent applications (including the Patent Rights),
prototypes, supply sources, tests and test results, ETC., together with that
portion of all media (whether in human or machine readable form) containing any
expression of such intellectual property rights, which directly or indirectly
relate to the development, registration, manufacture or use of the Products.
"KNOWLEDGE" shall mean, when used in reference to
Vyteris under Section 5.1 hereof, the actual knowledge of those officers,
directors and other members of the management of Vyteris identified on EXHIBIT
"1.2(B)" attached hereto and made a part hereof, based on reasonable inquiry of
the officers, directors, employees, outside accountants, attorneys and
institutional investors of Vyteris.
"LICENSED PROPERTY" shall mean, collectively, (i) the
Patent Rights, (ii) the License Rights, (iii) the Technology, and (iv) the NDA,
the NDA Filing, the 510(k) Clearance, and the 510(k) Filing.
"LICENSE RIGHTS" shall mean, collectively, the exclusive
license rights granted by BD&C to Vyteris under the BD&C License Agreement with
respect to BD&C's patent application Serial No. 09/584,453, "MEDICAMENT-LOADED
TRANSDERMAL RESERVOIR AND METHOD FOR ITS FORMULATION," and any corresponding
foreign patents and patent applications claiming priority thereto, which License
Rights are more fully described on EXHIBIT "1.2(C)" attached hereto and made a
part hereof.
"LIQUIDITY EVENT" shall mean, collectively, any
voluntary or involuntary liquidation, dissolution or winding-up of the affairs
of Vyteris or other similar event.
-6-
"MARKETING PLAN" shall mean a description of the work to
be performed by X.Xxxxx in connection with its efforts to market and sell the
Products in the USA Territory, all as described on EXHIBIT "1.2(D)" attached
hereto and made a part hereof, which Marketing Plan may be modified and amended
from time to time upon the mutual written agreement of the parties hereto or at
the request of X.Xxxxx and with the consent of Vyteris (such consent not to be
unreasonably withheld).
"MDR" shall mean the medical device reporting
regulations codified in Title 21, Part 803 of the CFR.
"MEASUREMENT PERIOD" shall mean, for purposes of the
X.Xxxxx Revenue Share Percentage Adjustment provisions of Section 3.5(e) hereof,
(i) each and every three (3) month period during the first and second Contract
Years (commencing with the initial three (3) month period during the first
Contract Year) and (ii) each and every six (6) month period during each
subsequent Contract Year (commencing with the initial six month period during
the third Contract Year).
"MILESTONE PAYMENT" shall mean the payment required to
be made by X.Xxxxx to Vyteris pursuant to Section 2.3(a) hereof.
"MINIMUM AVERAGE SELLING PRICE" shall mean, for and with
respect to any Measurement Period, [*].
"MINIMUM DISTRIBUTION EFFORT" shall have the meaning
ascribed to it in Section 2.1(c) hereof.
"MINIMUM PRODUCT PURCHASE REQUIREMENTS" shall mean, with
respect to any applicable Contract Year, (i) for the Foreign Territory, the
volume of Product purchases set forth on Exhibit "1.2(E)" attached hereto and
made a part hereof, (ii) for the USA Territory, the volume of Product purchases
set forth on Exhibit "1.2(E-1)" attached hereto and made a part hereof, and
(iii) for and with respect to X. Xxxxx'x right to extend the Term under Section
6.2(b) hereof, the volume of Product purchases set forth on Exhibit "1.2(E-2)"
attached hereto and made a part hereof.
"NDA" shall mean the NDA Filing, in the form approved by
the FDA, and all modifications, amendments or supplements thereto.
"NDA FILING" shall mean, collectively, (i) the new drug
application submitted to the FDA for and with respect to the Product, including
any and all amendments, supplements, post-marketing data, and other information
and documents included therein, attached thereto or incorporated by reference
therein, as well as all correspondence to and/or from the FDA, related thereto
and (ii) any and all individual investigational new drug applications filed with
the FDA, together with all submissions, amendments and supplements to the FDA,
all data generated thereunder and all correspondence to and/or from the FDA
related thereto.
"NET SALES" shall mean, collectively, for any applicable
period, (i) the aggregate amount collected by either applicable party hereto or
its Affiliates in connection with
-7-
the sale of the disposable iontophoretic patch Products by such party (exclusive
of sales made by such party to its Affiliates for resale, which, upon resale,
shall be included in Net Sales of such party hereunder), LESS (ii) freight,
special packaging and duties, sales, use, excise, value added and other taxes
(except for taxes based upon the net income of such party) and reasonable and
customary discounts, rebates, chargebacks, administrative fees paid to group
purchasing organizations, returns and allowances given or taken, as appropriate,
related to such sales of the disposable iontophoretic patch Products by such
party and its Affiliates.
"NEW TOPICAL ANESTHESIA PRODUCT" shall have the meaning
ascribed to it in Section 7.1(a) hereof.
"PATENT RIGHTS" shall mean, all issued U.S. and foreign
patents, pending U.S. and foreign patent applications of Vyteris or its
Affiliates (or in which Vyteris or its Affiliates have any right, title or
interest) and any U.S. or foreign patent applications hereinafter filed by
Vyteris or its Affiliates (or in which Vyteris or its Affiliates have any right,
title or interest) relating in any way, directly or indirectly, to the Products
or the methods of use of the Products, including any continuations,
continuations-in-part, divisionals, extensions, reexaminations, reissues or
renewals thereof. Patent Rights shall include, without limitation, the United
States and foreign patents and patent applications set forth on EXHIBIT "1.2(F)"
attached hereto.
"PERMITTED ENCUMBRANCE" shall have the meaning ascribed
to it in Section 5.1(d) hereof.
"PERSON" shall mean, collectively, an individual, a
corporation, a partnership, a joint venture, a limited liability company, a
trust or unincorporated organization, a joint stock company or other similar
organization, a government or any political subdivision thereof, or any other
legal entity.
"PHARMANET" shall mean Pharmanet Inc., a corporation
that is an independent clinical organization serving as agent for Vyteris in
connection with regulatory and other submissions to the FDA with respect to the
Products.
"PPM" shall mean the Private Placement Memorandum dated
as of March 4, 2002 prepared by Xxxxxxx Xxxxx Ventures, Inc. on behalf of
Vyteris with respect to the issuance by Vyteris of Series C Convertible
Preferred Stock therein described, a true, correct and complete copy of which
has heretofore been furnished to X.Xxxxx.
"POST-TERMINATION PERIOD" shall have the meaning
ascribed to it in Section 6.4(c) hereof.
"PRICING SCHEDULE" shall mean the pricing schedule for
the sale of the Products by Vyteris to X.Xxxxx hereunder as set forth on EXHIBIT
"1.2(G)" attached hereto and made a part hereof.
"PRIMARY FOREIGN TERRITORY MARKETS" shall have the
meaning ascribed to it in Section 2.1(c) hereof.
-8-
"PRODUCT" and "PRODUCTS" shall mean, individually or
collectively (as appropriate), the transdermal lidocaine delivery system more
particularly described on EXHIBIT "1.2(H)" attached hereto and made a part
hereof (including, without limitation, the disposable iontophoretic patches used
in connection therewith and the electrodes, printed circuitry, packaging, drug
reservoirs and electric connectors which are a part thereof), together with the
Product Developments.
"PRODUCT DEVELOPMENTS" shall have the meaning ascribed
to it in Section 2.1(f) hereof.
"PRODUCT ORDER FORECAST" shall have the meaning ascribed
to it in Section 3.1(b) hereof.
"PRODUCT STEERING COMMITTEE" shall mean a committee
comprised of four (4) individuals, including two (2) representatives designated
and appointed from time to time by each of Vyteris and X.Xxxxx in their sole
discretion, the purpose of which shall be to meet from time to time as and to
the extent necessary to evaluate and make joint decisions on behalf of X.Xxxxx
and Vyteris regarding the development of the Products, Agency submissions and
approvals, marketing and sales efforts with respect to the Products and other
issues bearing on the commercialization of the Products under and as
contemplated by this Agreement; PROVIDED, HOWEVER, the Product Steering
Committee shall have no right or authority to modify, amend or otherwise change
any provision of this Agreement.
"PURCHASE PRICE" and "PURCHASE PRICES" shall mean,
individually or collectively, as appropriate, the purchase price or purchase
prices at which the Products are sold by Vyteris to X.Xxxxx hereunder, as
determined by reference to the Pricing Schedule.
"PURCHASED SAMPLES" shall have the meaning ascribed to
it in Section 3.2(f) hereof.
"QSR" shall mean the quality system regulation as set
forth in Title 21, Part 820 of the CFR.
"REMEDIAL DEVELOPMENT PLAN" shall have the meaning
ascribed to it in Section 2.2(b) hereof.
"SALES LITERATURE" shall have the meaning ascribed to it
in Section 3.2(c) hereof.
"SECURITIES PURCHASE AGREEMENT" shall mean,
collectively, the Subscription Agreement and the Second Round Shares Purchase
and Registration Rights Agreement dated the date hereof between Vyteris and
X.Xxxxx, pursuant to which X.Xxxxx has agreed to purchase, concurrently with the
execution hereof, Five Hundred (500,000) shares of Common Stock at a purchase
price of One Dollar ($1.00) per share and (ii) Vyteris has granted X. Xxxxx an
option to purchase an additional 370,370 shares of Common Stock at a purchase
price of One Dollar and Thirty-Five Cents ($1.35) per share of Common Stock, all
on the terms and subject to the conditions set forth therein, together with any
amendments, restatements, modifications or supplements thereof or thereto.
-9-
"SPECIFICATIONS" shall mean, collectively, the
specifications for the Products set forth on EXHIBIT "1.2(I)" attached hereto
and made a part hereof and any amendments, restatements, modifications or
supplements thereof or thereof, which X.Xxxxx has the right to review and
approve pursuant to the provisions of Section 2.2(a)(iv) hereof.
"SUB MARKETS" shall have the meaning ascribed to it in
Section 2.1(c) hereof.
"SUPPLY CONTINUATION PLAN" shall have the meaning
ascribed to it in Section 6.3(b)(i) hereof.
"SYSTEMIC PAIN MANAGEMENT PRODUCT" shall have the
meaning ascribed to it in Section 7.1(b) hereof.
"TECHNOLOGY" shall mean and include, collectively, all
Industrial Property, documentation and data directly or indirectly related to
the Products or used in connection with its or their development, testing,
regulatory approval, manufacture and/or sale, together with all improvements,
enhancements, developments and derivatives relating or pertaining thereto.
"TERM" shall mean the term of this Agreement, as
specified in Section 6.2 hereof.
"TERRITORY" shall mean, collectively, (i) the Foreign
Territory and (ii) the USA Territory.
"TRADEMARKs" shall mean, collectively, the trademarks,
service marks and related intellectual property rights which Vyteris owns or has
the exclusive right to license, as appropriate, as more fully described on
EXHIBIT "1.2(J)" attached hereto and made a part hereof.
"TRIGGERING EVENt" shall mean the failure by Vyteris to
manufacture and supply Products to X.Xxxxx in accordance with the provisions of
this Agreement, which failure has resulted in a Default by Vyteris under and in
accordance with, and subject to the procedures established by, Section 6.3(b)(i)
hereof or (ii) the occurrence of any Default under Section 2.2(b) hereof.
"USA SHORTFALL AMOUNT" shall have the meaning ascribed
to it in Section 3.1(f) hereof.
"USA TERRITORY" shall mean, collectively, the territory
comprising the United States of America and its territories and possessions.
"VYTERIS" shall have the meaning ascribed to it in the
heading of this Agreement.
-10-
"VYTERIS PARTIES" shall have the meaning ascribed to it
in Section 6.1(c) hereof.
"VYTERIS NET SALES REPORT" shall have the meaning
ascribed to it in Section 3.5(d) hereof.
"VYTERIS REVENUE SHARE PAYMENT" shall have the meaning
ascribed to it in Section 3.5(c) hereof.
"VYTERIS REVENUE SHARE PERCENTAGE" shall mean the
applicable percentage set forth on Exhibit "1.2(K)" attached hereto and made a
part hereof.
1.3 OTHER DEFINITIONS. Any capitalized term used in this
Agreement and defined in a Section of this Agreement other than Sections 1.1 or
1.2 hereof shall have the meaning ascribed to it in such Section of this
Agreement.
SECTION 2. GRANT OF LICENSE; PRODUCT DEVELOPMENT; MILESTONE AND
OTHER PAYMENTS; EQUITY INVESTMENT BY X. XXXXX IN VYTERIS.
2.1 GRANT OF LICENSE; PRODUCT DEVELOPMENT; TRADEMARKS.
(a) Subject to the provisions of Sections 2.1(b),
2.1(c), 2.1(d), 3.1(e), and 3.1(f) hereof, and the other terms and conditions
set forth in this Agreement, Vyteris hereby (i) appoints X.Xxxxx to serve as the
exclusive distributor for Vyteris of, and grants to X.Xxxxx the exclusive right
to, directly and indirectly market, sell and distribute the Products in the
Territory (the right to distribute includes the right to market, sell, display,
advertise and otherwise promote the Products) during the Term and (ii) grants to
X.Xxxxx during the Term and the Post-Termination Period (and any extension
thereof pursuant to Section 6.5 hereof), and subject to the other terms and
conditions of this Agreement (including, without limitation, the revenue-sharing
obligations under Section 3.5 hereof and the provisions of Section 2.1(b)
hereof), an exclusive worldwide license in and to the Licensed Property to make
(and have made), use, practice, import, offer to sell, sell, distribute,
improve, enhance, develop, and derive the Products.
(b) Notwithstanding anything contained herein to the
contrary, the license granted by Vyteris to X.Xxxxx pursuant to the provisions
of clause (ii) of Section 2.1(a) hereof is and shall constitute a present,
absolute and unconditional exclusive worldwide license, as therein described,
except as otherwise provided in such clause (ii); provided, however, X.Xxxxx
covenants and agrees that it shall refrain from using or exploiting, and shall
not use or exploit, such license in any way unless and until a Triggering Event
shall have occurred, in which event: (i) the rights of X.Xxxxx in and to such
license shall no longer be subject to the covenants and restrictions contained
in this Section 2.1(b), it being understood and agreed, however, that nothing
contained herein shall be deemed to affect the rights of X.Xxxxx under clause
(i) of Section 2.1(a) hereof; (ii) Vyteris shall promptly deliver, or cause to
be delivered to X.Xxxxx, copies of all files, documents, data, information,
records, and written materials in the possession or under the control of Vyteris
that relate or pertain to the Licensed Property and the Products so as to enable
X.Xxxxx to fully exploit the license described in clause (ii) of Section 2.1(a)
hereof (including, without limitation, all such files, documents, data,
information, records, and materials necessary for X.Xxxxx to manufacture the
Products); and (iii) certain rights of
-11-
Vyteris shall terminate and certain provisions of this Agreement shall be
modified in the manner set forth in Section 6.5 hereof.
(c) Notwithstanding the foregoing, but subject to
the terms and conditions set forth in this Section 2.1(c), Section 2.1(d) hereof
and Section 2.1(e) hereof, at any time after the third anniversary of the
Commercial Start Date, Vyteris shall have the right to market, sell and
distribute Products in: (i) those secondary market segments in the Territory
("Sub Markets") described in Exhibit 2.1 in which X.Xxxxx has not achieved a
meaningful market presence with respect to the marketing, sale and distribution
of Products; and/or (ii) those primary market segments consisting of hospital
care and outpatient care facilities in those countries in the Foreign Territory
in which X.Xxxxx has not commenced and continued to sell the Products to such
facilities ("Primary Foreign Territory Markets"). Vyteris shall provide X.Xxxxx
with written notice of its desire to exercise rights under this Section 2.1(c),
which notice shall contain a detailed description of: (x) the Sub Markets and/or
the Primary Foreign Territory Markets, together with the related Territory
covered thereby, in which Vyteris desires to market, sell and distribute
Products; and (y) the manner in which Vyteris (or its agents or representatives)
intends to solicit business in the applicable Sub Markets and/or the applicable
Primary Foreign Territory Markets. Vyteris shall also promptly provide, or cause
to be promptly provided, to X.Xxxxx any and all other information reasonably
requested by X.Xxxxx in connection with the foregoing. X.Xxxxx shall review the
notice (and related information) provided to it by Vyteris in good faith
pursuant to this Section 2.1(c) and, within thirty (30) days following X.
Xxxxx'x receipt of such notice (and related information), advise Vyteris whether
or not X.Xxxxx intends to engage within the next six (6) months in, as
appropriate, (i) meaningful activities to market, sell and distribute Products
in the applicable Sub Markets referred to in the notice from Vyteris and/or (ii)
the commencement and/or continuation of the sale of the Products in the country
in which the applicable Primary Foreign Territory Market referred to in the
notice from Vyteris is located (the activities and efforts described in the
foregoing clauses (i) and (ii), as appropriate, being collectively referred to
herein as the "Minimum Distribution Effort").
(d) If X.Xxxxx advises Vyteris that it does not
intend to engage in the Minimum Distribution Effort in the applicable Sub Market
and/or the country in which the applicable Primary Foreign Territory Market is
located, as appropriate, or fails to respond to the notice delivered by Vyteris
under Section 2.1(c) hereof within the thirty (30) day period provided therein:
(i) with respect to the applicable Sub Market, Vyteris shall thereafter have the
right to market, sell and distribute Products in such Sub Market on a
non-exclusive basis, the exclusive license of X.Xxxxx to market, sell and
distribute Products in such Sub Market shall be converted to a non-exclusive
license (with no other amendments or modifications thereto), and X.Xxxxx shall
retain all of its rights in and to the Vyteris Revenue Share Payments due in
connection with Net Sales of Vyteris in such Sub Market; or (ii) with respect to
the country in which the applicable Primary Foreign Territory Market is located,
Vyteris shall thereafter have the right to market, sell and distribute Products
on an exclusive basis in such country, the exclusive license of X.Xxxxx to
market, sell and distribute Products in such country shall be terminated, and
X.Xxxxx shall have no further duties or obligations under Section 3.2(a) with
respect to such country.
(e) For each such Sub Market or Primary Foreign
Territory Market for which X.Xxxxx provides notice to Vyteris pursuant to
Section 2.1(c) hereof that it intends to
-12-
engage in the Minimum Distribution Effort, it shall provide to Vyteris a
detailed plan setting forth the manner and proposed schedule on which it intends
to engage in the Minimum Distribution Effort, including projected minimum sales
levels. X.Xxxxx shall also promptly provide, or cause to be promptly provided,
to Vyteris any and all other information reasonably requested by Vyteris in
connection with the foregoing. Such plan shall be subject to the approval by
Vyteris, which approval shall not be unreasonably withheld, delayed or
conditioned. X.Xxxxx shall thereafter diligently perform in accordance with the
plan to market the Products in the applicable Sub Market or country in which the
applicable Primary Foreign Territory Market is located. If X.Xxxxx does not meet
the minimum sales levels set forth in the plan for reasons other than a breach
by Vyteris of this Agreement, in and with respect to an applicable Sub-market or
country in which an applicable Primary Foreign Territory Market is located
Vyteris shall thereafter have the right to market, sell and distribute Products
in such Sub Market and/or country on a non-exclusive basis, the exclusive
license of X.Xxxxx to market, sell and distribute Products in such Sub Market or
country shall be converted to a non-exclusive license (with no other amendments
or modifications thereto), and X.Xxxxx shall retain all of its rights in and to
the Vyteris Revenue Share Payments due in connection with Net Sales of Vyteris
in such Sub Market or country. In the event of a dispute between Vyteris and
X.Xxxxx concerning agreement on a mutually-acceptable plan required under this
Section 2.1(e), or whether X.Xxxxx has met its minimum sales obligations under
any such plan, the parties shall arbitrate such dispute before a single
arbitrator, pursuant to and in accordance with Section 7.3(i) hereof.
(f) In the event that during the Term any invention,
development, modification, enhancement or improvement relating or pertaining to
the Products (all of the foregoing being collectively referred to herein as a
"Product Development") shall be made by or on behalf of, or otherwise acquired
or licensed by, Vyteris, (i) Vyteris shall promptly disclose the Product
Development to X.Xxxxx, together with such relevant data, information and
documentation relating or pertaining to the Product Development in the manner
necessary for X.Xxxxx to utilize the Product Development in a manner
contemplated hereby, and (ii) such Product Development shall be made available
to X.Xxxxx and be deemed to be part of the rights granted to X.Xxxxx hereunder,
subject, in all respects, to the terms and conditions of this Agreement.
(g) In the event that during the Term any Product
Development shall be made by or on behalf of X.Xxxxx, (i) X.Xxxxx shall promptly
disclose such Product Development to Vyteris, together with such relevant data,
information and documentation relating or pertaining to such Product Development
in a manner necessary for Vyteris to utilize the Product Development in a manner
contemplated hereby and (ii) X.Xxxxx hereby grants to Vyteris a perpetual,
worldwide, royalty-free, fully-paid, non-exclusive right and license to the
Product Development to make, have made, offer for sale, sell, use and import any
Product Development; PROVIDED, HOWEVER, the rights of Vyteris in and to such
Product Developments made by or on behalf of X.Xxxxx shall be subject, in all
respects to the other terms and conditions of this Agreement.
(h) Vyteris hereby grants to X.Xxxxx an exclusive,
non-transferable, royalty-free license to display, and use the Trademarks
without alteration or modification solely with respect to X. Xxxxx'x advertising
and marketing of the Products purchased, or to be purchased, during the Term and
the Post-Termination Period and not for any other purpose.
-13-
X.Xxxxx acknowledges the right, title and interest of Vyteris in the Trademarks
and agrees that any goodwill generated by X. Xxxxx'x use or display of the
Trademarks will inure to the benefit of Vyteris. X.Xxxxx further acknowledges
that neither this Agreement nor the use by X.Xxxxx of the Trademarks shall
create any right, title or interest in or to the Trademarks by X.Xxxxx. X.Xxxxx
shall submit all proposed uses of the Trademarks to Vyteris for its prior
approval, which approval shall not be unreasonably withheld, conditioned or
delayed, and X.Xxxxx further agrees that the nature and quality of all proposed
uses of the Trademarks under the terms of this Agreement shall conform to
standards reasonably established from time to time by Vyteris and notice of
which is furnished by Vyteris to X.Xxxxx. X.Xxxxx agrees to cooperate with
Vyteris in efforts by Vyteris to facilitate the control of such nature and
quality, to permit reasonable inspection of X. Xxxxx'x uses of the Trademarks
and to provide Vyteris with details regarding such uses as reasonably requested
by Vyteris. X.Xxxxx agrees to use the Trademarks only in the form and manner
approved by Vyteris, subject to the other provisions hereof. X.Xxxxx agrees not
to use the Trademarks in combination with any other trademark or service xxxx
without prior written and signed authorization from Vyteris. This Agreement is
not intended to convey and does not convey to X.Xxxxx the right to display or
use any trademarks or service marks of Vyteris other than the Trademarks.
2.2 PRODUCT DEVELOPMENT OBLIGATIONS OF VYTERIS; AND RELATED
COVENANTS.
(a) Vyteris represents, warrants, covenants and
agrees to and with X.Xxxxx that:
(i) it has reviewed and approved of the
Development Plan and all development and related tasks required to be
performed by it thereunder;
(ii) it shall use commercially reasonable
efforts to complete all of the tasks set forth in the Development Plan
in accordance with the time periods set forth therein;
(iii) it shall provide X.Xxxxx with an adequate
opportunity to review and provide suggestions and proposed modifications
to the NDA Filing and the 510(k) Filing to be made by Vyteris in
accordance with the Development Plan or otherwise pursuant to this
Agreement and, in connection therewith, it shall in good faith endeavor
to incorporate reasonable suggestions and proposed modifications to the
NDA Filing and the 510(k) Filing proposed by X.Xxxxx as and to the
extent permitted by applicable laws, rules and regulations;
(iv) it shall provide X.Xxxxx with an adequate
opportunity to review and provide suggestions and proposed modifications
to all features, the functions, and the appearance (including, without
limitation, labeling, packaging and graphics) of the Product and the
Specifications therefor and, in connection therewith, it shall in good
faith endeavor to incorporate reasonable suggestions and proposed
modifications to the Product and the Specifications as and to the extent
permitted by applicable laws, rules and regulations;
-14-
(v) it shall provide X.Xxxxx with advance
written notice if it believes that it will be unable to perform any of
the tasks set forth in the Development Plan within the time periods
provided thereby, which notice shall, when feasible, be furnished to
X.Xxxxx at least thirty (30) days in advance of the scheduled task
completion date, or if not feasible, as promptly as Vyteris can provide
such notice;
(vi) as soon as possible, but in any event not
later than twenty (20) days following the close of each calendar month,
it shall furnish to X.Xxxxx a status report regarding the Product
development obligations of Vyteris under the Development Plan, in a
format reasonably acceptable to X.Xxxxx;
(vii) it shall provide X.Xxxxx with prompt
written notice of any breach or default by either Vyteris or BD&C under
the BD&C License Agreement, together with a detailed description
thereof, and shall take any and all action necessary to cure, or cause
to be cured, such breach or default to ensure that the License Rights of
Vyteris thereunder remain in full force and effect;
(viii) it shall provide X.Xxxxx with prompt
written notice of any breach or default by Vyteris under any agreement,
document or instrument evidencing, relating or pertaining to the
Permitted Encumbrance, (or any lien, security interest, pledge or
encumbrance referred to in Section 2.2(a)(ix) hereof) together with a
detailed description thereof, and shall take any and all action
necessary to cure, or cause to be cured, such breach or default;
(ix) it shall provide X.Xxxxx with at least
fifteen (15) days' advance written notice of any lien, security
interest, pledge or other encumbrance on the Licensed Property, or any
portion thereof, and, as a condition thereto, shall cause the holder of
such lien, security interest, pledge or other encumbrance to enter into
an agreement with X.Xxxxx, in form and substance reasonably satisfactory
to X.Xxxxx, under which such holder agrees (A) that its lien, security
interest, pledge or other encumbrance is under and subject to the rights
of X.Xxxxx hereunder and (B) not to disturb, interfere or impair any
right of X.Xxxxx hereunder;
(x) it shall promptly furnish to X.Xxxxx, upon
X. Xxxxx'x request, any and all other information relating or pertaining
to the Product development obligations under the Development Plan as
X.Xxxxx may reasonably request from time to time; and
(xi) it shall furnish X.Xxxxx with at least
thirty (30) days' advance written notice of any Change in Control
Transaction to which it will be a party.
(b) Vyteris shall promptly notify X.Xxxxx in writing
when Vyteris becomes aware that it will fail or be unable to perform any of the
Product development obligations set forth in the Development Plan within the
time period required thereby, together with a description of the circumstances
giving rise to such failure. If such failure constitutes an Excusable
Development Failure and Vyteris provides X.Xxxxx with reasonably satisfactory
evidence thereof with the aforesaid notice, such failure shall not constitute a
Default and Vyteris
-15-
shall, within thirty (30) days from X. Xxxxx'x receipt of such notice, provide
X.Xxxxx with a written plan setting forth the actions Vyteris shall take to
remedy the Excusable Development Failure to meet the obligations in, and/or to
modify the requirements of the Development Plan, including the estimated times
and costs to perform the obligations under such plan (the "Remedial Development
Plan") consistent with the goals and objectives of the development project
herein. The Remedial Development Plan shall be subject to the review and
approval by X.Xxxxx, which review and approval shall not be unreasonably
withheld, conditioned or delayed. In the event that Vyteris fails to perform any
of its obligations under the Remedial Development Plan to X. Xxxxx'x reasonable
satisfaction, X.Xxxxx shall have the right to provide written notice of such
failure to Vyteris. If such failure remains uncured for sixty (60) days
following such notice from X.Xxxxx, X.Xxxxx may thereafter: (i) declare Vyteris
to be in Default under this Agreement without regard to any further notice or
cure period otherwise provided hereunder; and (ii) exercise any and all rights
and remedies available to X.Xxxxx under this Agreement as a result of such
Default. In the event of a dispute between Vyteris and X.Xxxxx concerning
agreement on a mutually acceptable Remedial Development Plan, the parties shall
arbitrate such dispute before a single arbitrator in accordance with Section
7.3(i) hereof. Any failure by Vyteris to perform any of the Product development
obligations set forth in the Development Plan within the time period required
thereby which does not constitute an Excusable Development Failure shall, at X.
Xxxxx'x option, by a Default if such failure is not cured within thirty (30)
days following written notice from X. Xxxxx to Vyteris of such failure.
(c) In connection with the obligations of Vyteris
under this Section 2.2, Vyteris shall also provide eighty (80) hours of training
per Contract Year to sales representatives and marketing personnel of X.Xxxxx
concerning the use of the Products, such training to be at such times and
locations designated by X.Xxxxx subject to approval by Vyteris, which approval
shall not be unreasonably withheld. Any additional training time requested by
X.Xxxxx shall be provided by Vyteris to X.Xxxxx, for which Vyteris shall invoice
X.Xxxxx and X.Xxxxx shall pay Vyteris the actual cost to Vyteris of providing
such additional training. All reasonable travel and hotel accommodation costs
associated with such training shall be borne by X.Xxxxx. All other costs
associated with such training, together with any materials, samples or equipment
required for such training, shall be borne by Vyteris.
(d) Notwithstanding anything contained herein to the
contrary, it is understood and agreed that Vyteris shall only be required to
pursue and obtain Agency approvals set forth in the Development Plan for the
marketing and sale of the Products in the USA Territory and shall have no duty
or obligation to pursue and obtain any Agency approvals in the Foreign
Territory; PROVIDED, HOWEVER, upon X. Xxxxx'x request at any time and from time
to time during the Term, Vyteris shall provide cooperation and assistance to
X.Xxxxx in connection with X. Xxxxx'x efforts, at its own cost and expense, to
pursue and/or obtain any Agency Approval in any country of the Foreign
Territory; it being understood and agreed that such cooperation and assistance
shall include, without limitation, providing X.Xxxxx with access to, and copies
of, all data and information, including clinical studies, stability data,
material qualifications, Specifications, Product labeling, validation data, and
quality systems data and information developed by or for Vyteris in connection
with the NDA Filing and the 510(k) Filing, but only to the extent that such data
and information are within the direct or indirect control of Vyteris and the
disclosure of such data and information to X.Xxxxx is within the legal rights of
Vyteris; it being understood that, for purposes of the foregoing, data and
information in the possession or
-16-
control of Pharmanet shall be deemed to be within the control of Vyteris.
Vyteris shall retain the right, but not the obligation, to pursue and obtain
Agency approval in any country of the Foreign Territory in which X.Xxxxx has not
pursued such approval. In the event X.Xxxxx obtains Agency approval to market,
sell and distribute Products in a country of the Foreign Territory, to the
extent Vyteris is permitted under this Agreement to market, sell or distribute
Products in such country, X.Xxxxx shall cooperate and assist Vyteris, at the
cost and expense of Vyteris, in connection with efforts by Vyteris to obtain, in
its own name, the right and ability to market, sell and distribute Products in
such country so long as such cooperation and assistance does not interfere,
impair or adversely affect the rights of X.Xxxxx in such country. To the extent
necessary or beneficial, the parties shall utilize the Product Steering
Committee to ensure proper communication and coordination with respect to
efforts to obtain any desired Agency Approval.
2.3 MILESTONE PAYMENT.
(a) For and in consideration of the covenants and
agreements of Vyteris herein, X.Xxxxx covenants and agrees to pay to Vyteris an
amount equal to Three Hundred Thousand Dollars ($300,000) upon execution and
delivery of this Agreement (the "Milestone Payment").
(b) The Milestone Payment shall be paid by wire
transfer of immediately available funds to such account or accounts as Vyteris
may designate in writing to X.Xxxxx at least one (1) day prior to the scheduled
Milestone Payment.
2.4 EQUITY INVESTMENT BY X.XXXXX. In connection with and as a
condition to the agreement by Vyteris to complete the transactions described
herein and contemplated hereby, X.Xxxxx shall make an investment in Vyteris in
the aggregate amount of Five Hundred Thousand Dollars ($500,000), on the terms
and subject to the conditions of the Securities Purchase Agreement.
SECTION 3. MANUFACTURE, SUPPLY AND DISTRIBUTION OF PRODUCTS.
3.1 MANUFACTURE AND SUPPLY OF PRODUCTS; MINIMUM PRODUCT PURCHASE
REQUIREMENTS.
(a) On the terms and subject to the conditions
hereinafter set forth, Vyteris shall manufacture or have manufactured, and
supply to X.Xxxxx, and X.Xxxxx shall purchase exclusively from Vyteris, X.
Xxxxx'x requirements for the Products during the Term and the Post-Termination
Period.
(b) Vyteris shall notify X.Xxxxx in writing within
three (3) business days of its receipt of all Agency approvals and clearances to
sell the Products in the USA Territory. Within ten (10) calendar days following
receipt of such notice, X.Xxxxx shall submit an initial binding purchase order
for the Products to be delivered within such reasonable time period to which the
parties may agree (but in any event not later than one hundred eighty (180) days
from the date of such notice), together with a binding purchase order for
Products to be delivered for the next succeeding calendar quarter. Thereafter,
X.Xxxxx shall submit binding purchase orders to Vyteris for the Products not
less than one hundred twenty (120) days prior to
-17-
the commencement of each calendar quarter for the Products to be delivered
during such calendar quarter, together with a rolling non-binding forecast of
orders (the "Product Order Forecast") of Products for the succeeding three (3)
calendar quarters during the Term and Post-Termination Period. Each purchase
order shall specify (i) the name and quantities of Products to be purchased, and
(ii) the desired Delivery Dates and shipping instructions with respect thereto.
Except for the information specified in clauses (i) and (ii) of the immediately
preceding sentence, the purchase and sale of the Products shall be governed
solely by this Agreement and any additional or contrary terms or provisions
contained in any purchase order or similar form or invoice or acknowledgment
shall be void and have no force or effect. Notwithstanding anything contained
herein to the contrary, each purchase order submitted by X. Xxxxx shall be for a
minimum quantity of Products equal to at least seventy-five percent (75%) of the
quantity of Products set forth in the most recent Product Order Forecast
furnished by X.Xxxxx under this Section 3.1(b) for such calendar quarter.
(c) Notwithstanding the provisions of Sections
3.1(a) and 3.1(b) hereof, provided that Vyteris shall have used commercially
reasonable efforts to manufacture and supply the quantity of Products ordered by
X.Xxxxx, Vyteris shall have no liability to X.Xxxxx for any failure, nor shall
it constitute a Default hereunder, to fail to supply Products under any purchase
order submitted by X.Xxxxx to Vyteris for any applicable calendar quarter to the
extent that such purchase order: (i) exceeds one hundred twenty-five percent
(125%) of the amount of Products forecasted by X.Xxxxx in the most recent
Product Order Forecast submitted by it to Vyteris for the applicable calendar
quarter; or (ii) during the three (3) year period commencing on the Commercial
Start Date, exceeds the amounts set forth in the Capacity Plan attached hereto
as Exhibit 3.1 attached hereto and made a part hereof.
(d) Each purchase order shall constitute a contract
consisting of the terms of the order and the terms of this Agreement and the
parties shall comply in all respects with the obligations set forth therein,
including, without limitation, the obligation of Vyteris to deliver the Products
on the Delivery Dates set forth in the purchase order. It is understood and
agreed that the Product Steering Committee shall be utilized by the parties
hereto to ensure that the parties hereto coordinate the ordering of Products,
the forecasting of Product orders under the Product Order Forecast and
manufacturing of Products in accordance with the provisions of this Agreement;
PROVIDED, HOWEVER, notwithstanding anything contained in this Agreement to the
contrary, the Product Steering Committee shall have no right or authority to
modify, amend, supplement or otherwise change any of the provisions of this
Agreement without the written consent of the parties hereto.
(e) During each Contract Year commencing with the
third Contract Year, X.Xxxxx agrees to submit purchase orders for the Minimum
Product Purchase Requirements applicable to the Foreign Territory. In the event
that X.Xxxxx fails to submit purchase orders for the Minimum Product Purchase
Requirements during any Contract Year for the Foreign Territory, as required by
this Section 3.1(e) (the amount by which the actual quantity of Products ordered
is less than the required minimum orders being referred to herein as the
"Foreign Shortfall Amount"), provided such failure is not as a result of a
breach of this Agreement by Vyteris or a Force Majeure Event, X.Xxxxx shall pay
to Vyteris, within sixty (60) days following the close of the applicable
Contract Year, an amount equal to forty percent (40%) multiplied by an amount
equal to the Foreign Shortfall Amount multiplied by the Purchase
-18-
Price(s). Within ninety (90) days after the end of any Contract Year, X.Xxxxx
may advise Vyteris in writing that it elects to convert that portion of the
exclusive rights granted under Section 2.1(a) hereof which relate to the sale of
the Products in the Foreign Territory to a non-exclusive right with all other
terms and conditions of this Agreement remaining in full force and effect and
unmodified (including, unless otherwise modified pursuant to the provisions of
Section 3.1(f) hereof, the exclusive rights which relates to the sale of
Products in the USA Territory). Upon conversion under this Section 3.1(e),
X.Xxxxx shall have no further obligation in any subsequent Contract Year to
purchase the Minimum Product Purchase Requirements in the Foreign Territory.
(f) During each Contract Year, X.Xxxxx agrees to
submit purchase orders for the Minimum Product Purchase Requirements applicable
to the USA Territory. In the event that X.Xxxxx fails to submit purchase orders
for the Minimum Product Purchase Requirements during any Contract Year for the
USA Territory, as required by this Section 3.1(f) (the amount by which the
actual quantity of Products ordered is less than the required minimum orders
being referred to herein as the "USA Shortfall Amount"), provided such failure
is not as a result of a breach of this Agreement by Vyteris or a Force Majeure
Event, X.Xxxxx shall pay to Vyteris, within sixty (60) days following the close
of the applicable Contract Year, an amount equal to forty percent (40%)
multiplied by an amount equal to the USA Shortfall Amount multiplied by the
Purchase Price. Within ninety (90) days after the end of any Contract Year,
X.Xxxxx may advise Vyteris in writing that it elects to convert that portion of
the exclusive rights granted under Section 2.1(a) hereof which relate to the
sale of the Products in the USA Territory to a non-exclusive right with all
other terms and conditions of this Agreement remaining in full force and effect
and unmodified (including, unless otherwise modified pursuant to the provisions
of Section 3.1(e) hereof, the exclusive rights which relates to the sale of
Products in the Foreign Territory). Upon conversion under this Section 3.1(f),
X.Xxxxx shall have no further obligation in any subsequent Contract Year to
purchase the Minimum Product Purchase Requirements in the USA Territory.
(g) Except as otherwise provided in and permitted in
accordance with the provisions of Section 2.1 hereof, Vyteris covenants and
agrees that it shall not, directly or indirectly, supply Products to any Person
other than X.Xxxxx for sales of Product in any Territory for which the grant is
exclusive to X.Xxxxx under this Agreement.
3.2 Distribution of Products; Sales Literature; Samples.
(a) X.Xxxxx shall use commercially reasonable
efforts to distribute and promote the sale of the Products within the Territory.
In the performance of such obligation, X.Xxxxx shall:
(i) maintain such sales personnel and facilities with
respect to the Products as X.Xxxxx reasonably determines to be adequate;
and
(ii) use its commercially reasonable efforts to solicit
new customers and to maintain existing customers for the Products.
-19-
(b) X.Xxxxx represents, warrants, covenants and
agrees to and with Vyteris that:
(i) it has reviewed and approved the Marketing Plan and
all marketing and related tasks required to be performed by it
thereunder;
(ii) it shall use commercially reasonable efforts to
complete all of the tasks set forth in the Marketing Plan in accordance
with the time periods set forth therein; and
(iii) during the Term and in furtherance of its duties
and obligations under this Section 3.2, it shall not market or sell any
Competitive Product in any part of the Territory in which X.Xxxxx then
has exclusive license rights under Section 2.1(a) hereof.
(c) On the Effective Date and on the first day of
each calendar quarter thereafter, Vyteris shall provide X.Xxxxx with two (2)
copies of each piece of sales, marketing or promotional literature, if any,
created or used by Vyteris in connection with the marketing and sale of the
Products (the "Sales Literature"). Vyteris hereby grants to X.Xxxxx the
non-exclusive, royalty free right during the Term and Post-Termination Period
to: (i) reproduce the Sales Literature; (ii) prepare and reproduce derivative
works based upon the Sales Literature; (iii) distribute copies of the Sales
Literature and such derivative works; and (iv) otherwise use the Sales
Literature for the marketing and sale of the Products. Vyteris hereby represents
and warrants to X.Xxxxx that the information contained in any Sales Literature
will be true, accurate and complete in all material respects, and shall comply
with all applicable laws, rules and regulations. X.Xxxxx hereby represents and
warrants that its use of the Sales Literature and any derivative works thereof
shall be in full and complete compliance with the provisions of Section 2.1(h)
hereof.
(d) Before X.Xxxxx shall print or use any
advertising or other sales materials related to the Products other than the
Sales Literature, X.Xxxxx shall submit a copy of the material for review and
approval by Vyteris, which approval shall not be unreasonably withheld,
conditioned or delayed. Vyteris shall respond to such proposed advertising or
other sales materials no later ten (10) calendar days after receipt of such
proposed advertising or other sales materials. If Vyteris fails to respond
within such period, Vyteris shall be deemed to have approved such advertising or
sales material.
(e) Vyteris covenants and agrees that it shall
promptly submit, or cause to be promptly submitted, to the FDA any and all
advertising, sales, packaging, labeling and other materials related to the
Products which X.Xxxxx intends and is permitted to use pursuant to the
provisions of Sections 3.2(d) or 3.3(b) hereof, as and to the extent required in
accordance with all applicable laws, rules and regulations.
(f) Vyteris shall provide samples of the Products to
X.Xxxxx, for its use in marketing Products to customers. Vyteris shall provide
such samples at no cost to X.Xxxxx, in quantities up to but not exceeding the
amounts set forth in the schedule in Exhibit "3.2" attached hereto and made a
part hereof. Any additional samples needed by X.Xxxxx shall be purchased by it
at the Purchase Price (the "Purchased Samples").
-20-
3.3 PRODUCT SPECIFICATIONS.
(a) Except as mandated by applicable laws, rules,
regulations, or Agency requirements, no modification, change, or enhancement
shall be made by Vyteris to the Products without the prior written consent of
X.Xxxxx, which consent shall not be unreasonably withheld or delayed; provided
that if X.Xxxxx fails to respond to any proposed modification, change, or
enhancement from Vyteris within thirty (30) days following receipt of such
proposed modification, change or enhancement, X.Xxxxx shall be deemed to have
consented to such proposed modification, change or enhancement. As and to the
extent permitted by applicable laws, rules and regulations, Vyteris hereby
agrees to promptly modify, change or enhance the Products at X. Xxxxx'x
reasonable request to address any complaints or concerns raised by an Agency or
reasonable complaints or concerns raised by X.Xxxxx customers, provided that
Vyteris approves such modification, change or enhancement, which approval by
Vyteris shall not be unreasonably withheld or delayed. Any modification, change
or enhancement approved and made in accordance with this Section 3.3(a) shall
constitute a Product Development as provided in Section 2.1(f) hereof.
(b) As and to the extent permitted by applicable
laws, rules and regulations, the Products shall be supplied to X.Xxxxx
assembled, packaged, and labeled with artwork provided and approved by X.Xxxxx.
As and to the extent permitted by applicable laws, rules and regulations,
X.Xxxxx shall have the right, at its sole expense, to modify and change product
labeling upon sixty (60) days prior written notice to Vyteris.
3.4 PURCHASE PRICES; PAYMENT OF PURCHASE PRICE.
(a) Products shall be purchased by X.Xxxxx from
Vyteris, and sold by Vyteris to X.Xxxxx, at the Purchase Prices.
(b) Vyteris shall bear all federal, state and local
taxes based upon or measured by its net income derived under this Agreement. Any
other tax, however denominated and howsoever measured, imposed upon the purchase
and sale by X. Xxxxx of the Products or upon its storage, inventory, sale,
transportation, delivery, use or consumption shall be the responsibility of
X.Xxxxx.
(c) Vyteris shall invoice X.Xxxxx concurrently with
any shipment of Products and X.Xxxxx shall make full payment to Vyteris, at the
address specified on the invoice, no later than forty-five (45) days from the
later of: (i) X. Xxxxx'x receipt of the invoice for the Product ordered; or (ii)
X. Xxxxx'x receipt of the Products to which the invoice relates.
3.5 REVENUE SHARE AGREEMENT.
(a) Within forty-five (45) days following the close
of each calendar quarter during the Term and the Post-Termination Period,
X.Xxxxx shall pay to Vyteris an amount equal to (i) (A) the X. Xxxxx Revenue
Share Percentage multiplied by (B) the Net Sales of X.Xxxxx for and with respect
to the immediately preceding calendar quarter, minus (ii) the sum of (A) the
aggregate amount paid by X.Xxxxx to Vyteris in respect of the disposable
iontophoretic patch Products pursuant to Section 3.4 hereof, the sale of which
are taken into account in the calculation of Net Sales under clause (i)(B) and
(B) the aggregate amount paid by
-21-
X.Xxxxx to Vyteris in respect of iontophoretic controller and component Products
pursuant to Section 3.4 hereof which were sold in combination with the
disposable iontophoretic patch Products and at a single sale price for both the
iontophoretic patch and controller Products, the sales of which are taken into
account in the calculation of Net Sales under (i) (B)(the payment due and owing
from X.Xxxxx to Vyteris under this Section 3.5(a) being referred to herein as
the "X.Xxxxx Revenue Share Payment"); PROVIDED, HOWEVER, notwithstanding
anything contained herein to the contrary, in the event that the calculation of
the X. Xxxxx Revenue Share Payment results in a negative number for any
applicable calendar quarter, then (y) no payment shall be due and owing by X.
Xxxxx to Vyteris in respect of such X. Xxxxx Revenue Share Payment for the
applicable calendar quarter and (z) Vyteris shall pay to X. Xxxxx, within
forty-five (45) days of Vyteris' receipt of the X.Xxxxx Net Sales Report for the
applicable calendar quarter and in the manner required by Section 3.5(d) hereof,
an amount equal to the difference between (1) the amount calculated under clause
(ii) of this Section 3.5(a) for the applicable calendar quarter and (2) the
amount calculated under clause (i) of this Section 3.5(a) for the applicable
calendar quarter. Notwithstanding the foregoing, the aggregate amount of paid by
X. Xxxxx to Vyteris for Purchased Samples of iontophoretic patch Products shall
not be included in the amount calculated under clause (ii)(A) above. In
determining the aggregate amount paid by X. Xxxxx to Vyteris in respect of the
disposable iontophoretic patch Products under clause (ii)(A) above, X. Xxxxx
shall use the same accounting method generally used by X. Xxxxx at the time of
such calculation to determine the cost of goods sold for other purchased
finished goods inventory.
(b) The X.Xxxxx Revenue Share Payment shall be: (i)
paid in Dollars ($) to Vyteris at its address set forth in Section 7.3(b)
hereof; and (ii) accompanied by a written report (a "X.Xxxxx Net Sales Report"),
in form and substance reasonably acceptable to Vyteris, setting forth all sales
and related data and information from which X. Xxxxx'x calculation of Net Sales
was made.
(c) Within forty-five (45) days following the close
of each calendar quarter during the Term and the Post-Termination Period,
Vyteris shall pay to X.Xxxxx an amount equal to (i) (A) the Vyteris Revenue
Share Percentage multiplied by (B) the Net Sales of Vyteris for and with respect
to the immediately preceding calendar quarter (the payment due and owing from
X.Xxxxx to Vyteris under this Section 3.5(c) being referred to herein as the
"Vyteris Revenue Share Payment").
(d) The Vyteris Revenue Share Payment shall be: (i)
paid in Dollars ($) to X.Xxxxx at its address set forth in Section 7.3(b)
hereof; and (ii) accompanied by a written report (a "Vyteris Net Sales Report"),
in form and substance reasonably acceptable to X.Xxxxx, setting forth all sales
and related data and information from which Vyteris's calculation of Net Sales
was made.
(e) In the event that the Average Selling Price is
less than the Minimum Average Selling Price for any Measurement Period, Vyteris
shall have the right, upon written notice to X. Xxxxx within fifteen (15) days
following the payment of the X. Xxxxx Revenue Share Payment by X. Xxxxx for the
period comprising the most recent completed Measurement Period, (the "Completed
Measurement Period"), to cause X. Xxxxx to enter into good faith discussions and
negotiations regarding a fair and equitable upward adjustment to the X. Xxxxx
Revenue Share Percentage (a "X. Xxxxx Revenue Share Percentage Adjustment") for
-22-
the Measurement Period immediately following such Completed Measurement Period.
No X. Xxxxx Revenue Share Percentage Adjustment shall be effective and binding
upon the parties hereto unless the X. Xxxxx Revenue Share Adjustment has been
agreed to in writing by both X. Xxxxx and Vyteris; PROVIDED, HOWEVER, if X.
Xxxxx and Vyteris are unable to agree upon a fair and equitable X. Xxxxx Revenue
Share Percentage Adjustment within forty-five (45) days following the
commencement of discussions and negotiations with respect thereto, X. Xxxxx and
Vyteris agree, at the written request of Vyteris, to submit the matter to
binding arbitration in which a single arbitrator having sufficient industry
experience and qualifications and reasonably satisfactory to both X. Xxxxx and
Vyteris, shall be authorized and directed to determine a fair and equitable X.
Xxxxx Revenue Share Percentage Adjustment. Such determination by the arbitrator
shall be based upon such factors that the arbitrator deems relevant in
connection therewith including, without limitation, the gross profit margin of
Vyteris prior to any request for a X. Xxxxx Revenue Share Percentage Adjustment
hereunder and the gross profit margin of Vyteris after giving effect to the
changes in pricing for the Products that resulted in the X. Xxxxx Revenue Share
Percentage Adjustment request by Vyteris hereunder. If X. Xxxxx and Vyteris are
unable to agree upon a mutually satisfactory arbitrator to resolve their
disagreement regarding a fair and equitable X. Xxxxx Revenue Share Percentage
Adjustment, such arbitrator shall be selected pursuant to and in accordance with
the procedures established by the American Arbitration Association. Any
agreement between X. Xxxxx and Vyteris with respect to a X. Xxxxx Revenue Share
Percentage Adjustment pursuant hereto, whether by mutual agreement or in
accordance with the arbitration procedures established hereby, shall be set
forth in an addendum to this Agreement, which shall be reasonably satisfactory
to X. Xxxxx and Vyteris. Notwithstanding anything contained in this Section
3.5(e) to the contrary, (i) a X. Xxxxx Revenue Share Percentage Adjustment shall
remain in effect only for the Measurement Period immediately following the
Completed Measurement Period for which Vyteris provided notice, and (ii) after
the expiration of such Measurement Period, the X. Xxxxx Revenue Share Percentage
shall immediately and automatically revert to the X. Xxxxx Revenue Share
Percentage set forth in this Agreement (without regard to any adjustment thereto
made under this Section 3.5(e)). Nothing contained in this Section 3.5(e) or
elsewhere in this Agreement shall, in any manner or respect, restrict or affect
the ability of X. Xxxxx to establish the prices at which it sells Products in
the Territory; it being understood and agreed that X. Xxxxx shall have the sole
and exclusive right, in its sole discretion, to establish such prices.
3.6 DELIVERY; TITLE; PACKAGING AND LABELING.
(a) All shipments of Products shall be made F.O.B.
Fairlawn, New Jersey. Vyteris shall arrange shipments to ensure that the
Products are received on the Delivery Date set forth in a purchase order. Title
to the Products and risk of loss with respect thereto shall pass to X.Xxxxx upon
X. Xxxxx'x receipt of the Products. X.Xxxxx shall be responsible for the cost of
all freight, shipping and handling, and insurance in connection with all
deliveries.
(b) In connection with the delivery of the Products by
Vyteris to X.Xxxxx hereunder, Vyteris covenants and agrees to furnish the
following information to X.Xxxxx concurrently with each shipment of Products:
-23-
(i) During the first Contract Year, at X. Xxxxx'x
request, Vyteris shall furnish to X.Xxxxx copies of the batch records and
certificates of analysis with respect to the Products being delivered;
(ii) During each subsequent Contract Year, Vyteris shall
furnish to X.Xxxxx a certificate of analysis in the form of Exhibit "3.6"
attached hereto and made a part hereof with respect to the Products being
delivered; and
(iii) Any and all information relating or pertaining to
the information required to be furnished under clauses (i) and (ii) above as
X.Xxxxx may reasonably request at any time and from time to time.
3.7 ACCEPTANCE.
(a) X.Xxxxx shall have the right to reject any
shipment (or portion thereof) of Products which do not conform, in all respects,
with the Specifications.
(b) After receipt of any Product, X.Xxxxx shall have
forty-five (45) days to examine such Product to determine if it conforms to the
Specifications and if it is free from defects in material and workmanship, and,
on the basis of such examination, to accept or reject such shipment (or portion
thereof). Any Products not rejected within such forty-five (45) day period shall
be deemed accepted by X.Xxxxx. Any claims for failure to so conform or for such
defects shall be made in writing by X.Xxxxx to Vyteris, indicating the
non-conforming characteristics of the Products. The acceptance or deemed
acceptance of the Products under this Section 3.7(b) shall not be deemed a
waiver or limitation in any manner or respect of the representations and
warranties made by Vyteris hereunder with respect to such Products.
(c) With respect to any Product which has been
rejected by X.Xxxxx, Vyteris shall, at its expense, replace the Product as soon
as practical and promptly reimburse X.Xxxxx for insurance, duties, freight
charges and other costs incurred by X.Xxxxx with respect to such rejected
Product.
3.8 PRODUCT WARRANTIES; INSPECTION RIGHTS; AND OTHER
REPRESENTATIONS AND COVENANTS.
(a) Vyteris hereby represents and warrants to
X.Xxxxx that Products delivered under this Agreement shall (i) be free from
defects in design, material and workmanship and in compliance, in all respects,
with the Specifications, (ii) not be adulterated or misbranded within the
meaning of the FDCA or within the meaning of any applicable state or municipal
law in which the definitions of adulteration and misbranding are substantially
the same as those contained in the FDCA, (iii) be new, unused and fit for the
purposes intended thereby, and (iv) be manufactured in accordance with the
applicable provisions of the cGMP and /or QSR.
(b) Vyteris hereby represents and warrants that both
Vyteris and the facilities at which the Products will be manufactured are, or
will be, registered with the FDA pursuant to and in accordance with the
applicable provisions of Title 21, Parts 207 and 807.
-24-
(c) Vyteris represents and warrants that it has
prepared, or will prepare, the NDA Filing and the 510(k) Filing pursuant to and
in all material respects in accordance with all applicable laws, rules and
regulations (and related Agency requirements applicable thereto) and, without
limiting the generality of the foregoing, to the best of the knowledge,
information and belief of Vyteris, the NDA Filing and the 510(k) Filing include
all data and information required under and pursuant to the applicable
provisions of Title 21 CFR Parts 314,312 and 807.
(d) Vyteris represents and warrants that its
facilities are in substantial compliance with all applicable laws, rules and
regulations and that Vyteris will take the actions set forth in Exhibit 3.8
attached hereto and made a part hereof in an effort to obtain a satisfactory
pre-approval inspection by the district office of the FDA that will enable such
office to make a recommendation to the Center of Drug Evaluation and Research
that the NDA Filing be approved.
(e) Vyteris represents, warrants and covenant to
X.Xxxxx that it shall, at all times, comply in all material respects with all
applicable laws, rules and regulations and standards applicable to manufacturing
and labeling of the Products, and X.Xxxxx represents, warrants and covenant to
Vyteris that it shall, at all times, comply in all material respects with all
applicable laws, rules and regulations and standards applicable to the
marketing, distribution and sale of the Products.
(f) Upon and after the receipt of the required
Agency approval and clearance to market and sell the Products in the USA
Territory, Vyteris represents and warrants that the Products will be included
under either the NDA or the 510(k) Clearance, or both, as applicable. Vyteris
shall be responsible for compliance with all Agency requirements relating to the
NDA Filing and 510(k) Filing and shall maintain the NDA and the 510(k) Clearance
for the Products during the Term and the Post-Termination Period. Vyteris
covenants and agrees to provide X.Xxxxx for its review and comment any proposed
modifications, supplements, changes or revision to the foregoing approvals and
clearances prior to any submission of such modifications, supplement, change or
revision to such approvals and clearances.
(g) X.Xxxxx shall have the right, at its own
expense, and at reasonable times and intervals, and in a reasonable manner, to
conduct periodic inspections of the facilities at which the Products are
manufactured to determine if the Products are manufactured in accordance with
the Specifications, and in compliance in all material respects with the
applicable provisions of the cGMP and QSR.
(h) Vyteris shall furnish to X.Xxxxx, upon request
by X.Xxxxx, information regarding any Agency audits of the facility(ies) at
which the Products are manufactured, inspectional observations (Form FDA 483),
warning letters, or recall notices received that relate directly to the Products
supplied by Vyteris hereunder. Vyteris will immediately notify X.Xxxxx and
forward written copies of any future inspectional observations (Form FDA 483),
warning letters or recall notices for the Products received or produced by
Vyteris or the entity that manufactures the Product.
-25-
(i) Vyteris shall comply in all material respects
with all applicable MDR and ADR requirements. A copy of each report submitted by
Vyteris to FDA pursuant to the MDR or ADR requirements shall be delivered to
X.Xxxxx at least two (2) business days prior to its submission to the FDA.
(j) Within two (2) years after the Effective Date,
Vyteris shall file for, or take such other steps as are required to formally
commence the process for seeking, certification by a notified body that the
facilities at which the Products are manufactured are in compliance with the
Medical Device Directives such that Vyteris may be granted a "CE" xxxx to allow
X.Xxxxx to market and sell the Products in the European Economic Community.
Vyteris and X.Xxxxx shall thereafter cooperate and use best efforts to ensure
that such certification is granted. X.Xxxxx and Vyteris shall share equally all
costs of filing and other governmental fees associated with seeking CE
certification for a Product. The preceding sentence shall not be construed in
any manner to require X. Xxxxx to bear any costs or expense associated with
Vyteris obtaining certifications of compliance of the facilities at which the
Products are manufactured.
(k) During the Term and the Post-Termination Period,
Vyteris shall furnish X.Xxxxx with copies of any and all correspondence
submitted by or on behalf of Vyteris relating or pertaining to the Products to
the FDA and/or any other Agency, within five (5) days following such submission
by Vyteris.
(l) All representations and warranties made by the
parties in this Section 3.8, and elsewhere in this Agreement, shall survive the
parties' execution and delivery of, and performance under, this Agreement
3.9 PRODUCT COMPLAINTS AND RECALLS; ADVERSE DRUG EXPERIENCE
REPORTS.
(a) X.Xxxxx shall be responsible for interfacing
with its customers regarding all Product complaints and inquiries. All
documentation and information received by X. Xxxxx concerning such complaints
and inquiries shall be promptly provided by X. Xxxxx to Vyteris. X.Xxxxx shall
cooperate fully with Vyteris to conduct reasonable investigations to evaluate
the complaint or inquiry. X.Xxxxx shall be responsible for contacting its
customers for the purpose of such investigations. Vyteris shall provide
reasonable technical support to X.Xxxxx for investigating complaints. Any
investigation conducted by X.Xxxxx shall be completed within ten (10) days after
receipt of the complaint and all results of the investigation shall be promptly
forwarded to Vyteris. Vyteris shall be solely responsible for the filing of any
reports pursuant to the MDR or ADR requirements. If Vyteris receives any
information regarding adverse reactions or defects of the Products, Vyteris
shall promptly inform X.Xxxxx thereof. Each party shall reasonably cooperate
with the other in sharing any information that may constitute an adverse
experience or complaint related to the Products and shall designate a
representative responsible for the exchange of such information.
(b) X.Xxxxx shall have the right to reasonably
declare any recall of, or field corrective action to, any Products supplied by
Vyteris after consultation with Vyteris. In the event of any such recall or
field corrective action directly attributable to a breach of the representations
and warranties provided by Vyteris hereunder, Vyteris shall be responsible for
the costs and expenses incurred by X.Xxxxx in connection therewith.
-26-
SECTION 4. CURRENCY, RECORDS, INSPECTION RIGHTS AND RELATED
MATTERS.
4.1 CURRENCY. All payments made pursuant to this Agreement shall
be in Dollars ($). To the extent Net Sales are made in currencies other than
Dollars ($), such Net Sales shall, for purposes of this Agreement, be converted
to Dollars ($) by reference to the appropriate exchange rate in effect on the
last business day of the applicable calendar quarter, as published in the WALL
STREET JOURNAL (Eastern Edition) (or any successor publication).
4.2 RECORDS; EXAMINATION RIGHTS. Each party shall at all times
during the Term and the Post-Termination Period maintain complete and accurate
books and records with respect to any and all transactions relating and
pertaining to this Agreement (including, without limitation, Net Sales). In
connection therewith, each party shall have the right, at its expense and upon
not less than fourteen (14) days' advance written notice to the other party, to
inspect and examine the books and records of such party relating and pertaining
to Net Sales and X.Xxxxx Revenue Share Payments or Vyteris Revenue Share
Payments, as the case may be, for and with respect to the immediately preceding
three (3) year period (to the extent not previously examined by a party
hereunder) for the sole and exclusive purpose of verifying the accuracy of the
calculation of such Revenue Share Payments during such period; PROVIDED,
however, (i) any inspection and examination by a party under this Section 4.2
shall be conducted during normal business hours by the party's accountant (who
shall be reasonably acceptable to the other party), (ii) such accountant shall,
prior to entering the premises for such purpose, be required to execute and
deliver a confidentiality agreement (in form and substance reasonably
satisfactory to the other party), and (iii) no more than one inspection and
examination may be conducted by a party under this Section 4.2 during any
Contract Year. The party conducting the audit shall bear all expenses of such
audit, except as hereinafter set forth. In the event that an examination
pursuant hereto reveals an error in the payment of royalties due hereunder, such
error shall be corrected by the refund from or payment to the party, as
appropriate, of the difference in immediately available funds. In the event that
an audit conducted pursuant hereto reveals an underpayment of more than five
percent (5%), the party whose books and records are being audited and that bears
responsibility for the underpayment shall pay the reasonable costs of conducting
such audit.
-27-
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PARTIES.
5.1 REPRESENTATIONS AND WARRANTIES OF VYTERIS. Vyteris
represents and warrants to X.Xxxxx as follows:
(a) Vyteris is a corporation organized and validly
existing under the laws of the State of Delaware and has all requisite corporate
power and authority to enter into and legally perform its obligations under this
Agreement without any approvals not heretofore obtained or contemplated hereby.
(b) When executed and delivered, this Agreement
shall constitute the valid and binding obligation of Vyteris, legally
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy or insolvency laws.
(c) The execution and delivery of, and performance
under, this Agreement will not violate or contravene any provision of any
existing law, rule or regulation or decree of any court, governmental authority,
bureau or agency having jurisdiction over Vyteris or of the articles or
certificate of incorporation or by-laws of Vyteris or of any mortgage,
indenture, security agreement, contract, license (including the BC&D License
Agreement), undertaking or agreement to which Vyteris is a party or by which any
of the Licensed Property is subject.
(d) Vyteris is the sole owner (or licensee with
respect to the License Rights) of the entire right, title and interest in and
to, and has the sole and exclusive right, without any restrictions, to license
the Licensed Property, and there are no outstanding assignments, grants,
licenses, sublicenses, liens, security interests, pledges, encumbrances, claims,
obligations or agreements, affecting Vyteris, Affiliates of Vyteris, or any of
the Licensed Property, whether written, oral or implied, which are inconsistent
with the terms of this Agreement, except for the security interest in the Patent
Rights heretofore granted by Vyteris as security for convertible promissory
notes of Vyteris, as more fully described on Exhibit "5.1(d)" attached hereto
and made a part hereof (the "Permitted Encumbrance").
(e) All right, title and interest relating or
pertaining to the Permitted Encumbrance is under and subject to the rights of
X.Xxxxx under this Agreement and the holder(s) of the Permitted Encumbrance have
acknowledged the foregoing and agreed not to disturb, interfere or impair any
right of X.Xxxxx under this Agreement pursuant to and in accordance with the
provisions of the agreement more fully described on Exhibit "5.1(e)" attached
hereto and made a part hereof.
(f) Vyteris knows of no circumstances and has not
committed and will not commit any acts, that are inconsistent with the terms or
purposes of this Agreement or which infringe or lessen any of the Patent Rights,
the Technology or other Licensed Property intended to be licensed to X.Xxxxx
hereunder. The foregoing shall not, however, be interpreted to prevent Vyteris
from amending claims of pending or later filed patent applications with the
Patent Rights as it deems necessary to define patentable subject matter.
-28-
(g) Vyteris does not own or control any patent
applications, patents or other restrictive rights, or other potential
restrictive rights, other than the Patent Rights and Technology that would be
infringed by or otherwise interfere with X. Xxxxx'x ability to import, make,
have made, use, offer to sell, or sell any goods comprising or incorporating a
transdermal lidocaine delivery system.
(h) To the best of the knowledge, information and
belief of Vyteris, (i) except as disclosed on Exhibit "5.1(h)" attached hereto
and made a part hereof, no third party claim of invalidity or enforceability, in
whole or in part, has been asserted against or with respect to the Patent Rights
and (ii) the manufacture, market and sale of the Products by X. Xxxxx will not
infringe any intellectual property rights of any third party.
(i) To the best of the knowledge, information and
belief of Vyteris, after reasonable inquiry of its outside patent counsel as to
its existing knowledge, information and belief, the Patent Rights are valid and
enforceable.
(j) (i) The BD&C License Agreement is in full force
and effect on the date hereof; (ii) neither Vyteris nor BD&C is in default under
the BD&C License Agreement; (iii) Vyteris has the right to license the License
Rights to X.Xxxxx under and pursuant to the provisions of this Agreement and is
not required to provide notice to or obtain the consent of BD&C in connection
therewith; (iv) no event, circumstance or condition has occurred or exists as of
the date hereof which could impair any of the License Rights (including, without
limitation, the ability of X.Xxxxx to exploit the License Rights in the manner
contemplated hereby); and (v) a true, correct and complete copy of the BD&C
License Agreement has been delivered on this date by Vyteris to X.Xxxxx, which
has been certified by an authorized officer of Vyteris.
(k) Except as otherwise disclosed in the PPM or any
Supplements thereto provided to X.Xxxxx, no actions, suits or proceedings before
any court or governmental department or agency are pending or, to the best of
the knowledge, information and belief of Vyteris, threatened (i) against Vyteris
with respect to any of the transactions contemplated by this Agreement or (ii)
against or affecting Vyteris or any of the Licensed Property (or any other
properties or assets of Vyteris) that, if adversely determined, could reasonably
be expected to have a material adverse effect upon the financial condition of
Vyteris or the ability of Vyteris to perform its duties and obligations under
this Agreement.
(l) To the best of the knowledge, information and
belief of Vyteris, except as set forth on Exhibit 5.1(l) (i) all of the
statements, data, and information contained in the PPM were accurate and
complete, in all material respects as of March 4, 2002, and are accurate and
complete, in all material respects as of the date hereof, and (ii) all of the
statements, data, and information contained in the Supplement to the PPM dated
June 25, 2002 were accurate and complete, in all material respects as of June
25, 2002, and are accurate and complete, in all material respects, as of the
date hereof.
(m) Vyteris ratifies and confirms the truth,
accuracy and completeness of all other representations and warranties contained
in this Agreement (including, without limitation, the representations and
warranties relating and pertaining to the Products set forth in Section 3.8
hereof).
-29-
(n) Neither this Agreement nor any Exhibit hereto
contains any untrue statement of material fact or omits to state a material fact
required to be stated in order to make such statement or document not
misleading.
5.2 REPRESENTATIONS AND WARRANTIES OF X.XXXXX. X.Xxxxx
represents and warrants to Vyteris as follows:
(a) X.Xxxxx is a corporation organized and validly
existing under the laws of Commonwealth of Pennsylvania and has all requisite
corporate power and authority to enter into and legally perform its obligations
under this Agreement without any approvals not heretofore obtained or
contemplated hereby.
(b) When executed and delivered, this Agreement
shall constitute the valid and binding obligation of X.Xxxxx, legally
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy or insolvency laws.
(c) The execution and delivery of, and performance
under, this Agreement will not violate or contravene any provision of any
existing law, rule or regulation or decree of any court, governmental authority,
bureau or agency having jurisdiction over X.Xxxxx or of the articles of
incorporation or by-laws of X.Xxxxx or of any mortgage, indenture, security
agreement, contract, license, undertaking or agreement to which X.Xxxxx is a
party or by which any of its properties or assets are subject.
(d) No actions, suits or proceedings before any
court or governmental department or agency are pending or, to the best of the
knowledge, information and belief of X.Xxxxx, threatened (i) against X. Xxxxx
with respect to any of the transactions contemplated by this Agreement or (ii)
against or affecting X.Xxxxx or any of its properties or assets that, if
adversely determined, could reasonably be expected to have a material adverse
effect upon the financial condition of X.Xxxxx or the ability of X.Xxxxx to
perform its duties and obligations under this Agreement.
5.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by the parties hereto in Sections 5.1 and
5.2 shall be deemed to be continuing in nature and shall survive the execution,
delivery and performance of this Agreement.
SECTION 6. INSURANCE, INDEMNIFICATION, TERM, TERMINATION RIGHTS.
6.1 INSURANCE; INDEMNIFICATION.
(a) During the Term and for a period of six (6)
years after the expiration of the Post-Termination Period, each party shall
obtain and/or maintain, at its sole cost and expense, product liability
insurance that satisfies the following requirements:
(i) the insurance shall name the other party as an
additional insured and shall insure the other party against all
liability related to the Products (whether the liability arises from a
party's own conduct or by virtue of its participation in this
Agreement), including liability for bodily injury, property damage,
wrongful death, but
-30-
excluding liability for infringement of any third party patent or other
intellectual property right;
(ii) the insurance shall be in amounts, respectively,
that are reasonable and customary in the United States of America for
pharmaceutical manufacturing companies of comparable size and
activities, but in no event less than Five Million Dollars ($5,000,000)
per occurrence and Twenty-Five Million Dollars ($25,000,000) in the
aggregate; and
(iii) Each party shall furnish to the other party
certificates evidencing this insurance and shall provide the other party
at least thirty (30) days' prior written notice of cancellation or
material modification of such insurance, all of which shall be
satisfactory, in form and substance, to such party.
(b) Vyteris hereby indemnifies and agrees to defend
and hold X.Xxxxx and BBM AG, and their respective affiliates, officers,
directors, agent and employees (individually and collectively, "X.Xxxxx
Parties") harmless from and against any and all damages, liabilities, penalties,
losses or expenses including, without limitation, legal fees, arising out of or
relating to any claims, actions, demands or proceedings asserted by a third
party (individually and collectively, a "Claim") which results from or arises
out of (i) the breach of any warranty, representation or agreement of Vyteris in
this Agreement, (ii) any infringement claims relating to the manufacture, use,
marketing, distribution or sale of the Products or the Licensed Property, (iii)
the death of, or bodily injury to, any Person on account of the use of any of
the Products, excluding, however, those Claims for which X.Xxxxx has provided
indemnification under clause (iv) of Section 6.1(c) hereof, or (iv) a product
recall or field correction of any Product by any Agency or X.Xxxxx (other than a
recall that is due to or results from the manner in which X.Xxxxx markets and
sells the Products).
(c) X.Xxxxx hereby indemnifies and agrees to defend
and hold Vyteris, its officers, directors, managers, agents and employees and
their successors and assigns (individually and collectively, "Vyteris Parties")
harmless from and against any and all damages, liabilities, penalties, losses or
expenses including without limitation, legal fees arising out of or relating to
any third party Claim resulting from or arising out of (i) the breach of any
warranty, representation or agreement of X.Xxxxx in this Agreement including,
without limitation, any such breach relating to the marketing, sale or
distribution of any Product by X.Xxxxx, (ii) the death of, or bodily injury to,
any Person on account of the use of any of the Products resulting from the
manner in which X.Xxxxx markets or sells the Products, (iii) a product recall or
field correction of any Product by any Agency due to or resulting from the
manner in which X.Xxxxx markets, sells or labels the Product; or (iv) the
manufacture, use, distribution or sale of the Products manufactured by X.Xxxxx
in connection with the efforts undertaken by or on behalf of X.Xxxxx to exploit
the license granted by Vyteris to X.Xxxxx under Section 2.1(a)(ii) hereof after
the occurrence of a Triggering Event other than (A) Claims that any such
manufacture, use distribution or sale of Products and the use of the Licensed
Property by X.Xxxxx in connection therewith constitutes an infringement on the
patent rights, intellectual property rights or proprietary rights of the
claimant or a misappropriation of trade secrets of the claimant, or (B) Claims
resulting from any breach of the representations and warranties made by Vyteris
in this Agreement.
-31-
(d) Upon receiving notice of any Claim under this
Section 6.1, the indemnified party shall notify the indemnifying party in
writing within ten (10) business days following receipt of the notice; PROVIDED,
HOWEVER, that the right of an indemnified party to be indemnified hereunder in
respect of Claims shall not be adversely affected by a failure to give such
notice, unless, and then only to the extent that an indemnified party is
materially prejudiced thereby.
(e) The indemnifying party shall undertake and
control the defense thereof by reputable counsel chosen by it, subject to the
approval of the indemnified party, which consent shall not be unreasonably
withheld or delayed. The indemnified party shall be entitled to retain separate
co-counsel at its sole cost and expense and participate in the defense of a
claim; PROVIDED, HOWEVER, the indemnifying party shall be responsible for the
reasonable cost and expense of counsel to the indemnified party if, in the
reasonable opinion of the indemnified party, representation of the interests of
both the indemnified party and the indemnifying party could reasonably be
expected to create a conflict of interest and written notice thereof is
furnished by the indemnified party to the indemnifying party. If any Claim is
asserted and the indemnifying party fails to contest and defend such Claim
within a reasonable period of time after the indemnified party's notice is
given, then the indemnified party may take such reasonable action in connection
therewith as the indemnified party deems necessary or desirable, including
controlling the defense of such claim, subject to the provisions of Section
6.1(f) hereof, and retaining counsel of its own choosing with the reasonable
costs and expenses of such defense being borne by the indemnifying party. The
reimbursement for all reasonable costs and expenses incurred by an indemnified
party pursuant to this Section 6.1(e) shall be paid as and when incurred within
thirty (30) days after receipt of an invoice therefor.
(f) If requested by the indemnifying party, the
indemnified party agrees to cooperate with the indemnifying party and its
counsel. The indemnified party shall not settle or compromise such claim without
the prior written consent of the indemnifying party, which consent shall not be
unreasonably withheld. At the request of the indemnifying party, the indemnified
party shall settle a Claim; PROVIDED, HOWEVER, that (i) such settlement involves
only the payment of monetary damages and no injunctive relief binding on the
indemnified party, and such monetary damages are paid by the indemnifying party,
(ii) the indemnified party does not admit any liability, and (iii) the
indemnified party is released from all further liability with respect to such
Claim.
(g) The obligations of the parties hereto under this
Section 6.1 shall survive any termination or expiration of this Agreement until
the expiration of all applicable statutes of limitation that could apply to any
actions, claims, proceedings or demands that could be asserted by a third party.
6.2 TERM.
(a) Subject to the terms of Section 6.3 hereof, this
Agreement shall commence on the date hereof and shall remain in full force and
effect for a term of ten (10) years from the Commercial Start Date (the "Initial
Term"). Each party shall notify the other in writing at least twelve (12) months
prior to the expiration of the Initial Term of their respective interest, if
any, in extending this Agreement beyond the Initial Term. If both parties
express interest in
-32-
extending this Agreement beyond the Initial Term, the parties agree to negotiate
in good faith an extension to the Agreement.
(b) Notwithstanding the provisions of Section 6.2(a)
hereof, X.Xxxxx shall have the right, in its sole discretion, to extend this
Agreement beyond the Initial Term (an "Extension Period") for an additional term
of five (5) years or such other period as may be agreed to in writing by the
parties, on the same terms and conditions as set forth herein by providing
written notice to Vyteris prior to the expiration of the Term, so long as
X.Xxxxx has purchased Products during the Initial Term in an aggregate amount
equal to at least the Minimum Product Purchase Requirements for the Initial
Term.
(c) If for any reason other than as a result of a
Default by X.Xxxxx under this Agreement, the Commercial Start Date does not
commence on or before August 1, 2006, X.Xxxxx shall have the right, for a period
of sixty (60) days thereafter, to terminate this Agreement, without liability or
obligation to Vyteris, upon written notice to Vyteris.
6.3 TERMINATION.
(a) Notwithstanding the provisions of Section 6.2
hereof, a non?defaulting party shall have the option, in addition to all other
legal and equitable rights and remedies available to it hereunder, to terminate
this Agreement effective immediately, or upon the expiration of any applicable
cure period, in the event of a "Default" by the other party (as defined below)
if written notice of the defaulting activity has been given to the party in
default.
(b) The term "Default" shall mean any of the
following events:
(i) A failure by Vyteris to supply X.Xxxxx with
Products pursuant to and in accordance with the provisions of Section 3.1 hereof
that is not cured within thirty (30) days following receipt by Vyteris of
written notice from X.Xxxxx of such failure; PROVIDED, HOWEVER, if (A) such
failure occurs during the first four (4) years following the Commercial Start
Date and results from circumstances beyond the reasonable control of Vyteris and
not directly or indirectly as a result of obligations of Vyteris to supply
Products to Persons other than X.Xxxxx (an "Excusable Supply Failure"), and (B)
Vyteris provides X.Xxxxx with written notice and evidence, in form and substance
reasonably satisfactory to X.Xxxxx, that the failure is an Excusable Supply
Failure within fifteen (15) days following receipt by Vyteris from X.Xxxxx of
such failure (an "Excusable Supply Failure Notice"), then Vyteris shall have the
right, which shall be exercised in the notice from Vyteris to X.Xxxxx provided
pursuant to this paragraph (B), to extend the thirty (30) day cure period set
forth in this Section 6.3(b)(i) in accordance with the following procedure: (1)
Vyteris shall furnish to X.Xxxxx a written plan (the "Supply Continuation Plan")
within thirty (30) days following X. Xxxxx'x receipt of the Excusable Supply
Failure Notice setting forth the actions that Vyteris shall take to cure the
Excusable Supply Failure as soon as commercially possible following the
occurrence of the failure giving rise to the notice from X.Xxxxx to Vyteris
under this Section 6.3(b)(i), (2) the Supply Continuation Plan shall be subject
to the review and approval by X.Xxxxx, which shall not be unreasonably withheld,
conditioned or delayed, (3) following X. Xxxxx'x review and approval of the
Supply Continuation Plan, no amendments, modifications or
-33-
changes shall be made thereto without the prior written consent and approval of
X.Xxxxx, it being understood and agreed that X.Xxxxx shall in good faith
consider, but shall have no obligation to approve, any reasonable request by
Vyteris for such an amendment, modification or change so long as the rights and
interests of X.Xxxxx are not adversely affected thereby, and (4) Vyteris shall
not be considered in Default under this Section 6.3(b)(i) as a result of the
Excusable Supply Failure if the Supply Continuation Plan is approved by X.Xxxxx
and Vyteris fulfills all of its supply and related obligations under the Supply
Continuation Plan within the time periods provided thereby. Vyteris shall use
its best efforts to cure any Excusable Supply Failure. Vyteris shall be
considered in Default under this Section 6.3(b)(i) if Vyteris fails to perform
any of its obligations under the Supply Continuation Plan in a manner reasonably
satisfactory to X.Xxxxx and such failure is not cured by Vyteris to the
reasonable satisfaction of X.Xxxxx within fifteen (15) days following receipt by
Vyteris of written notice of such failure by X.Xxxxx;
(ii) excluding events covered by clause (i) of this
Section 6.3(b) above a failure by Vyteris or X.Xxxxx to comply with or
perform any material provision of this Agreement or the Securities
Purchase Agreements and such failure remains uncured for thirty (30)
days following written notice of the defaulting activity from the
non-defaulting party to the defaulting party; or
(iii) a party is unable to pay its debts as they
mature, is the subject of a petition in bankruptcy whether voluntary or
involuntary or of any other proceeding under bankruptcy, insolvency or
similar laws, makes an assignment for the benefit of creditors, is named
in, or its property is subject to, a suit for the appointment of a
receiver.
(c) Vyteris recognizes, acknowledges and agrees that
the exclusive license rights granted by Vyteris to X.Xxxxx pursuant to the
provisions of Section 2.1(a) hereof, notwithstanding the provisions of Section
2.1(b) hereof, are granted and exist as of this date and may be retained by
X.Xxxxx under Section 365(n)(1)(B) of the Bankruptcy Code in the event that
Vyteris or a trustee on its behalf elects, and is permitted, to reject this
Agreement as an executory contract under Section 365(a) of the Bankruptcy Code.
6.4 EFFECT OF TERMINATION.
(a) Subject to the provisions of Sections 6.4(c) and
6.5(a) hereof, upon expiration or termination of this Agreement for whatever
reason, X.Xxxxx shall cease use, in any manner or for any purpose, directly or
indirectly, of any Trademark used to identify the Products or any marks or
symbols deceptively similar thereto, as well as of all Sales Literature,
advertising and promotional labeling and materials relative to the Products.
(b) The expiration or termination of this Agreement
shall not affect X. Xxxxx'x obligation to pay any amount accruing to Vyteris
under the provisions of this Agreement while it was in effect or the obligation
of Vyteris to pay any amount accruing to X.Xxxxx under the provisions of this
Agreement while it was in effect. Any termination of this Agreement pursuant to
Section 6.3(a) hereof shall not affect the parties' liabilities to each other
for breach of this Agreement.
-34-
(c) During the Post-Termination Period, X.Xxxxx
shall have the non-exclusive right to continue to purchase the Products at the
Purchase Prices and on the other terms and conditions contained in the Agreement
for sale by X.Xxxxx to those customers to whom X.Xxxxx had entered into
contracts to sell Products prior to the expiration or termination of this
Agreement (a "Contracted Customer"). The "Post-Termination Period" shall mean
the period that commences on the expiration or termination date of this
Agreement and concludes, with respect to sales to each Contracted Customer, on
the date that is the first to occur of: (i) the expiration or termination of the
contract with such Contracted Customer; or (ii) four (4) years after such
expiration or termination date of this Agreement.
6.5 TRIGGERING EVENT. Notwithstanding anything contained in this
Agreement to the contrary, upon the occurrence of a Triggering Event and a
decision by X.Xxxxx to exploit the license granted by Vyteris to X.Xxxxx under
Section 2.1(a)(ii) hereof as permitted by Section 2.1(b) hereof:
(a) The license granted by Vyteris to X.Xxxxx under
Section 2.1(a)(ii) hereof and the rights granted by Vyteris to X.Xxxxx under
Section 2.1(h) hereof shall be for a perpetual term subject, however, to all
other conditions of this Agreement (as modified by this Section 6.5), including,
without limitation, the revenue share provisions of Section 3.5(a) hereof.
(b) The rights of Vyteris under Sections 2.1(c),
2.1(d), 2.1(e), 2.1(g), 3.1(e), 3.1(f), 3.2(b)(iii), 3.2(d) and 3.5(e) hereof
shall cease and terminate and be of no further force or effect.
(c) The obligations of X.Xxxxx under Section 2.1(g),
3.1(a), 3.2(b)(iii), 3.2(d) and 3.5(e) hereof shall cease and terminate and be
of no further force or effect.
(d) Vyteris shall transfer, assign and convey all of
its right, title and interest in and to the NDA, the NDA Filing, the 510(k)
Clearance and/or the 510(k) Filing, to the extent permitted under applicable
laws, rules and regulations, if and to the extent such transfer, assignment and
conveyance, in the reasonable opinion of X.Xxxxx, is necessary for X.Xxxxx to
fully exploit and realize upon the license granted by Vyteris to X.Xxxxx under
Section 2.1(a)(ii) hereof.
6.6 CHANGE IN CONTROL TRANSACTION. In the event that
Vyteris is a party to a Change in Control Transaction in which Vyteris or the
business or assets of Vyteris that is subject to the Change in Control
Transaction is acquired or becomes subject to the control, directly or
indirectly, of a competitor of X.Xxxxx engaged in the business of developing,
manufacturing, marketing or selling medical products or services following the
Change in Control Transaction, then at X. Xxxxx'x option (which shall be
exercised by serving on Vyteris written notice of such exercise of rights), (i)
the rights of Vyteris under Sections 2.1(c), 2.1(d), 2.1(e), 2.1(g),
3.2(b)(iii), 3.2(d) and 3.5(e) hereof shall cease and terminate and be of no
further force or effect, (ii) the obligations of X.Xxxxx under Sections 2.1(g),
2.4, 3.2(b)(iii), 3.2(d), and 3.5(e) hereof, shall cease and terminate and be of
no further force or effect, (iii) the cure and related rights of Vyteris
contained in the proviso to Section 6.3(b)(i) hereof (including, without
limitation, the right of Vyteris to claim an Excusable Supply Failure, issue an
Excusable Supply Failure Notice and submit a Supply Continuation Plan in
connection with a failure by Vyteris to
-35-
supply X.Xxxxx with Products pursuant to and in accordance with the provisions
of Section 3.1 hereof) shall cease and terminate and be of no further force or
effect, (iv) the provisions of this Agreement shall be deemed to be modified and
amended to take into account the provisions of this Section 6.6 and (v) at the
request of X. Xxxxx, Vyteris shall enter into a modification and amendment to
this Agreement to reflect the foregoing, which modification and amendment shall
be reasonably satisfactory, in form and substance, to X. Xxxxx and Vyteris.
SECTION 7. RIGHTS OF FIRST REFUSAL; CONFIDENTIALITY, COVENANTS
AND MISCELLANEOUS PROVISIONS.
7.1 RIGHTS OF FIRST REFUSAL.
(a) If prior to the commencement of or during the
Term Vyteris develops or invents any non-invasive transdermal drug delivery
system (including a Competitive Product) that is used as a topical anesthesia
which is not a Product Development and which it desires to market, sell and
distribute to third parties (a "New Topical Anesthesia Product"), Vyteris shall
provide X.Xxxxx with prompt written notice of the New Topical Anesthesia
Product, which notice shall include: (i) a detailed description of the New
Topical Anesthesia Product (including, without limitation, a description of any
and all Industrial Property and other technology used in connection therewith),
and (ii) a detailed description and summary of the research and development
costs incurred by Vyteris as of the date of such notice relating solely and
exclusively to the New Topical Anesthesia Product and a description and summary
of such additional research and development costs that Vyteris projects that it
will incur after the date of such notice. X.Xxxxx shall have the right and
option (but not the obligation), which right shall be exercised by written
notice to Vyteris within thirty (30) days after its receipt of the notice from
Vyteris referred to in the immediately preceding sentence and any other
information that X.Xxxxx may request with respect to the New Topical Anesthesia
Product in connection therewith, to market, sell and distribute the New Topical
Anesthesia Product in the Territory on the same terms and conditions as are
contained in this Agreement (including, without limitation, the grant of an
exclusive license in and to all Industrial Property and other technology
relating and pertaining to the New Topical Anesthesia Product); provided,
however, that X.Xxxxx and Vyteris shall negotiate in good faith the (x) X.Xxxxx
Revenue Share Percentage for Net Sales of the New Topical Anesthesia Product by
X.Xxxxx, and (y) amount and percentage to be paid by X.Xxxxx to Vyteris for
research and development costs that have been or will be incurred by Vyteris
relating to the New Topical Anesthesia Product and referred to in clause (ii) of
the first sentence of this Section 7.1(a), which payment shall be made
concurrently with the exercise of X. Xxxxx'x rights hereunder with respect to
research and development costs already incurred by Vyteris and within thirty
(30) days after a request therefor by Vyteris (and detailed description thereof)
with respect to research and development costs incurred thereafter. In the event
that the parties are unable to reach agreement with respect to the amounts and
percentages referred to in the preceding clauses (x) and (y), they shall submit
the issues to binding arbitration by a single arbitrator having industry
experience, in which the arbitrator is authorized to determine such amounts and
percentages so as to ensure an appropriate level of profitability to each party
necessary to sustain a viable business, based on industry standards and
comparables. Such arbitrator shall be chosen by mutual agreement of the parties,
or, failing such agreement, in accordance with the procedures of the American
Arbitration Association. In the event that X.Xxxxx elects not to exercise its
rights under this Section 7.1(a) with respect to any New Topical Anesthesia
Product, X.Xxxxx shall retain its rights under this Section 7.1(a) with respect
to any other New Topical Anesthesia Product. In the event that X.Xxxxx elects to
exercise its rights under this Section 7.1(a) with respect to any New
-36-
Topical Anesthesia Product, the parties hereto shall enter into a new license,
development and distribution agreement with respect thereto incorporating the
terms and conditions herein set forth.
(b) Prior to entering into any contract, agreement,
understanding or arrangement (verbal or written) with respect to the sale,
transfer, licensing, marketing, exploitation and/or distribution of any type of
drug delivery system used for the treatment of systemic pain management
manufactured, developed or acquired by Vyteris, and the patents, intellectual
property, technology or other rights, ideas, concepts or interests derived
therefrom or relating thereto (each such new systemic pain management product
for the delivery of a specific drug a "Systemic Pain Management Product"),
Vyteris shall first furnish written notice to X.Xxxxx setting forth, in
reasonable detail, the desire of Vyteris to exploit, or cause the exploitation
of, each such Systemic Pain Management Product. Vyteris shall thereafter, if
X.Xxxxx requests, consider in good faith, on a non-exclusive basis
simultaneously with discussions with any interested third party, any proposal by
X.Xxxxx regarding the terms and conditions of an agreement under which, if
agreed, X.Xxxxx would be granted the exclusive right to exploit such Systemic
Pain Management Product. Vyteris shall not be obligated to negotiate exclusively
with X.Xxxxx for any time period, and shall have the right, following the
provision of notice to X.Xxxxx under this Section 7.1(b), in its sole
discretion, to enter into an agreement with a third party at any time.
7.2 CONFIDENTIALITY AND RELATED COVENANTS.
(a) During the Term and for a period of five (5)
years thereafter, each receiving party agrees to hold in confidence, and to
refrain from using, distributing, disseminating, or disclosing to others, any
Confidential Information of the other party, or from making or causing to be
made, or selling or distributing, any product embodying Confidential Information
of the disclosing party, except for the purposes described in this Agreement, as
contemplated hereby or as otherwise permitted by the disclosing party.
(b) Distribution of Confidential Information by the
receiving party after receipt thereof shall be limited to those employees of the
receiving party who have agreed to keep such information confidential pursuant
to the provisions hereof (the "Recipients"). The receiving party shall have the
obligation of assuring that its Recipients are aware of the confidential nature
of such information and that its Recipients are subject to no less stringent
nondisclosure and nonuse obligations with respect to any such Confidential
Information. Each receiving party shall be liable to the disclosing party for
any failure by its Recipients to adhere to the covenants and restrictions in
this Section 7.2.
(c) The restrictions set forth in this Section 7.2
shall not apply to information that: (i) the receiving party proves was derived
from information in the public domain; (ii) becomes a part of the public domain
through no fault of the receiving party; (iii) the receiving party proves was in
its possession prior to the disclosure of the information by the disclosing
party; (iv) the receiving party acquires the information outside of the
relationship
-37-
between the parties to this Agreement from a third party that is under no
obligation of confidence to a disclosing party; or (v) is proven to be
independently developed by a receiving party.
(d) In the event that the receiving party becomes
legally compelled (such as by order of court, administrative agency or other
governmental body) to disclose Confidential Information of the disclosing party,
the receiving party shall provide the disclosing party with prompt written
notice of such order or obligation, and to the extent possible, an opportunity
to seek a protective order or other appropriate means to preserve the
confidentiality of the Confidential Information. In the event no such order is
issued or no such challenge is undertaken or such challenge is unsuccessful,
only that portion of the Confidential Information which is legally required to
be disclosed shall be disclosed. The receiving party agrees that such disclosure
shall not cause any of the Confidential Information that was not required to be
disclosed to fall within any exception set forth in Section 7.2 hereof.
(e) Notwithstanding anything contained herein to the
contrary, the covenants and agreements of the parties hereto contained in this
Section 7.2 shall survive for a period of five (5) years following the
termination or expiration of this Agreement.
(f) The parties hereto expressly agree that a breach
of any of the terms and conditions of this Section 7.2 would result in
irreparable damage to the non-breaching party and money damages may be an
insufficient remedy. Accordingly, in the event of a breach or threatened breach
by either party hereto, or by any agent or advisors of either party hereto of
any of the provisions of this Section 7.2, and in addition to any other remedy
provided herein or by law or in equity, the non-breaching party shall be
entitled to appropriate injunctive relief in any court of competent
jurisdiction.
7.3 MISCELLANEOUS.
(a) Force Majeure. If either party is prevented from
complying, either totally or in part, with any of the terms or provisions of
this Agreement, by reason of a fire, flood, explosion, storm, strike, lockout or
other labor trouble, riot, war, terrorist actions, rebellion, or accidents (a
"Force Majeure Event"), then, upon written notice by the party liable to perform
to the other party, the requirements of this Agreement or such of its provisions
as may be affected (excluding, however, any obligation to pay money) and to the
extent so affected, shall be suspended during the period of such Force Majeure
Event; provided, that the party asserting a Force Majeure Event shall bear the
burden of establishing the existence of the Force Majeure Event by clear and
convincing evidence, shall use its best efforts to remove the Force Majeure
Event, shall continue performance with the utmost dispatch whenever such causes
are removed, and shall notify the other party of the Force Majeure Event not
more than ten (10) calendar days from the time of the event; PROVIDED, HOWEVER,
that the party not asserting the Force Majeure Event shall have the right, upon
payment of all sums due and owing under this Agreement, to terminate the
Agreement upon written notice to the party asserting force majeure if the Force
Majeure Event continues for more than one hundred twenty (120) days.
(b) Notices. All written notices or other written
communications required under this Agreement shall be deemed properly given when
provided to the parties entitled thereto by personal delivery (including
delivery by commercial services such as
-38-
messengers and airfreight forwarders), by electronic means (such as by
electronic mail, telex or facsimile transmission) or by mail sent registered or
certified mail, postage prepaid at the following addresses (or to such other
address of a party designated in writing by such party to the others):
Vyteris:
Vyteris Inc.
00-00 Xxxxxxx Xxxxx
Xxxx Xxxx, XX 00000
Attn: PresidentE-mail:
Xxxxxxxxxx Xxxxxxx, P.C.
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, X.X. 00000
Attn: Xxxxx X. Xxxxxxxxx, Esquire
X.Xxxxx:
X.Xxxxx Medical Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Attn: General Counsel
E-mail: xxxxxxx.xxxxxxx@xxxxx.xxx
All notices given by electronic means shall be confirmed by delivering to the
party entitled thereto a copy of said notice by certified or registered mail,
postage prepaid, return receipt requested. All written notices shall be deemed
delivered and properly received upon the earlier of two (2) days after mailing
the confirmation notice or upon actual receipt of the notice provided by
personal delivery or electronic means.
(c) Subject Headings. The subject headings of the
paragraphs of this Agreement are included solely for purposes of convenience and
reference only, and shall not be deemed to explain, modify, limit, amplify or
aid in the meaning, construction or interpretation of any of the provisions of
this Agreement.
(d) Amendments. Except as otherwise specified
herein, no supplement, modification or amendment of any term, provision or
condition of this Agreement (including this Section) shall be binding or
enforceable unless evidenced in a writing executed by the parties hereto.
(e) Entire Agreement and Waiver. This Agreement
contains the entire agreement between the parties hereto and supersedes all
prior and contemporaneous agreements, arrangements, negotiations and
understandings between the parties hereto, relating to the subject matter
hereof. There are no other understandings, statements, promises or inducements,
oral or otherwise, contrary to the terms of this Agreement. No representations,
warranties, covenants or conditions, express or implied, whether by statute or
otherwise, other than as set forth herein,
-39-
have been made by any party hereto. No waiver of any term, provision, or
condition of this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be, or shall constitute, a waiver of any other
provision hereof, whether or not similar, nor shall such waiver constitute a
continuing waiver, and no waiver shall be binding unless executed in writing by
the party making the waiver.
(f) Successors and Assigns. Neither party hereto may
assign either this Agreement or any of its rights hereunder without the written
consent of the other party hereto first obtained (which consent shall not be
unreasonably withheld) and any attempted assignment without such written consent
shall be void and confer no rights upon any third party. Subject to the
foregoing, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective representatives, successors and
permitted assigns. Notwithstanding the foregoing, (i) X.Xxxxx shall have the
right, upon advance notice to but without any requirement to obtain the consent
of Vyteris, to assign and delegate its rights and obligations under this
Agreement to a United States-based Affiliate of X.Xxxxx, and (ii) subject to
Section 6.6 hereof, either party may assign and delegate its duties under this
Agreement, upon advance notice to but without any requirement to obtain the
consent of the other party, to a purchaser or successor-in-interest to its
business in connection with a merger, consolidation or sale of all or
substantially all of such party's assets.
(g) Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(h) Applicable Law. This Agreement shall be governed
by and construed and enforced in accordance with and subject to the law of the
Commonwealth of Pennsylvania without regard to conflict of laws principles.
(i) Disputes/Cure/Arbitration. The parties shall
attempt in good faith to resolve any controversy or claims arising out of or
relating to this Agreement or any breach hereof promptly through negotiations
between their senior executives who have authority to settle the same. If the
matter is not resolved through negotiation within sixty (60) days of notice by a
party to the others of the controversy or claim, the parties shall attempt in
good faith to resolve the controversy or claim through a non-binding mediation
in Philadelphia County, Pennsylvania, under the Commercial Mediation Rules of
the American Arbitration Association. If the matter is not resolved through
mediation within sixty (60) days of initiation of such procedure, or if any
party fails or refuses to participate in the mediation, the controversy or claim
shall be finally settled by binding arbitration to be conducted as follows:
(i) The arbitration shall be conducted in
Philadelphia County, Pennsylvania, in accordance with the Commercial
Arbitration Rules and Supplementary Procedures for International
Commercial Arbitration of the American Arbitration Association. Process
may be served in the manner in which notices may be given as provided in
Section 7.3(b) hereof.
-40-
(ii) There shall be three (3) arbitrators who shall
be selected by agreement of the parties, or failing agreement on the
selection; they shall be selected in the manner determined by the
American Arbitration Association.
(iii) The arbitration panel shall determine the
matters in controversy in accordance with the internal laws of the
Commonwealth of Pennsylvania, without giving effect to the principles of
conflict of laws thereof. Any award in such arbitration shall be final
and binding upon the parties, and judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof.
Any award shall be promptly payable in Dollars ($).
(j) Custom. The parties to this Agreement shall have
the right at all times to enforce the provisions contained in this Agreement,
and in all other agreements and documents required or provided for herein, in
strict accordance with the terms thereof, notwithstanding any custom or practice
in the area or any conduct or continuing conduct on the part of either party
hereto to the contrary unless expressly agreed to in writing. The failure of
either party hereto, at any time or from time to time, to enforce any of its
rights under any provision herein, strictly in accordance with the same, shall
not be construed as varying the terms hereof, in any way or manner, contrary to
the specific provisions of this Agreement or be construed as modifying or
waiving such provision.
(k) Relationship of Parties. The relationship
between Vyteris and X.Xxxxx as established by this Agreement is that of
independent contractors. As such, subject to the provisions of this Agreement,
Vyteris and X.Xxxxx each will conduct their respective business at their own
initiative, responsibility and expense, and each will have no authority to incur
any obligation on behalf of the other.
(l) Confidentiality. In addition to the covenants
set forth in Section 7.2 hereof, the parties hereto agree that the existence,
terms and conditions of this Agreement are confidential and shall not be
disclosed by any party hereto to any other Person without the prior written
consent of the disclosing party first obtained except that the receiving party
shall have the right to disclose such information to professional advisors,
lenders, financial advisors, potential investors or acquirers, any potential
suppliers or other vendors to whom such disclosure is reasonably necessary for
the purpose of establishing creditworthiness, obtaining advice or such other
purposes as may be necessary and proper, of the receiving party provided such
parties are aware of the confidential nature of such information and agree to
keep such information confidential to the same extent as required of the
receiving party hereunder; PROVIDED, HOWEVER, a party (a "Disclosing Party")
shall provide the other party advance written notice of any disclosure of the
other party's confidential information to be made by the Disclosing Party
pursuant hereto and, upon the other party's request after a determination by the
other party that such disclosure could adversely affect its business interests,
shall require the recipient of any such information to enter into a standard and
customary confidentiality agreement containing terms and conditions which are
reasonably acceptable to the other party. Neither party shall issue any press
release or public statement regarding this Agreement or the subject matter
hereof without the prior written approval of the other party, which shall not be
unreasonably withheld, conditioned or delayed.
-41-
(m) Reformation/Severability. If any provision of
this Agreement (including, without limitation, the covenants and agreements set
forth in Section 7.2 hereof) is declared invalid by any tribunal, then such
provision shall be deemed automatically adjusted to the minimum extent necessary
to conform to the requirements for validity as declared at such time and, as so
adjusted, shall be deemed a provision of this Agreement as though originally
included herein. In the event that the provision invalidated is of such a nature
that it cannot be so adjusted, the provision shall be deemed deleted from this
Agreement as though such provision had never been included herein. In either
case, the remaining provisions of this Agreement shall remain in effect.
(n) Limitation of Liability. EXCEPT AS OTHERWISE SET
FORTH IN SECTION 6.1 (b) and (c) HEREOF, ABSENT A WILLFUL OR INTENTIONAL BREACH
OF THIS AGREEMENT, NEITHER PARTY BE LIABLE TO THE OTHER FOR INCIDENTAL,
CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES INCLUDING WITHOUT LIMITATION, LOST
BUSINESS, PROFITS OR DAMAGES ARISING FROM OR CONNECTED WITH LOST, DAMAGED OR
ALTERED DATA OR LOSS OF GOODWILL.
(o) Schedules/Exhibits. The following Schedules and
Exhibits (as attached hereto and as and when amended) are incorporated into, and
are an integral part of, this Agreement:
-42-
Exhibit 1.2(A) Development Plan
Exhibit 1.2(B) Knowledge of Vyteris
Exhibit 1.2(C) Description of License Rights
Exhibit 1.2(D) Marketing Plan
Exhibit 1.2(E) Minimum Product Purchase Requirements (Foreign Territory)
Exhibit 1.2(E-1) Minimum Product Purchase Requirements (USA Territory)
Exhibit 1.2(E-2) Minimum Product Purchase Requirements required to extend Term
Exhibit 1.2(F) Patent Rights
Exhibit 1.2(G) Pricing Schedule
Exhibit 1.2(H) Product Description
Exhibit 1.2(I) Specifications
Exhibit 1.2(J) Trademarks
Exhibit 1.2(K) Vyteris Revenue Share Percentage
Exhibit 2.1 Sub-Markets
Exhibit 3.1 Capacity Plan
Exhibit 3.2 Samples
Exhibit 3.5(e) Minimum Average Selling Price
Exhibit 3.6 Form of Certificate of Analysis
Exhibit 3.8 Pre-Approval Inspection Plan
Exhibit 5.1(d) Permitted Encumbrance
Exhibit 5.1(e) Agreement with Holder(s) of Permitted Encumbrance
Exhibit 5.1(h) Pending Patent Rights Proceedings
Exhibit 5.1(l) Exceptions to PPM
-43-
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above written by
persons duly authorized.
VYTERIS, INC.
By:/s/ Xxxxx Xxxxxxxx
-------------------------------------------------
Name: Xxxxx XxXxxxxx
Title: President
X. X. XXXXX MEDICAL INC.
By: /s/ Xxxx Xxxx
-------------------------------------------------
Name: Xxxx Xxxx
Title: Director of Marketing, Pain Control
-44-
EXHIBIT 1.2(A)
DEVELOPMENT PLAN
The plan outlined below represents target dates as of the Agreement date.
Incremental changes to the plan are expected and will be communicated in a
timely manner to both parties.
--------------------------------------------------------------------- -------------- ----------- -------------
TASK DURATION START FINISH
--------------------------------------------------------------------- -------------- ----------- -------------
[*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
NDA/FDA/510(k) [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Correct formatting issues cited by FDA [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
QC/QA all clinical study datasets [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Verify compliance of NDA to electronic [*] [*] [*]
submission guidance
--------------------------------------------------------------------- -------------- ----------- -------------
Revalidate statistical analyses of all clinical
data [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
File the NDA with the FDA [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
File the 510(k) with the FDA [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Patch Materials Development [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Complete development of hydrogel and
conductive ink coating processes [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Write and approve Development Reports [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Patch Mfg Process Development [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Complete three 21K-Patch Scale-Up Runs [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Optimize the CPAL-12 machine [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Controller Development [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Approve revised controller design [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Prepare drawings and specifications [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Select vendor(s) for controller components [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Assemble components and test first 1000
controllers [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Materials Qualification/Vendor Contracts [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Conduct vendor qualifications for custom
materials [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Negotiate supply agreements with customer
material vendors [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Validation Programs (Facility, Manufacturing,
Analytical [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Methods, and Network [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Quality Systems/cGMP compliance/Training [*] [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Commercialization Schedule*** [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Ready for Preapproval Inspection*** [*]
--------------------------------------------------------------------- -------------- ----------- -------------
NDA Declared "Approvable" (assume 14 mo.
Review)*** [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Labeling Receives Final Approval from FDA*** [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Labels Made and Patches Labeled*** [*] [*]
--------------------------------------------------------------------- -------------- ----------- -------------
Commercial Launch of Product (Commercial Start
Date)*** [*]
***Assumptions. Actual dates will depend on actions of regulatory bodies
including the Food and Drug Administration
-2-
EXHIBIT 1.2(B)
All individuals identified as being part of the management of Vyteris in the
PPM, as follows:
Xxxxxxx XxXxxxxx, Ph.D. Vice Chairman, President
Xxxxxxx XxXxxxxxxx Chief Financial Officer and
Treasurer
Xxxxx Xxxxxxxx Vice President, Business
Development
Xxxxxx Xxxxxxxxx Manager of Regulatory Compliance
and Quality Management
Xxxxxx Xxxxxx Chairman of the Board
-3-
EXHIBIT 1.2(C)
DESCRIPTION OF LICENSE RIGHTS
xxxx rights, service names and service name rights, brand names and brand name
rights. inventions, processes, formulae, copyrights and copyright rights, trade
dress, product names, logos, slogans, designs, trade secrets, know how,
industrial models, proprietary data. methodologies, computer programs and
software (including all source codes but excluding shrink-wrapped software) and
related 'documentation, technical information, manufacturing, engineering and
technical drawings, know-how, inventions, works of authorship, and all pending
applications for and registrations of patents, trademarks, service marks and
copyrights, now owned or licensed by Becton and developed in respect of the
Becton Iontophoresis R&D Program (including all intellectual property listed on
Schedule 3.06 hereto), including all forms (e.g., electronic media, computer
disks) in which such items are recorded; provided, however, that "Transferred
Intellectual Property" shall not include any intellectual property licensed to
NEWCO pursuant to Section 2.01(c)(ii) hereof.
(aaa) "Transitional Services Agreement" means the agreement to facilitate the
orderly transfer of Iontophoresis Systems to NEWCO to be entered into by Becton
and NEWCO substantially in the form of Exhibit G hereto, as such may be amended
from time to time.
(bbb) "Upfront Payment" means a cash payment received by NEWCO in connection
with the execution of any agreement relating to the commercial development,
promotion, manufacture, marketing, sale or distribution of any lontophoresis
Product that is designated as pre-paid royalties, including payments that either
(i) may later be credited against royalties due to NEWCO on net sales of such
Iontophoresis Product pursuant to such agreement or (ii) are intended to be a
lump-sum payment in lieu of royalties that would otherwise be payable to NEWCO
on sales of such Iontophoresis Product pursuant to such agreement; provided,
however, that "Upfront Payment" shall not include research grants or contract
research fees received by NEWCO.
(ccc) "VMA Plan" has the meaning set forth in Section 8.09 hereof, substantially
in the form of Exhibit H hereto.
(ddd) "WARN" means the Worker Adjustment Retraining and Notification Act, as
amended.
2. TRANSACTIONS AND CLOSING.
2.01. Terms of Contemplated Transactions. Upon the terms and subject to the
conditions set forth in this Agreement, the parties hereby agree that
immediately prior to (in respect to clause (a) below) or at the time of (in
respect to clauses (b) through (g) below) the Closing:
-4-
(a) NEWCO shall have filed Certificates of Designations with the Secretary
of State of the State of Delaware establishing the terms of (i) the Series A
Preferred Stock substantially in the form of Exhibit I-1 hereto and (ii) the
Series B Preferred Stock (as defined in Section 4.08 hereof) substantially in
the form of Exhibit I-2 hereto;
(b) Becton shall convey, transfer and deliver to NEWCO the Contributed
Assets, free and clear of all Liens (other than Permitted Liens), and NEWCO will
assume and agree to pay, perform and/or discharge the Assumed Liabilities;
(c) (i) Becton shall assign to NEWCO all direct or indirect right,
title and interest of Becton in, to and under the Transferred Intellectual
Property pursuant to the Intellectual Property Assignments, free and clear of
all Liens (other than Permitted Liens), and, subject to Sections 6.01 and 6.02
hereof, NEWCO and Becton hereby agree that NEWCO grants to Becton a perpetual,
worldwide, royalty free, fully-paid, non-exclusive right and license to the
Transferred Intellectual Property solely to make, have made, offer for sale,
sell, use and import any products or systems other than Iontophoresis Systems.
This license granted pursuant to this Section 2.01(c)(i) shall be assignable and
transferable only in the event of: (A) the transfer or sale of Becton's business
to which such license pertains, (B) Becton's merger or consolidation with or
acquisition by another Person or (C) the transfer or sale to a wholly-owned
subsidiary.
(ii) Effective immediately after Closing, Becton shall grant to NEWCO
a perpetual, worldwide, exclusive right and license to the intellectual property
identified on Schedule 2.01(c)(ii) hereto, as well as under any corresponding
foreign patents and applications claiming priority thereto, solely to make, have
made, offer for sale, sell, use and import Iontophoresis Systems. No royalty in
addition to the Royalties provided under Section 8.05 hereof shall be charged to
NEWCO for the right and license granted under this Section 2.01(c)(ii). The
license granted pursuant to this Section 2.01(c)(ii) shall be assignable and
transferable only in the event of (A) the transfer or sale of NEWCO's business
to which such license pertains, (B) NEWCO's merger or consolidation with or
acquisition by another Person or (C) the transfer or sale to a wholly-owned
subsidiary.
(iii) In connection with the transactions described in Sections
2.01(c)(i) and (ii) hereof, NEWCO shall agree to make the Royalty payments to
Becton pursuant to, and in accordance with, Section 8.05 hereof.
(d) Xxxxxxx Xxxxx Specialty Group and/or its Affiliates shall provide at
least $9,000,000 in cash to NEWCO in exchange for the issuance by NEWCO of
3,000,000 restricted shares of Series B Preferred Stock and 6,000,000 restricted
shares of Common Stock, which shares shall, upon issuance, be duly authorized,
fully paid and non-assessable shares of the capital stock of NEWCO;
(e) In exchange for the conveyance, transfer, delivery and assignment of the
Contributed Assets contemplated by Section 2.01(b) hereof, NEWCO shall issue
333,333 restricted shares of Series A Preferred Stock and 666,667 restricted
shares of Common
-5-
Stock to Becton, which shares shall, upon issuance, be duly authorized, fully
paid and non-assessable shares of the capital stock of NEWCO;
(f) Becton and NEWCO shall execute and deliver the Sublease and the
Transitional Services Agreement; and
(g) NEWCO, Becton, Xxxxxxx Xxxxx Specialty Group and any other holder(s) of
NEWCO capital stock shall execute and deliver the Stockholders Agreement.
2.02. Closing. The closing (the "Closing") of the Contemplated Transactions
will take place at the offices of Xxxxxxxxxxx & Xxxxxxxx LLP, 1251 Avenue of the
Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, on November 10, 2000, or on such
other date and at such
-6-
SCHEDULE 2.01(C)(II)
LICENSE TO NEWCO
[*]
-7-
0 Xxxxxx Xxxxx
Xxxxxxxx Xxxxx, Xxx Xxxxxx X0000 td: 201.847.6800
xxx.xx.xxx
March 19, 2002
Indispensable to
Xxxxx X. Xxxxxxxx, VP, Business Development
00-00 Xxxxxxx Xxxxx
Xxxx Xxxx, Xxx Xxxxxx 00000
Re: BDTS - Drug Delivery Technologies Dear Xxx:
In accordance with your discussion earlier today with Xxxxx Xxxx, this
letter will clarify and confirm the fact that the license granted under
Paragraph 2.01(c)(ii) of the Transaction Agreement among Becton, Xxxxxxxxx and
Company ("BD"), Xxxxxxx Xxxxx Specialty Group, LLC, Xxxxxxx Xxxxx Ventures, Inc.
and Drug Delivery Technologies, Inc., now known as Vyteris, Inc. ("Vyteris")
dated November 10, 2000, includes the right to grant sublicenses to Vyteris'
customers to offer for sale, sell, use or import lontophoresis Systems made by
or for Vyteris.
Please do not hesitate to contact me if you have any questions.
Very truly yours,
/s/ Xxxxx Xxxxxx, Esq.
----------------------
Xxxxx X. Xxxxxx, Esq.
Vice President and Chief Intellectual
Property Counsel St (000) 000-0000
(000) 000-0000
AW X\Xxx#00000
Xxxxxx. Xxxxxxxxx and Company
-8-
EXHIBIT 1.2(D)
MARKETING PLAN
MARKET PLAN SUMMARY
VYTERIS(R) TRANSDERMAL
LIDOCAINE DELIVERY SYSTEM
AUGUST 2002
CONFIDENTIAL
-9-
OUTLINE
o Introduction
o Product Overview
o Market Overview
o Current Landscape
o Target Opportunities
o Competitive Situation
o Selling Strategies
o Salesforce Deployment
o Pricing
o Product Complements
o Training
o Unit/Revenue Projections
-10-
OUTLINE
o Promotional Strategies
o Product Identity
o Tradeshows
o Direct mail
o Advertising
o Internet
o Public Relations
o Literature/Sales Aides
o Product Management
o Distribution
o Packaging
o Channels
o International
-11-
INTRODUCTION
o Following an extensive technology evaluation started March 2001, X.
Xxxxx Medical desires to distribute the transdermal lidocaine delivery
system from Vyteris, Inc. The evaluation revealed a product concept
which fits well within the current scope of X. Xxxxx products and call
points. In addition, the technology compliments X. Xxxxx'x focus on
providing customers a broad offering of safety related infusion
products.
o The following Market Plan Summary describes the pre-launch and launch
activities associated with introduction of the lidocaine delivery
system.
-12-
PRODUCT OVERVIEW
o The transdermal lidocaine delivery system from Vyteris provides
non-invasive delivery of lidocaine using the process of iontophoresis.
The product provides a safe, innovative method to eliminate pain
associated with needle puncture.
o The initial target group is pediatrics, however, market research shows a
high probability of rapid product expansion into other areas of the
hospital. In addition, substantial opportunities exist in the outpatient
market.
-13-
PRODUCT OVERVIEW
IONTOPHORESIS:
o Defined as non-invasive, controlled, programmable transdermal delivery
of charged drug molecules with the aid of low electric current
o Advantages & Capabilities
o Expands the range of drugs available for transdermal delivery
o Enhanced skin transport
o Rapid onset/offset
o Controllable & programmable
o Smooth & continuous plasma level
-14-
PRODUCT OVERVIEW
o Product Name = to be determined
o Lidocaine (w/epinephrine)
o Active area is 5cm2 circle
o Onset time = 10 minutes
o Depth of anesthesia = 6-10 mm
o Duration of anesthesia = ~30 min
o Controller
o wearable, reusable up to 100 times
o simple to use, pre-programmed
o Patch
o single use, disposable, pre-filled
-00-
XXXXXX XXXXXXXX
XXXXXXX LANDSCAPE:
o The transdermal lidocaine delivery system will aide healthcare workers
in complying with new standards on pain management included in the
2000-2001 Joint Commission standards manuals:
"JCAHO SURVEYORS HAVE BEGUN ASSESSING COMPLIANCE SINCE THE NEW STANDARDS
TOOK EFFECT JANUARY 1, 2001. JCAHO S NEW PAIN MANAGEMENT STANDARDS WERE
WELCOMED BY CLINICIANS, PAIN EXPERTS, PATIENTS, AND THEIR FAMILIES WHO
HAVE SEEN PAIN GO UNTREATED OR UNDERTREATED FOR DECADES."
-00-
XXXXXX XXXXXXXX
XXXXXXX LANDSCAPE:
o The transdermal lidocaine delivery system will also healthcare workers
in complying with the new joint consensus guidelines released from the
American Pain Society and American Academy of Pediatrics in September
2001:
"Local anesthetics and strategies to soothe and minimize distress should
be considered even for simple procedures, such as venipuncture."
-00-
XXXXXX XXXXXXXX
XXXXXXX LANDSCAPE:
o Recent published studies support the concept of iontophoresis as a
superior means for decreasing pain:
AANA JOURNAL, June 2001- "iontophoresis is the superior method for
decreasing pain associated with peripheral IV cannulation".
REGIONAL ANESTHESIA AND PAIN MEDICINE, June 2001- "evaluation of the
depth of anesthesia reveals that IP is superior to the other techniques
studied".
-00-
XXXXXX XXXXXXXX
[*]
-00-
XXXXXX XXXXXXXX
[*]
-00-
XXXXXXX XXXXXXXXXX
[*]
-21-
SELLING STRATEGIES
SALESFORCE DEPLOYMENT:
In order to focus on the primary product applications and call points previously
discussed, X. Xxxxx will utilize it's current distributor network to cover areas
outside the Hospital, ASC, Home Health, Oncology Centers and EMS as follows:
--------------------------- ------------------------- --------------------------
CURRENT DISTRIBUTION APPROX. NUMBER CALL POINTS
--------------------------- ------------------------- --------------------------
McKesson 450 Primary Care Physician's Office
--------------------------- ------------------------- --------------------------
Alliegence 260 Primary Care Physician's Office
--------------------------- ------------------------- --------------------------
PSS 650 Primary Care Physician's Office
--------------------------- ------------------------- --------------------------
Xxxxx Xxxxxx 00 Telesellers Physician's Office
250 Primary Care
--------------------------- ------------------------- --------------------------
-22-
SELLING STRATEGIES
PRODUCT COMPLEMENTS:
o X. Xxxxx offers a wide variety of IV infusion products which will help
pull-through transdermal patch sales. The following are currently sold
by both the ITS and CCTM salesforces:
o IV Catheters
o IV Start Kits
x Xxxxx Needles
o PICC's
o Infusion Pumps
o Infusion Sets
-00-
XXXXXXX XXXXXXXXXX
[*]
-24-
PROMOTIONAL STRATEGIES
PRODUCT IDENTITY:
o A product trade name will be established following completion of a
signed agreement between Vyteris and X. Xxxxx. A branding company will
be employed to help identify and finalize a product trademark. It is
anticipated the trademark will be displayed on packaging, the controller
and possibly on the patch. Primary product identity will focus on the
trade name with secondary focus on the company name (X. Xxxxx). Vyteris
and it's technology brands will be incorporated into X. Xxxxx branding
strategies.
-25-
PROMOTIONAL STRATEGIES
TRADESHOWS:
o Tradeshow attendance will be a major focus, both in the pre-launch and
post-launch phases. Activities associated with some, but not all
tradeshows, will include pre-show direct mail, tradeshow booth graphics,
literature, promotional give-away and educational symposiums. The
following are anticipated tradeshows to be attended:
o American Academy of Pediatrics (AAP)
o Oncology Nursing Society (ONS)
o Intravenous Nursing Society (INS)
o Society of Pediatric Nurses (SPN)
o American Association of Nurse Anesthetists (AANA)
o Others as identified
o Will be focus product at minimum two pediatric shows during 1st
year of launch
-26-
PROMOTIONAL STRATEGIES
[*]
-27-
PROMOTIONAL STRATEGIES
ADVERTISING:
o In conjunction with ad agency, appropriate advertising channels will be
identified and implemented. Primary activity will take place in the
post-launch period. Potential options are as follows:
o Professional journals associated with target groups
(Pediatricians, Nurses, etc.)
o Consumer magazines targeted at parents
o Physician's office informational pamphlets
-28-
PROMOTIONAL STRATEGIES
INTERNET:
o Will establish a separate product website tied to the X. Xxxxx homepage.
Content will focus on promotion and product information. In addition,
will contact appropriate professional societies (ONS, INS, SPN, AANA,
etc.) to explore opportunities to help sponsor their websites in return
for a link to the X. Xxxxx homepage.
-29-
PROMOTIONAL STRATEGIES
PUBLIC RELATIONS:
o Will work with current PR firm or acceptable substitute to generate
press releases, video news release (if necessary) and other appropriate
deliverables as identified by X. Xxxxx and PR firm.
-30-
PROMOTIONAL STRATEGIES
LITERATURE / SALES AIDES:
o Appropriate sales brochures will be developed utilizing X. Xxxxx
Graphics Department and/or ad agency. Sales aides such as demo kits,
instructional CD's and promotional giveaways will also be developed and
implemented.
-31-
PRODUCT MANAGEMENT
[*]
-32-
DISTRIBUTION
PACKAGING:
o Following completion of agreement between X. Xxxxx and Vyteris,
packaging configurations will be determined. It is anticipated that both
companies will provide input into final packaging options.
-33-
DISTRIBUTION
[*]
-34-
DISTRIBUTION
INTERNATIONAL:
o Following U.S. product launch, current plans include international
distribution by [*] (dependent upon capacity constraints). All orders to
X. Xxxxx international subsidiaries will be shipped from U.S. warehouse
locations. X. Xxxxx is represented in all major international markets.
-35-
X. XXXXX ACTIVITY TIMELINE
[*]
-00-
XXXXXXX XXXXXXXXXX
[*]
-00-
XXXXXXX XXXXXXXXXX
[*]
-38-
EXHIBIT 1.2(E)
Minimum Product Purchase Requirements (Foreign Territory)
The Minimum Product Purchase Requirements for the Foreign Territory shall be
established pursuant to and in accordance with the provisions of this Exhibit
"1.2(E)." During the sixty (60) day period following the expiration of the
second Contract Year, the parties shall negotiate in good faith the amount of
the Minimum Product Purchase Requirements for the Foreign Territory for one or
more Contract Years. Any agreement reached by the parties with respect thereto
shall be reduced to writing and incorporated into this Agreement as an amended
and restated Exhibit "1.2(E)." If, however, the parties are unable to agree upon
the amount of the Minimum Product Purchase Requirements for the Foreign
Territory for a given Contract Year within such sixty (60) day period, either
party shall have the right, upon written notice to the other party, to submit
the matter to [IMS, Inc.] or any successor entity ("IMS") for determination, in
which event (i) IMS shall determine the Minimum Product Purchase Requirements
for the next succeeding Contract Year as soon as possible following such
submission based upon and determined by reference to such factors as IMS shall
deem relevant, (ii) the determination by IMS pursuant thereto shall be final and
binding upon the parties, and (iii) each of Vyteris and X.Xxxxx shall pay
one-half of any costs or fees charged by IMS in connection with the foregoing.
Notwithstanding anything contained herein to the contrary, no further
amendments, modifications, adjustments or changes shall be made to the volume of
Product purchases representing the Minimum Product Purchase Requirements for the
foreign Territory in effect at the time of the occurrence of a Change in Control
Transaction described in Section 6.6 hereof; it being understood and agreed that
such volume of Product purchases shall constitute the Minimum Product Purchase
Requirements for the Foreign Territory following such Change in Control
Transaction without any further changes thereto.
-39-
EXHIBIT 1.2(E-1)
MINIMUM PRODUCT PURCHASE REQUIREMENTS (USA TERRITORY)
The following is the minimum number of units of iontophoretic patch Products
required to be ordered by X. Xxxxx during the first Four Contract Years to
maintain exclusivity in accordance with Section 3.1(f) of the Agreement.
------------------ --------------- -------------- -------------- ---------------
Contract Year 1 Q1 Q2 Q3 Q4
------------------ --------------- -------------- -------------- ---------------
133,500 144,500 173,000 185,000
------------------ --------------- -------------- -------------- ---------------
Total 636,000
------------------ --------------- -------------- -------------- ---------------
------------------ --------------- -------------- -------------- ---------------
Contract Year 2 Q1 Q2 Q3 Q4
------------------ --------------- -------------- -------------- ---------------
247,500 255,000 305,000 332,500
------------------ --------------- -------------- -------------- ---------------
Total 1,140,000
------------------ --------------- -------------- -------------- ---------------
------------------ --------------- -------------- -------------- ---------------
Contract Year 3 Q1 Q2 Q3 Q4
------------------ --------------- -------------- -------------- ---------------
398,750 498,750 498,750 498,750
------------------ --------------- -------------- -------------- ---------------
Total 1,995,000
------------------ --------------- -------------- -------------- ---------------
------------------ --------------- -------------- -------------- ---------------
Contract Year 4 Q1 Q2 Q3 Q4
------------------ --------------- -------------- -------------- ---------------
748,125 748,125 748,125 748,125
------------------ --------------- -------------- -------------- ---------------
Total 2,992,500
------------------ --------------- -------------- -------------- ---------------
For the fifth and subsequent Contract Years, the parties shall commence
good-faith negotiations of the Minimum Product Purchase Requirement for the USA
Territory at least six (6) months in advance of each Contract Year. If X. Xxxxx
and Vyteris are unable to agree upon the Minimum Product Purchase Requirements
for the USA Territory within sixty (60) days prior to the commencement of such
Contract Year, either party shall have the right to submit the matter to binding
arbitration in which a single arbitrator having sufficient industry experience
and qualifications and reasonably satisfactory to X.Xxxxx and Vyteris, shall be
authorized and directed to determine the Minimum Product Purchase Requirement
for such Contract Year. Such determination by the arbitrator shall be based upon
such factors that the arbitrator deems relevant in connection therewith
including, without limitation, the market for the Products in the USA Territory,
X.Xxxxx'x current sales in the USA Territory, and the competitive or alternative
products available in the USA Territory. If X. Xxxxx and Vyteris are unable to
agree upon a mutually satisfactory arbitrator to resolve their disagreement,
such arbitrator
-40-
shall be selected pursuant to and in accordance with the procedures established
by the American Arbitration Association.
Notwithstanding anything contained herein to the contrary, no further
amendments, modifications, adjustments or changes shall be made to the volume of
Product purchases representing the Minimum Product Purchase Requirements for the
USA Territory in effect at the time of the occurrence of a Change in Control
Transaction described in Section 6.6 hereof; it being understood and agreed that
such volume of Product purchases shall constitute the Minimum Product Purchase
Requirements for the USA Territory following such Change in Control Transaction
without any further changes thereto.
-41-
EXHIBIT 1.2(E-2)
MINIMUM PRODUCT PURCHASE REQUIREMENTS
Required to Extend Term
30,000,000 disposable iontophoretic patch Products
-42-
EXHIBIT 1.2(F)
PATENT RIGHTS
U.S. Patent No. 6,377,847 - Iontophoretic Drug Delivery Device and Reservoir and
Method of Making Same. (Expiration Date: April 23, 2020)
U.S. Patent No. 5,246,418 - Iontophoresis System Having Features For Reducing
Skin Irritation (Expiration Date: September 21, 2013)
U.S. Patent No. 5,873,850 -- Locking and Disfiguring Mechanism for an
Iontophoretic System (Expiration Date: February 23, 2019)
U.S. Patent No. 6,402,732 - Iontophoretic Drug Delivery Device Having High
Efficiency DC to DC Energy Conversion Circuit (Expiration Date: June 11, 2020)
U.S. Patent No. 6,385,488 - Circuits for Increasing the Reliability of an
Iontophoretic System (Expiration Date: May 20, 2019)
U.S. Patent Applications
U.S. Application No. 09/718,135 - Iontophoretic Drug Delivery Device Having
High-Efficiency DC-To-DC Energy Conversion Circuit - Response To Office Action
Filed 8/20/02
U.S. Application No. 10/127,333 -Method of Increasing the Reliability of
Iontophoresis System - Response to Missing Parts Due 9/9/02 with 2 Mo. Extension
U.S. Application No. 10/085,428 - Iontophoretic Drug Delivery Device and
Reservoir and Method Of Making Same - Awaiting Next Office Action
U.S. Application No. 09/610,563 - Shelf Storage Stable Iontophoresis
Reservoir-Electrode and Iontophoretic System Incorporating The
Reservoir-Electrode - Response To Office Action Filed 7/15/02
U.S. Application No. 09/897,698 - Shelf Storage Stable Iontophoresis
Reservoir-Electrode and Iontophoretic System Incorporating The
Reservoir-Electrode - Response To Office Action Filed 7/15/02
U.S. Application No. 09/584,453 - Medicament-Loaded Transdermal Reservoir and
Method For Its Formation - Pending. Application owned by Becton Xxxxxxxxx & Co.
Vyteris has exclusive rights for iontophoresis
-43-
Foreign Patent Rights
DE Patent No. P69225387.4 - Iontophoresis System Having Features For Reducing
Skin Irritation
FR Patent No. EP (FR) 0 547 482 - Iontophoresis System Having Features For
Reducing Skin Irritation
GB Patent No. EP (GB) 0 547 482 - Iontophoresis System Having Features For
Reducing Skin Irritation
IT Patent No. 49781/BE/98 - Iontophoresis System Having Features For Reducing
Skin Irritation
JP Patent No. 2026059 - Iontophoresis System Having Features For Reducing Skin
Irritation
Foreign Patent Applications
EP Application No. 96930652.1 - Iontophoretic Drug Delivery Device Having
High-Efficiency DC-to-DC Energy Conversion Circuit, Awaiting First Office
Action; AT, BE, CH, DE, DK, ES, FI, FR, GB, GR, IE, IT, LU, MO, NL, PO And SE
Designated
DE Application No. 10025027.0 - Method of Increasing the Reliability of
Iontophoresis System Published - Request Exam By 5/20/07
FR Application No. 00136639 - Method of Increasing the Reliability of
Iontophoresis System - New assignment sent to foreign associate (FA)
FR Application No. 0006312 - Method of Increasing the Reliability of
Iontophoresis System - Search Requested; New Assignment Sent To FA
FR Application No. 0013645 Method of Increasing the Reliability of Iontophoresis
System -New Assignment Sent to FA
JP Application No. 2000-147,822 - Method of Increasing the Reliability of
Iontophoresis System - Published - Request Exam By 5/19/07
CA Application No. 2,364,414 - Iontophoretic Drug Delivery Device and Reservoir
and Method of Making Same - Assignment Documents Sent To FA on 6/14/02
EP Application No. 942763.4 -Iontophoretic Drug Delivery Device and Reservoir
and Method Of Making Same - Foreign Associate Instructed To File Preliminary
Amendments On 3/19/02
-44-
JP Application No. 2001-501303 - Iontophoretic Drug Delivery Device and
Reservoir and Method Of Making Same - Power Of Attorney Sent To Foreign
Associate On 1/25/02; Request Exam By 6/9/07
WO Application No. PCT/US01/20886 - Shelf Storage Stable Iontophoresis
Reservoir-Electrode and Iontophoretic System Incorporating the
Reservoir-Electrode - Filed Response To Written Opinion On 6/21/02; Instructions
On Nationalization Needed By 11/15/02
CA Application No. 2230813 - Iontophoretic Drug Delivery Device Having
High-Efficiency DC-to-DC Energy Conversion Circuit Filed - Request Exam By
8/28/03
WO Application No. PCT/01US01/17385 - Medicament-Loaded Transdermal Reservoir
and Method For Its Formation - Pending; Application owned by Becton Xxxxxxxxx &
Co. Vyteris has exclusive rights for iontophoresis; Deadline For Nationalization
Is 11/30/02
-45-
EXHIBIT 1.2(G)
PRICING SCHEDULE
Lidocaine Patches:
-------------------------------------- ---------------------
[*] [*]
-------------------------------------- ---------------------
[*] [*]
-------------------------------------- ---------------------
[*] [*]
-------------------------------------- ---------------------
[*] [*]
-------------------------------------- ---------------------
[*] [*]
-------------------------------------- ---------------------
[*] [*]
-------------------------------------- ---------------------
[*] [*]
-------------------------------------- ---------------------
(1) The Purchase Prices for the iontophoretic patch Products are reflected
on an aggregate cumulative basis such that upon the purchase by X.Xxxxx during
any Contract Year of that unit that represents the first unit of a subsequent
Purchase Price traunche each unit thereafter will be purchased at the Purchase
Price reflected in such traunche. For example, if prior to the commencement of
the third Contract Year, X.Xxxxx has purchased since the Commercial Start Date
in the aggregate [*] Products, the first unit purchased by X.Xxxxx in Contract
Year 3 shall be at a Purchase Price of [*].
The Purchase Prices for the controller and component Products shall equal the
lesser of: (a) the Purchase Prices set forth in the chart below, or (b) the
actual price at which Vyteris purchases the controller and component Products
from a third party or the actual manufacturing costs incurred by Vyteris in
connection with the manufactures of the controller and component Products, as
the case may be.
---------------------------------------------- ---------------------------------
Contract Year Purchase Price
---------------------------------------------- ---------------------------------
First and Second Contract Year [*]
---------------------------------------------- ---------------------------------
If X. Xxxxx and Vyteris are unable to agree upon the Purchase Prices for the
iontophoretic patch and controller and component Products after the expiration
of the relevant periods set forth above, either party shall have the right to
submit the matter to binding arbitration in which a single arbitrator having
sufficient industry experience and qualifications and reasonably satisfactory to
X.Xxxxx and Vyteris, shall be authorized and directed to determine the Purchase
Prices for the next two succeeding Contract Year. Such determination by the
arbitrator shall be based upon the price at which X.Xxxxx is selling the
Products to end user customers in the Territory and the X.Xxxxx Revenue Share
Percentage in effect at such time with the objective of establishing a Purchase
Price that would not require Vyteris to remit amounts to X.Xxxxx under the
revenue share provisions of Section 3.5(a) of the Agreement. If X. Xxxxx and
Vyteris are unable to agree upon a mutually satisfactory arbitrator to resolve
their disagreement, such arbitrator shall be selected pursuant to and in
accordance with the procedures established by the American Arbitration
Association.
-46-
EXHIBIT 1.2(H)
PRODUCT DESCRIPTION
..
The Northstar Lidocaine Iontophoretic Drug Delivery System (Northstar System)
consists of the Northstar Lidocaine Iontophoretic Patch (Northstar Patch) Patch
containing [*] Lidocaine an [*] Epinephrine and the Northstar Iontophoretic
Controller (Northstar Controller). The Northstar System delivers lidocaine and
epinephrine simultaneously through a process known as iontophoresis to achieve
local dermal anesthesia.
Iontophoresis is based on the principle that a soluble salt or drug can be
transported across the skin barrier as a part of an electric current induced in
the skin. The quantity and distribution of delivered drug(s) is dependent on the
ion charge, molecular weight, intensity of the electric current, concentration
of the drug(s), and duration of current. At a nominal pH 4.5, lidocaine HCl and
epinephrine are both positively charged. In most iontophoretic systems,
iontophoresis is measured as total charge delivered in milliampere-minutes
(mA-min) units.
The Northstar Lidocaine Iontophoretic Drug Delivery System utilizes a
solid-state electronic controller and a pre-filled patch to form an
iontophoretic drug delivery system. As a result of this product design, the
Northstar Iontophoretic Controller (Northstar Controller) requires only an ON
button actuation to start the treatment and two indicators to inform the user of
the delivery status. The Northstar Controller is designed with a non-replaceable
battery that provides approximately 100 drug applications at [*].
The Northstar Patch is for one use only and disposable. The patch contains drug
and return reservoirs. The 5 cm2 circular drug reservoir delivers lidocaine and
epinephrine to the skin whereas the elongated return reservoir contains
electrolytes to complete the electrical circuit.
[*]
-47-
EXHIBIT 1.2(I)
SPECIFICATIONS
Vyteris, Inc.
--------------------------------------------------------------------------------
SPECIFICATION - PRODUCT
Title: Patch, Lidocaine / Epinephrine Document Number: [*]
Location(s): FL Drawing Number: [*]
--------------------------------------------------------------------------------
1 DESCRIPTION
The Iontophoretic anesthetic patch is a component in a combination product. The
patch contains a [*]of lidocaine hydrochloride and [*]epinephrine in the anode
hydrogel reservoir along with other materials such as electrodes, backing film,
transfer pads, adhesives, and a release cover. The patch is packaged in a foil
laminate pouch.
2 PRODUCT FUNCTION
The lidocaine/epinephrine patch is part of the Iontophoretic Vyteris, Inc.
system. The iontophoretic patch is placed in contact with the skin and connected
to the controller before being activated. The controller delivers a
pre-programmed current delivery profile to the patch which controls the delivery
of charged drug molecules to the patient.
3 PRODUCT CLAIMS
The lidocaine/epinephrine patch when connected to the controller provides local
dermal anesthesia on intact skin for patients 5 years and older.
4 FITNESS FOR USE
[*]
-48-
--------------------------------------------------------------------------------
Vyteris Inc.
SPECIFICATION - PRODUCT
Title: CONTROLLER-D, IONOPHORETIC, NORTHSTAR Document Number: [*]
Sales Drawing Number: [*]
Location(s): FN
--------------------------------------------------------------------------------
1.0 DESCRIPTION:
1.1 Multiple use, disposable, Iontophoretic Controller
1.2 For use only with associated "NorthStar" iontophoretic patch,
SP300017.
2.0 PRODUCT FUNCTION:
2.1 Delivers a pre-programmed current profile to an iontophoretic
anesthetic patch.
3.0 PRODUCT CLAIMS
3.1 Provide a minimum of 99 uses under average patient load.
3.2 Provide a numeric reading of the number of deliveries available
before battery depletion.
[*]
-49-
EXHIBIT 1.2(J)
TRADEMARKS
Word xxxx "VYTERIS" -- application filed February 15th 2001
Serial Number 76\211,577
Published for Opposition July 23, 2002
Goods and Services: Drug delivery devices namely iontophoretic drug delivery
devices, electroosmotic drug delivery devices; electrotransport drug delivery
devices; passive drug delivery devices; drug delivery devices in the nature of
transdermal drug delivery devices and associated products in the nature of
medical patches, dose-control devices, drug delivery electrodes, drug
reservoirs, drug delivery controllers, and apparatus for generating an electric
current for delivery of drugs through the skin
Also filed for in Canada, Europe, and Japan
Logo -- Application filed June 20th, 2001
Serial Number 76\274,067
Goods and Services: Drug delivery devices namely iontophoretic drug delivery
devices, electroosmotic drug delivery devices; electrotransport drug delivery
devices; passive drug delivery devices; drug delivery devices in the nature of
transdermal drug delivery devices and associated products in the nature of
medical patches, dose-control devices, drug delivery electrodes, drug
reservoirs, drug delivery controllers, and apparatus for generating an electric
current for delivery of drugs through the skin
-50-
EXHIBIT 1.2(K)
VYTERIS REVENUE SHARE PERCENTAGE
1. The Vyteris Revenue Share Percentage shall be equal to [*] for Net Sales
of Vyteris countries that are part of the Foreign Territory in which X.Xxxxx has
not engaged in Minimum Distribution Efforts.
2. For Net Sales of Vyteris in Sub Markets or Primary Foreign Territory
Markets in which X.Xxxxx has engaged in Minimum Distribution Efforts, the
Vyteris Revenue Share Percentage shall be determined by mutual agreement of the
parties prior to or when Vyteris begins marketing, selling and distributing
Products. If, however, the parties are unable to agree upon the Vyteris Revenue
Share Percentage hereunder, either party shall have the right to submit the
matter to binding arbitration pursuant to and in accordance with the provisions
of Section 7.3(i) of this Agreement, under which the arbitrators shall determine
the Vyteris Revenue Share Percentage so as to ensure Vyteris a reasonable return
on investment under the circumstances. Such determination by the arbitrators
shall be based upon such factors that the arbitrators deem appropriate
including, without limitation, the current market share of X.Xxxxx in the
applicable country, the number of years that X.Xxxxx has been marketing and
selling the Products in the country, the total sales by X.Xxxxx of the Products,
and the expenses incurred by X.Xxxxx in connection with the selling, marketing
and distribution of the Products.
-51-
EXHIBIT 2.1
SUB-MARKETS
The Sub-Markets are:
1. Office-based markets excluding Dermatologists but including, without
limitation, General Practitioners, Family Practitioners, and Pediatricians
2. Retail pharmacies, and
3. Dermatologists.
-52-
EXHIBIT 3.1
CAPACITY PLAN
The following is Vyteris's Capacity Plan for Patches in the first three Contract
Years, as outlined on a quarterly basis:
----------------------- ------------- ------------ ------------- ---------------
Contract Year 1 Q1 Q2 Q3 Q4
----------------------- ------------- ------------ ------------- ---------------
510,000 510,000 510,000 510,000
----------------------- ------------- ------------ ------------- ---------------
Total: 2,040,000
----------------------- ------------- ------------ ------------- ---------------
----------------------- ------------- ------------ ------------- ---------------
Contract Years 2 and 3 Q1 Q2 Q3 Q4
----------------------- ------------- ------------ ------------- ---------------
1,020,000 1,020,000 1,020,000 1,020,000
----------------------- ------------- ------------ ------------- ---------------
Total: 4,080,000
----------------------- ------------- ------------ ------------- ---------------
Note: There is no capacity limitation on controllers
-53-
EXHIBIT 3.2
SAMPLES
Sample Quantities
Vyteris will provide X.Xxxxx at Vyteris's expense the initial sampling quantity
of [*], no sooner than one month before anticipated Commercial Start Date.
-54-
EXHIBIT 3.5(E)
MINIMUM AVERAGE SELLING PRICE
------------------------------------- ---------------------- -------------------
Aggregate quantity of Minimum Average Projected
iontophoreticpatch Products Selling Price Selling Price
purchased by X.Xxxxx during the
Term and Post-Termination Period
------------------------------------- ---------------------- -------------------
0-499,000 [*] [*]
------------------------------------- ---------------------- -------------------
500,000-999,999 [*] [*]
------------------------------------- ---------------------- -------------------
1,000,000-1,999,999 [*] [*]
------------------------------------- ---------------------- -------------------
2,000,000-2,999,999 [*] [*]
------------------------------------- ---------------------- -------------------
3,000,000-4,999,999 [*] [*]
------------------------------------- ---------------------- -------------------
5,000,000-6,999,999 [*] [*]
------------------------------------- ---------------------- -------------------
Thereafter to be mutually agreed
upon
------------------------------------- ---------------------- -------------------
X.Xxxxx hereby agrees to consult with Vyteris prior to implementing pricing
program that would result in the establishment of pricing parameters that are
less than the Projected Selling Price set forth above.
If X. Xxxxx and Vyteris are unable to agree upon the Minimum Average Selling
Price for the iontophoretic patch Products after the sale by X.Xxxxx of [*]
Products, either party shall have the right to submit the matter to binding
arbitration in which a single arbitrator having sufficient industry experience
and qualifications and reasonably satisfactory to X.Xxxxx and Vyteris, shall be
authorized and directed to determine the Minimum Average Selling Pice for the
next two succeeding Contract Year. Such determination by the arbitrator shall be
based upon the price at which X.Xxxxx is selling the iontophorectic patch
Products to end user customers, the expenses incurred by X.Xxxxx in marketing,
distributing and selling the Products, the X.Xxxxx Revenue Share Percentage
currently in effect and the actual manufacturing costs incurred by Vyteris in
manufacturing the iontophorectic patch Products. If X. Xxxxx and Vyteris are
unable to agree upon a mutually satisfactory arbitrator to resolve their
disagreement, such arbitrator shall be selected pursuant to and in accordance
with the procedures established by the American Arbitration Association.
-55-
EXHIBIT 3.6
FORM OF CERTIFICATE OF ANALYSIS
Subject to the consent of Vyteris, which consent shall not be unreasonably
withheld, X. Xxxxx shall have the right to modify the form of Certificate of
Analysis to conform the Certificate of Analysis with the Specification and the
NDA.
-56-
EXHIBIT 3.8
PRE-APPROVAL INSPECTION PLAN
The plan outlined below represents target dates as of the agreement date.
Incremental changes to the plan are expected and will be communicated in a
timely manner to both parties
----------------------------------------------------------------- ------------ --------------- --------------
Task Duration Start Finish
----------------------------------------------------------------- ------------ --------------- --------------
Quality System Documents [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Complete Manufacturing/Inventory Procedures [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Train & implement Manufacturing Procedures [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Complete Quality Assurance Procedures [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Train & implement new QA procedures [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Complete Equipment Procedures (laboratory/facilities) [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Train and Implement Equipment Procedures [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Validation [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Laboratory Computer/Network Validation [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Identify & hire validation expert [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Upgrade Vyteris to Windows 2000 platform [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Validation-design, execute, report & train [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Facility Validation [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Identify/hire BMS software specialist [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Implement new software [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Validation-design, execute, report & train [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Laboratory Analytical Method Validation [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Write 4 Method Validation Protocols [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Execute 4 validations [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Manufacturing Validation [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
Write IOQ/PQ protocols for CPAL, Multivac, and [*] [*] [*]
Packaging Machine
----------------------------------------------------------------- ------------ --------------- --------------
Execute Protocols for CPAL, Multivac, and Packaging [*] [*] [*]
Machine
----------------------------------------------------------------- ------------ --------------- --------------
GMP TRAINING (company wide) [*] [*] [*]
----------------------------------------------------------------- ------------ --------------- --------------
-57-
EXHIBIT 5.1(D)
DESCRIPTION OF PERMITTED ENCUMBRANCE
Pursuant to an Intellectual Property Security Agreement, dated November 21,
2001, by and between Vyteris, Inc. (the "Company") and Xxxxxxx Xxxxx Specialty
Group, LLC and The Xxxxxx X. Xxxxxx Inter Vivos Trust (collectively, the
"Lenders"), as the same has been and may be amended from time to time, the
Company granted a security interest in the Company property described below in
order to secure the timely payment, performance and satisfaction of loans made
by the Lenders to the Company: all trademarks, trade names, registered
trademarks, trademark applications, service marks, registered service marks,
service xxxx applications, patents, patent applications, and any license
agreements with any other party, whether the Company is a licensee or licensor
thereunder, in each case as owned or existing as of the date of the
above-described Intellectual Property Security Agreement, or thereafter acquired
or arising.
-58-
EXHIBIT 5.1(E)
AGREEMENT WITH HOLDER(S) OF PERMITTED ENCUMBRANCE ACKNOWLEDGING THE PERMITTED
ENCUMBRANCE IS UNDER AND SUBJECT TO THE PROVISIONS AND RIGHTS OF X.XXXXX UNDER
THIS AGREEMENT.
To: X. Xxxxx Medical Inc.
From: Xxxxxxx Xxxxx Specialty Group, LLC
The Xxxxxx X. Xxxxxx Inter Vivos Trust
Date: September __, 2002
Re: License, Development and Distribution Agreement
Xxxxxxx Xxxxx Specialty Group, LLC, and The Xxxxxx X. Xxxxxx Inter Vivos
Trust (collectively, the "Lenders") are parties to an Intellectual Property
Security Agreement (the "Security Agreement"), dated as of November 21, 2001, as
amended, with Vyteris, Inc. (the "Company"), whereby the Company granted (and
shall continue to grant) a security interest in all Company trademarks, patents
and intellectual property licenses to secure the repayment of loans made by the
Lenders to the Company from time to time. A true, correct and complete copy of
the Security Agreement is attached hereto as Exhibit "A" and made a part hereof.
The Lenders recognize that pursuant to the License, Development and
Distribution Agreement (the "License Agreement"), dated September __, 2002, by
and between the Company and X. Xxxxx Medical Inc. ("BBMI"), inter alia, the
Company is granting to BBMI certain exclusive worldwide distribution rights and
certain exclusive worldwide license rights with respect to a transdermal
lidocaine delivery system and other intellectual property rights more fully
described therein (collectively referred to herein as the "System"). The Lenders
further recognize that, subject to the terms and conditions of the License
Agreement, if the Company becomes unable to manufacture the System, BBMI has
certain rights to manufacture or have manufactured that System so long as it
continues to meet its revenue sharing obligations (pursuant to the License
Agreement) to the Company or its successor(s) or assign(s). The Lenders
acknowledge that they have reviewed and approved the Company's execution and
delivery of, and performance under, the License Agreement notwithstanding any
provision contained in the Security Agreement or any promissory note, loan
agreement or other agreement, document or instrument executed by the Company in
favor of the Lenders (or either of them) in connection with the credit
transactions described in the Security Agreement or any other transaction
(collectively, the "Loan Documents").
The Lenders hereby agree not to cause the Company (or its successor(s)
or assign(s)) to reject to the License Agreement nor to exercise their rights,
or take any action, under the Security Agreement or any other Loan Document, in
such a way that
-59-
would interfere, impair, defeat or diminish, in any manner or respect, BBMI's
ability under the License Agreement to manufacture, distribute, market or sell
(or to have manufactured, distributed, marketed and sold) the System in
accordance with the terms of the License Agreement or exercise any other rights
under and pursuant to the License Agreement.
The Lenders recognize and acknowledge that BBMI would not enter into the
License Agreement or any related transaction described therein with the Company
unless the Lenders provided to BBMI the acknowledgments and agreements herein.
BBMI is relying upon the undisturbed and uninterrupted possession of the rights
and interests granted to it by the Company under the License Agreement. In that
regard, the Lenders covenant and agree to (i) take, or cause to be taken, any
further action (including, without limitation, executing and delivering
agreements, documents and instruments) that BBMI may reasonably request from
time to time to further evidence and confirm the acknowledgments and agreements
of the Lenders herein and (ii) provide BBMI with prompt written notice of any
default by the Company under the Loan Documents (unless the default is waived by
the Lenders).
The Lenders jointly and severally represent and warrant to BBMI that:
(i) this letter agreement constitutes the valid and binding obligation of the
Lenders, legally enforceable against it in accordance with its terms; and (ii)
the execution and delivery of, and performance under, this letter agreement will
not violate any contract, agreement or arrangement to which either Lender is a
party or by which either Lender is bound. The Lenders have executed and
delivered this letter agreement intending to be legally bound.
Agreed to as of the date first set forth above:
Xxxxxxx Xxxxx Specialty Group, LLC The Xxxxxx X. Xxxxxx Inter Vivos Trust
By:/s/ [Signature of Authorized Person] By:/s/ [Signature of Authorized Person]
-------------------------------------- ------------------------------------
Name: [Authorized Person] Name: [Authorized Person]
Title: NonMember Manager Title: Grantor
-60-
EXHIBIT 5.1(H)
PENDING PATENT RIGHTS PROCEEDINGS
Since the date of the Private Placement Memorandum "PPM", we have experienced
results in most of our European (EP) and Japanese (JP) patent challenges. As of
the date of this Agreement, we have resolved seven of the nine patent
oppositions listed in the "PPM."
---------------------------- -------------------------- -------------------------- --------------------------
Opposition Filing Date PATENT TITLE PATENT NUMBER STATUS
---------------------------- -------------------------- -------------------------- --------------------------
1999 Iontophoresis ystem EP 0 547 482 Still Pending
Having Features for
Reducing Skin Irritation
---------------------------- -------------------------- -------------------------- --------------------------
2000 Improved Iontophoretic EP 0 783 346 Preliminary ruling in
Drug Delivery Device favor of Vyteris
---------------------------- -------------------------- -------------------------- --------------------------
2000 Molecules for EP 0 552 878 Resolved-Process deemed
Iontophoretic Delivery unpatentable
---------------------------- -------------------------- -------------------------- --------------------------
1992 Apparatus of EP 0 185 520 Resolved-ruling in favor
Iontophoretic Delivery of Vyteris
---------------------------- -------------------------- -------------------------- --------------------------
1995 Iontophoretic Drug EP 0 522 092 Resolved-Alza appeal
Delivery System with Two dismissed; ruling in
Stage Delivery Profile favor of Vyteris
---------------------------- -------------------------- -------------------------- --------------------------
1995 Iontophoretic Delivery EP 0 528 789 Resolved-Alza Patent
Devices Utilizing claims deems
Selectively Permeable unpatentable
Membranes on the Basis
of Either Size or Change
of the Permeation Species
---------------------------- -------------------------- -------------------------- --------------------------
1997 Molecules for JP 2,506,543 Resolved-certain claims
Iontophoretic Delivery issued to Vyteris
---------------------------- -------------------------- -------------------------- --------------------------
1997 User Activated JP 2,542,792 Resolved-certain claims
Iontophoretic Device issued to Vyteris
---------------------------- -------------------------- -------------------------- --------------------------
1998 User activated EP 0 586 666 Resolved-ruling in favor
Iontophoretic Device of Vyteris
---------------------------- -------------------------- -------------------------- --------------------------
-61-
EXHIBIT 5.1(L)
EXCEPTIONS TO PPM
Update, as of September 5, 2002 ("Update'), to Supplement No. 1, dated June 25,
2002 ("Supplement") to Vyteris' Confidential Private Placement Memorandum dated
March 4, 2002 ("PPM")
RECENT DEVELOPMENTS
Food and Drug Administration (FDA) Filing
We submitted our New Drug Application (NDA) to the FDA regarding our
lidocaine product on May 9, 2002. On July 8, 2002 we withdrew the NDA due to
data presentation issues. All such data presentation issues have been resolved
and the resubmission of the NDA is expected to occur in September 2002. The
resubmission date is dependent on when a meeting with the FDA can be held.
Planned Private Placement
The private placement of $7 to $10 million of Series C Convertible
Preferred Stock ("Private Placement") was suspended due to Vyteris' withdrawal
of its NDA. On September 2, 2002 the Private Placement terminated. All funds
collected by the placement agent have been returned to the investors. Vyteris is
currently exploring alternative financing vehicles.
Convertible Promissory Notes
Since June 25, 2002, Xxxxxxx Xxxxx Specialty Group (STSG) has purchased
an additional $1.625 million principal amount of 8% Convertible Promissory Notes
(the "8% Convertible Notes") from Vyteris. Total principal amount of 8%
Convertible Promissory Notes outstanding as of August 31, 2002 is $7.875
million. The terms of these notes are identical to the terms of such notes
previously issued to STSG, as described the Memorandum and Supplement No. 1. The
8% Convertible Notes mature one-year from the dates of issue.
UPDATED RISK FACTORS
We have a history of operating losses and it is uncertain whether we will be
profitable in the future.
To date, we have not been profitable. We may never be profitable and, if we
become profitable, we may be unable to sustain profitability. We have incurred
operating losses since inception as we have been engaged primarily in clinical
testing and development activities. We reported a net loss of $15.4 million for
the period from inception (November 10, 2000) to June 30, 2002. Because it takes
years to develop, test and obtain
-62-
regulatory approval for drug delivery systems before we may commence
revenue-producing activities, we expect to continue to incur significant losses
for the foreseeable future.
Updated Securities Information
As of August 31, 2002, the following was outstanding:
- 6,749,917 Common Shares
- 333,333 shares of Series A Convertible, Redeemable Preferred Shares
- 3,000,000 shares of Series B Convertible, Redeemable Preferred Shares
- Warrants to purchase 3,500,000 shares of Common Stock
- Options to purchase 792,835 shares of Common Stock
- $7.875 million principal amount of 8% Convertible Promissory Notes,
which are convertible into 6,300,000 shares of Common Stock
Updated Capitalization
The following table sets forth the capitalization of Vyteris as of
June 30, 2002.
Stockholders' Equity (Deficit):
------------------------------------------------------- ------------------------
Common Stock, par value $0.0001 per share; 30,000,000 $ 675
authorized; 6,749,917 shares outstanding
------------------------------------------------------- ------------------------
Additional paid-in capital 7,164,526
------------------------------------------------------- ------------------------
Deferred compensation (149,915)
------------------------------------------------------- ------------------------
Accumulated deficit (15,351,829)
------------------------------------------------------- ------------------------
Total stockholders' equity (deficit) (8,336,543)
------------------------------------------------------- ------------------------
Preferred Stock, par value $0.0001 per share;
20,000,000 shares authorized:
------------------------------------------------------- ------------------------
Series A convertible, redeemable preferred stock; 333,333
333,333 shares issued and outstanding
------------------------------------------------------- ------------------------
Series B convertible, redeemable preferred stock; 2,917,640
3,000,000 shares issued and outstanding
------------------------------------------------------- ------------------------
Total preferred stock 3,250,973
------------------------------------------------------- ------------------------
Capital lease obligation 42,168
------------------------------------------------------- ------------------------
8% convertible promissory notes (1) 5,976,044
------------------------------------------------------- ------------------------
Total Capitalization $ 932,642
------------------------------------------------------- ------------------------
(1) In July and August 2002, an additional $1.625 million principal amount
of 8% Convertible Promissory Notes were issued to STSG.
Updated Selected Financial Data
The following table sets forth certain selected financial information. This
information should be read in conjunction with the financial statements and
accompanying notes
-63-
attached to this Update. The statement of operations data for the period from
November 10, 2000 (inception) through June 30, 2002, as well as the balance
sheet data as of June 30, 2002, are derived from financial statements prepared
by management without audit or without its independent accountant review.
---------------------------------- ---------------------------------------------
Period from November 10, 2000
(inception) through June 30, 2002 (in
thousands)
---------------------------------- ---------------------------------------------
Statement of Operations Data:
---------------------------------- ---------------------------------------------
Revenues $ 408,000
---------------------------------- ---------------------------------------------
Operating expenses:
---------------------------------- ---------------------------------------------
Research and development 10,965,664
---------------------------------- ---------------------------------------------
General and administrative 4,813,844
---------------------------------- ---------------------------------------------
Total operating expenses 15,779,508
---------------------------------- ---------------------------------------------
Interest income (expense), net 19,679
---------------------------------- ---------------------------------------------
Net loss $ (15,351,829)
---------------------------------- ---------------------------------------------
---------------------------------- ---------------------------------------------
--------------------------------------- ---------------------------------
June 30, 2002 (in thousands)
--------------------------------------- ---------------------------------
Balance Sheet Data:
--------------------------------------- ---------------------------------
Cash and cash equivalent $ 295
--------------------------------------- ---------------------------------
Equipment, net 1,967
--------------------------------------- ---------------------------------
Total assets 2,491
--------------------------------------- ---------------------------------
Total liabilities 7,577
--------------------------------------- ---------------------------------
Preferred stock 3,251
--------------------------------------- ---------------------------------
Total stockholders' equity (deficit) (8,337)
--------------------------------------- ---------------------------------
-64-
