STRATEGIC COLLABORATION AGREEMENT
THIS STRATEGIC COLLABORATION AGREEMENT dated as of August 17,
1999 (the "Agreement") is made by and between PALATIN TECHNOLOGIES, INC., a
Delaware corporation ("Palatin") and MALLINCKRODT INC., a Delaware corporation,
by and through its unincorporated Medical Imaging division ("Mallinckrodt").
RECITALS
WHEREAS, Palatin has certain intellectual property rights (including,
without limitation, certain patents) concerning, and is in the process of
developing a proprietary compound called, LeuTech(TM), which is a
radiopharmaceutical product useful for imaging infection and inflammation;
WHEREAS, Mallinckrodt is interested in entering into a joint
collaboration with Palatin for the development of a commercial product or
products from LeuTech(TM) and desires to obtain an exclusive license to market
and sell any product or products developed from LeuTech(TM) in all the countries
of the world, excluding those countries and other sovereign territories in
Europe, in accordance with the principles set forth herein; and
WHEREAS, Palatin is willing to enter into such a collaboration and to
xxxxx Xxxxxxxxxxxx such a license upon the terms and conditions set forth below.
NOW THEREFORE, in consideration of the premises and of the covenants
herein contained, the parties hereto mutually agree as follows:
Article 1
DEFINITIONS OF CERTAIN TERMS
For purposes of this Agreement, the terms defined in this Article
shall have the meanings specified below:
1.1 "Adverse Events" shall mean an adverse drug experience as defined
in 21 C.F.R.ss.314.80 (a).
1.2 "Affiliate" shall mean any corporation or other entity which
directly or indirectly controls, is controlled by or is under common control
with a party to this Agreement. A corporation or other entity shall be regarded
as in control of another corporation or entity if it owns or directly or
indirectly controls more than fifty percent (50%) of the voting stock or other
ownership interest of the other corporation or entity, or if it possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of the corporation or other entity or the power to elect
or appoint fifty percent (50%) or more of the members of the governing body of
the corporation or other entity.
1.3 "Annual Development Plan" shall have the meaning ascribed to it in
Section 3.1(f) and "Annual Marketing Plan" shall have the meaning ascribed to it
in Section 2.2(d).
1.4 "BLA" shall mean a Biologics License Application, or its
substantial equivalent, filed with the FDA (as defined below), or, with respect
to countries other than the United States, with the governing health or
regulatory authority of such country.
1.5 "cGMP" shall mean current Good Manufacturing Practices as
determined at any given time by the FDA.
1.6 "Change in Control" shall mean the occurrence, with respect to
Palatin, of any one of the following events:
(a) any "person" as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (and as used in Sections 13(d)(3) and
14(d)(2) of such Act) is or becomes a "beneficial owner" (as defined in Rule
13d-3 under such Act), directly or indirectly, of securities of Palatin
representing greater than fifty percent (50%) of the combined voting power of
Palatin's then outstanding securities eligible to vote for the election of its
board of directors; provided, however, that the event described in this clause
(a) shall not be deemed to be a change in control by virtue of any of the
following acquisitions: (i) by Palatin or any wholly-owned subsidiary of
Palatin, (ii) by any employee benefit plan sponsored or maintained by Palatin or
any subsidiary of Palatin, (iii) by any underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) except as
provided in subsection 1.6(c) below, in which voting securities of Palatin are
acquired from Palatin, if a resolution providing expressly that the acquisition
pursuant to this clause (iv) does not constitute a change in control is approved
by a vote of at least a majority of the directors who are directors of Palatin
on and as of the date hereof;
(b) individuals who, on the date hereof, constitute the board
of directors of Palatin cease for any reason to constitute at least a majority
thereof, provided that any person becoming a director subsequent to the date
hereof, whose election, or nomination for election, by Palatin's stockholders
was approved by a vote of at least a majority of the directors comprising the
current board of directors (either by a specific vote or by approval of the
proxy statement of Palatin in which such person is named as a nominee for
director, without objection to such nomination) shall be, for purposes of this
clause (b), considered as though such person were a member of the current board
of directors; provided, however, that no individual initially elected or
nominated as a director of Palatin as a result of an actual or threatened
election contest with respect to directors or any other actual or threatened
solicitation of proxies or consents by or on behalf of any person other than the
board of directors shall be deemed to be a member of the current board of
directors;
(c) a merger, consolidation, share exchange or similar form of
corporate reorganization of Palatin requiring the approval of Palatin's
stockholders (whether for such transaction or the issuance of securities in the
transaction or otherwise); provided, however, that a "change in control" shall
not be deemed to occur upon a merger, consolidation, share exchange or similar
form of corporate reorganization of Palatin, whether or not stockholder approval
is required, so long as (A) the Board of Directors of any entity surviving or
resulting from such reorganization contains at least fifty percent (50%) of the
directors who were members of the board of directors of Palatin immediately
prior to such reorganization and (B) the Chief Executive Officer of any such
surviving entity is the same person as the Chief Executive Officer of Palatin
immediately prior to such reorganization;
(d) the direct or indirect sale or other disposition of all,
substantially all or any substantial parts of the assets or lines of business of
Palatin, whether or not approval of any such transaction by stockholders is
required; provided, however, Palatin shall be able to sell or otherwise dispose
of non-LeuTech assets or lines of business in a transaction not otherwise
qualifying as a "Change of Control" under subsections (a), (b) and (c) of this
Section 1.6, whether or not approval of such transaction by stockholders is
required, and such sale or other disposition shall not constitute a "Change of
Control"; or
(e) the stockholders of Palatin approve a plan of complete liquidation
or dissolution of Palatin.
1.7 "Common Shares" shall mean, at any given time, those shares of the
Common Stock, owned by Mallinckrodt as a consequence of its exercise of the
conversion rights set forth in Section 5.2(c) or Section 5.2(e) below.
1.8 "Common Stock" shall mean the publicly traded, voting common stock
of Palatin.
1.9 "Defective Product" shall have the meaning ascribed to it in
Section 2.3(k) below.
1.10 "Development Costs" shall mean all external costs and direct
internal costs incurred in connection with the development of LeuTech Products
for diagnosing and imaging equivocal appendicitis and osteomyelitis for the
North American portion (i.e., the United States and Canada) of the Territory
during the Development Phase, [INFORMATION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION UNDER RULE 24b-2.]
1.11 "Development Criteria" shall mean those milestones and actions
that Palatin is required to achieve, in the manner and in the time specified,
with respect to the development of LeuTech, which milestones and actions are set
forth in Section 3.2(a) set forth below.
1.12 "Development Payments" shall mean those payments due by
Mallinckrodt to Palatin in accordance with Section 5.7(b) herein below as
Mallinckrodt's share of Development Costs with respect to the development of
LeuTech Products for diagnosing and imaging equivocal appendicitis and
osteomyelitis for the North American portion of the Territory.
1.13 "Development Phase" shall mean, as to each and every LeuTech
Indication, the period of time with respect to any portion of the Territory
during which such LeuTech Indication is being developed and such phase will
terminate, with respect to any given portion of the Territory, on the later of
the date approval for the marketing and sale of such LeuTech Indication as a
LeuTech Product is granted by the appropriate regulatory authority in any such
portion of the Territory or the date upon which post-approval product
development activities required by any government organization are complete.
1.14 "Development Program" shall mean the development program for
LeuTech Products for diagnosing and imaging equivocal appendicitis and
osteomyelitis for commercial sales in the North American portion of the
Territory, as such program will be more fully described in the first Annual
Development Plan to be prepared by Palatin and delivered to Mallinckrodt at the
first meeting of the Joint Steering Committee in connection herewith, as such
program may be amended from time to time by the parties in accordance with this
Agreement.
1.15 "Dilutive Event" shall have the meaning ascribed to such term in
Section 5.2(e) below.
1.16 "Europe" shall mean Ireland, Northern Ireland, the United Kingdom,
Iceland, Norway, Sweden, Finland, Denmark, Portugal, Spain, Gibraltar, France,
Monaco, Andorra, Belgium, the Netherlands, Luxembourg, Germany, Poland, Hungary,
Romania, Bulgaria, Slovakia, the Czech Republic, Austria, Liechtenstein,
Switzerland, Italy, San Marino, the Holy See, Malta, Greece, Serbia, Croatia,
Slovenia, Bosnia, Montenegro, Macedonia, Kosovo, Albania, the Russian Republic,
the Ukraine, Belarus, Moldova, Latvia, Lithuania and Estonia.
1.17 "FDA" shall mean the United States Food and Drug Administration.
1.18 "First Commercial Sale" shall mean the first sale of any LeuTech
Products for use or consumption by the general public in any portion of the
Territory, when such sale has been made with the required marketing approval, as
appropriate to the portion of the Territory, granted by the governing health or
regulatory authority.
1.19 "Indemnitee" shall have the meaning ascribed to such term in
Section 8.5 below.
1.20 "Indemnitor" shall have the meaning ascribed to such term in
Section 8.5 below.
1.21 "Information" shall have the meaning ascribed to such term in
Section 7.1(a) below.
1.22 "Joint Steering Committee" shall have the meaning ascribed to such
term in Section 4.1(a) below.
1.23 "Launch Activities" shall mean those activities to be carried out
by Mallinckrodt in connection with the commencement of commercial sales of
LeuTech Products in any portion of the Territory, which activities shall
generally include those listed on Exhibit B attached hereto.
1.24 "LeuTech(TM)" shall mean and refer to that compound the chemical
structure of which is described generally on Exhibit C attached hereto.
1.25 "LeuTech Indication" shall mean any specific imaging and
diagnostic use of LeuTech(TM), whether in the process of development or as
approved by the appropriate governmental regulatory agency or agencies.
1.26 "LeuTech Products" shall mean each and every commercial product
that is or can be developed for sale from LeuTech(TM) and which is used or
usable for nuclear imaging of infection or inflammation, and shall specifically
and in every instance (unless the context otherwise clearly requires and until
such time as the Joint Steering Committee expands the universe of commercial
products to be developed hereunder) refer at the very least to LeuTech
Indications for equivocal appendicitis and osteomyelitis as developed hereunder
for sale as commercial products in the North American portion of the Territory
(i.e., all uses of the term "LeuTech Products" herein shall be a reference to
developed commercial products usable for diagnosis and imaging of equivocal
appendicitis and/or osteomyelitis and appropriate for sale in the North American
portion of the Territory).
1.27 "License Payments" shall mean the payments made by Mallinckrodt to
Palatin as described in Section 5.1 below in consideration of the license rights
granted by Palatin to Mallinckrodt in accordance with Section 2.1 below.
1.28 "Mallinckrodt Indemnitee" shall have the meaning ascribed to such
term in Section 5.6(a) below.
1.29 "Marketing Criteria" shall mean those milestones, actions and
obligations that, with respect to any given period of time and in any given
portion of the Territory, Mallinckrodt is required to achieve and perform, in
the manner and time specified, with respect to the sales, marketing and
distribution of LeuTech Products, which Marketing Criteria shall be established
by the Joint Steering Committee and shall be derived from any Annual Marketing
Plan then in effect.
1.30 "Net Sales" shall mean the gross sales prices for LeuTech Products
billed to customers (including, without limitation, any distributors or
sublicensees) by a party or by its Affiliates less [INFORMATION OMITTED AND
FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2]. Reductions to gross
sales may include [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION
UNDER RULE 24b-2.] It is further understood that the amount of any adjustments
to the gross sales of LeuTech Products described in this Section 1.30 relate
solely to the sale of LeuTech Products. Net sales shall in all cases hereunder
be expressed in United States dollars regardless of the currency in which any
sales transaction is made.
With respect to Net Sales of Product Units where sales of such Product
Units have been "bundled" with other products (i.e., if a Product Unit is sold
pursuant to an agreement with an independent customer specifying, for a
combination of products and/or services, [INFORMATION OMITTED AND FILED
SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]
1.31 "Quarterly Net Sales Report" shall have the meaning ascribed to
such term in Section 2.2(c) below.
1.32 "Palatin Indemnitee" shall have the meaning ascribed to such term
in Section 5.6(b) below.
1.33 "Palatin Intellectual Property Rights" shall mean all of those
intellectual property rights of Palatin or any of its Affiliates of any nature
whatsoever (including, without limitation,
the Palatin Patent Rights, as defined herein below) which are used or
useful in connection with LeuTech(TM) or LeuTech Products.
1.34 "Palatin Patent Rights" shall mean those patents and applications
for patent owned by Palatin or any of its Affiliates or which Palatin or any of
its Affiliates has the right to use and which are used or useful in connection
with LeuTech(TM) or LeuTech Products, as set forth and described (including the
precise nature of Palatin's rights thereto) on Exhibit D attached hereto.
1.35 "Preferred Stock" shall mean the class of non-voting, subordinated
preferred stock of Palatin to be issued to Mallinckrodt in accordance herewith
and in consideration of the payments by Mallinckrodt set forth in Section 5.2(b)
below, which preferred stock shall have those rights and privileges as are fully
described in the certificate of designation attached hereto as Exhibit E.
1.36 "Pre-Launch Activities" shall mean the activities to be carried
out by Mallinckrodt to prepare for the commencement of commercial sale of
LeuTech Products in any portion of the Territory prior to any such activities
hereunder that are defined as Launch Activities, which activities shall
generally include those listed on Exhibit B attached hereto.
1.37 "Product Direct Cost" shall have the meaning ascribed to such term
in Section 2.3(f) below.
1.38 "Product Sample" shall mean Product Units (as defined below)
provided to Mallinckrodt by Palatin, at Palatin's Product Direct Cost, for
distribution to Mallinckrodt customers. Such Product Samples shall be used
solely for marketing purposes and shall be marked "Sample not for Commercial
Sale."
1.39 "Product Unit" shall mean one vial (regardless of the strength,
concentration or amount of active ingredients contained therein) of any LeuTech
Product, including (without limitation) those described on Exhibit F hereto that
are usable for the diagnosis and imaging of equivocal appendicitis and
osteomyelitis [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION
UNDER RULE 24b-2]. Exhibit F shall be amended from time to time by the parties
in accordance with this Agreement to reflect the development of additional
LeuTech Products based on a LeuTech Indication other than for the diagnosis and
imaging of equivocal appendicitis or osteomyelitis.
1.40 "Publishing Party" shall have the meaning ascribed to such term in
Section 7.3(a).
1.41 "Reviewing Party" shall have the meaning ascribed to such term in
Section 7.3(a).
1.42 "Royalty Payment" shall mean the amount to be paid by Mallinckrodt
to Palatin for Net Sales of Product Units, as further described and defined in
Section 5.9 below.
1.43 "SEC" shall mean the United States Securities and Exchange
Commission.
1.44 "Suspension Period" shall have the meaning ascribed to such term
in Section 5.4(e) below.
1.45 "Territory" shall mean all of the countries of the world
(excluding Europe).
1.46 [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION
UNDER RULE 24b-2].
1.47 "Wistar Agreement" shall have the meaning ascribed to such term in
Section 9.3(c).
Article 2
MARKETING, SALES AND MANUFACTURING RIGHTS
2.1 Grant of License Rights by Palatin to Mallinckrodt. In
consideration of the License Payments provided for herein Palatin hereby grants
to Mallinckrodt and its Affiliates the exclusive right and license under the
Palatin Intellectual Property to (i) use, market, distribute for sale and sell
LeuTech Products in the Territory and (ii) sublicense the rights set forth in
clause (i) to any third party for distribution of LeuTech Products, with the
prior written consent of Palatin, which consent shall not be unreasonably
withheld. Any such sublicensee shall be bound by the terms and conditions of
this Agreement (other than any of the provisions of this Agreement relating to
the Preferred Stock) as if the sublicensee were Mallinckrodt or its Affiliates,
and shall execute a sublicense agreement to that effect. The sublicensee shall
not have any rights greater than the rights granted Mallinckrodt under this
Agreement and shall not be permitted to sublicense to any other party rights
sublicensed from Mallinckrodt. Mallinckrodt agrees to assume full responsibility
for any such sublicensee's performance and shall at all times diligently audit
the performance of any such sublicensee. Mallinckrodt shall promptly inform
Palatin of any performance difficulties it discovers or reasonably anticipates
with respect to any such sublicensee, as well as the actions Mallinckrodt
intends to take to alleviate or ameliorate any such difficulties. The license
grant set forth in this Section 2.1 shall be deemed to be paid-up and
irrevocable for so long as and to the extent this Agreement is in effect,
subject only to such limitations as are expressly set forth herein below.
2.2 Mallinckrodt's Marketing Obligations.
(a) Mallinckrodt agrees (for itself and on behalf of its
Affiliates and sublicensees) to exert its best commercial efforts in the sales,
marketing and distribution of LeuTech Products, which it shall conclusively be
deemed to have done with respect to any particular LeuTech Product and for any
particular period if Mallinckrodt (and its Affiliates or sublicensees) meet
those Marketing Criteria or other marketing and sales requirements and
milestones established by the Joint Steering Committee and based on the
marketing details set forth in any applicable Annual Marketing Plan approved in
accordance herewith. If Mallinckrodt (and its Affiliates or sublicensees) have
properly addressed and promoted the sales, marketing and distribution of
applicable LeuTech Products during any particular period in accordance with the
requirements of any applicable Annual Marketing Plan, then Mallinckrodt (and its
Affiliates or sublicensees) shall be deemed to have met all applicable marketing
obligations hereunder, notwithstanding any failure to achieve expected gross
revenue levels for one or more LeuTech Products in any particular market if such
shortfall is due primarily to the occurrence of market, economic or technical
circumstances which are beyond the reasonable control of Mallinckrodt (and its
Affiliates or sublicensees). Mallinckrodt and its Affiliates or sublicensees
shall be responsible for the performance of and costs associated with all Launch
Activities and Pre-Launch Activities relative to preparation for the sales,
marketing and distribution of LeuTech Products, and shall otherwise engage in
those marketing activities set forth and described in Exhibit B attached hereto.
(b) In the event it is the determination of the Joint Steering
Committee that, with respect to any particular period of time and in any
substantial portion of the Territory, Mallinckrodt (and its Affiliates and
sublicensees) have failed to meet any applicable Marketing Criteria or other
marketing and sales requirements and milestones contained in or developed
jointly as a consequence of any applicable Annual Marketing Plan under
circumstances that clearly warrant the conclusion that Mallinckrodt (and its
Affiliates and sublicensees) have not exerted their best commercial efforts in
the sale and marketing of LeuTech Products then, at Palatin's option and upon
one hundred twenty (120) days advance written notice to Mallinckrodt specifying
in detail the manner in which Mallinckrodt (and its Affiliates and sublicensees)
have failed to discharge their marketing obligations under Section 2.2(a) above,
Palatin may terminate or declare to be non-exclusive some or all of the license
rights granted to Mallinckrodt pursuant to Section 2.1 above; provided that, if
Mallinckrodt (and its Affiliates and sublicensees) are able substantially to
cure any failure to meet its (or their) obligations under Section 2.2(a) to the
reasonable satisfaction of all of the members of the Joint Steering Committee
within such one hundred twenty (120) day period, Palatin will not have the right
to terminate or alter any of Mallinckrodt's license rights hereunder.
(c) During the term of this Agreement and for any calendar
quarter in which Mallinckrodt (or their Affiliates or sublicensees) have made
any sales of Product Units, Mallinckrodt shall, within sixty (60) days after the
end of each such calendar quarter, furnish to Palatin a written report showing
Net Sales of Product Units during such quarter ("Quarterly Net Sales Report")
and including the following specific information: (i) total Net Sales of Product
Units broken down into such significant geographical regions as may be specified
by the Joint Steering Committee, and sufficient documentation to demonstrate the
calculation of Net Sales from gross sales revenue and applicable adjustments,
(ii) an indication of the source of any gross revenue (i.e., sales to end-user
customers, sales to distributors, fees or payments from sublicensees, etc.) and
the calculation of the amount of Net Sales deriving from each source, (iii) the
exchange rates used in determining Net Sales in United States dollars for any
sales outside the United States, (iv) the estimated allocated sales and
marketing expense incurred by Mallinckrodt during the period of any such report
in each specific Sales Market and in total, and (v) a comparison of sales and
marketing results against any Marketing Criteria and Annual Marketing Plan then
in effect.
(d) The sales and marketing activities of Mallinckrodt and its
Affiliates or sublicensees shall be subject to the review and approval of the
Joint Steering Committee. To aid in review by the Joint Steering Committee,
Mallinckrodt shall develop an annual sales and marketing plan (an "Annual
Marketing Plan") which shall reasonably describe the sales, marketing and
distribution activities to be conducted by Mallinckrodt and its Affiliates or
sublicensees with regard to LeuTech Products and which shall include, among
other things, an annual budget and a specific description of the timing and
nature of any resources to be allocated by Mallinckrodt and its Affiliates to
the sales, marketing and distribution of LeuTech Products, the commissions to be
paid to sales representatives, training programs to be provided for sales
representatives, the nature of all advertising and promotional efforts and
materials, the proposed quantity and method of distribution of Product Samples,
and such other information as the Joint Steering Committee shall reasonably
determine to be necessary. Mallinckrodt shall develop and present the first
Annual Marketing Plan at the first meeting of the Joint Steering Committee,
which initial plan will set forth Mallinckrodt's overall marketing plan and
forecast assumptions in such detail as possible at this point in time. Such
initial plan will be refined and amended or supplemented as, when and to the
extent the Joint Steering Committee shall determine. Thereafter, the Annual
Marketing Plan shall be prepared by Mallinckrodt no later than sixty (60) days
prior to the beginning of each calendar or fiscal year in which sales and
marketing activities will occur or are expected to occur in accordance herewith.
In addition, if Mallinckrodt receives notice from the Joint Steering Committee
that government approval to market any LeuTech Products in a portion of the
Territory for which such approval was previously unavailable is reasonably
expected to occur within one hundred eighty (180) days, then within sixty (60)
days after receipt of such notice, Mallinckrodt will supplement any Annual
Marketing Plan then in effect to include all required information relative to
the sales, marketing and distribution of LeuTech Products in any such portion of
the Territory or, if Mallinckrodt's receipt of such notice occurs within six (6)
months from the end of any calendar or fiscal year for which any particular
Annual Marketing Plan is then in effect, Mallinckrodt will include all such
information in the Annual Marketing Plan to be prepared for the succeeding
calendar or fiscal year. Notwithstanding the immediately preceding sentence, any
changes or supplements to any Annual Marketing Plan shall be subject to review
and approval of the Joint Steering Committee.
(e) Mallinckrodt (on its own behalf and on behalf of its
Affiliates, sublicensees, contract consultants or other subcontractors)
represents and warrants to Palatin as follows:
(i) there is no claim, suit, proceeding or
investigation pending or, to the knowledge of Mallinckrodt, threatened
against Mallinckrodt or any of its Affiliates, sublicensees, contract
manufacturers, consultants or other subcontractors, which might prevent
or interfere with Mallinckrodt's performance under this Agreement;
(ii) LeuTech and LeuTech Products marketed and sold
hereunder will not be marketed or sold in violation of any applicable
federal, state or local law or regulation, or marketed or sold in
violation of any agreement (commercial or otherwise), judgment, order
or decree to which any of Mallinckrodt or its Affiliates, sublicensees,
contract manufacturers, consultants or other subcontractors are
parties;
(iii) neither Mallinckrodt nor any of its Affiliates,
sublicensees, contract consultants or other subcontractors (nor any
employee of any of the foregoing) has been disqualified or debarred by
any governmental authority for any purpose;
(iv) neither Mallinckrodt nor any of its contract
consultants or other subcontractors (nor to the best of Mallinckrodt's
knowledge any employee of any of the foregoing) have been charged with
or convicted under federal law for conduct relating to the marketing or
sale of any drug product under the Generic Drug Enforcement Act of 1992
or under any other relevant statute, law or regulation;
(v) Mallinckrodt and any of its Affiliates,
sublicensees, contract consultants and other subcontractors (and any
employee of any of the foregoing) will treat LeuTech Products as an
important product in the same manner Mallinckrodt, its Affiliates and
sublicensees traditionally market their important products for purposes
of Mallinckrodt's pre-marketing, marketing, sales and distribution
efforts and expenditures. Mallinckrodt's marketing, sales and
distribution efforts regarding LeuTech Products shall place emphasis on
all relevant clinical indications of LeuTech (covered by the scope of
this Agreement), market segments and appropriate geographical regions
in the Territory;
(vi) Mallinckrodt and any of its Affiliates,
sublicensees, contract consultants and other subcontractors (and any
employee of any of the foregoing) will provide an adequate sales
organization and facilities to assure adequate sales representation,
representation, prompt handling of inquiries and orders, and attention
to customer service requirements for LeuTech Products in support of the
activities described herein;
(vii) Mallinckrodt and any of its Affiliates,
sublicensees, contract consultants and other subcontractors (and any
employee of any of the foregoing) will provide support and assistance
in establishing efficient communications between Mallinckrodt and
Palatin for shipping information, invoicing, complaints and customer
relations information including support of computer communication
systems for information flow; and
(viii) Mallinckrodt and any of its Affiliates,
sublicensees, contract consultants and other subcontractors (and any
employee of any of the foregoing) will provide sales order entry and
customer service.
(f) Palatin, through its employees, consultants or other
representatives, will have the right, during normal business hours and upon
advance arrangements with Mallinckrodt, and no more often than quarterly, to
inspect the marketing and sales and other related operations of Mallinckrodt and
its Affiliates, sublicensees, contract consultants or other subcontractors to
determine whether or not Mallinckrodt is complying in all respects with
obligations and performance for which it is responsible hereunder. Palatin shall
give reasonable advance notice to Mallinckrodt of any such inspection and
Mallinckrodt shall have the right to have a representative present at all such
inspections. Palatin warrants that all such inspections and audits shall be
carried out in a manner calculated not to unreasonably interfere with the
audited party's conduct of business. Further, Palatin agrees to comply with all
of the audited party's safety and security requirements during any visits to
such audited party's facilities.
2.3 Manufacturing and Supply of the LeuTech Products.
(a) Palatin (either itself or through the efforts of its
contract manufacturers, consultants or other subcontractors) shall be
responsible for manufacturing Product Units at the required quality and in
quantities sufficient for preclinical and clinical development during the
Development Phase with respect to any LeuTech Product and in any particular
portion of the Territory until the termination or expiration of any such
Development Phase. All costs incurred by Palatin in connection with this
subsection (a) shall be deemed Development Costs and subject to the provisions
of Section 5.7(b) hereof.
(b) Prior to the termination or expiration of any such
Development Phase, Palatin (either itself or through the efforts of its contract
manufacturers, consultants or other subcontractors) shall be responsible for (i)
the design, testing and scale-up of the LeuTech Products manufacturing process,
(ii) manufacturing Product Units at the required quality and in quantities
sufficient for any further and final development efforts that may be necessary,
(iii) providing documentation regarding the manufacture of LeuTech Products
needed to secure the relevant governmental approvals to market and sell LeuTech
Products in any portion of the Territory, and (iv) arranging for pre-approval
and/or routine establishment inspections with respect to its facilities (or
those of its contract manufacturers or other subcontractors) that are and will
be manufacturing LeuTech Products. All costs incurred by Palatin in connection
with this subsection (b) shall be deemed Development Costs and subject to the
provisions of Section 5.7(b) hereof.
(c) Mallinckrodt will submit to Palatin, in writing within
sixty (60) days of the date of this Agreement, a non-binding forecast of the
anticipated amounts of its orders for finished Product Units of LeuTech for
diagnosing and imaging equivocal appendicitis and osteomyelitis Products for
sale and distribution in North America during each of the first two years
following approval of the marketing and sale of such LeuTech Products by the
FDA. After such approval is obtained, Mallinckrodt will submit to Palatin
updated and non-binding forecasts on a rolling quarterly basis. Under no
circumstances whatsoever shall any forecasts made hereunder be deemed to be an
order for the purchase of Product Units of any LeuTech Products, but
Mallinckrodt will at all times exercise reasonable care that such forecasts are
as accurate as possible under the applicable facts and circumstances.
(d) Subject to the provisions of subsection (f) and (g) of
this Section 2.3, upon completion of the Development Phase for a LeuTech Product
in any portion of the Territory, and for so long as Mallinckrodt and its
Affiliates retain any portion of the license rights granted pursuant to Section
2.1 above with respect to any such portion of the Territory, Palatin (either
itself or through the efforts of its contract manufacturers, consultants or
other subcontractors) will be responsible for supplying Mallinckrodt and its
Affiliates with such commercial quantities of LeuTech Products as Mallinckrodt
and its Affiliates shall require to carry out their obligations under Section
2.2 above, including any quantities of pre-launch commercial inventories of
LeuTech Products the parties agree should be produced. Mallinckrodt, for its
part, agrees to pay Palatin, for each Product Unit delivered to its facilities
by Palatin (or by its contract manufacturers or other subcontractors) and
accepted by Mallinckrodt in accordance with provisions set forth below in this
Section 2.3, an amount equal to the Transfer Price, as determined pursuant to
Section 1.46 above.
(e) [INFORMATION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION UNDER RULE 24b-2].
(f) [INFORMATION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION UNDER RULE 24b-2].
(g) [INFORMATION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION UNDER RULE 24b-2].
(h) Although Palatin shall have the right to subcontract any
or all of its responsibilities under this Section 2.3 to a contract
manufacturer, consultant or other subcontractor, Palatin shall at all times
diligently audit the performance of any such subcontractor hereunder and shall
promptly inform Mallinckrodt of any performance difficulties it discovers or
reasonably anticipates with respect to any such subcontractor, as well as the
actions Palatin intends to take to alleviate or ameliorate any such
difficulties. Notwithstanding any other provision herein, it is understood that
Palatin shall at all times be fully responsible for the performance of any
contract manufacturers, consultants or other subcontractors to whom it may
delegate any of its responsibilities or performance under this Section 2.3. Upon
discovery by Palatin of an actual or anticipatory breach by any of its contract
manufacturers or subcontractors of their obligations to produce Product Units
and upon their failure, within a reasonably short period (in any event no longer
than sixty (60) days), to cure or remove the threat of any such breach, Palatin
will commence all necessary steps to identify and qualify an alternate supplier
to replace such contract manufacturers or subcontractors and will diligently
pursue all approvals necessary to qualify such suppliers and resume production
at appropriate levels and/or in an appropriate manner. In the event that Palatin
fails to discharge its obligations pursuant to this subsection (h), Mallinckrodt
shall have the right to enforce Palatin's rights under and pursuant to any
contracts Palatin may have with its contract manufacturers or other
subcontractors and Palatin shall take all actions necessary and possible to
ensure that Mallinckrodt will be able fully to exercise such rights.
(i) If Mallinckrodt at any time cancels a purchase order for
Product Units, then Mallinckrodt shall pay to Palatin a cancellation fee equal
to one hundred percent (100%) of the Direct Product Cost incurred by Palatin in
accordance with such purchase order less such amount of Direct Product Cost with
respect to such purchase order that has already been paid by Mallinckrodt to
Palatin. Payment of any such cancellation fee shall be made within thirty (30)
days of submission of an invoice detailing such Direct Product Costs and
providing such support documentation and material as Mallinckrodt may reasonably
deem necessary. Any amounts not paid by Mallinckrodt within such thirty (30) day
period shall accrue interest at an annual rate of eight percent (8%) on the
unpaid balance due until paid.
(j) The manufacture of Product Units by Palatin (or by its
contract manufacturers, consultants or other subcontractors) will be
accomplished in accordance with all applicable laws, rules and regulations and
all manufacturing shall be performed in accordance with current Good
Manufacturing Practices ("cGMP") as defined by the FDA.
(k) At the time of delivery of Product Units, Palatin shall
supply to Mallinckrodt a certificate of analysis for such Product Units setting
forth an analysis of the Product Units in question as to each applicable
specification. If Mallinckrodt determines that any Product Units it has received
are not in conformance with any one or more applicable specifications for
Product Units to be supplied by Palatin to Mallinckrodt (hereinafter referred to
as a "Defective Product"), then Mallinckrodt may reject any such Defective
Product within thirty (30) days of delivery of such Product. At the time of any
such rejection, Mallinckrodt shall provide Palatin with a written notice
describing in detail the circumstances surrounding the rejection and
Mallinckrodt's reasons therefor. If Mallinckrodt rejects any such Defective
Product it will, at Palatin's option, return the Product Units in question to
Palatin (or to any contract manufacturer or other subcontractor Palatin shall
specify), or destroy or dispose of them in the least expensive and most
environmentally sound manner, or hold them in quarantine at a Mallinckrodt
facility, all at Palatin's cost (subject to any other relevant provisions of
this subsection (k)). If Mallinckrodt rejects any Defective Product, then
Palatin reserves the right to retest or reexamine such Defective Product for
conformity with specifications by an independent laboratory or other consultant
mutually agreed upon by both parties. If such testing or reexamination confirms
that the Product Units meet the applicable specifications, Mallinckrodt must
accept the Product Units, Mallinckrodt must pay any charges and expenses for
retesting or reexamination by such third party, and any costs associated with
Mallinckrodt's previous rejection of any such Product Units will be for the
account and expense of Mallinckrodt. Otherwise, the charges for retesting,
reexamination, return, destruction and/or quarantine will be paid by Palatin,
and, whether or not Palatin opts to retest or reexamine Product that has been
rejected by Mallinckrodt, Palatin will replace all Defective Product at no cost
to Mallinckrodt.
(l) Palatin (and its contract manufacturers, consultants and
other subcontractors) will comply with all federal, state and local laws,
regulations and standards applicable to production of LeuTech Products and the
performance of any obligations for which Palatin is responsible hereunder.
Palatin will promptly furnish Mallinckrodt with pertinent portions of all FDA
inspection reports and related correspondence directly related to and affecting
performance hereunder (including all such reports and correspondence relating to
its contract manufacturers, consultants or other subcontractors) as and when
such reports and correspondence become available to Palatin. Palatin will notify
Mallinckrodt promptly of (i) any warning (including any FDA Form 483 or warning
letter), citation, indictment, claim, lawsuit or proceeding issued or instituted
by any federal, state or local governmental entity or agency against Palatin or
any of its Affiliates, contract manufacturers, consultants or other
subcontractors, (ii) any revocation of any license or permit issued to Palatin
or any of its Affiliates, contract manufacturers, consultants or other
subcontractors, to the extent that any such occurrence described in clause (i)
or (ii) relates directly to performance for which Palatin is responsible
hereunder.
(m) Palatin (on its own behalf and on behalf of its contract
manufacturers, consultants or other subcontractors) represents and warrants to
Mallinckrodt as follows:
(i) All Product Units supplied to Mallinckrodt and its
Affiliates hereunder will be properly and safely packaged as reasonably
required by the applicable BLA. Palatin will be responsible to provide
all vials, boxes and other packaging materials required by Palatin to
perform its obligations hereunder (i.e., these are included in the
Transfer Price to be paid by Mallinckrodt).
(ii) Palatin currently has access to, and during the entire
term hereof will make all reasonable efforts to ensure that it will
continue to have access to, sufficient supplies of raw materials,
utilities, container/closure systems, packaging materials and all other
required items to perform the services required of it hereunder without
interruption.
(iii) Palatin shall be responsible (through the efforts of its
contract manufacturers, consultants and other subcontractors) for all
process, cleaning and methods validation, stability studies or other
tests and procedures necessary for the manufacture and release of
finished Product Units hereunder in accordance with cGMP and in
accordance with the requirements of the relevant manufacturing process.
Complete and accurate documentation of all validation data, stability
testing data, batch records, quality control and laboratory testing and
any other data required under cGMP or other FDA requirements, or under
any similar requirements of the relevant regulatory framework of any
other country (as such requirements may be applicable), in connection
with the supply of finished Product Units hereunder shall be
maintained, and such records shall be available for review by
Mallinckrodt on reasonable advance notice.
(iv) All Product Units produced and sold hereunder will be
produced in compliance with cGMPs applicable to LeuTech Products, and
will meet all applicable specifications.
(v) There is no claim, suit, proceeding or investigation
pending or, to the knowledge of Palatin, threatened against Palatin or
any of its Affiliates, sublicensees, contract manufacturers,
consultants or other subcontractors, which might prevent or interfere
with Palatin's performance under this Agreement.
(vi) Neither Palatin nor any of its Affiliates, sublicensees,
contract manufacturers, consultants or other subcontractors (nor to the
knowledge of Palatin any employee of any of the foregoing) has been
disqualified or debarred by the FDA for any purpose.
(vii) Neither Palatin nor any of its Affiliates, sublicensees,
contract manufacturers, consultants or other subcontractors (nor to
Palatin's knowledge any employee of any of the foregoing) have been
charged with or convicted under federal law for conduct relating to the
development or approval, or otherwise relating to the regulation of any
drug product under the Generic Drug Enforcement Act of 1992 or under
any other relevant statute, law or regulation.
(viii) Product Units sold hereunder will not be:
(A) in violation of Sections 5 or 12 of
the Federal Trade Commission Act or
improperly labeled under applicable
Federal Trade Commission Trade
Practice Rules, as and to the extent
applicable hereunder,
(B) adulterated or misbranded within
the meaning of the federal Food,
Drug and Cosmetic Act, as amended,
or within the meaning of any
applicable state or municipal law
in which the definitions of
adulteration and misbranding are
substantially identical with those
contained in the federal Food, Drug
and Cosmetic Act, or articles which
may not under the provisions of
Sections 404 or 505 of said Act be
introduced into interstate commerce
or which may not under
substantially similar provisions of
any state or municipal law be
introduced into commerce,
(C) in violation of Section 351 of the
Public Health Service Act, as
amended, as and to the extent
applicable hereunder,
(D) manufactured in violation of any
applicable federal, state or local
law, rule or regulation, or
(E) manufactured in violation of any
agreement (commercial or otherwise),
judgment, order or decree to which
any of Palatin or its contract
manufacturers, consultants or other
subcontractors are parties.
(n) Mallinckrodt, through its employees, consultants or other
representatives, will have the right, during normal business hours and upon
advance arrangement with Palatin, and no more often than quarterly, to inspect
the manufacturing and other related operations of Palatin and its contract
manufacturers, consultants or other subcontractors to determine whether or not
Palatin is complying in all respects with obligations and performance for which
it is responsible hereunder. Mallinckrodt shall give reasonable advance notice
to Palatin of any such inspection and Palatin shall have the right to have a
representative present at all such inspections. Mallinckrodt warrants that all
such inspections and audits shall be carried out in a manner calculated not to
unreasonably interfere with the audited party's conduct of business. Further,
Mallinckrodt agrees to comply with all of the audited party's safety and
security requirements during any visits to such audited party's facilities.
(o) If either party reasonably decides to or is required to
initiate a product recall, stock recovery, withdrawal or field correction with
respect to, or if there is any governmental seizure of, any Product Units
supplied hereunder which action is due, in whole or in part, to (i) a failure of
any of such Product Units manufactured hereunder to conform to applicable
specifications (including, without limitation, any such Product Units being
adulterated or misbranded), or any warranty or other requirement set forth in
this Agreement, (ii) the failure of either party (or any of their contract
manufacturers, consultants, subcontractors or sublicensees) to comply with any
applicable law, rule, regulation, standard, court order or decree or (iii) the
negligent or intentional wrongful act or omission of either party (or any of
their contract manufacturers, consultants, subcontractors or sublicensees) in
connection with performance hereunder, such party will notify the other party
promptly of the details regarding such action, including providing copies of all
relevant documentation concerning such action. The party so notified will assist
the party initiating any such action in investigating any such situation. All
regulatory contacts that are made and all activities concerning seizure, recall,
stock recovery, withdrawal or field correction will be jointly coordinated by
Mallinckrodt and Palatin, regardless of which party initiated or suffered any
applicable action. If any such recall, stock recovery, withdrawal, field
correction or seizure occurs due solely to (i) a failure of any Product Units
provided hereunder to conform to applicable specifications (including, without
limitation, any such Product Units being adulterated or misbranded) or any
warranty or other requirement set forth in this Agreement, (ii) the failure by
Palatin (or any of their contract manufacturers, consultants, subcontractors or
sublicensees) to comply with any applicable law, rule, regulations, standard,
court order or decree or (iii) the negligent or intentional wrongful act or
omission of Palatin (or any of its contract manufacturers, consultants,
subcontractors or sublicensees) in connection with the production of LeuTech
Products hereunder, then Palatin shall bear the full cost and expense of any
such seizure, recall, stock recovery, withdrawal or field correction and, to the
extent Mallinckrodt has paid any expenses, it shall be entitled to reimbursement
by deduction of such costs and expenses from the amount of any Royalty Payment
otherwise payable to Palatin hereunder in accordance with Section 5.9, such
deduction to occur with respect to the Royalty Payment payable for the calendar
quarter in which any such recall, stock recovery, withdrawal, field correction
or seizure occurs. If both Palatin and Mallinckrodt (or either of their
subcontractors, sublicenses or Affiliates) contribute to the cause of a seizure,
recall, stock recovery, withdrawal or field correction, the cost and expenses
thereof will be shared in proportion to each party's contribution to the problem
(as determined by the Joint Steering Committee or, in the absence of a decision
by the Joint Steering Committee, in accordance with the procedures set forth in
Section 10.6 herein), and any amount of cost and expense that is the liability
and responsibility of Palatin and is paid by Mallinckrodt shall be reimbursed to
Mallinckrodt by deduction from any Royalty Payment due Palatin in accordance
with the procedures set forth in the immediately preceding sentence. If any
recall, stock recovery, withdrawal, field correction or seizure occurs due
solely to the failure of Mallinckrodt, its Affiliates, sublicensees, contract
consultants or other subcontractors to comply with any applicable law, rule,
regulation, standard, court order or decree or the negligent or intentional
wrongful act or omission of Mallinckrodt in connection with performance
hereunder, then Mallinckrodt shall bear the full cost and expense of such
seizure, stock recovery, withdrawal or field correction.
(p) Mallinckrodt shall be responsible for monitoring,
investigating and reporting all customer complaints and Adverse Events
concerning the LeuTech Products. Palatin shall perform in a timely manner all
product testing in connection with such customer complaints and Adverse Events
as requested by Mallinckrodt. Mallinckrodt shall prepare and submit in full
compliance with applicable federal statutes and regulations the Annual Adverse
Event Report required to be submitted to the FDA and to prepare and submit
within the Territory in full compliance with applicable law all other required
regulatory filings relating to customer complaints and Adverse Events.
(q) In addition to any rights Mallinckrodt may otherwise have
hereunder (including, without limitation, any rights to terminate this Agreement
pursuant to Section 9.2 below), in the event Palatin is in material breach of
any obligations under this Section 2.3 for which it is responsible and which
material breach places Mallinckrodt in reasonable and imminent apprehension of
Palatin's continued ability or intention to supply Product Units of LeuTech
Products to Mallinckrodt hereunder, if such breach is caused by the acts or
omissions to act of Palatin, and such breach is not cured within one hundred
twenty (120) days after notice thereof is given by Mallinckrodt to Palatin, then
Mallinckrodt shall have the irrevocable right to manufacture or have
manufactured by any one or more contract manufacturers all of its requirements
for Product Units of LeuTech Products for the duration of any of its license
rights granted hereunder. Mallinckrodt may exercise the foregoing right by
giving notice to Palatin of its intent to do so at any time after the elapse of
the one hundred twenty (120) day cure period if, during such time, Palatin has
been unable substantially to cure any and all material breaches of this Section
2.3 to the reasonable satisfaction of Mallinckrodt. In the event Mallinckrodt
exercises such right of manufacture, Palatin shall, as soon after notice of the
exercise of such right as possible (but in no event later than six (6) months
thereafter), transfer to Mallinckrodt such contractual rights (i.e., its
contracts with all third party contract manufacturers, consultants and other
subcontractors) and such rights to its intellectual property and such know-how
as may be necessary to enable Mallinckrodt or a third party or parties
designated by Mallinckrodt to manufacture LeuTech Products in sufficient
quantity to meet Mallinckrodt's requirements therefor. Any repeated failure by
Palatin to supply the full amount of any Product Units ordered by Mallinckrodt
in accordance with the provisions hereof as and when such Products are to be
delivered in accordance with any accepted purchase order shall be deemed a
material breach for purposes hereof.
(r) Upon the written request of Mallinckrodt, Palatin shall
permit an independent public accountant selected by Mallinckrodt and acceptable
to Palatin, which acceptance shall not be unreasonably withheld or delayed, to
have access during normal business hours to such records of Palatin as may be
reasonably necessary to verify (i) the accuracy of any changes in Transfer Price
made by Palatin pursuant to Section 1.46 in respect of any calendar year (or
portion thereof) ending not more than twelve (12) months prior to the date of
such request and (ii) the accuracy of any xxxxxxxx (and all credits, refunds and
similar adjustments thereto) by Palatin to Mallinckrodt pursuant to Section
2.3(f) for the payment by Mallinckrodt of its portion of Product Direct Cost
applicable to any purchase order for Product Units made and accepted hereunder.
Subject to other relevant provisions of this subsection (r), all such
verifications shall be conducted at Mallinckrodt's expense, not more than twice
in each calendar year and no quarterly period may be audited more than once. In
the event such Mallinckrodt representative concludes (i) that changes in the
Transfer Price were not made in accordance with the requirements of Section 1.46
or (ii) that the amount of Product Direct Cost (and all credits, refunds or
similar adjustments thereto) owed by or accruing to the benefit of Mallinckrodt
were not correctly stated and therefore, if either or both of clause (i) or (ii)
of this sentence is true and in such representative's determination the
aggregate amount of the Transfer Price charged to Mallinckrodt by Palatin for
Product Units during the audited period is greater than the aggregate Transfer
Price that should have been charged, then, at the option of Mallinckrodt, either
(x) Palatin will refund the applicable amount to Mallinckrodt or (y)
Mallinckrodt may offset any amount due against amounts otherwise due by
Mallinckrodt to Palatin hereunder pursuant to Section 2.3(f), Section 2.3(g) or
Section 5.8(a), in any case such amount to include interest at the annual rate
of eight percent (8%) on any amounts due Mallinckrodt, measured from the date on
which such payment should have been made. In the event that, if either or both
of clause (i) or (ii) of the immediately preceding sentence is true, such
Mallinckrodt representative concludes that the amount of the aggregate Transfer
Price charged to Mallinckrodt by Palatin for Product Units during the audited
period is less than the aggregate Transfer Price that should have been charged,
then Mallinckrodt will pay the additional amount to Palatin, plus accrued
interest at the annual rate of eight percent (8%) on any amounts due Palatin
measured from the date on which such payment should have been made. Any amounts
due pursuant to this subsection (r) shall be paid (unless amounts are owed to
Mallinckrodt and it notifies Palatin of its decision to be paid by way of
offset) by the party owing such payment within fifteen (15) days of the date
Mallinckrodt delivers to Palatin such representative's written report concerning
any Transfer Price audit period, unless (in the event any such report reveals a
Transfer Price overcharge by Palatin) Palatin shall have a good faith dispute as
to the conclusions set forth in such written report, in which case Palatin shall
provide written notice to Mallinckrodt within such fifteen (15) day period of
the nature of its disagreement with such written report and, if such written
notice has been given, Palatin may withhold payment of the disputed portion of
any such amount due and Mallinckrodt shall not be entitled to exercise any right
of offset with respect to any disputed amount. If Palatin has provided written
notice to Mallinckrodt that if disputes any of Mallinckrodt's representative's
conclusions, the parties shall thereafter, for a period of sixty (60) days,
attempt in good faith to resolve such dispute and if they are unable to do so
then the matter will be submitted for resolution in accordance with Section
10.6. The fees charged by Mallinckrodt's representative shall be paid by
Mallinckrodt unless the audit discloses that any aggregate Transfer Prices paid
by Palatin for the audited period were greater by more than five percent (5%)
than the amount that should have been charged for the audited period, in which
case Palatin shall pay the reasonable fees and expenses charged by such
representative. Mallinckrodt agrees that all information subject to review under
this subsection (r) is confidential and that it shall cause its representatives
to retain all such information in confidence in accordance with the requirements
of Article 7 below.
Article 3
PRODUCT DEVELOPMENT
3.1 Conduct of the Development Program and Development Generally.
(a) Palatin will be responsible for performing all remaining
tasks associated with the development of LeuTech Products for diagnosing and
imaging equivocal appendicitis and osteomyelitis in connection with the
Development Program, including without limitation the design and conduct of
clinical trials and the preparation and filing of all required regulatory
submissions. It is understood that Mallinckrodt's entire financial
responsibility with respect to the development activities comprising the
Development Program are the Development Payments to be made by Mallinckrodt to
Palatin in accordance with Section 5.7(b). In addition to its performance of
certain tasks in conjunction with the Development Program, Palatin will also
perform all remaining tasks associated with the development of such LeuTech
Products as commercial products fully available for marketing and sale in every
portion of the Territory, including without limitation the design and conduct of
clinical trials and the preparation and filing of all required regulatory
submissions, such development activities to be conducted subject to the review
and approval of the Joint Steering Committee and at the joint expense of
Mallinckrodt and Palatin, as the Joint Steering Committee shall determine (in
Mallinckrodt's case and for the avoidance of doubt, any such expense to be
additional to the Development Payments to be made in accordance with Section
5.7(b)). When available and subject to the Joint Steering Committee, Palatin may
use the resources of Mallinckrodt or its Affiliates to conduct the development
activities described in the preceding sentence or, subject to the concurrence of
the Joint Steering Committee, Palatin may utilize the services of contract
research organizations for development activities. In addition, the nature and
scope of all future development activities relative to LeuTech Products that may
be developed outside the Development Program will be determined by Mallinckrodt
and Palatin and any such development activities will be conducted subject to the
review and approval of the Joint Steering Committee and at the joint expense of
Mallinckrodt and Palatin, as the Joint Steering Committee shall determine.
(b) Notwithstanding the responsibility of Palatin with respect
to the Development Program as described in the first sentence of subsection (a)
set forth immediately above, the development of LeuTech Products generally by
Palatin during the term hereof shall be subject to review and approval by the
Joint Steering Committee established hereunder. The Joint Steering Committee
will work on a regular basis with individuals designated by Palatin to
coordinate the Development Program and any future development of other LeuTech
Products. In the course of development of LeuTech Products, Palatin will provide
Mallinckrodt's representatives on the Joint Steering Committee (or any
individuals whom such representatives shall designate) with reasonable prior
notice of all meetings or conferences between Palatin's representatives
(including any contract research organizations, contract manufacturers,
consultants and other subcontractors) and any regulatory authorities that are
concerned with the securing of approval for the marketing and sale of LeuTech
Products as commercial products and will give Mallinckrodt the right to have a
representative attend all such meetings and conferences.
(c) At the quarterly meeting of the Joint Steering Committee,
during any Development Phase with respect to any portion of the Territory
(including with respect to the Development Program), Palatin shall provide
Mallinckrodt with reasonably detailed reports which shall describe Palatin's
progress with respect to its development efforts under this Agreement (including
a comparison of development efforts and progress with the requirements of any
Annual Development Plan then in effect), detail any Adverse Events to the
LeuTech Products under development and shall provide the available results of
all studies and trials conducted by or under the supervision of Palatin with
respect to LeuTech Products. In addition, at such quarterly meetings and with
respect to the Development Program, Palatin shall provide Mallinckrodt with a
reasonably detailed report which shall describe Palatin's progress in achieving
its Development Criteria set forth in Section 3.2(a) below and the Development
Costs incurred by Palatin during the preceding calendar quarter.
(d) Each party agrees to make its employees and those of its
subcontractors and consultants reasonably available at their respective places
of employment to consult with the other party on issues arising during the
Development Phase with respect to the development of any LeuTech Product and
with respect to any portion of the Territory, in connection with any request
from any regulatory agency, including all such requests related to regulatory,
scientific, technical, clinical testing and marketing issues.
(e) Representatives of Mallinckrodt may, at any time as
Mallinckrodt may reasonably request, with the prior approval of Palatin, which
approval shall not be unreasonably withheld or delayed, visit the sites of any
clinical trials or other experiments being conducted by Palatin or by any of its
contract research organizations, consultants or other subcontractors in
connection with the Development Program or any future development of LeuTech
Products. Palatin shall cause appropriate individuals involved in the
Development Program or any future development of LeuTech Products to be
reasonably available for consultation with Mallinckrodt.
(f) The Development Program or any future development of
LeuTech Products shall be conducted under and pursuant to an annual development
plan (the "Annual Development Plan") which shall reasonably describe the work to
be conducted by or under the supervision of Palatin with respect to the
development of LeuTech Products. The Annual Development Plan shall contain a
budget including, with respect to the Development Program, estimates of the
aggregate Development Costs to be incurred during the applicable year. The first
Annual Development Plan shall be presented at the first meeting of the Joint
Steering Committee. Thereafter, the Annual Development Plan for any given year
will be prepared by Palatin and presented to the Joint Steering Committee no
later than sixty (60) days prior to the beginning of each calendar or fiscal
year. Any Annual Development Plan and any changes to any Annual Development Plan
shall be subject to approval by the Joint Steering Committee in accordance with
procedures set forth herein and, to the extent any such Annual Development Plan
concerns the Development Program, shall be subject to the limitations set forth
in Section 5.7(d) hereof.
3.2 Development Criteria for the Development Program.
(a) In consideration of certain payments to be made by
Mallinckrodt to Palatin in accordance generally with the provisions of Sections
5.7 herein below, Palatin agrees to employ its best efforts to carry out, in a
complete, competent and timely fashion, its obligations to develop LeuTech
Products in connection with the Development Program. To ensure that Palatin's
development obligations hereunder with respect to the Development Program are
fulfilled, Palatin shall be subject to the following Development Criteria, each
expressed as a milestone with an associated time requirement:
Milestone Due Date
(1) [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER
RULE 24b-2]
(2) [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER
RULE 24b-2]
(3) [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER
RULE 24b-2]
If and as circumstances warrant, the Development Criteria set forth immediately
above may be amended, but only with the unanimous approval of the Joint Steering
Committee; provided that, if Palatin is unable to achieve one or more of the
Development Criteria in a timely fashion due to circumstances beyond Palatin's
reasonable control, Mallinckrodt's representatives to the Joint Steering
Committee will not unreasonably withhold consent to a reasonable extension of
time which would allow achievement of the particular milestone(s) in question.
(b) Subject only to the last sentence of subsection (a) set
forth immediately above, if Palatin fails to achieve any of the Development
Criteria within the time specified, at Mallinckrodt's option and effective
immediately upon notice by Mallinckrodt to Palatin, Mallinckrodt may terminate
this Agreement in its entirety; provided that, Mallinckrodt shall be responsible
to pay to Palatin all amounts then unpaid and due Palatin in accordance herewith
through the effective date of such termination. In the event of any such
termination by Mallinckrodt, the license rights granted by Palatin to
Mallinckrodt pursuant to Section 2.1 above shall immediately terminate and
Mallinckrodt shall thereafter have no further rights to Palatin Intellectual
Property Rights, LeuTech or LeuTech Products. In addition, in the event of any
such termination, Mallinckrodt will have no further responsibilities to perform
any obligation provided for hereunder (except for any such obligations which, by
their express terms and purposes, are intended to survive any such termination)
and, specifically and without limitation, Mallinckrodt shall have no obligation
to pay any portion of any Development Costs relating to any period of time or
any activity occurring after the effective date of such termination.
Article 4
MANAGEMENT OF THE COLLABORATION
4.1 Joint Steering Committee.
(a) A steering committee comprised of three (3) named
representatives of Mallinckrodt and three (3) named representatives of Palatin
(the "Joint Steering Committee") shall be appointed and shall meet as needed,
but not less than once each calendar quarter. Such meetings shall be at such
times and places and in such form as the members of the Joint Steering Committee
shall agree. At such meetings, the Joint Steering Committee will review and
approve the Development Program, any Annual Development Plan and any Annual
Marketing Plan. A party may change one or more of its representatives to the
Joint Steering Committee at any time. Members of the Joint Steering Committee
may be represented at any meeting by another member of the Joint Steering
Committee, or by an authorized designee. Any approval, determination or other
action agreed to by a two-thirds majority of the Joint Steering Committee or
their authorized designees present at the relevant Joint Steering Committee
meeting shall be the approval, determination or other action of the Joint
Steering Committee, provided at least two representatives of each party are
present at such meeting.
(b) The Joint Steering Committee shall initially be chaired by
a Palatin representative to the Committee. The Palatin representative shall
serve as the chair of the Joint Steering Committee through and including June
30, 2001. On July 1, 2001, a Mallinckrodt representative shall become the chair
of the Joint Steering Committee through and including June 30, 2003. Thereafter,
the chair of the Joint Steering Committee shall rotate between a representative
of Palatin and a representative of Mallinckrodt, with each chair serving for two
(2) years in succession.
(c) The Joint Steering Committee shall keep accurate minutes
of its deliberations which record all proposed decisions and all actions
recommended or taken. The chair shall be responsible for the preparation of
draft minutes. Draft minutes shall be sent to all members of the Joint Steering
Committee within ten (10) working days after each meeting. The draft minutes
shall be edited by the chair based on comments from the members of the Joint
Steering Committee and shall be distributed to the members prior to the next
meeting of the Joint Steering Committee for review and final approval at such
meeting. All records of the Joint Steering Committee shall at all times be
available to both parties.
(d) The Joint Steering Committee may delegate its authority
and oversight responsibility to any one or more subcommittees, each of which
shall have an equal number of members from Mallinckrodt and Palatin. The
membership of such subcommittees will include at least one member of the Joint
Steering Committee appointed by each of Palatin and Mallinckrodt but otherwise
the parties are free to appoint such other individuals to serve on any
subcommittees as they desire. Any decision on any matter by any subcommittee
must be reported to and approved by the Joint Steering Committee and any
disputes or disagreements among the members of any subcommittee that cannot be
resolved by such members shall be referred to the Joint Steering Committee for
resolution.
(e) All disagreements within the Joint Steering Committee as
to matters for which the Joint Steering Committee has the final authority to
make a decision shall be resolved in accordance with the following procedures:
(i) the representatives to the Joint Steering
Committee will negotiate in good faith for a period of not more than
sixty (60) days to attempt to resolve the dispute,
(ii) if the representatives to the Joint Steering
Committee are unable to resolve the dispute within such sixty (60) day
period, then such representatives shall promptly present the
disagreement to the Chief Executive Officer of Palatin and the
President of Mallinckrodt's Imaging Group or their respective
designees,
(iii) such executives shall meet or discuss in a
telephone or video conference each party's view and explain the basis
for such disagreement, and
(iv) if such executives cannot promptly resolve such
disagreement within sixty (60) days after such issue has been referred
to them, then the matter shall be referred to arbitration in accordance
with the procedures set forth in Section 10.6 below.
Article 5
PAYMENTS, PREFERRED STOCK AND COST SHARING
5.1 License Payments. In consideration of the license rights granted by
Palatin to Mallinckrodt and its Affiliates in accordance with Section 2.1 herein
above, Mallinckrodt hereby agrees to make the following License Payments to
Palatin:
(a) Mallinckrodt will pay [INFORMATION OMITTED AND FILED SEPARATELY
WITH THE COMMISSION UNDER RULE 24b-2] on and as of the date of execution of this
Agreement,
(b) Mallinckrodt will pay [INFORMATION OMITTED AND FILED SEPARATELY
WITH THE COMMISSION UNDER RULE 24b-2.] within fifteen (15) days after the
approval by the FDA of a BLA for any LeuTech Product useful for the imaging of
appendicitis, and
(c) Mallinckrodt will pay [INFORMATION OMITTED AND FILED SEPARATELY
WITH THE COMMISSION UNDER RULE 24b-2] within thirty (30) days after [INFORMATION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]
Remittance of each of the License Payments will be made by wire transfer of
immediately available United States funds to an account designated by Palatin to
Mallinckrodt at least three (3) business days prior to the date on which any
such payment is due.
5.2 Purchase of Palatin Preferred Stock.
(a) In consideration for the performance by Mallinckrodt of
its obligations hereunder and the payments to be made by Mallinckrodt as set
forth immediately below in Section 5.2(b), Palatin agrees that it will issue to
Mallinckrodt, on and as of the date of execution hereof, seven hundred thousand
(700,000) shares of the Preferred Stock, which shares of stock will be, when
issued, fully paid and nonassessable (except for any amounts payable in
accordance with Section 5.2(b) which are not due and payable at the time of such
issuance) and not subject to any antidilution rights, preemptive rights, or
rights of first refusal of any kind, except as set forth and described on
Exhibit G. The shares of Preferred Stock will have the rights, preferences and
limitations set forth on the certificate of designation attached hereto as
Exhibit X. Xxxxxxxxxxxx represents and warrants that at the time it was offered
the Preferred Stock to be acquired by it hereunder, it was, and at the date
hereof it is, an "accredited investor" as defined in Rule 501(a) under the
Securities Act of 1933, as amended ("Securities Act"). Mallinckrodt understands
that the shares of Preferred Stock acquired by it hereunder have no public
market and are not registered and may not be sold or transferred without
registration or unless an appropriate exemption from registration is available
under applicable law; therefore, Mallinckrodt understands that it may be
required to retain these shares of Preferred Stock and bear the economic risk of
such investment indefinitely. Mallinckrodt represents and warrants that it
possesses such knowledge, sophistication and experience in financial and
business matters as to be able to evaluate the merits and risks of an investment
in the Preferred Stock and that it has the economic ability to bear the high
degree of risk of such a speculative investment. Mallinckrodt further represents
and warrants that it is acquiring the shares of Preferred Stock hereunder for
its own account and for investment purposes only, and not with a view to resale
or distribution of any kind, except for such resale or distribution as may be
consistent with the requirements of applicable law. Mallinckrodt further
acknowledges that it has been afforded (i) the opportunity to ask such questions
as it has deemed necessary of, and to receive answers from, representatives of
Palatin concerning the terms and conditions of the offering of the Preferred
Stock, and the merits and risks of investing in the Preferred Stock, (ii) access
to information about Palatin and Palatin's financial condition, results of
operations, business, properties, management and prospects sufficient to enable
it to evaluate its investment, and (iii) the opportunity to obtain such
additional information which Palatin possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to such investment.
(b) In consideration for the issuance by Palatin of seven
hundred thousand (700,000) shares of the Preferred Stock to Mallinckrodt,
Mallinckrodt will pay to Palatin Thirteen Million Dollars ($13,000,000). The
amount to be repaid by Palatin to Mallinckrodt in accordance with Section 5.8(b)
below may be offset against the foregoing purchase price but will not reduce the
deemed actual purchase price for the Preferred Stock. The amount set forth in
the immediately preceding sentence shall be paid on the date of execution hereof
by wire transfer of immediately available United States funds to an account
designated by Palatin to Mallinckrodt.
(c) It is understood that, at any time and from time to time
on or after the fifth (5th) anniversary hereof or, if sooner, at any time upon
the occurrence of a Change of Control with respect to Palatin, and in either
such case effective upon written notice by Mallinckrodt to Palatin, Mallinckrodt
may convert some or all of the shares of Preferred Stock purchased hereunder
into fully paid and nonassessable shares of the Common Stock on a
one-share-for-one-share basis, without payment of funds or other consideration
of any kind. Any shares so converted (i.e., Common Shares) may be unregistered
and, therefore, subject to such restrictions on transfer as may exist under
applicable law and the rules and regulations of the SEC and of any exchange or
association on which such securities may be listed or traded. If and to the
extent, subsequent to conversion of any of the shares of Preferred Stock being
purchased hereunder, any of the Common Shares owned and held by Mallinckrodt are
unregistered, Mallinckrodt may have to continue to bear the economic risk of its
investment hereunder for an indefinite period of time, unless and to the extent
the Common Shares are registered, unless an appropriate exemption from
registration is available under applicable law, or until Mallinckrodt exercises
its rights under Sections 5.3 and/or 5.4 below. It is understood that the
700,000 shares of Preferred Stock being acquired by Mallinckrodt hereunder, if
it was fully converted on and as of the date hereof into shares of the Common
Stock, represents an eight percent (8%) interest in the voting capital stock of
Palatin.
(d) For so long as Mallinckrodt has at least a two percent
(2%) ownership interest of the Common Stock of Palatin (whether through direct
ownership of Common Stock or ownership of securities exercisable for or
convertible into Common Stock), Palatin covenants that it will furnish to
Mallinckrodt, promptly upon filing, copies as filed with the SEC or any other
similar regulatory authority of (A) Palatin's annual reports of Form 10-KSB, (B)
Palatin's quarterly reports on Form 10-QSB, (C) Palatin's current reports on
Form 8-K and (D) all other SEC or other similar reports filed pursuant to the
requirements of applicable law in any jurisdiction.
(e) From and after the date hereof and for so long as this
Agreement is in effect with respect to any portion of the Territory, if, as a
result of (i) the issuance and sale by Palatin of any shares of Common Stock
(including the issuance of Common Stock upon exercise or conversion of
securities exercisable for or convertible into Common Stock) or (ii) the
issuance by Palatin of any Common Stock or other securities in connection with
any stock split, stock dividend or other recapitalization (any such issuance
described in clauses (i) or (ii) of this sentence being referred to herein as a
"Dilutive Event"), a decrease occurs in the percentage of outstanding Palatin
Common Stock owned by Mallinckrodt (assuming full conversion of the Preferred
Stock) (the "Mallinckrodt Ownership"), then Mallinckrodt shall have the right,
exercisable as provided below, (i) if, at the time of the occurrence of the
Dilutive Event, the Preferred Stock is not then convertible, to receive that
number of shares of Preferred Stock which, when converted along with all other
shares of Preferred Stock and combined with all other shares of Common Stock
then owned by Mallinckrodt, would be required to preserve the Mallinckrodt
Ownership at the same percentage immediately before and after the Dilutive Event
or (ii) if, at the time of the occurrence of the Dilutive Event, the Preferred
Stock is then convertible, to receive that number of Common Shares which, when
combined with all other shares of Common Stock owned by Mallinckrodt (including
Common Stock underlying any Preferred Stock then owned by Mallinckrodt), would
be required to preserve the Mallinckrodt Ownership at the same percentage
immediately before and after the Dilutive Event. The foregoing right shall be
exercisable by payment of the purchase price and delivery of the notice
described below. The purchase price per share of Preferred Stock or Common
Stock, as the case may be, to be paid by Mallinckrodt upon exercise of the
foregoing right shall be equal to the consideration per share (if any) paid or
to be paid by the person to whom securities are being issued in connection with
the Dilutive Event. If the consideration paid by any such third party for such
securities is other than cash, such consideration shall be presumed to be cash
equal to the fair market value of such consideration as determined by an
independent party acceptable to both Mallinckrodt and Palatin. The cost of
making such determination, if any, shall be borne by Palatin. Palatin shall
provide written notice to Mallinckrodt of a Dilutive Event within five (5) days
after the issuance of any securities giving rise to the dilution, and
Mallinckrodt shall make its election to purchase all or any portion of the
securities which it is entitled to purchase or receive in accordance herewith to
preserve its percentage interest in the Common Stock by written notice to
Palatin no more than thirty (30) days following its receipt of Palatin's written
notice of a Dilutive Event. Upon failure timely to give written notice to
Palatin of such election Mallinckrodt shall be deemed to have waived its right
to purchase or receive any additional securities of Palatin on such occasion.
Mallinckrodt shall pay the purchase price (if any) for the securities it so
elects to purchase or receive within thirty (30) days subsequent to its notice
of election to purchase or receive additional securities. It is understood by
the parties hereto that any failure by Mallinckrodt on any occasion to purchase
or receive all or some of the securities which it is entitled to purchase or
receive pursuant to this subsection (e) as a consequence of the occurrence of a
single Dilutive Event shall not affect the right of Mallinckrodt, on the
subsequent occurrence of any different Dilutive Event, to purchase or receive
all or any portion of the securities which it is then entitled to purchase or
receive as a consequence of the operation of this subsection (e).
(f) In determining the amount of consideration paid to Palatin
for the issuance of Common Stock upon the exercise or conversion of exercisable
or convertible securities, all amounts paid to Palatin in consideration for the
issuance of the convertible or exercisable securities shall be included as part
of the consideration paid.
(g) The provisions of the foregoing subsection (e) shall not
apply with respect to the issuance of Common Stock in connection with, or upon
the exercise or conversion of securities issued in connection with, the
following transactions:
(i) exercise of rights or options granted or which
may be granted under a stock option or other plan for the benefit of
employees, directors and/or consultants;
(ii) exercise of rights, warrants or options
outstanding on the date hereof (as described on Exhibit G;
(iii) after such time as Mallinckrodt first becomes
eligible to convert any of the Preferred Stock in accordance with
Section 5.2(c) above, upon the issuance and sale of any shares of
Common Stock, including the issuance of Common Stock upon exercise of
convertible or exercisable securities sold in a firm commitment
underwritten public offering, including, without limitation, shares
sold upon the exercise of any overallotment option granted to the
underwriters in connection with such offering;
(iv) conversion of any shares of Palatin's
outstanding preferred stock of any other series, as well as any
additional shares of Preferred Stock issued pursuant to Section 5.2(e);
and
(v) issuance of Common Stock pursuant to antidilution
provisions contained in existing employment agreements (as described on
Exhibit G), and the issuance of Common Stock pursuant to antidilution
provisions described on the certificate of designations with respect to
the Series A Preferred Stock (also as described on Exhibit G).
(h) The purchase by Mallinckrodt of the Preferred Stock on and
as of the date hereof and any additional securities of Palatin that Mallinckrodt
may be entitled to acquire in accordance with the provisions of the Section
5.2(e) may be accomplished in accordance with the terms of a separate
subscription agreement or similar agreement if Palatin so desires; provided
that, such agreement shall in all respects be consistent with the terms hereof
and in the event of any conflict or inconsistency between the terms of such
agreement and the terms of this Agreement, the latter shall prevail.
5.3 Piggyback Registration Rights.
(a) In the event that, at any time during a five (5) year
period following the date on which Mallinckrodt first becomes eligible to
convert any of the Preferred Stock in accordance with Section 5.2(c) above,
Palatin proposes to register any of its Common Stock under the Securities Act in
connection with the public offering of such securities utilizing a form that
would additionally permit the registration of all or any portion of the Common
Shares then held by Mallinckrodt, Palatin shall notify Mallinckrodt of such fact
at least thirty (30) days prior to the date established for such public offering
and shall give Mallinckrodt, subject to the limitations and restrictions of this
Section 5.3, the right to have included in any such registered public offering
all or any portion of the Common Shares as Mallinckrodt shall notify Palatin
within twenty (20) days after Mallinckrodt is given notice of any intended
registered public offering by Palatin. If Mallinckrodt shall not provide any
such notice to Palatin within said twenty (20) day period, Mallinckrodt shall be
conclusively presumed to have waived its right to have all or any portion of the
Common Shares included in any such Palatin registered public offering, but such
waiver shall not affect Mallinckrodt's rights at any later date and in
connection with any subsequent public offering by Palatin to have some or all of
its Common Shares registered in accordance with the provisions and limitations
of this Section 5.3. Palatin shall use reasonable commercial efforts to cause
the managing underwriter or underwriters, if any, of a proposed underwritten
offering to permit Mallinckrodt, if Mallinckrodt has validly requested that some
or all of its Common Shares be included in the registration for such offering in
accordance with the provisions of this subsection, to include such Common Shares
in such offering on the same terms and conditions as any similar securities of
Palatin included therein. Nothing herein shall prevent Palatin from at any time
abandoning or delaying any such registration or prevent Mallinckrodt from
exercising its registration rights under this Section 5.3(a) any number of times
prior to the expiration of the period during which such rights are available
hereunder. Notwithstanding anything to the contrary contained herein,
Mallinckrodt shall not have the right to include all or any portion of the
Common Shares in a registered public offering by Palatin, pursuant to this
Section 5.3, if all of the Common Shares then held by Mallinckrodt become
eligible for sale in any three (3) month period pursuant to Rule 144 under the
Securities Act or any successor Rule.
(b) Notwithstanding the provisions of subsection (a) set forth
immediately above, Mallinckrodt shall not have the right to include all or any
portion of the Common Shares in a registered public offering by Palatin if, in
the reasonable judgment of the underwriter(s) or managing underwriter(s) for any
such registered public offering, the addition of some or all of the Common
Shares that Mallinckrodt wishes to have registered in connection therewith might
reasonably materially adversely affect the sale of all of the shares included in
such offering under the terms of the registered offering and during the period
of effectiveness of the registration statement with respect thereto. In the
event that the underwriter(s) or managing underwriter(s) with respect to any
such public offering determines, in its reasonable judgment, that some but not
all of the Common Shares that Mallinckrodt requested be included in any Palatin
registered public offering may be included in such offering, then Palatin will
notify Mallinckrodt as to the portion of the Common Shares that may be so
included and, unless Mallinckrodt notifies Palatin to the contrary within
fifteen (15) days of being so notified, that portion, and only that portion,
will be included in the registration relative to any such public offering. If
Mallinckrodt does timely notify Palatin to the contrary, none of its Common
Shares shall be included in such registration.
(c) In the event that Mallinckrodt exercises its rights under
this Section 5.3 and, in connection with any registered public offering by
Palatin, some portion of the Common Shares is included in the registration
statement with respect thereto, Mallinckrodt shall furnish Palatin with such
information concerning the Common Shares to be registered or otherwise incident
to the registration as Palatin shall reasonably request. Mallinckrodt's rights
pursuant to this Section 5.3 shall be subject to its compliance with any such
Palatin request.
(d) Palatin shall bear all expenses of any registered public
offering made pursuant to Section 5.3 in which all or any portion of the Common
Shares is included; provided that, Mallinckrodt shall be responsible for any
cost or expense (i) of its employees, agents, advisors or representatives to the
extent utilized in connection with any such registered public offering, (ii) for
the preparation of any financial statements, documents or the assembly or
preparation of any other information concerning Mallinckrodt requested by
Palatin pursuant to subsection (c) set forth immediately above and (iii)
underwriters' discounts and commissions applicable to the Common Shares included
in the offering.
(e) Palatin shall have an obligation, with respect to any
registered public offering made pursuant to Section 5.3 in which all or any
portion of the Common Shares is included, to use reasonable commercial efforts
to keep any registration statement effective, subject to Section 5.5(b), for at
least thirty (30) days.
5.4 Demand Registration Rights.
(a) Mallinckrodt will have the right, on no more than two (2)
occasions, and at any time within five (5) years after the date on which
Mallinckrodt first becomes eligible to convert any of the Preferred Stock in
accordance with Section 5.2(c) above, to demand by notice to Palatin that
Palatin register all or any portion of the Common Shares then owned by
Mallinckrodt, which notice must specify the number of Common Shares to be
registered and the intended method of disposition of those shares. Upon receipt
of any such notice from Mallinckrodt, Palatin will take all actions reasonably
necessary and appropriate to insure that, subject to the restrictions and
limitations set forth in this Section 5.4 and otherwise subject to any delays,
requirements or restrictions that may be imposed by the SEC, the NASD or other
regulatory authority, within forty-five (45) days of any such demand by
Mallinckrodt, a registration statement shall be filed on Form S-3 (or any
successor similar form if the use of such form is available) with respect to the
Common Shares for which Mallinckrodt demanded registration, subject to any
limitations set forth in Section 5.5 below. Palatin will use its best efforts to
cause such registration statement to become effective as soon as possible and
subject to Section 5.5(b) will use its best commercial efforts to keep any such
registration statement effective for such period of time as may be necessary to
sell all of the Common Shares to be sold thereunder. Notwithstanding anything to
the contrary contained herein, Mallinckrodt shall not have the right to demand
registration of all or any portion of the Common Shares, pursuant to this
Section 5.4, if all of the Common Shares then held by Mallinckrodt become
eligible for sale in any three (3) month period pursuant to Rule 144 under the
Securities Act or any successor Rule.
(b) In the event that Mallinckrodt exercises its rights under
this Section 5.4, Mallinckrodt shall furnish Palatin with such information
concerning the Common Shares to be registered or otherwise incident to the
registration as Palatin shall reasonably request. Mallinckrodt's rights pursuant
to Section 5.4 shall be subject to its compliance with any such Palatin request.
(c) Mallinckrodt shall bear all expenses of any registered
public offering made pursuant to Section 5.4(a) above. If Mallinckrodt so
elects, the offering of Common Shares pursuant to any demand registration shall
be in the form of an underwritten offering. If any demand registration is in the
form of an underwritten offering, Mallinckrodt will select and obtain the
managing underwriter or underwriters that will administer the offering, provided
that such managing underwriter or underwriters must be reasonably satisfactory
to Palatin.
(d) Notwithstanding any other provisions of this Section 5.4,
in the event that, with respect to Palatin's Common Stock, a registration
statement has been effective at any time during a ninety (90) day period
immediately prior to the giving of a demand notice for registration by
Mallinckrodt pursuant to Section 5.4(a), Palatin shall have the right,
exercisable by giving notice to Mallinckrodt within fifteen (15) days after any
such notice from Mallinckrodt, to delay the filing of any registration statement
by Palatin pursuant to this Section 5.4 for up to ninety (90) days after the
date on which any such registration statement would otherwise be required to
have been filed in accordance herewith.
(e) Notwithstanding any other provisions of this Section 5.4
and in addition to the provisions of subsection (d) set forth immediately above,
Palatin may delay the filing of any registration demanded pursuant to Section
5.4(a) above if (i) it is in possession of material non-public information, the
Chief Executive Officer of Palatin determines (based on advice of counsel) that
such delay is necessary in order to avoid a requirement to disclose such
material non-public information and the Chief Executive Officer of Palatin
determines in good faith that disclosure of such material non-public information
would not be in the best interests of Palatin and its shareholders or (ii)
Palatin or any of its Affiliates is engaged in or proposes to engage in any
material transaction, including a purchase or sale of assets or securities,
financing transaction, merger, consolidation, tender offer or any other
transaction that would require disclosure under any applicable securities laws,
rules or regulations, with respect to which the Chief Executive Officer of
Palatin in good faith determines that the filing of the registration demanded
pursuant to this Section 5.4(a) could reasonably be expected materially to
interfere with Palatin's ability to consummate such transaction in a timely
fashion. The period during which any delay contemplated by the immediately
preceding sentence is in effect shall be referred to as a "Suspension Period." A
Suspension Period shall commence on and include the date on which Palatin
provides written notice to Mallinckrodt of such determination and Palatin shall
be entitled to postpone the filing of a registration statement in accordance
with this Section 5.4(e) for a reasonable period of time not to exceed ninety
(90) days with respect to any particular demand by Mallinckrodt for the
registration of Common Shares pursuant to Section 5.4(a); provided that, Palatin
shall deliver to Mallinckrodt a statement, signed by the Chief Executive Officer
of Palatin, of the general reasons for such postponement or restriction on use
and an estimate of the anticipated delay, which Palatin agrees shall be as short
as possible given the circumstances justifying any such delay. Mallinckrodt
agrees to keep the information relating to the delay confidential. Palatin shall
promptly notify Mallinckrodt of the expiration of a Suspension Period or of its
decision to shorten any Suspension Period.
(f) In the event Mallinckrodt determines, as a result of any
delay occasioned by the operation of either subsection (d) or (e) of this
Section 5.4, that it wishes to withdraw its demand for registration it may do so
upon notice to Palatin. If, and only if, such withdrawal notice is given by
Mallinckrodt less than ten (10) days prior to the scheduled end of any
suspension period, the demand shall be with prejudice to its right on any future
occasion (subject to the limitations set forth herein) to again demand
registration of all or any portion of the Common Shares in accordance with
Section 5.4(a). Failing such notice Palatin shall register the Common Shares
demanded to be registered by Mallinckrodt pursuant to Section 5.4(a).
5.5 Registration Procedures.
(a) In connection with any registration to be effected in
accordance with Section 5.3, Palatin will use reasonable commercial efforts to
effect such registration to permit the sale of the Common Shares being sold in
accordance with the intended method or methods of distribution or disposition
thereof, and pursuant thereto Palatin will comply with the procedures and
principles set forth in this Section 5.5, as they are applicable. In connection
with any registration to be effected in accordance with Section 5.4, Palatin
will use its best efforts to effect such registration to permit the sale of the
Common Shares being sold in accordance with the intended method or methods of
distribution or disposition thereof, and pursuant thereto Palatin will comply
with the procedures and principles set forth in this Section 5.5, as they are
applicable.
(b) Palatin will prepare and file with the SEC, whenever
required to do so by the terms of Sections 5.3 and 5.4, a registration statement
relating to the registration on Form S-3 (or any successor or similar form) if
the use of such form is available, unless Palatin shall reasonably determine
that it is in the best interest of both Palatin and Mallinckrodt to file the
registration statement by using a different form or procedure, and use
reasonable commercial efforts (with respect to a registration pursuant to
Section 5.3) or its best efforts (with respect to a registration pursuant to
Section 5.4) to cause any such registration statement to become effective and
remain effective for (i) at least thirty (30) days if Mallinckrodt exercises its
piggyback registration rights pursuant to Section 5.3, or (ii) for such period
of time as may be necessary to sell all of the Common Shares being offered for
sale if Mallinckrodt demands the registration of any Common Shares pursuant to
Section 5.4, but regardless of whether piggyback or demand registration, not
later than the date that all Common Shares then held by Mallinckrodt become
eligible for sale in any three (3) month period pursuant to Rule 144 under the
Securities Act or any successor rule. With respect to the exercise by
Mallinckrodt of any piggyback registration rights pursuant to Section 5.3 or any
demand registration pursuant to Section 5.4 with respect to which Palatin
includes any shares of Common Stock, before the filing of any registration
statement or any prospectus, or any amendments or supplements thereto, Palatin
will furnish to Mallinckrodt and the managing underwriter or underwriters, if
any, copies of all such documents proposed to be filed and Mallinckrodt, within
a period of five (5) business days of receipt of such copies, shall have the
right to review and comment on such documents; provided that, Palatin shall
consider any comments Mallinckrodt may have with respect to such documents but
shall not be required to make any changes based on such comments unless Palatin
believes any such changes would be in the best interest of Palatin and its
shareholders and would be of benefit in the successful completion of the public
offering. With respect to the exercise by Mallinckrodt of any demand
registration rights pursuant to Section 5.4 hereof and with respect to which
Palatin is not offering any shares, before filing any registration statement or
any prospectus, or any amendments or supplements thereto, Palatin will furnish
to Mallinckrodt and the managing underwriter or underwriters, if any, copies of
all such documents proposed to be filed, and Palatin will not file any
registration statement or amendment thereto or any prospectus or any supplement
thereto to which the managing underwriter or underwriters, if any, shall
reasonably object or to which Mallinckrodt shall reasonably object, as long as
such objection is provided by notice to Palatin within twenty (20) business days
after the receipt by the managing underwriter or underwriters or Mallinckrodt of
any documents for review. For purposes of the immediately preceding sentence,
Mallinckrodt or the managing underwriter or underwriters, if any, shall be
deemed to have reasonably objected to such filing if any such registration
statement, amendment, prospectus or supplement, as applicable, as proposed to be
filed contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, which misstatement or omission is specifically
identified to Palatin in writing in accordance with the requirements of the
immediately preceding sentence.
(c) Palatin will prepare and file with the SEC such amendments
and post-effective amendments to any registration statement as may be necessary
to keep any such registration statement effective for the respective periods set
forth in Sections 5.3 and 5.4 hereof and reiterated in subsection (b) set forth
immediately above and will cause the prospectus to be supplemented by any
required supplement thereto, and as so supplemented to be filed pursuant to SEC
Rule 424(b) (or any successor or similar rule), and to comply fully with the
applicable provisions of SEC Rule 424(b) (or any successor or similar rule) in a
timely manner.
(d) Palatin will notify Mallinckrodt promptly in writing (i)
when the prospectus or any supplement thereto or post-effective amendment to any
registration statement has been filed, and, with respect to the registration
statement or any post-effective amendment thereto, when the same has become
effective, (ii) of any request by the SEC for an amendment of or supplement to
any registration statement, any preliminary prospectus, or the prospectus or for
additional information, (iii) of the issuance by the SEC (or any state
securities commission or other governmental authority) of any stop order
suspending the effectiveness of any registration statement or of the suspension
of qualification of the Common Shares for offering or sale in any jurisdiction,
or the initiation of any proceeding for such purposes and (iv) of the happening
of any event, including the filing of any information, documents or reports
pursuant to the Securities Exchange Act of 1934 that makes any statement made in
any registration statement or the prospectus (as then amended or supplemented)
untrue in any material respect or which requires the making of any additions to
or changes in any registration statement or the prospectus (as then amended or
supplemented) in order to state a material fact required by the Securities Act
of 1933, as amended, or the regulations thereunder to be stated therein or
necessary in order to make the statements therein not misleading, or of the
necessity to amend or supplement the prospectus (as then amended or
supplemented) to comply with the Securities Act of 1933, as amended, or any
other law.
(e) Palatin will, concurrent with the filing of any document
that is to be incorporated by reference into any registration statement or the
prospectus subsequent to the initial filing of any registration statement,
provides a copy of such document to Mallinckrodt, at Mallinckrodt's expense.
(f) Palatin will furnish to Mallinckrodt, without charge, one
copy of every registration statement as first filed with the SEC, and of each
amendment thereto.
(g) Palatin will deliver to Mallinckrodt, without charge, as
many copies of any preliminary prospectus and the prospectus and any amendments
or supplements thereto as Mallinckrodt may reasonably request, and Palatin
hereby consents to the use of any preliminary prospectus and the prospectus (and
any amendments or supplements thereto) by Mallinckrodt and the managing
underwriter and each of the underwriters, if any, in connection with the public
offering and the sale of any of the Common Shares covered by any preliminary
prospectus and the prospectus (or any amendments or supplements thereto) in the
manner specified therein.
(h) Palatin will use reasonable commercial efforts (with
respect to any registration to be effected pursuant to Section 5.3) and its best
efforts (with respect to any registration to be effected pursuant to Section
5.4) to cause the Common Shares covered by any registration statement to be
registered with or approved by such other governmental authorities (including,
without limitation, any applicable state securities or blue sky commissions) as
may be necessary to enable the seller or sellers thereof or the underwriter(s),
if any, to consummate the disposition of such Common Shares.
(i) Palatin will make available for inspection, at reasonable
times and intervals, by a representative of Mallinckrodt, by any underwriter
participating in any disposition pursuant to the filing of any registration
statement in accordance herewith, and by any attorney or accountant retained by
Mallinckrodt or any of the underwriters, all relevant financial and other
records, pertinent corporate documents and properties of Palatin and cause
Palatin's officers, directors and employees to supply all information reasonably
requested by Mallinckrodt, any underwriter, attorney or accountant in connection
with the filing of any such registration statement prior to its effectiveness.
(j) Palatin will cause all Common Shares covered by any
registration statement to be accepted for listing, subject to official notice of
issuance, on each securities exchange or quotation system on which similar
securities issued by Palatin are then listed.
(k) Palatin will enter into such underwriting agreements as
are reasonably requested by any underwriter(s) or managing underwriter(s)
containing such terms and conditions as are reasonably acceptable to Palatin.
(l) Palatin will otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC.
5.6 Indemnification with respect to Registration Rights.
(a) In connection with any registration statement in which
Mallinckrodt is included as a selling stockholder, Palatin agrees to indemnify
and hold harmless (i) Mallinckrodt and (ii) each person, if any, who controls
Mallinckrodt within the meaning of Section 15 of the Securities Act of 1933, as
amended, or Section 20 of the Securities Exchange Act of 1934 (any person
referred to in clause (i) or (ii) may sometimes hereinafter be referred to as a
("Mallinckrodt Indemnitee") from and against any and all losses, claims,
damages, liabilities and expenses (including reasonable costs of investigation)
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any preliminary prospectus or in any registration
statement or the prospectus or in any amendment or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which such statements were made, not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses arise out of or are based upon any untrue statement or omission or
alleged untrue statement or omission which has been made therein or omitted
therefrom in reliance upon and in conformity with the information furnished to
Palatin by or on behalf of such Mallinckrodt Indemnitee.
(b) In connection with any registration statement in which
Mallinckrodt is included as a selling stockholder, Mallinckrodt agrees to
indemnify and hold harmless (i) Palatin and (ii) each person, if any, who
controls Palatin within the meaning of Section 15 of the Securities Act of 1933,
as amended, or Section 20 of the Securities Exchange Act of 1934 (any person
referred to in clause (i) or (ii) may sometimes hereinafter be referred to as a
"Palatin Indemnitee") from and against any and all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation) arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or in any registration
statement or the prospectus or in any amendment or supplement thereto, or
arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which such statements were made, not
misleading, to the extent and only to the extent such losses, claims, damages,
liabilities or expenses arise out of or are based upon any untrue statement or
omission or alleged untrue statement or omission which has been made therein or
omitted therefrom in reliance upon and in conformity with the information
furnished by Mallinckrodt to Palatin by or on behalf of any Mallinckrodt
Indemnitee.
(c) If any action is brought against any Palatin Indemnitee,
Mallinckrodt Indemnitee or selling stockholder in respect of which indemnity may
be sought against Palatin or Mallinckrodt, as the case may be, pursuant to
either Section 5.6(a) or 5.6(b) above, such indemnified party or parties shall
promptly notify the indemnifying party in writing of the institution of such
action (but the failure so to notify shall not relieve the indemnifying party
from any liability pursuant to this Section 5.6, unless the indemnifying party
shall have been materially prejudiced by such failure) and the indemnifying
party shall promptly assume the defense of such action, including the employment
of counsel (reasonably satisfactory to such indemnified party or parties) and
payment of expenses. Such indemnified party or parties shall have the right to
employ its or their own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such indemnified party or parties unless
the employment of such counsel shall have been authorized in writing by the
indemnifying party in connection with the defense of such action. Anything in
this Section 5.6 to the contrary notwithstanding, the indemnifying party shall
not be liable for any settlement of any such claim or action effected without
its written consent, which shall not be unreasonably withheld.
5.7 Development Costs.
(a) All Development Costs of Palatin which have been incurred
by Palatin prior to July 1, 1999 shall be the liability and responsibility of
Palatin.
(b) Subject to Section 5.7(d) below, all Development Costs of
Palatin that are incurred by Palatin after date hereof shall be shared equally
by the parties and Mallinckrodt shall, therefore, pay one-half of all such
Development Costs (i.e., the "Development Payments") to Palatin, such
Development Payments to be made (subject to offset in accordance with Section
5.8(a) below and subject to audit in accordance with the provisions of
subsection (c) set forth immediately below) on a monthly basis within thirty
(30) days after the submission by Palatin to Mallinckrodt of an invoice and
written report (accompanied by a statement of the principles and assumptions
utilized by Palatin in calculating such Development Costs, a breakdown of the
Development Costs between and among wages, supplies and contract research
expenses which constitute "qualified research expenses" within the meaning of
Section 41(b)(1) of the Internal Revenue Code of 1986, as amended, and by such
supporting documentation and information as Mallinckrodt may request)
demonstrating the amount of qualifying Development Costs incurred by Palatin in
the previous calendar month. All Development Payments shall be payable in United
States dollars. Any amounts payable under this subsection (b) and not paid by
Mallinckrodt within the applicable thirty (30) day period shall accrue interest
at an annual rate of eight percent (8%) on the unpaid balance due until paid.
(c) Upon the written request of Mallinckrodt, Palatin shall
permit an independent public accountant selected by Mallinckrodt and acceptable
to Palatin, which acceptance shall not be unreasonably withheld or delayed, to
have access during normal business hours to such records of Palatin as may be
necessary to verify the amount of any Development Costs incurred by Palatin in
accordance herewith in respect of any calendar year (or portion thereof) ending
not more than twelve (12) months prior to the date of such request. Subject to
other relevant provisions of this subsection (c), all such verifications shall
be conducted at Mallinckrodt's expense and not more than twice in each calendar
year. In the event that Mallinckrodt's representative concludes that adjustments
should be made in Mallinckrodt's favor with respect to any audited period, then
any appropriate refund of Development Payments, plus accrued interest at the
annual rate of eight percent (8%) on any amounts due Mallinckrodt measured from
the date on which any amount to be refunded was originally paid by Mallinckrodt,
shall be made by Palatin within thirty (30) days of the date Mallinckrodt
delivers to Palatin such representative's written report so concluding (or, at
Mallinckrodt's option, shall be offset by Mallinckrodt against any future
Development Payments due by Mallinckrodt to Palatin hereunder), unless Palatin
shall have a good faith dispute as to the conclusions set forth in such written
report, in which case Palatin need not make the disputed portion of such
repayment and shall provide written notice to Mallinckrodt within such thirty
(30) day period of the nature of its disagreement with such written report. If
Palatin shall have in writing so disputed such written report by Mallinckrodt's
representative, the parties shall thereafter, for a period of sixty (60) days
after Palatin has provided written notice of such dispute, attempt in good faith
to resolve such dispute and if they are unable to do so then the matter will be
submitted to arbitration in accordance with Section 10.6 hereof. The fees
charged by Mallinckrodt's representative shall be paid by Mallinckrodt unless
the audit discloses that adjustments in Mallinckrodt's favor for the period
under review are greater than five percent (5%) of the amount of Development
Costs invoiced by Palatin to Mallinckrodt for such period, in which case Palatin
shall pay the reasonable fees and expenses charged by such representative.
Mallinckrodt agrees that all information subject to review under this subsection
(c) is confidential and that it shall cause its representatives to retain all
such information in confidence in accordance with the requirements of Article 7
below.
(d) Notwithstanding the provisions of Section 5.7(b) above,
(i) no Development Payments will be made for any costs incurred after the
termination of the Development Phase in any portion of the Territory with
respect to a LeuTech Indication which is being developed in accordance with the
Development Program and (ii) [INFORMATION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION UNDER RULE 24b-2]. Mallinckrodt hereby represents and warrants to
Palatin that the Development Payments have been approved by all necessary action
on the part of the Board of Directors of Mallinckrodt Inc., a New York
corporation publicly traded on the New York Stock Exchange and the ultimate
parent of Mallinckrodt, and that Mallinckrodt will take all steps necessary to
ensure that Development Payments will be made to Palatin as and when due in
accordance herewith.
5.8 Loans and Advances.
(a) Throughout the term of this Agreement, Palatin shall use
its best efforts to maintain an amount of cash and cash equivalents sufficient
to cover its anticipated operating expenses, including its estimated amount of
the Development Costs as set forth in the Annual Development Plan for any year.
If at any time Palatin's cash reserves are not sufficient to cover its
anticipated operating expenses and/or its portion of any Development Costs,
Mallinckrodt will consider loaning (but shall not be under any obligation to
loan) funds to Palatin, but only to the extent of any actual cash shortfall and
only if commercial funding is demonstrably not available to Palatin. Any amounts
loaned by Mallinckrodt to Palatin in accordance herewith shall be evidenced by a
promissory note with terms reasonably acceptable to Mallinckrodt and shall be
secured by such assets of Palatin as Palatin would normally be required to
pledge as collateral in any commercial loan transaction. All amounts loaned by
Mallinckrodt to Palatin shall bear interest at the prime rate plus two
percentage points, as determined from the prime interest rate as published by
the Wall Street Journal on the last day of the month preceding the month in
which any such loan is made and shall be repayable in full as soon as Palatin's
cash reserves are restored, but in no event later than the third anniversary of
the First Commercial Sale of LeuTech Products in the Territory or the second
(2nd) anniversary of the date of any such loan, whichever occurs first. It is
also understood that, if Palatin fails to make any payment with respect to any
such loan as and when due under the terms of any applicable promissory note,
Mallinckrodt shall have the right to offset against the principal and interest
of any amounts loaned to Palatin and due and payable under the terms of any
applicable promissory note all or any portion of any Development Payments due by
Mallinckrodt to Palatin in accordance with the provisions of Section 5.7 or
Royalty Payments due by Mallinckrodt to Palatin in accordance with the
provisions of Section 5.9; provided that, Mallinckrodt shall give written notice
to Palatin of the amount and nature of any such offset contemporaneously with
Mallinckrodt's exercise of such right.
(b) Prior to the date hereof, Mallinckrodt advanced Palatin
the sum of Two Million Dollars ($2,000,000) secured by a promissory note and a
security agreement, copies of which are attached hereto as Exhibit H and Exhibit
I. It is understood that the principal amount of such advance plus all accrued
interest thereon is being repaid by Palatin to Mallinckrodt on and as of the
date hereof by offset against that portion of the amount otherwise payable by
Mallinckrodt to Palatin in accordance with Section 5.2(b) above. On the date
hereof, Mallinckrodt will return to Palatin the original of the promissory note
attached hereto as Exhibit H marked as cancelled and paid in full together with
collateral under the Security Agreement.
5.9 Royalty Payments.
(a) [INFORMATION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION UNDER RULE 24b-2].
(b) During the term of this Agreement and with respect to any
calendar quarter during which there are commercial sales of any LeuTech Products
in the Territory, Mallinckrodt shall within sixty (60) days after the end of
each such calendar quarter furnish to Palatin a written quarterly report
showing: (i) the gross sales of LeuTech Products sold by Mallinckrodt and its
Affiliates during the quarter just ended and the calculation of Net Sales from
such gross sales revenue, (ii) any other revenues relating to LeuTech Products,
including but not limited to royalties and any other payments from sublicensees
and amounts paid by distributors, and (iii) the exchange rates used in
determining Net Sales in United States dollars. Mallinckrodt shall keep complete
and accurate records in sufficient detail to properly reflect all information
contained in such report, and to enable Net Sales and Royalty Payments payable
hereunder to be determined with accuracy.
(c) Upon the written request of Palatin, Mallinckrodt shall
permit an independent public accountant selected by Palatin and acceptable to
Mallinckrodt, which acceptance shall not be unreasonably withheld or delayed, to
have access during normal business hours to such records of Mallinckrodt as may
be reasonably necessary to verify the accuracy of the reports made by
Mallinckrodt pursuant to Section 5.9(b) and the consequent Royalty Payments due
Palatin in respect of any calendar year (or portion thereof) ending not more
than twelve (12) months prior to the date of such request. Subject to other
relevant provisions of this subsection (c), all such verifications shall be
conducted at Palatin's expense, not more than twice in each calendar year and no
quarterly period may be audited more than once. In the event such Palatin
representative concludes that additional Royalty Payments were owed to Palatin
during such audited period, the additional Royalty Payments, plus accrued
interest at the annual rate of eight percent (8%) on any amounts due Palatin
measured from the date on which any amount owed to Palatin should have been paid
by Mallinckrodt, shall be paid by Mallinckrodt within thirty (30) days of the
date Palatin delivers to Mallinckrodt such representative's written report so
concluding, unless Mallinckrodt shall have a good faith dispute as to the
conclusions set forth in such written report, in which case Mallinckrodt shall
provide written notice to Palatin within such thirty (30) day period of the
nature of its disagreement with such written report and may, if such written
notice has been given, withhold payment of the disputed portion of any such
Royalty Payment. If Mallinckrodt has provided written notice to Palatin that it
disputes any of Palatin's auditor's conclusions, the parties shall thereafter,
for a period of sixty (60) days, attempt in good faith to resolve such dispute
and if they are unable to do so then the matter will be submitted to arbitration
in accordance with Section 10.6. The fees charged by such representative shall
be paid by Palatin unless the audit discloses that any Royalty Payments made by
Mallinckrodt for the audited period were incorrect by more than five percent
(5%), in which case Mallinckrodt shall pay the reasonable fees and expenses
charged by such representative. Palatin agrees that all information subject to
review under this subsection (c) is confidential and that it shall cause its
representatives to retain all such information in confidence in accordance with
the requirements of Article 7 below.
Article 6
INTELLECTUAL PROPERTY
6.1 General Principles. It is understood by the parties that,
notwithstanding any payments that may be made by Mallinckrodt to Palatin
hereunder and further notwithstanding the joint cooperation of the parties
hereunder, throughout the existence of this Agreement and subsequent to its
expiration, the Palatin Intellectual Property Rights (including, without
limitation, the Palatin Patent Rights and the LeuTech compound) shall be and
remain the sole property of Palatin, subject only to such licenses as may be
granted to Mallinckrodt in accordance with any relevant provisions hereof. Any
inventions or developments relating to LeuTech or any LeuTech Products pursuant
to this Agreement, whether or not patentable, shall belong to Palatin.
6.2 Cross-Licensing. The parties understand that during the existence
of this Agreement, one party may develop modifications, improvements or
technology (whether patentable or not) in connection with their activities
hereunder that may be of use to the parties in connection with their joint
endeavors hereunder concerning LeuTech Products. The party that develops any
such modifications, improvements or technology will notify the other party
promptly of the existence and nature thereof. Any such modifications,
improvements or technology developed by one party that are useful to the other
party in performing its obligations hereunder concerning LeuTech Products shall
be licensed by the developing party to the other party for use in connection
with such other party's performance hereunder on a royalty-free basis, such
license to be coterminous with the existence of this Agreement, except and to
the extent otherwise provided in Section 3.2(b) or Article 9 hereof, as they may
be applicable. Neither this Section nor any other provision of this Agreement
shall be construed as granting any party a direct or implied license to any
Intellectual Property Rights except as they apply to LeuTech Products.
6.3 Filing, Prosecution and Maintenance of Palatin Intellectual
Property Rights.
(a) Palatin shall be responsible for maintenance of the
Palatin Patent Rights and all other Palatin Intellectual Property Rights in its
own name and at its own expense, keeping Mallinckrodt informed. Palatin agrees
that it will not abandon the prosecution of any patent applications included
within the Palatin Patent Rights nor will it fail to make any payment or fail to
take any other action necessary to maintain its rights to an issued patent
included in the Palatin Patent Rights without the prior written consent of
Mallinckrodt.
(b) Palatin and Mallinckrodt shall each promptly notify the
other in writing of any alleged or threatened infringement of patents or patent
applications included in the Palatin Patent Rights of which they become aware.
If any such actual or alleged infringement poses any reasonable threat to the
commercial viability or success of any LeuTech Product that is being sold or
marketed or is in the process of development hereunder, Palatin shall prosecute
any such infringement using counsel of its selection and no settlement or
compromise or consent to the entry of any judgment or other voluntary final
disposition of the suit may be entered into by Palatin without the consent of
the Joint Steering Committee, which consent shall not unreasonably be withheld.
[INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2].
(c) In any infringement suit instituted by Palatin to enforce
the Palatin Patent Rights pursuant to this Agreement, each party shall cooperate
in all respects and, to the extent possible, have its employees testify when
requested and make available relevant records, papers, information, samples and
the like.
[INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2].
(d) In the event that a declaratory judgment action alleging
invalidity or non-infringement of any of the Palatin Patent Rights shall be
brought against Palatin, Palatin shall notify Mallinckrodt in writing. Unless
the Joint Steering Committee decides that such action should not be defended,
Palatin will defend said action using counsel of its selection, and no
settlement, consent judgment or other voluntary final disposition of the action
may be entered into by Palatin without the consent of the Joint Steering
Committee, which consent shall not unreasonably be withheld. [INFORMATION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2].
6.4 Infringement Action Against Either Party. In the event that a suit
or action is brought against either party alleging infringement of any third
party patent right as a result of the exercise of Mallinckrodt's or its
Affiliates' rights pursuant to the license granted Mallinckrodt and its
Affiliates under Section 2.1 hereof, such party shall notify the Joint Steering
Committee. Palatin will defend said action, using counsel of its selection and
reasonably acceptable to Mallinckrodt, and no settlement, consent judgment or
other voluntary final disposition of the action may be entered into by Palatin
without the consent of the Joint Steering Committee, which consent shall not
unreasonably be withheld. [INFORMATION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION UNDER RULE 24b-2].
6.5 Cooperation Generally. Mallinckrodt shall make available to Palatin
(or to Palatin's authorized attorneys, agents or representatives), its
employees, agents, representatives or consultants (at Mallinckrodt's reasonable
expense) to the extent reasonably necessary or appropriate to enable Palatin to
file, prosecute and maintain patent applications and resulting patents included
in the Palatin Patent Rights and relevant to the strategic collaboration
hereunder for periods of time reasonably sufficient for Palatin to obtain the
assistance it needs from such personnel.
6.6 No Ownership. Except as otherwise expressly provided in this
Agreement, under no circumstances shall a party hereto, as a result of this
Agreement or performance of its obligations hereunder, obtain any ownership
interest in or other right to any technology, know-how, patents, pending patent
applications, products or biological materials of the other party.
Article 7
CONFIDENTIALITY
7.1 Nondisclosure Obligations.
(a) Except as otherwise provided in this Article 7, during the
term of this Agreement and for a period of ten (10) years thereafter, each party
shall maintain in confidence and use only for purposes specifically authorized
under this Agreement (i) all information and data, whether written or oral,
received from the other party resulting from or related to the development,
manufacture, marketing or sale of LeuTech Products and (ii) all information and
data not described in clause (i) but supplied by one party to the other party
under this Agreement and marked "Confidential", or with words of similar import,
or, if delivered orally, summarized and confirmed in writing in a manner clearly
indicating its confidentiality. For purposes of this Article 7, information and
data described in clause (i) or (ii) set forth in the immediately preceding
sentence shall be referred to as "Information."
(b) To the extent it is reasonably necessary or appropriate to
fulfill its obligations or exercise its rights under this Agreement, a party may
disclose Information it is otherwise obligated under this Section 7.1 not to
disclose to its Affiliates, sublicensees, distributors, consultants, agents,
representatives and clinical investigators, only on a need-to-know basis and
only on condition that such entities or persons agree in writing to keep the
Information confidential for the same time periods and to the same extent as
such party is required to keep the Information confidential and agree to use
such Information only for purposes relevant to the performance by a party of its
obligations under this Agreement. In addition, a party or its Affiliates (or any
of their sublicensees or distributors) may disclose such Information to
government or other regulatory authorities to the extent that such disclosure is
reasonably necessary to obtain patents or authorizations to conduct clinical
trials of, and to commercially market and sell, LeuTech Products.
(c) In addition to the exceptions to non-disclosure set forth
in subsection (b) set forth immediately above, the obligation not to disclose or
misuse Information shall not apply to any part of such Information that: (i) is
or becomes part of the public domain other than by unauthorized acts of the
party obligated not to disclose such Information or those of its Affiliates, or
its or their distributors or sublicensees, (ii) can be shown by written
documents to have been disclosed to the receiving party or its Affiliates, or to
its or their distributors or sublicensees, by a third party without violation of
an obligation of confidentiality with respect to such disclosure, (iii) can be
demonstrated by competent evidence, prior to disclosure under this Agreement,
already to have been in possession of the receiving party or its Affiliates, or
its or their distributors or sublicensees, provided such Information was not
obtained directly or indirectly from any third party that was under an
obligation of confidentiality with respect to such Information and in violation
of such obligation, (iv) can be demonstrated by competent evidence to have been
independently developed by the receiving party or its Affiliates, or by its or
their distributors or sublicenses, without breach of any of the provisions of
this Agreement, or (v) is disclosed by the receiving party or its Affiliates, or
by its or their distributors or sublicensees, pursuant to interrogatories,
requests for information or documents, subpoenas or civil investigative demands
(or similar process) issued by a court or governmental agency or pursuant to any
other requirement of law, provided that the party so disclosing, if at all
possible, notifies the other party prior to any such disclosure so that such
other party (with the cooperation of the receiving party) can seek a protective
order or other order limiting or preventing disclosure (if and to the extent
available under the circumstances), and provided further that the party so
disclosing furnishes only that portion of the Information which it is legally
required to disclose under the circumstances.
7.2 Terms of this Agreement. Palatin and Mallinckrodt each agree not to
disclose any terms or conditions of this Agreement to any third party without
the prior consent of the other party, except as required by applicable law. If
either party determines that it is required to file this Agreement with the SEC
or other governmental agency for any reason, such party shall request
confidential treatment of such portions of this Agreement as the parties shall
together determine as appropriate. Notwithstanding the foregoing, prior to
execution of this Agreement, Palatin and Mallinckrodt have agreed upon the
substance of information that can be used as a routine reference in the usual
course of business to describe the terms of this transaction, and Palatin and
Mallinckrodt may disclose such information, as modified by mutual agreement from
time to time, without the other party's consent as may periodically become
necessary or appropriate.
7.3 Publications.
(a) Procedure. The parties hereto acknowledge their mutual
interest in obtaining patent protection for inventions which arise under this
Agreement. In the event that either party, its employees or consultants or any
other third party under contract to either party wishes to make a publication
pertaining to the technical aspects of LeuTech Products (including any oral
disclosure made without obligation of confidentiality) relating to work
performed under this Agreement (the "Publishing Party"), such party shall
transmit to the other party (the "Reviewing Party") a copy of the proposed
written publication at least forty-five (45) days prior to submission for
publication or an abstract of such oral disclosure at least thirty (30) days
prior to submission of the abstract or oral disclosure, whichever is earlier.
The Reviewing Party shall have the right (i) to propose modifications to the
publication, (ii) to request a delay in publication or presentation in order to
protect patentable information, or (iii) to request that the information be
maintained as a trade secret and, in such case, the Publishing Party shall not
make such publication.
(b) Delay. If the Reviewing Party requests a delay as
described in Section 7.3(a)(ii), the Publishing Party shall delay submission or
presentation of the publication for a period of ninety (90) days to enable
patent applications protecting each party's rights in such information to be
filed.
(c) Resolution. Upon the receipt of written approval of the
Reviewing Party, the Publishing Party may proceed with the written publication
or the oral presentation.
7.4 Injunctive Relief. The parties hereto understand and agree that
remedies at law may be inadequate to protect a party against any breach by the
other party (or any other person acting in concert with such other party or on
its behalf) of any of the provisions of this Article 7. Accordingly, each party
shall be entitled to the granting of injunctive relief or other equitable relief
by a court of competent jurisdiction against any action that constitutes any
breach of this Article 7, in addition to any monetary damages or other relief to
which a party may be entitled.
Article 8
INDEMNITY
8.1 Mallinckrodt Indemnity Obligations. Subject to all of the
applicable provisions of this Article 8, and excepting the separate
indemnification and procedures set forth in Section 5.6, Mallinckrodt agrees to
defend, indemnify and hold Palatin, its Affiliates and their respective
directors, officers, employees and agents harmless from and against all costs,
judgments, liabilities and damages resulting from claims asserted by a third
party against Palatin, its Affiliates or their respective directors, officers,
employees or representatives arising in connection with or as a result of (i)
actual or asserted violations of any applicable law or regulation by
Mallinckrodt, its Affiliates, sublicensees, distributors or representatives in
connection with the sales, marketing and distribution (including, without
limitation, storage and radiolabeling) of LeuTech Products, including without
limitation, actual, alleged or asserted violations relating to adulterated,
misbranded, mislabeled or LeuTech Products otherwise not in compliance with
applicable law or regulation, (ii) claims for bodily injury, death or property
damage attributable to a recall ordered by a governmental agency or required by
a confirmed failure of LeuTech Products to the extent caused by any act or
omission to act by Mallinckrodt or its Affiliate or representative in connection
herewith, and (iii) any negligent or willful or intentional act or omission to
act by Mallinckrodt, its Affiliates or representatives in any manner in
connection with performance hereunder.
8.2 Palatin Indemnity Obligations. Subject to all of the applicable
provisions of this Article 8 and in addition to any obligations Palatin may have
under Article 6 set forth above, and excepting the separate indemnification and
procedures set forth in Section 5.6, Palatin agrees to defend, indemnify and
hold Mallinckrodt, its Affiliates and their respective directors, officers,
employees and agents harmless from and against all costs, judgments, liabilities
and damages resulting from claims asserted by a third party against
Mallinckrodt, its Affiliates or their respective directors, officers, employees
or representatives arising in connection with or as a result of (i) actual or
asserted violations of any applicable law or regulation by Palatin, its
Affiliates, sublicensees, distributors or representatives in connection
herewith, including (without limitation) any such actual or asserted violations
by Palatin or by any third party contract manufacturer employed by Palatin by
virtue of which any LeuTech Products manufactured, distributed or sold in any
manner in connection herewith shall be alleged or determined to be adulterated,
misbranded, mislabeled or otherwise not in compliance with such applicable law
or regulation, (ii) claims for bodily injury, death or property damage
attributable to a recall ordered by a governmental agency or required by a
confirmed failure of LeuTech Products to the extent caused by any act or
omission to act by Palatin or its Affiliates or representatives in connection
herewith, (iii) any negligent or willful or intentional act or omission to act
by Palatin, its Affiliates or representatives in any manner in connection with
performance hereunder, and (iv) claims for bodily injury or death attributable
to the toxicology, biologic activity or manufacture of LeuTech Products. It is
understood between the parties, however, that since the LeuTech Products may be
radiolabeled and stored by Mallinckrodt, or its Affiliates or sublicensees, then
with respect to any claims asserted by any third party concerning said
radiolabeling and storage, Mallinckrodt shall indemnify Palatin pursuant to
Section 8.1.
8.3 Product Liability. Mallinckrodt and Palatin understand and agree
that, because of the nature of the collaborative effort set forth in this
Agreement, should any third party claims be asserted against either or both of
them or any of their Affiliates, agents or representatives that are in the
nature of product liability claims (i.e., third party claims covered by the
indemnification obligation of Palatin pursuant to clause (iv) of Section 8.2
above), the parties will cooperate to ensure that such claims are defended,
settled and compromised in a manner that best protects the interests of both
parties hereunder. However, unless and until Palatin can demonstrate otherwise,
it shall be presumed that any third party claims relating to the toxicology, to
the biologic activity or to the manufacture of LeuTech Products shall be the
responsibility and liability of Palatin in accordance with clause (iv) of
Section 8.2 above and Palatin shall defend such claim. Palatin shall be
responsible for defending any such claims with counsel of its selection and will
have the daily responsibility for managing the defense of such claim, keeping
Mallinckrodt continually informed of any developments, issues or decisions that
arise as a consequence of such claim. It is understood between the parties,
however, that since the LeuTech Products will be radiolabelled by Mallinckrodt
or its Affiliates, then with respect to any claims asserted by any third party
concerning said radiolabelling, Mallinckrodt shall indemnify Palatin pursuant to
Section 8.1. As the Joint Steering Committee shall determine, Palatin and
Mallinckrodt will procure and maintain product liability insurance with
responsible carriers in amounts and with coverages and deductibles determined by
the Joint Steering Committee to be reasonable.
8.4 Contribution. Notwithstanding any other provision of this Article
8, to the extent it is possible to determine with accuracy, each party shall
only be responsible hereunder for and shall only have the duty to indemnify and
hold harmless the other party hereunder for that portion of any loss, cost,
damages or expense attributable to its acts or omissions to act, provided that
(except as and to the extent set forth in the last sentence of Section 8.2 and
the penultimate sentence of Section 8.3), Palatin shall be responsible for all
product liability claims related to LeuTech Products without reference to its
acts or omissions to act in connection with the circumstances surrounding any
such claim. If, in connection with any third party claim for which both parties
have responsibility for any loss, cost, damage or expense, it is impossible to
determine or fairly estimate the relative proportion of responsibility of the
parties, they shall each be responsible for an equal share of any such loss,
cost, damage or expense. In the event there is any dispute between the parties
concerning their relative proportion of responsibility with respect to any third
party claim the parties shall attempt to resolve such dispute within sixty (60)
days of the date it arises but, if they are unable to do so, the matter shall be
referred to arbitration for resolution pursuant to Section 10.6.
8.5 Procedure. Unless and to the extent otherwise specifically provided
herein, a party or any of its Affiliates (the "Indemnitee") that intends to
claim indemnification under this Article 8 shall promptly notify the other party
(the "Indemnitor") of any loss, claim, damage, or liability arising out of any
third party claim or action in respect of which the Indemnitee intends to claim
such indemnification, and the Indemnitor shall assume the defense thereof with
counsel of its own choosing; provided, however, that an Indemnitee shall have
the right to retain its own counsel, with the fees and expenses to be paid by
the Indemnitor, if representation of such Indemnitee by the counsel retained by
the Indemnitor, in the opinion of an independent counsel chosen by both parties,
would be inappropriate due to actual or potential differing interests between
such Indemnitee and any other party represented by such counsel in such
proceedings. An Indemnitee shall not be entitled to indemnification under this
Article 8 if any settlement or compromise of a third party claim is effected by
the Indemnitee without the consent of the Indemnitor, which consent shall not be
unreasonably withheld or delayed. An Indemnitee shall not be entitled to
indemnification with respect to any third party claim in an amount in excess of
the amount which such third party has unequivocally and in writing agreed with
the Indemnitor it is willing to accept in settlement or compromise of any such
third party claim. The failure by the Indemnitee to deliver notice to the
Indemnitor within a reasonable time after the commencement of any such third
party claim or action, if materially prejudicial to the Indemnitor's ability to
defend such action, shall relieve such Indemnitor of any liability to the
Indemnitee under this Article 8. An Indemnitee, and its employees, agents and
representatives, shall cooperate fully with the Indemnitor and its legal
representatives in the investigation of any action, claim or liability covered
by this indemnification.
Article 9
EXPIRATION AND TERMINATION
9.1 Termination and Expiration of the Development Phase.
(a) Unless this Agreement is sooner terminated by either party
in accordance with the provisions of this Article 9 or by Mallinckrodt in
accordance with the provision of Section 3.2(b) above, the term of the
Development Phase as to any LeuTech Product shall terminate in accordance with
Section 1.13.
(b) In addition to the right of termination granted to
Mallinckrodt by the provisions of Section 3.2(b) above, the Development Phase as
to any LeuTech Product may be terminated prior to the completion of development
of such LeuTech Product with respect to all or any portion of the Territory (i)
at any time by the mutual consent of the parties, (ii) by one party, upon notice
to the other party, if the terminating party has substantial evidence to support
the conclusion that any such LeuTech Product is not likely to become a viable
and profitable commercial product or (iii) by either party upon written notice
to the other if the Joint Steering Committee does not approve the Annual
Development Plan for such LeuTech Product pursuant to Section 3.1(f) and, after
the matter has been submitted for dispute resolution pursuant to Section 4.1(e)
hereof, the terminating party determines in good faith that it is unable to
proceed with development of such LeuTech Product based on the determination of
the arbitrator.
(c) In the event that, pursuant to subsection (b) set forth
immediately above, the Development Phase is terminated prior to the completion
of development of any LeuTech Product for all or any portion of the Territory,
then all rights with respect to the use, manufacture, marketing, distribution
for sale, licensing and sublicensing of such LeuTech Product with respect to
such portion of the Territory shall revert to Palatin.
(d) The expiration or termination of the Development Phase
with respect to any LeuTech Product for all or any portion of the Territory
shall not relieve the parties of any obligation that accrued with respect
thereto prior to such expiration or termination, including either party's right
to recover all costs and expenses incurred or committed prior to such expiration
or termination. Furthermore, notwithstanding any other provisions hereof, the
expiration or termination of the Development Phase with respect to any or all
LeuTech Products shall have no effect whatsoever on (i) the rights of either
party under the provisions of Sections 5.2, 5.3, 5.4, 5.5 and 5.6 above or (ii)
the issuance and sale of the Preferred Stock.
9.2 Termination and Expiration of this Agreement.
(a) This Agreement may be terminated by either party upon
thirty (30) days notice (i) by reason of a material breach (other than as
provided in clauses (ii) or (iii) below) if the breaching party fails to remedy
such breach within ninety (90) days after written notice thereof by the
non-breaching party, (ii) if the other party fails to make any payments of any
kind as and when due in accordance with the terms and procedures set forth
herein and such failure is not remedied within forty five (45) days after
written notice thereof by the nonbreaching party (unless and to the extent there
exists a good faith dispute as to the amount of any such payment due) or (iii)
upon the bankruptcy, insolvency, dissolution or winding up the other party,
except, in the case of a petition relative to any of the immediately foregoing
filed involuntarily against a party if such petition is dismissed within sixty
(60) days of the date of its filing.
(b) Unless renewed in writing by both Palatin and Mallinckrodt
or unless terminated earlier in accordance herewith, this Agreement shall expire
on and as of the end of the calendar quarter subsequent to the calendar quarter
in which the last commercial sale of Product Units of any LeuTech Product by
Mallinckrodt occurs. This Agreement shall expire if, after the date of the First
Commercial Sale of any LeuTech Product, there are no commercial sales of LeuTech
Products for two full calendar quarters.
9.3 Effect of Expiration or Termination of this Agreement.
(a) The expiration or termination of this Agreement for any
reason shall not relieve the parties of any obligation that accrued prior to
such expiration or termination. Furthermore, notwithstanding any other provision
hereof, the expiration or termination of this Agreement for any reason shall
have no effect whatsoever on (i) the rights of either party under the provisions
of Sections 5.2, 5.3, 5.4, 5.5 and 5.6 above or (ii) the issuance and sale of
the Preferred Stock.
(b) In the event that this Agreement is rightfully terminated
by Palatin pursuant to Section 9.2(a), Palatin shall be entitled to claim from
Mallinckrodt in a court of competent jurisdiction all damages or other relief
which would otherwise be available to Palatin at law or in equity and the
following shall also apply:
(i) all licenses and rights granted to Mallinckrodt
hereunder shall terminate, on and as of the effective date of such
termination (except for any license granted by Palatin to Mallinckrodt
pursuant to the last sentence of Section 6.2 above);
(ii) for a period of one (1) year following the
effective date of termination Mallinckrodt may dispose of its inventory
of Product Units on hand as of the effective date of termination and
may fill any orders for Product Units accepted prior to the effective
date of termination, and within thirty (30) days after disposition of
such inventory and fulfillment of such orders (and in any event within
thirty (30) days after the first anniversary of the effective date of
termination) Mallinckrodt will forward to Palatin a final report of
sales activity containing the details required by Section 5.9(b) hereof
and Mallinckrodt shall pay all Royalty Payments payable as a
consequence of the Net Sales of Product Units for such period as
reflected in such report;
(iii) Mallinckrodt shall take all action reasonably
necessary to assign all of its right, title and interest in any
trademark or trade name owned by Palatin under which Mallinckrodt shall
have marketed or sold LeuTech Products, together with the goodwill
associated therewith, to Palatin (provided that, this provision shall
not affect Mallinckrodt's right to any trademark or trade name owned by
Mallinckrodt); and
(iv) Mallinckrodt shall, (A) to the extent legally
permissible, take all additional action reasonably necessary to assign
all of its right, title and interest in, and transfer possession and
control to, Palatin of the regulatory filings (if any) prepared by
Mallinckrodt, and regulatory approvals if (any) received by
Mallinckrodt, to the extent that such filings and approvals relate to
LeuTech Products and (B) deliver to Palatin at the end of the first
anniversary of the effective date of termination all Information
supplied by Palatin to Mallinckrodt.
(c) In the event that this Agreement is rightfully terminated
by Mallinckrodt pursuant to Section 9.2(a), Mallinckrodt shall be entitled to
claim from Palatin in a court of competent jurisdiction all damages or other
relief which would otherwise be available to Mallinckrodt at law or in equity
and the following shall also apply:
(i) Mallinckrodt's license rights under Section 2.1
hereof (exclusive of any rights under the MCA 480 Cell Line License
Agreement between the Wistar Institute of Anatomy and Biology and
Palatin dated June 16, 1997, hereinafter the "Wistar Agreement") shall
(notwithstanding any other provisions hereof) be considered to be
exclusive, perpetual and irrevocable, and shall not otherwise be
restricted or limited in any manner from the license granted as set
forth herein, except that Mallinckrodt shall continue to make Royalty
Payments to Palatin in accordance with the provisions of Section 5.9;
(ii) Palatin shall continue to manufacture LeuTech
Products for Mallinckrodt, at Palatin's Product Direct Cost for such
manufacture (i.e., not at the Transfer Price that may then be in
effect), for a period of up to three (3) years after the effective date
of such termination or, at Mallinckrodt's option, and as soon after the
effective date of such termination as possible (but in any event no
later than six (6) months thereafter), shall transfer to Mallinckrodt,
on a non-exclusive basis, such contractual rights (i.e., rights under
its contracts with all third party contract manufacturers, consultants
or other subcontractors) and such rights to its intellectual property
and such know-how as may be necessary to enable Mallinckrodt or a third
party or parties designated by Mallinckrodt to manufacture LeuTech
Products in sufficient quantity thereafter to meet Mallinckrodt's
requirements for LeuTech Products;
(iii) Palatin shall (A) to the extent legally
permissible, take all actions necessary to assign to Mallinckrodt all
of the regulatory filings and approvals Palatin has that may be
necessary or useful to Mallinckrodt in exercising its license rights
and manufacturing rights as set forth in clauses (i) and (ii),
respectively, of this subsection (c) or if such assignment is not
readily available, take all actions available to it in support of any
new filings or approvals made or sought by Mallinckrodt, (B) deliver to
Mallinckrodt copies any and all documents it has containing Information
or other data that may be necessary or useful to Mallinckrodt in
exercising its license rights and manufacturing rights as set forth in
clauses (i) and (ii), respectively, of this subsection (c), which
Information may be employed by Mallinckrodt as needed in connection
with such rights subject to the requirements of Article 7 hereof, (C)
grant to Mallinckrodt a non-exclusive, worldwide, paid-up license
(including the goodwill associated therewith) to the rights of Palatin
in and to any trademarks or trade names under which Mallinckrodt shall
have marketed or sold LeuTech Products at any time prior to the
effective date of termination, and (D) deliver to Mallinckrodt at the
end of the first (1st) anniversary of the effective date of termination
all Information supplied by Mallinckrodt to Palatin; and
(iv) Palatin shall assign its rights under the Wistar
Agreement to Mallinckrodt.
9.4 Survival. The provisions of this Agreement shall survive
termination or expiration to the extent necessary for them to be fully performed
in accordance with their express terms.
Article 10
MISCELLANEOUS
10.1 Force Majeure. Neither party shall be held liable or responsible
to the other party nor be deemed to have defaulted under or breached this
Agreement for failure or delay in fulfilling or performing any term of this
Agreement when such failure or delay is caused by or results from causes beyond
the control of the affected party, including but not limited to fire, floods,
embargoes, war, acts of war (whether war is declared or not), insurrections,
riots, civil commotions, the existence or administration of any laws, rules or
regulations, strikes, lockouts or other labor disturbances, acts of God or acts,
omissions or delays in acting by any governmental authority or the other party;
provided, however, that the party so affected shall use reasonable commercial
efforts to avoid or remove such causes of nonperformance, and shall continue
performance hereunder with reasonable dispatch whenever such causes are removed.
Each party shall provide the other party with prompt written notice of any delay
or failure to perform that occurs by reason of force majeure. The parties shall
mutually seek a resolution of the delay or the failure to perform as noted
above.
10.2 Assignment. This Agreement may not be assigned or otherwise
transferred by either party without the prior written consent of the other
party, except that, either Palatin or Mallinckrodt may, without such consent,
assign its rights and obligations under this Agreement, (i) in connection with a
corporate reorganization, to any Affiliate, or (ii) to an unrelated third party
in connection with a merger, consolidation or sale of substantially all of a
party's assets to such unrelated third party (which shall include, in the case
of Mallinckrodt, a sale of substantially all of the assets of Mallinckrodt's
Imaging Group); provided that, in the case of either clause (i) or (ii) the
assigning or transferring party's rights and obligations under this Agreement
shall be assumed in writing by its successor in interest in any such transaction
and shall not be transferred separate from all or substantially all of its other
business assets (except as otherwise specifically noted with respect to
Mallinckrodt), including those business assets that are the subject of this
Agreement. Any purported assignment in violation of the preceding sentence shall
be void. Any permitted assignee shall assume all obligations of its assignor
under this Agreement.
10.3 Severability. Should one or more provisions of this Agreement be
or become invalid or unenforceable, the parties hereto shall substitute, by
mutual consent, valid and enforceable provisions for such invalid or
unenforceable provisions which new provisions, in their economic and other
effects, are sufficiently similar to the invalid or unenforceable provisions
that it can be reasonably assumed that the parties would have originally entered
into this Agreement with such new provisions. In case such new provisions cannot
be agreed upon, the invalidity or unenforceability of one or several provisions
of this Agreement shall not affect the validity of this Agreement as a whole or
the validity of any portions hereof, unless the invalid or unenforceable
provisions are of such essential importance to this Agreement that it is to be
reasonably assumed that the parties would not originally have entered into this
Agreement without such invalid or unenforceable provisions.
10.4 Notices. Any consent, notice or report required or permitted to be
given or made under this Agreement by one of the parties hereto to the other
shall be in writing, delivered personally or by facsimile (and promptly
confirmed by telephone, personal delivery or courier) or courier, postage
prepaid (where applicable), addressed to such other party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addressor and shall be effective upon receipt by the
addressee.
If to Palatin: Palatin Technologies, Inc.
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxx Xxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to: Xxxxxx & Xxxxx LLP
000 Xxxxx Xxxxxx, 00xx xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxx Xxxxxxx, Esq.
Telephone : (000) 000-0000
Facsimile: (000) 000-0000
If to Mallinckrodt: Mallinckrodt Inc.
000 XxXxxxxxx Xxxxxxxxx
X.X. Xxx 0000
Xx. Xxxxx, Xxxxxxxx 00000
Attn: President, Imaging Group
Telephone:
Facsimile:
with a copy to: Mallinckrodt Inc.
000 XxXxxxxxx Xxxxxxxxx
X.X. Xxx 0000
Xx. Xxxxx, Xxxxxxxx 00000
Attn: Vice President and General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
10.5 Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
its choice of laws provisions that might apply the law of another jurisdiction.
10.6 Dispute Resolution.
(a) The parties hereby agree that they will attempt in good
faith to resolve any controversy or claim arising out of or relating to this
Agreement promptly by negotiations and, where provided for, in accordance with
any specific provisions for dispute resolution set forth elsewhere in this
Agreement. If a controversy or claim should arise hereunder, the representatives
of the parties will confer at least once and will attempt to resolve the matter.
Except as specifically provided elsewhere in this Agreement, if the matter has
not been resolved within sixty (60) days of their first meeting, the
representatives shall refer the matter to the Chief Executive Officer of Palatin
and the President of Mallinckrodt's Imaging Group. If the matter has not been
resolved within sixty (60) days of the first meeting of the Chief Executive
Officer of Palatin and the President of Mallinckrodt's Imaging Group (which
period may be extended by mutual agreement), subject to a party's rights in an
appropriate case to seek injunctive relief or specific performance from a court
of appropriate jurisdiction, and unless otherwise specifically provided for
herein, any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, will be settled as set forth in subsection (b) set forth
immediately below.
(b) Subject to the provisions of subsection (a) set forth
immediately above, all disputes, controversies or differences which arise
between the parties out of or in relation to this Agreement or any default or
breach thereof will be resolved by arbitration in accordance with the American
Arbitration Association by one or more arbitrators appointed in accordance with
the said Rules. The arbitration shall take place in New York. Any decision or
award resulting from the arbitration provided for herein shall be final and
binding on the parties hereto. Notwithstanding the immediately foregoing
provisions of this subsection (b), without resort to arbitration in the first
instance, either party has the right to bring suit in a court of competent
jurisdiction against the other party for (i) any breach of such other party's
duties of confidentiality pursuant to Article 7 of this Agreement, (ii) any
infringement of its own proprietary rights by the other party, (iii) or in any
other circumstance in which the right to bring suit is contemplated by the
express language hereof. Judgment upon the arbitrator's award may be entered in
any court of competent jurisdiction. The award of the arbitrator may include
compensatory damages against either party, but under no circumstances will the
arbitrator be authorized to award punitive damages, consequential, special,
exemplary, indirect or multiple damages against either party. The parties agree
not to institute any litigation or proceedings against each other in connection
with this Agreement unless they have complied with the provisions of this
subsection (b), as they may be applicable, unless otherwise provided or allowed
herein. The fees and expenses associated with arbitration shall be shared
equally between Palatin and Mallinckrodt.
10.7 Public Announcements. The parties agree that press releases and
other public announcements to be made by either of them in relation to this
Agreement, including disclosing the name of the other party, shall be subject to
the written consent of the other party, which consent shall not be unreasonably
withheld or delayed, except that the parties may (without such consent) (i) make
any such press release that is required to be made by law, if the consent of the
other party has been sought but has not been timely obtained after reasonable
efforts to do so and (ii) disclose any information covered by a prior consent
obtained in accordance with this Section 10.7. The parties will agree to issue a
joint press release immediately following the execution of this Agreement, the
form and content of which shall be reasonably satisfactory to both parties.
10.8 Entire Agreement. This Agreement, together with the exhibits and
appendices hereto, contains the entire understanding of the parties with respect
to the subject matter hereof. All express or implied agreements and
understandings, either oral or written, heretofore made are expressly merged in
and made a part of this Agreement. This Agreement may be amended, or any term
hereof modified, only by a written instrument duly executed by authorized
representatives of both parties hereto.
10.9 Headings. The captions to the several articles and sections hereof
are not a part of this Agreement, but are merely guides or labels to assist in
locating and reading the several articles and sections hereof.
10.10 Waiver. The waiver by a party hereto of any right hereunder or
the failure of a party to object on any occasion to a breach or failure of
performance by the other party shall not be deemed a waiver of a party's other
rights hereunder or its right, on any subsequent occasion, to object to a breach
by the other party of any terms hereof or to insist upon the performance by the
other party of its obligations hereunder.
10.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.12 Agreement Not to Solicit Employees. During the term of this
Agreement and for a period of two (2) years following the expiration or
termination of this Agreement, Palatin and Mallinckrodt agree not to seek to
persuade or induce any employee of the other company to discontinue his or her
employment with that company in order to become employed by or associated with
any business, enterprise or effort that is associated with its own business.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first set forth above.
PALATIN TECHNOLOGIES, INC.
By: /ss/ Xxxxxx X. Xxxxxx
MALLINCKRODT INC.
By: /ss/ Xxxxxxx X. Xxxxxxx
LIST OF EXHIBITS
Exhibit A Development Costs - Overhead Cost Allocation Principles
Exhibit B Launch and Pre-Launch Activities
Exhibit C Chemical Structure of LeuTech Compound
Exhibit D Palatin Patent Rights
Exhibit E Certificate of Designation for Preferred Stock
Exhibit F Available LeuTech Products
Exhibit G Characteristics of Preferred Stock
Exhibit H Promissory Note
Exhibit I Security Agreement
EXHIBIT "A"
PALATIN TECHNOLOGIES, INC.
Cost Allocation Principles
[INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]
EXHIBIT B
Launch and Pre-Launch Activities
Launch Plan
o Design and establishment of sales and marketing programs
o Establishment of distribution network
o Design and production of sales aids oabCreation and distribution of sales
brochures
o Design and execution of product premium programs
o Establishment of a journal advertising campaign
o Design and distribution of educational package for radiopharmacies
o Design and production of direct mail offerings
o Establishment of sampling program
o Design and production of journal advertisements
o Trade show scheduling and attendance
o Creation of trade show displays
o Establishment of a Physician Advisory Board
o Scheduling of symposia and speaker program
o Design and establishment of Internet based information/advertising
o Creation and distribution of physician information packages
o Establishment of a speakers' bureau
o Development of a Phase IV protocol
EXHIBIT C
(LeuTech Biological Molecule)
The biological molecule that is the active component of LeuTech is [INFORMATION
OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.]
EXHIBIT D
(Palatin Patent Rights)
United States Patents:
1. U.S. Patent No. 5,346,687, Issued September 13, 1994, for Direct
Radiolabeling of Antibody against Stage Specific Embryonic Antigen for
Diagnostic Imaging
2. U.S. Patent No. RE35,500, issued May 6, 1997, for Direct Radiolabeling of
Antibodies and Other Proteins with Technetium for Rhenium by Regulated
Reduction
3. U.S. Patent No. RE35,457, issued February 18, 1997, for Radiolabeling
Antibodies and Other Proteins with Technetium or Rhenium by Regulated
Reduction
Corresponding Australian patent No. 650629
Canadian patent application No. 2,065,299-3
EP No. 0 486 622 B1 - Confirmed in Austria, Belgium, Denmark, France,
Germany, Italy, Netherlands, Spain, Sweden, Switzerland and United Kingdom
Japanese application No. 2-514515
4. U.S. Patent 4,917,878, issued April 17, 1990, for Novel Use of a
Radiolabeled Antibody against Stage Specific Embryonic Antigen for the
Detection of Occult Abscesses in Mammals (Subject to License Agreement
between Xxxxxx Xxxxxxxxx University and RhoMed, Incorporated)
5. U.S. Patent 5,011,676, issued April 30, 1991, for Improved Method to
Directly Radiolabel Antibodies for Diagnostic Imaging and Therapy (Subject
to License Agreement between Xxxxxx Xxxxxxxxx University and RhoMed,
Incorporated)
6. U.S. Patent 5,308,603, issued May 3, 1994, for Method to Directly Radiolabel
Antibodies for Diagnostic Imaging and Therapy (Subject to License Agreement
Between Xxxxxx Xxxxxxxxx University and RhoMed, Incorporated)
License Agreements:
1. MCA 480 Cell Line License Agreement between The Wistar Institute of Anatomy
and Biology and Palatin Technologies, Inc. dated May 1997.
1
2. License Agreement between Xxxxxx Xxxxxxxxx University and RhoMed,
Incorporated effective as of February 1, 1992.
2
EXHIBIT E
CERTIFICATE OF DESIGNATIONS
of
SERIES C CONVERTIBLE PREFERRED STOCK
of
PALATIN TECHNOLOGIES, INC.
[Filed separately as Exhibit 3.7 to Palatin's annual report on Form 10-KSB for
the year ended June 30, 1999, filed with the SEC on September 28, 1999.]
EXHIBIT F
(Available LeuTech Products)
LeuTech Products
1. LeuTech kit for producing 99mTc radiolabeled RB5 IgM for injection
containing one (1) [INFORMATION OMITTED AND FILED SEPARATELY WITH THE
COMMISSION UNDER RULE 24b-2.]
Palatin Technologies, Inc.
Exhibit G
o Warrants and options outstanding as of August 10, 1999 totaled 4,692,999
(See common stock dilution table attached)
o Existing employment agreements with anti-dilution provisions include:
o Xxxxxx Xxxxxx
o Xxxxxxx Xxxxxx
o Xxxx Xxxxx
o Xxxxxxx X. Xxxxx
o A summary of anti-dilution protections in employment agreements
follows:
Xxxxxx X. Xxxxxx: Palatin must issue additional anti-dilution
options at $.20 per share, so that Xx. Xxxxxx shall, at all
times, have options in the aggregate to purchase the number of
shares of common stock (together with common stock previously
purchased on the exercise of such options) equal to not less
than 3.75% of the outstanding common stock on a fully diluted
basis. The amount of common stock purchasable will be adjusted
proportionately in the event of any stock dividend, stock
split, recapitalization, exchange, merger, etc.
Xxxxxxx X. Xxxxxx, Xxxx Xxxxx and Xxxxxxx X. Xxxxx: If Palatin
issues new common stock or common stock derivative securities
which increase the outstanding common stock by 40% or more
over the amount outstanding at the time of the agreements,
then Palatin must issue additional options at $2.50 per share
so that each of the three officers has options to purchase the
same percentage of the outstanding common stock as he was able
to purchase before the issuance of the new securities. The
amount of common stock purchasable will be adjusted
proportionately in the event of any stock dividend,
stock split, recapitalization exchange, merger, etc.
Such contracts are on file with the SEC (via Xxxxx) and will
be provided on request.
o Warrants (five groups) containing anti-dilution provisions
(price protection) include:
o Class A Warrants
o Class A Placement Warrants
o Class B Warrants
o Class B Placement Agent Warrants
o Common Stock Placement Agent Warrants
o See Provisions relating to Price Protection (I and II)
o Securities with anti-dilution provisions (price protection) include the
Series A Preferred issue.
o See Provisions relating to Price Protection (III)
PALATIN TECHNOLOGIES, INC.
COMMON STOCK DILUTION TABLE
AS OF AUGUST 10, 1999
All stock amounts for derivative securities represent the maximum issuable if an
entire class were exercised together, making no allowance for cancellation of
fractional shares upon individual exercise. The 39,186 shares of Series A
Convertible Preferred Stock outstanding and the warrants to purchase an
additional 13,362 shares of Series A Convertible Preferred Stock are stated as
if converted to common stock at the adjusted conversion price of $4.67 per
share. The 12,875 non-voting shares of Series B Convertible Preferred Stock
outstanding are stated as if converted to common stock at the reset conversion
price of $3.52 per share.
----------------------------------------------------------- ------------------
Class Amount Comment
----------------------------------------------------------- ------------------
Common Stock outstanding (actual): 7,215,560
----------------------------------------------------------- ------------------
*Series A Conv. Prfd. @ $4.67 conversion price 839,100
----------------------------------------------------------- ------------------
Series A Conv. Prfd. converted, issuance pending 12,504 Masada and Xxxxxx Trust
----------------------------------------------------------- ------------------
Series A Conv. Prfd. converted, make-up due 5,623 to be issued to holders who
converted at $4.87
----------------------------------------------------------- ------------------
Series A Conv. Prfd. converted, make-up due 578 to be issued to holders who
converted at $4.68
----------------------------------------------------------- ------------------
Series B Conv. Prfd. @ $3.52 conversion price 365,767
----------------------------------------------------------- ------------------
Series B Conv. Prfd. converted, issuance pending 0
------------------------------------------------------------------------------ -------------------------------------
Total Common Outstanding, with Preferred As If Converted: 8,439,132
----------------------------------------------------------- ------------------ -------------------------------------
Warrants
----------------------------------------------------------- ------------------
Common Stock Warrants ('98-'99 offering) 939,250 exercise prices: $4.375 & $4.70
----------------------------------------------------------- ------------------
Placement/Consulting warrants ('98-'99 offering) 254,600 exercise prices: $3.75 to $4.70
----------------------------------------------------------- ------------------
Common Stock Warrants ('99 offering) 565,629 exercise prices: $4.48 to $5.06
----------------------------------------------------------- ------------------
Placement Warrants ('99 offering) 114,073 exercise prices: $4.48 to $5.57
----------------------------------------------------------- ------------------
*Placement Warrants (Series A Conv. Prfd.) 286,145 effective exercise price: $5.137
----------------------------------------------------------- ------------------
*Class A Warrants 65,668 exercise price: $0.22
----------------------------------------------------------- ------------------
*Placement Agent Warrants (Class A) 20,737 exercise price: $0.22
----------------------------------------------------------- ------------------
*Class B Warrants 30,766 exercise price: $2.64
----------------------------------------------------------- ------------------
*Placement Agent Warrants (Class B) 2,334 exercise price: $5.43
----------------------------------------------------------- ------------------
Class C Warrants 69,124 exercise price: $8.68
----------------------------------------------------------- ------------------
*Placement Agent Warrants (RhoMed offering) 212,329 exercise price: $5.43
----------------------------------------------------------- ------------------
*XxXxxxxxx (Fin. Serv. Adv. Agr.) Warrants 17,052 exercise prices: $6.45 to $6.56
----------------------------------------------------------- ------------------
Old Interfilm Warrants 1,875 exercise price: $282.00
------------------------------------------------------------------------------ -------------------------------------
Total of All Outstanding Warrants: 2,579,582
----------------------------------------------------------- ------------------ -------------------------------------
Options
----------------------------------------------------------- ------------------
1996 SOP (Palatin) 1,564,277 includes 225,000 granted 7/8/99
----------------------------------------------------------- ------------------
1995 EISOP (RhoMed) 80,359
----------------------------------------------------------- ------------------
1995 NQSOP (RhoMed) 40,114
----------------------------------------------------------- ------------------
1993 EIP (Interfilm) 750
----------------------------------------------------------- ------------------
1987 EISOP (RhoMed) 25,368
----------------------------------------------------------- ------------------
1987 NQSOP (RhoMed) 38,478
----------------------------------------------------------- ------------------
Quilty anti-dilution options through 3/24/98 106,609
----------------------------------------------------------- ------------------
other options: 1997 Exec. Off. SOA = 103,004. Spana SOA = 257,462
74,196. Xxxxxx SOA = 74,196. Xxxxxx SOA = 6,066.
------------------------------------------------------------------------------ -------------------------------------
Total of All Outstanding Options: 2,113,417
------------------------------------------------------------------------------ -------------------------------------
Total of All Outstanding Warrants & Options: 4,692,999
----------------------------------------------------------- ------------------ -------------------------------------
COMBINED TOTAL (Fully Diluted): 13,132,131
----------------------------------------------------------- ------------------
*Preferred stock and warrants with price protection. The conversion or exercise
price of these securities will be adjusted downward if Palatin sells common or
common-equivalent securities with a per share price less than the current
conversion or exercise price (shown in the table). In the case of Series A
preferred stock, the conversion price will also be adjusted downward if Palatin
sells common or common-equivalent securities with a per share price less than
the current market price of common stock.
All outstanding derivative securities have standard anti-dilution protection,
preserving their proportional share of common stock in the event of stock
dividends, stock splits, recapitalizations, merger, etc.
Provisions Relating to Price Protection
I. Selected Provisions of:
Class A Warrants
Class A Placement Agent Warrants
Class B Warrants
Class B Placement Agent Warrants
Common Stock Placement Agent Warrants
These five groups of warrants have identical provisions for price
protection in the event of the issuance of Common Stock (including warrants and
options) at a price per share less than the Per Share Warrant Price then in
effect:
Section 3 (c)
(c) Except as provided in Subsections 3(a) and 3(d), in case
the Company shall hereafter issue or sell any Common Stock, or any
securities convertible into Common Stock or any rights, options or
Warrants to purchase Common Stock or securities convertible into Common
Stock, in each case for a price per share or entitling the holders
thereof to purchase Common Stock at a price per share (determined by
dividing (i) the total amount, if any, received or receivable by the
Company in consideration of the issuance or sale of such securities
plus the total consideration, if any, payable to the Company upon
exercise or conversion thereof (the "TOTAL CONSIDERATION") by (ii) the
number of additional shares of Common Stock issuable upon exercise or
conversion of such securities) less than the then current Per Share
Warrant Price in effect on the date of such issuance or sale, the Per
Share Warrant Price shall be adjusted as of the date of such issuance
or sale so that the same shall equal the price determined by dividing
(i) the sum of (A) the number of shares of Common Stock outstanding on
the date of such issuance or sale multiplied by the Per Share Warrant
Price plus (B) the Total Consideration by (ii) the number of shares of
Common Stock outstanding on the date of such issuance or sale plus the
maximum number of additional shares of Common Stock issuable upon
exercise or conversion of such securities.
II. Selected Provisions of Financial Advisory Services (XxXxxxxxx) Warrants
There are two outstanding Financial Advisory Services Warrants, which contain
identical terms including the following provisions:
Section 3(c)
(c) Except as provided in subsections 3(a) and 3(d), in case
the Company shall hereafter issue or sell any Common Stock, any
securities convertible into Common Stock or any rights, options or
warrants to purchase Common Stock or securities convertible into Common
Stock, other than an offering of securities for which Paramount
Capital, Inc. serves as placement agent initiated within 180 days
following September 1, 1996 (the "Private Placement"), in each case for
a price per share or entitling the holders thereof to purchase Common
Stock at a price per share (determined by dividing (i) the total
amount, if any, received or receivable by the Company in consideration
of the issuance or sale of such securities plus the total
consideration, if any, payable to the Company upon exercise or
conversion thereof (the "TOTAL CONSIDERATION") by (ii) the number of
additional shares of Common Stock issued, sold or issuable upon
exercise or conversion of such securities) less than the then current
Market Price of the Common Stock or the current Per Share Warrant Price
in effect on the date of such issuance or sale, the Per Share Warrant
Price shall be adjusted by multiplying the Per Share Warrant Price then
in effect by a fraction, the numerator of which shall be (x) the sum of
(A) the number of shares of Common Stock outstanding on the record date
of such issuance or sale plus (B) the Total Consideration divided by
either the current Market Price of the Common Stock or the current Per
Share Warrant Price, whichever is greater, and the denominator of which
shall be (y) the number of shares of Common Stock outstanding on the
record date of such issuance or sale plus the maximum number of
additional shares of Common Stock issued, sold or issuable upon
exercise or conversion of such securities.
III. Selected Provisions of Series A Convertible Preferred Stock
Certificate of Designations
Section 3 (b) (i) (selected portions):
"Market Price" of a security shall mean the average Closing Bid Price
(as defined below) of such security, for twenty (20) consecutive
trading days, ending with the day prior to the date as of which the
Market Price is being determined.
The "Closing Bid Price" for any security for each trading day shall be
the reported closing bid price of such security on the national
securities exchange on which such security is listed or admitted to
trading, or, if such security is not listed or admitted to trading on
any national securities exchange, shall mean the reported closing bid
price of such security on the Nasdaq SmallCap Market or the Nasdaq
National Market System (collectively referred to as, "Nasdaq") or, if
such security is not listed or admitted to trading on any national
securities exchange or quoted on Nasdaq, shall mean the reported
closing bid price of such security on the principal securities exchange
on which such security is listed or admitted to trading (based on the
aggregate dollar value of all securities listed or admitted to trading)
or, if such security is not listed or admitted to trading on a national
securities exchange, quoted on Nasdaq or listed or admitted to trading
on any other securities exchange, shall mean the closing bid price in
the over-the-counter market as furnished by any NASD member firm
selected from time to time by the Corporation for that purpose.
"Trading day" shall mean a day on which the securities exchange or
NASDAQ used to determine the Closing Bid Price is open for the
transaction of business or the reporting of trades or, if the Closing
Bid Price is not so determined, a day on which such securities exchange
is open for the transaction of business.
Section 4 (c) (i):
(i) Except as otherwise provided herein, in the event the
Corporation shall, at any time or from time to time after the date
hereof,(1) sell or issue any shares of Common Stock for a consideration
per share less than either (i) the Conversion Price in effect on the
date of such sale or issuance or (ii) the Market Price of the Common
Stock as of the date of the sale or issuance, (2) issue any shares of
Common Stock as a stock dividend to the holders of Common Stock, or (3)
subdivide or combine the outstanding shares of Common Stock into a
greater or lesser number of shares (any such sale, issuance,
subdivision or combination being herein called a "Change of Shares"),
then, and thereafter upon each further Change of Shares, the Conversion
Price in effect immediately prior to such Change of Shares shall be
changed to a price (rounded to the nearest cent) determined by
multiplying the Conversion Price in effect immediately prior thereto by
a fraction, the numerator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to the sale or
issuance of such additional shares or such subdivision or combination
and the number of shares of Common Stock which the aggregate
consideration received (determined as provided in subsection 4(c)(v)(F)
below) for the issuance of such additional shares would purchase at the
greater of (i) the Conversion Price in effect on the date of such
issuance or (ii) the Market Price as of such date, and the denominator
of which shall be the number of shares of Common Stock outstanding
immediately after the sale or issuance of such additional shares or
such subdivision or combination. Such adjustment shall be made
successively whenever such an issuance is made.
It should be noted that the foregoing provides price protection both for (i)
issuances under the Conversion Price and (ii) issuances under the Market Price
of the Common Stock.
For purposes of the foregoing, the Certificate of Designation further provides
the following definition:
Section 4(c)(v):
(v) For purposes of Section 4(c)(i) hereof, the following
provisions (A) to (F) shall also be applicable:
(A) The number of shares of Common Stock deemed
outstanding at any given time shall include all shares of
capital stock convertible into or exchangeable for Common
Stock and all shares of Common Stock issuable upon the
exercise of any convertible debt, warrants outstanding on the
date thereof and options outstanding on the date thereof.
Accordingly, calculations are based on a fully-diluted number, including
issuance of Common Stock on conversion of Series A Convertible Preferred Stock
at the Conversion Price in effect prior to the recalculation.
EXHIBIT H
SUBORDINATED NON-NEGOTIABLE PROMISSORY NOTE
$2,000,000 St. Louis, Missouri
May __, 1999
PALATIN TECHNOLOGIES, INC., a Delaware corporation
(hereinafter called the "COMPANY"), for value received, hereby promises to pay
to MALLINCKRODT INC., a Delaware corporation (hereinafter called "MALLINCKRODT")
the principal sum of Two Million Dollars ($2,000,000), on the date specified
herein below, and to pay simple interest from the date hereof on the unpaid
principal amount hereof at the rate of 9% per annum, payable in full on the date
when the principal amount hereof shall have become due and payable, whether at
maturity or by acceleration or otherwise, and thereafter on demand at the rate
of 12% per annum on any overdue principal amount and (to the extent permitted by
applicable law) on any overdue interest until paid.
All payments of principal and interest on this Note shall be
in such coin or currency of the United States of America as at the time of
payment shall be legal tender for payment of public and private debts, and shall
be made at the offices of MALLINCKRODT, 000 XxXxxxxxx Xxxxxxxxx, P. O. Xxx 0000,
Xx. Xxxxx, Xxxxxxxx 00000, or its successors or assigns, as applicable.
1. Events Requiring Payment. The principal hereunder and all
interest accrued thereon shall be due and payable in full on the earliest to
occur of either of the following dates or events: (i) the execution by
MALLINCKRODT and COMPANY of a Strategic Collaboration Agreement relative to the
development, manufacture, marketing and sale of LeuTech(R), a
radiopharmaceutical imaging product useful in imaging infection and inflamation,
or (ii) December 31, 2000. In the event of the occurrence of the event set forth
in clause (i) of the immediately preceding sentence, the principal and interest
due hereunder will be paid by offset against amounts otherwise due and payable
to COMPANY by MALLINCKRODT as a consequence of the execution of said Strategic
Collaboration Agreement.
2. Security for Repayment. Repayment of this Note shall be
secured by an interest in substantially all of the assets of COMPANY ("Secured
Assets"), as more fully described in and in accordance with the terms of that
certain Security Agreement between MALLINCKRODT and the COMPANY attached hereto
as Exhibit I and expressly made a part hereof (the "Security Agreement").
COMPANY affirms and MALLINCKRODT understands that the lien securing the
repayment obligations under this Note shall be secondary in priority and
subordinate to any security interest held by any banks, lenders, or other
financial institutions (collectively "Banks") to whom the COMPANY has granted
any security interest or other lien on or prior to the date hereof, and in
accordance with the terms and conditions specifically governing such security
interest or other liens as such terms and conditions exist on and as of the date
hereof.
3. Loss, Theft, Destruction or Mutilation of Note. Upon
receipt of evidence reasonably satisfactory to the COMPANY of the loss, theft,
destruction or mutilation of this Note, and, in the case of any such loss, theft
or destruction, upon receipt of an affidavit of loss and indemnity from
MALLINCKRODT reasonably satisfactory to the COMPANY, or, in the case of any such
mutilation, upon surrender and cancellation of this Note, the COMPANY will make
and deliver, in lieu of this Note, a new Note of like tenor and unpaid principal
amount and dated as of the original date hereof.
4. Prepayment. Upon notice given to MALLINCKRODT the COMPANY
may, at its option, prepay the Note, as a whole at any time or in part from time
to time together with interest accrued thereon to the date of such prepayment.
Upon any prepayment of a portion of the principal amount of this Note,
MALLINCKRODT, at its option, may require the COMPANY to execute and deliver at
the expense of the COMPANY, upon surrender of this Note, a new Note for the
principal amount of this Note then remaining unpaid, or may present this Note to
the COMPANY for notation hereon of the payment of the portion of the principal
amount of this Note so prepaid.
5. Covenants. The COMPANY covenants and agrees that, so long
as any Note shall be outstanding;
(a) The COMPANY will promptly pay and discharge or cause to be
paid and discharged, before the same shall become in default, all lawful taxes
and assessments imposed upon the COMPANY or any subsidiary or upon the income
and profits of the COMPANY or any subsidiary, or upon any property, real,
personal or mixed, belonging to the COMPANY or any subsidiary, or upon any part
thereof by the United States or any State thereof, as well as all lawful claims
for labor, materials and supplies which, if unpaid, would become a lien or
charge upon the Secured Assets thereof; provided, however, that neither the
COMPANY nor any subsidiary shall be required to pay and discharge or to cause to
be paid and discharged any such tax, assessment, charge, levy or claim so long
as the COMPANY or its subsidiary (as appropriate) shall be contesting the
validity thereof in good faith by appropriate proceedings or the COMPANY shall,
in its good faith judgment, deem the validity thereof to be questionable.
(b) The COMPANY will at all times maintain and keep, or cause
to be maintained and kept, in good repair, working order and condition
(reasonable wear and tear excepted) all significant properties of the COMPANY
and its subsidiaries which are included in the Secured Assets (including
maintenance of fees for filing or registration due and payable with respect to
any intellectual property rights included in the Secured Assets) and will from
time to time make or cause to be made all reasonably necessary and proper
repairs, renewals, replacements, betterments and improvements thereto.
2
(c) The COMPANY will keep adequately insured, and will cause
each of its subsidiaries to keep adequately insured, by financially sound and
reputable insurers, all property included in the Secured Assets of a character
usually insured by corporations engaged in the same or a similar business
similarly situated against loss or damage of the kinds customarily insured
against by such corporations.
(d) The COMPANY will at all times keep, and cause each of its
subsidiaries to keep, proper books of record and account in which proper entries
will be made of its transactions in accordance with generally accepted
accounting principles consistently applied.
(e) The COMPANY will do or cause to be done all things
necessary and lawful to preserve and keep in full force and effect its corporate
existence, rights and franchises and the corporate existence, rights and
franchises of each of its operating subsidiaries; provided, however, that
nothing in this paragraph (e) shall prevent (i) a consolidation or merger of, or
a sale, transfer or disposition of all or any substantial part of the property
and assets of the COMPANY not prohibited by the provisions of paragraph (f)
below, or (ii) the abandonment or termination of any rights or franchises of the
COMPANY, or the liquidation or dissolution of, or a sale, transfer or
disposition (whether through merger, consolidation, sale or otherwise) of all or
any substantial part of the property and assets of any subsidiary or the
abandonment or termination of the corporate existence, rights and franchises of
any subsidiary if such abandonment, termination, liquidation, dissolution, sale,
transfer or disposition is, in the good faith business judgment of the COMPANY,
in the best interests of the COMPANY and does not prejudice MALLINCKRODT in any
material respect.
(f) The COMPANY will not consolidate or merge with or into, or
sell or otherwise dispose of all or substantially all of its property to, any
other corporation or other entity, unless:
(i) the surviving corporation or other entity (if other than
the COMPANY) shall expressly and effectively assume in writing the due and
punctual payment of the principal of and interest on the Note, and the due and
punctual performance and observation of all the terms, covenants, agreements and
conditions of this Note and the Security Agreement to be performed or observed
by the COMPANY to the same extent as if such surviving corporation had been the
original maker of the Note,
(ii) the COMPANY or such other corporation or other entity
shall not otherwise be in default in the performance or observance of any
material covenant, agreement or condition of the Note or of the Security
Agreement, and
3
(iii) MALLINCKRODT shall have received, in connection
therewith, immediately prior to the closing of such transaction an opinion of
counsel for the COMPANY (or other counsel satisfactory to MALLINCKRODT), in form
and substance satisfactory to MALLINCKRODT, to the effect that any such
consolidation, merger, sale or conveyance and any such assumption complies with
the provisions of this paragraph (f).
6. Events of Default. If any one or more of the following
events, herein called "Events of Default," shall occur, for any reason
whatsoever, and whether such occurrence shall, on the part of the COMPANY or any
subsidiary, be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of a court of competent jurisdiction or any order, rule or regulation of
any administrative or other governmental authority, and such Event of Default
shall be continuing:
(a) default shall be made in the payment of the principal or
interest of this Note when and as the same shall become due and payable in
accordance with the terms provided herein, or
(b) default shall be made in the due observance or performance
of any other covenant, representation, warranty, condition or agreement on the
part of the COMPANY to be observed or performed pursuant to the terms hereof or
pursuant to the Security Agreement and such default shall continue for thirty
(30) days after receipt of written notice thereof, specifying such default and
requesting that the same be remedied, by the COMPANY from MALLINCKRODT, or
(c) the entry of a decree or order for relief by a court
having jurisdiction in respect of the COMPANY or any subsidiary in any
involuntary case under the federal bankruptcy laws, as now constituted or
hereafter amended, or any other applicable federal or state bankruptcy,
insolvency or other similar laws, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of the COMPANY
or any subsidiary or for any substantial part of any of their property, or for
all or any portion of the Secured Assets, or ordering the winding-up or
liquidation of any of their affairs and the continuance of any such decree or
order unstayed and in effect for a period of sixty (60) days, or
(d) the commencement by the COMPANY or any subsidiary of a
voluntary case under the federal bankruptcy laws, as now constituted or
hereafter amended, or any other applicable federal or state bankruptcy,
insolvency or other similar laws, or the consent by any of them to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) of the COMPANY or
any subsidiary or for any substantial part of their property, or for all or any
portion of the Secured Assets, or the making by any of them of any assignment
for the benefit of creditors, or
4
(e) any default, as defined in any instrument evidencing or
under which the COMPANY or any subsidiary has outstanding at the time any
indebtedness for money borrowed in excess of $50,000 in aggregate principal
amount, shall occur,
then, MALLINCKRODT may, at its option, by notice to the COMPANY, declare this
Note to be, and this Note shall thereupon be and become, forthwith due and
payable together with interest accrued thereon without presentment, demand,
protest or further notice of any kind, all of which are expressly waived to the
extent permitted by law.
7. Suits for Enforcement. In case any one or more of the
Events of Default specified in Section 6 of this Note shall occur and be
continuing, MALLINCKRODT may proceed to protect and enforce its rights by suit
in equity, action at law and/or by other appropriate proceeding, whether for the
specific performance of any covenant or agreement contained in this Note or in
aid of the exercise of any power granted in this Note, or may proceed to enforce
the payment of this Note or to enforce any other legal or equitable right
hereunder.
In case of any default under this Note, the COMPANY will pay
to MALLINCKRODT such amounts as shall be sufficient to cover the costs and
expenses of MALLINCKRODT directly attributable to said default, including,
without limitation, collection costs and reasonable attorneys' fees, to the
extent actually incurred.
8. Remedies Cumulative. No remedy herein conferred upon
MALLINCKRODT is intended to be exclusive of any other remedy and each and every
such remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law on in equity or by statute
or otherwise.
9. No Waiver. No course of dealing between the COMPANY and
MALLINCKRODT or any delay on the part of MALLINCKRODT in exercising any rights
hereunder shall operate as a waiver of any of its rights hereunder. No failure
by MALLINCKRODT on any occasion to exercise any rights or remedies it may have
hereunder shall prejudice or operate as a waiver of any rights MALLINCKRODT may
have on any subsequent occasion to enforce its rights or take advantage of its
remedies pursuant to this Note.
10. Subordination.
(a) Anything in this Note to the contrary notwithstanding, the
obligation of the COMPANY to pay the principal of and interest on this Note, and
to discharge all its other obligations hereunder or under the Security
Agreement, shall be subordinate and junior in right of payment to any
indebtedness of COMPANY to Banks that is outstanding on and as of the date
hereof. The obligations of the COMPANY to which this Note is subordinate and
junior in the right of payment in accordance with said Subordination Agreement
are sometimes herein referred to as "Senior Debt." MALLINCKRODT hereby
acknowledges that the Senior Debt includes,
5
without limitation, debt under a patent assignment and license agreement with
Aberlyn Capital Management Limited Partnership dated as of July 15, 1993.
(b) Subject to the payment in full of all Senior Debt,
MALLINCKRODT shall be subrogated to the rights of the holders of Senior Debt to
receive payments or distributions of any kind or character, whether in cash,
property, stock or obligations (including any delivery of the Secured Assets),
which may be payable or deliverable to the holders of Senior Debt. Subject to
the rights of the holders of the Senior Debt, in accordance with the terms of
any agreements between any of such holders and COMPANY, to receive cash,
property, stock or obligations otherwise payable or deliverable to the holder of
this Note, nothing herein shall either impair, as between the COMPANY and
MALLINCKRODT, the obligation of the COMPANY, which is unconditional and
absolute, to pay MALLINCKRODT the principal hereof and interest hereon in
accordance with the terms and the provisions of this Note or prevent
MALLINCKRODT from exercising all remedies otherwise permitted by applicable law
or upon default hereunder. In addition, nothing set forth herein shall be
construed as having any effect or purpose to limit or change in any manner any
rights or remedies MALLINCKRODT may have under any other agreement between
MALLINCKRODT and the COMPANY, whether currently in effect or entered into
hereafter.
11. Successors and Assigns. All the covenants, stipulations,
promises and agreements in this Note contained by or on behalf of the COMPANY
shall bind its successors and assigns, whether so expressed or not.
12. Governing Law. This Note shall be enforced and construed
in accordance with the laws of the State of New York, without giving effect to
its conflict of laws principles.
13. Headings. The headings of the Sections and paragraphs of
this Note are inserted for convenience only and do not constitute a part of this
Note.
14. Validity. The execution and delivery of this Note and the
Security Agreement and the performance by the COMPANY of its obligations
hereunder and thereunder have been duly authorized by all requisite corporate
action by the COMPANY and will not violate any provisions of law, any of the
corporate governing documents of the COMPANY or any provisions of any indenture,
agreement or other instrument to which COMPANY or any of its assets is bound.
This Note has been duly executed and delivered by the COMPANY and constitutes
the legal, valid and binding obligation of the COMPANY, enforceable against the
COMPANY in accordance with its terms. The execution and delivery of this Note
and the performance by the COMPANY of its obligations hereunder and under the
Security Agreement does not and will not violate any judicial decree or order.
6
IN WITNESS WHEREOF, PALATIN TECHNOLOGIES, INC. has caused this
Note to be signed in its corporate name by one of its officers thereunto duly
authorized and to be dated as of the date and year first above written.
PALATIN TECHNOLOGIES, INC.
By:_________________________________
Name:
Title:
EXHIBIT I
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Security Agreement") is entered
into as of May __, 1999, by and among Palatin Technologies, Inc., a Delaware
corporation, with its principal executive offices in Princeton, New Jersey (the
"Debtor"), and Mallinckrodt Inc., a Delaware corporation, with its principal
offices in St. Louis, Missouri (the "Secured Party").
WHEREAS, on and as of the date hereof, the Debtor has executed
and delivered to Secured Party a certain Subordinated Non-Negotiable Promissory
Note in the original principal amount of Two Million Dollars ($2,000,000) (such
promissory note, and any and all amendments, modifications, extensions,
restatements, renewals, refinancings and/or replacements thereof from time to
time being herein referred to as the "Note");
WHEREAS, the indebtedness evidenced by the Note will be
secured as provided in Section 2 thereof and as consistently hereinafter
provided; and
WHEREAS, Debtor, in consideration of and in order to induce
Secured Party to make the advance of Two Million Dollars ($2,000,000) has
determined that it is in the best interest of Debtor and has agreed to execute,
deliver and perform this Security Agreement;
NOW, THEREFORE, for valuable consideration, the sufficiency
and receipt of which are hereby acknowledged, the Debtor and the Secured Party
hereby agree as follows:
1. Definitions. As used in this Security Agreement, the
following terms, which are in addition to terms defined elsewhere in this
Security Agreement, shall have the respective meanings as listed below:
"Accounts" shall mean (i) any right to payment for services
rendered and/or for goods sold or leased, now or hereafter owing to or held by
Debtor, whether such right to payment be classified by law as an instrument,
chattel paper, contract right, account, general intangible or otherwise, (ii)
the security, if any, for such right to payment, (iii) Debtor's right, title and
interest (including, without limitation, any applicable right of reclamation or
stoppage in transit) in or to the personal property, if any, that is the subject
of such right to payment, and (iv) all books, ledgers and records pertaining to
such right to payment (whether written or electronic), all whether now owned or
hereafter acquired by Debtor.
"Deposit Accounts" means any and all accounts, deposits,
investments, monies, securities or other property of Debtor.
"Equipment" shall mean all machinery, computer hardware and
software, equipment, appliances, furniture, fixtures, tools, supplies and
tangible personal property (except Inventory) of every kind and description,
including but not limited to, property included within the term "Equipment" as
defined in the UCC, now owned or hereafter acquired by Debtor.
"General Intangibles" shall mean all property (other than
Accounts, Equipment, Inventory, and Deposit Accounts) including, but not limited
to, all rights in patents, patent applications, trademarks and other
intellectual property, choses in action, contract rights, tax refunds, rights in
respect of employee benefit plan assets, trademarks, trade names, licenses,
consents, permits, marketing agreements, copyrights, customer lists,
identification of suppliers, data, plans, specifications, recorded knowledge,
manuals, standards, catalogs, books, records, sales data and other information
relating to sales, certifications and approvals of governmental agencies
pertaining to Debtor's operations or business, all rights of Debtor to receive
return of deposits and trust payments, all judgments, awards and warehouse
receipts, in each case whether now owned or hereafter acquired by Debtor and
whether now existing or hereafter arising.
"Inventory" shall mean all merchandise, finished goods, raw
materials, work in process, packaging, supplies, all types of property of Debtor
included within the term "Inventory" as defined in the UCC and other tangible
personal property held for sale or lease or furnished or to be furnished under
contracts of service or used or consumed in Debtor's business, wherever located,
whether now owned or hereafter acquired by Debtor (including, without
limitation, goods which are returned to or repossessed by Debtor) and whether
now existing or hereafter arising.
"Secured Assets" shall mean and include all property and
interests therein of every kind and description (tangible or intangible, real,
personal or mixed), wherever located, now owned or hereafter acquired by the
Debtor and whether now existing or hereafter arising, including, without
limitation, (i) all Accounts, (ii) all Equipment, (iii) all Inventory, (iv) all
General Intangibles, (v) all Deposit Accounts, (vi) all accessions to and
products of any of the foregoing, (vii) all additions to, or substitutions or
replacements for any of the foregoing, (viii) all proceeds of, or from, any of
the foregoing, (including insurance proceeds, whether or not the Secured Party
is the loss payee thereunder), and (ix) in all cases, whether now owned or
existing or hereafter acquired or arising.
"UCC" shall mean the Uniform Commercial Code as amended from
time to time, and any successor statute, enacted and in effect at any time in
the State of New York.
2
2. Definitions Incorporated. The following terms as used
herein have the meanings given to them in the Note: "Banks," "Event of Default,"
and "Senior Debt." In the event that the Note is from time to time amended or
modified or any instrument is substituted in replacement thereof, such
amendment, modification or substitution shall, from and after the date thereof,
be included within the definition of the "Note" as used herein. Terms used
herein, if not otherwise defined herein, shall have the meanings given them in
the UCC as enacted and as from time to time in effect in New York.
3. Security Interest. The Debtor, and its successors and
assigns, hereby give and grant to the Secured Party a security interest in all
the Secured Assets and all of their right, title and interest therein, whether
now owned or existing or hereafter acquired or arising, together with all
proceeds therefrom to secure (i) the payment of all principal of and interest
heretofore or hereafter owing or outstanding on the Note (including any notes
substituted therefor), (ii) the payment by the Debtor of all costs and expenses
(including reasonable attorneys' fees) incurred by the Secured Party in the
collection of amounts due under the Note or in enforcing its rights under the
Note or this Security Agreement and (iii) the performance by the Debtor of all
its obligations under the Note or this Security Agreement. The foregoing set
forth in clauses (i), (ii) and (iii) of the previous sentence shall hereinafter
be referred to as the "Obligations." Anything in this Security Agreement to the
contrary notwithstanding, the Obligations are subordinate and junior in right of
payment to any rights of the Senior Debt, as those rights may appear and exist
on and as of the date hereof.
4. Debtor Remains Liable. Anything herein to the contrary
notwithstanding, (i) Debtor shall remain liable under all contracts and
agreements included in the Secured Assets to the extent set forth therein to
perform all of its duties and obligations thereunder to the same extent as if
this Security Agreement had not been executed, (ii) the exercise by the Secured
Party of any of its rights hereunder shall not release Debtor from any of its
duties or obligations under the contracts and agreements included in the Secured
Assets, and (iii) the Secured Party shall not have any obligation or liability
under the contracts and agreements included in the Secured Assets or be
obligated to perform any of the obligations or duties of Debtor thereunder or to
take any action to collect or enforce any claim for payment assigned hereunder.
5. Accounts. Subject to the rights of holders of the Senior
Debt as described in Section 10 of the Note, with respect to Accounts included
within the Secured Assets, Debtor covenants and agrees as follows:
(a) Subject to the rights of holders of the Senior Debt as
described in Section 10 of the Note, the Debtor shall, after the
occurrence and during the continuance of an Event of Default which
remains uncured (if by the express
3
terms of the Note it may be cured), at the request of the Secured
Party, execute and deliver a form of agreement satisfactory to the
Secured Party and its counsel, establishing a lock box and cash
collateral arrangement with the Secured Party.
(b) In the event a government (including the United States
Government, the government of any state or any local government) or any
department, agency, instrumentality or subdivision thereof is an
account debtor or obligor on any Accounts or is a party to any contract
or order out of which will arise an Account, the Debtor shall promptly
notify the Secured Party of that fact and will execute such instruments
and take such steps required by the Secured Party in order that the
Account and all moneys due to the Secured Party and due notice thereof
is given to the appropriate governmental official.
(c) After an Event of Default and the repayment in full of the
Senior Debt and the termination of any agreements relating thereto, the
Secured Party shall have the right from time to time to arrange for
verification of all Accounts directly with the account debtors or by
other methods reasonably satisfactory to the Secured Party. Any such
verification shall be conducted in such a manner as to prevent (where
possible) or minimize disruption to Debtor's business.
(d) In the event any Accounts are evidenced by chattel paper
or other negotiable instruments, the Debtor shall, after the occurrence
and during the continuance of an Event of Default and subject to the
Senior Debt, deliver the same to the Secured Party (with all requisite
endorsements, in favor of the Secured Party, which the Secured Party
may make as attorney-in-fact for the Debtor) as soon as possible and
prior to such delivery shall hold (subject to the Senior Debt) the same
in trust for the benefit of the Secured Party.
(e) Except as otherwise provided in this subsection, the
Debtor shall use its commercially reasonable best efforts to collect,
at its own expense, all amounts due or to become due on the Accounts.
After the occurrence and continuance of an Event of Default, the
Secured Party shall have the right at any time, subject to the Senior
Debt, upon written notice to the Debtor, at the expense of the Debtor,
to take such action to collect the Accounts as the Secured Party deems
proper, including, without limitation, the right to notify account
debtors to remit all payments to the Secured Party and to adjust,
settle and compromise payment thereof, in the same manner and to the
same extent as the Debtor might have done. At such time as the Secured
Party is entitled to exercise and in fact exercises its rights pursuant
to the preceding sentence, the Debtor shall not take any action to
collect, adjust, settle or compromise any Account except with the
written consent of the Secured Party and any collections of Accounts
received or held by the Debtor shall be
4
property of the Secured Party, shall be held in trust for the benefit
of the Secured Party and shall be delivered to the Secured Party
immediately with all requisite endorsements in favor of the Secured
Party which the Secured Party may make as attorney-in-fact for the
Debtor. The Secured Party does not have any obligation to the Debtor to
collect or attempt to collect any Accounts or to preserve any rights
against any party in connection therewith.
(f) Debtor shall upon reasonable request by the Secured Party
and immediately after the occurrence of an Event of Default give the
Secured Party notice of all of the Deposit Accounts.
6. Inventory. So long as no Event of Default exists, Debtor
may sell the Inventory in the ordinary course of business on customary business
and payment terms, but no sale in bulk shall be permitted without the prior
written consent of the Secured Party.
7. Equipment--Possession. Debtor is entitled to the possession
of its Equipment and to use the same in connection with its business, subject to
the rights of the Secured Party hereunder upon the occurrence and continuance of
an Event of Default.
8. Records. Debtor will at all times keep accurate and
complete records of its Accounts, Deposit Accounts, Inventory, General
Intangibles, Equipment and other items included in the Secured Assets, and the
Secured Party shall have the right at all reasonable times, without disruption
to the business of the Debtor, to examine and inspect the same and to make
copies thereof.
9. Representations, Warranties and Covenants of the Debtor.
With respect to the Secured Assets, Debtor hereby represents, warrants and
covenants to the Secured Party as follows:
(a) Debtor is, and will be, the sole owner of all Accounts now
or hereafter appearing on the books of Debtor, and that the same are
and will be, during the term of this Security Agreement, free and clear
from any and all assignments, liens, and security interests except for
the security interests of the holders of the Senior Debt and except as
created hereby.
(b) All Accounts as shown on the books of Debtor or as shown
in any certificate, statement or other report, delivered by the Debtor
to the Secured Party, shall represent valid and existing obligations of
the account debtors (except as consistent with past practice and
experience of the Debtor) representing goods or services delivered or
performed, and invoiced, and which are not subject to any defense,
counterclaim or right of setoff unless otherwise stated on such
certificate, statement, or other report.
5
(c) Debtor is and, during the term of this Security Agreement,
will be the owner of each item of the Secured Assets; the same will be
used solely in connection with the Debtor's business; all of the
Equipment, Inventory and General Intangibles are free and clear of all
liens and encumbrances whatsoever, except as otherwise provided herein
and except for the security interests of the holders of the Senior
Debt.
(d) Debtor will execute all financing statements and
amendments and supplements thereto, if any, and will attend to the
filing of any and all continuation statements, as may be reasonably
requested by the Secured Party in order to continue the validity of the
security interests of the Secured Party hereunder.
(e) Debtor shall, from time to time as requested by the
Secured Party, take such action and execute and deliver to the Secured
Party all such instruments, supplements, further assurances and
security or other agreements as may be required or reasonably requested
by the Secured Party in order to perfect and continue the Secured
Party's security interest in the Secured Assets hereunder.
(f) Debtor agrees to pay, and to save the Secured Party
harmless from, any and all liabilities, costs and expenses (including,
without limitation, reasonable legal fees and expenses) except those
caused by willful misconduct or gross negligence of the Secured Party
(i) with respect to, or resulting from, any delay in paying, any and
all excise, sales or other taxes which may be payable or determined to
be payable with respect to any of the Secured Assets, and (ii) in
connection with any of the transactions contemplated by this Security
Agreement.
(g) Debtor will not create, incur or permit to exist, and it
will defend the Secured Assets against, and it will take such other
action as is necessary to remove, any lien or claim on or to the
Secured Assets, other than the liens created hereby and the liens
created pursuant to the Senior Debt, and it will defend the right,
title and interest of the Secured Party in and to any of the Secured
Assets against the claims and demands of all persons whomsoever, except
for any claims and demands of the Senior Debt.
(h) Debtor will not sell, transfer, lease or otherwise dispose
of any of the Secured Assets, except for sales of Inventory by Debtor
in the ordinary course of its business.
6
(i) Debtor has the power to execute and deliver this Security
Agreement and to perform its obligations hereunder and has taken all
necessary action and has received all required consents (private and
governmental) to authorize such execution, delivery and performance,
and therefore this Security Agreement constitutes the legal, valid and
binding obligation of the Debtor, enforceable against it and the
Secured Assets in accordance with its terms. Furthermore, to the best
of Debtor's knowledge, this Security Agreement does not and will not
violate any judicial decree or order, or any rules or regulations of
any federal, state or local government, or any branch, agency or
instrumentality of same.
(j) The execution, performance and delivery of this Security
Agreement does not violate or conflict with the terms or provisions of,
or the Debtor's performance under, any agreement, document or
instrument by which the Debtor is bound.
10. Secured Party's Duties. The powers conferred on the
Secured Party hereunder are solely to protect its interest in the Secured Assets
and shall not impose any duty upon it to exercise any such powers. Secured Party
shall have no obligation to preserve rights against prior parties.
11. Default Remedies. Except as expressly and unambiguously
set forth herein, this Security Agreement shall be deemed absolute and without
conditions and, subject to the rights of the Senior Debt, the Secured Party may
enforce its rights with respect to the Secured Assets without first being
required to attempt collection of any sums due from the Debtor. If an Event of
Default shall occur and remain uncured (if it is curable by the express terms of
the Note) for thirty (30) days after receipt of notice thereof by Debtor from
the Secured Party, the Secured Party shall have the following rights (subject
only to Section 10 of the Note and the rights of the holders of the Senior Debt
generally):
(a) to perform any defaulted covenant or agreement of this
Security Agreement to such extent as the Secured Party shall reasonably
determine and advance such moneys as it shall deem reasonably advisable
for the aforesaid purpose and all moneys so advanced, together with
interest thereon from the date advanced until paid at a rate per annum
equal to the rate then in effect on the Note, shall be secured hereby
and shall be repaid promptly after notice of the amount due without
demand, provided, however, that nothing herein contained shall be
construed to require the Secured Party to advance money for any of the
aforesaid purposes;
(b) to notify all account debtors, to the extent permitted by
applicable law or regulations, to pay directly to the Secured Party or
otherwise as the Secured Party may specify all amounts they owe then or
thereafter to Debtor;
7
(c) to take control of any and all proceeds to which the
Secured Party may be entitled under this Security Agreement, the Note,
or under any applicable laws;
(d) to take immediate possession of the Secured Assets and,
with or without taking possession of the Secured Assets, to sell, lease
or otherwise dispose of any or all of the Secured Assets, either at
public or private sale, upon commercially reasonable terms, and the
Secured Party may become the purchaser thereof at public sale; provided
that, any sale may be adjourned at any time and from time to time to a
reasonably specified time and place by announcement at the time and
place of sale as publication or otherwise of the time and place of such
adjourned sale; provided further that, subject to the Senior Debt, the
proceeds of any sale shall be applied (i) first to the expenses of
taking, holding and preparing for sale or disposition, and sale or
disposition and the like (including reasonable attorneys' fees), (ii)
next to the principal and interest due under the Note and the other
amounts secured under clauses (i) and (ii) of Section 3 hereof, (iii)
next to amounts secured under clause (iii) of Section 3 hereof, (iv)
next to the holder of any subordinate security interest therein if
written notification of demand therefor is received and verified by the
Debtor before distribution of the proceeds and (v) lastly, any surplus
to Debtor and Debtor shall remain liable for any deficiency; and
provided further that, any such sale, public or private, may be made on
credit at the option of the Secured Party; and provided finally that,
the Secured Party shall have the right to conduct any such sale on
Debtor's premises, and the Secured Party shall have such right of
possession of said premises as shall be necessary or convenient for
such purpose but the Secured Party shall make every reasonable effort
to avoid (where possible) or minimize disruption of Debtor's business
activities in so doing;
(e) to take immediate possession of the Secured Assets and to
use or operate the Secured Assets in order to preserve the same or
their value, and collect, receive and use all of the net profits from
such use or operation to pay indebtedness secured by such Secured
Assets;
(f) to require Debtor, to the extent practicable, to assemble
the Secured Assets and make them available to the Secured Party at such
locations within the county wherein such Secured Assets are located as
the Secured Party shall designate;
(g) to enter all of the Debtor's facilities to remove the
Secured Assets therefrom and take possession of the Debtor's books and
records and computer hardware and software, and to use all of the same
in a manner the Secured Party deems appropriate in order to preserve
and sell or otherwise
8
dispose of the Secured Assets;
(h) to (without assuming any obligations or liability
thereunder), at any time and from time to time, enforce against any
licensee or sublicensee all rights and remedies of the Debtor in, to
and under any patent licenses or trademark licenses included in the
General Intangibles and, in the exercise of commercial reasonableness,
take or refrain from taking any action under any such licenses, and the
Debtor hereby releases the Secured Party free and harmless from and
against any claims arising out of, any lawful action so taken or
omitted to be taken under applicable law with respect thereto;
(i) to proceed to protect and enforce its rights under the
Note and this Security Agreement by a suit or suits in equity or at
law, whether for specific performance or observance of any terms,
provisions, covenants or conditions herein or therein contained, in aid
of the execution of any power herein or therein granted, for any
foreclosure hereunder or thereunder, or for the enforcement of any
other proper legal or equitable remedy;
(j) to exercise any such additional and/or different rights or
remedies as are provided for in the Note; and
(k) to act as true and lawful attorney-in-fact of the Debtor,
with full power of substitution, with full irrevocable power and
authority in the place and stead of the Debtor, in the name of the
Debtor, or in its own name, for the purpose of carrying out the terms
of this Security Agreement, to take any and all appropriate action and
to execute any and all documents and instruments which may be
reasonably necessary or desirable to accomplish the purposes of this
Security Agreement.
The Secured Party shall have any and all other rights and
remedies provided by law or equity, including, without limitation, the rights
and remedies of a secured party. All of the Secured Party's rights and remedies
will be cumulative, and no waiver of any default will affect any other
subsequent default. The rights and remedies provided in this Security Agreement
are cumulative, may be exercised concurrently or separately, may be exercised
from time to time and in such order, without any marshalling, as the Secured
Party shall determine.
Subject to the Senior Debt, nothing herein contained shall be
construed as preventing the Secured Party from taking all reasonable and lawful
actions to protect its interest in the event that liquidation, insolvency,
bankruptcy, reorganization or foreclosure proceedings of any nature whatsoever
affecting the property or assets of Debtor should be instituted.
The Secured Party's sole duty with respect to the custody,
safekeeping
9
and physical preservation of the Secured Assets in its possession, shall be to
deal with it in the same manner as the Secured Party deals with similar property
for its own account. Neither the Secured Party, nor any of its respective
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon all or any part of the Secured Assets or for any delay
in doing so or shall be under any obligation to sell or otherwise dispose of any
Secured Assets upon the request of the Debtor or otherwise.
12. General Provisions. (a) This Security Agreement and the
security interests of the Secured Party in the Secured Assets created hereby
shall cease and terminate only upon repayment in full of the principal and any
accrued interest under and pursuant to the Note or upon cancellation of the Note
by Secured Party.
(b) Debtor hereby waives all demands, notices, presentments,
claims, defenses and protests of any kind, except as expressly and
unambiguously provided herein and unless not permitted by applicable
law, which might in any manner adversely affect the rights of Secured
Party herein.
(c) Except where the application of another law is mandatory,
this Security Agreement shall be construed to be a contract made under
and pursuant to the laws of New York, and all of the terms, covenants
and conditions contained herein shall be governed by and construed in
accordance with such laws, without giving effect to the conflict of
laws principles contained in such laws.
(d) This Security Agreement, all supplements hereto and all
amendments hereof, shall inure to the benefit of and be binding upon
the Debtor, the Secured Party, and their respective successors and
assigns, but this Security Agreement may not be assigned by Debtor
without the written consent of the Secured Party.
(e) No waiver of any term, provision, covenant or condition
contained in this Security Agreement, or of any breach of any such
term, provision, covenant or condition, shall constitute a waiver of
any subsequent breach or justify or authorize the non-observance on any
other occasion of such term, provision, covenant or condition contained
in this Security Agreement.
(f) The invalidity or unenforceability of any term or
condition hereof shall not affect the validity or enforceability of any
other term or condition hereof or of this Security Agreement as a
whole.
(g) In the event of any conflict or inconsistency between the
terms of the Note and those of this Security Agreement, the former
shall prevail.
10
IN WITNESS WHEREOF, the parties have caused this Security
Agreement to be executed in St. Louis, Missouri at the time first above written
by their officers thereunto duly authorized.
MALLINCKRODT INC.
("SECURED PARTY")
By:________________________________
PALATIN TECHNOLOGIES, INC.
("DEBTOR")
By:________________________________
11
