EXHIBIT 10.2
CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED BY MARKING SUCH
PORTIONS WITH ASTERISKS (THE "▇▇▇▇"). THIS EXHIBIT HAS BEEN FILED SEPARATELY
WITH THE SECRETARY OF THE COMMISSION WITHOUT THE ▇▇▇▇ PURSUANT TO THE COMPANY'S
APPLICATION REQUESTING CONFIDENTIAL TREATMENT.
LICENSE AND SUPPLY AGREEMENT
This License and Supply Agreement (this "Agreement") is entered as of the
Effective Date, by and between ADVANCED TISSUE SCIENCES, INC., a Delaware
corporation ("ATS"), and BIOZHEM COSMECEUTICALS INC., A TEXAS CORPORATION
("Buyer").
WHEREAS, ATS is a leading tissue engineering company engaged in the
development of human-based tissue products for therapeutic applications;
WHEREAS, certain of the living cells cultured by ATS produce a nutrient
solution (the "ATS Nutrient Solution," as more specifically described in Exhibit
-------
A hereto);
-
WHEREAS, Buyer wishes to obtain exclusive rights to use the ATS Nutrient
Solution in Buyer's skin care products for sales in the Marketplace (as defined
below), and ATS is willing to grant such rights to Buyer and to supply Buyer
with ATS Nutrient Solution pursuant to the terms and conditions of this
Agreement;
WHEREAS, in connection with this Agreement, Buyer is issuing ATS a warrant
to purchase [**] of its shares of Common Stock outstanding as of the Effective
Date (subject to certain adjustments) at a [**
] pursuant to a Warrant to Purchase Common Stock of even date
herewith substantially in the form of Exhibit C attached hereto;
---------
WHEREAS, in connection with this Agreement, Buyer and ATS are entering into
the Investor Rights Agreement of even date herewith substantially in the form of
Exhibit D attached hereto, which provides for, among other things, ATS's
---------
registration rights; and
NOW, THEREFORE, in consideration of the foregoing premises and the terms,
covenants and conditions set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, ATS
and Buyer agree as follows:
1. DEFINITIONS
-----------
1.1 "ATS Nutrient Solution" has the meaning set forth in the Recitals
above.
1.2 "ATS Patent Right(s)" means those certain inventions described in
claims of those patents set forth on attached Exhibit 1.2 or an amendment,
equivalent, counterpart, reissue, extension or continuation (including, without
limitation, a continuation-in-part or a subdivision) of the foregoing Patent(s).
1.3 "Affiliate" means any company owned or controlled to the extent of at
least fifty percent (50%) of its issued and voting capital by a party to this
Agreement and any other company so owned or controlled (directly or indirectly)
by any such company or the owner of any such company.
1.4 "Agreement" means this License and Supply Agreement, as amended from
time to time.
1.5 "Buyer Product(s)" means Buyer's branded skin care products, including
lip gloss and nail care products, but excluding any of Buyer's hair care and
hair growth product(s).
1
1.6 "Contract Year" shall be a twelve month period commencing on April 1st
of any year the Agreement is in effect. The First Contract Year is the period
from April 1, 2001 until March 31, 2002.
1.7 "Delivery Date" means an acknowledged and confirmed date for which
delivery of ATS Nutrient Solution is properly requested in a purchase order.
1.8 "Effective Date" shall be September 25, 2000.
1.9 "FDA" means the United States Food and Drug Administration or any
successor agency or authority, the approval of which is required to market
healthcare products in the United States.
1.10 "First Commercial Sale" means the first commercial sale by Buyer or
its sublicensees (if any) of a Licensed Product.
1.11 "Gross Sales" means, with respect to a Licensed Product, the gross
amount invoiced by Buyer to unrelated third parties for the Licensed Product,
without deduction, except for customer returns. Such amounts shall be determined
from the books and records of Buyer which shall be maintained in accordance with
generally accepted accounting principles.
1.12 "Intellectual Property Rights" means Patent rights, copyrights, trade
secret rights and all other intellectual property rights of any sort.
1.13 "Inventions" means all inventions, discoveries, improvements or other
technology conceived or reduced to practice during the term of this Agreement
solely or jointly by employees or others acting on behalf of Buyer or ATS or
their Affiliates to the extent relating to the ATS Nutrient Solution, the
Manufacturing Know-How or any improvements thereto.
1.14 "Licensed Product" means any Buyer Product which incorporates the ATS
Nutrient Solution (in any concentration quantity), or if it does not contain ATS
Nutrient Solution, the manufacture or use of which would infringe an ATS Patent
Right.
1.15 "Manufacturing Know-How" shall mean all information, techniques,
practices, methods, knowledge, skill and data, which are not generally known
including, but not limited to, a proprietary "trade secret" or other
Intellectual Property Right, whether or not patentable or copyrightable,
relating to or useful for the production, assembly, manufacture, storage and/or
transport of the ATS Nutrient Solution.
1.16 "Marketplace" means the [** ] direct response market of sales of
Buyer Product(s) to end consumers by telephone (including Buyer infomercials and
televised shopping channels), through Buyer-branded or co-branded World Wide Web
site(s), and Buyer-branded stores and kiosks. For purposes of clarity and
without expanding the foregoing, "Marketplace" shall not include mass market
retail, physician offices, spas, or any rights outside the Marketplace.
1.17 "Patent(s)" means all patents, both foreign and domestic (including
without limitation, all substitutions, extensions, reissues, renewals,
reexaminations, patents of addition, supplementary protection certificates and
inventors' certificates thereof), and all patent applications (including
provisional applications, divisions, continuations and continuations-in-part),
heretofore or hereafter filed or having any legal force in any country, together
with any patents that have issued or in the future issue therefrom, owned, in
whole or in part, by ATS, or licensed by ATS (with the right to disclose and
sublicense), which cover the ATS Nutrient Solution.
2
2. LICENSES
--------
2.1 License Grant. Subject to the terms and conditions of this Agreement,
-------------
ATS hereby grants to Buyer, under ATS's Intellectual Property Rights, an
exclusive (subject to Section 5.3.1 of this Agreement), [** ], license to
(i) use, sell, offer for sale, market and distribute the ATS Nutrient Solution
only as incorporated into a Licensed Product and only to customers within and
for use within the Marketplace, and (ii) use and modify the ATS Nutrient
Solution for development activities solely in connection with the Marketplace.
The foregoing license will only be sublicensable with ATS's prior approval. This
Agreement will not prevent ATS from licensing the ATS Nutrient Solution for use
and sale [** ] the Marketplace. Nothing herein shall be construed as
limiting in any manner ATS's marketing, distribution, development or licensing
activities or ATS's appointment of other dealers, distributors, licensees or
agents for sale or use of the ATS Nutrient Solution or other ATS products
[** ] the Marketplace.
2.2 Improvements. Buyer agrees to promptly disclose any modification or
------------
improvement to the ATS Nutrient Solution made or developed before the
termination of this Agreement. Any such modification or improvement shall only
be incorporated into the ATS Nutrient Solution for purposes of this Agreement
with the prior written consent of ATS, which consent ATS may withhold in its
sole discretion.
2.3 Concentration of ATS Nutrient Solution. ATS shall maintain the right,
--------------------------------------
in its sole discretion, to lower the concentration of the ATS Nutrient Solution
licensed and supplied to Buyer hereunder (the Concentration") prospectively;
[**
]. In addition, no other
retail or mass market licensee of ATS Nutrient Solution shall be allowed to use
a [**
]
3. SALE AND PURCHASE OF ATS NUTRIENT SOLUTION
------------------------------------------
3.1 Sale and Purchase. ATS, within the limitations contained in this
-----------------
Section 3, agrees to use reasonable commercial efforts to sell to Buyer such
quantities of ATS Nutrient Solution as Buyer may require. Subject to the
provisions of Section 7 hereof, so long as this Agreement shall remain in
effect, Buyer agrees to satisfy solely through Buyer's purchase of the ATS
Nutrient Solution under this Agreement, 100% of Buyer's and Buyer's
sublicensees' (if any) requirements of the ATS Nutrient Solution. It is
understood that ATS shall have the right in connection with supply hereunder to
contract with respect to the manufacture of the ATS Nutrient Solution with such
third parties as ATS deems advisable in its sole discretion; provided, however,
that ATS [** ]
3.2 Quantity; Forecasts.
-------------------
3.2.1 With respect to the purchase of the ATS Nutrient Solution under
this Section 3, Buyer shall deliver to ATS as soon as practical a forecast of
Buyer's quantity requirements for the ATS Nutrient Solution for the calendar
quarter in which the First Commercial Sale is projected to occur and, at least
one (1) full calendar quarter prior to the calendar quarter in which the First
Commercial Sale is projected to occur, Buyer's firm purchase order and Delivery
Dates for the ATS Nutrient Solution for such calendar quarter, which shall be
subject to acceptance by ATS, which acceptance shall not be unreasonably
withheld, and a good faith forecast of its quantity requirements for the ATS
Nutrient Solution for the next three (3) calendar quarters, provided that no
forecasts or purchase orders need be given for any period after the term of this
Agreement. Beginning on January 1, 2002, Buyer shall deliver to ATS at or prior
to the end of each calendar quarter, Buyer's firm purchase order and Delivery
Date for
3
the ATS Nutrient Solution for the next calendar quarter following such calendar
quarter, which shall be subject to acceptance by ATS, which acceptance shall not
be unreasonably withheld, and a good faith forecast of its quantity requirements
for the ATS Nutrient Solution for the next three (3) calendar quarters. If a
required forecast or purchase order for a quarter is not timely submitted for
the ATS Nutrient Solution, the immediately preceding forecast for that quarter
shall become the new forecast or purchase order; if there is no preceding
forecast for a quarter, the forecast or purchase order for the immediately
preceding quarter shall become the forecast or purchase order.
3.2.2 After the second Contract Year, for each quarterly forecast of
ATS Nutrient Solution, the amount of any ATS Nutrient Solution forecasted for
delivery in the first of the three (3) calendar quarters forecasted shall not be
less then seventy percent (70%) nor more than one hundred thirty percent (130%)
of the most recent previous forecast for such quarter. In addition, no firm
purchase order for a particular quarter shall cover an amount of ATS Nutrient
Solution more than twenty- five percent (25%) larger or smaller than the amount
of the ATS Nutrient Solution ordered for the previous quarter.
3.2.3 The total amount of the ATS Nutrient Solution ordered by Buyer
for delivery in any calendar quarter for which a purchase order is required may
not be less than seventy-five percent (75%) of Buyer's most recent forecast of
its requirements for ATS Nutrient Solution for such quarter. In addition, ATS
will not be obligated to supply more than one hundred twenty-five percent (125%)
of Buyer's most recent forecast of its requirements for ATS Nutrient Solution
for such quarter. If Buyer's ATS Nutrient Solution requirement for any quarter
exceeds 125% of Buyer's most recent forecast of its requirements for ATS
Nutrient Solution for such calendar quarter, ATS and Buyer will discuss in good
faith the additional amount, if any, which ATS is willing to accept to supply
consistent with its other obligations and Buyer will adjust its purchase order
accordingly. Buyer shall indemnify ATS and reimburse it promptly upon request
for all reasonable out-of-pocket costs and expenses, including the cost of
carrying increased inventory, to the extent caused by any deviation in order
quantities from the limits imposed by the preceding sentence, and ATS will act
reasonably to mitigate any such costs and expenses.
3.2.4 Buyer's forecasts and purchase orders shall reflect its good
faith expectations of customer demand and Buyer shall act in a commercially
reasonable manner to schedule orders to avoid creating production capacity
problems for ATS.
3.2.5 Notwithstanding the foregoing, in the event that the total
aggregate amount of ATS Nutrient Solution for which firm purchase orders have
been received by ATS from all of ATS's customers (including Buyer) in any
quarter is greater than ATS's available inventory of ATS Nutrient Solution for
such quarter, then Buyer shall be entitled only to its pro-rata portion of the
available ATS's Nutrient Solution as determined by multiplying the amount of ATS
Nutrient Solution for which firm purchase orders have been received by ATS from
Buyer for such quarter by a fraction, the numerator of which is the amount of
ATS Nutrient Solution for which firm purchase orders have been received by ATS
from Buyer for such quarter and the denominator of which is the aggregate total
of ATS Nutrient Solution for which firm purchase orders have been received by
ATS from all of ATS's customers (including Buyer) for such quarter. During any
period that ATS cannot provide the product properly requested by Buyer
hereunder, the minimum royalty thresholds will be waived until such capacity
limitations have been addressed.
3.3 Supply Price.
------------
3.3.1 Buyer shall pay to ATS for the ATS Nutrient Solution purchased
hereunder the prices set forth in Exhibit C hereto (the "Purchase Price"). The
---------
supply price specified herein shall be [**
]. The Purchase
Price shall be
4
adjusted upwards or downwards, as the case may be, as of each anniversary of the
Effective Date to reflect any change in the cost of the ATS Nutrient Solution to
ATS, but in no event shall such increase or decrease be in an amount greater
than five percent (5%) of the Purchase Price for the immediately preceding
twelve (12) month period. (Unless a greater than 5% decrease was necessary to
match the supply price awarded to another non-government vendor).
Notwithstanding the foregoing, ATS shall provide to Buyer solely for development
activities hereunder a batch of the ATS Nutrient Solution, [** ].
3.4 Delivery.
--------
3.4.1 All ATS Nutrient Solution delivered to Buyer shall be F.O.B.
ATS's plant or other place of shipment. ATS shall use its commercially
reasonable efforts to deliver the ATS Nutrient Solution within seven (7) days
of the applicable Delivery Dates and shall assist Buyer in arranging any desired
insurance (in amounts that Buyer shall determine) and transportation, via air
freight unless otherwise specified in writing, to any destinations specified in
writing from time to time by Buyer (subject to Section 10.12). All customs,
duties, costs, taxes, insurance premiums and other expenses relating to such
transportation and delivery shall be at Buyer's expense.
3.4.2 ATS shall use packaging methods and containers that are
reasonably acceptable to both parties.
3.5 Rejection of ATS Nutrient Solution in Case of Nonconformity.
-----------------------------------------------------------
3.5.1 Buyer may reject any portion of any shipment of ATS Nutrient
Solution which is not conforming in all material respects with the description
contained in Exhibit A hereto. In order to reject a shipment, Buyer must (i)
---------
give notice to ATS of Buyer's intent to reject the shipment within fifteen (15)
days of receipt together with a detailed written indication of the reasons for
such possible rejection, and (ii) as promptly as reasonably possible thereafter
but in any event within an additional thirty (30) days, provide ATS with notice
of final rejection and the full basis therefor. After notice of intention to
reject is given, Buyer shall cooperate with ATS in determining whether rejection
is necessary or justified. If no such notice of intent to reject is timely
received by ATS, Buyer shall be deemed to have accepted such shipment of ATS
Nutrient Solution.
3.5.2 On properly rejected ATS Nutrient Solution ATS shall provide
replacement ATS Nutrient Solution at the time it is ultimately rejected,
provided that if ATS disputes the rejection, replacement shall be made, if at
all, at the time the dispute is finally resolved. ATS shall notify Buyer as
promptly as reasonably possible whether it accepts Buyer's basis for rejection.
3.5.3 Buyer shall, upon receipt of ATS's request for return, promptly
dispatch said batch to ATS, [** ]. If ATS does not request the return to
it of a rejected batch within ninety (90) days of receipt of Buyer's notice of
rejection, Buyer shall destroy such batch promptly and provide ATS with
certification of such destruction.
3.6 Buyer's Obligations. Buyer agrees:
-------------------
3.6.1 to ascertain and comply with all applicable laws and regulations
and standards of industry or professional conduct (including without limitation
the FDA and any agency outside of the U.S. which is comparable to the FDA) in
connection with the use, distribution or promotion of the ATS Nutrient Solution
and Licensed Products, including without limitation, those applicable to
exportation, importation, product claims, labeling, approvals, registrations and
notifications;
5
3.6.2 to use best efforts, at its sole expense, to obtain and maintain
any applicable approvals, authorizations, registrations, notifications or the
like, in the United States and any countries where such approvals are legally
required, by the appropriate governmental entity or entities with regard to
manufacturing , marketing, using, selling, pricing, labeling or otherwise
promoting or making claims regarding the ATS Nutrient Solution and/or Licensed
Products or their uses or reimbursement therefor in the Marketplace; ATS will
reasonably cooperate with these efforts. Buyer shall not file any application or
document or conduct any study associated with obtaining or maintaining such
approvals, authorities, registrations, notifications or the like without ATS's
prior written consent. To the extent allowed by law (i) all approvals,
authorizations, registrations, notifications and the like (and all documents,
applications and information related thereto) and all rights thereunder or
thereto relating to the ATS Nutrient Solution shall be solely owned by and in
the name of ATS, and (ii) all approvals, authorizations, registrations,
notifications, and the like (and all documents, applications and information
related thereto) and all rights thereunder or thereto relating to the Licensed
Product shall be solely owned by and in the name of Buyer. Buyer will provide
ATS with any information regarding the foregoing that ATS may request reasonably
(with English translations);
3.6.3 to immediately notify ATS of any adverse or unexpected results or
any actual or potential government action relevant to ATS Nutrient Solution
and/or Licensed Products (but in no event later than 24 hours after any such
government action) and, if and to the extent requested by ATS in writing, to
suspend distribution of the Licensed Product; provided that should the
suspension continue for more than thirty (30) days, [**
];
3.6.4 to keep (and make reasonably available for ATS's use and copying)
for five years after termination of this Agreement (or longer if required by
applicable law) records of all Licensed Product sales and customers, as
available, sufficient to adequately administer a recall of any ATS Nutrient
Solution and to cooperate fully in any decision by ATS to recall the ATS
Nutrient Solution (by way of recalling the Licensed Product). Notwithstanding
the foregoing, Buyer has made ATS aware that Buyer will not receive the customer
name from sales derived from third parties such as The Home Shopping Network. In
addition ATS represents that it will treat all customer lists provided by Buyer
in a confidential manner.
3.6.5 that upon termination of the license set forth in Section 2.1, if
Buyer has any right, title or interest in anything referred to in Sections 3.6.1
or 3.6.2 related to the affected ATS Nutrient Solution it will immediately
assign all such right, title and interest to ATS and take all necessary action
to ensure that ATS obtains the full benefit thereof or, if ATS so requests in
writing with respect to any such item, take any necessary action to surrender
and cancel such item and the related rights, title and interest;
3.6.6 except as limited by applicable law, Buyer shall not knowingly
sell the Licensed Product to any third party outside of or for use outside of
the Marketplace; and
3.6.7 to provide to ATS and make available for ATS to use, all clinical
and other data generated by Buyer related to the ATS Nutrient Solution and/or
Licensed Products, including without limitation, information related to
formulations developed by or on behalf of Buyer.
3.7 ATS's Obligations. ATS agrees:
-----------------
3.7.1 to immediately notify Buyer of any actual or potential government
action relevant to ATS Nutrient Solution and/or Licensed Product; and
6
3.7.2 to provide available data to Buyer related to the ATS Nutrient
Solution and to provide for the use of such data by Buyer to the extent the
control and use of such data is within ATS's control.
3.8 Mutual Obligations.
------------------
3.8.1 Buyer and ATS each agree to promptly communicate in writing to
the other all information which comes to their respective attentions pertaining
to any adverse reactions, product anomalies, stability problems or complaints
relative to or having a bearing on the ATS Nutrient Solution and/or Licensed
Product sold hereunder (or any constituent components). Buyer and ATS shall each
use reasonable commercial efforts to cooperate and to promptly identify and
resolve any such problems. In the event of a recall of any batch(s) of any of
the Licensed Product solely as a result of deficiencies in the ATS Nutrient
Solution, [** ]. In all other events, [**
].
3.8.2 Each party shall maintain in full force and effect all necessary
licenses, permits and other authorizations required by law to carry out its
duties and obligations under this Agreement. Each party shall comply with all
laws, ordinances, rules and regulations (collectively, "Laws") applicable to its
activities under this Agreement. Buyer and ATS each shall keep all records and
reports required to be kept by applicable Laws. The parties will reasonably
cooperate with one another with the goal of ensuring full compliance with Laws,
including without limitation providing such letters, documentation and other
information on a timely basis as the other party may reasonably require to
fulfill its reporting and other obligations under applicable Laws to applicable
regulatory authorities. Except for such amounts as are expressly required to be
paid by a party to the other under this Agreement, each party shall be solely
responsible for any costs incurred by it to comply with its obligations under
applicable Laws.
3.8.3 Buyer and ATS each hereby agrees to use all reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary or proper to make effective the transactions contemplated by
this Agreement, including such actions as may be reasonably necessary to obtain
approvals and consents of governmental or other regulatory authorities;
provided, however, that no party shall be required to (i) pay money (other than
-------- -------
as expressly required pursuant to this Agreement), or (ii) assume any other
material obligation not otherwise required to be assumed by this Agreement.
3.9 Limitation of Liability. ATS' LIABILITY TO BUYER FOR DAMAGES FROM ANY
-----------------------
CAUSE OF ACTION WHATSOEVER RELATING TO ATS' AGREEMENT TO SELL TO BUYER SUCH
QUANTITIES OF ATS NUTRIENT SOLUTION AS BUYER MAY REQUIRE SHALL BE LIMITED TO THE
AMOUNT PAID BY BUYER FOR THE ATS NUTRIENT SOLUTION FOR THE APPLICABLE YEAR.
4. COMMERCIALIZATION, MARKETING AND PROMOTION
------------------------------------------
4.1 Commercialization. Except as described elsewhere in this Section 4, all
-----------------
decisions regarding commercialization, including without limitation, pricing and
terms of sale with respect to the Licensed Product, shall be determined by Buyer
in its sole discretion. Buyer agrees to use reasonable commercial efforts to
promote and market the Licensed Product under its license during the term of
this Agreement. Buyer acknowledges that its ability to commercialize the
Licensed Product is limited to within the Marketplace.
4.2 Marketing Partners. With ATS's prior written consent, which shall not
------------------
be unreasonably withheld, Buyer shall have the right to appoint one or more
third-party marketing partners to promote, co-promote, distribute, market or
co-market the Licensed Product within the Marketplace in [** ]
7
[** ]. In the event Buyer appoints a marketing partner, Buyer shall have
the right to supply the ATS Nutrient Solution to such partner at such prices as
Buyer shall determine; provided, however, that Buyer shall remain fully
responsible hereunder.
4.3 Use of ATS Name. Buyer not use the ATS name or the name of any employee
---------------
or representative of ATS without ATS's express prior written approval. Buyer
agrees that upon the request of ATS, all packaging and printed promotional
material in connection with the Licensed Product shall bear the phrase "Under
license from ATS" or other such branding language or marks identified by ATS .
4.4 Promotional Material. Buyer agrees to deliver to ATS, upon ATS's
--------------------
request and at [** ], all advertising, promotional and other printed
materials used in connection with the promotion, marketing and sale of the ATS
Nutrient Solution and/or Licensed Product.
5. PAYMENTS
--------
5.1 Milestone Payments. Buyer shall make the following payments to ATS in
------------------
cash within thirty (30) days following receipt of notice (in form and content
reasonably acceptable to ATS) by ATS of achievement of the following milestones
(the "Milestone Payments"):
5.1.1.1 upon the earlier of (a) Buyer achieving [**
] in cumulative Gross Sales of the Licensed Product or (b)
December 31, 2001, a payment in the amount of [** ];
5.1.1.2 upon Buyer achieving [** ]
in cumulative Gross Sales of the Licensed Product, a payment in the amount of
[** ];
5.1.1.3 upon Buyer achieving [**
] in cumulative Gross Sales of the Licensed Product, a payment in
the amount of [** ];
5.1.1.4 upon Buyer achieving [**
] in cumulative Gross Sales of the Licensed Product, a payment in
the amount of [** ];
5.1.1.5 upon Buyer achieving [**
] in cumulative Gross Sales of the Licensed Product, a payment in
the amount of [** ];
5.1.1.6 upon Buyer achieving [**
] in cumulative Gross Sales of the Licensed Product, a payment in
the amount of [** ];
5.1.1.7 upon Buyer achieving [**
] in cumulative Gross Sales of the Licensed Product, a payment in
the amount of [** ]; and
5.1.1.8 upon Buyer achieving [** ]
in cumulative Gross Sales of the Licensed Product, a payment in the amount of
[** ].
8
5.2 Royalty Payments. On a quarterly basis, Buyer shall make payments (the
----------------
"Royalty Payments") to ATS in amounts according to the following schedule:
Percentage of Gross Sales Amount of Annual Gross Sales for each
------------------------- -------------------------------------
12-month period beginning on January 1
--------------------------------------
[**] up to and including $[ ]
[**] greater than $[** ] and up to
and including $[** ]
[**] greater than $[** ] and up to
and including $[** ]
[**] greater than $[** ]
Once the aggregate total of the cumulative Gross Sales of Buyer Product(s) (as
calculated from the Effective Date) is [**
], Buyer shall make Royalty Payments to ATS
according to the following schedule:
Amount of Annual Gross Sales for each
-------------------------------------
Percentage of Gross Sales 12-month period beginning on January 1
------------------------- --------------------------------------
[**] up to and including $[** ]
[**] greater than $[** ]
Buyer shall make Royalty Payments within thirty (30) days following the end of
the applicable calendar quarter.
For purposes of clarity, the parties acknowledge the following example of the
calculation of a Royalty Payment. For the calendar quarter ending March 31,
2003, if the Gross Sales of all Licensed Product for such calendar quarter is
[** ] and the Annual Gross Sales for the 12-month period beginning January
1, 2002 is [** ] and the aggregate total of the [** ] Gross Sales is
[** ] as of March 31, 2003, then the Royalty Payment for such quarter is
equal to [** ].
5.3 Minimum Royalty Thresholds. Beginning with the Royalty Payment to be
--------------------------
made by Buyer to ATS for the calendar quarter ending March 31, 2002, in the
event any Royalty Payment is (i) not equal to or greater than the Exclusivity
Threshold (as defined below), then the license granted to Buyer in Section 2 of
this Agreement shall convert from exclusive to nonexclusive, or (ii) not equal
to or greater than the License Threshold (as defined below), then ATS may,
effective immediately upon notice, terminate this Agreement. The payments made
under this section shall be cumulative so that Buyer shall receive a credit in
the following period in the event the actual royalties paid in any period exceed
the minimum payments hereunder.
5.3.1 The "Exclusivity Threshold" shall be determined according to the
following schedule:
9
Contract Annual Minimum Quarterly Minimum [** ]
Year Royalty Payment Royalty Payment [** ]
-------- --------------- ----------------- --------------------
1 [** ] [** ] [** ]
2 [** ] [** ] [** ]
3 [** ] [** ] [** ]
4 [** ] [** ] [** ]
5 [** ] [** ] [** ]
6-10 [** ] [** ] [** ]
The payments made under this section shall be cumulative so that Buyer
shall receive a credit in the following period in the event the actual royalties
paid in any period exceed the minimum payments hereunder. A "Contract Year" is
the twelve month period commencing on April 1st. The First Contract Year is the
period from April 1, 2001, until March 31, 2002.
5.3.2 The "License Threshold" shall be equal to [** ] of
the applicable Exclusivity Threshold.
5.3.3 Notwithstanding the foregoing, actual payment of any unmet
quarterly balance of the Exclusivity Threshold or License Threshold for the 2001
and 2002 calendar years may be deferred at the option of Buyer until April 30
following the end of the respective Contract Year. Beginning with the Royalty
Payment to be made by Buyer to ATS for the calendar quarter ending March 31,
2003, the Exclusivity Threshold and License Threshold must be paid thirty (30)
days following the end of the applicable calendar quarter
5.4 Supply Price. The Milestone Payments and the Royalty Payments made by
------------
Buyer under this Section 5 are in addition to the payments made by Buyer
pursuant to Section 3.3.
5.5 Method of Payment; Taxes. All payments due under this Agreement to ATS
------------------------
shall be paid to ATS in United States dollars. If Buyer is required by the
United States government or other authorities to withhold any tax on the amounts
payable by Buyer to ATS under this Agreement, Buyer shall be allowed to do so,
and shall in such case remit payments to the ATS net of such withheld amount,
provided that Buyer furnishes ATS with reasonable evidence of such withholding
payment in electronic or written form as soon as practicable after such
withholding in order that ATS may use the withholding tax paid as a tax credit.
6. INFORMATION AND REPORTS
-----------------------
6.1 Sales Reports. Concurrently with the delivery of each Royalty Payment,
-------------
Buyer will provide a report to ATS covering the calendar quarter for which the
Royalty Payment is made and will show (a) unit sales of Licensed Products during
the most recently completed calendar quarter, (b) cumulative Gross Sales for the
12-month period beginning April 1 and (c) total cumulative Gross Sales.
6.2 Records. Buyer shall keep books and records accurately showing unit
-------
sales and Gross Sales under the terms of this Agreement for a period of two (2)
years following the year in which the sale was made. Upon written request and
after reasonable notice, Buyer shall
10
permit an independent, nationally recognized certified public accountant
selected by ATS and reasonably acceptable to Buyer ("Accountant") to inspect
such books and records after notice at reasonable times for the purpose of
verifying the accuracy of the quarterly reports, the Royalty Payments due and
the Milestone Payments due; provided, however, there shall not be more than one
-------- -------
(1) such inspection per calendar year. Upon the expiration of two (2) years
following the end of any calendar year, the calculation of amounts payable with
respect to such fiscal year shall be binding and conclusive upon ATS, and Buyer,
and its sublicensees and marketing partners, if any, shall be released from any
liability or accountability with respect to payments for such year. The fees and
expenses of the Accountant performing such an examination shall be borne by ATS;
provided, however, that if errors of two percent (2%) or more in ATS's favor are
-------- -------
discovered as a result of such examination, Buyer shall reimburse ATS for the
fees and expenses of such examination and pay the deficiency (with interest)
immediately. As a condition to such examination, the Accountant shall execute a
written agreement, reasonably satisfactory in form and substance to Buyer, to
maintain in confidence all information obtained during the course of any such
examination except for disclosure to ATS as necessary for the above purpose. The
opinion of the Accountant shall be binding on the parties hereto.
6.3 Other Information. Buyer agrees to provide to ATS, copies of all press
-----------------
releases by Buyer as well as copies of all securities filings by Buyer during
the term of this Agreement prior to or coincident with such press releases or
filings. Buyer agrees to provide ATS a copy of any and all marketing plans
prepared by Buyer related to the Licensed Product. In the event Buyer is
required to file this Agreement with any governmental or regulatory agency,
Buyer agrees to use its best efforts to protect provisions of this Agreement
that are confidential and proprietary to ATS including, but not limited to, the
royalty rates and milestone payments.
7. TERMINATION, RIGHTS AND OBLIGATIONS UPON TERMINATION
----------------------------------------------------
7.1 Term. Unless terminated by ATS pursuant to Section 5.3 of this
----
Agreement, or either party pursuant to this Section 7, this Agreement shall
continue in effect until March 31, 2011. (the "Initial Term"). At the expiration
of the Initial Term, the parties shall negotiate in good faith toward the
extension of the Agreement. Upon mutual written agreement between the parties,
this Agreement may renew for subsequent two (2) year terms following the Initial
Term if Buyer has made all payments required under this Agreement.
7.2 Termination for Default. If either party materially defaults in the
-----------------------
performance of any material agreement, condition or covenant of this Agreement,
and such default or noncompliance shall not have been remedied, or steps
initiated to remedy the same to the other party's reasonable satisfaction,
within ninety (90) days (or ten (10) days in the case of non-payment) after
receipt by the defaulting party of a notice thereof from the other party, the
party not in default may terminate this Agreement. For purposes of this
Agreement, failure by ATS to timely deliver at least sixty-five percent (65%) of
the amount of the ATS Nutrient Solution ordered by Buyer as required hereunder
for any reason, including, without limitation, force majeure, as measured over
any period of forty-five (45) or more consecutive days, shall be deemed to be a
material default in the performance of a material agreement. Properly rejected
ATS Nutrient Solution shall not be considered delivered.
7.3 Failure to Meet Minimum Thresholds. Buyer's failure to meet the
----------------------------------
Exclusivity Threshold set forth in Section 5.3.1 of this Agreement shall not
permit ATS to terminate this Agreement. Buyer's
11
failure to meet the License Threshold set forth in Section 5.3.2 of this
Agreement shall permit ATS to terminate this Agreement as set forth therein.
7.4 ATS Nutrient Solution Patent. In the event that ATS is ultimately
----------------------------
unable to successfully obtain any patent protection for the ATS Nutrient
Solution, then the parties agree to enter into good faith negotiations regarding
the [** ] to be made by Buyer hereunder, and if the parties are
unable to successfully re-negotiate such [** ] within ninety (90)
days following commencement of such negotiations, then [** ] may terminate this
Agreement upon thirty (30) days prior written notice.
7.5 Rights and Obligations on Expiration or Termination. Except to the
---------------------------------------------------
extent expressly provided to the contrary, the following provisions shall
survive the termination of this Agreement: Sections 3.6.3-3.6.6, Section 3.9,
Section 5, Section 6, Section 7.7, Section 8, Sections 9.3-9.8 and Section 10.
Any rights of ATS to payments accrued through termination as well as obligations
of the parties under firm purchase orders for purchase and delivery of ATS
Nutrient Solution at the time of such termination shall remain in effect, except
that in the case of termination under Section 7.5, the terminating party may
elect whether obligations under firm purchase orders will remain in effect. ATS
shall have the option, in its sole discretion, to repurchase from Buyer all or
any portion of Buyer's remaining inventory of ATS Nutrient Solution at the
Purchase Price paid by Buyer (the "Repurchase Right"). If ATS does not exercise
its Repurchase Right or does not repurchase all of Buyer's inventory of ATS
Nutrient Solution within thirty (30) days of termination of this Agreement, then
Buyer shall have the option to sell its remaining inventory of ATS Nutrient
Solution to any third party at a price [** ] of the
average price of the Licensed Product for the [** ]
immediately preceding termination of this Agreement.
7.6 Termination by ATS. Notwithstanding anything to the contrary, ATS shall
------------------
have the right to terminate this Agreement immediately upon written notice to
Buyer in the event Buyer fails to comply with any of the following:
7.6.1 Buyer must have filed a securities filing with the SEC
simultaneous with the execution of this Agreement setting forth detailed
information relative to the changes in the management structure of Buyer
contemplated by the parties and provide ATS with an executed copy of the
management agreement relating to such structure;
7.6.2 Buyer must close and demonstrate to ATS's satisfaction,
financing with net proceeds received by Buyer at a level of [**
], within [** ] days of execution of this
Agreement;
7.6.3 Buyer must make the first commercial sale of a Licensed Product
no later than [** ];
7.6.4 Notwithstanding anything in Section 5.3.1 to the contrary, Buyer
must meet the Exclusivity Thresholds in Section 5.3.1 during the First Contract
Year or ATS may, at its election, terminate the Agreement [**
].
However, in the event Buyer fails to meet the License Threshold in Section 5.3.2
during the First Contract Year, the agreement may be terminated by ATS at its
election as provided in Section 5;
7.6.5 Buyer must deliver to ATS executed copies of the Warrant and
Investor Rights Agreement within 5 days of the date of this Agreement.
12
7.6.6 Buyer must contract with a cosmetics formulator reasonably
acceptable to ATS within thirty (30) days from execution of the Agreement.
7.7 Loss of Key Management. ATS shall have the right to terminate this
----------------------
Agreement upon [** ] written notice in the event Buyer loses the
services of [** ] and Buyer cannot
secure the services of another executive reasonably equivalent in skill and
experience of these executives to the satisfaction of ATS.
8. CONFIDENTIALITY; OWNERSHIP
--------------------------
8.1 Confidentiality.
---------------
8.1.1 Nondisclosure and Nonuse Obligations. Except as otherwise
------------------------------------
provided in this Section 8, each party shall maintain in confidence, and use
only for purposes of this Agreement, all Confidential Information of the other
party. "Confidential Information" of Buyer shall mean all cell lines, biological
materials, chemical formulas, names and expertise of employees and consultants,
know-how, formulas, processes, ideas, inventions, schematics, and other
business, financial, customer and product development plans, forecasts,
strategies and information and data, whether disclosed prior to or after the
date of this Agreement and whether disclosed in written, electronic or oral
form, by Buyer to ATS under this Agreement and marked "Confidential."
"Confidential Information" of ATS shall mean all cell lines, biological
materials, chemical formulas, names and expertise of employees and consultants,
know-how, formulas, processes, ideas, inventions, schematics, and other
business, financial, customer and product development plans, forecasts,
strategies and information and data, whether disclosed prior to or after the
date of this Agreement and whether disclosed in written, electronic or oral
form, (a) that constitutes, embodies or relates to any portion of the ATS
Nutrient Solution, or (b) all cell lines, biological materials, chemical
formulas, names and expertise of employees and consultants, know-how, formulas,
processes, ideas, inventions, schematics, and other business, financial,
customer and product development plans, forecasts, strategies and information
and data not described in clause (a) above but supplied by ATS to Buyer under
this Agreement and marked "Confidential."
8.1.2 Permitted Disclosures. To the extent it is reasonably necessary
---------------------
or appropriate to fulfill its obligations or exercise its rights under this
Agreement, (i) a party may disclose Confidential Information it is otherwise
obligated under this Section 8.1 not to disclose to its Affiliates,
sublicensees, consultants, outside contractors and clinical investigators, on a
need-to-know basis, provided that such persons have entered into a written
agreement obligating them to keep the Confidential Information confidential and
not use the Confidential Information for the same time periods and to the same
extent as such party is required under this Agreement; and (ii) a party may
disclose such Confidential Information to government or other regulatory
authorities to the extent that such disclosure is required by applicable law,
regulation or court order, or is reasonably necessary to obtain Patents or
authorizations to conduct clinical trials with, and to commercially market the
Licensed Product, provided that the disclosing party shall provide written
notice to the other party and sufficient opportunity to object to such
disclosure or to request confidential treatment thereof.
8.1.3 Information that is Not Confidential. The obligation not to
------------------------------------
disclose or use Confidential Information shall not apply to any part of such
Confidential Information that (i) is or becomes patented, published or otherwise
part of the public domain other than by acts of the party obligated not to
disclose such Confidential Information or its Affiliates, sublicensees,
consultants, outside contractors or clinical investigators in contravention of
this Agreement; (ii) is disclosed to the receiving party or its Affiliates,
sublicensees, consultants, outside contractors or clinical investigators by a
third party, provided such Confidential Information was not obtained by such
third party directly or indirectly from the other party under this Agreement on
a confidential basis; or (iii) prior to disclosure under this
13
Agreement, was already in the possession of the receiving party or its
Affiliates, sublicensees, consultants, outside contractors or clinical
investigators, provided such Confidential Information was not obtained directly
or indirectly from the other party under this Agreement. Notwithstanding the
foregoing, all Confidential Information designated as owned by or assigned to a
party in connection with this Agreement shall be deemed Confidential Information
of such party disclosed by such party to the other and exception (iii) above
will not be applicable thereto.
8.1.4 Injunctive Relief. Each party acknowledges and agrees that due to
-----------------
the unique nature of the other's Confidential Information, there can be no
adequate remedy at law for any breach of its obligations under this Section 8.1
and, therefore, that upon any such breach or threat thereof, the other party
shall be entitled, notwithstanding anything to the contrary in this Agreement,
to injunctive relief and other appropriate equitable relief in addition to
whatever remedies it may have at law from any court of competent jurisdiction in
any jurisdiction authorized to grant the relief necessary to prohibit the breach
or threatened breach.
8.1.5 Terms of this Agreement. Buyer shall not disclose any terms or
-----------------------
conditions of this Agreement to any third party without the prior consent of
ATS, except as required by applicable law, regulation or court order, provided
that Buyer shall provide written notice to ATS and sufficient opportunity to
object to such disclosure or to request confidential treatment thereof.
8.1.6 Disclosure. Should either party be required by law to make a
----------
public disclosure about this Agreement, then the party required to disclose may
do so; provided, however, it gives at least two (2) business days prior written
notice to the other party and, during such two (2) day period, allow such other
party to comment on the proposed disclosure and incorporate such other party's
reasonable comments in such disclosure. Otherwise, Buyer shall not make any
press release or other public disclosure of the terms or conditions of this
Agreement without the prior written consent of ATS.
8.2 Ownership. As between the parties, ATS exclusively shall have all
---------
right, title and interest (including all Intellectual Property Rights throughout
the world) in any Inventions, the ATS Nutrient Solution (either alone or as
incorporated into another product, including the Licensed Product),
works-of-authorship, know-how, ideas or information, made or conceived or
reduced to practice by ATS, Buyer or the parties jointly in the course of
development under this Agreement. Buyer will have no right or license in the
foregoing, except as expressly provided in this Agreement.
8.3 Assignment. Buyer hereby makes any assignments necessary to accomplish
----------
the ownership provision of Section 8.2. In interpreting such ownership provision
anything made or conceived or reduced to practice by an employee or contractor
of Buyer in the course of performance under this Agreement will be deemed so
made or conceived or reduced to practice by Buyer. Buyer has and will have
appropriate agreements with all such employees and contractors necessary to
fully effect the provisions of this Section. ATS will have the exclusive right
to, and, at ATS's expense, Buyer agrees to assist ATS in every proper way
(including, without limitation, becoming a nominal party) to, evidence, record
and perfect the assignment and to apply for and obtain recordation of and from
time to time enforce, maintain and defend such proprietary right. In the event
that ATS is unable for any reason whatsoever to secure Buyer's signature to any
document it is entitled to under this Section, Buyer hereby irrevocably
designates and appoints ATS and its duly authorized officers and agents, as its
agents and attorneys-in-fact to act for and in its behalf and instead of Buyer,
to execute and file any such document and to do all other lawfully permitted
acts to further the purposes of the foregoing with the same legal force and
effect as if executed by Buyer.
8.4 Enforcement of Patent Rights. ATS in the case of all ATS Patent Rights,
----------------------------
shall have the right, at its expense, to determine the appropriate course of
action to enforce such rights or otherwise ▇▇▇▇▇ the
14
infringement thereof, to take (or refrain from taking) appropriate action to
enforce such rights, to control any litigation or other enforcement action and
to enter into, or permit, the settlement of any such litigation or other
enforcement action with respect to such rights. Buyer shall fully cooperate with
ATS in any action to enforce any such rights.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION
----------------------------------------------------------
9.1 Representations, Warranties and Covenants of ATS. ATS represents,
------------------------------------------------
warrants and covenants to Buyer as follows:
9.1.1 Organization of ATS. ATS is a corporation duly organized, validly
-------------------
existing and in good standing under the laws of Delaware with full corporate
power and authority adequate for executing and delivering and performing its
obligations under this Agreement;
9.1.2 Authorization. The execution, delivery and performance of this
-------------
Agreement have been duly authorized by all necessary corporate action on the
part of ATS and this Agreement, when executed and delivered, shall constitute a
legal, valid and binding obligation of ATS, enforceable against ATS in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors;
9.1.3 Compliance With Other Instruments. The execution, delivery and
---------------------------------
performance of this Agreement do not and will not conflict with or contravene
any provision of the charter documents or by-laws of ATS or any material
agreement, document, instrument, indenture or other obligation of ATS;
9.1.4 Other Agreements. ATS shall not enter into any agreement, make
----------------
any commitment, take any action or fail to take any action that would contravene
any material provision of this Agreement;
9.1.5 Intellectual Property Rights. To the best of ATS's knowledge, ATS
----------------------------
has sufficient legal and/or beneficial title and ownership to grant the license
and other Intellectual Property Rights provided in Section 2 of this Agreement;
and
9.1.6 Grant of Rights. ATS has not, and shall not during the term of
---------------
this Agreement, grant any right to any third party which would violate the terms
of or conflict with the rights granted to Buyer hereunder.
9.2 Representations, Warranties and Covenants of Buyer. Buyer represents,
--------------------------------------------------
warrants and covenants to ATS as follows:
9.2.1 Organization. Buyer is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Texas with full
corporate power and authority adequate for executing and delivering and
performing its obligations under this Agreement;
9.2.2 Authorization. The execution, delivery and performance of this
-------------
Agreement have been duly authorized by all necessary corporate action on the
part of Buyer, and this Agreement, when executed and delivered, shall constitute
a legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors;
15
9.2.3 Compliance with Other Instruments. The execution, delivery and
---------------------------------
performance of this Agreement do not and will not conflict with or contravene
any provision of the charter documents or by-laws of Buyer or any material
agreement, document, instrument, indenture or other obligation of Buyer; and
9.2.4 Other Agreements. Buyer shall not enter into any agreement, make
----------------
any commitment, take any action or fail to take any action that would contravene
any material provisions of this Agreement.
9.3 Limitation on Remedies. ATS AND BUYER ACKNOWLEDGE THAT THE ATS NUTRIENT
----------------------
SOLUTION IS LICENSED AND SOLD TO BUYER "AS IS" AND ATS AND BUYER EXPRESSLY
DISCLAIM AND HEREBY WAIVE, RELEASE AND RENOUNCE ANY WARRANTY, EXPRESS OR
IMPLIED, WITH RESPECT TO THE ATS NUTRIENT SOLUTION, INCLUDING, WITHOUT
LIMITATION ANY WARRANTY OF MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE
OR NON-INFRINGEMENT. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, ATS AND
BUYER DISCLAIM ALL WARRANTIES OF ANY NATURE, EXPRESS OR IMPLIED.
9.4 ATS Indemnification. ATS shall indemnify Buyer against any and all
-------------------
liability, damages, cost and expenses, including reasonable attorneys' fees made
against or sustained by Buyer arising from the death of, or bodily injury to,
any person on account of the use of any ATS Nutrient Solution (within the
Licensed Product), and any reasonable ATS-approved out-of-pocket costs to Buyer
of the recall of any Licensed Product (solely because it contains ATS Nutrient
Solution) (collectively "Buyer Losses") to the extent such Buyer Losses are
finally determined by a court of competent jurisdiction or by specific reference
in a settlement of litigation consented to by ATS pursuant to Section 9.7 to
have been caused by ATS's gross negligence or willful misconduct.
9.5 Buyer Indemnification. Buyer shall indemnify ATS against any and all
---------------------
liability, damages, cost and expenses, including reasonable attorneys' fees made
against or sustained by ATS arising from the death of, or bodily injury to, any
person on account of the use of any Licensed Product (collectively "ATS Losses")
to the extent such ATS Losses are finally determined by a court of competent
jurisdiction or by specific reference in a settlement of litigation consented to
by Buyer pursuant to Section 9.7 to have been caused by (a) Buyer's gross
negligence or willful misconduct or (b) Buyer's (or its direct or indirect
distributors') failure to properly disclaim to their customers all warranties
and liabilities on behalf of ATS to the same extent as disclaimed herein.
9.6 Limitations to Indemnity. The indemnities of Sections 9.4 and 9.5 shall
------------------------
not apply (i) if the indemnified party fails to give the indemnifying party
prompt notice of any claim it receives and such failure materially prejudices
the indemnifying party, or (ii) unless the indemnifying party is given the
opportunity to approve any settlement, which approval shall not be unreasonably
withheld. Furthermore, the indemnifying party shall not be liable for attorneys'
fees or expenses of litigation of the indemnified party unless the indemnified
party gives the indemnifying party the opportunity to assume control of the
defense or settlement. In addition, if the indemnifying party assumes such
control, it shall only be responsible for the legal fees and litigation expenses
of the attorneys it designates to assume control of the litigation. In no event
shall the indemnifying party assume control of the defense of the indemnified
party without the consent of the indemnified party (which consent shall be given
or not at its sole discretion).
9.7 Settlement. In no event shall the indemnified party be entitled to
----------
settle any of the above-mentioned claims without the consent of the indemnifying
party, which consent shall not be unreasonably withheld.
16
9.8 Insurance. Each party hereto agrees to use its best efforts to procure,
---------
and at all times during the term of this Agreement and for a period of [** ]
years after the termination hereof, to maintain in full force and effect
liability insurance coverage of at least [** ] per
occurrence. Such insurance shall be designed to cover any and all of the other
party's losses (Buyer Losses or ATS Losses, as applicable) for which
indemnification is provided by Sections 9.4 and 9.5 above. Each party, upon the
request of the other, will provide appropriate certificates of insurance
evidencing the insurance required under this Section 9.8.
10. MISCELLANEOUS
-------------
10.1 Entire Agreement. This Agreement contains the entire agreement of the
----------------
parties regarding the subject matter hereof and supersedes all prior agreements,
understandings and negotiations regarding the same. This Agreement may not be
changed, modified, amended or supplemented except by a written instrument signed
by both parties. Furthermore, it is the intention of the parties that this
Agreement be controlling over additional or different terms of any order,
confirmation, invoice or similar document, even if accepted in writing by both
parties, and that waivers and amendments shall be effective only if made by
non-pre-printed agreements clearly understood by both parties to be an amendment
or waiver.
10.2 Assignability. This Agreement may not be assigned by either party
-------------
without the prior consent of the other party (and any attempt to do so will be
void); provided, however, either party may assign this Agreement to any entity
-------- -------
which acquires substantially all of its stock or its assets or business to which
this Agreement relates.
10.3 Severability. If any provision of this Agreement shall be held illegal
------------
or unenforceable, that provision shall be limited or eliminated to the minimum
extent necessary so that this Agreement shall otherwise remain in full force and
effect and enforceable.
10.4 Further Assurances. Each party hereto agrees to execute, acknowledge
------------------
and deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
10.5 Use of Party's Name. No right, express or implied, is granted by this
-------------------
Agreement to either party to use in any manner the name of the other or any
other trade name or trademark of the other in connection with the performance of
this Agreement.
10.6 Notice and Reports. All notices, consents or approvals required by
------------------
this Agreement shall be in writing sent by internationally recognized overnight
carrier or by facsimile to the parties at the following addresses or such other
addresses as may be designated in writing by the respective parties:
To ATS: ADVANCED TISSUE SCIENCES, INC.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: [** ]
Facsimile: [** ]
With a copy to: ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: [** ].
Facsimile: [** ]
17
To Buyer: BIOZHEM COSMECEUTICALS INC.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: [** ]
Facsimile: [** ]
With a copy to: [** ]
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: [** ]
Notices shall be deemed effective one day following delivery to such overnight
courier or by facsimile.
10.7 Relationships of the Parties. Both parties are independent contractors
----------------------------
under this Agreement. Nothing contained in this Agreement is intended nor is to
be construed so as to constitute ATS and Buyer as partners, agents or joint
venturers with respect to this Agreement. Neither party hereto shall have any
express or implied right or authority to assume or create any obligations on
behalf of or in the name of the other party or to bind the other party to any
contract, agreement or undertaking with any third party.
10.8 Waiver. The waiver by either party of a breach of any provisions
------
contained herein shall be in writing and shall in no way be construed as a
waiver of any succeeding breach of such provision or the waiver of the provision
itself.
10.9 Applicable Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the state of California without regard to the
conflicts of laws provisions thereof. The exclusive jurisdiction and venue of
any action with respect to this Agreement shall be the state or federal courts
located within the state of California and each of the parties hereto submits
itself to the exclusive jurisdiction and venue of such courts for the purpose of
any such action. Service of process in any such action may be effected in the
manner provided in Section 10.6 for delivery of notices. The prevailing party in
any legal action to enforce or interpret this Agreement shall be entitled to
reasonable costs and attorney's fees.
10.10 Captions. Paragraph captions are inserted for convenience only and in
--------
no way are to construed to define, limit or affect the construction or
interpretation hereof.
10.11 Force Majeure. A party shall not be liable for nonperformance or
-------------
delay in performance (other than of obligations regarding confidentiality)
caused by any event reasonably beyond the control of such party including,
without limitation, wars, hostilities, revolutions, riots, civil commotion,
national emergency, strikes, lockouts, unavailability of supplies, epidemics,
fire, flood, earthquake, force of nature, explosion, embargo, or any other Act
of God, or any law, proclamation, regulation, ordinance, or other act or order
of any court, government or governmental agency.
10.12 Export Control. Buyer agrees to comply with all applicable export
--------------
laws, restrictions and regulations of the U.S. Department of Commerce, the U.S.
Department of Treasury and any other United States or foreign agency or
authority. Buyer will not export or re-export, or allow the export or reexport
of any ATS Nutrient Solution and/or Licensed Product (or technical data or
information related thereto) or any direct product thereof in violation of any
such restrictions, laws or regulations, or, without all necessary licenses and
approvals, to any country to which such export or reexport is prohibited,
including, without limitation, export or re-export to or any country subject to
U.S. trade embargoes, or to any party
18
on the U.S. Export Administration Table of Denial Orders or the U.S. Department
of Treasury List of Specialty Designated Nationals, or to any prohibited
destination in any of the Country Groups specified in the then current
Supplement No. 1 to Port 740 or the Commerce Control List specified in the then
current Supplement No. 1 to part 738 of the U.S. Export Administration
Regulations (or any successor supplement or regulations). Buyer shall obtain and
bear all expenses relating to any necessary licenses and/or exemptions with
respect to the export from the U.S. of the ATS Nutrient Solution and/or Licensed
Product to any location in compliance with all applicable laws and regulations.
10.13 Basis of Bargain. EACH PARTY RECOGNIZES AND AGREES THAT THE WARRANTY
----------------
DISCLAIMERS AND LIABILITY AND REMEDY LIMITATIONS IN THIS AGREEMENT ARE MATERIAL
BARGAINED FOR BASES OF THIS AGREEMENT AND THAT THEY HAVE BEEN TAKEN INTO ACCOUNT
AND REFLECTED IN DETERMINING THE CONSIDERATION TO BE GIVEN BY EACH PARTY UNDER
THIS AGREEMENT AND IN THE DECISION BY EACH PARTY TO ENTER INTO THIS AGREEMENT.
11. ARBITRATION
-----------
11.1 Any dispute arising out of or relating to this Agreement, including
any alleged breach or fraud in the inducement hereof, shall be settled in
accordance with the commercial rules of the American Arbitration Association.
The results of such arbitration proceedings shall be binding upon the parties
hereto, and judgment may entered upon the arbitration award in any court having
jurisdiction thereof. Notwithstanding the foregoing, either party may seek
interim injunctive relief from any court of competent jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the date first written above.
ADVANCED TISSUE SCIENCES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Title: President
---------------------------------
Print Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Ph.D.
----------------------------
BIOZHEM COSMECEUTICALS INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Title: Chairman
--------------------------------
Print Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
19
EXHIBIT A
ATS NUTRIENT SOLUTION
---------------------
[**
]
A-1
EXHIBIT B
PRICES
------
[**
]
B-1
EXHIBIT C
FORM OF WARRANT
---------------
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER
SUCH ACT.
WARRANT TO PURCHASE COMMON STOCK
OF
BIOZHEM COSMECEUTICALS INC.
VOID AFTER SEPTEMBER 25, 2005
This Warrant is issued to Advanced Tissue Sciences, Inc., or its registered
assigns ("Holder"), by BIOZHEM COSMECEUTICALS, INC., a Texas corporation, (the
"Company"), on September 25, 2000 (the "Warrant Issue Date"). This Warrant is
issued in consideration of Holder's entering into the License and Supply
Agreement with the Company of even date herewith (the "License and Supply
Agreement").
1. Purchase Shares. Subject to the terms and conditions hereinafter set
---------------
forth, the Holder is entitled, upon surrender of this Warrant at the principal
office of the Company (or at such other place as the Company shall notify the
Holder hereof in writing), to purchase from the Company up to [**
] fully paid and nonassessable
shares of Common Stock of the Company, $0.001 par value per share (the "Common
Stock"). The number of shares of Common Stock issuable pursuant to this Section
1 (the "Shares") shall be subject to adjustment pursuant to Section 8 hereof.
2. Exercise Price. The per share purchase price for the Shares shall be
--------------
[** ] per share, as adjusted from time to time pursuant to
Section 8 hereof (the "Exercise Price"). It is acknowledged that the Exercise
Price is based on negotiated terms and is not intended to reflect the current
fair market value of the Common Stock.
3. Exercise Period. This Warrant shall be exercisable, in whole or in part,
---------------
during the term commencing on the Warrant Issue Date and ending
at 5:00 p.m. California time on September 25, 2005.
4. Method of Exercise. While this Warrant remains outstanding and
------------------
exercisable in accordance with Section 3 above, the Holder
may exercise, in whole or in part, the purchase rights evidenced hereby. Such
exercise shall be effected by:
(a) the surrender of the Warrant, together with a duly executed copy
of the form of Notice of Exercise attached hereto, to the Secretary of the
Company at its principal offices; and
(b) the payment to the Company of cash equal to the aggregate Exercise
Price for the number of Shares being purchased.
5. Net Exercise. In lieu of exercising this Warrant pursuant to Section 4,
------------
the Holder may elect to receive, without the payment by the Holder of any
additional consideration, shares of Common Stock equal to the value of the
"spread" on the Shares (or the portion thereof being canceled) by
surrender of this Warrant at the principal office of the Company together with
the Notice of Exercise, in which event the Company shall issue to the holder
hereof a number of shares of Common Stock computed using the following formula:
Y (A - B)
---------
X = A
Where: X = The number of shares of Common Stock to be issued to the
Holder pursuant to this net exercise;
Y = The number of Shares in respect of which the net issue
election is made;
A = The fair market value of one share of the Common Stock at
the time the net issue election is made;
B = The Exercise Price (as adjusted to the date of the net
issuance).
For purposes of this Section 5, the fair market value of one share of Common
Stock as of a particular date shall be determined as follows: (i) if traded on a
securities exchange or through The Nasdaq National Market, the value shall be
deemed to be the average of the closing prices of the securities on such
exchange over the five (5) day period ending one (1) day prior to the net
exercise election; (ii) if traded over-the-counter but not on the Nasdaq
National Market, the value shall be deemed to be the average of the closing bid
or sale prices (whichever is applicable) over the five (5) day period ending one
(1) day prior to the net exercise; and (iii) if there is no active public
market, the value shall be the fair market value thereof, as determined in good
faith by the Board of Directors of the Company.
6. Certificates for Shares. Upon the exercise of the purchase rights
-----------------------
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued as soon as practicable thereafter (with appropriate
restrictive legends, if applicable), and in any event within ten (10) days of
the delivery of the Notice of Exercise.
7. Issuance of Shares. The Company covenants that the Shares, when issued
------------------
pursuant to the exercise of this Warrant, will be duly and validly issued, fully
paid and nonassessable and free from all taxes, liens, and charges with respect
to the issuance thereof.
8. Adjustment of Exercise Price and Number of Shares. The number of and
-------------------------------------------------
kind of securities purchasable upon exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time as follows:
(a) Special Definitions. For purposes of this Section 8, the following
-------------------
definitions apply:
(i) "Options" shall mean rights, options, or warrants to subscribe
for, purchase or otherwise acquire either Common Stock or Convertible Securities
(defined below);
(ii) "Change in Control Transaction" shall mean a consolidation of
the Company with, or merger of the Company into, another corporation or
business organization (other than a consolidation or merger in which the Company
is the continuing corporation), or any sale or conveyance to another corporation
or other business organization of all of the Company's stock or all or
substantially all of the assets of the Company.
2
(iii) "Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Common Stock) or other securities convertible
into or exchangeable for Common Stock;
(iv) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued (or, pursuant to Section 8(c) deemed to be issued) by the
Company after the Warrant Issue Date (i) to any celebrity endorser of the
Licensed Product (as defined in the License and Supply Agreement), (ii) in a
Change of Control or other Transaction with Beauty Technology Institute ("BTI"),
whether issued to BTI or to the employees and/or shareholders of BTI, or (ii) to
Sierra Silicon, ▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
(b) No Adjustment of Exercise Price. Any provision herein to the
-------------------------------
contrary notwithstanding, no adjustment in the Exercise Price shall be made in
respect of the issuance of Additional Shares of Common Stock unless the
consideration per share (determined pursuant to Section 8(d) hereof) for an
Additional Share of Common Stock issued or deemed to be issued by the Company is
less than the Exercise Price in effect on the date of, and immediately prior to
such issue.
(c) Deemed Issue of Additional Shares of Common Stock. In the event
-------------------------------------------------
the Company at any time or from time to time after the Warrant Issue Date shall
issue any Options or Convertible Securities, then the maximum number of shares
(as set forth in the instrument relating thereto without regard to any
provisions contained therein designed to protect against dilution) of Common
Stock issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or grant or, in case such a record date shall have been
fixed, as of the close of business on such record date, provided further that in
any such case in which Additional Shares of Common Stock are deemed to be
issued:
(i) no further adjustments in the Exercise Price shall be made
upon the subsequent issue of Convertible Securities or shares of Common Stock
upon the exercise of such Options or conversion or exchange of such Convertible
Securities;
(ii) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Exercise Price computed upon the original issue thereof (or upon the occurrence
of a record date with respect thereto), and any subsequent adjustments based
thereon, shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities (provided, however, that no such adjustment of the Exercise Price
shall affect Common Stock previously issued upon exercise of this Warrant).
(d) Determination of Consideration. For purposes of this Section 8,
------------------------------
the consideration received by the Company for the issue of any Additional Shares
of Common Stock shall be computed as follows:
(i) Cash and Property. Such consideration shall:
-----------------
(a) insofar as it consists of cash, be computed at the
aggregate amount of cash received or to be received by the Company excluding
amounts paid or payable for accrued interest or accrued dividends;
3
(b) insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of such issue, as determined in
good faith by the Board of Directors of the Company; and
(c) in the event Additional Shares of Common Stock are issued
together with other shares or securities or other assets of the Company for
consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (a) and (b) above, as determined in
good faith by the Board of Directors of the Company.
(ii) Options and Convertible Securities. The consideration per
----------------------------------
share received by the Company for Additional Shares of Common Stock deemed to
have been issued pursuant to Section 8(c), relating to Options and Convertible
Securities shall be determined by dividing
(a) the total amount, if any, received or receivable by the
Company as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein designed to protect against dilution) payable to the Company
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities, or in the case of Options for Convertible Securities,
the exercise of such Options for Convertible Securities and the conversion or
exchange of such Convertible Securities by
(b) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein designed to protect against the dilution) issuable upon the
exercise of such Options or conversion or exchange of such Convertible
Securities.
(e) Adjustment of Exercise Price Upon Issuance of Additional Shares of
------------------------------------------------------------------
Common Stock. In the event the Company, at any time after the Warrant Issue Date
------------
shall issue Additional Shares of Common Stock (including Additional Shares of
Common Stock deemed to be issued pursuant to Section 8(c)) without consideration
or for a consideration per share less than the Exercise Price in effect on the
date of and immediately prior to such issue, then and in such event, the
Exercise Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Exercise Price
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of shares of
Common Stock which the aggregate consideration received by the Company for the
total number of Additional Shares of Common Stock so issued would purchase at
such Exercise Price in effect immediately prior to such issuance, and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of such Additional Shares of
Common Stock so issued. For the purpose of the above calculation, the number of
shares of Common Stock outstanding immediately prior to such issue shall be
calculated on a fully diluted basis, as if all Convertible Securities had been
fully converted into shares of Common Stock and any outstanding warrants,
options or other rights for the purchase of shares of stock or convertible
securities had been fully exercised (and the resulting securities fully
converted into shares of Common Stock, if so convertible) as of such date.
(f) Adjustments to Exercise Price for Stock Dividends and for
---------------------------------------------------------
Combinations or Subdivisions of Common Stock. In the event that the Company at
--------------------------------------------
any time of from time to time after the Warrant Issue Date shall declare or pay,
without consideration, any dividend on the Common Stock payable in Common Stock
or in any right to acquire Common Stock for no consideration, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by stock split, reclassification or otherwise than by
payment of a dividend in Common Stock or in any right to acquire Common Stock),
or in the event the outstanding shares of Common Stock shall be
4
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares of Common Stock, then the Exercise Price (and the number of shares
covered by the warrant) in effect immediately prior to such event shall,
concurrently with the effectiveness of such event, be proportionately decreased
or increased, as appropriate. In the event that this Company shall declare or
pay, without consideration, any dividend on the Common Stock payable in any
right to acquire Common Stock for no consideration then the Company shall be
deemed to have made a dividend payable in Common Stock in an amount of shares
equal to the maximum number of shares issuable upon exercise of such rights to
acquire Common Stock.
(g) Change of Control Transaction, Reclassification and
---------------------------------------------------
Reorganization. If any Change of Control Transaction, or any capital
--------------
reorganization or reclassification of the capital stock of the Company shall be
effected in such a way that holders of Common Stock shall be entitled to receive
stock, securities or assets with respect to or in exchange for Common Stock,
then, as a condition of such Change of Control Transaction, reorganization or
reclassification, lawful and adequate provisions shall be made whereby the
Holder shall thereupon have the right to receive, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore receivable upon the exercise of the Warrant, such shares
of stock, securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such Common Stock immediately theretofore receivable upon
such exercise had such Change of Control Transaction, reorganization or
reclassification not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of the Holder to the end
that the provisions hereof (including, without limitation, provisions for
adjustments of the Exercise Price) shall thereafter be applicable, as nearly as
may be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights. Notwithstanding
anything to the contrary contained herein, the Holder shall have the right to
exercise the Warrant instead of giving effect to the provisions contained in
this Section.
(h) Notice of Adjustment. When any adjustment is required to be made
--------------------
in the number or kind of shares purchasable upon exercise of the Warrant, or in
the Warrant Price, the Company shall promptly notify the holder of such event
and of the number of shares of Common Stock or other securities or property
thereafter purchasable upon exercise of this Warrant.
9. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor on the basis of the Exercise Price then in effect.
10. No Shareholder Rights. Prior to exercise of this Warrant, the Holder
---------------------
shall not be entitled to any rights of a shareholder with respect to the Shares,
including (without limitation) the right to vote such Shares, receive dividends
or other distributions thereon, exercise preemptive rights or be notified of
shareholder meetings, and such holder shall not be entitled to any notice or
other communication concerning the business or affairs of the Company. However,
nothing in this Section 10 shall limit the right of the Holder to be provided
the Notices required under this Warrant.
11. Transfers of Warrant. Subject to compliance with applicable federal and
--------------------
state securities laws, this Warrant and all rights hereunder are transferable in
whole or in part by the Holder to any person or entity upon written notice to
the Company. The transfer shall be recorded on the books of the Company upon the
surrender of this Warrant, properly endorsed, to the Company at its principal
offices, and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer. In the event of a partial
transfer, the Company shall issue to the holders one or more appropriate new
warrants.
5
12. Successors and Assigns. The terms and provisions of this Warrant and
----------------------
the Purchase Agreement shall inure to the benefit of, and be binding upon, the
Company and the Holder and their respective successors and assigns.
13. Amendments and Waivers. Any term of this Warrant may be amended and the
----------------------
observance of any term of this Warrant may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the written
consent of the Company and the Holder.
14. Notices. All notices required under this Warrant and shall be deemed to
-------
have been given or made for all purposes (i) upon personal delivery, (ii) upon
confirmation receipt that the communication was successfully sent to the
applicable number if sent by facsimile; or (iii) one day after being sent, when
sent by professional overnight courier service. Notices to the Company shall be
sent to the principal office of the Company (or at such other place as the
Company shall notify the Holder hereof in writing). Notices to the Holder shall
be sent to the address of the Holder on the books of the Company (or at such
other place as the Holder shall notify the Company hereof in writing).
15. Investor Rights Agreement. The Holder and the Company are entering into
-------------------------
the Investor Rights Agreement of even date herewith, which provides for, among
other things, Holder's right to require registration of the Shares issuable
hereunder.
16. Captions. The section and subsection headings of this Warrant are
--------
inserted for convenience only and shall not constitute a part of this Warrant in
construing or interpreting any provision hereof.
17. Governing Law. This Warrant shall be governed by the laws of the State
-------------
of California as applied to agreements among California residents made and to be
performed entirely within the State of California.
18. Investment Intent. By acceptance of this Warrant, the Holder represents
-----------------
that it is acquiring this Warrant, and would acquire the underlying Shares, for
its own account for investment purposes only, and not for resale or with a view
to distribution of such shares or any part thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
an officer thereunto duly authorized.
BIOZHEM COSMECEUTICALS INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
6
NOTICE OF EXERCISE
------------------
To: BIOZHEM COSMECEUTICALS INC.
The undersigned hereby elects to [check applicable subsection]:
________ (a) Purchase _________________ shares of Common Stock of BIOZHEM
COSMECEUTICALS INC., pursuant to the terms of the attached
Warrant and payment of the Exercise Price per share required
under such Warrant accompanies this notice;
OR
________ (b) Exercise the attached Warrant for [all of the shares]
[________ of the shares] [cross out inapplicable phrase]
purchasable under the Warrant pursuant to the net exercise
provisions of Section 5 of such Warrant.
The undersigned hereby represents and warrants that the
undersigned is acquiring such shares for his own account for investment purposes
only, and not for resale or with a view to distribution of such shares or any
part thereof.
WARRANTHOLDER:
------------------------------------
By: _____________________________
Its: _____________________________
Name: _____________________________
Address: ____________________________________
____________________________________
Date:_____________________________
Name in which the shares should be registered:
______________________________________________
7
C-1
EXHIBIT D
INVESTOR RIGHTS AGREEMENT
----------------
September 25, 2000
by
BIOZHEM COSMECEUTICALS INC.
and
ADVANCED TISSUE SCIENCES, INC.
TABLE OF CONTENTS
-----------------
Page
----
1. Registration Rights.....................................................1
1.1. Definitions.......................................................1
1.2. Request for Registration..........................................2
1.3. Company Registration..............................................3
1.4. Obligations of the Company........................................4
1.5. Furnish Information...............................................5
1.6. Expenses of this Section 1 Registration...........................5
1.7. Underwriting Requirements.........................................6
1.8. Delay of Registration.............................................6
1.9. Indemnification...................................................6
1.10. Reports Under Securities Exchange Act of 1934.....................8
1.11. Form S-3 Registration.............................................9
1.12. Assignment of Registration Rights.................................9
1.13. Limitations on Subsequent Registration Rights....................10
1.14. Termination of Registration Rights...............................10
2. Covenants of the Company...............................................10
3. Miscellaneous..........................................................10
3.1. Successors and Assigns...........................................10
3.2. Governing Law....................................................11
3.3. Counterparts.....................................................11
3.4. Titles and Subtitles.............................................11
3.5. Notices..........................................................11
3.6. Expenses.........................................................11
3.7. Amendments and Waivers...........................................11
3.8. Severability.....................................................11
3.9. Aggregation of Stock.............................................11
3.10. Entire Agreement; Amendment; Waiver..............................11
i.
INVESTORS' RIGHTS AGREEMENT
---------------------------
THIS INVESTORS' RIGHTS AGREEMENT is made as of the 25th day of September,
2000, by and between BIOZHEM COSMECEUTICALS INC., a Texas corporation (the
"Company"), and ADVANCED TISSUE SCIENCES, INC., a Delaware corporation (the
"Investor").
RECITALS
--------
WHEREAS, the Company and the Investor are parties to the License and Supply
Agreement of even date herewith (the "License and Supply Agreement");
WHEREAS, the Company and the Investor are parties to the Warrant to
Purchase Common Stock of even date herewith (the "Warrant");
WHEREAS, in order to induce the Investor to enter into the License and
Supply Agreement, the Investor and the Company hereby agree that this Agreement
shall govern the rights of the Investor to cause the Company to register shares
of Common Stock issuable to the Investor and certain other matters as set forth
herein and provide that these rights are most favorable rights offered to any
other holders of the Company's securities.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as follows:
-------------------
1.1. Definitions. For purposes of this Section 1:
-----------
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "Form S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 1.12 hereof.
(d) The term "1934 Act" shall mean the Securities Exchange Act
of 1934, as amended.
(e) The term "register", "registered," and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means the Common Stock
issuable or issued upon exercise of the Warrant.
(g) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(h) The term "SEC" shall mean the Securities and Exchange
Commission.
1.2. Request for Registration.
------------------------
(a) If the Company shall receive at any time after September 1,
2002 a written request from the Holders of a majority of the Registrable
Securities then outstanding that the Company file a registration statement under
the Act covering the registration of [** ] the
Registrable Securities then outstanding (or a lesser percent if the anticipated
aggregate offering price, net of underwriting discounts and commissions, would
exceed [** ]), then the Company shall:
(i) within ten (10) days of the receipt thereof, give
written notice of such request to all Holders; and
(ii) effect as soon as practicable, and in any event within
60 days of the receipt of such request, the registration under the Act of all
Registrable Securities which the Holders request to be registered, subject to
the limitations of subsection 1.2(b), within twenty (20) days of the mailing of
such notice by the Company in accordance with Section 3.5.
(b) If the Holders initiating the registration request
hereunder ("Initiating Holders") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to subsection 1.2(a) and the
Company shall include such information in the written notice referred to in
subsection 1.2(a). The underwriter will be selected by the Initiating Holders
and shall be reasonably acceptable to the Company. In such event, the right of
any Holder to include his Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company as provided in subsection 1.4(e)) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provision of this Section 1.2, if the
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned
2.
by each Holder; provided, however, that the number of shares of Registrable
Securities to be included in such underwriting shall not be reduced unless all
other securities are first entirely excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than 60 days after receipt
of the request of the Initiating Holders; provided, however, that the Company
may not utilize this right more than once in any twelve-month period.
(d) In addition, the Company shall not be obligated to effect,
or to take any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected one (1) registration
pursuant to this Section 1.2 and such registration has been declared or ordered
effective;
(ii) During the period starting with the date thirty (30)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a
registration subject to Section 1.3 hereof; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) If the Initiating Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 1.11 below.
1.3. Company Registration. If (but without any obligation to do so)
--------------------
the Company proposes to register (including for this purpose a registration
effected by the Company for shareholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, a registration
on any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Registrable Securities or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities which are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 3.5, the Company shall, subject to the provisions of
Section 1.7, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
3.
1.4. Obligations of the Company. Whenever required under this
--------------------------
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for a period of up to one hundred twenty (120)
days or until the distribution contemplated in the Registration Statement has
been completed; provided, however, that (i) such 120-day period shall be
extended for a period of time equal to the period the Holder refrains from
selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company; and (ii) in
the case of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, provided that Rule 415, or any
successor rule under the Act, permits an offering on a continuous or delayed
basis, and provided further that applicable rules under the Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (I) includes any prospectus required by Section
10(a)(3) of the Act or (II) reflects facts or events representing a material or
fundamental change in the information set forth in the registration statement,
the incorporation by reference of information required to be included in (I) and
(II) above to be contained in periodic reports filed pursuant to Section 13 or
15(d) of the 1934 Act in the registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Act.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
4.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
(i) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 1, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
1.5. Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
1.6. Expenses of this Section 1 Registration. All expenses other
---------------------------------------
than underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to this Section 1, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company
(including fees and disbursements of counsel for the Company in its capacity as
counsel to the selling Holders hereunder; if Company counsel does not make
itself available for this purpose, the Company will pay the reasonable fees and
disbursements of one counsel for the selling Holders) and the reasonable fees
and disbursements of one counsel for the selling Holders shall be borne by the
Company; provided, however, that the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to Section 1.2 if the
registration request is subsequently withdrawn at the request of the Holders of
a majority of the
5.
Registrable Securities to be registered (in which case all participating holders
shall bear such expenses), unless the Holders of a majority of the Registrable
Securities agree to forfeit their right to one demand registration pursuant to
Section 1.2; provided further, however, that if at the time of such withdrawal,
the Holders have learned of a material adverse change in the condition,
business, or prospects of the Company from that known to the Holders at the time
of their request and have withdrawn the request with reasonable promptness
following disclosure by the Company of such material adverse change, then the
Holders shall not be required to pay any of such expenses and shall retain their
rights pursuant to Section 1.2.
1.7. Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by those
persons entitled to select the underwriters, and then only in such quantity as
the underwriters determine in their sole discretion will not jeopardize the
success of the offering by the Company. If the total amount of securities,
including Registrable Securities, requested by shareholders to be included in
such offering exceeds the amount of securities sold other than by the Company
that the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata, according to the total amount of securities entitled to be included, among
the Holders' Registrable Securities first, and then, to the extent that the
number of the Holders' Registrable Securities to be included in such offering is
less that the total amount of securities entitled to be included therein,
apportioned pro rata, according to the total amount of securities entitled to be
included therein, among the other selling shareholders) but in no event shall
the amount of Registrable Securities of the selling Holders included in the
offering be reduced if the number of the Holders' Registrable Securities to be
included in such offering is less that the total amount of securities entitled
to be included therein.
1.8. Delay of Registration. No Holder shall have any right to obtain
---------------------
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.9. Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
or the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained
6.
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Act, or the 1934
Act or any state securities law; and the Company will pay to each such Holder,
underwriter or controlling person, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 1.9(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will pay, any
legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this subsection 1.9(b), in connection with investigating
or defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this subsection 1.9(b) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Holder, which consent shall not be unreasonably withheld; provided, that, in no
event shall any indemnity under this subsection 1.9(b) exceed the gross proceeds
from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
7.
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.9, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.9.
(d) If the indemnification provided for in this Section 1.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.9 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.10. Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times during the term of this
Agreement;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has
8.
complied with the reporting requirements of SEC Rule 144, the Act and the 1934
Act or that it qualifies as a registrant whose securities may be resold pursuant
to Form S-3, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in availing any Holder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration or pursuant to such form.
1.11. Form S-3 Registration. In case the Company shall receive from
---------------------
any Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within 15 days after receipt of such written notice from the Company; provided,
however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 1.11: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than [** ]; (3) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
shareholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than 60 days after receipt of
the request of the Holder or Holders under this Section 1.11; provided, however,
that the Company shall not utilize this right more than once in any twelve month
period; (4) if the Company has, within the twelve (12) month period preceding
the date of such request, already effected two registrations on Form S-3 for the
Holders pursuant to this Section 1.11; or (5) in any particular jurisdiction in
which the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. Registrations effected pursuant to this
Section 1.11 shall not be counted as demands for registration or registrations
effected pursuant to Sections 1.2 or 1.3, respectively.
1.12. Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only
9.
with all related obligations) by a Holder to a transferee or assignee of such
securities, provided: (a) the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement, including without limitation the provisions of Section 1.13 below;
and (c) such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act.
1.13. Limitations on Subsequent Registration Rights. From and after
---------------------------------------------
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
include such securities in any registration filed under Section 1.2 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable
Securities of the Holders which is included or (b) to make a demand registration
which could result in such registration statement being declared effective prior
to the earlier of either of the dates set forth in subsection 1.2(a) or within
one hundred twenty (120) days of the effective date of any registration effected
pursuant to Section 1.2.
1.14. Termination of Registration Rights.
----------------------------------
(a) The right of any Holder to request registration or
inclusion in any registration pursuant to Section 1.3 shall terminate if all
shares of Registrable Securities held or entitled to be held upon conversion by
such Holder may immediately be sold under Rule 144 during any 90-day period,
provided, however, that the provisions of this Section 1.14(b) shall not apply
to any Holder who owns more than two percent (2%) of the Company's outstanding
stock until such time as such Holder owns less than two percent (2%) of the
outstanding stock of the Company.
2. Covenants of the Company. The Company agrees that in the event the
------------------------
Company offers registration and any similar rights provided hereunder to any
third party holder of the Company's securities which are superior or more
favorable than the rights granted to Investor hereunder, then the Company shall
promptly and at its sole expense take all necessary actions to amend or modify
this Agreement in order to provide Investor with such superior or more favorable
rights.
3. Miscellaneous.
-------------
3.1. Successors and Assigns. Except as otherwise provided herein,
----------------------
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
10.
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2. Governing Law. This Agreement shall be governed by and
-------------
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
3.3. 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.
3.4. Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5. Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
3.6. Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7. Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.
3.8. Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
3.9. Aggregation of Stock. All shares of Registrable Securities held
--------------------
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
3.10. Entire Agreement; Amendment; Waiver. This Agreement (including
-----------------------------------
the Exhibits hereto, if any) constitutes the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof.
11.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
BIOZHEM COSMECEUTICALS INC.
By:
--------------------------
Its:
-------------------------
Name:
------------------------
Address:
-----------------------------
-----------------------------
INVESTOR:
ADVANCED TISSUE SCIENCES, INC.
By:
---------------------------
Its:
--------------------------
Name:
-------------------------
Address:
------------------------------
------------------------------
12.
D-1
EXHIBIT 1.2
ATS PATENT RIGHTS
[**
]
[**
]
