EXHIBIT 10.9
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 2% of its shares of Common Stock outstanding as of the
Effective Date (subject to certain adjustments) at a price per share equal to
the average closing price of its Common Stock for the five (5) business days
prior to the Effective Date 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
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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.
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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).
1.6 "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 the date that ATS communicates in writing
to Buyer the final ATS Board of Directors approval of the Agreement as provided
under Section 11.1 of this Agreement.
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 worldwide 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.
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2. LICENSES
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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), worldwide, 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 outside of 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
outside of 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; PROVIDED, HOWEVER, that ATS shall not lower the Concentration if
ATS cannot demonstrate that such lower concentration is demonstrably effective
as a cosmeceutical product sold in a non-medical environment. In addition, no
other retail or mass market licensee of ATS Nutrient Solution shall be allowed
to use a concentration of the solution that is higher than the concentration
available for use by Buyer.
3. SALE AND PURCHASE OF ATS NUTRIENT SOLUTION
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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 shall remain fully responsible hereunder.
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
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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 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.
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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 no less favorable to Buyer
than the prices extended by ATS to any other non-governmental customer for
substantially similar quantities and concentrations of ATS Nutrient Solution.
The Purchase Price shall be 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, free of charge.
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, at ATS's cost. 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:
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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;
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, ATS will repurchase the ATS
Nutrient Solutions in Buyer's inventory at the Purchase Price paid for such ATS
Nutrient Solution;
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.
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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
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, ATS shall bear the expense of such recall. In all other
events, Buyer shall bear the expense of such recall.
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
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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.
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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 any country of the
world. 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 will 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 ATS's expense, 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
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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 Ten Million
Dollars ($10,000,000) in cumulative Gross Sales of the Licensed Product or (b)
December 31, 2001, a payment in the amount of One Million Dollars ($1,000,000);
5.1.1.2 upon Buyer achieving Fifty Million Dollars
($50,000,000) in cumulative Gross Sales of the Licensed Product, a payment in
the amount of One Million Five Hundred Thousand Dollars ($1,500,000);
5.1.1.3 upon Buyer achieving Seventy-Five Million Dollars
($75,000,000) in cumulative Gross Sales of the Licensed Product, a payment in
the amount of One Million Two Hundred Fifty Thousand Dollars ($1,250,000);
5.1.1.4 upon Buyer achieving One Hundred Million Dollars
($100,000,000) in cumulative Gross Sales of the Licensed Product, a payment in
the amount of One Million Two Hundred Fifty Thousand Dollars ($1,250,000).
5.1.1.5 upon Buyer achieving One Hundred Fifty Million Dollars
($150,000,000) in cumulative Gross Sales of the Licensed Product, a payment in
the amount of Two Million Dollars ($2,000,000);
5.1.1.6 upon Buyer achieving Two Hundred Million Dollars
($200,000,000) in cumulative Gross Sales of the Licensed Product, a payment in
the amount of Two Million Dollars ($2,000,000);
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5.1.1.7 upon Buyer achieving Five Hundred Million Dollars
($500,000,000) in cumulative Gross Sales of the Licensed Product, a payment in
the amount of Ten Million Dollars ($10,000,000); and
5.1.1.8 upon Buyer achieving One Billion Dollars
($1,000,000,000) in cumulative Gross Sales of the Licensed Product, a payment in
the amount of Fifteen Million Dollars ($15,000,000).
5.2 ROYALTY PAYMENTS. On a quarterly basis, Buyer shall make payments
(the "Royalty Payments") to ATS in amounts according to the following schedule:
AMOUNT OF ANNUAL GROSS SALES FOR EACH
PERCENTAGE OF GROSS SALES 12-MONTH PERIOD BEGINNING ON JANUARY 1
------------------------- --------------------------------------
10% up to and including $50,000,000
11% greater than $50,000,000 and up to and including
$75,000,000
12% greater than $75,000,000 and up to and including
$100,000,000
13% greater than $100,000,000
Once the e total of the cumulative Gross Sales of Buyer Product(s) (as
calculated from the Effective Date) is equal to or greater than Two Hundred
Million Dollars ($200,000,000), 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
------------------------- --------------------------------------
12% up to and including $100,000,000
13% greater than $100,000,000
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
$20,000,000 and the Annual Gross Sales for the 12-month period beginning January
1, 2002 is $80,000,000 and the aggregate total of the cumulative Gross Sales is
$190,000,000 as of March 31, 2003, then the Royalty Payment for such quarter is
equal to 12% of $20,000,000 or $2,400,000.
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
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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:
Annual Minimum Royalty Quarterly Minimum Royalty
Contract Year Payment Payment Annual Sales Targets
------------- ---------------------- ------------------------- --------------------
1 $1,500,000 $375,000 $15,000,000
2 $3,000,000 $750,000 $30,000,000
3 $4,000,000 $1,000,000 $40,000,000
4 $6,100,000 $1,525,000 $60,000,000
5 $9,600,000 $2,400,000 $80,000,000
6-10 $12,000,000/year $3,000,000 $100,000,000/year
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 fifty percent
(50%) 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.
10
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 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.
11
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 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 Royalty Payments to be made by Buyer hereunder, and if the parties are
unable to successfully re-negotiate such Royalty Payments within ninety (90)
days following commencement of such negotiations, then Buyer 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 no less than fifty percent (50%) of the
average price of the Licensed Product for the two (2) calendar quarters
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 no less than one
million dollars ($1,000,000), within twenty-one (21) days of execution of this
Agreement;
7.6.3 Buyer must make the first commercial sale of a Licensed
Product no later than March 31, 2001;
12
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 rather
than convert it to non-exclusive unless Buyer has both (i) met the License
Threshold AND (ii) raised an additional five million dollars ($5,000,000) in
financing. In that case, ATS shall only have the option of converting the
license to non-exclusive. 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.
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 THIRTY (30) DAYS WRITTEN NOTICE IN THE EVENT BUYER LOSES THE
SERVICES OF ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ OR ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 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
13
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 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.
14
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 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.
15
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;
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.
16
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.
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
three (3) years after the termination hereof, to maintain in full force and
effect liability insurance coverage of at least one million dollars ($1,000,000)
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:
17
To ATS: ADVANCED TISSUE SCIENCES, INC.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇)▇▇▇-▇▇▇▇
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.
18
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 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.
12. ARBITRATION
-----------
12.1 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: ▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇
BIOZHEM COSMECEUTICALS INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: CEO
Print Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
19
EXHIBIT A
ATS NUTRIENT SOLUTION
---------------------
The ATS Nutrient Solution is a byproduct of ATS manufacturing process for its
tissue engineered products. The ATS Nutrient Solution contains the following:
INORGANIC SALTS (including)
Calcium Chloride (CaCl2) (anhyd.)
Ferric Nitrate (Fe(NO3)3-9H2O)
Potassium Chloride (KCl)
Magnesium Sulfate (MgSO4)
Sodium Chloride (NaCl)
Sodium Bicarbonate (NaHCO3)
Sodium Phosphate (NaH2PO4-H2O)
OTHER COMPONENTS
D-Glucose
Phenol red
Bovine calf serum
AMINO ACIDS (including)
L-Arginine-HCl
L-Cystine 2HCl
L-Glutamine
Glycine
L-Histidine HCl-H2O
L-Isoleucine
L-Leucine
L-Lysine-HCl
L-Methionine
L-Phenylalanine
L-Serine
L-Threonine
L-Tryptophan
L-Tyrosine 2Na 2H20
VITAMINS (including)
D-Ca pantothenate
Choline Chloride
Folic Acid
i-Inositol
Niacinamide
Pyridoxine HCl
Riboflavin
Thiamine HCl
NON ESSENTIAL AMINO ACIDS
HUMAN COLLAGENS
NATURAL ANTI-OXIDANTS
NATURALLY SECRETED GROWTH FACTORS (including)
TGF beta
VegF
IL-6
A-1
EXHIBIT B
PRICES
------
PRICES ARE EXPRESSED IN TERMS OF CONCENTRATION FROM THE SOLUTION THAT IS A
DIRECT BYPRODUCT OF THE MANUFACTURING PROCESS. FOR EXAMPLE, 1X NUTRIENT SOLUTION
IS THE MATERIAL GENERATED BY MANUFACTURING WITHOUT ANY ADDITIONAL CONCENTRATION.
CONSEQUENTLY 2X, 5X OR 10X SOLUTION IS MATERIAL THAT HAS BEEN CONCENTRATED IN BY
THE APPROPRIATE FACTOR.
----------------------------------- -------------------------
Concentration Price Per Liter
----------------------------------- -------------------------
1X NUTRIENT SOLUTION $0.50
2X NUTRIENT SOLUTION $1.00
5X NUTRIENT SOLUTION $2.50
10X NUTRIENT SOLUTION $5.00
B-1
EXHIBIT C
FORM OF WARRANT
---------------
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT.
WARRANT TO PURCHASE COMMON STOCK
OF
BIOZHEM COSMECEUTICALS INC.
VOID AFTER ________, 2005
This Warrant is issued to Advanced Tissue Sciences, Inc., or its
registered assigns ("Holder"), by BIOZHEM COSMECEUTICALS, INC., a Texas
corporation, (the "Company"), on ___________, 2000 (the "Warrant Issue Date").
This Warrant is issued in consideration of Holder's entering into the License
and Supply Agreement with the Company of even date herewith (the "License and
Supply Agreement").
10.13.1 PURCHASE SHARES. Subject to the terms and conditions
hereinafter set forth, the Holder is entitled, upon surrender of this Warrant at
the principal office of the Company (or at such other place as the Company shall
notify the Holder hereof in writing), to purchase from the Company up to
[_______________] fully paid and nonassessable shares of Common Stock of the
Company, [$_________] par value per share (the "Common Stock") [TWO PERCENT (2%)
OF THE CAPITAL STOCK OF THE COMPANY OUTSTANDING AS OF THE DATE OF EXECUTION OF
THE LICENSE AND SUPPLY AGREEMENT (ASSUMING FULL CONVERSION OF ALL CONVERTIBLE
SECURITIES)]. 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.
10.13.2 EXERCISE PRICE. The per share purchase price for the Shares
shall be [$ _____] [THE PER SHARE AVERAGE CLOSING PRICE OF THE COMMON STOCK FOR
THE FIVE (5) BUSINESS DAYS PRIOR TO THE DATE OF EXECUTION OF THE LICENSE AND
SUPPLY AGREEMENT], 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.
10.13.3 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 [_____________], 2005.
10.13.4 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:
10.13.4.1 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
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10.13.4.2 the payment to the Company of cash equal to the
aggregate Exercise Price for the number of Shares being purchased.
10.13.5 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.
10.13.6 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.
10.13.7 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.
10.13.8 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:
10.13.8.1 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);
C-2
(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.
(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 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 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
10.13.8.2 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.
10.13.8.3 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
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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).
10.13.8.4 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;
(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
C-4
(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.
10.13.8.5 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.
10.13.8.6 ADJUSTMENTS TO EXERCISE PRICE FOR STOCK DIVIDENDS AND FOR
COMBINATIONS OR SUBDIVISIONS OF COMMON STOCK. In the event that the Company at
any time or 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 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.
10.13.8.7 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
C-5
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.
10.13.8.8 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.
10.13.9 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.
10.13.10 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.
10.13.11 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.
10.13.12 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.
10.13.13 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.
10.13.14 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).
10.13.15 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.
C-6
10.13.16 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.
10.13.17 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.
10.13.18 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:
-------------------------------
C-7
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:
___________________________________
C-8
EXHIBIT D
INVESTOR RIGHTS AGREEMENT
-------------------------
INVESTOR RIGHTS AGREEMENT
__________________________
______________, 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...........................................3
1.5. Furnish Information..................................................5
1.6. Expenses of this Section 1 Registration..............................5
1.7. Underwriting Requirements............................................5
1.8. Delay of Registration................................................6
1.9. Indemnification......................................................6
1.10. Reports Under Securities Exchange Act of 1934.......................7
1.11. Form S-3 Registration...............................................8
1.12. Assignment of Registration Rights...................................9
1.13. Limitations on Subsequent Registration Rights.......................9
1.14. Termination of Registration Rights..................................9
2. Covenants of the Company....................................................9
3. Miscellaneous...............................................................9
3.1. Successors and Assigns...............................................9
3.2. Governing Law.......................................................10
3.3. Counterparts........................................................10
3.4. Titles and Subtitles................................................10
i
3.5. Notices.............................................................10
3.6. Expenses............................................................10
3.7. Amendments and Waivers..............................................10
3.8. Severability........................................................10
3.9. Aggregation of Stock................................................10
3.10. Entire Agreement; Amendment; Waiver................................11
ii
INVESTORS' RIGHTS AGREEMENT
THIS INVESTORS' RIGHTS AGREEMENT is made as of the _________ day of
______________, 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:
11. REGISTRATION RIGHTS. The Company covenants and agrees as follows:
11.1 DEFINITIONS. For purposes of this Section 1:
11.1.1 The term "Act" means the Securities Act of 1933, as
amended.
11.1.2 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.
11.1.3 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.
11.1.4 The term "1934 Act" shall mean the Securities Exchange
Act of 1934, as amended.
11.1.5 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.
11.1.6 The term "Registrable Securities" means the Common
Stock issuable or issued upon exercise of the Warrant.
11.1.7 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.
D-1
11.1.8 The term "SEC" shall mean the Securities and Exchange
Commission.
11.2 REQUEST FOR REGISTRATION.
11.2.1 If the Company shall receive at any time after
[SEPTEMBER 1, 2003] 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 at least forty percent
(40%) of the Registrable Securities then outstanding (or a lesser percent if the
anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed $7,500,000), then the Company shall:
11.2.1.1 within ten (10) days of the receipt thereof,
give written notice of such request to all Holders; and
11.2.1.2 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.
11.2.2 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 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.
11.2.3 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.
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11.2.4 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:
11.2.4.1 After the Company has effected [ONE (1)]
registration pursuant to this Section 1.2 and such registration has been
declared or ordered effective;
11.2.4.2 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
11.2.4.3 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.
11.3 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.
11.4 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:
11.4.1 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.
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11.4.2 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.
11.4.3 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.
11.4.4 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.
11.4.5 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.
11.4.6 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.
11.4.7 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.
11.4.8 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) 11.4.9 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.
11.5 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.
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11.6 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 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.
11.7 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.
11.8 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.
11.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
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11.9.1 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 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.
11.9.2 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.
11.9.3 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
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-6
11.9.4 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.
11.9.5 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.
11.9.6 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.
11.10 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:
11.10.1 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;
11.10.2 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;
11.10.3 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
11.10.4 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 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.
11.11 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:
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11.11.1 promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
11.11.2 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 $250,000; (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.
11.11.3 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.
11.12 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only 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.
11.13 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
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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.
11.14 TERMINATION OF REGISTRATION RIGHTS.
11.14.1 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.
12. 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.
13. MISCELLANEOUS.
13.1 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, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
13.2 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.
13.3 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.
13.4 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.
13.5 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.
13.6 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.
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13.7 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.
13.8 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.
13.9 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.
13.10 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.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
[BIOZHEM COSMECEUTICALS INC.]
By:
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Its:
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Name:
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Address:
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INVESTOR:
ADVANCED TISSUE SCIENCES, INC.
By:
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Its:
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Name:
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Address: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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BIOZHEM LICENSE FINAL
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E-1
EXHIBIT 1.2
ATS PATENT RIGHTS
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US Patent Application Serial No. 09/313,538, by ▇▇▇▇▇▇▇▇ et al., entitled
"Conditioned Cell Medium Compositions and Methods of Use"; filed May 14, 1999.
International Patent Application No. PCT/US00/13016, entitled "Conditioned Cell
Medium Compositions and Methods of Use"; filed May 12, 2000 (Designating all
countries, including the US).