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EXHIBIT 10-U
REGISTRATION RIGHTS AGREEMENT
January 23, 1996
Advanced Polymer Systems, Inc., a Delaware corporation ("APS") and Dow
Corning Corporation, a Michigan corporation ("PURCHASER"), hereby agree as
follows:
RECITALS
A. APS is acquiring a polymer-based carrier system business from
PURCHASER, and in payment thereof is issuing 200,000 shares of its Common Stock
(the "Shares") to PURCHASER.
B. The parties wish to provide for the registration of the subsequent
resale of the Shares and for the orderly distribution thereof, all on the terms
and conditions hereof.
THE PARTIES AGREE AS FOLLOWS:
1. Registration Rights; Listing.
1.1 Certain Definitions. As used herein, the following terms
shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Convertible Securities" shall mean securities of APS
convertible into or exchangeable for Registrable Securities.
(c) "Holder" shall mean any holder of outstanding Registrable
Securities which have not been sold to the public, but only if such holder is
PURCHASER or an assignee or transferee of Registration rights as permitted by
Section 1.8.
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(d) The terms "Registrar", "Registered" and "Registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act ("Registration Statement"), and the
declaration or ordering of the effectiveness of such Registration Statement.
(e) "Registrable Securities" shall mean the Shares issued to PURCHASER
by APS, together with any Common Stock issued with respect to the Shares
pursuant to stock splits, stock dividends and similar distributions, so long as
such securities have not been sold to the public in a public distribution or a
public securities transaction or sold in a single transaction exempt from the
registration and prospectus delivery requirements of the Securities Act such
that all transfer restrictions and restrictive legends with respect to such
Shares shall have been removed in connection with such sale.
(f) "Registration Expenses" shall mean all expenses incurred by APS in
complying with this Agreement, including, without limitation, all federal and
state registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for APS, blue sky fees and expenses, the expense of
any special audits incident to or required by any such Registration and any
expenses related to the maintenance of such Registration and qualification
during the period specified in Section 1.4(a) hereof.
(g) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the
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rules and regulations of the Commission thereunder, all as the same shall be in
effect at the time.
(h) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities pursuant
to this Agreement.
1.2 Registration.
1.2.1 Registration. Subject to the terms of this Agreement, APS
shall use its best efforts to effect Registration of the Registrable Securities
within 60 days of their issuance to PURCHASER by filing as soon as possible
after the date hereof a Form S-3 Registration Statement (or any successor to
Form S-3) with the Commission.
1.2.2 Registration of Other Securities. Any Registration
Statement filed under this Section 1 may include securities of APS other than
Registrable Securities; provided, however, that neither PURCHASER or any Holder
shall be required to utilize an underwriter in connection with the sale of
their Registrable Securities.
1.2.3 Blue Sky. In the event of any Registration pursuant to
Section 1, APS will exercise its best efforts to Register and qualify the
securities covered by the Registration Statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably appropriate for the
distribution of such securities; provided, however, that:
(a) APS shall not be required to qualify to do business or
to file a general consent to service of process in
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any such states or jurisdictions, unless APS is already subject to service in
such jurisdiction; and
(b) notwithstanding anything in this Agreement to the contrary,
in the event any jurisdiction in which the securities shall be qualified
imposes a non-waivable requirement that expenses incurred in connection with
the qualification of the securities be borne by selling shareholders, such
expenses shall be payable pro rata by selling shareholders.
1.3 Expenses of Registration. All Registration Expenses (but not
Selling Expenses) incurred in connection with the Registration pursuant to
Section 1 shall be borne by APS.
1.4 Registration Procedures. Whenever required under this Agreement to
effect the Registration of any securities of APS, subject to the other
provisions of this Agreement, APS shall, as expeditiously as reasonably
possible:
(a) Prepare and file with the Commission a Registration
Statement with respect to such securities in accordance with Section 1.2.1 and
use its diligent best efforts to cause such Registration Statement to become
effective as promptly as possible thereafter and to remain effective for a
period equal to the shorter of: (i) three years from the date of such
effectiveness; or (ii) until the distribution described in the Registration
Statement has been completed.
(b) Prepare and file with the Commission 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 Securities
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Act with respect to the disposition of all securities covered by such
Registration Statement.
(c) Furnish to the Holders participating in such
Registration and the underwriters, if any, of the securities being
Registered, such reasonable number of copies of the Registration Statement,
preliminary prospectus and final prospectus as they may request in order to
facilitate the public offering of such securities.
1.5 Additional Information Available. So long as the Registration
Statement is effective covering the resale of Shares owned by a Holder, APS
will furnish to the Holder(s):
(a) as soon as practicable after it becomes available (but
in the case of APS' Annual Report to Stockholders, within 120 days after the
end of each fiscal year of APS), one copy of: (i) its Annual Report to
Stockholders (which Annual Report shall contain financial statements audited
in accordance with generally accepted accounting principles by a national firm
of certified public accountants); (ii) if not included in substance in the
Annual Report to Stockholders, its Annual Report on Form 10-K; (iii) if not
included in substance in its Quarterly Reports to Stockholders, its
quarterly reports on Form 10-Q; and (iv) a full copy of the particular
Registration Statement covering the Shares (the foregoing, in each case,
excluding exhibits); and
(b) upon the reasonable request of a Holder, all exhibits
excluded by the parenthetical to subparagraph (a) (iv) of this Section 1.5;
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and APS, upon the reasonable request of a Holder, will meet with such Holder or
a representative thereof at APS' headquarters to discuss all information
relevant for disclosure in the Registration Statement covering the Shares and
will otherwise cooperate with any Holder conducting an investigation for the
purpose of reducing or eliminating such Holder's exposure to liability under
the Securities Act, including the reasonable production of information at APS'
headquarters.
1.6 Information Furnished by Holder. It shall be a condition
precedent of APS' obligations under this Agreement that each Holder of
Registrable Securities included in any Registration furnish to APS such
information regarding such Holder and the distribution proposed by such Holder
as APS may reasonably request.
1.7 Indemnification.
1.7.1 Company's Indemnification of Holder. APS will
indemnify and hold harmless each Holder, each of its officers, directors,
employees, agents, affiliates and constituent partners, and each person deemed
to be in control of such Holder within the meaning of Section 15 of the
Securities Act or Section 20 of the Securities Exchange Act of 1934 (the
"Exchange Act"), from and against all claims, losses, damages or liabilities
(or actions in respect thereof) to the extent such claims, losses, damages or
liabilities arise out of or are based upon any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus or other
document (including any related Registration Statement) incident to any
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such Registration, qualification or compliance, or are based on any 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 any
violation by APS of any rule or regulation promulgated under the Securities Act
applicable to APS and relating to action or inaction required of APS in
connection with any such Registration, qualification or compliance or arise out
of any failure by APS to fulfill an undertaking included in the Registration
Statement; and APS will reimburse each such Holder, each such underwriter and
each person who controls any such Holder or underwriter, for any legal and any
other expenses reasonably incurred in connection with defending any such claim,
loss, damage, liability or action; provided, however, that the indemnity
contained in this Section 1.7.1 shall not apply to amounts paid in settlement
of any such claim, loss, damage, liability or action if settlement is effected
without the consent of APS (which consent shall not unreasonably be withheld)
and; provided, further, that APS will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based upon any untrue statement or omission based upon written information
furnished to APS by such Holder or controlling person and stated expressly to
be for use in connection with the offering of securities of APS.
1.7.2 Holder's Indemnification of Company. Each Holder will indemnify
and hold harmless APS, each of its directors, officers, employees, agents and
affiliates, each
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person deemed to be in control of APS within the meaning of Section 15 the
Securities Act or Section 20 of the Exchange Act, and each other such Holder,
each of its officers, directors, employees, agents, affiliates and constituent
partners, and each person deemed to be in control of such other Holder within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, from and against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based upon any untrue statement (or
alleged untrue statement) of a material fact contained in any such Registration
Statement, prospectus, offering circular or other document, or any 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 any
violation by such Holder of any rule or regulation promulgated under the
Securities Act applicable to such Holder and relating to action or inaction
required of such Holder in connection with any such Registration, qualification
or compliance; and will reimburse APS, such Holder, such directors, officers,
partners, persons or control persons for any legal and any other expenses
reasonably incurred in connection with defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such Registration Statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to APS by such Holder and specifically approved in writing by such
Holder for
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use in connection with the offering of securities of APS; provided, however,
that the indemnity contained in this Section 1.7.2 shall not apply with respect
to a Holder to amounts paid in settlement of any claim, loss, damage, liability
or action if settlement is effected without the consent of such Holder (which
consent shall not be unreasonably delayed or withheld).
1.7.3 Indemnification Procedure. Promptly after receipt by an
indemnified party under this Section 1.7 of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party under this Section 1.7, notify the
indemnifying party in writing of the commencement thereof and, to the extent
reasonably possible, generally summarize such action. The indemnifying party
shall have the right to participate in and to assume the defense of such claim;
provided, however, that the indemnifying party shall be entitled to select
counsel for the defense of such claim with the approval of any parties entitled
to indemnification, which approval shall not be unreasonably withheld;
provided, further, that if either party reasonably determines that there may be
a conflict between the position of APS and a Holder in conducting the defense
of such action, suit or proceeding by reason of recognized claims for indemnity
under this Section 1.7, then counsel for such party shall be entitled to
conduct, or participate in, the defense to the extent reasonably determined by
such counsel to be necessary to protect the interest of such party and the
costs of such counsel shall be borne by the indemnifying party. The failure to
notify an
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indemnifying party promptly of the commencement of any such action, if
prejudicial to the ability of the indemnifying party to defend such action,
shall relieve such indemnifying party, to the extent so prejudiced, of any
liability to the indemnified party under this Section 1.7, but the omission so
to notify the indemnifying party will not relieve such party of any liability
that such party may have to any indemnified party otherwise other than under
this Section 1.7.
1.8 Transfer of Rights. The right to cause APS to Register securities
granted by APS to PURCHASER under this Agreement may be assigned by any Holder
to a transferee or assignee of any Registrable Securities not sold to the
public acquiring at least 25,000 shares of such Holder's Registrable Securities
(equitably adjusted for any stock splits, subdivisions, stock dividends,
changes, combinations or the like); provided, however, that:
(a) APS must receive written notice prior to the time of said
transfer, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such information and
Registration rights are being assigned; and
(b) the transferee or assignee of such rights must not be a
person deemed by the Board of Directors of APS, in its best judgment, to be a
competitor or potential competitor of APS. Notwithstanding the limitations set
forth in the foregoing sentence respecting the minimum number of shares which
must be transferred and permitted transferees and assignees: (i) any
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Holder which is a partnership may transfer such Holder's Registration rights to
such Holder's constituent partners without restriction as to the number or
percentage of shares acquired by any such constituent partner; and (ii) Section
1.8(b) shall not prohibit the transfer or assignment of such rights to an
affiliate of the PURCHASER.
1.9 Nasdaq Listing. Prior to the effective date of a Registration of
any of the Shares, APS shall file an application with NASDAQ to list such
Shares for quotation on the Nasdaq National Market.
1.10 Delay in Effectiveness. In the event a Registration Statement
covering the Shares is not declared effective within ninety (90) days after the
date hereof or in the event the effectiveness of such Registration Statement is
suspended or terminated at any time subsequent to the 90th day after the date
hereof and prior to the termination of the period specified in Section 1.4(a)
hereof, APS shall pay to the Holders an amount equal to $275 per day for each
day such Registration Statement is not effective; provided that nothing herein
is intended to limit a Holder's ability to seek to enforce its rights to
require that a Registration Statement covering Shares remains effective during
the period specified in Section 1.4 hereof; and provided further that APS shall
not be required to make any payments to a Holder if the failure to obtain or
maintain an effective Registration Statement is solely attributable to a
Holder's failure to provide APS with
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information required to be provided by such Holder for inclusion in the
Registration Statement.
2. Miscellaneous.
2.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts entered into and wholly to be performed within the State of
California by California residents.
2.2 Successors and Assigns. Subject to the exceptions
specifically set forth in this Agreement, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
executors, administrators, heirs, successors and assigns of the parties.
2.3 Entire Agreement. This Agreement and the Asset Purchase
Agreement and the Exhibits and Schedules hereto and thereto constitute the
entire contract between APS and the PURCHASER relative to the subject matter
hereof. Any previous agreement between APS and the PURCHASER with respect to
the subject matter hereof is superseded by this Agreement.
2.4 Severability. Any invalidity, illegality or limitation of the
enforceability with respect to any Holder of any one or more of the provisions
of this Agreement, or any part thereof, whether arising by reason of the law of
any PURCHASER's domicile or otherwise, shall in no way affect or impair the
validity, legality or enforceability of this Agreement with respect to other
Holders. In case any provision of this Agreement shall be invalid, illegal or
unenforceable, it shall to the extent practicable, be modified so as to make it
valid, legal
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and enforceable and to retain as nearly as practicable the intent of the
parties, and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
2.5 Amendment of Agreement. Any provision of this Agreement may
be amended only by a written instrument signed by APS and by PURCHASER.
2.6 Notices. Any notice required or permitted hereunder shall be given
in writing and shall be conclusively deemed effectively given upon personal
delivery, or five days after deposit in the United States mail, by registered
or certified mail, postage prepaid, addressed:
(a) if to APS, Advanced Polymer Systems, Inc., ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ATTENTION: President; and
(b) if to PURCHASER, Dow Corning Corporation, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, ATTENTION: General Counsel.
2.7 Headings. The headings of the Sections of this Agreement are for
convenience and shall not by themselves determine the interpretation of this
Agreement.
2.8 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.
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IT WITNESS WHEREOF, the parties have executed this Agreement.
ADVANCED POLYMER SYSTEMS, INC.
By:/s/ ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇▇
Senior Vice President and CFO
DOW CORNING CORPORATION
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Commercial Unit Manager
Personal Household and
Automotive Products
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EXECUTION COPY
ASSET PURCHASE AGREEMENT
THIS AGREEMENT made the 23rd day of January, 1996, by and between
ADVANCED POLYMER SYSTEMS, INC., a Delaware corporation with its principal place
of business at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("APS") and
DOW CORNING CORPORATION, a Michigan corporation with its principal place of
business at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ("DCC").
RECITALS
A. APS and DCC entered into a Joint Agreement effective November
25, 1991, providing for joint cross licensing, joint development and sharing of
gross margin from the marketing of certain Microsponge(R) Systems and
Polytrap(R) Systems (together, the "Systems").
B. APS and DCC entered into a Purchase/Sales Agreement effective
November 25, 1991, providing for supply of the Systems by APS to DCC and their
purchase by DCC from APS.
C. The parties now desire to terminate the Joint Agreement and
the Purchase/Sales Agreement.
D. The parties also now desire to provide for the sale, transfer
and assignment by DCC to APS of certain worldwide patents that cover the
Polytrap(R) System, all unpatented Polytrap(R) Technology and the Polytrap(R)
Trademarks on the terms and conditions and for the consideration herein set
forth.
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IT IS, THEREFORE, AGREED as follows:
1. Definitions. For the purposes of this Agreement, the
following definitions shall apply.
"Affiliates" of a party shall mean agents, representatives,
attorneys, successors, assigns, employees, officers, directors and shareholders
of, or entities controlling, controlled by or under common control with, the
party.
"Capital Loan" shall have the definition as set forth in
Section 7.1 of the Joint Agreement.
"Closing Date" shall have the meaning as defined in Section 3
hereto.
"Division of Gross Margin" shall have the meaning consistent
with Section 6 of the Joint Agreement and the definition of "Gross Margin" in
such agreement.
"Joint Agreement" shall mean the agreement between the parties
effective November 25, 1991, a copy of which is attached hereto as Exhibit A.
"Microsponge(R) System" shall mean a polymer-based delivery
system as described and claimed in U.S. Patent No. 4,690,825.
"Net Sales" shall have the meaning set forth in Section 1.11
of the Joint Agreement.
"Purchase/Sales Agreement" shall mean the Purchase/Sales
Agreement effective November 25, 1991 between the parties.
"Polytrap(R) System Assets" shall have the meaning as set
forth in Section 3.1.
"Polytrap(R) System" shall mean a polymer-based carrier
system as described and claimed in U.S. Patent No. Re. 33,429 issued on
November 6, 1990.
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"Polytrap(R) Patents" shall mean the patents and patent
applications as listed on Exhibit B, and any patents that may issue on such
patent applications, any divisions, continuations, continuations-in-part and
reissues and renewals thereof, and all foreign counterparts thereof.
"Polytrap(R) Patents" shall not include (a) U.S. patent number 5,100,477 and
5,126,309, and Japanese application number 121430/9, all of which are entitled
"Decontamination of Toxic Chemical Agents"; and (b) U.S. patent number
5,173,520 entitled "Colorant Material with a Polymerized Coating," which are
not listed on Exhibit B.
"Polytrap(R) Technology" shall mean know-how, trade secrets,
inventions, data, technology and information, including, but not limited to,
improvements thereof, relating to a Polytrap(R) System which are now owned by
DCC and which DCC has the lawful right to disclose. Polytrap(R) Technology
shall include, but shall not be limited to, processes and analytical
methodology used in development, testing, analysis and manufacture, and
clinical, toxicological, research, formulation, product development and other
scientific data.
"Polytrap(R) Trademarks" shall mean the marks "Polytrap(R)",
"Polytrap FLM(R)" and "Polytrap SMP(R)" in use by or registered to DCC.
"Related Seller Documents" shall have the meaning as set forth
in Section 6.1(b) hereof.
"Related Purchaser Documents" shall have the meaning as set
forth in Section 6.2(b) hereof.
"System(s)" shall mean a Microsponge(R) and/or Polytrap(R)
System.
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2. Termination of Existing Agreements.
2.1 The Joint Agreement shall be terminated effective on
the Closing Date, as defined in Section 7. Notwithstanding such termination,
DCC shall pay to APS the excess of APS' unpaid share of the Division of Gross
Margin over the balance that may be due to DCC on the Capital Loan (subject to
paragraph 2.3 of this Section) and the Capital Loan shall be considered paid in
full.
2.2 The Purchase/Sales Agreement shall be terminated as of
the Closing Date. Notwithstanding such termination, DCC shall make payment of
all outstanding unpaid bills for purchases from APS (subject to provision 2.3
of this Section).
2.3 Any monies due APS, which relate to purchases and sales
occurring prior to DCC's filing on May 15, 1995 for Chapter 11 protection under
the U.S. Bankruptcy Code and still unpaid at Closing Date, may be considered
pre-petition claims of APS against DCC and subject to payment in accordance
with and upon confirmation of DCC's plan of reorganization.
3. Sale of Polytrap(R) System Assets.
3.1 DCC agrees to sell to APS and APS agrees to buy from DCC full
right and title to the Polytrap(R) Patents, the Polytrap(R) Technology, the
Polytrap(R) Trademarks, and all customer information and files with respect to
the sale of products utilizing the Polytrap(R) Patents or Technology
(collectively, the "Polytrap(R) System Assets"). In consideration of such sale
by DCC, APS shall issue to DCC 200,000 shares of its common stock (the
"Shares"). The Shares shall be publicly marketable (subject to any applicable
securities law restriction or limitation) pursuant to a separate agreement to
be executed substantially in the form attached as Exhibit C ("Registration
Rights Agreement").
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3.2 The Closing of the sale and transfer contemplated by this
Agreement (the "Closing") shall take place in Chicago on or before March 31,
1996, or at such other place, time and date as shall be fixed by mutual
agreement between the parties hereto. The date of Closing is referred to
herein as the "Closing Date".
3.3 The sale, assignment, conveyance, transfer and delivery
of the Polytrap(R) Assets shall be made at the Closing by appropriate bills of
sale, assignments, endorsements and such other appropriate instruments of
transfer, all in form and substance satisfactory to APS, as shall be sufficient
to vest in APS as of the Closing Date good and merchantable title to the
Polytrap(R) System Assets free and clear of any liens, charges, options,
encumbrances or adverse claims of any kind. Such instruments of assignment,
conveyance and transfer shall include the Patent Assignment and Trademark
Assignment, substantially in the form set forth hereto as Exhibits D and E,
respectively.
3.4 APS shall be responsible for preparing and recording
documents, including payment of any fees and expenses related thereto, as may
be required for affecting transfer of title and interest in, to and under all
of the Polytrap(R) System Assets from DCC to APS.
3.5 DCC agrees that at the Closing and from time to time
thereafter, without additional consideration, it will execute and deliver or
cause to be executed and delivered such other and further instruments of
assignment, transfer or conveyance of any of the assets and properties being
transferred and conveyed herein and take such other action as APS may
reasonably request to effect the transfer to APS of the right, title and
interest in, to and under all of the Polytrap(R) System Assets.
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4. Distribution Agreement. In order to assist with the business
transition from DCC to APS, DCC shall continue to distribute and sell on behalf
of APS all products that have been covered by the Joint Agreement between the
parties for a period not to exceed one (1) year in exchange for a service fee
paid to DCC by APS of three (3%) percent of Net Sales of such products made
directly by DCC's sales force. The terms and conditions of such sales and
distribution arrangement shall be as set forth in a separate agreement
substantially in the form attached hereto as Exhibit F ("Distribution
Agreement").
5. Noncompete. In consideration of the undertakings herein by
APS, DCC agrees that it will not compete with APS for a period of ten years
from the December 31, 1995, in the United States and other parts of the world
where Systems are presently being sold or utilized in products, in the business
of creating, licensing or marketing polymer-based carrier systems, pursuant to
a separate agreement to be executed substantially in the form attached as
Exhibit G ("Non-Compete Agreement").
6. Representations and Warranties.
6.1 DCC represents and warrants:
(a) DCC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan and has
the corporate power to own, lease and operate its properties and to carry on
its business as now being conducted. There will be delivered to APS on the
Closing Date accurate and complete copies of the Restated Articles of
Incorporation and Bylaws of DCC in effect on the Closing Date.
(b) DCC has all necessary corporate power and
authority under its Restated Articles of Incorporation and Bylaws and under the
laws of the State of Michigan and
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other applicable laws to execute, deliver and perform this Agreement and any
other agreements or documents delivered pursuant to this Agreement (the
"Related Seller Documents"). The execution, delivery and performance of this
Agreement and the Related Seller Documents have been duly authorized by all
necessary corporate action on the part of DCC, including any shareholder and
director approval necessary for the consummation of the transactions hereby
contemplated. This Agreement is, and each of the Related Seller Documents when
executed and delivered by DCC will be, a valid, binding and enforceable
obligation of DCC.
(c) DCC is not a party to any agreement, written or
oral, that is inconsistent with this Agreement.
(d) Except as set forth on Exhibit B hereto, to
its knowledge, (i) DCC has full right, title and interest in the Polytrap(R)
Patents, the Polytrap(R) Technology and the Polytrap(R) Trademarks and; (ii)
DCC is not presently aware of any patents owned by a third party which would be
infringed by the practice of the Polytrap(R) Patents or the Polytrap(R)
Technology.
(e) Except as set forth on Exhibit B hereto, to the
knowledge of DCC there have been no customer complaints concerning the use of
any product that utilizes Polytrap(R) Patents or Polytrap(R) Technology
during the period of two years prior to the Closing Date.
6.2 APS represents and warrants:
(a) APS is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power to own, lease and operate its properties and to carry on
its business as now being conducted. There will be delivered to DCC on the
Closing Date accurate and complete copies of the Certificate of
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22
Incorporation and Bylaws of APS in effect on the Closing Date.
(b) APS has all necessary corporate power and
authority under its Certificate of Incorporation and Bylaws and under the laws
of the State of Delaware and other applicable laws to execute, deliver and
perform this Agreement and any other agreements or documents delivered pursuant
to this Agreement (the "Related Purchaser Documents"). The execution, delivery
and performance of this Agreement and the Related Purchaser Documents have been
duly authorized by all necessary corporate action on the part of APS, including
any shareholder and director approval necessary for the consummation of the
transactions hereby contemplated. This Agreement is, and each of the Related
Purchaser Documents when executed and delivered by APS will be, a valid,
binding and enforceable obligation of APS.
(c) APS is not a party to any agreement, written or
oral, that is inconsistent with this Agreement.
(d) The Shares have been duly and validly issued and
are fully paid and non-assessable. No pre-emptive right, co-sale right,
registration right, right of first refusal or other similar right exists with
respect to the Shares or as a result of the issuance and sale thereof. No
further approval or authorization of any shareholder or director of APS or of
any other party is required for the issuance and sale or transfer of the Shares
in accordance with the terms of this Agreement and the Registration Rights
Agreement.
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7. Conditions of Closing; Closing Deliveries.
7.1 The obligations of APS to close under this Agreement
are subject to the satisfaction of all of the following conditions as of the
Closing Date, any of which may be waived by APS:
(a) the representations and warranties of DCC set
forth in this Agreement or in any certificate or document called for in this
Agreement shall be true and correct in all material respects as made, both on
the date hereof and at and as of the Closing (as though such representations
and warranties were made anew), and, except with respect to the effect of
transactions permitted by the provisions of this Agreement, all agreements and
transactions contemplated hereby and to be performed by DCC on or before the
Closing shall have been duly performed.
(b) there shall have been delivered to APS by DCC
such bills of sale, assignments, and other good and sufficient instruments of
transfer (the "Transfer Documents"), including, without limitation, the Patent
Assignment and Trademark Assignment, conveying and transferring to APS title to
the Polytrap(R) Patents and Trademarks as provided in this Agreement, and all
other required documents, certificates, and instruments set forth in Section
7.3. Provided, however, to the extent that it is not practicable to deliver
any of such conveyancing documents other than the Patent Assignment and the
Trademark Assignment at the time of Closing, such documents shall be delivered
to APS as soon as practicable thereafter.
7.2 The obligations of DCC to close under this Agreement are
subject to the satisfaction of all of the following conditions as of the
Closing Date, any of which may be waived by DCC:
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(a) the representations and warranties of APS
contained in this Agreement or in any certificate or document called for in
this Agreement shall be true and correct in all material respects as made, both
on the date hereof and at and as of the Closing (as though such representations
and warranties were made anew), and, except with respect to the effect of
transactions permitted by the provisions of this Agreement, all agreements and
transactions contemplated hereby and to be performed by APS on or before the
Closing shall have been duly performed.
(b) there shall have been delivered to DCC a
certified copy of a Resolution of the Board of Directors of APS authorizing and
approving the purchase of the Polytrap(R) System Assets.
(c) DCC shall have obtained approval from the U.S.
Bankruptcy Court, Eastern District of Michigan, Northern Division to enter into
the transactions contemplated by this Agreement.
7.3 At the Closing, DCC shall tender or cause to be tendered
to APS the following:
(a) the Transfer Documents referred to in Section
7.1(b) hereof properly executed and acknowledged.
(b) appropriate receipts.
(c) all other documents and papers required by
Section 7.1 hereof as conditions of Closing and executed counterparts of the
Agreements attached hereto as exhibits including:
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25
(1) the Patent Assignment, duly executed
by DCC.
(2) the Trademark Assignment, duly
executed by DCC.
(3) a counterpart of the Distribution
Agreement, duly executed by DCC.
(4) a counterpart of the Non-Compete
Agreement, duly executed by DCC.
(5) a counterpart of the Registration
Rights Agreement, duly executed by
DCC.
7.4 At the Closing, APS shall deliver to DCC the following:
(a) A certificate(s) for the Shares, free and clear
of any and all encumbrances (other than any restrictions under the U.S. or
state securities laws), in form satisfactory to DCC.
(b) all other documents and papers required by
Section 7.2 hereof as conditions to the Closing and executed counterparts of
the Agreements attached hereto as exhibits, including:
(1) a counterpart of the Distribution
Agreement, duly executed by APS.
(2) a counterpart of the Non-Compete
Agreement, duly executed by APS.
(3) a counterpart of the Registration
Rights Agreement, duly executed by
APS.
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8. Disclaimer. APS agrees that, as of Closing Date,
determination of the suitability of the Polytrap(R) System Assets for uses
contemplated by APS will be the sole responsibility of APS, that DCC has not
and does not represent that the Polytrap(R) System is suitable for, or has been
tested for medical device, pharmaceutical, or any other medical product
applications or end-uses, and that DCC shall not be held liable for the
damages, direct or consequential, resulting from the use of the Polytrap(R)
System Assets transferred to APS under this Agreement.
9. Assumption of Liabilities. APS shall assume, effective as of
the Closing Date, and thereafter pay, perform and discharge all liabilities and
obligations with respect to the prosecution, maintenance and protection of the
Polytrap(R) System Assets, and all liabilities for the sale and delivery of
Polytrap(R) System and Microsponge(R) System products after the Closing,
including without limitation, tort liability, products liability, and strict
liability related to Polytrap(R) System or Microsponge(R) System products made
by APS after the Closing.
10. Indemnification.
10.1 The representations and warranties made in this
Agreement by either party hereto and in any agreement, certificate, exhibit or
document delivered in connection therewith shall survive the Closing.
10.2 DCC agrees to indemnify and hold harmless APS and its
Affiliates from and against any loss, damage or expense (including reasonable
attorneys' fees) suffered by APS resulting from (a) any material breach by DCC
of this Agreement; (b) any material inaccuracy in or material breach of any of
the representations, warranties or covenants made by DCC herein, or in any
other agreement, or certificate delivered by DCC at the Closing in accordance
with the provisions of any Section hereof; (c) any and all liabilities,
obligations, charges, claims
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and demands in any way relating to, arising out of, or connected with (i) the
development, sale or distribution by DCC, or on behalf of DCC other than by
APS, of the Polytrap(R) System product prior to the Closing, including, but not
limited to, any products liability claims with respect to the Polytrap(R)
System product manufactured by or on behalf of DCC, (ii) the conduct of the
Polytrap(R) business prior to the Closing, or (iii) the ownership, possession
or use of the Polytrap(R) System Assets prior to the Closing; and (d) the
failure of DCC to pay, discharge or perform any liability or obligations of DCC
which is not expressly assumed by APS under this Agreement.
10.3 APS agrees to indemnify and hold harmless DCC and its
Affiliates from and against any loss, damage or expense (including reasonable
attorneys' fees) suffered by DCC resulting from (a) any material breach by APS
of this Agreement; (b) any material inaccuracy in or material breach of any of
the representations, warranties or covenants made by APS herein, or in any
agreement or certificate delivered by APS at the Closing in accordance with the
provisions of any Section hereof; (c) any and all liabilities, obligations,
charges, claims and demands in any way relating to, arising out of, or
connected with (i) the development, manufacture, sale or distribution by APS,
or on behalf of APS other than by DCC, of the Polytrap(R) System product after
the Closing, including, but not limited to any products liability claims with
respect to the Polytrap(R) System product manufactured by APS, (ii) the conduct
of the Polytrap(R) business after the Closing, or (iii) the ownership,
possession or use of the Polytrap(R) System Assets after the Closing; and (d)
the failure of APS to pay, discharge or perform any liability or obligations of
APS which is expressly assumed by APS under this Agreement.
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10.4 (a) A party entitled to be indemnified pursuant to
Section 10.2 or 10.3 hereof (the "Indemnified Party") shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand which the Indemnified Party has determined has given or could
give rise to a right of indemnification under this Agreement. Subject to the
Indemnifying Party's right to defend in good faith third party claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations
under this Section within thirty (30) days after receipt of written notice
thereof from the Indemnified Party.
(b) If the Indemnified Party shall notify the
Indemnifying Party of any claim or demand pursuant to Section 10.4(a) hereof,
and if such claim or demand relates to a claim or demand asserted by a third
party against the Indemnified Party which the Indemnifying party acknowledges
is a claim or demand for which it must indemnify or hold harmless the
Indemnified Party under Section 10.2 or 10.3 hereof, the Indemnifying Party
shall have the right to employ counsel acceptable to the Indemnified Party to
defend any such claim or demand asserted against the Indemnified Party. The
Indemnified Party shall have the right to cooperate in the defense of any such
claim or demand. The Indemnifying Party shall notify the Indemnified Party in
writing, within thirty (30) days after the date of the notice of claim given by
the Indemnified Party to the Indemnifying Party under Section 10.4(a) hereof of
its election to defend in good faith any such third party claim or demand. So
long as the Indemnifying Party is defending in good faith any such claim or
demand asserted by a third party against the Indemnified Party, the Indemnified
Party shall not settle or compromise such claim or demand. The Indemnified
Party shall make available other materials in the Indemnified Party's
possession reasonably required by it for its use in contesting any third party
claim or demand. Whether
14
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or not the Indemnifying Party elects to defend any such claim or demand, the
Indemnified Party shall have no obligation to do so.
10.5 The rights provided in this Section 10 do not
constitute an election of remedies or waiver of any rights which may be
available to any party other than as provided herein should the provisions of
this Section 10 be found by a court of competent jurisdiction to be
unenforceable, void or unavailable for any reason.
11. Confidentiality.
11.1 APS and DCC acknowledge that they will each become
privy to confidential information relating to each such party's businesses
during the course of the negotiations and during the period between the
execution hereof and the Closing hereunder which it otherwise would not have
known and that any disclosure of said information could injure such party's
businesses. Therefore APS and DCC and their respective representatives, agents
and employees agree to exert their best efforts (equivalent to the protection
given their own confidential information) to prevent delivery or disclosure of
all information so obtained to any third party or to any other outside source
or used for any purpose other than the consummation of this Agreement.
"Confidential Information" includes information ordinarily known only to the
personnel of APS and DCC and includes, without limitation, customer lists,
supplier lists, trade secrets, distribution channels, pricing policy and
records, inventory records, and such other information designated as
proprietary or confidential by APS or DCC.
11.2 It is understood and agreed by the parties that the
above obligations to keep information confidential shall not attach to
information which (a) was in the public knowledge or domain at the time of
disclosure, (b) was known to the recipient prior to the time of receipt
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30
under this Agreement as is shown by recipient's written or other tangible
records, or (c) is obtained by the recipient from a third party who has a bona
fide right to disclose the information and without obligations to keep it
confidential. It is further understood and agreed by the parties that the
obligations of confidence shall immediately cease at such time as the
information becomes a part of the public knowledge or domain without breach or
fault on the part of the receiving party, or a period of fifteen (15) years has
lapsed from the date of this Agreement.
11.3 In the event that the recipient of such information
considers certain confidential information received under this Agreement to be
excluded from the above obligations of confidence and intends to disclose or
transfer it to a third party, the recipient agrees to give the originating
party thirty (30) days written notice prior to any such disclosure or transfer
as to what information is believed to be excluded and the basis for the
exclusion.
11.4 Further, neither party hereto shall make any public
disclosure pertaining to the terms of this Agreement or any of the transactions
contemplated hereby, unless such disclosure is necessary (a) to satisfy such
party's legal or contractual obligations without the express written consent of
the other party or (b) reasonably required for compliance with any federal or
state securities laws, regulations, or filing requirements.
12. Miscellaneous.
12.1 The parties acknowledge that neither DCC, APS nor any
party acting on behalf of DCC or APS has paid or become obligated to pay any
fee or commission to any broker, finder or intermediary for or on account of
the transactions contemplated by this Agreement.
12.2 APS shall be responsible for obtaining all licenses,
permits and approvals
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31
from public authorities necessary for it to use the Polytrap(R) System Assets,
and DCC shall not be responsible for transferring or obtaining such licenses,
permits or approvals, except that DCC shall cooperate with APS in attempting to
obtain such licenses, permits and approvals.
12.3 Whether or not the transactions contemplated herein
are consummated, unless otherwise expressly provided herein each party hereto
shall pay its own expenses incident to this Agreement and the transactions
contemplated herein, including all legal and accounting fees and disbursements.
APS shall pay all sales and use taxes applicable to the transactions referred
to in this Agreement. The party responsible under applicable law shall bear and
pay in their entirety all other taxes and registration and transfer fees, if
any, payable by reason of the sale and conveyance of the Polytrap(R) System
Assets. The parties shall fully cooperate to avoid, to the extent legally
possible, the payment of duplicate taxes, and each party shall furnish, at the
request of the other, proof of payment of any taxes or other documentation
which is a prerequisite to avoiding payment of a duplicate tax. Each party
will cooperate to the extent practicable in minimizing all taxes and fees
levied by reason of the sale and conveyance of the Polytrap(R) System Assets.
12.4 Neither of the parties hereto shall, prior to the
Closing, issue or authorize to be issued any press release, or other public
announcement concerning this Agreement or any of the transactions contemplated
hereby (other than any filing required to be made by APS or DCC pursuant to any
federal or state law or regulation), unless such release or announcement, in
respect of timing and contents, has been approved by authorized executives or
officers of both APS and DCC, as appropriate, which approval shall not be
unreasonably withheld. Notwithstanding the foregoing, neither party is
prevented from making such public
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32
announcements as such party may consider necessary in order to satisfy such
party's legal or contractual obligations, including, but not limited to, the
public disclosure necessary for DCC to obtain Bankruptcy Court approval
pursuant to Section 7.2(c) of this Agreement.
12.5 Legal title, equitable title and risk of loss with
respect to the Polytrap(R) System Assets shall not pass to APS until they are
transferred at the Closing hereunder.
12.6 All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to be duly given upon delivery, if delivered by hand, or three business
days after mailing, if mailed certified or registered first class mail, postage
prepaid, properly addressed to the party entitled to receive such notice at the
addresses stated below:
If to APS:
Advanced Polymer Systems, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
If to DCC:
Dow Corning Corporation
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
or to such other address as a party may direct by notice given to the other
party.
12.7 The parties have in this Agreement and the Exhibits
hereto incorporated all representations, warranties, covenants, commitments and
understandings on which they have relied in entering into this Agreement and,
except as provided for herein, neither party has made any other covenant or
commitment to the other concerning its future action. Accordingly, this
Agreement, the Registration Rights Agreement, the Distribution Agreement, and
the ▇▇▇-
▇▇
▇▇
Compete Agreement (i) constitute the entire agreement and understanding between
the parties with respect to the matters contained herein, and there are no
promises, representations, conditions, provisions or terms related thereto
other than those set forth in these agreements, and (ii) supersede all previous
understandings, agreement(s) and representations between the parties, written
or oral, relating to the subject matter hereof. The parties hereto may from
time to time during the continuance of this Agreement modify, vary or alter any
of the provisions of this Agreement, but only by an instrument duly executed by
the parties hereto.
12.8 If any particular provision of this Agreement which
substantially affects the commercial basis of this Agreement shall be
determined to be invalid or unenforceable, such provision shall be amended as
hereinafter provided to delete therefrom or revise the portion thus determined
to be invalid or unenforceable. Such amendment shall apply only with respect
to the operation of such provision of this Agreement in the particular
jurisdiction for which such determination is made. In such event, the parties
agree to use reasonable efforts to agree on substitute provisions, which, while
valid, will achieve as closely as possible the same economic effects or
commercial basis as the invalid provisions, and this Agreement otherwise shall
continue in full force and effect.
12.9 The waiver by a party of any single default or breach
or succession of defaults or breaches by the other shall not deprive either
party of any right under this Agreement arising out of any subsequent default
or breach.
12.10 All matters affecting the interpretation, validity,
and performance of this Agreement shall be governed by the laws of the State of
Michigan, without regard to principles of conflict of laws.
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34
12.11 Except as specified in the attached Distribution
Agreement, nothing in this Agreement authorizes either party to act as agent
for the other party as to any matter. The relationship between APS and DCC is
that of independent contractors.
12.12 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.
12.13 The Section headings contained in this Agreement have
been inserted for identification and reference purposes and shall not determine
the construction or interpretation of this Agreement.
12.14 Each party hereto and its counsel have mutually
contributed to the drafting of this Agreement, and no provision hereof shall be
construed against any party on the grounds that a party or its counsel drafted
the provision.
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IN WITNESS WHEREOF, the parties have executed this Agreement.
ADVANCED POLYMER SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇▇
Senior Vice President and CFO
DOW CORNING CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Commercial Unit Manager
Personal, Household and Automotive Products
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36
EXHIBIT A
JOINT AGREEMENT
THIS AGREEMENT effective the 25th day of November, 1991, by and between
ADVANCED POLYMER SYSTEMS, INC. ("APS"), a Delaware corporation, and DOW CORNING
CORPORATION ("DCC"), a Michigan corporation.
R E C I T A L S
A. APS is the owner of the Patents and Patent Applications described
on Exhibit A attached hereto (the APS "Patent Rights") and the Trademark
described on Exhibit B attached hereto (the "APS Licensed Trademark").
B. APS possesses technical proprietary information relating to certain
proprietary polymers and manufacturing equipment and know-how for preparing
polymer-based carrier systems based thereon.
C. DCC is the owner of the Patents and Patent Applications described
on Exhibit C attached hereto (the DCC "Patent Rights").
D. DCC possesses technical proprietary information relating to certain
proprietary polymers and manufacturing equipment and know-how for preparing
polymer-based carrier systems based thereon.
E. DCC possesses worldwide capabilities to market certain products for
use in other products in the Field as hereinafter defined.
F. APS and DCC desire to form a joint endeavor pursuant to which APS
will supply and DCC will market polymer-based carrier
37
systems, based on the proprietary rights of APS and DCC, for use in products in
the Field.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, APS and DCC agree as follows:
1. Definitions. For purposes of this Agreement, the following
definitions shall be applicable:
1.1 "Promissory Notes" shall be the notes described in Section 7.3
of this Agreement.
1.2 "Capital Loan" shall be the loan described in Section 7.1 of
this Agreement.
1.3 "Research Loan" shall be the loan described in Section 7.2 of
this Agreement.
1.4 "CTFA" shall mean the most recent edition of the Cosmetic,
Toiletry and Fragrance Association Ingredient Handbook.
1.5 "Field" shall mean all CTFA listed ingredients entrapped in
Microsponge(R) Systems or improvements thereon or Polytrap(R) Systems or
improvements thereon or either System without entrapped ingredient or
ingredients, to be used as raw materials in cosmetic, personal care, and
personal household care, which are sold to primary or end-use manufacturers or
distributors. Excluded are entrapments of drugs (other than over-the-counter
"OTC" category I Sunscreens and OTC antiperspirant active ingredients), and any
pre-existing rights of third parties described in Exhibit 2.1.
1.6 "Affiliate" shall mean a corporation or any other entity that
directly, or indirectly through one or more
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38
intermediaries, is controlled by, the designated party, but only for so long as
the relationship exists. "Control" shall mean ownership of at least 50 percent
of the shares of stock entitled to vote for the election of directors in the
case of a corporation, and at least 50 percent of the interests in profits in
the case of a business entity other than a corporation.
1.7 "Fully Burdened Costs" shall mean in connection with services to
be performed by a party under the terms of this Agreement or the Manufacturing
Agreement, all direct and indirect costs incurred by the party or any Affiliate
in performing its obligations under this Agreement or the Manufacturing
Agreement as determined in accordance with generally accepted accounting
principles (based in the case of the Manufacturing Agreement on 80 percent
utilization of the manufacturing facility). Such costs shall include without
limitation:
(i) salaries and wages,
(ii) payroll taxes,
(iii) contract labor,
(iv) fringe benefits,
(v) facilities (including leasehold improvements)
and equipment related expenses,
(vi) recruitment and relocation,
(vii) communications expense,
(viii) raw materials and supplies,
(ix) development and prototype materials,
(x) freight and transportation, including freight
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39
charges for shipment of Products to DCC warehouse or customer
locations,
(xi) training and education,
(xii) travel expenses,
(xiii) data processing costs,
(xiv) patent, trademark and license fees,
(xv) insurance,
(xvi) professional services,
(xvii) depreciation and amortization of capital acquisitions,
(xviii) outside purchased services,
(xix) examples of the calculation of Fully Burdened Costs for 4
products are attached as Exhibit D.
1.8 "Gross Margin" shall mean Net Sales (whose computation shall be
after reimbursement of freight and sales taxes, import duties, and other excise
taxes) less cost of goods sold (which shall include the cost of active
ingredients supplied by DCC or an Affiliate at the price DCC or such Affiliate
charges to its most favored customer in the Field) computed in accordance with
generally accepted accounting principles consistently applied.
1.9 "Joint Operating Committee" shall mean the Committee referred to
in Article 4 hereof.
1.10 "Microsponge(R) System" shall mean a polymer-based delivery system
as described and claimed in U.S. Patent No. 4,690,825.
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40
1.11 "Net Sales" shall mean the total of all revenues received by DCC
and its Affiliates on sales of Products to an independent, unrelated third
party in a bona fide arm's length transaction, less the following deductions to
the extent included in the amounts received: (i) cash and trade discounts
actually allowed and taken; (ii) credits or refunds actually allowed for
spoiled, damaged, outdated or returned goods; (iii) freight charges paid for
delivery; (iv) sales taxes, import duties and other excise taxes; and (v)
external warehousing costs. Net sales shall not include sales between DCC and
any of its Affiliates or between Affiliates.
1.12 "Polytrap(R) System" shall mean a polymer-based carrier system as
described and claimed in U.S. Patent No. RE 33,426 issued on November 6, 1990.
1.13 "Products" shall mean any and all Microsponge and Polytrap
Systems for use in products in the Field.
1.14 "System" shall mean a Microsponge System or a Polytrap System.
1.15 "Technical Information" shall mean know-how, trade secrets,
inventions, data, technology and information including improvements thereof
relating to a System which are now owned or hereafter acquired by a party
hereto and which such party has the lawful right to disclose. Technical
Information shall include, without limitation, processes and analytical
methodology used in development, testing, analysis and manufacture, and
clinical, toxicological or other scientific data.
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41
2. Grant of Licenses.
2.1 APS hereby licenses DCC, royalty-free, under APS Patent Rights
and Technical Information to use and sell Microsponge Systems for use in the
Field in all countries of the world. Such license shall be exclusive except for
and subject to presently existing rights of others as set forth on Exhibit 2.1,
shall be immediately effective, and shall include, but shall not be limited to,
the Microsponge Systems containing entrapped silicone, vitamin A, vitamin E,
mineral oil, glycerin, alphabisabolol, and humectants, it being understood that
the parties agree to add or delete certain patent rights in this grant, in
support of the objectives of the Agreement, which patent rights shall be
contained in a writing executed by both parties, as an Addendum to this
Agreement.
2.2 DCC hereby licenses APS, royalty-free, under DCC Patent Rights
and Technical Information to manufacture Polytrap Systems for sale to DCC and
its Affiliates for use in the Field in all countries of the world. Such license
shall be exclusive, but shall not become effective until such time as APS is
prepared to undertake such manufacturing at its Lafayette, Louisiana,
manufacturing facilities and to supply the requirements of DCC for Systems for
use in the Field, and shall include, without limitation, the Polytrap Systems
containing entrapped silicone and mineral oil.
3. New Product Development.
3.1 APS will make available its research and development
capabilities to develop new products based on its
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42
Microsponge Systems for use in the Field as may be agreed upon by the Joint
Operating Committee.
3.2 DCC will advance to APS the full cost of such agreed research.
APS will reimburse DCC for one-half of such cost in accordance with the
provisions of Section 7.2 hereof.
4. Joint Operating Committee.
4.1 Each of APS and DCC shall promptly designate their respective
representatives to a Joint Operating Committee, which shall coordinate all
activities under this Agreement by unanimous decision. In the event any matter
for determination by the Joint Operating Committee is not concurred in by all
its then members, the parties shall consult together in good faith to endeavor
to resolve the issue. Any member of the Joint Operating Committee may be
replaced from time to time by notice from the party originally designating such
member to the other party.
4.2 The Joint Operating Committee is authorized to determine
general policy for the joint endeavor between the parties, including, but not
limited to, research and development programs and budget, sales goals and
policies, technical service levels and staffing, and expansion of manufacturing
facilities.
4.3 The Joint Operating Committee will meet at least quarterly.
Each party will also designate one of its members of the Committee as the
contact person for discussion of policy questions between meetings of the
Committee.
5. Certain Operating Provisions.
5.1 During the term of this Agreement, DCC will not undertake,
either through its own capabilities or those of any
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43
other party except APS and as approved by the Joint Operating Committee,
improvement of its Polytrap System technology in the Field or development of
new products in the Field that utilize a Polytrap System.
5.2 APS will use reasonable efforts to respond timely to reasonable
requests by the DCC sales and marketing force to supply custom formulation of
available Microsponge or Polytrap Systems, which requests result from technical
service contacts with customers and prospective customers. APS will also
provide reasonable help to aid DCC in training of its sales and marketing
personnel in possible applications of the Systems.
5.3 Both APS and DCC will jointly participate in the development of
formulations, on behalf of customers, of products incorporating a System.
5.4 APS will provide technical services at reasonable levels to
attempt solution of specific customer problems in the use of a System after
prescreening by DCC of such requests.
5.5 DCC will be responsible for the pricing of Systems to customers,
provided that the resulting Gross Margin will not be less than 30 percent
without APS' written consent.
5.6 All new products developed by APS in the Field, whether based on a
Microsponge or Polytrap System will be marketed under the Microsponge
trademark, which trademark, however, shall remain the property of APS but be
licensed to DCC for use in the Field during the term of the Agreement.
5.7 APS and DCC agree to decide the ownership of any jointly-developed
new trademarks in a separate Agreement.
-8-
44
6. Division of Gross Margin.
6.1 The parties will share equally (except to the extent that DCC
is entitled to reimbursement of advances by it to APS as provided herein) in
the Gross Margin received by DCC and its Affiliates on Net Sales by or on
behalf of DCC and its Affiliates of Microsponge and Polytrap Systems for use in
the Field.
6.2 Gross Margin payments shall be made to APS within thirty (30)
days following the end of each calendar quarter, and each payment shall include
payments which shall have accrued during the calendar quarter immediately
preceding, and shall be accompanied by a report setting forth separately the Net
Sales of each Product sold during said calendar quarter in each Area, (as
described in Exhibit 6.2A) and the calculation of Gross Margin payments payable
for such calendar quarter. Distribution of Gross Margin payments to APS shall
be net of amounts owed to DCC under the Promissory Notes attached as Exhibits
6.2B and 6.2C.
6.3 The remittance of Gross Margin payments payable on Net Sales
of Products outside the United States shall be made to APS at the internal DCC
Exchange Rate at which the sales were accrued. This Rate is updated monthly
and used by DCC in the reporting of all DCC's operations outside the United
States, less any withholding or transfer taxes which are applicable. DCC shall
at APS' request supply APS with proof of payment of such taxes deducted from
the Gross Margin payable to APS and paid on APS' behalf.
-9-
45
6.4 DCC and its Affiliates shall keep and maintain records of Net
Sales of Products. Such records shall be open to inspection at any mutually
agreeable time during normal business hours within three years after the
payment period to which such records relate by an independent certified public
accountant (or the equivalent in countries other than the United States)
reasonably acceptable to DCC, but selected by APS. Said accountant shall have
the right to examine the records kept pursuant to this Agreement and report
findings of said examination of records to APS only insofar as it is necessary
to evidence any error on the part of DCC. This right of inspection shall be
exercised only once with respect to each country of sale for any calendar year.
The cost of such inspection shall be borne by APS unless the result of such
examination is the determination that Net Sales in a particular country have
been understated by at least three percent for any calendar year in which event
DCC and its Affiliates shall bear the cost.
6.5 The inspecting accountant may make an examination of the accounts
contemplated above, as well as any supporting instruments and documents, and
make copies of and extracts from such records for the purposes of this
Agreement, provided that APS shall not be entitled to obtain or receive any
information on customers or regarding manufacturing operations not related to
the Products and further provided that any information obtained by APS pursuant
to such examination of accounts shall be kept confidential as provided herein
except as is necessary to protect
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46
the rights of APS under this Agreement and used solely for the purpose of this
Article 6.
7. Loans and Advances from DCC to APS.
7.1 Capital Loan. Upon execution of this Agreement, DCC will loan
to APS the sum of One Million Dollars ($1,000,000) as a Capital Loan which
Capital Loan will be used by APS in furtherance of its obligations under this
Agreement. Repayment of the Capital Loan by APS shall be as provided in
Section 7.3 hereof.
7.2 Research Loan. DCC will loan to APS one-half of the full cost
of research agreed to by the Joint Operating Committee pursuant to Section 3.2
hereof as a Research Loan; provided, however, the Research Loan shall not
exceed at any one time One Hundred Twenty-five Thousand Dollars ($125,000).
Repayment of the Research Loan by APS shall be as provided in Section 7.3
hereof.
7.3 Promissory Notes. The obligations of APS to repay the Capital
Loan and the Research Loan shall be evidenced by, and such repayment shall be
made by APS in accordance with the terms and conditions of, the Promissory
Notes attached hereto as Exhibits 6.2B and 6.2C. The Capital Loan and the
Research Loan shall be reimbursed to DCC by APS on a periodic, interest-free
basis; such periodic repayments shall be equal to twenty-five percent of APS'
share of the Gross Margin with such payments being first applied to the
outstanding balance under the Capital Loan and then to the Research Loan.
Provided, however, the unpaid balance under the Capital Loan and the Research
Loan shall
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47
be due and payable in any event upon the earlier of five years from the date
hereof or the date of termination of this Agreement. Notwithstanding the above
APS' repayment obligation under the Research Loan shall be suspended upon
termination of this agreement by DCC without cause or by APS with cause (as
specified in Section 11.1 hereof).
7.4 Security for Loans. The Promissory Notes shall be secured by a
mortgage and possessory collateral security agreement from APS to DCC on APS'
real estate located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇;
such mortgage and possessory collateral security agreement shall be in the
forms attached hereto as Exhibit 7.4A. The Promissory Notes shall be further
secured by a security agreement given by APS to DCC on all of APS' equipment
located at APS' facility at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
Louisiana, pursuant to a Security Agreement to be executed by APS and DCC in
the form attached as Exhibit 7.4B.
7.5 Indemnification. Notwithstanding any other provision of this
Agreement to the contrary, APS shall indemnify and hold DCC harmless form any
and all obligations and liabilities which DCC may incur for environmental or
other damages prior to the date of foreclosure in the event DCC elects to
foreclose on the manufacturing site owned and operated by APS and located in
Lafayette, Louisiana. APS does hereby release an shall defend, indemnify and
hold DCC harmless from any and all obligations and liabilities which may be
asserted by any person or entity against DCC for contribution, set-of,
indemnify or
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48
liability in any manner whatsoever under the Capital Loan, the Research Loan or
the Promissory Notes.
7.6 Corporate Resolution. APS shall furnish to DCC prior to execution
of this Agreement by DCC a certified copy of a corporate resolution, still in
effect, by the Board of Directors of APS authorizing the transactions set forth
in this Agreement.
7.7 No Consent Required. APS represents and warrants that, to the
best of APS' knowledge, no consent to any of the transactions set forth in this
Article 7 is required from any holder of any prior security interest in any
security provided hereunder for any loan from DCC to APS.
8. Future Capital Funding and Loans.
8.1 Provided that DCC first agrees that APS' manufacturing processes
should be modified for the production of Polytrap Systems and that the
estimated cost for such modification is reasonable, DCC will provide the
capital funds required for such modification. The cost of any such modification
paid for by DCC shall not be included in the computation of Fully Burdened
Costs for any purpose hereunder.
8.2 When and if APS' manufacturing facilities reach capacity and
provided that both parties agree to expand APS' capacity for manufacturing
Systems for use in the Field, DCC shall arrange for capital loans deemed
necessary for such expansion on such repayment terms to be negotiated at that
time. For the purposes of paragraph 8.2, "reaching capacity" is to be
determined on the basis of said manufacturing facilities being used solely for
the manufacture of Products covered by this
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49
Agreement. The parties agree that as of the signing of this Agreement, the best
approximation of APS' manufacturing capacity for such Products is 500,000
pounds per year of unloaded Product.
8.3 All obligations of DCC under Sections 8.1 and 8.2 are
expressly conditioned upon the negotiation and acceptance of terms and
conditions acceptable to DCC in its sole discretion and the execution by DCC
and APS of documents to effectuate the purposes of Sections 8.1 and 8.2 in
a form satisfactory to counsel for DCC.
9. Manufacturing.
APS and DCC shall enter into a Purchase/Sales Agreement for the
supply of Systems in the form attached hereto as Exhibit 9.
10. Term; Renewal.
10.1 The initial term of this Agreement shall be five years.
10.2 Such initial term shall be automatically renewed on a
year-to-year basis unless the party desiring to terminate the Agreement gives
to the other party at least two years' written advance notice of its intention
to terminate.
11. Termination.
11.1 Termination For Cause. Either APS or DCC may terminate
this Agreement and the licenses granted herein at any time upon breach of any
of the material terms hereof by the other party (including failure to pay Gross
Margin when due) upon sixty days' written notice; provided that if during said
sixty days the party so notified cures the breach complained of then
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50
this Agreement shall continue in full force and effect. In addition, APS or DCC
may terminate this Agreement if (a) the other party (or any affiliated entity)
becomes embroiled in circumstances which seriously degrade the terminating
party's name or reputation, (b) the other party is unable to perform its
obligations under this Agreement due to a contingency as provided under
paragraph 15 if such inability persists for a period of longer than six months,
and (c) the other party (i) commits an act of bankruptcy, (ii) is declared
bankrupt, (iii) voluntarily files or has filed against it a petition for
bankruptcy or reorganization unless such petition is dismissed within sixty
days of filing, (iv) enters a procedure of winding up or dissolution, or
(v) has a trustee or receiver appointed for its business assets or operations.
Any termination under this Section 11.1 shall be for cause.
11.2 Accounting Upon Termination. In the event of termination of this
Agreement for any reason by either party, DCC shall, with respect to such
termination, (a) make timely payment to APS of all monies owed it under this
Agreement net of amounts due from APS to DCC pursuant to the Promissory Notes
and (b) make an accounting to APS of the inventory of Systems it and its
Affiliates have on hand, if any, as of the date of such termination. DCC and
its Affiliates shall, for a period of six months after such termination, have
the right to sell such inventory, provided that the Net Sales thereof shall be
subject to the division of Gross Margin obligations set forth herein.
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51
11.3 Suspension of Research Note. Notwithstanding the
provisions of Section 11.2 above, in the event of termination of this Agreement
by DCC without cause or by APS with cause (as specified in Section 11.1
hereof), APS' repayment obligation under the Research Loan (pursuant to Section
7 hereof) shall be suspended upon such termination. Provided, however, such
repayment obligation shall not be suspended in the event of termination by DCC
with cause (as specified in Section 11.1 hereof) or by APS without cause in
which case repayment shall be made by APS to DCC within thirty days of such
termination.
11.4 Termination Procedure. The party terminating this
Agreement shall do so by registered letter to the other party.
11.5 Termination Without Prejudice. Termination of this
Agreement or any license granted hereunder shall be without prejudice to any
rights of either party which may have occurred prior to such termination or the
obligations of confidentiality contained in Section 14 hereof.
12. Assignability and Sublicensing.
12.1 This Agreement may not be assigned, nor may any
sublicense of any rights be granted, by either party without the prior written
consent of the other party which consent shall not be unreasonably withheld
except that without consent (i) this Agreement may be assigned, and rights may
be sublicensed in whole or in part, by DCC to an Affiliate of DCC or to a
corporate successor of DCC; (ii) this Agreement may be assigned by DCC in whole
to a person or corporation acquiring all or substantially all of the business
of DCC in the Field; and (iii) this Agreement
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52
may be assigned in whole by APS without consent to a corporate successor of APS
or to a person or corporation acquiring all or substantially all of the business
and assets of APS in the Field except APS shall give notice to DCC if all or
substantially all of the business and/or assets of APS are going to be acquired
by GE, Shinetsu, UCC, or any other basic silicone producer, at which time DCC
may elect to terminate this Agreement and such termination shall be considered
to be for cause.
12.2 APS agrees that DCC may enter into separate sublicense
agreements with Affiliates in or outside the United States, granting such
Affiliates rights to use and sell Microsponge Systems. Such sublicenses shall
be subject to the same terms and conditions as contained in this Agreement to
the extent permitted by the laws of the jurisdiction in which each such
Affiliate is located.
12.3 No assignment or sublicense contemplated by this Article 12
shall serve to release either party from liability for the performance of its
obligations hereunder.
13. Notices.
All notifications, demands, approvals and communications required
to be made under this Agreement shall be validly given if and when made by mail
prepaid and registered or certified (return receipt requested) addressed to the
address of the party to whom directed (as herein set forth or the latest change
thereof notified to the addressor). The parties hereto shall have the right to
notify each other of changes of address during the life of this Agreement.
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53
ADVANCED POLYMER SYSTEMS, INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
DOW CORNING CORPORATION
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
Any such notice mailed as aforesaid shall be deemed to have been
received by and given to the addressee on the date specified on the notice of
receipt of delivery returned to the sender.
14. Confidentiality.
14.1 Since each party may throughout the course of the
performance of this Agreement obtain access to confidential and proprietary
information of the other, each party will hold in strict confidence the
confidential information of the other and will treat it with the same degree
of care that it exercises with regard to its own proprietary information. This
obligation of confidentiality shall not prevent either party from making such
disclosures to government bodies, courts or agencies as are required by law,
as for example, to obtain the permission of said government body or agency to
test or market any Product or to file or prosecute a patent application for
any Product.
14.2 The obligation of confidentiality set out herein shall
extend for a period of five years beyond the expiration or termination of this
Agreement, provided however, that such obligations shall not apply to any
information:
(i) which is or becomes publicly available through no fault
of the obligated party; or
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54
(ii) which the obligated party can show by written
evidence was in its possession prior to the
furnishing of same by the furnishing party; or
(iii) which the obligated party lawfully receives from
a third party.
14.3 Each party shall protect the confidential information of the
other party and all Technical Information in the same manner that it protects
its own confidential information which it does not wish disclosed or
disseminated.
15. Force Majeure.
15.1 In the event of any failure or delay in the performance by a
party of any provision of this Agreement due to acts beyond the reasonable
control of such party (such as, for example, fire, explosion, strike or other
difficulty with workmen, shortage of transportation equipment, accident, act of
God, or compliance with or other action taken to carry out the intent or
purpose of any law or regulation), then such party shall have such additional
time to perform as shall be reasonably necessary under the circumstances. In
the event of such failure or delay, the affected party will use its best
efforts, consonant with sound business judgment and to the extent permitted by
law, to correct such failure or delay as expeditiously as possible.
15.2 In the event that a party is unable to perform by a reason
described in (a) above, the obligations under this Agreement thus affected
shall be suspended during such time of nonperformance.
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55
16. Miscellaneous.
16.1 It is the mutual desire and intent of the parties to provide
certainty as to their future rights and remedies against each other by defining
the extent of their mutual undertakings as provided herein. The parties have in
this Agreement incorporated all representations, warranties, covenants,
commitments and understandings on which they have relied in entering into this
Agreement and, except as provided for herein, neither party has made any
covenant or other commitment to the other concerning its future action.
Accordingly, this Agreement (i) constitutes the entire agreement and
understanding between the parties with respect to the matters contained herein,
and there are no promises, representations, conditions, provisions or terms
related thereto other than those set forth in this Agreement, and (ii)
supersedes all previous understandings, agreement and representations between
the parties, written or oral relating to the subject matter hereof. The parties
hereto may from time to time during the continuance of this Agreement modify,
vary or alter any of the provisions of this Agreement, but only by an
instrument duly executed by the parties hereto.
16.2 It is the desire and intent of the parties that the
provisions of this Agreement shall be enforced to the extent permissible under
the laws and public policies applied in each jurisdiction in which enforcement
is sought. Accordingly, if any particular provision of this Agreement which
substantially affects the commercial basis of this Agreement shall be
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56
determined to be invalid or unenforceable, such provision shall be amended as
hereinafter provided to delete therefrom or revise the portion thus determined
to be invalid or unenforceable, such amendment to apply only with respect to the
operation of such provision of this Agreement in the particular jurisdiction for
which such determination is made. In such event, the parties agree to use
reasonable efforts to agree on substitute provisions, which, while valid, will
achieve as closely as possible the same economic effects or commercial basis as
the invalid provisions, and this Agreement otherwise shall continue in full
force and effect. If the parties cannot agree to such revision within sixty days
after such invalidity or unenforceability is established, the matter may be
submitted by either party to arbitration as provided in this Agreement to
finalize such revision.
16.3 The waiver by a party of any single default or breach of
succession of defaults or breaches by the other shall not deprive either party
of any right under this Agreement arising out of any subsequent default or
breach.
16.4 All matters affecting the interpretation, validity, and
performance of this Agreement shall be governed by the laws of the State of
Michigan, without regard to principles of conflict of laws.
16.5 Nothing in this Agreement authorizes either party to act
as agent for the other party as to any matter. The relationship between APS and
DCC is that of independent contractors.
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57
16.6 Any controversy or claim arising out of or relating to
this Agreement or the Purchase/Sales Agreement between the parties, or the
breach thereof, including controversies or claims arising out of or relating to
(i) the parties' decision to enter into this Agreement, and the circumstances
thereof, or (ii) patent validity or infringement issues arising under this
Agreement, shall in any such case be settled by binding arbitration. Any
controversy or claim arising out of this Agreement, or the breach thereof, shall
be settled by arbitration before a panel of three arbitrators in accordance with
the commercial arbitration rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitration panel may be entered in any
court having jurisdiction thereof. The minimum qualifications of any arbitrator
selected pursuant to this Section 16.6 shall include graduation from an
accredited school of law and current admission to practice law within the United
States, and in the case of the head of the arbitration panel, substantial
experience in conducting contested case proceedings. Admission of any evidence
in any arbitration hearing conducted pursuant to this Section 16.6 shall be
governed by the Federal Rules of Evidence. In the event DCC initiates
arbitration, such arbitration shall be conducted in Palo Alto, California, and
in the event APS initiates arbitration, such arbitration shall be conducted in
Bay City, Michigan.
16.7 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.
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58
16.8 The Section headings contained in this Agreement have been
inserted for identification and reference purposes and shall not determine the
construction or interpretation of this Agreement.
16.9 Each party hereto and its counsel have mutually contributed
to the drafting of this Agreement, and no provision hereof shall be construed
against any party on the grounds that a party or its counsel drafted the
provision.
IN WITNESS THEREOF, the undersigned have caused this Agreement to
be duly executed on the day first above written by their duly authorized
officers.
ADVANCED POLYMER SYSTEMS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
---------------------------
Title: President
DOW CORNING CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Group Vice President
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59
EXHIBIT B
PATENTS/APPLICATIONS
US/FOREIGN
CASE NO PATENT NO CO SERIAL TITLE
--------------------------------------------------------------------------------
DC 2901 4,880,617 US Lattice-Entrapped Composition
DC 2979 4,762,703 US Nitrocellulose-Free Nail Lacquer
1,230,560 CA Composition
DC 3131 RE.33,429 US Lattice-Entrapped Emollient-
Moisturizer Composition
DC 3168 5,035,890 US Emulsifier-Free Hand and Body Lotion
GB 90106775
FR 90106775
EP 90106775
DE 90106775
BE 90106775
628,511 AU
57,859 TW
KR 90/4885
▇▇ ▇▇▇▇▇/▇▇
CA 2012892
DC 3170 4,898,913 US Method of Making Hydrophobic
GB 90303226 Copolymers Hydrophilic
FR 90303226
EP 90303226
DE 90303226
BE 90303226
JP 88432/90
CA 2012766
625,997 AU
DC 3176 4,948,818 US Method of Making Hydrophilic-
398,538 NL Lipophilic Copolymeric Powders
398,538 GB
398,538 FR
398,538 EP
398,538 DE
JP 121431/9
DC 3208 4,962,170 US Method of Making Highly Absorptive
NL 90308884 Polymers
IT 90308884
GB 90308884
FR 90308884
EP 90308884
DE 90308884
JP 121431/9
================================================================================
60
DC 3211 4,961,532 US Fragrance Release Device Containing A
51,199 TW Highly Adsorptive Copolymer
▇▇ ▇▇/▇▇▇▇▇
▇▇ ▇▇▇▇▇▇/▇
640,670 AU
DC 3228 4,962,133 US Method of Making Highly Adsorptive
417,606 NL Copolymers
417,606 IT
417,606 GB
417,606 FR
417,606 EP
417,606 DE
JP 235461/9
DC 3245 5,037,485 US Method of Cleaning Surfaces
57,156 TW
629,040 AU
DC 3273 5,102,662 US Insect Repellent Plastic
CA 2030829
DC 3283 5,208,038 US Coacervated Highly Absorptive Polymers
DC 3284 5,135,989 US Method of Making Hydrophobic
Copolymers Hydrophilic
DC 3388 5,246,972 US Polish Containing Highly Adsorptive
450,656 GB Polymer
450,656 EP
450,656 DE
JP 100261/9
DC 3413 5,169,904 US Method of Making Hydrophobic
Copolymers Hydrophilic
DC 3414 5,026,781 US Method of Making Hydrophobic
Copolymers Hydrophilic
DC 3447 5,281,413 US Antiperspirant Stick Containing A
JP 256883/9 Macroporous Polymer
CA 2050259
DC 3451 5,387,411 US Antiperspirant Containing A
JP 256881/9 Hydrophobic Macroporous Polymer as the
CA 2050188 Suspending Agent
DC 3491 5,135,660 US Method of Recovering Oil from the
JP 432/92 Surface of Water
DC 3538 5,145,685 US Skin Treatment Method and Composition
▇▇ ▇▇▇▇▇/▇▇
61
DC 3919 5,350,679 US Repeat Insult Microbial Test Method
GB 94304152
FR 94304152
EP 94304152
DE 94304152
▇▇ ▇▇▇▇▇/▇▇
▇▇ 130731/9
KR 94/13216
DC 3947 US 103,318 Method of Making Hydrophobic
Copolymers Hydrophilic
DC 4042 5,409,695 US Method of Increasing Deposition of
IT 95300979 Silicone Conditioner to Hair
GB 95300979
FR 95300979
ES 95300979
EP 95300979
DE 95300979
▇▇ ▇▇▇▇▇/▇▇
CA 2142511
DC 4139 US 307,121 Adsorption of Sweat Components with A
Macroporous Copolymer
62
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
January 23, 1996
Advanced Polymer Systems, Inc., a Delaware corporation ("APS") and Dow
Corning Corporation, a Michigan corporation ("PURCHASER"), hereby agree as
follows:
RECITALS
A. APS is acquiring a polymer-based carrier system business from
PURCHASER, and in payment thereof is issuing 200,000 shares of its Common Stock
(the "Shares") to PURCHASER.
B. The parties wish to provide for the registration of the subsequent
resale of the Shares and for the orderly distribution thereof, all on the terms
and conditions hereof.
THE PARTIES AGREE AS FOLLOWS:
1. Registration Rights; Listing.
1.1 Certain Definitions. As used herein, the following terms
shall have the following respective meanings:
(a) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Convertible Securities" shall mean securities of APS
convertible into or exchangeable for Registrable Securities.
(c) "Holder" shall mean any holder of outstanding Registrable
Securities which have not been sold to the public, but only if such holder is
PURCHASER or an assignee or transferee of Registration rights as permitted by
Section 1.8.
63
(d) The terms "Register", "Registered" and "Registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act ("Registration Statement"), and the
declaration or ordering of the effectiveness of such Registration Statement.
(e) "Registrable Securities" shall mean the Shares issued to PURCHASER
by APS, together with any Common Stock issued with respect to the Shares
pursuant to stock splits, stock dividends and similar distributions, so long as
such securities have not been sold to the public in a public distribution or a
public securities transaction or sold in a single transaction exempt from the
registration and prospectus delivery requirements of the Securities Act such
that all transfer restrictions and restrictive legends with respect to such
Shares shall have been removed in connection with such sale.
(f) "Registration Expenses" shall mean all expenses incurred by APS in
complying with this Agreement, including, without limitation, all federal and
state registration, qualification and filing fees, printing expenses, fees and
disbursements of counsel for APS, blue sky fees and expenses, the expense of
any special audits incident to or required by any such Registration and any
expenses related to the maintenance of such Registration and qualification
during the period specified in Section 1.4(a) hereof.
(g) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute, and the
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64
rules and regulations of the Commission thereunder, all as the same shall be in
effect at the time.
(h) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable Securities
pursuant to this Agreement.
1.2 Registration.
1.2.1 Registration. Subject to the terms of this Agreement,
APS shall use its best efforts to effect Registration of the Registrable
Securities within 60 days of their issuance to PURCHASER by filing as soon as
possible after the date hereof a Form S-3 Registration Statement (or any
successor to Form S-3) with the Commission.
1.2.2 Registration of Other Securities. Any Registration
Statement filed under this Section 1 may include securities of APS other than
Registrable Securities; provided, however, that neither PURCHASER or any Holder
shall be required to utilize an underwriter in connection with the sale of
their Registrable Securities.
1.2.3 Blue Sky. In the event of any Registration pursuant
to Section 1, APS will exercise its best efforts to Register and qualify the
securities covered by the Registration Statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably appropriate for
the distribution of such securities; provided, however, that:
(a) APS shall not be required to qualify to do
business or to file a general consent to service of process in
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65
any such states or jurisdictions, unless APS is already subject to service in
such jurisdiction; and
(b) notwithstanding anything in this Agreement to the
contrary, in the event any jurisdiction in which the securities shall be
qualified imposes a non-waivable requirement that expenses incurred in
connection with the qualification of the securities be borne by selling
shareholders, such expenses shall be payable pro rata by selling shareholders.
1.3 Expenses of Registration. All Registration Expenses (but not
Selling Expenses) incurred in connection with the Registration pursuant to
Section 1 shall be borne by APS.
1.4 Registration Procedures. Whenever required under this Agreement
to effect the Registration of any securities of APS, subject to the other
provisions of this Agreement, APS shall, as expeditiously as reasonably
possible:
(a) Prepare and file with the Commission a Registration
Statement with respect to such securities in accordance with Section 1.2.1 and
use its diligent best efforts to cause such Registration Statement to become
effective as promptly as possible thereafter and to remain effective for a
period equal to the shorter of: (i) three years from the date of such
effectiveness; or (ii) until the distribution described in the Registration
Statement has been completed.
(b) Prepare and file with the Commission 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 Securities
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Act with respect to the disposition of all securities covered by such
Registration Statement.
(c) Furnish to the Holders participating in such Registration and the
underwriters, if any, of the securities being Registered, such reasonable
number of copies of the Registration Statement, preliminary prospectus and
final prospectus as they may request in order to facilitate the public offering
of such securities.
1.5 Additional Information Available. So long as the Registration
Statement is effective covering the resale of Shares owned by a Holder, APS
will furnish to the Holder(s):
(a) as soon as practicable after it becomes available (but in the case
of APS' Annual Report to Stockholders, within 120 days after the end of each
fiscal year of APS), one copy of: (i) its Annual Report to Stockholders (which
Annual Report shall contain financial statements audited in accordance with
generally accepted accounting principles by a national firm of certified public
accountants); (ii) if not included in substance in the Annual Report to
Stockholders, its Annual Report on Form 10-K; (iii) if not included in
substance in its Quarterly Reports to Stockholders, its quarterly reports on
Form 10-Q; and (iv) a full copy of the particular Registration Statement
covering the Shares (the foregoing, in each case, excluding exhibits); and
(b) upon the reasonable request of a Holder, all exhibits excluded by
the parenthetical to subparagraph (a) (iv) of this Section 1.5;
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67
and APS, upon the reasonable request of a Holder, will meet with such Holder or
a representative thereof at APS' headquarters to discuss all information
relevant for disclosure in the Registration Statement covering the Shares and
will otherwise cooperate with any Holder conducting an investigation for the
purpose of reducing or eliminating such Holder's exposure to liability under
the Securities Act, including the reasonable production of information at APS'
headquarters.
1.6 Information Furnished by Holder. It shall be a condition precedent
of APS' obligations under this Agreement that each Holder of Registrable
Securities included in any Registration furnish to APS such information
regarding such Holder and the distribution proposed by such Holder as APS may
reasonably request.
1.7 Indemnification.
1.7.1 Company's Indemnification of Holder. APS will indemnify
and hold harmless each Holder, each of its officers, directors, employees,
agents, affiliates and constituent partners, and each person deemed to be in
control of such Holder within the meaning of Section 15 of the Securities Act
or Section 20 of the Securities Exchange Act of 1934 (the "Exchange Act"), from
and against all claims, losses, damages or liabilities (or actions in respect
thereof) to the extent such claims, losses, damages or liabilities arise out of
or are based upon any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus or other document (including any
related Registration Statement) incident to any
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68
such Registration, qualification or compliance, or are based on any 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 any
violation by APS of any rule or regulation promulgated under the Securities Act
applicable to APS and relating to action or inaction required of APS in
connection with any such Registration, qualification or compliance or arise out
of any failure by APS to fulfill an undertaking included in the Registration
Statement; and APS will reimburse each such Holder, each such underwriter and
each person who controls any such Holder or underwriter, for any legal and any
other expenses reasonably incurred in connection with defending any such claim,
loss, damage, liability or action; provided, however, that the indemnity
contained in this Section 1.7.1 shall not apply to amounts paid in settlement of
any such claim, loss, damage, liability or action if settlement is effected
without the consent of APS (which consent shall not unreasonably be withheld)
and; provided, further, that APS will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based upon any untrue statement or omission based upon written information
furnished to APS by such Holder or controlling person and stated expressly to be
for use in connection with the offering of securities of APS.
1.7.2 Holder's Indemnification of Company. Each Holder will indemnify
and hold harmless APS, each of its directors, officers, employees, agents and
affiliates, each
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69
person deemed to be in control of APS within the meaning of Section 15 the
Securities Act or Section 20 of the Exchange Act, and each other such Holder,
each of its officers, directors, employees, agents, affiliates and constituent
partners, and each person deemed to be in control of such other Holder within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act, from and against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based upon any untrue statement (or
alleged untrue statement) of a material fact contained in any such Registration
Statement, prospectus, offering circular or other document, or any 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 any
violation by such Holder of any rule or regulation promulgated under the
Securities Act applicable to such Holder and relating to action or inaction
required of such Holder in connection with any such Registration, qualification
or compliance; and will reimburse APS, such Holder, such directors, officers,
partners, persons or control persons for any legal and any other expenses
reasonably incurred in connection with defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such Registration Statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to APS by such Holder and specifically approved in writing by such
Holder for
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use in connection with the offering of securities of APS; provided, however,
that the indemnity contained in this Section 1.7.2 shall not apply with respect
to a Holder to amounts paid in settlement of any claim, loss, damage, liability
or action if settlement is effected without the consent of such Holder (which
consent shall not be unreasonably delayed or withheld).
1.7.3 Indemnification Procedure. Promptly after receipt by an
indemnified party under this Section 1.7 of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party under this Section 1.7, notify the
indemnifying party in writing of the commencement thereof and, to the extent
reasonably possible, generally summarize such action. The indemnifying party
shall have the right to participate in and to assume the defense of such claim;
provided, however, that the indemnifying party shall be entitled to select
counsel for the defense of such claim with the approval of any parties entitled
to indemnification, which approval shall not be unrasonably withheld; provided,
further, that if either party reasonably determines that there may be a
conflict between the position of APS and a Holder in conducting the defense of
such action, suit or proceeding by reason of recognized claims for indemnity
under this Section 1.7, then counsel for such party shall be entitled to
conduct, or participate in, the defense to the extent reasonably determined by
such counsel to be necessary to protect the interest of such party and the
costs of such counsel shall be borne by the indemnifying party. The failure to
notify an
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indemnifying party promptly of the commencement of any such action, if
prejudicial to the ability of the indemnifying party to defend such action,
shall relieve such indemnifying party, to the extent so prejudiced, of any
liability to the indemnified party under this Section 1.7, but the omission so
to notify the indemnifying party will not relieve such party of any liability
that such party may have to any indemnified party otherwise other than under
this Section 1.7.
1.8 Transfer of Rights. The right to cause APS to Register securities
granted by APS to PURCHASER under this Agreement may be assigned by any Holder
to a transferee or assignee of any Registrable Securities not sold to the
public acquiring at least 25,000 shares of such Holder's Registrable Securities
(equitably adjusted for any stock splits, subdivisions, stock dividends,
changes, combinations or the like); provided, however, that:
(a) APS must receive written notice prior to the time of said transfer,
stating the name and address of said transferee or assignee and identifying
the securities with respect to which such information and Registration rights
are being assigned; and
(b) the transferee or assignee of such rights must not be a person
deemed by the Board of Directors of APS, in its best judgment, to be a
competitor or potential competitor of APS. Notwithstanding the limitations set
forth in the foregoing sentence respecting the minimum number of shares which
must be transferred and permitted transferees and assignees: (i) any
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72
Holder which is a partnership may transfer such Holder's Registration rights to
such Holder's constituent partners without restriction as to the number or
percentage of shares acquired by any such constituent partner; and (ii) Section
1.8(b) shall not prohibit the transfer or assignment of such rights to an
affiliate of the PURCHASER.
1.9 Nasdaq Listing. Prior to the effective date of a Registration of
any of the Shares, APS shall file an application with NASDAQ to list such
Shares for quotation on the Nasdaq National Market.
1.10 Delay in Effectiveness. In the event a Registration Statement
covering the Shares is not declared effective within ninety (90) days after the
date hereof or in the event the effectiveness of such Registration Statement is
suspended or terminated at any time subsequent to the 90th day after the date
hereof and prior to the termination of the period specified in Section 1.4(a)
hereof, APS shall pay to the Holders an amount equal to $275 per day for each
day such Registration Statement is not effective; provided that nothing herein
is intended to limit a Holder's ability to seek to enforce its rights to
require that a Registration Statement covering Shares remains effective during
the period specified in Section 1.4 hereof; and provided further that APS shall
not be required to make any payments to a Holder if the failure to obtain or
maintain an effective Registration Statement is solely attributable to a
Holder's failure to provide APS with
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73
information required to be provided by such Holder for inclusion in the
Registration Statement.
2. Miscellaneous.
2.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California applicable to contracts
entered into and wholly to be performed within the State of California by
California residents.
2.2 Successors and Assigns. Subject to the exceptions specifically set
forth in this Agreement, the terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the respective executors, administrators,
heirs, successors and assigns of the parties.
2.3 Entire Agreement. This Agreement and the Asset Purchase Agreement
and the Exhibits and Schedules hereto and thereto constitute the entire
contract between APS and the PURCHASER relative to the subject matter hereof.
Any previous agreement between APS and the PURCHASER with respect to the
subject matter hereof is superseded by this Agreement.
2.4 Severability. Any invalidity, illegality or limitation of the
enforceability with respect to any Holder of any one or more of the provisions
of this Agreement, or any part thereof, whether arising by reason of the law of
any PURCHASER's domicile or otherwise, shall in no way affect or impair the
validity, legality or enforceability of this Agreement with respect to other
Holders. In case any provision of this Agreement shall be invalid, illegal or
unenforceable, it shall to the extent practicable, be modified so as to make it
valid, legal
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74
and enforceable and to retain as nearly as practicable the intent of the
parties, and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
2.5 Amendment of Agreement. Any provision of this Agreement may be
amended only by a written instrument signed by APS and by PURCHASER.
2.6 Notices. Any notice required or permitted hereunder shall be given
in writing and shall be conclusively deemed effectively given upon personal
delivery, or five days after deposit in the United States mail, by registered
or certified mail, postage prepaid, addressed:
(a) if to APS, Advanced Polymer Systems, Inc., ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ATTENTION: President; and
(b) if to PURCHASER, Dow Corning Corporation, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, ATTENTION: General Counsel.
2.7 Headings. The headings of the Sections of this Agreement are for
convenience and shall not by themselves determine the interpretation of this
Agreement.
2.8 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.
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75
IN WITNESS WHEREOF, the parties have executed this Agreement.
ADVANCED POLYMER SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇▇
_______________________________
▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇▇
Senior Vice President and CFO
DOW CORNING CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
____________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Commercial Unit Manager
Personal Household and
Automotive Products
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76
EXHIBIT D
ASSIGNMENT
For value received, the sufficiency, adequacy and receipt of
which is hereby acknowledged, DOW CORNING CORPORATION, a Michigan corporation,
having its principal office in Midland, Michigan, sells, assigns, transfers and
releases unto ADVANCED POLYMER SYSTEMS, INC., a Delaware corporation, having
its principal place of business at Redwood City, California, all of its right,
title and interest of whatsoever nature in and to the following United States
Letters Patents:
Patent Number Patent Number Patent Number
------------- ------------- -------------
Re.33,429 5,026,781 5,169,904
4,762,703 5,035,890 5,208,038
4,880,617 5,037,485 5,246,972
4,898,913 5,102,662 5,281,413
4,948,818 5,135,660 5,350,679
4,961,532 5,135,989 5,387,411
4,962,133 5,145,685 5,409,695
4,962,170
and in and to the following United States Patent Applications:
Serial Number
-------------
103,318
307,121
and in and to the following Foreign Patents:
Country Patent Number
------- -------------
Australia 628,511
Australia 625,997
▇▇▇▇▇▇▇▇▇ ▇▇▇,▇▇▇
▇▇▇▇▇▇ 1,230,560
European 398,538
European 417,606
European 450,656
European 629,040
Taiwan 51,199
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77
Taiwan 57,156
Taiwan 57,859
and in and to the following Foreign Patent Applications:
Country Serial Number
------- -------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇/▇▇
▇▇▇▇▇▇ 2012766
Canada 2012892
Canada 2030829
Canada 2050188
Canada 2050259
Canada 2142511
European 90106775
European 90303226
European 90308884
European 94304152
European 95300979
▇▇▇▇▇ ▇▇▇/▇▇
▇▇▇▇▇ ▇▇▇▇▇/▇▇
▇▇▇▇▇ ▇▇▇▇▇/▇▇
▇▇▇▇▇ 88432/90
▇▇▇▇▇ ▇▇▇▇▇/▇▇
▇▇▇▇▇ 100261/9
Japan 121431/9
▇▇▇▇▇ ▇▇▇▇▇▇/▇
▇▇▇▇▇ 177648/9
Japan 235461/9
▇▇▇▇▇ ▇▇▇▇▇▇/▇
▇▇▇▇▇ 256883/9
Korea 90/ 4885
Korea 90/10206
Korea 94/13216
and in and to all inventions described and claimed therein, and also in and to
any and all other U.S. and Foreign Patents, Reissue Patents and/or Patent
Applications deriving in any way out of said U.S. and Foreign Patents, and the
above listed U.S. and Foreign Patent Applications, and further including the
entire right, title and interest in and to any and all causes of action arising
out
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78
of all past, present and future infringement of said U.S. and Foreign Patents,
and Patent Applications.
The effective date of this Assignment is ____________ .
______________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President and
Executive Director
Science & Technology
STATE OF MICHIGAN )
) SS
COUNTY OF BAY )
BEFORE ME,_______________________, a Notary Public in and for
Bay County, Michigan, on this day personally appeared ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice
President and Executive Director, S&T, known to me to be the person and officer
whose name is subscribed to the foregoing instrument and acknowledged to me
that he executed the same as the act of such corporation for the purposes and
consideration therein expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this _____ day of
________________, 1996.
My commission expires on the ________day of
____, 19___.
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79
EXHIBIT E
TRADEMARK ASSIGNMENT
WHEREAS, Dow Corning Corporation, a Michigan corporation ("Dow Corning"),
has adopted, used and is using or has intent to use the marks which are
registered or pending registration and which are listed in the attached
Schedule;
AND WHEREAS, Advanced Polymer Systems, Inc., a Delaware corporation
("APS"), is desirous of acquiring said marks and the registrations thereof;
NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, said Dow Corning does hereby assign unto the said APS all right,
title and interest in and to the said marks, together with the goodwill of the
business symbolized by the marks and the attached identified registrations
thereof.
DOW CORNING CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
__________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Vice President, Secretary and
General Counsel
State of Michigan)
)ss
County of Bay )
On this ______ day of December 1995, before me appeared ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, the
person who signed this instrument, who acknowledged that he signed it as a
free act on behalf of the identified corporation.
_____________________________
Notary Public
80
SCHEDULE FOR EXHIBIT E
U.S. AND FOREIGN POLYTRAP TRADEMARK REGISTRATIONS
--------------------------------------------------------------------------------
TRADEMARK COUNTRY STATUS REGISTRATION REGISTRATION GOODS
DATE NUMBER
-------------------------------------------------------------------------------------------------------------------------------
POLYTRAP AUSTRALIA REGISTERED 05/07/82 A375,235 CHEMICALS AND CHEMICAL
PRODUCTS IN THIS CLASS,
INCLUSIVE OF POLYMER USED
FOR ENTRAPPING SOLID AND/OR
LIQUID MATERIALS.
POLYTRAP CANADA REGISTERED 11/10/83 284,921 CHEMICALS, NAMELY: A
POLYMER USED FOR ENTRAPPING
SOLID OR LIQUID MATERIALS.
POLYTRAP DENMARK REGISTERED 06/13/86 1403/1986 CHEMICAL PRODUCTS FOR
INDUSTRIAL USE, NAMELY
POLYMER USED FOR
ENTRAPPING SOLID AND/OR
LIQUID MATERIALS.
POLYTRAP FRANCE REGISTERED 08/04/82 1,210,886 CHEMICALS -- NAMELY, POLYMER
USED FOR ENTRAPPING SOLID
AND/OR LIQUID MATERIALS.
POLYTRAP GERMANY REGISTERED 08/07/82 1 054 970 CHEMICALS, POLYMER
POLYTRAP ITALY REGISTERED 03/03/86 408599 CHEMICALS -- NAMELY, POLYMER
USED FOR ENTRAPPING SOLID
AND/OR LIQUID MATERIALS.
POLYTRAP JAPAN REGISTERED 03/25/85 1752867 CHEMICALS -- NAMELY, POLYMER
USED FOR ENTRAPPING SOLID
AND/OR LIQUID MATERIALS.
POLYTRAP SWITZERLAND REGISTERED 05/05/82 318568 CHEMICALS -- NAMELY, POLYMER
USED FOR ENTRAPPING SOLID
AND/OR LIQUID MATERIALS.
----------------------------------------------------------------------------------------------------------------------------------
SCHEDULE -- Page 1
81
SCHEDULE FOR EXHIBIT E
U.S. AND FOREIGN POLYTRAP TRADEMARK REGISTRATIONS
----------------------------------------------------------------------------------------------------------------------------------
TRADEMARK COUNTRY STATUS REGISTRATION REGISTRATION GOODS
DATE NUMBER
----------------------------------------------------------------------------------------------------------------------------------
POLYTRAP UNITED KINGDOM REGISTERED 05/06/82 B1,174,500 CHEMICAL PRODUCTS, BEING POLYMERS FOR
ENTRAPPING SOLID AND/OR LIQUID MATERIALS.
POLYTRAP UNITED STATES REGISTERED 10/05/82 1,211,149
POLYTRAP FLM CANADA REGISTERED 06/14/85 303 665 CHEMICAL - NAMELY, POLYMER USED FOR ENTRAPPING
SOLID AND/OR LIQUID MATERIALS.
POLYTRAP FLM DENMARK REGISTERED 07/04/86 1587/1986 CHEMICALS - NAMELY, POLYMER USED FOR
ENTRAPPING SOLID AND/OR LIQUID MATERIALS.
POLYTRAP FLM ITALY REGISTERED 04/13/88 491490 CHEMICALS - NAMELY, POLYMER USED FOR
ENTRAPPING SOLID AND/OR LIQUID MATERIALS.
POLYTRAP FLM SWITZERLAND REGISTERED 05/20/83 325569 CHEMICALS - NAMELY, POLYMER USED FOR
ENTRAPPING SOLID AND/OR LIQUID MATERIALS.
POLYTRAP FLM UNITED KINGDOM REGISTERED 05/31/83 B1,196,850 CHEMICALS - NAMELY, POLYMER USED FOR
ENTRAPPING SOLID AND/OR LIQUID MATERIALS.
POLYTRAP FLM UNITED STATES REGISTERED 02/21/84 1,267,508 CHEMICALS - NAMELY, POLYMER USED FOR
ENTRAPPING SOLID AND/OR LIQUID MATERIALS.
----------------------------------------------------------------------------------------------------------------------------------
SCHEDULE - Page 2
82
SCHEDULE FOR EXHIBIT E
U.S. AND FOREIGN POLYTRAP TRADEMARK REGISTRATIONS
----------------------------------------------------------------------------------------------------------------------------------
TRADEMARK COUNTRY STATUS REGISTRATION REGISTRATION GOODS
DATE NUMBER
----------------------------------------------------------------------------------------------------------------------------------
POLYTRAP SMP CANADA REGISTERED 12/21/84 298 275 CHEMICAL - NAMELY, POLYMER USED FOR ENTRAPPING
SOLID AND/OR LIQUID MATERIALS.
POLYTRAP SMP ITALY REGISTERED 04/13/88 491491 CHEMICALS - NAMELY, POLYMER USED FOR
ENTRAPPING SOLID AND/OR LIQUID MATERIALS.
POLYTRAP SMP JAPAN REGISTERED 09/21/87 1,982,992 CHEMICALS - NAMELY, POLYMER USED FOR
ENTRAPPING SOLID AND/OR LIQUID MATERIALS.
POLYTRAP SMP UNITED KINGDOM REGISTERED 00/00/0000 B1,196,851 CHEMICALS - NAMELY, POLYMER USED FOR
ENTRAPPING SOLID AND/OR LIQUID MATERIALS.
POLYTRAP SMP UNITED STATES REGISTERED 02/21/84 1,267,515 CHEMICALS - NAMELY, POLYMER USED FOR
ENTRAPPING SOLID AND/OR LIQUID MATERIALS.
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SCHEDULE - Page 3
83
EXHIBIT F
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT is made and entered into this ___ day of
______, 1996, by and between Dow Corning Corporation, a corporation organized
and existing the laws of the State of Michigan and having its principal place of
business at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ ("DCC"), and
Advanced Polymer Systems, Inc. ("APS"), a corporation organized and existing
under the laws of the State of Delaware having its principal place of business
at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
WHEREAS, DCC and APS have entered into an Asset Purchase Agreement
dated _______ , 1996, wherein APS desires to appoint DCC, and DCC is willing to
accept the appointment, to act as a non-exclusive distributor to sell
Microsponge(R) and Polytrap(R) Systems ("Systems") to customers located within
and outside of the United States ("Customers").
NOW, THEREFORE, in consideration of the following covenants and
obligations, and subject to the conditions and limitations set forth here, the
parties agree as follows:
ARTICLE I. DEFINITIONS
All capitalized terms not defined herein shall have the same meaning as
defined in the Asset Purchase Agreement.
Unless otherwise specifically set forth herein, the following terms
shall have the following meanings:
1.1 "Distribution Agreement", with no other modification or
description, refers to this Distribution Agreement.
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84
1.2 "Gross Sales Revenues" shall mean the total sales revenues in
local currency derived by APS from the sale of Systems to Customers sold by DCC,
less (a) returns and allowances, and (b) shipping expenses, freight and duty, in
accordance with the appointment hereunder.
1.3 "Joint Agreement" shall mean that certain agreement between DCC
and APS effective November 25, 1991, which provides for the supply and purchase
of the Systems.
ARTICLE II. APPOINTMENT OF DCC
APS hereby appoints DCC, and DCC hereby accepts the appointment
by APS, to act as APS non-exclusive distributor of the Systems to Customers for
the period commencing on the date hereof and ending on _______, or such earlier
date mutually acceptable to DCC and APS ("Term"). During the Term, APS may also
sell Systems directly to Customers.
ARTICLE III. DISTRIBUTOR PRICES
APS shall continue to sell Systems to DCC at the same price and
under the same terms at which DCC has been purchasing Systems pursuant to the
Joint Agreement. Customer prices shall be determined by APS.
ARTICLE IV. SALES LEADS
As appropriate, DCC shall provide to APS any industry contracts
or potential sales leads that arise during the Term.
ARTICLE V. DELIVERY TO CUSTOMERS
DCC will work with APS to arrange for all orders of Systems to
be drop-shipped to Customer's plant. If APS is unable to arrange for
drop-shipment, DCC shall be reimbursed by APS for all shipping expenses,
overseas freight and duty, as applicable, incurred by DCC.
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85
ARTICLE VI. COMMISSION
In consideration for the foregoing to be performed by DCC, APS
agrees to pay to DCC, in U.S. dollars, a commission in the amount of three
percent (3%) of the Gross Sales Revenues ("Commissions").
ARTICLE VII. STATEMENTS AND PAYMENT
DCC shall pay APS, on a quarterly basis, the Gross Sales
Revenue, netted by Commissions earned and shipping expenses incurred for the
period. Each payment shall be accompanied by a statement setting forth the
amount of Gross Sales Revenue, Commissions earned and shipping expenses,
overseas freight and duty incurred for the period.
ARTICLE VIII. ACTS CONSTITUTING BREACH
8.1 Unless waived by DCC, the following acts shall be deemed to
constitute breach of this Distribution Agreement by APS:
8.1.1 The nonperformance by APS of any material provision of
this Distribution Agreement;
8.1.2 The insolvency or dissolution of APS;
8.1.3 The filing of a petition seeking relief under any
federal bankruptcy law by or against APS; or
8.1.4 An application by APS for receivership, an assignment
for the benefit of APS' creditors, or an admission by APS that it is
unable to pay its debts or meet its obligations.
8.2 Unless waived by APS, the nonperformance by DCC of any material
provision of this Distribution Agreement shall be deemed to constitute breach of
this Distribution Agreement by DCC.
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ARTICLE IX. REMEDIES UPON BREACH
9.1 In the event APS shall breach this Agreement as provided in
Paragraph 8.1, this Agreement shall terminate and DCC shall be entitled to
pursue any available remedies, whether legal or equitable, against APS.
9.2 In the event DCC shall breach this Agreement as provided in
Paragraph 8.2, this Agreement shall terminate and APS shall be entitled to
pursue any available remedies, whether legal or equitable, against DCC.
ARTICLE X. GOVERNING LAW
This Distribution Agreement, regardless of where signed, shall be
governed by the law of the State of Michigan without giving effect to any
principles of conflict of law.
ARTICLE XI. ENTIRE AGREEMENT AND AMENDMENT
This Distribution Agreement contains the entire agreement between the
parties in respect to the subject matter hereof and can only be altered or
amended by a written document or instrument signed by DCC and APS. No
modification of, addition to, extension of or waiver of any of the terms of this
Distribution Agreement shall be binding on the other party unless in writing and
signed by an authorized representative of such party.
ARTICLE XII. INVALID OR UNENFORCEABLE TERMS
If any term or provision of this Distribution Agreement is deemed
invalid or unenforceable by reason of law, this Distribution Agreement shall be
construed in such a manner as to delete that term or provision held to be
invalid or unenforceable and all other terms and provisions of this Distribution
Agreement shall remain in full force and effect. To the extent that any term or
provision is invalid or unenforceable by limitation or in part, then that term
or provision shall be enforceable to the fullest extent permitted by law.
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ARTICLE XIII. NOTICE
Any notice to APS provided for in this Distribution Agreement shall be
given by mailing such notice, or certified mail, return receipt requested,
addressed to ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or to such other
address as APS may designate by written notice to DCC. Any notice to DCC shall
be given by mailing such notice, certified mail, return receipt requested,
addressed to DCC at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: General Counsel or to such other address as DCC may designate by
written notice to APS. Any notice issued in accordance with this Distribution
Agreement shall be deemed to have been received by the appropriate party two (2)
business days after being so mailed.
IN WITNESS WHEREOF, the parties have executed this Distribution
Agreement.
DOW CORNING CORPORATION ADVANCED POLYMER SYSTEMS, INC.
By:___________________________ By: __________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Title:__________________________
Commercial Unit Manager
Personal, Household and
Automotive Products
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EXHIBIT G
NON-COMPETE AGREEMENT
THIS NON-COMPETE AGREEMENT ("Non-Compete Agreement") is made this
______ day of ___________, 1996, by and between Advanced Polymer Systems Inc., a
Corporation organized and existing under the laws of the State of Delaware
("Purchaser"), and Dow Corning Corporation, a Corporation organized and existing
under the laws of the State of Michigan ("DCC").
W I T N E S S E T H:
WHEREAS, Purchaser and DCC have entered into an Asset Purchase
Agreement dated _________________ related to the sale, transfer, and assignment,
from DCC to Purchaser of DCC's POLYTRAP(R) patents, trademarks, and technology;
and
WHEREAS, the Asset Purchase Agreement in Paragraph 5 provides that
Purchaser and DCC shall enter into a non-compete agreement on the terms and
conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the receipt and adequacy of which is hereby
acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Definitions
1.1 All capitalized terms not defined herein shall have the same
meaning as defined in the Asset Purchase Agreement.
1.2 Unless otherwise specifically set forth herein, the following terms
shall have the following meanings:
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1.2.1 "Field " shall mean a POLYTRAP(R) polymer-based carrier system,
with or without entrapped ingredient(s), to be used as a raw material(s), which
raw material(s) is sold to primary or end-use manufacturers or distributors.
Other than over-the-counter (OTC) sunscreens and OTC antiperspirant active
ingredients, entrapment of drugs is excluded.
1.2.2 "POLYTRAP(R)" shall mean a polymer-based carrier system as
described and claimed in US Patent No. Re. 33,429, issued on November 6, 1990.
SECTION 2. Covenant Not to Compete.
2.1 In the Asset Purchase Agreement of even date herewith, DCC has
agreed to sell, transfer, and assign, to PURCHASER all of DCC s rights in the
POLYTRAP(R) System Assets.
2.2 Except as provided in Section 4 of the Asset Purchase Agreement,
DCC hereby agrees not to engage, directly or indirectly, in the United States,
or in any foreign country, in which the POLYTRAP(R) System is presently being
sold or utilized in products, either alone or in association with any other
person, firm, corporation, or any other business organization, in the business
of creating, licensing, manufacturing, or marketing, POLYTRAP(R) polymer-based
carrier systems for use in the Field.
2.3 The period of time during which DCC is prohibited from engaging in
the activities enumerated in Section 2.2 hereof shall commence on the date
hereof and end on December 31, 2005, or end on the date when Purchaser ceases to
carry on like business, whichever occurs first.
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2.4 Nothing in this Non-Compete Agreement shall be construed as
prohibiting DCC from supplying organosilicon compounds, silicones, silanes, or
organo-modified silicones or silanes, to any person, firm, corporation, or
business located anywhere in the world, regardless of whether that person, firm,
corporation, or business is engaged in direct or indirect competition with
Purchaser.
2.5 DCC shall have no right to make, have made, use, or sell
POLYTRAP(R) materials, or license any third party to do so, for use in the
Field, for the term specified in Section 2.3.
2.6 DCC has carefully read and considered the provisions of this
Section 2, and having done so, agrees that the agreements and restrictions set
forth in this Section, including without limitation, the time period of
restriction and the geographical area of restriction, are bargained for, and are
fair and reasonable restrictions on DCC.
SECTION 3. New POLYTRAP(R) Developments
3.1 If, during the term of this Non-Compete Agreement, DCC acquires
licensable or sublicensable patent rights in POLYTRAP(R), uses of POLYTRAP(R),
or methods of making POLYTRAP(R), discovered after the date of this Non-Compete
Agreement, DCC agrees not to license or sublicense those rights to any third
party, without first offering such license or sublicense on the same terms to
Purchaser. Any license granted by DCC pursuant to this Section shall be, subject
to the extent of rights obtained by DCC, exclusive in nature for the term of
this Non-Compete Agreement and nonexclusive thereafter. Any such license shall
not bear a royalty in excess of five percent (5%) of the net sale price of
POLYTRAP(R) discovered after the date of this Non-Compete Agreement and covered
by such patent.
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SECTION 4. Fee.
4.1 In consideration of the agreements of DCC contained in this
Non-Compete Agreement, Purchaser agrees to pay to DCC the agreed upon
consideration set forth in Paragraph 3.1 in the Asset Purchase Agreement, the
consideration of which compensates DCC s for obligations undertaken in this
Non-Compete Agreement.
SECTION 5. Notices.
5.1 All demands, notices, and communications hereunder shall be in
writing, and shall be given by United States mail (certified, return receipt
requested), overnight courier services, or other means, in each case with all
postage or delivery charges prepaid, to the party entitled thereto at such
party's address as set forth below:
If to DCC: Dow Corning Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
If to Purchaser: Advanced Polymer Systems, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
or at such other address as such party may hereafter furnish to the other party,
by notice conforming to the requirements of this Section. Any demand, notice, or
communication hereunder shall be deemed to have been received by the appropriate
party three (3) business days after being so mailed.
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SECTION 6. Separability Clause.
Any provision of this Non-Compete Agreement that conflicts with
applicable law, or is held to be void or unenforceable, shall be ineffective to
the extent of such conflict, voidness, or unenforceability, without invalidating
the remaining provisions hereof, which remaining provisions shall be enforceable
to the fullest extent permitted under applicable law.
SECTION 7. Governing Law.
This Non-Compete Agreement shall be construed, and the obligations,
rights and remedies of the parties hereunder shall be determined, in accordance
with the laws of the State of Michigan, without reference to the principles of
conflict of laws thereof.
SECTION 8. Successors and Assigns; Assignment of Agreement.
This Non-Compete Agreement shall bind and inure to the benefit of, and
be enforceable by the parties hereto, and their respective successors and
assigns. This Non-Compete Agreement may not be assigned, pledged, or
hypothecated by any party hereto, to any person not a party hereto, whether by
operation of law or otherwise, without the consent of all parties to this
Non-Compete Agreement. This Non-Compete Agreement is not intended to confer upon
any person not a party hereto any rights or remedies hereunder, unless such
person is a permitted successor to or an assignee of a party hereto.
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SECTION 9. Waiver.
The failure of any party to insist upon strict performance of any
covenant or obligation hereunder, irrespective of the length of time for which
such failure continues, shall not be deemed a waiver of such party s right to
demand strict performance of such covenant or obligation at a later time. No
consent to or waiver of any breach or default in the performance of any covenant
or obligation hereunder, whether express or implied, shall constitute a consent
to or waiver of any other breach or default in the performance of the same, of
any other convenant or obligation hereunder. No term or provision of this
Non-Compete Agreement shall be deemed waived unless such waiver is in writing,
and signed by the party against whom such waiver is sought to be enforced.
SECTION 10. Term of Non-Compete Agreement.
This Non-Compete Agreement shall remain in effect from its date of
execution until December 31, 2005, unless terminated sooner as provided in
Section 2.2.
SECTION 11. Entire Agreement.
This Non-Compete Agreement constitutes the entire agreement, and
supersedes all other prior agreements and understandings, both written and oral,
between the parties hereto, with respect to the transactions contemplated
hereby, and the subject matter hereof. No provision of this Non-Compete
Agreement may be modified, altered, or amended except in writing executed by all
parties hereto.
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SECTION 12. Captions.
The Section and other headings contained in this Non-Compete Agreement
are inserted only as a matter of convenience and for reference, and in no way
define, limit, extend, or describe the scope of this Non-Compete Agreement, or
the intent of any provision hereof.
SECTION 13. Counterparts.
This Non-Compete Agreement may be executed simultaneously in any number
of counterparts, each of which shall be deemed to be an original, and all of
which shall constitute but one and the same instrument.
SECTION 14. Enforceability,
In the event of default by Purchaser thirty (30) days after receipt by
Purchaser of notice of such default from DCC, of consideration due DCC under the
terms of the Asset Purchase Agreement, then this Non-Compete Agreement shall be
null and void, and unenforceable against DCC.
IN WITNESS WHEREOF, the parties hereto have caused this Non-Compete
Agreement to be executed by their respective officers thereunto, duly
authorized.
ADVANCED POLYMER SYSTEMS, INC. DOW CORNING CORPORATION
By: __________________________ By: __________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Vice President & Director,
Science & Technology
Date: ________________________ Date: ________________________
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