EXHIBIT 10.2
DEVELOPMENT AGREEMENT
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This Development Agreement (the "Agreement") is made as of the ____ day
of August, 1997 between ALZA Corporation, a Delaware corporation ("ALZA"), and
Crescendo Pharmaceuticals Corporation, a Delaware corporation ("Crescendo").
BACKGROUND
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A. Crescendo has been formed for the purpose of selecting and
developing human pharmaceutical products, including products using ALZA
Technology (as defined below) and commercializing such products, most likely
through licensing to ALZA.
B. ALZA is engaged in the business of performing research and
development directed toward the development and commercialization of
pharmaceutical products.
C. Crescendo desires that ALZA perform, on behalf of Crescendo,
research and development activities directed toward the selection and
development of Crescendo Products (as defined below) and related activities.
Now, therefore, the parties agree as follows:
1. Definitions.
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For the purposes of this Agreement, the following terms shall have the
meanings set forth below:
1.1 "Affiliate" shall mean a corporation or any other entity
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, the designated party. "Control"
shall mean ownership of at least 50% of the shares of stock entitled to vote for
the election of directors in the case of a corporation, and at least 50% of the
interests in profits in the case of a business entity other than a corporation.
1.2 "ALZA Technology" shall mean all Proprietary Rights,
whether patented or unpatented, owned by, licensed to or controlled by ALZA, as
of the date of this Agreement or during the term of this Agreement, including
the Developed Technology and the Identified Product Technology.
1.3 "Available Funds" shall mean, as of any date of
determination, $300 million contributed to Crescendo by ALZA on or about August
__, 1997, plus any investment income earned thereon, less (a) Crescendo's
reasonable ongoing administrative expenses, (b) the Technology Fee and (c)
reserves of up to $2 million.
1.4 "Crescendo Product" shall mean an Identified Product, or
another human pharmaceutical product which has been recommended by ALZA and
accepted by Crescendo's independent Board of Directors for development as such
under this Agreement.
1.5 "Developed Technology" shall mean Proprietary Rights that
(a) are first generated, conceived or reduced to practice, as the case may be,
by ALZA or by any third party in the course of performing activities undertaken
pursuant to this Agreement or (b) are, in any manner, acquired by, or otherwise
obtained on behalf of, Crescendo during the term of this Agreement from persons
other than ALZA and are necessary or useful to the selection, development or
commercialization of Crescendo Products or Technical Evaluation Products.
1.6 "Developed Technology Product" shall mean any product
(other than a Crescendo Product) (i) covered, at the time of sale in a country
by one or more unexpired patents issued in such country that are included in
Developed Technology and (ii) with respect to which ALZA receives any
consideration.
1.7 "Developed Technology Royalties" shall mean the payments
made by ALZA to Crescendo with respect to Net Sales of Developed Technology
Products.
1.8 "Development Costs" shall mean the cost of the activities
undertaken pursuant to this Agreement, determined in accordance with Exhibit A
hereto.
1.9 "Distribution" shall mean ALZA's distribution of all of the
outstanding shares of Class A Common Stock of Crescendo to ALZA stockholders and
debenture holders of record on August __, 1997.
1.10 "Distribution Agreement" shall mean the Distribution
Agreement dated as of the date hereof between ALZA and Crescendo.
1.11 "FDA" shall mean the United States Food and Drug
Administration or any successor agency whose clearance is necessary to market a
Crescendo Product in the United States.
1.12 "Identified Product Technology" shall mean all ALZA
Technology existing on the effective date hereof relating to any Identified
Product.
1.13 "Identified Products" shall mean the following products:
OROS(R) oxybutynin, DUROS(TM) leuprolide, OROS(R) methylphenidate, IUTS
progesterone, D-TRANS(TM) testosterone matrix, E-TRANS(TM) LHRH and E-TRANS(TM)
(skin interface technology) insulin.
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1.14 "License Option" shall mean the option granted to ALZA
pursuant to the License Option Agreement.
1.15 "License Option Agreement" shall mean the License Option
Agreement dated as of the date hereof between ALZA and Crescendo.
1.16 "Major Market Country" shall mean any of the following
countries: United States, France, Germany, Italy, Japan or the United Kingdom.
1.17 "Net Sales" shall mean the total amount invoiced in United
States dollars (or converted thereto in accordance with Section 7.6 hereof) on
sales of a product by ALZA (or its Affiliates) or any ALZA sublicensee,
distributor or marketing partner (or its Affiliates), to unrelated third parties
such as wholesalers, hospitals and others, in bona fide arm's-length
transactions, less the following deductions, in each case related specifically
to the product in question and actually allowed and taken and not otherwise
recovered by or reimbursed to ALZA (or its Affiliates) or such sublicensee,
distributor or marketing partner (or its Affiliates): (i) trade, cash and
quantity discounts; (ii) taxes on sales (such as sales or use taxes) to the
extent added to the sales price and set forth separately as such in the total
amount invoiced; (iii) freight, insurance and other transportation charges to
the extent added to the sales price and set forth separately as such in the
total amount invoiced; and (iv) amounts repaid or credited by reason of
rejections, defects or returns or because of retroactive price reductions,
chargebacks or rebates under government programs. Net Sales shall also include
the fair market value of all other consideration received (a) by ALZA (or its
Affiliates) with respect to their sales of the product to unrelated third
parties other than sublicensees, distributors or marketing partners (or their
Affiliates) or (b) by any ALZA sublicensee, distributor or marketing partner (or
its Affiliates) with respect to their sales of the product to unrelated third
parties, in each case whether such consideration is in cash, payment in kind,
exchange or other form.
1.18 "Product Candidate" shall mean a potential Crescendo
Product for which ALZA proposes a Work Plan in accordance with Section 2.2.
1.19 "Product Development Program" shall mean a program to
develop a Crescendo Product.
1.20 "Proprietary Rights" shall mean data, inventions,
information, processes, know-how and trade secrets, and patents or patent
applications claiming any of the foregoing, owned by, licensed to or controlled
by a person and which such person has the right to license or sublicense.
Proprietary Rights shall not include trademarks.
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1.21 "Purchase Option" shall mean that certain option contained
in Crescendo's Restated Certificate of Incorporation pursuant to which ALZA has
the right to purchase all of the outstanding shares of Crescendo Class A Common
Stock.
1.22 "Technical Evaluation" shall mean a limited technical
evaluation involving a proprietary Therapeutic Agent of a third party undertaken
in order to determine the suitability of such Therapeutic Agent in an ALZA drug
delivery system or to induce the third party to license the Therapeutic Agent to
ALZA or Crescendo or otherwise collaborate with ALZA and Crescendo in the
development of a product.
1.23 "Technical Evaluation Product" shall mean a product, other
than one which will become a Crescendo Product, for which Crescendo funds a
Technical Evaluation.
1.24 "Technical Evaluation Product Payments" shall mean the
payments made by ALZA to Crescendo pursuant to Section 7.4 with respect to Net
Sales of Technical Evaluation Products.
1.25 "Technology Fee" shall mean payments to be made over a
maximum period of three years by Crescendo to ALZA in exchange for ALZA granting
Crescendo a license to use the Identified Product Technology.
1.26 "Technology License Agreement" shall mean the Technology
License Agreement dated as of the date hereof between ALZA and Crescendo.
1.27 "Therapeutic Agent" shall mean a drug, protein, peptide,
gene, compound or other pharmaceutically active ingredient.
1.28 "TDC" shall mean Therapeutic Discovery Corporation.
1.29 "Work Plan" shall mean a work plan including a cost
estimate.
2. Product Development Program.
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2.1 Product Candidate Identification Process. Within 30 days
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after the date of the Distribution and at least annually thereafter, ALZA shall
provide Crescendo with a proposed Work Plan covering activities to be undertaken
by ALZA to search for and identify Product Candidates for consideration by
Crescendo under Section 2.2 and to identify potential Technical Evaluations for
consideration by Crescendo under Section 2.4. Promptly after ALZA provides
Crescendo with such proposed Work Plan, Crescendo shall notify ALZA of its
acceptance or rejection of such proposed Work Plan.
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2.2 Product Candidate Selection.
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(a) From time to time during the term of this Agreement,
ALZA shall present Crescendo with Product Candidates recommended by ALZA for
development as Crescendo Products, together with preliminary lifetime plans that
provide, for each such Product Candidate, an estimate of the total Development
Costs for the Product Development Program for such Product Candidate through FDA
review for clearance to market the resulting product, milestones (including the
timetable for the development of the resulting product), detailed Work Plans for
the first proposed stage of the Product Development Program and any other
factors that ALZA deemed appropriate to determine whether to recommend the
Product Candidate for development.
(b) Promptly after ALZA recommends a Product Candidate
for development to Crescendo, Crescendo shall notify ALZA in writing of its
acceptance (in whole or in part) or rejection (in whole or in part) of the
initial Work Plan included with such recommendation. Upon written acceptance (in
whole or in part) of a Work Plan for a Product Candidate under this Section 2.2,
such Product Candidate shall be deemed to be a Crescendo Product.
(c) If Crescendo fails to accept a recommended Product
Candidate for development as a Crescendo Product within 120 days of
recommendation by ALZA, then Crescendo shall have no rights with respect to such
Product Candidate; provided, however, that, at any time during the term of this
Agreement, Crescendo may request ALZA to perform a Product Development Program
for such Product Candidate and ALZA shall undertake its duties with respect to
such Product Development Program, all in accordance with this Section 2 and
Section 3, unless, at the time of such request, ALZA is then undertaking the
development of such Product Candidate for its own account or with a third party,
or ALZA is otherwise not permitted to undertake such development hereunder
because of an arrangement with a third party.
2.3 Identified Products. As set forth in Section 4.1,
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Crescendo shall fund the Development Costs under ALZA-approved Work Plans for
each of the Identified Products during the period from the date on which TDC
ceased funding such products through October 31, 1997. On or before October 1,
1997, ALZA shall provide Crescendo with a proposed Work Plan and a lifetime plan
for the continued development of each of the Identified Products. On or before
October 31, 1997, Crescendo shall notify ALZA in writing of its acceptance (in
whole or in part) or rejection (in whole or in part) thereof.
2.4 Technical Evaluations. From time to time during the term
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of this Agreement, ALZA may provide Crescendo with a proposed Work Plan covering
one or more Technical Evaluations with respect to potential Technical Evaluation
Products. Promptly after ALZA provides Crescendo with such proposed Work Plan,
Crescendo
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shall notify ALZA of its acceptance (in whole or in part) or rejection (in whole
or in part) of such proposed Work Plan. ALZA may propose to Crescendo at any
time that any Technical Evaluation Product become a Crescendo Product by
complying with the procedures set forth in Section 2.2.
2.5 Partial Acceptance. If Crescendo accepts or rejects a Work
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Plan in part, ALZA may either (i) perform the activities under the Work Plan as
approved by Crescendo or (ii) propose a modified Work Plan to Crescendo for
approval.
3. Research and Development Programs; ALZA Services.
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3.1 Product Development - Crescendo Obligations. Once
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Crescendo accepts a Work Plan for a Crescendo Product or a Technical Evaluation
pursuant to Section 2.2 or 2.4, Crescendo shall use diligent efforts to complete
such Work Plan, as amended from time to time. Crescendo shall request that ALZA
or a third party perform the activities under each such Work Plan; provided,
however, that ALZA's prior written consent shall be required for a third party
to perform any activities that involve ALZA Technology or that could affect
ALZA's rights under any agreement between ALZA and Crescendo or ALZA's rights as
holder of the Class B Common Stock of Crescendo. Crescendo shall use diligent
efforts to cause each third party other than ALZA (or a third party engaged by
ALZA) to perform diligently the activities assigned it under a Work Plan.
3.2 Product Development - ALZA Obligations; Other ALZA
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Activities. Crescendo hereby engages ALZA to perform product identification,
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evaluation, research, development and related activities in accordance with the
tasks assigned to ALZA under the Work Plans accepted under Section 2, and to
undertake such other activities as the parties may agree. ALZA diligently shall
perform or cause to be performed such activities. In connection therewith, ALZA
shall make available such of its scientific, engineering, manufacturing and
other personnel, and shall take such steps as it deems necessary in order to
perform its obligations in accordance with the terms hereof, but ALZA is not
obligated to devote any specific amount of time or resources to activities
hereunder. ALZA shall have full discretion to determine from time to time the
allocation of resources of ALZA (facilities, equipment and personnel) that are
available for activities hereunder, and to determine from time to time the
allocation of resources of ALZA among such activities. Crescendo understands,
acknowledges and agrees that ALZA may devote substantial time and resources to
research and development activities for other persons and for its own account,
and as a result, ALZA may develop and commercialize, or have commercialized,
products competitive with Crescendo Products, Technical Evaluation Products and
Developed Technology Products.
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3.3 Work Plans. The parties understand and acknowledge that
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it is difficult to predict accurately the activities that will be necessary to
complete any Work Plan, including the Development Costs thereof, and that
significant uncertainties exist in any product development effort. Crescendo and
ALZA shall cooperate in good faith to devise mutually acceptable Work Plans for
Product Development Programs, Technical Evaluations, candidate identification
activities and such other activities as the parties may agree. ALZA and
Crescendo shall review each such Work Plan from time to time, and with respect
to a Work Plan for a Crescendo Product no less often than at the end of each
stage of development, and shall revise each Work Plan as appropriate such that
each Work Plan remains a best estimate of the work to be performed to complete
the development objectives identified therein and of the Development Costs
thereunder. Crescendo shall not be obligated to pay Development Costs in excess
of those provided for in approved Work Plans, and ALZA shall not be obligated to
perform work which would result in Development Costs exceeding those in approved
Work Plans.
3.4 Consultation. Crescendo shall consult with ALZA and shall
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review with ALZA from time to time the progress toward completion of the
activities under the Work Plans for candidate identification activities and for
each Crescendo Product and Technical Evaluation, including without limitation,
the status in each country for each Crescendo Product for which marketing
clearance is being sought.
3.5 Third Party Rights. Subject to the terms and conditions of
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this Agreement, Crescendo shall have discretion to attempt to obtain, using
Available Funds, any Proprietary Rights from any third party that Crescendo
reasonably determines to be necessary or useful to conduct any Product
Development Program, Technical Evaluation or related activities under this
Agreement. Such Proprietary Rights shall be included in the Developed
Technology. The costs of obtaining any such Proprietary Rights shall be included
in the calculation of Development Costs paid by Crescendo pursuant to this
Agreement.
3.6 Development Assets. ALZA shall own and have the right to
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use any clinical supplies, materials and other assets purchased, manufactured or
developed pursuant to approved Work Plans ("Development Assets") and, until such
time as the License Option is exercised with respect to the product to which any
particular Development Asset pertains, shall use such Development Assets solely
in the development of Crescendo Products under approved Work Plans.
3.7 No Use of Available Funds After Expiration of License
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Option. After such time as the License Option for a Crescendo Product in a
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country expires
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unexercised as to such country, no additional Available Funds shall be expended
for the development of such Crescendo Product for sale in such country.
3.8 Notices. ALZA shall notify Crescendo within three business
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days after ALZA receives notice of clearance to market any Crescendo Product in
any country. ALZA shall promptly notify Crescendo of the first commercial sale
of a Crescendo Product, Developed Technology Product or Technical Evaluation
Product in any country.
4. Payment For Services; Timing of Payments.
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4.1 Payment of Development Costs. In consideration of the
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work to be carried out by ALZA hereunder, Crescendo shall reimburse ALZA for all
Development Costs incurred by ALZA in accordance with accepted Work Plans.
Crescendo shall also reimburse ALZA for Development Costs incurred with respect
to the Identified Products from the date on which TDC ceased funding the
development of such products through October 31, 1997 in accordance with the
ALZA-approved Work Plans for such products in effect as of the date hereof.
4.2 Timing of Payments. Crescendo shall pay to ALZA monthly,
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in arrears, all such Development Costs incurred by ALZA during the preceding
calendar month, within 30 days after ALZA's invoice therefor.
4.3 Sufficiency of Funds. Neither Crescendo nor ALZA makes any
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warranty, express or implied, that Available Funds will be sufficient to
complete the development of any or all Crescendo Products or the other
activities contemplated hereunder.
5. Reports and Records.
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5.1 Product Development Program Reports. Within 45 days after
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the end of each calendar quarter, ALZA shall provide to Crescendo, and Crescendo
shall require each third party engaged by Crescendo pursuant to Section 3.1 to
provide to Crescendo and to ALZA, a reasonably detailed report setting forth (a)
a summary of the work performed hereunder by ALZA or such third party, as
appropriate, and its employees and agents during such quarter; and (b) the total
Development Costs of such activities during such quarter and cumulatively to
date, for each Work Plan.
5.2 Available Funds Statement. Within 45 days after the end of
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each calendar quarter, Crescendo shall provide to ALZA a statement setting
forth, as of the end of such quarter, the Available Funds remaining.
5.3 Product Payment Reports. Within 90 days after the end of
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each calendar quarter for which payments are due under Section 7.4, ALZA shall
render an
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accounting to Crescendo, on a product-by-product and country-by-country basis,
with respect to all payments due for such quarter under Section 7.4. Such report
shall indicate, for such quarter, the quantity and dollar amount of Net Sales of
each Developed Technology Product and each Technical Evaluation Product by ALZA
and its Affiliates, sublicensees, distributors and marketing partners (and their
Affiliates), or other consideration with respect to Net Sales, with respect to
which payments are due; provided, however, that if ALZA shall not have received
from any foreign sublicensee, distributor or marketing partner a report of its
(and its Affiliates') sales for such quarter, then such sales shall be included
in the next quarterly report, and payments with respect to such report shall be
due in the next quarter. In case no payment is due for any calendar quarter,
ALZA shall so report. ALZA shall keep accurate records in sufficient detail to
enable the payments due hereunder to be determined.
5.4 Records; Review by Accountants. Each of Crescendo and ALZA
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shall keep and maintain, in accordance with generally accepted accounting
principles, proper and complete records and books of account documenting all
Development Costs and amounts paid or payable by ALZA to Crescendo under this
Agreement, in the case of ALZA, and remaining Available Funds, in the case of
Crescendo. Each of Crescendo and ALZA shall have the right, once in each
calendar year during regular business hours and upon reasonable notice to the
other party, and at its own expense, to examine or to have examined by a
certified public accountant or similar person reasonably acceptable to the other
party, pertinent books and records of one another, for the sole purpose of
determining the correctness of amounts invoiced, paid or due under this
Agreement and the application of Available Funds by Crescendo. Such examination
shall take place not later than two years following the year in question, and
only one examination may take place with respect to any period as to which such
books and records are examined. Each party shall obtain, for itself and for the
other party, similar reasonable rights to audit the Development Costs of, and
payments with respect to Net Sales by, each third party engaged by Crescendo
pursuant to Section 3.1 or appointed or permitted by ALZA to commercialize any
product as to which payments are due to Crescendo hereunder.
6. Technology Licensed For Development.
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6.1 License to Use ALZA Technology. Crescendo hereby grants to
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ALZA a sublicense to use the ALZA Technology licensed to Crescendo under the
Technology License Agreement solely for the purpose of conducting the activities
contemplated hereunder.
6.2 Termination of License. Termination of the license granted
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under the Technology License Agreement automatically shall terminate the
sublicense to the ALZA Technology granted to ALZA pursuant to Section 6.1.
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7. Ownership of Crescendo Products and Developed Technology;
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Patents; Payments to Crescendo.
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7.1 Ownership of Crescendo Products. Unless Crescendo agrees
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otherwise, all Crescendo Products will be owned by Crescendo or, in the case of
a product licensed from a third party (or a product incorporating a
Therapeutic Agent licensed from a third party), exclusively licensed to
Crescendo on a worldwide basis, with the right to sublicense, and otherwise on
terms granting rights substantially similar to those rights Crescendo would have
as an owner, in either case subject to the License Option.
7.2 Ownership of Developed Technology. As between ALZA and
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Crescendo, ALZA shall own all Developed Technology (which shall be part of the
ALZA Technology), subject to the Technology License Agreement.
7.3 Patents Covering Developed Technology. ALZA shall
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determine whether and to what extent to seek and maintain United States and/or
foreign patents covering any Developed Technology. Any such patents and
applications therefor shall be in ALZA's name and shall be owned by ALZA.
Crescendo and ALZA each shall pay one-half of the costs of obtaining and
maintaining any such patents during the term of this Agreement.
7.4 Payments Based on Sales of Developed Technology Products
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and Technical Evaluation Products.
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(a) ALZA shall pay Developed Technology Royalties to
Crescendo, on a country-by-country basis, equal to 1% of Net Sales in the
relevant country of each Developed Technology Product. Only one payment under
this Section 7.4 shall be payable by ALZA to Crescendo with respect to Net Sales
of each Developed Technology Product in any country, regardless of the number of
patents covering such Developed Technology Product in such country. Subject to
Section 7.5, payments with respect to sales of a Developed Technology Product in
any country shall be made by ALZA until the expiration of the last to expire of
the patent or patents covering such Developed Technology Product in any country.
(b) ALZA shall make Technical Evaluation Product Payments
to Crescendo equal to 1% of Net Sales of each Technical Evaluation Product.
Subject to Section 7.5, payments with respect to sales of a Technical Evaluation
Product shall be made by ALZA until seven years after the first commercial sale
of such Technical Evaluation Product in the first Major Market Country in which
such product is commercially sold.
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(c) In determining payments due under this Section 7.4,
Net Sales by ALZA shall be reduced by the dollar amount of any license or
similar payments made by or due from ALZA or its Affiliates to third parties
with respect to any such sales of such Developed Technology Product or Technical
Evaluation Product. If license or similar payments are made to third parties
with respect to sales of such products and to sales of other products, ALZA
shall allocate such payments, if necessary, in a commercially reasonable manner.
(d) Notwithstanding the foregoing, if a product is both
a Developed Technology Product and a Technical Evaluation Product, amounts
payable under this Section 7.4 with respect to such product for any period of
time shall be limited to 1% of Net Sales.
7.5 Buy-Out of Payments Based on Sales of Developed Technology
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Products and Technical Evaluation Products.
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(a) ALZA shall have the option with respect to each
Developed Technology Product and each Technical Evaluation Product, in its
discretion, at any time after the end of the twelfth calendar quarter during
which such product was commercially sold in a country, to buy out its remaining
obligation to make payments under Section 7.4 with respect to sales of such
Developed Technology Product or Technical Evaluation Product in such country.
The buy-out price shall be an amount equal to 15 times the payments made by or
due from ALZA to Crescendo under Section 7.4 with respect to sales of such
Developed Technology Product or Technical Evaluation Product in such country for
the four calendar quarters immediately preceding the quarter in which the buy-
out option is exercised.
(b) ALZA shall have the option with respect to each
Developed Technology Product and each Technical Evaluation Product, in its
discretion, at any time after the end of the twelfth calendar quarter during
which such product was commercially sold in either the United States or two
other Major Market Countries, to buy out its remaining worldwide obligations to
make payments under Section 7.4 with respect to sales of such Developed
Technology Product or Technical Evaluation Product. The buy-out price shall be
an amount equal to (i) 20 times (A) the payments made by or due from ALZA to
Crescendo under Section 7.4 with respect to sales of such Developed Technology
Product or Technical Evaluation Product, plus (B) such payments as would have
been made by or due from ALZA to Crescendo if ALZA had not exercised any
country-specific buy-out option with respect to such Developed Technology
Product or Technical Evaluation Product, in each case, for the four calendar
quarters immediately preceding the quarter in which the buy-out option is
exercised, less (ii) any amounts previously paid to exercise any country-
specific buy-out option with respect to such Developed Technology Product or
Technical Evaluation Product.
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7.6 Payments. Payments shown by each calendar quarter report
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described in Section 5.3 to have accrued shall be due and payable on the date
the report is due and shall be paid in United States dollars. Any and all taxes
due or payable on such payments or with respect to the remittance thereof shall
be deducted from such payments and shall be paid by ALZA to the proper taxing
authorities, and proof of payment shall be secured and sent to Crescendo as
evidence of such payment. The rate of exchange to be used in computing the
amount of United States dollars due to Crescendo in satisfaction of payment
obligations with respect to sales in foreign countries shall be calculated by
converting the amount due in such foreign currency into United States dollars
based on the rate for the purchase of United States dollars with such currency
as published in the Wall Street Journal on the last business day of the calendar
quarter for which payment is being made.
7.7 Certain Foreign Payments. If governmental regulations
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prevent remittance from any foreign country of any amounts due under Section 7.4
with respect to that country, ALZA shall so notify Crescendo in writing, and the
obligation under this Agreement to make payments with respect to sales in that
country shall be suspended (but the amounts due but not paid shall continue to
accrue) until such remittances are possible. Crescendo shall have the right,
upon written notice to ALZA, to receive payment in any such country in the local
currency.
7.8 Late Payments. Any payments due hereunder that are not
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made when due shall accrue interest at the lesser of 10% per annum or the
maximum rate as may be allowed by law, beginning on the date when Crescendo
notifies ALZA that such payments are overdue.
8. Access to Information; Confidentiality.
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8.1 Access. Subject to the terms of this Agreement, each party
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shall be permitted access to the premises of the other during normal business
hours, for the purpose of monitoring the progress of activities under this
Agreement. Each party shall keep full and complete records and notebooks
containing all experiments performed during its work under this Agreement and
the results thereof. Such items and copies of all documentation shall be
available during normal business hours for inspection by the other party. In
addition, each party shall provide to the other such other information as
reasonably may be requested.
8.2 Third Parties. Crescendo and ALZA shall cause each third
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party engaged pursuant to Section 3.1 or 3.2 to provide access similar to that
to be provided pursuant to Section 8.1, for the benefit of both Crescendo and
ALZA.
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8.3 Product Lists. ALZA shall maintain a complete list of
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Crescendo Products, Developed Technology Products and Technical Evaluation
Products at all times. Confirmation of the completeness and accuracy of such
list shall be made at any time upon the reasonable request of Crescendo.
8.4 Confidentiality. During the term of this Agreement and
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for a period of ten years following its termination, each party shall maintain
in confidence all Proprietary Rights of the other; provided, however, that
nothing contained herein shall prevent either party from disclosing any
Proprietary Rights to the extent that such Proprietary Rights (a) are required
to be disclosed in connection with selecting and developing Crescendo Products,
conducting Technical Evaluations, conducting related activities, securing
necessary governmental authorization for the marketing of Crescendo Products, or
directly or indirectly making, using or selling Crescendo Products, as permitted
or provided for in the agreements between the parties, (b) are required to be
disclosed by law for the purpose of complying with governmental regulations, (c)
are disclosed to sublicensees, distributors or marketing partners or potential
sublicenses, distributors or marketing partners permitted under the agreements
between the parties in connection with the proposed or actual development,
manufacturing or marketing of Crescendo Products, subject to similar obligations
of confidentiality on the part of such third parties as required by the
agreements between the parties, (d) are known to or used by the recipient prior
to the date hereof (other than through disclosure by or on behalf of the other
party) as evidenced by the recipient's written records , (e) are lawfully
disclosed to the recipient by a third party having the right to disclose such
information to the recipient, or (f) either before or after the time of
disclosure to the recipient, become known to the public other than by an
unauthorized act or omission of the recipient or any of the recipient's
employees or agents; provided that clause (d) does not give ALZA the right to
disclose Proprietary Rights that relate exclusively to the Identified Products;
provided further that, Crescendo may disclose ALZA Proprietary Rights to third
parties only in accordance with the provisions of Section 10.3 hereof and in
accordance with the provisions of the Technology License Agreement. The
obligations of each of the parties pursuant to this Section 8.4 shall survive
the termination of this Agreement for any reason. Any breach of this Section 8.4
may result in irreparable harm, and in the event of a breach, the aggrieved
party shall be entitled to seek injunctive relief (without the need to post a
bond) in addition to any other remedies available at law or in equity.
9. Public Disclosure.
-----------------
9.1 Public Disclosure. The parties will work together with
-----------------
respect to public statements disclosing the status of and results under Product
Development Programs and related matters. Except to the extent previously
disclosed pursuant to the terms hereof, neither party shall disclose to third
parties nor originate any publicity, news release or public announcement,
written or oral, whether to the public, the press,
13
stockholders or otherwise, referring to activities conducted, or the parties'
performance under, this Agreement, except such announcements, as in the opinion
of the counsel for the party making such announcement, are required by law,
including United States securities laws, rules or regulations, without the prior
written consent of the other party. If a party decides to make an announcement
it believes to be required by law with respect to this Agreement, it will give
the other party such notice as is reasonably practicable and an opportunity to
comment upon the announcement.
10. Covenants.
---------
10.1 Use of Available Funds. Unless ALZA agrees otherwise,
----------------------
Crescendo agrees to expend all Available Funds for activities undertaken
pursuant to this Agreement. Pending application of all Available Funds as set
forth above, Available Funds shall be invested in securities issued or
guaranteed as to principal and interest by the United States, or by a person
controlled or supervised by or acting as an instrumentality of the government of
the United States pursuant to authority granted by the Congress of the United
States, or any certificate of deposit for any of the foregoing, or any other
types of high quality marketable investment securities that are proposed by
Crescendo and are approved by ALZA in its sole discretion.
10.2 Negative Pledge. Crescendo shall not create, incur,
---------------
assume or suffer to exist any lien upon or with respect to, or otherwise take
any action with respect to, Available Funds so as to prevent or interfere with
full expenditure of such funds for activities under this Agreement in accordance
with Section 10.1.
10.3 No Inconsistent Agreements. Without the written consent of
--------------------------
ALZA, Crescendo shall not enter into any agreement or arrangement that is in any
way inconsistent with or that could adversely affect ALZA Technology or ALZA's
rights under any agreement between ALZA and Crescendo, or that is in any way
inconsistent with or that could adversely affect ALZA's rights as holder of the
Class B Common Stock of Crescendo. Crescendo must include in any agreement
between Crescendo and a third party relating to Crescendo Products and/or
activities hereunder such provisions as ALZA reasonably deems appropriate to
protect ALZA Technology and to protect ALZA's rights under any agreement between
ALZA and Crescendo and as a holder of the Class B Common Stock of Crescendo
(including ALZA's rights under the Purchase Option).
14
11. Effective Date; Term and Termination.
-------------------------------------
11.1 Effective Date. The effective date of this Agreement
--------------
shall be the date of the Distribution.
11.2 Automatic Termination. This Agreement shall terminate upon
---------------------
exercise or expiration of the Purchase Option, except that ALZA's obligations to
make payments to Crescendo with respect to Developed Technology Products and
Technical Evaluation Products shall continue after expiration of the Purchase
Option as provided in Section 7 hereof.
11.3 Other Termination. Either party may, in its discretion,
-----------------
terminate this Agreement in the event that the other party:
(a) breaches any material obligation hereunder or under
the Technology License Agreement, the License Option Agreement, or any license
thereunder, and such breach continues for a period of 60 days after written
notice thereof by the terminating party to the other party; or
(b) enters into any proceeding, whether voluntary or
otherwise, in bankruptcy, reorganization or arrangement for the appointment of a
receiver or trustee to take possession of its assets or any other proceeding
under any law for the relief of creditors, or makes an assignment for the
benefit of its creditors.
12. Force Majeure.
-------------
12.1 Force Majeure. Neither party to this Agreement shall be
-------------
liable for failure or delay in the performance of any of its obligations
hereunder, if such failure or delay is due to causes beyond its reasonable
control including, without limitation, acts of God, earthquakes, fires, strikes,
acts of war, or intervention of any governmental authority, but any such delay
or failure shall be remedied by such party as soon as possible after the removal
of the cause of such failure or delay.
13. Miscellaneous.
-------------
13.1 Waiver, Remedies and Amendment. Any waiver by either party
------------------------------
hereto of a breach of any provisions of this Agreement shall not be implied and
shall not be valid unless such waiver is recited in writing and signed by such
party. Failure of any party to require, in one or more instances, performance by
the other party in strict accordance with the terms and conditions of this
Agreement shall not be deemed a waiver or relinquishment of the future
performance of any such terms or conditions or of any other terms and conditions
of this Agreement. A waiver by either party of any term or condition of this
Agreement shall not be deemed or construed to be a waiver of any other
15
term or condition of this Agreement. All rights, remedies, undertakings,
obligations and agreements contained in this Agreement shall be cumulative and
none of them shall be a limitation of any other remedy, right, undertaking,
obligation or agreement of either party. This Agreement may not be amended
except in a writing signed by both parties.
13.2 Assignment. Neither party may assign its rights and
----------
obligations hereunder without the prior written consent of the other party,
which consent may not be unreasonably withheld; provided, however, that ALZA may
assign such rights and obligations hereunder to an Affiliate of ALZA or to any
person or entity with which ALZA is merged or consolidated or which acquires all
or substantially all of the assets of ALZA.
13.3 Arbitration.
-----------
(a) All disputes which may arise under, out of or in
connection with this Agreement shall be settled by arbitration conducted in the
city of San Francisco, State of California, in accordance with the then existing
rules of the American Arbitration Association, and judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. The parties hereby agree that service of any notices in the course of
such arbitration at their respective addresses as provided for in Section 13.7
of this Agreement shall be valid and sufficient.
(b) In any arbitration pursuant to this Section 13.3, the
award shall be rendered by a majority of the members of a board of arbitration
consisting of three members who shall be appointed by the parties jointly, or if
the parties cannot agree as to three arbitrators within 30 days after the
commencement of the arbitration proceeding, then one arbitrator shall be
appointed by ALZA and one arbitrator shall be appointed by Crescendo within 60
days after the commencement of the arbitration proceeding. The third arbitrator
shall be appointed by mutual agreement of such two arbitrators. In the event of
failure of the two arbitrators to agree within 75 days after commencement of the
arbitration proceeding upon the appointment of the third arbitrator, the third
arbitrator shall be appointed by the American Arbitration Association in
accordance with its then existing rules. Notwithstanding the foregoing, in the
event that any party shall fail to appoint an arbitrator it is required to
appoint within the specified time period, such arbitrator and the third
arbitrator shall be appointed by the American Arbitration Association in
accordance with its then existing rules. For purposes of this Section 13.3, the
"commencement of the arbitration proceeding" shall be deemed to be the date upon
which a written demand for arbitration is received by the American Arbitration
Association from one of the parties.
16
13.4 Counterparts. This Agreement may be executed in any
------------
number of counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute this Agreement.
13.5 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the state of California as applied to
residents of that state entering into contracts to be performed in that state.
13.6 Headings. The section headings contained in sections of
--------
this Agreement are included for convenience only and form no part of the
Agreement between the parties.
13.7 Notices. Notices required under this Agreement shall be in
-------
writing and sent by registered or certified mail, postage prepaid, or by
facsimile and confirmed by registered or certified mail, postage prepaid, and
addressed as follows:
If to ALZA: ALZA Corporation
950 Page Mill Road
Palo Alto, CA 94304
Facsimile: __________________
Attention: Senior Vice President
and General Counsel
If to Crescendo: Crescendo Pharmaceuticals Corporation
1454 Page Mill Road
Palo Alto, CA 94304
Facsimile: __________________
Attention: President and Chief
Executive Officer
All notices shall be deemed to be effective five days after the date of mailing
or upon receipt if sent by facsimile (but only if followed by certified or
registered confirmation). Either party may change the address at which notice is
to be received by written notice pursuant to this Section 13.7.
13.8 Severability. If any provision of this Agreement is held
------------
by a court of competent jurisdiction to be invalid or unenforceable, it shall be
modified, if possible, to the minimum extent necessary to make it valid and
enforceable or, if such modification is not possible, it shall be stricken and
the remaining provisions shall remain in full force and effect.
13.9 Relationship of the Parties. For purposes of this
---------------------------
Agreement, Crescendo and ALZA shall be deemed to be independent contractors, and
anything in this Agreement to the contrary notwithstanding, nothing herein shall
be deemed to constitute
17
Crescendo and ALZA as partners, joint venturers, co-owners, an association or
any entity separate and apart from each party itself, nor shall this Agreement
constitute any party hereto an employee or agent, legal or otherwise, of the
other party for any purposes whatsoever. Neither party hereto is authorized to
make any statements or representations on behalf of the other party or in any
way obligate the other party, except as expressly authorized in writing by the
other party. Anything in this Agreement to the contrary notwithstanding, no
party hereto shall assume or be liable for any liabilities or obligations of the
other party, whether past, present or future.
13.10 Survival. The provisions of Sections 1, 7, 8.3, 8.4, 11,
--------
13.1, 13.3, 13.5, 13.6, 13.7, 13.8, 13.9, and this Section 13.10, and of
Sections 4 and 5 to the extent of obligations under such sections relating to
periods prior to termination of this Agreement, shall survive the termination
for any reason of this Agreement. Any payments due under this Agreement with
respect to any period prior to its termination shall be made notwithstanding the
termination of this Agreement. Neither party shall be liable to the other due to
the termination of this Agreement as provided herein, whether in loss of good
will, anticipated profits or otherwise.
18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
ALZA CORPORATION
By:
------------------------------------
Title:
---------------------------------
CRESCENDO PHARMACEUTICALS CORPORATION
By:
------------------------------------
Title:
---------------------------------
19
EXHIBIT A
DEVELOPMENT COSTS
Development Costs are equal to the sum of (i) Research Expenses, (ii) General
and Administrative Expenses and (iii) Capital Asset Expenditures.
(i) Research Expenses include both Direct Expenses and Indirect
Expenses, with the cost elements outlined on Exhibit A-1.
(a) Direct Expenses include Direct Research Salaries,
Clinical Expenses, Supplies and other expenses
incurred specifically in connection with the Program.
(b) Indirect Expenses include Research Management and
support costs of the research and product development
organization. (Indirect Expenses are allocated to all
projects and billed to clients at a fixed rate* of
160% of Direct Research Salaries.)
(ii) General and Administrative Expenses include cost elements
outlined on Exhibit A-2. (General and Administrative Expenses
are allocated among the research and product development,
manufacturing and marketing organizations. The portion
allocated to the research and product development organization
is then allocated to all projects and billed to clients at a
fixed rate* of 80% of Direct Research Salaries.)
(iii) Capital Asset Expenditures are the actual costs of new capital
assets acquired specifically for the project.
- --------------
* This fixed billing rate will not be changed prior to January 1, 1998
and, if changed on or after January 1, 1998, such changes will be limited to not
more than one change per calendar year and shall be a maximum of 10% of the rate
in effect at the time of the increase.
EXHIBIT A-1
Research Expenses
-----------------
Direct Expenses
- ---------------
Direct Research Salaries*
Project Clinical Expenses and Outside Services
Project Specific Supplies
Project Travel and Related Expenses
Miscellaneous Project Expenses
Regulatory and Filing Fees and Maintenance Payments
Indirect Expenses
- -----------------
Research Management and Indirect Salaries*
General Research Supplies and Materials
General Research Consulting and Outside Services
Facilities Expenses
Telephone and Communications
Equipment Depreciation, Rent, Maintenance and Services
Research Travel and Related Expenses
Patent and Trademark Expenses
Miscellaneous Indirect Research Expenses
*Salaries include Benefits
EXHIBIT A-2
General and Administrative Expense
----------------------------------
Corporate Management, Administrative, and Indirect Salaries*
Telephone and Communications
Equipment Depreciation, Rent, Maintenance and Services
Board of Directors and Corporate Consulting
Annual Audit, Accounting and Legal Expenses
Facilities Expenses
Information Services (Data Processing) Expenses
Interest Expense
Miscellaneous General and Administrative Expenses
*Salaries include Benefits