-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F53andi5TPKrrgdpc3fLvgHdYkafPC7znJh5X9DbuYgGJoA8/7cU1gXKWDTPjJdu Q7LrOHDt8/9yV7F8pjXGtw== /in/edgar/work/0000725058-00-000015/0000725058-00-000015.txt : 20001115 0000725058-00-000015.hdr.sgml : 20001115 ACCESSION NUMBER: 0000725058-00-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CYTOGEN CORP CENTRAL INDEX KEY: 0000725058 STANDARD INDUSTRIAL CLASSIFICATION: [2835 ] IRS NUMBER: 222322400 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14879 FILM NUMBER: 766392 BUSINESS ADDRESS: STREET 1: 600 COLLEGE RD EAST CN 5308 CITY: PRINCETON STATE: NJ ZIP: 08540 BUSINESS PHONE: 6099878200 MAIL ADDRESS: STREET 1: 600 COLLEGE RD EAST CN 5308 STREET 2: 600 COLLEGE RD EAST CN 5308 CITY: PRINCETON STATE: NJ ZIP: 08540 10-Q 1 0001.txt 3RD QUARTER 2000 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Conformed Washington, D.C. 20549 Copy FORM 10-Q (Mark One) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 ------------------ OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------ ------------ Commission file number 000-14879 Cytogen Corporation ------------------- (Exact name of Registrant as specified in its charter) Delaware 22-2322400 - ------------------------------- ---------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 600 College Road East, CN 5308, Princeton, NJ 08540-5308 -------------------------------------------------------- (Address of Principal Executive Offices and Zip Code) Registrant's telephone number, including area code (609) 750-8200 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes X No . Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Class Outstanding at November 1, 2000 - ---------------------------- ------------------------------- Common Stock, $.01 par value 76,084,756 PART I - FINANCIAL INFORMATION - ------------------------------- Item I - Consolidated Financial Statements CYTOGEN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (All amounts in thousands, except share data) (Unaudited)
September 30, December 31, 2000 1999 ------------- ------------ ASSETS: Current Assets: Cash and cash equivalents .......................................... $ 14,178 $ 10,801 Short-term investments ............................................. -- 1,593 Accounts receivable, net ........................................... 2,385 2,150 Inventories ........................................................ 631 685 Other current assets ............................................... 410 465 --------- --------- Total current assets ............................................ 17,604 15,694 Property and Equipment, net ........................................... 2,032 1,997 Other Assets .......................................................... 1,060 914 --------- --------- $ 20,696 $ 18,605 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY: Current Liabilities: Current portion of long-term liabilities ........................... $ 161 $ 162 Accounts payable and accrued liabilities ........................... 4,851 5,478 --------- --------- Total current liabilities ....................................... 5,012 5,640 --------- --------- Long-Term Liabilities ................................................. 2,441 2,416 --------- --------- Stockholders' Equity: Preferred stock, $.01 par value, 5,400,000 shares authorized - Series C Junior Participating Preferred Stock, $.01 par value, 200,000 shares authorized, none issued and outstanding ......... -- -- Common stock, $.01 par value, 250,000,000 shares authorized, 75,588,000 and 70,527,000 shares issued and outstanding in 2000 and 1999, respectively ................................... 756 705 Additional paid-in capital .......................................... 335,971 311,209 Deferred compensation ............................................... (990) (82) Accumulated deficit ................................................. (322,494) (301,283) --------- --------- Total stockholders' equity ........................................ 13,243 10,549 --------- --------- $ 20,696 $ 18,605 ========== ==========
The accompanying notes are an integral part of these statements. 2 CYTOGEN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (All amounts in thousands, except per share data) (Unaudited)
Three Months Nine Months Ended September 30, Ended September 30, --------------------- --------------------- 2000 1999 2000 1999 --------- --------- --------- --------- Revenues: Product related: ProstaScint ............................................... $ 1,849 $ 1,646 $ 5,036 $ 4,899 OncoScint ................................................. 130 188 437 509 -------- -------- -------- -------- Total product sales ............................. 1,979 1,834 5,473 5,408 Quadramet royalties ....................................... 523 245 1,529 706 -------- -------- -------- -------- Total product related ........................... 2,502 2,079 7,002 6,114 License and contract ......................................... 17 267 165 3,006 -------- -------- -------- -------- Total revenues .................................. 2,519 2,346 7,167 9,120 -------- -------- -------- -------- Operating Expenses: Cost of product and contract manufacturing revenues .......................... 1,136 955 3,047 3,229 Research and development ..................................... 2,005 708 5,037 2,746 Acquisition of marketing and technology rights ............... 13,241 -- 13,241 1,214 Selling and marketing ........................................ 1,242 1,094 3,695 3,122 General and administrative ................................... 1,716 892 3,770 2,784 -------- -------- -------- -------- Total operating expenses ........................ 19,340 3,649 28,790 13,095 -------- -------- -------- -------- Operating loss .................................. (16,821) (1,303) (21,623) (3,975) Gain on sale of laboratory and manufacturing facilities ..................................... -- -- -- 3,298 Interest income ................................................. 182 131 545 282 Interest expense ................................................. (24) (60) (133) (144) -------- -------- -------- -------- Net loss ......................................................... $(16,663) $ (1,232) $(21,211) $ (539) ======== ======== ======== ======== Basic and diluted net loss per share .................................................... $ (0.23) $ (0.02) $ (0.29) $ (0.01) ======== ======== ======== ======== Basic and diluted weighted average common shares outstanding .................................... 73,632 68,757 72,660 66,204 ======== ======== ======== ========
The accompanying notes are an integral part of these statements. 3 CYTOGEN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (All amounts in thousands) (Unaudited)
Nine Months Ended September 30, ------------------------------- 2000 1999 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ............................................................ $ (21,211) $ (539) --------- --------- Adjustments to reconcile net loss to cash used in operating activities: Depreciation and amortization ................................. 679 786 Imputed interest .............................................. (66) (33) Stock option and warrant grants ............................... 129 122 Stock based compensation ...................................... 154 -- Acquisition of marketing and technology rights ................ 13,079 1,214 Write down of assets .......................................... -- 79 Gain on sale of laboratory and manufacturing facilities ....... -- (3,298) Gain on sale of equipment ..................................... (148) -- Changes in assets and liabilites: Accounts receivable, net .................................... (169) (1,421) Inventories ................................................. 54 45 Other assets ................................................ (91) (151) Accounts payable and accrued liabilities .................... (495) (3,660) Other liabilities ........................................... 117 71 --------- --------- Total adjustments ................................... 13,243 (6,246) --------- --------- Net cash used in operating activities ......................... (7,968) (6,785) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Net cash acquired from Prostagen, Inc. .............................. -- 550 Net proceeds from sale of equipment ................................. 148 -- Net proceeds from sale of laboratory and manufacturing facilities ... -- 3,584 Redemption (purchases) of short-term investments .................... 1,593 (2,361) Purchases of property and equipment ................................. (751) (139) --------- --------- Net cash provided by investing activities ..................... 990 1,634 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock .............................. 10,411 9,578 Payment of long-term liabilities .................................... (56) (782) --------- --------- Net cash provided by financing activities ..................... 10,355 8,796 --------- --------- Net increase in cash and cash equivalents ........................... 3,377 3,645 Cash and cash equivalents, beginning of period ...................... 10,801 3,015 --------- --------- Cash and cash equivalents, end of period ............................ $ 14,178 $ 6,660 ========= =========
The accompanying notes are an integral part of these statements. 4 CYTOGEN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The Company Cytogen Corporation ("Cytogen" or "the Company" which includes the Company and its subsidiaries) is an established biopharmaceutical company with two principal lines of business, proteomics and oncology. The Company is extending its expertise in antibodies and molecular recognition to the development of new products and a proteomics-driven drug discovery platform. The Company has established a pipeline of product candidates based upon its proprietary antibody and prostate specific membrane antigen, or PSMA, technologies. The Company, with Progenics Pharmaceuticals, Inc. ("Progenics") has formed a joint venture focusing on the development of cancer in vivo immunotherapies based on PSMA technology. Cytogen's cancer management franchise currently comprises three marketed FDA-approved products: ProstaScint(R), used to image the extent and spread of prostate cancer; OncoScint CR/OV(R), a diagnostic imaging agent for colorectal and ovarian cancer; and Quadramet(R), for the relief of cancer-related bone pain. The Company's subsidiary, AxCell Biosciences Corporation ("AxCell"), is developing a proprietary protein pathway database as a drug discovery and development tool for the pharmaceutical and biotechnology industries. Basis of Consolidation The consolidated financial statements include the accounts of Cytogen and its subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. Basis of Presentation The consolidated financial statements of Cytogen Corporation are unaudited and include all adjustments which in the opinion of management are necessary to present fairly the financial condition and results of operations as of and for the periods set forth in the Consolidated Balance Sheets, Consolidated Statements of Operations and Consolidated Statements of Cash Flows. All such accounting adjustments are of a normal, recurring nature. The consolidated financial statements do not include all of the information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission, which includes financial statements as of and for the year ended December 31, 1999. The results of the Company's operations for any interim period are not necessarily indicative of the results of the Company's operations for any other interim period or for a full year. 5 CYTOGEN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd) Cash and Cash Equivalents Cash and cash equivalents include cash on hand, cash in banks and all highly-liquid investments with a maturity of three months or less at the time of purchase. Net Loss Per Share Basic net loss per share is based upon the weighted average common shares outstanding during each period. Diluted net loss per share is the same as basic net loss per share, as the inclusion of common stock equivalents would be antidilutive. Inventory The Company's inventory is primarily related to ProstaScint and OncoScint CR/OV. Inventory is stated at the lower of cost or market using the first-in, first-out method and consisted of the following: September 30, December 31, 2000 1999 -------------- ------------ Raw materials................. $400,000 $529,000 Work-in process............... 9,000 28,000 Finished goods................ 222,000 128,000 -------- -------- $631,000 $685,000 ======== ======== 2. SALES OF CYTOGEN COMMON STOCK: During the nine months ended September 30, 2000, the Company sold 1.0 million shares of Cytogen common stock to Berlex Laboratories ("Berlex") for $1.0 million or $1.00 per share upon an exercise of a warrant, and approximately 1.7 million additional shares of Cytogen common stock for total proceeds of $3.5 million at an average price of $2.12 per share upon the exercises of employee stock options and other warrants. In September 2000, the Company sold to Acqua Wellington North American Equities Fund, Ltd. ("Acqua Wellington") 902,601 registered shares of Cytogen common stock at an aggregate price of $6.0 million or $6.647 per share. In October 2000, the Company entered into an equity financing facility with Acqua Wellington for up to $70 million. Pursuant to this facility, over the next 20 months, Cytogen may, at its discretion, sell additional shares of its common stock to Acqua Wellington at a small discount to the market price to be determined before each sale. The financing facility is not subject to any minimum takedown requirements, nor did the Company pay any financing fees or other compensation in connection with this transaction. 6 CYTOGEN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd) 3. RECENTLY ENACTED ACCOUNTING PRONOUNCEMENTS: In December 1999, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB 101). The bulletin draws on existing accounting rules and provides specific guidance on how those accounting rules should be applied, and specifically addresses revenue recognition for non-refundable technology access fees in the biotechnology industry. The Company will adopt SAB 101 during the fourth quarter of 2000 resulting in a cumulative effect adjustment. The Company will defer a portion of the upfront licensing fees from Berlex Laboratories, Inc. related to the licensing of Quadramet recognized in October 1998 and the licensing of certain applications of PSMA to a joint venture formed by Cytogen and Progenics recognized in June 1999 which will be recorded as deferred revenue with a corresponding one-time, non-cash expense. 4. DSM BIOLOGICS COMPANY B.V.: In July 2000, the Company entered into a Development and Manufacturing Agreement with DSM Biologics Company B.V. ("DSM"), pursuant to which DSM will conduct certain development activities with respect to ProstaScint, including the delivery of a limited number of batches of ProstaScint for testing and evaluation purposes. Under the terms of such agreement, and subject to the satisfactory performance thereof by DSM and the achievement of certain regulatory approvals for the manufacturing of ProstaScint, the parties are obligated to negotiate in good faith a long term supply agreement. Notwithstanding the parties' obligations to perform under the agreement or to negotiate a supply agreement in good faith, the Company cannot be certain that DSM will satisfactorily perform its obligations thereunder or that the parties will be able to negotiate a supply agreement on commercially satisfactory terms, if at all. Alternatively, the Company has the option, but not the obligation to enter into certain licensing arrangements with DSM on terms and conditions to be agreed upon by the parties. 5. ADVANCED MAGNETICS, INC.: In August 2000, the Company and Advanced Magnetics, Inc. ("Advanced Magnetics"), a developer of novel diagnostic pharmaceuticals for use in magnetic resonance imaging (MRI), mutually terminated an agreement, under which Cytogen was to acquire Advanced Magnetics. Instead, the two companies entered into marketing, license and supply agreements ("AVM Agreements"). Under the AVM Agreements, Cytogen acquired certain rights to Advanced Magnetics' product candidates: Combidex(R), a magnetic resonance imaging contrast agent for the detection of lymph node metastases and imaging agent Code 7228 for oncology applications. Advanced Magnetics will be responsible for all costs associated with the clinical development, supply and manufacture of Combidex and Code 7228 and will receive royalties based upon product sales. There can be no assurance that Advanced Magnetics will receive approval from the U.S. Food and Drug Administration ("FDA") to market Combidex in the United States. 7 CYTOGEN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont'd) In exchange for the future marketing rights to Combidex and Code 7228, Cytogen issued 1.5 million shares of its common stock to Advanced Magnetics at closing and may issue an additional 500,000 shares, which are currently in escrow, subject to the achievement of certain milestones. Since the Advanced Magnetics' product candidates have not yet received FDA approval, the Company recorded a $13.2 million charge in the accompanying statement of operations for the acquisition of marketing and technology rights, of which $13.1 million was non-cash and represented the fair value of the 1.5 million shares of common stock issued. 6. DRAXIS HEALTH INC.: In September 2000, the Company signed a letter of intent with Draxis Health and its subsidiary, Draximage Inc. ("Draxis") to market and distribute BrachySeedTM implants for prostate cancer therapy in the U.S. The Company currently is negotiating definitive documents reflective of the terms of the letter of intent. Under the terms of the proposed agreement, Draximage will supply radioactive iodine and palladium seeds to Cytogen in exchange for royalties on sales and certain milestone payments. The FDA has granted marketing approval for BrachySeed in September 2000. Upon execution of the definitive documents, the Company believes it would launch the radioactive iodine BrachySeed in the U.S. later this year. The Company cannot be certain, however, as to the timing of the BrachySeed launch, the market acceptance of the product or whether this product will significantly increase the revenues of the Company. 8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion contains historical information as well as forward looking statements that involve a number of risks and uncertainties. Generally, forward looking statements can be identified by the use of phrases like "believe", "expect", "anticipate", "plan", "may", "will", "could", "estimate", "potential", "opportunity" and "project" and similar terms. The Company's actual results could differ materially from the Company's historical results of operations and those discussed in the forward looking statements. Factors that could cause actual results to differ materially, include, but are not limited to those identified in the Company's 1999 Form 10-K under the captions, "Important Factors Regarding Forward Looking Statements" and "Risk Factors". Stockholders are cautioned not to put undue reliance on any forward looking statement. The following discussion and analysis should also be read in conjunction with the Financial Statements and related notes thereto contained elsewhere herein, as well as the Company's 1999 Form 10-K and from time-to-time the Company's other filings with the Securities and Exchange Commission. Overview In August 2000, the Company and Advanced Magnetics mutually terminated an agreement, under which Cytogen was to acquire Advanced Magnetics. Instead, the two companies entered into marketing, license and supply agreements (see Note 5 to the Consolidated Financial Statements.) Under the AVM Agreements, the Company acquired exclusive U.S. rights to two product candidates, Combidex and imaging agent Code 7228 for oncology applications. Combidex, a MRI contrast agent for the detection of lymph node metastases, recently received an approvable letter subject to certain conditions by the FDA, following a priority review. Code 7228 is being developed for oncology and magnetic resonance angiography applications and is expected to enter Phase II clinical development early next year. There can be no assurance that the Company will receive FDA approval to market Combidex or Code 7228 in the United States. In September 2000, the Company signed a letter of intent with Draxis to market and distribute BrachySeed implants for prostate cancer therapy in the U.S. The Company currently is negotiating definitive documents reflective of the terms of the letter of intent. Under the terms of the proposed agreement, Draxis will supply radioactive iodine and palladium seeds to Cytogen in exchange for royalties on sales and certain milestone payments. The FDA has granted marketing approval for BrachySeed in September 2000. Upon execution of the definitive documents, the Company believes it would launch the radioactive iodine BrachySeed in the U.S. later this year. The Company cannot be certain, however, as to the timing of the BrachySeed launch, the market acceptance of the product or whether this product will significantly increase the revenues of the Company. 9 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd) The AVM licenses and the Draxis proposal represent a strategic step for Cytogen to broaden its oncology presence and strengthen its position in the area of cancer staging and detection and therapy, in which Cytogen currently markets two products, ProstaScint and OncoScint. The Company plans to utilize Cytogen's oncology sales and marketing organization for the expected launch of BrachySeed and later Combidex, subject to the receipt of final approval of Combidex by FDA. In September 2000, the Company sold to Acqua Wellington $6.0 million of Cytogen common stock. In October 2000, the Company entered into an equity financing facility with Acqua Wellington for up to $70 million. Pursuant to this facility, over the next 20 months, Cytogen may, at its discretion, sell additional shares of its common stock to Acqua Wellington at a small discount to the market price to be determined before each sale (see Note 2 to the Consolidated Financial Statements). This financing facility should give the Company the flexibility to access capital, pursuant to the terms of the Agreement, to accelerate its proteomics and drug development programs as well as pursue other strategic opportunities. Results of Operations Three Months Ended September 30, 2000 and 1999 Revenues. Total revenues for the third quarter of 2000 were $2.5 million compared to $2.3 million for the same period in 1999. The increase from the prior year period is due to higher product related revenues, partially offset by lower contract revenues as a result of the discontinuance of contract manufacturing services in 2000. Product related revenues, which included product sales and royalties, accounted for 99% of total revenues in 2000, versus 89% from the comparable period of 1999. License and contract revenues accounted for the remainder of revenues in such period. Product related revenues for the third quarter of 2000 were $2.5 million compared to $2.1 million for the same period in 1999. ProstaScint accounted for 74% and 79% of product related revenues in the third quarters of 2000 and 1999, respectively, while Quadramet royalties accounted for 21% and 12% of product related revenues, respectively. Sales of ProstaScint were approximately $1.8 million in the third quarter of 2000, $200,000 higher than the $1.6 million recorded in the third quarter of 1999. Beginning in July 2000, the Company assumed sole responsibility for selling and marketing ProstaScint from Bard Urological Division of the C.R. Bard Company ("Bard"), its former co-marketing partner. The Company took this step because it believes that a highly trained and dedicated internal sales force will be able to market its products most effectively and to build a marketing capability for anticipated future product acquisitions. The Company cannot be certain, however, as to the effect on sales of ProstaScint as a result of this action. 10 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd) Quadramet royalties for the third quarter of 2000 increased to $523,000 from the $245,000 recorded in the same period of 1999. Quadramet was re-launched by Berlex in March 1999. Although Cytogen believes that Berlex is an advantageous marketing partner, there can be no assurance that Quadramet will achieve greater market acceptance on a timely basis or result in significant revenues for Cytogen. Sales of OncoScint CR/OV for the third quarter of 2000 were $130,000, $58,000 lower than the $188,000 recorded in the same period of 1999. The market for OncoScint CR/OV for colorectal cancer diagnosis has been negatively affected by positron emission tomography or "PET" scans which have shown the same or higher sensitivity than OncoScint CR/OV. License and contract revenues for the third quarter of 2000 were $17,000 compared to $267,000 for the same period of 1999. The decrease from the prior year period is due primarily to the discontinuance of contract manufacturing services in 2000, a result of the sale of Cytogen's manufacturing facility in 1999. The Company recorded $102,000 of contract manufacturing revenues in the third quarter of 1999. Operating Expenses. Total operating expenses for the third quarter of 2000 were $19.3 million compared to $3.6 million recorded in the same quarter of 1999. The increase from the prior year period is attributable primarily to a $13.2 million charge related to the acquisition of the marketing and technology rights to Combidex and Code 7228, of which $13.1 million was non-cash. The 2000 operating expenses further increased due to the additional funding for the proteomics research program at AxCell, the expansion of Cytogen's in-house sales force to assume sole responsibility of marketing and sales of ProstaScint and costs associated with the termination of the proposed merger with Advanced Magnetics. Cost of product and contract manufacturing revenues for the third quarter of 2000 were $1.1 million compared to $1.0 million recorded in the same period of the prior year. The increase from the prior year period is due to increased manufacturing costs and increased product sales. Research and development expenses for the third quarter of 2000 were $2.0 million compared to $708,000 recorded in the same period of 1999. The increase from the prior year period is due to increased funding for the proteomics program at AxCell and product development efforts relating to PSMA technologies. The Company anticipates that funding for AxCell will continue to increase over the remainder of this year. Acquisition of marketing and technology rights of $13.2 million represents a charge related to the acquisition of certain rights to product candidates Combidex and Code 7228 from Advanced Magnetics, of which $13.1 million was a non-cash charge (see Note 5 to the Consolidated Financial Statements). 11 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd) Selling and marketing expenses were $1.2 million for the third quarter of 2000 compared to $1.1 million in the same period of 1999. The current year expenses reflect the Company's efforts to expand its in-house sales force and assume sole responsibility for the selling and marketing of ProstaScint from Bard. General and administrative expenses for the third quarter 2000 were $1.7 million compared to $892,000 for the comparable period in 1999. The increase from the prior year period is due to expenses related to the termination of the proposed merger with Advanced Magnetics, stock based compensation for a key employee and additional staffing and related costs. Interest Income/Expense. Interest income for the third quarter of 2000 was $182,000 compared to $131,000 recorded in the same period of 1999. The increase from the prior year period is due to higher average cash balance during 2000. Interest expense for the third quarter of 2000 was $24,000 compared to $60,000 recorded in the same period of 1999. The interest expenses included finance charges related with various equipment leases. Net Loss. Net loss for the third quarter of 2000 was $16.7 million compared to $1.2 million recorded in the same period of 1999. The net loss per share was $0.23 based on average common shares outstanding of 73.6 million compared to a loss of $0.02 per share based on average common shares outstanding of 68.8 million for the same period in 1999. Nine months ended September 30, 2000 and 1999 Revenues. Total revenues for the nine months ended September 30, 2000 and 1999 were $7.2 million and $9.1 million, respectively. The decrease from the prior year period is due primarily to the $1.8 million licensing fee for PSMA technology in the second quarter of 1999 and the discontinuance of contract manufacturing services in 2000, partially offset by the increase in 2000 of product related revenues. Product related revenues, which included product sales and royalties, accounted for 98% of total revenues in 2000 versus 67% of total revenues for the comparable period of 1999. License and contract revenues accounted for the remainder of revenues. Product related revenues for the nine months ended September 30, 2000 and 1999 were $7.0 million and $6.1 million, respectively. ProstaScint accounted for 72% and 80% of product related revenues in the nine months ended September 30, 2000 and 1999, respectively, while revenues from Quadramet accounted for 22% and 12% of product related revenues, respectively. Sales of ProstaScint were $5.0 million in the nine months of 2000 compared to $4.9 million in the nine months of 1999. Beginning in July 2000, the Company assumed sole responsibility for the selling and marketing of ProstaScint from Bard. Royalties from Quadramet increased to $1.5 million in the nine months ended September 30, 2000 from $706,000 in the same period of 1999. Quadramet royalties are based on net sales of Quadramet by Berlex. 12 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd) Sales of OncoScint CR/OV were $437,000 in 2000 versus $509,000 in the same period of 1999. The market for OncoScint CR/OV for colorectal cancer diagnosis has been negatively affected by positron emission tomography or "PET" scans which have shown the same or higher sensitivity than OncoScint CR/OV. To date, OncoScint CR/OV has not realized substantial sales. License and contract revenues for the nine months ended September 30, 2000 and 1999 were $165,000 and $3.0 million, respectively. The 1999 license fee included $1.8 million of revenue from the licensing of certain applications of PSMA to a joint venture formed by Cytogen and Progenics and $603,000 of contract manufacturing revenues. The Company has discontinued contract manufacturing services in 2000. Operating Expenses. Total operating expenses for the nine months ended September 30, 2000 and 1999 were $28.8 million and $13.1 million, respectively. The increase from the prior year period is due primarily to the acquisition of marketing and technology rights to Combidex and Code 7228 from Advanced Magnetics, resulting in a charge of $13.2 million, of which $13.1 million was non-cash. The current year expenditures also reflect development efforts in the proteomics programs, PSMA technologies, expansion of Cytogen's in-house sales force and costs associated with the termination of the proposed merger with Advanced Magnetics. The 1999 expenses included a non-cash charge of $1.2 million related to the acquisition of exclusive technology rights to PSMA for immunotherapy through the acquisition of Prostagen. Cost of product and contract manufacturing revenues for the nine months ended September 30, 2000 were $3.0 million compared to $3.2 million recorded in the same period of the prior year. The decrease from the prior year period is due to decreased contract manufacturing costs associated with discontinuance of contract manufacturing activities in 2000. Research and development expenses for the nine months ended September 30, 2000 were $5.0 million compared to $2.7 million recorded in the same period of 1999. The increase from the prior year period is due to increased funding for the proteomics program at AxCell, the product development efforts related to the PSMA technologies and costs associated with certain manufacturing development by DSM with respect to ProstaScint (see Note 4 to the Consolidated Financial Statements). The Company anticipates that funding for AxCell will continue to increase over the balance of the year and costs to DSM for manufacturing development will continue at their current level. Acquisition of marketing and technology rights of $13.2 million in 2000 represents a non-cash charge of $13.1 million related to the acquisition of certain rights to product candidates Combidex and Code 7228 from Advanced Magnetics. In 1999 the acquisition of technology rights was $1.2 million and represents a non-cash charge related to the acquisition of Prostagen. 13 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd) Selling and marketing expenses were $3.7 million for the nine months ended September 30, 2000 compared to $3.1 million in the same period of 1999. The current year expenses reflect the Company's efforts to expand its in-house sales force as well as payments to Bard, its former co-marketing partner. In July 2000, Cytogen assumed sole responsibility for the selling and marketing of ProstaScint. General and administrative expenses for the nine months ended September 30, 2000 were $3.8 million compared to $2.8 million for the comparable period in 1999. The increase from the prior year is due to expenses related to the termination of the proposed merger with Advanced Magnetics, stock based compensation for a key employee, additional staffing and related costs. Gain on sale of laboratory and manufacturing facilities. The Company recorded a gain of $3.3 million in the first quarter of 1999 from the sale of the Company's laboratory and manufacturing facilities. Interest Income/Expense. Interest income for the nine months ended September 30, 2000 was $545,000 compared to $282,000 in the same period of 1999. The increase from the prior year period is due to higher average cash balance during 2000. Interest expense for the nine months ended September 30, 2000 was $133,000 compared to $144,000 recorded in the same period of 1999. The interest expenses included finance charges related with various equipment leases. Net Loss. Net loss for the nine months ended September 30, 2000 was $21.2 million compared to a net loss of $539,000 recorded in the same period of 1999. The net loss per share was $0.29 based on average common shares outstanding of 72.7 million compared to a net loss of $0.01 per share based on average common shares outstanding of 66.2 million for the same period in 1999. Liquidity and Capital Resources The Company's cash, cash equivalents and short-term investments were $14.2 million as of September 30, 2000, compared to $12.4 million as of December 31, 1999. The cash used for operating activities for the nine months ended September 30, 2000 was $8.0 million versus $6.8 million in the same period of 1999. The increase from the prior year period is due primarily to the increased funding for the proteomics program at AxCell, the Company's efforts to expand its in-house sales force, and various expenses related to the termination of the proposed merger with Advanced Magnetics. 14 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd) Historically, the Company's primary sources of cash have been proceeds from the issuance and sale of its stock through public offerings and private placements, product related revenues, revenues from contract manufacturing and research services, fees paid under license agreements and interest earned on cash and short term investments. In February 2000, the Company received $1.0 million from Berlex Laboratories for the exercise of a warrant to purchase 1,000,000 shares of Cytogen's common stock at $1.00 per share. In addition, during the nine months ended September 30, 2000, the Company sold approximately 1.7 million additional shares of Cytogen common stock for total proceeds of $3.5 million at an average price of $2.12 per share upon the exercises of employee stock options and other warrants. In September 2000, the Company sold to Acqua Wellington 902,601 registered shares of Cytogen common stock at an aggregate price of $6.0 million or $6.647 per share. In October 2000, the Company entered into an equity financing facility with Acqua Wellington for up to $70 million. Pursuant to this facility, over the next 20 months, Cytogen may, at its discretion, sell additional shares of its common stock to Acqua Wellington at a small discount to the market price to be determined before each sale. The financing facility is not subject to any minimum takedown requirements, nor did the Company pay any financing fees or other compensation in connection with this transaction. The Company's capital and operating requirements may change depending upon various factors, including: (i) whether the Company and its strategic partners achieve success in manufacturing, marketing and commercialization of its products; (ii) the amount of resources which the Company devotes to clinical evaluations and the expansion of marketing and sales capabilities; (iii) results of clinical trials and research and development activities; and (iv) competitive and technological developments, in particular the Company may expend funds for development of its proteomics and PSMA technologies. The Company's financial objectives are to meet its capital and operating requirements through revenues from existing products and licensing arrangements. To achieve its strategic objectives, the Company may enter into research and development partnerships and acquire, in-license and develop other technologies, products or services. Certain of these strategies may require payments by the Company in either cash or stock in addition to the costs associated with developing and marketing a product or technology. However, the Company believes that, if successful, such strategies may increase long-term revenues. There can be no assurance as to the success of such strategies or that resulting funds will be sufficient to meet cash requirements until product revenues are sufficient to cover operating expenses. To fund these strategic and operating activities, the Company may sell equity and debt securities as market conditions permit or enter into credit facilities. The Company has incurred negative cash flows from operations since its inception, and has expended, and expects to continue to expend in the future, substantial funds to implement its planned product development efforts, including acquisition of products and complementary technologies, research and development, clinical studies and regulatory activities, and to further its marketing and sales programs. The Company expects that its existing capital 15 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd) resources together with the Acqua Wellington equity line should be adequate to fund the Company's operations for the foreseable future. The Company cannot be certain that it will not consume a significant amount of its currently available resources and reasonably expects that it will have additional requirements for debt or equity capital, irrespective of whether and when it reaches profitability, for further development of products, product and technology acquisition costs, and working capital. The Company's future capital requirements and the adequacy of available funds will depend on numerous factors, including the successful commercialization of its products, the costs associated with the acquisition of complementary products and technologies, progress in its product development efforts, the magnitude and scope of such efforts, progress with clinical trials, progress with regulatory affairs activities, the cost of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights, competing technological and market developments, and the expansion of strategic alliances for the sales, marketing, manufacturing and distribution of its products. To the extent that the currently available funds and revenues are insufficient to meet current or planned operating requirements, the Company will be required to obtain additional funds through equity or debt financing, strategic alliances with corporate partners and others, or through other sources. Based on the Company's historical ability to raise capital and current market conditions, the Company believes other financing alternatives are available. There can be no assurance that the financing commitments described above or other financial alternatives will be available when needed or at terms commercially acceptable to the Company. If adequate funds are not available, the Company may be required to delay, further scale back or eliminate certain aspects of its operations or attempt to obtain funds through arrangements with collaborative partners or others that may require the Company to relinquish rights to certain of its technologies, product candidates, products or potential markets. If adequate funds are not available, the Company's business, financial condition and results of operations will be materially and adversely affected. ================================= Cautionary Statement The foregoing discussion contains historical information as well as forward looking statements that involve a number of risks and uncertainties. In addition to the risks discussed above, among other factors that could cause actual results to differ materially from expected results are the following: (i) the Company's ability to access the capital markets in the near term and in the future for continued funding of existing projects and for the pursuit of new projects; (ii) the ability to attract and retain personnel needed for business operations and strategic plans; (iii) the timing and results of clinical studies, and regulatory approvals; (iv) market acceptance of the Company's products, including programs designed to facilitate use of the products, such as the Partners in Excellence or PIE Program; (v) demonstration over time of the efficacy and safety of the Company's products; (vi) the degree of competition from existing or new products; (vii) the decision by the majority of public and private insurance carriers on whether to reimburse patients for the Company's 16 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont'd) products; (viii) the profitability of its products; (ix) the ability to attract, and the ultimate success of, strategic partnering arrangements, collaborations, and acquisition candidates; (x) the ability of the Company and its partners to identify new products as a result of those collaborations that are capable of achieving FDA approval, that are cost-effective alternatives to existing products and that are ultimately accepted by the key users of the product; (xi) the success of the Company in obtaining marketing approvals for its products in Canada and Europe; (xii) the ability of the Company to protect proprietary technology, its trade secrets or know-how under the patent and other intellectual property laws of the United States and other countries; and (xiii) the ability of Advanced Magnetics to satisfy the conditions specified by the FDA regarding approval to market Combidex in the United States. 17 PART II - OTHER INFORMATION Item 5 - Other Information - ------ In October 2000, the Company entered into an equity financing facility with Acqua Wellington for up to $70 million. Pursuant to this facility, over the next 20 months, Cytogen may, at its discretion, sell additional shares of its common stock to Acqua Wellington at a small discount to the market price to be determined before each sale. The financing facility is not subject to any minimum takedown requirements, nor did the Company pay any financing fees or other compensation in connection with this transaction. Item 6 - Exhibits and Reports on Form 8-K - ------ (a) Exhibits: 10.1 License and Marketing Agreement by and between Cytogen Corporation and Advanced Magnetics, Inc. dated August 25, 2000. Filed herewith.* 10.2 Development and Manufacturing Agreement by and between Cytogen Corporation and DSM Biologics Company B.V. dated July 12, 2000. Filed herewith.* 27 Financial Data Schedule(Submitted to SEC only in electronic format). *Cytogen Corporation has requested confidential treatment of certain provisions contained in this exhibit. The copy filed as an exhibit omits the information subject to the confidentiality request. (b) Reports on Form 8-K During the three months ended September 30, 2000, the Company filed two reports on Form 8-K. The Form 8-K dated July 14, 2000, reported on "Item 5. Other Events" a press release announcing the proposed acquisition by Cytogen Corporation of Advanced Magnetics, Inc. The Form 8-K dated September 7, 2000, reported on "Item 5. Other Events" a press release announcing the mutual agreement of Cytogen Corporation and Advanced Magnetics, Inc. to terminate the proposed merger and to enter into licensing, marketing and supply agreements. 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CYTOGEN CORPORATION Date November 14, 2000 By /s/ H. Joseph Reiser -------------------- -------------------------------------------- H. Joseph Reiser President and Chief Executive Officer Date November 14, 2000 By /s/ Lawrence R. Hoffman -------------------- -------------------------------------------- Lawrence R. Hoffman Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 19 EX-10.1 2 0002.txt LICENSE AND MARKETING AGREEMENT-ADVANCED MAGNETICS EXHIBIT 10.1 CONFIDENTIAL TREATMENT LICENSE AND MARKETING AGREEMENT BY AND BETWEEN CYTOGEN CORPORATION AND ADVANCED MAGNETICS, INC. TABLE OF CONTENTS 1. Definitions.................................................................1 2. The Projects................................................................6 3. Cooperation.................................................................7 3.1 Cytogen Assistance with AM Projects.......................................7 3.2 Cooperation Regarding FDA Matters.........................................7 3.3 Post-Marketing Regulatory Communications..................................8 3.4 Adverse Event and Other Reporting.........................................8 3.5 Advertising and Promotional Materials.....................................9 4. Grants of Rights and Licenses..............................................10 4.l Rights and Licenses......................................................10 4.2 Rights to Feridex I.V....................................................11 4.3 License of Trademarks....................................................11 4.4 Sublicensees.............................................................12 5. License Fees...............................................................13 5.1 Payments.................................................................13 6. Disclosure of Project and Other Information................................13 7. Confidentiality............................................................14 7.1 Confidentiality..........................................................14 7.2 Exceptions...............................................................14 7.3 Project Information Disclosed to AM......................................15 9. Infringement Actions.......................................................15 8.1 Infringement of Agent Technology or Manufacturing Technology.............15 8.2 Infringement of Patents of Third Parties.................................17 8.3 Limitation of Remedies...................................................20 9. Ownership..................................................................20 10. Supply; Royalties.........................................................21 10.2 Payment.................................................................21 10.2 Minimum Sales...........................................................21 12. Obligation of Cytogen to Market Agent.....................................22 12. Reports and Accounting for Agent..........................................23 12.1 Payments and Monthly Reports for Agent Net Sales........................23 12.2 Annual Reports..........................................................23 12.3 Records.................................................................23 12.4 Currency................................................................24 13. Compliance with Regulations...............................................24 14. Representations and Warranties............................................24 14.1 By AM...................................................................24 14.2 By Cytogen..............................................................25 14.3 Limitations.............................................................27 15. Term and Termination......................................................27 15.1 Term....................................................................27 15.2 Termination Events......................................................27 15.3 Partial Termination for Certain Agents..................................28 15.4 Effect of Expiration or Termination.....................................28 16. General Provisions........................................................29 16.1 Force Majeure...........................................................29 -i- 16.2 Waiver..................................................................29 16.3 Publicity...............................................................29 16.4 Notices.................................................................30 16.5 Entire Agreement........................................................31 16.6 Headings................................................................31 16.7 Assignment..............................................................31 16.8 Independent Contractors.................................................31 16.9 Governing Law...........................................................31 16.10 Severability...........................................................32 -ii- LICENSE AND MARKETING AGREEMENT AGREEMENT made as of this 25th day of August 2000 (the "Effective Date), by and between Advanced Magnetics, Inc., a Delaware corporation having an address of 61 Mooney Street, Cambridge, Massachusetts 02138 ("AM"), and Cytogen Corporation, a Delaware corporation, having an address of 600 College Road East, Princeton, New Jersey 08540 ("Cytogen"). RECITALS: WHEREAS, AM is developing certain contrast agents for use in magnetic resonance imaging ("MRI"); and WHEREAS, subject to the terms and conditions hereinafter set forth, AM is willing to grant Cytogen the right to market and sell Feridex I.V., Combidex and Code 7228 in the Territory; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. 1.1 "Affiliate" shall mean a Person that directly, or indirectly through one or more intermediaries, controls, is Controlled by, or is under common Control with, the Person specified. 1.2 "Agent" shall mean Feridex I.V., Combidex and Code 7228, individually or in the aggregate, as the context provides. 1.3 "Agent Net Sales" shall mean, with respect to any Agent, during the term of this Agreement and calculated for each period indicated herein, the gross amount invoiced for such Agent by Cytogen, its Affiliates, and its Approved Sublicensees to Third Parties, less deductions for: (i) quantity and/or cash discounts, allowances, rebates, and chargebacks actually allowed or given; (ii) freight, postage and shipping, and insurance expenses (if separately identified in such invoice); (iii) credits or refunds actually allowed for rejected, outdated or returned Agent; and (iv) sales and other taxes and duties directly related to the sale, to the extent that such items are included in the gross invoice price (but not including taxes assessed against the income derived from such sale); provided, however, that Agent Net Sales shall not include sales to Affiliates of a reasonable amount of samples and supplies for clinical studies permitted pursuant to this Agreement. In the event of any sale of Agent to any Affiliate or Approved Sublicense for resale to its customers, "Agent Net Sales" shall be based on the greater of the amount actually received by Cytogen from its Affiliate or Approved Sublicensees or the amount actually received by such Affiliate or Approved Sublicensee from its customers for the sale of Agent. 1.4 "Agent Technology" shall mean all proprietary information with respect to any Agent and improvements (as defined below) thereto, including, without limitation, all information provided by AM pursuant to Article 6 of this Agreement, Project Information, trade secrets, technical information, data, techniques, discoveries, inventions, processes, know-how, patents (including any extension, reissue or renewal thereof) and patent applications (including such patents and patent applications set forth in Exhibit A to this Agreement and incorporated herein), that AM now has or may hereafter conceive, develop, own or Control during the term of this Agreement (but excluding any information owned or Controlled by any Person who becomes a successor or assignee of AM hereunder immediately prior to becoming a successor or assign), which is necessary or useful in connection with: the performance of the Cytogen Project, the marketing and sale by Cytogen of Agent pursuant to Section 4.1 or 4.2 or the performance by Cytogen of its obligations hereunder. No Manufacturing Technology shall be deemed to be included in Agent Technology. For purposes of this Section 1.4, a substance shall only be deemed an "improvement" to the extent that it is an MRI contrast agent composed of the same active ingredient contained in the Agent to which it would be an improvement and falls within the claims of any Patent covering such Agent. 1.5 "AM Projects" shall mean the Combidex Project and the Code 7228 Project. 1.6 "Approved Sublicensee" shall mean any Person to whom Cytogen has sublicensed all or a part of its rights arising under this Agreement with AM's written consent, subject to Section 4.4. 1.7 "Feridex Agreement" shall mean the agreement by and between AM and a Third Party under which AM has granted exclusive marketing rights in the Territory to such Third Party. 1.8 "Code 7228" shall mean the contrast agent currently known as Code 7228 which is composed of the substance AMI-7228 and which (i) is covered in whole or in part by an issued, unexpired claim of one or more of the Patents or is manufactured using a process which is covered in whole or in part by an issued, unexpired claim of one or more of the Patents or (ii) is covered by the Agent Technology. 1.9 "Code 7228 Approval Date" shall mean the later of (a) the date of AM's receipt of an FDA approval letter permitting commercial marketing of Code 7228 in the United States (said date being referred to as the "Code 7228 Approval Letter Date") and (b) the date on which AM is first able to produce and provide a supply of Code 7228 to Cytogen for commercial marketing in the United States in interstate commerce pursuant to and in compliance with an approved NDA and any other conditions that must be satisfied prior to initial commercial sales then imposed by law, such supply to be sufficient to 2 supply at least six months of reasonable Cytogen requirements as set forth in a notice sent to AM by Cytogen no later than fifteen (15) business days after AM's receipt of the approval letter from the FDA and notice thereof to Cytogen. If Cytogen fails to timely provide such notice of supply requirements, the Code 7228 Approval Date shall be the Code 7228 Approval Letter Date. 1.10 "Code 7228 NDA" shall mean the New Drug Application submitted by AM to the FDA with respect to Code 7228. 1.11 "Code 7228 Project" shall mean any work undertaken in obtaining FDA approval for commercial marketing of Code 7228 in the United States including all work upon which such approval is contingent, including, without limitation, the conduct of human clinical trials and United States regulatory applications (including the preparation and filing of the Code 7228 NDA). The Code 7228 Project shall also include all studies which are required to be conducted as a condition of the FDA approval of the Code 7228 NDA. 1.12 "Code 7228 Project Team" shall mean a standing committee composed of designated representatives of AM and Cytogen, with majority representation from AM, established for the purpose of overseeing the Code 7228 Project and relating to the Field of Use. AM shall have the primary responsibility for and the final decision with respect to any actions or recommendations made by the Code 7228 Project Team. Notwithstanding the foregoing, the Parties shall jointly agree to labeling content and requirements for Code 7228 in the Field of Use. 1.13 "Collective Opinion of Patent Counsel" shall mean the final joint opinion of patent counsel selected by AM and patent counsel selected by Cytogen after review of all data and information reasonably available at the time such opinion is rendered. If patent counsel for AM and Cytogen cannot agree on a final joint opinion, such counsel shall agree on the selection of a third patent counsel who shall offer an independent opinion on the subject matter. The final opinion of such third patent counsel shall be the Collective opinion of Patent Counsel. 1.14 "Combidex" shall mean the contrast agent currently known as Combidex which is composed of the substance with the United States Adopted Name Ferumoxtran-10 and which (i) is covered in whole or in part by an issued, unexpired claim of one or more of the Patents or is manufactured using a process which is covered in whole or in part by an issued, unexpired claim of one or more of the Patents or (ii) is covered by the Agent Technology. 1.15 "Combidex Approval Date" shall mean the later of (a) the date of AM's receipt of an FDA approval letter permitting commercial marketing of Combidex in the United States (said date being referred to as the "Combidex Approval Letter Date") and (b) the date on which AM is first able to 3 produce and provide a supply of Combidex to Cytogen for commercial marketing in the United States in interstate commerce pursuant to and in compliance with an approved NDA and any other conditions that must be satisfied prior to initial commercial sales then imposed by law, such supply to be sufficient to supply at least six months of reasonable Cytogen requirements as set forth in a notice sent to AM by Cytogen no less than six months after the execution date of this Agreement but no later than fifteen (15) business days after AM's receipt of the approval letter from the FDA and notice thereof to Cytogen. If Cytogen fails to timely provide such notice of supply requirements, the Combidex Approval Date shall be the Combidex Approval Letter Date. 1.16 "Combidex NDA" shall mean the New Drug Application submitted by AM to the FDA with respect to Combidex and accepted for filing by the FDA on December 21, 1999. 1.17 "Combidex Project" shall mean any work undertaken in obtaining FDA approval for commercial marketing of Combidex in the United States, including all work upon which such approval is contingent, including, without limitation, the conduct of human clinical trials. The Combidex Project shall include all studies which are required to be conducted as a condition of the FDA approval of the NDA. 1.18 "Combidex Project Team" shall mean a standing committee composed of designated representatives of AM and Cytogen, with majority representation from AM, established for the purpose of overseeing the Combidex Project. AM shall have the primary responsibility for and the final decision with respect to any actions or recommendations made by the Combidex Project Team. Notwithstanding the foregoing, the Parties shall jointly agree to labeling content and requirements for Combidex. 1.19 "Competing Products" shall mean, with respect to any Agent, a product approved by the FDA for marketing in the Territory with substantially similar indications. 1.20 "Controls" or "Control" shall mean, in the case of any Person, the possession of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of at least fifty percent (50%) of the voting securities thereof or otherwise, and when used in the context of "Control" of technology or information, shall mean possession by a Person of the right to grant licenses or sublicenses of such technology, or disclose such information, without violating the terms of any agreement or other arrangement with, or the rights of, any other Person or any legally binding laws or regulations. 1.21 "Cytogen Agreements" shall mean this Agreement, the Supply Agreement and the Escrow Agreement. 4 1.22 "Cytogen Project" shall mean the conduct of such Phase III(b) Studies and Phase IV Studies and any other studies undertaken to enhance the marketing of any Agent that Cytogen elects to conduct. 1.23 "Escrow Agreement" shall mean the Escrow Agreement entered into as of the date hereof by and between Cytogen, AM and Chase Mellon Shareholder Services, Inc. 1.24 "Feridex I.V." shall mean the contrast agent currently known and marketed as Feridex I.V., which is composed of the substance with the United States Adopted Name Ferumoxide and which (i) is covered in whole or in part by an issued, unexpired claim of one or more of the Patents or is manufactured using a process which is covered in whole or in part by an issued, unexpired claim of one or more of the Patents or (ii) is covered by the Agent Technology. 1.25 "Feridex I.V. NDA" shall mean the New Drug Application submitted by AM to the FDA with respect to Feridex I.V. and accepted for filing by the FDA on or about April 8, 1994 and approved by the FDA on August 30, 1996. 1.26 "Feridex Start Date" shall mean the date on which AM notifies Cytogen of the termination of the Feridex Agreement. 1.27 "Field of Use" shall mean diagnostic imaging for the detection or staging of cancer, and similar diagnostic applications in the field of oncology. 1.28 "Manufacturing Technology" shall have the meaning defined in Section 1.26 of the Supply Agreement. l.29 "Party" shall mean Cytogen and/or AM. 1.30 "Patents" shall mean the patents listed on Exhibit A and any reissues, extensions or renewals thereof. 1.31 "Phase III Studies" shall mean clinical or other studies of any Agent which are necessary for approval of the applicable NDA. 1.32 "Person" shall mean an individual, partnership, corporation, joint venture, unincorporated association, or other entity, or a government or department or agency thereof. 1.33 "Phase III(b) Studies" shall mean clinical or other studies of any Agent which are not necessary for approval of the applicable NDA, but which are begun prior to FDA approval of the applicable NDA. 1.34 "Phase IV Studies" shall mean clinical or other studies of any Agent which are undertaken following approval of the applicable NDA, and which are not required to be conducted as a condition of the FDA approval of the applicable NDA. 5 1.35 "Project" or "Projects" shall mean the AM Projects and/or the Cytogen Project. 1.36 "Project Information" shall mean all information developed as a result of the Projects, including, without limitation, techniques, discoveries, processes, know-how, toxicological and pharmacological data, clinical trial results, regulatory applications and documents evidencing approval thereof, and test results, and all information and data provided to a Party pursuant to Article 6 hereof. 1.37 "Qualified Person" shall mean any employee or agent of Cytogen engaged in the Cytogen Project pursuant to Article 2, the marketing of the Agent pursuant to Section 11 or the performance of Cytogen's other obligations hereunder, or any employee or agent of AM engaged in the AM Project or the performance of AM's obligations hereunder, designated by Cytogen or AM respectively, to receive Agent Technology, Project Information or other information provided pursuant to Article 6 of this Agreement or any other information proprietary to AM or Cytogen, respectively, who has a need to know the information included therein and disclosed to them. 1.38 "Supply Agreement" shall mean the Supply Agreement entered into as of the Effective Date by and between Cytogen and AM. 1.39 "Territory" shall mean the United States (including its territories and possessions and Puerto Rico). 1.40 "Third Party" shall mean any party other than a Party, to this Agreement. 1.41 "Trademarks" shall mean the following trademarks registered in the United States of America: Feridex I.V. and Combidex. Any other mark registered by AM in the United States relating to Feridex I.V., Combidex and Code 7228 (only in the Field of Use) after the Effective Date shall be deemed a Trademark hereunder. 2. The Projects. AM shall be responsible for the conduct of, and shall bear all out-of-pocket expenses in connection with, the AM Projects. AM shall consult with the Combidex Project Team and the Code 7228 Project Team in developing plans for clinical trials. Cytogen shall be responsible for the conduct of, and shall bear all out-of-pocket expenses in connection with, the Cytogen Project. AM may conduct Phase III(b) Studies or Phase IV Studies at its own expense, and Cytogen shall have no rights to the benefits thereof. AM will be responsible for all fees paid for FDA approval, including fees paid to the FDA in connection with Combidex, prior to the Combidex Approval Letter Date. AM will be responsible for all fees for FDA approval, including fees payable to the FDA in connection with Code 7228 on filing of the Code 7228 NDA and up to the Code 7228 Approval Letter Date. AM will be responsible for all fees payable to the FDA in connection with the certification of its facilities for commercial production of Agent. Cytogen will be responsible for any other fees payable to the FDA in 6 connection with (i) Code 7228 (in the Field of Use) and Combidex as such Agents incur FDA charges after their respective Approval Letter Dates and (ii) Feridex I.V. if a license is granted under Section 4.2 hereof. Cytogen shall reimburse AM for the Annual Product Registration Fee payable with respect to any NDA for an Agent while Cytogen has exclusive rights under this Agreement to such Agent. AM shall be responsible for the annual Establishment Registration Fee. If Cytogen desires to conduct any clinical study solely to enhance the marketing of any Agent and such study necessitates no material labeling change, then Cytogen shall be responsible for conducting any such study and shall be responsible for all costs incurred in connection therewith. AM and Cytogen shall agree to a protocol for such study, provided, however, that Cytogen shall have final approval of any such protocol. If AM or Cytogen desires to conduct any clinical study to enhance the marketing of any Agent, which study supports any material changes to the labeling of such Agent, Cytogen and AM shall be responsible for sixty percent (60%) and forty percent (40%), respectively, of the costs incurred in connection therewith. AM and Cytogen shall agree to a protocol for such study, provided, however, that Cytogen shall have final approval of any such protocol. 3. Cooperation. 3.1 Cytogen Assistance with AM Projects. Cytogen and AM shall mutually agree upon the reasonable assistance that Cytogen shall provide AM with the AM Projects, which will include assistance in reviewing and commenting on information provided by AM, evaluating clinical data and, when deemed appropriate, providing alternative language or other advice believed to be constructive to FDA approval of the NDAs and communication with the FDA. Cytogen shall provide such services to AM at cost. AM shall not contract for services in connection with the AM Projects without first offering to Cytogen the opportunity to submit a proposal to provide such services, such proposal to be submitted by Cytogen within thirty days of AM's request. Cytogen shall not be obligated to submit a proposal and AM shall not be obligated to accept any such proposal. AM may contract for services from Cytogen or others in its sole discretion. If Cytogen provides such services, AM shall not be responsible to Cytogen for amounts greater than the quoted amount for such services. 3.2 Cooperation Regarding FDA Matters. Prior to the respective Combidex and Code 7228 Approval Dates, AM shall provide the Combidex Project Team and the Code 7228 Project Team with (i) an opportunity to consult in advance with AM regarding clinical trials, research and regulatory applications to be conducted by, or for, AM or to be submitted and filed pursuant to the AM Projects after the date hereof; (ii) a reasonable opportunity to review and comment on material 7 communications with or submissions to the FDA after the date hereof prior to their submission and filing; and (iii) an opportunity to be present at meetings between the FDA and AM concerning Combidex or Code 7228, and shall advise Cytogen from time to time, but no less than on a monthly basis, of the status of the Combidex and Code 7228 NDAs. AM shall be under no obligation to accept any comments or other advice provided by Cytogen, and Cytogen shall have no liability to AM for the consequences to AM of accepting or rejecting any such comments or advice, absent bad faith or willful misconduct by Cytogen. Subject to Section 3.3, AM shall promptly advise Cytogen of any material communication which it may receive from the FDA regarding any Agent and Cytogen shall promptly advise AM of any communication which it may receive from the FDA regarding any Agent. Except as expressly provided in Section 3.5, or prior to the respective Combidex and Code 7228 Approval Dates, Cytogen shall not make any communications to the FDA concerning Combidex or Code 7228 other than through, or with the prior consent of, AM, and AM shall advise Cytogen before it shall make any material communication with the FDA. 3.3 Post-Marketing Regulatory Communications. It is the intent of the parties that AM shall, as the sponsor of the Feridex I.V. NDA, the Combidex NDA and the Code 7228 NDA, be primarily responsible for conducting communications with the FDA regarding the Agents. Unless otherwise agreed by the Parties, except as expressly provided in Section 3.5, following the Approval Date with respect to any Agent, neither AM nor Cytogen shall make any material communications to the FDA concerning such Agent without the prior consent of the other unless such communication is required by law or regulation or is of such an urgent and material nature that such Party is not reasonably able to consult with the other Party in advance of the time communication is to be made to the FDA; in which case such Party shall inform the other Party of such communication as soon as practicable thereafter. AM shall use its commercially reasonable efforts to obtain such status of the current circumstances concerning any Agent or NDA for Cytogen as will enable Cytogen to communicate with the FDA concerning the Agent in the emergency circumstance described in this section. 3.4. Adverse Event and Other Reporting. (a) If Cytogen learns of any information that might give rise to a recall or market withdrawal of any Agent or which might result in a field alert report pursuant to the NDA, or which involves a complaint about the quality or purity of any Agent, then Cytogen shall promptly provide notice thereof to AM. With respect to any Agent, and as between Cytogen and AM, initiation of any recall or market withdrawal, any investigation of any product complaint, or the filing of any field alert report with the FDA, shall be the responsibility of AM, and AM shall be responsible for and handling of all interaction with the FDA and other governmental authorities. 8 To the extent possible under the circumstances, AM will inform Cytogen prior to communicating with the FDA concerning any recall, market withdrawal or field alert report involving any Agent distributed by Cytogen. (b) If in any case where Cytogen's name is on the label of an Agent and Cytogen is of the opinion that a report to a regulatory agency must be made, or a recall or market withdrawal initiated, and such action has not been taken diligently by AM, then Cytogen shall have the right to take such action, if required by law, except that Cytogen will not initiate a recall or market withdrawal without first discussing the matter with the FDA. (c) Any U.S. adverse event report or medical complaint received by Cytogen or AM relating to an Agent shall be promptly investigated by Cytogen. AM will notify Cytogen within one working day of becoming aware of an adverse event or medical complaint, providing appropriate contact information to allow for Cytogen follow-up. Adverse events from outside the U.S. will be followed up by AM. Copies of serious (FDA defined) non-U.S. cases will be transmitted to Cytogen within five (5) working days of AM becoming aware of the case. Any such report that involves an event that is both serious and unexpected (as those terms are defined by then applicable FDA regulations) will be promptly reported to the FDA by Cytogen within fifteen (15) working days of receipt (term definition and reporting requirements to be modified to meet then applicable regulations). Cytogen will provide AM with copies of completed serious (FDA defined) U.S. cases within five (5) working days of Cytogen becoming aware of the case. Cytogen will prepare adverse event periodic reports in accordance with FDA regulations. Periodic reports will be forwarded to AM within twenty-five (25) days of close of the reporting interval, AM will be responsible for submission of periodic and other non-fifteen (15) day reports to the FDA. Each Party will provide the other with monthly updates of adverse event and product complaint activity. 3.5 Advertising and Promotional Materials. (a) Prior to the approval of the Combidex NDA, Cytogen will have the exclusive right to submit to the FDA for approval, and negotiate with the FDA with respect to the approval of, the advertising and promotional materials to be used by Cytogen relating to Combidex. If such direct contact with the FDA is not permitted by the FDA, then AM, at no cost to Cytogen, will act as Cytogen's agent in obtaining approval of such advertising and promotional materials. If AM acts as Cytogen's agent, AM may make changes requested by the FDA, only after consultation with and approval of Cytogen. 9 (b) After the approval of the Combidex NDA, Cytogen, to the extent permitted by law and regulation, will have the exclusive right to submit to the FDA and negotiate with the FDA with respect to Cytogen's advertising and promotional materials for Combidex. (c) After the approval of the Code 7228 NDA, Cytogen, to the extent permitted by law and regulation, will have the exclusive right to submit to the FDA and negotiate with the FDA with respect to Cytogen's advertising and promotional materials for Code 7228 in the Field of Use. (d) After the Feridex Start Date, Cytogen, to the extent permitted by law and regulation, will have the exclusive right to submit to the FDA and negotiate with the FDA with respect to Cytogen's advertising and promotional materials for Feridex I.V. (e) The rights granted Cytogen under this Section 3.5 with respect to any Agent shall terminate in the event of the termination of the exclusivity of the license grant with respect to such Agent pursuant to Sections 8.2, 11, 10.2 or 15.3. (f) Notwithstanding anything to the contrary in this Section 3.5, AM shall, solely relating to the use of the Trademarks, have final approval regarding advertising and promotional materials to be submitted to the FDA and any advertising and promotional materials approved by the FDA to confirm that such materials comply with AM's policy for the use of its trademarks; provided, however, that if AM does not object to any advertising and promotional materials proposed by Cytogen within five (5) days of communication thereof to AM by Cytogen in writing, AM shall be deemed to have consented to such materials. 4. Grants of Rights and Licenses. 4.l Rights and Licenses. Subject to the terms and conditions contained in this Agreement, AM hereby grants to Cytogen and its Affiliates (a) the non-exclusive right to use the Agent Technology for purposes of performing the Cytogen Project; (b) the exclusive right and license to distribute, market, offer to sell and sell Combidex in the Territory; and (c) the exclusive right and license to distribute, market, offer to sell and sell Code 7228 in the Territory for the Field of Use. AM may request a proposal from Cytogen for the marketing of Code 7228 in the Territory for one or more indications outside the Field of Use. If Cytogen notifies AM in writing within five (5) business days after receipt of such notice of its interest in obtaining such rights, there shall be a period of ***** (*****) days after such notice from Cytogen to AM in which the Parties may negotiate and execute a final agreement relating thereto or Cytogen may deliver a proposal, binding on itself, covering all the matters set forth in AM's notice to Cytogen. If the Parties do not execute an agreement or if AM declines to accept any binding proposal offered by Cytogen within such ***** (*****) day period, AM may in its sole - --------------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. 10 discretion enter into a definitive agreement with a Third Party covering the subject matter of the notice from AM to Cytogen requesting a proposal; provided, however, that AM shall not enter into a definitive agreement with a Third Party, other than an Affiliate of AM, granting the rights to market and distribute Code 7228 in the Territory for an indication outside the Field of Use on terms less advantageous to AM than those contained in any proposal made by, and binding upon, Cytogen to obtain such rights. The foregoing shall not restrict AM from granting rights to market Code 7228 to an Affiliate of AM or outside of the Territory; nor shall there be any restriction on AM developing or marketing Code 7228 for any indication outside the Field of Use for its own account. If Cytogen does not make a binding proposal, AM shall have no restrictions as to the matters set forth in its notice requesting a proposal. 4.2 Rights to Feridex I.V. Subject to the terms and conditions contained in this Agreement, AM shall grant to Cytogen the exclusive right and license to distribute, market, offer to sell and sell Feridex I.V. in the Territory if the Feridex Agreement terminates for any reason; provided, however, such grant shall not be exclusive to the extent that AM has granted rights to a Third Party which will survive the termination of the Feridex Agreement and solely for the purpose of meeting AM's obligations under the survival provisions of such Feridex Agreement. Such license shall be granted automatically as of the Feridex Start Date. 4.3 License of Trademarks. (a) Subject to the terms and conditions of this Agreement and for as long as the license granted under Section 4.1 or 4.2 remains exclusive with respect to Combidex or Feridex I.V., AM hereby grants to Cytogen an exclusive right and license to use the Trademarks in the Territory solely in connection with Cytogen's use, marketing, distribution, offer for sale and sale of the Agent in the Territory to which the Trademark relates; provided, however, the right to use the Feridex I.V. Trademark shall not commence until the Feridex Start Date; provided, further, however, that Cytogen may not use the trademark "Feridex" in the United States for any activities; in the United States, the word Feridex is to be used as "Feridex I.V." (b) Cytogen shall not use any other marks in connection with the marketing or sale of Agent or market or sell Agent under any other trademark, whether registered or unregistered without AM's prior written consent, which consent may be granted or withheld in AM's sole discretion. (c) Cytogen undertakes that the nature and quality of Agent made by it, if any, or for it by any Person (other than AM) and identified by the Trademarks shall at all times conform to the standards set by and maintained by AM. 11 (d) Cytogen acknowledges that AM is the owner of the Trademarks. Cytogen shall not at any time do, cause to be done, or permit any act or thing inconsistent with, contesting or in any way impairing or tending to impair, such ownership. Cytogen acknowledges that nothing in this Agreement shall give Cytogen any right, title or interest in the Trademarks other than the right to use the Trademarks in accordance with this Agreement. Cytogen agrees that it will not challenge the title or ownership of AM to the Trademarks or attack or contest the validity of the Trademarks and that any such challenge, attack or contest will be deemed a material breach of this Agreement. (e) AM shall register and maintain the Trademarks as necessary to protect the Trademarks in the Territory during the term of this Agreement. If either Party learns of any unauthorized use of the Trademarks by others in the Territory, such Party agrees to promptly notify the other Party of such unauthorized use. (f) Cytogen shall not alter, cover, obfuscate or remove any Trademark placed by AM on any vials of Agent. Cytogen shall at all times display the Trademarks with the trademark symbol "R" and any proprietary legend that AM shall determine to be reasonably necessary to protect its rights therein. Cytogen shall not, during the term of this Agreement or thereafter, use, adopt or seek to register the Trademarks or any trademark or trade name similar to or confusing with the Trademarks, or any translation thereof, in any jurisdiction. Cytogen further agrees that, if it shall have obtained or shall obtain in the future, in any jurisdiction, any right, title or interest in any mark, symbol or phrase which shall be identical to, similar to or likely to be confused with any Trademark, or any translation thereof, then Cytogen shall have acted or shall act as an agent and for the benefit of AM for the limited purpose of obtaining such registrations and assigning such registration (and all right, title and interest in such mark, symbol or phrase) to AM. Cytogen further agrees to execute any and all instruments deemed by AM to be necessary to transfer such registrations or such right, title or interest to AM. Cytogen shall not challenge, or assist others in challenging, the validity or ownership of any Trademarks. 4.4 Sublicensees. So long as the rights and licenses remain exclusive, Cytogen may sublicense any of the rights or licenses granted to Cytogen in this Article 4 to any Person, but not without the prior written consent of AM, such consent not to be unreasonable withheld, it being agreed that consent shall not be deemed to be unreasonably withheld if, in AM's judgment, that consent would not be in the commercial best interests of AM; provided, however, that Cytogen shall have the right, without the consent of AM, to transfer Agent to any Affiliate for marketing and resale in the Territory. Cytogen shall be responsible for the payment of all payments and royalties due and the making of reports under 12 this Agreement by reason of sales of any Agent by its Affiliates and Approved Sublicensees and their compliance with all applicable terms of this Agreement. 5. License Fees. 5.1 Payments. In consideration of the rights and licenses granted pursuant to Article 4, Cytogen shall issue, on the Effective Date, two million (2,000,000) shares of its common stock, par value $.01 per share, to AM. A certificate or certificates representing one million five hundred thousand (1,500,000) shares shall be delivered to AM on the date hereof. Two certificates representing two hundred fifty thousand (250,000) shares each shall be delivered to an escrow agent and placed in an escrow account to be distributed pursuant to the terms set forth in the Escrow Agreement. Of the 1,500,000 shares not subject to escrow, AM shall not transfer, sell or otherwise dispose of 1,200,000 shares; provided, however, that this restriction on transfer shall terminate with respect to 300,000 shares one month after the Effective Date and an additional 300,000 shares on each monthly anniversary of the Effective Date thereafter. Such shares shall have been issued pursuant to a registration statement filed with and declared effective by the U.S. Securities and Exchange Commission and shall be freely tradable without restriction under the Securities Act of 1933, as amended. Certificates representing such shares shall be issued in the name of AM and delivered to AM upon the Effective Date and shall not be inscribed with any restrictive legends relating to registration under the Securities Act. 6. Disclosure of Project and Other Information. Each Party (the "Delivering Party") shall, at the reasonable request of the other Party (the "Receiving Party"), disclose and deliver to such Qualified Persons as shall be designated by the Receiving Party to the Delivering Party, as it becomes available, all Agent Technology and such additional information and data which it may develop or acquire relating to any Agent and the Agent Technology necessary to enable the other Party to exercise its then existing rights and perform its then existing obligations hereunder, including all information concerning product formulation and information provided to AM by Third Party licensees of any Agent with respect to that Agent (including regulatory filings made by such licensees with applicable regulatory authorities) to the extent such disclosure is permitted under the terms of AM's agreements with such Third Parties. AM agrees that to the extent that disclosure to Cytogen of such information provided to AM by Third Party licensees is not so permitted, AM shall use commercially reasonable efforts to obtain such licensee's consent to such disclosure, or to otherwise enable Cytogen to obtain access to such information (consistent with AM's agreements with such Third Party). Each Party shall also provide the other with all information currently known (or which subsequently becomes known) to it regarding handling 13 precautions, toxicity, and hazards associated with the Agent. Said information shall be provided in written form. If requested by Cytogen, AM shall provide Cytogen with the appropriate Material Safety Data Sheet for the Agent. 7. Confidentiality. 7.1 Confidentiality. Except as expressly permitted in this Section 7.1, Cytogen shall maintain the confidentiality of all written or orally disclosed Agent Technology, Project Information, information provided pursuant to Article 6 and other information proprietary to AM (collectively "AM Confidential Material"), and not disclose any such AM Confidential Material to any Person (including its own employees and agents), other than Qualified Persons who have signed Cytogen's standard agreement protecting the confidentiality of Third Party information prior to such disclosure, and shall hold the same in confidence and shall use the same only for the purposes specified herein. Notwithstanding anything in this Agreement to the contrary, Cytogen may disclose such AM Confidential Information: (i) to Affiliates or Approved Sublicensees on a confidential basis to the extent necessary to enable them to perform the Cytogen Project (to the extent permitted pursuant to Article 2) and (ii) to Affiliates or Approved Sublicensees on a confidential basis to the extent necessary to enable them to market (to the extent permitted under Section 4.4 and 4.5) Agent in the Territory; provided, however, that Cytogen shall be responsible for any failure by any such Affiliate or Approved Sublicensee to (a) maintain the confidentiality of such information (except as provided in Section 7.2), (b) use it only for such purposes and/or (c) disclose it only to employees who need to know such information for such purposes and who have previously signed Cytogen's standard agreement, referred to above, or are otherwise bound by obligations substantially similar to those in such standard agreement, prior to such disclosure. 7.2. Exceptions. (a) The obligations of confidentiality and restrictions on use imposed upon Cytogen by Section 7.1 shall not apply to any AM Confidential Information that was: (i) in the public domain before the Effective Date or subsequently came into the public domain other than through any act or omission of Cytogen; or (ii) lawfully received by Cytogen without an obligation of confidentiality from a source other than AM; or (iii)disclosed with the prior written approval of AM. (b) Notwithstanding anything to the contrary contained in this Agreement, Cytogen and its Affiliates and Approved Sublicensees may disclose or deliver any such AM Confidential Information (i) to any government agency or official to the extent that such disclosure or delivery is 14 necessary for compliance with any law or regulation or (ii) to any Third Party if required to be disclosed by governmental or judicial order, in which case Cytogen shall promptly notify AM and take reasonable steps to assist in contesting such order or in protecting AM's rights prior to disclosure. 7.3 Project Information Disclosed to AM. AM shall be obligated to maintain the confidentiality of any Project Information, marketing and business plans and strategies developed by Cytogen and disclosed or delivered to AM by Cytogen to the same extent that Cytogen is obligated to maintain the confidentiality of Project Information pursuant to Section 7.1, except that AM may share information on adverse events and Project Information with the FDA and may share such information, on a confidential basis, with Third Party licensees of Agent if (a) such Third Party licensee, or AM, has provided comparable information developed by or on behalf of, or owned or Controlled by, such Third Party licensee, to Cytogen, or (b) such Third Party licensee has agreed to the disclosure of such comparable information to Cytogen when it is developed. Such obligation on the part of AM shall be subject to the same exceptions and conditions that are applicable to Cytogen's maintenance of the confidentiality of Project Information pursuant to Section 7.2. 7.4 This Article 7 shall survive termination of this Agreement for any reason for a period of five (5) years. 8. Infringement Actions. 8.1 Infringement of Agent Technology or Manufacturing Technology. Cytogen and AM shall promptly notify each other of any infringement or misappropriation of any patent or proprietary right that forms part of the Agent Technology or Manufacturing Technology and shall provide each other with any available evidence of such infringement or misappropriation. AM shall promptly investigate all such alleged infringement or misappropriation and advise Cytogen about any action it intends to take within two (2) months of notice from Cytogen or discovery by AM. Cytogen shall not institute any action during this period or during the pendency of any action instituted by AM. AM shall have the right, but not the obligation, at its sole cost and expense, to take all reasonable steps necessary to enjoin and prevent such infringement or misappropriation and/or to seek damages as a consequence thereof, including the institution and maintenance of legal or equitable proceedings. If AM determines that it is necessary for Cytogen to join in any such suit, action or proceeding, Cytogen shall, at AM's expense, execute all papers and perform such other acts as may be reasonably required and may, at its option, be represented by counsel of its choice; provided that AM shall control the decisions related to the litigation. If AM shall cause Cytogen to join in any such suit, action, or proceeding, then AM shall reimburse Cytogen for all reasonable expenses (including reasonable attorneys' fees) incurred in connection with any such suit, action or proceeding, as such expenses are incurred. If AM lacks standing to bring any such suit, action or proceeding, then Cytogen shall, at the request of AM, do so upon AM's undertaking to indemnify and hold it harmless (to the extent permissible by law) from all consequent liability and to reimburse it for all reasonable expenses (including reasonable attorneys' fees) incurred in 15 connection therewith, as such expenses are incurred; provided that AM shall control the decisions related to the litigation. Any amount received by AM in or as a result of any proceeding referred to in the fourth sentence of this paragraph shall be paid, first, to reimburse AM for any out-of-pocket expenses incurred in connection with such proceeding, and next to reimburse AM and Cytogen for any damages actually suffered by either party as a result of such infringement or misappropriation (other than consequential or incidental damages, such as loss of profits), and any additional amounts remaining after such application shall be shared equally by AM and Cytogen. Notwithstanding the foregoing, AM shall not be required to directly or indirectly contest, or intentionally assist in any contest of, any patent or other proprietary right licensed to AM if AM would thereby breach the terms of its license to such patent or other proprietary interest. After evaluating such claims, if AM does not, at its option, within such period of two (2) months, either bring suit or cause such alleged infringement or misappropriation to cease, then Cytogen shall have the right, but not the obligation, to prosecute all substantial claims of infringement or misappropriation of any of said patents or proprietary rights, at its own expense and for its own benefit, in the name of AM, if necessary, and AM agrees to execute any necessary papers for such suits (at Cytogen's expense). If Cytogen determines that it is necessary for AM to join in any such suit, action or proceeding, AM shall, at Cytogen's expense, execute all papers and perform such other acts as may be reasonably required and may, at its option, be represented by counsel of its choice; provided that Cytogen shall control the decisions related to the litigation. If Cytogen shall cause AM to join in any such suit, action, or proceeding, then Cytogen shall reimburse AM for all reasonable expenses (including reasonable attorneys' fees) incurred in connection with any such suit, action or proceeding, as such expenses are incurred. Any amount received by Cytogen in or as a result of any such proceeding shall be paid, first, to reimburse Cytogen for any out-of-pocket expenses incurred in connection with such proceeding, and next to reimburse Cytogen and AM for any damages actually suffered by each Party as a result of such infringement or misappropriation (other than consequential or incidental damages, such as loss of profits), and any additional amounts remaining after such application shall be shared equally by Cytogen and AM. 16 8.2 Infringement of Patents of Third Parties. (a) If, in the Collective Opinion of Patent Counsel, a patent or patents covering the manufacture, use or sale of any Agent should issue or have issued in the United States in the Field of Use, if applicable, to a Third Party, AM shall attempt to negotiate a license from such Third Party to permit the manufacture, use and sale by AM and its licensees of such Agent. If AM shall obtain a license to any such patent or patents covering any Agent directly from such Third Party, Cytogen shall receive a sublicense under such license, and Cytogen shall, on a quarterly basis, reimburse AM in an amount equal to ***** percent (*****%) of AM's cost of obtaining such license, including any license fees and royalty payments (excluding such portion, if any, of such cost that is attributable to sales by AM and/or its licensees of products other than any Agent or outside the Field of Use, if applicable, to sales of any Agent by AM and/or its licensees outside the Territory or to considerations other than the sale of Agent in the Territory). To the extent that the total payment to AM in any fiscal quarter under the preceding sentence would exceed ***** percent (*****%) of the total Royalty payments from Cytogen that are due to AMfor such quarter pursuant to Section 10.1, such excess amount shall not be payable in that quarter, and shall instead be carried forward and paid quarterly as soon thereafter as is possible without causing the payments by Cytogen under this paragraph in any quarter to exceed ***** percent (*****%) of the total Royalty payments from Cytogen that are due to AM for such quarter pursuant to Section 10.1. If AM is not successful in obtaining such a license within three months of the Collective Opinion of Patent Counsel, and if Cytogen thereafter obtains such a license, the Parties agree that ***** percent (*****%) of any consideration paid by Cytogen therefor, including royalties paid by Cytogen pursuant to such license and license fees paid to obtain such license, shall be creditable against the Royalty payments due from it to AM pursuant to Section 10.1 with respect to the Agent or Agents to which the Collective Opinion of patent Counsel relates; provided, however, that Cytogen shall use commercially reasonable efforts to enter into any such licensing arrangements on the most favorable terms then available. In no event, however, shall the total credit available to Cytogen in any fiscal quarter under this paragraph exceed ***** percent (*****%) of the total Royalty payments from Cytogen that would have been due to AM for such quarter (prior to giving effect to such credit) pursuant to Section 10.1 of this Agreement. To the extent any credit available to Cytogen under this Agreement cannot be totally exhausted in any period, the balance of such credit shall be carried forward and used in future periods until it is so exhausted. If (i) AM and/or Cytogen are unable to obtain the license referred to above within ninety (90) days after the date of the Collective Opinion of Patent Counsel, or (ii) the consideration to be paid to a Third Party for such license would (x) exceed ***** percent (*****%) of Agent Net Sales relating to such Agent that allegedly infringes the patents or proprietary rights for the six-month period ending prior to the date of - --------------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. 17 the Collective Opinion of Patent Counsel or (y) make such Agent commercially unviable for either Party, then either Party shall have the right for thirty (30) days after the expiration of such ninety (90) day period to terminate the licenses granted hereunder with respect to such Agent and the obligation to market and supply such Agent. In the event that the foregoing applies to two or more Agents, either party shall have the right for thirty (30) days after the expiration of such ninety (90) day period to terminate this Agreement by written notice to the other Party hereto. During the period from the issuance of the Collective Opinion of Patent Counsel until such time as a license is secured pursuant to this Section 8.2(a) or a termination as described above is effected, Cytogen shall not be obligated to meet its minimum revenue obligations under Section 10.2, AM shall not be required to supply the applicable Agent pursuant to the Supply Agreement and AM shall have no indemnity obligations under Section8.2(b) or (c) hereof for sales by Cytogen of such Agent during such period. Any failure to deliver Agent as a consequence of this Section 8.2(a) shall not be deemed a breach of the Supply Agreement, shall not give rise to any right of Cytogen to manufacture any Agent and any cure periods shall be extended during this period. (b) Should a Third Party institute a patent infringement suit against Cytogen or an Affiliate thereof in the United States during the term of this Agreement charging that their sale or manufacture, if permitted under the Supply Agreement, of any Agent in the United States infringes one or more United States patents owned by or licensed to such Third Party, Cytogen shall so notify AM. AM shall have the option at its expense to control the defense of such suit, in which case Cytogen shall execute all papers and perform other acts as AM may reasonable request. AM shall reimburse Cytogen for any out-of-pocket expenses in connection with the suit. If AM elects not to control the defense, then, except as set forth in paragraph (c) below, Cytogen shall have the right to reduce the Royalty amount payable to AM pursuant to Section 10.1 of this Agreement with respect to such Agent up to ***** percent (*****%) of the amount of reasonable out-of-pocket costs, including legal fees incurred by Cytogen, in defending or settling such suit. In no event, however, shall the total credit available to Cytogen in any fiscal quarter under this paragraph exceed ***** percent (*****%) of the total Royalty payments from Cytogen that would have been due to AM for such quarter (prior to giving effect to such credit) pursuant to Section 10.1 of this Agreement. To the extent any credit available to Cytogen under this Agreement cannot be totally exhausted in any period, the balance of such credit shall be carried forward and used in future periods until it is so exhausted. Such reimbursement or credit shall not include the cost of Cytogen's in-house attorneys' or other Cytogen employees' time. If such Third Party suit is not successfully defended by Cytogen or AM, AM shall indemnify Cytogen for ***** percent (*****%) of all - ----------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. 18 damages which may be finally awarded against Cytogen based upon such patent infringement. If a license is negotiated, the payments for such license shall be controlled by the provisions of paragraph (a) above. (c) Should a Third Party institute a patent infringement suit against AM, or against AM and Cytogen jointly, in the United States based on: (i) any modification or enhancement of Agent or of the Agent Technology or Manufacturing Technology, or (ii) the method of the manufacture, finish or use of the Agent; which in either case (i) or (ii) is not the result of AM's acts but that of Cytogen or its Affiliates or Approved Sublicensees, Cytogen shall reimburse AM for ***** percent (*****%) of the amount of reasonable out-of-pocket costs, including legal fees incurred by AM, in defending such suit and AM shall be entitled to control such defense; provided, however, that Cytogen shall be able to participate fully in the preparation of such defense and that AM shall make no settlement agreement affecting material rights held by Cytogen without the consent of Cytogen. Such credit shall not include the cost of AM's in-house attorneys' or other AM employees' time. If such Third Party suit is not successfully defended by Cytogen or AM, Cytogen shall indemnify AM for ***** percent (*****%) of all damages which may be finally awarded against it based upon patent infringement. If a license is negotiated, the payments for such license shall be controlled by the provisions of paragraph (a) above. (d) Nothing in this Article shall prevent either Party, at its own expense, from obtaining any license or other rights from Third Parties it deems appropriate in order to permit the full and unhindered exercise of its rights under this Agreement. (e) If (i) as a result of any claim made against either Party during the term of this Agreement or the Supply Agreement alleging that the manufacture and sale to Cytogen of any Agent by AM or the manufacture, use or sale of any Agent by Cytogen (in the case of a claim against Cytogen) infringes or misappropriates any patent or any other proprietary right of a Third Party, a judgment is entered against such Party by a court of competent jurisdiction from which no appeal can be or is taken within the time permitted for appeal, such that AM cannot manufacture an Agent or sell the Agent to Cytogen in the United States (in the case of a claim against AM), or that Cytogen cannot sell an Agent in the United States (in the case of a claim against Cytogen), without infringing the patent or other proprietary rights of such Third Party and (ii) (A) AM and/or Cytogen are unable to obtain the license referred to in subsection (a) above within ninety (90) days after such entry of judgment, or (B) such consideration to be paid to a Third Party for such license would (x) exceed ***** percent (*****%) of Agent Net Sales relating to such Agent that infringes the patents or proprietary rights for the six-month period ending prior to the time such infringement or misappropriation complaint is filed in a court of - --------------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. 19 competent jurisdiction or (y) make such Agent commercially unviable to either Party, then either Party shall have the right for thirty (30) days after the expiration of such ninety (90) day period to terminate the licenses granted hereunder with respect to such Agent and the obligation to market such Agent. In the event that the foregoing applies to two or more Agents, either party shall have the right for thirty (30) days after the expiration of such ninety (90) day period to terminate this Agreement by written notice to the other Party hereto. 8.3 Limitation of Remedies. The provisions of Section 8.2 set forth the Parties' only remedies against each other in respect of the subject matter thereof, absent bad faith or willful misconduct. In no event shall either Party be liable to the other under this Article 8 for incidental or consequential damages (including, but not limited to, loss of profits or loss of use damages). 9. Ownership. (a) AM shall be the sole and exclusive owner of (i) the Agent Technology, subject to Cytogen's rights pursuant to Article 4 hereof, (ii) the Manufacturing Technology, subject to Cytogen's rights pursuant to Article 4 hereof, and (iii) the Project Information obtained and/or developed exclusively by AM, subject to Cytogen's rights pursuant to Article 4 hereof. Cytogen shall be the sole and exclusive owner of Project Information developed exclusively by Cytogen, and such information may not be used by AM or licensed by AM to any person without Cytogen's consent except as otherwise provided in Article 7. Project Information, other than patents and patent applications, obtained and/or developed jointly by AM and Cytogen shall be deemed owned jointly and severally by them, without an obligation of accounting. Any inventions conceived and reduced to practice for which a patent is filed having named investors on the patent including both one or more AM employees and one or more Cytogen employees ("Joint Invention(s)"), shall belong jointly to AM and Cytogen. AM shall have the first right, at its own expense, to prepare, file, prosecute and maintain patent application(s) and patent(s) for Joint Invention(s) in the United States and foreign countries. AM shall provide Cytogen with a copy of such application at least fifteen (15) days prior to filing and a filed copy within thirty (30) days of filing. In the event AM elects not to prepare, file, prosecute and/or maintain any such patent application(s) and/or patent(s) in any jurisdiction, AM shall notify Cytogen at least thirty (30) days prior to taking, or not taking any action which would result in abandonment, withdrawal or lapse of such patent application(s) or patent(s). In any event, Cytogen shall have the right to prepare, file, prosecute and maintain, at its own expense, patent application(s) and patent(s) on any Joint Invention(s) for which AM elects not to seek or maintain patent protection in the United States. Title to all patents issued thereon, regardless of which party filed the corresponding application(s), shall be jointly held by AM and Cytogen. AM's rights to a Joint Invention are subject to Cytogen's rights as a joint owner and the rights 20 and licenses granted to Cytogen in this Agreement. Neither party shall grant any rights to a Joint Invention to a Third Party which would limit the other party's rights as a joint owner of the Joint Inventions. (b) AM shall pay any fees necessary to maintain the Patents in effect. If AM determines, in its sole judgment, not to maintain any of the Patents, it shall timely notify Cytogen so that Cytogen may pay the necessary maintenance fees on AM's behalf. If Cytogen elects to pay the maintenance fees, AM shall execute any documents necessary to assign such Patent to Cytogen for such period as Cytogen continues to pay such maintenance fees. Cytogen's right set forth in this Section 9(b) shall be the sole and exclusive remedy for AM's failure to maintain any Patent. 10. Supply; Royalties. 10.1 Payment. In consideration of the rights granted hereunder, Cytogen shall pay to AM a royalty (the "Royalty") in an amount equal to ***** percent (*****%) of Agent Net Sales, on the payment terms set forth in subsection 12.1; provided that such Royalty shall be reduced to ***** percent (*****%) for any Agent if Cytogen's license under this Agreement is converted to a non-exclusive license with respect to such Agent and shall be reduced to *****% for any Agent upon the expiration of the last to expire Patent covering such Agent. Such Royalty shall be payable as long as AM continues to provide Agent to Cytogen pursuant to the Supply Agreement. Furthermore, such Royalty shall also be payable, if applicable, as long as Cytogen manufactures Agent pursuant to the Supply Agreement. 10.2 Minimum Revenues. (a) With respect to Combidex, for each full twelve-month period beginning on the first day of the fiscal quarter commencing after the Combidex Approval Date, the total amount of revenue to AM resulting from royalties on Agent Net Sales of Combidex under this Agreement and payments for Combidex under the Supply Agreement shall not be less than: First Year $***** Second Year $***** Third Year $***** Fourth Year $***** Fifth Year $***** Thereafter ***** If such revenues are less than such amount in any period, AM shall have the right to elect that the licenses and rights granted under this Agreement with respect to Combidex be converted to non-exclusive licenses and rights. - --------------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. 21 (b) With respect to Code 7228, for each full twelve-month period beginning on the first day of the third fiscal quarter commencing after the Code 7228 Approval Date, the total amount of revenue to AM resulting from royalties on Agent Net Sales of Code 7228 and Combidex combined under this Agreement and payments for Combidex and Code 7228 combined under the Supply Agreement by Cytogen shall not be less than: First Year $***** Second Year $***** Third Year $***** Fourth Year $***** Fifth Year $***** Thereafter ***** If such revenues for Code 7228 and Combidex combined are less than such amount in any period, AM shall have the right to elect that the licenses and rights granted under this Agreement with respect to Code 7228 be converted to non-exclusive licenses and rights. (c) If Combidex may not be marketed and sold due to FDA action or any reason unrelated to an action or inaction of Cytogen and outside its control, the Parties shall negotiate in good faith to revise the minimum revenue targets set forth in Section 10.2(b). (d) The requirement to achieve the minimum revenue targets set forth above shall be suspended during any period when (i) a Third Party is marketing a Competing Product in the Territory that competes with Combidex or (for purposes of Section 10.2(b) only) Code 7228, such Competing Product has attained a market share of twenty-five percent (25%) or greater in any calendar quarter (measured as sales of such Competing Product divided by sales of all products which are Competing Products and the relevant Agent), Cytogen has notified AM pursuant to Section 8.1(a) that such Competing Product infringes some portion of the Agent Technology, and AM has elected not to institute any action to prohibit the marketing of such Competing Product, (ii) AM fails to supply a sufficient amount of Agent to meet the minimum revenue targets or (iii) as provided in Section 8.2(a). (e) If AM converts any license to a non-exclusive license pursuant to this Section 10.2, the minimum revenue requirement for any such Agent shall terminate and Cytogen shall not be required to use its commercially reasonable efforts to market or sell such Agent. 11. Obligation of Cytogen to Market Agent. From and after the respective Combidex or Code 7228 Approval Date, Cytogen shall use - --------------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. 22 ***** efforts to market and sell Combidex and/or Code 7228, as the case may be, in the Territory. From and after the date which is two months after the Feridex Start Date, Cytogen shall use ***** efforts to market Feridex I.V. in the Territory. As part of said obligation, Cytogen agrees that, it will commence the marketing of each Agent as soon as practicable, but in any event not more than sixty (60) business days following any Approval Date or the Feridex Start Date (each, a "Market Launch Date"). If Cytogen fails to commence marketing of any Agent within such period, in addition to any other remedy it may have, AM will have the option to terminate the licenses and rights granted under Article 4 with respect to that Agent. If AM chooses to terminate such rights and licenses, AM shall so notify Cytogen. Cytogen's obligations to market and AM's obligation to supply such Agent shall cease and each party shall follow the procedures of Section 15.4(b) with regard to the return or destruction of any Agent Technology or other information. Subsequent to the Effective Date, the parties agree to cooperate and coordinate their activities in connection with any such Market Launch Date. 12. Reports and Accounting for Agent. 12.1 Payments and Monthly Reports for Agent Net Sales. Within thirty (30) days after the close of each calendar quarter after Cytogen commences sales of any Agent, Cytogen shall deliver to AM a report containing an accounting to AM with respect to all Agent Net Sales for such quarter. Such report shall indicate the amount and calculations of any payments of Royalties due to AM pursuant hereto, and the amount of Agent Net Sales separately for each Agent, and shall be accompanied by payment thereof in full of such Royalties. If no payment is due for any calendar quarter, Cytogen shall so report. Interest on all payments due to AM and not paid by Cytogen when due shall accrue at a rate of 12% per annum from the due date, or such maximum rate allowed by law if less. No sales of Agent to any Person shall be counted more than once in the calculation of Agent Net Sales, and no payments under Article 10 shall be payable more than once with respect to any sale of Agent, i.e., payments due AM with respect to any sale of Agent shall not be cumulative. 12.2 Annual Reports. Cytogen shall cause to be delivered to AM, within ninety (90) days after the end of each fiscal year of Cytogen, a report certified by an authorized financial officer of Cytogen setting forth the basis upon which payments were calculated hereunder during the preceding fiscal year and the amount of payments payable hereunder during and with respect to such fiscal year. 12.3 Records. Cytogen shall keep and maintain in accordance with U.S. generally accepted accounting principles, consistently applied, proper and complete records and books of account - ----------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. 23 with respect to the payments made or due pursuant to Article 10 but no longer than three (3) years after the year in which such Agent Net Sales occurred. AM shall have the right, upon reasonable prior written notice to Cytogen but in no event less than ten (10) days notice, during normal business hours, and at its own expense to examine or to have examined by a certified public accountant, or other person reasonably acceptable to Cytogen, pertinent books and records of Cytogen, solely for the purpose of determining the correctness of payments made hereunder. 12.4 Currency. All payments and royalties payable under this Agreement shall be paid in U.S. dollars in immediately available funds to an account designated by AM. 13. Compliance with Regulations. Each Party will comply with, and cause any of their Affiliates performing any of their respective rights or obligations hereunder (and in the case of Cytogen, will use its reasonable best efforts to cause its Approved Sublicensees) to comply with, all laws and regulations applicable to such rights and obligations. 14. Representations and Warranties; Limitation of Liability. The following provisions relate to representations and warranties by the Parties made in connection with this Agreement and the Supply Agreement: 14.1 By AM. AM represents and warrants to Cytogen as follows: (a) AM is a corporation duly organized, validly existing, and in good standing under the laws of the state of Delaware. (b) AM has all necessary corporate power to enter into and perform its obligations under each of the Cytogen Agreements and has taken all necessary corporate action under the laws of the state of Delaware and its certificate of incorporation and by-laws to authorize the execution and consummation of the Cytogen Agreements. (c) AM's performance under and in accordance with each of the Cytogen Agreements will not result in a breach of or constitute a default under any contract between AM and a Third Party, and will not violate any United States statute, rule or governmental regulation applicable to AM. (d) AM is the sole and absolute owner of all of the Patents and the Trademarks, and has the right to grant the exclusive rights and licenses granted under Article IV, subject to the Feridex Agreements. (e) To the best of AM's knowledge, all the Patents and Trademarks are in full force and effect and have been maintained to date. 24 (f) Other than litigation disclosed in its filings with the Securities and Exchange Commission, AM is not aware of any asserted claim or demand, or unasserted claim or demand which is likely to be asserted against the Patents or Trademarks; (g) AM has not entered into any agreement with any Third Party which is in conflict with the rights granted to Cytogen or the obligations assumed by AM pursuant to the Cytogen Agreements. (h) Other than litigation disclosed in its filings with the Securities and Exchange Commission, AM is not aware of any asserted claim or demand, or Third Party unasserted claim or demand, which is likely to be asserted, which AM considers valid, which would materially affect AM's ability to perform its obligations under the Cytogen Agreements. 14.2 By Cytogen. Cytogen represents and warrants to AM, as follows: (a) Cytogen is a corporation duly organized, validly existing, and in good standing under the laws of Delaware. (b) Cytogen has all necessary corporate power to enter into and perform its obligations under the Cytogen Agreements and has taken all necessary corporate action under the laws of Delaware and its charter and by-laws to authorize the execution and consummation of each of the Cytogen Agreements. (c) Cytogen's performance under and in accordance with each of the Cytogen Agreements will not result in a breach of or constitute a default under any contract between Cytogen and a Third Party, and will not violate any United States statute, rule or governmental regulation applicable to Cytogen. (d) Cytogen has not entered into any agreement with any Third Party which is in conflict with the rights granted to AM or the obligations assumed by Cytogen pursuant to the Cytogen Agreements. (e) Cytogen is not aware of any asserted claim or demand or Third Party unasserted claim or demand which is likely to be asserted, which Cytogen considers valid, and which would materially affect Cytogen's ability to perform its obligations under this Agreement or the Supply Agreement. (f) The authorized capital stock of Cytogen consists of 250,000,000 shares of common stock, par value $.01 per share ("Cytogen Common Stock"), and 5,400,000 shares of preferred stock, par value $.01 per share ("Cytogen Preferred Stock"), of which Cytogen Preferred Stock, 200,000 shares have been designated Series C Junior Participating Preferred Stock, $.01 par value. At 25 the close of business on August 23, 2000, (i) 73,166,056 shares of Cytogen Common Stock were issued and outstanding, all of which were validly issued, fully paid and nonassessable, and free of preemptive rights, (ii) no shares of Cytogen Common Stock were held in the treasury of Cytogen, (iii) 5,682,837 shares of Cytogen Common Stock were reserved for future issuance pursuant to stock option arrangements of Cytogen (collectively, the "Cytogen Stock Option Plans"). No shares of Cytogen Preferred Stock are issued and outstanding. As of the date of this Agreement, except as set forth above, no shares of capital stock or other voting securities of Cytogen were issued, reserved for issuance or outstanding. As of the date of this Agreement, except for stock options covering not in excess of 3,974,336 shares of Cytogen Common Stock issued under the Cytogen Stock Option Plans (collectively, the "Cytogen Stock Options"), rights to purchase covering approximately 371,950 shares of Cytogen Common Stock under the Cytogen Employee Stock Purchase Plan, warrants to purchase 328,012 shares of Cytogen Common Stock, approximately 923,534 shares of Cytogen Common Stock underlying a certain convertible promissory note and 950,000 shares of Cytogen Common Stock issuable, in certain circumstances, pursuant to an acquisition agreement, there are no options, warrants, calls, rights or agreements to which Cytogen or any of its subsidiaries is a party or by which any of them is bound obligating Cytogen or any of its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock of Cytogen or obligating Cytogen or any of its subsidiaries to grant, extend or enter into any such option, warrant, call, right or agreement. Cytogen does not have any outstanding bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the right to vote) with the stockholders of Cytogen on any matter. (g) The shares of Cytogen Common Stock to be issued in accordance with this Agreement will be, upon issuance, duly authorized, validly issued, fully paid and nonassessable, with no personal liability attaching to the ownership thereof. Such issuance of shares of Cytogen Common Stock will be free of any restrictions on transfer imposed by Cytogen, other than those contemplated by this Agreement. There are no preemptive rights or other anti-dilution rights which would become effective upon or prohibit such issuance of shares of Cytogen Common Stock. (h) No stop order suspending the effectiveness of the registration statement covering the issuance of the shares of Cytogen Common Stock to AM under the terms of this Agreement has been issued under the Securities Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of Cytogen, are contemplated by the Securities and Exchange Commission. 26 14.3 Limitations. Notwithstanding the foregoing, Cytogen's sole remedies if it is alleged or determined that Cytogen's exercise of any of its rights hereunder would infringe upon, or conflict with, any patent or other proprietary right of any Third Party shall be as set forth in Section 8.2, and AM's sole remedies if it is alleged or determined that AM's exercise of any of its rights hereunder would infringe upon, or conflict with, any patent or proprietary right of any Third Party shall be as set forth in Section 8.2. Except in connection with a breach of the confidentiality obligations of Article VII hereof or in connection with an infringement or misappropriation by one Party of the intellectual property of the other, neither Party shall be liable to the other for any indirect, incidental, special, or consequential damages in connection with this Agreement, however caused, whether based on contract, tort, warranty, or other legal theory, and even if such Party has been informed in advance of the possibility of such damages or such damages could have been reasonably foreseen by such Party. 15. Term and Termination. 15.1 Term. This Agreement shall continue in force until August __, 2010, with rolling automatic successive renewal periods of an additional five (5) years, unless notice of non-renewal or termination is given by Cytogen or AM ninety (90) days prior to the commencement of any renewal period, and unless and until terminated pursuant to the provisions of Section 15.2. 15.2 Termination Events. This Agreement may be terminated: (a) at any time, by Cytogen or AM, in accordance with and to the extent permitted by the provisions of Section 8.2 hereof; (b) at any time, by Cytogen or AM if the other Party shall materially breach any of the terms, conditions and agreements contained herein to be kept, observed, and performed by it, in which case the non-breaching Party may terminate this Agreement at its option and without prejudice to any of its other legal and equitable rights or remedies except as specifically provided in this Agreement, by giving the Party which committed the breach sixty (60) days written notice, particularly specifying the breach, unless the notified Party within such sixty (60) days shall have cured the breach; (c) at any time, if any assignment shall be made by either Party for the benefit of creditors, or if a receiver, trustee in bankruptcy or similar officer shall be appointed to take charge of all of the property of either Party, or if either Party files a voluntary petition under applicable bankruptcy laws or such a petition is filed against either Party and is not dismissed within sixty (60) days, the other Party may immediately terminate this Agreement by giving written notice of termination; or (d) by AM or Cytogen, upon thirty (30) days written notice, if the Supply Agreement has terminated; provided, however, that the notice of termination of this Agreement pursuant 27 to this subsection must be served on the other party within ninety (90) days of the termination of the Supply Agreement, as applicable. 15.3 Partial Termination for Certain Agents. The obligations of Cytogen to market any Agent and the grant of the rights and licenses by AM with respect to such Agent may be terminated (a) at any time, by AM or Cytogen, upon thirty (30) days written notice, in the event of significant bona fide concerns about the safety or efficacy of such Agent on the part of the chief medical officer of the party asserting such concern, such concerns to be set forth in writing and delivered to the other Party with the termination notice. Concerns about safety shall be considered an appropriate basis for termination of the obligations or license with respect to such Agent under this subsection if the safety profile of the Agent is such that it fails a risk/benefit analysis conducted by physicians experienced in the use of MRI contrast media. Concerns about efficacy shall be considered an appropriate basis for termination of the obligations or license with respect to such Agent under this subsection if physicians experienced in the use of MRI contrast media conclude that the Agent is of little diagnostic value; or (b) at any time by AM or Cytogen in accordance with the terms and provisions of Section 8.2. 15.4 Effect of Expiration or Termination. (a) Except as otherwise provided in Article 7, Article 13, or subsections (c) and (d) of this Section 15.4, expiration or termination of this Agreement shall result in the termination of all provisions hereof; provided, that Cytogen shall continue to be liable for all license fees and Royalty (with respect to all Agent that has then been sold by Cytogen or its Affiliates or Approved Sublicensees) payments that shall then have accrued and each Party shall be responsible for any amounts due under Section 8.2 and remaining unpaid. (b) Upon expiration or termination of this Agreement, Cytogen shall return to AM (i) the Agent Technology, (ii) the Manufacturing Technology, if any, in its possession, and (iii) Project Information not developed by Cytogen, or otherwise dispose of such Agent Technology, Manufacturing Technology or Project Information as instructed by AM. (c) Upon termination of this Agreement by AM, Cytogen shall have the right to complete the sale of its inventory of the Agent in the Territory; provided, that Cytogen's obligations hereunder to comply with this Agreement and the Supply Agreement in connection with such completion of sale shall remain in effect; and further provided, that if requested by AM, Cytogen shall negotiate with AM for the sale of Cytogen's entire inventory of the Agent to AM on terms to be negotiated by the Parties at such time. 28 (d) Upon expiration or termination of this Agreement, neither Party shall have liability to the other Party for damages of any kind solely as a result of the fact of such expiration or termination, whether on account of the loss by Cytogen of present or prospective sales, investments or goodwill arising solely from statutes that relate to termination of distributors or licensees, and each Party hereby waives any rights which may be granted to it by such statutes. 16. General Provisions. 16.1 Force Majeure. If either Party is prevented from performing, or is unable to perform, any of its obligations under this Agreement, due to any act of God, fire, casualty, flood, war, strike, lock out, failure of public utilities, injunction or any act, exercise, assertion or requirement of governmental authority, compliance with any law or government regulation or order, epidemic, destruction of production facilities, insurrection, inability to procure materials, labor, equipment, transportation or energy sufficient to meet its production or performance needs, or any other cause beyond the reasonable control of the Party invoking this provision, and if such Party shall have used its commercially reasonable efforts to avoid such occurrence and minimize its duration and has given prompt written notice to the other Party, then the affected Party's performance shall be excused and the time for performance shall be extended for the period of delay or ability to perform due to such occurrence. 16.2 Waiver. The waiver by either Party of a breach or a default of any provision of this Agreement by the other Party shall not be construed as a waiver of any succeeding breach of the same or any other provisions, nor shall any delay or omission on the part of either Party to exercise or avail itself of any right, power or privilege that it has, or may have hereunder, operate as a waiver of any right, power or privilege by such Party. No waiver, consent, modification or change of terms of this Agreement shall bind either Party unless in a writing signed by both parties, and then such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose given. 16.3 Publicity. Except as required by or advisable under law, governmental regulation, judicial order, generally accepted accounting principles or any obligations pursuant to any listing agreement with, or regulation of, any national securities exchange or quotation system, neither Party shall directly or indirectly make any public announcement or publicity concerning this Agreement or the subject matter hereof without the prior written consent of the other Party and agreement upon the nature, text and timing of such announcement, which approval and agreement shall not be unreasonably withheld. Such approval and agreement shall be deemed to be given if no response is given to the other 29 Party within two working days of receipt of the proposed text from the Party intending to make such announcement. In the event of a public announcement or publicity not required by law, the Party making such announcement shall use commercially reasonable efforts to provide the other with a copy of the proposed text prior to such announcement, for the purpose of notice and opportunity to comment. Upon execution hereof, each Party expects to issue a press release concerning the subject matter hereof. 16.4 Notices. All notices and other communications under this Agreement shall be in writing and shall be delivered by hand or overnight courier service, mailed or sent by telecopier, as follows: If to AM: Advanced Magnetics, Inc. 61 Mooney Street Cambridge, Massachusetts 02138 Attention: Chief Executive Officer Telecopier: (617) 547-2445 with a copy to: Testa, Hurwitz & Thibeault 125 High Street Boston, Massachusetts 02110 Attention: Leslie E. Davis, Esq. Telecopier: (617) 248-7100 If to Cytogen: Cytogen Corporation 600 College Road East Princeton, New Jersey 08540 Attention: Dr. Joseph Reiser Telecopier: ( ) ___-____ with a copy to: Cytogen Corporation 600 College Road East Princeton, New Jersey 08540 Attention: General Counsel Telecopier: ( ) ___-____ or to such other address as any Party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall only be effective upon receipt. All notices and other communications given to any Party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent 30 by telex, graphic scanning or other telegraphic communications equipment of the sender, or on the date five business days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such Party as provided in this Section 16.4. 16.5 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof The subject matter of this Agreement is limited to the rights expressly granted herein. The terms of this Agreement shall have no force or effect with respect to any claim based on the use of any intellectual property rights of AM or its licensors outside the scope of the licenses expressly granted herein. No waiver, consent, modification or change of terms of this Agreement shall bind either Party unless in a writing signed by both parties, and then such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose given. There are no understandings, agreements, representations or warranties, expressed or implied, not specified herein regarding this Agreement or the subject matter thereof. 16.6 Headings. Captions and headings contained in this Agreement have been included for ease of reference and convenience and shall not be considered in interpreting or construing this Agreement. 16.7 Assignment. Neither this Agreement nor any rights granted hereby may be assigned by Cytogen voluntarily or by operation of law, without AM's prior written consent which consent may be granted or withheld in AM's sole discretion. Assignment shall be deemed to include the transfer of substantially all of the assets of, or a majority interest in the voting stock of, Cytogen, or the merger of Cytogen with one or more other Persons (except a merger in which the stockholders of Cytogen prior to the merger constitute the holders of a majority of the capital stock of the surviving entity following the merger). This Agreement shall be freely assignable by AM. This Agreement shall be binding upon, and shall inure to the benefit of, the successors and assigns of AM and the permitted successors and assigns of Cytogen. 16.8 Independent Contractors. No agency, partnership or joint venture is hereby established. Neither Party shall be responsible for the acts or omissions of the other Party. Neither Cytogen nor AM shall enter into, or incur, or hold itself out to Third Parties as having authority to enter into or incur on behalf of the other Party any contractual obligations, expenses or liabilities whatsoever. 16.9 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without regard to conflicts-of-law principles thereof. Each party irrevocably submits to the exclusive jurisdiction of any state or federal district court of competent jurisdiction in the Commonwealth of Massachusetts for the purpose of any 31 suit, action or other proceeding arising out of this Agreement or any transaction contemplated by this Agreement (and agrees not to commence any action, suit or proceeding relating to this agreement or any such transaction, except in those courts). Each party further agrees that service of any process, summons, notice or document in accordance with Section 16.4 shall be effective service of process for any action, suit or proceeding with respect to any matters to which it has submitted to jurisdiction as set forth in the immediately preceding sentence. Each party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this agreement or the transactions contemplated by this agreement in any state or federal court of competent jurisdiction in the Commonwealth of Massachusetts, and further irrevocably and unconditionally waives and agrees not to plead or claim in any such action, suit or proceeding sought in any such court that such action, suit or proceeding has been brought in an inconvenient forum. 16.10 Severability. The provisions of this Agreement are severable, and in the event that any provisions of this Agreement shall be determined to be invalid or unenforceable under any controlling body of the law, such invalidity or unenforceability shall not in any way affect the validity or enforceability of the remaining provisions hereof. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 32 IN WITNESS WHEREOF, this Agreement has been duly executed as a sealed instrument as of the date specified above. ADVANCED MAGNETICS, INC. CYTOGEN CORPORATION By: _/s/ Jerome Goldstein ____ By: _/s/ H. Joseph Reiser _______ Title: __Chairman/CEO ________ Title: __President and CEO_______ EXHIBIT A Issued Patents Country Patent No. Issuance Date U.S. 4,770,183 9/13/88 U.S. 4,827,945 5/9/89 U.S. 4,951,675 8/28/90 U.S. 5,055,288 10/8/91 U.S. 5,102,652 4/7/92 U.S. 5,219,554 6/15/93 U.S. 5,248,492 9/28/93 U.S. 5,160,726 11/3/92 U.S. 5,262,176 11/16/93 U.S. 5,314,679 5/24/94 Patent Applications Country Application Serial No. File Date U.S. ***** 3/8/00 - --------------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission. EX-10.2 3 0003.txt DEVELOPMENT AND MANUFACTURING AGREEMENT-DSM BIO EXHIBIT 10.2 CONFIDENTIAL TREATMENT DEVELOPMENT AND MANUFACTURING AGREEMENT This development and manufacturing agreement is made and entered into on this 12th day of July 2000. BY AND BETWEEN: CYTOGEN CORPORATION, a company incorporated under New Jersey law, having its registered address at 600 College Road East, Princeton, New Jersey 08540-5308, United States of America (hereinafter referred to as "CYTOGEN"), of the one part; AND: DSM BIOLOGICS COMPANY B.V., a company incorporated under Dutch law, having its registered address at 72/2 Zuiderweg, 9744 Groningen, The Netherlands (hereinafter referred to as "DSM Biologics"), of the other part; CYTOGEN and DSM Biologics hereinafter sometimes individually referred to as "Party" and collectively as "Parties". SECTION 1 - PREAMBLE - -------------------- WHEREAS, CYTOGEN avails of a hybridoma cell line for expressing a protein for inclusion in a product known by CYTOGEN as Prostascint(R) and wishes to have a manufacturing process developed for this cell line and have manufactured three (3) cGMP batches of this protein which will thereafter be conjugated by DSM Biologics; WHEREAS, DSM Biologics has expertise and know-how in the area of development and production of biopharmaceutical products; WHEREAS, the Parties have signed a letter of commitment dated January 26, 2000 for the commencement by DSM Biologics of some development activities for the CYTOGEN hybridoma cell line; NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND AGREEMENTS HEREIN CONTAINED, IT IS HEREBY AGREED BY THE PARTIES HERETO AS FOLLOWS: SECTION 2 - DEFINlTIONS - ----------------------- In this Agreement the following terms, whether used in the singular or plural, shall, as used herein, have the following respective meanings: 2.1 "Acceptance" has the meaning ascribed thereto in Section 5.3; 2.2 "Affiliates" means any individual, company, partnership or other entity which directly or indirectly, at present or in the future, controls, is controlled by or is under common control with a Party; 2.3 "Agreement" means this development and manufacturing agreement; 2.4 "Batch Records" means for each batch of Product manufactured in Step 5, the production protocols showing how the batch was manufactured; 2.5 "Bill of Testing" means a document carrying Product and/or Project identification, and stating for the Process the list of analytical tests, their standard methods and procedures, and the criteria to be met during the cGMP manufacturing Product, and all amendments thereto, to be agreed upon between the Parties; 2.6 "CCN" means a so-called contemplated change notification describing any material deviation from the Project, which notice is provided in writing by DSM Biologics to CYTOGEN and must be approved by CYTOGEN in writing prior to taking effect; 2.7 "cGMP" means current good manufacturing practices and general biological products standards as promulgated under the United States Federal Food, Drug and Cosmetic Act at 21 CFR, Canadian Good Manufacturing Practices and the EEC Guide to Good Manufacturing Practices for Medical Products (Vol. IV rules governing medical products in the European Community 1989); 2.8 "Claims" means any and all claims, demands, losses, obligations, liabilities, damages, deficiencies, actions, settlements, judgments, cost and expenses which a Party may incur or suffer (including reasonable costs and legal fees incident thereto or in seeking indemnification therefor); 2.9 "Costs" means the costs for the Project, which costs shall exclude the Price but shall include the costs of raw materials, filters, resins, Product release testing, external testing, any royalties to be paid to third parties, subcontractor costs, out of pocket expenses, travel and lodging costs, capital investments, shipping Product, insuring shipped Products, and all brokers fees, customs duties, import duties, excise taxes and other taxes payable in connection with the delivery of Product; 2.10 "CYTOGEN" means Cytogen Corporation; 2 2.11 "CYTOGEN Proprietary Information" has the meaning ascribed thereto in Section 14.1; 2.12 "CYTOGEN Technology" means any and all current and future Intellectual Property Rights proprietary to CYTOGEN in so far as provided, granted, divulged or disclosed, either directly or indirectly by CYTOGEN to DSM Biologics, pertaining to the Project. 2.13 "Defaulting Party" has the meaning ascribed thereto in Section 15.3; 2.14 "Documents" means the Specifications, Bill of Testing, Batch Records, certificate of analysis containing the outcome of the tests on the Product and Release statement; 2.15 "DSM Biologics" means DSM Biologics Company B.V.; 2.16 "DSM Biologics Technology" means any and all current and future-Intellectual Property Rights proprietary to DSM Biologics in so far as provided, granted, divulged or disclosed, either directly or indirectly, by DSM Biologics to CYTOGEN in the process of performing the Project, pertaining to fermentation, primary recovery and purification of biopharmaceutical products; 2.17 "Force Majeure" has the meaning ascribed thereto in Section 20.1; 2.18 "Intellectual Property Rights" means, whether or not protected or protectible under any particular law, all patents, patent applications, patentable subject matter, copyrights, copyrightable subject matter, ideas, inventions, discoveries, devices, designs, apparatuses, practices, processes, methods, products, cell lines, progeny, engineered cell lines, clones, samples, trade secrets, technology, know-how, software, hardware, improvements, trademarks and service marks (and the goodwill pertaining thereto); 2.19 Letter of Commitment" means the letter agreement entered into between the Parties dated January 26, 2000 for the commencement by DSM Biologics of some development activities for the Product cell line; 2.20 "Manufacturing Instructions" means the protocols for manufacturing Product in Step 5 and all amendments thereto, to be agreed upon between the Parties. It is understood between the Parties that these protocols may be amended at all times, including during manufacturing of Product; 2.21 "Parties" means DSM Biologics and CYTOGEN collectively; 2.22 "Party" means either DSM Biologics or CYTOGEN; 3 2.23 "Price" means the price for the Project as specified in Section 6, which price shall exclude Costs; 2.24 "Process" means the stirred tank perfusion bioreactor process to manufacture Product, as well as purification and conjugation, if reduced to practice as a result of Step 1 and Step 4 of the Project; 2.25 "Product" means purified bulk conjugated antibody known by CYTOGEN as CYT 356; 2.26 "Project" means development-, upscaling-, cell banking-, manufacturing- and validation activities, and providing regulatory support, by DSM Biologics, comprising of Step 1, Step 2, Step 3, Step 4, Step 5 and Step 6 as further described in the Schedule annexed hereto and being a part hereof, and all amendments thereto, to be agreed upon between the Parties; 2.27 "Project Manager" means the individual assigned by DSM Biologics who will be responsible for the scientific management and technical components of the Project; 2.28 "Release" means that, after Product has been manufactured in Step 5, the Product meets the Specifications and was manufactured according to cGMP and the Manufacturing Instructions; 2.29 "Specifications" means the specifications, technical data and/or formulae of the Product manufactured in Step 5, and all amendments thereto, to be agreed upon between the Parties; 2.30 "Steering Committee" means a committee with an equal number of representatives from each Party; 2.31 "Step 1" means developing a Process under non-cGMP conditions by adapting the CYTOGEN Product cell line to a serum free media formulation and by performing upstream and downstream development activities, including a seven (7) liter fermentation run and a fifty (50) liter so called pilot fermentation with a lab scale down stream processing step and conjugation; 2.32 "Step 2" means transfer, development and optimization of CYTOGEN quality control assays; 2.33 "Step 3" means preparing under cGMP conditions a master cell bank and a manufacturer working cell bank 4 2.34 "Step 4" means using the Process as developed in Step I to perform at fifty (50) liter scale, under non-cGMP conditions, one (1) so cal1ed shakedown run including one (1) conjugation; 2.35 "Step 5" means cGMP manufacturing three (3) batches of Product using the Process for a Biologics License Application (BLA) supplement and market distribution; 2.37 "Step 6" means: i) writing a Process and assay master validation plan and subsequently executing this plan during the performance of Step 5; ii) means providing support for CYTOGEN's preparation of a chemistry manufacturing and control (CMC) data package for filing the Process for a United States BLA supplement and a European Marketing Authorization Application (MAA) supplement. SECTION 3 - OBJECTIVES AND OBLIGATIONS OF THE PARTIES - ----------------------------------------------------- 3.1 It is the intention of the Parties to hereby establish a lasting and mutually profitable relationship and for that purpose to inform and assist one another in a spirit of co-operation during the execution of the Project. 3.2 Subject to the terms and conditions of this Agreement, CYTOGEN hereby engages DSM Biologics to carry out the Project and DSM Biologics, subject to the terms and conditions of this Agreement, hereby undertakes to use its best reasonable efforts to carry out the Project in accordance with the Schedule annexed hereto and being a part hereof. 3.3 The Parties hereby acknowledge and agree that there is absolutely no guarantee: i.) that the Product and the Process will be commercially exploitable, profitable or approved by any regulatory authority; ii.) that the milestones identified in the Schedule to this Agreement for Step 1, Step 2 and Step 4 will be achieved; iii.) that any Product resulting from Step 1 or Step 4 will fulfill certain specifications, certain yields or will be delivered in time for any further use intended therefor by CYTOGEN; or iv.) that the Product to be manufactured in Step 5 will be delivered in time for a BLA and MAA supplement submission and approval or for market distribution. 3.4 CYTOGEN shall timely provide all CYTOGEN Technology necessary for the performance of the Project as well as, if so requested by DSM Biologics, 5 provide reasonable technical assistance needed by DSM Biologics for the performance of the Project. Any material change to the scope of the Project shall not take effect unless approved in writing by CYTOGEN through a CCN. The Parties acknowledge that this Agreement is only for certain development activities and the delivery of three (3) batches of Product and not for commercially manufacturing Product. Therefore, during the performance of Step 5 of the Project, the Parties shall in good faith negotiate a long term supply agreement in respect of the Product under the proviso that the aforementioned three (3) batches comply with the Specifications and that all relevant governmental authority is granted to commercially use the Product on human subjects. If the Parties do not enter into such an agreement, at CYTOGEN's request, the Parties will enter into good faith negotiations for CYTOGEN to - license the DSM Biologics Technology pursuant to a license agreement on terms and conditions to be agreed upon. Such terms and conditions shall be as competitive as DSM Biologics offers to any third party. The Parties will elect, at their convenience, a Steering Committee, that will oversee the general execution of the Project and the Agreement and will discuss, both during the performance of the Project and after completion of the Project, the further plans of CYTOGEN for the Product and the Process, including the status and outcome of clinical trials, registration activities and future requirements by CYTOGEN of Product, whether for further clinical trials or for marketing. SECTION 4 - STEP 1, STEP 2, STEP 3 AND STEP 4 OF THE PROJECT - ------------------------------------------------------------ 4.1 The different parts of the Project are estimated to require the periods of time identified in the Schedule to this Agreement. DSM Biologics shall timely notify CYTOGEN if it expects performance of a part of the Project not to be possible within the timeframe as described in the Schedule, and shall take all reasonable efforts to perform that part of the Project as soon as possible thereafter. 4.2 The Parties shall, during and after completion of Step 1, discuss whether the milestones identified in the Schedule to this Agreement for Step 1 have been achieved and shall, based upon such discussion, decide on whether to perform additional work with regard to Step 1, proceed with Step 2 according to the Schedule or terminate the Project. If the Parties decide to perform additional work with regard to Step 1, the duration, scope, price and costs thereof shall be separately agreed upon between the Parties. 6 4.3 During the performance and after completion of Step 2, if and when performed, the Parties shall, based upon the milestones identified in the Schedule to this Agreement for Step 2, decide on whether to perform additional work with regard to Step 2, proceed with Step 4 according to the Schedule or terminate the Project. If the Parties decide to perform additional work with regard to Step 2, the duration, scope, price and costs thereof shall be separately agreed upon between the Parties. 4.4 If the Parties agree Step 3 is necessary, and as described in the Schedule to this Agreement, DSM Biologics shall commence with performing Step 3 of the Project as outlined in the Schedule. 4.5 During the performance and after completion of Step 4, if and when performed, the Parties shall, based upon technical reasons such as the robustness of the Process, decide on whether to perform additional work with regard to Step 4, proceed with Step 5 according to the Schedule or terminate the Project. If the Parties decide to perform additional work with regard to Step 4, the duration, scope, price and costs thereof shall be separately agreed upon between the Parties. SECTION 5 - STEP 5 AND STEP 6 OF THE PROJECT - -------------------------------------------- 5.1 DSM Biologics shall commence with performing Step 5 of the Project if and when the Parties decide thereto according to Section 4.5. DSM Biologics shall timely notify CYTOGEN if it expects delivery of Product not to be possible within the timeframe described in the Schedule to this Agreement, and shall take all efforts to deliver Product as soon as possible thereafter. 5.2 The Product shall be manufactured in accordance with the Manufacturing Instructions and under cGMP conditions. Each batch of Product will be sampled and tested by the quality control department of DSM Biologics against the Specifications. The quality assurance department of DSM Biologics will review the Batch Records and will assess if the manufacturing has taken place in compliance with the Manufacturing Instructions and cGMP regulations. 5.3 If based upon such tests, a batch of Product conforms to the Specifications and was manufactured according to cGMP and the Manufacturing Instructions, a Release statement will be completed and approved by the quality assurance department of DSM Biologics. This certificate together with all other Documents will be delivered to CYTOGEN or a third party appointed by Cytogen. The batch of Product will be delivered to CYTOGEN or a third party appointed by Cytogen. DSM Biologics shall retain sample of the batch to be delivered and shall have the batch shipped and insured according to 7 CYTOGEN's instructions. Responsibility for the batch shall pass after delivery by DSM Biologics of the batch to the carrier (CIP as defined in the INCO Terms 1990). 5.4 CYTOGEN will test the batch for compliance with the Specifications through analyzing the Documents delivered by DSM Biologics, within two (2) weeks of delivery of the Documents and will Accept the batch in case of such compliance ("Acceptance"). CYTOGEN has no obligation to accept the batch if such batch does not comply with the Specifications. CYTOGEN will notify DSM Biologics in writing of its Acceptance or rejection of the batch within two (2) weeks of delivery of the Documents. In the absence of any such written confirmation to DSM Biologics, the batch shall be deemed to comply with the Specifications and Accepted by CYTOGEN. During the aforementioned two (2) weeks CYTOGEN shall store or have stored the batch- under controlled conditions. 5.5 If there is any dispute concerning whether Product complies with the Specifications or not or whether such failure is due (in whole or in part) to acts or omissions of CYTOGEN or a CYTOGEN designee after delivery of Product, a sample of the rejected Product and a sample retained by DSM Biologics as set forth above shall be exchanged between CYTOGEN and DSM Biologics for a counter check. If such counter-check does not resolve the dispute, a sample of the rejected Product and a sample retained by DSM Biologics shall be submitted to an independent, qualified third-party laboratory that is mutually acceptable and selected by the Parties promptly in good faith. Such laboratory shall determine whether the rejected Product met the Specifications at the time of delivery to the carrier and such laboratory's determinations shall be final and determinative for purposes of this Agreement save for manifest error on the face of decision. The Party against whom the laboratory rules shall bear all costs of the third-party laboratory activities. 5.6 If a batch of Product does not conform to the Specifications, and this nonconformity is not due to DSM Biologics' failure to comply with the Manufacturing Instructions or with cGMP, CYTOGEN shall have to pay the Price and Costs for this batch. DSM Biologic shall at CYTOGEN's request, cost and expense, either obtain new raw materials and produce a new batch of Product as soon as reasonably possible or rework the batch. 5.7 Regardless of whether a batch of Product conforms to the Specifications or not, if this batch was not manufactured according to cGMP and/or the Manufacturing Instructions, thereby making the Product unsuitable for its intended purpose, CYTOGEN shall not have to pay the Price and Costs for this batch. DSM Biologics shall at CYTOGEN's request, cost and expense, obtain new raw materials and produce a new batch of Product as soon as reasonably possible. However, in the event it is possible to rework the Product in such a 8 way that the batch can be deemed to have been manufactured according to cGMP and the Manufacturing Instructions, then CYTOGEN shall have to pay the Price and Costs for batch of Product but not the costs of the reworking, which shall be for DSM Biologics' account. 5.8 The Parties shall in good faith separately agree upon the scope of work for Step 6, the commencement date and expected duration, and the price and costs thereof. SECTION 6 - PRICE AND COSTS - --------------------------- 6.1 It is understood between the Parties that the Price for the Project shall be based upon the assumptions contained in the Schedule hereto and the limited information available to DSM Biologics up to the effective date of this Agreement. If, during the preparation for or the performance of the Project, itbecomes clear that these assumptions are not correct, and have consequences for the Project which cannot be dealt with through a CCN, or the detailed information further exchanged between the Parties indicates more labor and/or occupancy is needed to perform the Project, the Parties shall renegotiate the Price in good faith. ID addition, the Price for Step 4 and Step 5 is based upon the expected process steps to be defined in the Process. Should the Step 1 and/or Step 4 activities lead to a Process which differs significantly in the expected number of process steps and/or the time for executing the Process, the Price for Step 4 and Step 5 shall be adjusted accordingly. 6.2 The Price, excluding VAT, for the work to be performed in Step 1 of the Project shall be ***** United States dollars (US $ *****). Under the Letter of Commitment, Cytogen has paid an amount of ***** United States dollars (US $ *****) as an upfront payment for the performance by DSM Biologics of Step 1. The remainder of the Price, including VAT if applicable, for Step 1, being ***** United States dollars (US $ *****) shall be invoiced as follows: i.) ***** United States dollars (US $*****) upon completion of the seven (7) liter fermentation run in Step 1; ii) ***** United States dollars (US $ *****) upon completion in Step 1 of the fifty (50) liter so called pilot fermentation with a lab scale down stream processing step and conjugation. 6.3 The Price, excluding VAT, for the work performed in Step 2 of the Project shall be based on ***** United States dollars (US $ *****) per hour worked. - ----------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission 9 This Price, including VAT if applicable, shall be invoiced every month based on the actual man-hours spent by DSM Biologics in the previous month on performing Step 2. 6.4 The Price, excluding VAT, for the work performed in Step 3 of the Project shall be ***** United States dollars (US $*****). This Price, including VAT if applicable, shall be invoiced to and paid by CYTOGEN as follows: i) ***** percent (***** %) one (1) month prior to commencement of Step 3; ii) ***** percent (***** %) at completion of Step 3. 6.5 The Price, excluding VAT, for the work performed in Step 4 of the project shall be ***** United States dollars (US $ *****). This Price, including VAT if applicable, shall be invoiced to and paid by CYTOGEN as follows: i) ***** percent (***** %) one (1) month prior to commencement of Step 4; ii) ***** percent (***** %) at completion of fermentation; iii) ***** percent (***** %) at complexion of downstream processing; iv) ***** percent (***** %) upon delivery by DSM Biologics of any resulting Product. 6.6 The Price, excluding VAT, for the cGMP batches of Product manufactured in Step 5 of the Project shall be ***** United States dollars (US $ *****) per batch. The total Price for manufacturing three (3) batches of Product shall thus be ***** United States dollars (US $ *****). The Price per batch of Product, including VAT if applicable, shall be invoiced to and paid by CYTOGEN as follows: iii) ***** percent (***** %) one (1) month prior to commencement of the manufacture of the Product; iv) ***** percent (***** %) at completion of fermentation of the Product; v) ***** percent (***** %) at completion of downstream processing the Product; vi) ***** percent (***** %) upon delivery by DSM Biologics of Product, all related Documents and Acceptance. 6.7 The Price, excluding VAT, for Step 6 of the Project shall separately be agreed upon in good faith between the Parties. - ----------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission 10 6.8 The Costs for the Project, including VAT if applicable, shall be invoiced to and paid by CYTOGEN when the Costs are made by DSM Biologics. However, in respect of raw materials, CYTOGEN shall, two (2) months prior to commencement of Step 5, make an advance payment of ***** United States dollars (US $ *****), which amount DSM Biologics shall use to pay the first invoices for raw materials to be ordered for Step 5. 6.9 All invoices shall be payable by CYTOGEN within thirty (30) days of receipt of an invoice into the bank account specified on the invoice. Any delay in the payment by CYTOGEN of the Price and/or the Costs, except in the event of a dispute in respect of Price and/or Costs, shall carry an interest rate as of the first day of delayed payment, which interest rate shall be based on a annual interest rate of fifteen percent (15%). SECTION 7 - MANAGEMENT OF THE PROJECT - ------------------------------------- 7.1 The Parties hereby agree that the Project shall be under the day-today supervision of a Project Manager. 7.2 The Parties shall work in conjunction with the Project Manager to ensure the satisfactory performance of the Project. 7.3 The Project Manager shall be entitled to propose recommendations to the Parties to ensure that the Project meets its objectives. 7.4 The Project Manager shall be in charge of all managerial and scientific aspects of the Project and shall maintain communication with the Parties in connection therewith. 7.5 DSM Biologics shall permit any individual so authorized by CYTOGEN to visit, during regular business hours, the site where the Project is being conducted to evaluate the progress thereof, unless such visit would conflict with a prearranged visit by another client or an inspection by or for another client. Except in exigent circumstances, said visit shall be made subject to ten (10) days notice of the requirement of such visit, such notice to be given to DSM Biologics by CYTOGEN. 7.6 The Parties may use electronic mail to communicate during the performance of the Project. The Parties shall use all reasonable measures to ensure the confidentiality of information so communicated. - ----------------------------- ***** Confidential portion omitted and filed separately with the Securities and Exchange Commission 11 SECTION 8 - RECORDS AND REPORTS - ------------------------------- DSM Biologics hereby undertakes that it shall have the Project Manager submit to CYTOGEN, after completion of Step 1 and Step 2 a report detailing the progress and results of these Steps and highlighting any major issues encountered during the previous period. SECTION 9 - AUDITS AND CYTOGEN REGULATORY APPROVALS - --------------------------------------------------- 9.1 DSM Biologics grants CYTOGEN the right to audit or to appoint third parties to audit, under applicable confidentiality provisions, at any reasonable time, the facilities employed and the documentation utilized by DSM Biologics for performing the Project. Except in exigent circumstances, CYTOGEN will notify DSM Biologics at least twenty (20) business days in advance of such an audit by CYTOGEN and thirty (30) business days in advance of such an audit by a third party. All DSM Biologics' expenses associated with such audits shall be borne by CYTOGEN. 9.2 DSM Biologics permits inspections of DSM Biologics' facilities by governmental authorities (such as the United States of America Food and Drug Administration and equivalent European regulatory authorities) for any registration or pending registration for manufacturing of Product. All DSM Biologics' expenses associated with inspections as they relate directly to manufacturing of Product shall be borne by CYTOGEN. SECTION 10 - SUBCONTRACTING - --------------------------- DSM Biologics shall be entitled to subcontract portions of the Project to those subcontractors identified in the Schedule to this Agreement. In addition, DSM Biologics shall be entitled to subcontract any portion of its obligations hereunder to its Affiliates. Subcontracting by DSM Biologics of any portion of its obligations hereunder to any other third party requires CYTOGEN's prior written permission thereto which permission shall not be unreasonably or untimely withheld. SECTION 11 - INTELLECTUAL PROPERTY RIGHTS - ----------------------------------------- 11.1 CYTOGEN declares that it has the full right and title to make available the CYTOGEN Technology to DSM Biologics. DSM Biologics shall use the CYTOGEN Technology solely to perform the Project. 12 11.2 CYTOGEN Technology shall remain the sole and exclusive property of CYTOGEN. All DSM Biologics Technology shall remain the sole and exclusive property of DSM Biologics. The Product manufactured in the Project, the Documents and the reports referred to in Section 8 shall be the sole and exclusive property of CYTOGEN and all rights and tide thereto shall vest in and to CYTOGEN. In addition, CYTOGEN shall exclusively own all Intellectual Property Rights obtained in the Project specifically related to the Process. DSM Biologics shall, as soon as possible, execute and do all instruments and things reasonably necessary to transfer or vest such Intellectual Property Rights in CYTOGEN. DSM Biologics shall, however, have the right to freely use all Intellectual Property Rights obtained in the Project in the general field of fermentation, primary recovery and purification of biopharmaceutical products. SECTION 12 - WARRANTY, LIABILITY AND INDEMNIFICATION - ---------------------------------------------------- 12.1 DSM Biologics does not grant any warranty, either expressed or implied, legal or conventional, with regard to the Project other than as explicitly contained or incorporated in this Agreement and disclaims all implied warranties of merchantability and fitness for a particular purpose except to the extent of DSM Biologics' own processes and facilities. DSM Biologics in particular does not warrant, either expressed or implied, that the performance by it of the activities contemplated by the Project in accordance with this Agreement will not infringe upon Intellectual Property Rights of any third party. 12.2 DSM Biologics shall indemnify, defend and hold harmless CYTOGEN against and in respect of any and all Claims arising out of or based upon: i) the breach by DSM Biologics of any representations, warranties, covenants or terms contained or incorporated in this Agreement; or ii) any gross negligence or willful misconduct by DSM Biologics or its employees, agents, sub-contractors or suppliers of raw materials in connection with the performance of the Project; except to the extent of Claims being due to CYTOGEN's or its supplier's negligence or fault and provided that DSM Biologics shall not be liable for any consequential, indirect or exemplary damages suffered by CYTOGEN and provided further that the total of any damages, other than as to Claims against CYTOGEN for personal injury, to be paid by DSM Biologics shall not exceed the Price. DSM Biologics shall, at the request of CYTOGEN, assume the defense of any demand, claim, action, suit or proceeding brought against CYTOGEN by reason of the foregoing and shall pay any and all damages up to the Price that are 13 assessed or that are payable by CYTOGEN as a result of the disposition of any such demand, claim, action, suit or proceeding. Notwithstanding the foregoing, CYTOGEN may be represented in any such action, suit or proceeding at its own expense and by its own counsel. 12.3 CYTOGEN shall indemnify, defend and hold harmless DSM Biologics against and in respect of any and all Claims arising out of or based upon: i) the breach by CYTOGEN of any representations, warranties, covenants or terms contained or incorporated in this Agreement; or ii) any gross negligence or willful misconduct by CYTOGEN or its employees, agents, or suppliers of raw materials in connection with the performance of the Project; except to the extent of Claims being due to DSM Biologics' or its supplier's negligence or fault and provided that CYTOGEN shall not be liable for any consequential, indirect or exemplary damages suffered by DSM Biologics and provided further that the total of any damages, other than as to Claims against DSM Biologics for personal injury, to be paid by CYTOGEN shall not exceed the Price. 12.4 CYTOGEN shall, at the request of DSM Biologics' assume the defense of any demand, claim, action, suit or proceeding brought against DSM Biologics by reason of the foregoing and shall pay any and all damages up to the Price that are assessed or that are payable by DSM Biologics as a result of the disposition of any such demand, claim, action, suit or proceeding. Notwithstanding the foregoing, DSM Biologics may be represented in any such action, suit or proceeding at its own expense and by its own counsel. Furthermore, CYTOGEN agrees to indemnify DSM Biologics and save and hold it harmless from and against any Claims which DSM Biologics is or may become liable for or may incur or may be called upon to pay or may pay and that result from or are alleged to result from the infringement of any Intellectual Property Rights through the use by DSM Biologics or its subcontractors of CYTOGEN Technology, or the development, use or manufacturing by DSM Biologics or its subcontractors of the Process or the Product, provided that DSM Biologics notifies CYTOGEN immediately of any demand, claim, action, suit or other proceeding. CYTOGEN shall however not be liable to indemnify or hold harmless DSM Biologics for payment of any settlement unless . : CYTOGEN has consented to the settlement. CYTOGEN shall, at the request of DSM Biologics, assume the defense of any demand, claim, action, suit or proceeding brought against DSM Biologics by reason of the foregoing and pay any and all damages assessed or that are payable by DSM Biologics as a result of the disposition of any such demand, claim, action, suit or proceeding. Notwithstanding the foregoing, DSM 14 Biologics may be represented in any such action, suit or proceeding at its own expense and by its own counsel. 12.5 DSM Biologics agrees to indemnify CYTOGEN and save and hold it harmless from and against any Claims which CYTOGEN is or may become liable for or may incur or may be called upon to pay or may pay and that result from or are alleged to result from the infringement of any Intellectual Property Rights through the use by DSM Biologics or its subcontractors of DSM Biologics Technology for the Project, provided that CYTOGEN notifies DSM Biologics immediately of any demand, claim, action, suit or other proceeding. DSM Biologics shall however not be liable to indemnify or hold harmless CYTOGEN for payment of any settlement unless DSM Biologics has consented to the settlement. DSM Biologics shall, at the request of CYTOGEN, assume the defense of any demand, claim, action, suit or proceeding brought against CYTOGEN by reason of the foregoing and pay any and all damages assessed or that are payable by CYTOGEN as a result of the disposition of any such demand, claim, action, suit or proceeding. Notwithstanding the foregoing. CYTOGEN may be represented in any such action, suit or proceeding at its own expense and by its own counsel. SECTION 13 - REPRESENTATIONS AND WARRANTIES - ------------------------------------------- 13.1 DSM Biologics hereby represents and warrants to CYTOGEN that: i) it is a corporation duly organized, validly existing and in good standing under the laws of The Netherlands, and has full corporate power to conduct the business in which it is presently engaged and to enter into and perform its obligations under this Agreement; ii) it has taken all necessary corporate action under the applicable laws and its articles of incorporation and bylaws to authorize the execution by its undersigned officers and consummation of this Agreement. This Agreement constitutes a valid and legally binding agreement, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; iii) the performance by it of its obligations contemplated by the Project in accordance with this Agreement will not violate the terms of any other agreement to which it is subject to or by which it is bound; iv) it has the right and power to perform the activities contemplated by the Project; 15 v) it will not use in any capacity, in connection with performing the Project, any individual who has been debarred pursuant to the United States Federal Food, Drug and Cosmetic Act; and vi) to its knowledge, the performance by it of the activities contemplated by the Project in accordance with this Agreement will not conflict with any law or regulation applicable to DSM Biologics. 13.2 CYTOGEN hereby represents and warrants to DSM Biologics that: i) it is a corporation duly organized, validly existing and in good standing under the laws of New Jersey, and has full corporate power to conduct the business in which it is presently engaged and to enter into and perform its obligations under this Agreement: ii) it has taken all necessary corporate action under the applicable laws and its articles of incorporation and bylaws to authorize the execution by its undersigned officers and consummation of this Agreement. This Agreement constitutes a valid and legally binding agreement, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; iii) the performance by it of its obligations contemplated by the Project in accordance with this Agreement will not violate the terms of any other agreement to which it is subject to or by which it is bound; iv) it has the right and power to perform the activities contemplated by the Project; and v) to its knowledge, the performance by it of the activities contemplated by the Project in accordance with this Agreement will not conflict with any law or regulation applicable to CYTOGEN. SECTION 14 - CONFIDENTALITY - --------------------------- 14.1 Unless agreed to otherwise in this Agreement, DSM Biologics shall maintain the confidentiality of the CYTOGEN Technology, the Documents, the reports referred to in Section 8, the Manufacturing Instructions and the Process (jointly the "CYTOGEN Proprietary Information") and CYTOGEN shall maintain the confidentiality of the DSM Biologics Technology, and the Parties shall not in any way or at any time make use thereof for any purpose other than pursuant to and in order to carry out the terms and objectives of this Agreement. 14.2 DSM Biologics' obligations contained in Section 14.1 shall not apply to CYTOGEN Proprietary Information, and CYTOGEN's obligations contained in Section 14.1 shall not apply to DSM Biologics Technology which: 16 i) at the time of disclosure either is or was part of the public knowledge or literature; ii) after disclosure becomes part of the public knowledge or literature through no fault or action of the receiving Party; iii) the receiving Party can establish by competent proof either is or was at the time of disclosure in its lawful possession from a source other than the disclosing Party; iv) after disclosure is acquired by the receiving Party from a third party who did not obtain such CYTOGEN Proprietary Information respectively DSM Biologics Technology, directly or indirectly, from the disclosing Party; v) is independently developed by CYTOGEN or DSM Biologics without the use of DSM Biologics Technology respectively CYTOGEN Proprietary Information: 14.3 The obligations set forth under Section 14.1 shall, furthermore, not apply to CYTOGEN Proprietary Information or DSM Biologics Technology which the receiving Party is required to disclose in prosecuting or defending litigation or in complying with applicable governmental regulations in such case reasonable advance notice shall be given to the disclosing Party. 14.4 DSM Biologics shall not disclose CYTOGEN Proprietary Information and CYTOGEN shall not disclose DSM Biologics Technology to any persons other than to its shareholders, Affiliates, agents, employees, consultants, subcontractors and other authorized representatives necessarily connected with the Project. From all such persons the Parties will, prior to his or her receipt of CYTOGEN Proprietary Information respectively DSM Biologics Technology, obtain undertakings to maintain the confidentiality of any such disclosure containing the obligations as set forth in Section 14.1. 14.5 The obligations as set forth in this Section 14 shall expire five (5) years from the date this Agreement terminates. 14.6 The provisions of this Section 14 replace and annul the terms and conditions of the mutual confidential disclosure agreement entered into on October 8, 1998 by CYTOGEN and DSM Biologics' Affiliate Gist-Brocades/Bio-Intermediair Inc., now named DSM Biologics Company Inc. SECTION 15 - TERM AND TERMINATION - --------------------------------- 15.1 This Agreement shall enter into force as of the date it is signed by both Parties and shall remain in effect until the earlier date of the Project being completed or the Agreement being terminated by either Party as provided herein. As per the 17 date this Agreement enters into force, the Letter of Commitment shall terminate. 15.2 This Agreement shall terminate if a go/no go decision to be taken in accordance with the Schedule to this Agreement is a no go decision. In such event the Agreement shall terminate as per the date the Parties take this decision. In the event of such termination, CYTOGEN shall compensate DSM Biologics for the following costs: i) the Price for all work performed in the Project up to the date of termination; ii) close-out costs being the Price for the work that is scheduled for the three (3) months following the date of termination as detailed in the Schedule. CYTOGEN however retains the right to have such scheduled work performed in those three (3) months. In the event CYTOGEN does not make use of this right, and DSM Biologics is able to resell part or whole of this three (3) month capacity to a third party, DSM Biologics will so inform CYTOGEN and will provide a good faith discount to CYTOGEN in respect of the close-out costs; iii) raw materials and supplies already ordered by DSM Biologics iv) third party commitments, such as in respect of external testing, already entered into by DSM Biologics. 15.3 Either Party shall have the right to terminate this Agreement in the event that: i) the other Party (the "Defaulting Party") fails to perform any material obligations, warranty, duty or responsibility or is in default with respect to any material term or condition undertaken by the Defaulting Party under this Agreement and such failure or default continues unremedied for a period of ninety (90) days after written notice thereof by the aggrieved Party to the Defaulting Party; provided that if such breach cannot be reasonably cured within ninety (90) days, such breach shall be deemed cured if the Defaulting Party commences to cure such breach within such ninety (90) day period and diligently continues such cure and no material adverse impact will result from the delay; ii) the Defaulting Party is affected by a Force Majeure which cannot be removed, overcome or abated within six (6) months (or such-other period as the Parties jointly shall determine) from the date the Defaulting Party first became affected; or iii) the Defaulting Party ceases or takes material steps to cease carrying on its business, or takes any action to liquidate its assets; if the Defaulting Party files a voluntary petition in bankruptcy or for arrangement, reorganization or other relief under any bankruptcy legislation or any similar law, now or hereafter in effect; or files an answer or other pleading in any proceeding admitting insolvency, bankruptcy or inability to pay its debts as they mature; or within thirty (30) days after the filing 18 of any involuntary proceedings under any bankruptcy legislation or similar law, now or hereafter in effect, such proceedings shall not have been vacated; or all or a substantial part of its assets are attached, seized, subjected to a writ or distress warrant, or are levied upon, unless such attachment, seizure, writ, warrant or levy is vacated within thirty (30) days, or shall be adjudicated as bankrupt; or shall make an assignment for the benefit of creditors or shall admit in writing its inability to pay its debts generally as they become due or shall consent to the appointment of a receiver or trustee or liquidator of all or the substantial part of its property; or any order appointing a receiver, trustee or liquidator of the Defaulting Party of all or a substantial part of its property is not vacated within sixty (60) days following the entry thereof; if an order shall be made or resolution passed for the winding-up or the liquidation of the Defaulting Party or if the Defaulting Party adopts or takes any corporate proceedings for its dissolution or liquidation. 15.4 The effective date of termination will be the date stated in any termination notice given hereunder, which date will not be before the expiration of any applicable cure period provided for in this Agreement. 15.5 Termination of this Agreement will not affect the rights and obligations of the Parties accrued under this Agreement prior to termination nor the provisions contained in this Agreement which by their purpose have a term beyond the termination of this Agreement. 15.6 Upon the termination of this Agreement: i) DSM Biologics shall return to CYTOGEN or destroy, immediately upon CYTOGEN's first request, any and all CYTOGEN Proprietary Information which is in DSM Biologics' possession and all documents containing such CYTOGEN Proprietary Information or any part thereof, and all copies and extracts made thereof, provided however that DSM Biologics may keep one (1) copy of all CYTOGEN Proprietary Information received by it for its legal files to enable it to determine its obligations hereunder and for regulatory compliance; ii) CYTOGEN shall return to DSM Biologics or destroy, immediately upon DSM Biologics' first request, any and all DSM Biologics Technology which is in CYTOGEN's possession and all documents containing such DSM Biologics Technology or any part thereof, and all copies and extracts made thereof, provided however that CYTOGEN may keep one (1) copy of all DSM Biologics Technology received by it for its legal files to enable it to determine its obligations hereunder and for regulatory compliance; 19 iii) DSM Biologics shall at CYTOGEN's request and expense, ship to CYTOGEN any capital investment and raw materials purchased in the course of and for the Project; iv) unless DSM Biologics shall have terminated the Agreement pursuant to Section 15.3, DSM Biologics shall assist CYTOGEN in transferring the Process to such facility as indicated by CYTOGEN. Any costs therefor shall be borne by CYTOGEN. SECTION 16 - NOTICES - -------------------- All notices, requests, demands and other communications hereunder shall be given in writing and shall be given by prepaid registered mail, receipt return requested, or by telecopier, to the other Party at the following addresses: if to CYTOGEN: Cytogen Corporation 600 College Road East Princeton, New Jersey 08540-5308 United States of America FaxTelecopier: 1-609-7508122 Attention: Mr. M. Titus with a copy to: General Counsel if to DSM Biologics: DSM Biologics Company B.V. 72/2 Zuiderweg 9744 Groningen The Netherlands FaxTelecopier: 31-50-5222333 Attention: CEO with a copy to: Legal Counsel or at such other address as a Party may have previously indicated to the other Party in writing in conformity with the foregoing. Any such notice, request, demand or other communication shall be deemed to have been received on the seventh (7th) business day following the date of its mailing if sent by registered mail, or the next business day immediately following the date of transmission if sent by telecopier. SECTION 17 - ASSIGNMENT - ----------------------- This Agreement will be to the benefit of the permitted successors and assign of the Parties hereto. Neither Party will be entitled to assign its rights under this Agreement to any 20 individual, partnership or other entity, including Affiliates, without the prior written consent of the other Party hereto and any attempted assignments without such written consent shall be of no effect. Notwithstanding the foregoing, either Party shall be entitled, without the prior written consent of the other Party, to assign all or part of its rights under this Agreement to a purchaser of all or substantially all of its assets, or an entity with which it may merge, provided that the assignee agrees in writing to assume all obligations undertaken by its assignor in this Agreement. No assignment shall relieve the assigning Party of responsibility for the performance of any of its obligations hereunder. SECTION 18 - DISPUTES AND APPLICABLE LAW - ---------------------------------------- 18.1 In the event of a dispute between the Parties, the Parties shall firstly make every effort to find an amicable settlement to such dispute. Before having recourse to litigation under Section 18.2, the Chief Executive Officers of the Parties, or their nominees, shall within one (1) month (which time may be extended by mutual agreement) from a request by either Party meet and use their best efforts to resolve any disputes. Failing such settlement, the provisions of Section 18.2 shall apply. 18.2 All disputes which cannot be settled amicably shall be finally settled by binding arbitration under the rules of conciliation and arbitration of the International Chamber of Commerce. 18.3 This Agreement is governed by and interpreted in accordance with the laws of England without regard to conflicts of laws principles. SECTION 19 - FAILURE TO ACT - --------------------------- Notwithstanding any other provision of this Agreement, whenever a Party is given a time period pursuant to this Agreement in which to exercise an option, make an election, give a notice or the like, failure to act during such time period will be conclusively deemed a decision not to exercise the option, make the election, give the notice or the like, as fully as if the Party with the option, election, right to give notice or the like had provided written notice of a decision not to exercise the option, make the election, give the notice or the like. SECTION 20 - FORCE MAJEURE - -------------------------- 20.1 The obligations of either Party hereunder shall be suspended during the time and 21 circumstance beyond the control and without the fault or negligence of that Party so affected ("Force Majeure") including but not limited to inevitable accidents, perils of navigation, floods, fire, storms, epidemics, acts of god, earthquakes, explosions, hostilities, civil commotion, war (declared or undeclared), orders, requisitions, regulations or acts of any government or governmental authority, whether de jure or de facto or any official purporting to act under the authority of any such government, illegality arising from domestic or foreign laws or regulations, insurrections, failure or slowdown of public utilities or common carriers, inability to procure raw materials or other circumstances or conditions of a similar nature, quarantine or custom restrictions, damage in factories or warehouses, strikes, lockouts or any other labor difficulty at the Parties and/or suppliers of goods, raw materials and/or excipients, lack of conveyance, resulting in hindrance of this Agreement. 20.2 As soon as possible after being affected by a Force Majeure, the Party so affected shall furnish to the other Party all particulars of the Force Majeure and the manner in which its performance is thereby prevented or delayed. The Party whose obligations hereunder have been suspended shall promptly and diligently pursue appropriate action to enable it to perform such obligations, except that the Parties shall not be obligated to settle any strike, lockout or other labor difficulty on terms contrary to their wishes. 20.3 In the event that any Force Majeure cannot be removed, overcome or abated within six (6) months (or such other period as the Parties jointly shall determine) from the date the Party affected first became affected, then either Party may, at the expiration of such period by notice to the other Party terminate this Agreement. SECITION 21 - MISCELLANEOUS PROVISIONS - -------------------------------------- 21.1 DSM Biologics shall obtain all permits and governmental licenses required in connection with its activities under this Agreement and shall, in addition, comply with applicable law in performing its obligations hereunder. 21.2 All rights and recourses of a Parts, under this Agreement are cumulative and the exercise by a Party of any of its rights or recourses will not prevent it from exercising any other right or recourse available under this Agreement or at law. All obligations of the Parties under this Agreement are indivisible. 21.3 If any covenant, obligation or term hereunder or the application of any part of this Agreement to any person, party or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Agreement or the application of such covenants, agreements or obligations other than those which are held to be 22 invalid or unenforceable shall not be affected thereby and each covenant, obligation and agreement contained herein shall be separately valid and enforceable to the full extent permitted by law. 21.4 This is an agreement between separate entities and neither is the agent, representative, master or servant of or possesses the power to obligate the other or to make any warranties or representations on behalf of the other. Nothing in this Agreement will be interpreted so as to create a relationship of partners' joint ventures, agents, mandate, fiduciaries or any other similar relationship between the Parties. 21.5 Failure by either Party to take action against the other will not affect its right to require full performance of this Agreement at any time thereafter. The waiver by either Party of the breach of any term of this Agreement by the other Party will not operate or be interpreted as a waiver of any subsequent breach by such Party. No term of this Agreement will be deemed to have been waived by either Party unless such waiver is in writing. 21.6 This Agreement and the documents referred to in it or attached to this Agreement constitute the entire agreement between the Parties with respect to the subject matter hereof and supersede all prior discussions, negotiations and agreements with respect thereto. No amendment of, change to or variance from this Agreement will be binding on either Party unless in writing and signed by the Parties. 21.7 Each of the Parties agrees to perform such acts, sign and deliver such other agreements' cause such meetings to be held, resolutions passed and by-laws enacted, exercise their vote and influence as may be necessary or desirable from time to time in order to give full effect to this Agreement. 21.8 This Agreement may be executed in two (2) counterparts, each of which shall be an original and all of which shall constitute together but one and the same document. 21.9 The headings and subheadings of the sections of this Agreement have been included solely for ease of reference and do not form part of this Agreement. 21.10 All words and personal pronouns relating thereto shall be read and construed as the number and gender of the Party or Parties referred to in each case require and the verb shall be construed as agreeing with the required word and/or pronoun. 23 21.11 This Agreement will not be binding upon the Parties until it has been signed below on behalf of each Party, in which event it shall be effective as of the date of signing. IN WITNESS WHEREOF, the Parties have signed on the date first hereinabove mentioned. DSM BIOLOGICS COMPANY B.V. CYTOGEN CORPORATION /s/ G.P. Algra /s/ J.W.R. den Toom - ------------------ ----------------------------- G.P. Algra J.W.R. den Toom President & CEO Director Marketing, Sales and Strategic Development 24 EX-27 4 0004.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2000 AND THE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 14,178,000 0 2,449,000 (64,000) 631,000 410,000 8,375,000 (6,342,000) 20,696,000 5,011,000 0 0 0 756,000 976,523,000 20,696,000 5,473,000 7,167,000 3,047,000 6,742,000 22,048,000 0 133,000 (21,211,000) 0 (21,211,000) 0 0 0 (21,211,000) (0.29) (0.29)
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