-----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, S1QtwAoj8GEZ123NmLijXDBx1EEIpaAY6VKUHr/YKoRmHecBdNcwC9b5IbPpeSKE /CcYnuhvXBx7NltP1sCiJA== 0000950109-96-007539.txt : 19961118 0000950109-96-007539.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950109-96-007539 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CYTOGEN CORP CENTRAL INDEX KEY: 0000725058 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 222322400 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14879 FILM NUMBER: 96662799 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 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, 1996 ------------------ 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 0-14879 --------- 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) 987-8200 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 October 22, 1996 - ------------------------ ------------------------------- Common Stock, $.01 par value 50,150,534 Warrants to Purchase One Share of Common Stock, 4,023,595 $.01 par value CYTOGEN CORPORATION AND SUBSIDIARIES September 30, 1996 PART I - FINANCIAL INFORMATION - ------ --------------------- Item 1 - Consolidated Financial Statements INTRODUCTORY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------------------- The accompanying consolidated financial statements have been prepared by the Registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosure normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations. It is suggested that these condensed consolidated financial statements be read in conjunction with CYTOGEN Corporation's (the "Company" or "CYTOGEN") audited consolidated financial statements and notes thereto for the year ended December 31, 1995. In the opinion of the Registrant, these consolidated financial statements contain all adjustments necessary to present fairly the financial position of CYTOGEN as of September 30, 1996, the results of operations for the three and nine months ended September 30, 1996 and 1995, and the cash flows for the nine months ended September 30, 1996 and 1995. The results of operations for the periods ended September 30, 1996 are not necessarily indicative of the operating results for the full year. 2 CYTOGEN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (All amounts in thousands, except share data) (Unaudited)
September 30, December 31, ASSETS 1996 1995 -------------------- -------------------- Current Assets: Cash and cash equivalents $ 14,478 $ 27,551 Short term investments 5,977 1,201 Restricted cash 9,850 383 Accounts receivable, net 527 284 Inventories 270 356 Other current assets 500 360 -------------------- -------------------- Total current assets 31,602 30,135 -------------------- -------------------- Property and Equipment: Leasehold improvements 9,977 9,850 Equipment and furniture 7,022 6,535 -------------------- -------------------- 16,999 16,385 Less- Accumulated depreciation and amortization (12,058) (10,923) -------------------- -------------------- Net property and equipment 4,941 5,462 -------------------- -------------------- Other Assets 1,501 1,552 -------------------- -------------------- $ 38,044 $ 37,149 -------------------- -------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued liabilities $ 3,534 $ 6,385 Current portion of long term liabilities 1,807 2,213 -------------------- -------------------- Total current liabilities 5,341 8,598 -------------------- -------------------- Long Term Liabilities 1,895 3,275 -------------------- -------------------- Stockholders' Equity: Preferred stock, $.01 par value, 5,400,000 shares authorized - Series A Preferred Stock, $.01 par value, 1,000 shares authorized and outstanding in 1996 -- -- Common stock, $.01 par value, 89,600,000 shares authorized, 49,241,000 and 46,040,000 shares issued and outstanding in 1996 and 1995, respectively 492 460 Additional paid-in capital 275,310 253,122 Unrealized (loss) gains on short term investments (3) 34 Accumulated deficit (244,991) (228,340) -------------------- -------------------- Total stockholders' equity 30,808 25,276 -------------------- -------------------- $ 38,044 $ 37,149 ==================== ====================
The accompanying notes are an integral part of these statements. 3 CYTOGEN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (All amounts in thousands, except per share data) (Unaudited)
Three Months Ended Sept. 30, Nine Months Ended Sept. 30, --------------------------------- ------------------------------- 1996 1995 1996 1995 ----------- ------------- ------------ ----------- REVENUES: Product related $ 393 $ 347 $ 1,135 $ 1,075 License and contract 795 2,445 2,804 3,237 ---------- ------------- ------------ ----------- Total Revenues 1,188 2,792 3,939 4,312 ---------- ------------- ------------ ----------- OPERATING EXPENSES: Research and development 4,825 4,526 14,441 14,822 Selling and marketing 874 652 2,573 2,371 Acquisition of technology rights - - - 19,663 General and administrative 1,258 1,512 4,313 4,702 ---------- ------------- ------------ ----------- Total Operating Expenses 6,957 6,690 21,327 41,558 ---------- ------------- ------------ ----------- LOSS FROM OPERATIONS $ (5,769) $ (3,898) $ (17,388) $ (37,246) ---------- ------------- ------------ ----------- GAINS ON INVESTMENTS, net 313 142 1,079 518 INTEREST EXPENSE (116) (148) (342) (444) ---------- ------------- ------------ ----------- NET LOSS $ (5,572) $ (3,904) $ (16,651) $ (37,172) ========== ============= ============ =========== NET LOSS PER COMMON SHARE $ (0.12) $ (0.12) $ (0.35) $ (1.20) ========== ============= ============ =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 48,358 33,013 47,703 30,998 ========== ============= ============ ===========
The accompanying notes are an integral part of these statements. 4 CYTOGEN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (All amounts in thousands) (Unaudited)
Nine Months Ended September 30, ------------------------------------------- 1996 1995 ------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (16,651) $ (37,172) -------------- ------------ Adjustments to Reconcile Net Loss to Cash Used for Operating Activities: Depreciation and Amortization 1,135 1,101 Imputed Interest 310 444 Amortization of Deferred Charges (17) (27) Acquisition of Technology Rights - 19,663 Inventory Writedown - 1,144 Stock Grants - 43 Changes in Assets and Liabilities, Net of Effect from Acquisition: Accounts receivable, net (243) (197) Inventories 86 (106) Other assets (89) (375) Accounts payable and accrued liabilities (2,851) (2,870) Other liabilities (2,079) (2,103) -------------- ------------ Total adjustments (3,748) 16,717 -------------- ------------ Net cash used for operating activities (20,399) (20,455) -------------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of Short Term Investments (4,813) (1,232) (Increase) in Restricted Cash (9,467) - Purchases of Property and Equipment (614) (475) Net Cash Acquired in CytoRad Acquisition (See Note 8) - 10,514 -------------- ------------ Net cash (used for) provided by investing activities (14,894) 8,807 -------------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Issuance of Common Stock 17,370 14,309 Proceeds from Issuance of Series A Preferred Stock 4,850 - Redemption of Common Stock - (332) -------------- ------------ Net cash provided by financing activities 22,220 13,977 -------------- ------------ Net (Decrease) Increase in Cash and Cash Equivalents (13,073) 2,329 Cash and Cash Equivalents, Beginning of Period 27,551 7,700 -------------- ------------ Cash and Cash Equivalents, End of Period $ 14,478 $ 10,029 ============== ============
The accompanying notes are an integral part of these statements. 5 CYTOGEN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS From time to time, the term "Company" as used herein, may include CYTOGEN and its wholly-owned subsidiaries Cellcor, Inc. ("Cellcor") and Targon Corporation ("Targon") taken as a whole, where appropriate. (Information as of September 30, 1996 and for the three and nine months ended September 30, 1996 and 1995 is unaudited.) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 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. Short Term Investments Management determines the appropriate classification of debt and equity securities at the time of purchase and re-evaluates such designation as of each balance sheet date. At September 30, 1996, the Company's short term investments are classified as available for sale and are carried at fair value based on quoted market prices. Differences between an investment's amortized cost and fair value are charged directly to stockholders' equity, net of income taxes. Accordingly, a net unrealized loss of approximately $3,000 has been recorded as a separate component of stockholders' equity at September 30, 1996. Restricted Cash In September 1996, the Company and Elan Corporation, plc and affiliated corporations (collectively, "Elan") created Targon, a new U.S.-based cancer company (see Note 2). Through this collaboration, the Company received net proceeds of $9.9 million from Elan. The uses of these funds are restricted to Targon's operations. 6 Other Assets Other assets consist primarily of undeveloped real property with a net book value of $1.3 million, which is valued at the lower of cost or market (see Note 11). Revenue Recognition Product related revenues include product sales by CYTOGEN to its customers and in 1996, to its European distributor, CIS biointernational ("CISbio") (see Note 4). Product sales are recognized upon shipment of finished goods. Beginning in October 1995, as a result of CYTOGEN's acquisition of Cellcor (see Note 6), product related revenues also include the recovery of costs associated with the treatment of patients who have received the autolymphocyte therapy ("ALT") for metastatic renal cell carcinoma ("mRCC") under a compassionate protocol and in 1996, also include the cost recovery associated with the Treatment IND program. License and contract revenues include milestone payments and fees under collaborative agreements with third parties, the sale of research and manufacturing services and materials, and revenues from other miscellaneous sources. Revenues from milestone payments are recognized when all parties concur that the events stipulated in the agreement have been achieved. Revenues from cost-plus contracts are recognized when the costs are incurred. Common Stock Outstanding As a result of the Cellcor merger, the issued and outstanding shares of Cellcor common stock and preferred stock ("Cellcor Shares") were converted into the right to receive shares of CYTOGEN common stock. As of September 30, 1996, certain holders of Cellcor Shares had not yet exchanged their Cellcor Shares for shares of CYTOGEN common stock. For accounting purposes, all Cellcor Shares were deemed exchanged for issued and outstanding shares of CYTOGEN common stock as of the date of the Cellcor merger. See Note 6. New Accounting Pronouncements The Company will be required to adopt the disclosure requirement of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," for the year ended December 31, 1996. The adoption of this pronouncement will have no impact on the Company's statement of operations. Reclassifications Certain reclassifications have been reflected in the 1995 financial statements to conform with the 1996 presentation. 2. TARGON CORPORATION: Pursuant to agreements between the Company and Elan, Targon was established in September 1996. Targon will focus on the development, registration, manufacturing and commercialization of differentiated oncology products utilizing the competencies of the Company and Elan in drug development and manufacturing. Targon is, initially, a wholly-owned subsidiary of the Company. At the time of the establishment of Targon, Elan purchased 932,535 shares of 7 CYTOGEN's common stock for $5 million and 1,000 shares of CYTOGEN's newly created Series A Preferred Stock for $15 million. The Company used the proceeds of these sales to capitalize Targon. Targon used $10 million of these proceeds to acquire certain technology from Advanced Therapeutics Systems Ltd., an affiliate of Elan. The Series A Preferred Stock has a liquidation value of $5 million. Accordingly, for accounting purposes, the Company recorded the Series A Preferred Stock investment as a net capital contribution of $5 million. The Series A Preferred Stock of CYTOGEN held by Elan may, at Elan's option, be either (i) exchanged for one-half of the Company's interest in Targon or (ii) converted into shares of common stock of CYTOGEN. If Elan elects to exchange the Series A Preferred Stock for one-half of the Company's interest in Targon, then Elan will be entitled through March 31, 2003 to exercise a warrant to purchase up to 1 million shares of CYTOGEN's common stock, at an exercise price per share which escalates from $8.40 to $14 over the life of the warrant. If Elan elects to convert the Series A Preferred Stock into CYTOGEN's common stock, it will receive a number of shares which declines from 1,785,715 shares to 1,071,429 shares, depending on the time of conversion. If Elan exercises its conversion right, then the Company will retain full ownership of Targon. Elan must elect to exchange its Series A Preferred Stock no later than March 31, 2001. Any shares of Series A Preferred Stock not exchanged or converted by March 31, 2003 will be automatically converted into CYTOGEN's common stock on that date. The Series A Preferred Stock has no special dividend rights, however if dividends are declared on CYTOGEN's common stock, holders of Series A Preferred Stock will be entitled to such dividends as they would have received had they converted their shares of Series A Preferred Stock into common stock immediately prior to the dividend. Each share of Series A Preferred Stock carries a liquidation value of $5,000 per share. In connection with the formation of Targon, the Company contributed certain technology to Targon. 3. C.R. BARD, INC.: In August 1996, CYTOGEN entered into a co-promotion agreement (the "Co- Promotion Agreement") with C.R. Bard, Inc. ("Bard") pursuant to which CYTOGEN granted to Bard (i) the exclusive right to market and promote ProstaScint, an FDA approved prostate cancer imaging product, to urologists in the U.S. and (ii) the co-exclusive right with CYTOGEN to market and promote ProstaScint to managed care organizations in the U.S. The Co-Promotion Agreement provides that Bard shall make payments upon the occurrence of certain milestones which include expansion of co-promotion rights in selected countries outside the U.S. During the term of the Co-Promotion Agreement, Bard will receive performance-based compensation for its services. The initial term of the Co-Promotion Agreement is ten (10) years from the date of the product launch of ProstaScint. 4. CIS BIOINTERNATIONAL AND FAULDING: In January 1996, CYTOGEN entered into a distribution agreement (the "CISbio Agreement") with CISbio, granting to CISbio the exclusive right to distribute and sell OncoScint CR/OV in all the countries of the world, except for the U.S. and Canada. The CISbio Agreement provides for payments upon execution of the agreement and upon achievement of a certain milestone, payments for minimum annual purchases of the components of OncoScint CR/OV by CISbio, and certain royalties based upon net sales, if any, of OncoScint CR/OV by CISbio. For the nine months ended September 30, 1996, CYTOGEN recorded $244,000 in license and product related revenues from CISbio. 8 In December 1995, CYTOGEN entered into a distribution agreement (the "Faulding Agreement") with Faulding (Canada) Inc. ("Faulding") granting to Faulding the exclusive right to distribute and sell OncoScint CR/OV in Canada. Faulding is currently pursuing the necessary regulatory approvals to market the product in Canada. In addition to a one-time, up-front cash payment for execution of the agreement, which amount was recognized by the Company in 1996, Faulding will be required to make additional payments upon achievement of certain milestones, payments for minimum annual purchases of OncoScint CR/OV by Faulding, and certain royalties based upon net sales, if any, of OncoScint CR/OV by Faulding. 5. ELAN CORPORATION: In December 1995, CYTOGEN entered into a research and development and option agreement (the "Elan Agreement") with Elan under which both parties will implement a research program that combines CYTOGEN's Genetic Diversity Library ("GDL") technology with Elan's drug delivery system technology to collaboratively develop orally administered products. Thereunder, Elan has been granted an option for the exclusive worldwide licensing rights to any products so developed and the Company will receive royalties based on sales, if any, of such products. Elan will provide the funding necessary for the Company to fulfill its obligations under the research program with aggregate payments for work performed by CYTOGEN not to exceed $1.5 million during the first sixteen months of the research program. For the three and nine months ended September 30, 1996, CYTOGEN recorded $344,000 and $988,000, respectively, in contract revenues from Elan. 6. CELLCOR, INC.: Pursuant to an Agreement and Plan of Merger dated June 15, 1995, as amended, in October 1995, CYTOGEN completed its acquisition of Cellcor and the related subscription offering (the "Subscription Offering"). As a result, CYTOGEN issued (i) 4,713,564 shares of CYTOGEN common stock to acquire Cellcor (see Note 1) and (ii) 5,144,388 shares of CYTOGEN common stock in connection with the Subscription Offering raising a total of $20.0 million, and has reserved for issuance up to 606,952 shares of CYTOGEN common stock issuable upon the exercise of the options that were outstanding under the Cellcor employee stock option plans at the time of merger. The transaction was accounted for by using the purchase method of accounting, whereby the Company recorded a one- time, non-cash charge of approximately $26.2 million for acquisition of technology rights to its statement of operations during the three months ended December 31, 1995, which charge represented the amount by which the purchase price exceeded the fair value of net assets acquired from Cellcor. 7. DUPONT MERCK: Pursuant to a license agreement dated as of December 20, 1994 and as amended on March 29, 1996 (the "DP/Merck Agreement"), CYTOGEN has sub-licensed to The DuPont Merck Pharmaceutical Company ("DuPont Merck") CYTOGEN's manufacturing and marketing rights to Quadramet in the U.S., Canada and Latin America (the "Territory Rights"), if and when approved for marketing in each applicable country. CYTOGEN has retained the right to co-promote the product to nuclear medicine specialists. Quadramet is a therapy agent for treatment of severe pain associated with cancers that spread to the bone. CYTOGEN acquired the Territory Rights to Quadramet from The Dow Chemical Company ("Dow") pursuant to a license agreement, under 9 which it assumed responsibility for the development and commercialization of the product (see Note 9). The New Drug Application ("NDA") for Quadramet was officially filed by FDA in August 1995. Pursuant to the terms of the DP/Merck Agreement, in January 1995, CYTOGEN received from DuPont Merck $4.0 million for the sale of 908,265 shares of CYTOGEN common stock to DuPont Merck and $1.3 million to fund additional clinical programs to expand the use and marketing of Quadramet, of which $333,000 and $1.0 million were recognized as license and contract revenues during the three and nine months ended September 30, 1995, respectively. The remaining $333,000 was classified as deferred revenues, and was recognized in the fourth quarter of 1995 as services under the contract were performed. For the three and nine months ended September 30, 1996, CYTOGEN recorded $364,000 and $1.2 million, respectively, as license and contract revenues from DuPont Merck. The DP/Merck Agreement further provides for future payments of up to $1.8 million toward additional clinical programs, a $2.0 million milestone payment if and when Quadramet receives FDA approval, additional payments upon achievement of certain other milestones and royalty payments based on sales, including guaranteed minimum payments. 8. CYTORAD INCORPORATED: In February 1995, CYTOGEN completed its acquisition of CytoRad Incorporated ("CytoRad") pursuant to an Agreement and Plan of Merger dated November 15, 1994, under which CYTOGEN exchanged for each outstanding CytoRad unit (i) 1.5 shares of CYTOGEN common stock, (ii) a warrant to acquire one share of CYTOGEN common stock for $8.00 that expires January 31, 1997 and (iii) a contingent value right ("CVR") to receive, under certain circumstances and at no additional cost, up to one-half share of CYTOGEN common stock. On February 29, 1996, the Company announced that the CVRs had expired by their terms and were of no further value. Accordingly, the Company no longer has an obligation to issue shares of its common stock to holders of CVRs on January 31, 1997. As a result of the merger, the Company acquired $11.7 million of CytoRad's cash and securities, before payment of certain transaction costs. In addition, CYTOGEN recorded approximately $19.7 million for acquisition of technology and marketing rights as a charge to its statement of operations during the three months ended March 31, 1995, which charge represented the amount by which the purchase price exceeded the fair value of net assets acquired from CytoRad. 9. THE DOW CHEMICAL COMPANY: In 1993, CYTOGEN acquired from Dow an exclusive license in the U.S. for Quadramet. This license was amended in 1995 to expand the territory to include Canada and Latin America, and in 1996 to expand the field to include all osteoblastic diseases. For the three months ended September 30, 1995, upon the filing of the NDA for Quadramet with FDA, the Company recorded a one-time licensing fee of $2.0 million from Dow for their use of Quadramet's NDA filing package. At the same time, the Company was required to pay to Dow $1.0 million. The Company will be required to pay to Dow $4.0 million if and when Quadramet receives FDA approval. The agreement provides for additional payments by the Company upon achievement of certain milestones and royalties on net sales of the product once commercialized, including guaranteed minimum payments. 10 10. REVENUES FROM MAJOR CUSTOMERS: Customers who contributed 10% or more of the Company's total product related, license and contract revenues were as follows:
3 Months Ended September 30, 9 Months Ended September 30, ---------------------------- ---------------------------- 1996 1995 1996 1995 ------ ------ ------ ------ Customer - ------------ DuPont Merck (See Note 7) 31% 12% 29% 23% Medi-Physics 11% 6% 11% 11% Elan (See Note 5) 29% - 25% - Dow (See Note 9) - 70% - 45%
Medi-Physics is a chain of radiopharmacies. 11. LONG TERM LIABILITIES:
September 30, December 31, 1996 1995 ----------- ----------- Due to Knoll $ 2,904,000 $ 4,237,000 Due to Chiron 428,000 785,000 Capital lease obligations 370,000 448,000 Deferred charges - 18,000 ----------- ----------- 3,702,000 5,488,000 Less: Current portion (1,807,000) (2,213,000) ----------- ----------- $ 1,895,000 $ 3,275,000 =========== ===========
In November 1994, CYTOGEN executed a termination agreement (the "Termination Agreement") with Knoll Pharmaceutical Company ("Knoll"). Pursuant to the Termination Agreement, the Company has reacquired from Knoll all U.S. marketing rights to OncoScint CR/OV (the "U.S. Rights"), which were previously granted to Knoll. The resulting liability of CYTOGEN to Knoll will be paid over a four- year period and without interest, as follows: $3.1 million in 1995 (which amount has been paid); $1.6 million in 1996 (which amount was paid in July 1996); $1.6 million in 1997; and $1.7 million in 1998. Imputed interest of $88,000 and $266,000 relating to the obligation, which was discounted based upon a 10% interest rate, was recorded for the three and nine months ended September 30, 1996, respectively. For the three and nine months ended September 30, 1995, imputed interest was $130,000 and $390,000, respectively. In December 1994, the Company entered into a disengagement agreement (the "Disengagement Agreement") with Chiron B.V., formerly EuroCetus B.V., successor in interest to EuroCetus International, N.V. ("Chiron"). Under the Disengagement Agreement, the Company reacquired the exclusive marketing and distribution rights in Europe (the "European Rights"), which were previously granted to Chiron, and purchased certain business assets relating to the European Rights. The resulting liability of CYTOGEN to Chiron will be paid over three years and without interest, as follows: $200,000 in 1995 (which amount has been paid), $300,000 in 1996 (of which $200,000 has been paid) and $377,181 in 1997. Payment is secured by a mortgage covering approximately 11 acres of undeveloped real property owned by the Company in Ewing, New Jersey. 11 This obligation is non-recourse to the Company. Imputed interest of $15,000 and $44,000 relating to the obligation, which was discounted based upon a 10% interest rate, was recorded for the three and nine months ended September 30, 1996, respectively. For the three and nine months ended September 30, 1995, imputed interest was $18,000 and $54,000, respectively. 12. COMMON STOCK: Under an option agreement (the "Option") granted to Fletcher Capital Market, Inc. ("Fletcher") in May 1994, as amended, Fletcher purchased (i) 1.8 million shares of CYTOGEN common stock in August 1995, at an aggregate price of approximately $7.3 million, or $4.058 per share, (ii) 500,000 shares of CYTOGEN common stock in November 1995, at an aggregate price of $2.3 million, or $4.696 per share, and (iii) an aggregate of 1.0 million shares of CYTOGEN common stock in January 1996, at an aggregate price of $4.7 million, or $4.70 per share. Pursuant to an Investment Agreement between the Company and Fletcher Fund, L.P., a Delaware limited partnership ("Fletcher Fund"), dated as of September 8, 1995 (as amended, the "Investment Agreement"), the Company sold 665,352 shares of CYTOGEN common stock, for an aggregate purchase price of approximately $2.7 million. Under the Investment Agreement, as amended by the First Amendment to Investment Agreement dated April 26, 1996 (the "Amendment"), the Company was also granted the right to issue and sell to Fletcher Fund, and Fletcher Fund will be obligated to purchase, up to 675,000 shares of CYTOGEN common stock from time to time (collectively, the "Put Rights") at a purchase price per share equal to 101% of the average of the daily volume weighted average price of CYTOGEN common stock on the Nasdaq National Market ("NASDAQ") during (a) a designated twenty-one business day period or (b) the last three business days of said designated twenty-one business day period, whichever is less. The Put Rights, which were originally scheduled to expire on March 29, 1996, were extended until December 15, 1996 pursuant to the Amendment. Under certain circumstances, Fletcher Fund will have the right to decrease or increase the number of shares of CYTOGEN Common Stock to be purchased in connection with the exercise of a Put Right by the Company, but in no event shall the total number of shares sold by the Company and purchased by Fletcher Fund pursuant to the Investment Agreement exceed 4.9% of the total number of shares of CYTOGEN common stock outstanding, after giving effect to the proposed sale and purchase of the shares in question. The shares to be issued and sold in this transaction were registered pursuant to a registration statement on Form S-3 filed with the Securities and Exchange Commission ("SEC") in April 1994. In September 1996, in connection with the exercise of a Put Right, the Company sold 225,000 shares of CYTOGEN common stock to Fletcher Fund at an aggregate price of $1.5 million, or $6.529 per share. In November 1995, the Company sold 1,256,565 shares of CYTOGEN common stock to a European institutional investor ("the Investor") in a private placement transaction pursuant to Regulation S of the Securities Act for an aggregate price of $5.0 million. The Company also sold to the Investor (i ) 729,394 shares of CYTOGEN common stock in April 1996 for an aggregate price of $5.0 million, (ii) 913,909 shares of CYTOGEN common stock in October 1996 for an aggregate price of $5.0 million pursuant to a Stock Purchase Agreement between CYTOGEN and the Investor, dated as of August 27, 1996, as amended (the "Purchase Agreement"), and (iii) 776,791 shares of CYTOGEN common stock in November 1996 for an aggregate price of approximately $4.0 million under the Purchase Agreement. 12 CYTOGEN and Nomura Securities International, Inc. ("Nomura") executed an agreement effective as of February 23, 1996 that terminated the Purchase Agreement between CYTOGEN and Nomura dated March 28, 1995. No sales of stock occurred under the terms of the agreement. See Notes 2, 6, 7 and 8 for information related to the Company's issuance of common stock in connection with Targon, the Cellcor merger, DP/Merck Agreement, and CytoRad merger. 13 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Background Historically, CYTOGEN's revenues have resulted primarily from (i) payments received from the sale of research services pursuant to collaborative agreements, (ii) fees generated from the licensing of its technology and marketing rights to its products and (iii) product related revenues on sales of its OncoScint products in the U.S. and Western Europe. In January 1995, CYTOGEN received from DuPont Merck $5.3 million pursuant to the DP/Merck Agreement (see Note 7 to the Consolidated Financial Statements), of which $1.3 million was to fund additional clinical programs to expand the use and marketing of Quadramet and $4.0 million was to purchase 908,265 shares of CYTOGEN common stock. In addition, for the three and nine months ended September 30, 1996, CYTOGEN recorded $364,000 and $1.2 million, respectively, in license and contract revenues from DuPont Merck. The NDA for Quadramet was accepted for filing by FDA effective August 1995. The timing and outcome of FDA's decision regarding Quadramet cannot be predicted by the Company. In February 1995, CYTOGEN acquired CytoRad by merging CytoRad with and into a wholly-owned subsidiary of CYTOGEN. See Note 8 to the Consolidated Financial Statements. As a result of the merger, the Company acquired $11.7 million of CytoRad's cash and securities, before payment of certain transaction costs. In addition, during the three months ended March 31, 1995, the Company recorded a one-time non-cash charge to the statement of operations of $19.7 million for the acquisition of technology rights pertaining to the merger. In December 1995, CYTOGEN entered into the Elan Agreement with Elan under which Elan will provide the funding necessary for the Company to fulfill its obligations under a research program with aggregate payments for work performed by CYTOGEN not to exceed $1.5 million during the first sixteen months of that research program. See Note 5 to the Consolidated Financial Statements. For the three and nine months ended September 30, 1996, CYTOGEN recorded $344,000 and $988,000, respectively, in contract revenues from Elan. In 1996, the Company has created certain strategic business units ("SBUs"). The Company believes that, if successful, such SBU's will enable the Company to leverage existing assets and capabilities to attract new collaborations and partnerships and increase revenues. There can be no assurance as to the strategy's success or that revenues will increase markedly. To date, sales of OncoScint CR/OV in both the U.S. and European markets have been limited, in part, because OncoScint CR/OV is a "technique-dependent" product that requires a high degree of proficiency in nuclear imaging, as well as a thorough appreciation of the information the scan can provide. In December 1995 and January 1996, CYTOGEN entered into agreements with Faulding and CISbio, respectively, to market and distribute OncoScint CR/OV outside the U.S. Faulding is currently pursuing the necessary regulatory approvals in Canada. CISbio has advised the Company that, as of September 30, 1996, it had relaunched OncoScint CR/OV in eight of the twelve European 14 countries where the product has been approved for marketing, and that it is in the process of relaunching in the rest of the countries while initiating steps to obtain regulatory approvals for additional markets in accordance with the terms of the CISbio Agreement. See Note 4 to the Consolidated Financial Statements. In August 1996, CYTOGEN entered into the Co-Promotion Agreement with Bard pursuant to which CYTOGEN granted to Bard (i) the exclusive right to market and promote ProstaScint to urologists in the U.S. and (ii) the co-exclusive right with CYTOGEN to market and promote ProstaScint to managed care organizations in the U.S. See Note 3 to the Consolidated Financial Statements. In October 1996, ProstaScint received marketing approval from FDA. In preparation for the launch of ProstaScint in early 1997, CYTOGEN is developing its Partners in Excellence or PIE/TM/ Program (the "PIE Program") by establishing a network of qualified nuclear medicine sites and physicians. Each site will be trained and certified in acquiring, processing and interpreting antibody-derived images. ProstaScint can be directed to such qualified sites, thus providing quality control and support. In October 1995, CYTOGEN completed its acquisition of Cellcor by merging Cellcor with and into a wholly-owned subsidiary of CYTOGEN. See Note 6 to the Consolidated Financial Statements. In the fourth quarter of 1995, Cellcor completed patient accrual for its Phase III pivotal clinical trial using ALT to treat metastatic kidney cancer patients. The study is expected to conclude in the fourth quarter of 1996. If results from the trial are favorable and FDA concurs, the Company and FDA will determine the timing and contents of the formal application with FDA seeking marketing approval. It is likely that ALT would qualify for a new application called a Biologics License Application ("BLA"). The BLA is a result of FDA's initiative to accelerate review and approval of cancer products specifically for autologous cell therapies (such as Cellcor's ALT). There can be no assurance regarding the results of the study or the timing or outcome of FDA's review. Cellcor has received FDA approval to proceed with a Treatment IND that allows ALT to be available as a treatment option for patients who have no satisfactory alternative therapy to treat their metastatic kidney cancer. The Treatment IND also allows the Company to recover costs associated with the treatment. ALT will be available through the Treatment IND while the Company continues to pursue FDA approval of ALT. As a result of the Cellcor merger, beginning October 1995, the Company's product related revenues included the cost recovery related to the treatment of patients receiving ALT under a compassionate protocol and in 1996, also included the cost recovery related to the Treatment IND program. In addition, during the three months ended December 31, 1995, the Company recorded a one-time non-cash charge to the statement of operations of approximately $26.2 million for acquisition of Cellcor technology rights. In September 1996, pursuant to agreements between the Company and Elan, Targon was established. Targon will focus on the development, registration, manufacturing and commercialization of differentiated oncology products utilizing the competencies of the Company and Elan in drug development and manufacturing. Targon is initially a wholly-owned subsidiary of the Company. At the time of the establishment of Targon, Elan purchased 932,535 shares of CYTOGEN's common stock for $5 million and 1,000 shares of CYTOGEN's newly created Series A Preferred Stock for $15 million. The Company used the proceeds of these sales to capitalize Targon (see Note 2 to the Consolidated Financial Statements). In connection with the formation of 15 Targon, the Company contributed certain technology to Targon. Targon used $10 million of the proceeds of the Company's investment in Targon to acquire certain technology from Advanced Therapeutics Systems Ltd., an affiliate of Elan. The Series A Preferred Stock has a liquidation value of $5 million. Accordingly, for accounting purposes, the Company recorded the Series A Preferred Stock investment as a net capital contribution of $5 million. Results of Operations Revenues. Total revenues for the three months ended September 30, 1996 were $1.2 million compared to $2.8 million recorded in the same period of 1995. The decrease is primarily attributable to a $2.0 million one-time license fee from Dow for their use of Quadramet's NDA filing package in 1995. Year-to-date revenues of $3.9 million were only slightly below the $4.3 million recorded in the same period of 1995 and include additional license and contract revenues realized in 1996 under agreements executed in the fourth quarter of 1995 and the first quarter of 1996 with Elan and CISbio, respectively. For the three and nine months ended September 30, 1996, product related revenues were $393,000 and $1.1 million, respectively, compared to $347,000 and $1.1 million recorded for the same periods of 1995. In addition to sales of OncoScint CR/OV, the 1996 product related revenues included cost recovery associated with the ALT Treatment, for which $66,000 and $111,000 were recognized during the three and nine months ended September 30, 1996, respectively. The 1995 product related revenues were from the sales of OncoScint CR/OV. License and contract revenues for three months ended September 30, 1996 were $795,000 compared to $2.4 million recorded in the same period of 1995. The decrease is primarily attributable to a one-time license fee from Dow recorded in 1995. Year-to-date license and contract revenues of $2.8 million were only slightly below the $3.2 million recorded in the same period of 1995 and include revenues realized in 1996 from Elan and CISbio. Operating Expenses. Operating expenses for the three and nine months ended September 30, 1996 were $7.0 million and $21.3 million, respectively, compared to $6.7 million and $41.6 million recorded in the same periods of 1995. The year-to-date decrease from the prior year period is largely attributable to a one-time non-cash charge of $19.7 million recorded in the three months ended March 31, 1995 for the acquisition of technology rights associated with the CytoRad merger. After excluding this one-time charge, year-to-date 1996 operating expenses, which included $912,000 and $2.8 million of expenses for the three and nine months ended September 30, 1996, respectively, from Cellcor operations, were lower than those recorded in the comparable period of 1995. The level of current year operating expenses reflects the Company's objective to control spending and to focus its efforts on its highest priority products and technology, which are (i) OncoScint CR/OV, (ii) Quadramet, (iii) ProstaScint, (iv) the GDL technology and (v) ALT therapy for mRCC. Research and development expenses for the three and nine months ended September 30, 1996 were $4.8 million and $14.4 million, respectively, compared to $4.5 million and $14.8 million recorded in the same periods of 1995. These expenses principally reflect product development efforts and support for various ongoing clinical trials. The 1996 research and development expenses 16 included $811,000 and $2.6 million of expenses for the three and nine months ended September 30, 1996, respectively, from Cellcor operations. 1995 research and development expenses for the three months ended September 30 included a $1.0 million milestone payment to Dow at the time of the NDA filing for Quadramet. 1995 year-to-date expenses also included a charge of $1.1 million for inventory writedown of commercial inventory relating to OncoScint CR/OV. Selling and marketing expenses for the three and nine months ended September 30, 1996 were $874,000 and $2.6 million, respectively, compared to $652,000 and $2.4 million recorded in the same periods of 1995. The increase from the prior year periods is primarily attributable to expenses associated with establishing the PIE Program. The acquisition of technology rights expense of $19.7 million was a one-time non-cash charge recorded during the three months ended March 31, 1995, representing the amount by which the purchase price exceeded the fair value of net assets acquired in connection with the CytoRad merger. General and administrative expenses for the three and nine months ended September 30, 1996 were $1.3 million and $4.3 million, respectively, compared to $1.5 million and $4.7 million recorded in the comparable periods of 1995. The decrease from the prior year periods is primarily attributable to decreased spending for professional and consulting services. Other Income/Expense. Net gains on investments for the three and nine months ended September 30, 1996 were $313,000 and $1.1 million, respectively, compared to $142,000 and $518,000 realized in the same periods of 1995. The increase from the prior year periods is due primarily to higher average cash and short term investment balances for the periods. Interest expense for the three and nine months ended September 30, 1996 was $116,000 and $342,000, respectively, compared to $148,000 and $444,000 recorded in the same periods of 1995. Imputed interest on liabilities associated with CYTOGEN's termination agreements with Knoll and Chiron were $103,000 and $310,000 for the three and nine months ended September 30, 1996, respectively, compared to $148,000 and $444,000 recorded for the comparable periods of 1995. Net Loss. Net loss for the three months ended September 30, 1996 was $5.6 million compared to a net loss of $3.9 million incurred in the same period of 1995. The loss per common share was $0.12 on 48.4 million average shares outstanding compared to $0.12 on 33.0 million average shares outstanding for the same period in 1995. For the nine months ended September 30, 1996, the net loss was $16.7 million compared to a $37.2 million loss recorded in the comparable period of the prior year. The loss per common share was $0.35 on 47.7 million average shares outstanding compared to $1.20 on 31.0 million average shares outstanding in 1995. As discussed above, the decrease in the net loss and net loss per common share for the nine months is primarily attributable to the charge to the statement of operations for the acquisition of technology rights in 1995. At September 30, 1996, the Company had outstanding (i) options to purchase up to 3.1 million shares of CYTOGEN common stock under its various stock option plans with exercise prices ranging from $0.83 to $18.33 per share; (ii) warrants to purchase 4.3 million shares of CYTOGEN common stock with exercise prices ranging from $8.00 to $18.87 per share; and (iii) certain put rights to issue and sell up to approximately 1.2 million shares of CYTOGEN common stock, subject to adjustment. The loss per share calculation stated above does not take into account the shares issuable in 17 connection with such options, warrants and put rights as their effect is antidilutive. Liquidity and Capital Resources The Company's cash, restricted cash and short term investments were $30.3 million as of September 30, 1996, compared to $29.1 million as of December 31, 1995. The cash used for operating activities and purchases of property and equipment for the nine months ended September 30, 1996 were $20.4 million and $614,000, respectively, compared to $20.5 million and $475,000 used in the same period of 1995. 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, the sale of research services, fees paid under its license agreements and interest earned on its cash and short term investments. CYTOGEN Capital Stock. In January 1996, Fletcher purchased an aggregate of 1.0 million shares of CYTOGEN common stock at an aggregate price of approximately $4.7 million, or $4.70 per share, pursuant to the Option granted to Fletcher in May 1994, as amended. See Note 12 to the Consolidated Financial Statements. Effective as of February 23, 1996, CYTOGEN and Nomura executed an agreement that terminated the Purchase Agreement between CYTOGEN and Nomura dated March 28, 1995. No sales of stock occurred under the terms of the agreement. During 1996, CYTOGEN sold to a European institutional investor (i) 729,394 shares of common stock in April for an aggregate purchase price of $5.0 million, (ii) 913,909 shares of common stock in October for an aggregate purchase price of $5.0 million, and (iii) 776,791 shares of common stock in November for an aggregate purchase price of approximately $4.0 million. See Note 12 to the Consolidated Financial Statements. In September 1996, CYTOGEN sold 225,000 shares of common stock to Fletcher Fund at an aggregate price of $1.5 million or $6.529 per share, upon the exercise of a Put Right granted to CYTOGEN pursuant to the Investment Agreement, as amended in April 1996, between CYTOGEN and Fletcher Fund. Under the Investment Agreement, CYTOGEN has the right until December 15, 1996 to issue and sell to Fletcher Fund, and Fletcher Fund will be obligated to purchase, up to 450,000 additional shares of CYTOGEN common stock from time to time, subject to adjustment. See Note 12 to the Consolidated Financial Statements. In September 1996, at the time of the establishment of Targon (see Note 2 to the Consolidated Financial Statements), Elan purchased 932,535 shares of CYTOGEN common stock for $5 million and 1,000 shares of CYTOGEN's newly created Series A Preferred Stock for $15 million. The Company used the proceeds of these sales to capitalize Targon. Targon used $10 million of the proceeds of the Company's investment in Targon to acquire certain technology from Advanced Therapeutics Systems Ltd. Product Related Revenues. OncoScint CR/OV. To date, sales of OncoScint CR/OV have not 18 been significant and are not expected to become a significant source of cash flow in 1996. In November 1994, the Company executed the Termination Agreement with Knoll, pursuant to which the Company is required to pay to Knoll, over a four-year period and without interest, $3.0 million to reacquire the U.S. Rights and $5.0 million of liabilities previously incurred under the terms of a license, supply and marketing agreement executed in December 1991. The payment of these liabilities will be made as follows: $3.1 million in 1995 (which amount has been paid); $1.6 million in 1996 (which amount has been paid); $1.6 million in 1997; and $1.7 million in 1998. In December 1994, CYTOGEN entered into the Disengagement Agreement with Chiron to reacquire the European Rights and purchase certain business assets relating to the European Rights. The resulting liability of CYTOGEN to Chiron will be paid over three years and without interest, as follows: $200,000 in 1995 (which amount has been paid); $300,000 in 1996 (of which $200,000 has been paid); and $377,000 in 1997. Payment is secured by a mortgage covering approximately 11 acres of undeveloped real property owned by the Company in Ewing, New Jersey. This obligation is non-recourse to the Company. In December 1995 and January 1996, CYTOGEN entered into agreements with Faulding and CISbio, respectively, to market and distribute OncoScint CR/OV outside the U.S. Faulding is currently pursuing the necessary regulatory approvals in Canada. As described above, CISbio is actively marketing OncoScint CR/OV in certain countries in Europe. In addition to one-time, up-front cash payments for execution of the agreements, which amounts were recognized by the Company in 1996, each of Faulding and CISbio will be required to make payments upon the achievement of certain milestones, payments for the purchase of products and royalties on net sales, if any. See Note 4 to the Consolidated Financial Statements. ProstaScint. In August 1996, CYTOGEN entered into the Co-Promotion Agreement with Bard to market and promote ProstaScint, pursuant to which Bard shall make payments upon the occurrence of certain milestones which include expansion of co-marketing rights in selected countries outside the U.S. During the term of the Co-Promotion Agreement, Bard will receive performance-based compensation for its service. See Note 3 to the Consolidated Financial Statements. In October 1996, ProstaScint was approved for marketing by FDA. CYTOGEN is developing the PIE Program (as described above) in preparation for the ProstaScint launch in early 1997 and significant resources might be required. ALT. Beginning October 1995, as a result of the Cellcor merger, the Company's product related revenues included the cost recovery related to the treatment of patients receiving ALT under a compassionate protocol, and in 1996 also included the cost recovery associated with the Treatment IND program. Research Services and Licenses. Pursuant to the terms of the DP/Merck Agreement between CYTOGEN and DuPont Merck, CYTOGEN will receive from DuPont Merck future payments of up to $1.8 million towards additional clinical programs, a $2.0 million milestone payment if and when Quadramet receives FDA approval and royalty payments based on sales, including guaranteed minimum payments. For the three and nine months ended September 30, 1996, CYTOGEN 19 recorded $364,000 and $1.2 million, respectively, in license and contract revenues from DuPont Merck. See Note 7 to the Consolidated Financial Statements. CYTOGEN acquired an exclusive license in the U.S. from Dow for Quadramet in 1993. This license was later amended in 1995 and 1996. See Note 9 to the Consolidated Financial Statements. The Company will be required to pay to Dow $4.0 million if and when Quadramet receives FDA approval. The agreement provides for additional payments by the Company upon achievement of certain milestones and royalties on net sales of the product once commercialized, including guaranteed minimum payments. In December 1995, the Company and Elan entered into the Elan Agreement, under which Elan will provide the funding necessary for the Company to fulfill its obligations under the research program, with aggregate payments for work performed by CYTOGEN not to exceed $1.5 million during the first sixteen months of the research program. For the three and nine months ended September 30, 1996, CYTOGEN recorded $344,000 and $988,000, respectively, in contract revenues from Elan. See Note 5 to the Consolidated Financial Statements. The Company's capital and operating requirements, as described above, may further change depending upon several factors, including: (i) the amount of resources which the Company devotes to clinical evaluations and the establishment of manufacturing, marketing and sales capabilities; (ii) results of preclinical testing, clinical trials and research and development activities; and (iii) competitive and technological developments. The Company plans to continue to control spending and expects that its cash position at September 30, 1996, together with the approximate $9.0 million received from the Investor for sales of CYTOGEN common stock in October and November 1996, will be adequate to support the Company's operations into 1997. The Company's financial strategy is to meet its capital and operating requirements through revenues from existing products, the establishment of strategic marketing alliances and research and development partnerships, the acquisition, in-licensing and development of other technologies, products or services, subcontract manufacturing revenues, license and contract revenues, sale of equity securities as market conditions permit, interest income, and a continued commitment to control spending. Certain of these transactions may require payments by the Company in either cash or stock in addition to the costs associated with developing and marketing any product or technology and, if successful, increase long term revenues. There can be no assurance as to the strategy's success or that any resulting funds will be sufficient to meet the Company's cash requirements through the time that product related resources are sufficient to cover the Company's operating expenses. 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 timing and results of clinical studies; (ii) market acceptance of the Company's products, including programs designed to facilitate use of the products, such as the PIE Program and the use of teleradiology; (iii) the profitability of its products; (iv) the ability to attract, and the ultimate success of strategic partnering arrangements, collaborations, and acquisition candidates; (v) the ability of the Company and its partners to identify new products as a result of those 20 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; (vi) the success of the Company's distributors in obtaining marketing approvals in Canada and in additional European countries, in achieving milestones and achieving sales of products resulting in royalties; and (vii) the Company's ability to access the capital markets in the future for continued funding of existing projects and for the pursuit of new projects. PART II - OTHER INFORMATION - ------- ----------------- Item 6 - Exhibits and Reports on Form 8-K - ------ (a) Exhibits: 3.1- Certificate of Designations, Powers, Preferences and Rights of the Series A Convertible and Exchangeable Preferred Stock of CYTOGEN Corporation. 10.1- Securities Purchase Agreement between CYTOGEN Corporation and Elan International Services, Ltd., dated as of September 26, 1996. 10.2- Warrant to purchase CYTOGEN common stock, issued to Elan International Services, Ltd., dated September 26, 1996. 10.3- Joint Development and Operating Agreement among CYTOGEN Corporation, Elan Corporation, plc. and Targon Corporation dated September 26, 1996.* 10.4- Marketing and Co-Promotion Agreement between CYTOGEN Corporation and C.R. BARD, Inc. effective August 1, 1996.* 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: None 21 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 13, 1996 By /s/ T. Jerome Madison --------------------------- -------------------------------- T. Jerome Madison Chief Financial Officer (Authorized Officer and Principal Financial Officer) 22 EX-3.1 2 CERTIFICATE OF DESIGNATIONS, POWERS, PREFERENCES CERTIFICATE OF THE DESIGNATIONS, POWERS, PREFERENCES AND RIGHTS OF THE SERIES A CONVERTIBLE AND EXCHANGEABLE PREFERRED STOCK (par value $.01 per share) of CYTOGEN CORPORATION a Delaware Corporation ____________ Pursuant to Section 151 of the General Corporation Law of the State of Delaware ____________ The undersigned DOES HEREBY CERTIFY that the following resolution was duly adopted by the Board of Directors of CYTOGEN CORPORATION, a Delaware corporation (the "Corporation"), at a duly convened meeting on September 25, 1996: RESOLVED, that one series of the class of authorized preferred stock, $.01 par value, of the Corporation is hereby created and that the designations, powers, preferences and relative, participating, optional or other special rights of the shares of such series, and qualifications, limitations or restrictions thereof, are hereby fixed as follows: S1C Definitions. "Board" shall mean the Board of Directors of the Corporation. ----- "Business Day" shall mean any day other than Saturday, Sunday or a day ------------ on which federally chartered banks located in New York, New York are permitted by law to be closed. "Common Stock" shall mean, collectively, the Corporation's Common ------------ Stock and any capital stock of any class of the Corporation (other than any preferred stock) hereafter authorized which is not limited to a fixed amount or percentage of par or stated value in respect of the rights of the holders thereof to participate in dividends or in the distribution of assets upon any liquidation, dissolution or winding up of the Corporation. 1 "Conversion Price" shall mean, with respect to the shares of Series A ---------------- Preferred Stock, (a) $8.40 for the period ending on September 30, 1997, (b) $9.00 for the period commencing on October 1, 1997 and ending on March 31, 1998, (c) $9.80 for the period commencing on April 1, 1998 and ending on September 30, 1998, (d) $11.20 for the period commencing on October 1, 1998 and ending on September 30, 1999, (e) $12.60 for the period commencing on October 1, 1999 and ending on September 30, 2000 and (f) $14.00 for the period commencing on October 1, 2000 and ending on March 31, 2003; provided, in each case, that such amounts shall be subject to adjustment as provided herein, including Section 7 hereof. "Conversion Stock" shall mean shares of the Corporation's Common ---------------- Stock; provided, that if there is a modification or change which results in securities issuable upon conversion of the Series A Preferred Stock that are issued by an entity other than the Corporation or there is a modification or change in the class of securities so issuable, then the term "Conversion Stock" shall mean one share of the security issuable upon conversion of the Series A Preferred Stock if such security is issuable in shares, or shall mean the smallest unit in which such security is issuable if such security is not issuable in shares. "Dividend Rate" shall mean, with respect to the Series A Preferred ------------- Stock, the same rate of dividends, if any, declared and paid by the Company from time to time in respect of its Common Stock, assuming conversion thereof into Common Stock as set forth in Section 3(a) hereof. "Exchange Right" shall mean the right, in exchange for delivery of all -------------- of the outstanding shares of the Series A Preferred Stock to the Corporation, to acquire from the Corporation, 500,000 shares of Targon Common Stock through March 31, 1998, 400,000 shares of Targon Common Stock from and after April 1, 1998 through and including September 30, 1999, 300,000 shares of Targon Common Stock from and after October 1, 1999 through and including September 30, 2000, and 200,000 shares of Targon Common Stock from and after October 1, 2000 through and including September 30, 2001. "Excluded Stock" shall mean shares of Common Stock issued or reserved -------------- for issuance by the Corporation as a stock dividend payable in shares of Common Stock, or upon any subdivision or split-up of the outstanding shares of Common Stock, or upon conversion of shares of Series A Preferred Stock. "Fair Value" shall mean the fair value of any securities or assets as ---------- reasonably and in good faith determined by the Board. "Junior Securities" shall mean any of the Corporation's equity ----------------- securities (whether or not currently authorized) other than the Series A Preferred Stock. "Liquidation Value" of any share of Series A Preferred Stock as of any ----------------- particular date shall be equal to $5,000 per share. 2 "Market Price" of any security shall mean the average of the closing ------------ prices of such security's sales on all securities exchanges on which such security may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00, New York time, or, if on any day such security is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization, in each such case averaged over a period of the 10 trading days preceding the determination date. If at any time such security is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the "Market Price" shall be the Fair Value thereof. "Person" shall mean an individual, a partnership, a corporation, an ------ association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "Preferred Issuance Price" shall mean the purchase price for the ------------------------ Series A Preferred Stock, which is $15,000 per share. "Series A Preferred Stock" shall have the meaning given to such term ------------------------ in Section 2 hereof. "Subsidiary" shall mean any corporation of which the shares of ---------- outstanding capital stock possessing the voting power (under ordinary circumstances) in electing the board of directors are, at the time as of which any determination is being made, owned by the Corporation either directly or indirectly through subsidiaries. "Targon" shall mean Targon Corporation, a Delaware corporation. ------ "Targon Common Stock" shall mean shares of common stock, no par value, ------------------- of Targon. S2C Series A Preferred Stock. 1,000 shares of the preferred stock, $.01 par value per share, of the Corporation are hereby constituted as a series of preferred stock of the Corporation designated as Series A Preferred Stock (the "Series A Preferred Stock"). Such amount shall be adjusted by the Corporation in the event that any adjustments to the Series A Preferred Stock are required as set forth herein, including Section 7 hereof; the Corporation shall take all necessary or appropriate actions and make all necessary or appropriate filings in connection therewith. 3 S3C Dividends. (a) General. The holder of each share of Series A Preferred Stock, ------- a pari passu basis with the holders of the Common Stock, as if the Series A Preferred Stock had been converted into Common Stock immediately prior to the record date in respect thereof, based on the Conversion Price then in effect, shall be entitled to receive, when and as declared by the Board out of funds legally available for the declaration and payment of dividends, cumulative cash dividends at the Dividend Rate for such series, payable from time to time on a pro rata basis (treating such Series A Preferred Stock as outstanding Common Stock solely for such purpose, as described above), to the holders of record of such shares at the start of business on each applicable record date. Except as set forth above, such holders shall not be entitled to receive any dividends. (b) Payment of Dividends. If the Corporation declares a dividend, but does -------------------- not have sufficient funds legally available for paying dividends on the Series A Preferred Stock, the Corporation shall pay to each holder of the Series A Preferred Stock such holder's pro rata share of the dividends accrued on such holder's outstanding Series A Preferred Stock out of funds legally available therefor and shall pay the remaining dividends in such installments as soon as practicable after the Corporation has funds legally available therefor. (c) Distribution of Partial Dividend Payments. Except as otherwise ----------------------------------------- herein, if at any time the Corporation pays less than the total amount of dividends otherwise payable with respect to the Series A Preferred Stock, such payment shall be distributed ratably among the holders of Series A Preferred Stock based upon the aggregate dividends accrued but unpaid on the shares of Series A Preferred Stock held by each such holder. S4C Liquidation. Upon any liquidation, dissolution or winding up of the Corporation, each holder of the Series A Preferred Stock, at its sole discretion, shall be entitled to (i) receive an amount equal to the Liquidation Value per share multiplied by the number of shares of Series A Preferred Stock held by such holder or (ii) if all other holders of Series A Preferred Stock agree to convert, convert all of the shares of Series A Preferred Stock then held by such holder into shares of Common Stock, in accordance with the provisions of Section 7 hereof, effective immediately prior to the date of such liquidation, in which case, in the case of this clause (ii), the holders of Series A Preferred Stock shall be treated as holders of Common Stock. The Corporation shall provide written notice of such liquidation, dissolution or winding up, not less than 30 days prior to the payment date stated therein, to each record holder of Series A Preferred Stock. 4 S5C Voting Rights. (a) No Voting. Subject to Section 5(b) hereof, the outstanding shares --------- of Series A Preferred Stock shall not be entitled to vote on any matter as to which stockholders of the Corporation shall be entitled to vote. Notwithstanding the preceding sentence, holders of Series A Preferred Stock shall be entitled to notice of any stockholders' meeting in accordance with the By-laws of the Corporation. (b) Special Voting Rights. The Corporation shall not, without first --------------------- obtaining the affirmative vote or written consent of the holders of not less than 50% of the then outstanding shares of Series A Preferred Stock, voting as a single class: (1) amend or repeal any provision of, or add any provision to, the Corporation's Certificate of Incorporation or By-laws if such action would adversely alter or change the preferences, rights, privileges or powers of, or the restrictions provided for the benefit of, any shares of Series A Preferred Stock in this Certificate; or (2) increase or decrease the number of authorized shares of Series A Preferred Stock, except as required by Section 2 hereof. S6C Exchange. (a) Exchange. The holders of Series A Preferred Stock shall have the -------- right to exercise the Exchange Right in respect of all of the Series A Preferred Stock (including any fraction of a share), so long as such Exchange Right is exercised in respect of all shares of Series A Preferred Stock. (b) Exchange Procedure. ------------------ (1) Before the holders of the Series A Preferred Stock shall be entitled to exercise the Exchange Right (which shall be exercised on an all-or-nothing basis), such holder shall surrender the certificate or certificates, duly endorsed, at the office of the Corporation or of any transfer agent for the Series A Preferred Stock, and shall give written notice on or prior to September 30, 2001, to the Corporation at its principal corporate office, of the election to exercise the Exchange Right and shall state therein the name or names in which the certificate or certificates for shares of Targon Common Stock are to be issued. (2) The Exchange Right shall be deemed to have been effected on the close of business on the date on which the certificates representing all of the Series A Preferred Stock to be exchanged have been surrendered at the principal corporate office of the Corporation. At such time as the Exchange Right has been exercised, the rights of 5 the holder of such Series A Preferred Stock as a holder shall cease, and the Person or Persons in whose name or names any certificate or certificates for shares of Targon Common Stock are to be issued by Targon, upon instructions by the Corporation, upon the exercise of the Exchange Right shall be deemed to have become the holder or holders of record of the shares of the Targon Common Stock represented thereby. (3) As soon as possible after the exercise of the Exchange Right (but in any event within five business days in the case of clause (6) below), the Corporation shall deliver to the holder or holders exercising the Exchange Right: (i) a certificate or certificates representing the number of shares of Targon Common Stock issuable by reason of such exercise in such name or names and such denomination or denominations as the holder exercising the Exchange Right has specified; and (ii) payment in an amount equal to the amount payable under clause (6) below with respect to such exercise. (4) The delivery of certificates for shares of Targon Common Stock upon the exercise of the Exchange Right shall be made without charge to the holders of such Series A Preferred Stock for any cost incurred by the Corporation or Targon in connection with such exercise and the related delivery of shares of Targon Common Stock. Upon exercise of each share of Series A Preferred Stock, the Corporation shall and shall cause Targon to take all such actions as are necessary in order to ensure that the shares of Targon Common Stock issuable with respect to such exercise shall be validly issued, fully paid and non-assessable. (5) The Corporation shall not close its books against the transfer of Series A Preferred Stock upon exercise of the Exchange Right in any manner which interferes with the timely exercise of the Exchange Right. The Corporation shall assist and cooperate with any holder of Series A Preferred Stock required to make any governmental filings or obtain any governmental approval prior to or in connection with any exercise of the Exchange Right hereunder (including, without limitation, making any filings required to be made by the Corporation). (6) If any fractional interest in a share of Targon Common Stock would, except for the provisions of this clause (6), be deliverable upon any exercise of the Exchange Right, the Corporation, in lieu of delivering the fractional share of Targon Common Stock therefor, shall pay an amount to the holder thereof equal to the Market Price of such fractional interest as of the date of the exercise of the Exchange Right. 6 (7) The Corporation shall ensure that all shares of Targon Common Stock issued upon exercise of the Exchange Right shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges. The Corporation shall and shall cause Targon to take all such actions as may be necessary to ensure that all such shares of Targon Common Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange or market upon which shares of Targon Common Stock may be listed (except for official notice of issuance which shall be immediately delivered by Targon upon each such issuance and except for filings, notices of applicability and permissions solely within the control of, or laws and regulations solely applicable to, the holders of Series A Preferred Stock). (8) If the holders of the Series A Preferred Stock shall not have exercised the Exchange Right on or prior to March 31, 2001, such Exchange Right shall lapse. S7C Conversion. (a) Conversion. All holders of Series A Preferred Stock shall have ---------- the right to convert all of the Series A Preferred Stock (including any fraction of a share), so long as all shares of Series A Preferred Stock are converted at the same time. The number of shares of Conversion Stock issuable upon such conversion shall be computed by (A) multiplying the number of shares of Series A Preferred Stock to be converted by the Preferred Issuance Price for the Series A Preferred Stock and (B) dividing the result of the calculation in clause (A) above by the Conversion Price for the Series A Preferred Stock then in effect. If any holder of Series A Preferred Stock has exercised its Exchange Right, then the conversion right set forth in this Section 7 with respect to all remaining shares of Series A Preferred Stock shall expire. (b) Conversion Procedure. -------------------- (1) Before any holder of shares of the Series A Preferred Stock shall be entitled to convert any of such shares into shares of Common Stock, such holder shall surrender the certificate or certificates, duly endorsed, at the office of the Corporation or of any transfer agent for the Series A Preferred Stock, and shall give written notice, to the Corporation at its principal corporate office, of the election to convert such shares and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. (2) Each conversion of the Series A Preferred Stock shall be deemed to have been effected on the close of business on the date on which the certificate or certificates representing the Series A Preferred Stock to be converted have been 7 surrendered at the principal corporate office of the Corporation. At such time as such conversion has been effected, the rights of the holder of such Series A Preferred Stock as a holder shall cease, and the Person or Persons in whose name or names any certificate or certificates for shares of Conversion Stock are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the shares of Conversion Stock represented thereby. (3) As soon as possible after a conversion has been effected (but in any event within five business days in the case of clause (6) below), the Corporation shall deliver to the converting holder: (i) a certificate or certificates representing the number of shares of Conversion Stock issuable by reason of such conversion in such name or names and such denomination or denominations as the converting holder has specified; and (ii) payment in an amount equal to the amount payable under clause (6) below with respect to such conversion. (4) The issuance of certificates for shares of Conversion Stock upon conversion of the Series A Preferred Stock shall be made without charge to the holders of such Series A Preferred Stock for any cost incurred by the Corporation in connection with such conversion and the related issuance of shares of Conversion Stock. Upon conversion of each share of Series A Preferred Stock, the Corporation shall take all such actions as are necessary in order to ensure that the Conversion Stock issuable with respect to such conversion shall be validly issued, fully paid and nonassessable. (5) The Corporation shall not close its books against the transfer of Series A Preferred Stock or of Conversion Stock issued or issuable upon conversion of Series A Preferred Stock in any manner which interferes with the timely conversion of Series A Preferred Stock. The Corporation shall assist and cooperate with any holder of Series A Preferred Stock or Conversion Stock required to make any governmental filings or obtain any governmental approval prior to or in connection with any conversion of shares hereunder (including, without limitation, making any filings required to be made by the Corporation). (6) If any fractional interest in a share of Conversion Stock would, except for the provisions of this clause (6), be deliverable upon any conversion of the Series A Preferred Stock, the Corporation, in lieu of delivering the fractional share therefor, shall pay an amount to the holder thereof equal to the Market Price of such fractional interest as of the date of conversion. 8 (7) The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Conversion Stock, solely for the purpose of issuance upon the conversion of the Series A Preferred Stock, such number of shares of Conversion Stock issuable upon the conversion of all outstanding Series A Preferred Stock. All shares of Conversion Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges. The Corporation shall take all such actions as may be necessary to ensure that all such shares of Conversion Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange or market upon which shares of Conversion Stock may be listed (except for official notice of issuance which shall be immediately delivered by the Corporation upon each such issuance and except for filings, notices of applicability and permissions solely within the control of, or laws and regulations solely applicable to, the holders of Series A Preferred Stock). (8) If the holders of the Series A Preferred Stock shall not have exercised their right to convert or to exchange the Series A Preferred Stock on or prior to March 31, 2003, such Series A Preferred Stock shall be deemed automatically converted into Common Stock, pursuant to this Section 7, at the Conversion Price in effect on such date; subject to adjustment as provided herein. (c) Conversion Price. ---------------- (1) Changes in Common Stock. In case the Company shall at ----------------------- any time or from time to time after the date of this Agreement (i) pay a dividend or make any other distribution with respect to its Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, (iii) combine its outstanding shares of Common Stock or (iv) issue any shares of its capital stock or other assets in a reclassification or reorganization of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing entity), then the number and kind of shares of capital stock of the Company or other assets that may be received upon the conversion of the Series A Preferred Stock shall be adjusted to the number of shares of Conversion Stock and amount of any such securities, cash or other property of the Company which the holders would have owned or have been entitled to receive after the happening of any of the events described above had the Series A Preferred Stock been converted immediately prior to the record date (or, if there is no record date, the effective date) for such event. An adjustment made pursuant to this clause (1) shall become effective retroactively immediately after the effective date in other cases. Any Conversion Stock or other assets to be acquired as a result of such adjustment shall not be issued prior to the effective date of such event. For the purposes of this clause (1), the 9 number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. (2) Issuance of Rights. In case the Company shall issue, at ------------------ any time on or prior to March 31, 1998, to all holders of its Common Stock rights, options or warrants to subscribe for or purchase, or other securities exchangeable for or convertible into, shares of Common Stock (any such rights, options, warrants or other securities, collectively, "Rights") (excluding rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest) at a subscription offering, exercise or conversion price per share (as defined below, the "offering price per share") which, before deduction of customary discounts and commissions, is lower than the current Market Price per share of Common Stock on the record date of such issuance of grant, whether or not, in the case of Rights, such Rights are immediately exercisable or convertible, then the number of shares of Conversion Stock issuable upon conversion of the Series A Preferred Stock shall be adjusted by multiplying the number of shares of Conversion Stock issuable upon conversion of the Series A Preferred Stock immediately prior to any adjustment in connection with such issuance or grant by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding (exclusive of any treasury shares) on the record date of issuance or grant of such Rights plus the number of additional shares of capital stock that would be issued upon exercise of the Rights, and the denominator of which shall be the number of shares of Common Stock outstanding (exclusive of any treasury shares) on the record date of issuance or grant of such Rights plus the number of shares which the aggregate offering price (as defined below) of the total number of shares of Common Stock so offered would purchase at the current Market Price per share of Common Stock on the record date, less customary discounts and commissions. Such adjustment shall be made immediately after the record date for the issuance or granting of such Rights. For purposes of this clause , the "offering price per share" of Common Stock shall in the case of Rights be determined by dividing (x) the total amount received or receivable by the Company in consideration of the issuance of such Rights plus the total consideration payable to the Company upon exercise thereof (the "aggregate offering price"), by (y) the total number of shares of Common Stock covered by such Rights. In case the Company shall issue, at any time on or after April 1, 1998, to all holders of its Common Stock any Rights (excluding rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest), at the offering price per share which, before deduction of customary discounts and commissions, is lower than the current Market Price per share of Common Stock on the record date of such issuance or grant, whether or not, in the case of Rights, such Rights are immediately exercisable or convertible, then the holders of the Series A Preferred Stock shall be entitled to receive all of the same Rights pro rata as the holders of Common Stock, on an as-converted basis, as and when distributed to the holders of Common Stock. For the purposes of this clause (2), the number of shares of Common 10 Stock at any time outstanding shall not include shares held in the treasury of the Company. The Company shall not issue any Rights in respect of shares of Common Stock held in the treasury of the Company. (3) Dividends and Distributions. In case the Company shall distribute --------------------------- to all holders of its shares of Common Stock any dividend or other distribution of evidences of its indebtedness or other assets (in each case other than cash dividends and other than as provided in clause (1) above in which the holders of the Series A Preferred Stock are otherwise entitled to share, as provided herein) or Rights, then, in each case, all holders of the Series A Preferred Stock shall be entitled to receive all of the same dividends, distributions or Rights, as the case may be, as the holders of Common Stock, on an as-converted basis, as and when distributed to the holders of Common Stock, at such time, if any, that the holders of the Series A Preferred Stock shall have elected to convert such stock to Common Stock, as provided herein. (4) Computations. For the purpose of any computation under clauses (1) ------------ and (2) above, the current Market Price per share of Common Stock at any date shall be as set forth in (i) the definition of Market Value for the 10 consecutive trading days commencing 20 trading days prior to the earlier to occur of (A) the date as of which the market price is to be computed or (B) the last full trading day before the commencement of "ex-dividend" trading in the Common Stock relating to the event giving rise to the adjustment required by clause (1) or (2) or (ii) any other arm's-length adjustment formula that the Board may use in good faith. In the event the Common Stock of the Company is not then publicly traded or if for any other reason the current market price per share cannot be determined pursuant to the foregoing provisions of this clause (4) the current market price per share shall be the Fair Value thereof. (5) Adjustment. Whenever the number of shares of Conversion Stock ---------- issuable upon exercise of the Series A Preferred Stock is adjusted as provided under clause (1) or (2), the Conversion Price payable upon conversion of the Series A Preferred Stock shall be adjusted by multiplying such Conversion Price immediately prior to such adjustment by a fraction, the numerator of which shall be the number of shares of Conversion Stock issuable upon conversion of any shares of Series A Preferred Stock immediately prior to such adjustment, and the denominator of which shall be the number of shares of Conversion Stock issuable upon conversion of any shares of Series A Preferred Stock immediately thereafter. (6) Securities. For the purpose of this Section (7), the term "shares ---------- of Common Stock" shall mean (i) the class of stock designated as Common Stock, par value $.01 per share, of the Company on the date of this Agreement or (ii) any other class of stock resulting from successive changes or reclassifications of such shares consisting 11 solely of changes in par value, or from par value to no par value, or from no par value to par value. (7) Re-Adjustment. If, at any time after any adjustment to the ------------- number of Shares of Conversion Stock issuable upon conversion of the Series A Preferred Stock or the Conversion price shall have been made pursuant to clause (5) of this Section 6, any rights, options, warrants or other securities convertible into or exchangeable for shares of Common Stock shall have expired, or any thereof shall not have been exercised, the Conversion Price and the number of shares of Conversion Stock issuable upon conversion of the Preferred Stock shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case may be) as if (A) the only shares of Common Stock offered were the shares of Common Stock, if any, actually issued or sold upon the exercise of such rights, options or warrants and (B) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise plus the aggregate consideration, if any, actually received by the Company for the issuance, sale or grant of all such rights, options or warrants whether or not exercised; provided, further that no such readjustment shall have the effect of increasing the Conversion Price or decreasing the number of Conversion Shares issuable upon conversion of the Series A Preferred Stock by an amount (calculated by adjusting such increase or decrease as appropriate to account for all other adjustments pursuant to this Section 6 following the date of the original adjustment referred to above) in excess of the amount of the adjustment initially made in respect of the issuance, sale or grant of such rights, options or warrants. (d) Voluntary Adjustment by the Company. The Corporation may at its ----------------------------------- option, at any time during the term of the Preferred Stock, reduce the then current Conversion Price to any amount and for any period of time deemed appropriate by the Board in its sole discretion, but subject to approval by the holders of the majority of Series A Preferred Stock. (e) Reorganization, Reclassification, Consolidation, Merger or Sale. Any --------------------------------------------------------------- recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Corporation's assets to another Person or other transaction which is effected in such a manner that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock is referred to herein as an "Organic Change". Prior to the consummation of any Organic Change, the Corporation shall make appropriate provisions to ensure that each of the holders of each share of Series A Preferred Stock shall thereafter have the right to acquire and receive, in lieu of or in addition to (as the case may be) the shares of Conversion Stock immediately theretofore acquirable and receivable upon the conversion of such holder's Series A Preferred Stock, such shares of stock, securities or assets as such holder would have received in connection with such 12 Organic Change if such holder had converted its Series A Preferred Stock immediately prior to such Organic Change. In each such case, the Corporation shall also make appropriate provisions to ensure that the provisions of this Section 6 hereof shall thereafter be applicable to the Series A Preferred Stock. The Corporation shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof, the successor corporation (if other than the Corporation) resulting from consolidation or merger or the corporation purchasing such assets assumes by written instrument, the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire. (f) Notices. ------- (1) Immediately upon any adjustment of the Conversion Price for the Series A Preferred Stock, the Corporation shall give written notice thereof to all holders of Series A Preferred Stock setting forth in reasonable detail and certifying the calculation of such adjustment. (2) The Corporation shall given written notice to all holders of Series A Preferred Stock at least 30 days prior to the date on which the Corporation closes its books or takes a record for determining rights to receive any dividends or distributions. (3) The Corporation shall also give written notice to holders of Series A Preferred Stock at least 30 days prior to the date on which any Organic Change shall take place. S8C Registration of Transfer. The Corporation shall keep at its principal office a register for the registration of the record holders of the Series A Preferred Stock. Upon the surrender of any certificate representing Series A Preferred Stock at such place, the Corporation shall, at the request of the record holder of such certificate, execute and deliver (at the Corporation's expense, provided that the holder will be responsible for any transfer taxes if the certificate is registered in a new name) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares of the Series A Preferred Stock represented by the surrendered certificate. Each such new certificate shall be registered in such name and shall represent such number of shares of the Series A Preferred Stock as is requested by the holder of the surrendered certificate and shall be substantially identical in form to the surrendered certificate, and dividends shall accrue on the Series A Preferred Stock represented by such new certificate from the date to which dividends have been fully paid on such Series A Preferred Stock represented by the surrendered certificate. S9C Replacement. 13 Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of the Series A Preferred Stock, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation, or, in the case of any such mutilation upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such series represented by such lost, stolen, destroyed or mutilated certificate, and dividends shall accrue on the Series A Preferred Stock represented by such new certificate from the date to which dividends have been fully paid on such lost, stolen, destroyed or mutilated certificate. S10C Amendment and Waiver. No amendment, modification or waiver shall be binding or effective with respect to any provision of this Certificate of Designations hereof without the prior written consent of the holders of 50% or greater of the Series A Preferred Stock outstanding at the time such action is taken voting as a single class on a Common Stock equivalent basis. S11C Notices. Except as otherwise expressly provided hereunder, all notices referred to herein shall be in writing and shall be delivered by registered or certified mail, return receipt requested and postage prepaid, or by reputable overnight courier or telecopy service, charges prepaid, and shall be deemed to have been given when so mailed or sent (a) to the Corporation, at its principal executive offices and (b) to any stockholder, at such holder's address as it appears in the stock records of the Corporation (unless otherwise indicated by any such holder). 14 IN WITNESS WHEREOF, Cytogen Corporation has caused this Certificate of Designations to be executed this 25th day of September, 1996. CYTOGEN CORPORATION By: /s/ T. Jerome Madison -------------------------------- Name: T. Jerome Madison Title: Chief Financial Officer and Secretary EX-10.1 3 SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT dated as of September 26, 1996, between Cytogen Corporation, a Delaware corporation (the "Company"), and Elan International Services, Ltd., a Bermuda corporation (the "Purchaser"). R E C I T A L S : A. The Company desires to sell to the Purchaser and the Purchaser desires to purchase from the Company the shares of Common Stock and Series A Preferred Stock (each as defined below) provided for herein, in connection with which the Company will issue to the Purchaser the Warrant (as defined below). B. Simultaneously with the consummation of the transactions contemplated hereby, the Company shall capitalize Targon Corporation, a Delaware corporation ("Targon"), with the proceeds of the sale of the Securities (as defined below) contemplated hereby, pursuant to a Stock Subscription Agreement dated as of the date hereof between the Company and Targon (as amended at any time, the "Subscription Agreement"). C. In connection with such transactions, the Company has granted to the Purchaser certain additional rights, as provided herein. A G R E E M E N T : The parties agree as follows: SECTION 1. Certificate of Designations; Authorizations; Etc. ------------------------------------------------ (a) Prior to the Closing (as defined below), the Company shall file with the Secretary of State of the State of Delaware a Certificate of Designations (the "Certificate of Designations"), in the form attached hereto as Exhibit A, setting forth, among other things, the designations, powers, - --------- preferences and rights of the Series A Preferred Stock, $.01 par value per share (the "Series A Preferred Stock"). (b) The Company has authorized the issuance to the Purchaser of: (i) 1,000 shares of the Company's Series A Preferred Stock; (ii) up to 1,000,000 shares of the Company's common stock, par value $.01 per share (the "Common Stock"; together with the Series A Preferred Stock, the "Securities"), issuable as provided in Section 2(b) hereof; (iii) up to 1,785,750 shares of Common Stock (subject to adjustment as provided in the Certificate of Designations) issuable upon conversion of the Series A Preferred Stock (the "Conversion Shares"); and (iv) up to 1,000,000 shares of Common Stock issuable under the Warrant (the "Warrant Shares"). SECTION 2. Closings. -------- (a) The closing of the transactions contemplated hereby (the "Closing") shall occur on or prior to September 26, 1996 (the "Closing Date"), at the offices of O'Sullivan Graev & Karabell, LLP, 30 Rockefeller Plaza, New York, New York 10112, or such other place as the parties may agree. (b) At the Closing, the Company shall sell to the Purchaser, and the Purchaser shall purchase from the Company, upon the terms and subject to the conditions set forth herein, for an aggregate purchase price for the Securities of $20 million, (i) a number of shares of Common Stock equal to the amount obtained by dividing (A) $5 million by (B) the amount obtained by (I) multiplying the average of the closing prices of the Company's Common Stock on the Nasdaq Stock Market for the 10 trading days preceding the day which is two business days prior to the date hereof and (II) .925 (i.e., 932,535 Shares) and (ii) 1,000 shares of Series A Preferred Stock, which shall simultaneously be transferred, in immediately available funds by wire transfer, by the Purchaser to Targon. (c) At the Closing, the parties hereto shall execute and deliver to each other, as applicable: (i) certificates in respect of the Common Stock and Series A Preferred Stock, which shall be duly executed and delivered by the Company; (ii) a Warrant in the form attached hereto as Exhibit B --------- (as amended at any time, the "Warrant"); a Registration Rights Agreement between the Company and the Purchaser substantially in the form attached hereto as Exhibit C (as amended at any time, the "Cytogen Registration --------- Rights Agreement"); a Registration Rights Agreement among Targon, the Purchaser and the Company substantially in the form attached hereto as Exhibit D as contemplated by the Subscription Agreement (as amended at any --------- time, the "Newco Registration Rights Agreement"); the Joint Development and Operating Agreement among the Company, Elan Corporation, plc and Targon (as amended at any time, the "Development Agreement"); each of which shall be executed and delivered by each of the parties thereto, as applicable; and (iii) certificates as to the effectiveness of this Agreement, the lack of breaches and defaults hereunder, the incumbency of the officers executing the Transaction Documents (as defined below) and such other matters as shall be customary for transactions of this type and as may be reasonably requested by each of the parties hereto of the other. In addition, at the Closing, the Company shall (1) cause to be delivered to the Purchaser an opinion of counsel, from counsel and in form reasonably satisfactory to the Purchaser, covering the due issuance of the Common Stock and the Series A Preferred Stock and -2- the fact that such securities (and the Common Stock underlying them), upon issuance, will be duly and validly issued and fully-paid and non-assessable and (2) take such further actions in order to implement the transactions contemplated hereby and by the other Transaction Documents (or to better assure unto the Purchaser the rights intended to be afforded hereunder) that the other party shall reasonably request. (d) The Common Stock issued pursuant to this Agreement shall be registered for sale under the Securities Act of 1933, as amended (the "Securities Act") on a registration statement on Form S-3 (or other form satisfactory to the Purchaser). (e) The Series A Preferred Stock, the Conversion Shares, the Warrant and the Warrant Shares will be issued under an exemption or exemptions from registration under the Securities Act; accordingly, the certificates evidencing the Series A Preferred Stock, the Conversion Shares, the Warrant and the Warrant Shares shall, upon issuance, contain the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF EFFECTIVE REGISTRATION UNDER SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS." (f) The closing under the Stock Subscription Agreement dated as of September 26, 1996 between Targon and the Company shall occur on the Closing Date. SECTION 3. Exchange and Conversion of Series A Preferred Stock. --------------------------------------------------- (a) The Company hereby grants to the Purchaser, effective on the Closing Date, the right (the "Exchange Right") in exchange for the delivery to the Company of all of the shares of the Company's Series A Preferred Stock, to acquire (i) through March 31, 1998, 500,000 shares of common stock, no par value, of Targon (the "Targon Common Stock"), which 500,000 shares of Targon Common Stock shall initially represent 50% of the aggregate issued and outstanding shares of Targon Common Stock, other than the shares of Targon Common Stock, if any, issued or issuable (pursuant to options or otherwise) to members of management or employees or directors of, or consultants to, Targon (collectively, the "Management Shares"); thereafter, the number of shares of Targon Common Stock that the Purchaser shall be entitled to receive upon exercise of the Exchange Right shall be decreased (if the Exchange Right is not exercised on or prior to the applicable date set forth below) to (A) 400,000 shares of Targon Common Stock owned by the Company from and after April 1, 1998 through and including September 30, 1999; (B) 300,000 shares of Targon Common Stock owned by the Company -3- from and after October 1, 1999 through and including September 30, 2000; and (C) 200,000 shares of Targon Common Stock owned by the Company from and after October 1, 2000 through and including September 30, 2001. The Management Shares shall result in pro rata dilution of Cytogen and Elan based on their respective ownership interests in the Company at the time of issuance of such Management Shares. (b) In order to exercise the Exchange Right, the Purchaser shall provide written notice thereof to the Company on or prior to September 30, 2001, indicating the Purchaser's desire to so exercise such right. In such event, a closing shall be held on a date designated by the Purchaser in accordance with the Certificate of Designations, at which the Company shall deliver to the Purchaser the applicable number of shares of Targon Common Stock, and the Purchaser shall deliver to the Company all of the issued and outstanding shares of Series A Preferred Stock referred to in Section 3(a) above, and the parties shall exchange other customary closing documents and instruments. In the event that the Purchaser exercises the Exchange Right, the Purchaser thereafter shall not have the right to convert the Series A Preferred Stock into Common Stock, as otherwise provided in the Certificate of Designations (the "Conversion Right"). (c) In the event that the Purchaser exercises the Exchange Right, then, in such event, the Warrant (as defined below) shall immediately become exercisable, as provided therein. The Warrant shall be exercisable multiple times up to the number of shares of Common Stock covered thereby for its term. (i) In the event that the Development Agreement is terminated, as provided in Article XIX thereof prior to the exercise of the Exchange Right, the Exchange Right shall thereupon cease and be of no further force and effect. (d) At any time that the Purchaser shall not have elected the Exchange Right, the Purchaser shall have the right to convert all of the Series A Preferred Stock into Conversion Shares (or such Series A Preferred Stock shall be deemed converted into Conversion Shares) in accordance with the Certificate of Designations. If the right to convert the Series A Preferred Stock into Conversion Shares is exercised, then: (i) The Exchange Right shall thereupon expire and be of no further force and effect. (ii) Cytogen shall cause Targon (which covenant is hereby agreed to by Targon), to convey to or as directed by the Purchaser (including to one of the Purchaser's affiliates) all of Targon's right, title and interest in and to the ATS Compounds (as defined in the Development Agreement) and any development work in respect thereof and related Technology (as defined in the Development Agreement) undertaken at any time by or on behalf of Targon, for a payment to the Company of $10 million, which shall be paid by the Purchaser or one of its Affiliates upon the exercise of the Conversion Right. Such transfer shall be pursuant to documents and instruments containing customary provisions and reasonably satisfactory to the Purchaser; it being understood that an instrument in the form of the Technology Transfer Agreement dated -4- as of the date hereof between Advanced Therapeutic Systems, Ltd., a Bermuda corporation, and Targon (in relation to the transfer of the ATS Compounds but containing appropriate conforming modifications, including the lack of payment therefor) shall be deemed to be satisfactory. In addition, in such event, the Purchaser shall thereafter pay or cause to be paid to Targon a royalty of 4% of net sales of products derived from the ATS Compounds on the terms and conditions set forth in Section 7.9(c) of the Development Agreement (with appropriate changes to conform to the proper parties). (e) The Purchaser and the Company shall, if required, mutually reasonably cooperate with each other in connection with the filing of all documents and instruments necessary or appropriate in connection with a pre- merger notification with the Federal Trade Commission (the "FTC") and the Department of Justice (the "DOJ") pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). The Purchaser and the Company shall use their respective commercially reasonable efforts promptly to comply with all formal or informal requests for additional information by the FTC or the DOJ in respect of such filing. It shall be a condition to the exercise of the Exchange Right or conversion of the Series A Preferred Stock into the Conversion Shares that the parties shall have complied with applicable law relating thereto, including the consummation of all necessary filings under the HSR Act, and all applicable waiting periods shall have expired. (f) The Purchaser and the Company agree that the exercise of the Exchange Right shall be treated by them as a redemption in payment for the Series A Preferred Stock under Section 302(a) of the Internal Revenue Code of 1986, as amended. SECTION 4. Representations and Warranties of the Company. --------------------------------------------- The Company hereby represents and warrants to the Purchaser as follows, as of the date hereof and as of the Closing Date: 4.1 Organization. ------------ The Company is a company duly organized, validly existing and in good standing under the laws of the State of Delaware and has all the requisite corporate power and authority to own and lease its properties, to carry on its business as presently conducted and as proposed to be conducted and to carry out the transactions contemplated hereby. The Company is qualified and in good standing to do business in the State of New Jersey and each other jurisdiction in which the nature of the business conducted or the property owned by it requires such qualification, except where the failure to so qualify would not reasonably be expected to have a material adverse effect on the business of the Company. 4.2 Capitalization. -------------- (a) The authorized and outstanding shares of capital stock of the Company are as of the date hereof, as set forth in the Company's latest SEC Filings (as defined below) and except as set forth on Schedule 4.2 hereto. ------------ -5- (b) Except as set forth in the Company's latest SEC Filings and except as set forth in Schedule 4.2, as of the Closing, there are no options, ------------ warrants or other rights outstanding to purchase, or any securities convertible into, any of the Company's authorized and unissued capital stock. Other than as set forth in this Agreement and as described in Schedule 4.2, there are no ------------ agreements, arrangements or understandings concerning the voting, acquisition or disposition of any of the Company's outstanding securities to which the Company is a party or of which it is otherwise aware, and, other than as set forth in the Cytogen Registration Rights Agreement there are no agreements to register any of the Company's outstanding securities under the U.S. federal securities acts. (c) All of the outstanding shares of capital stock of the Company have been issued in accordance with applicable state and federal laws and regulations governing the sale and purchase of securities and none of such shares carries preemptive or similar rights. 4.3 Authorization of Agreement. -------------------------- The execution, delivery and performance by the Company of this Agreement and each other document or instrument contemplated hereby, including without limitation, the Certificate of Designations, the Securities, the Warrant, the Cytogen Registration Rights Agreement, the Development Agreement and the Subscription Agreement (collectively, and together with the Targon Registration Rights Agreement, the "Transaction Documents"), have been duly authorized by all requisite corporate action by the Company; and this Agreement and each other of the Transaction Documents have been duly executed and delivered by the Company and are the valid and binding obligation of the Company, enforceable against the Company in accordance with their respective terms. 4.4 No Conflicts. ------------ The execution, delivery and performance by the Company of this Agreement and each of the other Transaction Documents, the issuance, sale and delivery of the Securities (and the issuance of any Common Stock issuable upon the conversion or exercise thereof), and compliance with the provisions hereof by the Company, will not (a) violate any provision of applicable law, statute, rule or regulation applicable to the Company or any ruling, writ, injunction, order, judgment or decree of any court, arbitrator, administrative agency or other governmental body applicable to the Company or any of its properties or assets or (b) conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute (with notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, or result in the creation of, any Encumbrance (as defined below) upon any of the properties or assets of the Company under, the Certificate of Incorporation, as amended, the Certificate of Designations or By- laws of the Company or any material contract to which the Company is a party, except where such violation, conflict or breach would not, individually or in the aggregate, have a material adverse effect on the Company. As used herein, "Encumbrance" shall mean any liens, charges, encumbrances, equities, claims, options, proxies, pledges, security interests, or other similar rights of any nature, except for such conflicts, breaches or defaults which would not, individually or in the aggregate, have a material adverse effect on the Company. -6- 4.5 Approvals. --------- Except for (a) the filing of the Certificate of Designations on or prior to the Closing, and (b) the filing of any notice subsequent to the Closing which may be required under applicable federal or state securities law (which, if required, shall be filed on a timely basis as may be so required), no permit, authorization, consent or approval of or by, or any notification of or filing with, any Person (governmental or private) is required in connection with the execution, delivery or performance of this Agreement by the Company. There is no approval of the Company's stockholders required under applicable laws, regulations or stock exchange or listing authority rules or regulations in connection with the execution and delivery of the Transaction Documents or the consummation of the transactions contemplated thereby, including the issuance of the Securities or Common Stock underlying the Securities. 4.6 Authorization of the Shares; Etc. -------------------------------- The issuance, sale and delivery by the Company of the Securities (and the Conversion Shares and the Warrant Shares) have been duly authorized by all requisite corporate action of the Company, and the Securities and the Conversion Shares and the Warrant Shares, when issued as contemplated hereby, will be validly issued and outstanding, fully paid and nonassessable and not subject to preemptive or any other similar rights of the stockholders of the Company or others. 4.7 Filings. ------- The Company has filed its annual report on Form 10-K for the year ended December 31, 1995, its quarterly reports on Form 10-Q for the quarters ended March 31 and June 30, 1996, its proxy materials in respect of the Annual Meeting of Stockholders held in 1996 (collectively, including all exhibits and schedules required to be filed in connection therewith, the "SEC Filings"), in a timely manner and as otherwise required by applicable laws and regulations, including the federal securities acts. The audited financial statements of the Company for the fiscal year ended December 31, 1995 included in the SEC Filings (the "Audited Financial Statements"), and the Company's unaudited balance sheets for the period ending June 30, 1996, together with the accompanying statements of operations and cash flows, including the notes thereto (the "June Financial Statements" included in the SEC Filings; collectively, with the Audited Financial Statements, the "Financial Statements") fairly present the financial condition of the Company at the dates thereof and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the period indicated (except as may be otherwise indicated in such financial statements or the notes thereto), subject, in the case of the June Financial Statements, to normal year-end audit adjustments (which shall not be material in the aggregate) and the absence of footnote disclosure. 4.8 Absence of Changes. ------------------ Except as set forth on Schedule 4.8, since June 30, 1996, there has ------------ been no change in the assets, liabilities, financial condition or operating results of the Company from that reflected on the Form 10-Q filed with the Securities and Exchange Commission, except changes -7- in the ordinary course of business that have not been, individually or in the aggregate, materially adverse to the assets, properties, financial condition, operating results or business of the Company. 4.9 Disclosure. ---------- This Agreement and the other Transaction Documents do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements contained herein and therein not misleading. The Company is not aware of any material contingency, event or circumstances relating to its business or prospects, which could have a material adverse effect thereon which should be but is not disclosed in the SEC Filings in order for the disclosure therein relating to the Company not to be misleading in any material respect. 4.10 Brokers or Finders. ------------------ The Company has not retained any investment banker, broker or finder in connection with the transactions contemplated by this Agreement and the other Transaction Documents. The Company agrees to indemnify and hold the Purchaser harmless against any liability, settlement or expense arising out of, or in connection with, any such claim. 4.11 Stock Subscription Agreement. ---------------------------- The Subscription Agreement has been executed and delivered by each of the parties thereto and is in full force and effect and there is no default or breach by the Company thereunder. 4.12 Targon. ------ The Company has not caused or, to the Company's knowledge, permitted Targon to incur any obligations or liabilities from the date of its formation through and including the date hereof. SECTION 5. Representations and Warranties of the Purchaser. ----------------------------------------------- The Purchaser hereby represents and warrants to the Company as follows: 5.1 Organization. ------------ The Purchaser is a company duly organized, validly existing and in good standing under the laws of Bermuda and has all the requisite corporate power and authority to own and lease its properties, to carry on its business as presently conducted and as proposed to be conducted and to carry out the transactions contemplated hereby. The Purchaser is qualified and in good standing to do business in each jurisdiction in which the nature of the business conducted or the property owned by it requires such qualification, except where the failure to do so qualify would not reasonably be expected to have a material adverse effect on the business of the Purchaser. -8- 5.2 General. ------- The Purchaser has full legal right, power and authority to enter into this Agreement and perform its obligations hereunder, which have been duly authorized by all requisite corporate action. This Agreement is the valid and binding obligation of the Purchaser, enforceable against it in accordance with its terms. 5.3 No Conflicts. ------------ The execution, delivery and performance by the Purchaser of this Agreement, the purchase and acceptance of the Securities (and the acceptance of any Common Stock issuable upon the conversion of exercise thereof), and compliance with the provisions hereof by the Purchaser, will not (a) violate any provisions of applicable law, statute, rule or regulation applicable to the Purchaser or any ruling, writ, injunction, order, judgment or decree of any court, arbitrator, administrative agency of other governmental body applicable to the Purchaser of any of its properties or assets or (b) conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute (with which or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, or result in the creation of, any Encumbrance upon any of the properties or assets of the Purchaser under, the Certificate of Incorporation or By-laws of the Purchaser or any material contract to which the Purchaser is a party, except where such violation, conflict or breach would not, individually or in the aggregate, have a material adverse effect on the Purchaser. 5.4 Approvals. --------- No permit, authorization, consent or approval of or by, or any notification of or filing with, any Person (governmental or private) is required in connection with the execution, delivery or performance of this Agreement by the Purchaser. 5.5 Investment Representations. -------------------------- (a) The Purchaser is capable of evaluating the merits and risks of its investment in the Company and has the capacity to protect its own interests. The Purchaser has not been formed solely for the purpose of making this investment and is acquiring the Securities and the underlying Common Stock for investment for its own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution of any part thereof. The Purchaser understands that the Securities (and the Conversion Shares and the Warrant Shares) have not been registered under the Securities Act or applicable state and other securities laws by reason of a specific exemption from the registration provisions of the Securities Act and applicable state and other securities laws, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of such Purchaser's representations as expressed herein. The Purchaser understands that no public market now exists for any of the Securities and that there is no assurance that a public market will ever exist for the Securities. (b) Nothing contained in this Section 5.5 shall limit any of the Company's representations or warranties or limit the Purchaser's recourse in respect thereof. -9- 5.6 Brokers or Finders. ------------------ Except as previously disclosed to the Company, the Purchaser has not retained any investment banker, broker or finder in connection with the purchase of the Securities or the transactions contemplated by this Agreement and the other Transaction Documents. SECTION 6. Covenants of the Company. ------------------------ (a) From and after the date hereof, (i) the Company agrees to do or cause to be done such further acts and things and deliver or cause to be delivered to the Purchaser such additional assignments, agreements, powers and instruments, as the Purchaser may reasonably require or deem advisable to carry into effect the purposes of this Agreement and the other Transaction Documents or better to assure and confirm unto the Purchaser its rights, powers and remedies hereunder and thereunder. (b) Until the earlier of the exercise or lapsing of the Exchange Right, the Company shall not transfer, assign, sell, hypothecate or otherwise dispose of any shares of Targon Common Stock other than to the Purchaser upon exercise of the Exchange Right and, to secure the Company's obligations to the Purchaser with respect to the Exchange Right, the Company is hereby delivering to the Purchaser the certificates for such shares of Targon Common Stock, together with a duly executed stock power in blank, to be held by the Purchaser pending such exercise or lapsing of the Exchange Right, and the Purchaser has filed a form UCC-1 with the Secretary of State of the State of New Jersey in respect thereof. Upon the unexercised lapsing or termination of the Exchange Right, such shares of Targon Common Stock shall be returned by the Purchaser to the Company. Upon the reduction of the number of shares of Targon Common Stock subject to the Exchange Right under Section 3(a), all shares of Targon Common Stock no longer subject to the Exchange Right shall be returned by the Purchaser to the Company and appropriate replacement certificate(s) shall be issued. After the lapsing or exercise of the Exchange Right, such transfers, assignments, sales, hypothecations or other dispositions of the Targon Common Stock shall be governed by the Development Agreement. SECTION 7. [Intentionally omitted]. ----------------------- SECTION 8. Closing and Survival Matters. ---------------------------- The representations herein shall survive for a period of 18 months following the Closing. SECTION 9. Exchanges; Lost, Stolen or Mutilated Certificates. ------------------------------------------------- Upon surrender by the Purchaser to the Company of a certificate representing any Securities acquired by the Purchaser hereunder, the Company at its expense will issue in exchange therefor and deliver to the Purchaser, a new certificate or certificates representing such Securities, in such denomination or denominations, aggregating the number of shares or warrants underlying such Securities represented by the certificate so surrendered, as may be requested by the Purchaser. Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any certificate representing any Securities purchased or acquired by -10- the Purchaser hereunder, and in case of any such loss, theft or destruction, upon delivery of any indemnity agreement reasonably satisfactory to the Company, or in case of any such mutilation, upon surrender and cancellation of such certificate, the Company at its expense will issue and deliver to the Purchaser a new certificate representing such Securities of the same tenor, in lieu of such lost, stolen or mutilated certificate. SECTION 10. Parties in Interest; Etc. ------------------------ This Agreement shall not be assigned, transferred or delegated by either party hereto (other than in the case of the Purchaser to one or more of its affiliates) without the prior written consent of the other party. Subject to the preceding sentence, this Agreement shall bind and inure to the benefit of the Company, the Purchaser and their respective successors and assigns. SECTION 11. Entire Agreement. ---------------- This Agreement and the Transaction Documents contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings among the parties with respect thereto. SECTION 12. Indemnification. --------------- (a) In addition to all rights and remedies available to the parties hereunder at law or in equity, each party (in such capacity, an "Indemnifying Party") shall indemnify the other party, and their respective affiliates and their respective stockholders, officers, directors, employees, agents, representatives, successors and permitted assigns (collectively, the "Indemnified Persons") and save and hold each of them harmless against and pay on behalf of or reimburse such party as and when incurred for (a) any loss, liability, demand, claim, action, cause of action, cost, damage, deficiency, tax, penalty, fine or expense, whether or not arising out of any claims by or on behalf of the Company or any third party, including interest, penalties, reasonable attorneys' fees and expenses and all amounts paid in investigation, defense or settlement of any of the foregoing (collectively, "Losses") which any such party may suffer, sustain or become subject to, as a result of, in connection with, relating or incidental to or by virtue of: (i) any misrepresentation or breach of warranty on the part of the Indemnifying Party under Sections 4 or 5 of this Agreement; or (ii) any nonfulfillment or breach of any covenant or agreement on the part of the Indemnifying Party under this Agreement. (b) The maximum recovery of the Purchaser under this Section 12 shall not exceed $5 million; provided, that such amount shall be increased on a dollar for dollar basis by the amount of the payment made by the Purchaser under Section 3(d)(ii) above. The maximum recovery of the Company under this Section 12 shall not exceed the actual costs and expenses of the Company in negotiating, executing and delivering this Agreement and out-of-pocket expenses incurred in connection with the successful assertion of any claim hereunder. Neither -11- Indemnified Party shall assert any such claim unless Losses in respect thereof, when aggregated with all previous Losses hereunder, equal or exceeds $50,000, but at such time that an Indemnified Party is so permitted to assert a claim, such claim shall include all Losses covered by this indemnification. (c) Notwithstanding the foregoing, and subject to the following sentence, upon judicial determination, which is final and no longer appealable, that the act or omission giving rise to the indemnification set forth above resulted primarily out of or was based primarily upon the Indemnified Party's gross negligence, fraud or willful misconduct (unless such action was based upon the Indemnified Person's reliance in good faith upon any of the representations, warranties, covenants or promises made by the Indemnifying Party herein), by the indemnified party, the Indemnifying Party shall not be responsible for any Losses sought to be indemnified in connection therewith, and the Indemnifying Party shall be entitled to recover from the Indemnified Persons all amounts previously paid in full or partial satisfaction of such indemnity, together with all costs and expenses of the Indemnifying Party reasonably incurred in effecting such recovery, if any. (d) All indemnification rights hereunder shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby to the extent provided in Section 8(b) above, irrespective of any investigation, inquiry or examination made for or on behalf of, or any knowledge of the Indemnified Persons or the acceptance of any certificate or opinion. All indemnification rights hereunder shall terminate 18 months after the Closing, except for claims made in writing prior to such time. (e) If for any reason the indemnity provided for in this Section 12 is unavailable to any Indemnified Person or is insufficient to hold each such Indemnified Person harmless from all such Losses arising with respect to the transactions contemplated by this Agreement, then the Indemnifying Party and the Indemnified Person shall each contribute to the amount paid or payable by such Loss in such proportion as is appropriate to reflect not only the relative benefits received by the Indemnifying Party on the one hand and such Indemnified Person on the other but also the relative fault of the Indemnifying Party and the Indemnified Person as well as any relevant equitable considerations. The indemnity, contribution and expenses reimbursement obligations that the Indemnifying Party has under this Section 12 shall be in addition to any liability that the Indemnifying Party may otherwise have. The Indemnifying Party further agrees that the indemnification and reimbursement commitments set forth in this Agreement shall apply whether or not the Indemnified Person is a formal party to any such lawsuits, claims or other proceedings. SECTION 13. Notices. ------- (a) All notices, demands and requests of any kind to be delivered to any party in connection with this Agreement shall be in writing and shall be deemed to have been duly given if personally delivered or if sent by nationally-recognized overnight courier or by registered or certified airmail, return receipt requested and postage prepaid, or by facsimile transmission, addressed as follows: (i) if to the Company, to: -12- Cytogen Corporation 600 College Road East CN 5308 Princeton, New Jersey 08540-5308 Telecopy: (609) 951-9298 Attention: President; with a copy to: Dewey Ballantine 1301 Avenue of the Americas New York, New York 10019 Telecopy: (212) 259-6333 Attention: Frederick W. Kanner, Esq. (ii) if to the Purchaser, to: Elan International Services, Ltd. 102 St. James Court Flatts Smiths SL04 Bermuda Telecopy: (441) 292-2224 Attention: President; with a copy to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, New York 10112 Telecopy: (212) 408-2420 Attention: David Robbins, Esq. or to such other address as the party to whom notice is to be given may have furnished to the other parties hereto in writing in accordance with the provisions of this Section 13. Any such notice or communication shall be deemed to have been received (i) in the case of personal delivery or facsimile transmission, on the date of such delivery, (ii) in the case of nationally- recognized overnight courier, on the next business day after the date when sent and (iii) in the case of mailing, on the third business day following that on which the piece of mail containing such communication is posted. (b) Notices hereunder may be given on behalf of the parties by their respective attorneys. -13- SECTION 14. Amendments. ---------- This Agreement may not be modified or amended, or any of the provisions hereof waived, except by written agreement of the Company and the Purchaser. SECTION 15. Counterparts and Facsimile. -------------------------- This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. This Agreement may be signed and delivered to the other party by facsimile transmission; such transmission shall be deemed a valid signature hereof. SECTION 16. Headings. -------- The section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 17. Governing Law. ------------- This Agreement shall be governed by and construed in accordance with the laws of the State of New York (without giving effect to principles of conflicts of laws). SECTION 18. Expenses. -------- Targon shall bear and be responsible for the costs and expenses of each of the parties incurred in connection with this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby. SECTION 19. Public Releases. --------------- The parties reasonably shall agree upon the contents of a press release or releases and other public disclosure in respect of the transactions contemplated hereby and the other Transaction Documents and, except as specifically may otherwise be required by applicable law, each party covenants not to issue such release or make such disclosure absent such agreement. SECTION 20. Certain Additional Covenants and Representations. ------------------------------------------------ (a) The Purchaser covenants that it will not transfer, assign, sell, hypothecate or otherwise dispose of (other than to its affiliates) the shares of Series A Preferred Stock prior to the exercise or lapsing of the Exchange Right, without the prior written consent of the Company. (b) Targon hereby restates and repeats for the benefit of the Purchaser, mutatis mutandis, each of the representations and warranties made to the Company in the Subscription Agreement. -14- IN WITNESS WHEREOF, each of the undersigned has duly executed this Securities Purchase Agreement as of the date first written above. CYTOGEN CORPORATION By: /s/ Thomas J. McKearn ------------------------------ Name: Thomas J. McKearn Title: Chairman, President and CEO ELAN INTERNATIONAL SERVICES, LTD. By: /s/ Thomas Lynch ------------------------------- Name: Thomas Lynch Title: Executive Vice President & CFO Agreed to the provisions of Sections 2 (d)(iii), 18 and 21(b): TARGON CORPORATION By: /s/ Michael Sember ------------------------------- Name: Michael Sember Title: CEO & Chairman Schedule 4.2 ------------ As of the date hereof, there are 48,301,195 shares of the Company's capital stock outstanding. Schedule 4.8 ------------ None. EX-10.2 4 WARRANT THIS WARRANT AND THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF EFFECTIVE REGISTRATION UNDER SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS OR AN EXEMPTION THEREFROM UNDER SUCH ACT AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS. CYTOGEN CORPORATION ------------------- WARRANT NO. W-1 SEPTEMBER 26, 1996 VOID AFTER MARCH 31, 2003 (or earlier upon the occurrence of certain events described below) THIS CERTIFIES that, for value received, ELAN INTERNATIONAL SERVICES, LTD., a Bermuda corporation, or permitted assigns (collectively, the "Holder"), shall be entitled to subscribe for and purchase from CYTOGEN CORPORATION, a Delaware corporation (the "Company"), up to 1,000,000 shares (the "Warrant Shares"), subject to adjustment as provided herein, of Common Stock, $.01 par value per share, of the Company (the "Common Stock"), at the Exercise Price (as defined in Section 2 hereof), during the Exercise Period (as defined in Section 1 hereof), pursuant to the terms and subject to the conditions hereof. This Warrant is being issued pursuant to the Securities Purchase Agreement dated as of September 26, 1996 (as amended from time to time, the "Purchase Agreement") between the Company and the initial Holder. Capitalized terms used herein but not otherwise defined herein have the meanings ascribed thereto in the Purchase Agreement. SECTION 1. Exercise Period. This Warrant may be exercised by the Holder --------------- at any time and from time to time after the date hereof and on or prior to March 31, 2003; provided, that the Holder shall have exercised the Exchange Right as provided for in the Purchase Agreement on or prior to such exercise date (such period being herein referred to as the "Exercise Period"). If the Exchange Right is not exercised by the Holder on or prior to September 30, 2001, this Warrant shall be automatically cancelled and become null and void by its terms and without any action on the part of the Company, and the Company shall give written notice to the Holder to surrender such cancelled warrant to the Company promptly upon the cancellation of this Warrant. SECTION 2. Exercise Price. The exercise price (the "Exercise Price") for -------------- each Warrant Share shall be $8.40 if the Exchange Right is exercised on or prior to September 30, 1997; thereafter the Exercise Price will increase to $9.00 for the period commencing on October 1, 1997 and ending on March 31, 1998; $9.80 for the period commencing on April 1, 1998 and ending on September 30, 1998; $11.20 for the period commencing on October 1, 1998 and ending on September 30, 1999, $12.60 for the period commencing on October 1, 1998 and ending on September 30, 2000 and $14.00 for the period commencing on October 1, 2000 and ending on March 31, 2003, each of such amounts being subject to adjustment pursuant to Section 5 hereof. SECTION 3. Exercise Of Warrant; Warrant Shares. ----------------------------------- (a) The rights represented by this Warrant may be exercised, in whole or in any part (but not as to a fractional share of Common Stock), by (i) the surrender of this Warrant (properly endorsed) at the office of the Company (or at such other agency or office of the Company in the United States of America as it may designate by notice in writing to the Holder at the address of the Holder appearing on the books of the Company), (ii) delivery to the Company of a notice of election to exercise in the form of Exhibit A attached hereto, and (iii) --------- payment to the Company of the aggregate Exercise Price by cash, wire transfer funds or certified check. (b) Each date on which this Warrant is surrendered and on which payment of the Exercise Price is made in accordance with Section 3(a) above is referred to herein as an "Exercise Date." Simultaneously with each exercise, the Company shall issue and deliver a certificate or certificates for the Warrant Shares being purchased pursuant to such exercise, registered in the name of the Holder or the Holder's designee, to such Holder or designee, as the case may be. If such exercise shall not have been for the full number of Warrant Shares, then the Company shall issue and deliver to the Holder a new Warrant, registered in the name of the Holder, of like tenor to this Warrant, for the balance of the Warrant Shares that remain after exercise of the Warrant. (c) The person in whose name any certificate for shares of Common Stock is issued upon any exercise shall for all purposes be deemed to have become the holder of record of such shares as of the Exercise Date, except that if the Exercise Date is a date on which the stock transfer books of the Company are closed, such person or entity shall be deemed to have become the holder of record of such shares at the close of business on the next succeeding date on which the stock transfer books are open. The Company shall pay all documentary, stamp or other transactional taxes attributable to the issuance or delivery of shares of Common Stock upon exercise of all or any part of this Warrant; provided, however, that the Company shall not be required to pay any taxes which - -------- ------- may be payable in respect of any transfer involved in the issuance or delivery of any certificate for such shares in a name other than that of the Holder to the extent such taxes would exceed the taxes otherwise payable if such certificate had been issued to the Holder. SECTION 4. Representations, Warranties And Covenants As To Common Stock. ------------------------------------------------------------ 2 STOCK. The Company represents and warrants to the Holder that all shares of - ----- Common Stock which may be issued upon the exercise of this Warrant will, upon issuance, be validly issued, fully paid and nonassessable, with no personal liability attaching to the ownership thereof, and free from all taxes, liens and charges with respect to the issue thereof. The Company covenants to the Holder that it will from time to time take all such action as may be required to assure that the stated or par value per share of the Common Stock is at all times no greater than the then effective Exercise Price. The Company further covenants and agrees that the Company will take all such action as may be required to assure that the Company shall at all times have authorized and reserved, free from preemptive rights, a sufficient number of shares of its Common Stock to provide for the exercise of this Warrant. If any shares of Common Stock reserved for the purpose of issuance upon the exercise of this Warrant require registration with or approval of any governmental authority under any Federal or state law before such shares may be validly issued or delivered upon exercise to the Holder, then the Company shall in good faith and as expeditiously as possible, at the expense of the Company, endeavor to secure such registration or approval, as the case may be. SECTION 5. Adjustment Of Exercise Price. ---------------------------- (a) Changes in Common Stock. In case the Company shall at any time or ----------------------- from time to time after the date of this Agreement (i) pay a dividend or make any other distribution with respect to its Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, (iii) combine its outstanding shares of Common Stock or (iv) issue any shares of its capital stock or other assets in a reclassification or reorganization of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing entity), then the number and kind of shares of capital stock of the Company or other assets that may be received upon the exercise of this Warrant shall be adjusted to the number of the Warrant Shares and amount of any such securities, cash or other property of the Company which the holders would have owned or have been entitled to receive after the happening of any of the events described above had the Warrant been exercised immediately prior to the record date (or, if there is no record date, the effective date) for such event. An adjustment made pursuant to this clause (a) shall become effective retroactively immediately after the effective date in other cases. Any Warrant Share or other assets to be acquired as a result of such adjustment shall not be issued prior to the effective date of such event. For the purposes of this clause (a), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. (b) Issuance of Rights; Etc. In case the Company shall issue, at any time ------------------------ on or prior to March 31, 1998, to all holders of its Common Stock rights, options or warrants to subscribe for or purchase, or other securities exchangeable for or convertible into, shares of Common Stock (any such rights, options, warrants or other securities, collectively, "Rights") (excluding rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest) at a subscription offering, exercise or conversion price per share (as defined below, the "offering price per share") which, before deduction of customary discounts and commissions, is lower than the current Market Price per share of Common Stock on the record date of such issuance of grant, whether or not, in the case of Rights, such Rights are 3 immediately exercisable or convertible, then the number of Warrant Shares issuable upon exercise of this Warrant shall be adjusted by multiplying the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to any adjustment in connection with such issuance or grant by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding (exclusive of any treasury shares) on the record date of issuance or grant of such Rights plus the number of additional shares of capital stock that would be issued upon exercise of the Rights, and the denominator of which shall be the number of shares of Common Stock outstanding (exclusive of any treasury shares) on the record date of issuance or grant of such Rights plus the number of shares which the aggregate offering price (as defined below) of the total number of shares of Common Stock so offered would purchase at the current Market Price per share of Common Stock on the record date, less customary discounts and commissions. Market Price means the average of the closing prices on the Nasdaq Stock Market (or other principal exchange of Cytogen's Common Stock) for the 10 trading days preceding the date of determination. Such adjustment shall be made immediately after the record date for the issuance or granting of such Rights. For purposes of this clause, the "offering price per share" of Common Stock shall in the case of Rights be determined by dividing (x) the total amount received or receivable by the Company in consideration of the issuance of such Rights plus the total consideration payable to the Company upon exercise thereof (the "aggregate offering price"), by (y) the total number of shares of Common Stock covered by such Rights. In case the Company shall issue, at any time on or after April 1, 1998, to all holders of its Common Stock any Rights (excluding rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest) at the offering price per share which, before deduction of customary discounts and commissions, is lower than the current Market Price per share of Common Stock on the record date of such issuance or grant, whether or not, in the case of Rights, such Rights are immediately exercisable or convertible, then the Holder shall be entitled to receive all of the same Rights pro rata as the holders of Common Stock, on an as-exercised basis, as and when distributed to the holders of Common Stock. For the purposes of this clause (b), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. The Company shall not issue any Rights in respect of shares of Common Stock held in the treasury of the Company. (c) Dividends and Distributions. In case the Company shall distribute to --------------------------- all holders of its shares of Common Stock any dividend or other distribution of evidences of its indebtedness or other assets (other than as provided in clause (a) above) or Rights, then, in each case, the Holder shall be entitled to receive all of the same dividends, distributions or Rights, as the case may be, as the holders of Common Stock, on an as-exercised basis, as and when the Holder shall have elected to exercise this Warrant. (d) Computations. For the purpose of any computation under clauses ------------ (b) and (c) above, the current Market Price per share of Common Stock at any date shall be as set forth in (i) the definition of Market Price for the 10 consecutive trading days commencing 20 trading days prior to the earlier to occur of (A) the date as of which the market price is to be computed or (B) the last full trading day before the commencement of "ex-dividend" trading in the Common stock relating to the event giving rise to the adjustment required by clause (a) or (b) or (ii) any other arm's-length adjustment formula that the Board of Directors of the Company may use in good faith. In the event the Common Stock of the Company is not then publicly traded or 4 if for any other reason the current market price per share cannot be determined pursuant to the foregoing provisions of this clause (d) the current market price per share shall be the Fair Value thereof. (e) Adjustment. Whenever the number of Warrant Shares issuable upon ---------- exercise of this Warrant is adjusted as provided under clauses (a) or (b), the Exercise Price shall be adjusted by multiplying such Exercise Price immediately prior to such adjustment by a fraction, the numerator of which shall be the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment, and the denominator of which shall be the number of Warrant Shares issuable upon exercise of this Warrant immediately thereafter. (f) Securities. For the purpose of this Section (f), the term "shares of ---------- Common Stock" shall mean (i) the class of stock designated as Common Stock, par value $.01 per share, of the Company on the date of this Warrant or (ii) any other class of stock resulting from successive changes or reclassifications of such shares consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. (g) Re-Adjustment. If, at any time after any adjustment to the number of ------------- Warrant Shares issuable upon exercise of this Warrant or the Exercise Price shall have been made pursuant to clause (e) of this Section 5, any rights, options, warrants or other securities convertible into or exchangeable for shares of Common Stock shall have expired, or any thereof shall not have been exercised, the Exercise Price and the number of Warrant Shares issuable upon exercise of this Warrant shall, upon such expiration, be readjusted and shall thereafter be such as it would have been had it been originally adjusted (or had the original adjustment not been required, as the case may be) as if (A) the only shares of Common Stock offered were the shares of common stock, if any, actually issued or sold upon the exercise of such rights, options or warrants and (B) such shares of Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise plus the aggregate consideration, if any, actually received by the Company for the issuance, sale or grant of all such rights, options or warrants whether or not exercised; provided, further that no such readjustment shall have the effect of increasing the Exercise Price or decreasing the number of Warrant Shares issuable upon exercise of this Warrant by an amount (calculated by adjusting such increase or decrease as appropriate to account for all other adjustments pursuant to this Section 5 following the date of the original adjustment referred to above) in excess of the amount of the adjustment initially made in respect of the issuance, sale or grant of such rights, options or warrants. (h) Voluntary Adjustment by the Company. The Company may at its option, ----------------------------------- at any time during the term of this Warrant, reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company, in its sole discretion, but subject to approval by the Holder. (i) Reorganization, Reclassification, Consolidation, Merger or Sale. Any --------------------------------------------------------------- recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company's assets to another Person or other transaction which is effected in such a manner that holders of Common Stock are entitled to receive (either directly or upon 5 subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock is referred to herein as an "Organic Change". Prior to the consummation of any Organic Change, the Company shall make appropriate provisions to ensure that the Holder shall thereafter have the right to acquire and receive, in lieu of or in addition to (as the case may be) the Warrant Shares immediately theretofore acquirable and receivable upon the exercise of this Warrant, such shares of stock, securities or assets as such holder would have received in connection with such Organic Change if such holder had exercised this Warrant immediately prior to such Organic Change. The Company shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof, the successor corporation (if other than the Company) resulting from consolidation or merger or the corporation purchasing such assets assumes by written instrument, the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire. (j) Notices. ------- (1) Immediately upon any adjustment of the Exercise Price, the Company shall give written notice thereof to the Holder, setting forth in reasonable detail and certifying the calculation of such adjustment. (2) The Company shall given written notice to the Holder at least 30 days prior to the date on which the Company closes its books or takes a record for determining rights to receive any dividends or distributions. (3) The Company shall also give written notice to the Holder at least 30 days prior to the date on which any Organic Change shall take place. (k) Calculations. All calculations under this Section 5 shall be made to ------------ the nearest one-thousandth of a cent ($.001) or to the nearest one-thousandth of a share, as the case may be. SECTION 6. No Shareholder Rights. This Warrant shall not entitle the --------------------- Holder to any voting rights or other rights as a shareholder of the Company. SECTION 7. Restrictions On Transfer. Subject to the other provisions of ------------------------ this Section 7 and Section 9 of the Purchase Agreement, this Warrant and all rights hereunder are transferable on or after September 26, 1997, in whole or in part, at the agency or office of the Company referred to in Section 3 hereof, by the Holder in person or by duly authorized attorney, upon (i) surrender of this Warrant properly endorsed, and (ii) delivery of a notice of transfer in the form of EXHIBIT B hereto; provided, however, that this Warrant and the Warrant Shares --------- -------- ------- may be transferred to a maximum of three holders (reasonably satisfactory to the Company) other than an Affiliate of the initial Holder. The Warrant Shares are transferable at any time in compliance with applicable laws. Each transferee and holder of this Warrant, by accepting or holding the same, consents that this Warrant, when endorsed, in blank, shall be deemed negotiable, and, when so endorsed, the holder hereof shall be treated by the Company and all other persons dealing with this Warrant as the absolute owner hereof for any purposes and as the 6 person entitled to exercise the rights represented by this Warrant, or to the transfer hereof on the books of the Company, any notice to the contrary notwithstanding; provided, however, that until each such transfer is -------- ------- recorded on such books, the Company may treat the registered holder hereof as the owner hereof for all purposes. SECTION 8. Lost, Stolen, Mutilated Or Destroyed Warrant. If this Warrant -------------------------------------------- is lost, stolen, mutilated or destroyed, the Company shall, on such terms as to indemnity or otherwise as it may in its reasonable discretion impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone. SECTION 9. Notices. All notices or other communications which are ------- required or permitted hereunder shall be in writing and sufficient if delivered personally or sent by registered mail, postage prepaid, return receipt requested, or via facsimile, addressed as follows: If to the Company, to: Cytogen Corporation 600 College Road East CN 5308 Princeton, New Jersey 08540-5308 Attention: Chief Executive Officer Facsimile: (609) 951-9298; With a copy to: Dewey Ballantine 1301 Avenue of the Americas New York, New York 10019 Attention: Frederick W. Kanner, Esq. Facsimile: (212) 259-6333 If to the initial Holder or any of its Affiliates, to: Elan International Services, Ltd. 102 St. James Court Flatts Smiths SL04 Bermuda Attention: President Facsimile: (441) 292-2224 7 With a copy to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, New York 10112 Attention: David Robbins, Esq. Facsimile: (212) 408-2420; or to such other address as the party to whom notice is to be given may have furnished to the other party in writing in accordance herewith. If mailed, as aforesaid, any such communication shall be deemed to have been given on the third business day following the day on which the piece of mail containing such communication is posted. SECTION 10. Governing Law. This Warrant shall be governed by and ------------- construed in accordance with the laws of the State of New York (without giving effect to principles of conflicts of laws). SECTION 11. Headings. The headings of the various sections contained in -------- this Warrant have been inserted for convenience of reference only and should not be deemed to be a part of this Warrant. SECTION 12. Execution In Counterpart. This Warrant may be executed in one ------------------------ or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument and not separate Warrants. * * * * 8 IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officers as of the date first written above. CYTOGEN CORPORATION By: /s/ Thomas J. McKearn ----------------------- Name: Thomas J. McKearn Title:Chairman, President and CEO ATTEST: - ------- /s/ Charles Ogelsby - ------------------------- Name: Charles Ogelsby Title:Corporate Controller and Assistant Secretary EXHIBIT A --------- FORM OF NOTICE OF ELECTION TO EXERCISE [To be executed only upon exercise of the Warrant to which this form is attached] To Cytogen Corporation: The undersigned, the holder of the Warrant to which this form is attached, hereby irrevocably elects to exercise the right represented by such Warrant to purchase __________ shares of Common Stock of CYTOGEN CORPORATION, and herewith tenders the aggregate payment of $_________ in the form of cash, wire transfer funds or certified check, in full payment of the purchase price for such shares. The undersigned requests that a certificate for such shares be issued in the name of _______________, whose address is ________________________, and that such certificate be delivered to ______________, whose address is _______________. If such number of shares is less than all of the shares purchasable under the current Warrant, the undersigned requests that a new Warrant, of like tenor as the Warrant to which this form is attached, representing the remaining balance of the shares purchasable under such current Warrant be registered in the name of _______________, whose address is _____________________________, and that such new Warrant be delivered to ______________, whose address is _____________________________. Signature:___________________________________ (Signature must conform in all respects to the name of the holder of the Warrant as specified on the face of the Warrant) Date:________________________________________ EXHIBIT B --------- FORM OF NOTICE OF TRANSFER [To be executed only upon transfer of the Warrant to which this form is attached] For value received, the undersigned hereby sells, assigns and transfers unto _________________________ all of the rights represented by the Warrant to which this form is attached to purchase _________________________ shares of Common Stock of CYTOGEN CORPORATION (the "Company"), to which such Warrant relates, and appoints __________________________ as its attorney to transfer such right on the books of the Company, with full power of substitution in the premises. Signature:___________________________________ (Signature must conform in all respects to the name of the holder of the Warrant as specified on the face of the Warrant) Address:_____________________________________ _____________________________________ Date:________________________________________ Signed in the presence of: ______________________________ EX-10.3 5 JOINT DEVELOPMENT & OPERATING AGREEMENT JOINT DEVELOPMENT AND OPERATING AGREEMENT ELAN CORPORATION, PLC AND CYTOGEN CORPORATION AND TARGON CORPORATION SEPTEMBER 26, 1996 THIS JOINT DEVELOPMENT AND OPERATING AGREEMENT is dated September 26, 1996 among CYTOGEN CORPORATION, a Delaware corporation, having its principal place of business at 600 College Road East, Princeton, New Jersey 08540 (together with its Subsidiaries and Affiliates (each as defined below), " Cytogen"); ELAN CORPORATION, PLC, a public limited company incorporated under the laws of Ireland, having its principal place of business at Monksland, Athlone, County Westmeath, Ireland (together with its Subsidiaries and Affiliates, "ELAN"); and TARGON CORPORATION, a Delaware corporation, having its principal place of business at 600 College Road East, Princeton, New Jersey 08540 (the "Company"). Capitalized terms not otherwise defined herein are defined in Section 1.1 hereof. RECITALS: A. The Company was formed on September 25, 1996 for the purpose of conducting research, development and commercialization of the ATS Compounds and the Cytogen Compounds related activities. The Company has issued 1,000,000 shares of its Common Stock to Cytogen on the date hereof, constituting 100% of the Company's issued and outstanding share capital (other than the Management Shares). In connection with the closing of the Securities Purchase Agreement, Cytogen has granted to Elan International Services, Ltd. ("EIS"), a Bermuda corporation and wholly-owned subsidiary of Elan Corporation, plc, the Elan Exchange Right, as provided in the Securities Purchase Agreement. Pursuant to the Elan Exchange Right, the Company has granted to EIS the option to exchange all of the issued and outstanding shares of the Cytogen's Series A preferred Stock initially for 500,000 shares of Common Stock of the Company, initially representing 50% of the share capital of the Company (other than Management Shares), subject to adjustment as described in the Securities Purchase Agreement. B. Cytogen and Elan have agreed to cooperate in the establishment and management of the Company for development of specific pharmaceutical compounds (biological and otherwise) incorporating the technologies developed by the Company, Cytogen, Elan and/or Advanced Therapeutic Systems, Ltd., a Bermuda corporation ("ATS"), and their sale and supply, and desire that such activities be undertaken through the Company, and for this purpose Cytogen and EIS have agreed to participate as holders of the Common Stock of the Company (in the case of EIS, through exercise, in EIS's discretion, of the Elan Exchange Right), for the purposes and on the terms set out in this Agreement. In connection with the forgoing, the Company shall acquire certain Technology and, in connection therewith, shall agree to make certain payments to Cytogen, Elan and ATS. C. The Company and Cytogen and Elan desire to set forth in the Agreement certain provisions relating to (1) the research, development and commercialization work described above and (2) the operations of the business of the Company. AGREEMENT: ACCORDINGLY, IT IS HEREBY AGREED AS FOLLOWS: ARTICLE I DEFINITIONS 1.1. In this Agreement, the following words and meanings shall, where not inconsistent with the context, have the following meanings respectively. "Additional Compounds" means any compound or formulation now or hereafter owned by the Company or in which the Company has any development, marketing or similar rights, other than the Compounds utilizing the Cytogen Technology or the Elan Technology. "Affiliate" means any Person other than the Company controlling, controlled or under the common control of Elan or Cytogen, as the case may be. For the purpose of this definition, "control" shall mean direct or indirect ownership of 40% or more of the stock or shares entitled to vote for the election of directors or the ability, by contract or agreement or otherwise, to direct the management and affairs of a Person. "Agreed" means agreed by all Parties and confirmed in writing. "Agreement" means this agreement (which expression shall be deemed to include the Recitals, the Schedules and Appendices hereto). "Articles" means the certificate or articles of incorporation and by-laws of the Company in the form attached as Exhibit D hereto. --------- "ATS Compounds" means [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.] "ATS Transfer Agreement" means the agreement dated the date hereof between ATS and the Company pursuant to which ATS has transferred the ATS Compounds and the related Intellectual Property to the Company. "Business" means the business of the Company as described in Article II and subject to the provisions of Article IV, such other business as the Parties may agree from time to time in writing should be carried on by the Company. "Business Plan" means the Company's business plan in the form attached hereto as Exhibit A or in such other form as shall be agreed to from --------- time to time in writing by Cytogen and Elan, in conjunction with the Research and Development Programs, for the conduct of the Business of the Company for each Financial Year for the duration of this Agreement, which shall include, in particular, details of the planned research and development expenses to be -2- incurred in that Financial Year, which of the Shareholders shall be responsible for the relevant research and development expenditure, and how such expenses shall be funded. "Common Stock" means the common stock, $01 par value per share, of the Company. "Compounds" means the ATS Compounds and the Cytogen Compounds, together with any Additional Compounds hereafter acquired by the Company from Cytogen, ATS, Elan or any other Person, or developed by the Company. "Cytogen Compounds" means the [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.] "Cytogen Directors" means the Directors designated by Cytogen pursuant to the terms hereof and holding office from time to time. "Cytogen Technology" means any intellectual property, know-how, trade secrets, patents or patent rights or other rights relating to the Cytogen Compounds owned by Cytogen and transferred to the Company pursuant to the Cytogen Transfer Agreement. "Cytogen Transfer Agreement" means the agreement dated the date hereof between Cytogen and the Company pursuant to which Cytogen has transferred the Cytogen Compounds and the related Intellectual Property to the Company. "Directors" means the Cytogen Directors and the Elan Directors from time to time and any other Director agreed to by the Cytogen Directors and the Elan Directors from time to time. "Elan Directors" means the Directors designated by Elan pursuant to the terms hereof and holding office from time to time. "Elan Exchange Right" means the right granted by Cytogen to EIS, as set forth in the Securities Purchase Agreement, to acquire shares of Common Stock of the Company from Cytogen, as provided for in the Securities Purchased Agreement. "Elan Technology" means any intellectual property, know-how, trade secrets, patents or patent rights or other rights relating to the ATS Compounds owned by Elan or ATS and transferred to the Company pursuant to the ATS Transfer Agreement. "FDA" means the U.S. Food and Drug Administration or any successor U.S federal agency. "Field" means the [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.] "Financial Year" means initially, September 1, 1996 through December 31, 1996 and thereafter each year commencing on January 1 and expiring on December 31 of each year. -3- "Independent Third Party" means any Person other than Elan, Cytogen, ATS or the Company, or any Affiliate of any such Person. "INDA" means any investigational new product application in relation to a Product or Compound. "Loan" means any loan(s) advanced from time to time by any of the Shareholders to the Company. "Management Shares" means Shares issued or issuable to directors, officers or other Persons pursuant to such plans, options, warrants, arrangements and/or understandings as shall be satisfactory to the Shareholders. "NDA" means a new drug application. "Net Sales" means the [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2] "Party" means Elan, Cytogen or the Company, as the case may be; "Parties" means more than one Party. "Person" means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, or other entity of whatever nature. "PLA" means Product License Application. "Prime" means the prime or base rate established from time to time by Morgan Guaranty Trust Company in New York. "Product(s)" means depending on the context one or more formulations of the Compounds or based, in whole or in part, on the Technology and developed by or on behalf of the Company. "Research and Development Programs" mean(s), depending on the context, one or more programs of research and development work being conducted or to be conducted by Cytogen and/or Elan for and on behalf of the Company which have been devised by the Research Committee and approved by the Management Committee. "Securities Purchase Agreement" means the Securities Purchase Agreement dated as of the date hereof between Cytogen and EIS, pursuant to which Cytogen has agreed to issue to EIS and EIS has agreed to purchase from Cytogen the securities set forth therein, including, -4- without limitation, the Series A Preferred Stock of Cytogen, in connection with which Cytogen has granted to EIS the Elan Exchange Right. "Shares" means any outstanding shares of Common Stock. "Shareholder" means Cytogen or Elan for so long as such Party or its Affiliates owns at least 10% of the aggregate shares or, in the case Elan, has the right to acquire such Shares in connection with the Elan Exchange Right; "Shareholders" means both of Cytogen and Elan together. "Subsidiary" of any Person means any other Person at least 50% of the capital stock is owned by such first Person. "Supply Agreements" means one or more Manufacture and Supply Agreements to be entered into by Elan and/or Cytogen, on the one hand Company, on the other hand, pursuant to the terms hereof to facilitate commercial development and exploitation of Compounds or Products. "Technology" means, collectively, the Cytogen Technology, the Elan Technology and any intellectual property, know-how, trade secrets, patents or patent rights or other rights relating to the Compounds and, developed or acquired by or on behalf of the Company. "Territory" means all of the countries of the world. "Transfer Agreements" means the ATS Transfer Agreement and the Cytogen Transfer Agreement. 1.2. Words importing the singular shall include the plural and vice versa. 1.3. Unless the context otherwise requires, reference to an article, paragraph, provision, clause or schedule is an article, paragraph, provision, clause or schedule of or to this Agreement. 1.4. Reference to a statute or statutory provision includes a reference to it as from time to time amended, extended or re-enacted. 1.5. The headings in this Agreement are inserted for convenience only and do not affect its construction. ARTICLE II THE COMPANY'S BUSINESS 2.1. The primary object of the Company and any Subsidiaries is to carry on the business of the Field in the Territory and to achieve the objectives set out in this Agreement. -5- 2.2. On the date hereof, as provided in Article V hereof, (a) Cytogen is paying to the Company $20 million (the "Initial Capital"), in consideration of all of the Shares. The Company hereby agrees that, unless consented to by the Shareholders, it shall not issue any Shares other than Management Shares. Each of the Shareholders agrees that it shall use its best efforts to cause the Company to be bound by the provisions of this Agreement. Except as the Shareholders may otherwise agree in writing and except as may be provided in this Agreement, the Business Plan or any Supply Agreements, the Shareholders shall exercise their powers in relation to the Company so as to ensure that the business is carried on in a proper and prudent manner. 2.3. Each of Cytogen and Elan shall use all reasonable and proper means at its disposal and within its power to maintain, extend and improve the Business of the Company, within the limits of this Agreement, and to further the reputation and interests of the Company. 2.4. The central management and control of the Company shall be exercised at the principal place of business of the Company and shall be vested in the Directors and such persons as they may delegate the exercise of their powers in accordance with this Agreement. The Shareholders shall use their best endeavors to ensure that the Company is treated as resident for taxation in such jurisdiction as the Directors shall determine and that the right to use of the Technology shall, to the maximum extent practicable, be owned and held by the Company, or its Affiliate, or its designee. 2.5. Each of the Shareholders hereby confirms that in the event of a dispute arising between the Company and a Shareholder, the Directors appointed by that Shareholder shall consent to any action or proceedings taken or initiated by the Company against that Shareholder to resolve the dispute. ARTICLE III ARTICLES OF THE COMPANY 3.1. In the event of any ambiguity or conflict arising between the terms of this Agreement and those of the Company's Articles, the terms of this Agreement shall prevail as between the Shareholders. 3.2. Subject to Section 3.1, each of the Parties hereto undertakes with each of the other Parties fully and promptly to observe and comply with the provisions hereof to the intent and effect that each and every provision thereof shall be enforceable by the Parties hereto. ARTICLE IV WARRANTIES 4.1. The Company warrants to the Shareholders that the Recitals are true and correct in every respect insofar as they relate the Company, and that prior to the date hereof the -6- Company has neither traded nor incurred any liabilities or obligations of any nature whatsoever other than those imposed on the Company by virtue of its incorporation and this Agreement. 4.2. Elan and Cytogen each warrants and undertakes to the other that the Shares to be acquired by it in the Company, as provided herein, will be acquired for its own absolute beneficial ownership and not on behalf of any other Person. 4.3. Elan and Cytogen each warrants and undertakes to the other (with respect to Elan Corporation, plc and Cytogen Corporation, respectively) that except as disclosed in writing to each other prior to the execution of this Agreement: (a) it is duly incorporated under the laws of its place of incorporation; (b) it has full authority and capacity to enter into and perform its obligations under this Agreement (having obtained all requisite corporate and governmental approvals); (c) it is not engaged in any litigation or arbitration, or in any dispute or controversy reasonably likely to lead to litigation, arbitration or any other proceeding, which would materially affect the validity of this Agreement, such Party's fulfillment of its respective obligations under this Agreement or the business of the Company as contemplated herein; and (d) that this Agreement has been fully authorized, executed and delivered by it and that it has full legal right, power and authority to enter into and perform this Agreement, which constitutes a valid and binding agreement between the Parties. ARTICLE V CLOSING 5.1. The closing of the transactions contemplated hereby shall occur on the date hereof, simultaneously with the execution and delivery of this Agreement and the Securities Purchase Agreement, at the offices of counsel to Elan in New York, New York, or at such other place as the Shareholders shall agree upon. 5.2. At the closing, each of the parties hereto shall take or (to the extent that the same is within such Person's powers) cause to be taken the following steps at Directors' and Shareholder's meetings of the Company, or such other meetings or closing, as appropriate: (a) the adoption by the Company of the Articles in the form attached hereto as Exhibit D and the designation and appointment of the initial --------- Directors; (b) the consummation of the transactions contemplated by the Securities Purchase Agreement, including without limitation, the issuance by Cytogen to EIS of the common stock and Series A Preferred Stock of Cytogen issuable to EIS thereunder; -7- (c) the issuance of the Shares to Cytogen and the appointment of the initial Directors of the Company, as agreed to on the date hereof by Cytogen and Elan; (d) the payment by Cytogen to the Company of the Initial Capital; (e) the execution by the Company, on the one hand, and ATS, Cytogen and EPRC, on the other hand, of the Transfer Agreements; and (f) the delivery of such additional documents and instruments, and opinions of counsel and other Persons, as shall be customary in the circumstances and reasonably requested by each of the Parties. ARTICLE VI CONTRIBUTIONS 6.1 The Shareholders and the Company acknowledge and agree that the financial requirements of the Company will be borne by the Company, initially from the Initial Capital or such other basis as may be agreed by the Shareholders, in their sole discretion, whether by way of providing cash or technical know-how. 6.2 Cytogen has contributed to the Company on the date hereof the Cytogen Compounds and the Cytogen Technology (pursuant to the Cytogen Transfer Agreement), and ATS has contributed to the Company on the date hereof the Elan Technology and ATS Compounds (pursuant to the ATS Transfer Agreement). 6.3. The Shareholders agree that any further financing of the Company required in respect of any research and development expenditure to be incurred by the Company in excess of the contributions pursuant to Section 6.2 shall be borne as the Shareholders may hereafter agree; it being understood that neither Cytogen nor Elan shall have any obligation to contribute additional funds absent its specific agreement in respect thereof. ARTICLE VII MANAGEMENT AND DIRECTION OF RESEARCH AND DEVELOPMENT 7.1 The Company's Board of Directors initially shall consist of (a) three Directors appointed by Cytogen, (b) three Directors appointed by Elan, and (c) one independent Director (i.e., a Person who is not affiliated with either Cytogen or Elan). Such provisions shall remain in effect until the earlier to occur of the termination of this Agreement and the initial public offering of equity securities of the Company in a registered offering under the Securities Act of 1933 and the registration of the Common Stock under the Securities Act of 1934 (an "IPO"); provided, that at such time that Elan or Cytogen owns, directly or indirectly, fewer than 20% of -8- the Shares, such Shareholder's (but not the other Shareholder's) right to appoint Directors shall expire. 7.2. The Directors shall appoint a management committee (the "Management Committee") to exercise certain of their functions in accordance with their right to delegate such powers pursuant to the Articles. The Management Committee will consist of two individuals, one of whom initially shall be nominated by Elan and one of whom initially shall be nominated by Cytogen. Each of the Shareholders shall be entitled to remove any of its nominees to the Management Committee and appoint a replacement in place of any nominee so removed. 7.3. The Management Committee shall appoint a research committee (the "Research Committee"). The Research Committee shall consist of two individuals, one of whom initially shall be nominated by Elan and one of whom initially shall be nominated by Cytogen. Each of the Shareholders shall be entitled to remove its nominee to the Research Committee and appoint a replacement in place of any nominee so removed. The number of individuals on the Research Committee shall be altered if agreed to by the Management Committee. 7.4. The Management Committee shall be responsible for, among other things, devising implementing and reviewing strategy for the Business and, in particular, devising the Company's strategy for research and development in relation to the Field and to monitor and supervise the implementation of the Company's strategy for research and development. 7.5. The Management Committee shall report all significant developments to the Directors and the Shareholders on the occurrence thereof and, in addition, shall report at quarterly intervals to the Directors and the Shareholders. In the event of an irreconcilable dispute or deadlock among the members of the Management Committee, the provisions of Article XXIII shall apply. 7.6. The Research Committee shall be responsible for the implementation of the Research and Development Programs for the Company and shall meet at regular intervals to monitor the progress of the research and development programs and to report on its progress to the Management Committee. In the event of any dispute among the Research Committee, the Research Committee shall refer such dispute to the Management Committee whose decision on the dispute shall be binding on the Research Committee. If the Management Committee fail to reach a decision, the provisions of Article XXIII shall apply. 7.7. The Company shall, in the first instance, solicit Cytogen or Elan to provide such research and development services as may reasonably be required by the Company, upon such terms and conditions as may be subsequently agreed by the Company, on the one hand, and Cytogen or Elan, on the other hand. 7.8. The Company shall pay Elan and Cytogen for any research and development work carried out by them on behalf of the Company, as provided in the Business Plan and otherwise agreed to by the Management Committee, on the one hand, and Cytogen or Elan, on the other hand, subject to the proper vouching of research and development work and expenses. The -9- payments by the Company to Elan and Cytogen shall be calculated [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.] 7.9. In consideration of the patent rights granted, or which hereafter may be granted, by the Parties regarding the work to be completed hereunder in connection with the development of the Compounds and the Products, the Company shall pay to Cytogen and Elan the following amounts from time to time. [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.] In the event that the provisions of this Section 7.9 are applicable, the Company shall grant to Cytogen and Elan such audit and review rights related to the calculation payments and challenging of such applicable amounts as shall be reasonably customary in the pharmaceutical industry at such time, which rights shall be set forth in a written instrument signed by the Company. 7.10. In no event shall Cytogen or Elan have any further or additional liability or obligation to the Company, other than as set forth in this Agreement, by virtue of the payments provided for under Section 7.9. -10- ARTICLE PROPERTY OWNERSHIP RIGHTS 8.1. The Company shall own the legal and equitable title to the Technology, the ATS Compounds and the Cytogen Compounds. Cytogen and Elan shall have the sole right to license the Technology outside the Field Pursuant to and in accordance with the provisions of this Article VIII and Section 11.2. 8.2. In the event that Cytogen or Elan wish to exploit the Technology outside the Field, such Shareholder or Shareholders shall provide written notice to such effect to the Company. The Company shall thereafter negotiate in good faith with each of the Shareholders as to the terms and conditions of a license or licenses in respect thereof, which shall be on then customary terms and conditions. Such license or licenses may be in the form of non-exclusive licenses to each of Cytogen and Elan or appropriate cross-licenses, or on such other terms and conditions as the Parties shall otherwise mutually agree; it being understood that such work which is directly related to or in furtherance of development of the Compounds, Products or Technology shall be the property of the Company. Such licenses may include non-exclusive license to each Cytogen and Elan or appropriate cross-licenses among the Parties. If the Parties are unable to agree upon the terms of any such license, such disagreement shall be referred to an Independent Expert, as provided in Article XXII. ARTICLE IX PATENT RIGHTS 9.1. The Company shall have the right to obtain and prosecute patents and patent rights relating to the Compounds, Products and Technologies, whether within or outside the Field; rights outside the Field shall be governed by Article VIII. ARTICLE X EQUIPMENT 10.1. Any equipment or other assets purchased by Cytogen and/or Elan which is funded by the Company shall belong to the Company. The Parties shall appropriate arrangements as regards marking of such equipment and assets, insurance and bailment provisions. -11- ARTICLE XI EXPLOITATION OF PRODUCTS 11.1. The Company will have an exclusive entitlement to develop and/or exploit Products in the Field. In order to commercialize the Products the Company shall obtain marketing approval in such countries in the Territory as is determined by the Business Plan. It may be necessary to file an INDA and perform clinical testing in more than one country, and the Shareholders shall reasonably agree on such testing. 11.2. In the event that the Company decides that it does not wish to pursue the research and development and/or commercialization of a Product, and either Elan or Cytogen wishes to pursue such research and development and/or commercialization, the Company shall grant a license agreement in respect of such Product to Elan and/or Cytogen, as the case may be; provided, that such Product does not or will not compete in any material respect with any Product or proposed Product. The Company and the relevant Shareholder shall negotiate in good faith the terms of such a license agreement, which shall be on then- commercially customary and reasonable terms and conditions. 11.3. The strategy for the commercialization of the Products shall be determined by the Management Committee, subject to the supervision of the Board of Directors. ARTICLE XII TECHNICAL SERVICES AND ASSISTANCE 12.1. Whenever commercially and technically feasible, the Company shall offer to contract with Cytogen or Elan as the case may be to perform such other services as the Company may require. In determining which party should provide such services, the Management Committee shall in good faith take into account the respective infrastructure and experience of Elan and Cytogen. 12.2. The Company shall if appropriate conclude an administrative support agreement with Elan and/or Cytogen on such terms as the parties thereto shall in good faith negotiate. The management services required shall include one or more of the following management services which shall be requested by the Company: (a) accounting, financial and other services; (b) tax services; (c) insurance services; (d) human resources services; -12- (e) legal and company secretarial services; (f) patent and related intellectual property services; and (g) all such other services consistent with and of the same type as those services to be provided pursuant to this Agreement, as may be required The foregoing list of services shall not be deemed exhaustive and may be changed from time to time upon written request by the Company. If Elan or Cytogen so requires, in good faith, Cytogen or Elan shall receive, at times and for periods mutually acceptable to the parties, employees of the other party (such employees to be acceptable to the receiving party in the matter of qualification and competence) for instruction in respect of the Elan Technology or the Cytogen Technology as the case may be as is necessary to further the Research and Development Programs. The employees received by Elan or Cytogen, as the case may be, shall be subject to obligations of confidentiality no stringent than those set out herein and such employees shall observe the rules, regulations and systems adopted by the party receiving the said employees for its own employees or visitors. ARTICLE XIII MANUFACTURE AND SUPPLY ARRANGEMENTS 13.1. If the Company elects to finance, develop and/or exploit the commercial production of a Product, the Company shall enter into a Supply Agreement with Cytogen or Elan or any Subsidiary of either to allow for the commercial production of such Product on behalf of the Company. The Supply Agreement shall be negotiated and agreed by the Parties as contemplated by the Business Plan or as otherwise agreed to by the Management Committee. The terms of the Supply Agreements shall be on normal commercial terms, and shall be negotiated in good faith by the Parties thereto. The determination of which of Cytogen or Elan shall be offered the first opportunity to enter into a Supply Agreement with the Company shall be made by the Company in good faith, based upon the relevant facts and circumstances, including the ability of Cytogen or Elan to manufacture the relevant Products and provide infrastructure and Product support, and the experience and reputation of such Party's in commercializing the relevant Product. ARTICLE XIV AUDITORS; REGISTERED OFFICE; ACCOUNTING REFERENCE DATE 14.1. Unless otherwise agreed by the Shareholders and save as may be provided to the contrary herein; -13- (a) The auditors of the Company shall be Arthur Anderson, LLP or such other auditors as may be chosen by Cytogen, which shall be reasonably satisfactory to Elan. Elan shall retain the right to have an audit conducted for their own internal purposes using another accounting. (b) The registered office of the Company shall be at such address as the Shareholders shall agree from time to time; and (c) The accounting reference date of the Company shall be 31 December in each Financial Year. ARTICLE XV SHARE RIGHTS AND DIRECTORS 15.1. All Shares shall be identical and shall rank pari passu, be of one class and shall carry the same voting rights, rights to appoint and remove Directors, rights to dividends and other rights as provided in the Articles, and be subject to the restrictions on the transfer and distribution of assets and other provisions set forth in the Clauses and as set forth in this Agreement. ARTICLE XVI PROCEEDING OF DIRECTORS AND CHAIRMAN 16.1. The initial Chairman shall be a Director designated by Elan. 16.2 The Chairman designated under Section 16.1 shall retire as Chairman at the first Annual Stockholders Meeting of the Company. Thereafter, each Shareholder, beginning with Cytogen, shall have the right, exercisable alternatively, of nominating one of the Directors to be Chairman of the Company for a period of one year. The Chairman shall hold office until the termination of the next Annual Stockholders Meeting following his appointment. If the Chairman is unable to attend any meeting of the Board, the Directors of the same designation shall be entitled to appoint another Director to act as Chairman in his place at the meeting. From and after the IPO, the Chairman shall be an individual (who may be a Director designated by either Cytogen or Elan) who shall be approved by the Directors, and who shall remain Chairman until his retirement or replacement by the Directors. 16.3. In the case of an equality of votes at a meeting of the Board of the Company, the Chairman shall not be entitled to a second or casting vote. 16.4. Any Shareholder removing a Director shall be responsible for and shall indemnify the other Shareholder and the Company against any claim by such Director in respect of dismissal arising from such removal. -14- 16.5. The Directors shall meet not less than four times in any year and all Directors' meeting shall be held at such location as shall be designated by the Board. The quorum for each such meetings shall be a majority of Directors, including at least one Cytogen Director and at least one Elan Director. In the event that a quorum cannot be convened as a result of the persistent refusal of a Shareholders' Directors to attend a meeting (which period shall not exceed 10 days), the provisions of Article XXIII shall be applicable. ARTICLE XVII MATTERS REQUIRING SHAREHOLDERS' APPROVAL 17.1. Unless otherwise agreed between the Shareholders in writing, until the earlier of the occurrence of the IPO and either Cytogen or Elan owning, directly or indirectly, fewer than 20% of the Shares (in which case, the rights described below shall lapse only with respect to such Shareholder and not the other Shareholder) the Shareholders shall exercise all voting rights and other powers of control available to them in relation to the Company to procure (insofar as they are able by the exercise of such rights and such powers) that neither the Company nor any Subsidiary of the Company shall without the prior approval of the Shareholders (which may be evidenced by a vote of their designated Directors). (a) engage in any activity other than the Business; (b) sell the principal assets, undertaking or business of the Company; (c) appoint or dismiss a Director except in accordance with the rights conferred on the Shareholders under Article XVII to appoint and remove a Director; (d) create any fixed or floating charge, lien (other than a lien arising by operation of law) or other encumbrance over the whole or any part of the undertaking, property or assets of the Company or of any Subsidiary, except for the purpose of securing the indebtedness of the Company to its bankers for sums borrowed in the ordinary and proper course of the Business; (e) borrow any sum (except from the Company's bankers in the ordinary and proper course of the Business) in excess of a maximum aggregate sum outstanding at any time of $15,000; (f) make any loan or advance or give any credit (other than normal trade credit) in excess of $15,000 to any Person, except for the purpose of making deposits with bankers; (g) give any guarantee or indemnity to secure the liabilities or obligations of any Party other than those which it is usual to give in the ordinary course of a business similar to the Business; (h) sell, transfer, lease, assign, or otherwise dispose of part of the undertaking, property and/or assets other than stock or assets (or any interest therein) which are surplus to the -15- requirements of the Company or any Subsidiary, or contract so to do where the value of the undertaking property and/or assets exceed $15,000; (i) enter into any contract, arrangement or commitment involving expenditure on capital account or the realization of capital assets if the amount or the aggregate amount of such expenditure or realization by the Company, and all of the Subsidiaries of the Company would exceed $50,000 in any one year or in relation to any one project, and for the purpose of this paragraph the aggregate amount payable under any agreement for hire, hire purchase or purchase on credit sale or conditional sale terms shall be deemed to be capital expenditure incurred in the year in which such agreement is entered into; (j) issue any unissued shares or create or issue any new shares; (k) alter any rights attaching to any class of share in the capital of the Company or alter the Articles; (l) consolidate, sub-divide or convert any of the Company's share capital or in any way alter the rights attaching thereto; (m) create, acquire or dispose of any Subsidiary or of any shares in any Subsidiary; (n) enter into any partnership or profit sharing agreement with any Person other than arrangements with trade representatives and similar Persons in the ordinary course of business; (o) do or permit or suffer to be done any act or thing whereby the Company may be wound up (whether voluntarily or compulsorily), save as otherwise expressly provided for in this Agreement; (p) issue any debentures or other securities convertible into shares or debentures or any share warrants or any options in respect of Shares; (q) enter into any material contract or transaction except in the ordinary and proper course of the Business on arm's length terms; (r) acquire, purchase or subscribe for any shares, debentures, mortgages or securities (or any interest therein) in any company, trust or other body; (s) adopt any employee benefit program or incentive schemes; (t) engage any new employee at remuneration which could exceed the rate of $60,000 per annum; or (u) pay any remuneration to Directors designated by either of them as provided in Article VII by virtue of holding such office other than Directors who hold executive office. -16- ARTICLE XVIII THE BUSINESS PLAN AND REVIEWS 18.1. The Directors and Shareholders shall meet together as soon as reasonably practicable after the date hereof and thereafter prior to the accounting reference date specified in Article XIV in any Financial Year to agree and approve the Business Plan for the following Financial Year, or any amendment or modification to the Business Plan, with at least one Director appointed by each Shareholder concurring. 18.2. The Shareholders agree that the Management Committee shall submit to the Directors on 15th May, 15th August, 15th November, and 15th February or as soon as reasonably practicable thereafter in each Financial Year a report on the performance of the business activities of the Company and the Directors shall hold such meeting as may be necessary to review the performance of the Company against the Business Plan for the relevant year of trading. ARTICLE XIX REVIEW AND DURATION 19.1. This Agreement shall remain in force for a period of two years from the date hereof and thereafter, subject to the written agreement of the Shareholders, shall be renewed for successive periods of one year. 19.2. The Shareholders shall meet together to review the performance of the Company not less than six months prior to the expiration of the initial two-year period and six months prior to the expiration of each successive one-year period referred to in Section 19.1. If following such review, either Shareholder determines that it does not wish or intend to renew or extend this Agreement as aforesaid, such Shareholder shall forthwith serve written notice of discontinuance upon the other Shareholder whereupon the provisions of Article XXI shall apply. 19.3. The following provisions shall be applicable in the event of a termination of this Agreement or failure to renew this Agreement upon an applicable renewal date (each, a "Termination Date"): (a) In the event that the Termination Date shall have occurred after EIS shall have exercised the Exchange Right (as defined in the Securities Purchase Agreement) and, accordingly, owns Shares, the provisions of Article XXI shall be applicable and the provisions of Section 7.9(c) hereof shall survive such termination. (b) In the event that the Termination Date shall have occurred after EIS shall have elected to convert its Series A Preferred Stock of Cytogen and, accordingly, the Exchange Right shall have lapsed neither party shall have any additional rights hereunder, except that the provisions of Section 7.9(c) hereof shall survive such termination. -17- (c) In the event that the Termination Date shall have occurred prior to the time that the Exchange Right shall have been exercised and prior to the time, if any, that the Series A Preferred Stock of Cytogen shall have been converted into Cytogen Common Stock, as a result of Cytogen's exercise of its right to terminate under Section 19.2 (or election not to continue the business of the Company), the ATS Products shall be transferred to or as directed by Elan in the manner described in the Securities Purchase Agreement and neither party shall have any additional rights hereunder, except the provisions of Section 7.9(c) hereof shall survive such termination, but the royalty rate shall be [*] rather than [*], of Net Sales. [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.] (d) In the event that the Termination Date shall occurred prior to the time that the Exchange Right shall have been exercised and prior to the time, if any, that the Series A Preferred Stock of Cytogen shall have been converted into Cytogen Common Stock, as a result of any reason other than described in clause (c) above, the ATS Products shall be transferred to or as directed by Elan in the manner described in the Securities Purchase Agreement and neither party shall have any additional rights hereunder, except that the provisions of Section 7.9(c) hereof shall survive such termination but the royalty rate shall be [*], rather than [*], of Net Sales. [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2.] ARTICLE XX TRANSFER OF OR CHARGING OF SHARES 20.1. No Shareholder shall transfer any of its Shares or Loans to any other Person (other than to any Affiliates, in whose hands the same restriction on further transfer shall apply) without the prior written consent of the other. 20.2. No Shareholder shall transfer, create or dispose of any interests in or over any of its Shares or Loans except: (a) by a transfer of the entire and legal beneficial interest in all its Shares and Loans; and (b) to a transferee as permitted by this Agreement. 20.3. No Shareholder shall, except with the prior written consent of the other Shareholder, create or permit to subsist any pledge, lien or charge over, or grant any option or other rights or dispose of any interest in, all or any of the Shares held by it (other than by a transfer of such Shares in accordance with the provisions of this Agreement) or in any Loans (or *-INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24b-2. -18- part thereof) made by it to the Company unless any Person in whose favor any such pledge, lien, or charge is created or permitted to subsist or such option or rights are granted or such interest is disposed of shall be expressly subject to and bound by all the limitations and provisions which are embodied in this Agreement. ARTICLE XXI REALIZATION 21.1. For the purpose of Article XXI "Relevant Event" is committed or suffered by a Shareholder if: (a) an event specified in Section 19.3(a) shall have occurred; or (b) it commits a material breach of its obligations under this Agreement and, in the case of a breach capable of remedy, fails to remedy it within 30 days of being specifically required in writing to do so by the other Shareholder; or (c) a distress, execution, sequestration or other process is levied or enforced upon or sued out against a material part of its property which is not discharged or challenged within 20 days; or (d) it is unable to pay its debts in the normal course of business; or (e) it ceases or threatens to cease wholly or substantially to carry on its business, otherwise than for the purpose of a reconstruction or amalgamation without the prior written consent of the other Shareholder (such consent not to be unreasonably withheld); or (f) the appointment of a liquidator, receiver, administrator, receiver, examiner, trustee or similar officer of such Shareholder or over all or a substantial part of its assets; (g) if an application or petition for bankruptcy, corporate reorganization, composition, administration, examination, arrangement or any other procedure similar to any of the foregoing under the law of any applicable jurisdiction is filed and is not discharged within 30 days, or if a shareholder applies for or consents to the appointment of a receiver, administrator, examiner or similar officer of it or of all or a material part of its assets, rights or revenues or the assets and/or the business of a Shareholder are for any reason seized, confiscated or condemned; or (h) a Person who is not a shareholder of a Shareholder or its Affiliates on the date of this Agreement acquiring control of that Shareholder. 21.2. If either Shareholder commits or suffers a Relevant Event, the other Shareholder shall be entitled, within three months of its becoming aware of the occurrence of the Relevant Event, to require the defaulting Shareholder (the "Recipient Shareholder") to sell to the non defaulting Shareholder (the "Proposing Shareholder") all (but not less than all) of the Shares held -19- or beneficially owned by the Recipient Shareholder. The Proposing Shareholder shall notify the Recipient Shareholder of the exercise of this option by delivering written notice to the Recipient Shareholder stating that the option is exercised. 21.3. The Recipient Shareholder will be obliged within 60 days of receipt of such offer to either (a) accept such offer or (b) make a written counter offer in which the price per share must be at least 10% higher than in the offer received from the Proposing Shareholder. The counter offer must be an offer to purchase all (but not less than all) of the Shares of the Proposing Shareholder. 21.4. The Proposing Shareholder will be obliged within seven days from the date on which it receives the counter offer to either (a) accept the counter offer or (b) make a written second counter offer in which the price per share must be at least 10% higher than the counter offer received from the Recipient Shareholder. The second counter offer must be an offer to purchase all (but not part only) of the shares of the Recipient Shareholder. 21.5. The Recipient Shareholder will be obliged within seven days from the date on which it receives the second counter offer to either (a) accept the second counter offer, or (b) to purchase all of the shares of the Proposing Shareholder for an amount which is 10% higher than the price per share at which the Proposing Shareholder offered to purchase the Shares of the Recipient Shareholder in the second counter offer. The foregoing provisions relating to bidding in 10% higher increments, as described in this Article XXI shall continue until one of the Shareholders has elected to discontinue bidding. 21.6. Time shall be of the essence and a failure to respond to an offer or any counter offer within the permitted time period shall be deemed to constitute acceptance of such offer or counter offer. 21.7. The Shareholder who has accepted or is deemed to have accepted an offer or counter offer made pursuant to the provisions of this Section 22 shall deliver to the other Shareholder within 30 days of the date of acceptance or deemed acceptance (or three days following the issuance of any regulatory consent required to effect such sale) a duly executed transfer of all its shares in favor of the other Shareholder (or as it may direct) upon full payment of the relevant price for such shares. The Shareholders shall each use their best endeavors to procure the issuance of any such regulatory consents as soon as possible. The shares so transferred shall be deemed to be sold by the transferor as beneficial owner with effect from the date of such transfer free from any lien, charge or encumbrance with all rights attaching thereto. 21.8. In the alternative to the procedure set out in Sections 21.2 to 21.7, if either Shareholder commits or suffers a Relevant Event, the other Shareholder shall be entitled, within three months of its becoming aware of the occurrence of the Relevant Event, to serve a written notice ("Warning Notice") on the other Shareholder stating that it intends to serve a Winding-Up Notice (as hereinafter defined) on the Company. A Warning Notice may be withdrawn before the expiry of 60 days after it has been served ("the Warning Period"). Within 30 days of the expiry of the Warning Period during which period the relevant warning notice shall not have been withdrawn, the Party serving the Warning Notice may at any time serve a further written notice -20- ("the Winding-Up Notice") on the other Shareholder requiring that the Company be wound up, whereupon the Shareholders shall be bound to take all such steps as may be necessary to wind up the Company forthwith and in an orderly and efficient manner. ARTICLE XXII EXPERT DETERMINATION 22.1. Should any dispute or difference arise between Elan and Cytogen or between Elan or Cytogen, and the Company, during the period that this Agreement is in force, then either Party shall forthwith give to the other notice of such dispute or difference, and such dispute or difference shall be and is hereby referred to such expert as the Parties in dispute may agree (the "Independent Expert"). In the event that the parties are unable or unwilling to agree upon an Independent Expert, or the Independent Expert declines to accept the appointment or after the appointment is incapable of acting or dies, the Parties, in the absence of agreement on a replacement within a period of seven days, shall forthwith request the American Arbitration Association in New York City to appoint a replacement to constitute the Independent Expert. The Independent Expert shall act as an expert and not as an arbitrator. The fees of the Independent Expert shall be shared equally between the Parties in dispute. The Independent Expert shall be entitled to inspect and examine all documentation and any other material which he may consider to be relevant to the dispute. He shall afford each Party a reasonable opportunity (in writing or orally) of stating reasons in support of such contentions as each Party may wish to make relative to the matters under consideration. The Independent Expert shall give notice in writing of his determination to the Parties within such time as may be stipulated in his terms of appointment or in the absence of such stipulation, within two weeks from the reference of the dispute or difference to him. Any determination by the Independent Expert of a dispute of difference shall be final and binding on the Parties unless written notice of rejection of the determination is given by one Party to the other Party within 21 days from the date of the relevant determination. Any such rejection shall constitute a "Deadlock" for the purposes of Article XXI and the rejecting Party shall be deemed to be Proposing Shareholder. ARTICLE XXIII PROCEDURE IN THE EVENT OF A DEADLOCK 23.1. For the purpose of this Article XXIII a "Deadlock" means any cause where the Shareholder notifies the other Shareholder in writing that they consider an irreconcilable deadlock has arisen at Director, Shareholder or Management Committee level with respect to any material item or matter relating to the Business or the Company, and identifying the matter in dispute. A Deadlock may only arise relating to a material item or matter; all immaterial items or matters shall not give rise thereto; a material item or matter means one that could reasonably be expected to have a material or significant effect on the Company's business, financial condition or prospects. -21- 23.2. In any case of Deadlock each of the Shareholders shall within 10 days of the Deadlock arising, cause its appointees on the Board or the Management Committee, as the case may be, to prepare and circulate to the other Shareholder and the other Directors a memorandum or other form of statement setting out its position on the matter in dispute and its reasons for adopting that position. Each memorandum or statement shall be considered by the chief executive officer of each Shareholder to which it is addressed who shall endeavor to resolve the Deadlock. Each Shareholder agrees upon a resolution or disposition of the matter, they shall execute a statement setting out the agreed terms. The Shareholders shall exercise the voting rights and other powers available to them in relation to the Company to procure that the agreed terms are fully and promptly carried into effect. 23.3. If the Deadlock is not resolved or disposed of in accordance with Section 23.2. within 30 days after expiry of the seven-day period, or such longer period as the Shareholders agree in writing, and if it prevents the Company or a Subsidiary from continuing to achieve its business purposes, either Shareholder may (if they have not previously done so) refer the matter to an expert pursuant to the provisions of Article XXII, and the provisions of Article XXI shall otherwise be applicable. ARTICLE XXIV WINDING UP 24.1. In the event of the Company being wound up by way of the Shareholder's voluntary winding up, the Shareholders will procure that the liquidator is a member of the American Institute of Certified Public Accounts ("AICPA") or member of the Bar of any state acceptable to both Shareholders, or in default of agreement, nominated by the President of the AICPA. 24.2. The Shareholders shall prove in the winding up of the Company to the maximum extent permitted by applicable law for all sums due or to fall due to them respectively from the Company and shall exercise all rights of set-off and generally do all such other acts and things as may be available to them in order to obtain the maximum receipts and recoveries. ARTICLE XXV CONFIDENTIALITY 25.1. The Shareholders and the Company acknowledge that it may be necessary, from time to time, to disclose to each other confidential and proprietary information, including without limitation, inventions, works of authorship, trade secrets, specifications, designs, data, know-how and other information, relating to the Field, the Products, processes, and services of the disclosing Party. -22- 25.2. The Shareholders and the Company agree that the information to be disclosed by Cytogen and Elan to the Company may include trade secrets, know-how and other proprietary information and data regarding the Technology. It is agreed that the information to be disclosed by the Company to Cytogen and Elan may include trade secrets, know-how and other proprietary information and data regarding the Compounds or the Products. 25.3. The foregoing shall be referred to collectively as "Confidential Information". Any Confidential Information revealed by a Party to another Party shall be used by the receiving Party exclusively for the purposes of fulfilling the receiving Party's obligations under this Agreement, and for no other purpose. 25.4. Each Party agrees to disclose Confidential Information of another Party only to those employees, representatives and agents requiring knowledge thereof in connection with their duties directly related to the fulfilling of the Party's obligations under this Agreement. Each Party further agrees to inform all such employees, representatives and agents of the terms and provisions of this Agreement and their duties hereunder and to obtain their consent hereto as a condition of receiving Confidential Information. Each Party agrees that it will exercise the same degree of care and protection to preserve the proprietary and confidential nature of the Confidential Information disclosed by a Party, as the receiving Party would exercise to preserve its own proprietary and confidential information. Each Party agrees that it will, upon request of a Party, return all documents and any copies thereof containing Confidential Information belonging to or disclosed by, such Party. 25.5. Any breach of this Article XXV by any of the Persons informed by one of the Shareholders is considered a breach by the Party itself. Confidential Information shall not be deemed to include: (a) Information that is in the public domain. (b) Information which is made public by the disclosing Party. (c) Information which is independently developed by a Party. (d) Information that is published or otherwise becomes part of the public domain without any disclosure by a Party, or on the part of a Party's directors, officers, agents, representatives or employees. (e) Information that becomes available to a Party on a non-confidential basis, whether directly or indirectly, from a source other than a Party, which source, to the best of the Party's knowledge, did not acquire this information on a confidential basis; and (f) Information which the receiving Party is required to disclose pursuant to a valid order of a court or other governmental body or any political subdivision thereof or otherwise required by law. -23- 25.6. The provisions relating to confidentiality in this Article XXV shall remain in effect during the term of this Agreement, and for a period of seven years following the expiration or earlier termination of this Agreement. 25.7. The Shareholders agree that the obligations of this Article XXV are necessary and reasonable in order to protect the Shareholders' respective businesses, and each Party expressly agrees that monetary damages would be inadequate to compensate a Party for any breach by the other Party of its covenants and agreements set forth herein. Accordingly, the Shareholders agree and acknowledge that any such violation or threatened violation will cause irreparable injury to a Party and that, in addition to any other remedies that may be available, in law and equity or otherwise, any Party shall be entitled to obtain injunctive relief against the threatened breach of the provisions of this Article XXV, or a continuation of any such breach by the other Party, specific performance and other equitable relief to redress such breach together with its damages and reasonable counsel fees and expenses to enforce its rights hereunder, without the necessity of proving actual or express damages. ARTICLE XXVI SHAREHOLDERS' CONSENT 26.1. Where this Agreement provides that any particular transaction or matter requires the consent, approval or agreement of any Shareholder, such consent, approval or agreement may be given subject to such terms and conditions as that Shareholder may impose and any breach of such terms and conditions by any Persons subject thereto shall ipso facto be deemed to be a breach of the terms of this Agreement. ARTICLE XXVII COSTS 27.1. The Company shall bear the legal and other costs of the Parties incurred in relation to preparing and concluding this Agreement and the related agreements and other documents. 27.2. All costs, legal fees, registration fees and other expenses, including the costs and expenses incurred in relation to the incorporation of the Company, shall be borne by the Company. -24- ARTICLE XXVIII GENERAL 28.1. Each of the Parties hereto undertakes with the others to do all things reasonably within its power which are necessary or desirable to give effect to the spirit and intent of this Agreement and the Clauses. 28.2. The Parties hereto shall use their respective reasonable endeavors to procure that any necessary third Party shall do, execute and perform all such further deeds, documents, assurances, acts and things as any of the Parties hereto may reasonably require by notice in writing to the others to carry the provisions of this Agreement into full force and effect. 28.3. Where either Shareholder is required under this Agreement to exercise its powers in relation to the Company to procure a particular matter or thing such obligation shall be deemed to include an obligation to exercise its powers both as a Shareholder and as a Director (where applicable) of the Company and to procure that any Director appointed by it (whether alone or jointly with any other Person) shall procure such matter or thing. 28.4. Neither Party to this Agreement shall be liable for delay in the performance of any of its obligations hereunder if such delay results from causes beyond its reasonable control, including, without limitation, acts of God, fires, strikes, acts of war, or intervention of any relevant government authority, but any such delay or failure shall be remedied by such Party as soon as practicable. 28.5. Nothing contained in this Agreement is intended or is to be construed to constitute Elan and Cytogen as partners, or Elan as an employee of Cytogen, or Cytogen as an employee of Elan. No Party hereto shall have any express or implied right or authority to assume or create any obligations on behalf of or in the name of the Party or to bind the other Party to any contract, agreement or undertaking with any third Party. 28.6. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute this Agreement. 28.7. Any notice to be given under this Agreement shall be sent in writing by registered or recorded delivery post or telecopied to: -25- Elan at: Elan Corporation, plc Monksland, Athlone County Westmeath Ireland Attention: Chief Financial Officer Telefax: 353-902-92427 copy to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, NY 10112 Attention: David Robbins, Esq. Telefax: (212) 408-2420 Cytogen at: Cytogen Corporation 600 College Road East Princeton, New Jersey 08540-5308 Attention: Chief Financial Officer Telefax: (609) 951-9298 copy to: Dewey Ballantine 1301 Avenue of the Americas New York, NY 10019 Attention: Frederick W. Kanner, Esq. Telefax: (212) 259-6333 the Company at: Targon Corporation 600 College Road East Princeton, New Jersey 08540 Attention: Chief Executive Officer Telefax: (609) 951-9298 -26- copy to: O'Sullivan Graev & Karabell, LLP 30 Rockefeller Plaza New York, NY 10112 Attention: David Robins, Esq. Telefax: (212) 408-2420 copy to: Dewey Ballantine 1301 Avenue of the Americas New York, NY 10019 Attention: Frederick W. Kanner, Esq. Telefax: (212) 259-6333 or to such other address(es) as may from time to time be notified by either Party to the other hereunder. Any notice sent by mail shall be deemed to have been delivered within seven working days after dispatch and any notice sent by telecopy shall be deemed delivered within 24 hours of the time of the dispatch. Notices of change of address shall be effective upon receipt. 28.8. This Agreement shall be governed by and construed in accordance with the laws of Delaware and the Parties agree to submit to the jurisdiction of any federal or state court sitting in New York City for the resolution of disputes hereunder. 28.9. If any provision in this Agreement is agreed by the Parties to be, deemed to be or becomes invalid, illegal, void or unenforceable under any law that is applicable hereto, (i) such provision will be deemed amended to conform to applicable laws so as to be valid and enforceable or, if it cannot be so amended without materially altering the intention of the Parties, it will be deleted, with effect from the date of such agreement or such earlier date as the Parties may agree, and (ii) the validity, legality and enforceability of the remaining provisions of this Agreement shall not be impaired or affected in any way. 28.10. No amendment, modification or addition hereto shall be effective or binding on either Party unless set forth in writing and executed by a duly authorized representative of both Parties. 28.11. No waiver of any right under this Agreement shall be deemed effective unless contained in a written document signed by the Party charged with such waiver, and no waiver of any breach or failure to perform shall be deemed to be a waiver of any future breach or failure to perform or of any other right arising under this Agreement. -27- 28.12. The section headings contained in this Agreement are included for convenience only and form no part of the agreement between the Parties. Except as otherwise provided herein, references to articles, paragraphs, clauses and appendices are to those contained in this Agreement. 28.13. None of the Parties may assign their rights and obligations hereunder without the prior written consent of the other Parties. Elan and/or Cytogen shall have the right to delegate or subcontract all or any portion of their duties hereunder to their respective Affiliates; provided, that Elan or Cytogen, as the case may be, guarantees the performance by such Affiliate of the obligations of Elan or Cytogen, as the case may be under this Agreement. 28.14. No provision of this Agreement shall be construed so as to negate, modify or affect in any way the provisions of any other agreement between the Parties unless specifically referred to, and solely to the extent provided, in any such other agreement. 28.15. This Agreement shall be binding upon and enure to the benefit of the Parties hereto, their successors and permitted assigns. -28- IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the day first set forth above. ELAN CORPORATION, PLC By: /s/ Donal Geaney --------------------------------- Name: Donal Geaney Title: CEO CYTOGEN CORPORATION By: /s/ Thomas J. McKearn --------------------------------- Name: Thomas J. McKearn Title: Chairman, President and CEO TARGON CORPORATION By: /s/ Michael Sember --------------------------------- Name: Michael Sember Title: CEO and Chairman LIST OF EXHIBITS EXHIBIT A Business Plan of Targon Corporation EXHIBIT B List of ATS Compounds EXHIBIT C List of Cytogen Compounds EXHIBIT D Certificate of Incorporation and Bylaws of Targon Corporation EX-10.4 6 MARKETING AND CO-PROMOTION AGREEMENT MARKETING AND CO-PROMOTION AGREEMENT ------------------------------------ This Agreement (hereinafter "Agreement") effective the 1st day of August, 1996, is between C.R. BARD, INC., a New Jersey corporation with offices at 730 Central Avenue, Murray Hill, New Jersey 07974 (hereinafter "Bard"), and CYTOGEN CORPORATION, a Delaware corporation with offices at 600 College Road East, Princeton, New Jersey 08540 (hereinafter "Cytogen"). BACKGROUND WHEREAS, Cytogen has developed and will continue to develop a line of in vivo cancer imaging products, and - -- ---- WHEREAS, Bard has substantial experience in marketing medical products, and WHEREAS, Cytogen is desirous of granting Bard the exclusive right to market and promote "Product" in the "U.S." to "Urologists" and is further desirous of granting Bard the co-exclusive right with Cytogen to market and promote Product in the U.S. to "Managed Care Organizations", and WHEREAS, Cytogen, subject to exhaustion of rights of negotiation granted to "CIS" with respect to promotion of Product to Urologists in the Selected Countries (exclusive of Canada), is desirous of affording Bard a right of first offer to obtain the exclusive right to market and promote Product in one or more of the Selected Countries (exclusive of Canada), and WHEREAS, Cytogen, subject to exhaustion of rights of negotiation granted to "Faulding" with respect to promotion of Product to Urologists in Canada, is desirous of affording Bard a right of first offer to obtain the exclusive right to market and promote Product in Canada, and WHEREAS, Cytogen is desirous of granting Bard a right of first offer to obtain the exclusive right to market and promote each "New Product" to Urologists in the U.S. and is further desirous of granting Bard a right of first offer to obtain the co-exclusive right with Cytogen to market and promote each New Product to Managed Care Organizations in the U.S., and WHEREAS, Cytogen, subject to exhaustion of rights of negotiation granted to CIS with respect to promotion of New Product to Urologists in the Selected Countries (exclusive of Canada) is desirous of granting Bard a right of first offer to obtain the exclusive right to market and promote each New Product to Urologists in each of the Selected Countries (exclusive of Canada) in which Bard or any of its Affiliate(s) promote and market Product, and 2 WHEREAS, Cytogen, subject to exhaustion of rights of negotiation granted to Faulding with respect to promotion of New Product to Urologists in Canada, is desirous of granting Bard a right of first offer to obtain the exclusive right to market and promote each New Product to Urologists in Canada provided Bard or any of its Affiliate(s) promote and market Product in Canada, and WHEREAS, Cytogen is desirous of retaining the exclusive right to market and promote Product and each New Product to radiologists, nuclear medicine physicians, nuclear medicine technologists and radiopharmacies and is further desirous of retaining the exclusive right to sell Product and each New Product to all customers. NOW THEREFORE, in consideration of the above premises and the mutual agreements and undertakings set forth below, Cytogen and Bard hereby agree as follows: ARTICLE 1. - DEFINITIONS ------------------------ 1.1. AFFILIATE shall mean any corporation, company, partnership, joint --------- venture, person and/or firm which controls, is controlled by or is under common control with a party. For purposes of this Paragraph 1.1, control shall mean: (i) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or participating shares 3 entitled to vote for the election of directors, and (ii) in the case of non- corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest or the power to direct the management and policies of such entity. 1.2 ANTIBODY - means the monoclonal antibody 7E11-C5.3 which is produced -------- by the hybridoma deposited with the American Type Culture Collection under ATCC Designation HB 10494. 1.3 BARD MARKETING PLAN - shall have the meaning ascribed in Paragraph ------------------- 5.3. 1.4 BASELINE SALES - shall mean, for any given calendar year, the Net -------------- Sales achieved during the immediately preceding calendar year, provided, however, that for the period commencing with the day after the first anniversary of the Product Launch Date through and including the immediately following December 31st, the definition set forth in Exhibit A, which is attached hereto --------- and incorporated herein, shall apply. 1.5 CIS - means CIS Biointernational, Inc., a corporation having its --- principal place of business at B.P. 32-91192 Gef-Sur Yvette, Cedex, France. 1.6 COMMISSIONS - shall have the meaning ascribed in Paragraph 6.2 and ----------- Exhibit A. - --------- 4 1.7 COMMISSION RATE - shall have the meanings ascribed in Exhibit A. --------------- --------- 1.8 COMPETITIVE PRODUCT - means an in vivo nuclear imaging system which: ------------------- (i) utilizes a targeting agent to which a radioisotope is bonded during use, and (ii) is sold for detecting prostate cancer outside of the prostate gland, and (iii) directly competes with Product or a New Product which Bard is obligated to market and promote hereunder. 1.9 CYTOGEN MARKETING PLAN - shall have the meaning ascribed in Paragraph ---------------------- 5.3. 1.10 DISCLOSING PARTY - shall have the meaning ascribed in Paragraph 8.1. ---------------- 1.11 EFFECTIVE DATE - shall mean the date of this Agreement first written -------------- above. 1.12 FAULDING - means Faulding (Canada), Inc., a corporation having a place -------- of business at 334 Aime-Vincent, Vaudrevil, Quebec, Canada J72525. 1.13 FDA - shall mean the United States Food and Drug Administration. --- 5 1.14 FD&C ACT - shall mean the Food Drug & Cosmetic Act as set forth in -------- Title 21, United States Code, as amended, and the regulations promulgated thereunder. 1.15 IMAGING PHYSICIANS - shall mean radiologists, nuclear medicine ------------------ physicians, radiology/nuclear medicine technologists and radiopharmacists. 1.16 INCREMENTAL SALES - shall mean, for any given year, that portion of ----------------- Net Sales, if any, which exceeds Baseline Sales. 1.17 INDEMNITEE - shall have the meaning ascribed in Paragraph 9.4. ---------- 1.18 INDEMNITOR - shall have the meaning ascribed in Paragraph 9.4 ---------- 1.19 JOINT MARKETING COMMITTEE - shall mean the Joint Marketing Committee ------------------------- established pursuant to Section 5.1 hereof. 1.20 MANAGED CARE ORGANIZATIONS - shall mean health maintenance -------------------------- organizations, networks of healthcare providers or other similar entities that provide, or otherwise make available, a program of health care services to a member/subscriber for a fixed fee. 6 1.21 NET SALES - shall mean [INFORMATION OMITTED AND FILED SEPARATELY WITH --------- THE COMMISSION UNDER RULE 24B-2.] 1.22 NEW PRODUCT - shall mean and include each in vivo prostate cancer ----------- imaging product which does not utilize the Antibody and which, during the Term, Cytogen or any Affiliate of Cytogen would have the right to sell in any part of the Territory. 7 1.23 PARTIAL YEAR PERIOD - shall mean the period commencing on the day ------------------- following the first anniversary of the Product Launch Date through and including the immediately following December 31st. 1.24 PIE SITES - mean those hospital-based nuclear medicine physicians or --------- radiologists or department of nuclear medicine physicians or radiologists who: (i) prior to the Effective Date, have been accepted into Cytogen's Partners In Excellence Program and have received training and testing in the use of Product in accordance with Cytogen's quality assurance protocols, or (ii) during the Term, the Joint Marketing Committee determines meet the criteria set forth on Exhibit B, which is attached hereto and incorporated herein, (as may be modified - --------- from time to time by the Joint Marketing Committee), and who are accepted into Cytogen's Partners In Excellence Program and undergo training and testing in the use of Product in accordance with Cytogen's quality assurance protocols. 1.25 PLA - means a product license application as described in 21 CFR Part --- 601. 1.26 PRODUCT - shall mean and include each in vivo prostate cancer imaging ------- product which utilizes the Antibody and which, during the Term, Cytogen or any Affiliate of Cytogen has or would have the right to sell in any part of the Territory. 8 1.27 PRODUCT LAUNCH DATE - shall mean the date of first commercial sale of ------------------- Product in the Territory by Cytogen or any Affiliate of Cytogen to a non- Affiliate of Cytogen following the receipt by Cytogen of all necessary FDA approvals to market and promote such Product in the Territory, including, without limitation, any necessary pre-approval of advertising or promotional materials. 1.28 REACTION NOTICE - shall have the meaning ascribed in Paragraph 7.1. --------------- 1.29 RECEIVING PARTY - shall have the meaning ascribed in Paragraph 8.1. --------------- 1.30 SELECTED COUNTRIES - mean Australia, Canada, France, Germany, Austria, ------------------ Switzerland, Italy, Japan, Sweden, Norway, Finland, Denmark, Spain and the United Kingdom. 1.31 SPECIFICATIONS - mean the finished product specifications and related -------------- quality control testing protocols relating to Product, as constituted on the Effective Date, as set forth in the PLA referred to in Paragraph 2.1(e), as may be amended or supplemented by Cytogen during the Term. 1.32 TERM - shall mean the period commencing on the Effective Date and, ---- unless terminated earlier pursuant to 9 Paragraph 3.3, Paragraph 11.1 or Article X, ending on the later of: (i) the tenth anniversary of the Product Launch Date, or (ii) the last date of any applicable additional term described to Paragraph 10.1 hereof. 1.33 TERRITORY - shall mean the U.S. and those Selected Countries added to --------- the Territory by mutual written agreement of the parties pursuant to Paragraph 4.4. 1.34 UNACCEPTED 3.2 OFFER - shall have the meaning ascribed in Paragraph -------------------- 3.2. 1.35 UNACCEPTED 4.4 OFFER - shall have the meaning ascribed in Paragraph -------------------- 4.4. 1.36 UROLOGISTS - shall mean: (i) physicians who are board certified for ---------- the practice of urology, and (ii) primary care physicians who treat urological conditions. 1.37 U.S. - means the United States of America exclusive of its territories ---- and possessions. 1.38 WAIVER NOTICE - shall have the meaning ascribed in Paragraph 4.4. ------------- 10 1.39 3.2 BARD NOTICE - shall have the meaning ascribed in Paragraph 3.2. --------------- 1.40 3.2 CYTOGEN NOTICE - shall have the meaning ascribed in Paragraph 3.2. ------------------ 1.41 4.4 BARD NOTICE - shall have the meaning ascribed in Paragraph 4.4. --------------- 1.42 4.4 CYTOGEN NOTICE - shall have the meaning ascribed in Paragraph 4.4. ------------------ ARTICLE 2. - REPRESENTATIONS AND WARRANTIES ------------------------------------------- 2.1. REPRESENTATIONS & WARRANTIES OF CYTOGEN - Cytogen hereby represents --------------------------------------- and warrants to bard that: (a) Cytogen is a corporation organized, validly existing and in good standing under the laws of the State of Delaware, has all requisite corporate power and authority to own and operate its property and to carry on its business as now being conducted, and is duly qualified and in good standing to do business in any of those jurisdictions where it is required to be qualified as a result of ownership of property or residence of any of its employees or agents, except for those jurisdictions in which failure to so qualify 11 would not have a material adverse effect on the business or assets of Cytogen, and (b) the execution and delivery of this Agreement has been duly and validly authorized by all necessary corporate action on the part of Cytogen and (assuming valid execution of this Agreement by Bard) this Agreement is and shall be, during the Term, a valid and binding obligation of Cytogen enforceable against it in accordance with its terms, except to the extent that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights or the discretion of a court of competent jurisdiction as to specific performance, and (c) neither Cytogen nor any Affiliate of Cytogen is currently a party to any agreement or understanding, oral or written, which is inconsistent, in any material respect, with the rights granted to Bard hereunder or the obligations imposed on Cytogen hereunder and, during the Term, Cytogen and its Affiliates shall refrain from entering into any agreement or understanding, oral or written, which would be inconsistent, in any material respect, with the rights 12 granted to Bard hereunder or the obligations imposed on Cytogen hereunder, and (d) prior to the Effective Date, Phase III clinical trials of the Product which is the subject of the PLA referred to in Paragraph 2.1(e) were completed, and (e) a PLA on a Product, in form as constituted on the Effective Date, is currently pending with FDA which, on July 22, 1996, received unanimous recommendation for approval by the Medical Imaging Drug Advisory Committee to FDA, and (f) on the Effective Date, Cytogen owns or leases a manufacturing facility having production capability sufficient to manufacture 400,000 units of Product per year. (g) Exhibit C, which is attached hereto and incorporated herein, sets --------- forth a true, accurate and complete list of the name and address of each PIE Site existing on the Effective Date, and (h) prior to the Effective Date, Cytogen did not grant to any third party any marketing, promotional or distribution rights on any in vivo prostate cancer 13 imaging product, except for the right of first negotiation to market and promote Product and New Product in the Selected Countries (exclusive of Canada) previously granted to CIS and the right of first negotiation to market and promote Product and New Product in Canada previously granted to Faulding. 2.2 REPRESENTATIONS & WARRANTIES OF BARD - Bard hereby represents and ------------------------------------ warrants to Cytogen that: (a) Bard is a corporation organized, validly existing and in good standing under the laws of the State of New Jersey, has all requisite corporate power and authority to own and operate its property and to carry on its business as now being conducted and is duly qualified and in good standing to do business in any of those jurisdictions where it is required to be qualified as a result of ownership of property or residence of any of its employees or agents, except for those jurisdiction in which failure to so qualify would not have a material adverse effect on the business or assets of Bard, and (b) the execution and delivery of this Agreement has been duly and validly authorized by all necessary corporate action on the part of Bard and (assuming valid 14 execution of this Agreement by Cytogen) this Agreement is and shall be, during the Term, a valid and binding obligation of Bard enforceable against it in accordance with its terms, except to the extent that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights or the discretion of a court of competent jurisdiction as to specific performance, and (c) neither Bard nor any Affiliate of Bard is currently a party to any agreement or understanding, oral or written, which would prohibit or which would limit, in any material manner, the performance of any obligation undertaken hereunder to be performed by Bard directly or indirectly through and of its Affiliates, and (d) neither Bard nor any Affiliate of Bard will market or promote Product outside of the Territory. ARTICLE 3. - MARKETING AND PROMOTION BY BARD 3.1 GRANT OF PRODUCT MARKETING AND PROMOTION RIGHTS. Cytogen hereby grants ----------------------------------------------- to Bard the exclusive right to market each Product in the Territory to Urologists and the co-exclusive right with Cytogen to market each Product in the U.S. to Managed Care 15 Organizations. Subject to the provisions of Paragraph 4.4, Cytogen reserves all other rights to market, promote and sell each Product. Cytogen covenants to notify Bard of the existence of each Product which is different, in any material respect, from the Product which is the subject of the PLA referred to in Paragraph 2.1(e) within thirty (30) days of the date on which the clinical efficacy thereof has been established and further covenants to include in its notice a technical summary of the clinical advantages of such Product vis a vis the Product which is the subject of the PLA referred to in Paragraph 2.1(e). Further, Cytogen covenants to disclose to Bard, within fourteen (14) business days of receipt of request from Bard, such other technical information relating to each Product which is the subject of a notice issued by Cytogen pursuant to this Paragraph 3.1 as Bard reasonably requests. 3.2. RIGHT OF FIRST OFFER - Cytogen hereby grants to Bard a right of first -------------------- offer to obtain: (i) the exclusive right to market and promote each New Product to Urologists in the U.S., and (ii) the co-exclusive right with Cytogen to market and promote each New Product to Managed Care Organizations in the U.S., and (iii) the exclusive right to market and promote each New Product to Urologists in each of the Selected Countries (exclusive of Canada) in which Bard or any of its Affiliate(s) promote and market Product, subject to exhaustion of rights of negotiation granted to CIS with respect to promotion of New Product to Urologists in the Selected Countries (exclusive of Canada), on a country by country basis, and (iv) the exclusive right to market and promote each New Product to 16 Urologists in Canada provided Bard or any of its Affiliate(s) promote and market Product in Canada, subject to exhaustion of rights of negotiation granted to Faulding with respect to promotion of New Product to Urologists in Canada. Cytogen hereby covenants to notify Bard of the existence of each New Product within thirty (30) days of the availability of a final report on the Phase III clinical trials relating thereto and further covenants to include in each such notice all technical information and data in its possession relative to the New Product which is the subject of such notice, as well as the terms upon which Cytogen would be willing to grant Bard such marketing and promotional rights thereon, by country (a "3.2 Cytogen Notice"). Within sixty (60) days of receipt by Bard of a particular 3.2 Cytogen Notice, Bard shall notify Cytogen of its intent to negotiate with Cytogen with respect to the right to market and promote the New Product which was the subject of such 3.2 Cytogen Notice in the U.S. and/or in one (1) or more of the Selected Countries (a "3.2 Bard Notice"). In the event Bard fails to respond to a particular 3.2 Cytogen Notice within sixty (60) days of receipt thereof, Bard's right of first offer on the New Product which was the subject of such 3.2 Cytogen Notice shall immediately be extinguished. In the event a particular 3.2 Bard Notice indicates that Bard has no interest in negotiating with Cytogen with respect to the New Product which was the 17 subject of the corresponding 3.2 Cytogen Notice, Bard's right of first offer on such New Product shall immediately be extinguished. In the event a particular 3.2 Bard Notice indicates that Bard is interested in negotiating with Cytogen on some but not all of the rights which are the subject to its right of first offer relating to the New Product which was the subject of the corresponding 3.2 Cytogen Notice, Bard's right of first offer on such New Product shall immediately be extinguished only to the extent such 3.2 Bard Notice indicates a lack of interest in such rights. In the event a particular 3.2 Bard Notice indicates that Bard is interested in negotiating with Cytogen with respect to the grant to Bard of marketing and promotional rights on the New Product which was the subject of the corresponding 3.2 Cytogen Notice, the parties shall meet within ten (10) business days of Cytogen's receipt of such 3.2 Bard Notice and shall negotiate, in good faith, the grant of rights thereon to the extent specified therein. In the last mentioned event, if the parties fail to reach written agreement, within ninety (90) days of Cytogen's receipt of a particular 3.2 Bard Notice, on the grant of rights specified therein, Bard shall reduce its last offer thereon ( an "Unaccepted 3.2 Offer") to writing, shall furnish the same to Cytogen and Cytogen shall thereafter have the right to itself market and promote the New Product which was the subject of the Unaccepted 3.2 Offer to the extent specified therein and shall have the right to grant any third party the right to market and promote such New Product on 18 terms no more favorable than those specified in the Unaccepted 3.2 Offer. Cytogen covenants, from the time of issuance of a particular 3.2 Cytogen Notice through the expiration of the ninety (90) day negotiation period thereon, to refrain from marketing or promoting (or negotiating with any third party on marketing or promoting) the New Product which was the subject of such 3.2 Cytogen Notice in a manner which is inconsistent with Bard's right of first offer thereon. The restrictions in the immediately preceding sentence shall cease in the event the negotiations between Cytogen and Bard are terminated. In the event Cytogen, on one or more occasions, intends to offer a third party rights on terms more favorable than those in an Unaccepted 3.2 Offer, Cytogen shall so notify Bard setting forth such terms. Any notice issued by Cytogen pursuant to the immediately preceding sentence shall be deemed a counter offer which may be accepted by Bard within forty five (45) days of Bard's receipt thereof. 3.3 MARKETING AND PROMOTION. Subject to the granting of required ----------------------- regulatory approvals and registrations to sell Product, during the Term, Bard shall use commercially reasonable efforts to market and promote Product to Urologists and Managed Care Organizations in the U.S. and, subject to expansion of the Territory pursuant to Paragraph 4.4, shall use commercially reasonable efforts to market and promote Product to Urologists in the Territory outside the U.S. in a manner intended to maximize 19 sales and market penetration of Product at the earliest date and consistent with the Bard Marketing Plan presented annually to the Joint Marketing Committee by Bard pursuant to Paragraph 5.3 hereof. Promotion by Bard during the first three (3) years following the Product Launch Date shall: (i) average at least [*] Product presentations to Urologists per year, and (ii) include a minimum of [*] Product presentations to Urologists per year. The parties hereby expressly acknowledge and agree that the aforementioned presentations may be made by Bard on Product alone or may be made in conjunction with the presentation of one or more products of Bard and/or its Affiliates, provided however, if any such presentation of Product is made in conjunction with one or more products of Bard and/or its Affiliates, Bard shall assure that a fair presentation of Product is given. In addition to Bard's expenditures for such direct marketing and promotional presentations, Bard's marketing and promotional efforts shall further include additional promotional expenditures (the amount of which shall be determined by Bard in its sole judgment) for promotional brochures, conventions and exhibits, and educational programs consistent with the Bard Marketing Plan approved by the Joint Marketing Committee. Additionally, Bard shall include Product in any applicable prostate disease management program sponsored by Bard. Further, Bard hereby covenants to Cytogen that, during the remainder of the Term following the Product Launch Date, Bard shall maintain a sales force of not less than forty four (44) competent persons * [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24B- 2.] 20 dedicated to promoting medical products to Urologists in the U.S. on a full time basis. In the event Bard breaches the covenant set forth in the immediately preceding sentence and fails to cure such breach written ninety (90) days of receipt of written demand from Cytogen, Cytogen, as its sole and exclusive remedy, shall have the right to immediately terminate this Agreement upon notice to Bard. 3.4 SUPPORT SERVICES - Bard, at its expense, shall develop and produce, or ---------------- cause to be developed and produced, all marketing, promotional and advertising materials to be used in the performance of the duties described in Paragraph 3.3. Bard agrees to provide Cytogen, for its review and written approval prior to use, with all proposed marketing, promotional and advertising materials for Product to enable Cytogen to assure itself that such materials comply with labeling approved by FDA and all other requirements of competent governmental authorities in the Territory. Further, Bard agrees to provide Cytogen with the requisite number of production samples of all materials referred to in this Paragraph 3.4 for submission by Cytogen to FDA. Additionally, Bard, with technical support from Cytogen as necessary, agrees to provide Urologists located in the Territory and Managed Care Organizations located in the U.S. with support on the clinical utility of Product. 21 3.5 MARKETING AND PROMOTION BY BARD - Bard hereby covenants that Bard (and ------------------------------- to the extent applicable Affiliates of Bard) shall market and promote Product only: (i) for a use(s), indication(s) or application(s) which is contained in labeling supplied by Cytogen or is contained in marketing, promotional or advertising materials which have been approved in writing by Cytogen in advance of use, and (ii) in a manner which is consistent, in every material respect, with Bard's customary marketing and promotional guidelines, and (iii) in compliance with all applicable laws and regulations governing the conduct of employees engaged in the promotion and marketing of in vivo diagnostic products, except where non-compliance with any such law or regulation results from promotion of Product for a use(s), indication(s) or application(s) which is contained in: (a) labeling supplied by Cytogen, or (b) marketing, promotional or advertising materials which have been approved in writing by Cytogen in advance of use. ARTICLE 4 - CYTOGEN'S DUTIES 4.1 REGULATORY APPROVALS. Cytogen shall bear the costs, have the -------------------- responsibility for, and use diligent efforts to, obtain and maintain all regulatory approvals and registrations from governmental authorities necessary in order to lawfully manufacture, market, promote and sell Product in the Territory. 22 4.2 MANUFACTURING, MARKETING AND PROMOTION. Subject to obtaining required -------------------------------------- regulatory approvals and registrations, during the Term, Cytogen shall have the obligation to use commercially reasonable efforts to: (i) manufacture sufficient quantities of Product to timely fill all customer orders in the Territory, and (ii) market and promote Product in the Territory to Imaging Physicians and in the U.S. to Managed Care Organizations, and (iii) sell Product to customers in the Territory, provided, however, that marketing and promotional activities by Cytogen which are directed to Managed Care Organizations shall be coordinated with the Joint Marketing Committee and be consistent with both the Bard Marketing Plan and the Cytogen Marketing Plan. Cytogen agrees to cause at least [*] PIE Sites to be operational by the Product Launch Date. Additionally, Cytogen agrees to cause at least [*] PIE Sites to be operational not later than the first anniversary of the Product Launch Date and to cause at least [*] PIE Sites to be operational not later than the second anniversary of the Product Launch Date. In the event that Cytogen achieves at least eighty percent (80%) of any applicable milestone set forth in the immediately preceding sentence as of the prescribed date, then Cytogen shall have an additional six (6) months to fully achieve such milestone. Cytogen agrees that the abovereferenced PIE Sites which are to become operational after the Product Launch Date shall be at locations reasonably acceptable to Bard. Further, Cytogen shall cause additional PIE Sites to become operational at times and at locations identified * [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24B- 2.] 23 by the Joint Marketing Committee and in the Cytogen Marketing Plan with the intention of including such additional PIE Sites as marketing targets for Product. 4.3 SUPPORT SERVICES. Cytogen shall, at its own expense, be responsible ---------------- for the manufacturing, storage, distribution and sale of Product, including, without limitation, the entry of sales orders, invoicing and collection of sales revenues. To the extent necessary to fulfill its obligations under Paragraphs 3.4 and 4.2, Cytogen shall: (i) develop and produce all marketing and promotional materials for Product, and (ii) provide all customer and technical support relating to Product. 4.4 EXPANSION OF THE TERRITORY - The parties hereby acknowledge and agree -------------------------- that, as of the Effective Date, the Territory shall be limited to the U.S. Cytogen hereby grants to Bard a right of first offer to expand the Territory to include one (1) or more of the Selected Countries, subject to relinquishment by CIS and Faulding of their respective rights of first negotiation to market and promote Product to Urologists in the Selected Countries. In the event CIS notifies Cytogen that it relinquishes its said right of first negotiation with respect to one or more of the Selected Countries (other than Canada) or in the event Faulding notifies Cytogen that it relinquishes its said right of first negotiation with respect to Canada (a "Waiver Notice"), Cytogen, within thirty (30) business days of its 24 receipt of the Waiver Notice, shall so notify Bard and shall include in its notice the country or countries which were the subject of the Waiver Notice, as well as the terms and conditions upon which Cytogen would be willing to expand the Territory to include the country or countries which were the subject of the Waiver Notice (a "4.4 Cytogen Notice"). Within sixty (60) days of receipt by Bard of a particular 4.4 Cytogen Notice, Bard shall issue a notice to Cytogen (a "4.4 Bard Notice") of its intent to negotiate with Cytogen on expansion of the Territory to include one (1) or more of the countries specified in such 4.4 Cytogen Notice. In the event Bard fails to respond to a particular 4.4 Cytogen Notice within sixty (60) days of receipt thereof, Bard's right of first offer to expand the Territory to include the country or countries specified in such 4.4 Cytogen Notice shall immediately be extinguished. In the event a particular 4.4 Bard Notice indicates that Bard has no interest in negotiating with Cytogen to expand the Territory to include any of the countries specified in the corresponding 4.4 Cytogen Notice, Bard's right of first offer to expand the Territory to include such countries shall immediately be extinguished. In the event a particular 4.4 Bard Notice indicates that Bard is interested in negotiating with Cytogen to expand the Territory to include some but not all of the countries specified in the corresponding 4.4 Cytogen Notice, Bard's right of first offer to expand the Territory shall be extinguished only to the extent such 4.4 Bard Notice indicates a lack of interest in negotiating with respect to a specific 25 country or countries. In the event a particular 4.4 Bard Notice indicates that Bard is interested in negotiating with Cytogen to expand the Territory, the parties shall meet within thirty (30) business days of Cytogen's receipt of such 4.4 Bard Notice and shall negotiate, in good faith, the expansion of the Territory to the extent specified in the 4.4 Bard Notice. In the last mentioned event, if the parties fail to reach written agreement, within ninety (90) days of Cytogen's receipt of a particular 4.4 Bard Notice, on the expansion of the Territory to include the country or countries specified therein, Bard shall reduce its last offer thereon (an "Unaccepted 4.4 Offer") to writing, shall furnish the same to Cytogen and Cytogen shall thereafter have the right to itself market and promote Product to Urologists in the country or countries which were the subject of the Unaccepted 4.4 Offer and shall have the right to grant any third party the right to market and promote Product to Urologists in the country or countries which were the subject of the Unaccepted 4.4 Offer on terms no more favorable than those specified therein. Cytogen covenants, from the time of issuance of a particular 4.4 Cytogen Notice through the expiration of the ninety (90) day negotiation period thereon, to refrain from marketing or promoting (or negotiating with any third party on marketing or promoting) Product to Urologists in the country or countries which were the subject of such 4.4 Cytogen Notice, except to the extent Bard's right of first offer to expand the Territory has been extinguished. The restrictions in the immediately preceding 26 sentence shall cease in the event negotiations between Cytogen and Bard are terminated. In the event Cytogen, on one or more occasions, intends to offer a third party rights on terms more favorable than those in an Unaccepted 4.4 Offer, Cytogen shall so notify Bard setting forth such terms. Any notice issued by Cytogen pursuant to the immediately preceding sentence shall be deemed a counter offer which may be accepted by Bard within forty five (45) days of Bard's receipt thereof. 4.5 CHANGE IN SPECIFICATIONS - During the Term, Cytogen shall not change ------------------------ or supplement any of the Specifications where any such change or supplement requires a PLA or PLA supplement without first consulting with Bard. 4.6 MARKETING AND PROMOTION BY CYTOGEN - Cytogen hereby covenants that ---------------------------------- Cytogen (and to the extent applicable Affiliates of Cytogen) shall market, promote and sell Product only: (i) for a use(s), indication(s) or application(s) which is approved by competent governmental authority in the country in which Product is marketed, promoted or sold, and (ii) in compliance with all applicable laws and regulations governing the conduct of employees engaged in the promotion and marketing of in vivo diagnostic products. 27 ARTICLE 5 - JOINT MARKETING COMMITTEE 5.1 FORMATION. Within thirty (30) days after the Effective Date, the --------- parties shall establish a Joint Marketing Committee having a total membership of four (4), of which two shall be designated by each party to this Agreement. A Chairman shall be selected by Cytogen to preside over its meetings and to establish the Joint Marketing Committee's agenda. The Joint Marketing Committee shall meet on frequent basis, at least quarterly, during the Term at a time and place to be mutually agreed upon in advance by the members of the Joint Marketing Committee. 5.2 PURPOSE. The purpose of the Joint Marketing Committee is to co- ------- ordinate and monitor the marketing and promotional efforts of Bard and the marketing, promotional and sales efforts of Cytogen with respect to Product and to assist in: (i) the development of consistent marketing strategies and promotional materials for Product, and (ii) effective implementation of such strategies, and (iii) the sharing of relevant market statistics and information about Product and each party's performance under this Agreement. 5.3 REPORTING. At least sixty (60) days before the Product Launch Date, --------- and at least sixty (60) days before each anniversary of the Product Launch Date thereafter, each party shall deliver to the Joint Marketing Committee for its approval an annual 28 marketing plan for Product (referred to as the "Cytogen Marketing Plan", or the "Bard Marketing Plan", as the case may be) which shall include a three (3) year forecast of sales by units of Product, marketing goals and tactics, and the anticipated marketing and sales resources to be allocated to the implementation of the marketing plan. Within fifteen (15) days after the last day of each calendar quarter following the Product Launch Date, Cytogen shall deliver a written report to the Joint Marketing Committee setting forth: (i) the gross sales of Product by Cytogen or any Affiliate of Cytogen during such quarter, broken down by country within the Territory, and information detailing deductions in arriving at Net Sales, and (ii) actual expenditures, during such quarter, by Cytogen and any Affiliate of Cytogen for marketing, promotional and sales efforts relative to Product, and (iii) such additional information as the Joint Marketing Committee may reasonably request. Within fifteen (15) days after the last day of each calendar quarter following the Product Launch Date, Bard shall deliver a written report to the Joint Marketing Committee setting forth: (i) actual expenditures, during such quarter, by Bard and any Affiliate of Bard, for marketing and promotional efforts relating to Product, and (ii) the number of Product presentations made by Bard to Urologists and Managed Care Organizations during such quarter, and (iii) such additional information as the Joint Marketing Committee may reasonably request. A copy of each such report shall be sent to the President of Cytogen and the Vice President and General 29 Manager of Bard's Urological Division within fifteen (15) days of the end of the calendar quarter to which it relates. 5.4 DISPUTE RESOLUTION. In the event that the Joint Marketing Committee ------------------ is unable to reach a unanimous agreement by its members on any matter within its purview, such dispute shall be the subject of discussion and negotiation between the President of Cytogen and the Vice President and General Manager of Bard Urological Division. Neither party shall pursue any of its remedies under this Agreement, whether at law or otherwise, with respect to such dispute until at least thirty (30) days have elapsed since the date upon which written notice of a dispute has been delivered to the designee of each party hereto. ARTICLE 6 - PAYMENTS 6.1 CO-PROMOTIONAL RIGHTS PAYMENT In consideration of the grant by ----------------------------- Cytogen to Bard of the exclusive right to market and promote Product to Urologists in the U.S. and the grant by Cytogen to Bard of the co-exclusive right to market and promote Product to Managed Care Organization in the United States, Bard shall pay to Cytogen [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24B-2.] within fifteen (15) days after notice by Cytogen to Bard of FDA approval to market and sell Product in the U.S. Additionally, in the event the Territory is expanded to include Japan, Bard shall pay Cytogen [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24B-2.] on the 30 date on which the Territory is so expanded. Further, in the event the Territory is expanded to include four (4) of the Selected Countries (other than Japan), Bard shall pay Cytogen [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24B-2.] on the date on which the Territory is so expanded. 6.2 COMMISSIONS. In consideration of the undertakings of Bard hereunder, ----------- Cytogen agrees to pay Commissions to Bard in accordance with the provisions of Exhibit A. - --------- 6.3 PAYMENT OF COMMISSIONS. Bard's right to receive a Commissions under ---------------------- Paragraph 6.2 shall commence upon the first commercial sale of Product in the Territory by Cytogen or any Affiliate of Cytogen to a non-Affiliate of Cytogen. Cytogen shall invoice and shall cause its Affiliates to invoice customers for Product within two (2) business days of shipment. For purposes of this Agreement, each Product shall be deemed sold at the time of invoice. Cytogen shall pay Bard Commissions on a quarterly basis during the Term within forty- five (45) days after the end of each calendar quarter. All Commission payments due hereunder shall be paid in the currency of the country in which the applicable sales of Product are made. 6.4 QUARTERLY REPORTS. Within forty-five (45) days after the end of each ----------------- calendar quarter, Cytogen shall provide Bard with an accurate written report with respect to such quarter 31 detailing: (i) the gross sales of Product by Cytogen or any Affiliate of Cytogen during such quarter, by country, PIE Site, hospital or other health care facility, and (ii) information detailing deductions from the gross sales in arriving at Net Sales, and (iii) the calculation of Commissions payable for such quarter. No reports shall be required under this Paragraph prior to the date of first commercial sale of Product in the Territory. 6.5 RECORDS AND AUDIT RIGHTS. Cytogen shall maintain all reports referred ------------------------ to in Paragraph 6.4, together with supporting business records, for a period of five (5) years. Additionally, Cytogen shall generate and maintain, for a period of five (5) years post sale, accurate records of Net Sales, Baseline Sales and Incremental Sales. At the request and expense of Bard, an independent auditor, selected by Bard and acceptable to Cytogen, shall have access limited to once per calendar year, at Cytogen's principal place of business during ordinary business hours with reasonable notice, to records referred to in this Paragraph 6.5. If deemed necessary or desirable, in the sole opinion of the independent auditor, the independent auditor shall, at Bard's expense, be permitted to consult with and obtain the assistance of consultants selected by the independent auditor and acceptable to Cytogen. Such acceptance shall not be unreasonably withheld. Neither the independent auditor nor the selected consultants shall disclose to Bard, or any third parties, any information relating to the business of Cytogen other than information 32 relating solely to the accuracy of the reports and payments under this Agreement. In the event the independent auditor determines that there was an underpayment or overpayment in Commissions, the error shall be reconciled by payment by the appropriate party to the other within thirty (30) days of issuance of the auditor's report. Notwithstanding the foregoing, if the auditor determines that in any audit that there has been an underpayment of Commissions of ten percent (10%) or more for the period examined, Cytogen hereby agrees to reimburse Bard for its actual incurred costs in having such audit conducted. ARTICLE 7 - ADVERSE REACTION 7.1 REPORTING. Each party agrees to report to the other party in writing --------- any serious adverse reactions or any side effects which occur or other adverse events with Product as promptly as possible after receipt of information of such event (a "Reaction Notice"), but in no event later than three (3) business days following receipt of a Reaction Notice of any event described in Paragraph 7.2(a) through 7.2(e). Any such reactions or side effects must be reported (in full detail if requested) irrespective of whether there is a causal connection with Product being administered or whether the causal connection is unclear or presumed to be not likely. Additionally, each party shall report to the other in writing, quarterly during the three (3) year period following the Product Launch Date and annually thereafter 33 during the remainder of the Term, all other unexpected non-serious adverse events associated with Product which come to the attention of such party. 7.2 For purposes of Paragraph 7.1, a serious adverse reaction or side effect is a reaction or side effect from Product which meets one or more of the following criteria: (a) a reaction or side effect that is life threatening or fatal; (b) a reaction or side effect that resulted in hospitalization, or if the patient was already hospitalized, a reaction or side effect which prolonged hospitalization; (c) a reaction or side effect that resulted in severe or permanent disability; (d) a reaction or side effect that involved congenital anomaly or overdose, or cancer which was not already present at the beginning of treatment with Product involved; or (e) a reaction that is considered to be important, significant or otherwise medically serious. 7.3 Each of the parties hereto shall monitor all relevant journals and media communications for information on factors materially affecting the use or efficacy of Product and shall promptly inform the other party of such information. The 34 informing party may provide in writing its evaluation of such information. Either party shall promptly inform the other if it has actual knowledge of any measures which are necessary to eliminate or minimize any risk associated with the use of Product, provided however, neither party shall have such obligation if any such measure would require the disclosure of any information which is proprietary to it. ARTICLE 8 - CONFIDENTIAL INFORMATION 8.1 NONDISCLOSURE AND NONUSE. The parties hereto agree that during the ------------------------ Term and during the five (5) year period following the expiration or termination of this Agreement, each party shall keep completely confidential and shall not publish or otherwise divulge or use, for its own benefit or for the benefit of any third party, any information of a proprietary nature furnished to it (the "Receiving Party") by the other party (the "Disclosing Party") without the prior written approval of the Disclosing Party in each instance, except: (a) as necessary to obtain governmental approval for the marketing of Product; (b) to consultants, Affiliates and agents who are obligated to maintain it in confidence pursuant to written agreements which are at least as stringent as the terms of this Article VIII; and 35 (c) as otherwise may be required by law, regulation or judicial order. Information of a proprietary nature shall include, but not be limited to, information concerning a party's products, proposed products, marketing plans, methods of manufacture, customers or any other information or materials in whatever form not generally known to the public. 8.2 EXCEPTIONS. Nothing in this Article 8 shall prevent disclosure or use ---------- of information which: (a) is disclosed orally unless such oral disclosure is reduced to writing within thirty (30) days of the oral disclosure and such reduction to writing is marked as proprietary or confidential; (b) is already known to the Receiving Party at the time of disclosure by the Disclosing Party as evidenced by the Receiving Party's business records maintained in the normal course of business; (c) was known to the public at the time of disclosure, or subsequently becomes so known through no act or omission of the Receiving Party; (d) is lawfully disclosed to the Receiving Party by a non-Affiliate having the right to convey such information. 36 ARTICLE 9 - INDEMNIFICATION 9.1 INDEMNIFICATION BY CYTOGEN. Cytogen hereby agrees to defend -------------------------- (utilizing counsel reasonably acceptable to Bard), indemnify, save and hold Bard, its Affiliates and their respective successors harmless from and against all claims, damages, liabilities, losses, costs and expenses, including reasonable attorneys' fees, which arise or result from: (i) the design or manufacture of Product, or (ii) the promotion of Product by Cytogen or any Affiliate of Cytogen, (iii) the breach by Cytogen of any of its representations and warranties set forth in this Agreement, or (iv) the default by Cytogen in the observance or performance of any obligation imposed upon it hereunder, or (v) the use by Bard or any Affiliate of Bard of labeling supplied by Cytogen or marketing, promotional or advertising materials approved by Cytogen in advance of use, or (vi) the sale or use of Product. Cytogen shall have no obligation under this Paragraph 9.1 to the extent that a particular claim, damage, liability, loss, cost or expense arises or results from: (a) a breach by Bard or any Affiliate of Bard of a covenant contained in Paragraph 3.5, or (b) the gross negligence of wilful misconduct of Bard or any Affiliate of Bard. 9.2 INDEMNIFICATION BY BARD. Bard hereby agrees to defend (utilizing ----------------------- counsel reasonably acceptable to Cytogen), indemnify, save and hold Cytogen, its Affiliates and their respective 37 successors harmless from and against all claims, damages, liabilities, losses, costs and expenses, including reasonable attorneys' fees, which arise or result from the breach by Bard of any of its representations and warranties set forth in this Agreement or the default by Bard in the observance or performance of any obligation imposed upon it hereunder. Bard shall have no obligation to Cytogen under this Paragraph 9.2 to the extent that a particular claim, damage, liability, loss, cost or expense falls within Cytogen's obligations under Paragraph 9.1 or arises or results from the gross negligence or wilful misconduct of Cytogen or any Affiliate of Cytogen. 9.3 INFRINGEMENT. Cytogen hereby agrees to defend (utilizing counsel ------------ reasonably acceptable to Bard), indemnify, save and hold Bard, its Affiliates and their respective successors harmless from all claims, damages, liabilities, losses, costs and expenses which arise or result from any third party claim alleging that the manufacture, use, sale, import, promotion or marketing of Product, alone or in combination with any other article, infringes a patent(s) owned by or licensed to the third party claimant. 9.4 COOPERATION - As a condition precedent to the right to be indemnified ----------- from any claim pursuant to this Article IX, the party claiming the right to be indemnified (the "Indemnitee"): (i) shall promptly notify the other party (the "Indemnitor") of 38 the claim and shall include in its notice all information in its possession relating to the claim, and (ii) shall fully cooperate with the Indemnitor in the defense of such claim, and (iii) shall not settle the claim without the prior written consent of the Indemnitor, it being expressly understood and agreed that the Indemnitor shall have the right to settle any such claim on such terms as it deems appropriate. ARTICLE 10 - TERM AND TERMINATION 10.1 TERM. This Agreement shall have an initial term commencing on the ---- Effective Date and shall continue thereafter until the tenth anniversary of the Product Launch Date, unless sooner terminated in accordance with the provisions of Paragraph 3.3, 11.1 or this Article X. This Agreement may be renewed on the same terms and conditions for one (1) or more additional two (2) year periods upon mutual written agreement of the parties executed not less than ninety (90) days prior to the expiration of the then current term. 10.2 FAILURE TO PAY COMMISSIONS. Bard may terminate this Agreement at any -------------------------- time upon Cytogen's failure to pay Commissions due to Bard pursuant to this Agreement and the continuation of such failure for more than thirty (30) days after delivery of written notice to Cytogen of such failure. 39 10.3 MATERIAL BREACH. Either party may terminate this Agreement upon --------------- ninety (90) days prior written notice in the event of the other party's breach of or default under any other material provision of this Agreement, if such default or breach is not remedied within ninety (90) days from the date of such notice, except where such default or breach is due to circumstances beyond the reasonable control of the other party as described in Paragraph 11.7 hereof. 10.4 FAILURE TO MEET BASELINE SALES. In the event that Net Sales for any ------------------------------ of the four years following the second anniversary of the Product Launch Date fail to equal or exceed the corresponding Baseline Sales: (i) the parties hereto shall promptly meet to discuss the reasons for such failure and, with the participation and approval of the Joint Marketing Committee, develop a plan to achieve a level of sales in the next succeeding years in excess of Baseline Sales, and (ii) if Net Sales in the next succeeding year also fail to equal or exceed the Baseline Sales for such year, then either party may immediately terminate the Agreement by providing written notice to the other party. 10.5 BANKRUPTCY. If, during the term of this Agreement, either party makes ---------- an assignment of this Agreement or generally, for the benefit of creditors, or becomes insolvent or seeks protection under any bankruptcy, receivership, trust deed, creditor's arrangement or composition, or if any comparable proceeding is instituted against the other party and is not dismissed within ninety (90) days of such institution, then the 40 other party may terminate this Agreement immediately upon delivery of written notice thereof. 10.6 EFFECTS OF TERMINATION. ---------------------- 10.6.1 Breach by Cytogen - In the event this Agreement is terminated ----------------- by Bard pursuant to Paragraph 10.2 or 10.3, Cytogen agrees to remit to Bard, within thirty (30) days of the termination of this Agreement, a sum equal to the amount, if any, by which monies paid by Bard to Cytogen pursuant to Paragraph 6.1 hereof exceed Commissions paid to Bard hereunder. 10.6.2 Payments - Termination of this Agreement by either party shall -------- not prejudice the right of Bard to recover Commissions earned but unpaid at the time of termination. 10.6.3 Marketing Rights. Upon termination of this Agreement, Bard's ---------------- rights to market and promote Product shall immediately cease and within sixty (60) days of such termination, Bard shall deliver to Cytogen all marketing and promotional materials with respect to Product in the possession of Bard or any of its Affiliates. 41 ARTICLE 11 - GENERAL PROVISIONS 11.1 SALE OF COMPETITIVE PRODUCT - Cytogen hereby acknowledges and agrees --------------------------- that Bard and its Affiliates reserve the right to manufacture, have manufactured, use, market, promote and sell any Competitive Product. However, in the event the Urological Division of Bard sells any Competitive Product in the U.S. during the Term, Cytogen, as its sole and exclusive remedy, shall have the right, upon notice to Bard, to terminate this Agreement only with respect to the U.S. Further, in the event Bard or any Affiliate of Bard sells any Competitive Product, during the Term, in any country which constitutes a part of the Territory (other than the U.S.), Cytogen, as its sole and exclusive remedy, shall have the right, upon notice to Bard, to terminate this Agreement only with respect to such country or countries. If any event referred to in this Paragraph 11.1 occurs, Bard shall give Cytogen notice thereof within fifteen (15) business days of the date on which the sale of the Competitive Product occurs. 11.2 GOVERNING LAW. This Agreement shall be governed by and interpreted in ------------- accordance with the laws of the State of New Jersey, within the United States of America, as though all parties were resident of, and the contract was to be performed in, New Jersey. 42 11.3 ENTIRE AGREEMENT. This Agreement represents the entire Agreement and ---------------- understanding of the parties hereto with respect to the subject matter hereof, supersedes all previous agreements and understandings related thereto and may only be amended or modified in writing signed by an authorized representative of the parties hereto. 11.4 ASSIGNMENT. Except as hereinafter provided, neither party may assign, ---------- transfer or otherwise dispose of any of its rights or obligations pursuant to this Agreement without the prior written consent of the other party, which consent shall not be unreasonably delayed or withheld. Either party may assign this Agreement, upon notice to but without the consent of the other party, to any person or entity which purchases substantially all of its stock or substantially all of its cancer diagnostic assets. Additionally, Cytogen shall have the right to delegate its obligations under Paragraph 4.2 and Article V to an Affiliate of Cytogen. Further, Bard shall have the right to delegate its obligations, if any, outside of the U.S. to one or more of its Affiliates. 11.5 NOTICE. All notices under this Agreement shall be in writing and ------ shall be deemed given if sent by telecopier (except for legal process), certified or registered mail or commercial courier (return receipt or confirmation of delivery required), or by personal delivery to the party to receive such notices or 43 other communications called for this Agreement at the following addresses (or at such other address for a party as shall be specified by such party by like notice): CYTOGEN CORPORATION 600 College Road East Princeton, New Jersey 08540 Attention: General Counsel C.R. BARD, INC. 730 Central Avenue Murray Hill, New Jersey 07974 Attention: General Counsel Copy to: BARD UROLOGICAL DIVISION C.R. Bard Inc. 8195 Industrial Blvd. Covington, Georgia 30209 Attention: Vice President and General Manager 11.6 LIMITATION ON LIABILITY. In no event shall either party be liable to ----------------------- the other for incidental or consequential damages, including, without limitation, loss of profits or punitive damages even if such party shall have been advised of the possibility of the same. [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24B-2.], Bard's right to monetary damages upon a breach of this Agreement by Cytogen shall be limited to [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24B- 2.]. Notwithstanding anything to the contrary contained in this Agreement, Bard's liability to Cytogen, under Article 9 or otherwise, shall be 44 limited: (i) during the period from the Effective Date through the first anniversary of the Product Launch Date, [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24B-2.], (ii) from and after the first anniversary of the Product Launch Date, [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24B- 2.]. 11.7 FORCE MAJEURE. Except for the obligation to make payments under this ------------- Agreement, each of the parties hereto shall be excused from the performance of its obligations hereunder in the event such performance is prevented by force majeure, and such excuse shall continue so long as the condition constituting 45 such force majeure continues and for thirty (30) days after the termination of such condition. For the purposes of this Agreement, force majeure is defined to include causes beyond the control of the parties hereto, including without limitation, acts of God, acts, resolutions or laws of any government, war, war like conditions, civil commotion, destruction of production facilities or materials by fire, earthquake or storm, labor disturbances, epidemic and failure of public utilities or common carriers. 11.8 PUBLICITY. Neither party shall make any press release or other --------- similar public disclosure or announcement concerning this Agreement, without the prior written consent of the non-disclosing party, except as otherwise required by law. Consent will be deemed granted if no response is received from the non- disclosing party within fifteen (15) days of its confirmed written request for approval from the disclosing party. Notwithstanding the foregoing, in the event such disclosure or public announcement is required to be made on a more immediate basis in order to comply with applicable state or federal securities laws, then approval will be deemed granted if no response is received from the non-disclosing party within the timeframes required by law; provided, however, that the disclosing party provides the non-disclosing party with notice of the legally required timeframe for approval of the disclosure at the time of providing a copy of the proposed disclosure or announcement. 46 11.9 SURVIVAL OF RIGHTS. All provisions of this Agreement which by their ------------------ nature are intended or required to be observed or performed after the expiration or termination of this Agreement, including but not limited to the provisions of Articles 6, 8, 9, and Paragraphs 10.6.1, 10.6.2, 10.6.3, 11.2, 11.3, 11.6 and 11.9 shall survive the expiration or termination of this Agreement. 11.10 COUNTERPARTS. This Agreement may be executed in any number of ------------ counterparts, each of which shall be an original and all of which shall constitute but one and the same document. 11.11 SEVERABILITY. Any provision of this Agreement that is prohibited or ------------ unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 11.12 CAPTIONS - The Article and Paragraph headings of this Agreement are -------- intended for convenience of reference only and shall not define or limit the provisions of this Agreement. 11.13 WAIVERS - The failure of either of the parties to exercise their ------- respective rights under this Agreement regarding any misrepresentation, breach or default shall not prevent the party from exercising such or any other right hereunder regarding such or any subsequent misrepresentation, breach or default. 47 11.14 RELATIONSHIP OF PARTIES - It is expressly agreed that the ----------------------- relationship of the parties herein created is that of independent contractors. Further, it is expressly agreed that nothing contained herein is intended to create, nor shall it be deemed or construed as creating, an agency relationship, an employer-employee relationship or a relationship of joint ventures. Neither party shall represent to any third party that it has authority to bind the other in any manner. 11.15 INSURANCE - During the Term, Cytogen, at its expense, shall maintain --------- a policy of comprehensive general liability insurance with products liability endorsement providing coverage relating to Product on a claims made basis in a minimum amount of five million dollars ($5,000,000) annual aggregate. Within thirty (30) days of the Effective Date and annually thereafter, Cytogen shall furnish Bard with a certificate evidencing such insurance coverage. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. CYTOGEN CORPORATION By: /s/ Richard J. Walsh ---------------------- Title: Vice President, Corporate Development C.R. BARD, INC. By: /s/ Benson F. Smith --------------------- Title: President and COO 48 Exhibit A --------- Commissions ----------- [INFORMATION OMITTED AND FILED SEPARATELY WITH THE COMMISSION UNDER RULE 24B-2.] 49 Exhibit B --------- . Approval by Cytogen Clinical Investigations/Technical Operations. . Experience with immunoscintigraphy or similar techniques. . State-of-the-art camera/computer system. . Knowledgeable nuclear medicine technologists/physicians. . Clinical study or consulting agreement. . Access to a multispecialty physician group. . Affiliation with a healthcare delivery system (IHN, oncology group practice, cancer carve-out). . Hospital with a large cancer patient pool under an indemnity contract (Medicare/HCFA or HMO agreement). 50 Exhibit C --------- 1. Brooke Army Medical Center Ft. Sam Houston, TX 78234-6200 2. Cedars Sinai Medical Center Los Angeles, CA 90048 3. Cleveland Clinic Foundation Cleveland, OH 44195 4. Columbia Presbyterian New York, NY 10032 5. George Washington University Washington, DC 20037 6. Georgia Baptist Medical Center Atlanta, GA 30312 7. Harper Hospital Detroit, MI 48201 8. Harris Methodist Fort Worth, TX 76108 9. Henry Ford Hospital Detroit, MI 48202 10. University of Illinois Chicago, IL 60612 11. Iowa City VAMC Iowa City, IA 52242 12. Jersey Shore Medical Center Neptune, NJ 07754 13. Jewish Hospital St. Louis, MO 63110 14. Johns Hopkins Bayview Baltimore, MD 21224-2780 15. John Peter Smith Fort Worth, TX 76104 16. Lehigh Valley Hospital Allentown, PA 18105 17. Louisiana State University Shreveport, LA 71130 51 18. Loyola University Maywood, IL 60153 19. Mayo Clinic Rochester, MN 55905 20. M.D. Anderson Cancer Center Houston, TX 77030 21. Medical College of WI Milwaukee, WI 53226 22. MetroHealth Medical Center Cleveland, OH 44109 23. Memorial Medical Center Springfield, IL 62781 24. University of Miami Miami, FL 33136 25. Montefiore Medical Center Bronx, NY 10467 26. Morton Plant Hospital Clearwater, FL 27. Mount Sinai Hospital New York, NY 10029 28. Ohio State University Columbus, OH 43210 29. Our Lady of the Lake Baton Rouge, LA 70808 30. Queens Medical Center Honolulu, HI 96813 31. Scott & White Memorial Temple, TX 76508 32. St. Francis Hospital Topeka, KS 66606 33. St. Joseph's Hospital Houston, TX 77002 34. St. Luke's Medical Center Milwaukee, WI 53215 35. St. Mary's Medical Center Saginaw, MI 48601 52 36. St. Vincent's Hospital Portland, OR 37. SUNY at Buffalo Buffalo, NY 14214 38. Sutter General Hospital Sacramento, CA 95816 39. Tri-City Medical Center Oceanside, CA 92056 40. University of Washington Seattle, WA 53 EX-27 7 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1996 AND THE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 24,328,000 5,977,000 1,063,000 (536,000) 270,000 500,000 16,999,000 (12,058,000) 38,044,000 5,341,000 0 0 0 492,000 30,316,000 38,044,000 1,135,000 3,939,000 0 2,830,000 18,497,000 0 342,000 (16,651,000) 0 (16,651,000) 0 0 0 (16,651,000) (0.35) 0
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