<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 12, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ILEX ONCOLOGY, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 8071 74-2699185
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
RICHARD L. LOVE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
14785 OMICRON DRIVE, SUITE 101 ILEX ONCOLOGY, INC.
SAN ANTONIO, TEXAS 78245 14785 OMICRON DRIVE, SUITE 101
(210) 677-6080 SAN ANTONIO, TEXAS 78245
(Address, including zip code, and telephone number, (210) 677-6080
including area code, of registrant's principal (Name and address, including zip code, and telephone
executive offices) number, including area code, of agent for service)
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Copies to:
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PHILLIP M. RENFRO, ESQ. GEORGE W. BILICIC, JR., ESQ.
FULBRIGHT & JAWORSKI L.L.P. CRAVATH, SWAINE & MOORE
300 CONVENT STREET, SUITE 2200 825 EIGHTH AVENUE
SAN ANTONIO, TEXAS 78205 NEW YORK, NEW YORK 10019
(210) 224-5575 (212) 474-1000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED
PROPOSED PROPOSED MAXIMUM
MAXIMUM MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) PRICE(1) FEE
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Common Stock, $.01 par value(2).............. 2,875,000 shares $13.00 $37,375,000 $11,326
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes 375,000 shares of Common Stock subject to the Underwriters'
over-allotment option.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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ILEX ONCOLOGY, INC.
CROSS REFERENCE SHEET
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FORM S-1 ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
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<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus......... Cover Page of Registration Statement;
Cross-Reference Sheet; Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus..................................... Inside Front and Outside Back Cover
Pages of Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges...................... Prospectus Summary; Risk Factors;
Selected Financial Data
4. Use of Proceeds.................................. Use of Proceeds
5. Determination of Offering Price.................. Outside Front Cover Page of
Prospectus; Underwriting
6. Dilution......................................... Risk Factors; Dilution
7. Selling Security Holders......................... *
8. Plan of Distribution............................. Outside Front Cover Page of
Prospectus; Underwriting
9. Description of Securities to be Registered....... Outside Front Cover Page of
Prospectus; Dividend Policy;
Description of Capital Stock
10. Interest of Named Experts and Counsel............ Legal Matters; Experts
11. Information with Respect to the Registrant....... Prospectus Summary; Risk Factors;
Dividend Policy; Capitalization;
Selected Financial Data;
Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Principal Stockholders;
Description of Capital Stock;
Certain Transactions; Shares
Eligible for Future Sale; Financial
Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................... Management
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* Not applicable.
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***************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH *
* SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* STATE. *
* *
***************************************************************************
Subject to Completion,
Dated December 12, 1996
PROSPECTUS
2,500,000 SHARES
ILEX ONCOLOGY, INC. [LOGO]
COMMON STOCK
($.01 PAR VALUE)
All of the 2,500,000 shares of Common Stock, $.01 par value (the "Common
Stock"), being offered hereby (the "Shares") are being issued and sold by ILEX
Oncology, Inc. ("ILEX" or the "Company"). It is anticipated that the initial
public offering price will be between $11.00 and $13.00 per share. Prior to this
offering, there has been no public market for the Common Stock of the Company.
See "Underwriting" for a discussion of the factors considered in determining the
initial public offering price.
The Company intends to apply for quotation and trading on the Nasdaq National
Market under the trading symbol "ILXO."
SEE "RISK FACTORS" COMMENCING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT COMPANY(1)
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Per Share.................................... $ $ $
- ---------------------------------------------------------------------------------------------------
Total(2)..................................... $ $ $
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(1) Before deducting expenses of the offering payable by the Company estimated
at $600,000.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
an aggregate of 375,000 additional shares of Common Stock at the Price to
Public, less the Underwriting Discount, solely to cover over-allotments, if
any. If the Underwriters exercise such option in full, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
The Shares are offered subject to receipt and acceptance by the Underwriters, to
prior sale and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Shares will be made at the office of Salomon Brothers Inc,
Seven World Trade Center, New York, New York, or through the facilities of The
Depository Trust Company, on or about , 1997.
SALOMON BROTHERS INC
COWEN & COMPANY
SMITH BARNEY INC.
The date of this Prospectus is , 1997.
<PAGE> 4
ILEX Oncology, Inc. is a drug development company focused on the timely
development, manufacture and regulatory approval of oncology drugs.
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[Picture of a physician and child] [Picture of two individuals]
The American Cancer Society estimates one in The best way to cure cancer is not to get it
three Americans will be diagnosed with in the first place. Two drugs in
cancer in their lifetime. Nine drugs in development.
development.
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Treatment
ILEX Prevention
Contract Research Services
ILEX's Full Range of Development Services
[Table showing services]
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Preclinical Pharmacology Phase I Clinical Trials
Formulation Phase II Clinical Trials
Synthesis/Sale-up (GMP) NDA Preparation
Toxicology FDA Approval
IND Preparation
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE OVER-THE-COUNTER MARKET
(INCLUDING THE NASDAQ NATIONAL MARKET) OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
ILEX(TM) IS A TRADEMARK OF THE COMPANY. TRADEMARKS OF OTHERS ARE ALSO REFERRED
TO IN THIS PROSPECTUS.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements including the notes thereto contained
elsewhere in this Prospectus. Investors should carefully consider the
information set forth under the heading "Risk Factors." In this Prospectus, the
term "Company" or "ILEX" refers to ILEX Oncology, Inc. Except as otherwise
indicated, all information in this Prospectus (i) assumes the conversion of all
outstanding shares of convertible preferred stock of the Company ("Convertible
Preferred Stock") into Common Stock upon consummation of this offering, (ii)
reflects an approximate 1-for-1.752 reverse stock split (the "Reverse Stock
Split") of the outstanding Common Stock effective immediately prior to the
effective date of the Registration Statement of which this Prospectus is a part,
and (iii) assumes no exercise of the Underwriters' over-allotment option. See
"Capitalization," "Description of Capital Stock" and "Underwriting."
THE COMPANY
ILEX is a drug development company focused exclusively on oncology. The
Company leverages its expertise in the identification, development,
manufacturing and regulatory approval process of oncology drugs to (i) develop
cancer therapeutics, (ii) build a product platform for the prevention of cancer
("chemoprevention") and (iii) serve as a value-added provider of contract
research services. ILEX's objective is to be a leading worldwide oncology drug
development company. The Company has nine cancer treatment compounds under
development, including five in Phase II or Phase III clinical trials. In October
1996, ILEX submitted a New Drug Application ("NDA") to the Food and Drug
Administration ("FDA") seeking accelerated marketing approval for mitoguazone
("MGBG") as a second-line treatment for patients with AIDS-related non-Hodgkin's
lymphoma. Additionally, ILEX has two chemoprevention compounds under
development. Consistent with its strategy, the Company has established worldwide
development and marketing collaborations with Sanofi S.A. ("Sanofi"), Janssen
Pharmaceutica N.V., a subsidiary of Johnson & Johnson ("Janssen"), and MGI
Pharma, Inc. ("MGI Pharma") for certain of its compounds. In addition to its
proprietary product development programs, the Company offers contract research
organization ("CRO") services to both the pharmaceutical and biotechnology
industries. ILEX believes it is currently the only full-service provider of
contract research services focused exclusively on oncology.
Oncology represents a significant market opportunity. The American Cancer
Society estimates that over 1.3 million new cases of cancer will be diagnosed
and approximately 550,000 cancer deaths, representing approximately 25% of all
projected deaths, will occur in the United States in 1996. Cancer is the second
leading cause of death in the United States and over 10 million people alive
today have a history of cancer. The worldwide oncology drug market was estimated
at approximately $5.6 billion in 1995 and is projected to total approximately $9
billion by the year 2000. While recent data suggests that overall cancer death
rates have declined since 1990, primarily due to an overall reduction in lung
cancer deaths, the death rates resulting from several cancers are still rising,
including non-Hodgkin's lymphoma, pancreatic cancer, multiple myeloma and
chronic leukemia. Moreover, the incidence of cancer increases dramatically with
age, with eighty-five percent of cancers diagnosed occurring in people over the
age of 50. Specifically, people over the age of 65 have, on average, a ten times
greater risk of dying from cancer than those in the under-65 population.
Therefore, since the over-65 population is one of the fastest growing age groups
in the United States, it is expected that there will be an increased need for
oncology products. Additionally, due to the life-threatening nature of cancer,
the FDA has announced procedures for accelerating the approval of oncology
agents, thereby reducing the amount of time required to bring such agents to
market. The Company believes that the increasing demand for oncology products
and the acceleration of the oncology product approval process by the FDA creates
a unique opportunity for the Company to leverage its expertise in oncology drug
development.
ILEX was formed by The Cancer Therapy and Research Foundation of South
Texas ("CTRC") in December 1993 for the purpose of conducting certain advanced
drug development programs and pursuing commercial opportunities which were not
within the scope of CTRC's tax-exempt purpose.
3
<PAGE> 6
CTRC is a non-profit organization, which, in conjunction with the University of
Texas Health Science Center at San Antonio ("UTHSCSA"), is a National Cancer
Institute ("NCI") designated Comprehensive Cancer Center and one of the premier
organizations in the United States for the clinical testing of oncology drugs.
CTRC and its research subsidiary, CTRC Research Foundation ("CTRC Research") and
certain related entities have had some level of participation in the clinical
development of a majority of the oncology drugs developed over the past 15
years. The Company's relationship with CTRC, CTRC Research and such related
entities provides the Company with (i) access to a large population of
investigators and patients for clinical trials, (ii) the ability to obtain
prompt feedback regarding the safety and efficacy of its compounds, (iii) access
to potential CRO clients and (iv) a potential opportunity to license certain
drug discoveries arising from the research programs of CTRC Research. The
Company also utilizes its relationship with CTRC and ILEX's Scientific Advisory
Board to identify and in-license cancer compounds. CTRC Research currently owns
approximately 30.3% of the outstanding shares of capital stock of the Company
and will own approximately 23.8% upon the closing of this offering.
ILEX's objective is to be a leading worldwide oncology drug development
company. The Company believes that its approach of developing proprietary cancer
therapeutics and chemoprevention compounds combined with serving as a
value-added partner for its contract research clients will generate near-term
revenues and diversify risk, while building a proprietary product portfolio with
significant long-term potential. The Company's strategy consists of the
following elements: (i) focusing on the expanding cancer market; (ii) leveraging
its expertise to identify and in-license compounds in later stages of
development; (iii) building a product platform in chemoprevention; (iv) forming
strategic collaborations with corporate partners; and (v) offering a full range
of oncology product development and manufacturing services.
ILEX has submitted an NDA to the FDA seeking accelerated marketing approval
for MGBG as a second-line treatment for patients with AIDS-related non-Hodgkin's
lymphoma. The Company, in collaboration with Sanofi, plans to expand MGBG's
indication by conducting clinical trials for other non-Hodgkin's lymphomas,
Hodgkin's disease and pancreatic cancer. There can be no assurance, however,
that MGBG will receive FDA approval on a timely basis, if at all, be
commercially viable or achieve market acceptance. ILEX has established a
worldwide development and marketing collaboration with Sanofi for MGBG. In
addition, the Company has established a worldwide development and marketing
collaboration with Janssen for crisnatol mesylate ("Crisnatol"), which is in
Phase III clinical trials for treatment of patients with glioblastoma, a type of
brain tumor. ILEX is also pursuing the development of difluoromethyl ornithine
("DFMO") for brain tumors, carcinoid syndrome and breast cancer, and expects to
initiate a pivotal Phase II trial in 1997 for breast cancer. The Company,
through a joint venture with MPI Enterprises, L.L.C. ("MPI"), is developing
Piritrexim for Kaposi's sarcoma and advanced bladder cancer, and is currently
conducting a Phase III trial for Kaposi's sarcoma.
ILEX is also developing chemoprevention compounds. Physicians are
increasingly able to identify people at risk of developing cancer. For example,
tests are currently available to detect precancerous conditions, such as lesions
of the cervix and recurrent colon polyps. In the future, it is expected that
genetic markers will also be used to identify high-risk individuals. The Company
is attempting to develop oral, non-toxic drugs which, when taken chronically,
may prevent a progression to cancer. ILEX believes that clinical development
strategies with appropriate intermediate endpoints will be fundamental to the
timely development of such pharmaceuticals. Currently, the Company has two
chemoprevention compounds under development. Based on the potential market
opportunity, the Company plans to devote a significant portion of its resources
to building a chemoprevention product platform.
In addition to its proprietary product development programs, ILEX offers
CRO services to the pharmaceutical and biotechnology industries. The Company
believes it is currently the only full-service provider of contract research
services focused exclusively on oncology. The Company offers its contract
research clients, among other things, expertise in the design of cancer clinical
protocols, preparation of regulatory submissions, toxicology services, access to
patients and investigators and state-of-the-art manufacturing capabilities. As a
result of such capabilities, ILEX believes that it may be able to reduce
4
<PAGE> 7
the time normally required by pharmaceutical and biotechnology companies and
broad-based CROs to develop oncology products and increase the probability of
obtaining regulatory approval.
THE OFFERING
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Common Stock offered........................ 2,500,000 shares
Common Stock to be outstanding after the
offering.................................. 11,679,594 shares(1)
Use of proceeds............................. For research and development activities, working
capital and general corporate purposes, which may
include capital expenditures and acquisitions
Proposed Nasdaq National Market symbol...... ILXO
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(1) Based on the number of shares outstanding at December 11, 1996 as if the
conversion of the outstanding Convertible Preferred Stock into shares of
Common Stock had occurred on that date. Excludes (i) 1,141,647 shares of
Common Stock issuable upon exercise of outstanding options and warrants as
of December 11, 1996, at a weighted average exercise price of approximately
$4.21 and $7.63, respectively, and (ii) 624,398 additional shares of Common
Stock reserved for issuance pursuant to the Company's 1995 Stock Option Plan
and 1996 Non-Employee Director Plan as of December 11, 1996. See
"Management -- Stock Option Plans" and "Description of Capital
Stock -- Warrants."
RISK FACTORS
See "Risk Factors" commencing on page 7 for a discussion of certain factors
that should be considered by prospective purchasers of the Shares.
5
<PAGE> 8
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The summary financial information below has been taken or derived from the
audited financial statements and other records of the Company. The summary
financial information should be read in conjunction with the Company's financial
statements including the notes thereto, and the other financial data contained
elsewhere in this Prospectus. See also "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
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INCEPTION
(OCTOBER 1, 1994) NINE-MONTH PERIODS
THROUGH YEAR ENDED ENDED SEPTEMBER 30
DECEMBER 31, DECEMBER 31, ------------------
1994 1995 1995 1996
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(IN THOUSANDS, EXCEPT PER SHARE DATA)
SUMMARY OF OPERATING STATEMENT DATA:
Revenue:
Product development.................. $ 1,065 $3,551 $2,467 $ 2,899
Contract research services........... 188 658 536 842
------ ------ ------ -------
Total revenue................ 1,253 4,209 3,003 3,741
------ ------ ------ -------
Operating expenses:
Research and development costs....... 945 3,213 2,224 2,503
General and administrative........... 156 1,312 886 1,914
Costs of contract research
services.......................... 78 330 207 1,040
Subcontractor costs.................. 119 199 151 468
------ ------ ------ -------
Total operating expenses..... 1,298 5,054 3,468 5,925
------ ------ ------ -------
Operating loss......................... (45) (845) (465) (2,184)
Interest income (expense), net......... (1) 133 (13) 455
------ ------ ------ -------
Net loss............................... $ (46) $ (712) $ (478) $(1,729)
====== ====== ====== =======
Net loss per share..................... $ (.01) $ (.09) $ (.06) $ (.20)
====== ====== ====== =======
Weighted average shares used in
computing net loss per share(1)...... 7,544 7,737 7,553 8,560
====== ====== ====== =======
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SEPTEMBER 30, 1996
-------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
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BALANCE SHEET DATA:
Cash, cash equivalents and investments in marketable
securities......................................... $17,412 $ 23,412 $ 50,712
Working capital...................................... 9,731 15,731 43,031
Total assets......................................... 19,715 25,715 53,015
Accumulated deficit.................................. (2,487) (2,487) (2,487)
Total stockholders' equity........................... 17,749 23,749 51,049
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(1) See Note 2 of Notes to Financial Statements of information concerning the
computation of net loss per share.
(2) Reflects the pro forma effect of the sale of the Series D and E convertible
preferred stock as if the sale of such shares had occurred on September 30,
1996.
(3) As adjusted to reflect the net proceeds to the Company from the sale of
2,500,000 shares of common stock at an initial public offering price of
$12.00 per share and the application of the net proceeds therefrom and the
assumed conversion of all convertible preferred stock to common stock. See
"Use of Proceeds" and "Capitalization".
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," including statements regarding the anticipated
development and expansion of the Company's business, the products which the
Company expects to offer, anticipated research and development expenditures and
regulatory reform, the intent, belief or current expectations of the Company,
its directors or its officers, primarily with respect to the future operating
performance of the Company and other statements contained herein regarding
matters that are not historical facts, are "forward-looking" statements (as such
term is defined in the Private Securities Litigation Reform Act of 1995).
Because such statements include risks and uncertainties, actual results may
differ materially from those expressed or implied by such forward-looking
statements. Factors that could cause actual results to differ materially from
those expressed or implied by such forward-looking statements include, but are
not limited to, the factors set forth in "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."
RISK FACTORS
Prospective investors should consider carefully the following risk factors
in addition to the other information presented in this Prospectus before
purchasing any shares of Common Stock being offered hereby.
ABSENCE OF DEVELOPED PRODUCTS; EARLY STAGE OF PRODUCT DEVELOPMENT; UNCERTAINTY
OF PRODUCT DEVELOPMENT AND CLINICAL DEVELOPMENT
The Company has no products available for sale and does not expect to have
any products available to be marketed in the near future. The Company's proposed
products are primarily in the development stage and will require extensive
clinical testing prior to submission of any regulatory application for
commercial use. These potential products are subject to the risks of failure
inherent in the development of pharmaceutical products. Some of the Company's
potential products may be found to be unsafe or ineffective or otherwise fail to
receive necessary regulatory clearances, and some have been found to have
adverse side effects in previous clinical trials. A finding that these products
have undesirable or unintended side effects or other characteristics that
prevent or limit their commercial use could have a material adverse effect on
the Company's business, financial condition and results of operations. There can
be no assurance that any products will be developed successfully by the Company
or its partners, prove to be safe and efficacious, receive required governmental
regulatory approvals, be capable of being manufactured on a large scale or at
acceptable costs, be economical to market or achieve market acceptance. There
can also be no assurance that third parties will not market superior products or
that reimbursement to the consumer from third-party payors will be sufficient or
available.
Although the Company has submitted an NDA to the FDA seeking marketing
approval for MGBG under the accelerated procedures promulgated by the FDA for
drugs indicated for life-threatening diseases, there can be no assurance that
MGBG will receive such approval on a timely basis, if at all, be commercially
viable or achieve market acceptance. The failure to obtain FDA approval of the
NDA for MGBG could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company has filed only one
NDA to date, and does not expect to file another in the near future. There can
be no assurance that the Company will file an NDA for any other compound or that
the Company will receive approvals for such compounds. The failure to obtain FDA
approval for the Company's other compounds could have a material adverse effect
on the Company's business, financial condition and results of operations.
The Company's area of focus, oncology, is not thoroughly understood and
there can be no assurance that the drugs the Company is seeking to develop will
prove to be safe and effective in treating or preventing cancer. The development
of such drugs will require the commitment of substantial resources to conduct
the preclinical development and clinical trials necessary to bring such
compounds
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<PAGE> 10
to market. Drug research and development by its nature is uncertain. For
example, to date, no drug for the prevention of cancer (i.e. chemoprevention
drug) has been approved by the FDA, and there can be no assurance that the
Company will be able to develop successfully a safe and efficacious
chemoprevention product, that such drug will be commercially viable or will
achieve market acceptance. There is a risk of delay or failure at any stage, and
the time required and cost involved in successfully accomplishing the Company's
objectives cannot be predicted. For example, actual drug research and
development costs could exceed budgeted amounts, which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
DEPENDENCE ON COLLABORATIVE RELATIONSHIPS; DEPENDENCE ON LICENSEES
The Company's strategy for the development, clinical testing, manufacture
and commercialization of certain of its proposed products depends upon the
Company's entering into various collaborations with corporate partners,
licensors, licensees and others, and is contingent upon the subsequent success
of these third parties in performing their responsibilities. To date, the
Company has entered into corporate collaborations with Sanofi, Janssen and MGI
Pharma. The amount and timing of capital and resources to be devoted to these
activities by its strategic partners and any future collaborators are not within
the control of the Company. There can be no assurance that such partners will
perform their obligations as expected or that the Company will derive any
additional revenue from such arrangements. There can be no assurance that these
strategic partners or any other future collaborators will not pursue their
existing or alternative products in preference to those being developed in
collaboration with the Company. In addition, there can be no assurance that
these collaborations will be maintained, that these strategic partners or any of
the Company's future collaborators will pay any additional fees to the Company
or that they will market any products pursuant to agreements with the Company.
Furthermore, there can be no assurance that the Company will be able to
negotiate additional collaborative arrangements in the future, or that such
collaborative arrangements will be maintained or be successful. To the extent
that the Company chooses not to, or is unable to, establish and maintain (or
avoid termination of) such arrangements, it would require substantially greater
capital to undertake development and marketing of its proposed products at its
own expense. In addition, the Company may encounter significant delays in
introducing its proposed products into certain markets or find that the sale of
its proposed products in such markets is adversely affected by the absence of
such collaborative agreements. The Company does not have sales, marketing or
distribution capability. To market any of its products directly, the Company
must develop a marketing and sales force with both technical expertise and
supporting distribution capability. There can be no assurance that the Company
will be able to establish in-house sales and distribution capabilities or
marketing relationships with third parties, that such marketing relationships
will be successful or that the Company will be otherwise successful in gaining
market acceptance for its products. Failure to market or otherwise develop its
products successfully through corporate partners or directly would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Strategic Alliances and Collaborations."
UNCERTAINTY RELATED TO IDENTIFICATION AND ACQUISITION OF NEW PRODUCT CANDIDATES
The success of the Company depends upon its ability to identify and obtain
rights to commercially viable oncology compounds and to negotiate favorable
relationships with owners of oncology-related technology. There can be no
assurance that the Company will be successful in identifying commercially viable
oncology compounds, in-licensing the rights to such compounds or negotiating
other favorable relationships. See "Business -- In-Licensing Agreements." Due to
the technical expertise and knowledge required by ILEX to identify potential
compounds or technology acquisition targets, it has made a strategic decision to
rely heavily upon Dr. Daniel Von Hoff and Dr. Charles A. Coltman, Jr., founders
of the Company and Co-Chairmen of the Company's Scientific Advisory Board. The
consulting contracts between the Company and Dr. Von Hoff and Dr. Coltman,
however, do not obligate these persons to devote any specified level of time or
resources to the development of potential products for ILEX. Each of Drs. Von
Hoff and Coltman have substantial other time commitments, and there can be no
assurance that such individuals will provide the Company with any product
targets in the future. In addition,
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Drs. Von Hoff and Coltman are prohibited under the terms of their consulting
agreements from making recommendations about, or actively participating in
decisions regarding the acquisitions of compounds or technologies (i) owned or
discovered by certain entities related to CTRC, or (ii) for which such persons
were the principal investigator, supervised the principal investigator or
provided the leadership for the clinical or preclinical studies for such
compounds or technologies, when such actions would give the appearance of a
conflict. Drs. Von Hoff and Coltman are also prohibited from acting as the
principal investigator for or supervising the principal investigator for studies
conducted by the Company. There can be no assurance that the Company, through
Drs. Von Hoff or Coltman or otherwise, will be successful in selecting product
candidates or developing commercial pharmaceutical products that are safe and
efficacious. See "Management -- Employment and Consulting Agreements."
The Company's relationship with CTRC Research and certain of its related
entities provides the Company with (i) access to a large population of
investigators and patients for clinical trials, (ii) the ability to obtain
prompt feedback regarding the safety and efficacy of its compounds, and (iii)
access to potential CRO clients. The Company has an agreement with CTRC Research
which provides the Company with an option to license certain drug discoveries
arising from research programs of CTRC Research. Such licensing opportunities
are currently limited due to, among other reasons, an exclusive option held by
Sanofi through December 2000, to license and develop any products developed by
CTRC Research in connection with research funded by Sanofi through December 31,
1997. If Sanofi declines or fails to exercise its option to license such a CTRC
Research product, ILEX has certain rights to negotiate to license and develop
those products pursuant to the terms of the Subordinated Option Agreement (as
hereinafter defined) between ILEX and CTRC Research. However, the terms of that
agreement only provide ILEX with an option to negotiate to license certain of
CTRC Research's rights and fund certain of its programs, to the extent that
Sanofi has not licensed or funded such rights or programs, and there can be no
assurance that ILEX and CTRC Research will be able to agree on the terms of such
licenses and agreements or that any products acquired or licensed by ILEX
pursuant thereto will be successful. Moreover, the parties have agreed to
negotiate an extension of Sanofi's exclusive option prior to or upon its
expiration. Although CTRC Research will own approximately 23.8% of the
outstanding shares of capital stock of the Company upon closing of this
offering, CTRC Research is an independent entity that neither ILEX nor its
management controls. The Company has no written agreement to acquire technology
from CTRC Research other than the Subordinated Option Agreement, and there can
be no assurance that such a relationship will continue. If ILEX is unable to
maintain a mutually beneficial relationship with CTRC Research and its related
entities or if the Company is unable to obtain licensing opportunities arising
from the research of CTRC Research, the business, financial condition and
results of operations of the Company could be materially and adversely affected.
See "Business -- Relationship with CTRC" and "-- Dependence on CTRC Research and
its Related Entities, Certain Industries and Clients; Loss or Delay of CRO
Contracts."
DEPENDENCE ON KEY INDIVIDUALS; POSSIBLE LOSS OF KEY EMPLOYEES UPON ADVERSE IRS
TAX RULING; NEED FOR ADDITIONAL PERSONNEL
Because of the specialized scientific nature of the Company's business, the
Company's success is highly dependent upon its ability to attract and retain
qualified scientific and technical personnel. Loss of the services of Mr.
Richard Love or Dr. Daniel Von Hoff would be significantly detrimental to the
Company's product development and manufacturing programs and the Company's
ability to identify and obtain rights to commercially viable oncology compounds.
Mr. Love's employment agreement with the Company provides that it is terminable
without cause by either party upon 30 days' notice. In addition, although there
are currently eight members of the Company's Scientific Advisory Board, the
Company relies most heavily upon Dr. Daniel Von Hoff, who does not have an
exclusive contractual relationship with the Company. Dr. Von Hoff also serves on
scientific advisory boards for other companies and has several other significant
professional commitments. Dr. Von Hoff does not have an employment agreement
with the Company and, although he has executed a consulting agreement stating
that he will not undertake affiliations that would conflict with his duties and
responsibilities to the Company without the Company's written consent,
discontinuation of the Company's relationship with Dr. Von Hoff could have a
signifi
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<PAGE> 12
cantly adverse effect on the Company's business, financial condition and results
of operations. The Company is also highly dependent on the other principal
members of its scientific and management staff, and the loss of the services of
such personnel could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company only maintains
key-man life insurance policies on each of Mr. Love and Dr. Von Hoff, in each
case in the amount of $3 million.
CTRC Research is attempting to obtain a private letter ruling from the
United States Internal Revenue Service ("IRS") to confirm certain tax
implications to CTRC Research associated with the formation of the Company by
CTRC. As part of the formation of the Company, shares of Common Stock were
issued to Mr. Love, Dr. Weis, Dr. Coltman and Dr. Von Hoff (the "Founders"). A
provision in the stock purchase agreements entered into between ILEX and the
Founders requires the Company and the Founders to attempt to reach an "equitable
adjustment" of their stock purchases in the event CTRC Research is unable to
obtain a favorable private letter ruling from the IRS. If the Company and the
Founders are unable to reach or agree upon an "equitable adjustment" within a
specified period after the adverse IRS tax ruling, the purchases would be
rescinded and the Company would be required to repurchase the Common Stock
purchased by the Founders at the purchase price paid upon formation. A provision
in the employment and consulting agreements entered into between the Company and
the Founders also requires the Company and the Founders to renegotiate in good
faith an "equitable adjustment" to the terms of such agreements in the event
that CTRC Research is unable to obtain a favorable private letter ruling from
the IRS. If the Company is unable to successfully renegotiate the terms of such
agreements after a specified period of time, they automatically terminate. It is
anticipated that, if CTRC Research is unable to obtain a favorable IRS tax
ruling, the original purchases of Common Stock by the Founders could be required
to be rescinded or the Founders could be required to pay further consideration
for such purchases. It is the current intention of ILEX to take such actions as
are necessary to maintain the services of the Founders. Any negotiations with
the Founders may include, without limitation, issuing shares of Common Stock or
options to purchase shares of Common Stock to the Founders or making cash
payments to the Founders for lost value associated with any shares repurchased
pursuant to the terms of the stock purchase agreements. There can be no
assurance, however, that the negotiations with the Founders would be
successfully consummated, in which case the services of one or more of the
Founders may be lost. The loss of the services of such personnel could have a
material adverse effect on the Company's business, financial condition and
results of operations. It is also possible that payments made by the Company to
retain the services of the Founders could be material. See "Management --
Employment and Consulting Agreements." Furthermore, it is possible that
conflicts between the Company's interest in maintaining the services of the
Founders and the interest of CTRC Research and related entities in maintaining
its tax-exempt status could materially and adversely affect the relationship
between the Company and CTRC Research and related entities and thus the
Company's business, financial condition and results of operations. See
"-- Dependence on CTRC Research and its Related Entities, Certain Industries and
Clients; Loss or Delay of CRO Contracts."
To expand its research and development programs, pursue its product
development plans and expand its CRO business, the Company will be required to
hire additional qualified scientific and technical personnel, as well as
personnel with expertise in clinical testing and government regulation. There is
intense competition for qualified personnel in the areas of the Company's
activities, and there can be no assurance that the Company will be able to
attract and retain the qualified personnel necessary for the development of its
business. The Company faces competition for qualified individuals from numerous
pharmaceutical and biotechnology companies, universities and research
institutions. The failure to attract and retain key scientific and technical
personnel would have a material adverse effect on the Company's business,
financial condition and results of operations.
LIMITED OPERATING HISTORY; HISTORY OF OPERATING LOSSES; EXPECTED FUTURE LOSSES
The Company commenced operations in October 1994 and has only a limited
operating history upon which potential investors may base an evaluation of its
performance. Potential investors, therefore, have limited historical financial
information upon which to base an evaluation of the Company's performance
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<PAGE> 13
and an investment in shares of Common Stock. The Company's prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stages of operations.
To date, the Company has incurred substantial net losses. Net loss for the
period from inception (October 1, 1994) to December 31, 1994, the year ended
December 31, 1995, and the nine-month period ending September 30, 1996 was
$46,000, $712,000 and $1,729,000, respectively. The Company has not generated
any revenues from product sales to date, and there can be no assurance that
revenues from product sales will be achieved. ILEX has not generated significant
contract research revenue or revenue sufficient to cover direct and overhead
costs associated with these activities and there can be no assurance that
contract research revenue will be significantly increased. Moreover, even if the
Company does achieve revenues from product sales or increased contract research
services, the Company expects to incur significant operating losses over the
next several years. The Company's ability to achieve a profitable level of
operations in the future will depend in large part on its completing development
of its compounds, obtaining regulatory approvals for such compounds,
commercializing these potential products through marketing agreements with other
companies or, if the Company chooses, marketing such compounds independently,
successfully manufacturing such compounds, achieving market acceptance of such
compounds and expanding its contract research services business. There can be no
assurance that the Company will ever be successful in developing such compounds,
obtaining such approvals, bringing such compounds to market, developing sales,
marketing or distribution capabilities, manufacturing such products, generating
market acceptance or expanding its contract services business. The likelihood of
the long-term success of the Company must be considered in light of the
expenses, difficulties and delays frequently encountered in the development and
commercialization of new pharmaceutical products, competitive factors in the
marketplace as well as the comprehensive and uncertain regulatory environment in
which the Company operates. There can be no assurance that the Company will ever
achieve significant revenues or profitable operations. See "Selected Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company will require substantial additional funds to conduct research
and development, to develop further its potential pharmaceutical products, to
manufacture and market any pharmaceutical products that may be developed and to
expand its contract research services business. The Company's capital
requirements depend on numerous factors, including but not limited to, the
progress of its research and development programs, the progress of preclinical
and clinical testing, the magnitude and scope of these activities, the time and
cost involved in obtaining regulatory approvals, the cost of preparing, filing,
prosecuting, maintaining, defending and enforcing patent claims and other
intellectual property rights, competing technological and market developments,
changes in or terminations of existing collaborative arrangements, the ability
of the Company to establish and maintain additional collaborative arrangements,
the development of commercialization activities, the growth of its CRO business,
and the purchase of capital equipment and acquisitions of compounds,
technologies or businesses. The Company expects its capital and operating
expenditures to increase substantially over the next several years. The Company
has no current sources of funding beyond the proceeds from this offering, its
collaborative agreements with its strategic partners, its drug development
service operations, existing cash and cash equivalents and investments in
marketable securities. The Company believes that the estimated net proceeds of
this offering, its collaborative agreements with strategic partners, its
contract research services, existing cash and cash equivalents and investments
in marketable securities will satisfy its currently budgeted cash requirements
for the foreseeable future based upon the Company's current operating plan and
conditions, but there can be no assurance that the Company will not require
additional funds sooner than currently anticipated. The Company may seek such
additional funding through public or private equity or debt financings,
collaborative or other arrangements with third parties or from other sources.
There can be no assurance, however, that additional funds will be available on
acceptable terms, if at all. If additional funds are raised by issuing equity
securities, further substantial dilution to existing stockholders, including
purchasers of the Common Stock offered hereby, may result. If
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<PAGE> 14
adequate funds are not available, the Company may be required to delay, scale
back or eliminate one or more of its development programs, or to obtain funds by
entering into arrangements with collaborative partners or others that may
require the Company to relinquish rights to certain of its products or
technologies that the Company would not otherwise relinquish and which could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Use of Proceeds."
DEPENDENCE ON CTRC RESEARCH AND ITS RELATED ENTITIES, CERTAIN INDUSTRIES AND
CLIENTS; LOSS OR DELAY OF CRO CONTRACTS
Most of the Company's CRO contracts are terminable upon 60 to 90 days'
notice by the client. Clients terminate or delay service contracts for a variety
of reasons, including, among others, the failure of a compound being tested to
satisfy safety requirements, unexpected or undesired clinical results of the
compound, the client's decision to forego a particular study, insufficient
patient enrollment or investigator recruitment or production problems resulting
in shortages of the compound. The loss or delay of a large contract or the loss
or delay of multiple contracts could have a material adverse effect on the
business, financial condition and results of operations of the Company. The
Company's contract services revenues are highly dependent on research and
development expenditures by the pharmaceutical and biotechnology industries. The
Company's business, financial condition and results of operations could be
materially and adversely affected by general downturns in, or adverse trends or
factors impacting, the pharmaceutical or biotechnology industries, the impact of
the current trend toward consolidation in these industries or any decrease in
research and development expenditures. The Company's relationship with CTRC
Research and certain of its related entities provides the Company with (i)
access to a large population of investigators and patients for clinical trials,
(ii) the ability to obtain prompt feedback regarding the safety and efficacy of
its compounds, and (iii) access to potential CRO clients. If ILEX and CTRC
Research and its related entities are unable to maintain a mutually beneficial
relationship, including access by the Company to CTRC Research's and its related
entities' patients and investigators and potential contract research clients,
the business, financial condition and results of operations of the Company would
be materially and adversely affected. See "Business -- Contract Research and
Development Services" and "Business -- Relationship with CTRC."
INTENSE COMPETITION; RAPID TECHNOLOGICAL CHANGE
Competition in the area of pharmaceutical products is intense. There are
many companies, both public and private, including pharmaceutical and
biotechnology companies, that are engaged in the development of products for
certain of the applications being pursued by the Company. Moreover, products
currently exist in the market that will compete directly with the products that
the Company is seeking to develop. Most of these companies have substantially
greater financial, research and development, manufacturing and marketing
experience and resources than the Company and represent substantial long-term
competition for the Company. Such companies may succeed in discovering and
developing pharmaceutical products more rapidly than the Company and its
collaborative partners or pharmaceutical products that are safer or more
effective or less costly than any that may be developed by the Company and its
collaborative partners and may also prove to be more successful than the Company
and its collaborative partners in production and marketing. Smaller companies
may also prove to be significant competitors, particularly through collaborative
arrangements with large pharmaceutical and established biotechnology companies.
Academic institutions, governmental agencies and other public and private
research organizations also conduct clinical development, seek patent protection
and establish collaborative arrangements for the development of oncology
products. ILEX will face competition based on product efficacy and safety, the
timing and scope of regulatory approvals, availability of supply, marketing and
sales capability, reimbursement coverage, price and patent position. There can
be no assurance that the Company's competitors will not (i) develop more safe
and effective products; (ii) obtain patent protection or intellectual property
rights that limit the Company's or its collaborative partners' ability to
commercialize products that may be developed; or (iii) commercialize products
earlier than the Company. The industry in which the Company competes is
characterized by extensive research
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and development efforts and rapid technological progress. New developments occur
and are expected to continue to occur at a rapid pace, and there can be no
assurance that discoveries or commercial developments by the Company's
competitors will not render some or all of the Company's potential products
obsolete or non-competitive, which would have a material adverse effect on the
Company's business, financial condition and results of operations. The Company's
competitive position also depends on, among other things, its ability to attract
and retain qualified scientific and other personnel, develop effective
proprietary products, implement development and marketing plans, obtain patent
protection and secure adequate capital resources.
In its drug development and contract research services, the Company
primarily competes against in-house departments of pharmaceutical companies,
CROs and, to a lesser extent, universities and teaching hospitals. Many of these
competitors have substantially greater capital, technical and other resources
than the Company and represents significant long-term competition for the
Company. CROs generally compete on the basis of previous experience, medical and
scientific expertise in specific therapeutic areas, the quality of contract
research, the ability to organize and manage large-scale trials on a global
basis, the ability to manage large and complex medical databases, the ability to
provide statistical and regulatory services, the ability to recruit
investigators and patients, the ability to integrate information technology with
systems to improve the efficiency of contract research, an international
presence with strategically located facilities, financial viability and price.
There can be no assurance that the Company will be able to compete favorably in
these areas. See "Business -- Competition."
UNCERTAINTY REGARDING PATENTS AND PROPRIETARY POSITION; RIGHTS TO TECHNOLOGY
DEPENDENT UPON COMPLIANCE WITH LICENSES AND AGREEMENTS
The Company's success depends in part on its ability to obtain patents,
maintain trade secrets and operate without infringing on the proprietary rights
of others. Although the Company seeks appropriate patent protection for its
proprietary compounds and technologies, to date, the Company has no patents
issued in its name. ILEX currently holds two Orphan Drug Designations and has
licenses providing it with certain rights to 14 issued United States patents and
related foreign patents. However, there can be no assurance that the Company's
patent position will provide it with significant protection against competitors
or that patents issued to or licensed by the Company will not be infringed or
will not be challenged, invalidated or circumvented. The patent positions of
biotechnology and pharmaceutical companies can be highly uncertain and often
involve complex legal and factual questions, and therefore, the breadth of
claims allowed in biotechnology and pharmaceutical patents cannot be predicted.
There can also be no assurance that the Company will develop additional
technologies, drugs or processes that are patentable, license new technology,
that patents will issue from any patent application or that claims allowed will
be sufficient to protect the Company's products and technologies. Competitors
may have filed applications, may have been issued patents or may obtain
additional patents and proprietary rights relating to technologies, drugs and
processes that compete with those of the Company. The failure by the Company to
protect adequately its technologies, drugs and processes covered by issued
patents or to obtain patents could have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company's compounds acquired pursuant to in-licensing arrangements are
protected by 14 patents obtained by the Company's licensors in the United
States; six patents of the Company's licensors are pending in the United States.
The Company's licensors also obtained 126 foreign patents (counterparts to the
United States issued patents and patent applications) and nine foreign patents
are pending. The patents and patent applications in-licensed by the Company have
not been independently investigated by the Company, and there can be no
assurance that any such patents or patent applications will not be challenged or
will provide protection for the Company's compounds. The Company has filed two
of its own United States patent applications for the use of DFMO in combination
with certain drugs used to treat breast cancer and in certain novel
formulations. There can be no assurance that a patent will issue as a result of
either such application, or, to the extent a patent is issued, as to the scope
of protection that these issued patents will provide or whether such patents
will
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ultimately be upheld as valid by a court of competent jurisdiction in the event
of a legal challenge. The patent and license applicable to DHAC recently expired
and, as a result, the DHAC technology is currently available for general public
use. Notwithstanding the patent and license expiration, ILEX holds an Orphan
Drug Designation for DHAC for the treatment of patients with mesothelioma and
has applied for a patent for using DHAC as a treatment with patients with
prostate cancer. Currently, Orphan Drug Designation provides market exclusivity
to ILEX for this indication for seven years following marketing approval.
Following this period of exclusivity for this indication, however, this product
will be deemed a generic drug for all indications and, therefore, will be
subject to competitive pricing pressures. In addition, Oxypurinol and
Aminopterin do not have patent protection and United States patents on ILEX's
other current products which expire in the next 10 years include: MGBG (2002);
Crisnatol (2004, 2005); DFMO (2000); and Piritrexim (2007). See
"Business -- Patents, Trademarks and Trade Secrets."
The Company's rights to its proprietary compounds are dependent upon
compliance with certain licenses and agreements which require, among other
things, certain royalty and other payments, the Company's reasonable use of the
underlying technology of the applicable patents, as well as the filing of
certain regulatory submissions. In addition, the terms of the Company's license
and development agreements with Sanofi require the parties to agree on a
decrease in the royalties and payments to be received by ILEX under certain
limited circumstances. Failure to comply with such licenses and agreements,
which could result in loss of the Company's underlying rights to one or more of
these potential products or a decrease in the payments to ILEX under the Sanofi
agreements, could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- In-Licensing
Agreements."
In addition to pursuing patent protection in appropriate cases, the Company
also relies on trade secret protection for its unpatented proprietary
technology. However, trade secrets are difficult to protect. There can be no
assurance that the Company will meaningfully protect its rights in such
unpatented proprietary technology or that others will not independently develop
substantially equivalent proprietary information and techniques, circumvent the
Company's attempts to protect its proprietary technology, or otherwise gain
access to the Company's trade secrets, that such trade secrets will not be
disclosed or that the Company can effectively protect its rights to unpatented
trade secrets. The Company requires its employees and consultants to execute
proprietary information agreements upon commencement of employment or consulting
relationships with the Company, which agreements provide that all confidential
information developed or made known to the individual during the course of the
relationship shall be kept confidential except in specified circumstances. There
can be no assurance, however, that these agreements will provide meaningful
protection for the Company's trade secrets or other proprietary information in
the event of unauthorized use or disclosure of such information.
Litigation, which could result in substantial costs to the Company, could
be necessary to protect the Company's Orphan Drug Designations or patent
position or to determine the scope and validity of third-party proprietary
rights, and there can be no assurance that the Company will have the required
resources to pursue such litigation or otherwise to protect its patent rights.
An adverse outcome in litigation with respect to the validity of any Company
patents could subject the Company to significant liabilities to third parties,
require disputed rights to be licensed from third parties or require the Company
to cease using such product or technology, any of which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
There can be no assurance that claims against the Company will not be
raised in the future based on patents or other intellectual property rights held
by others or that, if raised, such claims will not be successful. Such other
persons could bring legal actions against the Company claiming damages and
seeking to enjoin clinical testing, manufacturing and marketing of the affected
product. If any actions are successful, in addition to any potential liability
for damages, the Company could be required to obtain a license in order to
continue to manufacture or market the affected product. There can be no
assurance that the Company would prevail in any such action or that any license
required under any such patent would be made available on acceptable terms, if
at all. There has been, and the Company believes that there will continue to be,
significant litigation in the pharmaceutical industry regarding patent and other
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<PAGE> 17
intellectual property rights. If the Company becomes involved in any litigation,
it could consume a substantial portion of the Company's resources and capital
regardless of the outcome of such litigation.
LACK OF OPERATING EXPERIENCE; MANAGEMENT OF GROWTH
The Company has no experience in manufacturing or procuring products in
commercial quantities or selling pharmaceutical products and has only limited
experience in negotiating, establishing and maintaining strategic relationships,
conducting clinical trials and other later-stage phases of the regulatory
approval process. To date, the Company has engaged exclusively in acquiring and
developing pharmaceutical compounds and providing clinical research, development
and manufacturing services. The Company's ability to manage its growth, if any,
will require it to continue to improve and expand its management, operational
and financial systems and controls. If the Company's management is unable to
manage growth effectively, the Company's business, financial condition and
results of operations will be adversely affected. In addition, if rapid growth
occurs, it may strain the Company's operational, managerial and financial
resources. In the normal course of business, the Company evaluates potential
acquisitions of patents, compounds, technologies and businesses that could
complement or expand the Company's business. In the event the Company were to
identify an appropriate acquisition candidate, there is no assurance that the
Company would be able to successfully negotiate, finance or integrate such
acquired patents, compounds, technologies or businesses. Furthermore, such an
acquisition could cause a diversion of management time and resources. There can
be no assurance that a given acquisition would not materially adversely affect
the Company's business, financial condition and results of operations.
EXTENSIVE GOVERNMENT REGULATION; NO ASSURANCE OF NECESSARY FDA AND OTHER
REGULATORY APPROVALS; UNCERTAINTY OF ORPHAN DRUG STATUS
The design, development, research, testing, manufacture, labeling,
distribution, marketing and advertising of products such as the Company's
proposed products are subject to extensive regulation by governmental regulatory
authorities in the United States and other countries. The drug approval process
is generally lengthy, expensive and subject to unanticipated delays. The FDA,
and comparable agencies in foreign countries, impose substantial requirements on
the introduction of new pharmaceutical products through lengthy and detailed
preclinical and clinical testing procedures, sampling activities and other
costly and time-consuming compliance procedures. Satisfaction of such regulatory
requirements, which includes demonstrating to the satisfaction of the FDA that
the relevant product is both safe and effective, typically takes several years
or more depending upon the type, complexity and novelty of the product and
requires the expenditure of substantial resources. Preclinical studies must be
conducted in conformance with the FDA's good laboratory practice regulations.
The Company's compounds require extensive clinical trials and FDA review as new
drugs. Clinical trials will be vigorously regulated and must meet requirements
for FDA review and oversight and requirements under good clinical practice
regulations. There can be no assurance that the Company will not encounter
problems in clinical trials which would cause the Company or the FDA to delay or
suspend clinical trials. Any such delay or suspension could have a material
adverse effect on the Company's business, financial condition and results of
operations. See Business -- Government Regulation."
The Company cannot predict with certainty when, if ever, it might submit
for regulatory review additional compounds currently under development. Once the
Company submits its potential products for review, there can be no assurance
that FDA or other regulatory approvals for any pharmaceutical products developed
by the Company will be granted on a timely basis, if at all. There also can be
no assurance that delays or rejections will not be encountered based upon
additional government regulation from future legislation or administrative
action or that changes will not be made in FDA policy during the period of
product development and FDA regulatory review of each submitted NDA. A delay in
obtaining or failure to obtain such approvals would have a material adverse
effect on the Company's business, financial condition and results of operations.
Even if such regulatory approval is obtained, it is limited as to the indicated
uses for which the product may be promoted or marketed. A marketed product, its
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manufacturer and the facilities in which it is manufactured are subject to
continual review and periodic inspections. Failure to comply with regulatory
requirements and other factors could subject the Company to regulatory or
judicial enforcement actions, including, but not limited to, product recalls or
seizures, injunctions, withdrawal of the product from the market, civil
penalties, criminal prosecution, refusals to approve new products and withdrawal
of existing approvals, as well as potentially enhanced product liability
exposure. Sales of the Company's products outside the United States will be
subject to foreign regulatory requirements governing clinical trials and
marketing approval. These requirements vary widely from country to country and
could delay introduction of the Company's products in certain countries. See
"Business -- Government Regulation."
One element of the Company's strategy is to develop chemoprevention
compounds that when taken chronically may prevent the progression to cancer. To
date, the FDA has not approved any chemoprevention compounds and there can be no
assurance that the FDA will approve such compounds in the future. Because there
are currently no chemoprevention drugs which have obtained marketing approval,
the clinical development path is uncertain. There can be no assurance that ILEX
will be able to successfully develop a safe and efficacious chemoprevention
product, that such product will be commercially viable or will achieve market
acceptance.
In 1988, the FDA issued regulations intended to expedite the development,
evaluation and marketing of new therapeutic products to treat life-threatening
and severely debilitating illnesses for which no satisfactory alternative
therapies exist. These regulations provide for early consultation between the
sponsor and the FDA in the design of both preclinical studies and clinical
trials. At the present time, MGBG is being developed under such an accelerated
program. There can be no assurance, however, that any future products the
Company may develop will be eligible for evaluation by the FDA under the 1988
regulations. In addition, there can be no assurance that MGBG or any future
products, if eligible, will be approved for marketing at all or, if approved for
marketing, will be approved for marketing sooner than would be traditionally
expected. Regulatory approval granted under these regulations may be restricted
by the FDA as necessary to ensure the safe use of the drug. In addition,
post-marketing clinical studies are required. If drugs do not perform
satisfactorily in such post-marketing clinical studies, the products would
likely be required to be withdrawn from the market.
The Company intends to seek orphan drug status for some of its product
candidates pursuant to the Orphan Drug Act of 1983 (the "Orphan Drug Act") and
has been granted orphan drug status for MGBG for treatment of patients with
diffuse lymphomas and for DHAC for treatment of patients with mesothelioma.
There can be no assurance orphan drug status will be granted for other product
candidates or that any such grant of orphan drug status will provide the Company
with any benefits. Although orphan drug status may provide an applicant
exclusive marketing rights in the United States for a designated indication for
seven years following marketing approval, in order to obtain such benefits, the
applicant must be the sponsor of the first NDA approved for that drug and
indication. Moreover, amendment of the Orphan Drug Act by the United States
Congress and reinterpretation by the FDA are frequently discussed. Legislation
to limit exclusivity in some respects was passed by Congress, but vetoed by the
President in 1990. FDA regulations reflecting certain other limitations and
procedures went into effect in January 1993. Therefore, there can be no
assurance as to the precise scope of protection that may be afforded by orphan
drug status in the future, or that the current level of exclusivity will remain
in effect. See "Business -- Orphan Drug Status."
POTENTIAL LIMITATIONS ON THIRD-PARTY REIMBURSEMENT RELATED MATTERS AND HEALTH
CARE REFORM
The levels of revenues and profitability of pharmaceutical companies may be
affected by the continuing efforts of governmental and third-party payors to
contain or reduce the costs of health care. The Company cannot predict the
effect that private sector or governmental health care reforms may have on its
business, and there can be no assurance that any such reforms will not have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, in both the United States and elsewhere,
sales of prescription pharmaceuticals are dependent in part on the availability
of reimbursement to the consumer from third-party payors, such as government and
private
16
<PAGE> 19
insurance plans. Third-party payors and others are increasingly challenging the
prices charged for medical products and services. If the Company succeeds in
bringing one or more products to the market, there can be no assurance that
these products will be considered cost effective or that reimbursement to the
consumer will be available or will be sufficient to allow the Company to sell
its products on a competitive basis. In addition, because no chemoprevention
drug has been approved by the FDA to date, there can be no assurance that any
chemoprevention drug developed by the Company, if any, would be eligible for
reimbursement to the consumer. See "Business -- Government Regulation."
CONTROL BY EXISTING STOCKHOLDERS; ANTI-TAKEOVER PROVISIONS
Upon the closing of the offering, CTRC Research will beneficially own
approximately 23.8% of the Company's outstanding shares of Common Stock, and the
Company's executive officers and directors, as a group, will beneficially own
approximately 9.3% of the Company's outstanding shares of Common Stock.
Accordingly, together with CTRC Research, the present directors and executive
officers will have the ability to exercise substantial influence over the
outcome of most stockholders' actions. Moreover, the Company's certificate of
incorporation does not provide for cumulative voting with respect to the
election of directors. Consequently, the present directors and executive
officers, together with CTRC Research, will be able to exercise substantial
influence over the election of the members of the Board of Directors. Such
concentration of ownership could have an adverse effect on the price of the
Common Stock or have the effect of delaying or preventing a change in control of
the Company. In addition, certain provisions of Delaware law and the Company's
Certificate of Incorporation could have the effect of making it more difficult
for a third party to acquire, or of discouraging a third party from attempting
to acquire control of the Company. Such provisions could limit the price that
certain investors might be willing to pay in the future for shares of the
Company's Common Stock. These provisions of Delaware law and the Company's
Certificate of Incorporation may also have the effect of discouraging or
preventing certain types of transactions involving an actual or threatened
change of control of the Company (including unsolicited takeover attempts), even
though such a transaction may offer the Company's stockholders the opportunity
to sell their stock at a price above the prevailing market price. Certain of
these provisions allow the Company to issue Preferred Stock without any vote or
further action by the stockholders and prevent or eliminate cumulative voting in
the election of directors. These provisions may make it more difficult for
stockholders to take certain corporate actions and could have the effect of
delaying or preventing a change in control of the Company. In addition, certain
of the Company's corporate partners have the right to terminate their respective
agreements with the Company upon certain changes in control of the Company,
which may discourage acquisitions or other changes in control (including those
in which stockholders of the Company might otherwise receive a premium for their
shares over then-current market prices). See "Business -- Strategic Alliances
and Collaborations," "Management," "Principal Stockholders," "Description of
Capital Stock -- Preferred Stock" and "-- Certain Anti-Takeover Effects of
Provisions of the Certificate of Incorporation, Bylaws and Delaware Law."
RIGHTS OF LICENSORS
Through licenses and other agreements, the Company has various rights to
certain products. The terms of these licenses and agreements generally survive
for a specified period of years; however, the licensor also has the ability to
terminate the license, or render it nonexclusive, if the Company fails to
perform its obligations pursuant to the agreements, or in the case of any
compound acquired from a public health service, including MGBG, if public health
and safety needs require such actions. In certain of these agreements the
licensor has reserved royalty-free licenses for research and other purposes. If
any of these licenses were terminated or rendered nonexclusive, the business,
financial condition and results of operations of the Company could be materially
and adversely affected. See "Business -- In-Licensing Agreements."
17
<PAGE> 20
LACK OF COMMERCIAL MANUFACTURING EXPERIENCE; HANDLING OF HAZARDOUS MATERIALS;
ENVIRONMENTAL MATTERS
ILEX is currently responsible for manufacturing bulk drug product for
preclinical and clinical trials of MGBG, Crisnatol and oncology drugs on behalf
of third parties; however, other than MGBG, the compounds being developed by the
Company have never been manufactured on a commercial scale and the Company has
no experience in manufacturing these compounds in commercial quantities. There
can be no assurance that such compounds can be manufactured at a cost, or in
quantities, necessary to make them commercially viable. All facilities and
manufacturing techniques used in the manufacture of compounds for clinical use
or for sale in the United States must be operated in conformity with current
Good Manufacturing Practices ("cGMP") regulations, FDA regulations and
guidelines governing the development and production of pharmaceutical compounds.
The Company's facilities are subject to scheduled periodic regulatory
inspections to ensure compliance with cGMP requirements. Failure on the part of
the Company to comply with applicable requirements could result in the
termination of ongoing research or the disqualification of data for submission
to regulatory authorities. A finding that the Company had materially violated
cGMP requirements could result in additional regulatory sanctions and, in severe
cases, could result in a mandated closing of the Company's facilities, which
would materially and adversely affect the Company's business, financial
condition and results of operations. If the Company proves to be unsuccessful in
supplying compounds on acceptable terms, fails to satisfy regulatory
requirements or if it should encounter delays or difficulties in its third-party
relationships, the Company's clinical testing schedule would be delayed,
resulting in delay in the submission of compounds for regulatory approval or the
market introduction and subsequent sales of such products, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company's development and preclinical supply contract manufacturing
programs involve or could involve in the future the controlled use of hazardous
materials, chemicals and various radioactive compounds. The Company is subject
to federal, state and local laws and regulations governing the use, manufacture,
storage, handling and disposal of hazardous materials and certain waste
products. Although the Company believes that its safety procedures for handling
and disposing of such materials will comply with the standards prescribed by
state and federal regulations, the risk of accidental contamination or injury
from these materials cannot be completely eliminated. In the event of such an
accident, the Company could be held liable for any damages that result and any
such liability could exceed the resources of the Company. The Company may incur
substantial costs to comply with environmental regulations if and when the
Company develops commercial scale manufacturing capacity.
POTENTIAL LIABILITY; POSSIBLE INSUFFICIENCY OF INSURANCE
Clinical research involves the testing of new drugs on human volunteers
pursuant to a study protocol, and such testing involves a risk of liability for
personal injury or death to patients due to, among other reasons, possible
unforeseen adverse side effects or improper administration of the new drug. Many
of these patients are already seriously ill and are at risk of further illness
or death. The Company could be materially and adversely affected if it were
required to pay damages or incur defense costs (i) in connection with a claim
outside the scope of indemnity or insurance coverage, (ii) if the indemnity,
although applicable, is not performed in accordance with the terms of the
relevant contract or (iii) if the Company's liability exceeds the amount of
applicable insurance. In addition, there can be no assurance that such insurance
will continue to be available on terms acceptable to the Company, if at all, or
that, if obtained, the insurance coverage will be sufficient to cover any
potential claims or liabilities. Similar risks would exist upon the
commercialization or marketing of any products by the Company or its partners.
See "Business -- Product Liability and Insurance."
NO PRIOR PUBLIC TRADING MARKET; VOLATILITY OF STOCK PRICE; VARIATION IN
QUARTERLY OPERATING RESULTS
The stock market has experienced significant price and volume fluctuations
that have particularly affected the market prices of equity securities of many
pharmaceutical, biotechnology and developmental stage companies and that are
often unrelated to the operating performance of particular companies.
18
<PAGE> 21
These broad market fluctuations may adversely affect the market price of the
Common Stock. In addition, the market price of the Common Stock is likely to be
highly volatile. Factors such as fluctuations in the Company's operating
results, announcements of technological innovations or new products by the
Company or its competitors, announcements of new collaborations or changes in
existing collaborations by the Company or its competitors, the loss, or prospect
of loss, of a significant contract with one or more of the Company's contract
research clients, FDA and international regulatory actions, actions with respect
to reimbursement matters, developments with respect to patents or proprietary
rights, public concern as to the safety of products developed by the Company or
others, changes in health care policy in the United States and internationally,
rumors relating to the Company or its competitors, changes in stock market
analyst recommendations regarding the Company, other pharmaceutical companies or
the pharmaceutical industry generally and general market conditions may have a
significant effect on the market price of the Common Stock. Prior to this
offering, there has been no public market for the Common Stock, and there can be
no assurance that an active trading market will develop or, if one does develop,
that it will continue. The initial public offering price, which will be
established by negotiations between the Company and the Underwriters, may not be
indicative of prices that will prevail in the market after this offering. See
"Underwriting" for a discussion of the factors relevant to the determination of
the initial public offering price.
The Company's results of operations historically have fluctuated on a
quarterly basis and can be expected to continue to be subject to quarterly
fluctuations. Quarterly results can fluctuate as a result of a number of
factors, including the commencement, completion or cancellation of large
contracts, progress of ongoing contracts, recognition of licensing revenue,
acquisitions, the timing of start-up expenses for new facilities and changes in
the Company's mix of services. The Company believes that quarterly comparisons
of its financial results are not necessarily meaningful and should not be relied
upon as an indication of future performance. In addition, fluctuations in
quarterly results could affect the market price of the Common Stock in a manner
unrelated to the longer term operating prospects of the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
ADVERSE EFFECT ON MARKET PRICE OF SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION
RIGHTS
Sales of substantial amounts of Common Stock in the public market following
this offering, or the prospect of such sales, could have an adverse effect on
the price of the Company's Common Stock. Upon completion of this offering, the
Company will have outstanding 11,679,594 shares of Common Stock (which amount
does not include shares of Common Stock issuable upon the exercise of
outstanding options). The 2,500,000 shares being offered hereby (except for
shares that may be acquired by affiliates of the Company) will be freely
tradeable in the public market without restriction or limitation under the
Securities Act of 1933, as amended (the "Securities Act"). Beginning 180 days
after the effective date of the Registration Statement (the "Effective Date"),
upon the expiration of certain agreements not to sell such shares, an additional
approximately 4,179,012 shares of Common Stock will become eligible for sale
subject to compliance with Rule 144 of the Securities Act. In addition, the
holders of approximately 671,565 shares of Common Stock are entitled to certain
piggy-back registration rights with respect to such shares. If the Company is
required to include in a Company-initiated registration shares held by such
holders pursuant to the exercise of their piggy-back registration rights, sales
made by such holders may have an adverse effect on the Company's ability to
raise needed capital and on the price of the Common Stock. In addition, certain
stockholders hold demand registration rights which permit them to request the
Company to register the shares of Common Stock held by them. If such parties, by
exercising their demand registration rights, cause a large number of shares to
be registered and sold in the public market, such sales may have an adverse
effect on the market price for the Common Stock. In addition, shares of Common
Stock that are issued by the Company to fund its operations or in connection
with an acquisition could also have an adverse effect on the market price for
the Common Stock. See "Description of Capital Stock -- Registration Rights" and
"Shares Eligible for Future Sale."
19
<PAGE> 22
DILUTION
Purchasers of the Common Stock in this offering will experience an
immediate and substantial dilution in net tangible book value per share. See
"Dilution."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered hereby are estimated to be approximately $27,300,000
($31,485,000 if the Underwriters' over-allotment option is exercised in full),
based on an assumed initial public offering price of $12.00 per share and after
deducting underwriting discounts and the estimated expenses of this offering
payable by the Company.
The Company expects to use a majority of the net proceeds of this offering
to fund its research and development activities, which may include the formation
of joint ventures and other collaborative relationships. The amount and timing
of the net proceeds allocated to specific research and development activities
will depend upon numerous factors, such as the progress of the Company's drug
development programs, the receipt of necessary regulatory approvals, the cost of
preparing, filing, prosecuting, maintaining, defending and enforcing patent
claims and other intellectual property rights, the status of competitive
products and technologies and the timing and availability of alternative methods
of financing for the Company, including existing or future strategic alliances
and joint ventures with third parties. The Company's research and development
expenditures will vary as product candidates, if any, are added or abandoned or
as additional collaborations are established. In addition, the Company intends
to use some of the proceeds of this offering to expand its CRO services through
internal growth, including acquisition of information technology and expansion
of existing facilities, the acquisitions of other businesses and the formation
of contract research service joint ventures and other strategic collaborations.
The Company intends to use the remainder of the proceeds of this offering for
working capital and general corporate purposes. Pending such uses, the Company
intends to invest the net proceeds from this offering in United States
government securities and investment-grade, interest-bearing instruments. The
Company expects to continue to be able to avoid the registration requirements of
the Investment Company Act of 1940 (the "1940 Act"). If the Company were
required to register as an investment company under the 1940 Act, it would
become subject to substantial regulations with respect to its capital structure,
management, operations, transactions with affiliates (as defined in the 1940
Act), and other matters. Application of the provisions of the 1940 Act would
have a material adverse effect on the Company.
In the ordinary course of business, the Company investigates, evaluates and
discusses with others the potential acquisition of businesses, technologies and
compounds which complement the Company's business. Although the Company
currently has no understandings or agreements with respect to any such
acquisition, net proceeds from this offering may be used for such purpose.
The Company believes that the estimated net proceeds of this offering, its
collaborative agreements with strategic partners, its contract research services
and existing cash, cash equivalents and investments and marketable securities
will satisfy its cash requirements for the foreseeable future, but there can be
no assurance that the Company will not require additional funds sooner than
currently anticipated. See "Risk Factors -- Future Capital Needs; Uncertainty of
Additional Funding."
DIVIDEND POLICY
The Company has never declared nor paid dividends on its capital stock. The
Company currently intends to retain any future earnings for funding growth and,
therefore, does not intend to pay any cash dividends in the foreseeable future.
20
<PAGE> 23
CAPITALIZATION
The following table sets forth (i) as of September 30, 1996, the actual
capitalization of the Company, (ii) the capitalization of the Company as of such
date on a pro forma basis to give effect to the issuance of the Series D and
Series E Convertible Preferred Stock and (iii) the pro forma capitalization as
of such date, as adjusted, after giving effect to the sale of the 2,500,000
shares of Common Stock offered hereby at an assumed initial public offering
price of $12.00 per share, less offering expenses and underwriting discounts and
the application of the estimated net proceeds therefrom and the effect of the
assumed conversion of all the outstanding Convertible Preferred Stock, including
the Series D and E Convertible Preferred Stock, into shares of Common Stock. See
"Use of Proceeds" and Notes 13 and 14 to the Financial Statements. This table
should be read in conjunction with the Company's Financial Statements and the
Notes thereto, and the other financial data included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
---------------------------------------
PRO FORMA
ACTUAL(1) PRO FORMA AS ADJUSTED
--------- --------- -----------
<S> <C> <C> <C>
(IN THOUSANDS)
Stockholders' equity:
Convertible Preferred Stock, $0.01 par value;
20,000,000 shares authorized, 7,402,349 issued and
outstanding, actual; 7,992,055 shares issued and
outstanding, pro forma; none issued and outstanding,
pro forma as adjusted............................... $ 74 $ 80 --
Common Stock, $0.01 par value; 40,000,000 shares
authorized, 1,187,539 shares issued and outstanding,
actual and pro forma; 11,679,594 shares issued and
outstanding, pro forma as adjusted(1)............... 12 12 117
Additional paid-in capital............................. 20,263 26,257 53,532
Receivables on sale of common stock.................... (113) (113) (113)
Accumulated deficit.................................... (2,487) (2,487) (2,487)
------- ------- -------
Total stockholders' equity.......................... 17,749 23,749 51,049
------- ------- -------
Total capitalization........................... $17,749 $23,749 $51,049
======= ======= =======
</TABLE>
- ---------------
(1) Excludes, as of September 30, 1996, (i) 967,396 shares of Common Stock
issuable upon exercise of outstanding options and warrants at a weighted
average exercise price of approximately $5.01 and $7.63, respectively, and
(ii) 798,649 additional shares reserved for issuance pursuant to the
Company's 1995 Stock Option Plan and 1996 Non-Employee Director Plan. See
"Management -- Stock Option Plans" and "Description of Capital
Stock -- Warrants."
21
<PAGE> 24
DILUTION
At September 30, 1996, the Company had pro forma net tangible book value of
approximately $23,749,000 or $2.59 per share of outstanding Common Stock,
assuming the conversion of all outstanding shares of Convertible Preferred
Stock, including Series D and Series E Convertible Preferred Stock, into shares
of Common Stock. Pro forma net tangible book value per share is determined by
dividing the net tangible book value (tangible assets less liabilities) of the
Company by the pro forma number of shares of Common Stock outstanding. After
giving effect to the issuance and sale of the 2,500,000 shares of Common Stock
offered hereby (assuming an initial public offering price of $12.00 per share)
and the application of the estimated net proceeds therefrom as set forth in "Use
of Proceeds," the pro forma, as adjusted, net tangible book value of the Company
at September 30, 1996, would have been $51.0 million or $6.96 per share. This
represents an immediate increase in net tangible book value of approximately
$4.37 per share to the existing stockholders and an immediate dilution of $5.04
per share to new investors purchasing shares at the initial offering price. The
following table illustrates this dilution per share:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $12.00
Pro forma net tangible book value per share as of
September 30, 1996........................................... $2.59
Increase in net tangible book value per share attributable to
new investors................................................ $4.37
Pro forma, as adjusted, net tangible book value per share after
this offering................................................ 6.96
------
Dilution per share to new investors............................... $ 5.04
======
</TABLE>
The following table sets forth, on a pro forma basis as of September 30,
1996, the differences between the existing stockholders and the new investors
with respect to the number of shares purchased from the Company, the total
consideration paid and the average price per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing
stockholders........ 9,179,594 78.6% $26,959,000 47.3% $ 2.94
New investors......... 2,500,000 21.4% $30,000,000 52.7% 12.00
---------- ----- ----------- -----
Total....... 11,679,594 100.0% $56,959,000 100.0%
========== ===== =========== =====
</TABLE>
The foregoing computations assume no exercise of stock options or warrants
outstanding at September 30, 1996. At September 30, 1996, there were outstanding
stock options to purchase 514,429 shares of Common Stock at a weighted average
exercise price of approximately $3.26 per share and options to purchase an
additional 161,520 shares of Common Stock were granted after September 30, 1996
at a weighted average exercise price of approximately $7.01 per share. In
addition, at September 30, 1996, 452,967 shares of Common Stock were issuable
upon exercise of outstanding warrants at a weighted average exercise price of
approximately $7.63 per share. To the extent these stock options and warrants
are exercised, there will be further dilution to purchasers in this offering.
Assuming the exercise of all outstanding options and warrants, the total
dilution in net tangible book value per share to new investors would be $5.62.
See "Management -- Executive Compensation," "Certain Transactions" and
"Description of Capital Stock."
22
<PAGE> 25
SELECTED FINANCIAL DATA
The following selected financial information relating to the Company has
been taken or derived from the audited financial statements, and notes related
thereto, and other records of the Company. The statements of operations and
balance sheets for the period from inception (October 1, 1994) to December 31,
1994, the year ended December 31, 1995, and the nine-month periods ended
September 30, 1996 and 1995, have been audited by Arthur Andersen LLP,
independent certified public accountants, as indicated in their report on those
statements. The selected financial information should be read in conjunction
with the Company's financial statements, including the notes thereto, and the
other financial data contained elsewhere in this Prospectus. See also
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
INCEPTION
(OCTOBER 1, 1994) NINE-MONTH PERIODS
THROUGH YEAR ENDED ENDED SEPTEMBER 30
DECEMBER 31, DECEMBER 31, -------------------
1994 1995 1995 1996
----------------- ------------ ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
SUMMARY OF OPERATING STATEMENT DATA:
Revenue:
Product development....................... $ 1,065 $ 3,551 $ 2,467 $ 2,899
Contract research services................ 188 658 536 842
------ ------- ------- -------
Total revenue..................... 1,253 4,209 3,003 3,741
------ ------- ------- -------
Operating expenses:
Research and development costs............ 945 3,213 2,224 2,503
General and administrative................ 156 1,312 886 1,914
Costs of contract research services....... 78 330 207 1,040
Subcontractor costs....................... 119 199 151 468
------ ------- ------- -------
Total operating expenses.......... 1,298 5,054 3,468 5,925
------ ------- ------- -------
Operating loss.............................. (45) (845) (465) (2,184)
Other income:
Interest income........................... -- 159 5 459
Interest expense.......................... (1) (26) (18) (4)
------ ------- ------- -------
Net loss.................................... $ (46) $ (712) $ (478) $(1,729)
====== ======= ======= =======
Net loss per share.......................... $ (.01) $ (.09) $ (.06) $ (.20)
====== ======= ======= =======
Weighted average shares used in computing
net loss per share(1)..................... 7,544 7,737 7,553 8,560
====== ======= ======= =======
BALANCE SHEET DATA:
Cash, cash equivalents and investments in
marketable securities..................... $ 79 $ 9,636 $10,761 $17,412
Working capital............................. (122) 9,004 9,542 9,731
Total assets................................ 1,166 11,257 11,871 19,715
Accumulated deficit......................... (46) (758) (524) (2,487)
Total stockholders' equity.................. (57) 9,511 9,742 17,749
</TABLE>
- ---------------
(1) See Note 2 of Notes to Financial Statements of information concerning the
computation of net loss per share.
(2) Reflects the pro forma effect of the sale of the Series D and E convertible
preferred stock as if the sale of such shares had occured on September 30,
1996.
(3) As adjusted to reflect the net proceeds to the Company from the sale of
2,500,000 shares of common stock at an initial public offering price of
$12.00 per share and the application of the net proceeds therefrom and the
assumed conversion of all convertible preferred stock to common stock. See
"Use of Proceeds" and "Capitalization".
23
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors," "Business" and under this heading.
OVERVIEW
ILEX is drug development company engaged in the business of (i) acquiring
rights to (generally in exchange for the payment of licensing fees and future
royalty payments), and developing for commercialization, pharmaceuticals for the
treatment of patients with cancer and the prevention of cancer and (ii)
providing clinical research, development and manufacturing services on a
contract basis to pharmaceutical and biotechnology companies engaged in the
development of oncology products. By leveraging its expertise in the
identification, development, manufacturing and regulatory approval process of
oncology drugs, the Company believes it can develop cancer therapeutics, build a
chemoprevention product platform and serve as a value-added partner for its
contract research clients. ILEX was formed in December 1993 for the purpose of
conducting certain advanced drug development programs and pursuing commercial
opportunities of CTRC Research, but did not commence operations until October
1994.
The Company has financed its operations primarily through the sale of
Convertible Preferred Stock, through development funding provided by its
collaborative partners under its collaborative agreements and, to a lesser
extent, through fee-for-service or participatory revenues pursuant to contracts
with its CRO clients. See "Business -- Strategic Alliances and Collaborations."
The development funding received by the Company pursuant to collaborative
agreements often includes licensing fees, payments for research to support the
development of specific compounds and payments upon the achievement of specified
research and drug development milestones. ILEX's collaborative agreements are
generally conducted on a best efforts basis and payments for research are
recognized based on the time incurred on the related studies. The Company is
reimbursed for investigator costs based on actual costs incurred or at
predetermined rates plus out-of-pocket costs incurred during the performance of
the study. Revenues related to milestone payments are recognized upon the
achievement of the related milestone and when collection is probable.
ILEX also derives revenue from performing CRO services for companies within
the pharmaceutical and biotechnology industries. In general, the Company
provides CRO services to a client based on a pre-specified contract cost that
may be adjusted during the term of the project. The terms of the Company's
engagements vary, ranging from less than one month to several years, and
generally may be terminated upon notice of 30 days or less by the client. The
Company recognizes revenue with respect to its CRO services on a percentage of
completion basis as work is performed.
Research and development costs are expensed as incurred and include costs
associated with collaborative agreements. These costs consist of direct and
indirect costs related to specific projects as well as fees paid to other
entities which conduct certain research activities on behalf of the Company.
ILEX has no products available for sale and, with the exception of MGBG,
does not expect to have any products resulting from its drug development
efforts, including its collaborations with others, commercially available for
several years, if at all. The Company has incurred losses and expects to incur
increasing losses for the foreseeable future as the Company's research and
development expenditures increase. The Company's revenue for the foreseeable
future will be limited to development funding under its collaborative
relationships, fee-for-service income or participatory revenues pursuant to
contracts with its CRO clients, interest income and other miscellaneous income.
During the period from inception through December 31, 1994, the year ended
December 31, 1995, and during the nine-month periods ending September 30, 1995
and 1996, the Company had one
24
<PAGE> 27
collaborative research agreement that accounted for 85%, 84%, 82% and 68% of
total revenue, respectively.
RESULTS OF OPERATIONS
ILEX expects that results of operations in the future will fluctuate
significantly from period to period. Such fluctuations may result from numerous
factors, including the amount and timing of revenues earned under existing or
future collaborative relationships or joint ventures, if any, technological
advances and determinations as to the commercial potential of compounds, the
progress of the Company's drug development programs, the receipt of regulatory
approvals, the cost of preparing, filing, prosecuting, maintaining, defending
and enforcing patent claims and other intellectual property rights, the status
of competing products and technologies and the timing and availability of
financing for the Company, including existing or future strategic alliances and
joint ventures with third parties. In addition, with respect to the Company's
contract research services revenues, fluctuations may result due to a number of
factors, including the commencement, completion or cancellation of large
contracts and progress of ongoing contracts. ILEX believes that comparisons of
its historical results may not be meaningful and should not be relied upon as an
indication of future performance.
To date, the majority of the Company's expenditures have been for research
and development activities. With the exception of MGBG, ILEX's most clinically
advanced compound, the Company does not expect to receive royalties or other
revenues based upon net sales of drugs that may be developed for a significant
number of years, if at all. ILEX expects research and development expenses to
increase significantly over the next several years as its development programs
progress. In addition, general and administrative expenses necessary to support
such expanded programs are also expected to increase over the next several
years.
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996
Total revenue increased from approximately $3.0 million in the first nine
months of 1995 to $3.7 million in the first nine months of 1996. The increase of
$740,000 was due to an additional $430,000 of product development revenue, and
$310,000 of contract research services revenue. The incremental product
development revenues were attributable to increased revenues received by the
Company under its product development agreements with Sanofi and Janssen. The
increase in contract research services revenues was a result of an increased
number of contracts.
Total operating expenses increased from approximately $3.5 million in the
first nine months of 1995 to $6.0 million in the first nine months of 1996. This
increase of $2.5 million was primarily a result of increases in costs of
contract research services of $830,000, subcontractor costs of $320,000 relating
to increases in expenditures required to support the Company's contract research
services operations, manufacturing operations, which commenced operations in
early 1996, and increased administrative costs. In addition, operating expenses
increased by approximately $1.0 million due to increases in general and
administrative expenses associated with increased compensation as a result of
the increased number of personnel and business development costs. ILEX
anticipates that general and administrative expenses will substantially increase
as the Company increases the number of products in development, product
in-licenses and collaborations. Research and development costs increased by
approximately $280,000 primarily due to costs associated with MGBG. ILEX
believes that research and development costs will increase substantially in
future periods as the Company expands its preclinical and clinical trials
associated with developing additional compounds.
Net interest income increased from a loss of approximately $10,000 in the
first nine months of 1995 to income of $460,000 in the comparable period in
1996. This increase of $470,000 is attributable to an increase in interest
income resulting from higher average balances of cash, cash equivalents and
investments in marketable securities from proceeds received from sales of
Convertible Preferred Stock completed in 1995 and 1996.
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<PAGE> 28
PERIOD FROM INCEPTION THROUGH DECEMBER 31, 1994 AND YEAR ENDED DECEMBER 31, 1995
Total revenue increased from approximately $1.3 million in the period from
inception through December 31, 1994 to $4.2 million in the year ended December
31, 1995. This increase of $2.9 million was primarily a result of an increase in
product development revenues of $2.5 million, from $1.1 million to $3.6 million
over the same period, which increase was attributable to a full year of MGBG
activity. Contract research services revenues increased by $470,000, from
$190,000 to $660,000, over the same period due to an increased volume of
services rendered.
Total operating expenses increased from approximately $1.3 million in the
period from inception through December 31, 1994 to $5.1 million in the year
ended December 31, 1995. This increase of $3.8 million was primarily a result of
a $2.3 million increase in research and development costs, which increased from
$950,000 to $3.2 million. Research and development costs increased primarily
because there was a full year of associated expenses. General and administrative
costs increased by $1.1 million, from $160,000 to $1.3 million, for the same
reason. Costs of contract research services and subcontractor costs increased by
$250,000 and $80,000, respectively, due to an increased volume of contracts.
Net interest income increased from a loss of approximately $1,000 for the
period from inception through December 31, 1994 to income of $133,000 in the
year ended December 31, 1995. This increase of $134,000 is attributable to the
investment of the proceeds from sales of Convertible Preferred Stock completed
in 1995.
INCOME TAXES
As of September 30, 1996, the Company estimates that it had approximately
$2.3 million and $767,000 of net operating loss and tax credit carryforwards,
respectively, which expire at various dates between fiscal 2009 and 2011. The
Tax Reform Act of 1986 (the "Tax Act") contains certain provisions that may
limit the Company's ability to utilize net operating loss and tax credit
carryforwards in any given year if certain events occur, including cumulative
changes in ownership interests in excess of 50% over a three-year period. ILEX
experienced a change in ownership interest in excess of 50% as defined under the
Tax Act upon the consummation of its offering of Series B Convertible Preferred
Stock. The Company does not believe that this change in ownership significantly
impacts the Company's ability to utilize its net operating loss and tax credit
carryforwards. There can be no assurance that ownership changes in future
periods will not significantly limit the Company's use of its existing net
operating loss and tax credit carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
ILEX has financed its operations primarily through the sale of Convertible
Preferred Stock, through development revenues provided by its collaborative
partners under its collaborative agreements and, to a lesser extent, through
fee-for-service or participatory revenues pursuant to contracts with its CRO
clients along with a $500,000 line of credit received in 1994 (which was repaid
in full in February 1996). Since its inception, the Company has received
approximately $20.2 million in net proceeds from the sale of Convertible
Preferred Stock to investors and collaborative partners, $6.8 million in
development funding from its collaborative partners and $1.7 million through
fee-for-service or participatory revenues pursuant to contracts with its CRO
clients. Approximately 96% of the aggregate amount of the Company's development
funding to date has been provided pursuant to its relationship with Sanofi, with
Sanofi providing $220,000, $3.8 million and $2.5 million in development funding
during the years ended December 31, 1994 and 1995, and for the nine-month period
ending September 30, 1996, respectively. The Company is entitled to receive
additional payments under collaborative agreements in the form of development
funding, milestone payments, if milestones are achieved, and royalties, if
products are commercialized.
In the period from the time the Company commenced operations to September
30, 1996, the Company used a total of $2.0 million to fund its operations.
During the nine months ended September 30, 1995 and 1996, and the years ended
December 31, 1994 and 1995, the Company had cash provided by
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<PAGE> 29
(used in) operations of $400,000, $(1.5 million), $40,000 and $(410,000),
respectively. The changes in cash used in operations were the result of costs
associated with increased research and development activities and increased
general and administrative expenses necessary to support increased operations.
The Company's expenditures for equipment and leasehold improvements for the
period from the time the Company commenced operations to September 30, 1996 were
approximately $880,000. As of September 30, 1996, the Company had cash, cash
equivalents and investments in marketable securities of approximately $17.4
million and working capital of approximately $9.7 million.
ILEX's future expenditures and capital requirements will depend on numerous
factors, including without limitation, the progress of its research and
development programs, the progress of its preclinical and clinical testing, the
magnitude and scope of these activities, the time and costs involved in
obtaining regulatory approvals, the cost of filing, prosecuting, defending and
enforcing any patent claims and other intellectual property rights, competing
technological and market developments, changes in or terminations of existing
collaborative arrangements and the ability of the Company to establish, maintain
and avoid termination of collaborative arrangements. The Company's cash
requirements are expected to continue to increase significantly each year as it
expands its activities and operations. There can be no assurance that the
Company will ever be able to generate product revenue or achieve or sustain
profitability.
The Company has no current sources of funding beyond the proceeds from this
offering, its collaborative agreements with its strategic partners, its drug
development service operations, existing cash and cash equivalents and
investments in marketable securities. The Company believes that the estimated
net proceeds of this offering, its collaborative agreements with strategic
partners, its contract research services, existing cash and cash equivalents and
investments in marketable securities will satisfy its currently budgeted cash
requirements for the foreseeable future based upon the Company's current
operating plan and conditions, but there can be no assurance that the Company
will not require additional funds sooner than currently anticipated. However, if
the Company experiences unanticipated cash requirements resulting from, among
other things, delays in its research and development programs, changes in or
terminations of existing collaborative arrangements or contract research
agreements and additional compound development opportunities, the Company could
require additional capital to fund operations, continue research and development
programs, continue pre-clinical and clinical testing of its proprietary products
and commercialize any products that may be developed. The Company may seek such
additional funding through future public or private equity or debt financings,
collaborative or other arrangements with third parties or from other sources.
There can be no assurance, however, that additional funds will be available on
acceptable terms, if at all. See "Risk Factors -- Future Capital Needs;
Uncertainty of Additional Funding."
INFLATION
The Company does not believe that inflation has had a significant effect on
the Company's operations to date.
ACCOUNTING MATTERS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," in June 1996. This
statement provides accounting and reporting standards for, among other things,
the transfer and servicing of financial assets, such as factoring receivables
with recourse. This statement is effective for transfers and servicing of
financial assets occurring after December 31, 1996, and is to be applied
prospectively. Earlier or retroactive application is not permitted. The Company
believes the adoption of this statement will not have an impact on the financial
condition or results of operations of the Company.
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<PAGE> 30
BUSINESS
SUMMARY
ILEX is a drug development company focused exclusively on oncology. The
Company leverages its expertise in the identification, development,
manufacturing and regulatory approval process of oncology drugs to (i) develop
cancer therapeutics, (ii) build a product platform for the prevention of cancer
("chemoprevention") and (iii) serve as a valueadded provider of contract
research services. ILEX's objective is to be a leading worldwide oncology drug
development company. The Company has nine cancer treatment compounds under
development, including five in Phase II or Phase III clinical trials. In October
1996, ILEX submitted a New Drug Application ("NDA") to the Food and Drug
Administration ("FDA") seeking accelerated marketing approval for Mitoguazone
("MGBG") as a second-line treatment for patients with AIDS-related non-Hodgkin's
lymphoma. Additionally, ILEX has two chemoprevention compounds under
development. Consistent with its strategy, the Company has established worldwide
development and marketing collaborations with Sanofi S.A. ("Sanofi"), Janssen
Pharmaceutica N.V., a subsidiary of Johnson & Johnson ("Janssen"), and MGI
Pharma, Inc. ("MGI Pharma") for certain of its compounds. In addition to its
proprietary product development programs, the Company offers contract research
organization ("CRO") services to both the pharmaceutical and biotechnology
industries. ILEX believes it is currently the only full-service provider of
contract research services focused exclusively on oncology.
ILEX was formed by The Cancer Therapy and Research Foundation of South
Texas ("CTRC") in December 1993 for the purpose of conducting certain advanced
drug development programs and pursuing commercial opportunities which were not
within the scope of CTRC's tax-exempt purpose. CTRC is a non-profit
organization, which, in conjunction with the University of Texas Health Science
Center at San Antonio ("UTHSCSA"), is a National Cancer Institute ("NCI")
designated Comprehensive Cancer Center and one of the premier organizations in
the United States for the clinical testing of oncology drugs. CTRC and its
research subsidiary, CTRC Research Foundation ("CTRC Research") and certain
related entities have had some level of participation in the clinical
development of a majority of the oncology drugs developed over the past 15
years. The Company's relationship with CTRC, CTRC Research and such related
entities provides the Company with (i) access to a large population of
investigators and patients for clinical trials, (ii) the ability to obtain
prompt feedback regarding the safety and efficacy of its compounds, (iii) access
to potential CRO clients and (iv) a potential opportunity to license certain
drug discoveries arising from the research programs of CTRC Research. The
Company also utilizes its relationship with CTRC and ILEX's Scientific Advisory
Board to identify and in-license cancer compounds. CTRC Research currently owns
approximately 30.3% of the outstanding shares of capital stock of the Company
and will own approximately 23.8% upon the closing of this offering.
ILEX's objective is to be a leading worldwide oncology drug development
company. The Company believes that its approach of developing proprietary cancer
therapeutics and chemoprevention compounds combined with serving as a
value-added partner for its contract research clients will generate near-term
revenues and diversify risk, while building a proprietary product portfolio with
significant long-term potential. The Company's strategy consists of the
following elements: (i) focusing on the expanding cancer market; (ii) leveraging
its expertise to identify and in-license compounds in later stages of
development; (iii) building a product platform in chemoprevention; (iv) forming
strategic collaborations with corporate partners; and (v) offering a full range
of oncology product development and manufacturing services.
ILEX has submitted an NDA to the FDA seeking accelerated marketing approval
for MGBG as a second-line treatment for patients with AIDS-related non-Hodgkin's
lymphoma. The Company, in collaboration with Sanofi, plans to expand MGBG's
indication by conducting clinical trials for other non-Hodgkin's lymphomas,
Hodgkin's disease and pancreatic cancer. There can be no assurance, however,
that MGBG will receive FDA approval on a timely basis, if at all, be
commercially viable or achieve market acceptance. ILEX has established a
worldwide development and marketing collaboration with Sanofi for MGBG. In
addition, the Company has established a worldwide development and marketing
collaboration
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with Janssen for crisnatol mesylate ("Crisnatol"), which is in Phase III
clinical trials for treatment of patients with glioblastoma, a type of brain
tumor. ILEX is also pursuing the development of difluoromethyl ornithine
("DFMO") for brain tumors, carcinoid syndrome and breast cancer, and expects to
initiate a pivotal Phase II trial in 1997 for breast cancer. The Company,
through a joint venture with MPI Enterprises, L.L.C. ("MPI"), is developing
Piritrexim for Kaposi's sarcoma and advanced bladder cancer, and is currently
conducting a Phase III trial for Kaposi's sarcoma.
ILEX is also developing chemoprevention compounds. Physicians are
increasingly able to identify people at risk of developing cancer. For example,
tests are currently available to detect precancerous conditions, such as lesions
of the cervix and recurrent colon polyps. In the future, it is expected that
genetic markers will also be used to identify high-risk individuals. The Company
is attempting to develop oral, non-toxic drugs which, when taken chronically,
may prevent a progression to cancer. ILEX believes that clinical development
strategies with appropriate intermediate endpoints will be fundamental to the
timely development of such pharmaceuticals. Currently, the Company has two
chemoprevention compounds under development. Based on the potential market
opportunity, the Company plans to devote a significant portion of its resources
to building a chemoprevention product platform.
In addition to its proprietary product development programs, ILEX offers
CRO services to the pharmaceutical and biotechnology industries. The Company
believes it is currently the only full-service provider of contract research
services focused exclusively on oncology. The Company offers its contract
research clients, among other things, expertise in the design of cancer clinical
protocols, preparation of regulatory submissions, toxicology services, access to
patients and investigators and state-of-the-art manufacturing capabilities. As a
result of such capabilities, ILEX believes that it may be able to reduce the
time normally required by pharmaceutical and biotechnology companies and
broad-based CROs to develop oncology products and increase the probability of
obtaining regulatory approval.
The Company was incorporated in Delaware in 1993. The Company's executive
offices are located at 14785 Omicron Drive, Suite 101, San Antonio, Texas 78245.
The Company's phone number is (210) 677-6080.
STRATEGY
ILEX's objective is to be a leading worldwide oncology drug development
company. By leveraging its expertise in the identification, development,
manufacturing and regulatory approval process of oncology drugs, the Company
believes it can develop cancer therapeutics, build a chemoprevention product
platform and serve as a value-added partner for its contract research clients.
ILEX believes that this approach will, in the near term, generate licensing
fees, research and development funding, milestone payments, and fee-for-service
or participatory revenues pursuant to contracts with its contract research
clients, and in the longer term, generate royalty payments from its corporate
partners for its cancer treatment drugs and allow the Company to generate
revenue from its chemoprevention drugs. The Company believes that this strategy
allows the Company to generate near-term revenues and diversify risk, while
building a proprietary product portfolio with significant long-term potential.
ILEX's strategy consists of the following elements:
Focus on the Expanding Cancer Market. The American Cancer Society estimates
that over 1.3 million new cases of cancer will be diagnosed and approximately
550,000 cancer deaths, representing approximately 25% of all projected deaths,
will occur in the United States in 1996. Cancer is currently the second leading
cause of death in the United States, and over 10 million people alive today have
a history of cancer. The worldwide oncology drug market was approximately $5.6
billion in 1995 and is projected to total approximately $9.0 billion by the year
2000. It is expected that there will be an increased need for oncology products
because incidence of cancer increases dramatically with age and the over-65
population is one of the fastest growing age groups in the United States.
Moreover, due to the lifethreatening nature of cancer, the FDA has announced
procedures for accelerating the approval of oncology agents, thereby reducing
the amount of time required to bring such agents to market. ILEX believes that
the increasing demand for oncology products and the acceleration of the oncology
product
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<PAGE> 32
approval process by the FDA creates a unique opportunity for the Company to
leverage its expertise in oncology drug development.
Leverage its Expertise to Identify and In-License Compounds in Later Stages
of Development. The Company will continue to leverage the expertise of its
management team and Scientific Advisory Board, as well as its established
relationship with CTRC Research and its related entities, to identify and in-
license oncology compounds for development. ILEX focuses its development
activities on cancer treatment compounds in the later stages of development in
order to reduce the risk associated with drug discovery and early stage
development. The Company concentrates on those compounds that have demonstrated
preliminary safety and efficacy in human and/or animal studies, and that are
protected by, among other things, patents or orphan drug status. There are over
200 oncology drugs currently in development in the United States. The Company
believes that many of these oncology drugs will become available for
in-licensing or equity participation by ILEX or other market participants
because (i) industry consolidation has caused pharmaceutical and biotechnology
companies to prioritize research and development programs, resulting in numerous
licensing opportunities, (ii) evaluation of a compound's market potential based
on its initial indication may lead to an underestimation of the market potential
of certain oncology products and (iii) the market potential of certain of these
compounds may be considered too small to be attractive to large drug companies.
Build a Chemoprevention Product Platform. Physicians are increasingly able
to identify people at risk of developing cancer. The Company is attempting to
develop non-toxic, oral drugs which when taken chronically, may prevent the
onset of cancer. ILEX believes that clinical development strategies will be
fundamental to the timely development of such pharmaceuticals. The Company
believes that chemoprevention agents may have utility for individuals diagnosed
with precancerous conditions, such as precancerous lesions of the cervix or
recurrent colon polyps and, in the longer term, may have utility for individuals
diagnosed as predisposed to cancer, based on emerging genetic markers. Based on
the potential market opportunity, the Company plans to devote a significant
portion of its resources to building a chemoprevention product platform.
Form Strategic Collaborations with Corporate Partners. ILEX seeks to form
corporate partnerships with pharmaceutical and biotechnology companies to obtain
financial and marketing support for certain of its product development
activities. The Company believes that its product development strategy (i)
minimizes the substantial financial investment otherwise required by ILEX to
develop its oncology drugs, (ii) provides the Company with access to
international markets, (iii) enables the Company to carry an increased number of
products in its oncology drug portfolio and (iv) limits the Company's dependence
on the success of any single product.
Offer Full-Range of Oncology Product Development and Manufacturing
Services. The Company believes it is currently the only full-service provider of
CRO services focused exclusively on oncology. The Company offers its contract
research clients, among other things, expertise in the design of cancer clinical
protocols, preparation of regulatory submissions, toxicology services, access to
patients and investigators and state-of-the-art manufacturing capabilities. As a
result of such expertise, the Company believes that it may be able to reduce the
time normally required by other pharmaceutical and biotechnology companies and
broad-based CROs to develop oncology products and increase the probability of
obtaining regulatory approval. In addition, ILEX intends to continue its
relationship with CTRC Research and its related entities, which provides access
to both a large population of investigators and patients and potential contract
services clients.
OVERVIEW OF CANCER
Cancer is characterized by uncontrolled cell division resulting in the
growth of a mass of cells commonly known as a tumor. Cancer cells, if not
eradicated, can spread (metastasize) throughout the body. Cancerous tumors can
arise in almost any tissue or organ within the human body. Cancer is believed to
occur as a result of a number of factors, including genetic predisposition,
environmental
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agents and irradiation. These factors may result in genetic changes affecting
the ability of cells to regulate normally their growth and division.
There are currently more than 200 investigational agents being developed in
the United States for treating patients with cancer, more than at any time in
United States history. Most of these agents are being developed for treatment of
advanced disease. Due to the life-threatening nature of cancer, the FDA has
announced procedures for accelerating the approval of oncology agents, thereby
reducing the amount of time required to bring such agents to market. Under these
procedures, an oncology drug can be approved if it is shown to shrink tumors in
Phase II studies and if the developing company commits to performing and
completing Phase III trials after marketing approval.
Treatment of Cancer. The three most prevalent methods of treating patients
with cancer are surgery, radiation therapy and chemotherapy. A cancer patient
often receives a combination of two or all three of these modalities. Surgery
and radiation therapy are particularly effective in patients in which the
disease has not yet spread to other tissues or organs. Chemotherapy is the
principal treatment for tumors that have metastasized. The purpose of
chemotherapy is to interfere with the molecular and cellular processes that
control the development, growth and survival of malignant tumor cells.
Chemotherapy involves the administration of cytotoxic drugs designed to kill
cancer cells or the administration of hormone analogues to either reduce the
production of, or block the action of, certain hormones, such as estrogens and
androgens, which affect the growth of tumors. In many cases, chemotherapy
consists of the administration of several different drugs in combination.
Because chemotherapeutic agents generally attack rapidly dividing cells
indiscriminately, damaging normal as well as cancerous cells, use of such agents
often has adverse effects.
Although several types of tumors can now be treated effectively with drugs,
survival rates for the most common tumors have only begun to improve slightly.
In recent years, however, there have been significant advances in molecular
biology, immunology and other related fields of biotechnology which have led to
a better understanding of the processes that regulate the proliferation and
metastasis of malignant cells and by which malfunctioning genes can result in
the formation of tumors.
Prevention of Cancer. There are a number of conditions which can currently
be diagnosed and which predispose an individual to developing cancer. For
example, high-grade cervical dysplasia, if left unattended, often progresses to
invasive cervical cancer. Recurrent colon polyps can lead to colon cancer;
actinic keratosis can progress to skin cancers; and individuals who have had a
local tumor removed are at high risk for having a second tumor. In the near
future, physicians will increasingly be able to use relatively simple
genetic-based tests to identify individuals at risk for developing cancer. The
Company believes there is a significant need for non-toxic, oral drugs which can
be prescribed for chronic use to prevent the onset of cancer in these
situations. To date, no drug for the prevention of cancer (i.e. chemoprevention
drugs) has been approved by the FDA, and there can be no assurance that the
Company will be able to develop successfully a safe and efficacious
chemoprevention product, that such drug will be commercially viable or will
achieve market acceptance.
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PRODUCTS UNDER DEVELOPMENT
ILEX is developing compounds for treating patients with cancer as well as
chemoprevention compounds. The following table summarizes the drugs under
development by the Company and is qualified in its entirety by the more detailed
information following the table and elsewhere in this Prospectus:
PRODUCTS UNDER DEVELOPMENT
<TABLE>
<CAPTION>
WORLDWIDE
MARKETING
COMPOUNDS INDICATION DEVELOPMENT STATUS(1) RIGHTS
- ------------------ ------------------------- ------------------------- --------------
<S> <C> <C> <C>
CANCER TREATMENT
MGBG - AIDS-related, non- NDA submitted October Sanofi
Hodgkin's lumphoma 1996
- CNS lymphoma Phase II ongoing
- Other non-Hodgkin's Phase I/II ongoing
lymphoma
- Hodgkin's disease Initiate Phase II in 1997
- Pancreatic cancer Initiate Phase I in 1997
DFMO - Brain tumors Phase III ongoing(2) ILEX
- Carcinoid syndrome Initiate Phase II in
1997(2)
- Breast cancer Initiate Pivotal Phase II
in 1997
Piritrexim - Kaposi's sarcoma Phase III ongoing ILEX/MPI(3)
- Advanced bladder cancer Initiate Pivotal Phase II
in 1997
Crisnatol - Glioblastoma Phase III ongoing Janssen (J&J)
- Brain metastasis Phase I ongoing
DHAC - Mesothelioma Phase II completed(2) MGI Pharma
- Myelodysplastic Initiate Phase II in 1997
syndrome (MDS)
- Prostate cancer Initiate Phase II in 1998
Intoplicine - Various solid tumors Initiate Phase I in 1997 ILEX(4)
Aminopterin - Acute lymphocytic Phase I/II ongoing(5) ILEX
leukemia
Oxypurinol - Hyperuricemia(6) Compassionate MGI Pharma
distribution
Farnesyl - Various solid tumors Preclinical ILEX
Transferase
Inhibitors
CHEMOPREVENTION
DFMO - High-grade cervical Initiate Phase III in ILEX
intraepithelial 1997
neoplasia
- Prevention of certain Multiple Phase I and II
cancers in high-risk studies ongoing(2)
patients
IL23-7553 - Prevention of certain Preclinical ILEX
(Vitamin D3 cancers in high-risk
Analogue) patients
</TABLE>
- ---------------
(1) Trials indicated are conducted or planned to be initiated by ILEX, except as
otherwise indicated.
(2) Trials conducted or planned to be initiated by NCI.
(3) The Company has formed a joint venture with MPI Enterprises, L.L.C. to
jointly develop Piritrexim.
(4) Rhone-Poulenc Rorer Inc. has retained an option to market Intoplicine in
North America.
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(5) Investigator IND.
(6) A condition which results from chemotherapy treatment in some cancer
patients or in patients with gouty arthritis.
CANCER TREATMENT COMPOUNDS
MGBG (MITOGUAZONE)
Overview. MGBG is the first of a new class of cancer treatment drugs which
inhibit polyamines (substances which are used by dividing cells to stabilize
DNA). MGBG is being developed for the treatment of patients with non-Hodgkin's
lymphoma ("NHL"), Hodgkin's disease and pancreatic cancer. The Company submitted
an NDA to the FDA in October 1996 pursuant to the accelerated procedures
promulgated by the FDA for drugs indicated for life-threatening diseases,
seeking marketing approval for MGBG as a second-line treatment for patients with
AIDS-related NHL. The Company has licensed worldwide marketing rights to MGBG to
Sanofi. MGBG is expected to be marketed under the trade name Zyrkamine. The use
of MGBG is protected by an issued patent in the United States and MGBG is
designated as an Orphan Drug for treatment of patients with diffuse lymphomas,
including AIDS-related NHL. There can be no assurance that MGBG will receive FDA
approval on a timely basis, if at all, become commercially viable or achieve
market acceptance. See "Risk Factors -- Absence of Developed Products; Early
Stage of Product Development; Uncertainty of Product Development and Clinical
Development."
Development History. Early Phase I trials sponsored by the NCI in the
1970's showed that MGBG had antitumor activity, particularly in leukemias and
lymphomas; however, when administered on a daily dosing schedule, the drug
caused intolerable mucositis which led to a discontinuation of clinical trials.
Interest in the drug was renewed in the 1980's when it was discovered that the
plasma half-life of the agent was relatively long (at least seven days).
Subsequent clinical trials using a weekly or bi-weekly schedule demonstrated
that MGBG had significant anti-tumor activity, particularly in patients with
lymphomas, and such a dosing schedule did not cause severe mucositis or severe
toxicity to bone marrow cells (i.e. non-myelosuppressive). In addition, MGBG has
been shown to cross the blood brain barrier, making it an attractive agent for
testing in patients with cancers of the central nervous system ("CNS"),
particularly CNS lymphoma, a disease for which there is currently no effective
therapy. ILEX acquired rights to MGBG based upon its experiences using MGBG in
clinical trials and MGBG's demonstrated antitumor activity in human clinical
trials. In addition, the Company believes MGBG may ultimately be used in
combination regimens for treating various types of cancer because it works by a
novel mechanism of action, is not myelosuppressive and is relatively well
tolerated. Rights to MGBG were acquired by CTRC Research in 1992 from the Public
Health Service ("PHS"), a division of the Department of Health and Human
Services, and was subsequently transferred to ILEX.
ILEX has chosen AIDS-related lymphoma as the first indication for MGBG
because of the drug's demonstrated activity against lymphomas, its lack of
myelosuppression, which is important in patients with AIDS, and its
bioavailability to the CNS, which is a frequent metastatic site. The choice of
first-line therapy for patients with this disease depends on many factors, but
the therapy most commonly used, known as CHOP, is a combination of cytotoxic
agents, cyclophosphamide + doxorubicin + vincristine + prednisone.
Development Status. In October 1996, the Company submitted an NDA to the
FDA seeking marketing approval for MGBG as a treatment for patients with
AIDS-related NHL who have failed a potentially curative regimen such as CHOP.
The Company is seeking marketing approval under the accelerated approval
procedures promulgated by the FDA for anticancer drugs.
The Company has completed two open-labeled Phase II clinical trials in a
total of 90 patients with AIDSrelated NHL. In both studies, 600 mg/M(2) was
given via an intravenous infusion on Days 1 and 8 and once every two weeks
thereafter until disease progression or the patient completed an additional 16
weeks of treatment after response was first observed. The primary endpoint of
the studies was tumor response rate. Other endpoints included duration of
response, survival and clinical benefit parameters.
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The overall objective response rate in the 90 patients enrolled in the two
studies was 14.4%. Six patients (6.7%) had a complete remission, seven (7.8%)
had a partial response (greater than 50% decrease in tumor size) and 16 (17.8%)
had their disease stabilized. In both studies the drug was well tolerated and
there was evidence that patients who had tumor shrinkage or stabilization also
experienced relief from tumor-associated symptoms. The Company believes these
results are meaningful because there are no approved treatments for patients who
have failed first-line therapy. Additionally, patients who participated in the
studies had very advanced disease and yet some clearly benefitted from tumor
shrinkage and improvement in their tumor-associated symptoms. The Company
believes that MGBG demonstrated a favorable benefit-to-risk ratio in these
studies. The Company is planning to initiate a post-marketing approval Phase III
trial in accordance with the FDA's accelerated approval guidelines. See "Risk
Factors -- Extensive Government Regulation; No Assurance of Necessary FDA and
Other Regulatory Approvals; Uncertainty of Orphan Drug Status."
The Company plans to engage in efforts to expand MGBG's indications by
conducting additional trials to demonstrate its efficacy in non-AIDS related
NHL, CNS lymphoma, pancreatic cancer and Hodgkin's disease. The Company
anticipates that MGBG, if approved, will be used in combination with other
agents for these indications. ILEX is conducting a Phase I/II trial in patients
with NHL, using MGBG combined with CHOP and plans to initiate a Phase II trial
in 1997 in patients with lymphoma who have failed bone marrow transplantation. A
Phase II trial has been initiated in patients with CNS lymphoma. The Company
plans to initiate a Phase I trial in 1997 combining MGBG with gemcitabine and a
Phase II trial in patients with either NHL or Hodgkin's disease who have failed
bone marrow transplant treatment.
Marketing. Worldwide marketing rights have been licensed to Sanofi pursuant
to the terms of a license and development agreement between Sanofi and ILEX.
Under the terms of the agreement, ILEX is responsible for providing clinical
trial materials, managing the clinical development of MGBG and preparing and
submitting an NDA. If approved, the NDA and Orphan Drug Designation are to be
assigned to Sanofi, which will be responsible for the marketing and manufacture
of MGBG for commercial distribution. ILEX has received from Sanofi an initial
license fee and development funding for MGBG and is entitled to receive
additional development funding, milestone payments and royalties on sales.
The Company is seeking approval of MGBG initially for second-line treatment
of patients who have AIDS-related NHL, a disease which currently afflicts
approximately 10,000-20,000 persons in the United States. Because of its unique
mechanism of action and lack of myelosuppression, the Company believes MGBG
could be used in combination treatment regimens for non-AIDS-related NHL and
other lymphomas, Hodgkin's disease and pancreatic cancer. These diseases are
newly diagnosed in more than 256,000 people annually in the United States.
Proprietary Position. In November 1994, the exclusive license to the United
States patent for MGBG held by PHS was transferred to ILEX from CTRC Research.
The PHS United States patent, which expires in May 2002, claims the intended
regimen for using MGBG to treat patients with cancer. No international patents
have been issued or are pending. Pursuant to the terms of the agreement with
PHS, ILEX is obligated to pay PHS an annual royalty based on net sales of MGBG.
MGBG is currently designated as an Orphan Drug for the treatment of patients
with diffuse lymphomas, a classification of most lymphomas that are treated by
chemotherapy, including AIDS-related NHL. See "Risk Factors -- Uncertainty
Regarding Patents and Proprietary Position; Rights to Technology Dependent Upon
Compliance with Licenses and Agreements" and "-- In-Licensing Agreements."
DFMO
Overview. DFMO is a selective irreversible inhibitor of ornithine
decarboxylase, an enzyme which controls synthesis of certain polyamines which
are required by dividing cells such as cancer cells. DFMO was discovered and
developed through Phase II trials by Marion Merrell Dow Inc. ("MMD"), now
Hoechst Marion Roussel, Inc. ILEX obtained a worldwide, exclusive license to
DFMO from MMD for use in the fields of cancer and infectious diseases. ILEX
plans to develop DFMO as a treatment for breast cancer, carcinoid syndrome and
possibly brain tumors. The Company plans to initiate in 1997 pilot
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studies in patients with breast cancer. In addition, ILEX plans to develop DFMO
as a chemoprevention drug. See "-- Cancer Treatment Compounds -- DFMO."
Development History. DFMO's demonstrated activity in many preclinical
cancer and parasitic disease models led MMD to pursue its development as an
agent to treat certain infectious diseases, parasitic diseases and advanced
cancer. MMD obtained marketing approval of DFMO as a treatment for Trypanosoma
brucei gambiense and rhodensiense infections ("African Sleeping Sickness"), a
rare disease found in certain developing countries. MMD supplies a parenteral
dosage form of DFMO to the World Health Organization for distribution for this
indication under the trade name ORNIDYL.
MMD also conducted clinical studies with DFMO in patients with advanced
cancer. DFMO inhibits the growth of tumors rather than killing cancer cells and,
therefore, tumor reductions were rarely seen in most tumor types. However,
promising results were observed when DFMO was used to treat patients with brain
tumors. As a result, the NCI is sponsoring two ongoing, randomized, controlled
Phase III trials in patients with brain tumors with survival as the primary
endpoint. In one study by the Northern California Cancer Center ("NCCC"),
radiation treatment with and without DFMO is being compared in 200 patients
newly diagnosed with glioblastoma multiforme. This study, initiated in 1991,
completed patient accrual in 1996 with an additional one or two years planned
for follow-up. In a second study, initiated in 1992 by the NCI, DFMO is combined
with Procarbazine + cyclohexyenitrosourea ("CCNU") + Vincristine ("PCV") and
compared to PCV alone in patients with primary brain tumors. Either one or both
of these studies could yield results supportive of an NDA filing by ILEX for
DFMO for the treatment of patients with intracranial malignancies. ILEX's
Scientific Advisory Board advised the Company to acquire the rights to DFMO from
MMD because (i) DFMO had demonstrated antitumor activity alone and in
combination with other oncology drugs in numerous laboratory studies, (ii)
DFMO's mechanism of action is novel, (iii) recent clinical studies had indicated
that DFMO at low doses might be effective without the side effects seen at
higher doses, (iv) Phase III studies had been initiated in patients with brain
tumors and (v) the NCI was sponsoring a number of chemoprevention studies using
DFMO.
In laboratory studies sponsored by ILEX, DFMO has been shown to be more
active than Tamoxifen in mice implanted with estrogen receptor positive breast
tumors, to be active in Tamoxifen-resistant lines, and to be active in estrogen
receptor negative cell lines and to enhance the effectiveness of paclitaxel.
Because many women fail therapy for advanced disease, there is a significant
need for new therapies for breast cancer. Published studies have also shown that
DFMO was more active than the current therapy, somatostatin, in an animal model
used to study carcinoid tumors. A Phase II trial is expected to be initiated by
the NCI in 1997.
Development Status. ILEX plans to evaluate the results of the NCCC study of
DFMO in combination with radiation for the treatment of glioblastoma multiforme
when they are available in 1997 or 1998 and to determine if the clinical results
are sufficient to support an NDA submission. The Company plans to initiate in
1997 two pilot studies in patients with breast cancer, one in patients who have
failed hormonal therapy and a second combining DFMO with Taxol (paclitaxel).
Each study is expected to enroll between 14 and 35 patients depending on the
responses observed. If positive results are seen in either setting, the Company
plans to initiate pivotal Phase II trials. In addition, the Company plans to
support an NCI-sponsored clinical study in patients with carcinoid syndrome who
are failing conventional treatment.
Marketing. The Company will seek one or more partners for development of
this compound outside of the United States and may retain marketing rights in
the United States. The annual incidence of breast cancer, brain tumors and
carcinoid syndrome is estimated to be approximately 186,000, 17,900 and 5,000
persons per year in the United States, respectively. Approximately 45,000 women
die from breast cancer each year and more than 13,000 patients with brain tumors
die from their disease.
Proprietary Position. In August 1995, ILEX obtained a worldwide, exclusive
license to patents held by MMD covering the composition and use of DFMO for the
treatment of cancer and various parasitic infections (excluding African Sleeping
Sickness). Four MMD patents have issued in the United States which expire from
August 16, 2000 through March 26, 2008. Applications for five additional MMD
patents are pending. Fifty (counter) foreign patents have issued to MMD; four
foreign applications have been
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filed by MMD. In November 1996, the Company learned that notice of allowance of
claims had been received for a patent claiming the use of DFMO with a number of
chemotherapeutic agents. The Company has filed two United States patent
applications for the use of DFMO in combination with certain drugs used to treat
breast cancer and in certain novel formulations. Pursuant to the terms of a
license agreement, ILEX has paid MMD a licensing fee and is required to pay it
certain milestone payments. In addition, ILEX is obligated to pay MMD a royalty
based on net sales of DFMO related to applications of the product patented by
MMD, and a lower royalty for applications not covered by MMD patents, subject to
adjustment under certain circumstances. See "Risk Factors -- Uncertainty
Regarding Patents and Proprietary Position; Rights to Technology Dependent Upon
Compliance with Licenses and Agreements" and "-- In-Licensing Agreements."
PIRITREXIM
Overview. Piritrexim is a novel dihydrofolate reductase inhibitor
originally discovered and developed by Burroughs Wellcome Co., now Glaxo
Wellcome, and The Wellcome Foundation Limited (collectively, "Wellcome") with
demonstrated antitumor activity in patients with advanced bladder cancer,
Kaposi's sarcoma ("KS") and other diseases. ILEX has obtained an exclusive
license to patents held by Wellcome for use of Piritrexim as a treatment of
patients with cancer and related diseases. The Company has initiated a Phase III
trial in patients with KS and is collaborating with the Eastern Cooperative
Oncology Group ("ECOG"), an NCI cooperative group, which is organizing a pivotal
Phase II trial in patients with advanced bladder cancer.
Development History. Piritrexim was discovered and developed by Wellcome as
an agent with potentially superior properties to that of methotrexate. Because
Piritrexim enters the cell by a different mechanism of action than that of
methotrexate, Piritrexim was expected to be active in certain
methotrexate-resistant tumors. Wellcome conducted Phase I and II studies in more
than 700 patients. Tumor responses were noted in patients with advanced bladder
cancer, KS, colon cancer, melanoma, head-and-neck cancer and other cancers. In
published Phase II studies, Piritrexim demonstrated objective response rates
ranging from 23% to 75% in patients with advanced bladder cancer who failed the
standard first-line chemotherapy regimen of methotrexate + vinblastine +
adriamycin + cisplatin ("MVAC"). Because MVAC is a very toxic regimen, there is
a significant need for new effective treatments for advanced bladder cancer.
Wellcome developed an oral and an intravenous formulation of Piritrexim. The
Company has determined that the oral formulation is superior based upon its
safety and efficacy profile. The dose limiting toxicity with this agent is
myelosuppression, and other toxicities observed thus far are considered mild.
ILEX acquired rights from Wellcome to Piritrexim in 1995 upon the recommendation
of its Scientific Advisory Board. The Company sought to acquire rights to
Piritrexim because (i) objective tumor responses were observed in patients with
a number of different types of cancer, (ii) the drug appears to be well
tolerated at the recommended dose and schedules and (iii) the oral formulation
is convenient for patients. The Company believes that Piritrexim has the
potential to be used for treating a number of different diseases in a number of
different regimens.
Development Status. The Company plans to initially pursue a parallel
development path for Piritrexim, developing this agent both for patients with KS
and for those with advanced bladder cancer. The Company has initiated a Phase
III double-blind, placebo-controlled trial for patients with very early stage
KS. These patients typically receive local therapy only. The objective of this
study is to demonstrate that Piritrexim can prevent or reduce the number of new
lesions formed (primary endpoint). The trial, designed for 120 evaluable
patients, is expected to take approximately 18 months to complete. The Company
plans to conduct a Phase II trial with approximately 50 patients to demonstrate
responses in existing KS lesions as its second pivotal study.
The Company also expects two Phase II pivotal studies to be conducted with
approximately 100 patients with advanced bladder cancer who have failed MVAC or
another first-line regimen. ECOG plans to initiate such a study with Piritrexim
in early 1997. The Company plans to initiate a second study in 1997 with United
States, European and Canadian institutions. These two studies are expected to
constitute the two well-controlled pivotal studies required for an NDA under the
accelerated approval
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mechanism. The Company also plans to conduct a Phase I trial combining
Piritrexim with two other chemotherapy drugs with the objective of defining a
new first-line regimen for patients with advanced bladder cancer.
Marketing. There are approximately 100,000-130,000 patients in the United
States suffering with KS, with approximately 25,000 new cases diagnosed
annually. The incidence of bladder cancer in the United States is estimated to
be approximately 52,900 patients in 1996, and approximately 11,700 deaths are
expected to result from advanced bladder cancer each year. ILEX and MPI, a drug
development company, have formed an equally owned joint venture to develop
Piritrexim. The Company has licensed Piritrexim to the joint venture in exchange
for licensing fees, milestone payments and royalties. Coincident with the
transaction, MPI made an equity investment of $5 million in ILEX. See
"-- Strategic Alliances and Collaborations -- MPI."
Proprietary Position. In March 1995, the Company obtained an exclusive,
worldwide license to patents held by Wellcome covering the composition and use
of Piritrexim for all cancer indications. Five Wellcome patents have issued in
the United States, the two most relevant of which expire in 2007; these patents
claim the composition of Piritrexim and its use as a treatment of patients with
cancer. The Wellcome Foundation Limited has 36 foreign patents for Piritrexim
with expiration dates ranging from 1999 to 2008. Pursuant to the terms of the
license agreement, ILEX has paid a portion of a licensing fee to Wellcome, with
a final payment due in March 1997. ILEX is also obligated to pay Wellcome
royalties based on net sales of Piritrexim, subject to adjustment under certain
circumstances. See "Risk Factors -- Uncertainty Regarding Patents and
Proprietary Position; Rights to Technology Dependent Upon Compliance with
Licenses and Agreements" and "-- In-Licensing Agreements."
CRISNATOL
Overview. Crisnatol is a compound that inhibits DNA and RNA synthesis and
has demonstrated activity in patients with brain tumors. The Company is
currently conducting a 200-patient, multi-center Phase III trial in patients
with glioblastoma multiforme, comparing Crisnatol as an adjuvant therapy with
Carmustine ("BCNU"), the only drug currently approved for treatment of this
disease. The Company has licensed worldwide marketing rights to Janssen, a
subsidiary of Johnson & Johnson.
Development History. Crisnatol was discovered and initially selected for
development by Wellcome on the basis of its in vitro and in vivo antitumor
activity and its high degree of lipophilicity. Based on a number of limited
Phase I and Phase II trials conducted under the prior sponsorship of Wellcome,
the most promising antitumor activity for Crisnatol was seen in a Phase II trial
for patients with malignant gliomas and no prior chemotherapy utilizing BCNU. In
a Phase II study conducted by CTRC in 14 patients with recurrent high-grade
brain tumors who had undergone surgery and radiation treatment, two patients
obtained a complete remission and three had their disease stabilized. The
complete remissions have been durable, and both patients are alive without
evidence of disease, six and seven years since initiation of treatment,
respectively. Another patient had disease stabilization that lasted 42 months
after receiving ten months of therapy with Crisnatol. The Company sought to
acquire rights to Crisnatol because (i) durable, complete remissions are rare in
patients with recurrent high-grade brain tumors, (ii) the market potential for
this indication alone was sufficiently attractive and (iii) Crisnatol might be
an effective treatment for patients with brain metastasis. Rights to Crisnatol
were acquired by CTRC Research from Wellcome in 1992 and was subsequently
transferred to ILEX.
Development Status. ILEX has initiated a randomized, controlled Phase III
trial in adult patients with glioblastoma multiforme. Glioblastoma multiforme
accounts for approximately 25% of all brain tumors. It is the most serious of
all brain tumors, with median survival of those treated by surgery alone being
approximately three to six months. Studies indicate that the addition of
radiation treatment improves this median survival to 12 months. Nonetheless,
survival remains poor with only 21% of patients surviving two years after being
diagnosed with glioblastoma multiforme and less than 5% surviving five years
after diagnosis.
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In an ongoing Phase III adult trial, approximately 200 patients will
receive either Crisnatol or BCNU after both surgery and radiation treatment. As
of October 1, 1996, 52 patients have been enrolled at 12 clinical sites.
Crisnatol is administered by continuous intravenous infusion for a period of
three days on an outpatient basis. The primary endpoint is survival, with
time-to-tumor progression and quality of life as the other endpoints. Because
tumors in patients with glioblastoma multiforme usually recur within six months,
this trial design is expected to yield a determination of efficacy in a
relatively short period of time. An interim analysis of the clinical data is
scheduled to occur in the second quarter of 1997. The adult clinical trial is
expected to be completed in late 1998.
ILEX is also evaluating the use of Crisnatol in combination with radiation
treatment and is exploring prolonged administration in preparation for clinical
trials in patients with brain metastases. The Company is conducting a Phase I
study exploring a longer continuous infusion schedule. The objective is to be
able to administer Crisnatol continuously to patients who are undergoing
radiation therapy for brain metastases in order to completely eradicate cancer
cells that have metastasized to the brain.
ILEX sponsored a Phase I clinical trial in 18 pediatric patients with brain
stem gliomas. The results of this study are currently being analyzed.
Crisnatol's antitumor activity has not been well studied in patients with
diseases other than brain tumors. Crisnatol may have applications in other
neoplastic diseases. Accordingly, ILEX plans to evaluate Crisnatol's potential
in other diseases after the brain tumor studies are completed.
Marketing. In October 1996, ILEX entered into an agreement with Janssen
under which Janssen obtained worldwide rights to manufacture and market
Crisnatol. Under such agreement, ILEX is responsible for process development,
clinical development, and for preparing an NDA in the United States and
registration dossiers outside the United States. ILEX retained an option to
manufacture Crisnatol if Janssen elects to outsource manufacturing. ILEX
received an initial license fee and will receive project funding, milestone
payments and a royalty based upon the gross margin achieved by Janssen.
Coincident with executing the licensing agreement, Johnson & Johnson Development
Corp. made an equity investment of $1 million in ILEX. See "-- Strategic
Alliances and Collaborations -- Janssen."
The annual incidence of brain tumors in the United States in 1996 was
estimated by the American Cancer Society to be 17,900, of which approximately
25% were glioblastoma multiforme. BCNU is the only drug approved for treatment
of patients with high-grade brain tumors and effectiveness is marginal.
Therefore, there is a significant need for new therapies for this disease. In
addition, approximately 80,000 patients annually develop brain metastasis.
Proprietary Position. In November 1994, the exclusive, worldwide license to
Crisnatol for the treatment and/or prophylaxis of cancer was transferred to ILEX
from CTRC Research. This license agreement also provides ILEX with certain
non-exclusive rights for diseases other than cancer. Two Wellcome patents have
issued in the United States, with expiration dates of 2005 and 2006. Wellcome
has 36 patents in 35 foreign countries with expiration dates ranging from 1999
to 2007. Pursuant to the terms of the license agreement, ILEX is obligated to
pay Wellcome a royalty based on net sales of Crisnatol products. See "Risk
Factors -- Uncertainty Regarding Patents and Proprietary Position; Rights to
Technology Dependent Upon Compliance with Licenses and Agreements" and "--
In-Licensing Agreements."
DHAC
Overview. Dihydro-5-azacytidine ("DHAC") is a DNA interactive agent and was
initially developed as an antitumor agent by the NCI. In Phase II trials
conducted by the NCI, DHAC was shown to induce responses in patients with
mesothelioma, a cancer of the lung pleural cavity which is often attributed to
exposure to asbestos. DHAC was also shown to increase expression of certain
genes needed for inhibition of cancer cell growth. ILEX plans to develop this
agent as a treatment for patients with myelodysplastic syndrome ("MDS"), a
serious pre-leukemic condition, and ultimately as a treatment for patients with
prostate cancer. The Company plans to initiate Phase II clinical trials for
patients with MDS in 1997.
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Development History. DHAC was designed as an analogue of 5-azacytidine
("AC"), a drug which had shown potential as a treatment for leukemia, with the
objective of overcoming the severe gastrointestinal toxicities associated with
AC. However, clinical studies conducted by the NCI demonstrated that DHAC was a
drug completely different from AC with significantly less bone marrow toxicity.
The dose limiting toxicity of DHAC was shown to be pleurisy, pain in the pleural
cavity surrounding the lungs. As a result of this observation, the NCI organized
a clinical study of DHAC as a treatment for patients with mesothelioma.
Antitumor responses were observed in a multi-center clinical trial conducted by
the NCI. Trials also demonstrated that DHAC caused demethylation of DNA, which
corrected certain DNA defects and caused re-expression of certain cell surface
receptors. In follow-up preclinical studies, ILEX investigators demonstrated
that DHAC could increase expression of androgen receptors and, therefore,
potentially could be used to prolong the usefulness of androgen-related therapy
in patients with prostate cancer. In other clinical studies, AC, which has a
similar mechanism of action to that of DHAC, has been shown to reduce the number
of transfusions required to maintain patients with MDS. Since AC is highly toxic
to bone marrow, DHAC might be a better candidate for treatment of patients with
MDS.
Development Status. ILEX proposes initially to explore the development of
DHAC in combination with growth factors as a treatment for MDS due to both a
significant need for new treatments for patients with MDS as well as because
DHAC could be as effective as AC without being toxic to bone marrow cells. In
addition, the Company may also propose that it or its development partner, MGI
Pharma, conduct Phase II clinical trials in patients with mesothelioma and
prostate cancer. The Company expects that Phase II clinical trials will be
initiated in 1997 for MDS and in 1998 for prostate cancer.
Marketing. The incidence of new cases of MDS in the United States in 1996
is approximately 7,500 and the incidence of prostate cancer is approximately
317,000. ILEX has entered into an agreement with MGI Pharma pursuant to which
MGI Pharma obtained worldwide rights to manufacture and market DHAC. MGI Pharma
agreed to contract with ILEX for 50% or more of the clinical development related
to DHAC or equivalent services related to another project. ILEX will receive a
licensing fee and a royalty based upon sales, if any, achieved by MGI Pharma or
its sublicensee(s). See "-- Strategic Alliances and Collaborations -- MGI
Pharma."
Proprietary Position. The composition of matter patent for DHAC expired in
1994. The Company has applied for a United States patent for the use of DHAC to
enhance androgen therapy in patients with prostate cancer. In addition, the
Company has obtained Orphan Drug Designation for DHAC as a treatment for
patients with mesothelioma. See "Risk Factors -- Uncertainty Regarding Patents
and Proprietary Position; Rights to Technology Dependent Upon Compliance with
Licenses and Agreements."
OTHER PRODUCTS
Intoplicine. ILEX has licensed intoplicine ("Intoplicine"), a compound that
inhibits both topoisomerase I and topoisomerase II, from Rhone-Poulenc Rorer
Inc. ("RPR"). In preclinical studies, Intoplicine demonstrated significant
antitumor activity against human tumor stem cells and in tumor-bearing animal
model systems. RPR terminated development of Intoplicine, because, in Phase I
clinical trials by RPR, patients developed serious liver toxicity at dose levels
below that which RPR believed to be necessary for antitumor activity. ILEX
believes that it is possible to change the dosing schedule to decrease or
eliminate the toxicity. RPR granted ILEX an exclusive, worldwide license to its
United States patent, five foreign patents and five foreign patent applications
on Intoplicine, and agreed to transfer know-how and regulatory documents to the
Company. ILEX plans to test new dosing regimens in Phase I clinical trials of
patients with various tumors beginning in 1997.
Aminopterin. ILEX is collaborating with the University of
Texas -- Southwestern Medical Center at Dallas on the development of aminopterin
("Aminopterin"), a compound in the same family as methotrexate. ILEX assisted
the investigator with the preparation of an Investigational New Drug ("IND")
application and supplied the initial clinical quantities. Early clinical results
from an ongoing Phase I/II trial
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indicate that the drug has activity. ILEX plans to collaborate in the
development of this agent as a treatment for patients with acute lymphocytic
leukemia and intends to apply for orphan drug status at the appropriate time.
Aminopterin is not covered by any existing patents.
Oxypurinol. In March 1995, ILEX obtained rights to an exclusive, worldwide
license to technology held by Wellcome related to the synthesis and use of
oxypurinol ("Oxypurinol"). Oxypurinol is an analogue of Wellcome's Allopurinol
for the treatment of gout or cancer patients who have high uric acid levels, a
condition resulting from chemotherapy treatment in some cancer patients. ILEX is
currently distributing Oxypurinol on a compassionate basis to patients who are
allergic to Allopurinol or who cannot take Allopurinol for other reasons. ILEX
intends to pursue marketing approval of this agent for treatment of patients who
have allergic reactions to Allopurinol utilizing the data that has been
collected on the compassionate use program. ILEX has entered into an agreement
with MGI Pharma pursuant to which MGI Pharma obtained worldwide rights to
manufacture and market Oxypurinol. ILEX is currently responsible for preparing a
development plan. ILEX will receive a licensing fee and funding for data
retrieval, analysis and project planning. Future funding and a milestone payment
will depend on the feasibility of the development plan. See "-- Strategic
Alliances and Collaborations -- MGI Pharma."
Farnesyl Transferase Inhibitors. In July 1996, ILEX obtained rights to an
exclusive, worldwide license from Sother, Inc. to a family of compounds that are
currently in preclinical evaluation and have been shown to inhibit farnesyl
transferase inhibitors. Farnesyl transferase inhibitors is an enzyme that is
involved in the intracellular pathway which is activated in dividing cells. This
enzyme is activated in a large number of tumors and therefore may be a promising
target for new oncolytic agents. These compounds are currently being evaluated
in preclinical studies.
CHEMOPREVENTION COMPOUNDS
The Company believes that drugs can be developed which can be used to treat
premalignant conditions and halt the progression of cells to invasive cancer.
There are a number of conditions which currently can be diagnosed and which
predispose an individual to developing cancer. Examples include (i) high-grade
cervical dysplasia, which if left unattended, often progresses to invasive
cervical cancer; (ii) recurrent colon polyps, which can lead to colon cancer;
(iii) actinic keratosis, which can progress to skin cancers; and (iv) instances
when an individual has had a local tumor removed and is at high risk for
developing a second tumor. The Company believes that in the near future,
physicians will increasingly be able to use relatively simple genetic-based
tests to identify individuals at risk for developing cancer. There is a
significant need for non-toxic, oral drugs which may be prescribed to prevent
the onset of cancer in these situations.
ILEX believes that clinical development strategies will be fundamental to
the development of chemoprevention drugs. However, because there are currently
no chemoprevention drugs which have obtained marketing approval, the clinical
development path is uncertain. The Company believes that the design of clinical
trials with appropriate intermediate endpoints in terms of demonstrating safety
and efficacy in treating conditions that are known to progress to cancer will be
important to the successful development of these products. Because of the
potential market opportunity and ILEX's expertise in formulating clinical
development strategies, the Company plans to devote significant resources to
building a chemoprevention product platform. ILEX has two products which are
currently being developed for chemoprevention.
DFMO
Overview. In addition to its cancer treatment potential, DFMO has shown
potential to prevent the onset of cancer. Preclinical models have demonstrated
that DFMO can block the promotion step in carcinogenesis in a number of tumor
models. Studies sponsored by the NCI's Division of Cancer Prevention and Control
("DCPC") have shown that DFMO can reverse certain premalignant conditions. The
Company plans to conduct pivotal trials in patients with cervical
intraepithelial neoplasia ("CIN"), which can lead to cervical cancer, and other
diseases and to collaborate with DCPC in the development
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of DFMO as a treatment for recurrent colon polyps, which can lead to colon
cancer. The Company plans to initiate a Phase III clinical trial in 1997 for the
treatment of high-grade CIN. ILEX obtained a worldwide, exclusive license to
DFMO for use in the field of cancer and infectious diseases. ILEX also plans to
develop DFMO as a cancer treatment compound. See "-- Cancer Treatment
Compounds -- DFMO."
Development History. Clinical studies conducted by investigators at the
University of Wisconsin demonstrated that low, non-toxic doses of DFMO taken
orally could inhibit the target enzyme, ornithine decarboxylase. Doses equal to
1/20th of those used to treat advanced disease were shown to be effective. As a
result, DCPC initiated a number of Phase I and II(a) chemoprevention studies in
patients at risk for developing colorectal cancer, bladder cancer, prostate
cancer, skin cancer, cervical cancer or head-and-neck cancer. In one study, DFMO
was shown to regress high-grade CIN lesions in 50% of women with only 30 days of
treatment. High-grade lesions, if not treated, can progress to cervical cancer.
In another randomized, controlled study, DFMO was shown to reduce actinic
keratosis lesions, a condition which can progress to squamous cell carcinoma of
the skin.
Development Status. The Company has entered into a clinical trials
agreement to collaborate with DCPC in the development of DFMO as a
chemoprevention agent. The Company has also completed the design of a Phase III
clinical trial in 120 patients with high-grade CIN who have compromised immune
systems. Such patients are known to have a high risk of recurrence of CIN
lesions and are ultimately at risk for cervical cancer. In this study,
HIV-infected women who have had their CIN lesions surgically removed will be
randomized to receive daily doses of placebo or DFMO and followed to determine
the time-to-disease recurrence in the two groups. The Company expects to start a
Phase III trial in early 1997. The Company also plans to pursue the development
of DFMO to treat actinic keratosis lesions through a partnership with a company
which markets dermatologic products.
DCPC is planning a randomized, placebo-controlled study designed to
demonstrate that DFMO can reduce the recurrence of colon polyps. Individuals who
have recurrent colon polyps are known to be at high risk for developing colon
cancer. NCI and ILEX are reviewing future indications that may include treatment
of patients with recurrent colon polyps, oral leukoplakia and others at risk for
developing prostate cancer.
Marketing. The Company plans to retain marketing rights to DFMO in the
United States and Europe for the oral dose form and to seek marketing partners
in Europe and Japan and for topical uses worldwide.
Proprietary Position. The Company has filed a patent application for the
use of DFMO to treat CIN lesions on behalf of M.D. Anderson Cancer Center and
has obtained an exclusive license to the drug. See "Risk Factors -- Uncertainty
Regarding Patents and Proprietary Position; Rights to Technology Dependent Upon
Compliance with Licenses and Agreements" and "-- In-Licensing Agreements."
IL23-7553 (VITAMIN D3 ANALOGUE)
ILEX has obtained an exclusive, worldwide license from Hoffmann-La Roche to
IL23-7553, an analogue of vitamin D3, for uses in the field of cancer. IL23-7553
has been shown in preclinical studies to cause cancer cells to stop dividing
(i.e. differentiation) and to shrink established tumors. At therapeutic
concentrations, IL23-7553 does not appear to cause hypercalcemia, a toxic side
effect caused by vitamin D3. ILEX plans to develop IL23-7553 for the prevention
of several cancers, including prostate cancer. ILEX plans to synthesize the
compound and to conduct all preclinical studies such that it can submit an IND
for IL23-7553 as early as 1998. ILEX is in discussions with DCPC for the
development of this agent.
CONTRACT RESEARCH AND DEVELOPMENT SERVICES
In order to fund its drug development efforts and monitor oncology trends,
the Company provides contract clinical research, development and manufacturing
services to pharmaceutical and biotechnology companies engaged in the
development of oncology drugs. ILEX believes that by leveraging its expertise
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in the identification, development, manufacturing and regulatory approval
process of oncology drugs, the Company can serve as a value-added partner for
its contract research clients. The Company believes it is currently the only
full-service provider of contract research services focused exclusively on
oncology.
Companies developing oncology drugs face particular issues related to
conducting clinical studies. Patients are increasingly being seen by physicians
in managed care organizations rather than at teaching institutions. Therefore,
the traditional clinical trial sites often cannot meet the patient accrual
requirements for studies. In addition, with new agents being more rapidly
approved by the FDA and the large number of oncology drugs currently in
development, it is critical that clinical trial designs take into account
competing clinical trials and changing treatment practices.
ILEX's internal clinical staff has extensive knowledge of the current
oncology environment, which the Company believes provides its clients with a
distinct advantage. The Company offers its contract research clients, among
other things, expertise in the design of cancer clinical protocols, preparation
of regulatory submissions, toxicology services, access to patients and
investigators and state-of-the-art manufacturing capabilities. As a result, ILEX
believes that it may be able to reduce the time normally required by other
pharmaceutical and biotechnology companies and broad-based CROs to develop
oncology products and increase the probability of obtaining regulatory approval.
The Company estimates that pharmaceutical and biotechnology companies spent
approximately $2.6 billion in 1995 for research and development of anticancer
and endocrine system drugs. During the nine-month period ended September 30,
1996, ILEX provided services to 15 clients, including four pharmaceutical
companies and 11 biotechnology companies, involving over 25 projects. As of
December 11, 1996, the Company has active contracts with 12 pharmaceutical and
biotechnology companies and is in ongoing discussions with these and additional
companies to manage development programs for their oncology drugs.
ILEX has in the past derived, and may in the future derive, a significant
portion of its contract research services revenue from a relatively limited
number of major projects or clients. Concentrations of business in the contract
service industry are not uncommon and the Company is likely to experience such
concentration in future years. The Company intends to continue to expand its
contract research business by focusing its marketing efforts on longerterm,
multi-phase drug development programs. In the nine months ended September 30,
1996, ILEX's top five CRO customers accounted for 81.4% of the Company's
contract research services revenue. The loss of business from a significant
client could materially and adversely affect the Company's business, financial
condition and results of operations.
CLINICAL RESEARCH SERVICES
The Company offers its contract research clients a full range of services,
including but not limited to the following:
Study Protocol Design. The protocol defines the medical issues the
study seeks to examine and the statistical tests that will be conducted.
Accordingly, the protocol defines the frequency and type of laboratory and
clinical measures that are to be tracked and analyzed, the number of
patients required to produce a statistically valid result, the period of
time over which the patients must be tracked and the frequency and dosage
of drug administration. The Company believes its experience with
NDA-directed studies, knowledge of rapidly changing clinical practices and
knowledge of the FDA's position on acceptable endpoints are very beneficial
to the design of oncology clinical trials.
Site and Investigator Recruitment. The study drug is administered to
patients by physicians, referred to as investigators, at hospitals, clinics
or other locations, referred to as sites. The trial's success depends on
the successful identification and recruitment of investigators with an
adequate base of patients who satisfy the requirements of the study
protocol. ILEX has access to leading sites and investigators through its
relationship with CTRC Research, the Company's Scientific Advisory Board
and investigators used on previous studies.
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Patient Enrollment. The speed with which trials can be completed is
significantly affected by the rate at which patients are enrolled by
investigators. ILEX has access to a large patient population through its
relationship with CTRC Research and Southwest Oncology Group ("SWOG"),
which the Company believes enrolls more oncology patients into Phase II and
III trials than any other multi-institutional group in the United States.
The Company also has access to a network of investigators who collaborate
with ILEX, CTRC Research and members of ILEX's Scientific Advisory Board.
Regulatory Affairs Services. ILEX provides comprehensive regulatory
product registration services for pharmaceutical and biotechnology products
in North America and, to a lesser extent, in Europe, including regulatory
strategy formulation, document preparation and liaison with the FDA and
other regulatory agencies. ILEX works closely with clients to devise
regulatory strategies and comprehensive product development programs. The
Company's regulatory affairs experts review existing published literature,
assess the scientific background of a product, assess the competitive and
regulatory environment, identify deficiencies and define the steps
necessary to obtain registration in the most expeditious manner. Through
this service, the Company helps its clients determine the feasibility of
developing a particular product or product line. ILEX's regulatory group
specializes in enabling clients to make timely regulatory submissions with
the final objective of NDA approval. The Company frequently communicates
with the FDA, which the Company believes streamlines the approval process
by allowing the Company to address regulatory concerns early in the
development plan. ILEX also closely monitors evolving regulatory policies
in the United States and internationally, which allows the Company to
design global regulatory strategies with the objective of expedited product
approvals.
Toxicology Services. ILEX performs the full range of drug safety
toxicology analyses in a state-of-the-art, American Association for
Accreditation of Laboratory Animal Care ("AAALAC") accredited facility
currently certified to meet National Institutes of Health U.S. Public
Health Service guidelines and current Good Laboratory Practices ("cGLP")
standards. The Company's drug safety specialists develop and execute
comparative studies, find the mechanism of action and interpret the data to
determine a compound's clinical significance. The Company has also
developed animal models to test compounds for the prevention of alopecia,
mucositis and cardiotoxicity, side effects frequently associated with
cancer treatment drugs. ILEX's Quality Assurance Unit audits all drug
safety studies to certify that technicians are performing the procedures
according to Standard Operating Procedures and/or protocols. The Company
currently manages validated animal testing laboratories at the University
of Texas Health Science Center at San Antonio ("UTHSCSA") for the purposes
of conducting toxicology studies under cGLP.
Manufacturing Expertise. ILEX believes that it is one of only a few
custom chemical synthesis manufacturers focused on bulk oncology drugs in
the United States. The Company conducts its manufacturing operations at a
7,200-square-foot state-of-the-art manufacturing facility, at which it
manufactures bulk drug products for preclinical and clinical trials for CRO
clients and in-licensed compounds. Oncology drugs are complex, toxic
molecules that are difficult to synthesize and require special handling
procedures. ILEX's management team has extensive oncology drug
manufacturing expertise. See "Risk Factors -- Lack of Commercial
Manufacturing Experience; Handling of Hazardous Materials; Environmental
Matters."
Additional services provided by the Company include study monitoring and
data collection, report writing and medical services.
RELATIONSHIP WITH CTRC
The Company was incorporated in December 1993 coincident with the transfer
of certain advanced drug development programs, intellectual property rights and
commercial opportunities from CTRC Research. CTRC Research was formed as part of
a program begun by CTRC, a regional cancer treatment and research center located
in San Antonio, Texas, which was founded in 1972 and today, in conjunction with
the UTHSCSA, is an NCI-designated Cancer Center, one of two in the state of
Texas. Under the
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leadership of Charles Coltman, Jr. M.D., Co-Chairman of the Company's Scientific
Advisory Board, CTRC has become known for its expertise in clinical research.
Dr. Coltman is also Chairman of SWOG. Dr. Daniel Von Hoff, the other Co-Chairman
of the Company's Scientific Advisory Board, was appointed Director of Research
at CTRC in 1988. In 1991, under the direction of Dr. Von Hoff, CTRC established
the Institute for Drug Development ("IDD") under a Program Agreement with
UTHSCSA, with the mission of accelerating the development of oncology drugs.
Primarily through the efforts of Dr. Von Hoff, IDD has since established one of
the largest groups in the United States for conducting Phase I trials of
oncology drugs. In 1991, CTRC also formed CTRC Research to principally engage in
the research activities of CTRC, including the IDD. CTRC and CTRC Research and
its related entities have had some level of participation in the clinical
development of a substantial majority of the anticancer drugs developed over the
past 15 years.
As the majority holder of Series A Preferred Stock, CTRC Research has the
right to elect three members of the Company's Board of Directors. Upon
consummation of the offering, this right will terminate and CTRC Research will
beneficially own approximately 23.8% of the Company's outstanding shares of
Common Stock. See "Risk Factors -- Control by Existing Stockholders;
Anti-Takeover Provisions." The Company and CTRC Research also have an agreement
not to commence any legal action against, in the case of CTRC Research, the
Board of Directors of the Company, other than Directors of the Company who are
also employees or officers of or consultants to ILEX, or, in the case of ILEX,
the Board of Trustees of CTRC Research, for any claim that would have been
covered by any directors and officers liability insurance policies maintained by
CTRC or ILEX, as applicable, subject to certain exceptions. This agreement will
terminate upon consummation of this offering, but such agreement will remain in
effect with respect to any activity occurring prior to the termination of the
agreement.
During the period from 1991 through 1994, CTRC Research obtained certain
rights to patents covering MGBG, Crisnatol and DHAC (certain of which have
terminated), and entered into negotiations to license DFMO, Piritrexim,
Intoplicine and Oxypurinol. In addition, CTRC Research entered into a contract
to develop a synthesis process to make a compound for a third party and retained
an option to produce future commercial supplies. In 1993, CTRC incorporated ILEX
as a for-profit subsidiary and, in 1994, transferred certain advanced drug
development programs, intellectual property rights and commercial opportunities
to the Company, and, through CTRC Research, retains an equity position in ILEX.
See "Principal Stockholders."
CTRC Research has agreed to provide certain administrative and technical
assistance to the Company on a feefor-service basis. In addition, CTRC Research
has a 38,000-square-foot laboratory devoted to preclinical development of
oncology agents. Testing capabilities include growth inhibition assays using
tumor cell lines, various biochemical assays, testing in animals and the human
tumor cloning assay. The Company believes that access to these resources will
better enable it to focus its efforts on building highly effective clinical
development, manufacturing and toxicology capabilities. The Company expects to
continue to engage CTRC Research to conduct clinical studies of ILEX's products,
which enables ILEX to receive timely feedback regarding the efficacy and safety
of new drugs.
CTRC Research and Sanofi have entered into agreements (collectively, the
"Sanofi Agreements"), pursuant to which Sanofi agreed to fund various CTRC
Research research programs (the "Research Programs") through December 31, 1997
and obtained an exclusive option through December 2000 to evaluate and license
all of CTRC Research's commercial drugs, compounds, products and rights arising
from programs funded by Sanofi through December 31, 1997. If Sanofi exercises
its options to acquire any such rights from CTRC Research, the parties are
obligated to enter into a license and development agreement for those rights,
pursuant to which Sanofi will agree to pay various licensing fees, royalties and
milestone payments to CTRC Research. See "Risk Factors -- Uncertainty Related to
Identification and Acquisition of New Product Candidates."
If Sanofi declines or fails to exercise its options to license a CTRC
Research product or right, ILEX will have certain rights to negotiate to license
and develop those products pursuant to the terms of a subordinated option
agreement between ILEX and CTRC Research (the "Subordinated Option Agree-
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ment"). The terms of the Subordinated Option Agreement provide ILEX with a first
right to negotiate a license for the technology declined by Sanofi and, upon the
expiration of the Sanofi Agreements, a first right to negotiate a funding and
licensing agreement with CTRC Research for programs unencumbered by Sanofi. The
Subordinated Option Agreement expires March 2000, and the parties have agreed to
negotiate the possible renewal of the agreement upon its expiration.
Prior to the formation of ILEX, Sanofi exercised its option to sublicense
MGBG from CTRC Research. CTRC Research assigned all of its rights and
obligations regarding MGBG to ILEX in November 1994 and, accordingly, Sanofi and
ILEX became parties to license and development arrangements with respect to
MGBG.
The Company believes that its established relationship with CTRC Research
and its related entities and the Company's experienced Scientific Advisory Board
put it in a position to identify and to license novel cancer drugs for
development. In addition, a substantial percentage of all experimental oncology
drugs currently undergoing clinical trials in the United States have been
tested, at one time or another, by CTRC and/or SWOG. ILEX believes its
established relationship with CTRC Research and SWOG provide it access to a
large population of investigators and patients, which allows it to obtain prompt
feedback on the clinical utility of its compounds, and access to potential
contract services clients. There can be no assurance, however, that ILEX and
CTRC will be able to maintain their mutually beneficial relationship and any
deterioration of such relationship could have a material adverse effect on the
Company's business, financial condition and results of operations.
For a discussion of certain matters relating to a pending IRS private
letter ruling affecting the Company, CTRC Research and certain affiliates of
such entities, see "Risk Factors -- Dependence on Key Individuals; Possible Loss
of Key Employees Upon Adverse IRS Tax Ruling; Need for Additional Personnel."
STRATEGIC ALLIANCES AND COLLABORATIONS
The Company may develop and commercialize on its own those product
candidates for which the clinical trial and marketing requirements can
realistically be managed by the Company. However, for most of the Company's
products, including MGBG, Crisnatol, Piritrexim and DHAC, for which greater
resource commitments will be required, the Company has formed or intends to form
corporate partnerships with pharmaceutical companies for product development and
commercialization. In a typical licensing arrangement, a corporate partner would
likely bear the substantial cost of clinical development, scale-up production,
FDA approval and marketing. ILEX has entered into strategic alliances with
respect to MGBG, Crisnatol, Piritrexim and DHAC. Although the Company believes
that these strategic partners and any future corporate partners in these
collaborations have or will have an economic motivation to perform their
contractual responsibilities, the amount and timing of capital to be devoted to
these activities are not within the control of the Company. There can be no
assurance that such partners will perform their obligations as expected or that
the Company will derive any additional revenue from such arrangements.
Furthermore, there can be no assurance that the Company will be able to
negotiate additional collaborative arrangements in the future, or that such
collaborative arrangements will be successful. To the extent that the Company
chooses not to, or is unable to, establish such arrangements, it would require
substantially greater capital to undertake development and marketing of its
proposed products at its own expense. See "Risk Factors -- Dependence on
Collaborative Relationships; Dependence on Licensees."
Sanofi
Worldwide marketing rights to MGBG have been licensed to Sanofi pursuant to
the terms of a license and development agreement between Sanofi and ILEX. Under
the terms of the agreement, ILEX is responsible for securing clinical trials
materials, managing the clinical development of MGBG and preparing and
submitting an NDA. The NDA, if approved, and Orphan Drug Designation are to be
assigned to Sanofi, which will be responsible for the marketing and
manufacturing of MGBG for
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commercial distribution. ILEX has received from Sanofi an initial licensing fee
and development funding for MGBG and is entitled to receive additional
development funding, milestone payments and royalties on sales. See "Risk
Factors -- Absence of Developed Products; Early Stage of Product Development;
Uncertainty of Product Development and Clinical Development" and
"-- Relationship with CTRC."
Janssen
In October 1996, ILEX entered into an agreement with Janssen, a subsidiary
of Johnson & Johnson, under which Janssen obtained worldwide rights to
manufacture and market Crisnatol. Janssen agreed to contract with ILEX for both
process development and clinical development, and ILEX is responsible for
preparing an NDA for the United States and registration dossiers outside the
United States. ILEX retained an option to manufacture Crisnatol if Janssen
elects to outsource manufacturing. ILEX received an initial license fee, and
will receive milestone payments and a royalty based upon the gross margin
achieved by Janssen. Janssen has the right to terminate its support of the
project at any time with 90 days' notice, in which case all rights revert to
ILEX. The agreement also provides that, upon the acquisition of more than 33% of
the outstanding voting securities of ILEX by a pharmaceutical or biotechnology
company with annual worldwide sales of $500 million or more, Janssen may (i)
terminate the agreement in its entirety or (ii) terminate the provisions of the
agreement relating to the development plan and the funding thereof by Janssen
while continuing the license. An interim analysis of the clinical data is
scheduled to occur in April 1997. Coincident with executing the licensing
agreement, Johnson & Johnson Development Corp. made an equity investment of $1
million in ILEX.
MGI Pharma
In November 1996, ILEX entered into agreements with MGI Pharma pursuant to
which MGI Pharma obtained worldwide marketing rights to DHAC and Oxypurinol.
With respect to DHAC, MGI Pharma will either contract with ILEX for a portion of
work related to the clinical development of DHAC or for an equivalent amount of
work related to another MGI Pharma project or projects. With respect to
Oxypurinol, ILEX is responsible for preparing a development plan. With respect
to both compounds, ILEX will receive a licensing fee and periodic payments for
development work at ILEX's standard contract rates. In addition, in the case of
Oxypurinol, ILEX may receive a milestone payment, and in the case of DHAC, ILEX
is entitled to receive royalties based on sales by MGI Pharma or its
licensee(s). MGI Pharma has certain rights to terminate (i) the agreement with
respect to Oxypurinol if Wellcome does not consent to amend its license
agreement with ILEX to include non-cancer indications and (ii) the agreement
with respect to DHAC if the NCI fails to transfer the IND or fails to deliver
bulk drug substance from the NCI's inventory for clinical trials. See "Risk
Factors -- Dependence on Collaborative Relationships; Dependence on Licensees."
MPI
In December 1996, ILEX formed a joint venture with MPI to develop
Piritrexim pursuant to which ILEX licensed rights to Piritrexim to the joint
venture in exchange for licensing fees, milestone payments and royalties. The
joint venture subcontracted with MPI and ILEX to execute the development plan.
ILEX and MPI own the joint venture equally. Coincident with this transaction,
MPI made an equity investment of $5.0 million in ILEX.
IN-LICENSING AGREEMENTS
As a part of its business strategy, the Company actively seeks to expand
its product portfolio. Historically, these acquisitions have been in the form of
exclusive licensing arrangements with a number of universities, pharmaceutical
companies, and individual inventors.
The Company's in-license agreements (the "Licenses") generally require the
Company to undertake and pursue with diligence and best efforts the development
of the compounds and technologies licensed and to report on a regular basis on
the Company's development, progress and plans. Each of
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the Licenses requires payments of royalties on sales of products covered by the
License and, in several instances, minimum annual royalties. Under most of the
Licenses, the licensor has the first right to sue for infringement of, and
defend invalidity charges against, the licensed patents. All of the Licenses
provide that in the event of the Company's default in its obligations, including
the obligations to diligently pursue and apply best efforts to the development
of the licensed compound or technology, and, in some instances, in the event of
the Company's insolvency or bankruptcy, all or a portion of the license or
sublicense may be terminated by the licensor or sublicensor. In addition, if
certain development milestones are not achieved by specified dates or, in lieu
thereof, payments extending such dates are not made by the Company, then certain
Licenses will automatically terminate. A termination of any of the Licenses
could have a material adverse effect upon the Company. The Company believes it
has complied in all material respects with the terms of all of its Licenses to
date. The Company intends to continue its licensing program and to engage in
compound acquisitions with a primary focus on clinical stage oncology compounds.
There can be no assurance that any such licenses or acquisitions will be on
terms similar to the Licenses or favorable to the Company. See "Risk
Factors -- Uncertainty Related to Identification and Acquisition of New Product
Candidates."
The Company's agreements with its strategic corporate partners typically
provide that in the event the Company is required to pay a royalty to a third
party in order to market a product in any country because of a third-party
patent in such country, a portion of any such payments may be credited by the
Company against royalties payable to the partner. In addition, with respect to
any country in which patent rights do not exist, if a product containing the
compound subject to the agreement is introduced into such markets and sales of
such competing product exceed certain specified percentages of unit sales of the
Company's products, then the royalty rates are subject to reduction. Subject to
certain exceptions, the obligation to pay royalties with respect to net sales in
a specific country typically ceases from eight to 15 years from the date of
first commercial sale of the product in a such country.
ORPHAN DRUG STATUS
Pursuant to the Orphan Drug Act, the FDA may designate a drug intended to
treat a "rare disease or condition" as an "orphan drug." A "rare disease or
condition" is one which affects less than 200,000 people in the United States,
or which affects more than 200,000 people but for which the cost of development
and distribution of the drug will not be recovered from sales of the drug in the
United States. Upon approval of an NDA for an orphan drug, such drug may be
eligible for exclusive marketing rights in the United States for designated and
approved indications for seven years. Orphan drugs may also be eligible for
federal income tax credits for certain clinical trial expenses. The Company
holds orphan drug designations for MGBG for treatment of patients with diffuse
lymphomas and for DHAC for treatment of patients with mesothelioma. See
"-- Products Under Development," and "Risk Factors -- Extensive Government
Regulation; No Assurance of Necessary FDA and Other Regulatory Approvals;
Uncertainty of Orphan Drug Status."
The Company may receive marketing exclusivity for an orphan drug only if it
is the sponsor of the first NDA approved for the drug for an indication for
which the drug was designated as an orphan drug prior to the approval of such
NDA. Therefore, unlike patent protection, orphan drug status does not prevent
other manufacturers from attempting to develop the drug for the designated
indication or from obtaining NDA approval prior to approval of the Company's
NDA. If another sponsor's NDA for the same drug and the same indication is
approved first, that sponsor is entitled to exclusive marketing rights if that
sponsor has received orphan drug designation for the drug. In that case, the FDA
would be prohibited from approving the Company's application to market the
product for the relevant indication for a period of seven years. If another
sponsor's NDA for the same drug and the same indication is approved first, but
that drug has not been designated as an orphan drug, the FDA would still be
permitted to approve the Company's NDA without the exclusivity provided by
orphan drug status.
The Company believes that some of its products in addition to MGBG and DHAC
may qualify for designation as orphan drugs. There can be no assurance, however,
that such other products will receive orphan drug status. Moreover, possible
amendment of the Orphan Drug Act by the United States
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Congress and possible reinterpretation by the FDA are frequently discussed.
Legislation to limit exclusivity in some respects was passed by Congress, but
vetoed by the President in 1990. FDA regulations reflecting certain other
limitations and procedures went into effect in January 1993. Therefore, there is
no assurance as to the precise scope of protection that may be afforded by
orphan drug status in the future, or that the current level of exclusivity and
tax credits will remain in effect.
PATENTS, TRADEMARKS AND TRADE SECRETS
Proprietary protection for the Company's products is important to the
Company's business. Although the Company seeks appropriate patent protection
both in the United States and abroad for its proprietary technology, to date,
the Company has no patents issued in its name. In addition to seeking its own
patents, the Company has entered into license agreements with various
pharmaceutical companies and research, educational and governmental institutions
to obtain certain patent rights from them for the purpose of developing,
manufacturing and selling potential products using the compounds and
technologies protected by such patents. See the discussion of patent rights
under "-- Products Under Development." Under these agreements, the Company is
obligated to pay royalties of varying rates based upon, among other things,
levels of revenues from the licensed products. Generally, the agreements
continue for a specified number of years or for as long as any licensed patents
remain in force, absent breach of the terms of the agreements or termination of
the agreements. See the discussion of the various license agreements under "--
Products Under Development."
The Company's compounds acquired pursuant to in-licensing arrangements are
protected by 14 patents obtained by the Company's licensors in the United
States; six patents of the Company's licensors are pending in the United States.
The Company's licensors also obtained 126 foreign patents (counterparts to the
United States issued patents and patent applications) and nine foreign patents
are pending. The patents and patent applications in-licensed by the Company have
not been independently investigated by the Company, and there can be no
assurance that any such patents or patent applications will not be challenged or
will provide protection for the Company's compounds. The Company has filed two
of its own United States patent applications for the use of DFMO in combination
with certain drugs used to treat breast cancer and in certain novel
formulations. There can be no assurance that a patent will issue as a result of
either such application or what scope of protection that these issued patents
will provide or whether such patents will ultimately be upheld as valid by a
court of competent jurisdiction in the event of a legal challenge. The patent
and license applicable to DHAC recently expired and, as a result, the DHAC
technology is currently available for general public use. Notwithstanding the
patent and license expiration, ILEX holds an Orphan Drug Designation for DHAC
for the treatment of patients with mesothelioma and has applied for a patent for
using DHAC as a treatment with patients with prostate cancer. Currently, Orphan
Drug Designation provides market exclusivity to ILEX for this indication for
seven years following marketing approval. Following this period of exclusivity
for this indication, however, this product will be deemed a generic drug for all
indications and, therefore, will be subject to competitive pricing pressures. In
addition, Oxypurinol and Aminopterin do not have patent protection. United
States patents on ILEX's other current products which expire in the next 10
years include: MGBG (2002); Crisnatol (2004, 2005); DFMO (2000); and Piritrexim
(2007). See "Business -- Patents, Trademarks and Trade Secrets."
A number of significant changes in the United States patent laws were
mandated by the North American Free Trade Agreement ("NAFTA") and the General
Agreement on Tariffs and Trade ("GATT"). Legislation enacting these treaties has
been passed into law. The term of exclusive rights afforded by a United States
patent has historically been a period of 17 years measured from the date of
grant. Under the new legislation, the new term of United States patents will
commence on the date of grant, and terminate 20 years from the date on which the
patent application was filed in the United States. Existing patents and future
patents granted on an application filed before June 8, 1995, will have a term
that is the longer of 20 years from the filing date or 17 years from the date of
grant. If a patent issues from a continuation-in-part, divisional or continuing
application, the 20-year patent expiration date is measured from the filing date
of the earliest United States priority application relied on by the applicant.
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This change will affect the term of any patent granted on applications filed
subsequent to June 8, 1995, including patents which ultimately mature from
existing applications, if they are refiled as continuations or
continuations-in-part after June 8, 1995.
Under the Drug Price Competition and Patent Term Restoration Act of 1984,
United States product patents or use patents may be extended for up to five
years under certain circumstances to compensate the patent holder for the time
required for FDA regulatory review of the product. The benefits of the Act are
available only to the first approved use of the active ingredient in the drug
product and may be applied only to one patent per drug product. This law also
establishes a period of time following FDA approval of certain new drug
applications during which other sponsors may not submit an NDA for the drug.
There can be no assurance that the Company will be able to take advantage of
either the patent term extension or market exclusivity provisions of this law.
No assurance can be given that any patent issued to, or licensed by, the
Company will provide protection that has commercial significance. In this
regard, the patent position of pharmaceutical compounds is particularly
uncertain. No assurance can be given that the Company's patents will afford
protection against competitors with similar compounds or technologies, that
others will not obtain patents claiming aspects similar to those covered by the
Company's patents or applications or that the patents of others will not have an
adverse effect on the ability of the Company to do business. See "Risk
Factors -- Uncertainty Regarding Patents and Proprietary Position." Moreover,
the Company believes that obtaining foreign patents may, in some cases, be more
difficult than obtaining domestic patents because of differences in patent laws,
and the Company recognizes that its patent position, therefore, may be stronger
in the United States than abroad. In addition, the protection provided by
foreign patents, once they are obtained, may be weaker than that provided by
domestic patents. See "Risk Factors -- Extensive Government Regulation; No
Assurance of Necessary FDA and Other Regulatory Approvals; Uncertainty of Orphan
Drug Status."
In addition to seeking the protection of patents and licenses, the Company
also relies on trade secrets to maintain its competitive position. It is the
practice of the Company to enter into confidentiality agreements with employees,
consultants and licensees. No assurance can be given, however, that these
measures will provide meaningful protection for the Company's trade secrets in
the event of the unauthorized disclosure or use of such information. See "Risk
Factors -- Uncertainty Regarding Patents and Proprietary Position; Rights to
Technology Dependent Upon Compliance with Licenses and Agreements."
ILEX is a registered United States trademark of the Company.
COMPETITION
Competition in the area of pharmaceutical products is intense. There are
many companies, both public and private, including pharmaceutical and
biotechnology companies, that are engaged in the development of products for
certain of the applications being pursued by the Company. Moreover, products
currently exist in the market that will compete directly with the products that
the Company is seeking to develop. Most of these companies have substantially
greater financial, research and development, manufacturing and marketing
experience and resources than the Company and represent substantial long-term
competition for the Company. Such companies may succeed in discovering and
developing pharmaceutical products more rapidly than the Company and its
collaborative partners or pharmaceutical products that are safer or more
effective or less costly than any that may be developed by the Company and its
collaborative partners and may also prove to be more successful than the Company
and its collaborative partners in production and marketing. Smaller companies
may also prove to be significant competitors, particularly through collaborative
arrangements with large pharmaceutical and established biotechnology companies.
Academic institutions, governmental agencies and other public and private
research organizations also conduct clinical development, seek patent protection
and establish collaborative arrangements for the development of oncology
products. ILEX will face competition based on product efficacy and safety, the
timing and scope of regulatory approvals, availability of
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supply, marketing and sales capability, reimbursement coverage, price and patent
position. There can be no assurance that the Company's competitors will not (i)
develop more safe and effective products; (ii) obtain patent protection or
intellectual property rights that limit the Company's or its collaborative
partners' ability to commercialize products that may be developed; or (iii)
commercialize products earlier than the Company. The industry in which the
Company competes is characterized by extensive research and development efforts
and rapid technological progress. New developments occur and are expected to
continue to occur at a rapid pace, and there can be no assurance that
discoveries or commercial developments by the Company's competitors will not
render some or all of the Company's potential products obsolete or
non-competitive, which would have a material adverse effect on the Company's
business, financial condition and results of operations. The Company's
competitive position also depends on its ability to attract and retain qualified
scientific and other personnel, develop effective proprietary products,
implement development and marketing plans, obtain patent protection and secure
adequate capital resources.
In its drug development and contract research services, the Company
primarily competes against in-house departments of pharmaceutical companies,
CROs and, to a lesser extent, universities and teaching hospitals. Many of these
competitors have substantially greater capital, technical and other resources
than the Company. CROs generally compete on the basis of previous experience,
medical and scientific expertise in specific therapeutic areas, the quality of
contract research, the ability to organize and manage large-scale trials on a
global basis, the ability to manage large and complex medical databases, the
ability to provide statistical and regulatory services, the ability to recruit
investigators and patients, the ability to integrate information technology with
systems to improve the efficiency of contract research, an international
presence with strategically located facilities, financial viability and price.
There can be no assurance that the Company will be able to compete favorably in
these areas.
GOVERNMENT REGULATION
The production and marketing of the Company's products and its research and
development activities are subject to comprehensive regulation by various
federal, state and local authorities in the United States and by governmental
authorities of other countries. In particular, the FDA exercises regulatory
authority over the development, testing, formulation, manufacture, labeling,
storage, record keeping, quality control, advertising and promotion of the
Company's products. See "Risk Factors -- Extensive Government Regulation; No
Assurance of Necessary FDA and Other Regulatory Approvals; Uncertainty of Orphan
Drug Status."
A new drug may not be marketed in the United States until it has undergone
rigorous testing and has been approved by the FDA. The drug may then be marketed
only for the specific indications, uses, formulation, dosage forms and strengths
approved by the FDA. Similar requirements are imposed by foreign regulators upon
the marketing of a new drug in their respective countries.
The steps required before a drug may be marketed in the United States
include (i) preclinical laboratory and animal tests, (ii) submission to the FDA
of an application for an Investigational New Drug exemption, or IND, which must
become effective before human clinical trials may commence, (iii) human clinical
trials to establish the safety and efficacy of the drug, (iv) the submission of
a detailed NDA to the FDA and (v) FDA approval of the NDA. In addition to
obtaining FDA approval for each product, each domestic establishment where the
drug is to be manufactured must be registered with the FDA. Domestic
manufacturing establishments must comply with cGMP and are subject to periodic
inspections by the FDA. Foreign manufacturing establishments also must comply
with cGMP and are subject to periodic inspection by the FDA or by local
authorities under agreement with the FDA.
Preclinical tests include laboratory evaluation of product chemistry and
animal studies to assess the potential safety and efficacy of the product.
Products must be formulated according to cGMP, and preclinical tests must be
conducted by laboratories that comply with FDA regulations regarding cGLP. The
results of preclinical tests are submitted to the FDA as part of an IND, which
must become effective before the sponsor may conduct clinical trials in human
subjects. Unless the FDA objects to an IND, the
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IND becomes effective 30 days following its receipt by the FDA. There is no
certainty that submission of an IND will result in FDA authorization of the
commencement of clinical trials.
Clinical trials involve the administration of the investigational drug to
patients. Clinical trials typically are conducted in three phases, which
generally are conducted sequentially, and test for safety, side effects, dosage
tolerance, metabolism and clinical pharmacology. With respect to anticancer
agents, testing typically is done with a small group of patients with advanced
cancers that have proved unresponsive to other forms of therapy. Phase I testing
typically takes one year to complete. Phase II involves tests in a larger but
still limited patient population to determine the efficacy of the drug for
specific indications, to determine optimal dosage and to identify possible side
effects and safety risks. Phase II testing for an indication typically takes
from one and one-half to two and one-half years to complete. If a drug proves to
be efficacious in Phase II evaluations, expanded Phase III trials are undertaken
to evaluate the overall risks and benefits of the drug in relationship to the
treated disease in light of other available therapies. Phase III studies
generally take from two and one-half to five years to complete. There can be no
assurance, however, that Phase I, Phase II or Phase III testing will be
completed successfully within any specified time period, if at all. Furthermore,
the FDA may suspend clinical trials at any time if it decides that patients are
being exposed to a significant health risk.
The results of the preclinical studies and clinical trials are submitted to
the FDA as part of an NDA for approval of the marketing and commercial shipment
of the drug. The NDA also includes information pertaining to the chemistry,
formulation, activity and manufacture of the drug and each component of the
final product, as well as details relating to the sponsoring company. The NDA
review process takes more than two years on average to complete, although
reviews of treatments for cancer and other life-threatening diseases may be
accelerated. However, the process may take substantially longer if the FDA has
questions or concerns about a product. In general, the FDA requires at least two
adequate and well-controlled clinical studies demonstrating efficacy in order to
approve an NDA. The FDA may, however, request additional information, such as
long-term toxicity studies or other studies relating to product safety.
Notwithstanding the submission of such data, the FDA ultimately may decide that
the application does not satisfy its regulatory criteria for approval. Finally,
the FDA may require additional clinical tests following NDA approval. See "Risk
Factors -- Extensive Government Regulation; No Assurance of Necessary FDA and
Other Regulatory Approvals; Uncertainty of Orphan Drug Status."
The Company's area of focus, oncology, is not thoroughly understood and
there can be no assurance that the drugs the Company is seeking to develop will
prove to be safe and effective in treating or preventing cancer. The development
of such drugs will require the commitment of substantial resources to conduct
the preclinical development and clinical trials necessary to bring such
compounds to market. Drug research and development by its nature is uncertain.
There is a risk of delay or failure at any stage, and the time required and cost
involved in successfully accomplishing the Company's objectives cannot be
predicted. Actual drug research and development costs could exceed budgeted
amounts, which could have a material adverse effect on the Company's business,
financial condition and results of operations.
One element of the Company's strategy is to develop chemoprevention
compounds that, when taken chronically, may prevent the progression to cancer.
To date, the FDA has not approved any chemoprevention compounds and there can be
no assurance that the FDA will approve such compounds in the future. Because
there are currently no chemoprevention drugs which have obtained marketing
approval, the clinical development path is uncertain. There can be no assurance
that ILEX will be able to successfully develop a safe and efficacious
chemoprevention product, that such product will be commercially viable or will
achieve market acceptance.
In 1988, the FDA issued regulations intended to expedite the development,
evaluation and marketing of new therapeutic products to treat life-threatening
and severely debilitating illnesses for which no satisfactory alternative
therapies exist. These regulations provide for early consultation between the
sponsor and the FDA in the design of both preclinical studies and clinical
trials. At the present time, MGBG is being developed under such an accelerated
program. There can be no assurance, however,
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that any future products the Company may develop will be eligible for evaluation
by the FDA under the 1988 regulations. In addition, there can be no assurance
that MGBG or any future products, if eligible, will be approved for marketing at
all or, if approved for marketing, will be approved for marketing sooner than
would be traditionally expected. Regulatory approval granted under these
regulations may be restricted by the FDA as necessary to ensure the safe use of
the drug. In addition, post-marketing clinical studies are required. If drugs do
not perform satisfactorily in such post-marketing clinical studies, the products
would likely be required to be withdrawn from the market.
Among the requirements for product approval is the requirement that
prospective manufacturers conform to the FDA's cGMP standards, which also must
be observed at all times following approval. Accordingly, manufacturers must
continue to expend time, money and effort in production, record keeping and
quality control to ensure compliance with cGMP standards. Failure to so comply
subjects the manufacturer to possible FDA action, such as the suspension of
manufacturing or seizure of the product. The FDA may also request a voluntary
recall of a product.
The product testing and approval process is likely to take a substantial
number of years, and involves the expenditure of substantial resources. There
can be no assurance that any approval will be granted. The FDA also may require
post-marketing testing and surveillance to monitor the product and its continued
compliance with regulatory requirements. Upon approval, a drug may only be
marketed for the approved indications in the approved dosage forms and at the
approved levels. Adverse experiences with the product must be reported to the
FDA. The FDA also may require the submission of any lot of the product for
inspection and may restrict the release of any lot that does not comply with FDA
standards, or may otherwise order the suspension of manufacture, recall or
seizure if non-compliant product is discovered. Product approvals may be
withdrawn if compliance with regulatory standards is not maintained or if
problems concerning safety or efficacy of the product are discovered following
approval.
The Prescription Drug User Fee Act of 1992 was enacted to expedite FDA
review and approval of new drugs by providing the FDA additional funds through
the imposition of user fees. The Act imposes three kinds of user fees on
manufacturers of prescription drugs: (i) a one-time fee for each single-source
prescription drug application submitted on or after September 1, 1992; (ii) an
annual fee for each establishment that produces single-source prescription
drugs; and (iii) an annual fee for each single-source prescription drug product
marketed.
The Company also will be subject to foreign regulatory requirements
governing clinical trials, manufacturing of products, marketing of products and
product approvals. Whether or not FDA approval has been obtained, approval of a
product by the comparable regulatory authorities of foreign countries must be
obtained prior to the commencement of marketing of the product in those
countries. The approval process varies from country to country and the time
required may be longer or shorter than that required for FDA approval. Under its
agreement with licensees and distributors in foreign countries, the Company
often requires the licensee or the distributor to be responsible for obtaining
regulatory approvals in their respective territories.
Health care reform, if enacted, could result in significant change in the
financing and regulation of the health care business. The Company is unable to
predict whether such changes will be enacted or, if enacted, the effect of such
changes on the future operation of the Company's business. Changes affecting
drug pricing, drug reimbursement, prescription benefits and levels of
reimbursement for drugs, among other changes, could have a materially adverse
effect on the Company's business, financial condition and results of operations.
See "Risk Factors -- Potential Limitations on Third-Party Reimbursement Related
Matters and Health Care Reform."
PRODUCT LIABILITY AND INSURANCE
The Company's business involves the risk of product liability claims. The
Company has not experienced any product liability claims to date. Although the
Company maintains clinical trials liability insurance with coverage limits of $2
million per occurrence and an annual aggregate maximum of $2 million, and
general commercial liability insurance with an additional $5 million umbrella
coverage per
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occurrence and an annual aggregate maximum of $5 million, there can be no
assurance that product liability claims will not exceed such insurance coverage
limits, which could have a material adverse effect on the Company's business,
financial condition or results of operations, or that such insurance will
continue to be available on commercially reasonable terms, if it all. See "Risk
Factors -- Potential Liability; Possible Insufficiency of Insurance."
EMPLOYEES
As of December 11, 1996, the Company had 65 full-time employees, 51 of whom
are engaged in research and development activities. No employees are covered by
collective bargaining agreements, and the Company believes it maintains good
relations with its employees.
MANUFACTURING AND OTHER FACILITIES
The Company's administrative offices comprise approximately 12,000 square
feet of leased office space in the Texas Research Park located in Bexar County,
Texas, near San Antonio, of which approximately 3,000 square feet are located in
CTRC Research's research facility and the remaining 9,000 square feet are
located nearby. The Company also has an option to purchase a site within the
Texas Research Park for permanent facilities to accommodate future growth. The
Texas Research Park is a 1,500-acre development designed for high-technology
research, development and manufacturing businesses.
The Company leases and operates a 7,200-square-foot manufacturing facility
that has been designed to produce multi-kilogram lot sizes of anticancer
compounds under cGMP. The design of this facility, prepared by ILEX staff, has
been reviewed by the Regional Compliance Office of the FDA and found to be
suitable for production of bulk drugs. The manufacturing facility is owned by a
non-profit corporation that is controlled by CTRC Research and the Texas
Research and Technology Foundation, and provides for the payment by the Company
of fixed monthly rent plus a percentage of gross sales generated from the
facility. These two organizations obtained a grant to build the facility from
the Economic Development Administration. ILEX has a 15-year lease to the
facility with three five-year-extension options.
LEGAL PROCEEDINGS
The Company is not currently involved in any legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- -----------------------------------------------
<S> <C> <C>
Richard L. Love(1)............ 53 President, Chief Executive Officer and Director
Alexander L. Weis, Ph.D....... 47 Executive Vice President, Chief Scientific
Officer and Director
Timothy J. Williamson......... 53 Senior Vice President, Marketing & Business
Development
James R. Koch................. 42 Vice President and Chief Financial Officer
Deirdre K. Tessman, Ph.D...... 51 Vice President, Drug Development
Pedro Santabarbara, M.D.,
Ph.D........................ 44 Vice President, Medical Affairs
Gary V. Woods(1).............. 53 Chairman of the Board
A. Dana Callow, Jr.(1)........ 44 Director
John L. Cassis(1)(2).......... 48 Director
Jason S. Fisherman, M.D....... 40 Director
Jerry R. Mitchell, M.D.,
Ph.D........................ 52 Director
Ruskin C. Norman, M.D.(2)..... 76 Director
Daniel D. Von Hoff, M.D....... 49 Director and Co-Chairman of Scientific Advisory
Board
Robert V. West, Jr., Ph.D..... 75 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
RICHARD L. LOVE has served as President, Chief Executive Officer and
Director of the Company since its inception in December 1993. Mr. Love has more
than 30 years of industry experience with more than 16 years in the biosciences
industry. Prior to forming ILEX, Mr. Love was Chief Operating Officer of CTRC
Research from 1991 to 1993. From 1983 through 1991, Mr. Love served as CEO of
Triton Biosciences Inc., a subsidiary of Shell Oil Company, and led the sale of
Triton Biosciences Inc. to Berlex Laboratories, Inc., a subsidiary of Schering,
A.G. Mr. Love earned his B.S. and M.S. in Chemical Engineering from Virginia
Polytechnic Institute.
ALEXANDER L. WEIS, PH.D., has served as Executive Vice President, Chief
Scientific Officer and Director of the Company since October 1994. From 1991
through 1994, Dr. Weis was the Director of Preclinical Research and Development
for CTRC Research. Prior to joining CTRC Research, Dr. Weis worked at Eastman
Kodak Company and Sterling Winthrop Inc. (currently STWB Inc.), the Weizmann
Institute of Sciences, Israel and the Russian Academy of Sciences in the former
USSR. Dr. Weis is also the owner and chief executive officer of Lipitek
International, Inc., one of the Company's subcontractors. See "Certain
Transactions." Dr. Weis received his Ph.D. in Organic Chemistry at the National
Academy of Sciences in the former USSR.
TIMOTHY J. WILLIAMSON has served as Senior Vice President Marketing and
Business Development of the Company since October 1994. From April 1990 through
October 1994, Mr. Williamson served as Vice President for Marketing and Sales
with Boehringer Mannheim Pharmaceuticals Corporation ("Boehringer"). Prior to
joining Boehringer, Mr. Williamson served as Regional Sales Director at
Genentech, Inc. and held various positions with Merck Sharp & Dohme, the U.S.
pharmaceuticals division of Merck & Co. Inc. Mr. Williamson holds his B.A. from
the University of Texas.
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JAMES R. KOCH, CMA, has served as Vice President and Chief Financial
Officer of the Company since August 1996. Mr. Koch was the Vice President,
Finance and Chief Financial Officer for two start-up specialty pharmaceutical
companies, Symphony Pharmaceuticals, Inc. (1993-1996) and Neose Pharmaceuticals
(1991-1993) (currently Neose Technologies, Inc.). His prior experience also
includes ten years in senior financial management positions with G.D. Searle
Pharmaceutical. Mr. Koch holds his M.S. from the Krannert School of Management
at Purdue University and his B.S. in Mechanical Engineering from General Motors
Institute.
DEIRDRE K. TESSMAN, PH.D., has served as Vice President, Drug Development
of the Company since October 1994. From January 1991 to October 1994, Dr.
Tessman served as Director, Worldwide Pharmaceutical Projects for Schering AG,
and from 1987 to 1991 as Director of Pharmaceutical Project Development at
Triton Biosciences Inc. Dr. Tessman has also served as Director of Clinical
Research at Roskon Research Corporation, as Manager of Clinical Research at
Medco Research, Inc. and as a Scientist with Warner-Lambert/Parke Davis. Dr.
Tessman earned her B.S. from Marygrove College, her M.B.A. from the University
of Michigan and her Ph.D. from California Coast University.
PEDRO SANTABARBARA, M.D., PH.D., has served as Vice President, Medical
Affairs since August 1996. Prior to joining ILEX, he was Director of Clinical
Research Oncology for RPR in North America from August 1994 to August 1996, and
served Bristol-Myers Squibb Company in its medical oncology departments in
domestic and international positions from February 1988 to August 1994. Dr.
Santabarbara holds his M.D. and Ph.D. degrees from the University of Barcelona
where he specialized in Internal Medicine and Medical Oncology.
GARY V. WOODS joined ILEX as a Director in December 1993 and was elected
Chairman of the Board in October 1994. Since 1979, Mr. Woods has been employed
as President of McCombs Enterprises, Inc., an organization which invests in
automobile dealerships, oil and gas ventures, real estate and broadcasting. He
currently serves on the Board of Directors of several organizations, including
Titan Holdings, Inc., the CTRC, and the Greater San Antonio Chamber of Commerce,
and is Chairman of the Board of Trustees of CTRC Research. Mr. Woods also served
as President of the San Antonio Spurs, a professional basketball team, from 1988
to 1993. Mr. Woods received his B.B.A. from Southwest Texas State University and
his M.B.A. from Southern Methodist University and is a licensed Certified Public
Accountant.
A. DANA CALLOW, JR. has been a director of ILEX since October 1995. He is a
partner of several Boston Capital Ventures' partnerships ("BCV"), which he
co-founded in 1982. Prior to that, he was a management consultant for Braxton
Associates, Inc. He is or has been a director of many companies, including:
PAREXEL International, Inc., Medical Management of New England, Inc., Tektagen,
Inc., and Continuity Marketing Corporation, Inc. Mr. Callow received his A.B.
from Tufts University and received his M.B.A. from The Amos Tuck School at
Dartmouth College.
JOHN L. CASSIS has been a director of ILEX since October 1995. Mr. Cassis
joined Hambro America Biosciences, Inc. in 1994 as a co-founder. Prior to that,
he was a director of Salomon Brothers Inc, where he co-founded Salomon Brothers
Venture Capital in 1986 and headed it from 1990 to 1994. From 1976 to 1981, he
was a Managing Director of Ardshiel Associates, Inc. (currently Ardshiel Inc.),
a merchant bank. In 1972, Mr. Cassis was employed by Johnson & Johnson ("J&J")
where he founded the Johnson & Johnson Development Corporation, that firm's
venture capital arm, and was J&J's Manager of Acquisitions. Mr. Cassis is
currently on the Board of Directors of Articulate Systems, Inc., LifeQuest
Medical, Inc. and HealthTech Services Corp., and is Chairman of the Board of
Directors of IMPATH Inc. and Dome Imaging Systems, Inc. Mr. Cassis received his
A.B. and M.B.A. from Harvard University.
JASON S. FISHERMAN, M.D., has been a director of ILEX since October 1995.
Dr. Fisherman is currently a partner at Advent International Corporation. Prior
to joining Advent, Dr. Fisherman served as Senior Director of Medical Research
for Enzon, Inc. from 1991 to 1994. Between 1989 and 1992, he managed clinical
development of a number of anticancer drugs at the NCI. Dr. Fisherman is
currently a director of several private health care companies. Dr. Fisherman
received his B.A. in Molecular Biophysics
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<PAGE> 58
and Biochemistry from Yale, his M.D. from the University of Pennsylvania, and
his M.B.A. from Wharton. He is Board-certified in internal medicine and medical
oncology.
JERRY R. MITCHELL, M.D., PH.D., has been a director of ILEX since December
1996. Dr. Mitchell co-founded MPI Research in November 1995 and has held the
position of Chief Executive Officer of MPI Research since November 1995 and is
co-Chairman of MPI. Between 1989 and November 1995, Dr. Mitchell held various
executive positions with the Upjohn Company. He became President of Upjohn
Laboratories in 1990, a member of Upjohn's Board of Directors in 1991 and,
subsequently, Vice Chairman of the Board in 1993. Dr. Mitchell has served on a
number of national science committees, including the National Academy of
Sciences (two committees), the FDA's Advisory Committee on Gastrointestinal
Drugs and the NIH Pharmaceutical Sciences Committee. He received M.D. and Ph.D.
degrees from Vanderbilt University and completed residency training in internal
medicine at Cornell University Medical Center.
RUSKIN C. NORMAN, M.D., has been a director of ILEX since December 1993.
Dr. Norman is past member (Senior Partner) of Radiology Physician Associates, as
well as a previous President of St. Luke's Lutheran Hospital. In 1978, he held
the post of Chairman of the National Medical Advisory Committee of the American
Health Care Association. Dr. Norman serves on the Board of Directors of several
companies, including CTRC and Compass Bank -- San Antonio. Dr. Norman holds his
B.S. in Pharmacy from the St. Louis College of Pharmacy and his M.D. from the
Northwestern University Medical School.
DANIEL D. VON HOFF, M.D., has served as Co-Chairman, Scientific Advisory
Board and a director of the Company since October 1994. Dr. Von Hoff has been
Director of IDD and Chief Executive Officer of CTRC Research since 1989 and
1995, respectively, and has also been a Clinical Professor of Medicine at
UTHSCSA since 1995. He is a holder of an NCI grant to conduct Phase I trials
with compounds from the NCI. Over the past 17 years, Dr. Von Hoff has conducted
national clinical trials with more than 110 new antineoplastic and biologic
agents. Dr. Von Hoff has served on the FDA's Oncology Advisory Committee and was
a member of the Board of Directors of the American Society of Clinical Oncology.
He is currently a member of the Board of Directors of the American Association
for Cancer Research and is the Director of Research for PRN Inc., a division of
Physicians Reliance Network. He is the recipient of numerous awards and honors
including the K. Bagshawe Honorary Lecture for the British Association for
Cancer Research, the EORTC Michel Clavel Lectureship and the Therapeutic
Frontiers Lecture Award from the American College of Clinical Pharmacy. He is a
Fellow of the American Association for the Advancement of Science and is a
recipient of both the Outstanding Professor Award and the Presidential Teaching
Award from UTHSCSA. Dr. Von Hoff holds his B.S. from Carroll College, and his
M.D. from Columbia College of Physicians and Surgeons.
ROBERT V. WEST, PH.D., has been a director of the Company since December
1993. He is the Founder and former Chairman and CEO of Tesoro Petroleum
Corporation. Dr. West currently serves on the Board of Directors of the Frost
National Bank, San Antonio, Texas and is Vice Chairman of CTRC and Chairman of
its subsidiary, the CTRC Clinical Foundation. He is Vice Chairman of the Board
of Trustees of the Baptist Memorial Healthcare System Foundation, San Antonio,
Texas. Dr. West holds B.S., M.S. and Ph.D. degrees in Chemical and Petroleum
Engineering from The University of Texas at Austin.
All directors of the Company hold office until the next annual meeting of
stockholders and the election and qualification of their successors. The holders
of the Series A Preferred Stock and Series B Preferred Stock each have the right
to elect three members to the Board. This right to elect directors, along with
the other terms of the Preferred Stock, will be eliminated upon the consummation
of this offering. Each officer of the Company was chosen by the Board of
Directors and serves at the pleasure of the Board of Directors until his or her
successor is appointed or until his or her earlier resignation or removal in
accordance with applicable law.
SCIENTIFIC ADVISORY BOARD
The Company has organized a Scientific Advisory Board which consists of
recognized scientists with expertise in oncology. The members of the Scientific
Advisory Board are appointed by the Board of
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Directors and review and comment upon the Company's ongoing and proposed
scientific projects. The Scientific Advisory Board also advises the Company on
potential areas of clinical interest and provides scientific evaluations on
products under development. The Scientific Advisory Board meets semi-annually
and certain members meet in smaller groups or individually with the Company as
needed. The Company provides each member of the Scientific Advisory Board, other
than the Co-Chairmen, with a stipend in the amount of $2,000 per meeting and a
one-time grant of an option for 5,710 shares of the Company's Common Stock. The
Company also reimburses each member for expenses incurred when traveling to and
attending meetings.
All members of the Scientific Advisory Board have commitments to and/or
consulting contracts with other organizations, including potential competitors
of ILEX, that may limit their availability to the Company. None of these
individuals is expected to devote more than a small portion of his or her time
to the Company. The following are the members of ILEX's Scientific Advisory
Board:
For a biography of DANIEL D. VON HOFF, M.D., see "-- Executive Officers and
Directors."
CHARLES A. COLTMAN, JR., M.D., is Professor of Medicine at the UTHSCSA and
the Director of the San Antonio Cancer Institute. He is President and CEO of
CTRC, Chairman of SWOG, and has received numerous citations for his research in
cancer control and the treatment of leukemias, lymphomas, and Hodgkin's Disease.
Dr. Coltman is Co-Chairman of ILEX's Scientific Advisory Board with Daniel D.
Von Hoff, M.D., and has served in such position since November 1994. Dr. Coltman
holds his M.D. from the University of Pittsburgh School of Medicine.
DAVID SAMUEL ALBERTS, M.D., has been a Professor of Medicine and
Pharmacology at the Arizona Cancer Center, Tucson, since 1975, has been a
Director of Cancer Prevention and Control at the NCI since 1988, and served as
chairman of the Oncology Drug Advisory Committee to the FDA from 1982-1984. Dr.
Alberts received his B.S. from Trinity College in 1962, and his M.D. from the
University of Virginia in 1966.
LAWRENCE H. EINHORN, M.D., has been associated with Indiana University
since 1973 and currently holds the title of Distinguished Professor of Medicine.
Dr. Einhorn has won numerous awards related to his cancer research, especially
in testicular cancer, and is the recipient of a National Cancer Institute
Outstanding Investigator Grant from 1985 through 1999. Dr. Einhorn received his
M.D. degree from the State University of Iowa Medical School in 1967.
MARK R. GREEN, M.D., is the Gilbreth Professor of Clinical Oncology, Chief
of Hematology Oncology and Director of the Hollings Cancer Center at the Medical
University of South Carolina in Charleston, South Carolina. Between 1985 and
1990, he served as the Director of the University of California San Diego Cancer
Center ("UCSD"), an NCI-designated Clinical Cancer Center, and, in 1992, Dr.
Green was appointed the first Edwin and Evelyn Tasch Professor in Cancer
Research at UCSD. He held that position until moving to the Medical University
of South Carolina as Director of the Hollings Cancer Center in August 1996. Dr.
Green's research interests are in clinical investigation with a focus in lung
cancer. He attended Harvard College and Harvard Medical School, receiving his
B.A. degree in 1966, and his M.D. in 1970.
WAUN KI HONG, M.D., is an American Cancer Society Clinical Research
Professor, and Professor of Medicine and Chairman of the Department of
Thoracic/Head and Neck Medical Oncology at M.D. Anderson Cancer Center, where he
also holds the Charles A. LeMaistre Chair in Thoracic Oncology. He received his
oncology training at Memorial Sloan-Kettering Cancer Center, and afterward
served as Chief of Medical Oncology at the Boston V.A. Medical Center until
joining M.D. Anderson in 1984. Dr. Hong is dedicated to translational research
in both head and neck and lung cancer, and also focuses on the area of
chemoprevention.
ALEXANDRA M. LEVINE, M.D., joined the staff at the University of Southern
California School of Medicine in 1977 and is currently a Professor of Medicine
and Chief, Division of Hematology and Medical Oncology. Dr. Levine served as the
Executive Associate Dean of the University of Southern California School of
Medicine from 1985 to 1990. Dr. Levine's research interests include the
hematologic malignancies. She began an active program of AIDS research in 1981,
focused primarily on the cancers related to AIDS, and most recently on HIV
disease in women. Dr. Levine was appointed to the Presidential
57
<PAGE> 60
HIV/AIDS Advisory Council by President Clinton in June 1995, and currently
serves as Chair of the Research Committee for the Presidential Council. Dr.
Levine graduated from University of California at Berkely, and received her M.D.
from the University of Southern California School of Medicine. She received
training in Internal Medicine and Hematology at the University of Southern
California School of Medicine, and in Oncology at Emory University.
JEFFREY M. TRENT, PH.D., serves as both the Scientific Director and the
Chief of the Laboratory of Cancer Genetics, National Center for Human Genome
Research. Dr. Trent was recruited to the NIH Bethesda campus to establish the
Intramural Research Program of the National Center for Human Genome Research. He
received his Bachelor's Degree from Indiana University, and his Ph.D. from The
University of Arizona. He remained on the faculty at The University of Arizona
for several years, where he served as the Director of Basic Research for the
Arizona Comprehensive Cancer Center. He then accepted an Endowed Chair in
Oncology at The University of Michigan in Ann Arbor where he also directed the
Basic Science Program of the Cancer Center. His research interests are in the
molecular genetics and cytogenetics of human cancer.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the Delaware General Corporation Law (the "Delaware Law"),
the Company's Certificate of Incorporation includes a provision that eliminates
the personal liability of its directors to the Company or its stockholders for
monetary damages for breach of their fiduciary duty to the maximum extent
permitted by the Delaware Law. The Delaware Law does not permit liability to be
eliminated (i) for any breach of a director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions, as provided
in Section 174 of the Delaware Law or (iv) for any transaction from which the
director derived an improper personal benefit. In addition, as permitted in
Section 145 of the Delaware Law, the Certificate of Incorporation of the Company
provides that the Company shall indemnify its directors and executive officers
to the fullest extent permitted by Delaware Law, including those circumstances
in which indemnification would otherwise be discretionary, subject to certain
exceptions. The Certificate of Incorporation also provides that the Company may
advance expenses to directors and executive officers incurred in connection with
an action or proceeding as to which they may be entitled to indemnification,
subject to certain exceptions.
The Company has or will enter into indemnity agreements with each of its
directors and executive officers that provide the maximum indemnity allowed to
directors and executive officers by the Delaware Law and the Company's
Certificate of Incorporation, subject to certain exceptions, as well as certain
additional procedural protections. In addition, the indemnity agreements will
provide generally that the Company will advance expenses incurred by directors
and executive officers in any action or proceeding as to which they may be
entitled to indemnification subject to certain exceptions.
The indemnification provisions in the Company's Certificate of
Incorporation and the indemnity agreements to be entered into between the
Company and its directors and executive officers may permit indemnification for
liabilities arising under the Securities Act. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
The Company currently expects to carry director and officer liability
insurance following this offering.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Company's Board of
Directors are Messrs. Cassis, Callow, Woods and Love. The Compensation Committee
makes recommendations to the Board of Directors regarding executive compensation
matters, including decisions relating to salary and
58
<PAGE> 61
bonus and grants of stock options. During the last fiscal year, Mr. Love
participated in deliberations concerning compensation of executive officers of
the Company other than himself.
DIRECTOR COMPENSATION
Following this offering, directors of the Company who are not officers or
employees of the Company ("Non-Employee Directors") will receive a fee of $1,000
per Board meeting and committee meeting attended, if such committee meeting is
held on a different day than a Board meeting. Directors of the Company who are
officers or employees of the Company will not receive additional compensation
for serving on the Board or on any committee thereof. The Company makes a
one-time option grant, upon a Non-Employee Director's first appointment to the
Board, to purchase 17,128 shares of Common Stock at the fair market value on the
date of grant. All options become exercisable at a rate of one-forty-eighth per
month, on a cumulative basis. The economic benefit of all options granted to Mr.
Woods, Dr. West and Dr. Norman has been transferred to CTRC Research, and the
economic benefit of the option granted to Mr. Cassis has been transferred to
Hambro America Biosciences, Inc., a stockholder of the Company. See "-- Stock
Option Plans -- 1996 Non-Employee Director Stock Option Plan" and "Principal
Stockholders."
EXECUTIVE COMPENSATION
The following table summarizes all compensation awarded to, earned by or
paid for services rendered to the Company in all capacities during the year
ended December 31, 1995 by the Company's (i) Chief Executive Officer and (ii)
three other most highly-compensated executive officers whose total compensation
exceeded $100,000 during 1995 (together, the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES ALL OTHER
---------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION SALARY ($) BONUS ($) OPTIONS (#) ($)
------------------------------------- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Richard L. Love
President and Chief Executive
Officer......................... $ 175,000 $35,000 28,546 $ 3,400(1)
Alexander L. Weis, Ph.D.
Executive Vice President,
Chief Scientific Officer........... $ 160,000 $16,000 28,546 $ 0
Timothy J. Williamson
Senior Vice President,
Marketing & Business Development... $ 112,885 $12,500 47,500 $ 0
Deirdre K. Tessman, Ph.D.
Vice President, Drug Development... $ 125,000 $25,000 47,500 $ 15,790(2)
</TABLE>
- ---------------
(1) Life insurance premiums paid by the Company on behalf of Mr. Love.
(2) Relocation expenses paid by the Company to Dr. Tessman.
STOCK OPTION PLANS
1995 Stock Option Plan
On April 10, 1995, the Board of Directors of the Company adopted, and the
stockholders of the Company approved, the 1995 Stock Option Plan (the "1995
Stock Option Plan"). The 1995 Stock Option Plan, as amended, provides for the
issuance of up to a maximum of 1,141,807 shares of the Company's Common Stock to
key employees of and consultants to the Company or any of its subsidiaries as
well as to directors of the Company, whether or not employees. Options granted
under
59
<PAGE> 62
the 1995 Stock Option Plan may be either incentive stock options ("ISOs") or
options which do not qualify as ISOs ("non-ISOs").
The 1995 Stock Option Plan is to be administered by a committee of at least
two members of the Board of Directors, chosen by the Board of Directors, and is
currently administered by the Company's Compensation Committee (the
"Committee"). The current members of the Committee are Messrs. Cassis, Callow,
Woods and Love. Subject to the provisions of the 1995 Stock Option Plan, the
Committee has the authority to determine the individuals to whom stock options
will be granted, the number of shares to be covered by each option, the option
price, the type of option, the option period, the vesting restrictions, if any,
with respect to the exercise of the option, the terms for the payment of the
option price and other terms and conditions. After the offering, non-employee
directors of the Company, which include various members of the Committee, will
not be eligible to receive options under the 1995 Stock Option Plan and will
thus qualify as "disinterested directors" within the meaning and for the
purposes of Rule 16b-3 under the Securities Exchange Act of 1934. Payment for
shares acquired upon exercise of an option must be made in cash.
The exercise price for shares may not be less than 100% of the fair market
value of the Common Stock on the date of grant (110% in the case of a grant of
an ISO to an individual who owns 10% or more of the outstanding stock of the
Company or any subsidiary (a "10% Stockholder")). Unless otherwise approved by
the Committee, an option may not be exercised during the first six months after
the date of its grant. All options must expire no later than ten years from the
date of grant. In general, no option may be exercised more than three months
after the termination of the optionee's service with the Company and any of its
subsidiaries. However, the three-month period is extended to 12 months if the
optionee's service is terminated by reason of disability, death or retirement.
No individual may be granted ISOs that become exercisable for the first time in
any calendar year for Common Stock having a fair market value, determined at the
time of grant, in excess of $100,000.
All options granted under the 1995 Stock Option Plan become fully vested
and exercisable upon a change of control of the Company. A "change of control"
of the Company is deemed to have occurred upon the consummation of a merger or
consolidation, or sale of all or substantially all of the Company's business or
assets, and, as a result thereof, less than 50% of the outstanding capital stock
of the surviving or acquiring entity is owned, in the aggregate, by the
stockholders of the Company immediately prior to such merger, consolidation or
sale.
Options may not be transferred during the lifetime of an optionee. Subject
to certain limitations set forth in the 1995 Stock Option Plan and applicable
law, the Board of Directors may amend or terminate the 1995 Stock Option Plan.
By its own terms, the 1995 Stock Option Plan will terminate at the discretion of
the Board of Directors.
At December 11, 1996, the Company has granted options to purchase an
aggregate of 688,680 shares of Common Stock at a weighted average exercise price
per share of $4.21.
1996 Non-Employee Director Stock Option Plan
The Company has adopted the 1996 Non-Employee Director Stock Option Plan
(the "Directors' Plan") to promote the Company's interests by attracting and
retaining highly-skilled, experienced and knowledgeable non-employee directors.
An aggregate of 171,271 shares of Common Stock have been reserved for issuance
under the Directors' Plan. Options granted under the Directors' Plan do not
qualify as incentive stock options within the meaning of Section 422 of the
Code. The Directors' Plan provides for the automatic grant to each of the
Company's current non-employee directors of an option to purchase 17,128 shares
of Common Stock and with respect to newly-elected or appointed non-employee
directors, an automatic grant of an option to purchase 17,128 shares of Common
Stock effective upon his or her initial election or appointment to the Board of
Directors. The options have an exercise price of 100% of the fair market value
of the Common Stock on the date of grant and have a ten-year term. All options
become exercisable at a rate of one-forty-eighth per month, on a cumulative
basis. Each outstanding option is
60
<PAGE> 63
subject to acceleration in the event of a change of control of the Company (as
defined in the Directors' Plan). The options may be exercised by payment in
cash, check or shares of Common Stock.
All options granted under the Directors' Plan become fully vested and
exercisable upon a change of control of the Company. A "change of control" of
the Company is deemed to have occurred upon the consummation of a merger or
consolidation, or sale of all or substantially all of the Company's business or
assets, and, as a result thereof, less than 50% of the outstanding capital stock
of the surviving or acquiring entity is owned, in the aggregate, by the
stockholders of the Company immediately prior to such merger, consolidation or
sale.
The following tables set forth information concerning individual grants of
stock options, exercises of stock options, and aggregate stock options held for
each of the Named Officers listed in the Summary Compensation Table above for
the year ended December 31, 1995:
OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL
NUMBER OF TOTAL RATES OF STOCK
SECURITIES OPTIONS APPROXIMATE PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE MARKET PRICE FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE AT GRANT EXPIRATION ------------------
NAME GRANTED(#)(1) 1995 PER SHARE DATE DATE 5% 10%
- ----------------------- ------------- ------------ ----------- ------------ ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard L. Love........ 28,546 10.2% $3.50 $3.50 9/14/05 $62,457 $163,939
Alexander L. Weis,
Ph.D................. 28,546 10.2% $3.50 $3.50 9/29/05 $62,791 $165,025
Timothy J.
Williamson........... 47,500 16.9% $.18 $.18 6/23/05 $ 5,188 $ 13,522
Deirdre K. Tessman,
Ph.D................. 47,500 16.9% $.18 $.18 6/23/05 $ 5,188 $ 13,522
</TABLE>
- ---------------
(1) The potential realizable value is calculated based on the term of the option
and is calculated by assuming that the fair market value of Common Stock on
the date of the grant as determined by the Board appreciates at the
indicated annual rate compounded annually for the entire term of the option
and that the option is exercised and the Common Stock received therefor is
sold on the last day of the term of the option for the appreciated price.
The 5% and 10% rates of appreciation are derived from the rules of the
Securities and Exchange Commission and do not reflect the Company's estimate
of future stock price appreciation. The actual value realized may be greater
than or less than the potential realizable values set forth in the table.
AGGREGATE FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
12/31/95
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR-END(#) OPTIONS AT FISCAL YEAR-END($)(1)
-------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Richard L. Love.............. 7,137 21,409 $ 60,642 $ 181,908
Alexander L. Weis, Ph.D...... 7,137 21,409 $ 60,642 $ 181,908
Timothy J. Williamson........ 11,875 35,625 $ 140,420 $ 421,260
Deirdre K. Tessman, Ph.D..... 11,875 35,625 $ 140,420 $ 421,260
</TABLE>
- ---------------
(1) The dollar values have been calculated by determining the difference between
the fair market value of the securities underlying the options at December
31, 1995 and the exercise prices of the options. Solely for purposes of
determining the value of options at December 31, 1995, the Company has
assumed that the fair market value of the Common Stock issuable upon
exercise of the option was $12.00 per share, the assumed initial public
offering price, since the Common Stock was not traded in an established
market prior to this offering.
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<PAGE> 64
EMPLOYMENT AND CONSULTING AGREEMENTS
Richard L. Love is a party to an employment agreement with the Company for
a four-year period expiring in November 1998. The agreement provides for an
initial base salary of $175,000 per year. The agreement contains a
non-disclosure covenant and provides that for a period of one year after
termination of employment, Mr. Love may not compete with the Company by engaging
in certain Restricted Activities (as defined in the agreement). The agreement
provides that either party may terminate the agreement without cause upon 30
days' notice. If the agreement is terminated by the Company other than for
cause, the Company is obligated to pay Mr. Love a severance payment, unless Mr.
Love elects to receive limited accelerated vesting of his stock options. See
"Risk Factors -- Dependence on Key Individuals; Possible Loss of Key Employees
Upon Adverse IRS Tax Ruling; Need for Additional Personnel."
Alexander L. Weis, Ph.D., is a party to an employment agreement with the
Company for a four-year period expiring in November 1998. The agreement provides
for an initial base salary of $160,000 per year. The agreement contains a
non-disclosure covenant and provides that for a period of one year after
termination of employment, unless Dr. Weis elects not to receive severance
compensation, Dr. Weis may not compete with the Company by engaging in certain
Restricted Activities (as defined in the agreement). The agreement provides that
either party may terminate the agreement without cause upon 30 days' notice. If
the agreement is terminated by the Company for other than cause, the Company is
obligated to pay Dr. Weis a severance payment, unless Dr. Weis elects (i) to
receive limited accelerated vesting of his stock options or (ii) to have the
limitation on his Restricted Activities terminate on the date of such
termination. Dr. Weis's agreement also permits Dr. Weis to continue to be the
owner and chief executive officer of Lipitek International, Inc., a
subcontractor to the Company. See "Certain Transactions."
The agreements provide that Mr. Love and Dr. Weis shall negotiate in good
faith with the Company to reach an equitable adjustment of the provisions of
their agreements in the event that (i) the Internal Revenue Service (the "IRS")
notifies CTRC Research, or any affiliate thereof, that it will not rule that the
establishment and operation of the Company will not adversely affect CTRC, CTRC
Research's or any such affiliate's status as an exempt organization under
Section 501(c)(3) of the Internal Revenue Code (the "Code"), or (ii) a private
ruling is not requested, and CTRC, CTRC Research and/or any affiliate thereof
are unable to obtain from qualified tax counsel an opinion satisfactory to each
of them to the effect that the establishment and operation of the Company will
not adversely affect CTRC's, CTRC Research's or such affiliate's status as an
exempt organization under Section 501(c)(3) of the Code. The agreements
terminate automatically if the Company and Mr. Love and the Company and Dr. Weis
cannot reach such an agreement within 90 days after the occurrence of such
event. See "Risk Factors -- Dependence on Key Individuals; Possible Loss of Key
Employees Upon Adverse IRS Tax Ruling; Need for Additional Personnel."
James R. Koch is a party to an employment agreement with the Company. The
agreement provides for an initial base salary of $125,000 per year. The
agreement provides that either party may terminate the agreement without cause
upon 30 days' notice; however, in the event the Company elects to terminate the
agreement without cause within three years of the date of the agreement, the
Company is required to pay to Mr. Koch a severance payment. The agreement
contains a non-disclosure covenant and provides that for a period of one year
after termination of employment, Mr. Koch will not compete with the Company,
solicit its customers or recruit its employees.
Pedro Santabarbara, M.D., Ph.D., is a party to an employment agreement with
the Company. The agreement provides for an initial base salary of $180,000 per
year. The agreement provides that either party may terminate the agreement
without cause upon 30 days' notice; however, in the event the Company elects to
terminate the agreement without cause within four years of the date of the
agreement, the Company is required to pay to Dr. Santabarbara a severance
payment. The agreement contains a non-disclosure covenant and provides that for
a period of one year after termination of employment, Dr. Santabarbara will not
compete with the Company, solicit its customers or recruit its employees.
Pursuant to the terms of Dr. Santabarbara's employment agreement, the Company
arranged for and
62
<PAGE> 65
guaranteed a loan in the employee's name. Additionally, the Company has agreed
to reimburse this employee for monthly interest payments on the loan.
Each of Dr. Von Hoff and Dr. Coltman is a party to a consulting agreement
with the Company pursuant to which they provide consulting services to the
Company in exchange for an annual retainer, compensation for services provided
at a per day and hourly rate, as applicable, and for attending meetings of the
Company's Scientific Advisory Board. The agreements contain a non-disclosure
covenant, provide that either party may terminate the agreement upon 60 days'
notice to the other party and provide that Dr. Von Hoff and Dr. Coltman will not
undertake affiliations that would conflict with their duties and
responsibilities to the Company without the Company's consent. Drs. Von Hoff and
Coltman's agreements expire in December 1998 and October 1998, respectively. See
"Risk Factors -- Dependence on Key Individuals; Possible Loss of Key Employees
Upon Adverse IRS Tax Ruling; Need for Additional Personnel" and "Risk
Factors -- Uncertainty Related to Identification and Acquisition of New Product
Candidates."
CERTAIN TRANSACTIONS
ILEX was formed in December 1993 for the purpose of conducting certain
advanced drug development programs and pursuing commercial opportunities of
CTRC. As the majority holder of Series A Preferred Stock, CTRC Research has the
right to elect three members of the Company's Board of Directors. Upon
consummation of the offering, this right will terminate and CTRC Research will
beneficially own approximately 23.8% of the Company's outstanding shares of
Common Stock. See "Risk Factors -- Control by Existing Stockholders;
Anti-Takeover Provisions." The Company and CTRC Research also have an agreement
not to commence any legal action against, in the case of CTRC Research, the
Board of Directors of the Company, other than Directors of the Company who are
also employees or officers of or consultants to ILEX, or, in the case of ILEX,
the Board of Trustees of CTRC Research, for any claim that would have been
covered by any directors and officers liability insurance policies maintained by
CTRC or ILEX, as applicable, subject to certain exceptions. This agreement will
terminate upon consummation of this offering, but such agreement will remain in
effect with respect to any activity occurring prior to the termination of the
agreement.
In November 1994, CTRC Research granted the Company a revolving line of
credit of $500,000 bearing interest at the prime rate plus one-half of one
percent. The line of credit provided the Company with sufficient working capital
to initiate operations. At December 31, 1995, the outstanding balance and the
interest rate on this line of credit were $305,000 and nine percent,
respectively. In February 1996, the Company repaid the entire outstanding
balance on the line of credit, and the line of credit was terminated in December
1996.
Pursuant to a services agreement, CTRC Research has agreed to perform
certain administrative and technical support services for the Company. For the
period from October 1, 1994 through December 31, 1994, the year ended December
31, 1995 and the nine-month periods ended September 30, 1995 and 1996, the
Company paid CTRC Research approximately $143,000, $313,000, $247,000 and
$114,000, respectively, for these services and reimbursement of salaries and
benefits. In addition, the Company has a lease agreement with CTRC Research for
office space, a lab and the cGMP facility. For the period from inception through
December 31, 1994, the year ended December 31, 1995 and the nine-month periods
ended September 30, 1995 and 1996, the Company paid CTRC Research approximately
$5,000, $49,000, $22,000 and $30,000, respectively, related to these lease
agreements. The Company leases its cGMP facility from a non-profit corporation
that is controlled by CTRC Research and the Texas Research and Technology
Foundation. Such lease provides that rent will be paid at a fixed monthly rate
plus a percentage of gross sales from the facility, as defined in the lease. The
Company is not required to begin making fixed monthly payments until 1998 or
payments based on a percentage of gross sales until certain gross levels are
achieved. At December 31, 1994 and 1995, and September 30, 1996, the Company had
payables to CTRC Research amounting to approximately $166,000, $85,000 and
$48,000, respectively, related to the aforementioned services and lease
agreements.
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<PAGE> 66
Subcontractors provide the Company with consulting services and preclinical
and clinical testing related to certain of its contracts. During the period from
October 1, 1994, through December 31, 1994, the year ended December 31, 1995,
and the nine-month periods ended September 30, 1995 and 1996, the Company
incurred approximately the following expenses for subcontracting costs to the
named related parties:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------------- ----------------------
1994 1995 1995 1996
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
CTRC Research....................... $ 42,000 $140,000 $ 48,000 $ 257,000
Dr. Von Hoff........................ 36,000 136,000 122,000 205,000
UTHSCSA and Dr. Coltman............. -- 142,000 88,000 271,000
Lipitek International, Inc.......... 111,000 42,000 42,000 276,000
-------- -------- -------- ----------
Total..................... $189,000 $460,000 $300,000 $1,009,000
======== ======== ======== ==========
</TABLE>
At December 31, 1994 and 1995 and September 30, 1996, the following
subcontractor and consulting costs were payable to the named related parties:
<TABLE>
<CAPTION>
1994 1995 1996
-------- ------- --------
<S> <C> <C> <C>
CTRC Research....................................... $ 9,000 $ 5,000 $ 60,000
Dr. Von Hoff........................................ 36,000 34,000 104,000
UTHSCSA and Dr. Coltman............................. -- 24,000 22,000
Lipitek International, Inc.......................... 81,000 21,000 37,000
-------- ------- --------
Total..................................... $126,000 $84,000 $223,000
======== ======= ========
</TABLE>
In June 1996, the Company entered into a services agreement with Lipitek
International, Inc. ("Lipitek"), a corporation whose sole stockholder and chief
executive officer is Dr. Alexander L. Weis, Executive Vice President, Chief
Scientific Officer of the Company. The scope of the services to be performed by
Lipitek pursuant to the agreement and the payment for such services will be
agreed to by the parties on a project-by-project basis. Subject to certain
conditions, the agreement may be terminated on 30 days' notice by either party.
During 1995, the Company entered into consulting services agreements with
Daniel D. Von Hoff, M.D. and Charles A. Coltman, Jr., M.D., co-chairmen of the
Company's Scientific Advisory Board. See "Management -- Employment and
Consulting Agreements." Dr. Von Hoff is also a director of the Company. Under
the terms of the agreements, the consultants are entitled to receive annual
retainers and fixed daily fees for full days of service and hourly fees for
partial days of service. In addition, the consultants exercised their right to
purchase shares of Common Stock under such agreements and financed a portion of
the Common Stock purchases with a promissory note to the Company. The promissory
notes of Dr. Von Hoff and Dr. Coltman are in the principal amounts of $64,000
and $38,000, respectively, and have balances at September 30, 1996 of $59,000
and $35,000, respectively. The promissory notes each bear interest at an annual
rate of 8% and mature in March 1999.
Pursuant to the terms of their employment agreements, Mr. Love and Dr. Weis
exercised their right to purchase shares of Common Stock and financed a portion
of the Common Stock purchases with promissory notes to the Company. The
promissory notes of Mr. Love and Dr. Weis are each in the principal amount of
$20,000 and have balances at September 30, 1996 of $19,000 and $0, respectively.
Pursuant to the terms of Dr. Santabarbara's employment agreement, the Company
arranged for and guaranteed a loan in the employee's name. Additionally, the
Company has agreed to reimburse this employee for monthly interest payments on
the loan. See "Management -- Employment and Consulting Agreements."
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<PAGE> 67
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of December 11, 1996 and
as adjusted to give effect to the sale by the Company of the shares offered
hereby with respect to (a) each stockholder known by the Company to be the
beneficial owner of 5% or more of the Company's Common Stock, (b) each director
of the Company, (c) each Named Officer and (d) all executive officers and
directors as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
SHARES BENEFICIALLY OWNED
BENEFICIALLY ----------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1)(2) BEFORE OFFERING AFTER OFFERING
- --------------------------------------------------- ------------ --------------- --------------
<S> <C> <C> <C>
CTRC Research Foundation........................... 2,782,127 30.3% 23.8%
8122 Datapoint
San Antonio, Texas 78229
Boston Capital Ventures III,(3).................... 891,547 9.7% 7.6%
Limited Partnership
45 School Street
Boston, Massachusetts 02108
Hambro America Biosciences, Inc.(4)................ 836,388 9.1% 7.2%
650 Madison Avenue, 21st Fl.
New York, New York 10022
Perseus Pharmaceuticals, L.L.C.(5)................. 818,383 8.8% 6.9%
The Army and Navy Club Building
1627 I Street N.W., Suite 610
Washington, D.C. 20006
Advent International Corporation(6)................ 688,468 7.5% 5.9%
101 Federal Street
Boston, Massachusetts 02110
MPI Enterprises, L.L.C............................. 475,753 5.2% 4.1%
54943 N. Main Street
Mattawan, Michigan 49071
Pharmacia & Upjohn Company......................... 570,904 6.2% 4.9%
7000 Portage Road
Kalamazoo, Michigan 49001
Daniel D. Von Hoff, M.D.(7)........................ 379,652 4.1% 3.3%
Richard L. Love(8)................................. 288,307 3.1% 2.5%
Alexander L. Weis, Ph.D.(7)........................ 288,307 3.1% 2.5%
Timothy J. Williamson(9)........................... 23,750 * *%
Deirdre K. Tessman, Ph.D.(9)....................... 23,750 * *%
James R. Koch...................................... -- -- --
Pedro Santabarbara, M.D., Ph.D..................... -- -- --
John L. Cassis(10)(11)............................. 1,071 * *%
A. Dana Callow, Jr.(10)(12)........................ 11,325 * *%
Jason S. Fisherman, M.D.(10)....................... 1,071 * *%
Jerry R. Mitchell, M.D., Ph.D.(13)................. 357 * *%
</TABLE>
65
<PAGE> 68
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
SHARES BENEFICIALLY OWNED
BENEFICIALLY ----------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1)(2) BEFORE OFFERING AFTER OFFERING
- --------------------------------------------------- ------------ --------------- --------------
<S> <C> <C> <C>
Ruskin Norman, M.D.(10)(14)........................ 21,138 * *%
Robert V. West, Jr., Ph.D.(10)(15)................. 10,171 * *%
Gary V. Woods(10)(16).............................. 45,984 * *%
All executive officers and directors as a group (14
persons)(11)(12)(17)............................. 1,094,166 11.8% 9.3%
</TABLE>
- ---------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares of Common Stock beneficially
owned by a person and the percentage ownership of that person, shares of
Common Stock subject to options and warrants held by that person that are
currently exercisable or exercisable within 60 days of December 11, 1996
are deemed outstanding. Such shares, however, are not deemed outstanding
for the purposes of computing the percentage ownership of any other person.
Except as otherwise noted, the street address of the named beneficial owner
is 14785 Omicron Drive, Suite 101, San Antonio, Texas 78245.
(2) To the Company's knowledge, unless otherwise indicated below, the persons
and entities named in the table have sole voting and sole investment power
with respect to all shares beneficially owned, subject to community
property laws where applicable.
(3) Includes 64,129 shares of Common Stock issuable upon exercise of warrants.
(4) Includes shares of Common Stock held by Cross Atlantic Partners K/S and
Cross Atlantic Partners II K/S, both of which are entities under common
control of Hambro America Biosciences, Inc. Includes 24,552 shares of
Common Stock issuable upon the exercise of warrants.
(5) Includes 163,677 shares of Common Stock issuable upon the exercise of
warrants.
(6) Includes shares of Common Stock held by Rovent II Limited Partnership,
Advent Performance Materials Limited Partnership, ADVENTACT Limited
Partnership and Advent International Investors II Limited Partnership, all
of which are entities under common control of Advent International
Corporation. Includes 23,513 shares of Common Stock issuable upon the
exercise of warrants.
(7) Includes 14,273 shares of Common Stock issuable upon the exercise of
options granted under the Company's 1995 Stock Option Plan. See
"Management -- Stock Option Plans."
(8) Includes 14,273 shares of Common Stock issuable upon the exercise of
options granted under the Company's 1995 Stock Option Plan. See
"Management -- Stock Option Plans."
(9) Consists of shares of Common Stock issuable upon the exercise of options
granted under the Company's 1995 Stock Option Plan. See
"Management -- Stock Option Plans."
(10) Includes 1,071 shares of Common Stock issuable upon the exercise of options
granted under the Company's 1996 Non-Employee Director Stock Option Plan.
See "Management -- Stock Option Plans."
(11) Does not include any shares beneficially owned by Hambro America
Biosciences, Inc. Mr. Cassis, a partner of Hambro America Biosciences,
Inc., may be deemed to be a beneficial owner of the shares of Common Stock
beneficially owned by Hambro American Biosciences, Inc. Mr. Cassis
disclaims any such beneficial ownership.
(12) Does not include any shares beneficially owned by Boston Capital Ventures
III Limited Partnership. Mr. Callow, a general partner of Boston Capital
Ventures III Limited Partnership, may be deemed to
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<PAGE> 69
be a beneficial owner of the shares of Common Stock beneficially owned by
Boston Capital Ventures III Limited Partnership. Includes 1,081 shares of
Common Stock issuable upon exercise of warrants and 1,071 shares of Common
Stock issuable upon exercise of options granted under the Company's 1996
Non-Employee Director Stock Option Plan. See "Management -- Stock Option
Plans."
(13) Includes 357 shares of Common Stock issuable upon exercise of options under
the Company's Non-Employee Director Stock Option Plan. See
"Management -- Stock Option Plans." Does not include any shares
beneficially owned by MPI. Dr. Mitchell, co-founder and Chief Executive
Officer of an affiliate of MPI, may be deemed to be a beneficial owner of
the shares of Common Stock owned by MPI.
(14) Includes 1,159 shares of Common Stock issuable upon the exercise of
warrants.
(15) Includes 536 shares of Common Stock issuable upon the exercise of warrants.
(16) Includes 3,274 shares of Common Stock issuable upon the exercise of
warrants.
(17) Includes 6,783 shares of Common Stock issuable upon exercise of options
granted under the Company's 1996 Non-Employee Director Stock Option Plan.
Includes 90,319 shares of Common Stock issuable upon the exercise of
options granted under the Company's 1995 Stock Option Plan. See
"Management -- Stock Option Plans." Includes 6,050 shares of Common Stock
issuable upon exercise of warrants.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 40,000,000 shares of
Common Stock, $.01 par value, and 20,000,000 shares of Preferred Stock, $.01 par
value. As of December 11, 1996, the Company had issued and outstanding 9,179,594
shares of Common Stock which were held of record by 33 stockholders (after
giving effect to the conversion of all outstanding Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock into Common Stock and the Reverse Stock Split of the
outstanding shares of Common Stock), and no shares of Preferred Stock will be
outstanding upon consummation of this offering.
The following summary of certain provisions of the Common Stock and
Preferred Stock, outstanding warrants and related registration rights does not
purport to be complete and is subject to, and qualified in its entirety by, the
provisions of the Company's Certificate of Incorporation, as amended, the
various warrant documents and the amended registration rights agreement which
are included as exhibits to the Registration Statement of which this Prospectus
is a part.
COMMON STOCK
Holders of shares of Common Stock are entitled to one vote per share for
the election of directors and all matters to be submitted to a vote of the
Company's stockholders. Subject to the rights of any holders of Preferred Stock
which may be issued in the future, the holders of shares of Common Stock are
entitled to share ratably in such dividends as may be declared by the Board of
Directors and paid by the Company out of funds legally available therefor. In
the event of dissolution, liquidation or winding up of the Company, holders of
shares of Common Stock are entitled to share ratably in all assets remaining
after payment of all liabilities and liquidation preferences, if any. Holders of
shares of Common Stock have no preemptive, subscription, redemption, conversion
rights or similar rights. The Company's Certificate of Incorporation does not
provide for cumulative voting rights with respect to the election of directors.
The outstanding shares of Common Stock are, and the shares of Common Stock to be
issued by the Company in connection with this offering will be, duly authorized,
validly issued, fully paid and nonassessable.
Delaware law does not require stockholder approval for any issuance of
authorized shares of Common Stock. Such authorized and unissued shares may be
used for a variety of corporate purposes,
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<PAGE> 70
including future public offerings to raise additional capital or to facilitate
corporate acquisitions. One of the effects of the existence of unissued and
unreserved Common Stock may be to enable the Board of Directors to issue shares
to persons friendly to current management, which issuance could render more
difficult or discourage an attempt to obtain control of the Company by means of
a merger, tender offer, proxy contest or otherwise, and thereby protect the
continuity of the Company's current management and possibly deprive the
stockholders of opportunities to sell their shares of Common Stock at prices
higher than prevailing market prices.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of Preferred
Stock will be converted into 7,992,052 shares of Common Stock. See Note 5 of
Notes to Financial Statements for a description of the currently outstanding
Convertible Preferred Stock. Following the conversion, the Company's Certificate
of Incorporation will be amended to delete all references to such outstanding
series of Preferred Stock. Under the Certificate of Incorporation, as amended,
upon the closing of this offering, the Company's Board of Directors will be
authorized to issue Preferred Stock in one or more series with designations,
rights and preferences determined from time to time by its Board of Directors.
Accordingly, the Company's Board of Directors is empowered, without stockholder
approval, to issue Preferred Stock with dividends, liquidation, conversion,
voting or other rights that could adversely affect the voting power or other
rights of the holders of the Common Stock. The issuance of Preferred Stock could
decrease the amount of earnings and assets available for distribution to holders
of Common Stock. In the event of issuance, the Preferred Stock could be used,
under certain circumstances, as a method of discouraging, delaying or preventing
a change in control of the Company. See "Risk Factors -- Control by Existing
Stockholders; Anti-Takeover Provisions."
WARRANTS
The Company has issued warrants to purchase 97,054 shares of Common Stock
at $3.50 per share to Vector Securities International, Inc. (the "Vector
Warrants") in connection with the provision of certain financial consulting
services. The Vector Warrants may be exercised in whole at any time or in part
from time to time prior to their expiration in September 2000.
In connection with the private placement of its Series C Preferred stock,
the Company has issued warrants to purchase 327,367 shares of Common Stock at
$8.76 per share (the "Series C Warrants"). The Series C Warrants may be
exercised in whole at any time or in part from time to time prior to their
expiration in July 2001.
The Company has issued warrants to purchase 28,546 shares of Common Stock
at $8.76 per share to Chestnut Partners, Inc. (the "Chestnut Warrants," and,
together with the Vector Warrants and the Series C Warrants, the "Warrants") in
connection with the provision of certain financial consulting services. The
Chestnut Warrants may be exercised in whole at any time or in part from time to
time prior to their expiration in 2001.
The exercise price of the Warrants may be paid in cash or surrender for
cancellation of a portion of the Warrants (valued according to a formula
described in the Warrants). The exercise price for the Warrants and the number
and kind of shares of Common Stock, or other securities and property issuable
upon exercise of the Warrants, are subject to adjustment upon a stock split,
stock dividend or subdivision. Additionally, an adjustment will be made upon a
sale of all or substantially all of the assets of the Company or in the case of
a reorganization, reclassification, consolidation or merger of the Company, in
order to enable holders of Warrants to purchase the kind and number of shares of
stock or other securities or property (including cash) receivable in such event
by a holder of the number of shares of Common Stock that might otherwise have
been purchased upon exercise of the Warrants. The exercise price of the Warrants
is also subject to adjustment in the event of the issuance by the Company of
shares of additional Common Stock subsequent to the date of the Warrants at a
price per share less than the exercise price of the Warrants.
68
<PAGE> 71
The Warrants do not confer upon the holder any voting or any other rights
of a stockholder of the Company, and are subject to certain registration rights
agreements described below. See "-- Registration Rights."
REGISTRATION RIGHTS
In connection with the Company's private placements of its convertible
preferred stock and Warrants, the Company executed a Registration Rights
Agreement. The Registration Rights Agreement, as amended, provides that the
holders of more than an aggregate of 20% of the shares of Common Stock issuable
on conversion of the Series B Convertible Preferred Stock, Series C Convertible
Preferred Stock, Series D Convertible Preferred Stock, Series E Convertible
Preferred Stock and the Series C Warrants, shall be entitled to two demand
registrations on Form S-1 and an unlimited number of demand registrations on
Form S-2 or S-3, subject to certain limitations as to the amount of shares
registerable and the frequency of such demand registrations. Holders of more
than an aggregate of 50% of the shares of Common Stock issued upon conversion of
the Series A Convertible Preferred Stock and the Common Stock are also entitled
to one demand registration on Form S-1 and three demand registrations on Form
S-2 or S-3.
In addition, if the Company proposes to register any of its securities,
either for its own account, or for the account of other stockholders, the
Company is required, with certain exceptions, to notify the holders described
above and the holder of the Vector Warrants and, subject to certain limitations,
to include in such registration all of the shares of Common Stock requested to
be included by such holders. The Company is generally required to pay all of the
expenses of such registrations other than the underwriting discounts and
commissions.
CERTAIN ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION,
BYLAWS AND DELAWARE LAW
Upon the consummation of the offering, the Company will be subject to the
provisions of Section 203 of the Delaware General Corporation Law (the
"Anti-Takeover Law") regulating corporate takeovers. The Anti-Takeover Law
prevents certain Delaware corporations from engaging, under certain
circumstances, in a "business combination" (which includes a merger or sale of
more than 10% of the corporation's assets) with any "interested stockholder" (a
stockholder who acquired 15% or more of the corporation's outstanding voting
stock without the prior approval of the corporation's board of directors) for
three years following the date that such stockholder became an "interested
stockholder." A Delaware corporation may "opt out" of the Anti-Takeover Law with
an express provision in its original certificate of incorporation or an express
provision in its certificate of incorporation or bylaws resulting from a
stockholder's amendment approved by at least a majority of the outstanding
voting shares. The Company has not "opted out" of the provisions of the
Anti-Takeover Law.
CERTAIN CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS
The Company has no supermajority, staggered board or other anti-takeover
provisions in either its Certificate of Incorporation or Bylaws. The Certificate
of Incorporation of the Company contains provisions which eliminate the personal
liability of its directors for monetary damages resulting from breaches of their
fiduciary duty other than liability for a breach of the duty of loyalty, acts or
omissions not in good faith that constitute a breach of the director's duty to
the Company, acts that involve intentional misconduct or a knowing violation of
the law, transactions in which the director receives an improper benefit and
acts or omissions for which liability is expressly provided by an applicable
statute. The Bylaws of the Company contain provisions requiring the
indemnification of the Company's directors and officers, and persons serving at
the request of the Company as a director or officer of another corporation, to
the fullest extent permitted under the Delaware General Corporation Law. The
Company believes that these provisions are necessary to attract and retain
qualified persons as directors and officers of the Company.
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<PAGE> 72
LISTING
The Company intends to apply to list the Common Stock on the Nasdaq
National Market under the trading symbol "ILXO."
TRANSFER AGENT
The Transfer Agent for the Common Stock is ChaseMellon Shareholder
Services.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the Common
Stock, and any sale of substantial amounts of Common Stock in the open market
may adversely affect the market price of the Common Stock offered hereby.
Upon completion of this offering, there will be an aggregate of 11,679,594
shares of Common Stock outstanding assuming (i) no exercise of the Underwriters'
over-allotment option and (ii) no exercise of outstanding options to purchase
Common Stock. Of these shares, the 2,500,000 shares of Common Stock sold in this
offering will be freely tradeable without restriction or further registration
under the Securities Act, unless such shares are held by "affiliates" of the
Company, as that term is defined under the Securities Act and the regulations
promulgated thereunder. The remaining 9,179,594 shares of Common Stock (the
"Restricted Shares") are held by officers, directors, employees and other
stockholders of the Company. The Restricted Shares were sold by the Company in
reliance on exemptions from the registration requirements of the Securities Act
and are "restricted" securities within the meaning of Rule 144 under the
Securities Act.
The Company and each of its directors, officers and certain other
stockholders, who own in the aggregate approximately 8,823,432 shares of Common
Stock, have agreed that they will not offer, sell or contract to sell, or
otherwise dispose of, directly or indirectly, or announce an offering of, any
shares of Common Stock or any securities convertible into, or exchangeable for,
shares of Common Stock (without the prior consent of Salomon Brothers Inc) for a
period of 180 days after the effective date of the Registration Statement (the
"Effective Date"), provided that the Company may issue and sell shares of Common
Stock pursuant to the 1995 Stock Option Plan and the Directors' Plan.
Beginning 180 days after the Effective Date, approximately 4,179,012 of the
Restricted Shares will become eligible for sale subject to the provisions of
Rule 144 under the Securities Act. The remainder of the Restricted Shares held
by existing stockholders will become eligible for sale at various times
thereafter, subject to the provisions of Rule 144. Additionally, shares issued
pursuant to certain employee benefit plans and contracts with employees in
compliance with Rule 701 under the Securities Act may be sold beginning 90 days
after this offering by non-affiliates of the issuer subject to the manner of
sale requirements of Rule 144, but without compliance with the other
requirements of Rule 144. There are 688,680 shares of the Company's stock
outstanding which are covered by Rule 701.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for at least two years is entitled to sell, within any three-month period
commencing 90 days after the Effective Date, a number of shares that does not
exceed the greater of (i) 1% of the then outstanding shares of Common Stock
(116,796 shares immediately after this offering) or (ii) the average weekly
trading volume in the Common Stock during the four calendar weeks preceding such
sale, subject to the filing of a Form 144 with respect to such sale and certain
other limitations and restrictions. Pursuant to a recent proposal of the
Securities and Exchange Commission (the "Commission") that has not yet been
adopted, the two-year holding period described in the preceding sentence would
be reduced to one year. In addition, a person who is not deemed to have been an
affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least three
years, would be entitled to sell such shares under Rule 144(k) without regard to
the requirements described above. Pursuant to a
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<PAGE> 73
recent proposal of the Commission that has not yet been adopted, the three-year
holding period described in the preceding sentence would be reduced to two
years.
Any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
is entitled to rely on the resale provisions of Rule 701, which permits
non-affiliates to sell their Rule 701 shares without having to comply with the
public-information, holding-period, volume-limitation or notice provisions of
Rule 144 and permits affiliates to sell their Rule 701 shares without having to
comply with Rule 144's holding-period restrictions, in each case commencing 90
days after the Effective Date. However, unless Salomon Brothers Inc gives its
prior written consent, all officers and directors and certain other stockholders
have agreed not to sell or otherwise dispose of Common Stock of the Company for
the 180-day period after the Effective Date. See "Underwriting."
Within 90 days of the date of this Prospectus, the Company intends to file
a registration statement under the Securities Act to register shares of Common
Stock reserved for issuance under its equity incentive plans, thus permitting
the resale of such shares by non-affiliates in the public market without
restriction under the Securities Act. Such registration statements will become
effective immediately upon filing. As of December 11, 1996, options to purchase
688,680 shares of Common Stock at a weighted average exercise price of $4.21 per
share were outstanding under the Company's stock option plans.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to the Underwriters, and each of the Underwriters,
for whom Salomon Brothers Inc, Cowen & Company and Smith Barney Inc. are acting
as representatives (the "Representatives"), has severally agreed to purchase
from the Company the number of shares set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
------------------------------------------------------------------------- ---------
<S> <C>
Salomon Brothers Inc.....................................................
Cowen & Company..........................................................
Smith Barney Inc.........................................................
---------
Total.......................................................... 2,500,000
=========
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
shares of Common Stock offered hereby (other than those covered by the
over-allotment option described below) if any such shares of Common Stock are
purchased. In the event of a default by any Underwriter, the Underwriting
Agreement provides that, in certain circumstances, purchase commitments of the
non-defaulting Underwriters may be increased or the Underwriting Agreement may
be terminated. The Company has been advised by the Representatives that the
several Underwriters propose initially to offer such shares of Common Stock at
the public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $ per share to other dealers. After the initial
offering, the public offering price and such concessions may be changed.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to 375,000
additional shares of Common Stock, at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus. The
Underwriters may exercise such option only to cover over-allotments in the sale
of the shares of Common Stock that the Underwriters have agreed to purchase. To
the extent that the Underwriters exercise such option, each Underwriter will
have a firm commitment, subject to certain conditions, to purchase a number of
option shares proportionate to such Underwriter's initial commitment.
71
<PAGE> 74
The Company's officers and directors and the beneficial owners of more than
one percent of the Common Stock have agreed that they will not, without the
prior written consent of Salomon Brothers Inc, offer, sell or contract to sell,
or otherwise dispose of, directly or indirectly, or announce an offering of, any
shares of Common Stock beneficially owned by such person or any securities
convertible into, or exchangeable for, shares of Common Stock during the 180-day
period following the date of this Prospectus, other than shares of Common Stock
disposed of as bona fide gifts. The Company has agreed that it will not, without
the prior written consent of Salomon Brothers Inc, offer, sell or contract to
sell, or otherwise dispose of, directly or indirectly, or announce an offer of
any shares of Common Stock, options or any securities convertible into, or
exchangeable for, shares of Common Stock during the 180-day period following the
date of this Prospectus; provided, however, that the Company may issue and sell
Common Stock pursuant to any employee stock option in effect at the date of this
Prospectus and the Company may issue Common Stock issuable upon the conversion
of securities or the exercise of warrants outstanding on the date of this
Prospectus. Salomon Brothers Inc in its sole discretion may release any of the
shares subject to the lock-up at any time without notice.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act, or contribute to payments the Underwriters may be required
to make in respect thereof.
The Representatives have informed the Company that they do not intend to
confirm sales to any account over which they exercise discretionary authority.
Prior to this offering there has been no public market for the Common
Stock. The price to the public for the Shares will be determined through
negotiations between the Company and the Representatives and will be based on,
among other things, the Company's financial and operating history and condition,
the prospects of the Company and its industry in general, the management of the
Company and the market prices of securities of companies engaged in businesses
similar to those of the Company. There can, however, be no assurance that the
prices at which the Shares will sell in the public market after this offering
will not be lower than the price at which it is sold by the Underwriters.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Fulbright & Jaworski L.L.P., San Antonio,
Texas. Certain legal matters in connection with this offering will be passed
upon for the Underwriters by Cravath, Swaine & Moore, New York, New York.
EXPERTS
The financial statements included in this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
auditing and accounting in giving said reports.
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<PAGE> 75
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the shares of Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits and schedules
filed therewith. Statements contained in this Prospectus regarding the contents
of any contract or any other document referred to herein are not necessarily
complete, and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. A copy of the
Registration Statement may be inspected without charge at the Commission's
principal office at 450 Fifth Street, N.W., Judiciary Plaza, Room 1024,
Washington D.C. 20549 and at the following regional offices of the Commission:
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511 and at Seven World Trade Center, Suite 1300, New York, New York
10048, and copies of all or any part of the Registration Statement may be
obtained from the Public Reference Section of the Commission, at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549 upon the payment of the
fees prescribed by the Commission. The Commission maintains a WorldWide Web site
on the Internet at http://www.sec.gov that contains reports, proxy statements
and other information regarding registrants that file electronically with the
Commission.
The Company intends to furnish to its stockholders annual reports
containing financial statements audited by an independent public accounting firm
and quarterly reports for the first three quarters of each fiscal year
containing unaudited interim financial information.
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<PAGE> 76
ILEX ONCOLOGY, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Balance Sheets as of December 31, 1994 and 1995, and September 30, 1996............... F-3
Statements of Operations -- For the Period From Inception (October 1, 1994) Through
December 31, 1994, the Year Ended December 31, 1995, and the Nine-Month Periods
Ended September 30, 1995 and 1996................................................... F-4
Statements of Stockholders' Equity -- For the Period From Inception (October 1, 1994)
Through December 31, 1994, the Year Ended December 31, 1995, and the Nine-Month
Period Ended September 30, 1996..................................................... F-5
Statements of Cash Flows -- For the Period From Inception (October 1, 1994) Through
December 31, 1994, the Year Ended December 31, 1995, and the Nine-Month Periods
Ended September 30, 1995 and 1996................................................... F-6
Notes to Financial Statements......................................................... F-7
</TABLE>
F-1
<PAGE> 77
On the effective date of both the securities offering and the reverse stock
split discussed in Note 13 in ILEX Oncology Inc.'s financial statements, we
expect to be in a position to render the following audit report.
ARTHUR ANDERSEN LLP
San Antonio, Texas
December 11, 1996
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ILEX Oncology, Inc.:
We have audited the accompanying balance sheets of ILEX Oncology, Inc. (a
Delaware corporation), as of December 31, 1994 and 1995, and September 30, 1996,
and the related statements of operations, stockholders' equity and cash flows
for the period from inception (October 1, 1994) through December 31, 1994, the
year ended December 31, 1995, and for the nine-month periods ended September 30,
1995 and 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ILEX Oncology, Inc., as of
December 31, 1994 and 1995, and September 30, 1996, and the results of its
operations and its cash flows for the period from inception (October 1, 1994)
through December 31, 1994, the year ended December 31, 1995, and for the
nine-month periods ended September 30, 1995 and 1996, in conformity with
generally accepted accounting principles.
F-2
<PAGE> 78
ILEX ONCOLOGY, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1994 1995 1996
------------ ------------ -------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents..................................... $ 79 $ 9,636 $ 7,663
Investments in marketable securities.......................... -- -- 2,358
Accounts receivable, net of allowance for doubtful accounts of
$0, $123 and $123 in 1994, 1995 and 1996, respectively...... 1,015 720 996
Prepaid expenses and other.................................... 7 394 507
------ ------- -------
Total current assets................................... 1,101 10,750 11,524
------ ------- -------
NONCURRENT ASSETS:
Investments in marketable securities.......................... -- -- 7,391
------ ------- -------
PROPERTY AND EQUIPMENT:
Office equipment.............................................. 67 252 458
Lab equipment................................................. -- -- 146
Leasehold improvements........................................ -- 283 300
------ ------- -------
67 535 904
Less -- Accumulated depreciation and amortization............. (2) (28) (104)
------ ------- -------
65 507 800
------ ------- -------
Total assets........................................... $1,166 $ 11,257 $19,715
====== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Advances from related party................................... $ 150 $ 305 $ --
Accounts payable --
Related parties............................................. 166 85 50
Other....................................................... 214 303 329
Accrued subcontractor costs --
Related parties............................................. 126 84 223
Other....................................................... 410 680 345
Accrued liabilities........................................... 79 119 368
Deferred revenue.............................................. 78 170 478
------ ------- -------
Total current liabilities.............................. 1,223 1,746 1,793
------ ------- -------
OTHER LONG-TERM LIABILITIES..................................... -- -- 173
------ ------- -------
COMMITMENTS AND CONTINGENCIES (Notes 8, 10 and 12)
STOCKHOLDERS' EQUITY:
Convertible Preferred Stock, $0.01 par value; 20,000,000
shares authorized --
Series A; none, 2,991,477 and 2,991,477 issued and
outstanding in 1994, 1995 and 1996, respectively.......... -- 30 30
Series B; none, 3,101,448 and 3,101,448 issued and
outstanding in 1994, 1995 and 1996, respectively.......... -- 31 31
Series C; none, none and 1,309,424 issued and outstanding in
1994, 1995 and 1996, respectively......................... -- -- 13
Common stock, $0.01 par value; 40,000,000 shares authorized;
58, 1,187,539 and 1,187,539 shares issued and outstanding in
1994, 1995 and 1996, respectively........................... -- 12 12
Additional paid-in capital.................................... (11) 10,332 20,263
Receivables on sale of common stock (Note 5).................. -- (136) (113)
Accumulated deficit........................................... (46) (758) (2,487)
------ ------- -------
Total stockholders' equity............................. (57) 9,511 17,749
------ ------- -------
Total liabilities and stockholders' equity............. $1,166 $ 11,257 $19,715
====== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 79
ILEX ONCOLOGY, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
INCEPTION NINE-MONTH
(OCTOBER 1, 1994) PERIODS ENDED
THROUGH YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, -----------------
1994 1995 1995 1996
----------------- ----------------- ------ -------
<S> <C> <C> <C> <C>
REVENUE:
Product development.................. $ 1,065 $ 3,551 $2,467 $ 2,899
Contract research services........... 188 658 536 842
------ ------ ------ -------
Total revenue................ 1,253 4,209 3,003 3,741
------ ------ ------ -------
OPERATING EXPENSES:
Research and development costs....... 945 3,213 2,224 2,503
General and administrative........... 156 1,312 886 1,914
Costs of contract research
services.......................... 78 330 207 1,040
Subcontractor costs.................. 119 199 151 468
------ ------ ------ -------
Total operating expenses..... 1,298 5,054 3,468 5,925
------ ------ ------ -------
OPERATING LOSS......................... (45) (845) (465) (2,184)
OTHER INCOME (EXPENSE):
Interest income...................... -- 159 5 459
Interest expense..................... (1) (26) (18) (4)
------ ------ ------ -------
NET LOSS............................... $ (46) $ (712) $ (478) $(1,729)
====== ====== ====== =======
NET LOSS PER SHARE..................... $ (0.01) $ (0.09) $(0.06) $ (0.20)
====== ====== ====== =======
WEIGHTED AVERAGE SHARES USED IN
COMPUTING NET LOSS PER SHARE......... 7,544 7,737 7,553 8,560
====== ====== ====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 80
ILEX ONCOLOGY, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARES ISSUED AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C
CONVERTIBLE CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK
------------------- ------------------- ------------------- -------------------
SHARES $0.01 SHARES $0.01 SHARES $0.01 SHARES $0.01
ISSUED AND PAR ISSUED AND PAR ISSUED AND PAR ISSUED AND PAR
OUTSTANDING VALUE OUTSTANDING VALUE OUTSTANDING VALUE OUTSTANDING VALUE
----------- ----- ----------- ----- ----------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES, inception (October 1, 1994)... -- $-- -- $-- -- $-- -- $--
Net assets transferred and liabilities
assumed............................. -- -- -- -- -- -- 58 --
Capital contribution by CTRC
Research............................ -- -- -- -- -- -- -- --
Net loss.............................. -- -- -- -- -- -- -- --
--------- --- --------- --- --------- --- --------- ---
BALANCES, December 31, 1994............. -- -- -- -- -- -- 58 --
Issuance of common stock.............. -- -- -- -- -- -- 1,187,481 12
Issuance of Series A convertible
preferred stock..................... 2,991,447 30 -- -- -- -- -- --
Private placement of Series B
convertible preferred stock for
cash................................ -- -- 3,101,448 31 -- -- -- --
Issuance cost of Series B convertible
preferred stock..................... -- -- -- -- -- -- -- --
Net loss.............................. -- -- -- -- -- -- -- --
--------- --- --------- --- --------- --- --------- ---
BALANCES, December 31, 1995............. 2,991,447 30 3,101,448 31 -- -- 1,187,539 12
Private placement of Series C
convertible preferred stock for
cash................................ -- -- -- -- 1,309,424 13 -- --
Issuance cost of Series C convertible
preferred stock..................... -- -- -- -- -- -- -- --
Payments received on receivables on
sale of common stock................ -- -- -- -- -- -- -- --
Net loss.............................. -- -- -- -- -- -- -- --
--------- --- --------- --- --------- --- --------- ---
BALANCES, September 30, 1996............ 2,991,447 $30 3,101,448 $31 1,309,424 $13 1,187,539 $12
========= === ========= === ========= === ========= ===
<CAPTION>
RECEIVABLES
ADDITIONAL ON SALE
PAID-IN OF COMMON ACCUMULATED
CAPITAL STOCK DEFICIT TOTAL
---------- ----------- ----------- -------
<S> <C> <C> <C> <C>
BALANCES, inception (October 1, 1994)... $ -- $ -- $ -- $ --
Net assets transferred and liabilities
assumed............................. (22) -- -- (22)
Capital contribution by CTRC
Research............................ 11 -- -- 11
Net loss.............................. -- -- (46) (46)
------- ----- ------- -------
BALANCES, December 31, 1994............. (11) -- (46) (57)
Issuance of common stock.............. 195 (136) -- 71
Issuance of Series A convertible
preferred stock..................... (30) -- -- --
Private placement of Series B
convertible preferred stock for
cash................................ 10,834 -- -- 10,865
Issuance cost of Series B convertible
preferred stock..................... (656) -- -- (656)
Net loss.............................. -- -- (712) (712)
------- ----- ------- -------
BALANCES, December 31, 1995............. 10,332 (136) (758) 9,511
Private placement of Series C
convertible preferred stock for
cash................................ 9,987 -- -- 10,000
Issuance cost of Series C convertible
preferred stock..................... (56) -- -- (56)
Payments received on receivables on
sale of common stock................ -- 23 -- 23
Net loss.............................. -- -- (1,729) (1,729)
------- ----- ------- -------
BALANCES, September 30, 1996............ $ 20,263 $(113) $(2,487) $17,749
======= ===== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 81
ILEX ONCOLOGY, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
INCEPTION
(OCTOBER 1, 1994) NINE-MONTH PERIODS
THROUGH YEAR ENDED ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, --------------------
1994 1995 1995 1996
----------------- ------------ ------- --------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss...................................... $ (46) $ (712) $ (478) $ (1,729)
Adjustments to reconcile net loss to net cash
provided by (used in) operating
activities --
Provision for uncollectible receivables..... -- 123 120 --
Depreciation and amortization............... 2 25 18 77
Change in assets and liabilities --
(Increase) decrease in assets --
Accounts receivable.................... (1,015) 172 280 (276)
Prepaid expenses and other............. (7) (387) (288) (113)
Increase (decrease) in liabilities --
Accounts payable....................... 380 7 536 (9)
Accrued liabilities.................... 577 269 (24) 53
Deferred revenue....................... 67 93 238 308
Other long-term liabilities............ -- -- -- 173
------- ------- ------- --------
Net cash provided by (used in) operating
activities.................................. (42) (410) 402 (1,516)
------- ------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable securities, net....... -- -- -- (9,749)
Purchase of property and equipment............ (40) (468) (154) (370)
------- ------- ------- --------
Net cash used in investing activities....... (40) (468) (154) (10,119)
------- ------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock for cash............. -- 66 66 --
Repayments of receivables on sale of common
stock....................................... -- 5 4 23
Issuance of Series B preferred stock.......... -- 10,865 10,865 --
Issuance of Series C preferred stock.......... -- -- -- 10,000
Stock issuance costs paid..................... -- (656) (656) (56)
Capital contribution by CTRC Research at
inception................................... 11 -- -- --
Advances from related party................... 150 155 155 --
Repayment of advances from related party...... -- -- -- (305)
------- ------- ------- --------
Net cash provided by financing activities... 161 10,435 10,434 9,662
------- ------- ------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................... $ 79 $ 9,557 $10,682 $ (1,973)
CASH AND CASH EQUIVALENTS, beginning of
period........................................ -- 79 79 9,636
------- ------- ------- --------
CASH AND CASH EQUIVALENTS, end of period........ $ 79 $ 9,636 $10,761 $ 7,663
------- ------- ------- --------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for --
Interest.................................... $ 1 $ 20 $ 19 $ 10
Income taxes................................ -- -- -- --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 82
ILEX ONCOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995 AND SEPTEMBER 30, 1995 AND 1996
(AMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION,
PER SHARE INFORMATION OR AS OTHERWISE INDICATED)
1. ORGANIZATION AND OPERATIONS:
ILEX Oncology, Inc. (the "Company"), formerly Biovensa, Inc., was
incorporated in December 1993 under the laws of the State of Delaware. The
Company was incorporated as a for-profit, wholly owned subsidiary of the CTRC
Research Foundation ("CTRC Research"), a nonprofit organization.
The Company is a drug development company focused exclusively on oncology.
The Company is focused primarily in the areas of identification, development,
manufacturing and regulatory approval of oncology compounds to develop cancer
therapeutics, build a chemoprevention product platform and serve as a
value-added provider of contract development services. In addition to its
proprietary product development programs, the Company offers contract research
services to both the pharmaceutical and biotechnology industries.
Currently, the Company has no products available for sale and expects to
have only one product available to be marketed in the near future. The Company's
proposed products are primarily in the development stage and will require
extensive clinical testing prior to submission of any regulatory application for
commercial use. As well, the Company has incurred net losses to date. The
Company has not generated any revenues from product sales to date, and there can
be no assurance that revenues from product sales will be achieved. The Company's
ability to achieve a profitable level of operations in the future will depend in
large part on its completing development of its compounds, obtaining regulatory
approvals for such compounds, commercializing these potential products through
marketing agreements with other companies or, if the Company chooses, marketing
such compounds independently, successfully manufacturing such compounds,
achieving market acceptance of such compounds and expanding its contract
research services business. There can be no assurance that the Company will ever
be successful in developing such compounds, obtaining such approvals, bringing
such compounds to market, developing sales, marketing or distribution
capabilities, manufacturing such products, generating market acceptance or
expanding its contract research services business.
The Company may require substantial additional funds to conduct research
and development, to develop further its potential pharmaceutical products, to
manufacture and market any pharmaceutical products that may be developed and to
expand its contract research services business. The Company expects its capital
and operating expenditures to increase substantially over the next several
years. The Company has no current sources of funding beyond the proceeds from
the IPO (see Note 13), its collaborative agreements with its strategic partners,
its drug development service operations, existing cash and cash equivalents and
investments in marketable securities. The Company believes that the estimated
net proceeds of the IPO, its collaborative agreements with strategic partners,
its contract research services, existing cash and cash equivalents and
investments in marketable securities will satisfy its cash requirements for the
foreseeable future. There can be no assurance, however, that additional funds
will be available on acceptable terms, if at all.
Although it was incorporated in December 1993, the Company did not commence
operations until October 1, 1994, after CTRC Research's assignment to the
Company of certain rights and assets, including CTRC Research's advanced drug
development and manufacturing programs.
The Company changed its name to ILEX Oncology, Inc., on December 22, 1994.
Prior to 1996, the Company had been in the development stage.
F-7
<PAGE> 83
ILEX ONCOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
Product Development -- Revenues from drug development studies are based on
the time incurred on such studies and recognized on a percentage-of-completion
basis. The Company is reimbursed for investigator costs based on actual costs
incurred or predetermined rates and out-of-pocket costs incurred during the
performance of the study. Revenues related to the milestone payments of the drug
development studies are recognized based on the completion of the milestone
measurements. Revenues from license fees related to drug development studies are
recognized upon execution of the related contract.
Contract Research Services -- Revenues from contract research services are
related to both fixed price and hourly based customer contracts and are
recognized on a percentage-of-completion basis or as such services are
performed.
Property and Equipment
Property and equipment are reported at cost and depreciated over the
estimated useful lives of the individual assets using the straight-line method.
Leasehold improvements represent capitalized employee salaries and other
miscellaneous costs incurred to bring the leased cGMP (current Good
Manufacturing Practices) facility (Note 10) into use. Leasehold improvements are
amortized over the lesser of the life of the lease or the useful life of the
related property. Expenditures for maintenance and repairs are charged to
expense as incurred. The estimated lives used in computing depreciation and
amortization are as follows:
<TABLE>
<S> <C>
Office equipment.............................................. 3 - 10 years
Lab equipment................................................. 5 - 10 years
Leasehold improvements........................................ 15 years
</TABLE>
Deferred Revenue
Deferred revenue represents advances for services not yet rendered under
contract services and billings in excess of revenue recognized.
Investments in Marketable Securities
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," requires that investments in
debt securities and marketable equity securities be designated as trading, held
to maturity or available for sale. At September 30, 1996, marketable debt
securities have been categorized as held to maturity and are stated at amortized
cost, as these securities have staggering maturity dates, and management of the
Company does not intend to liquidate these securities before maturity.
Marketable debt securities with an original maturity of less than one year are
classified in the balance sheet as current assets, while securities with a
maturity of greater than one year are classified as long-term assets.
Credit Risk and Major Customer
The Company's accounts receivable are from pharmaceutical and biotechnology
companies. Based on the Company's evaluation of the collectibility of these
accounts receivable, an allowance for doubtful accounts of $0, $123 and $123 was
necessary as of December 31, 1994 and 1995, and September 30, 1996,
respectively. The remaining accounts receivable are from pharmaceutical and
biotechnology
F-8
<PAGE> 84
ILEX ONCOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
companies that are financially strong and, thus, the Company believes the
exposure to credit risk related to the remaining accounts receivable is
minimized.
From inception through December 31, 1994, the year ended December 31, 1995,
and the nine-month periods ended September 30, 1995 and 1996, 85 percent, 84
percent, 82 percent and 68 percent, respectively, of revenue arose from one
customer.
Estimates in Financial Statements
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 may differ from those estimates.
Income Taxes
Deferred tax liabilities and assets are recorded based on enacted income
tax rates that are expected to be in effect in the period in which the deferred
tax liability or asset is expected to be settled or realized. A change in the
tax laws or rates results in adjustments to the deferred taxes in the period in
which the tax laws or rates are changed.
The Company has incurred losses since inception for both book and tax
purposes as of September 30, 1996. Accordingly, no income taxes have been
provided for in the consolidated financial statements for the period from
inception to December 31, 1994, and the year ended December 31, 1995, and the
nine-month periods ended September 30, 1995 and 1996.
Statements of Cash Flows
The Company considers all highly liquid investments with maturities of
three months or less at the date of purchase to be cash equivalents.
Noncash financing and investing activities for the period from October 1,
1994, to December 31, 1994, included CTRC Research's assignment of certain
rights and assets to the Company and the Company's assumption of certain
liabilities. In connection with this assignment in 1994, the Company recorded
the following balances as reflected on the books and records of CTRC Research:
<TABLE>
<S> <C>
Office equipment..................................................... $ 27
Accrued subcontractor costs.......................................... 6
Accrued liabilities.................................................. (44)
Deferred revenue..................................................... (11)
----
Contributed deficit.................................................. $(22)
====
</TABLE>
Noncash financing and investing activities for the year ended December 31,
1995, included the sale of $208 of common stock in exchange for a note
receivable for the same amount. (See Note 5.)
Net Loss Per Share
Net loss per share has been computed using the weighted average number of
shares of common stock outstanding during the period, as adjusted for the
1.75161005882673 for 1 reverse stock split discussed in Note 13. Common
equivalent shares attributable to convertible preferred stock, stock options and
warrants are excluded from the computation as their effect is antidilutive.
However,
F-9
<PAGE> 85
ILEX ONCOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
convertible preferred stock, common stock, stock options and warrants issued
prior to the initial public offering (the "IPO") with a price below the
estimated IPO price have been included as outstanding for all periods presented.
New Accounting Pronouncements
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," in June 1996. This
statement provides accounting and reporting standards for, among other things,
the transfer and servicing of financial assets, such as factoring receivables
with recourse. This statement is effective for transfers and servicing of
financial assets occurring after December 31, 1996, and is to be applied
prospectively. Earlier or retroactive application is not permitted. The Company
believes the adoption of this statement will not have an impact on the financial
condition or results of operations of the Company.
Reclassifications
Certain reclassifications have been made to prior year balances to conform
to current year financial statement presentation.
3. INVESTMENTS IN MARKETABLE SECURITIES:
Marketable securities due within one year and classified as current assets
at September 30, 1996, include the following:
<TABLE>
<CAPTION>
COST FAIR VALUE
------ ----------
<S> <C> <C>
Government securities........................................... $2,358 $2,357
====== ======
</TABLE>
Marketable securities due after one year through five years and classified
as noncurrent assets at September 30, 1996, include the following:
<TABLE>
<CAPTION>
COST FAIR VALUE
------ ----------
<S> <C> <C>
Government securities........................................... $7,391 $7,351
====== ======
</TABLE>
Gross unrealized holding gains and losses at September 30, 1996, were
approximately $21 and $62, respectively. For the purpose of determining gross
realized gains and losses, the cost of securities sold is based upon specific
identification.
4. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
In December 1991, Statement of Financial Accounting Standards No. 107,
"Disclosures About Fair Value of Financial Instruments" ("FAS 107"), was issued.
FAS 107 requires disclosures of the fair value of financial instruments. The
following methods and assumptions were used to estimate the fair value of each
class of financial instruments held by the Company.
Current assets and current liabilities -- The carrying value approximates
fair value due to the short maturity of these items.
Investment in marketable securities -- The fair value of marketable
securities is based on currently published market quotations.
F-10
<PAGE> 86
ILEX ONCOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. STOCKHOLDERS' EQUITY:
In April 1995, certain consultants and employees of the Company exercised
rights to purchase, in aggregate, 1,187,481 shares of common stock pursuant to
their respective consulting or employment agreements for $208. A portion of this
amount was paid in cash and a portion was financed by the Company. At September
30, 1996, notes receivable from the consultants and employees related to these
financings equaled $113. The notes receivable bear interest at an annual rate of
8 percent and mature in March 1999. Payments of principal and interest are due
quarterly with the remaining balance due at maturity. The notes receivable are
presented as a deduction from stockholders' equity for financial reporting
purposes.
Also in April 1995, the Company issued 2,991,477 shares of Series A
convertible preferred stock in exchange for certain rights and net assets
previously transferred to the Company as capital contributions by CTRC Research.
The rights and net assets previously transferred to the Company were recorded at
the carrying value of its predecessor as of the date of the transfer. Of the
shares issued, 2,782,069 were issued to CTRC Research, and 209,408 were issued
to the University of Texas Health Science Center at San Antonio.
The terms of the Series A convertible preferred stock provide for
cumulative annual dividends of approximately $0.26 per share that are payable at
the discretion of the board of directors, a liquidation preference of
approximately $3.24 per share plus accrued but unpaid dividends, an option to
convert into common stock on a one-share to one-share basis, automatic
conversion to common stock on a one-share to one-share basis upon the effective
completion of the Company's IPO (see Note 13), and various protective provisions
limiting, among other things, issuance of senior equity securities, any merger
or sale of substantially all the assets of the Company and restrictions on the
declaration and payment of dividends.
In September 1995, the Company effected a private placement of 3,101,448
shares of Series B convertible preferred stock. The terms of the Series B
convertible preferred stock provide for cumulative annual dividends of
approximately $0.28 per share that are payable at the discretion of the board of
directors, a liquidation preference of approximately $3.50 per share plus
accrued but unpaid dividends, an option to convert common stock on a one-share
to one-share basis, automatic conversion to common stock on a one-share to
one-share basis upon the effective completion of the Company's IPO (see Note
13), and various protective provisions comparable to those of the Series A
convertible preferred stock.
In July 1996, the Company effected a private placement of 1,309,424 shares
of Series C convertible preferred stock. The terms of the Series C convertible
preferred stock provide for cumulative annual dividends of approximately $0.61
per share that are payable at the discretion of the board of directors, a
liquidation preference of approximately $7.64 per share plus accrued but unpaid
dividends, an option to convert common stock on a one-share to one-share basis,
automatic conversion to common stock on a one-share to one-share basis upon the
effective completion of the Company's IPO (see Note 13), and various protective
provisions comparable to these of the Series A and Series B convertible
preferred stock.
6. STOCK OPTIONS AND STOCK PURCHASE WARRANTS:
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("FAS 123"), was issued. FAS 123
defines a fair value based method of accounting for employee stock options or
similar equity instruments and encourages all entities to adopt that method of
accounting for all of their employee stock compensation plans. Under the fair
value based method, compensation cost is measured at the grant date based on the
value of the award and is recognized over the service period of the award, which
is usually the vesting period. However, FAS 123 also allows entities to continue
to measure compensation costs for employee stock compensation plans
F-11
<PAGE> 87
ILEX ONCOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
using the intrinsic value method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25). The Company has adopted FAS
123 effective January 1, 1996, and has elected to remain with the accounting
prescribed by APB 25. The Company has made the required disclosures prescribed
by FAS 123.
During 1995, the Company adopted a stock option plan (the "Plan"). Under
the Plan, incentive stock options may be granted to key employees and
consultants of the Company as approved by a committee of the Company's board of
directors. The stock options granted as part of the consulting and employee
agreements described in Note 7 are covered by the Plan. Originally, the Company
had reserved 570,904 shares of common stock for issuance in accordance with the
Plan. In October 1996, the Company increased the number of authorized shares of
common stock reserved for issuance under the Plan to 1,141,807. Stock options
vest pursuant to the individual stock option agreements, usually 25 percent per
year beginning one year from the date of grant, with unexercised options
expiring 10 years from the date of grant.
A summary of the status of the Company's fixed stock option plan for the
year ended December 31, 1995, and the nine-month periods ended September 30,
1995 and 1996, and changes during the periods on those dates is presented below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------
DECEMBER 31, 1995 1995 1996
------------------ ------------------ ------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of
period................... -- $ -- -- $ -- 337,490 $ 2.41
Granted.................... 337,490 2.41 225,010 1.86 183,334 4.84
Exercised.................. -- -- -- -- -- --
Forfeited.................. -- -- -- -- (6,395) 3.50
------- ----- ------- ----- ------- -----
Outstanding, end of
period................... 337,490 $ 2.41 225,010 $ 1.86 514,429 $ 3.22
======= ===== ======= ===== ======= =====
Options exercisable at end
of period................ 41,981 $ 1.31 -- $ -- 56,255 $ 1.86
======= ===== ======= ===== ======= =====
Weighted average fair value
of options granted during
the period............... $ 1.09 $ 0.87 $ 2.68
===== ===== =====
</TABLE>
The following table summarizes the information about fixed stock options
outstanding at September 30, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------------ OPTIONS EXERCISABLE
WEIGHTED -------------------------
AVERAGE NUMBER WEIGHTED
REMAINING WEIGHTED EXERCISABLE AT AVERAGE
NUMBER CONTRACTUAL AVERAGE SEPTEMBER 30, EXERCISE
EXERCISE PRICES OUTSTANDING LIFE EXERCISE PRICE 1996 PRICE
--------------------------- ----------- ----------- -------------- -------------- --------
<S> <C> <C> <C> <C> <C>
$0.18...................... 110,826 8.7 years $ 0.18 27,707 $ 0.18
$3.50...................... 333,720 9.2 years $ 3.50 28,548 $ 3.50
$7.01...................... 69,883 9.9 years $ 7.01 -- $ 7.01
------- ------
514,429 9.3 years $ 3.26 56,255 $ 1.86
======= ======
</TABLE>
F-12
<PAGE> 88
ILEX ONCOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Because the Company has elected to remain with the accounting prescribed by
APB 25, no compensation cost has been recognized for its fixed stock option
plan. Had compensation cost for the Company's stock-based compensation plans
been determined on the fair value of the grant dates for awards under those
plans consistent with the method of FAS 123, the Company's net loss and loss per
share would have been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, ------------------
1995 1995 1996
------------ ------ -------
<S> <C> <C> <C>
Net loss
As reported.................................. $ (712) $ (478) $(1,729)
------- ------- --------
Pro forma.................................... $ (725) $ (478) $(1,819)
------- ------- --------
Loss per share
As reported.................................. $(0.09) $(0.06) $ (0.20)
------- ------- --------
Pro forma.................................... $(0.09) $(0.06) $ (0.22)
------- ------- --------
</TABLE>
The fair value of each option grant was estimated on the date of the grant
using the minimum value method as the Company was a nonpublic entity when such
options were granted. This value is the current stock price less the present
value of the exercise price for a stock that does not pay dividends. The
assumptions used for the minimum value computation for the year ended December
31, 1995, and the nine-month periods ended September 30, 1995 and 1996, are: the
risk free interest rates are 6.2 percent, 6.3 percent and 6.6 percent,
respectively; the exercise price is equal to the fair market value of the
underlying common stock at the grant date; the expected life of the option is
the term to expiration; and the common stock will pay no dividends. No
disclosures are presented for the period ended December 31, 1994, as no options
were issued at that date.
In connection with the private placement of Series B convertible preferred
stock, the Company issued a warrant for the purchase of 97,054 shares of common
stock at approximately $3.50 per share to the securities firm that assisted in
the private placement of Series B convertible preferred stock. The warrant may
be exercised in whole at any time or in part from time to time, prior to its
expiration in September 2000.
In connection with the private placement of Series C convertible preferred
stock, the Company issued 327,367 warrants for the purchase of common stock at
approximately $8.76 per share to the Series C convertible preferred
stockholders. The warrants may be exercised in whole at any time or in part from
time to time, prior to their expiration in July 2001.
In July 1996, the Company entered into a consultation agreement with a firm
for services related to the Company's proposed IPO (see Note 13). In connection
with this agreement, the Company issued to the firm a warrant for the purchase
of 28,546 shares of the Company's common stock at approximately $8.76 per share.
The warrant may be exercised in whole or in part from time to time, prior to its
expiration in July 2001.
In October 1996, the Company adopted a nonemployee directors' stock option
plan (the Directors' Plan). Under the Directors' Plan, each nonemployee director
is granted a one-time option equaling 17,128 shares of common stock. In October
and December 1996, the nonemployee directors were granted 119,896 options
exercisable at approximately $7.01 per share. These options vest at 1/48 per
month beginning from the date of grant, with unexercised options expiring 10
years from the date of grant.
F-13
<PAGE> 89
ILEX ONCOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. RELATED-PARTY TRANSACTIONS:
Pursuant to a services agreement, CTRC Research has agreed to perform
certain administrative and technical support services for the Company. For the
period from October 1, 1994, through December 31, 1994, the year ended December
31, 1995, and the nine-month periods ended September 30, 1995 and 1996, the
Company paid CTRC Research approximately $143, $313, $247 and $114,
respectively, for these services and reimbursement of salaries and benefits. As
described in Note 10, the Company has lease agreements with CTRC Research for
office space, a lab and the cGMP facility. For the period from inception through
December 31, 1994, the year ended December 31, 1995, and the nine-month periods
ended September 30, 1995 and 1996, the Company paid CTRC Research approximately
$5, $49, $22 and $30, respectively, related to these lease agreements. At
December 31, 1994 and 1995, and September 30, 1996, the Company had payables to
CTRC Research amounting to $166, $85 and $48, respectively, related to the
aforementioned services and lease agreements.
In November 1994, CTRC Research granted the Company a revolving line of
credit of $500 bearing interest at the prime rate plus 1/2 of 1 percent. The
line of credit provided the Company with sufficient working capital to initiate
operations. At December 31, 1995, the outstanding balance and the interest rate
on this line of credit were $305 and 9 percent, respectively. In February 1996,
the Company repaid the entire outstanding balance on the line of credit. In
1996, the Company and CTRC Research terminated the line of credit.
In March 1995, the Company entered into a subordinated option agreement
with CTRC Research. The agreement gives the Company the subordinated option to
acquire licenses or certain marketable rights, as defined in the agreement,
owned by CTRC Research. The subordinated option for any particular marketable
right is exercisable only after a third party, with which CTRC Research has
contracted, elects not to exercise its primary option on the same marketable
right. The subordinated option agreement expires in fiscal year 2000.
Subcontractors provide the Company with consulting services and preclinical
and clinical testing related to certain of its contracts. Such costs may be
included in either research and development costs or subcontractor costs in the
accompanying financial statements. During the period from October 1, 1994,
through December 31, 1994, the year ended December 31, 1995, and the nine-month
periods ended September 30, 1995 and 1996, the Company incurred the following
expenses for subcontracting costs:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------- ---------------
1994 1995 1995 1996
---- ---- ---- ------
<S> <C> <C> <C> <C>
CTRC Research................................... $ 42 $140 $ 48 $ 257
Director of the Company......................... 36 136 122 205
Stockholders.................................... -- 142 88 271
Company owned by officer/director
of the Company................................ 111 42 42 276
---- ---- ---- ------
$189 $460 $300 $1,009
==== ==== ==== ======
</TABLE>
F-14
<PAGE> 90
ILEX ONCOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1994 and 1995, and September 30, 1996, the following
subcontractor costs were payable to related parties:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
CTRC Research................................................ $ 9 $ 5 $ 60
Director of the Company...................................... 36 34 104
Stockholders................................................. -- 24 22
Company owned by officer/director of the Company............. 81 21 37
---- --- ----
$126 $84 $223
==== === ====
</TABLE>
During 1995, the Company entered into consulting services agreements with
two individuals. Both consultants have been designated as co-chairmen of the
Company's Scientific Advisory Board and one of the consultants is also a
director of the Company. Under the terms of the agreements, the consultants are
entitled to receive annual retainers and fixed daily fees for full days of
service or hourly fees for partial days of service. In addition, the consultants
were granted the right to purchase common stock as stipulated in the agreements.
As discussed in Note 5, the consultants exercised this right and financed a
portion of the common stock purchases with a promissory note to the Company.
Each consultant was also granted stock options to acquire 28,546 shares of
common stock. (See Note 6.) The consulting services agreements expire during
fiscal year 1998.
The Company maintains employment agreements with four employees. The terms
of the four agreements provide for base salaries and benefits. Under two of
these agreements, the employees were granted the right to purchase common stock.
As discussed in Note 5, the two employees exercised this right and financed a
portion of the common stock purchases with a promissory note to the Company.
Additionally, each of these two employees was granted stock options to acquire
28,546 shares of common stock. (See Note 6.) These two agreements expire in
1998.
8. LICENSING AGREEMENTS:
In 1994, the Company obtained two licensing agreements for oncology
compounds from CTRC Research in conjunction with the assignment described in
Note 1. During 1995 and through September 30, 1996, the Company entered into
five additional licensing agreements. In November 1996, the Company entered into
one additional licensing agreement for an oncology compound. All of the
licensing agreements grant the Company the right to develop and market the
oncology compounds covered by such agreements and to license the rights to such
compounds to other third parties.
Under the terms of the agreements, the Company is required to pay upfront
fees and/or annual fees, as defined in the agreements. For the period from
October 1, 1994, through September 30, 1996, the Company paid upfront fees
and/or annual fees totaling $585. In addition, the Company must also pay
royalties upon commercialization of the compounds. Under certain agreements, the
Company is required to make milestone payments, as defined in the agreements. At
September 30, 1996, the Company had not attained any of the events that require
a milestone payment.
Pursuant to an agreement with Sanofi, the Company granted Sanofi a
worldwide option to license and use the Company's information relating to two of
its oncology compounds for the development and commercialization of such
compounds. In connection with the agreement, Sanofi agreed to reimburse the
Company for costs incurred in the development of the compounds. In addition, the
Company is entitled to certain milestone payments and royalties on net sales of
the compounds.
In December 1994, Sanofi notified the Company of its decision to terminate
support for the development of one of the oncology compounds. In 1995, Sanofi
funded the wind-down effort and paid
F-15
<PAGE> 91
ILEX ONCOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
for certain future obligations the Company incurred with respect to this
compound. In October 1996, the Company reached an agreement with Janssen
Pharmaceutica ("Janssen"), an affiliate of Johnson & Johnson Development
Corporation, whereby the Company granted Janssen an option to license and use
the Company's information relating to this compound for its development and
commercialization. In connection with the agreement, Janssen agreed to reimburse
the Company for costs incurred in the development of the compound not to exceed
a predetermined amount. In addition, the Company is entitled to certain
milestone payments and royalties based on various levels of manufacturing costs
of marketable product, as defined in the agreement.
9. EMPLOYEE BENEFITS:
The Company has an employee benefit plan and trust for certain employees
who meet specified length of service requirements. The plan qualifies under
Section 401(k) of the Internal Revenue Code as a salary reduction plan.
Employees may elect to contribute a certain percentage of their salary on a
before-tax basis. Employees are immediately fully vested in their contributions
and begin vesting in employer contributions after one year of service, as
defined in the plan document. The plan is a defined contribution plan with
employer contributions made solely at the discretion of the board of directors.
From inception through September 30, 1996, no employer contributions had been
made by the Company. During the period from inception through December 31, 1994,
the year ended December 31, 1995, and the nine-month periods ended September 30,
1995 and 1996, administrative expenses incurred by the Company related to this
plan were not significant.
In December 1990, Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" ("FAS
106"), was issued. FAS 106 requires employers to recognize the obligation to
provide postretirement benefits to employees during the periods that employees
render service to earn the benefit. Previously, generally accepted accounting
principles provided that employers could report such expenses in the period the
related costs were paid. The Company does not provide such benefits to its
employees, thus, FAS 106 has no effect on the results of operations of the
Company.
In November 1992, Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits" ("FAS 112"), was issued. FAS
112 requires employers to recognize the obligation to provide benefits to former
or inactive employees after employment but before retirement, if certain
conditions are met. The Company does not provide such benefits to its employees,
thus, FAS 112 has no effect on the results of operations of the Company.
10. OPERATING LEASES:
The Company has several noncancelable operating leases for office space and
equipment. As described in Note 7, one of the leases is with CTRC Research, a
related party. Rent expense associated with these leases was approximately $15,
$77, $56 and $238 for the period from inception to December 31, 1994, the year
ended December 31, 1995, and the nine-month periods ended September 30, 1995 and
1996, respectively.
During 1995, the Company entered into a lease agreement with CTRC Research
and the Texas Research and Technology Foundation ("TRTF") for the use of the
cGMP facility. The cGMP facility will be utilized for the manufacturing of
oncology drugs. Under the terms of the lease agreement, which expires in 2010,
the Company is required to make monthly payments commencing in 1998. The
payments will be based on a fixed monthly rate plus a percentage of gross sales,
as defined in the agreement.
F-16
<PAGE> 92
ILEX ONCOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
At September 30, 1996, future minimum lease payments under all operating
leases are as follows:
<TABLE>
<CAPTION>
RELATED PARTY OTHER TOTAL
------------- ------ ------
<S> <C> <C> <C>
Three months ending December 31, 1996.............. $ 7 $ 75 $ 82
Year ending December 31 --
1997............................................. 28 502 530
1998............................................. 120 644 764
1999............................................. 120 658 778
2000............................................. 120 671 791
2001............................................. 120 489 609
Thereafter....................................... 1,070 1,070 2,140
</TABLE>
In February 1996, the Company entered into a noncancelable lease agreement
for equipment to be used in the cGMP facility. The lease requires the Company to
make monthly payments of approximately $16 and expires in 2001. Under the terms
of the agreement, the Company is required to maintain $825 in the form of U.S.
Treasury notes as collateral for the equipment. The U.S. Treasury notes
collateral requirement will be reduced, as defined in the lease agreement,
through the life of the lease.
11. INCOME TAXES:
As of September 30, 1996, the Company had net operating loss carryforwards
of approximately $2,256 for U.S. federal income tax purposes which are available
to reduce future taxable income of which $35, $578 and $1,643 will expire in
2009, 2010 and 2011, respectively. The tax effects of significant temporary
differences representing deferred income tax assets and liabilities are as
follows as of December 31, 1995, and September 30, 1996:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Net operating loss carryforward......................... $ 208 $ 767
Expense provisions...................................... 53 79
Other tax differences, net.............................. (11) (9)
Valuation allowance..................................... (250) (837)
----- -----
Total deferred income tax assets.............. $ -- $ --
===== =====
</TABLE>
The valuation allowance as of December 31, 1995, and September 30, 1996,
represents tax benefits of certain future net operating loss carryforwards which
were not realizable at that date.
The Company's income tax benefit at the statutory federal income tax rate
for the period from Inception to December 31, 1994, and the year ended December
31, 1995, and the nine-month period ended September 30, 1996, differs from the
actual income tax benefit of $0 for those periods, as the Company has provided a
valuation reserve equal to the income tax benefit amount computed at the
statutory federal tax rate.
The availability of the NOL carryforward to reduce U.S. federal taxable
income is subject to various limitations under the Internal Revenue Code of 1986
(the "Code"), as amended, in the event of an ownership change as defined in
Section 382 of the Code. The Company has not experienced a limitation of its NOL
carryforward as a result of the changes in ownership. The Company's management
believes that the IPO (see Note 13) will result in a change in control, however,
it will not materially limit its ability to utilize NOL carryforwards in the
future.
F-17
<PAGE> 93
ILEX ONCOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
12. COMMITMENTS AND CONTINGENCIES:
CTRC Research is attempting to obtain a private letter ruling from the U.S.
Internal Revenue Service ("IRS") to confirm certain tax implications to CTRC
Research associated with the formation of the Company by CTRC Research. A
provision in the employment and consulting agreements entered into between the
Company and certain individuals requires the Company and such individuals to
renegotiate the terms of such agreements in the event that CTRC Research is
unable to obtain a favorable private letter ruling from the IRS. If the Company
is unable to successfully negotiate the terms of such agreements, they
automatically terminate. The Company's management does not believe that the
ultimate outcome of the private letter ruling, or any impact it may have on
employment agreements between the Company and certain individuals, will have a
material adverse effect on the financial condition of the Company.
13. SECURITIES OFFERING:
The Company has filed a Registration Statement with the Securities and
Exchange Commission for an underwritten offering of 2,500,000 shares of common
stock (the "Offering"). In connection with the Offering, the board of directors
approved a 1.75161005882673 for 1 reverse stock split of the Company's common
stock effective upon the effective date of the Offering. All common stock,
convertible preferred stock, options, warrants and per share information
included in the accompanying financial statements has been adjusted to give
retroactive effect to the split. The Company expects to use the net proceeds of
the offering to fund its research and development activities, which may include
the formation of joint ventures and other collaborative relationships. In
addition, the Company intends to use some of the proceeds of this offering to
expand its contract research services through internal growth, including the
acquisition of information technology and expansion of other strategic
collaborations. The Company intends to use the remainder of the proceeds of this
offering for working capital and general corporate purposes. Pending the
aforementioned uses, the Company intends to invest the net proceeds of this
offering in government securities and investment-grade, interest-bearing
instruments.
14. SUBSEQUENT EVENTS:
In November 1996, the Company effected a private placement of 113,953
shares of Series D convertible preferred stock. The terms of the Series D
convertible preferred stock provide for cumulative annual dividends of
approximately $0.72 per share that are payable at the discretion of the board of
directors, a liquidation preference of approximately $8.78 per share plus
accrued but unpaid dividends, an option to convert common stock on a one-share
to one-share basis, automatic conversion to common stock on a one-share to
one-share basis upon the effective completion of the Company's IPO (see Note
13), and various protective provisions comparable to those of the Series A,
Series B and Series C convertible preferred stock.
In December 1996, the Company effected a private placement of 475,753
shares of Series E convertible preferred stock. The terms of the Series E
convertible preferred stock provide for cumulative annual dividends of
approximately $0.48 per share that are payable at the discretion of the board of
directors, a liquidation preference of approximately $10.51 per share plus
accrued but unpaid dividends, an option to convert common stock on a one-share
to one-share basis, automatic conversion to common stock on a one-share to
one-share basis upon the effective completion of the Company's IPO (see Note
13), and various protective provisions comparable to those of the Series A,
Series B, Series C and Series D convertible preferred stock.
In connection with the private placement of Series E convertible preferred
stock, the Company entered into an agreement with an entity for an equally-owned
joint venture for research collaboration endeavors. Under the agreement, the
Company will provide the joint venture with $1.0 million in initial funding.
F-18
<PAGE> 94
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATES AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH SOLICITATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 7
Use of Proceeds........................ 20
Dividend Policy........................ 20
Capitalization......................... 21
Dilution............................... 22
Selected Financial Data................ 23
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 24
Business............................... 28
Management............................. 54
Certain Transactions................... 63
Principal Stockholders................. 65
Description of Capital Stock........... 67
Shares Eligible for Future Sale........ 70
Underwriting........................... 71
Legal Matters.......................... 72
Experts................................ 72
Additional Information................. 73
Index to Financial Statements.......... F-1
</TABLE>
---------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
2,500,000 SHARES
ILEX ONCOLOGY, INC.
COMMON STOCK
($.01 PAR VALUE)
[LOGO]
SALOMON BROTHERS INC
COWEN & COMPANY
SMITH BARNEY INC.
PROSPECTUS
DATED , 1997
<PAGE> 95
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses payable by the
Registrant in connection with the issuance and distribution of the securities
being registered hereby (other than underwriting discounts and commissions).
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee............................. $12,888
NASDAQ National Market System application fee............................. 17,500
NASD filing fee........................................................... 4,238
Legal fees and expenses................................................... *
Transfer Agent and Registrar fee and expenses............................. *
Accounting fees and expenses.............................................. *
Blue sky fees and expenses (including counsel fees)....................... *
Printing costs............................................................ *
Miscellaneous............................................................. *
-------
Total........................................................... $ *
=======
</TABLE>
- ---------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a Delaware corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. A
Delaware corporation may indemnify any person under such Section in connection
with a proceeding by or in the right of the corporation to procure judgment in
its favor, as provided in the preceding sentence, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action, except that no indemnification shall be
made in respect thereof unless, and then only to the extent that, a court of
competent jurisdiction shall determine upon application that such person is
fairly and reasonably entitled to indemnity for such expenses as the court shall
deem proper. A person is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper. A Delaware corporation must indemnify
any person who was successful on the merits or otherwise in defense of any
action, suit or proceeding or in defense of any claim, issue or matter in any
proceeding, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation or is or was serving at the request of the
corporation, against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith. A Delaware corporation may
pay for the expenses (including attorneys' fees) incurred by an officer or
director in defending a proceeding in advance of the final disposition upon
receipt of an undertaking by or on behalf of such officer or director to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation.
Section 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director shall not be personally liable to
the corporation or its stockholders for monetary damages
II-1
<PAGE> 96
for a breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for any acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) in respect of certain unlawful
dividend payments or stock redemptions or repurchases, or (iv) for any
transaction from which the director derived an improper personal benefit.
Article 10 of the Company's Certificate of Incorporation, as amended, eliminates
the liability of directors to the fullest extent permitted by Section 102(b)(7)
of the DGCL. The DGCL permits the purchase of insurance on behalf of directors
and officers against any liability asserted against directors and officers and
incurred by such persons in such capacity, or arising out of their status as
such, whether or not the corporation would have the power to indemnify directors
and officers against such liability.
The Registrant also has a policy insuring its directors and officers
against certain liabilities, including liabilities under the Securities Act.
Section of the Underwriting Agreement (contained in Exhibit 1.1
hereto) provides for indemnification by the Underwriters of directors and
officers of the Registrant against certain liabilities, including liabilities
under the Securities Act of 1933, under certain circumstances.
See "Item 17. Undertakings" for a description of the Securities and
Exchange Commission's position regarding such indemnification provisions.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
During the last three years, the Registrant sold the following securities
which were not registered under the Securities Act of 1933, as amended (the
"Act"). All share numbers have been adjusted to reflect a 1-for-1.75161005882673
reverse stock split that will occur before the closing of this offering.
The Company was incorporated in December 1993, and January 1994, issued 58
shares of Common Stock to CTRC Research Foundation in exchange for a $1,000
capital contribution.
In November 1994 and January and March 1995, the Company contracted to sell
1,187,481 shares at $0.18 per share of Common Stock to the founders of the
Company, Richard L. Love, Daniel D. Von Hoff, Alexander L. Weis and Charles A.
Coltman. The shares were subsequently issued in early 1995. Each of these sales
was made pursuant to Section 4(2) of the Securities Act.
In April 1995, the Company issued to CTRC Research Foundation and the
University of Texas Health Sciences Center at San Antonio 2,991,477 of its
Series A Convertible Preferred Stock in exchange for certain assets and rights
transferred to the Company as capital contributions, pursuant to Section 4(2) of
the Securities Act.
In September 1995, the Company issued 3,101,448 shares of Series B
Convertible Preferred Stock to various sophisticated private investors, pursuant
to Section 4(2) of the Securities Act and Regulation D thereunder. The aggregate
purchase price for the Series B Convertible Preferred Stock was $10,865,000.
In July 1996, the Company issued to Perseus Pharmaceuticals, L.L.C., Drug
Royalty Corporation, Inc. and certain holders of the Company's Series B
Convertible Preferred Stock, 1,309,424 shares of its Series C Convertible
Preferred Stock and warrants (the "Series C Warrants") for the purchase of
327,367 shares of Common Stock for an aggregate purchase price of $10 million,
pursuant to Section 4(2) of the Securities Act and Regulation D thereunder.
The Series C Warrants entitle the holder, upon exercise thereof, to
purchase from the Company shares of its Common Stock at a price per share of
$8.76. The holders of the Series C Warrants are provided certain registration
rights that arise upon the Company's proposal to register, subsequent to its
initial public offering, the Common Stock for sale to the public under the
Securities Act. The Series C Warrants are also subject to certain adjustments
which may be made to the number of shares purchasable resulting from stock
splits, issuance of additional Common Stock, issuance of additional warrants or
other rights or issuance of securities convertible into Common Stock by the
Company. The
II-2
<PAGE> 97
Company has also issued warrants to Vector Securities International, Inc. and
Chestnut Partners, Inc. for the purchase of 97,054 and 28,546 shares of Common
Stock, respectively. The warrants issued to Vector Securities International,
Inc. were issued in September 1995 in consideration of services rendered in
connection with the offering of the Series B Convertible Preferred Stock and
have an exercise price of $3.50 per share. The warrant issued to Chestnut
Partners, Inc. was issued in July 1996 in consideration of services rendered in
connection with this offering on substantially the same terms as the Series C
Warrant. See "Description of Capital Stock -- Warrants."
In November 1996, the Company issued to Johnson & Johnson Development
Corporation, pursuant to Section 4(2) of the Securities Act and Regulation D
thereunder, 113,953 shares of Series D Convertible Preferred Stock, for an
aggregate purchase price of $1.0 million.
In December 1996, the Company issued to MPI Enterprises, L.L.C., pursuant
to Section 4(2) of the Securities Act and Regulation D thereunder, 475,753
shares of Series E Convertible Preferred Stock, for an aggregate purchase price
of $5.0 million.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NUMBER IDENTIFICATION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C> <S>
1.1* -- Form of Underwriting Agreement
3.1* -- Amended and Restated Certificate of Incorporation of the Company
3.2 -- Bylaws of the Company, as amended
4.1* -- Specimen of certificate representing Common Stock, $.01 par value, of
the Company
5.1* -- Opinion of Fulbright & Jaworski L.L.P. regarding legality of the
Common Stock being registered
10.1 -- Revolving Promissory Note dated November 18, 1994, in the original
principal amount of $500,000, payable by the Company to CTRC Research
Foundation
10.2 -- Loan Agreement dated November 18, 1994 between the Company and CTRC
Research Foundation
10.3* -- Letter Agreement dated December 4, 1996 between the Company and CTRC
Research Foundation terminating the line of credit
10.4 -- Assignment of Rights and Assets dated November 1994 from CTRC
Research Foundation to the Company
10.5 -- First Amendment to Assignment of Rights and Assets dated September
1995 between ILEX Oncology, Inc. and CTRC Research Foundation
10.6 -- Services Agreement dated November 18, 1994 between CTRC Research
Foundation and the Company
10.7 -- Covenant Not To Sue dated September 1995 between CTRC Research
Foundation and the Company
10.8 -- Office Lease dated October 1, 1994 between the Company and CTRC
Research Foundation
10.9 -- Lease Agreement dated October 1, 1994 between Texas Research and
Technology Foundation and the Company
10.10* -- Lease Agreement dated September 1, 1995 between CTRC Research
Foundation and the Company
10.11* -- Commercial Industrial Sublease Agreement between TRTF/CTRCRF Building
Corporation and the Company
</TABLE>
II-3
<PAGE> 98
<TABLE>
<CAPTION>
EXHIBIT NUMBER IDENTIFICATION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C> <S>
10.12 -- Agreement dated November 1, 1994 [cGMP Plant] by and among Texas
Research and Technology Foundation, CTRC Research Foundation,
TRTF/CTRCRF Building Corporation and the Company
10.13+* -- License Agreement [Piritrexim Isethionate] dated March 31, 1995 by
and among Burroughs Wellcome Co., The Wellcome Foundation Limited and
the Company
10.14+* -- License Agreement [Oxypurinol] dated March 31, 1995 by and among
Burroughs Wellcome Co., The Wellcome Foundation Limited and the
Company
10.15+* -- License Agreement [Crisnatol Mesylate] dated November 1, 1993 by and
among Burroughs Wellcome Co., The Wellcome Foundation Limited and
CTRC Research Foundation
10.16+* -- Amendment and Agreement with Respect to License Agreement [crisnatol
mesylate] dated October 5, 1996 amending License Agreement dated
November 1, 1993 by and among Burroughs Wellcome Co., The Wellcome
Foundation Limited and CTRC Research Foundation
10.17+* -- License Agreement [Eflornithine] between ILEX Oncology, Inc. and
Marion Merrell Dow Inc. and its subsidiaries Merrell Dow
Pharmaceuticals Inc. and Marion Merrell Dow France Et Cie
10.18+* -- Development and License Agreement [crisnatol mesylate] dated October
11, 1996 by and among the Company and Janssen Pharmaceutica, N.V.
10.19+* -- License Agreement [Farnesyl Transferase Inhibitors] dated July 1,
1996 by and between Sother Limited and the Company
10.20+* -- License Agreement [RP 60475] dated November 18, 1994 between Rhone-
Poulenc Rorer S.A. and the Company
10.21+* -- Agreement dated November 25, 1996 between Hoffmann-La Roche, Inc. and
the Company [RO23-7553]
10.22+* -- License and Development Agreement [MGBG] dated October 1, 1992
between Sterling Winthrop Inc. and CTRC Research Foundation
10.23+* -- Research Collaboration Agreement dated December 12, 1995 between CTRC
Research Foundation and Sanofi
10.24+* -- Consent, Acknowledgment and Waiver Agreement dated September 1994 by
and among CTRC Research Foundation, Sterling Winthrop Inc. and the
Company
10.25+* -- Drug Development Project Agreement [4-hydroperoxycyclophosphamide]
effective April 1, 1993 between CTRC Research Foundation and MGI
Pharma, Inc.
10.26 -- Material Transfer Agreement [Dihydro-5-Azacytidine] dated March 9,
1995 between the Company and the National Institutes of Health
10.27+* -- Patent License Agreement--Exclusive [Methyl-Glyoxal
Bis-Guanylhydrazone] dated September 8, 1991 between the National
Institutes of Health and Cancer Therapy and Research Center
10.28* -- Agreement for Services dated February 15, 1995 between the Company
and The University of Texas Health Science Center at San Antonio
10.29 -- Agreement for Services effective September 20, 1994 between CTRC
Research Foundation and The University of Texas Health Science Center
at San Antonio
10.30 -- Master Services Agreement (Preclinical Services) dated June 11, 1996
by and between the Company and Lipitek International, Inc.
</TABLE>
II-4
<PAGE> 99
<TABLE>
<CAPTION>
EXHIBIT NUMBER IDENTIFICATION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C> <S>
10.31 -- Letter Agreement dated September 28, 1995 between Cross Atlantic
Partners K/S, Boston Capital Ventures III. Limited Partnership,
Rovent II Limited Partnership, CTRC Research Foundation and the
Company
10.32 -- Warrant for the purchase of shares of Common Stock dated September
1995 between the Company and Vector Securities International, Inc.
10.33* -- Warrant for the Purchase of shares of Common Stock dated July 1996
between the Company and Chestnut Partners, Inc.
10.34 -- Institute for Drug Development Program Agreement dated September 20,
1994 between CTRC Research Foundation and The University of Texas
Health Science Center at San Antonio
10.35 -- Subordinated Option Agreement dated March 27, 1995 between CTRC
Research Foundation and the Company
10.36 -- Employment Agreement dated November 2, 1994 between Richard L. Love
and the Company
10.37* -- Amendment to Employment Agreement dated April 4, 1995 between Richard
L. Love and the Company
10.38* -- Amendment to Employment Agreement dated September 27, 1995 between
Richard L. Love and the Company
10.39 -- Employment Agreement dated November 2, 1994 between Alexander L.
Weis, Ph.D. and the Company
10.40* -- Amendment to Employment Agreement dated April 10, 1995 between
Alexander L. Weis, Ph.D. and the Company
10.41* -- Amendment to Employment Agreement dated September 27, 1995 between
Alexander L. Weis, Ph.D. and the Company
10.42 -- Employment Agreement dated August 13, 1996 between James R. Koch and
the Company
10.43 -- Employment Agreement dated August 27, 1996 between Pedro
Santabarbara, M.D., Ph.D. and the Company
10.44 -- Letter Agreement dated November 2, 1994 between Alexander L. Weis,
Ph.D. and the Company
10.45 -- Consulting Services Agreement dated March 16, 1995 between the
Company and Charles A. Coltman, Jr., M.D.
10.46 -- Consulting Services Agreement dated January 1, 1995 between the
Company and Daniel Von Hoff, M.D.
10.47* -- 1995 Stock Option Plan for the Company
10.48* -- 1996 Non-Employee Director Stock Option Plan for the Company
10.49* -- Form of Non-Employee Director Stock Option Agreement
10.50* -- Third Amended and Restated Registration Rights Agreement between the
Company, CTRC and the holders of the Series B, C, D and E Preferred
Stock
10.51* -- Convertible Preferred Stock Purchase Agreement dated September 29,
1995 among the Company and the holders of Series B Preferred Stock
10.52* -- Convertible Preferred Stock Purchase Agreement dated December 11,
1996 between the Company and MPI
10.53 -- Convertible Preferred Stock Purchase Agreement dated November 11,
1996 between the Company and Johnson & Johnson Development
Corporation
</TABLE>
II-5
<PAGE> 100
<TABLE>
<CAPTION>
EXHIBIT NUMBER IDENTIFICATION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C> <S>
10.54 -- Convertible Preferred Stock Purchase Agreement dated as of July 22,
1996 among the Company and the holders of Series C Preferred Stock
10.55* -- Form of Pledge Agreement between Cancer Therapy and Research Center
Endowment and each of Gary V. Woods, Ruskin C. Norman, M.D. and
Robert V. West, Jr., Ph.D.
11.1 -- Computation of Earnings Per Share
23.1 -- Consent of Arthur Andersen L.L.P.
23.2* -- Consent of Fulbright & Jaworski L.L.P. (included in 5.1)
24.1 -- Power of Attorney (included on signature page of initial filing of
this Registration Statement)
27 -- Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
+ Confidential treatment will be requested with respect to certain portions of
this exhibit. Omitted portions will be filed separately with the Securities
and Exchange Commission.
(b) Financial Statement Schedules:
All financial statement schedules, for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission, are
not required under the related instructions, are inapplicable or information
required is included in the financial statements and therefore have been
omitted.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions described in Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
Prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 101
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Antonio, State of Texas on December 11, 1996.
ILEX ONCOLOGY, INC.
By: /s/ RICHARD L. LOVE
---------------------------------
Richard L. Love
President and Chief Executive
Officer
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints Richard L. Love and James R. Koch and each of
them, his/her true and lawful attorneys-in-fact and agents with full power of
substitution, for him/her and in his/her name, place and stead in any and all
capacities, to sign the Registration Statement on Form S-1 of ILEX Oncology,
Inc. and any and all amendments thereto, including post-effective amendments,
and to file same, with all exhibits thereto, and all documents in connection
therewith, and any Registration Statement relating to this offering that is to
be effective upon filing pursuant to Rule 462(b) under the Securities Act of
1933, as amended, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them full power and authority to
do and perform each and every act and thing requisite and necessary to be done
to comply with the provisions of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his/her substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- -------------------------- ------------------
<C> <S> <C>
/s/ GARY V. WOODS Director December 11, 1996
- ---------------------------------------------
Gary V. Woods
/s/ RICHARD L. LOVE President, Chief Executive December 11, 1996
- --------------------------------------------- Officer and Director
Richard L. Love (Principal Executive
Officer)
/s/ ALEXANDER L. WEIS, Ph.D. Director December 11, 1996
- ---------------------------------------------
Alexander L. Weis, Ph.D.
/s/ JAMES R. KOCH Vice President and Chief December 11, 1996
- --------------------------------------------- Financial Officer
James R. Koch (Principal Financial and
Accounting Officer)
/s/ DANIEL D. VON HOFF, M.D. Director December 11, 1996
- ---------------------------------------------
Daniel D. Von Hoff, M.D.
</TABLE>
II-7
<PAGE> 102
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- -------------------------- ------------------
<C> <S> <C>
/s/ JOHN L. CASSIS Director December 11, 1996
- ---------------------------------------------
John L. Cassis
/s/ A. DANA CALLOW, JR. Director December 11, 1996
- ---------------------------------------------
A. Dana Callow, Jr.
/s/ RUSKIN C. NORMAN, M.D. Director December 11, 1996
- ---------------------------------------------
Ruskin C. Norman, M.D.
/s/ ROBERT V. WEST, JR., Ph.D. Director December 11, 1996
- ---------------------------------------------
Robert V. West, Jr., Ph.D.
/s/ JASON S. FISHERMAN, M.D. Director December 11, 1996
- ---------------------------------------------
Jason S. Fisherman, M.D.
</TABLE>
II-8
<PAGE> 103
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER IDENTIFICATION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C> <S>
1.1* -- Form of Underwriting Agreement
3.1* -- Amended and Restated Certificate of Incorporation of the Company
3.2 -- Bylaws of the Company, as amended
4.1* -- Specimen of certificate representing Common Stock, $.01 par value, of
the Company
5.1* -- Opinion of Fulbright & Jaworski L.L.P. regarding legality of the
Common Stock being registered
10.1 -- Revolving Promissory Note dated November 18, 1994, in the original
principal amount of $500,000, payable by the Company to CTRC Research
Foundation
10.2 -- Loan Agreement dated November 18, 1994 between the Company and CTRC
Research Foundation
10.3* -- Letter Agreement dated December 4, 1996 between the Company and CTRC
Research Foundation terminating the line of credit
10.4 -- Assignment of Rights and Assets dated November 1994 from CTRC
Research Foundation to the Company
10.5 -- First Amendment to Assignment of Rights and Assets dated September
1995 between ILEX Oncology, Inc. and CTRC Research Foundation
10.6 -- Services Agreement dated November 18, 1994 between CTRC Research
Foundation and the Company
10.7 -- Covenant Not To Sue dated September 1995 between CTRC Research
Foundation and the Company
10.8 -- Office Lease dated October 1, 1994 between the Company and CTRC
Research Foundation
10.9 -- Lease Agreement dated October 1, 1994 between Texas Research and
Technology Foundation and the Company
10.10* -- Lease Agreement dated September 1, 1995 between CTRC Research
Foundation and the Company
10.11* -- Commercial Industrial Sublease Agreement between TRTF/CTRCRF Building
Corporation and the Company
10.12 -- Agreement dated November 1, 1994 [cGMP Plant] by and among Texas
Research and Technology Foundation, CTRC Research Foundation,
TRTF/CTRCRF Building Corporation and the Company
10.13+* -- License Agreement [Piritrexim Isethionate] dated March 31, 1995 by
and among Burroughs Wellcome Co., The Wellcome Foundation Limited and
the Company
10.14+* -- License Agreement [Oxypurinol] dated March 31, 1995 by and among
Burroughs Wellcome Co., The Wellcome Foundation Limited and the
Company
10.15+* -- License Agreement [Crisnatol Mesylate] dated November 1, 1993 by and
among Burroughs Wellcome Co., The Wellcome Foundation Limited and
CTRC Research Foundation
10.16+* -- Amendment and Agreement with Respect to License Agreement [crisnatol
mesylate] dated October 5, 1996 amending License Agreement dated
November 1, 1993 by and among Burroughs Wellcome Co., The Wellcome
Foundation Limited and CTRC Research Foundation
</TABLE>
<PAGE> 104
<TABLE>
<CAPTION>
EXHIBIT NUMBER IDENTIFICATION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C> <S>
10.17+* -- License Agreement [Eflornithine] between ILEX Oncology, Inc. and
Marion Merrell Dow Inc. and its subsidiaries Merrell Dow
Pharmaceuticals Inc. and Marion Merrell Dow France Et Cie
10.18+* -- Development and License Agreement [crisnatol mesylate] dated October
11, 1996 by and among the Company and Janssen Pharmaceutica, N.V.
10.19+* -- License Agreement [Farnesyl Transferase Inhibitors] dated July 1,
1996 by and between Sother Limited and the Company
10.20+* -- License Agreement [RP 60475] dated November 18, 1994 between Rhone-
Poulenc Rorer S.A. and the Company
10.21+* -- Agreement dated November 25, 1996 between Hoffmann-La Roche, Inc. and
the Company [RO23-7553]
10.22+* -- License and Development Agreement [MGBG] dated October 1, 1992
between Sterling Winthrop Inc. and CTRC Research Foundation
10.23+* -- Research Collaboration Agreement dated December 12, 1995 between CTRC
Research Foundation and Sanofi
10.24+* -- Consent, Acknowledgment and Waiver Agreement dated September 1994 by
and among CTRC Research Foundation, Sterling Winthrop Inc. and the
Company
10.25+* -- Drug Development Project Agreement [4-hydroperoxycyclophosphamide]
effective April 1, 1993 between CTRC Research Foundation and MGI
Pharma, Inc.
10.26 -- Material Transfer Agreement [Dihydro-5-Azacytidine] dated March 9,
1995 between the Company and the National Institutes of Health
10.27+* -- Patent License Agreement--Exclusive [Methyl-Glyoxal
Bis-Guanylhydrazone] dated September 8, 1991 between the National
Institutes of Health and Cancer Therapy and Research Center
10.28* -- Agreement for Services dated February 15, 1995 between the Company
and The University of Texas Health Science Center at San Antonio
10.29 -- Agreement for Services effective September 20, 1994 between CTRC
Research Foundation and The University of Texas Health Science Center
at San Antonio
10.30 -- Master Services Agreement (Preclinical Services) dated June 11, 1996
by and between the Company and Lipitek International, Inc.
10.31 -- Letter Agreement dated September 28, 1995 between Cross Atlantic
Partners K/S, Boston Capital Ventures III. Limited Partnership,
Rovent II Limited Partnership, CTRC Research Foundation and the
Company
10.32 -- Warrant for the purchase of shares of Common Stock dated September
1995 between the Company and Vector Securities International, Inc.
10.33* -- Warrant for the Purchase of shares of Common Stock dated July 1996
between the Company and Chestnut Partners, Inc.
10.34 -- Institute for Drug Development Program Agreement dated September 20,
1994 between CTRC Research Foundation and The University of Texas
Health Science Center at San Antonio
10.35 -- Subordinated Option Agreement dated March 27, 1995 between CTRC
Research Foundation and the Company
10.36 -- Employment Agreement dated November 2, 1994 between Richard L. Love
and the Company
</TABLE>
<PAGE> 105
<TABLE>
<CAPTION>
EXHIBIT NUMBER IDENTIFICATION OF EXHIBIT
- -------------------- ------------------------------------------------------------------------
<C> <S>
10.37* -- Amendment to Employment Agreement dated April 4, 1995 between Richard
L. Love and the Company
10.38* -- Amendment to Employment Agreement dated September 27, 1995 between
Richard L. Love and the Company
10.39 -- Employment Agreement dated November 2, 1994 between Alexander L.
Weis, Ph.D. and the Company
10.40* -- Amendment to Employment Agreement dated April 10, 1995 between
Alexander L. Weis, Ph.D. and the Company
10.41* -- Amendment to Employment Agreement dated September 27, 1995 between
Alexander L. Weis, Ph.D. and the Company
10.42 -- Employment Agreement dated August 13, 1996 between James R. Koch and
the Company
10.43 -- Employment Agreement dated August 27, 1996 between Pedro
Santabarbara, M.D., Ph.D. and the Company
10.44 -- Letter Agreement dated November 2, 1994 between Alexander L. Weis,
Ph.D. and the Company
10.45 -- Consulting Services Agreement dated March 16, 1995 between the
Company and Charles A. Coltman, Jr., M.D.
10.46 -- Consulting Services Agreement dated January 1, 1995 between the
Company and Daniel Von Hoff, M.D.
10.47* -- 1995 Stock Option Plan for the Company
10.48* -- 1996 Non-Employee Director Stock Option Plan for the Company
10.49* -- Form of Non-Employee Director Stock Option Agreement
10.50* -- Third Amended and Restated Registration Rights Agreement between the
Company, CTRC and the holders of the Series B, C, D and E Preferred
Stock
10.51* -- Convertible Preferred Stock Purchase Agreement dated September 29,
1995 among the Company and the holders of Series B Preferred Stock
10.52* -- Convertible Preferred Stock Purchase Agreement dated December 11,
1996 between the Company and MPI
10.53 -- Convertible Preferred Stock Purchase Agreement dated November 11,
1996 between the Company and Johnson & Johnson Development
Corporation
10.54 -- Convertible Preferred Stock Purchase Agreement dated as of July 22,
1996 among the Company and the holders of Series C Preferred Stock
10.55* -- Form of Pledge Agreement between Cancer Therapy and Research Center
Endowment and each of Gary V. Woods, Ruskin C. Norman, M.D. and
Robert V. West, Jr., Ph.D.
11.1 -- Computation of Earnings Per Share
23.1 -- Consent of Arthur Andersen L.L.P.
23.2* -- Consent of Fulbright & Jaworski L.L.P. (included in 5.1)
24.1 -- Power of Attorney (included on signature page of initial filing of
this Registration Statement)
27 -- Financial Data Schedule
</TABLE>
<PAGE> 106
- ---------------
* To be filed by amendment.
+ Confidential treatment will be requested with respect to certain portions of
this exhibit. Omitted portions will be filed separately with the Securities
and Exchange Commission.
(b) Financial Statement Schedules:
All financial statement schedules, for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission, are
not required under the related instructions, are inapplicable or information
required is included in the financial statements and therefore have been
omitted.
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
ILEX ONCOLOGY, INC.
(ADOPTED 9/95)
ARTICLE 1.
AMENDMENTS
Section 1.1 Amendment of the By-laws. These By-Laws may be
altered, amended or repealed, and new By-laws may be adopted, by the
stockholders or the Board of Directors.
ARTICLE 2.
OFFICES
Section 2.1 Registered Office. The Corporation shall maintain in the
State of Delaware a registered office which may, but need not be, the same as
its place of business, and a registered agent whose business office is
identical with such registered office.
Section 2.2 Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the business
of the Corporation may require.
ARTICLE 3.
STOCK
Section 3.1 Form of Stock Certificates. Every holder of stock in the
Corporation shall be entitled to receive a certificate representing such stock.
3.1.1 Signing of Certificates. Certificates representing
stock of the Corporation shall be signed by the appropriate officers
and may be sealed with the seal or a facsimile of the seal of the
Corporation.
3.1.2 Identification of Stockholders. The name and address of
each stockholder, the number and class of stock held and the date on
which the stock was issued shall be entered on the books of the
Corporation. The person in whose name stock stands on the books of
the Corporation shall be deemed the owner thereof for all purposes as
regards the Corporation.
Section 3.2 Lost, Stolen or Destroyed Certificates. If a certificate
representing stock has been lost, stolen or destroyed, the Board of Directors
may in its discretion,
<PAGE> 2
except as may be required by law, direct that a new certificate be issued upon
satisfaction of any conditions or requirements it may impose.
Section 3.3 Transfers of Stock. Transfers of stock of the Corporation
shall be recorded on the books of the Corporation.
ARTICLE 4.
STOCKHOLDERS
Section 4.1 Annual Meeting. The annual meeting of the stockholders
for the election of directors and the transaction of any other proper business
shall be held at such date and time within a reasonable period of time after
the annual audit report for the previous fiscal year has become available, as
the Board of Directors shall determine.
Section 4.2 Special Meetings. Special meetings of the stockholders
may be called by the Chairman of the Board or the President, by the Board of
Directors or the holders of not less than one-fifth of all the outstanding
stock of the Corporation entitled to vote on the matter for which the meeting
is called.
Section 4.3 Place of Meeting. The Board of Directors may designate
any place as the place of meeting for any annual or special meeting of the
stockholders. In the absence of such designation, the place of the meeting
shall be the principal place of business of the Corporation.
Section 4.4 Notice of Meetings. For all meetings of stockholders, a
written notice of the meeting shall be delivered to each stockholder of record
entitled to vote at such meeting, which notice shall state the place, date and
hour of meeting. For all special meetings and when and as otherwise required
by law, the notice shall state the purpose or purposes of the meeting. The
notice of the meeting shall be given not less than ten nor more than sixty days
before the date of the meeting. Such notice shall be deemed to have been
delivered when sent by registered mail or by confirmed telex or telecopy,
directed to the stockholder at his or her address as it appears in the records
of the Corporation. When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken, unless
otherwise required by law.
Section 4.5 Quorum. The holders of a majority of the outstanding
stock of the Corporation entitled to vote on a matter, present in person or
represented by proxy, shall constitute a quorum for consideration of such
matter at any meeting of the stockholders unless a greater or lesser number is
required by the Corporation's Certificate of Incorporation, as amended from
time to time (along with any preferred stock designations adopted by the
Corporation and filed by the Corporation with the Secretary of State of the
State of Delaware, the "Certificate of Incorporation"). At any adjourned
meeting at which a quorum is present or represented, any business may be
-2-
<PAGE> 3
transacted which might have been transacted at the original meeting, unless
otherwise required by law. Withdrawal of stockholders from any meeting shall
not cause failure of a duly constituted quorum at a meeting, unless otherwise
required by law.
Section 4.6 Manner of Acting. The affirmative vote of a majority of
the stock represented at a meeting and entitled to vote on a matter at which a
quorum is present shall be the act of the stockholders, unless the vote of a
greater number or voting by class is required by law or the Certificate of
Incorporation.
Section 4.7 Proxies. A stockholder may appoint a proxy to vote or
otherwise act for him or her by signing an appointment form and delivering it
to the person so appointed. No proxy shall be valid after the expiration of
three years from the date thereof unless otherwise provided in the proxy. An
appointment of a proxy is revocable by the stockholder unless the appointment
form states that it is irrevocable and if, and only so long as, it is coupled
with an interest sufficient in law to support an irrevocable power.
Section 4.8 Consent of Stockholders in lieu of Meeting. An action
required to be taken, or which may be taken, at any annual or special meeting
of stockholders may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of shares of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
Section 4.9 Notice of Stockholders Not Consenting. Prompt notice of
the taking of corporate action without a meeting by less than unanimous consent
shall be given in writing to those stockholders who have not consented in
writing. In the event that the action which is consented to is such as would
have required the filing of a certificate under any Section of the General
Corporation Law of the State of Delaware if such action had been voted on by
the stockholders at a meeting thereof, the certificate filed under such other
Section shall state, in lieu of any statement required by such Section
concerning any vote of stockholders, that written consent has been given in
accordance with the provisions of said Section and that written notice to
non-consenting stockholders has been given as provided by this By- law.
ARTICLE 5.
DIRECTORS
Section 5.1 General Powers. The business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors.
Section 5.2 Number, Tenure and Resignation. Subject to any
resignations or removals contemplated by this Article, there shall be not fewer
than three (3) and not
-3-
<PAGE> 4
more than eleven (11) directors of the Corporation. The number of directors
may be increased or decreased from time to time by amendment to these By-laws,
within the limitations prescribed by this Section and the Certificate of
Incorporation; provided however that no decrease in the number of directors
shall have the effect of shortening the term of any incumbent director. Except
as otherwise provided in the Certificate of Incorporation, each director shall
hold office until the last to occur of the next annual meeting of stockholders
or until his successor shall have been elected and qualified, or until his
earlier written resignation or removal in the manner hereinafter provided. A
director may resign at any time by written notice to the Board, its Chairman,
the President or the Secretary, provided that no resignation shall be effective
on a retroactive basis.
Section 5.3 Quorum and Manner of Acting. A majority of the Board of
Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors; provided however that if less than a
majority of the number of directors is present at a meeting, a majority of the
directors present may adjourn the meeting at any time without further notice
unless required by law.
Section 5.4 Manner of Acting. The act of a majority of the duly
elected or appointed directors shall be the act of the Board of Directors,
unless the act of a greater number is required by law, the Certificate of
Incorporation or these By-laws.
Section 5.5 Vacancies. Except as otherwise provided in the
Certificate of Incorporation, any vacancy occurring in the Board of Directors
and any directorship to be filled by reason of an increase in the number of
directors may be filled by election at an annual meeting or at a special
meeting of stockholders called for that purpose. The board of directors may
appoint a director to fill a vacancy at any regular or special meeting of the
Board of Directors to hold office until a meeting of stockholders is held. A
director elected by the stockholders to fill a vacancy shall hold office for
the balance of the term for which he or she was elected.
Section 5.6 Removal of Directors. Except as otherwise provided in the
Certificate of Incorporation, one or more of the directors may be removed, with
or without cause, at a meeting of stockholders, by the affirmative vote of the
holders of a majority of the outstanding stock then entitled to vote for the
election of the director or directors proposed to be removed. No director
shall be removed at a meeting of the stockholders unless the notice of such
meeting shall state that a purpose of the meeting is to vote upon the removal
of one or more directors named in the notice. Only the named director or
directors may be removed at such meeting.
Section 5.7 Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than these By-laws, immediately
after, and, at the same place as, the annual meeting of stockholders. The
Board of Directors may provide, by resolution, the place, date and hour for the
hold of additional regular meetings of the Board of Directors, without other
notice than such resolution.
-4-
<PAGE> 5
Section 5.8 Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board of
Directors, the President or a majority of the directors.
Section 5.9 Notice. Notice of any special meeting shall be given to
each director at least 24 hours prior to the special meeting, provided that any
director can waive the requirement of such notice. Such notice can be given
orally or in writing, and if given in writing shall be deemed to have been
given to a director when and at the time delivered to the director's business
address. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting except as otherwise provided by
these By-laws. The attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
Section 5.10 Presumption of Assent. A director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be conclusively presumed to have assented tot
he action taken, unless his or her dissent shall be entered in the minutes of
the meeting or unless he or she shall file his or her written dissent to such
action with the person acting as the Secretary of the meeting before the
adjournment thereof, or shall forward such dissent by registered mail to the
Secretary of the Corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in favor of such
action.
Section 5.11 Committees. A majority of the directors by resolution
passed by the number of directors fixed pursuant to this Article may designate
one or more committees and appoint members of the Board to serve on the
committee or committees. Each committee shall have one or more members, who
serve at the pleasure of the Board.
Section 5.12 Consent in Lieu of Meeting. Any action required by the
General Corporation Law of the State of Delaware to be taken at a meeting of
the Board of Directors or any other action which may be taken at a meeting of
the Board or a committee thereof, may be taken without a meeting if a consent
in writing, setting forth the action so taken, shall be signed by all the
directors entitled to vote with respect to the subject matter thereof, or by
all members of such committee, as the case may be, entitled to vote with
respect thereto.
Section 5.13 Meeting by Conference Telephone. Members of the Board of
Directors or any committee designated by such Board may participate in and act
at any meeting of the Board or committee by means of conference telephone or
other similar communication equipment by means of which all persons
participating in the meeting can hear each other. Participation in a meeting
pursuant hereto shall constitute presence in person at such meeting.
-5-
<PAGE> 6
Section 5.14 Compensation. The Board of Directors, by the affirmative
vote of a majority of the directors then in office, and irrespective of any
personal interest of any of its members, shall be authority to establish
reasonable compensation of all directors for services to the Corporation as
directors, officers or otherwise.
Section 5.15 Chairman of the Board. The Board of Directors may, from
time to time, appoint a Chairman, who shall preside at all meetings of the
stockholders and of the Board of Directors.
ARTICLE 6.
OFFICERS
Section 6.1 Number. The offices of the Corporation shall be a
President, one or more Vice Presidents (if elected), a Secretary, a Treasurer,
one or Assistant Secretaries (if elected), one or more Assistant Treasurers (if
elected), and such other officers as may be elected in accordance with the
provisions of this Article.
Section 6.2 Election and Term of Office. The officers of the
Corporation shall be elected annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as reasonably practicable.
Subject to the provisions set forth in this Article, each officer shall hold
office until the last to occur of the first meeting of the Board of Directors
held after the next annual meeting of stockholders or until his successor is
duly elected and qualified. Election of an officer shall not, of itself,
create contract rights.
Section 6.3 Removal. Any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors.
Section 6.4 Vacancies: New Offices. A vacancy occurring in any office
may be filled and new offices may be created and filled, at any time, by the
Board of Directors.
Section 6.5 President. The President shall be the chief executive
officer of the Corporation. He or she shall be in charge of the day to day
business and affairs of the Corporation, subject to the direction and control
of the Board of Directors. In the absence of the Chairman, he or she shall
preside at all meetings of the Board of Directors. He or she shall have the
power to appoint such agents and employees as in his or her judgment may be
necessary or proper for the transaction of the business of the Corporation. He
or she may sign, on behalf of the Corporation, stock certificates, deeds,
mortgages, bonds, contracts, or other instruments which the Board of Directors
has authorized to be executed. He or she may vote on behalf of the
Corporation, by proxy or otherwise, all securities which the Corporation is
entitled to vote, and, in general, shall perform all duties incident to the
office of the President and such other duties as from time to time may be
prescribed by the Board of Directors.
-6-
<PAGE> 7
Section 6.6 Vice President(s). The Vice President, if one is elected
(or in the event more than one Vice President is elected, each of the Vice
Presidents), shall assist the President in the discharge of his or her duties
as the President may direct, and shall perform such other duties as from time
to time may be assigned to him or her (them) by the President or the Board of
Directors. In the absence of the President, the Vice President, if one is
elected (or Vice Presidents, in the order designated, or in the absence of any
designation, then in the order of their election), shall perform the duties and
exercise the authority of the President.
Section 6.7 The Treasurer. The Treasurer shall have charge and
custody of and be responsible for all funds and securities of the Corporation;
receive and give receipts for monies due and payable to the Corporation from
any source whatsoever, and deposit all such monies in the name and to the
credit of the Corporation; have charge of and be responsible for the
maintenance of adequate books of account for the Corporation; and, in general
perform all duties incident to the office of the Treasurer and such other
duties not inconsistent with these By-laws as from time to time may be assigned
to him by the President, or the Board of Directors.
Section 6.8 The Secretary. The Secretary shall keep the minutes of
the stockholders' and the Board of Directors' meetings; see that all notices
are duly given in accordance with the provisions of these By-laws or as
required by law; be custodian of the corporate records and for the seal of the
Corporation; keep a register of the post office address of each stockholder
which shall be furnished to the Secretary by such stockholder; sign with the
President, or other authorized officer, stock certificates of the Corporation,
the issuance of which shall have been authorized by resolution of the Board of
Directors, and any contracts, deeds, mortgages, bonds or other instruments
which the Board of Directors has authorized to be executed, according to the
requirements of the form of the instrument; have general charge of the stock
transfer books of the Corporation; and, in general perform all duties incident
to the office of the Secretary and such other duties not inconsistent with
these By-law as from time to time may be assigned to him by the President or
the Board of Directors.
Section 6.9 Assistant Treasurers and Assistant Secretaries. The Board
of Directors may elect one or more Assistant Treasurers and Assistant
Secretaries. In the absence of the Treasurer or in the event of his inability
or refusal to act, the Assistant Treasurer(s), in order of their election,
shall perform the duties and exercise the authority of the Treasurer. In the
absence of the Secretary, or in the event of his inability or refusal to act,
the Assistant Secretary(ies), in the order of their election, shall perform the
duties and exercise the authority of the Secretary. The Assistant Treasurer(s)
shall respectively, if required by the Board of Directors, give bonds for the
faithful discharge of their duties in such sums and with such sureties as the
Board of Directors shall determine. The Assistant Treasurer(s) and Assistant
Secretary(ies), in general, shall perform such other duties not inconsistent
with these By-laws as shall be assigned to them by the Treasurer or the
Secretary, respectively, or by the President or the Board of Directors.
-7-
<PAGE> 8
Section 6.10 Compensation. The compensation of the officers shall be
fixed from time to time by the Board of Directors. No officers shall be
prevented from receiving such compensation by reason of the fact that he is
also a director of the Corporation. All compensation shall be reasonable and
solely for services rendered to the Corporation.
ARTICLE 7.
FISCAL MATTERS
Section 7.1 Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 7.2 Contracts. The Board of Directors may authorize any
officer or officers, agents or agents, to enter into any contract or execute
and deliver any instrument in the name and on behalf of the Corporation, and
such authority may be general or confined to specific instances.
Section 7.3 Loans and Indebtedness. No loans shall be contracted on
behalf of the Corporation and no evidences of indebtedness shall be issued in
its name unless authorized by a resolution of the Board of Directors. Such
authority may be general or confined to specific instances.
Section 7.4 Checks, Drafts, etc. All checks, drafts, or other orders
for the payment of money, notes or other evidences of indebtedness issued in
the name of the Corporation, shall be signed by such officer or officers, agent
or agents of the Corporation as the Board of Directors shall from time to time
designate.
ARTICLE 8.
GENERAL
Section 8.1 Dividends and Distributions. The Board of Directors, may
from time to time declare or otherwise authorize and the Corporation may pay,
dividends or other distributions on its outstanding stock in the manner and
upon the terms, conditions and limitations provided by law or the Certificate
of Incorporation.
Section 8.2 Corporate Seal. The Board of Directors may provide a
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the Corporation and the words "Corporate Seal, Delaware."
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or in any manner reproduced.
-8-
<PAGE> 9
Section 8.3 Waiver of Notice. Whenever any notice what ever is
required to be given by law, the Certificate of Incorporation or under the
provisions of these By-laws, a written waiver thereof, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice.
Section 8.4 Headings. Article or section headings are inserted herein
only for convenience of reference and shall not be considered in the
construction of any provision hereof.
The undersigned person hereby certifies in his or her capacity set
forth below that these are the duly adopted By-laws of Ilex Oncology, Inc.
-----------------------------------------------
Title:
-----------------------------------------
Date:
------------------------------------------
-9-
<PAGE> 1
EXHIBIT 10.1
REVOLVING PROMISSORY NOTE
$500,000.00 San Antonio, Texas
November 18, 1994
FOR VALUE RECEIVED, on or before the Maturity Date, (as that term is
defined in the Loan Agreement referred to in the next paragraph), Biovensa
Inc., a Delaware corporation promises to pay to the order of CTRC Research
Foundation (the "Lender") at its office at 14960 Omicron, San Antonio, Texas
78245, the lesser of the principal sum of FIVE HUNDRED THOUSAND DOLLARS
($500,000.00), or the amount outstanding as endorsed on the grid attached to
this Note (or recorded in the Lender's books and records, if the Lender is the
holder hereof). Such notation or recording by the Lender shall be rebuttably
presumptive evidence of the principal balance due on this Note.
This Note evidences indebtedness incurred under, and it subject to,
the terms and provisions of a Loan Agreement dated as of November 18, 1994
(and, if amended, all amendments thereto) between the undersigned and the
Lender (the "Loan Agreement"). The undersigned promises to pay interest at the
rate or rates and times established under the Loan Agreement. Reference is
hereby made to the Loan Agreement for a statement of its terms, definitions and
provisions, including those under which this Note is required to be and may be
paid prior to its due date or have its due date accelerated, and this Note is
expressly subject to the terms and conditions of the Loan Agreement.
Payments of both principal and interest are to be made in immediately
available funds in lawful money of the United States of America.
The undersigned agrees to pay or reimburse the Lender and any other
holder hereof for all costs and expenses of seeking advice in regard to,
preparing any amendments to or waivers under, enforcing, and preserving its
rights under this Note or any document or instrument executed in connection
herewith (including legal fees and reasonable time charges of attorneys who may
be employees of the Lender, whether in or out of court, in original or
appellate proceedings or in bankruptcy). The undersigned irrevocably waives
presentment, protest, demand and notice of any kind in connection herewith.
This Note is made under and governed by the internal laws of the State
of Texas, and shall be deemed to have been executed in the State of Texas.
BIOVENSA INC.
/s/ RICHARD L. LOVE
---------------------------------------
By: Richard L. Love
Its: President
CTRC RESEARCH FOUNDATION
/s ANITA I. BUSQUETS
---------------------------------------
By: Anita I. Busquets
Its: Chief Operating Officer
<PAGE> 2
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of
Amount of Principal Paid Unpaid Principal Notation
Date Loan or Prepaid Balance Made By
<S> <C> <C> <C> <C>
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</TABLE>
-2-
<PAGE> 3
EXHIBIT E
Loan Agreement
-3-
<PAGE> 1
EXHIBIT 10.2
EXECUTION COPY
LOAN AGREEMENT
Dated as of November 18, 1994
BIOVENSA INC., a Delaware corporation, (the "Borrower" or "Biovensa"),
and CTRC RESEARCH FOUNDATION, a Texas not-for-profit corporation (the
"Lender"), agree as follows:
RECITALS
WHEREAS, the Lender and its affiliates recently established the
Borrower as a wholly-owned subsidiary;
WHEREAS, the Borrower and the Lender desire to enter into an agreement
whereby the Lender will loan the Borrower various sums for general corporate
and working capital purposes; and
WHEREAS, such loans will initially be structured as a revolving line
of credit, and will eventually convert to a fixed term loan upon the occurrence
of certain specified events.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and undertakings contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Borrower and Lender agree as follows:
SECTION 1. LOAN
SECTION 1.1. LOAN. Subject to the terms and conditions of this
Agreement, the Lender agrees to make loans to the Borrower from time to time
from the date hereof through the Maturity Date (as that term is defined in
Section 7) in an aggregate amount not to exceed Five Hundred Thousand Dollars
($500,000.00) (the "Commitment"). From the date hereof until the Conversion
Date (such period is referred to herein as the "Revolver Period"), Lender
agrees to make loans to the Borrower (the "Loan(s)") at such times and in such
amounts not to exceed the Commitment, as Borrower may request. During the
Revolver Period, Borrower may borrow, repay and reborrow hereunder, provided
that each borrowing shall be in an amount of not less than the lesser of
$10,000.00 or the remaining unused amount of the Commitment. Effective as of
the Conversion Date (as that term is defined in Section 7), any Loans
outstanding hereunder shall convert into a term loan and Lender shall have no
further obligations to make any additional Loans to Borrower nor shall Borrower
be entitled to reborrow any amounts repaid hereunder. All Loans hereunder
shall be due and payable on the Maturity Date (as the term is defined in
Section 7). Notwithstanding anything contained herein to the contrary, the
Lender shall not be required to make a Loan if, (a) after giving effect
thereto, the aggregate outstanding
<PAGE> 2
principal amount of all Loans hereunder would exceed the Commitment, or (b)
Lender does not have sufficient funds in its possession to make such Loan.
SECTION 1.2. NOTE. The Loans shall be evidenced by a promissory note
(the "Note"), substantially in the form of Exhibit A, with appropriate
insertions, dated the date hereof, payable to the order of the Lender, in the
principal amount of the Commitment, and with the amounts borrowed and repaid
and the balance endorsed on the grid by the Lender. The Lender shall, and is
hereby authorized by the Borrower to, endorse on the schedule annexed to the
Note notations with respect to each Loan specifying the date, the principal
amount thereof and the date and amount of each payment of principal made by the
Borrower with respect to such Loan. As long as the Lender is the holder of the
Note it may, at its option, in lieu of endorsing the grid, record such matters
in its books and records. The failure of the Lender to make any such notation
or recording shall not limit or otherwise affect the right of the Lender to
repayment of the Loans (including interest thereon). Such notation or
recording by the Lender shall be rebuttably presumptive evidence of the
principal balance outstanding and interest due on the Note. The principal of
the Note shall be payable in full on the Maturity Date.
SECTION 1.3. TERMINATION. The obligation of the Lender to make Loans
hereunder shall terminate immediately and without further action upon the
earlier to occur of an Event of Default or the Maturity Date.
SECTION 2, INTEREST AND REPAYMENTS
SECTION 2.1. INTEREST. (a) The unpaid principal amount from time to
time outstanding hereunder shall bear interest from the date of the Note until
paid in full, so long as no Event of Default (as hereinafter defined) has
occurred and is continuing, at a rate of per annum equal to the "Frost Prime
Rate" (as hereinafter defined) plus 0.5%. The "Frost Prime Rate" shall mean
the rate of interest per annum announced from time to time by The Frost
National Bank, San Antonio, Texas, 78295, as its "prime rate". The Lender
shall determine the Frost Prime Rate on the first day of each calendar month,
and such rate shall be deemed the "Frost Prime Rate" for purposes hereof for
such calendar month. Any determination of the Frost Prime Rate by the Lender
shall be conclusive absent manifest error.
(b) Upon and after the occurrence of an Event of Default
hereunder, and until such Event of Default shall be cured, the unpaid principal
amount from time to time outstanding hereunder shall bear interest at a rate
per annum equal to the Frost Prime Rate plus 3.0% provided that such interest
rate shall never exceed a maximum of eighteen percent (18.0%) per annum.
SECTION 2.2. PAYMENT OF INTEREST. Except as otherwise provided herein
(for example, in the event of voluntary prepayments or mandatory prepayments,
the occurrence of an Event of Default or otherwise), all accrued but unpaid
interest shall be paid directly to the Lender:
<PAGE> 3
(a) on the first day of each January, April, July and October of
each year, beginning with the later to occur (i) July 1, 1995 and (ii) the
first of such dates to occur after the date of the initial Loan hereunder, at
maturity and upon payment in full; and
(b) in respect of any overdue installment of principal, interest
shall be payable upon demand.
SECTION 2.3. BASIS OF COMPUTATION. Interest shall be computed for the
actual number of days elapsed on the basis of a year consisting of 365 or 366
days, as the case may be. Interest shall be calculated to include the date a
Loan is made and exclude the date such Loan is paid or prepaid.
SECTION 2.4. REPAYMENTS. (a) The Borrower agrees to pay on the first
day of each January, April, July and October, commencing one year after the
Conversion Date, an amount equal to one-eighth of the principal amount
outstanding on the Conversion Date pursuant to the Note. The entire amount of
unpaid principal and accrued but paid interest, if any, outstanding as of the
Maturity Date shall become due and payable on the Maturity Date. No premium
shall be payable in connection with any payment pursuant to this Section
2.4(a). The quarterly payments provided for by this Section 2.4(a) shall be in
addition to the quarterly payments of interest provided for by Section 2.2.
(b) The Borrower shall have the right, by given written notice to
the Lender by not later than 5:00 p.m. (San Antonio time) on the business day
preceding the date of such payment, to prepay all or any portion of the Note,
without any premium or penalty.
(c) Any principal amount of the Loans repaid during the Revolver
Period may be reborrowed by the Borrower hereunder, subject to the terms and
conditions hereof, prior to the Conversion Date.
SECTION 2.5. SETOFF. At any time and without notice of any kind, any
account, deposit or other indebtedness owing by the Lender or any of its
affiliates to the Borrower, and any securities or other property of the
Borrower delivered to or left in the possession of the Lender or any of its
affiliates or nominee or bailee thereof, may be set off against and applied in
payment of any obligation hereunder, whether due or not, and the Borrower
hereby grants to the Lender a continuing security interest in, and assigns to
the Lender, such accounts, property deposits and indebtedness as collateral
security for the payment of such obligations.
SECTION 3. MANNER OF BORROWING
SECTION 3.1. NOTICE OF BORROWING. The Borrower shall give a written
notice of borrowing to the Lender of each requested Loan during the Revolver
Period by not later than 11:00 a.m. (San Antonio time) on the fifth business
day preceding the business day on which a Loan is to be made. On the requested
business day of a Loan, the Lender shall make available to the Borrower the
amount of such Loan by transferring the amount thereof in immediately available
funds for credit to an account maintained by the Borrower as specified in the
notice of borrowing.
<PAGE> 4
SECTION 3.2. CONDITIONS PRECEDENT TO EACH LOAN
(a) REPRESENTATIONS AND WARRANTIES. At the date of each Loan, the
Borrower's representations and warranties set forth herein shall be true and
correct in all material respects as at such date with the same effect as though
those representations and warranties had been made on and as of such date.
(b) No Default. At the time of each Loan, and immediately after
giving effect to each Loan, the Borrower shall be in compliance with all the
terms and provisions set forth herein on its part to be observed or performed,
and no Event of Default or Unmatured Event of Default shall have occurrence and
be continuing at the time of any Loan, or would result from the making of any
Loan.
SECTION 3.3. LOANS. The application by the Borrower for any Loan
shall be deemed a representation and warranty by the Borrower that the
statements in Section 3.2 are true and correct on and as of the date of each
such Loan.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To include the Lender to make the Loans hereunder, the Borrower
represents and warrants to the Lender that:
SECTION 4.1. ORGANIZATION. Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full power and authority to own and operate its property, to carry on
its business as proposed to be conducted, to enter into this Agreement and to
issue the Note as contemplated by this Agreement.
SECTION 4.2. AUTHORIZATION: NO CONFLICT. The borrowings hereunder,
the execution and delivery of the Note and the performance by the Borrower of
its obligations under this Agreement and the Note have been authorized by all
necessary corporate action, have received all necessary governmental approval
(if any shall be required) and do not and will not contravene or conflict with
any provision of law or of the certificate of incorporation of the Borrower or
of any agreement binding upon the Borrower.
SECTION 4.3. LIENS. Other than agreements (a) entered into between
Borrower and Lender or (b) which may be entered into pursuant to the Private
Placement, none of the assets of the Borrower are subject to any mortgage,
pledge, title retention lien, or other lien, encumbrance or security interest,
except for liens arising in the ordinary course of business for sums not due or
sums being contested in good faith and by appropriate proceedings, but not
involving any deposits or advances or borrowed money or the deferred purchase
price of property or services.
SECTION 4.4. ADVERSE CONTRACTS. The Borrower is not a party to any
agreement or instrument or subject to any charter or other corporate
restriction, nor is it subject to any judgment, decree or order of any court or
governmental body, which may have a material and adverse effect on the
business, financial condition, operations or business prospects of the
<PAGE> 5
Borrower or on the ability of the Borrower to perform its obligations under
this Agreement or the Note. The Borrower has not, nor with reasonable
diligence should have had, knowledge of or notice that it is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any such agreement, instrument, restriction, judgment,
decree or order.
SECTION 4.5. REGULATION U. The Borrower is not engaged principally
in, nor is one of the Borrower's important activities, the business of
extending credit for the purpose of purchasing or carrying "margin stock"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System as now and from time to time hereinafter in effect.
SECTION 4.6. LITIGATION AND CONTINGENT LIABILITIES. No litigation
(including derivative actions), arbitration proceedings or governmental
proceedings are pending or, to the knowledge of the Borrower, threatened
against the Borrower which would (singly or in the aggregate), if adversely
determined, have a material and adverse effect on the financial condition,
continued operations or prospects of the Borrower.
SECTION 4.7. SUBSIDIARIES. The Borrower has no subsidiaries.
SECTION 4.8. PURPOSE. The proceeds of the Loans shall be used by the
Borrower for working capital in the conduct of its business.
SECTION 5. COVENANTS
Until all obligations of the Borrower hereunder and under the Note are
paid and fulfilled in their entirety, the Borrower agrees that it shall comply
with the following covenants, unless the Lender consents otherwise in writing:
SECTION 5.1. CORPORATE EXISTENCE, MERGERS, ETC. The Borrower shall
preserve and keep in force and effect its legal existence and all rights,
franchises, licenses and privileges necessary for the conduct of its business,
and will not liquidate, dissolve, or merge into or consolidate with any other
entity, or sell, lease, transfer or otherwise dispose of all or a substantial
part of its assets.
SECTION 5.2. REPORTS, CERTIFICATES AND OTHER INFORMATION. The
Borrower shall furnish to the Lender:
(a) AUDITED ANNUAL STATEMENTS. Within 90 days after the end of each
fiscal year of the Borrower, a copy of annual financial statements of the
Borrower prepared in conformity with generally accepted accounting principals
applied on a consistent basis, duly certified by independent certified public
accountants of recognized standing satisfactory to the Lender, accompanied by
an opinion without significant qualification of such accountants.
(b) OTHER INFORMATION. From time to time such other information,
financial or otherwise, concerning the Borrower as the Lender may reasonably
request.
<PAGE> 6
SECTION 5.3. INSPECTION. The Borrower shall permit the Lender and
its agents at any time during normal business hours to inspect their properties
and to inspect and make copies of their books and records.
SECTION 5.4. INDEBTEDNESS. Unless the Lender shall give its prior
written consent, the Borrower shall not incur, permit to remain outstanding,
assume or in any way become committed for Indebtedness, except (i) Indebtedness
incurred hereunder or pursuant to the Private Placement, and (ii) accounts
payable arising in the Borrower's ordinary course of business which are paid
upon customary and usual terms and as to which no interest or other charge is
payable.
SECTION 5.5. LIENS. Unless the Lender shall give its prior written
consent, during the term of this Agreement and until the Note is paid in full,
the Borrower shall not create, suffer or permit to exist any mortgage, lien,
security interest, pledge or other encumbrance of any kind or nature upon any
of its assets now or hereafter owned or acquired, or acquire or agree to
acquire any property or assets of any character under any conditional sale
agreement or other title retention agreement, but this Section shall not be
deemed to apply to any liens arising pursuant to the Private Placement, or any
liens of landlords, contractors, laborers or supplymen, tax liens or liens
securing performance or appeal bonds or other similar liens or charges arising
out of the Borrower's business, provided that tax liens are removed before
related taxes become delinquent and other liens are promptly removed, in either
case unless contested in good faith and by appropriate proceedings and as to
which adequate reserves shall have been established.
SECTION 5.6. TAXES. The Borrower shall pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it, upon its income
or profits or upon any of its properties, prior to the date on which penalties
attach thereto, and all lawful claims for labor, materials and supplies when
due, except that no such tax, assessment, charge, levy or claim need be paid
which is being contested in good faith by appropriate proceedings and as to
which adequate reserves shall have been established, and as to which no
foreclosure, distraint, sale or similar proceedings have commenced.
SECTION 5.7. CONTINUANCE IN PRESENT BUSINESS. The Borrower shall
continue to engage substantially in the business of manufacturing and
commercially developing therapeutic agents and pharmaceutical products for the
treatment of human cancer.
SECTION 5.8. COMPLIANCE WITH THE LAW. The Borrower shall comply with
all applicable laws, rules, regulations and orders, the failure to comply with
which could have a material adverse impact on the business, properties, assets,
operations, condition or prospects of the Borrower, including without
limitation the Borrower's ability to pay or perform its obligations to the
Lender hereunder or under the Notes; provided that the Borrower shall not be
required to comply with any law, rule, regulation or order if the Borrower is
contesting the applicability or validity thereof in good faith by appropriate
proceedings, no foreclosure, distraint, sale or similar proceedings have
commenced, and the Borrower has established adequate reserves with respect
thereto in accordance with generally accepted accounting principles.
<PAGE> 7
SECTION 5.9. USE OF PROCEEDS.
(a) GENERAL. The proceeds of the Loans shall be used by the
Borrower for working capital in the conduct of its business and the Borrower
shall not use or permit any proceeds of the Loans to be used, either directly
or indirectly, for the purpose, whether immediate, incidental or ultimate, of
"purchasing or carrying any margin stock" within the meaning of Regulation U or
X of the Board of Governors of the Federal Reserve System, as amended from time
to time. If requested by the Lender, the Borrower will furnish to the Lender a
statement in conformity with the requirements of Federal Reserve Form U-1 to
the foregoing effect. No part of the proceeds of the Loans will be used for
any purpose which violates or is inconsistent with the provisions of Regulation
U or X of the Board of Governors of the Federal Reserve System.
(b) TENDER OFFERS AND GOING PRIVATE. The Borrower shall not use
(or permit to be used) any proceeds of the Loans to acquire any security in any
transaction which is subject to Section 13 or 14 of the Securities Exchange Act
of 1934, as amended, or any regulations or rulings thereunder.
SECTION 6. DEFAULT
SECTION 6.1. EVENTS OF DEFAULT. Each of the following occurrences is
hereby defined as an "Event of Default":
(a) Default in the due and punctual payment of any interest due
under the Note and the continuation thereof for five (5) calendar days; or
(b) Default in the due and punctual payment of any principal due
under the Note; or
(c) Any representation, warranty, certificate, financial
statement, report, notice or other writing furnished by or on behalf of the
Borrower to the Lender is false or misleading in any material respect on the
date as of which the facts therein set forth are stated or certified, or deemed
to be stated or certified; or
(d) The Borrower shall fail to comply with any provision hereof,
which failure does not otherwise constitute an Event of Default, and such
failure shall continue for thirty (30) days after written notice thereof to the
Borrower by the Lender; or
(e) Any suit, action or other proceeding (judicial or
administrative) commenced against the Borrower, or with respect to any assets
of the Borrower, shall threaten to have a material and adverse effect on the
future operations of the Borrower; or a final judgment or settlement in excess
of $50,000.00 shall be entered in, or agreed to in respect of, any such suit,
action or proceeding and any such judgment shall not be effectively bonded,
vacated, discharged, stayed on appeal or otherwise contested in good faith by
appropriate proceedings within thirty (30) days after the entry thereof; or
(f) The Borrower shall be dissolved or terminated; or
<PAGE> 8
(g) The Borrower shall: (i) become insolvent; or (ii) be unable,
or admit in writing its inability, to pay its debts as they mature; or (iii)
make a general assignment for the benefit of creditors or to an agent
authorized to liquidate any substantial amount of its property; or (iv) be
adjudicated a bankrupt; or (v) file a petition in bankruptcy or to effect a
plan or other arrangement with creditors; or (vi) file an answer to a
creditor's petition (admitting the material allegations thereof) for an
adjudication of bankruptcy or to effect a plan or other arrangement with
creditors; or (vii) apply to a court for the appointment of a receiver or
similar official appointed for any of its assets; or (viii) have a receiver or
similar official appointed for any of its assets, or, if such receiver or
similar official is appointed without the consent of the Borrower, such
appointment shall not be discharged within sixty (60) days after his
appointment; or (ix) a petition described in (v) is filed against the Borrower
and remains undismissed for a period of sixty (60) consecutive days.
SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default
set forth in subsections (a)-(f) of Section 6.1 and during the continuance
thereof, the Lender may declare the Note and any other amounts owed to the
Lender to be immediately due and payable, whereupon the Note and any other
amounts owed to the Lender shall forthwith become immediately due and payable.
Upon the occurrence of any Event of Default set forth in subsection (g) of
Section 6.1, the Note and any other amounts owed to the Lender shall be
immediately and automatically due and payable without action of any kind on the
part of the Lender or any other holder of the Note. The Borrower expressly
waives presentment, demand, notice or protest of any kind in connection
herewith. The Lender shall promptly give the Borrower notice of any such
declaration, but failure to do so shall not impair the effect of such
declaration. No delay or omission on the part of the Lender in exercising any
power or right hereunder or under the Note shall impair such right or power or
be construed to be a waiver of any Event of Default or any acquiescence
therein, nor shall any single or partial exercise of any power or right
hereunder preclude other or further exercise thereof, or the exercise of any
other power or right.
SECTION 7. DEFINITIONS
"Conversion Date" shall mean the initial closing date of the
transaction(s) referred to herein as the Private Placement.
"Indebtedness" shall mean all current and noncurrent liabilities of
the Borrower, including without limitation (i) obligations for borrowed money,
(ii) obligations representing the deferred purchase price of property, (iii)
obligations, whether or not assumed, secured by liens or payable out of the
proceeds or production from property now or hereafter owned or acquired by the
Borrower, (iv) all obligations of the Borrower, whether direct or contingent,
arising under or in connection with letters of credit and banker's acceptances,
(v) any obligation which is secured or which is evidenced by a note, acceptance
or other instrument, (vi) capitalized lease obligations, and (vii) accounts
payable of the Borrower.
"Maturity Date" shall mean the earlier to occur of (a) December 31,
1998 or (b) three years subsequent to the Conversion Date.
<PAGE> 9
"Private Placement" shall mean a transaction, or series of related
transactions whereby Biovensa receives at least Four Million Dollars $4,000,000
in the aggregate from unaffiliated third parties in exchange for equity
securities issued and sold to such third parties by Biovensa.
"Subsidiary" shall mean a corporation of which more than 50% of the
outstanding capital stock ordinarily entitled to vote for the election of
directors is owned directly or indirectly by the Borrower.
"Unmatured Event of Default" shall mean an event which would become an
Event of Default with notice or the passage of time or both.
SECTION 8. MISCELLANEOUS
SECTION 8.1. WAIVER OF DEFAULT. The Lender may, by written notice to
the Borrower, at any time and from time to time, waive any default in the
performance or observance of any condition, covenant or other term hereof, or
any Event of Default, which shall be for such period and subject to such
conditions as shall be specified in any such notice. In the case of any such
waiver, the Lender and the Borrower shall be restored to their former position
and rights hereunder and under the Note, respectively, and any default or Event
of Default so waived shall be deemed to be cured and not continuing; but no
such waiver shall extend to or impair any right consequent thereon or to any
subsequent or other default or Event of Default.
SECTION 8.2. NOTICES. All notices, requests, demands or other
communications to or upon a party hereto shall be in writing and shall be
delivered by mail, sent by courier or by telecopy or personally delivered to
such party at its address set forth below, or at such other address as to which
such party may hereafter notify the others in writing.
If to the Borrower:
Biovensa Inc.
14960 Omicron
San Antonio, Texas 78245
Attn: Richard L. Love
Facsimile No.: (210) 677-6080
If to the Lender:
CTRC Research Foundation
14960 Omicron
San Antonio, Texas 78245
Attn: Anita I. Busquets
Facsimile No.: (210) 677-0058
Any notice shall be deemed given, if mailed properly addressed, on the fifth
business day after the placing thereof in the United States mail, postage
prepaid; if transmitted by telecopier, when
<PAGE> 10
receipt is acknowledged; if personally delivered, at the time delivered by
hand; and if sent by overnight courier, the next succeeding business day after
timely delivery to the courier.
SECTION 8.3. NONWAIVER: CUMULATIVE REMEDIES. No failure to exercise,
and no delay in exercising, on the part of the Lender of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies of
the Lender herein provided are cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 8.4. SURVIVAL OF AGREEMENTS. All agreements, representations
and warranties made herein shall survive the delivery of the Note and the
making of the Loans hereunder and shall expire upon payment in full of the
Borrower's obligations hereunder and under the Note.
SECTION 8.5. SUCCESSORS. This Agreement shall, upon execution and
delivery by the Borrower, and acceptance by the Lender, become effective and
shall be binding upon and inure to the benefit of the Borrower, the Lender and
their respective successors and assigns, except that the Borrower may not
transfer or assign any of its rights or interest hereunder without the prior
written consent of the Lender.
SECTION 8.6. CAPTIONS. Captions in this Agreement are for
convenience of reference only and shall not define or limit any of the terms or
provisions hereof. References herein to Sections or provisions without
reference to the document in which they are contained are references to this
Agreement.
SECTION 8.7. SINGULAR AND PLURAL. Unless the context requires
otherwise, whenever used herein the singular shall include the plural and vice
versa, and the use of one gender shall also denote the others where
appropriate.
SECTION 8.8. COUNTERPARTS. This Agreement may be executed by the
parties on any number of separate counterparts, and by each party on separate
counterparts; each counterpart shall be deemed an original instrument; and all
of the counterparts taken together shall be deemed to constitute one and the
same instrument.
SECTION 8.9. INDEMNITY. Without limiting any other provision of this
Agreement, the Borrower agrees to indemnify, hold harmless and reimburse the
Lender and its directors, officers, employees, attorneys and agents
("Indemnified Parties") for, from and against any and all losses, claims,
liabilities, suits, actions, proceedings and expenses (including without
limitation reasonable attorneys' fees, legal costs and expenses, and reasonable
time charges of attorneys who may be employees of the Lender) incurred or paid
by it or any of them as a result of or in connection with any actions taken or
omitted to be taken pursuant to this Agreement, except such as may result
solely and directly from the gross negligence or willful misconduct of such
Indemnified Party.
SECTION 8.10. CONSTRUCTION. This Agreement, the Note and any
document or instrument executed in connection herewith shall be governed by,
and construed and interpreted
<PAGE> 11
in accordance with, the internal laws of the State of Texas, and shall be
deemed to have been executed in the State of Texas.
SECTION 8.11. SUBMISSION TO JURISDICTION: VENUE. TO INDUCE THE
LENDER TO MAKE THE LOAN, AS EVIDENCED BY THE NOTE AND THIS AGREEMENT, THE
BORROWER IRREVOCABLY AGREES THAT, SUBJECT TO THE LENDER'S SOLE AND ABSOLUTE
ELECTION, ALL SUITS, ACTIONS OR OTHER PROCEEDINGS IN ANY WAY, MANNER OR
RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT, THE NOTE OR ANY
DOCUMENT EXECUTED IN CONNECTION HEREWITH, SHALL BE SUBJECT TO LITIGATION IN
COURTS HAVING SITUS WITHIN BEXAR COUNTY, TEXAS. THE BORROWER HEREBY CONSENTS
AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED
WITHIN BEXAR COUNTY, TEXAS. THE BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE
TO REQUEST OR DEMAND TRIAL BY JURY, TO TRANSFER OR CHANGE THE VENUE OF ANY
SUIT, ACTION OR OTHER PROCEEDING BROUGHT AGAINST THE BORROWER BY THE LENDER IN
ACCORDANCE WITH THIS SECTION OR TO CLAIM THAT ANY SUCH PROCEEDING HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
BIOVENSA INC.
/s/ RICHARD L. LOVE
---------------------------------
By: Richard L. Love
Its: President
CTRC RESEARCH FOUNDATION
/s/ ANITA I. BUSQUETS
---------------------------------
By: Anita I. Busquets
Its: Chief Operating Officer
<PAGE> 12
EXHIBIT A
NOTE
$500,000.00 San Antonio, Texas
November 18 , 1994
FOR VALUE RECEIVED, on or before the Maturity Date, (as that term is
defined in the Loan Agreement referred to in the next paragraph), Biovensa
Inc., a Delaware, corporation promises to pay to the order of CTRC Research
Foundation (the "Lender") at its office at 14960 Omicron, San Antonio, Texas
78245, the lesser of the principal sum of FIVE HUNDRED THOUSAND DOLLARS
($500,000.00), or the amount outstanding as endorsed on the grid attached to
this Note (or recorded in the Lender's books and records, if the Lender is the
holder hereof). Such notation or recording by the Lender shall be rebuttably
presumptive evidence of the principal balance due on this Note.
This Note evidences indebtedness incurred under, and is subject to,
the terms and provisions of a Loan Agreement dated as of November 18 , 1994
(and, if amended, all amendments thereto) between the undersigned and the
Lender (the "Loan Agreement"). The undersigned promises to pay interest at the
rate or rates and times established under the Loan Agreement. Reference is
hereby made to the Loan Agreement for a statement of its terms, definitions and
provisions, including those under which this Note is required to be and may be
paid prior to its due date or have its due date accelerated, and this Note is
expressly subject to the terms and conditions of the Loan Agreement.
Payments of both principal and interest are to be made in immediately
available funds in lawful money of the United States of America.
The undersigned agrees to pay or reimburse the Lender and any other
holder hereof for all costs and expenses of seeking advice in regard to,
preparing any amendments to or waivers under, enforcing, and preserving its
rights under this Note or any document or instrument executed in connection
herewith (including legal fees and reasonable time charges of attorneys who may
be employees of the Lender, whether in or out of court, in original or
appellate proceedings or in bankruptcy). The undersigned irrevocably waives
presentment, protest, demand and notice of any kind in connection herewith.
This Note is made under and governed by the internal laws of the State
of Texas, and shall be deemed to have been executed in the State of Texas.
BIOVENSA INC.
-------------------------------
By: Richard L. Love
Its: President
<PAGE> 13
CTRC RESEARCH FOUNDATION
-------------------------------
By: Anita I. Busquets
Its: Chief Operating Officer
<PAGE> 14
LOAN AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
================================================================================
AMOUNT OF
AMOUNT OF PRINCIPAL PAID UNPAID PRINCIPAL NOTATION
DATE LOAN OR PREPAID BALANCE MADE BY
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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</TABLE>
<PAGE> 1
EXHIBIT 10.4
EXECUTION COPY
ASSIGNMENT OF RIGHTS AND ASSETS
This ASSIGNMENT OF RIGHTS AND ASSETS (the "Assignment"), is made as of
November ____, 1994 from CTRC Research Foundation, a Texas not-for-profit
corporation ("CTRC"), to Biovensa Inc., a Delaware corporation ("Biovensa").
R E C I T A L S:
WHEREAS, CTRC owns all of the issued and outstanding capital stock of
Biovensa;
WHEREAS, CTRC has determined that it would be beneficial for Biovensa
to have the use and ownership of certain rights and assets currently held and
owned by CTRC;
WHEREAS, CTRC has determined that such rights and assets should be
transferred to Biovensa in the form of a capital contribution and in exchange
for certain additional equity ownership in Biovensa; and
WHEREAS, Biovensa has agreed to accept the assignment of such rights
and assets.
NOW, THEREFORE, in consideration of the premises contained herein, and
other good and valuable consideration, the receipt and sufficiency of which is
acknowledged, the parties hereby agree as follows:
1. Assignment. As a contribution to the capital of Biovensa, and
in exchange for certain additional equity ownership in Biovensa, CTRC hereby
assigns, conveys, transfers, sets over and delivers to Biovensa, and Biovensa
hereby accepts, all of CTRC's right, title and interest of any nature, in and
to the following (collectively the "Assigned Assets"):
1.1. Computer Equipment. The computer hardware and
equipment described on Exhibit A hereto;
1.2. Business Plan. The Biovensa Business Plan dated May
18, 1994, as supplemented and updated, as included in Exhibit B
hereto, including all predecessors thereto;
1.3. Pharmaceutical Rights. The know-how, processes,
formulae, rights to make, sell and use, and all tangible samples of
the pharmaceutical compounds known as "4-hydroperoxycyclophosphamide"
and "dihydro-5-azacitidine".
1.4. Sterling Winthrop Contract Rights. (a) The MGBG
License and Development Agreement by and between CTRC and Sterling
Winthrop Inc.
<PAGE> 2
("Sterling") dated as of October 1, 1992, as included as Exhibit C
hereto (the "MGBG License Agreement"), and the development and other
rights and obligations of CTRC relating to the cancer compound known
as Crisnatol Mesylate ("Crisnatol") arising under the Option Agreement
by and between CTRC and Sterling dated as of October 1, 1992 and
amended effective as of April 1, 1994 as included as Exhibit D hereto
(the "Option Agreement") and;
(b) Biovensa hereby accepts the assignments set forth in
paragraph (a) hereof and hereby assumes all the obligations and
commitments of CTRC arising under the MGBG License Agreement and with
respect to the compound Crisnatol under the Option Agreement;
1.5. License Negotiations. CTRC's rights and interests in
and pursuant to any negotiations, letters of intent, agreements or
commitments made with respect to the compounds commonly known as
Difluoromethylornithine, Oxpurinol and Piritrexim.
1.6. Governmental Approvals and Applications. Any
approvals, applications, registrations, designations or other rights
applied for by, granted or conveyed to CTRC by any governmental or
regulatory body, department, commission or instrumentality, which
relate to the Assigned Assets described in Sections 1.3, 1.4 or 1.5
hereof.
2. Representations and Warranties of CTRC. With the exception of
the assets described in Section 1.4, which are held pursuant to the MGBG
License Agreement and the Option Agreement, CTRC represents and warrants to
Biovensa that as of the date hereof, CTRC has good and marketable title to all
of the Assigned Assets, free and clear of any liens, pledges, claims,
encumbrances or security interests of any kind of nature.
3. Miscellaneous.
3.1. Governing Law. This Assignment shall be governed by
and construed in accordance with the internal laws of the State of
Texas, without giving effect to any choice or conflict of law
provisions or rules (whether of the State of Texas or otherwise) that
would cause the application of the laws of any jurisdiction other than
the State of Texas.
3.2. Successors and Assigns. This Assignment shall be
binding upon and inure to the benefit of the parties hereto, and their
successors and assigns, however, neither party may assign its rights,
interests or obligations hereunder without the prior written consent
of the other party.
3.3 Execution in Counterparts. This Assignment may be
executed simultaneously in one or more counterparts, each of which
shall be deemed an original agreement, but all of which together shall
constitute one and the same instrument.
-2-
<PAGE> 3
3.4. Titles and Headings. The titles and headings to
sections contained herein are for purposes of reference only, and
shall not affect the provisions hereof.
3.5. Entire Agreement. This Assignment constitutes the
entire agreement among the parties with respect to the matters covered
thereby and supersedes all previous written, oral or implied
understanding among them with respect to such matters.
3.6. Amendment and Modification. The terms of this
Assignment may be amended, modified, waived or supplemented only by
mutual consent set forth in a writing duly signed by the parties
hereto.
3.7. Severability. In case of any of the provisions
contained in this Assignment are found to be invalid, illegal or
unenforceable in any request, any invalidity, illegality or
unenforceability shall not affect any other provision of this
Assignment, but this Assignment shall be construed as if such invalid,
illegal or unenforceable provision has been limited or modified
(consistent with its general intent) to the extent necessary so that
it shall be valid, legal and enforceable, or if it shall not be
possible to so limit or modify such invalid or illegal or
unenforceable provision or part of a provision, this Assignment shall
be construed as if such invalid or illegal or unenforceable provision
or part of a provision had never been contained herein.
3.8. Cooperation. CTRC and Biovensa agree to take all
actions and execute all documents or instruments as either party may
reasonably request to consummate the transactions contemplated by this
Agreement.
IN WITNESS THEREOF, the undersigned have executed this Assignment of
Rights and Assets as of the date set forth above.
CTRC RESEARCH FOUNDATION BIOVENSA
/s/ ANITA BUSQUETS /s/ RICHARD LOVE
- ------------------------------- -------------------------------
By: Anita Busquets By: Richard Love
---------------------------- ----------------------------
Title: Chief Operating Officer Title: CEO
------------------------- -------------------------
-3-
<PAGE> 4
Exhibit A
<TABLE>
<CAPTION>
FIXED ASSETS
VALUE
<S> <C> <C>
Computer for Alex Weis:
Macintosh llci F11140J3765 $1,478.20
Extended Keyboard II MI0501Q8%MO312
Monitor Model #M0401 7043104
Mouse MI050KD3C25
Computer for Deirdre Tessman:
Macintosh LC E1205AMM0442LL/A $1,415.62
Extended Keyboard II AP1361MY%MO312
Monitor M11140T5DTO
Mouse LT1160RSC22
Computer for Richard Love:
Macintosh Powerbook 180 Model # M444O $3,067.64
FC3023LQ441
Computer for Sharon Marino:
Macintosh IIsi F2112NL6C56 $1,454.36
Extended Keyboard II AP1115YG%MO312
Monitor MI13085FDT6
Mouse MI1050KOC25
Computer for Ed Martinez:
Macintosh IIsi CS2416NIC53 $1,454.36
Mouse: LT224618C22
Extended Kayboard II: AP24005C%MO312
Model M3501
Monitor M1212: SG231J9LEO4
Computer for Paul Vilk:
Macintosh IIx F9490W1M5835 -0-
Mouse 1288893
Extended Keyboard: SI2341KNO3N
Monitor VEC Multisync 3Ds 14M30109
Computer for Vishwas Gaitonde:
Macintosh IIsi FC2416MPC53 $1,235.00
Mouse: LT2245ZAC22
Extended Kayboard II: AP240058%MO32
Model M3501
Monitor M1212: SG231068E04
Computer for Donna Corbell:
</TABLE>
-4-
<PAGE> 5
<TABLE>
<S> <C> <C>
Macintosh LC E1104RM0812LL/A2111 $1,415.62
Mouse: LT104RRNC22
Extended Keyboard II: APO41JY%MO312
Model M3501
Monitor M1212: M136FJDT6
Computer for Don Martin:
Macintosh Quadra 660AV XB351CFP13Z $1,868.14
Mouse: LT340T72T18
Extended Kayboard II: AP351AAA%MO312
Model M3501
Monitor M1212: S5404142EO4
Computer for Susan Smith:
Macintosh LC III SG32229YNVA2 $1,388.94
Mouse: MB3211C3T18
Extended Keyboard II: AP32583T%MO312
Model M3501
Monitor M1212:
Computer for Teresa Mooneyham:
Power Macintosh 6100/60: XB426T2M175 $2,710.99
Monitor -
Macintosh Color Display: S54203TC2B7
Extended Keyboard II: AP33691C
Model M3501
Mouse: MB418EB5T18
Computer for Diana Guerrero:
Power Macintosh 6100/60: XB426T3Z175 $2,710.99
Mouse: MB418E9NT18
Extended Keyboard II: AP33691B
Model M3501
Macintosh Color
Display Monitor: S54203TN2B7
Computer for Tim Williamson:
Macintosh Quadra 660AV XB3519DU12Z $2,224.68
Mouse: MB335E7CT18
Extended Keyboard II: AP352DUZ%MO312
Model M3501
Monitor M1212: S53480BFE04
Computer for Larry Arthaud:
Power Macintosh 6100/60: XB426T3N175 $2,710.99
Mouse: MB418ECAT18
Extended Keyboard II: AP336919
</TABLE>
-5-
<PAGE> 6
<TABLE>
<S> <C>
Model M3501
Macintosh Color
Display Monitor: S54203TQ2B7
Computer for Alma Maldanado:
Power Macintosh 6100/60: XB426T2S175 $2,710.99
Mouse: MB418EBDT18
Extended Keyboard II AP33691A
Model M3501
Macintosh Color
Display Monitor S54203TP2B7
For Richard Love:
Dictaphone (Brand) Equipment: $625.02
Microcassette Portable Model # 3243
Serial # 842989
Exectalk Transcriber Model # 3712
Serial # 045041
#15 Software Licenses for Microsoft Office Mac 4.3 Pro -0-
includes:
FoxPro 2.6
Microsoft Word 6.0
Excel 5.0
PowerPoint 4.0
Microsoft Mail
Total $28,471.54
</TABLE>
-6-
<PAGE> 7
EXHIBIT A
Assignment of Rights Agreement
-7-
<PAGE> 1
EXHIBIT 10.5
FIRST AMENDMENT TO
ASSIGNMENT OF RIGHTS AND ASSETS
FIRST AMENDMENT TO ASSIGNMENT OF RIGHTS AND ASSETS (the "Amendment") made and
entered into by and between ILEX ONCOLOGY, INC., a Delaware corporation
formerly known as Biovensa Inc. ("ILEX"), and CTRC RESEARCH FOUNDATION, a Texas
not-for-profit corporation ("CTRC"), as of September 15, 1995 (ILEX and CTRC
are collectively referred to as the "Parties").
WHEREAS, the Parties have entered into an Assignment of Rights and Assets dated
as of November _____, 1994 (the "Agreement"); and
WHEREAS, the Parties desire to amend the Agreement in the manner indicated
herein;
NOW, THEREFORE, in consideration of the recitals and agreements contained
herein the sufficiency of which is hereby acknowledged, the Parties agree as
follows:
1. AMENDMENTS. Section 1 of the Agreement is amended as follows:
(a) by deleting Section 1.3 and inserting in its place the
following:
"1.3 PHARMACEUTICAL RIGHTS. The know-how, processes,
formulae, rights to make, have made, sell and use, and all
tangible samples of the pharmaceutical compounds known as
"4-hydroperoxycyclophosphamide" and "dihydro-5-azactitidine."
(b) by adding the following new subsections at the end thereof:
"1.7 CERTAIN AGREEMENTS. That certain Drug Development
Project Agreement effective as of April 1, 1993 between CTRC
and MGI Pharma, Inc. (the "MGI Pharma Agreement").
"1.8 CERTAIN LICENSES, APPLICATIONS AND AGREEMENTS. (a) that
certain Patent License Agreement dated as of November 12, 1992
between CTRC and the National Institute of Health (the "MGBG
License") and applications for orphan drug designation of
mitoguazone, and (b) that certain License Agreement effective
as of November 1, 1993 by and among Burroughs Wellcome Co.,
the Wellcome Foundation Limited and CTRC (the "Crisnatol
License", together with the MGBG License, the "Licenses") and
(c) that certain Agreement for services dated March 29, 1994
by and between the Institute for Drug Development and Parexel
International Corporation (the "Parexel Agreement")".
2. CERTAIN OTHER MATTERS. The Parties agree and acknowledge that (a)
pursuant to Section 11.4 of the MGI Pharma Agreement, the requisite
notice of the
<PAGE> 2
assignment and delegation contemplated by the Agreement, as amended
hereby, was made to MGI Pharma pursuant to a letter dated March 10,
1995 and attached hereto as Exhibit A, (b) in connection with the
consummation of the transactions contemplated by the Agreement, CTRC
transferred to ILEX substantially all of CTRC's business relating to
its operations which concern the Licenses, and (c) the licensor
pursuant to the MGBG License was notified of the assignment pursuant
to a letter dated February 21, 1995 and attached hereto as Exhibit B.
CTRC represents and warrants to ILEX that the Assigned Assets
constitute all of the assets and rights owned or licensed by CTRC
relating to 4-hydroperoxycyclophosphamide, dihydro-5-azactitidine,
mitoguazone and crisnatol mesylate.
3. PERFORMANCE OF CERTAIN PROVISIONS. Pursuant to Section 1 of the
Agreement, CTRC was entitled to receive "certain additional equity
ownership" in ILEX in exchange for the transfer of assets and rights
pursuant to the Agreement. CTRC agrees and acknowledges that ILEX has
fully performed its obligations pursuant to that section of the
Agreement by issuing a total of 5,239,900 shares of ILEX's Series A
Convertible Preferred Stock to CTRC pursuant to a dividend in March of
1995.
4. MISCELLANEOUS. The remainder of the Agreement shall not be affected
by this Amendment and shall remain in full force and effect.
5. COUNTERPARTS. This Amendment may be executed in two or m ore
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
6. MERGER. This Amendment, as amended hereby, embodies the entire
agreement and understanding between ILEX and CTRC and supersedes all
prior oral and written agreements and understandings relating to the
subject matter hereof.
IN WITNESS WHEREOF, the Parties have executed this Amendment as of the date
first written above.
ILEX ONCOLOGY, INC. CTRC RESEARCH FOUNDATION
/s/ RICHARD L. LOVE /s/ DAVID HUSCH
- ---------------------------- --------------------------------
By Richard L. Love By: David Husch
Its President -----------------------------
Its: Chief Operating Officer
----------------------------
<PAGE> 3
EXHIBIT A
MGI PHARMA NOTICE
<PAGE> 1
EXHIBIT 10.6
EXECUTION COPY
SERVICES AGREEMENT
This SERVICES AGREEMENT (the "Agreement") dated as of November 18,
1994 is entered into by and between CTRC Research Foundation, a Texas
not-for-profit corporation ("CTRC), and Biovensa Inc., a Delaware corporation
("Biovensa").
R E C I T A L S:
WHEREAS, CTRC and certain affiliates thereof recently established
Biovensa as a subsidiary to engage in the business of researching, developing,
licensing, marketing and owning pharmaceutical products and various other
activities associated therewith;
WHEREAS, CTRC previously employed various employees of Biovensa;
WHEREAS, CTRC has requested Biovensa to perform certain consulting and
administrative services for CTRC;
WHEREAS, Biovensa has requested CTRC to provide certain administrative
services for the benefit of Biovensa's employees;
WHEREAS, in the future Biovensa may request CTRC to provide certain
technical services and support.
NOW, THEREFORE, in consideration of the representations, warranties
and covenants contained herein, and other valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I.
BIOVENSA SERVICES
1.1. Services. Biovensa agrees that it shall provide the
following services to CTRC (collectively, the "Biovensa Services") according to
CTRC's written requests:
1.1.1. Management Consultation. Consultation with
respect to the overall management and day-to-day operations of CTRC's
Institute for Drug Development ("IDD"), including but not limited to,
guidance regarding budgets, personnel staffing matters and contractual
relationships (collectively, the "Management Services"). The
Management Services shall be provided by the
<PAGE> 2
President of Biovensa (the "President"), or other substitute personnel
reasonably acceptable to CTRC.
1.1.2. Research and Development Consultation.
Consultation with respect to the preclinical research and development
activities of IDD, including but not limited to, guidance regarding
budgets, personnel staffing matters and contractual relationships
(collectively, the "R&D Services"). The R&D Services shall be
provided by Biovensa's Chief Technical Officer ("CTO"), or other
substitute personnel reasonably acceptable to CTRC.
1.1.3. Regulatory Consultation. Consultation with
respect to regulatory matters related to IDD's activities, including
but not limited to, assisting CTRC personnel in the preparation and
submission of the following with the United States Food and Drug
Administration: investigational new drug applications and annual
reports, compassionate use requests and drug master files
(collectively, the "Regulatory Services"). The Regulatory Services
shall be provided by Biovensa's Director of Regulatory Affairs
("DRA"), or other substitute personnel reasonably acceptable to CTRC.
1.2. Frequency and Compensation for Services. In exchange for the
Biovensa Services, CTRC shall pay Biovensa the following (collectively, the
"Biovensa Service Fees"):
1.2.1. Management Services. For each hour of
Management Services provided, $145.00 per hour.
1.2.2. R&D Services. For each hour of R&D Services
provided, $100.00 per hour.
1.2.3. Regulatory Services. For each hour of
Regulatory Services provided, $60.00 per hour.
Biovensa and CTRC Research shall keep reasonable records of the time
spent by the President, CTO and DRA, or any substitutes therefor (collectively,
the "Biovensa Employees") providing the Biovensa Services, which records shall
be available for review by CTRC upon reasonable notice. At least two (2) days
prior to the last business day of each month, Biovensa shall submit to CTRC an
invoice for the Biovensa Services which were provided by Biovensa Employees,
and for which payment has not been received. CTRC shall pay the Biovensa
Service Fees to Biovensa in the form of a check or wire transfer of immediately
available funds on the last business day of each month.
1.3. Reimbursement of Expenses. In addition to paying the Biovensa
Service Fees, CTRC shall reimburse Biovensa for any reasonable expenses
incurred by Biovensa or the Biovensa Employees during the course of providing
the Biovensa Services,
<PAGE> 3
provided that any such single expense or disbursement in excess of $200 must be
authorized by CTRC prior to being made or incurred.
1.4. Scheduling of Services. Biovensa shall use its best efforts
to provide the Biovensa Services at the times and locations reasonably required
by CTRC. CTRC agrees to use its best efforts to provide Biovensa and the
Biovensa Employees with as much advance notice as is practicable regarding
CTRC's scheduling needs.
1.5. Duration of Services. The Biovensa Services shall be provided
to CTRC until the earlier to occur of (a) CTRC's hiring or retaining of
individuals or entities to perform the Biovensa Services, or (b) December 31,
1995.
1.6. Status of Biovensa Employees. Notwithstanding anything to the
contrary contained herein, Biovensa and CTRC expressly agree and acknowledge
that (a) the Biovensa Employees are and shall remain employees of Biovensa and
shall not be employees of CTRC, and (b) Biovensa shall have the sole discretion
and authority with respect to all scheduling and employment matters relating to
the Biovensa Employees.
1.7. Ownership of Work Product. CTRC and Biovensa agree that all:
(a) inventions, ideas, discoveries, developments, improvements and innovations,
whether or not patentable or reduced to practice, (b) all copyrightable works,
such as reports, specifications, data, databases, software (including all
source, object and executable codes) and documentation, and (c) all other
fruits of Biovensa's work for CTRC conceived, made or developed by Biovensa or
its agents, employees or representatives in performing the Biovensa Services,
whether alone or together with others (all of the foregoing and all
intellectual property and trade secrets relating thereto (such as copyrights;
copyright registrations, renewals, and applications; patents; patent
applications; substitutions for, and divisions, continuations, extensions,
continuations in part, renewals, reissues, and reexaminations of, patents, and
patent applications) are collectively referred to herein as the "Biovensa Work
Product"), are and shall be the property of CTRC. In consideration for the
payment by CTRC of the Biovensa Service Fees, Biovensa hereby quitclaims and
assigns to CTRC all of its right, title and interest now or hereafter arising
in and to the Biovensa Work Product. Biovensa agrees to execute and deliver
(without receiving additional consideration therefor), such additional
documents as CTRC reasonably deems necessary or convenient to perfect or
evidence CTRC's ownership of the Biovensa Work Product or to enable CTRC to
record this Agreement and secure rights of copyright and/or patent in its name
for the Biovensa Work Product in any country throughout the world, provided
that preparation of such additional documents shall be at the expense of CTRC.
1.8. Nondisclosure. Biovensa agrees that it will not disclose any
Biovensa Work Product or information relating thereto, to any third parties
without the prior written consent of CTRC, nor shall it use any of said
Biovensa Work Product or information relating thereto for its own purposes or
for the benefit of any third party.
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<PAGE> 4
ARTICLE 2
CTRC SERVICES
2.1. Services. CTRC agrees that it shall provide the following
services to Biovensa (collectively, the "CTRC Services"):
2.1.1. Employee Benefits. CTRC will administer
Biovensa's payroll and Biovensa employees will be covered under CTRC's
employee health, dental and life insurance policies until such time as
providing such benefits is not feasible and CTRC or Biovensa gives
reasonable notice to the other party to terminate such services. CTRC
will follow its normal policies and procedures in providing these
services (collectively the "Benefit Services").
2.1.2.Procurement. At Biovensa's request, CTRC will
provide procurement and purchasing services (collectively, the
"Procurement Services").
2.1.3. Miscellaneous. At Biovensa's request CTRC
will provide miscellaneous services such as public relations, and
other administrative tasks (the "Miscellaneous Services").
2.1.4. Technical Services. Biological testing,
chemical synthesis and analytical testing of various compounds
(collectively, the "Technical Services") as may be identified by
Biovensa from time to time. The Technical Services shall be provided
to Biovensa upon its request and will encompass whatever procedures
CTRC and Biovensa may agree to in writing from time to time.
2.1.5. Insurance. Coverage under CTRC's general
liability and directors and officers insurance policies until such
time as CTRC no longer owns 50% or more of the issued and outstanding
capital stock of Biovensa, or it is no longer feasible to provide such
coverage.
2.2. Compensation for Services. In exchange for the CTRC Services,
Biovensa shall pay CTRC the following (collectively, the "CTRC Service Fees"):
2.2.1. Employee Benefits Services. For each month
in which CTRC provides Benefits Services, $400.00 (the "Benefit Fees")
(plus the cost of such benefits).
2.2.2. Procurement Services. For each month in
which CTRC provides Procurement Services, $400.00 for Procurement
Services.
2.2.3. Miscellaneous Services. Compensation for
Miscellaneous Services shall be determined on a case-by-case basis
(collectively, the "Miscellaneous Fees").
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<PAGE> 5
2.2.4. Technical Services. For each project or
study for which CTRC provides Technical Services, CTRC and Biovensa
agree that they shall negotiate in good faith to determine the
appropriate compensation to be paid to CTRC (the "Insurance Fees").
The parties agree that such compensation will provide CTRC with fair
consideration for the Technical Services, comparable to the "market
price" an unaffiliated third party would charge for similar services.
2.2.5. Insurance Fees . For each insurance policy
under which Biovensa is covered pursuant to Section 2.1.5 hereof, CTRC
and Biovensa agree that they shall negotiate in good faith to
determine the compensation to be paid to CTRC (the "Insurance Fees").
The parties agree that such negotiations will be conducted with input
from CTRC's insurance broker as to the relative risk and basis for
premium determination regarding Biovensa's coverage pursuant to such
policies.
Biovensa shall pay the Benefits Fees and the Administrative Fees to
CTRC in the form of a check or wire transfer of immediately available funds on
the last business day of each month. CTRC and Biovensa shall agree on a
payment schedule for the Miscellaneous Fees, Technical Fees and Insurance Fees
when such fees have been negotiated pursuant to Sections 2.2.3, 2.2.4 and
2.2.5.
2.3. Reimbursement. In addition to paying the CTRC Services Fees,
Biovensa shall also reimburse CTRC for any reasonable expenses incurred, by
CTRC during the course of providing the CTRC Services, provided that such
expenses and disbursements are authorized by Biovensa prior to being made or
incurred.
2.4. Scheduling of Services. CTRC shall use its best efforts to
provide the CTRC Services at the times and locations reasonably requested by
Biovensa. Biovensa agrees to use its best efforts to provide CTRC with as much
advance notice as is practicable regarding Biovensa's scheduling needs.
2.5. Ownership of Work Product. CTRC and Biovensa agree that all:
(a) inventions, ideas, discoveries, developments, improvements and innovations,
whether or not patentable or reduced to practice, (b) all copyrightable works,
such as reports, specifications, data, databases, software (including all
source, object and executable codes) and documentation, and (c) all other
fruits of CTRC's work for Biovensa conceived, made or developed by CTRC or its
agents, employees or representatives in performing the CTRC Services, whether
alone or together with others (all of the foregoing and all intellectual
property and trade secrets relating thereto (such as copyrights; copyright
registrations, renewals, and applications; patents; patent applications;
substitutions for, and divisions, continuations, extensions, continuations in
part, renewals, reissues, and reexaminations of, patents, and patent
applications) are collectively referred to herein as the "CTRC Work Product"),
are and shall be the property of Biovensa. In consideration for the payment by
Biovensa of the CTRC Service Fees, CTRC hereby quitclaims and assigns to
Biovensa all of its right, title and interest now or hereafter arising in and
to the CTRC Work Product. CTRC agrees to
-5-
<PAGE> 6
execute and deliver (without receiving additional consideration therefor), such
additional documents as Biovensa reasonably deems necessary or convenient to
perfect or evidence Biovensa's ownership of the CTRC Work Product or to enable
Biovensa to record this Agreement and secure rights of copyright and/or patent
in its name for the CTRC Work Product in any country throughout the world,
provided that preparation of such additional documents shall be at the expense
of Biovensa.
2.6. Nondisclosure. CTRC agrees that it will not disclose any CTRC
Work Product or information relating thereto, to any third parties without the
prior written consent of Biovensa, nor shall it use any of said CTRC Work
Product or information relating thereto for its own purposes or for the benefit
of any third party.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1. Mutual Representations and Warranties. CTRC and Biovensa
represent and warrant to one another that:
3.1.1. Due Incorporation. Each is a corporation
duly organized, validly existing and in good standing under the laws
of its state of incorporation.
3.1.2. Authority. Each has the complete and
unrestricted right, power and authority to enter into, deliver and
perform this Agreement, and the execution, delivery and performance of
this Agreement and all of the transactions contemplated hereby have
been duly authorized by all necessary corporate action by each of
them.
3.1.3. Valid and Binding Agreement. This Agreement
constitutes the valid and binding obligation of each of them,
enforceable in accordance with its terms, subject as to enforcement to
usual equitable principles and except as limited by bankruptcy,
moratorium, insolvency or similar laws of general application
affecting the enforcement of creditor's rights.
3.1.4. No Violations. Neither of them are subject
to any restriction or other provision contained in their respective
articles or certificates of incorporation or bylaws, or any agreement,
instrument, order, judgment, decree or other restriction that would
prevent the consummation of the transactions contemplated by this
Agreement.
3.1.5. Consents. No notice to, filing with, or
authorization, consent or approval of any public body or authority or
other person or entity is required of either of them in connection
with the execution, delivery and performance of this Agreement.
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<PAGE> 7
ARTICLE 4
CONFIDENTIALITY
4.1. Confidential Information. "Confidential Information" shall
consist of: (a) all information relating to the business and affairs of
Biovensa and CTRC, as the case may be, including but not limited to business
and financial information; legal documents; customer lists; advice to
customers; data and databases; documentation and specifications; inventions;
theories; models, algorithms, know-how, software, discoveries, developments,
devices, methods, processes, formulations, manufacturing operations, and other
technology; the Biovensa Work Product and CTRC Work Product, as the case may
be, and compilations and other materials (whether in written, graphic,
audiovisual, optical, electronic or other media); and (b) any other information
identified by Biovensa or CTRC, as the case may be, as confidential; provided
that Confidential Information shall not include any information that (i) is in
the public domain or otherwise publicly available (other than through the fault
of the person entrusted with the Confidential Information), (ii) is rightfully
disclosed to the person entrusted with the Confidential Information by a third
party without continuing restrictions on its use or disclosure, or (iii) the
person entrusted with the Confidential Information can demonstrate through
documentary evidence was developed independently by such person without the use
of Confidential Information and other than in connection with providing the
Biovensa Services or the CTRC Services, as the case may be. Biovensa and CTRC
agree that they will comply with the terms of any non-disclosure or
confidentiality agreements entered into, or understandings reached, by the
other with any supplier, licensor or customer of the other.
4.2. Title to and Agreement Not to Divulge Confidential
Information. Each of Biovensa and CTRC acknowledge that it has no right, title
or interest in the other's Confidential Information. Each of Biovensa and CTRC
agrees that during the term of this Agreement, and at all times thereafter, it:
(a) will hold all Confidential Information of the other in strict confidence
and trust for the benefit of the other, (b) will use the other's Confidential
Information for the sole purpose of performing the Biovensa Services or the
CTRC Services, as the case may be, and not for its own benefit or the benefit
of any third party, (c) will not copy the other's Confidential Information
except as necessary to perform the Biovensa Services or the CTRC Services, as
the case may be, and (d) will not divulge or convey to any third party any of
the other's Confidential Information, except pursuant to the other's prior
written direction or consent. Each of Biovensa and CTRC agrees that any
Confidential Information of the other disclosed to it prior to or during the
term of this Agreement shall be subject to this Agreement.
4.3. Return of Materials. Promptly upon the expiration or
termination of this Agreement, Biovensa and CTRC shall return to the other all
records, documents, papers, computer disks/diskettes, computer printouts or
other tangible materials containing the other's Confidential Information, and
will certify in writing that all such records have been delivered to Biovensa
or CTRC, as the case may be.
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<PAGE> 8
ARTICLE 5
INDEMNIFICATION
5.1. By CTRC. CTRC shall indemnify and save and hold Biovensa
harmless from and against any claim, cost, expense, damage, liability, loss or
deficiency suffered or incurred by Biovensa (including, without limitation,
reasonable attorney's fees and other reasonable costs and expenses incident to
any suit, action or proceeding) arising out of or resulting from CTRC's (a)
failure to perform or observe any term, provision, covenant, agreement or
condition in this Agreement, or (b) negligent performance of the CTRC Services.
5.2. By Biovensa. Biovensa shall indemnify and save and hold CTRC
harmless from and against any claim, cost, expense, damage, liability, loss or
deficiency suffered or incurred by CTRC (including, without limitation,
reasonable attorney's fees and other reasonable costs and expenses incident to
any suit, action or proceeding) arising out of or resulting from Biovensa's (a)
failure to perform or observe any term, provision, covenant, agreement or
condition in this Agreement, or (b) negligent performance of the Biovensa's
Services.
5.3. Procedure. CTRC and Biovensa shall give prompt written notice
to one another of any assertion, claim or demand which CTRC or Biovensa
discover or of which notice is received after the date of this Agreement which
might give rise to a claim by CTRC or Biovensa against the other under Sections
5.1 or 5.2 hereof, stating the nature, basis and amount thereof. In the case
of any claim by a third party, any suit, any claim by any governmental body, or
any legal, administrative arbitration or proceeding with respect to which CTRC
or Biovensa may have liability under the indemnity agreements contained in
Sections 5.1 and 5.2 hereof, the party which may have such liability to the
other shall be entitled to participate therein, and to the extent desired, to
assume the defense thereof, and after notice from CTRC or Biovensa, as the case
may be, of its election to assume the defense thereof, the assuming party will
not be liable to the other for any legal or other expenses subsequently
incurred by the other in connection with the defense thereof, other than
reasonable costs of investigation, unless the assuming party does not actually
assume the defense thereof following notice of such election. CTRC or
Biovensa, as the case may be, shall make available to the other and its
attorneys and accountants, at all reasonable times, all books and records
relating to such suit, claim or proceeding, and CTRC or Biovensa, as the case
may be, will render to each other such assistance as may reasonably be required
of each other in order to insure proper and adequate defense of any such suit,
claim or proceeding. CTRC and Biovensa, as the case may be, will not make any
settlement of any claim which might give rise to liability of the other under
the indemnity agreements contained in Sections 5.1 and 5.2 hereof without the
prior written consent of the other. If CTRC or Biovensa, as the case may be,
shall desire and be able to effect a compromise or settlement of any such claim
and the other shall refuse to consent to such compromise or settlement, then
the liability of CTRC or Biovensa, as the case may
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<PAGE> 9
be, to the party which refuses to consent with respect to settlement of such
claim shall be limited to the amount so offered in compromise or settlement.
ARTICLE 6
TERM AND TERMINATION
6.1. Duration. This Agreement shall be effective as of the date
set forth above and shall continue in force and effect for twelve (12) months
subsequent thereto (the "Initial Term"), unless earlier terminated pursuant to
this Article. This Agreement shall automatically renew for three (3)
successive twelve (12) month periods (each such period a "Renewal Term," and
together with the Initial Term, a "Term"), unless either party notifies the
other in writing at least thirty (30) days before the expiration of the Initial
or a Renewal Term, of its desire to not renew the Agreement.
6.2. Termination. Either party may terminate this Agreement in
their sole discretion, by providing the other party with at least sixty (60)
days prior written notice. Provided that CTRC is fulfilling its obligations
pursuant to Sections 1.2 and 1.3, Biovensa agrees that it shall not terminate
this Agreement prior to the expiration of the period described in Section 1.5.
6.3. Survival. Notwithstanding anything contained herein to the
contrary, the expiration or termination of this Agreement shall not relieve any
of the parties of their obligations pursuant to Sections 1.5, 2.5 and Article
4.
ARTICLE 7
MISCELLANEOUS
7.1. Cooperation. CTRC and Biovensa agree to take all actions and
execute all documents or instruments as either party may reasonably request to
consummate the transactions contemplated by this Agreement.
7.2. Notices. All notice hereunder shall be in writing and shall
be deemed given when delivered in person or when telecopied with hard copy to
follow, or three (3) business days after being deposited in the United States
mail, postage prepaid, via registered or certified mail, or two (2) business
days after delivery to a nationally recognized express courier, expenses
prepaid, addressed as follows:
If to CTRC:
CTRC Research Foundation
14960 Omicron
San Antonio, Texas 78245
Attention: Ms. Anita Busquets
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<PAGE> 10
If to Biovensa:
Biovensa Inc.
14960 Omicron
San Antonio, Texas 78245
Attention: Mr. Richard L. Love,
President
and/or such other addresses and/or to such other addresses as may be
designated by notice given in accordance with the provisions hereof.
7.3. Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, successors and
permitted assigns. No party shall assign this Agreement or its rights
hereunder without the prior written consent of the other party hereto.
7.4. Merger. This Agreement contains all of the agreements between
the parties with respect to the subject matter hereof and this Agreement
supersedes all previous or contemporaneous written, oral or implied
understandings between the parties hereto with respect to the subject matter
hereof.
7.5. Amendment: Waiver. No change or modification of this
Agreement shall be valid unless the same shall be in writing and signed by the
parties hereto. No waiver of any provisions of this Agreement shall be valid
unless in writing and signed by the waiving party. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver, unless so provided in the waiver.
7.6. Severability. If any provision of this Agreement (or portion
thereof) shall, for any reason, be considered invalid or unenforceable by any
court of competent jurisdiction, such provision (or portions thereof) shall be
ineffective only to the extent of such invalidity or unenforceability, and the
remaining provisions of this Agreement (or portions thereof) shall nevertheless
be valid, unenforceable and of full force and effect.
7.7. Section Headings. The article, section or paragraph headings
or titles herein are inserted for convenience of reference only and shall not
be deemed a part of this Agreement.
7.8. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which
when taken together shall constitute a single instrument.
7.9. Governing Law. This Agreement shall be governed and
controlled as to validity, enforcement, interpretation, construction, effect
and in all other respects by the laws of the State of Texas applicable to
contracts made in that State (other than
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<PAGE> 11
any conflict of laws rule which might result in the application of the laws of
any other jurisdiction).
IN WITNESS WHEREOF, CTRC and Biovensa have caused this Agreement to be
executed by their duly authorized officers as of the date set forth above.
CTRC RESEARCH FOUNDATION BIOVENSA INC.
/s/ Anita I. Busquets /s/ R. L. Love
By: Anita I. Busquets By: Richard L. Love
---------------------------------- ----------------------------------
Title: Chief Operating Officer Title: President
------------------------------- -------------------------------
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<PAGE> 1
EXHIBIT 10.7
COVENANT NOT TO SUE
In consideration of one dollar ($1.00), and other good and valuable
consideration, the sufficiency and receipt of which is acknowledged, CTRC
Research Foundation ("CTRC"), on the one hand, and Ilex Oncology, Inc.
("Ilex"), on the other hand, hereby agree on behalf of themselves, their
representatives, agents, assignees, parents, subsidiaries, affiliates
(including, in the case of CTRC, Dr. Daniel D. Von Hoff and Dr. Charles A.
Coltman, Jr.), successors, executors, officers, directors, trustees and
employees (collectively, such person's "Affiliates") not to commence or
otherwise prosecute any legal action or proceeding of any nature whatsoever
against, in the case of CTRC, the current or future members (or their estates,
heirs or legal representatives) of the Board of Directors of Ilex, other than
members of the Ilex Board of Directors who also are employees or officers of or
consultants to Ilex (the "Ilex Directors"), or, in the case of Ilex, the
current or future members (or their estates, heirs or legal representatives) of
the Board of Trustees of CTRC (the "CTRC Directors"), for any claim that would
have been covered by any directors and officers liability insurance policies
maintained by CTRC or Ilex, as the case may be, but for any exclusion
thereunder of coverage for any claim brought by or made on behalf of or in the
name of CTRC or any CTRC Affiliate in the case of a claim relating to Ilex or
Ilex or any Ilex Affiliate in the case of a claim relating to CTRC. The
agreements set forth in the preceding sentence shall continue in full force and
effect until the earlier of (i) the first date on which CTRC or Ilex, as the
case may be, obtains directors and officers liability insurance not including
the aforementioned exclusion, (ii) the date on which Ilex consummates an
initial public offering of its equity securities or (iii) the third (3rd)
anniversary of the date hereof; provided that any such termination of this
agreement shall not apply to actions or proceedings arising from or based upon
facts, developments or activities arising or occurring prior to the termination
and with respect to any such actions or proceedings this agreement shall
continue in full force and effect after the termination.
CTRC and Ilex further agree to defend, indemnify and hold harmless the
Ilex Directors or the CTRC Directors, as the case may be, for all damages,
costs and expenses, including legal fees and costs of suit, for any breach of
this agreement by CTRC or Ilex, as the case may be, or by any employee, agent,
representative, executor, director or officer of such party or its assignees.
Each of the undersigned represents and warrants that it is not aware
of any accrued or unaccrued claim which exists against the Ilex Directors or
the CTRC Directors, as the case may be, by the undersigned. Each of the
undersigned further represents and warrants that it has not assigned any claim
against the Ilex Directors or the CTRC Directors, as the case may be, and
covenants and agrees that it will not assign any such claim before the
termination of this agreement.
<PAGE> 2
This agreement is executed and delivered by the parties hereto as of
the 26th day of September, 1995.
CTRC RESEARCH FOUNDATION
/s/ DAVID HIRSCH
--------------------------------------
Name:
Chief Operating Officer
--------------------------------------
Title:
--------------------------------------
ILEX ONCOLOGY, INC.
/s/ RICHARD LOVE
--------------------------------------
Name:
President and CEO
--------------------------------------
Title:
--------------------------------------
Acknowledged and agreed to as of
the date set forth above:
/s/ DR. DANIEL D. VON HOFF
- ----------------------------------
Dr. Daniel D. Von Hoff
/s/ DR. CHARLES A. COLTMAN
- ----------------------------------
Dr. Charles A. Coltman
-2-
<PAGE> 1
EXHIBIT 10.8
OFFICE LEASE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
DATE OF LEASE TERM OF LEASE MONTHLY RENT
As of BEGINNING ENDING
__________,_ 1996 October 1, 1996 September 30, 1996 4,562.00
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Location of Premises: 4960 Omicron, San Antonio, TX 78245
(Comprising approx. 3,245 of furnished office space)
- --------------------------------------------------------------------------------------------------------
Purpose: General Business Office
- --------------------------------------------------------------------------------------------------------
</TABLE>
LESSEE LESSOR
NAME Blouensa, Inc. NAME CTRC Research Foundation
ADDRESS 14960 Omicron ADDRESS 14960 Omicron
CITY San Antonio, Texas 78245 CITY San Antonio, Texas 78245
In consideration of the mutual covenants and agreements herein stated,
Lessor hereby leases to Lessee and Lessee hereby leases from Lessor solely for
the above purposes the premises designated above (the "Premises"), together
with the appurtenances thereto, for the above Term.
RENT 1. Lessee shall pay Lessor or Lessor's agent as rent
for the Premises the sum stated above, monthly in
advance, until termination of this lease, at Lessor's
address stated above or such other address as Lessor
may designate in writing.
HEAT; NON- 2. Lessor will at all reasonable hours during each
LIABILITY day and evening, during the term, when required by the
OF LESSOR season, furnish at his own expense heat and/or air
conditioning for the heating and air conditioning
apparatus in the demised premises, except when
prevented by accidents and unavoidable delays,
provided, however, that except as provided by Texas
statute, the Lessor shall not be held liable in damages
on account of any personal injury or loss occasioned by
the failure of the heating or air conditioning
apparatus to heat or air condition the Premises
sufficiently, by any leakage or breakage of the pipes,
by any defect in the electric wiring elevator apparatus
and service thereof, or by reason of any other defect,
latent or patent, in, around or about the said
building.
HALLS 3. Lessor will cause the halls, corridors and other
parts of the building adjacent to the Premises to be
lighted, cleaned and generally cared for, accidents
and unavoidable delays excepted.
RULES AND 4. The rules and regulations at the end of this Lease
REGULATIONS constitute a part of this Lease. Lessee shall observe
and comply with them, and also with such further
reasonable rules and regulations as may later be
required by Lessor for the necessary, proper and
orderly care of the Building in which Premises are
located.
ASSIGNMENT, 5. Lessee shall neither sublet the Premises or any
SUBLETTING part thereof nor assign this Lease nor permit by any
act or default any transfer of Lessee's interest by
operation of law, nor offer the Premises or any part
thereof for lease or sublease, nor permit the use
thereof for any purpose other than as above mentioned,
without in each case the written consent of Lessor,
which consent will not be unreasonably withheld.
SURRENDER OF 6. Lessee shall quit and surrender the Premises at
PREMISES the end of the term in as good condition as the
reasonable use thereof will permit, with all keys
thereto, and shall not make any alterations in the
Premises without the written consent of Lessor; and
all alterations which may be made by either party
hereto upon the Premises, except movable furniture and
fixtures put in at the expense of Lessee, shall be the
property of Lessor, and shall remain upon and be
surrendered with the Premises as a part thereof at the
termination of this lease.
<PAGE> 2
NO WASTE OR MISUSE 7. Lessee shall restore the Premises to Lessor, with
glass of like kind and quality in the several doors
and windows thereof, entire and unbroken, as is now
therein, and will not allow any waste of the water or
misuse or neglect the water or light fixtures on the
Premises, and will pay all damages to the Premises as
well as all other damage to other tenants of the
Building, caused by such waste or misuse.
TERMINATION, 8. At the termination of this lease, by lapse of time
ABANDONMENT, RE- or otherwise, Lessee agrees to yield up immediate and
ENTRY, RELETTING peaceable possession to Lessor, and it shall be lawful
for the Lessor or his legal representative at any time
thereafter, without notice, to re-enter the Premises of
any part thereof, either with or (to the extent
permitted by law) without process of law, and to expel,
remove and put out the Lessee or any person or persons
occupying the same, using such force as may be
necessary so to do, and to repossess and enjoy the
Premises again as before this lease, without prejudice
to any remedies which might otherwise be used for
arrears of rent or preceding breach of covenants; or in
case the Premises shall be abandoned, deserted, or
vacated, and remain unoccupied five days consecutively,
the Lessee hereby authorizes and requests the Lessor as
Lessee's agent to re-enter the Premises and remove all
articles found therein, place them in some regular
warehouse or other suitable storage place, at the cost
and expense of Lessee, and proceed to re-rent the
Premises at the Lessor's option and discretion and
apply all money so received after paying the expenses
of such removal toward the rent accruing under this
lease. This request shall not in any way be construed
as requiring any compliance therewith on the part of
the Lessor, except as required by Texas statute. If
the Lessee shall fail to pay the rent at the times,
place and in the manner above provided, and the same
shall remain unpaid five days after the day whereon the
same should be paid, the Lessor by reason thereof shall
be authorized to declare the term ended, and the Lessee
hereby expressly waives all right or rights to any
notice or demand under any statute of the state
relative to forcible entry or detainer or landlord and
tenant, and agrees that the Lessor, his agents or
assigns may begin suit for possession or rent without
notice or demand.
GOVERNING LAW 9. This lease shall be governed by the internal laws
of the state of Texas, without giving effect to any
choice of law provisions that would require the
application of any laws other than those of the
state of Texas.
LESSOR NOT LIABLE 10. Except as provided by Texas statute, the Lessor
shall not be liable for any loss of property or
defects in the Building or in the Premises, or any
accidental damages to the person or property of the
Lessee in or about the Building or the Premises, from
water, rain or snow which may leak into, issue or flow
from any part of the Building or the Premises, or from
the pipes or plumbing works of the same. The Lessee
hereby covenants and agrees to make no claim for any
such loss or damage at any time.
OPTION TO TERMINATE 11. In the event that the Lessor, his successors,
attorneys or assigns shall desire to regain the
possession of the Premises herein described, for any
reason, Lessor shall have the option of so doing upon
giving the Lessee ninety days' notice of Lessor's
election to exercise such option.
CONFESSION OF 12. If default be made in the payment of rent, or any
JUDGMENT installment thereof, as herein provided, Lessee hereby
irrevocably constitutes any attorney of any Court of
Record in this State, attorney for Lessee and in
Lessee's name, from time to time, to enter the
appearance of Lessee, to waive the issuance of process
and service thereof, to waive trial by jury, and to
confess judgment in favor of Lessor against Lessee for
the amount of rent which may be then due hereunder,
together with costs of suit and a reasonable sum for
plaintiff's attorney's fees in or about the entry of
such judgment, and to waive and release all errors and
right of appeal from any such judgment, and to consent
to an immediate execution thereon.
PLURALS; SUCCESSORS 13. The words "Lessor" and "Lessee" wherever used in
this lease shall be construed to mean Lessors or
Lessees in all cases where there is more than one
Lessor or Lessee, and to apply to individuals, male or
female, ,or to firms or corporations, as the same may
be described as Lessor or Lessee herein, and the
necessary grammatical changes shall be assumed in each
case as though fully expressed. All covenants,
promises, representations and agreements herein
contained shall be binding upon, apply and inure to
the benefit of Lessor and Lessee and their respective
heirs, legal representatives, successors and assigns.
/s/ ANITA BUSQUETS (Seal) /s/ RICHARD LOVE (Seal)
- ------------------------------- -------------------------------
CTRC Research Foundation (Seal) Blouensa, Inc. (Seal)
- ------------------------------- -------------------------------
Lessor Lessee
<PAGE> 3
RULES AND REGULATIONS
1. No sign, advertisement or notice shall be inscribed, painted or
affixed on any part of the outside or inside of Building, except on
the glass of the doors and windows of the room leased and on the
directory board, and then only of such color, size, style and material
as shall be first specified by the Lessor in writing, endorsed on this
lease. The Lessor reserves the right to remove all other signs and
showcases without notice to the Lessee, at the expense of the Lessee.
At the expiration of the term Lessee is to remove all his signs from
such windows, doors and directory board.
2. Lessee shall not put up or operate any steam engine, boiler, machinery
or stove upon the Premises, or carry on any mechanical business on
Premises, or use or store inflammable fluids in the Premises without
the written consent of the Lessor first had and endorsed on this
lease, and all stoves which may be allowed in the Premises shall be
placed and set up according to the city ordinance.
3. No additional locks shall be placed upon any doors of said room
without the written consent of the Lessor first had and endorsed upon
this lease; and the Lessee will no permit any duplicate keys to be
made (all necessary keys to be furnished by the Lessor) and upon the
termination of this Lease. Lessee will surrender all keys of Premises
and Building.
4. All safes shall be carried up or into Premises at such times and in
such a manner as shall be specified by the Lessor; the Lessor shall in
all cases retain the power to prescribe the proper position of such
safes, and any damage done to the Building by taking in or putting
out a safe, or from overloading the floor with any safe, shall be paid
by the Lessee. Furniture, boxes or other bulky articles belonging to
lessee shall be carried up in the freight compartment of the elevators
of the Building; packages which can be carried by one person and not
exceeding fifty pounds in weight, may, however, be carried down by the
passenger elevator, at such times as may be allowed by the management.
5. No person or persons other than the janitor of this Building shall be
employed by Lessee for the purpose of taking charge of Premises
without the written consent of Lessor first had and endorsed upon this
lease. Any person or persons so employed by Lessee (with the written
consent of the Lessor) must be subject to and under the control and
direction of the janitor of the Building in all things in the Building
and outside of the Premises. The agent and janitor of the Building in
all things in the Building and outside of the Premises. The agent and
janitor of the Building shall at all times keep a pass key and be
allowed admittance to the Premises, to cover any emergency of fire, or
required examination that may arise.
6. The Premises leased shall not be used for the purpose of lodging or
sleeping rooms or for any immoral or illegal purpose.
7. The rent of an office will include occupancy of office, water to
Lessor's standard fixtures, heat, and elevator service during
reasonable working hours; but Lessor shall not be liable for any
damages from the stoppage of water, heat or elevator service.
8. If Lessee desires telegraphic or telephonic connections, the Lessor
will direct the electricians as to where and how the wires are to be
introduced, and without such written directions endorsed on this lease
no boring or cutting for wires will be permitted.
9. If Lessee desires Venetian or other awnings or shades over and outside
of the windows, to be erected at the Lessee's expense, they must be of
such shape, color, material and make as may be prescribed by the
Lessor in writing on this lease.
10. Birds, dogs, or other animals shall not be allowed in the Building.
All tenants and occupants must observe strict care not to leave their
windows open when it rains or snows, and for any default or
carelessness in these respects, or any of them, shall make good all
injuries sustained by other tenants, and also all damage to the
Building resulting from such default or carelessness.
11. No packages, merchandise or other effects shall be allowed to remain
in the halls at any time.
12. The Lessor reserves the right to make such other and further
reasonable rules and regulations as in his judgment may from time to
time, be needed for the safety, care and cleanliness of the Premises
and for the preservation of good order therein.
13. It is understood and agreed between the Lessee and the Lessor that no
assent or consent to change in or waiver of any part of the lease has
been or can be made unless done in writing and endorsed hereon by the
Lessor; and in such case it shall operate only for the time and
purpose in such lease expressly stated.
14. Lessee shall have the right to use any photocopiers, facsimile
machines, printers, and any electronic mail located on the Premises.
15. Lessee shall have the right to use any kitchen or conference rooms
located on the Premises, provided that such facilities are not then
being used by Lessor or its agents.
<PAGE> 1
EXHIBIT 10.9
TEXAS RESEARCH AND TECHNOLOGY FOUNDATION
LEASE AGREEMENT
The Texas Research and Technology Foundation (the "Foundation") is a
Texas non-profit corporation, with its principal place of business in San
Antonio, Texas. One of its purposes is to provide space for certain small
scientific and technical enterprises. In carrying out this purpose, the
Foundation desires to lease space to Biovensa Inc. (the "Tenant"), a Delaware
corporation, with its principal place of business in San Antonio, Texas, and
the Tenant desires to lease such space from the Foundation.
Accordingly, in return for mutual covenants contained herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows, effective as of October 1,
1994 (the "Effective Date"):
1. The Foundation hereby leases to the Tenant, and the Tenant
hereby leases from the Foundation, as of the Effective Date, an area of
approximately 480 square feet in a building located at 14785 Omicron Drive, San
Antonio, Texas, 78245, as shown more fully on Exhibit A which is attached
hereto and incorporated herein. The area that is leased hereunder, together
with the common areas that are located inside and outside the building,
(collectively, the "Premises") will be available to the Tenant during this
Lease to use as its principal place of business in accordance with the terms
set out herein. The Tenant specifically agrees that the Premises will be used
only as an office and not for any other purpose, unless the Foundation
otherwise agrees in writing.
2. In addition to the other rights that are granted to the Tenant
under this Lease, the Foundation, without further charge, will permit the
Tenant exclusive use of the fixtures and items of personal property which are
presently located in the space that is the subject hereof, or are being
installed for the Tenant's use by the Foundation and Tenant. The Foundation
will also provide, without charge, water, gas and other building services that
are similar to services supplied to all other tenants. All benefits provided
to the Tenant by the Founder hereunder will be provided WITHOUT ANY EXPRESSED
OR IMPLIED WARRANTIES OF ANY NATURE WHATSOEVER, INCLUDING THOSE OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.
3. The Lease will continue for a term of six (6) months from the
Effective Date. The tenant shall have the option to terminate the Lease
<PAGE> 2
with thirty (30) days written notice. Although the parties anticipate that it
will continue through the term, the Lease may be terminated by the Foundation
upon thirty (30) days notice if the Tenant fails to substantially comply with
the terms and fails to cure such default within thirty (30) days after written
notice hereof. The Lease may also be terminated by the Foundation as elsewhere
provided herein.
Notwithstanding the foregoing, the Foundation shall give Tenant written notice
of its failure to pay rent when due (as hereinafter provided) and Tenant shall
have seven (7) days after delivery of written notice from the Foundation as
(hereinafter provided) of the default in which to pay all rent when due and
owing; and the Foundation shall give Tenant written notice of its failure to
comply with any other term of this lease, excluding the obligation to pay rent
when due, and Tenant shall have thirty (30) days after delivery of written
notice from the Foundation (as hereinafter provided) of the default in which to
cure the default.
If, after written notice of default and the expiration of the appropriate cure
period, tenant has not cured a monetary or nonmonetary default, then the
Foundation may terminate this Lease by giving written notice of termination to
Tenant and Tenant hereby agrees to vacate the Premises (as hereinafter
provided). The Lease may also be terminated by the Foundation as elsewhere
provided herein.
4. As consideration for the matters contained in this lease, the
Tenant will pay the Foundation the sum of three hundred sixty dollars and
no/100 ($360.00) per month as rent during the initial term of the Lease. If
Tenant desires to renew the Lease at the expiration of the initial term, the
Tenant shall give the Foundation written notice at least sixty (60) days prior
to the expiration of the initial term. All rental rates, terms and conditions
shall be negotiated at least thirty (30) days prior to the expiration of the
initial term, or any subsequent renewal terms, as appropriate. All sums will
be paid at the office of the Foundation in Bexar County, Texas, regularly, in
advance, on or before the first (1st) day of each and every calendar month, and
any payment that is not made within 7 days after due date shall bear interest
at the highest applicable rate provided by law. If this Lease, or any
subsequent Lease begins or ends on a date other than the first or last day of a
calendar month, the rent due for that month will be prorated.
5. The Foundation, at its expense, will maintain the building and
land on which the Premises are located in good condition, ordinary wear and
tear excepted, provided that the Tenant will be required to repair any damage
which has been caused by its own acts or omissions, ordinary
<PAGE> 3
wear and tear excepted. If, however, the Premises are materially damaged by
fire or other casualty, and the Foundation determines that it is not reasonable
to continue to operate the building, the Foundation may elect to close the
building and terminate this Lease, by giving not less than thirty (30) days
prior written notice thereof to the Tenant.
6. The Tenant, at its expense, will maintain the area that is the
subject of this Lease in a clean and neat condition at all times and will make
all repairs or replacements that may be required as a result of its activities,
ordinary wear and tear excepted. The Tenant will not, without the prior
written consent of the Foundation, bring any hazardous or toxic substances onto
the Premises or take any other action with respect to the Premise which may
result in an increase in the insurance premiums of the Foundation or a
reduction in the value of the building or land on which the Premises are
located. Tenant shall comply with all state and federal laws, ordinances,
rules and regulations applicable to the Tenant and/or the Premises, and its use
and operation, including, but not limited to (a) the Americans with
Disabilities Act of 1990, and (b) OSHA standards, including, but not limited
to, 29 C.F.R. S 1910.1030, and Tenant shall comply with all, and not violate
any, easements, restrictions, agreements, covenants and conditions with respect
to or affecting the Premises, or any part thereof; provided, however, that the
Foundation is responsible for ensuring that the building complies with all of
the requirements of the Americans With Disabilities Act of 1990, and for any
and all expenses related to that compliance.
7. The Foundation may, from time to time, publish rules governing
the conduct of tenants and it may modify these rules within reasonable bounds
and/or within areas currently contemplated by existing rules in order to
continue to provide a beneficial environment for all of its tenants. The
Tenant will comply with such rules, regardless of whether they now or hereafter
exist as long as they are consistent with the terms of this lease and not
detrimental to the operation of Tenants's business. In this connection, if the
Foundation concludes in the future that such a rule should be implemented or
modified, it will so notify the Tenant in writing and thirty (30) days
thereafter the rule, as implemented or modified, will apply to this Lease, and
govern the conduct of the Tenant, just as if it were initially set forth
herein.
8. The Tenant will pay all costs and expenses that relate to its
affairs. Nothing herein shall make the Tenant a partner, joint venturer, agent
or employee of the Foundation or create any duty on the part of the Foundation
to provide any financial or administrative support to the Tenant.
Notwithstanding the foregoing, the Tenant will obtain and
<PAGE> 4
maintain liability insurance coverage throughout this Lease in the amount of
Five Hundred Thousand Dollars ($500,000.00), with such terms as the Foundation
may reasonably require, and the Foundation will be named therein as an
additional insured. Nothing herein shall make the Foundation a partner, joint
venturer or agent of Tenant nor give the Foundation any rights of ownership to
Tenant's technology.
9. The Tenant will indemnify and hold the Foundation and its
directors, officers and employees harmless from any losses, damages and
expenses that are hereafter brought against the Foundation, or its directors,
officers or employees as a result of any act or omission of the Tenant relating
to the Premises or this Agreement, regardless of whether such demand, claim,
cause of action or proceeding is also based in whole or in part on the
negligence or alleged negligence of the Foundation, or its directors, officers
or employees. The Foundation will indemnify and hold Tenant and its directors,
officers and employees harmless from any losses, damages and expenses arising
from any demands, claims, cause of action or other proceedings that are
hereafter brought against Tenant, or its directs, officers or employees as a
result of any act or omission of the Foundation relating to the Premises or
this Agreement, regardless of whether such demand, claim, cause of action or
proceeding is also based in whole or in part on the negligence or alleged
negligence of the Tenant, or its directors, officer or employees.
10. This Lease will terminate as provided herein and upon the date
of the termination the Tenant will vacate the Premises and return the Premises
in good condition together with all fixtures and items of Foundation's personal
property that have been provided hereunder, normal wear and tear excepted.
Sometime during the term of the Lease, regardless of any other provision of
this Lease, the Foundation may desire to exchange the area that it hereby
leased to the Tenant for comparable space and facilities in the same building.
The Foundation shall notify the Tenant in writing of its desire and thereafter
the Tenant will have a period of sixty (60) days to consider such exchange. In
the event of such exchange, the Foundation will compensate Tenant for cost
incurred to exchange the space and facilities and perform the exchange in a
timely manner so as not to cause Tenant loss of revenue during the exchange.
If the Tenant does not agree to such exchange within this period, then this
lease shall immediately terminate.
11. Any notices that are to be given under this Lease shall be
considered given if written and delivered in person or three (3) days after
<PAGE> 5
deposited with the United States Postal Service, postage prepaid, to be
delivered to the other party by registered and certified mail at the address
set forth next to the signatures below or such other address as may be
designated in writing.
12. This Lease shall be governed and construed in accordance with
the laws of Texas. It contains the entire agreement between the parties
relating to the Premises and their use and it will not be modified in any way
other than by a written document that has been signed by both parties. If any
question arises in the future regarding the Lease, it shall be resolved in
accordance with the laws of Texas. The Lease may not be assigned or sublet by
the Tenant to any third party, and control of the tenant may not be transferred
to any third party, without the prior written consent of the Foundation.
EXECUTED this 28th day of October, 1994.
TEXAS RESEARCH AND TECHNOLOGY
FOUNDATION, a Texas non-profit corporation
By: York Duncan
Name: /s/ YORK DUNCAN
-----------------------------
Title: Park Manager
-----------------------------
Address: 14785 Omicron Drive
San Antonio, Texas 78245
TENANT: Biovensa Inc.
By: Richard L. Love
Name: /s/ RICHARD L. LOVE
-----------------------------
Title: President
-----------------------------
Address: 14785 Omiron Dr.
San Antonio, TX 78245
<PAGE> 1
EXHIBIT 10.12
AGREEMENT
AGREEMENT, dated and effective this 1st day of November 1994, by and
among Texas Research and Technology Foundation, a Texas non-profit corporation
("TRTF"), CTRC Research Foundation, a Texas non-profit corporation ("CTRC")
(TRTF and CTRC are sometimes collectively referred to herein as the
"Foundations"), TRTF/CTRCRF Building Corporation, a non-profit corporation (the
"Building Corporation"); and Biovensa Inc., a Delaware corporation
("Biovensa").
WITNESSETH
WHEREAS, the Foundations desire to build a small scale (pilot) bulk
manufacturing plant ("GMP Plant") that produces bulk anticancer drugs for
clinical trials, which GMP Plant will be leased to and/or operated by Biovensa;
WHEREAS, to facilitate this goal, TRTF has decided to contribute to
the Building Corporation up to $750,000 in cash, a triple net lease of a
building shell and related real property as described in Exhibit A hereto (the
"Property") and all proceeds it may have a right to from Economic Development
Administration ("EDA") grant No. 08-01-02894 (the "Grant"); and CTRC has
decided to contribute to the Building Corporation up to $750,000 in cash and
all proceeds it may have a right to from the Grant;
WHEREAS, Biovensa desires that the Foundations make these
contributions to the Building Corporation and that the Building Corporation
build the GMP Plant to Biovensa or contract with Biovensa for its operation;
and
<PAGE> 2
WHEREAS, Biovensa may be forced to make arrangements to manufacture
certain drugs at other facilities in the event the GMP Plant construction is
not commenced as soon as possible;
NOW, THEREFORE, for and in consideration of the mutual promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
GENERAL
1.01. On and subject to the terms and conditions of this Agreement,
TRTF hereby agrees to contribute to the Building Corporation and equal amount
as contributed by CTRC up to $750,000 in cash together with the Property which
is described in the Grant Application as required to construct the GMP Plant in
consideration for the right to appoint or elect two of the four members of the
Board of Directors of the Building Corporation and the right to one-half of any
distributions or grants, if any, made by the Building Corporation.
1.02. On and subject to the terms and conditions of this Agreement,
CTRC hereby agrees to contribute to the Building Corporation and equal amount
as contributed by TRTF up to $750,000 in cash, and all proceeds from the Grant
as required to construct the GMP Plant in consideration for the right to
appoint or elect two of the four members of the Board of Directors of the
Building Corporation and the right to one-half of the distributions, if any,
made by the Building Corporation.
1.03. On and subject to the terms and conditions of this Agreement,
TRTF and CTRC hereby agree to use their respective best efforts to effectuate
the assignment to
-2-
<PAGE> 3
the Building Corporation of all right, title and interest they have to the
Grant proceeds. Upon such assignment, Building Corporation agrees to abide by
terms and conditions of the Grant.
1.04. On and subject to the terms and conditions of this Agreement,
Biovensa hereby agrees to enter into a lease and/or operating agreement of the
GMP Plant with the Building Corporation or its assigns which contains the terms
and conditions outlined in Exhibit B hereto, along with such other
representations, warranties, agreements of indemnity, and other provisions as
are customary in connection with such lease and/or operating agreements.
ARTICLE II
CONTINGENCIES
2.01. In the event that agreements and/or leases for the GMP Plant
containing additional satisfactory terms and conditions cannot be reached with
Biovensa by November 30, 1994, and unless the Foundations unanimously agree to
continue the development of the GMP Plant, the Foundations and the Building
Corporation agree as follows:
a. The Building Corporation shall discontinue
construction of the GMP Plant and attempt to minimize
losses as appropriate; and
b. The Building Corporation shall file Articles of
Dissolution with the Secretary of State of the state
of incorporation and provide in its plan of
liquidation that each Foundation will receive back
all non-cash property which was contributed by that
Foundation, and that all other assets of the Building
Corporation shall be distributed to the Foundations
in proportion to their right to appoint or elect
members to the Board of Directors of the Building
Corporation.
This provision, however, is not intended to address or limit the Foundations'
or the Building Corporation's rights, if any, to proceed against Biovensa.
-3-
<PAGE> 4
2.02. In the event that the Foundations are unable to assign the
Grant proceeds to the Building Corporation, the parties hereto agree as
follows:
a. The Foundations shall make a good faith effort to
restructure the proposed transaction in order to
effectuate the goals discussed in this Agreement
without jeopardizing the tax-exempt status of either
of the Foundations; including, but not limited to,
the assignment by the Building Corporation of the
agreement providing for the construction of the GMP
Plant to any new entity created for the purpose of
owning such facility and receiving the Grant
Proceeds;
b. Biovensa shall continue its obligations hereunder
with the assigns of the Building Corporation and
shall enter into any further agreements to operate
the GMP Plant with the entity designated by the
Foundations to own such facility after the
restructure has taken place; provided, however, that
the amount of capital of such new entity shall not
materially differ from the capital currently proposed
for the Building Corporation;
c. In the event the Foundations are unable to
restructure the proposed transaction without
jeopardizing the tax-exempt status of either of the
Foundations or substantially changing the material
terms of the transaction, the Foundation and the
Building Corporation agree as follows:
i. The Building Corporation shall discontinue
construction of the GMP Plant and attempt to
minimize losses as appropriate; and
ii. The Building Corporation shall file Articles
of Dissolution with the Secretary of State of
the state of incorporation and provide in its
plan of liquidation that each Foundation will
receive back all non-cash property which was
contributed by that Foundation, and that all
other assets of the Building Corporation
shall be distributed to the Foundations in
proportion to their right to appoint members
to the Board of Directors of the Building
Corporation.
2.03. In the event that the Board of Directors of the Building
Corporation unanimously agree prior to February 28, 1995 that it is not in its
or the Foundations' best interest to proceed with construction of the GMP
Plant, Biovensa releases and forever discharges the Foundations and the
Building Corporation from any and all
-4-
<PAGE> 5
damages arising from the Building Corporation's failure to proceed in the
construction of the GMP Plant.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
TEXAS RESEARCH AND TECHNOLOGY
FOUNDATION
By: /s/ JE CAMPIAN
------------------------------------------------
Name: JE Campian
----------------------------------------------
Title: President
---------------------------------------------
CTRC RESEARCH FOUNDATION
By: /s/ ANITA BUSQUETS
------------------------------------------------
Name: Anita Busquets
----------------------------------------------
Title: Cheif Operating Officer
---------------------------------------------
TRTF/CTRCRF BUILDING CORPORATION
By: /s/ YORK DUNCAN
------------------------------------------------
Name: York Duncan
----------------------------------------------
Title: President
---------------------------------------------
BIOVENSA INC.
By: /s/ RICHARD L. LOVE
------------------------------------------------
Name: Richard L. Love
----------------------------------------------
Title: President
---------------------------------------------
-5-
<PAGE> 6
EXHIBIT A
PROPOSED TERMS OF
TRTF LEASE TO BUILDING CORPORATION
. One Dollar ($1.00) per year lease payment
. Term of the lease is for a period of fifteen (15) years with the
option by Building Corporation to renew for three additional terms of
five (5) years each.
. Customary and usual provisions relating to:
. Indemnity
. Use Restrictions
. Insurance Coverage
-1-
<PAGE> 7
EXHIBIT B
TRTF/CTRC GMP BUSINESS TERMS OF
PROPOSED OPERATING AGREEMENT
SEPTEMBER 14, 1994
1. TRTF/CTRC Joint Venture will enter into an agreement with BioVensa to
lease and operate the GMP facility.
2. BioVensa intends on diligently pursuing the growth of a pharmaceutical
a manufacturing business in the Texas Research Park and expects to
eventually build a commercial scale manufacturing plant for bulk drugs
(Phase II) and a commercial scale manufacturing plant for finished
dose forms (Phase III).
3. Lease term will be 15 years beginning with occupancy. BioVensa will
have 3 options to extend the primary term by 5 years each. The terms
and conditions for each option period will be negotiated at least 180
days prior to the expiration of the initial term and/or option period,
respectively.
4. No base lease payments will be made in years 1 and 2.
5. The base lease payments will be calculated to amortize over a 13-year
period the total cash contributions of TRTF and CTRC Research to build
the facility (approximately $1.7 million) at 4% Interest; annual
payment will be approximately $170,250 for a total of $2,213,250.
6. BioVensa will make additional royalty payments during the primary term
as follows:
A. BioVensa will pay the JV royalties based on gross sales of
products manufactured in the Texas Research Park according to
the following schedule:
-1-
<PAGE> 8
Royalties on Gross Sales ($ Millions)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Yr 1 Yr 2 Yr 3 Yr 4
---- ---- ---- ----
- -----------------------------------------------------------------------------------------------------------
greater than 2 0% greater than 2 0% greater than 1.5 0%
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
2+ 3% on 1st 2+ 3% on 1st 1.5-2 3% 0-2 3%
2
- -----------------------------------------------------------------------------------------------------------
2+ 3% on 1st
2
- -----------------------------------------------------------------------------------------------------------
2-5 2% 2-5 2% 2-5 2% 2-5 2%
- -----------------------------------------------------------------------------------------------------------
5-100 1% 5-100 1% 5-100 1% 5-100 1%
- -----------------------------------------------------------------------------------------------------------
</TABLE>
B. All product sales will be at market value for royalty
calculations. If only a portion of the final product is
manufactured in facilities at the Texas Research Park, the
ratio of the product costs for the portion manufactured at the
Texas Research Park divided by the total costs will be applied
to the total product sales.
C. In keeping with the mission of TRTF as an economic developer
for the area, and in keeping with the intent of job creation
in the Texas Research Park pursuant to the EDA application
receiving approval, any additions or expansions of the GMP
facility or any Phase II or III facilities will be located in
the Texas Research Park, unless 1) environmental or
governmental regulations prohibit projects of this nature, 2)
occurrences beyond the control of CRTC or BioVensa prohibit
future development of projects of this nature, or 3) BioVensa
decides, for good and valid business reasons, to locate its
Phase II and/or III manufacturing operations at a location
other than the Texas Research Park and pays TRTF a fee
according to the following schedule:
<TABLE>
<S> <C>
Years 0 through 7 $1,000,000
Years 8 through 10 $ 750,000
Years 11 through 12 $ 500,000
</TABLE>
In addition, if BioVensa relocates the GMP facility as a part
of its relocation of a Phase II or III facility, BioVensa will
pay to the JV up to two years of base lease payments if a
worthy tenant is not found to lease the GMP facility within
the initial two-year period after termination of the Operating
Agreement. BioVensa may not relocate the GMP facility except
in conjunction with a Phase II and/or III expansion, or unless
BioVensa is purchased by a third party.
BioVensa agrees in good faith that it will not make a decision
to relocate primarily to reduce its royalty obligation to the
JV. In the event
-2-
<PAGE> 9
BioVensa relocates, the JV will assist BioVensa in finding a
tenant to occupy the GMP facility who will not cause the EDA
to demand repayment of its grant. However, if the relocation
of BioVensa does result in an EDA demand for repayment of the
grant, BioVensa will repay grant on behalf of the JV, TRTF and
CTRC.
D. TRTF agrees to provide any expansion or new facility with
recruitment incentives at least equal to those offered to any
other entity or facility it is attempting to attract to the
Texas Research Park, including using its best efforts to
assist BioVensa in obtaining any third party benefit or
relief, such as tax abatement.
E. In the event either party decides to sell its Interest in the
JV, the selling party will offer the remaining party a first
right of refusal to acquire it's Interest pursuant to good
faith negotiations. In the event that JV decides to sell the
GMP facility and is permitted to do so by the Economic
Development Administration, JV will offer BioVensa the first
right of refusal to purchase the facility pursuant to good
faith negotiations.
-3-
<PAGE> 1
EXHIBIT 10.26
National Institutes of Health
Alcohol, Drug Abuse and Mental Health Administration
MATERIAL TRANSFER AGREEMENT
This Material Transfer Agreement ("MTA") has been adopted for use by the
National Institutes of Health ("NIH") in all transfers of research material
("Research Material") whether NIH or ADAMHA is identified below as its Provider
or Recipient.
1. Provider agrees to transfer to Recipient's investigator named below
the following Research Material:
Dihydro-5-Azacytidine (DHCA) bulk and formulated clinical grade material and
corresponding documentation.
2. THIS RESEARCH MATERIAL MAY NOT BE USED IN HUMAN SUBJECTS. This
Research Material will only be used for research purposes by Recipient's
investigator in his/her laboratory, for the Research Project described below,
under suitable containment conditions. This Research Material will not be used
for commercial purposes such as screening, production or sale, for which a
commercialization license may be required. Recipient agrees to comply with all
Federal rules and regulations applicable to the Research Project and the
handling of the Research Material.
2. (a). Are Research Materials of human origin? [ ] Yes [X] No
2. (b). If Yes in 2(a), were Research Materials collected according to 45
CFR 46 "Protection of Human Subjects?" [ ] Yes [ ] No
Please Provide Assurance Number:
-------------------------
3. This Research Material will be used by Recipient's investigator solely
in connection with the following research project ("Research Project")
described with specificity as follows (use an attachment page if necessary:
Pre-Clinical evaluation and analysis of the bulk and formulated clinical grade
material of DHAC. An Amendment "Appendix A" to this MTA pursuant to Paragraph
11 will be executed prior to anticipated Clinical Testing of DHAC. Recipient
therefore agrees that Clinical Human studies, without additional documentation
and approval as described in Paragraph 11, are not the subject of this MTA.
4. In all oral presentations or written publications concerning the
Research Project, Recipient will acknowledge Provider's contribution of this
Research Material unless requested otherwise. TO the extent permitted by law,
Recipient agrees to treat in confidence, for a period of three (3) years from
the date of its disclosure, any of Provider's written information about this
Research Material that is stamped
<PAGE> 2
"CONFIDENTIAL," except for information that was previously known to Recipient
or that is or becomes publicly available or which is disclosed to Recipient
without a confidentiality obligation. Recipient may publish or otherwise
publicly disclose the results of the Research Project, but if Provider has
given CONFIDENTIAL information to Recipient such public disclosure may be made
only after Provider has had thirty (30) days to review the proposed disclosure,
except when a shortened time period under court order or the Freedom of
Information Act pertains.
5. This Research Material represents a significant investment on the part
of Provider, and is considered proprietary to Provider. Recipient's
investigator therefore agrees to retain control over this Research Material,
and further agrees not to transfer the Research Material to other people not
under her or his direct supervision without advance written approval of
Provider. Provider reserves the right to distribute the Research Materials to
others and to use it for its own purposes. When the Research Project is
completed, or three (3) years have elapsed, whichever occurs first, the
Research Material will be destroyed by Recipient or otherwise disposed of as
mutually agreed by Provider and Recipient.
6. This Research Material is provided as a service to the research
community. IT IS BEING SUPPLIED TO RECIPIENT WITH NO WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. Provider makes no representations that the use of the Research
Material will not infringe any patent or proprietary rights of third parties.
7. When Provider is the NIH/ADAMHA: Recipient shall retain title to any
patent or other intellectual property rights in inventions made by its
employees in the course of the Research Project. Information derived from the
Research Project which creates an intellectual property interest in Recipient
may be used by Recipient for any purpose including a commercial purpose.
Recipient agrees not to claim, infer, or imply Governmental endorsement of the
Research Project, the institution or personnel conducting the Research Project
or any resulting commercial products(s). Recipient agrees to hold the United
States Government harmless and to indemnify the Government for all liabilities,
demands, damages, expenses and losses arising out of Recipient's use for any
purpose of the Research Material.
8. When Recipient is the NIH/ADAMHA: The NIH/ADAMHA shall retain title
to any patent or other intellectual property rights in inventions made by its
employees in the course of the Research Project. The NIH/ADAMHA are not
authorized to promise rights in advance for inventions developed through this
Research Project, except under a Cooperative Research and Development Agreement
("CRADA") pursuant to the Federal Technology Transfer Act of 1986. Except as
many be accorded through Paragraph 9, below, Provider acquires no intellectual
property rights under this MTA, but may apply for license rights to any
patentable invention that might result from t his Research Project. It is the
intention of NIH/ADAMHA that Provider not be liable to NIH/ADAMHA for any
claims or damages arising from NIH/ADAMHA's use of the Research Material;
however, no indemnification is provided or intended.
-2-
<PAGE> 3
9. Pursuant to their "Policy Statement on Cooperative Research and
Development Agreements and Intellectual Property Licensing," NIH and ADAMHA may
permit their investigators to enter into CRADAs (and thereby promise an option
to acquire intellectual property rights) to exchange for the contribution of
"essential research materials...not otherwise reasonably available." If the
Research Material transferred by this MTA is so certified below, Provider and t
he NIH/ADAMHA (when Recipient) investigator should submit a formal CRADA for
NIH/ADAMHA approval. For nongovernmental entities that regularly provide
research materials to NIH or ADAMHA, it is suggested that a master CRADA be
negotiated under which a certification below will suffice to invoke the
provisions of the CRADA. If provider and Recipient otherwise decide to engage
in a cooperative research or development project using the Research Material, a
formal CRADA must also be negotiated. For general inquiries regarding CRADAs
or NIH/ADAMHA technology transfer policies, contact the Office of Technology
Transfer at (301) 496-7057.
For receipt of Research Materials under this Paragraph, when a master CRADA
governing material transfers is in effect between NIH or ADAMHA and Provider,
the NIH/ADAMHA investigator must identify the CRADA by NIH/ADAMHA reference
number: and provide a more detailed description than in Paragraph 2, above
of the specific extent of activities within the overall Research Project to
which the provisions of the CRADA will pertain (use an attachment page if
necessary). Signature by the investigator and authorized official below
constitutes certification that the Research Material transferred by this MTA is
essential and not otherwise reasonable available for the following activities:
10. This MTA shall be construed in accordance with Federal law as applied
by the Federal courts in the District of Columbia.
11. Additional: 1) Prior to the transfer of any material under this
agreement, Recipient must document with DCT, NCI a plan to develop and
commercialize this agent as a drug therapeutic. 2) Recipient agrees to report
all non- clinical experimental results at least annually to DCT, NCI. 3)
Clinical uses of this compound will be performed only after an appropriate
amendment to this agreement has been executed, including submission of
documentation to DCT, NCI regarding clinical protocols and IND approval, and
agreement to provide DCT, NCI copies of all Clinical Trial Annual Reports
submitted to the FDA.
-3-
<PAGE> 4
The undersigned expressly certifies or affirms that the contents of any
statements made or reflected in this document are truthful and accurate.
<TABLE>
<S> <C>
RECIPIENT:
RICHARD L. LOVE, PRESIDENT/CEO
March 9, 1995 /s/ RICHARD L. LOVE
- ------------------------------- ---------------------------------------
Date Investigator and Title
/s/ RICHARD L. LOVE
- ------------------------------- ---------------------------------------
Date Authorized signature and Title
Institute for Drug Development/ILEX Oncology
11812 Beckett Street
Potomac MD 20854
FOR THE NATIONAL INSTITUTES OF HEALTH:
DR. DALE SHOEMAKER
- ------------------------------ ------------------------------------------
Date Investigator and Title
- ------------------------------ ------------------------------------------
Date DR. BRUCE A. CHABNER, DIR., DCT, NCI
Authorized signature and Title
</TABLE>
-4-
<PAGE> 1
EXHIBIT 10.29
AGREEMENT FOR SERVICES
I. AGREEING PARTIES:
This Agreement is entered into by and between THE CTRC
RESEARCH FOUNDATION ("CTRC Research") and THE UNIVERSITY OF TEXAS
HEALTH SCIENCE CENTER AT SAN ANTONIO ("Health Science Center") under
the Affiliation Agreement between the Board of Regents of the
University of Texas System and the Cancer Therapy and Research
Foundation of South Texas dated June 7, 1993 and the Institute for
Drug Development Program Agreement ("Program Agreement") between the
Health Science Center and the CTRC Research Foundation dated September
20, 1994.
II. SERVICES TO BE PERFORMED:
At the request of CTRC Research, Health Science Center will
provide the services of Daniel D. Von Hoff, M.D., Professor of
Medicine, in the capacity of Director of the Institute for Drug
Development, a Division of CTRC Research, and as Vice President of
CTRC Research (for duties, see Attachment A). As a Health Science
Center faculty member, Dr. Von Hoff will retain the prerogative of
conducting research and serving as Principal Investigator for Health
Science Center-managed drug development studies. However, he is also
authorized in accordance with Section III A of the Program Agreement
to serve as Principal Investigator on existing CTRC Research-managed
research projects concerning elimination of extrachromosomal DNA from
ovarian cancer.
III. PAYMENT FOR SERVICES:
A. CTRC Research shall pay annually to Health Science
Center $147,000. in twelve equal increments, for Dr. Von
Hoff's Services. This amount may be adjusted annually subject
to the agreement of the parties. Payment will be made by CTRC
Research within 30 days of monthly billings by Health Science
Center.
B. It is recognized that Dr. Von Hoff possesses unique
expertise in the development of anticancer agents which will
likely result in the creation of value at CTRC Research over
and above that arising from sole-inventor or joint-inventor
patents as defined in the Program Agreement. Accordingly,
CTRC Research shall, in addition to payments cited in
subsection A above, make payments to the Health Science Center
within 45 days of the end of each three-month period specified
in Section VI A of the Program Agreement, of an amount equal
to 7% of the gross revenue received subsequent to January 1,
1996 by CTRC Research for CTRC Research products licensed to
third parties, and 7% of the stock received by CTRC Research
for assets of the Institute for Drug Development which are
transferred to Biovensa or any other commercial venture
founded by
1
<PAGE> 2
CTRC Research. CTRC Research products are defined as those
products to which CTRC Research has been assigned rights or
which have been acquired by CTRC Research and which have been
included in the research and development program of the
Institute for Drug Development.
C. For drugs for which a patent application has been
filed during Dr. Von Hoff's tenure as Director, such payments
shall continue for the commercial life of the product. For
all other products under development at such time that Dr. Von
Hoff's tenure as Director should terminate, payments will
continue for a period of two years for every year from the
effective date of this agreement until the date of departure
of Dr. Von Hoff.
IV. INTELLECTUAL PROPERTY:
A. Any intellectual property created by Dr. Von Hoff,
whether solely or jointly, will be subject to patent
procedures and responsibilities set forth in Section V of the
Program Agreement.
B. CTRC Research shall have an option to license and
sublicense, on a worldwide exclusive basis, intellectual
property generated by Dr. Von Hoff in the course of and as a
direct result of the research cited in Section II above and
patented by or on behalf of Health Science Center.
Compensation for such option will be as specified in the
Program Agreement.
V. PERFORMANCE EVALUATION:
As necessary, Health Science Center shall solicit, and CTRC
Research shall provide, information as to the nature of Dr. Von Hoff's
performance of the duties specified in Attachment A.
VI. TERM OF AGREEMENT:
A. The primary term of this Agreement will be for five
years beginning with the effective date of September 20, 1994
with automatic extensions of three years unless either party
gives at least 180 days notice before the end of the primary
term or extension thereof.
B. This Agreement will be terminated if Dr. Von Hoff
relinquishes his Health Science Center faculty status, resigns
from his position as Director of the Institute for Drug
Development or otherwise terminates his relationship with
either institution. However, CTRC Research obligations for
payments will continue as stipulated in Section III above.
2
<PAGE> 3
C. This agreement will be reviewed annually in
accordance with Section XII of the Program Agreement.
EXECUTED by the parties on the day and year first written
above.
SIGNATURES
THE UNIVERSITY OT TEXAS HEALTH CTRC RESEARCH FOUNDATION:
SCIENCE CENTER AT SAN ANTONIO:
/s/ /s/ GEORGE ENSLEY
- -------------------------------- ----------------------------------
President Chairman, Board of Trustees
/s/ JAMES YOUNG /s/ CHARLES COLTMAN
- -------------------------------- ----------------------------------
Dean, Medical School President
3
<PAGE> 4
ATTACHMENT A
RESPONSIBILITIES OF DANIEL D. VON HOFF, M.D.
I. Vice President, CTRC Research
A. Develop programs for cancer research in the following
laboratories at CTRC Research (including recruiting personnel to be
granted appropriate faculty appointments at Health Science Center,
helping garner support for laboratories, setting up collaborations
between CTRC Research and Health Science Center):
1. Clinical research (Phase I and II levels)
2. Molecular biology
3. Cytogenetics
4. Flow cytometry
5. Investigational drug section
6. Chemistry of new antineoplastic agents
7. Computer-assisted drug design
8. Tumor cell biology
9. Drug evaluation laboratory
10. Human tumor cloning laboratory
11. Pharmacology laboratory
B. Directly oversee the activities of the Human Tumor Cloning
Laboratory in testing the effects of standard as well as
investigational anticancer agents against patients'
malignancies.
C. Tour visitors who come to CTRC Research who are interested in
the areas of basic and clinical cancer research.
II. Director, Institute for Drug Development
A. Establish and execute the mission of the Institute to
accelerate the development of new anticancer agents.
4
<PAGE> 5
B. Develop targets against which new anticancer agents are
directed.
C. Recruit and/or train researchers and others necessary for the
development of new agents.
D. Attract funds to support development of new agents and
promote self-sufficiency of the Institute.
E. Provide expertise in bridging the development of agents from
basic to clinical research.
F. Serve as a member of Program Councils or other bodies convened
to govern the operating progress of research undertakings.
5
<PAGE> 1
EXHIBIT 10.30
MASTER SERVICES AGREEMENT
(PRECLINICAL SERVICES)
This Agreement dated as of June 11, 1996 (this "Agreement"), is entered
into by and between ILEX Oncology Inc., a Delaware corporation ("ILEX"), with
offices located at 14785 Omicron Drive, San Antonio, Texas 78245, and Lipitek
International, Inc., a Delaware corporation ("LIPITEK"), with offices located
at 14785 Omicron Drive, San Antonio, Texas 78245.
RECITALS
A. ILEX is in the business of evaluating and developing anticancer
pharmaceuticals.
B. LIPITEK is engaged in the business, amoung other activities, of
providing formulation and manufacturing services with regard to the evaluation
and development of anticancer pharmaceuticals.
C. ILEX and LIPITEK desire to enter into this Master Services Agreement
for the purpose of delineating in advance the terms and conditions which will
govern the relationship between the parties and define the conditions under
which ILEX will award to LIPITEK, and LIPITEK will accept from and perform for
ILEX, certain services.
AGREEMENTS
In consideration of the mutual agreements of the parties contained
herein and other good and valuable consideration, the legal sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS
1.1 "Invention" means any discovery, concept or idea, whether or not
patentable or copyrightable, which arises directly out of the Services
performed pursuant to this Agreement or any Work Plan and is conceived
and reduced to practice during the term of this Agreement.
1.2 "Agents" means the employees, consultants and agents of LIPITEK engaged
by LIPITEK in connection with the performance of the Services.
1.3 "Services" shall refer to the particular tasks to be performed by
LIPITEK as set out in any Work Plan or document attached thereto.
1
<PAGE> 2
1.4 "Work Plan" shall refer to the written agreement between ILEX and
LIPITEK which sets out with specificity the services to be performed,
the time line for the performance of the services, the costs associated
with the services, the schedule of payments for the performance of the
services and specifically incorporates by reference the terms and
conditions of this Agreement. No Work Plan shall be effective until it
is accepted in writing by both ILEX and LIPITEK. The terms and
conditions of this Agreement shall be made a part of and incorporated by
reference into each Work Plan. A specimen of the form of each Work Plan
is attached hereto as Exhibit A.
2. SCOPE OF THE WORK
2.1 There shall be no limit to the number of Work Plans that may be entered
into and governed by this Agreement. Each Work Plan shall constitute a
unique agreement and shall stand alone with respect to any other Work
Plan entered under this Agreement. The performance of obligations under
any one Work Plan shall not effect, and shall at all times be unrelated
to, the performance of any other Work Plan entered under this Agreement.
2.2 LIPITEK agrees to devote its best reasonable efforts to perform the
specific tasks set forth in each individual Work Plan in accordance with
the terms and conditions contained herein, as set out in each Work Plan
and in accordance with all applicable laws and regulations.
2.3 This Agreement and individual Work Plans entered hereunder may be
extended or modified (including changes in scope) upon the written
agreement of both parties; provided, however, both parties shall agree
on the amount of additional payment to be made by ILEX with respect to
additional costs associated with such extension or modification.
Modifications to specific Work Plans shall not effect this Agreement, or
prior, current or future Work Plans unless it is the express written
intent of the parties that modifications do so.
2.4 If the assumption under which the parties create a Work Plan budget and
time line prove to be materially inaccurate, in whole or in part, then
the parties shall review the Work Plan budget and the time line and make
all reasonable revisions to insure the Work Plan is sufficiently funded
and to promote the best interests of the Work Plan.
2.5 The existence of this Agreement shall not preclude or limit the ability
of the parties to enter into independent contracts outside of this
Agreement.
2.6 In the event of a conflict between the terms of this Agreement and any
Work Plan, the terms of this Agreement shall govern.
2
<PAGE> 3
3. SERVICES AND PAYMENTS
3.1 Each Work plan shall contain a description of the Services to be
performed by LIPITEK pursuant to such Work Plan, including a time line
for such performance.
3.2 Each Work Plan shall contain a schedule of payments to be made by ILEX
to LIPITEK for the Services performed pursuant to such Work plan,
including the amount and timing of such payments.
3.3 Unless otherwise specified in a particular Work Plan, LIPITEK shall
provide to ILEX invoices for payments due under the terms of such Work
Plan.
4. PERIOD OF THE AGREEMENT
4.1 The term of this Agreement shall commence on the date of this Agreement
and continue until terminated by either party as hereinafter provided.
4.2 Either party may terminate this Agreement or any individual Work Plan,
with or without cause, upon 30 days prior written notice thereof given
to the other party.
4.3 Upon termination of this Agreement, ILEX shall pay to LIPITEK all sums
owing to LIPITEK at the time of termination and all costs incurred or
accrued during any wind down period hereinafter described. Upon notice
of termination of this Agreement prior to the completion of all Work
Plans, the parties shall negotiate in good faith any Services to be
undertaken and the costs associated with the winding down and closing
out of any then uncompleted Work Plan(s).
4.4 The payment and service related provisions of this Agreement shall
survive any termination but only as necessary to allow completion of any
particular Work Plan and for the limited purpose of regulating the
obligations and duties of the parties with respect to particular Work
Plan obligations that extend beyond contract termination.
4.5 The provisions of Articles 5, 6 and 8 shall survive any termination of
this Agreement for a period of five years.
5. CONFIDENTIALITY
5.1 LIPITEK will keep strictly confidential and will not use for any purpose
other than as described herein all information transmitted to it by
ILEX. For purposes hereof, confidential information shall not include
information that:
(a) is or becomes publicly available through no fault of LIPITEK;
3
<PAGE> 4
(b) is disclosed to LIPITEK by a third party, provided such
information was not obtained by such third party, directly or
indirectly, from ILEX on a confidential basis;
(c) is already known to LIPITEK as shown by its prior written records
or other competent evidence;
(d) is required by law or court order to be disclosed.
5.2 Notwithstanding the foregoing, LIPITEK may disclose such confidential
information to its Agents who have a need to know such confidential
information and, to the extent necessary to others who are involved in
the performance of the Services. LIPITEK will use its best efforts to
require any third party to whom it discloses such information to
maintain the confidential information to substantially the same extent
as LIPITEK.
5.3 It may become necessary for LIPITEK to disclose to ILEX information
which LIPITEK considers proprietary, privileged or confidential. ILEX
shall protect LIPITEK's confidential information with the same degree of
care as LIPITEK is required to protect ILEX' confidential information
under this Article 5.
5.4 Except as required by applicable law, neither party will release or
distribute any materials or information (excluding reprints of
previously published materials) containing the name of the other party
or its employees, consultants or agents without the prior written
approval of the other party, which approval will not be unreasonably
withheld.
6. INVENTIONS
6.1 All techniques, processes, methods and other know-how of LIPITEK and its
Agents as of the date of this Agreement shall continue to be the sole
and exclusive property of LIPITEK and its Agents.
6.2 If an Invention is made, either solely or jointly, LIPITEK and ILEX
shall give each other written notice thereof within 30 days of
identification of such invention. As promptly as reasonably practical
thereafter, the parties will use reasonable efforts to cooperate with
each other to investigate, evaluate and determine the ownership of such
invention.
6.3 ILEX may, in its own discretion, file and prosecute at its own expense,
applications for foreign and United States letters patent or any
patentable information derived from such Invention. Upon the request of
ILEX, and at the sole expense of ILEX, LIPITEK shall assist in
prosecuting such applications and shall execute and deliver any and all
instruments necessary to make, file, and prosecute all such
applications, divisions, continuations, continuations-in-part or reissue
thereof.
4
<PAGE> 5
6.4 LIPITEK shall assign its rights to any Invention to ILEX.
6.5 At LIPITEK's request, ILEX shall grant LIPITEK a royalty-free, world-
wide, non-exclusive, right to use any Invention which represents a new,
improved or modified technique, process, method or similar know-how for
the performance of services for existing or future customers of LIPITEK
(a "Process Improvement").
6.6 Notwithstanding anything to the contrary contained in this Agreement or
any Work Plan, LIPITEK may retain in its possession copies of any and
all data, documents or information related to the performance of the
Services required for regulatory, legal, insurance or record keeping
purposes.
7. WARRANTIES AND REPRESENTATIONS
7.1 ILEX warrants and represents that it has disclosed to LIPITEK, prior to
contract, all material facts relating to this Agreement or any Work Plan
that may affect LIPITEK's performance of the Services.
7.2 LIPITEK warrants and represents that it possesses the requisite skill,
experience and personnel to perform the described services in accordance
with the professional standards of the industry. LIPITEK disclaims all
other representations or warranties, express or implied, including any
warranty of merchantability, fitness for particular use or whether any
information may infringe the rights of others.
8. INDEMNIFICATION
8.1 ILEX shall indemnify, defend and hold harmless LIPITEK and its
employees, officers, directors, parent and affiliated companies, agents,
subcontractors, authorized independent contractors, successors and
assigns (herinafter "indemnitee") against all losses, costs, expenses,
liabilities and damages of every kind and nature, including, without
limitation, interest, penalties, reasonable attorney's fees and
arbitration and/or litigation costs, in connection with or arising out
of or during LIPITEK's performance of the Services (collectively the
"claims"), except to the extent that any such claim is caused solely by
the indemnitee's own gross negligence, reckless or intentional
misconduct in the performance of the Services.
8.2 Indemnitee may tender to ILEX the defense of any claim by giving ILEX
timely written notice after such claim was served upon indemnitee. ILEX
shall defend indemnitee from any claim so tendered to ILEX at ILEX' sole
cost and expense and ILEX shall keep indemnitee informed as to the
progress of its defense of any such claim. ILEX shall have the right to
control the defense and disposition (including, without limitation,
settlement, litigation or appeal) of any such claim.
5
<PAGE> 6
8.3 The parties agree, however, that no such settlement shall serve to
establish liability on the part of LIPITEK, its parent, employees or
agents without the express written consent of LIPITEK. ILEX shall be
obligated to fully indemnify the indemnitee as described in this Article
8.
8.4 LIPITEK agrees to indemnify, defend and hold harmless ILEX against and
in respect of any and all losses, costs, expenses, liabilities and
damage, including, without limitation, interest, penalties and
reasonable attorney's fees resulting from LIPITEK's gross negligence or
willful misconduct in the performance of the Services.
8.5 LIPITEK shall not be held accountable for delay in its performance of
the Services due to the errors, acts, omissions or negligence of persons
or entities not employed by or otherwise under the direct control of
LIPITEK, except that LIPITEK may be held accountable for delays in its
performance of this Agreement due to the errors, acts, or omissions of
Agents under LIPITEK's direct control. LIPITEK shall not be held
accountable for errors contained in data delivered to LIPITEK from
persons or entities not under the direct control of LIPITEK.
9. MISCELLANEOUS
9.1 This Agreement may not be assigned by either party without the prior
written consent of the other party.
9.2 The relationship between the parties is that of an independent
contractor and neither party shall have the authority to bind or act on
behalf of the other party without its prior written consent. This
Agreement shall not constitute, create, or in any way be interpreted as
a joint venture, partnership or business organization of any kind.
9.3 This Agreement shall constitute the entire understanding of the parties
hereto relating to the subject matter hereof and shall not be changed or
modified except in writing and signed by authorized representatives of
the parties. All prior Agreements, whether written or oral between the
parties relating to the subject matter hereof are superseded by this
Agreement and are of no further force or effect.
9.4 The covenants and conditions contained herein will apply to and bind the
successors, representatives and assigns of all parties hereto.
9.5 If any provision of this Agreement shall be deemed void in whole or in
part for any reason whatsoever, the remaining provisions shall remain in
full force and effect.
6
<PAGE> 7
9.6 No failure or delay of one of the parties to execute any of its rights
or powers under this Agreement shall operate as a waiver thereof, nor
shall any other single or partial exercise of such right or power
preclude any other further exercise thereof. The rights and remedies
provided for in this Agreement are not cumulative and not exclusive of
any rights or remedies provided by law.
9.7 No party will be liable for failure or delay in performing the
obligations set forth in this Agreement, and no party shall be deemed in
breach of its obligations, if such failure or delay is due to any causes
reasonably beyound the control of such party.
9.8 Notices hereunder shall be provided by certified mail/courier only.
If to ILEX: ILEX Oncology Inc.
14785 Omicorn Dr., Suite 101
San Antonio, TX 78245
Attention: Dick Love
If to LIPITEK: Lipitek International, Inc.
14785 Omicron Dr.
San Antonio, TX 78245
Attention: Alex Weis, Ph.D.
9.9 This Agreement may be executed in counterpart original.
9.10 The validity, interpretation, performance, rights and duties with
respect to this Agreement shall be determined by the laws, and within
the jurisdiction, of the State of Texas.
This Master Services Agreement is executed as of the date first written
above.
ILEX Oncology Inc. LIPITEK INTERNATIONAL Inc.
BY: By:
----------------------------- ---------------------------
Name: Richard L. Love Name: Charles T. Goodhue
---------------------------- ---------------------------
Title: President/CEO Title: Director of Research
----------------------------- ---------------------------
Date: Date:
----------------------------- ---------------------------
7
<PAGE> 8
WORK PLAN NO. 1
Master Services Agreement:
This Work Plan is executed pursuant to the Master Services Agreement
dated as of June 11, 1996, (the "Master Agreement"), between ILEX Oncology,
Inc., a Delaware corporation ("ILEX"), and Lipitek International, Inc., a
Delaware corporation ("LIPITEK"). This Work Plan is governed by the terms of
the Master Agreement, which terms are incorporated by reference; and this Work
Plan is hereby made a part of the Master Agreement.
Services
1. Lipitek will undertake, with its best efforts, to resolve DFMO into l-
enantiomer and possibly useful quantities of D-enantiomer. ILEX will provide
one (1) kilo of racemic DFMO of highest purity available.
2. Lipitek will undertake, with its best efforts, the DFMO resolution on a
small scale (1-10g) to prove feasibility. The time required for this is in the
order of 1 month. The cost for this will be $15,000 up front.
3. If the small scale process is successful, Lipitek then will produce 100
g of the L-enantiomer in a purity of 98% or greater. The cost of this will be
an additonal $35,000 payable in two equal installments, the first at the
initiation of the large scale separation, and the final payment after delivery
and acceptance of the material.
4. It should be pointed out that the process may also yield a useful
quantity of the D-enantiomer of DFMO, probably as an ester or amide.
Payment Schedule
ILEX will make an initial payment of $15,000 due and payable before initiation
of the project.
If the small scale resolution is successful ILEX will make a sceond payment of
$17,500 prior to the initiation of the large scale separation.
8
<PAGE> 9
ILEX will make a final payment of $17,500 within 15 days of delivery and
acceptance by ILEX of at least 100 g of L-enantiomer and all quantities of D-
enantiomer prepared in the resolution process.
Approved:
ILEX Oncology Inc. Lipitek International Inc.
- ----------------------------- -----------------------------
Signature Signature
Richard L. Love Charles T. Goodhue
- ---------------------------- -----------------------------
Name Name
President/CEO Director of Research
- ----------------------------- -----------------------------
Title Title
- ----------------------------- -----------------------------
Date Date
9
<PAGE> 10
WORK PLAN NO. 2
Preparation of MSI-1436 from Squalamine
Master Services Agreement
This Work Plan is executed pursuant to the Master Services Agreement
dated as of June 11, 1996 (the "Master Agreement"), between ILEX Oncology,
Inc., a Delaware corporation ("ILEX"), and Lipitek International, Inc., a
Delaware corporation ("LIPITEK"). This Work Plan is governed by the terms of
the Master Agreement, which terms are incorporated by reference; and this Work
Plan is hereby made a part of the Master Agreement.
Services
o Reproduce the synthetic scheme for MSI-1436 on a small scale (0.5
- 1.0 gam)
o Optimize reaction sequence and establish a reproducible and
scaleable synthetic method to produce approximately 3 gm of
material
o Establish raw material release specifications
o Collect analytical data on all intermediates and final product:
HPLC purity, TLC and NMR
o Use best effort to match or exceed purity, as determined by HPLC,
of MSI-1436 sample
o Submit final report summarizing synthesis scheme used for final
product and analytical data for all intermediates and final
product
ILEX will provide:
o Squalamine starting material (approximately 10 gm) in one or more
batches
o Details of all available analytical procedures and synthetic
prosesses
o MSI-1436 sample
o Access to ILEX facilities
Payment Schedule
ILEX will make an initial payment of $12,000 due and payable before initiation
of the project.
10
<PAGE> 11
ILEX will make a final payment of $12,000 within 15 day of delivery and
acceptance by ILEX of final product and Final Report.
Approved:
ILEX Oncology Inc. Lipitek International Inc.
/s/ RICHARD L. LOVE /s/ CHARLES T. GOODHUE
- ----------------------------- -----------------------------
Signature Signature
Richard L. Love Charles T. Goodhue
- ---------------------------- -----------------------------
Name Name
President/CEO Director of Research
- ----------------------------- -----------------------------
Title Title
- ----------------------------- -----------------------------
Date Date
11
<PAGE> 1
EXHIBIT 10.31
September 28, 1995
Cross Atlantic Partners K/S ("CAP") Boston Capital Ventures III, Limited
c/o Hambro America Biosciences Partnership ("Boston Capital")
650 Madison Avenue 45 School Street
New York, NY 10022 Boston, MA 02108
Rovent II Limited Partnership
Advent Performance Materials Limited
Partnership
ADVENT ACT Limited Partnership
Advent International Investors II Limited
Partnership, (collectively "Advent")
101 Federal Street
Boston, MA 02110
RE: ILEX ONCOLOGY, INC.
Ladies and Gentlemen:
As you are well aware, CTRC Research Foundation ("CTRC") is the holder
of 4,873,100 shares of Series A Convertible Preferred Stock of Ilex Oncology,
Inc. (the "Company") and the individuals listed below (collectively, the
"Founders") are the holders in the aggregate of 2,080,000 shares of Common
Stock of the Company. In connection with and in partial consideration for the
investment by you or your affiliates in Series B Convertible Preferred Stock of
the Company, CTRC and each of the Founders severally agree as follows:
1. CTRC will direct its designees serving from time to time on
the Board of Directors of the Company (the "Board") to, and
each Founder serving from time to time on the Board shall, (i)
approve the appointment and continuation by the Board of a
three member Audit Committee, a three member Compensation
Committee and a three member Relationships Committee and (ii)
appoint to and maintain on the Audit Committee one Board
designee of the Series B Convertible Preferred Stock (a
"Series B Designee"), appoint to and maintain on the
Relationships Committee one Series B Designee (who initially
shall be Jason Fisherman), and appoint to and maintain on the
Compensation Committee two Series B Designees (who shall
initially be John Cassis and A. Dana Collow, Jr.,
respectively), provided however if any Series B Designee
proposed to be appointed to or maintained on a Committee has
committed malfeasance against the Company or is incapable to
serve as a Committee member, CTRC or the Founder, as the case
may be, shall inform you of that determination and shall not
be obligated to direct its designees serving on the Board to
support the appointment of such Series B Designee to such
Committee, but you shall have an opportunity to designate
another Series B Designee for such appointment.
2. CTRC will direct its designees serving from time to time on
the Board to, and each Founder serving from time to time on
the Board shall, (i) reduce the number of directors on the
Board to ten (10) persons on or before February 29, 1996, (ii)
reduce the number of directors on the Board to nine (9)
persons on or before June 30, 1996, and maintain thereafter a
nine (9) person Board (provided that CTRC shall not be under
any obligation to reduce the number of directors subject to
election by CTRC and the other holders of the Company's Series
A Preferred Stock below the number provided for in the
Certificate of Designation,
<PAGE> 2
Preferences and Rights for the Company's Series A Preferred
Stock), and (iii) cooperate with the Series B Designees to
select by September 15, 1996 a mutually acceptable senior
executive with experience in the Company's business to serve
as a director of the Company.
3. CTRC agrees with you that, without the prior written consent
of at least one of you, it will not consent to a termination
pursuant to the termination provisions of that certain
Preferred Stockholders' Sales Agreement executed and delivered
by you. CTRC and certain other persons in connection with
your purchase of Series B Convertible Preferred Stock.
4. CTRC and the Founders each severally agrees (i) to vote all
shares of Company capital stock owned by them and (ii) to use
its or his reasonable efforts to cause the Company to take all
such actions, as may be necessary from time to time,
including, without limitation, the calling of meetings of
stockholders, to bring into effect and maintain in effect the
provisions of paragraphs 1 and 2 of this Agreement.
5. Each of the undersigned agrees severally that this agreement
shall bind its or his heirs, executors, administrators, legal
representatives, successors and assigns and shall inure to the
benefit of successors and assigns of CAP, Advent and Boston
Capital, and agrees not to sell or otherwise transfer or
convey ownership of or voting power over any of the shares of
Company capital stock during the term of this agreement unless
the transferee shall agree in writing to be bound by the
provisions of this agreement.
The agreements set forth in paragraphs 1, 2 and 4 above shall continue
in full force and effect until the terms of that certain Stockholders'
Agreement executed and delivered by you and certain other persons in connection
with your purchase of Series B Convertible Preferred Stock is terminated in
accordance with the terms thereof (as such terms exists as of the date hereof).
The agreement set forth in paragraph 3 above shall continue in full force and
effect until the Preferred Stockholders' Sales Agreement is terminated in
accordance with the terms thereof (other than pursuant to a termination in
violation of paragraph 3 above).
Very truly yours,
/s/ JEANETTE A. HAUCK
--------------------------------------------
Jeanette A. Hauck of
--------------------------------------------
CTRC Research Foundation
/s/ DANIEL D. VON HOFF
--------------------------------------------
Daniel D. Von Hoff
/s/ RICHARD L. LOVE
--------------------------------------------
Richard L. Love
/s/ ALEXANDER L. WEIS, PH.D.
--------------------------------------------
Alexander L. Weis, Ph.D.
/s/ CHARLES A. COLTMAN, M.D.
--------------------------------------------
Charles A. Coltman, M.D.
-2-
<PAGE> 3
Except as otherwise prohibited by law, the Company agrees that it
shall not permit any transfer of shares of its capital stock in violation of
this Agreement. The Company agrees to use reasonable efforts to take all
actions to bring into effect and maintain in effect the provisions of
paragraphs 1 and 2 of this Agreement.
ILEX ONCOLOGY, INC.
/s/ RICHARD L. LOVE
-------------------------------------
Richard L. Love
President
-3-
<PAGE> 1
EXHIBIT 10.32
ILEX ONCOLOGY, INC.
Warrant for the purchase of shares of Common Stock
September ___, 1995
170,000 Shares
FOR $50.00 RECEIVED, ILEX Oncology, Inc., a Delaware corporation (the
"Company"), hereby certifies that VECTOR SECURITIES INTERNATIONAL, INC., or
assigns thereof, is entitled to purchase from the Company, at any time prior to
5:00 P.M., New York City time, on that date which is five (5) years from the
date hereof, 170,000 fully paid and nonassessable shares of the common stock,
par value $.01 per share, of the Company upon payment of the purchase price of
$2.00 per share. (Hereinafter, (i) said common stock, together with any other
equity securities which may be issued by the Company with respect thereto or in
substitution therefor is referred to as the "Common Stock," (ii) the share of
the Common Stock purchasable hereunder or under any other Warrant (as
hereinafter defined) are referred to as the "Warrant Shares," (iii) the
aggregate purchase price payable hereunder for each of the Warrant Shares is
referred to as the "Per Share Warrant Price," (v) this Warrant, all identical
warrants issued on the date hereof and all warrants hereafter issued in
exchange or substitution for this Warrant or such other warrants are referred
to as the "warrants" and (vi) the holder of this Warrant is referred to as the
"Holder" and the holder of this Warrant and all other Warrants are referred to
as the "Holders"). The Aggregate Warrant Price is not subject to adjustment.
The Per Share Warrant Price is subject to adjustment as hereinafter provided;
in the event of any such adjustment, the number of Warrant Shares shall be
adjusted by dividing the Aggregate Warrant Price by the Per Share Warrant Price
in effect immediately after such adjustment.
1. Exercise of Warrant.
This Warrant may be exercised, in whole at any time or in part from
time to time, prior to its expiration as set forth above by the Holder
by the surrender of this Warrant (with the subscription form at the
end hereof duly executed) at the address set forth in Subsection 9
hereof, together with proper payment of the Aggregate Warrant Price,
or the proportionate part thereof if this Warrant is exercised in
part. Payment for Warrant Shares shall be made by cashier's check or
by wire transfer of funds. If this Warrant is exercised in part, this
Warrant must be exercised for a number of whole shares of the Common
Stock, and the Holder is entitled to receive a new Warrant covering
the Warrant shares which have not been exercised and setting forth the
proportionate part of the Aggregate Warrant Price applicable to such
Warrant Shares. Upon such surrender of this Warrant, the Company will
(a) issue a certificate or certificates in the name of the Holder for
the largest number of whole shares of the Common Stock to which the
Holder shall be entitled and, if this Warrant is exercised in whole,
in lieu of any fractional share of the Common Stock to which the
Holder shall be
<PAGE> 2
entitled, pay to the Holder cash in an amount equal to the fair value
of such fractional share (determined in such reasonable manner as the
Board of Directors of the Company shall determine), and (b) deliver
the other securities and properties receivable upon the exercise of
this Warrant, or the proportionate part thereof if this Warrant is
exercised in part, pursuant to the provisions of this Warrant.
2. Reservation of Warrant Shares Listing.
The Company agrees that, prior to the expiration of this Warrant, the
Company will at all times (a) have authorized and in reserve, and will
keep available, solely for issuance or delivery upon the exercise of
this Warrant, the shares of the Common Stock and other securities and
properties as from time to time shall be receivable upon the exercise
of this Warrant, free and clear of all restrictions on sale or
transfer and free and clear of all preemptive rights and (b) if the
Company has affected a public offering of its Common Stock pursuant to
a registration statement declared effective under the Securities Act
of 1933, as amended, and is subject to the periodic reporting
requirements of Section 12 or Section 15 of the Securities Exchange
Act of 1934, as amended, keep the shares of the Common Stock
receivable upon the exercise of this Warrant available for quotation
on the National Association of Securities Dealers Automated Quotation
("NASDAQ") Official System (or other national securities exchange upon
which the Common Stock is listed) upon notice of issuance.
3. Protection Against Dilution.
(a) In case the Company shall hereafter (i) pay a dividend or make
a distribution on its capital stock in shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a
greater number of shares, (iii) combine its outstanding shares
of Common Stock into a smaller number of shares or (iv) issue
by reclassification of its Common Stock any shares of capital
stock of the Company, the Per Share Warrant Price shall be
adjusted so that the Holder of any Warrant upon the exercise
hereof shall be entitled to receive the number of shares of
Common Stock or other capital stock of the Company which he
would have owned had he exercised the Warrant immediately
prior to such event An adjustment made pursuant to this
Subsection 3(a) shall become effective immediately after the
record date in the case of a dividend or distribution and
shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification.
If, as a result of an adjustment made pursuant to this
Subsection 3(a), the Holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive
shares of two or more classes of capital stock or shares of
Common Stock and other capital stock of the Company, the Board
of Directors (whose determination shall be conclusive and
shall be described in a written notice to the Holder of any
Warrant promptly after such
-2-
<PAGE> 3
adjustment) shall determine the allocation of the adjusted Per
Share Warrant Price between or among shares of such classes of
capital stock or shares of Common Stock and other capital
stock.
(b) In case of any capital reorganization or reclassification, the
Holder of this Warrant shall have the right thereafter to
convert such Warrant into the kind and amount of securities,
cash or other property which he would have owned or have been
entitled to receive immediately after such reorganization or
reclassification had this Warrant been exercised immediately
prior to the effective date of such reorganization or
reclassification and in any such case, if necessary,
appropriate adjustment shall be made in the application of the
provisions set forth in this Section 3 with respect to the
rights and interests thereafter of the Holder of this Warrant
to the end that the provisions set forth in this Section 3
shall thereafter correspondingly be made applicable, as nearly
as may be reasonable, in relation to any shares of stock or
other securities or, in relation to any shares of stock or
other securities or property thereafter deliverable on the
conversion of this Warrant. The above provisions of this
Subsection 3(b) shall similarly apply to successive
reorganizations or reclassifications. The issuer of any
shares of stock or other securities or property thereafter
deliverable on the conversion of this Warrant shall be
responsible for all of the agreements and obligations of the
Company hereunder. Notice of any such reorganization or
reclassification and of said provisions so proposed to be
made, shall be mailed to the Holders of the Warrants not less
than 15 days prior to such event.
This Warrant shall expire upon any consolidation or merger to
which the Company is a party or upon any sale or conveyance to
another entity of the property of the Company as an entirety
or substantially as an entirety, other than a consolidation
merger, sale or conveyance in which the Company is the
continuing corporation or in the case of any statutory
exchange or securities with another corporation (excluding any
exchange effected in connection with a merger of a third
corporation into the Company). Notice of any such
consolidation, merger, sale, conveyance or statutory exchange,
and of the expiration of this Warrant, shall be mailed to the
Holders of the Warrants not less than 15 days prior to such
event.
(c) No adjustment in the Per Share Warrant Price shall be required
in the case of the issuance of shares under or grant by the
Company of options to employees, officers, directors, advisors
or consultants under any stock option plan or arrangement of
the Company, or the issuance of any and all shares of Common
Stock upon exercise of such options or upon the issuance of
shares under any options, warrants, or convertible securities
outstanding as of the date hereof.
-3-
<PAGE> 4
(d) No adjustment in the Per Share Warrant Price shall be required
unless such adjustment would require an increase or decrease
of at least $0.25 per share of Common Stock; provided,
however, that any adjustments which by reason of this
Subsection 3(d) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment;
provided further, however, that adjustments shall be required
and made in accordance with the provisions of this Section 3
(other than this Subsection 3(d) not later than such time as
may be required in order to preserve the tax-free nature of a
distribution to the Holder of this Warrant or Common Stock
issuable upon exercise hereof. All calculations under this
Section 3 shall be made to the nearest cent or to the nearest
share, as the case may be. Anything in this Section 3 to the
contrary notwithstanding, the Company shall be entitled to
make such reductions in the Per Share Warrant Price, in
addition to those required by this Section 3, as it in its
discretion shall deem to be advisable in order that any stock
dividend, subdivision of shares or distribution of rights to
purchase stock or securities convertible or exchangeable for
stock hereafter made by the Company to its shareholders shall
not be taxable.
(e) Whenever the Per Share Warrant Price is adjusted as provided
in this Section 3 and upon any modification of the rights of a
Holder of Warrants in accordance with this Section 3, the
Company shall promptly provide a certificate of the chief
financial officer of the Company setting forth the Per Share
Warrant Price and the number of Warrant Shares after such
adjustment or the effect of such modification, a brief
statement of the facts requiring such adjustment or
modification and the manner of computing the same and cause
copies of such certificate to be mailed to the Holders of the
Warrants.
(f) If the Board of Directors of the Company shall declare any
dividend or other distribution with respect to the Common
Stock, other than a cash distribution out of earned surplus,
the Company shall mail notice thereof to the Holders of the
Warrants not less than 15 days prior to the record date fixed
for determining shareholders entitled to participate in such
dividend or other distribution.
4. Fully Paid Stock; Taxes.
The Company agrees that the shares of the Common Stock represented by
each and every certificate for Warrant Shares delivered on the
exercise of this Warrant shall at the time of such delivery, be
validly issued and outstanding, fully paid and nonassessable, and not
subject to pre-emptive rights, and the Company will take all such
actions as may be necessary to assure that the par value or stated
value, if any, per share of the Common Stock is at all times equal to
or less than the then Per Share Warrant Price. The Company further
covenants and agrees that it will pay, when due and payable, any and
all Federal
-4-
<PAGE> 5
and state stamp, original issue or similar taxes which may be payable
in respect of the issue of any Warrant Share or certificate therefor.
5. Registration Rights.
The Holder of this Warrant and/or Warrant Shares shall have certain
registration and other rights as set forth in the Registration Rights
Agreement (the "Agreement") dated as of September ___, 1995, which is
attached hereto as Appendix A. This Warrant is referred to in the
Agreement as the Vector Warrants.
6. Loss, etc., of Warrant.
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant, and of indemnity
reasonably satisfactory to the Company, if lost, stolen or destroyed,
and upon surrender and cancellation of this Warrant, if mutilated, the
Company shall execute and deliver to the Holder a new Warrant of like
date, tenor and denomination.
7. Warrant Holder Not Shareholders.
Except as otherwise provided herein, this Warrant does not confer upon
the Holder any right to vote or to consent to or receive notice as a
shareholder of the Company, as such, in respect of any matters
whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.
8. Amendment.
These Warrants may be amended by mutual agreement of the Company and
the Holders of a majority of the then outstanding Warrants.
9. Communication.
No notice or other communication under this Warrant shall be effective
unless, but any notice or other communication shall be effective and
shall be deemed to have been given if, the same is in writing and is
mailed by first-class mail, postage prepaid, addressed as set forth
below.
If to the Company: ILEX Oncology, Inc.
14785 Omicron Drive
San Antonio, TX 78245-3217
Attn: Corporate Secretary
or such other address as the Company has designated in writing to the
Holder.
-5-
<PAGE> 6
If to the Holder: Vector Securities International, Inc.
1751 Lake Cook Road, Suite 350
Deerfield, Illinois 60015
or such other address as the Holder has designated in writing to the
Company.
10. Headings.
The headings of this Warrant have been inserted as a matter of
convenience and shall not affect the construction hereof.
11. Applicable Law.
This Warrant shall be governed by and construed in accordance with the
law of the State of Delaware without giving effect to the principles
of conflicts of law thereof.
IN WITNESS WHEREOF, ILEX Oncology, Inc. has caused this Warrant to be signed by
its President and its corporate seal to be hereunto affixed and attested by its
Secretary this _____ day of September, 1995.
/s/ RICHARD L. LOVE
----------------------------
Richard L. Love
President
ATTEST:
/s/ SHARON MORINO
- -----------------------------------------------
/s/ SHARON MORINO Corporate Secretary
- --------------------------
[Corporate Seal]
-6-
<PAGE> 7
SUBSCRIPTION
The undersigned, ____________________________, pursuant to the provisions of
the foregoing Warrant, hereby agrees to subscribe for and purchase ____________
shares of the Common Stock of ILEX Oncology, Inc. covered by said Warrant, and
makes payment therefor in full at the price per share provided by said Warrant.
Dated: Signature:
------------------------ -----------------------------
Address:
-----------------------------
-----------------------------
-7-
<PAGE> 8
ASSIGNMENT
FOR VALUE RECEIVED ____________________ hereby sells, assigns and transfers
unto _____________________________ the foregoing Warrant and all rights
evidenced thereby, and does irrevocably constitute and appoint
_________________________ _________, attorney, to transfer said Warrant on the
books of ILEX Oncology, Inc.
Dated: Signature:
------------------------ -----------------------------
Address:
-----------------------------
-----------------------------
-8-
<PAGE> 9
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______________________ hereby assigns and transfers unto
_________________________________ the foregoing Warrant, and a proportionate
part of said Warrant and the rights evidenced hereby, and does irrevocably
constitute and appoint ______________________________, attorney, to transfer
that part of said Warrant on the books of ILEX Oncology, Inc.
Dated: Signature:
------------------------ -----------------------------
Address:
-----------------------------
-----------------------------
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EXHIBIT 10.34
INSTITUTE FOR DRUG DEVELOPMENT
PROGRAM AGREEMENT
I. Agreeing Parties.
This Program Agreement is entered into by and between the CTRC
RESEARCH FOUNDATION (hereinafter referred to as "CTRC Research"), and the
UNIVERSITY OF TEXAS HEALTH SCIENCE CENTER AT SAN ANTONIO (hereinafter referred
to as "Health Science Center"). It is established pursuant to the authority of
the Affiliation Agreement dated June 7, 1993, by and between the Board of
Regents of the University of Texas System and the Board of Governors of the
Cancer Therapy and Research Foundation of South Texas.
II. Purpose of Agreement.
The purpose of this Program Agreement is to specify the terms under
which the agreeing parties shall collaborate in conducting research and
development of drugs for the treatment of patients with cancer under the
auspices of the Institute for Drug Development, a division of CTRC Research.
The term "research and development" as used in this agreement shall include
basic research, applied research and development, and clinical research. It is
understood that no provision of this agreement is intended to contravene any
rules, regulations, and/or bylaws which govern either of the Institutions.
Furthermore, nothing in this agreement shall limit the right of either party to
engage in such research unilaterally, or do so in collaboration with others.
III. Services To Be Performed.
A. Health Science Center will:
(1) Provide the services of a faculty member who is
acceptable to CTRC Research to serve as Director of the
Institute for Drug Development under conditions and terms to
be set forth in a specific contractual service agreement.
Those services may include drug development research under the
auspices of CTRC Research if specifically authorized in the
contractual agreement. "Faculty member" is defined as a
full-time paid employee of Health Science Center who holds a
faculty appointment through one or more Academic Departments.
If the position of Director of the Institute for Drug
Development becomes vacant, and if there are no mutually
acceptable candidates from the faculty of the Health Science
Center, Health Science Center will initiate expeditious
recruitment to employ a mutually acceptable individual for
this position. This recruitment will be conducted jointly,
with active participation by members of both institutions.
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(2) Provide the services of other mutually agreed-upon
faculty research scientists, under conditions and terms to be
set forth in specific contractual service agreements.
B. CTRC Research will:
(1) Provide access to the facilities, staff, and other
resources of the Institute for Drug Development for all
collaborative research and development activities undertaken
pursuant to this agreement. Allocations of such resources for
use by a Health Science Center faculty member will be subject
to the written concurrence of the relevant Academic Department
Chair and the Chief Operating Officer of the Institute for
Drug Development.
(2) Provide office space, secretarial support, and
laboratory facilities for use by the Director of the Institute
for Drug Development.
C. Additional services needed in the execution of this agreement
may be obtained as needed on a case-by- case basis. Contractual
agreements between the agreeing parties for such services are
required.
D. Nothing in this agreement or its execution shall be construed
so as to negate the requirement for Health Science Center faculty
members to discharge all applicable faculty responsibilities, and
provide information to academic Division and Department superiors
concerning all activities in which they are engaged.
IV. Management of Grants and Study Agreements.
A. The responsibility for soliciting, receiving, and managing any
collaborative research or clinical study project will be vested in the
institution furnishing the Principal Investigator ("managing party"),
which shall use its own system for preparing and submitting
grant/study applications and for managing awards.
B. One or more subcontracts will be established for all work or
services to be contributed by the other institution ("subcontracting
party"). Unless mutually agreed otherwise, the subcontract will
provide for the reimbursement of the subcontracting party's indirect
costs associated with the project.
C. For non-Federally supported clinical trials in which the
Principal Investigator is a Health Science Center faculty member and
the majority of the work is to be performed using CTRC Research staff
and facilities, the parties agree to the following:
(1) The Principal Investigator, with the support and
participation of CTRC Research, will have the primary
responsibility for negotiating the protocol and
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payment terms of any agreement with a sponsoring organization
("Sponsor"). Such an agreement will contain terms and
conditions acceptable to both Health Science Center and CTRC
Research, and will be processed by appropriate designated
Health Science Center staff.
(2) The clinical trials agreement will be executed by and
between Health Science Center and Sponsor. The
responsibilities of CTRC Research will be clearly delineated
in the clinical trials contract, and CTRC Research will be
provided an opportunity to review and comment on the final
draft agreement before execution by the Health Science Center.
(3) Health Science Center will subcontract with CTRC
Research for all work to be done by CTRC Research. The
subcontract will contain a budget for the work to be performed
and any specific terms for reimbursement of budgeted costs and
additional expenses incurred.
(4) The proceeds from each award will be distributed as
follows:
(a) An amount not to exceed 20% of the total
direct expenses incurred will be retained by Health
Science Center, to be shared equally by the
applicable academic Department and Division to
compensate for costs of clinical supervision and
management.
(b) In the specific instance in which all of the
work is to be performed using CTRC Research staff and
facilities, the remaining contract amount will be
devoted to the reimbursement of direct and indirect
costs incurred by CTRC Research as the subcontracting
party.
(c) In all other instances, the disposition of
the remaining contract amount will be negotiated
between the managing and subcontracting parties on a
case-by-case basis.
(5) CTRC Research will provide administrative tracking of
all research progress, and will notify Health Science Center
when a requirement occurs for billing a Sponsor in accordance
with the provisions of the clinical trial contract.
(6) CTRC Research shall invoice Health Science Center for
its portion of the costs incurred as provided for in the
subcontract between Health Science Center and CTRC Research.
D. All collaborative research and/or clinical study protocols
involving Health Science Center employees will require an approved
Certification of Proposals for Research and Other Sponsored
Activities, obtained in accordance with instructions contained in the
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Health Science Center Handbook of Operating Procedures. In addition,
protocols proposing the use of human subjects will require approval by
Health Science Center's Institutional Review Board, and those
proposing to use animal subjects will require approval by Health
Science Center's Institutional Animal Care and Use Committee.
V. Intellectual Property.
A. Under the Rules and Regulations of the University of Texas
System Board of Regents, all intellectual property created by Health
Science Center employees and/or with the support of Health Science
Center funds or facilities, whether or not collaboratively pursued, is
the property of The University of Texas System. It is agreed,
however, that when such intellectual property arises from
collaborative effort under this Program Agreement, the revenues
occurring from its license, sale or other such disposition will be
shared on a fair and reasonable basis between the collaborating
institutions as detailed in subsection C below.
B. Responsibilities for protecting intellectual property through
patent action are contingent upon the origin of the Invention or
discovery.
(1) Health Science Center is responsible at its expense
for seeking all patents for inventions or intellectual
property for which a Health Science Center employee is sole
inventor ("Health Science Center patents").
(2) CTRC Research is responsible at its expense for
seeking or arranging for all patents relative to inventions
for which CTRC Research employees are sole inventors ("CTRC
Research patents").
(3) CTRC Research is responsible at its expense for
seeking on behalf of Health Science Center, all patents
relative to inventions in which Health Science Center
employee(s) and CTRC Research employee(s) are joint or
co-inventors ("Joint Inventor Patents").
(4) If Health Science Center decides not to pursue a
patent in any country, CTRC Research will have the right to
file such patents on behalf of Health Science Center and
deduct patent filing and prosecution costs from future royalty
payments. Health Science Center is not obliged to seek patent
protection should CTRC Research opt not to seek patents for
which it has responsibility.
C. To the extent that it has the legal right to do so, Health
Science Center grants to CTRC Research during the term of this Program
Agreement an exclusive option to license, on a worldwide,
royalty-bearing basis, intellectual property created by Health Science
Center employees in the course of their drug development work
undertaken pursuant to either a grant managed by or a subcontract
awarded to Health Science
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Center, as described in Sections IV A and B. In addition, CTRC
Research shall have an exclusive option to license with the right to
sublicense Health Science Center intellectual property created by the
Director of the Institute for Drug Development directly related to any
other projects specified in the service agreement governing his/her
duties at the Institute. Beginning with the receipt by CTRC Research
of a disclosure by the Health Science Center of any creation of any
intellectual property subject to protection pursuant to Title 35 of
the United States Code, or at any earlier time mutually agreeable to
the two institutions, CTRC Research shall have four (4) months to
notify the Health Science Center of its desire to enter into a
licensing agreement. Should the Health Science Center and CTRC
Research fail to enter into a license agreement within six (6) months,
or such other time as the parties may agree, Health Science Center may
dispose of such intellectual property in accordance with Health
Science Center policy.
(1) If CTRC Research exercises its option and enters into
a license for any intellectual property, it will reimburse
Health Science Center for expenses associated with securing
the patent. CTRC Research will also pay Health Science Center
an amount equal to 50% of Net Royalties received by CTRC
Research from sublicenses for Health Science Center patents.
For Joint Inventor patents, compensation will be in an amount
equal to 25% of Net Royalties. However, if either party can
demonstrate to the other party that a different percentage
represents a more reasonable contribution by the inventing
parties, then the parties will enter into negotiation for
royalties other than that provided for herein. "Net
Royalties" is defined as the royalty payments due less
out-of-pocket expenses paid for the filing and prosecution of
patent applications.
(2) For products covered by any license, compensation
will be paid as long as CTRC Research derives income from the
patent.
(3) If CTRC Research does not exercise its option for any
intellectual property, all rights to such intellectual
property will remain with Health Science Center.
D. The parties understand that in order to obtain funding for
research including clinical trials, options and other rights relating
to intellectual property may need to be granted to the sponsor of such
research. Agreements with such sponsors shall clearly specify what
rights, if any, are to be granted in consideration for funding the
research and are to be processed in accordance with Section IV,
Management of Grants and Study Agreements. Unless otherwise provided
for in those agreements, income which results from the licensing of
intellectual property from the sponsored research agreement shall be
distributed in accordance with this article.
E. The parties recognize that a Research Collaboration Agreement
dated October 1, 1992, and an Option Agreement dated October 1, 1992,
between CTRC Research and
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Sterling Winthrop Inc. ("Sterling") provide that Sterling will fund
certain projects and programs in return in part for certain rights to
intellectual property developed as a direct result of such funding.
The parties recognize that some of the intellectual property referred
to in the agreements between Sterling and CTRC Research may be
developed in whole or in part by Health Science Center employees.
Health Science Center hereby provides to CTRC Research an exclusive
option to intellectual property developed by its employees to the
extent such intellectual property is developed pursuant to the funding
obtained from Sterling and thereby subject to the agreements between
Sterling and CTRC Research. Should CTRC Research and Sterling
exercise their respective options relating to Health Science Center
intellectual property, such intellectual property shall be treated in
accordance with the Sterling agreements and this agreement. Any
income received by CTRC Research as a result of Health Science Center
intellectual property shall be distributed in accordance with Section
V C (1) of this agreement. Any modifications to the Sterling
agreements which affect the rights of Health Science Center or its
employees shall require prior approval of Health Science Center.
VI. Reports.
A. For each of the three-month periods beginning September 1,
December 1, March 1, and June 1 of each year, CTRC Research will
provide to Health Science Center detailed progress reports describing
the scientific objectives, status, and prospects of each collaborative
research and development effort undertaken pursuant to this Program
Agreement.
B. For each patent of any type licensed or sublicensed to CTRC
Research, the License Agreement shall require that CTRC Research
provide to Health Science Center a report for each of the three-month
periods cited above, describing relevant costs, revenues, and other
financial aspects, to include a statement of Net Royalties or Net
Sales as defined in Section V C(1), and a forecast of further
commercial prospects. An annual consolidated report will be rendered
as of August 31 each year. All reports are subject to audit.
VII. Payment.
A. For services rendered pursuant to Section III A above, Health
Science Center shall furnish monthly invoices to CTRC Research for
each contract, showing current amounts due and itemizing the nature of
effort and time spent by its employees in rendering those services.
B. For compensation due pursuant to the provisions of Section V C
above, CTRC Research will make monthly payments based on the Statement
of Net Royalties or Net Sales, as appropriate, required by Section VI
B above. Any necessary adjustment in accumulated payments will be
accomplished as required.
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C. Payment shall be by check drawn against current funds of CTRC
Research, made payable to The University of Texas Health Science
Center at San Antonio and forwarded to the attention of:
Robert B. Price
Executive Vice President for Administration
and Business Affairs
The University of Texas Health Science Center at San Antonio
7703 Floyd Curl Drive
San Antonio, Texas 78284-7862
VIII. Advisory Board.
A. An Advisory Board, consisting of three members each from CTRC
Research and Health Science Center and appointed by the President of
Health Science Center and Chairman of CTRC Research or their
designees, shall review and advise CTRC Research, Health Science
Center, and the Director of the Institute for Drug Development on all
efforts undertaken in the Institute for Drug Development pursuant to
this Program Agreement. The Advisory Board will provide special
attention to collaborative research policies and practices,
contributions to and equitable compensation arising from proposed or
ongoing collaborative ventures, maintenance of institutional integrity
and recognition, and circumstances which could result in individual or
institutional conflict of interest or the appearance thereof. The
Advisory Board Chair will be alternated annually between the agreeing
parties, with the incumbent to be selected by the Board members.
B. The President of Health Science Center or his/her designee
shall appoint one Health Science Center member of the Advisory Board
to also serve as an ex officia member of any Program Council or
similar body constituted by CTRC Research and its sublicensees to
govern the operating progress of research undertakings.
IX. Publication or Presentation.
Publication or oral presentation of results arising from research
conducted by Health Science Center faculty members shall be governed by the
Rules and Regulations of the Board of Regents of the University of Texas
System. Individuals proposing to engage in such publication or presentation
will advise CTRC Research leadership of that fact in ample time to permit any
necessary discussion and negotiations concerning content and timing.
X. Administration.
A. The President of Health Science Center or his/her designee,
and the President of the Board of Governors of the Foundation or
his/her designee, will serve as the principal points of contact for
all matters arising from this agreement.
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B. Health Science Center faculty, as defined in Section III A(a)
above, remain full-time employees even though a portion or all of
their services may be contracted to CTRC Research. Health Science
Center lenders will have ultimate supervisory responsibilities for all
full time Health Science Center faculty and resources participating in
these joint activities, whereas Foundation lenders will have similar
supervisory responsibilities for all CTRC Research employees.
XI. Term.
The primary term of this Program Agreement will be for five years
beginning with the effective date of September 20, 1994 with automatic
extensions of three years unless either party gives at least 180 days notice
before the end of the primary term or extensions thereof. Either party may
terminate this Agreement at any time with 180 days written notice to the other.
Any service agreements, contracts or other agreements entered into under the
provisions of this Program Agreement may continue in force until their
specified termination dates.
XII. Review of Agreement.
The Advisory Board shall, not less than once annually, review the
contents of this Agreement and all associated individual study agreements and
service agreements. Upon completion of their review, the Advisory Board shall
report to the Presidents of the two institutions any proposed revisions to any
of the agreements.
XIII. Amendment
All amendments to this Agreement must be in writing and signed by the
same officials authorizing the basic agreement. Amendments are effective on
the date of signature unless otherwise specified.
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EXECUTED by the parties on the day and year first written above.
SIGNATURES
THE UNIVERSITY OF TEXAS HEALTH CTRC RESEARCH FOUNDATION:
SCIENCE CENTER AT SAN ANTONIO:
/s/ /s/ GEORGE ENSLEY
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/s/ JAMES YOUNG /s/ CHARLES COLTMAN
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EXHIBIT 10.35
EXECUTION COPY
SUBORDINATED OPTION AGREEMENT
This SUBORDINATED OPTION AGREEMENT (the "Agreement") dated as of
March 27 , 1995 is entered into by and between CTRC Research Foundation, a
Texas not-for-profit corporation ("CTRC"), and ILEX Oncology, Inc., a Delaware
corporation formerly known as Biovensa, Inc. ("ILEX").
R E C I T A L S:
WHEREAS, CTRC and certain affiliates thereof recently established ILEX
as a subsidiary to engage in the manufacture and commercial development of
therapeutic agents and pharmaceutical products for the treatment of human
cancer;
WHEREAS, CTRC has entered into (i) a Research Collaboration Agreement
with Sanofi Winthrop Inc., formerly known as Sterling Winthrop Inc.,
("Sanofi"), dated as of October 1, 1992, as amended (the "Research
Collaboration Agreement"), and (ii) an Option Agreement with Sanofi dated as of
October 1, 1992, as amended (the "Option Agreement," together with the Research
Collaboration Agreement, the "Sanofi Agreements");
WHEREAS, the Sanofi Agreements provide Sanofi with various rights to
fund certain research programs and options to license certain Commercial Rights
(as that term is defined in the Sanofi Agreements) of CTRC through December 31,
1996;
WHEREAS, ILEX is contemplating a private placement of various shares
of its preferred stock, which private placement will benefit CTRC as a
shareholder of ILEX;
WHEREAS, in connection with, and to assist ILEX in consummating such a
sale of its preferred stock, CTRC has decided to grant ILEX (i) a subordinated
option to license any of CTRC's rights to any compound, material, technology or
know-how that Sanofi elects not to license pursuant to the Sanofi Agreements,
and (ii) an option to fund certain research programs conducted by CTRC, and
license any rights arising from such ILEX-funded research programs; and
NOW, THEREFORE, in consideration of the representations, warranties
and covenants contained herein, and other valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1.
GRANT OF OPTIONS
1.1. Option Grants: CTRC hereby grants the following options to
ILEX:
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1.1.1. Subordinated License Option. Throughout the
term of this Agreement, ILEX shall have an option (the "Subordinated Option")
to acquire on commercially reasonable terms and conditions a world-wide,
exclusive, royalty-bearing license to possess, utilize, develop, market,
manufacture and sell any "Marketable Rights" (as that term is defined below)
which Sanofi elects not to license pursuant to the terms of the Sanofi
Agreements. For the purposes of this Agreement, "Marketable Rights" shall
mean: CTRC's legal right by patient, contract, agreement, copyright, trademark,
or any other means to make, have made, sell or have sold in any country and
compound, substance, material, technology, know-how, data, results of
experiments, formulae, specifications, procedures, methods, tests, cell lines,
cultures, constructs, vectors, development strains, micro-organisms, assay
systems, assay protocol and assay supporting material, fermentation and
purification material and techniques, for commercial purposes in connection
with the treatment and/or mitigation of cancer in humans.
1.1.2. Subordinated Funding Option and Derivative
Option and Derivative Option. Throughout the term of this Agreement, ILEX
shall have an option (the "Funding Option") to fund directly or indirectly any
research and preclinical development programs being planned or conducted by
CTRC that are not encumbered nor being funded by Sanofi pursuant to the Sanofi
Agreements (the "Unfunded Research Programs"). If ILEX elects to fund any such
research programs according to the provisions of Section 1.3.2 hereof (the
"ILEX Research Programs"), then ILEX shall have an option (the "Derivative
Option", together with the Subordinated Option and the Funding Option, the
"Options") to acquire a world-wide exclusive license to possess, utilize,
develop, market, manufacture and sell any Marketable Rights directly or
indirectly arising or resulting from such ILEX Research Programs.
1.2. Information to be Sent to ILEX. CTRC agrees that:
1.2.1 Subordinated Option. Throughout the duration
of the Subordinated Option, CTRC shall provide ILEX with Data/Information
Packages (as that term is defined in the Sanofi Agreements) no later than 15
days after the earlier to occur of (i) CTRC receiving notice from Sanofi that
Sanofi has elected not to exercise its option with respect to a Marketable
Right described in a Data/Information Package already delivered to Sanofi, and
(ii) the expiration of Sanofi's rights to exercise its option with respect to
any Marketable Right.
1.2.2. Funding and Derivative Options. Throughout
the term of this Agreement, CTRC shall provide ILEX with periodic written
descriptions and scientific reviews concerning all Unfunded Research Programs.
Such description and reviews shall provide ILEX with reasonable details
concerning the Unfunded Research Programs and CTRC agrees that it will provide
ILEX with whatever additional information concerning such Unfunded Research
Programs that ILEX reasonably deems is necessary for it to determine whether to
exercise the Funding Option.
1.3. Exercise of Options.
1.3.1. Subordinated Option. No later than 60 days
after ILEX receives a Data/Information Package from CTRC pursuant to Section
1.2.1, ILEX shall
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notify CTRC in writing as to whether it wishes to exercise its Subordinated
Option with respect to the Marketable Right described in that Data/Information
Package.
1.3.2. Funding and Derivative Options. No later
than 60 days after ILEX receives a written description or scientific review of
an Unfunded Research Project pursuant to Section 1.2.2 hereof, ILEX shall
notify CTRC in writing as to whether it wishes to enter into good faith
negotiations to reach agreement (the "Funding Agreement") on the level and
manner of funding, other funding provisions, reporting requirements, licensing
and exercise terms of its Derivative Option (collectively, the "Funding Terms")
regarding the Unfunded Research Program described in such materials.
In the event that ILEX notifies CTRC that it requires additional time to
determine whether it wishes to exercise any of the Options, CTRC agrees that it
shall provide ILEX with such additional time as is reasonable under the
circumstances, which in no event shall exceed an additional 60 days.
1.4. Failure to Exercise Options. If (a) ILEX notifies CTRC of its
intent not to exercise any of its Options hereunder, or (b) ILEX fails to
notify CTRC that it has elected to exercise any of its Options according to the
time requirements set forth in Section 1.3 hereof, then any and all of ILEX's
rights pursuant to this Agreement shall expire with respect to everything in
that Data/Information Package or Unfunded Research Program.
1.5. License Terms and Funding Obligations.
1.5.1. Subordinated Option and Derivative Option
License. If ILEX exercises its Subordinated Option or its Derivative Option in
accordance with the terms hereof, CTRC and ILEX shall negotiate in good faith
and attempt to enter into a license and development agreement on commercially
reasonable terms for the Marketable Right in question. If the parties cannot
agree on the terms of such a license and development agreement after a
commercially reasonable period of negotiation, which period shall not exceed
120 days unless otherwise agreed by the parties, CTRC shall be entitled to
enter into similar negotiations with any third party of its choice.
1.5.2. Funding Obligations Pursuant to ILEX's
Funding Option. If ILEX exercises its Funding Option in accordance with the
terms hereof, then ILEX and CTRC agree to negotiate in good faith to determine
the Funding Terms necessary to adequately complete the ILEX Research Program in
question. If the parties cannot agree on such matters after a commercially
reasonable period of negotiations, which period shall not exceed 120 days
unless otherwise agreed by the parties, CTRC shall be entitled to enter into
similar negotiations with any third party of its choice.
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ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
2.1. Mutual Representations and Warranties. CTRC and ILEX
represent and warrant to one another that:
2.1.1. Due Incorporation. Each is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation.
2.1.2. Authority. Each has the complete and
unrestricted right, power and authority to enter into, deliver and perform this
Agreement, and the execution, delivery and performance of this Agreement and
all of the transactions contemplated hereby have been duly authorized by all
necessary corporate action by each of them.
2.1.3. Valid and Binding Agreement. This Agreement
constitutes the valid and binding obligation of each of them, enforceable in
accordance with its terms, subject as to enforcement to usual equitable
principles and except as limited by bankruptcy, moratorium, insolvency or
similar laws of general application affecting the enforcement of creditor's
rights.
2.1.4. No Violations. Neither of them are subject
to any restriction or other provision contained in their respective articles or
certificates of incorporation or bylaws, or any agreement, instrument, order,
judgment, decree or other restriction that would prevent the consummation of
the transactions contemplated by this Agreement.
2.1.5. Consents. No notice to, filing with, or
authorization, consent or approval of any public body or authority or other
person or entity is required of either of them in connection with the
execution, delivery and performance of this Agreement.
ARTICLE 3.
CONFIDENTIALITY
3.1. Confidential Information. "Confidential Information" shall
consist of: all information relating to the business and affairs of ILEX and
CTRC, as the case may be, which is identified and marked by ILEX or CTRC as
confidential, which may include, but is not limited to, business and financial
information; legal documents; customer lists; advice to customers; data and
databases; documentation and specifications; inventions; theories; models,
algorithms, know-how, software, discoveries, developments, devices, methods,
processes, formulations, manufacturing operations, and other technology; and
compilations and other materials (whether in written, graphic, audiovisual,
optical, electronic or other media); provided that Confidential Information
shall not include any information that (i) is in the public domain or otherwise
publicly available (other than through the fault of the person entrusted with
the Confidential Information), (ii) is rightfully disclosed to the person
entrusted with the Confidential
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Information by a third party without continuing restrictions on its use or
disclosure, or (iii) the person entrusted with the Confidential Information can
demonstrate through documentary evidence was developed independently by such
person without the use of Confidential Information. ILEX and CTRC agree that
they will comply with the terms of any non-disclosure or confidentiality
agreements entered into, or understandings reached by, the other with any
supplier, licensor or customer of the other upon the prior written notice to
them and their prior review and written approval of the terms of any such
non-disclosure or confidentiality agreement.
3.2. Title to and Agreement Not to Divulge Confidential
Information. Each of ILEX and CTRC acknowledge that it has no right, title or
interest in the other's Confidential Information. Each of ILEX and CTRC agrees
that during the term of this Agreement, and at all times thereafter, it: (a)
will hold all Confidential Information of the other in strict confidence and
trust for the benefit of the other, (b) will not use the other's Confidential
Information for its own benefit or the benefit of any third party, (c) will not
copy the other's Confidential Information, and (d) will not divulge or convey
to any third party of the other's Confidential Information, except pursuant to
the other's prior written direction or consent. Each of ILEX and CTRC agrees
that any Confidential Information of the other disclosed to it prior to or
during the term of this Agreement shall be subject to this Agreement.
3.3. Return of Materials. Promptly upon the expiration or
termination of this Agreement, ILEX and CTRC shall return to the other all
records, documents, papers, computer disks/diskettes, computer printouts or
other tangible materials containing the other's Confidential Information, and
will certify in writing that all such records have been delivered to ILEX or
CTRC, as the case may be.
ARTICLE 4.
INDEMNIFICATION
4.1. By CTRC. CTRC agrees that it shall pay ILEX on written demand
the full amount of any sum that ILEX may become obligated to pay pursuant to
any law, regulation, contract, judgment or legal or similar other proceeding,
and CTRC shall indemnify and save and hold ILEX harmless from and against any
claim, cost, expense, damage, liability, loss or deficiency suffered or
incurred by ILEX (including, without limitation, reasonable attorney's fees and
other reasonable costs and expenses incident to any suit, action or proceeding)
arising out of or resulting from CTRC's (a) failure to perform or observe any
team, provision, covenant, agreement or condition in this Agreement, or (b)
failure to obtain or secure valid and enforceable ownership rights in any CTRC
Products or Marketable Rights which ILEX elects to license pursuant to this
Agreement.
4.2. By ILEX. ILEX agrees that it shall pay CTRC on written demand
the full amount of any sum that CTRC may become obligated to pay pursuant to
any law, regulation, contract, judgment or legal or similar other proceeding,
and ILEX shall indemnify and save and hold CTRC harmless from and against any
claim, cost, expense, damage, liability, loss or deficiency suffered or
incurred by CTRC (including, without limitation, reasonable attorney's fees and
other reasonable costs and expenses incident
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to any suit, action or proceeding) arising out of or resulting from (a) ILEX's
failure to perform or observe any term, provision, covenant, agreement or
condition in this Agreement or (b) any technology, products, goods or services
that uses the Marketable Rights licensed to ILEX pursuant to this Agreement.
4.3. Procedure. CTRC and ILEX shall give prompt written notice to
one another of any assertion, claim or demand which CTRC or ILEX discover or of
which notice is received after the date of this Agreement which might give rise
to a claim by CTRC or ILEX against the other under Sections 4.1 or 4.2 hereof,
stating the nature, basis and amount thereof. In the case of any claim by a
third party, any suit, any claim by any governmental body, or any legal,
administrative arbitration or proceeding with respect to which CTRC or ILEX may
have liability under the indemnity agreements contained in Sections 4.1 and 4.2
hereof, the party which may have such liability to the other shall be entitled
to participate therein, and to the extent desired, to assume the defense
thereof, and after notice from CTRC or ILEX, as the case may be, of its
election to assume the defense thereof, the assuming party will not be liable
to the other for any legal or other expenses subsequently incurred by the other
in connection with the defense thereof, other than reasonable costs of
investigation, unless the assuming party does not actually assume the defense
thereof following notice of such election. CTRC or ILEX, as the case may be,
shall make available to the other and its attorneys and accountants, at all
reasonable times, all books and records relating to such suit, claim or
proceeding, and CTRC and ILEX, as the case may be, will render to each other
such assistance as may reasonably be required of each other in order to insure
proper and adequate defense of any such suit, claim or proceeding. CTRC and
ILEX, as the case may be, will not make any settlement of any claim which might
give rise to liability of the other under the indemnity agreements contained in
Sections 4.1 or 4.2 hereof without the prior written consent of the other. If
CTRC or ILEX, as the case may be, shall desire and be able to effect a
compromise or settlement of any such claim and the other shall refuse to
consent to such compromise or settlement, then the liability of CTRC or ILEX,
as the case may be, to the party which refuses to consent with respect to
settlement of such claim shall be limited to the amount so offered in
compromise or settlement.
ARTICLE 5.
TERM AND TERMINATION
5.1. Duration. This Agreement shall be effective as of the date
set forth above and shall continue in force and effect for sixty (60) months
subsequent thereto (the "Initial Term"), unless earlier terminated pursuant to
this Article. Six (6) months prior to the end of the Initial Term, the parties
shall enter into good faith negotiations for the renewal of this Agreement;
provided that at the end of the Initial Term there shall be no obligation on
the part of any party hereto to enter into a renewal of this Agreement or any
other agreement concerning the subject matter hereof.
5.2. Survival. Notwithstanding anything contained herein to the
contrary, the expiration or termination of this Agreement shall not relieve
either party of its obligations pursuant to Article 3 hereof.
<PAGE> 7
ARTICLE 6.
MISCELLANEOUS
6.1. Cooperation. CTRC and ILEX agree to take all actions and
execute all documents or instruments as either party may reasonably request to
consummate the transactions contemplated by this Agreement.
6.2 Notices. All notices hereunder shall be in writing and shall
be deemed given when delivered in person or when telecopied with hard copy to
follow, or three (3) business days after being deposited in the United States
mail, postage prepaid, via registered or certified mail, or two (2) business
days after delivery to a nationally recognized express courier, expenses
prepaid, addressed as follows:
If to CTRC:
CTRC Research Foundation
14960 Omicron
San Antonio, TX 78245
Attention: Jeanette Hauck
Facsimile: (210) 677-0058
If to ILEX:
ILEX Oncology, Inc.
14785 Omicron
San Antonio, TX 78245
Attention: Richard L. Love, President
Facsimile: (210) 677-0058
and/or such other addresses and/or to such other addresses as may be
designated by notice given in accordance with the provisions hereof.
6.3. Assignment. This Agreement shall be binding upon and insure
to the benefit of the parties hereto and their respective heirs, successors and
permitted assigns. No party shall assign this Agreement or its rights
hereunder without the prior written consent of the other party hereto.
6.4. Merger. This Agreement contains all of the agreements between
the parties with respect to the subject matter hereof and this Agreement
supersedes all previous or contemporaneous written, oral or implied
understandings between the parties hereto with respect to the subject matter
hereof.
6.5. Amendment: Waiver. No change or modification of this
Agreement shall be valid unless the same shall be in writing and signed by the
parties hereto. No waiver of any provisions of this Agreement shall be valid
unless in writing and signed by the waiving party. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver, unless so provided in the waiver.
<PAGE> 8
6.6. Severability. If any provision of this Agreement (or the
portions thereof) shall, for any reason, be considered invalid or unenforceable
by any court of competent jurisdiction, such provision (or portions thereof)
shall be ineffective only to the extent of such invalidity or unenforceability,
and the remaining provisions of this Agreement (or portions thereof) shall
nevertheless be valid, enforceable and of full force and effect.
6.7. Section Headings. The article, section or paragraph headings
or titles herein are inserted for convenience of reference only and shall not
be deemed a part of this Agreement.
6.8. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which
when taken together shall constitute a single instrument.
6.9. Governing Law. This Agreement shall be governed and
controlled as to validity, enforcement, interpretation, construction, effect
and in all other respects by the laws of the State of Texas applicable to
contracts made in that State (other than any conflict of laws rule which might
result in the application of the laws of any other jurisdiction).
IN WITNESS WHEREOF, CTRC and ILEX have caused this Agreement to be
executed by their duly authorized officers as of the date set forth above.
CTRC RESEARCH FOUNDATION ILEX ONCOLOGY, INC.
/s/ CHARLES COLTMAN /s/ RICHARD LOVE
- ------------------------------ -----------------------------
By: Charles Coltman By: Richard Love
--------------------------- --------------------------
Title: President Title: President
------------------------ -----------------------
<PAGE> 1
EXHIBIT 10.36
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into effective
as of the 2nd day of November, 1994, by and between Richard L. Love
("Employee") and Biovensa Inc., a Delaware corporation (the "Company").
WHEREAS, the Company desires to employ Employee, and Employee desires
to become employed by the Company, on the terms hereinafter set forth.
NOW, THEREFORE, in consideration for the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DUTIES
1.1 DUTIES. During the term of this Agreement, the Company agrees
to employ Employee as President and Chief Executive Officer of the Company, and
as a member of the Board of Directors of the Company (the "Board"), and
Employee agrees to serve the Company in such capacities as the Board may
direct, all upon the terms and subject to the conditions set forth in this
Agreement.
1.2 EXTENT OF DUTIES. Subject to Employee engaging from time to
time in activities permitted under Section 5.2 hereof, Employee shall devote
his full-time business time, energy and skill to the affairs of the Company as
reasonably necessary to discharge his duties hereunder. The discharge of duties
hereunder shall be Employee's primary occupation. All other activities
permitted under Section 5.2 shall be secondary and shall be limited at all
times so as not to interfere in any material respect with the discharge of
Employee's duties hereunder.
ARTICLE 2
TERM OF EMPLOYMENT
The term of this Agreement shall commence on the date hereof and
continue for a period of four years, subject to earlier termination as
hereinafter provided.
ARTICLE 3
COMPENSATION
3.1 ANNUAL BASE COMPENSATION. As compensation for services
rendered under this Agreement, Employee shall be entitled to receive from
Company an annual base salary of $175,000 (before standard deductions) during
the first year of this Agreement. Employee's annual base salary shall be
subject to review and adjustment by the Board on an annual basis. Employee's
annual base salary shall be payable at regular intervals (at least monthly) in
accordance with the prevailing practice and policy of the Company.
<PAGE> 2
3.2 INCENTIVE BONUS. As additional compensation for services
rendered under this Agreement, Employee shall be entitled to an annual
incentive bonus if earned. Within 60 days after the date of this Agreement and
within 60 days after each anniversary of this Agreement during the term of this
Agreement, the Employee and the Board shall cooperate to establish performance
milestones for Employee's annual incentive bonus for the period ending on the
next anniversary of this Agreement. Employee's annual incentive bonus shall be
paid within 60 days after each anniversary of this Agreement.
3.3 STOCK OPTION. As additional compensation for services
rendered under this Agreement, the Company shall grant to Employee an option to
acquire up to a certain number of shares of common stock ("Common Stock") of
the Company. The exercise price of the option shall be equal to the Common
Stock equivalent purchase price per share of equity securities (anticipated to
be preferred stock) issued by the Company pursuant to its initial private
placement or other offering which results in gross proceeds to the Company in
excess of $3 million. The number of shares of Common Stock covered by the
option shall be equal to $100,000 divided by the Common Stock equivalent
purchase price per share applicable to such offering (for example, if the
private placement price is $1.50 per share, Employee would receive an option to
acquire up to 66,667 shares). The option shall vest over four years as
follows: 25% on the first anniversary of this Agreement, 25% on the second
anniversary of this Agreement, 25% on the third anniversary of this Agreement,
and 25% on the fourth anniversary of this Agreement. All options must be
exercised upon the later of (i) the fifth year anniversary of this Agreement,
(ii) one year subsequent to the termination of employment, for any reason, from
the Company, or (iii) one year subsequent to the termination of the "lock-up
period" that is negotiated by the Company and its underwriters in connection
with an initial public offering of the Company's Common Stock (the "Option
Term"). The option will be granted as an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended. The
option will be granted contemporaneously with the completion of such initial
private placement or other offering pursuant to a separate instrument which
shall make reference to the provisions of this Agreement. Employee shall also
be entitled to such performance-based options as the Board may from time to
time grant to the executive officers of the Company.
3.4 OTHER BENEFITS. Employee shall, in addition to the
compensation provided for herein, be entitled to the following additional
benefits:
(a) MEDICAL, HEALTH AND DISABILITY BENEFITS. Employee
shall be entitled to receive all medical, health and disability
benefits that may, from time to time, be provided by the Company to
its executive officers.
(b) OTHER BENEFITS. Employee shall also be entitled to
receive any other benefits that may, from time to time, be provided by
the Company to all employees of Company as a group, or all executive
officers of the Company as a group, including any life insurance,
profit sharing, 401(k) or retirement benefits.
(c) VACATION PAY. Employee shall be entitled to an
annual vacation as determined in accordance with the prevailing
practice and policy of the Company.
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<PAGE> 3
(d) HOLIDAYS. Employee shall be entitled to holidays in
accordance with the prevailing practice and policy of the Company.
(e) REIMBURSEMENT OF EXPENSES. The Company shall
reimburse Employee for all expenses reasonably incurred by Employee on
behalf of the Company in accordance with the prevailing practice and
policy of the Company.
ARTICLE 4
TERMINATION
4.1 TERMINATION BY THE COMPANY WITHOUT CAUSE. Subject to the
provisions of this Section , this Agreement may be terminated by the Company
without cause upon 30 days prior written notice thereof given to Employee. In
the event of termination pursuant to this Section , the Company shall pay
Employee, within 15 days of such termination, (a) his base salary earned pro
rata to the date of such termination, plus (b) a lump-sum payment equal to one
full year of his then effective annual base salary under Section (unless
Employee makes an election under Section 4.5(a)(ii) to receive limited
accelerated vesting of his stock option in lieu of a lump-sum payment under
clause (b) above).
4.2 TERMINATION BY THE COMPANY FOR CAUSE. The Company may
terminate this Agreement at any time if such termination is for "cause" (as
defined below), by delivering to Employee written notice describing the cause
of termination 30 days before the date of such termination. In the event the
employment of Employee is terminated for "cause", Employee shall be entitled
only to his base salary earned pro rata to the date of such termination. The
determination of whether Employee shall be terminated for "cause" shall be made
by the Board, in the reasonable exercise of its business judgment, and shall be
limited to the occurrence of the following events:
(a) Conviction of or a plea of nolo contendere to the
charge of a felony (which, through lapse of time or otherwise, is not
subject to appeal);
(b) Failure (without proper legal cause) to perform in a
reasonably satisfactory manner, or negligence in performing,
Employee's material duties and responsibilities hereunder as
determined by the Board in the exercise of its reasonable judgment,
provided that a written warning is given to Employee by the Company
and such non-performance or negligence continues seven days
thereafter;
(c) Gross negligence in performing Employee's material
duties and responsibilities under this Agreement which are within
Employee's job responsibilities hereunder;
(d) Breach of fiduciary duty to the Company;
(e) Except with respect to limited activities permitted
under Section 1.2, the unauthorized absence of Employee from work
(other than for sick leave or disability) for
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<PAGE> 4
a period of three working days or more during any period of 30 working
days during the term of this Agreement; or
(f) Breach of any material obligation of Employee under
the provisions of Article 5 hereof, provided that written notice
thereof is given to Employee by the Company and such breach continues
seven days thereafter.
4.3 TERMINATION UPON DEATH OR PERMANENT DISABILITY. In the event
that Employee dies, this Agreement shall terminate upon the Employee's death.
Likewise, if the Employee becomes unable to perform the essential functions of
his duties hereunder, with or without reasonable accommodation, on account of
illness, disability or other reason whatsoever for a period of more than 15
consecutive or nonconsecutive days in any six-month period, this Agreement
shall thereupon terminate. In the event of termination pursuant to this
Section 4.3, Employee (or his legal representatives) shall be entitled only to
his base salary earned pro rata to the date of such termination.
4.4 VOLUNTARY TERMINATION BY EMPLOYEE. Employee may terminate
this Agreement at any time upon delivering 30 days written notice of
resignation to the Company. In the event of such voluntary termination,
Employee shall be entitled to his base salary earned pro rata to the date of
his resignation. On or after the date the Company receives notice of
Employee's resignation, the Company may, at its option, pay Employee his base
salary through the effective date of his resignation and terminate his
employment immediately.
4.5 STOCK OPTIONS. The stock option issued to Employee pursuant
to Section 3.3 hereof will be issued pursuant to the Company's stock option
plan (the "Plan") to be adopted for key employees of the Company. The
instrument evidencing the granting of such option to Employee shall expressly
incorporate, and the Company covenants that the Plan shall permit, the
following rights which Employee shall have relating to termination of this
Agreement pursuant to the provisions of Article 4:
(a) In the event of termination by the Company without
cause under Section 4.1, (i) outstanding stock options held by Employee which
are then vested shall remain exercisable for the Option Term, (ii) if, within
10 days of such termination, Employee notifies the Company that he is making an
election under this Section 4.5(a)(ii), outstanding stock options held by
Employee which would vest within one year from the date of termination shall
automatically become vested and shall remain exercisable for the Option Term
(such limited accelerated vesting being in lieu of the lump-sum payment under
clause (b) of Section 4.1), and (iii) after giving effect to any accelerated
vesting under clause (ii) above, any then unvested portion of Employee's
outstanding stock options shall lapse.
(b) In event of termination by the Company for "cause"
under Section 4.2, upon death or disability under Section 4.3 or by Employee
pursuant to a voluntary resignation under Section 4.4, (i) any portion of
Employee's outstanding stock options which are vested as of the date of
termination shall remain exercisable for the Option Term and (ii) any then
unvested portion of Employee's outstanding stock options shall lapse.
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<PAGE> 5
4.6 STOCK REPURCHASE RIGHT.
(a) Within 30 days after the date of full execution of
this Agreement, Employee will purchase, and the Company will sell to Employee,
480,000 shares (the "Shares") of Common Stock of the Company, representing 6%
of the total outstanding shares of Common Stock, for $48,000 or $.10 per share.
The purchase price will be paid $28,000 in cash and the balance pursuant to a
Promissory Note dated as of the date of issuance (the "Note"), executed by
Employee and payable to the order of the Company, in the stated principal
amount of $20,000. The Note will bear interest at a rate of 8% simple interest
(i.e. not compounded) and will be payable in quarterly installments based upon
a 10-year amortization schedule and will mature on the fourth anniversary of
this Agreement. The Note shall be secured by a pledge of that number of Shares
as is determined by dividing the outstanding principal balance of the Note by
the per share purchase price of the Shares (e.g. if the Note balance is
$20,000, the number of Shares pledged would be 200,000), with a mechanism for
partial releases of pledged shares to reflect reductions in the unpaid balance
of the Note on the same basis.
(b) In event that, prior to the fourth anniversary of
this Agreement, this Agreement is terminated by the Company for "cause" under
Section 4.2 or by Employee pursuant to a voluntary resignation under Section
4.4, the Company shall have the option, exercisable in its sole discretion, to
repurchase the Shares on the following terms:
(i) pursuant to the Company's option hereunder,
the Company shall be entitled to purchase (A) up to 100% of the Shares
if such termination occurs on or before the first anniversary of this
Agreement; (B) up to 75% of the Shares if such termination occurs
after the first anniversary of this Agreement and on or before the
second anniversary of this Agreement; (C) up to 50% of the Shares if
such termination occurs after the second anniversary of this Agreement
and on or before the third anniversary of this Agreement; and (D) up
to 25% of the Shares if such termination occurs before the fourth
anniversary of this Agreement;
(ii) such option shall be exercisable by the
Company within 30 days after the date of termination, by the Company
giving Employee written notice of exercise of the option, which notice
shall specify the number of Shares which the Company elects to
purchase;
(iii) unless exercised in accordance with clause
(ii) above, the option shall lapse on the 30th day after the date of
termination;
(iv) the closing of any purchase of Shares
pursuant to this Section shall occur within 30 days after notice of
exercise of the option is given by the Company to Employee;
(v) at closing, the Company shall pay to
Employee a purchase price equal to $.10 per Share purchased by the
Company plus simple interest (i.e. not compounded) on the total amount
of the purchase price from the date hereof through the date of
purchase at
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<PAGE> 6
8%, and Employee shall deliver to the Company one or more certificates
representing the number of Shares purchased by the Company, duly
endorsed by Employee for transfer or accompanied by a stock power
executed by Employee; and
(vi) if at the time of closing the Note has not
been paid in full (whether principal and/or accrued, unpaid interest),
the purchase price to be paid by the Company shall be paid by
satisfaction of Employee's next accruing obligations under the Note
and the balance, if any, shall be paid in cash; and if at the time of
closing the Note has been paid in full, the purchase price shall be
paid in cash;
(vii) any balance of the Note remaining unpaid
after closing shall be immediately repaid in full by Employee.
(d) In the event of termination by the Company without
cause under Section 4.1 or upon death or disability under Section 4.3, the
Shares shall not be subject to any repurchase right by the Company hereunder.
4.7 EXCLUSIVITY OF TERMINATION PROVISIONS. The termination
provisions of this Agreement regarding the parties' respective obligations in
the event Employee's employment is terminated, are intended to be exclusive and
in lieu of any other rights or remedies to which Employee or the Company may
otherwise be entitled at law, in equity or otherwise. It is also agreed that,
although the personnel policies and fringe benefit programs of the Company may
be unilaterally modified from time to time, the termination provisions of this
Agreement are not subject to modification, whether orally, impliedly or in
writing, unless any such modification is mutually agreed upon and signed by the
parties.
ARTICLE 5
CONFIDENTIALITY AND NON-COMPETITION
5.1 CONFIDENTIALITY.
(a) Employee acknowledges that the Company has a
proprietary interest in maintaining the confidentiality of Confidential
Information (defined below), and Employees shall not, during the term of this
Agreement and for three years after the termination of this Agreement, disclose
any Confidential Information to any third party or use any Confidential
Information for his benefit or for the benefit of any third party; provided
that the foregoing is not intended to restrict disclosures in the course of
employment under this Agreement and in furtherance of the business of the
Company; provided further that Employee nonetheless agrees to abide by the
terms of any confidentiality agreement entered into by the Company with third
parties which extend beyond said three-year term of the foregoing
confidentiality.
(b) For the purposes of this Agreement, "Confidential
Information" means all information which is learned or developed by Employee in
the course and performance of his duties under this Agreement, including
without limitation, reports, laboratory notebooks, information and
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<PAGE> 7
data relating to the Company's drug development or manufacturing activities,
excluding in any event, however, information which:
(i) at the time of disclosure, is, or, after
disclosure, becomes generally known or available to the public other
than as a consequence of Employee's breach of this Agreement;
(ii) was known or otherwise available to Employee
prior to the disclosure by the Company;
(iii) disclosed by a third party to Employee after
the disclosure by the Company if such third party's disclosure neither
violates any obligation of the third party to the Company nor is a
consequence of Employee's breach of this Agreement;
(iv) is required to be disclosed under the terms
of a subpoena or order issued by a court of competent jurisdiction or
by a governmental body, provided that Employee shall immediately
notify the Company of the existence, terms and circumstances
surrounding such required disclosure so that it may seek an
appropriate protective order; or
(v) the Company authorizes for release.
5.2 NON-COMPETITION.
(a) During the term of this Agreement, Employee shall not
engage, anywhere in the world, whether directly or indirectly, as principal,
owner, officer, director, agent, employee, consultant or partner, in the
research, development, manufacture or commercialization of products that
compete with the Company's products or programs ("Restricted Activities"),
provided that the foregoing shall not restrict Employee from engaging in any
Restricted Activities which the Company directs Employee to undertake or which
the Company are otherwise expressly authorizes. The foregoing shall not
restrict Employee from owning less than 5% of the outstanding capital stock of
any company which engages in Restricted Activities, provided that Employee is
not otherwise involved with such company as an officer, director, agent,
employee or consultant.
(b) Subject to Employee's continuing compliance with the
provisions of Section 1.2 and Section 5.2(a), Employee may be a principal,
owner, officer, director, agent, consultant or partner, of any corporation,
partnership or other entity.
(c) The foregoing provisions of this Section 5.2 shall
not be held invalid because of the scope of the territory covered, the actions
restricted thereby, or the period of time such covenant is operative. Any
dispute under this Section shall be subject to arbitration under Article 7
hereof.
5.3 REMEDIES. In the event of a breach or threatened breach by
the Employee of Section 5.1 or 5.2 hereof, the Company shall be entitled to a
temporary restraining order and an injunction restraining the Employee from the
commission of such breach. Nothing herein shall be construed
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<PAGE> 8
as prohibiting the Company from pursuing any other remedies available to it for
such breach or threatened breach, including the recovery of money damages.
ARTICLE 6
PROPRIETARY PROPERTY ASSIGNMENT
6.1 OWNERSHIP. All notes, reference materials, sketches,
diagrams, reproductions, memoranda, documentation and records incorporating or
reflecting any Confidential Information shall belong exclusively to the Company
and shall be delivered to the Company upon termination of Employee's employment
with the Company, for whatever reason said termination occurs. All inventions,
improvements, ideas or discoveries made or conceived by Employee in the course
of performance Employee's duties hereunder for the Company, whether patentable
or unpatentable, or for which equipment, supplies or facilities of the Company
are used, or which is derived from trade secrets owned by the Company, during
the term of this Agreement ("Proprietary Property") shall be the sole property
of the Company and shall be promptly reported both orally and in writing to the
Company.
6.2 COOPERATION. Employee, without charge to the Company, shall
execute, acknowledge and deliver to the Company all such further papers,
including applications for patents or copyrights, the expense of which is to be
borne by the Company, as may be necessary to enable the Company to protect said
Proprietary Property by patent, copyright or otherwise, in any and all
countries, and to vest title to said Proprietary Property in the Company or its
nominees (and their successors or assigns) and to maintain and enforce such
protection; and further Employee shall render all such assistance (with
reasonable compensation for Employee's time at all times after the termination
of this Agreement) as may be reasonably necessary to perfect or protect any
such patent or copyright.
ARTICLE 7
ARBITRATION
Any controversy of any nature whatsoever, including but not limited to
tort claims or contract disputes, between the parties to this Agreement or
between the Employee, his heirs, executors, administrators, legal
representatives, successors, and assigns and the Company and its affiliates,
arising out of or related to the Employee's employment with the Company, any
resignation from or termination of such employment and/or the terms and
conditions of this Agreement, including the implementation, applicability and
interpretation thereof, shall, upon the written request of one party served
upon the other, be submitted to and settled by arbitration in accordance with
the provisions of the Federal Arbitration Act, 9 U.S.C. Sections 1-15, as
amended. Each of the parties to this Agreement shall appoint one person as an
arbitrator to hear and determine such disputes, and if they should be unable to
agree, then the two arbitrators shall choose a third arbitrator from a panel
made up of experienced arbitrators selected pursuant to the procedures of the
American Arbitration Association (the "AAA") and, once chosen, the third
arbitrator's decision (which shall be in writing and issued to each party)
shall be final, binding and conclusive upon the parties to this Agreement.
Each party shall be responsible for the fees and expenses of its arbitrator and
the fees and expenses of the third arbitrator shall be shared equally by the
parties. The terms
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<PAGE> 9
of the commercial arbitration rules of AAA shall apply except to the extent
they conflict with the provisions of this paragraph. It is further agreed that
any of the parties hereto may petition the United States District Court for the
Western District of Texas, San Antonio Division, for a judgment to be entered
upon any award entered through such arbitration proceedings.
ARTICLE 8
MISCELLANEOUS
8.1 MODIFICATION; AMENDMENT; WAIVER. No modification, amendment
or waiver of any provisions of this Agreement shall be effective unless
approved in writing by both parties. The failure at any time to enforce any of
the provisions of this Agreement shall in no way be construed as a waiver of
such provisions and shall not affect the right of either party thereafter to
enforce each and every provision hereof in accordance with its terms.
8.2 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be held to
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
8.3 ASSIGNMENT. The rights and obligations of the parties under
this Agreement shall be binding upon and inure to the benefit of their
respective successors, assigns, executors, administrators and heirs, provided,
however, that neither the Company nor Employee any assign any rights, duties or
obligations under this Agreement without the prior written consent of the
other.
8.4 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally, mailed by certified mail (return receipt requested) or sent by
reputable overnight delivery service, cable, telegram, facsimile transmission
or telex to the parties at the following addresses or at such other addresses
as shall be specified by the parties by like notice:
If to the Company: Biovensa Inc.
14960 Omicron Drive
San Antonio, Texas 78245
Attention: Chairman of the Board
If to the Employee: Richard L. Love
24 Eton Green Circle
San Antonio, TX 78257
8.5 COMPLETE AGREEMENT. This Agreement constitutes the entire
agreement between the parties and cancels and supersedes all other agreements
between the parties which may have related to the subject matter contained in
this Agreement.
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<PAGE> 10
8.6 GOVERNING LAW. This Agreement and performance under it, and
all proceedings that may ensue from its breach, shall be construed in
accordance with and under the laws of the State of Texas.
8.7 IRS CONTINGENCY. This Agreement is conditioned on the
issuance of a private letter ruling by the U.S. Internal Revenue Service to
Cancer Therapy and Research Foundation of South Texas ("CTRF") and/or CTRC
Research Foundation ("CTRCRF") that this Agreement is fair and reasonable and
does not provide excessive compensation to Employee for the services and other
contributions to be made by Employee hereunder. This Agreement is additionally
conditioned on a similar favorable opinion by the outside auditors for CTRF and
CTRCRF. Further, the parties agree that CTRF and/or CTRCRF shall have the
option to obtain a "fairness opinion" of a consultant of their choice and at
their expense, in addition to their outside auditor, and that should CTRF or
CTRCRF exercise their option to obtain such an opinion, then this Agreement is
further conditioned on that opinion being that this Agreement is fair and
reasonable and does not provide excessive compensation for the services and
other contributions to be made by Employee hereunder. Should the IRS, the
outside auditor for CTRF or CTRCRF, or the consultant retained by CTRF or
CTRCRF determine that this Agreement provides excessive compensation, then the
parties agree to modify same in order to satisfy any fairness requirements.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day and year indicated above.
BIOVENSA INC.
By /s/ GARY V. WOODS
--------------------------------------
Name Gary V. Woods
------------------------------------
Title Chairman of the Board
-----------------------------------
/s/ RICHARD L. LOVE
----------------------------------------
RICHARD L. LOVE
-10-
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EXHIBIT 10.39
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into effective
as of the 2nd day of November, 1994, by and between Alexander L. Weis, Ph.D.
("Employee") and Biovensa Inc., a Delaware corporation (the "Company").
WHEREAS, the Company desires to employ Employee, and Employee desires
to become employed by the Company, on the terms hereinafter set forth.
NOW, THEREFORE, in consideration for the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DUTIES
1.1 DUTIES. During the term of this Agreement, the Company agrees
to employ Employee as Executive Vice President and Chief Scientific Officer of
the Company, and as a member of the Board of Directors of the Company (the
"Board"), and Employee agrees to serve the Company in such capacities as the
President of the Company may direct, all upon the terms and subject to the
conditions set forth in this Agreement.
1.2 EXTENT OF DUTIES. Subject to Employee engaging from time to
time in activities permitted under Section 5.2 hereof, Employee shall devote
his full-time business time, energy and skill to the affairs of the Company as
reasonably necessary to discharge his duties hereunder. The discharge of duties
hereunder shall be Employee's primary occupation. All other activities
permitted under Section 5.2 shall be secondary and shall be limited at all
times so as not to interfere in any material respect with the discharge of
Employee's duties hereunder.
ARTICLE 2
TERM OF EMPLOYMENT
The term of this Agreement shall commence on the date hereof and
continue for a period of four years, subject to earlier termination as
hereinafter provided.
ARTICLE 3
COMPENSATION
3.1 ANNUAL BASE COMPENSATION. As compensation for services
rendered under this Agreement, Employee shall be entitled to receive from
Company an annual base salary of $160,000 (before standard deductions) during
the first year of this Agreement. Employee's annual base salary shall be
subject to review and adjustment by the Board on an annual basis. Employee's
annual base salary shall be payable at regular intervals (at least monthly) in
accordance with the prevailing practice and policy of the Company.
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3.2 INCENTIVE BONUS. As additional compensation for services
rendered under this Agreement, Employee shall be entitled to an annual
incentive bonus if earned. Within 60 days after the date of this Agreement and
within 60 days after each anniversary of this Agreement during the term of this
Agreement, the Employee and the Board shall cooperate to establish performance
milestones for Employee's annual incentive bonus for the period ending on the
next anniversary of this Agreement. Employee's annual incentive bonus shall be
paid within 60 days after each anniversary of this Agreement.
3.3 STOCK OPTION. As additional compensation for services
rendered under this Agreement, the Company shall grant to Employee an option to
acquire up to a certain number of shares of common stock ("Common Stock") of
the Company. The exercise price of the option shall be equal to the Common
Stock equivalent purchase price per share of equity securities (anticipated to
be preferred stock) issued by the Company pursuant to its initial private
placement or other offering which results in gross proceeds to the Company in
excess of $3 million. The number of shares of Common Stock covered by the
option shall be equal to $100,000 divided by the Common Stock equivalent
purchase price per share applicable to such offering (for example, if the
private placement price is $1.50 per share, Employee would receive an option to
acquire up to 66,667 shares). The option shall vest over four years as
follows: 25% on the first anniversary of this Agreement, 25% on the second
anniversary of this Agreement, 25% on the third anniversary of this Agreement,
and 25% on the fourth anniversary of this Agreement. All options must be
exercised upon the later of (i) the fifth year anniversary of this Agreement,
(ii) one year subsequent to the termination of employment, for any reason, from
the Company, or (iii) one year subsequent to the termination of the "lock-up
period" that is negotiated by the Company and its underwriters in connection
with an initial public offering of the Company's Common Stock (the "Option
Term"). The option will be granted as an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended. The
option will be granted contemporaneously with the completion of such initial
private placement or other offering pursuant to a separate instrument which
shall make reference to the provisions of this Agreement. Employee shall also
be entitled to such performance-based options as the Board may from time to
time grant to the executive officers of the Company.
3.4 OTHER BENEFITS. Employee shall, in addition to the
compensation provided for herein, be entitled to the following additional
benefits:
(a) MEDICAL, HEALTH AND DISABILITY BENEFITS. Employee
shall be entitled to receive all medical, health and disability
benefits that may, from time to time, be provided by the Company to its
executive officers.
(b) OTHER BENEFITS. Employee shall also be entitled to
receive any other benefits that may, from time to time, be provided by
the Company to all employees of Company as a group, or all executive
officers of the Company as a group, including any life insurance,
profit sharing, 401(k) or retirement benefits.
(c) VACATION PAY. Employee shall be entitled to an annual
vacation as determined in accordance with the prevailing practice and
policy of the Company.
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(d) HOLIDAYS. Employee shall be entitled to holidays in
accordance with the prevailing practice and policy of the Company.
(e) REIMBURSEMENT OF EXPENSES. The Company shall
reimburse Employee for all expenses reasonably incurred by Employee on
behalf of the Company in accordance with the prevailing practice and
policy of the Company.
ARTICLE 4
TERMINATION
4.1 TERMINATION BY THE COMPANY WITHOUT CAUSE. Subject to the
provisions of this Section , this Agreement may be terminated by the Company
without cause upon 30 days prior written notice thereof given to Employee. In
the event of termination pursuant to this Section , the Company shall pay
Employee, within 15 days of such termination, (a) his base salary earned pro
rata to the date of such termination, plus (b) a lump-sum payment equal to one
full year of his then effective annual base salary under Section (unless
Employee makes an election under Section 4.5(a)(ii) to receive limited
accelerated vesting of his stock option in lieu of a lump-sum payment under
clause (b) above).
4.2 TERMINATION BY THE COMPANY FOR CAUSE. The Company may
terminate this Agreement at any time if such termination is for "cause" (as
defined below), by delivering to Employee written notice describing the cause
of termination 30 days before the date of such termination. In the event the
employment of Employee is terminated for "cause", Employee shall be entitled
only to his base salary earned pro rata to the date of such termination. The
determination of whether Employee shall be terminated for "cause" shall be made
by the Board, in the reasonable exercise of its business judgment, and shall be
limited to the occurrence of the following events:
(a) Conviction of or a plea of nolo contendere to the
charge of a felony (which, through lapse of time or otherwise, is not
subject to appeal);
(b) Failure (without proper legal cause) to perform in a
reasonably satisfactory manner, or negligence in performing, Employee's
material duties and responsibilities hereunder as determined by the
President of the Company in the exercise of his reasonable judgment,
provided that a written warning is given to Employee by the Company and
such non-performance or negligence continues seven days thereafter;
(c) Gross negligence in performing Employee's material
duties and responsibilities under this Agreement which are within
Employee's job responsibilities hereunder;
(d) Breach of fiduciary duty to the Company;
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(e) Except with respect to limited activities permitted
under Section 1.2, the unauthorized absence of Employee from work
(other than for sick leave or disability) for a period of three working
days or more during any period of 30 working days during the term of
this Agreement; or
(f) Breach of any material obligation of Employee under
the provisions of Article 5 hereof, provided that written notice
thereof is given to Employee by the Company and such breach continues
seven days thereafter.
4.3 TERMINATION UPON DEATH OR PERMANENT DISABILITY. In the event
that Employee dies, this Agreement shall terminate upon the Employee's death.
Likewise, if the Employee becomes unable to perform the essential functions of
his duties hereunder, with or without reasonable accommodation, on account of
illness, disability or other reason whatsoever for a period of more than 15
consecutive or nonconsecutive days in any six-month period, this Agreement
shall thereupon terminate. In the event of termination pursuant to this
Section 4.3, Employee (or his legal representatives) shall be entitled only to
his base salary earned pro rata to the date of such termination.
4.4 VOLUNTARY TERMINATION BY EMPLOYEE. Employee may terminate
this Agreement at any time upon delivering 30 days written notice of
resignation to the Company. In the event of such voluntary termination,
Employee shall be entitled to his base salary earned pro rata to the date of
his resignation. On or after the date the Company receives notice of
Employee's resignation, the Company may, at its option, pay Employee his base
salary through the effective date of his resignation and terminate his
employment immediately.
4.5 STOCK OPTIONS. The stock option issued to Employee pursuant
to Section 3.3 hereof will be issued pursuant to the Company's stock option
plan (the "Plan") to be adopted for key employees of the Company. The
instrument evidencing the granting of such option to Employee shall expressly
incorporate, and the Company covenants that the Plan shall permit, the
following rights which Employee shall have relating to termination of this
Agreement pursuant to the provisions of Article 4:
(a) In the event of termination by the Company without
cause under Section 4.1, (i) outstanding stock options held by Employee which
are then vested shall remain exercisable for the Option Term, (ii) if, within
10 days of such termination, Employee notifies the Company that he is making an
election under this Section 4.5(a)(ii), outstanding stock options held by
Employee which would vest within one year from the date of termination shall
automatically become vested and shall remain exercisable for the Option Term
(such limited accelerated vesting being in lieu of the lump-sum payment under
clause (b) of Section 4.1), and (iii) after giving effect to any accelerated
vesting under clause (ii) above, any then unvested portion of Employee's
outstanding stock options shall lapse.
(b) In event of termination by the Company for "cause"
under Section 4.2, upon death or disability under Section 4.3 or by Employee
pursuant to a voluntary resignation under Section 4.4, (i) any portion of
Employee's outstanding stock options which are vested as of the date of
termination shall remain exercisable for the Option Term and (ii) any then
unvested portion of Employee's outstanding stock options shall lapse.
4.6 STOCK REPURCHASE RIGHT.
(a) Within 30 days after the date of full execution of
this Agreement, Employee will purchase, and the Company will sell to Employee,
480,000 shares (the "Shares") of Common
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Stock of the Company, representing 6% of the total outstanding shares of Common
Stock, for $48,000 or $.10 per share. The purchase price will be paid $28,000
in cash and the balance pursuant to a Promissory Note dated as of the date of
issuance (the "Note"), executed by Employee and payable to the order of the
Company, in the stated principal amount of $20,000. The Note will bear
interest at a rate of 8% simple interest (i.e. not compounded) and will be
payable in quarterly installments based upon a 10-year amortization schedule
and will mature on the fourth anniversary of this Agreement. The Note shall be
secured by a pledge of that number of Shares as is determined by dividing the
outstanding principal balance of the Note by the per share purchase price of
the Shares (e.g. if the Note balance is $20,000, the number of Shares pledged
would be 200,000), with a mechanism for partial releases of pledged shares to
reflect reductions in the unpaid balance of the Note on the same basis.
(b) In event that, prior to the fourth anniversary of this
Agreement, this Agreement is terminated by the Company for "cause" under
Section 4.2 or by Employee pursuant to a voluntary resignation under Section
4.4, the Company shall have the option, exercisable in its sole discretion, to
repurchase the Shares on the following terms:
(i) pursuant to the Company's option hereunder,
the Company shall be entitled to purchase (A) up to 100% of the Shares
if such termination occurs on or before the first anniversary of this
Agreement; (B) up to 75% of the Shares if such termination occurs after
the first anniversary of this Agreement and on or before the second
anniversary of this Agreement; (C) up to 50% of the Shares if such
termination occurs after the second anniversary of this Agreement and
on or before the third anniversary of this Agreement; and (D) up to 25%
of the Shares if such termination occurs before the fourth anniversary
of this Agreement;
(ii) such option shall be exercisable by the
Company within 30 days after the date of termination, by the Company
giving Employee written notice of exercise of the option, which notice
shall specify the number of Shares which the Company elects to
purchase;
(iii) unless exercised in accordance with clause
(ii) above, the option shall lapse on the 30th day after the date of
termination;
(iv) the closing of any purchase of Shares
pursuant to this Section shall occur within 30 days after notice of
exercise of the option is given by the Company to Employee;
(v) at closing, the Company shall pay to
Employee a purchase price equal to $.10 per Share purchased by the
Company plus simple interest (i.e. not compounded) on the total amount
of the purchase price from the date hereof through the date of purchase
at 8%, and Employee shall deliver to the Company one or more
certificates representing the number of Shares purchased by the
Company, duly endorsed by Employee for transfer or accompanied by a
stock power executed by Employee; and
(vi) if at the time of closing the Note has not
been paid in full (whether principal and/or accrued, unpaid interest),
the purchase price to be paid by the Company
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shall be paid by satisfaction of Employee's next accruing obligations
under the Note and the balance, if any, shall be paid in cash; and if
at the time of closing the Note has been paid in full, the purchase
price shall be paid in cash;
(vii) any balance of the Note remaining unpaid
after closing shall be immediately repaid in full by Employee.
(d) In the event of termination by the Company without
cause under Section 4.1 or upon death or disability under Section 4.3, the
Shares shall not be subject to any repurchase right by the Company hereunder.
4.7 EXCLUSIVITY OF TERMINATION PROVISIONS. The termination
provisions of this Agreement regarding the parties' respective obligations in
the event Employee's employment is terminated, are intended to be exclusive and
in lieu of any other rights or remedies to which Employee or the Company may
otherwise be entitled at law, in equity or otherwise. It is also agreed that,
although the personnel policies and fringe benefit programs of the Company may
be unilaterally modified from time to time, the termination provisions of this
Agreement are not subject to modification, whether orally, impliedly or in
writing, unless any such modification is mutually agreed upon and signed by the
parties.
ARTICLE 5
CONFIDENTIALITY AND NON-COMPETITION
5.1 CONFIDENTIALITY.
(a) Employee acknowledges that the Company has a
proprietary interest in maintaining the confidentiality of Confidential
Information (defined below), and Employees shall not, during the term of this
Agreement and for three years after the termination of this Agreement, disclose
any Confidential Information to any third party or use any Confidential
Information for his benefit or for the benefit of any third party; provided
that the foregoing is not intended to restrict disclosures in the course of
employment under this Agreement and in furtherance of the business of the
Company; provided further that Employee nonetheless agrees to abide by the
terms of any confidentiality agreement entered into by the Company with third
parties which extend beyond said three-year term of the foregoing
confidentiality.
(b) For the purposes of this Agreement, "Confidential
Information" means all information which is learned or developed by Employee in
the course and performance of his duties under this Agreement, including
without limitation, reports, laboratory notebooks, information and data
relating to the Company's drug development or manufacturing activities,
excluding in any event, however, information which:
(i) at the time of disclosure, is, or, after
disclosure, becomes generally known or available to the public other
than as a consequence of Employee's breach of this Agreement;
(ii) was known or otherwise available to Employee
prior to the disclosure by the Company;
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(iii) disclosed by a third party to Employee after
the disclosure by the Company if such third party's disclosure neither
violates any obligation of the third party to the Company nor is a
consequence of Employee's breach of this Agreement;
(iv) is required to be disclosed under the terms
of a subpoena or order issued by a court of competent jurisdiction or
by a governmental body, provided that Employee shall immediately notify
the Company of the existence, terms and circumstances surrounding such
required disclosure so that it may seek an appropriate protective
order; or
(v) the Company authorizes for release.
5.2 NON-COMPETITION.
(a) During the term of this Agreement, Employee shall not
engage, anywhere in the world, whether directly or indirectly, as principal,
owner, officer, director, agent, employee, consultant or partner, in (i)
development of any compounds or drugs for use in the treatment of cancer
("Restricted Development Work"), or (ii) manufacture of compounds or drugs for
use in the treatment of cancer ("Restricted Manufacturing", and together with
Restricted Development Work, "Restricted Activities"), provided that the
foregoing shall not restrict Employee from engaging in any Restricted
Activities which the Company directs Employee to undertake or which the Company
are otherwise expressly authorizes. As used throughout this Section 5.2, the
phrase "use in the treatment of cancer" shall exclude use in the diagnosis of
cancer. The foregoing shall not restrict Employee from (A) providing
consulting services to a company which, as part of its diversified business, is
engaged in Restricted Activities, provided that the part of such company's
business in which Employee provides consulting services does not involve any
Restricted Activities; or (B) owning less than 5% of the outstanding capital
stock of any company which engages in Restricted Activities, provided that
Employee is not otherwise involved with such company as an officer, director,
agent, employee or consultant.
(b) Notwithstanding the foregoing, during the term of this
Agreement, Employee and the Company stipulate the following special agreements:
(i) Employee is the owner and chief executive
officer of Lipitek International, Inc. ("Lipitek"), which engages in
(A) manufacture of specialty compounds and drugs, and (B) research to
identify potential new compounds or drugs for development.
(ii) As to manufacturing, Employee agrees that,
during the term of this Agreement, he will not permit Lipitek to engage
in Restricted Manufacturing, except that: (A) at the Company's
request, Lipitek may engage in Restricted Manufacturing for the
manufacture of compounds or drugs for use by the Company in its
development work, and (B) Lipitek may engage in Restricted
Manufacturing if (x) Lipitek first refers such manufacturing work to
the Company, (y) the Company does not undertake such manufacturing
work, and (z) the Company expressly authorizes Lipitek to undertake
such manufacturing, which authorization will not be unreasonably
withheld.
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(iii) As to research, Lipitek may conduct such
research as it deems appropriate, subject to restrictions expressly
agreed between Employee and the Company pursuant to a side letter of
even date herewith.
(iv) Subject to Employee's continuing compliance
with the provisions of Section 1.2 and Section 5.2(a), Employee may be
a principal, owner, officer, director, agent, consultant or partner, of
any corporation, partnership or other entity.
(c) The foregoing provisions of this Section 5.2 shall not
be held invalid because of the scope of the territory covered, the actions
restricted thereby, or the period of time such covenant is operative. Any
dispute under this Section shall be subject to arbitration under Article 7
hereof.
5.3 REMEDIES. In the event of a breach or threatened breach by
the Employee of Section 5.1 or 5.2 hereof, the Company shall be entitled to a
temporary restraining order and an injunction restraining the Employee from the
commission of such breach. Nothing herein shall be construed as prohibiting
the Company from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of money damages.
ARTICLE 6
PROPRIETARY PROPERTY ASSIGNMENT
6.1 OWNERSHIP. All notes, reference materials, sketches,
diagrams, reproductions, memoranda, documentation and records incorporating or
reflecting any Confidential Information shall belong exclusively to the Company
and shall be delivered to the Company upon termination of Employee's employment
with the Company, for whatever reason said termination occurs. All inventions,
improvements, ideas or discoveries made or conceived by Employee in the course
of performance Employee's duties hereunder for the Company, whether patentable
or unpatentable, or for which equipment, supplies or facilities of the Company
are used (excluding uses of equipment, supplies or facilities of the Company in
the performance of contracts with Lipitek or its customers), or which is
derived from trade secrets owned by the Company, during the term of this
Agreement ("Proprietary Property") shall be the sole property of the Company
and shall be promptly reported both orally and in writing to the Company.
6.2 COOPERATION. Employee, without charge to the Company, shall
execute, acknowledge and deliver to the Company all such further papers,
including applications for patents or copyrights, the expense of which is to be
borne by the Company, as may be necessary to enable the Company to protect said
Proprietary Property by patent, copyright or otherwise, in any and all
countries, and to vest title to said Proprietary Property in the Company or its
nominees (and their successors or assigns) and to maintain and enforce such
protection; and further Employee shall render all such assistance (with
reasonable compensation for Employee's time at all times after the termination
of this Agreement) as may be reasonably necessary to perfect or protect any
such patent or copyright.
6.3 EXCLUSION. Neither the Company nor any of its related
institutions shall have any claim or right to intellectual property or other
matters relating or arising from activities of Employee with Lipitek, and they
specifically release Employee, his heirs, successors and assigns
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from all rights, titles and interest to Lipitek and the activities of Employee
performed in connection therewith. However, the foregoing exclusion shall not
apply with respect to the relative rights of the parties to intellectual
property which is (i) associated with any molecule, compound or drug with
respect to which Lipitek undertakes any Restricted Activities not permitted
under Section 5.2 hereof or (ii) the subject of a separate written agreement
between the parties addressing the intellectual property rights of the parties
(such as a manufacturing contract between the Company and Lipitek).
ARTICLE 7
ARBITRATION
Any controversy of any nature whatsoever, including but not limited to
tort claims or contract disputes, between the parties to this Agreement or
between the Employee, his heirs, executors, administrators, legal
representatives, successors, and assigns and the Company and its affiliates,
arising out of or related to the Employee's employment with the Company, any
resignation from or termination of such employment and/or the terms and
conditions of this Agreement, including the implementation, applicability and
interpretation thereof, shall, upon the written request of one party served
upon the other, be submitted to and settled by arbitration in accordance with
the provisions of the Federal Arbitration Act, 9 U.S.C. Sections 1-15, as
amended. Each of the parties to this Agreement shall appoint one person as an
arbitrator to hear and determine such disputes, and if they should be unable to
agree, then the two arbitrators shall choose a third arbitrator from a panel
made up of experienced arbitrators selected pursuant to the procedures of the
American Arbitration Association (the "AAA") and, once chosen, the third
arbitrator's decision (which shall be in writing and issued to each party)
shall be final, binding and conclusive upon the parties to this Agreement.
Each party shall be responsible for the fees and expenses of its arbitrator and
the fees and expenses of the third arbitrator shall be shared equally by the
parties. The terms of the commercial arbitration rules of AAA shall apply
except to the extent they conflict with the provisions of this paragraph. It
is further agreed that any of the parties hereto may petition the United States
District Court for the Western District of Texas, San Antonio Division, for a
judgment to be entered upon any award entered through such arbitration
proceedings.
ARTICLE 8
MISCELLANEOUS
8.1 MODIFICATION; AMENDMENT; WAIVER. No modification, amendment
or waiver of any provisions of this Agreement shall be effective unless
approved in writing by both parties. The failure at any time to enforce any of
the provisions of this Agreement shall in no way be construed as a waiver of
such provisions and shall not affect the right of either party thereafter to
enforce each and every provision hereof in accordance with its terms.
8.2 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be held to
be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
8.3 ASSIGNMENT. The rights and obligations of the parties under
this Agreement shall be binding upon and inure to the benefit of their
respective successors, assigns, executors,
<PAGE> 10
administrators and heirs, provided, however, that neither the Company nor
Employee any assign any rights, duties or obligations under this Agreement
without the prior written consent of the other.
8.4 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered
personally, mailed by certified mail (return receipt requested) or sent by
reputable overnight delivery service, cable, telegram, facsimile transmission
or telex to the parties at the following addresses or at such other addresses
as shall be specified by the parties by like notice:
If to the Company: Biovensa Inc.
14960 Omicron Drive
San Antonio, Texas 78245
Attention: President
If to the Employee: Alexander L. Weis, Ph.D.
12718 Old Wick Road
San Antonio, Texas 78230
8.5 COMPLETE AGREEMENT. This Agreement constitutes the entire
agreement between the parties and cancels and supersedes all other agreements
between the parties which may have related to the subject matter contained in
this Agreement.
8.6 GOVERNING LAW. This Agreement and performance under it, and
all proceedings that may ensue from its breach, shall be construed in
accordance with and under the laws of the State of Texas.
8.7 IRS CONTINGENCY. This Agreement is conditioned on the
issuance of a private letter ruling by the U.S. Internal Revenue Service to
Cancer Therapy and Research Foundation of South Texas ("CTRF") and/or CTRC
Research Foundation ("CTRCRF") that this Agreement is fair and reasonable and
does not provide excessive compensation to Employee for the services and other
contributions to be made by Employee hereunder. This Agreement is additionally
conditioned on a similar favorable opinion by the outside auditors for CTRF and
CTRCRF. Further, the parties agree that CTRF and/or CTRCRF shall have the
option to obtain a "fairness opinion" of a consultant of their choice and at
their expense, in addition to their outside auditor, and that should CTRF or
CTRCRF exercise their option to obtain such an opinion, then this Agreement is
further conditioned on that opinion being that this Agreement is fair and
reasonable and does not provide excessive compensation for the services and
other contributions to be made by Employee hereunder. Should the IRS, the
outside auditor for CTRF or CTRCRF, or the consultant retained by CTRF or
CTRCRF determine that this Agreement provides excessive compensation, then the
parties agree to modify same in order to satisfy any fairness requirements.
[Signatures on Next Page]
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IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the day and year indicated above.
BIOVENSA INC.
By /s/ RICHARD L. LOVE
--------------------------------------
Richard L. Love,
President and CEO
/s/ ALEXANDER L. WEIS
--------------------------------------
Alexander L. Weis, Ph.D.
<PAGE> 1
EXHIBIT 10.42
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into effective
as of the ______ day of August, 1996, between James R. Koch ("Employee"), a
resident of Ambler, Pennsylvania, and ILEX Oncology, Inc., a Delaware
corporation (the "Company"), whose principal executive offices are located in
San Antonio, Texas.
WHEREAS, the Company desires to employ Employee, and Employee desires to
be employed by the Company, on terms hereinafter set forth;
NOW, THEREFORE, in consideration for the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DUTIES
1.1 Employment. During the term of this Agreement, the Company
agrees to employ Employee, and Employee accepts such employment, on the terms
and conditions set forth in this Agreement.
1.2 Extent of Service. During the term of this Agreement, Employee
shall devote his or her full-time business time, energy and skill to the
affairs of the Company and its affiliated companies, and Employee shall not be
engaged in any other business or consulting activities pursued for gain, profit
or other pecuniary advantage, without the prior written consent of the Company.
The foregoing shall not prevent Employee from making monetary investments in
businesses which do not involve any services on the part of Employee in the
operation or affairs of such businesses.
1.3 Duties. Employee's duties hereunder shall include acting as a
Vice President and the Chief Financial Officer of the Company. In this
capacity Employee will provide services with regard to directing the Company's
financial operations, planning and controlling corporate growth, evaluating
performance against objectives or such other duties as may be prescribed from
time by Employee's supervisor or the Board of Directors of the Company (the
"Board"). Such duties include, without limitation, the development of
Proprietary Information (defined in Article 5 hereof) for the Company.
Employee shall also perform, without additional compensation, related services
for the Company's subsidiaries and joint ventures.
1.4 Access to and Use of Proprietary Information. Employee
recognizes and the Company agrees that, to assist Employee in the performance
of his or her duties hereunder, Employee will be provided access to and limited
use of proprietary and confidential information of the Company. Employee
further recognizes that, as a part of his or her employment with the Company,
Employee will benefit from and Employee's qualifications will be enhanced by
additional training, education and experience which will be provided to
Employee by the Company directly and/or as a result of work projects assigned
by the Company in which proprietary and confidential information of the Company
is utilized by Employee.
<PAGE> 2
ARTICLE 2
TERM OF EMPLOYMENT
The term of this Agreement shall commence on the date hereof and
continue until terminated pursuant to Article 4 hereof.
ARTICLE 3
COMPENSATION
3.1 Monthly Base Salary. As compensation for services rendered under
this Agreement, Employee shall be entitled to receive from the Company a
monthly base salary (before standard deductions) equal to $10,416.66, subject
to periodic review and adjustment by Employee's supervisor or the Board.
Employee's monthly base salary shall be payable at regular intervals (at least
semi-monthly) in accordance with the prevailing practice and policy of the
Company.
3.2 Performance Bonus. As additional compensation for services
rendered under this Agreement, Employee shall also be eligible to receive (a) a
performance bonus equal to up to 10% of the sum of all payments of monthly base
salary (before standard deductions) paid to Employee during the 1996 calendar
year based upon the Company and the Employee achieving (as determined by the
Board) certain 1996 goals to be established by the Board and (b) a performance
bonus equal to up to an additional 10% of the sum of all payments of monthly
base salary (before standard deductions) paid to Employee during the 1996
calendar year if the Company and the Employee greatly exceed (as determined by
the Board) the 1996 goals established by the Board. For subsequent calendar
years, Employee shall be eligible to receive a discretionary performance bonus
if, as and when declared by the Board.
3.3 Stock Options. Employee shall also be granted an incentive
option to purchase 60,000 shares of Common Stock of the Company at a per-share
price of $4.00 under the Company's Stock Option Plan. The options will vest
over a 4-year period at a rate of 25% per year. The terms of such stock option
grant will be set forth in a separate stock option agreement.
3.4 Benefits. Employee shall, in addition to the compensation
provided for herein, be entitled to the following additional benefits:
(a) Medical, Health and Disability Benefits. Employee shall
be entitled to receive all medical, health and disability benefits that
may, from time to time, be provided by the Company to all employees of
the Company as a group.
(b) Other Benefits. Employee shall also be entitled to
receive any other benefits that may, from time to time, be provided by
the Company to all employees of Company as a group.
(c) Vacation. Employee shall be entitled to an annual
vacation determined in accordance with the prevailing practice and
policy of the Company (initially 3 weeks per year).
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<PAGE> 3
(d) Holidays. Employee shall be entitled to holidays in
accordance with the prevailing practice and policy of the Company.
(e) Reimbursement of Business Expenses. The Company shall
reimburse Employee for all expenses reasonably incurred by Employee in
conjunction with the rendering of services at the Company's request,
provided that such expenses are incurred in accordance with the
prevailing practice and policy of the Company and are properly
deductible by the Company for federal income tax purposes. As a
condition to such reimbursement, Employee shall submit an itemized
accounting of such expenses in reasonable detail, including receipts
where required under federal income tax laws.
(f) Reimbursement of Relocation Expenses. Promptly following
the full execution of this Agreement, the Company shall pay to Employee
the sum of $20,000 (before standard deductions) to partially reimburse
Employee for incidental expenses of relocating and taxes associated with
certain reimbursed relocation expenses. Additionally, the Company shall
reimburse Employee for (i) reasonable relocation expenses incurred by
Employee in connection with a maximum of 2 house-hunting trips by
Employee and his spouse to San Antonio, Texas from Employee's current
residence, (ii) reasonable relocation expenses incurred by Employee in
connection with the moving of Employee's household goods from Employee's
current residence to San Antonio, Texas (including temporary storage, if
necessary) and (iii) such other reasonable relocation expenses as may be
approved by the Company. As a condition to such reimbursement, Employee
shall submit an itemized accounting of such expenses in reasonable
detail, including receipts. In the event Employee's employment with the
Company is terminated (howsoever such termination may occur) on or
before the first anniversary of the date of this Agreement, Employee
shall immediately pay to the Company an amount equal to 50% of all
amounts paid to Employee by the Company pursuant to this Section 3.4(f)
(which amounts owing, if any, may be offset by the Company against any
amounts then owing by the Company to Employee under this Agreement).
3.5 Commencement of Compensation. Compensation under this Agreement
shall be payable to Employee commencing on upon Employee's commencement of
full-time service to the Company.
ARTICLE 4
TERMINATION
4.1 Termination With Notice. This Agreement may be terminated by the
Company or Employee, without cause, upon 30 days prior written notice thereof
given by one party to the other party. In the event of termination pursuant to
this Section 4.1, the Company shall pay Employee his or her monthly base salary
(subject to standard deductions) earned pro rata to the date of such
termination and the Company shall have no further obligations to Employee
hereunder. Notwithstanding the foregoing:
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(a) in lieu of continuing the employment of Employee for a period
of 30 days after notice of termination is given under this Section 4.1,
the Company may, in its sole discretion, elect to terminate this
Agreement immediately and pay Employee a lump-sum equal to (i)
Employee's monthly base salary (subject to standard deductions) earned
pro rata to the date of such notification of termination plus (ii) 30
days of Employee's then effective base salary (subject to standard
deductions), whereupon the Company shall no further obligations to
Employee hereunder; and
(b) in the event of a termination by the Company pursuant to this
Section 4.1 within 3 years of the date hereof, the Company shall pay,
within 15 days after the Determination Date (defined below), to Employee
an additional amount equal to postive amount, if any, resulting from (x)
Employee's current base monthly salary (before standard deductions)
multiplied by 12 minus (y) an amount equal to the Option Appreciation as
of the Determination Date.
"Determination Date" means the earlier to occur of (i)
three months after the date of termination and (ii) delivery by
Employee to the Company of a waiver letter, in form reasonably
acceptable to the Company, pursuant to which Employee waives his
right to exercise any unexercised portion of Employee's then
existing options to purchase the Company's Common Stock.
"Option Appreciation" means, as of the Determination Date,
the number of Exercised Option Shares as of such date multiplied
by an amount equal to the positive difference, if any, resulting
from (i) the Fair Market Value Per Share of the Company's Common
Stock as of such date minus (ii) the exercise price per share
paid with respect to the Exercised Option Shares.
"Exercised Option Shares" means, as of the Determination
Date, the shares of Common Stock issued or issuable by the
Company as a result of Employee's proper exercise of options to
purchase the Company's Common Stock.
"Fair Market Value Per Share" means, as to the Company's
Common Stock, (i) the average closing price per share of such
stock for the 5 trading days prior to the termination, if such
stock is publicly traded or (ii) the fair market value per share
of such stock as determined in good faith by the Board, if such
stock is not publicly traded.
4.2 Termination For Cause. This Agreement may be terminated by the
Company for "Cause" (hereinafter defined) upon written notice thereof given by
the Company to Employee. In the event of termination pursuant to this Section
4.2, the Company shall pay Employee his or her monthly base salary (subject to
standard deductions) earned pro rata to the date of such termination and the
Company shall have no further obligations to Employee hereunder. The term
"Cause" shall include, without limitation, the following, as determined by the
Board in its sole judgment: (i)
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<PAGE> 5
Employee breaches any of the terms of this Agreement; (ii) Employee is
convicted of a felony; (iii) Employee fails, after at least one warning, to
satisfactorily perform duties assigned under this Agreement as determined by
the Chief Executive Officer or the Board (other than a failure due to death or
physical or mental disability); (iv) Employee intentionally engages in conduct
which is demonstrably and materially injurious to the Company; (v) Employee
commits fraud or theft of personal or Company property from Company premises;
(vi) Employee falsifies Company documents or records; (vii) Employee engages in
acts of gross carelessness or willful negligence to endanger life or property
on Company premises; (viii) Employee engages in sexual harassment; (ix)
Employee uses, distributes, possesses or is under the influence of illegal
drugs, alcohol or any other intoxicant on Company premises; or (x) Employee
intentionally violates state, federal or local laws and regulations.
4.3 Termination Upon Death or Disability. In the event that Employee
dies, this Agreement shall terminate upon Employee's death. Likewise, if
Employee becomes "disabled" as determined in accordance with the Company's
disability insurance policies and plans, the Company may, upon notice to
Employee, terminate this Agreement. In the event of termination pursuant to
this Section 4.3, Employee (or his or her legal representatives) shall be
entitled only to his or her monthly base salary earned pro rata for services
actually rendered prior to the date of such termination; provided, however,
Employee shall not be entitled to his or her monthly base salary for any period
with respect to which Employee has received short-term or long-term disability
benefits under employee benefit plans maintained from time to time by the
Company.
4.4 Survival of Provisions. The covenants and provisions of Articles
5, 6 and 7 hereof shall survive any termination of this Agreement and continue
for the periods indicated, regardless of how such termination may be brought
about.
ARTICLE 5
PROPRIETARY PROPERTY; CONFIDENTIAL INFORMATION
5.1 Duties. Employee understands and agrees that during the term of
this Agreement Employee's duties will include involvement with the conception
of improvements and inventions (whether or not ultimately issuing as Letters
Patent in any country), the creation of confidential information protected by
the Company as trade secrets and the authoring of "works" as defined under the
copyright laws of the United States of America found in 17 United States Code.
Such information is collectively referred to in this Agreement as "Proprietary
Information".
5.2 Ownership. Employee understands and agrees that for all
Proprietary Information created within the scope of Employee's employment, the
Company shall own all right, title and interest thereto. In the case of works
authored or created by Employee, such works are considered a "work made for
hire" under 17 United States Code Section 101 - the copyright laws. All
Proprietary Information, if any, created by Employee prior to his or her
employment with the Company, and in which Employee claims ownership, is shown
in Schedule 5.2 attached hereto.
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<PAGE> 6
5.3 Notice and Assistance. Employee shall give adequate written
notice to the Company as soon as practicable of all Proprietary Information
created by Employee during Employee's employment with the Company, assist the
Company in evaluating the Proprietary Information for trade secret and
copyright protection and sign all documents and do all things necessary at the
expense of the Company to assist the Company in the protection, development,
marketing or transfer of such Proprietary Information.
5.4 Assignment. Employee hereby assigns and agrees to assign all
right, title and interest into such Proprietary Information to the Company or
its nominee. At the request of the Company, whether during or after the
termination of Employee's employment, Employee shall timely execute or join in
executing all papers or documents required for the filing of patent
applications and copyright registrations in the United States of America and
such foreign countries as the Company may in its sole discretion select, and
shall assign all such patent applications and copyrights to the Company or its
nominee, and shall provide the Company or its agent or attorneys with all
reasonable assistance in the preparation and prosecution of patent applications
and copyright registrations, including drawings, specifications, and the like,
all at the expense of the Company, and shall do all that may be necessary to
establish, protect or maintain the rights of the Company or its nominee in the
inventions, patent applications, Letters Patent and copyrights in accordance
with the spirit of this Agreement.
5.5 Confidential Information. Employee agrees to keep confidential
all information protected by the Company as trade secrets during the term of
this Agreement (including any leaves of absence) and will neither use nor
disclose the confidential information without written authorization by the
Company for ten years thereafter. For the purposes of this Agreement, such
confidential information shall include information set forth in any application
for Letters Patent unless and until such information is ultimately published.
The Company and Employee mutually agree that the following types of information
shall not be protected by this Agreement:
(a) Information already in the public domain at the time
Employee received it;
(b) Information which although disclosed in confidence to
Employee is later disseminated by the Company into the public domain;
(c) Information which although received in confidence by
Employee is subsequently disseminated into public domain by a third
party who has not breached any duty to any other party in disseminating
such information;
(d) Information given by the Company in confidence to Employee
which Employee is expressly authorized in writing by the Company to use
or disclose thereafter; and
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<PAGE> 7
(e) Information required by law to be disclosed, provided that
Employee will promptly advise the Company of any such required
disclosure and cooperate fully with the Company to avoid such
disclosure, if legally possible, or to obtain confidential treatment of
such Information disclosed.
Employee also understands and agrees that he or she will maintain in confidence
all information known to him or her by reason of his or her employment even if
such information is included in a redacted deposit of a work filed with an
application for copyright registration, if such deposit has been abridged in
order to protect the confidentiality of the information deposited with the
Copyright Office. For purposes of this Agreement, a trade secret "...may
consist of any formula, pattern, device or compilation of information which is
used in one's business, and which gives him or her an opportunity to obtain an
advantage over competitors who do not know or use it. It may be a formula for
a chemical compound, a process of manufacturing, trading or preserving
materials, a pattern for machine or other device, or a list of customers..." as
commonly interpreted by the courts of the State of Texas. Upon the termination
of this Agreement, regardless of how such termination may be brought about,
Employee shall deliver to the Company any and all documents, instruments,
notes, papers or other expressions or embodiments of Proprietary Property or
confidential information which are in Employee's possession or control.
5.6 Publicity. During the term of this Agreement and for a period of
ten years thereafter, Employee shall not, directly or indirectly, originate or
participate in the origination of any publicity, news release or other public
announcements, written or oral, whether to the public press or otherwise,
relating to this Agreement, to any amendment hereto, to Employee's employment
hereunder or to the Company, without the prior written approval of the Company.
5.7 Fiduciary Relationship. Employee, by virtue of his or her high
position of trust and reliance on him or her by the Company, understands that
Employee enjoys a fiduciary relationship with the Company in carrying out his
or her obligations under this Article 5. Accordingly, Employee agrees to honor
his or her obligations under this Agreement by conducting himself or herself
with the highest degree fairness and trust toward the Company.
ARTICLE 6
RESTRICTIVE COVENANTS
6.1 Non-Competition. In consideration of the benefits of this
Agreement, including Employee's access to and limited use of proprietary and
confidential information of the Company, as well as training, education and
experience provided to Employee by the Company directly and/or as a result of
work projects assigned by the Company with respect thereto, Employee hereby
covenants and agrees that during the term of this Agreement and for a period of
one year following termination of this Agreement, regardless of how such
termination may be brought about, Employee shall not, directly or indirectly,
as proprietor, partner, stockholder, director, officer, employee, consultant,
joint venturer, investor or in any other capacity, engage in, or own, manage,
operate or control, or participate in the ownership, management,
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<PAGE> 8
operation or control, of any entity which engages, as its primary business,
anywhere in the United States in contract clinical testing of pharmaceuticals
for treatment of patients with cancer or any other business activity which the
Company participates during Employee's employment with the Company; provided,
however, the foregoing shall not prohibit Employee from purchasing and holding
as an investment not more than 1% of any class of publicly traded securities of
any entity which conducts a business in competition with the business of the
Company, so long as Employee does not participate in any way in the management,
operation or control of such entity.
6.2 Judicial Reformation. Employee acknowledges that, given the
nature of the Company's business, the covenants contained in Section 6.1
establish reasonable limitations as to time, geographic area and scope of
activity to be restrained and do not impose a greater restraint than is
reasonably necessary to protect and preserve the goodwill of the Company's
business and to protect its legitimate business interests. If, however,
Section 6.1 is determined by any court of competent jurisdiction to be
unenforceable by reason of its extending for too long a period of time or over
too large a geographic area or by reason of it being too extensive in any other
respect or for any other reason, it will be interpreted to extend only over the
longest period of time for which it may be enforceable and/or over the largest
geographic area as to which it may be enforceable and/or to the maximum extent
in all other aspects as to which it may be enforceable, all as determined by
such court.
6.3 Customer Lists; Non-Solicitation. In consideration of the
benefits of this Agreement, including Employee's access to and limited use of
proprietary and confidential information of the Company, as well as training,
education and experience provided to Employee by the Company directly and/or as
a result of work projects assigned by the Company with respect thereto,
Employee hereby further covenants and agrees that for a period of one year
following the termination of this Agreement, regardless of how such termination
may be brought about, Employee shall not, directly or indirectly, (a) use or
make known to any person or entity the names or addresses of any clients or
customers of the Company or any other information pertaining to them, other
than information that Employee can demonstrate was known to Employee prior to
his employment with the Company and with respect to which the Company has no
obligation of confidentiality, (b) call on, solicit, take away or attempt to
call on, solicit or take away any clients or customers of the Company on whom
Employee called or with whom he or she became acquainted during his or her
employment with the Company, nor (c) recruit, hire or attempt to recruit or
hire any employees of the Company.
ARTICLE 7
ARBITRATION
Except for the provisions of Articles 5 and 6 of this Agreement dealing
with proprietary property, confidential information and restrictive covenants,
with respect to which the Company expressly reserves the right to petition a
court directly for injunctive and other relief, any claim, dispute or
controversy of any nature whatsoever, including but not limited to tort claims
or contract disputes, between the parties to this Agreement or their respective
heirs, executors, administrators, legal representatives,
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<PAGE> 9
successors and assigns, as applicable, arising out of or relating to your
employment or the termination of your employment with the Company and/or the
terms and conditions of this Agreement, including the implementation,
applicability and interpretation thereof, shall be resolved as follows: upon
the written request of one party served upon the other, any such claim, dispute
or controversy shall be submitted to and settled by arbitration in accordance
with the provisions of the Federal Arbitration Act, 9 U.S.C. Sections 1-15, as
amended. If arbitration is requested, each of the parties to this Agreement
shall appoint one person as an arbitrator to hear and determine any such
disputes, and if they should be unable to agree, then the two arbitrators shall
choose a third arbitrator from a panel made up of experienced arbitrators
selected pursuant to the procedures of the American Arbitration Association
(the "AAA") and, once chosen, the third arbitrator's decision shall be final,
binding and conclusive upon the parties to this Agreement. Each party shall be
responsible for the fees and expenses of its arbitrator and the fees and
expenses of the third arbitrator shall be shared equally by the parties. The
terms of the commercial arbitration rules of AAA shall apply except to the
extent they conflict with the provisions of this paragraph. It is further
agreed that any of the parties hereto may petition the United States District
Court for the Western District of Texas, San Antonio Division, for a judgment
to be entered upon any award entered through such arbitration proceedings.
ARTICLE 8
MISCELLANEOUS
8.1 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered personally,
mailed by certified mail (return receipt requested) or sent by an overnight
delivery service with tracking procedures or by facsimile to the parties at the
following addresses or at such other addresses as shall be specified by the
parties by like notice: If to Employee, at the address set forth below his or
her name on the signature page hereof; and if to the Company, at 14785 Omicron
Drive, Suite 100, San Antonio, Texas 78245-3217, Attention: President and Chief
Executive Officer.
8.2 Equitable Relief. In the event of a breach or a threatened
breach by Employee of any of the provisions contained in Article 5 or 6 of this
Agreement, Employee acknowledges that the Company will suffer irreparable
injury not fully compensable by money damages and, therefore, will not have an
adequate remedy available at law. Accordingly, the Company shall be entitled
to obtain such injunctive relief or other equitable remedy from any court of
competent jurisdiction as may be necessary or appropriate to prevent or curtail
any such breach, threatened or actual. The foregoing shall be in addition to
and without prejudice to any other rights that the Company may have under this
Agreement, at law or in equity, including, without limitation, the right to sue
for damages.
8.3 Assignment. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Company. Employee's rights under this Agreement
are not assignable and any attempted assignment thereof shall be null and void.
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8.4 Governing Law; Venue. This Agreement shall be subject to and
governed by the laws of the State of Texas. Non-exclusive venue for any action
permitted hereunder shall be proper in San Antonio, Bexar County, Texas, and
Employee hereby consents to such venue.
8.5 Entire Agreement; Amendments. This Agreement constitutes the
entire agreement between the parties and supersedes all other agreements
between the parties which may relate to the subject matter contained in this
Agreement including, without limitation, the letter agreement dated July 25,
1996. This Agreement may not be amended or modified except by an agreement in
writing which refers to this Agreement and is signed by both parties.
8.6 Headings. The headings of sections and subsections of this
Agreement are for convenience only and shall not in any way affect the
interpretation of any provision of this Agreement or of the Agreement itself.
8.7 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law. If any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
8.8 Waiver. The waiver by any party of a breach of any provision
hereof shall not be deemed to constitute the waiver of any prior or subsequent
breach of the same provision or any other provisions hereof. Further, the
failure of any party to insist upon strict adherence to any term of this
Agreement on one or more occasions shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement unless such party expressly waives such
provision pursuant to a written instrument which refers to this Agreement and
is signed by such party.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ILEX ONCOLOGY, INC.
By: /s/ RICHARD L. LOVE
----------------------------------
Richard L. Love,
President and Chief Executive
Officer
EMPLOYEE:
/s/ JAMES R. KOCH
-------------------------------------
James R. Koch
Address:
----------------------------
----------------------------
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SCHEDULE 5.2
PROPRIETARY PROPERTY CLAIMED BY EMPLOYEE
Proprietary Property Claimed:*
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* None, if left blank
<PAGE> 1
EXHIBIT 10.43
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into effective
as of the 27th day of August, 1996, between Pedro Santabarbara, M.D., Ph.D.
("Employee"), a resident of Creamery, Pennsylvania, and ILEX Oncology, Inc., a
Delaware corporation (the "Company"), whose principal executive offices are
located in San Antonio, Texas.
WHEREAS, the Company desires to employ Employee, and Employee desires to
be employed by the Company, on terms hereinafter set forth;
NOW, THEREFORE, in consideration for the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DUTIES
1.1 Employment. During the term of this Agreement, the Company
agrees to employ Employee, and Employee accepts such employment, on the terms
and conditions set forth in this Agreement.
1.2 Extent of Service. During the term of this Agreement, Employee
shall devote his or her full-time business time, energy and skill to the
affairs of the Company and its affiliated companies, and Employee shall not be
engaged in any other business or consulting activities pursued for gain, profit
or other pecuniary advantage, without the prior written consent of the Company.
The foregoing shall not prevent Employee from making monetary investments in
businesses which do not involve any services on the part of Employee in the
operation or affairs of such businesses.
1.3 Duties. Employee's duties hereunder shall include acting as a
Vice President of the Company. In this capacity Employee will provide services
with regard to (i) providing medical direction to the implementation of the
Company's drug programs and product/technology acquisition opportunities, (ii)
assisting in the development of protocols, (iii) reviewing clinical results,
including adverse events, (iv) participating as a senior leader in developing
and obtaining marketing approval of the Company's products or (v) such other
duties as may be prescribed from time by Employee's supervisor or the Board of
Directors of the Company (the "Board"). Such duties include, without
limitation, the development of Proprietary Information (defined in Article 5
hereof) for the Company. Employee shall also perform, without additional
compensation, related services for the Company's subsidiaries and joint
ventures.
1.4 Access to and Use of Proprietary Information. Employee
recognizes and the Company agrees that, to assist Employee in the performance
of his or her duties hereunder, Employee will be provided access to and limited
use of proprietary and confidential information of the Company. Employee
further recognizes that, as a part of his or her employment with the Company,
Employee will benefit from and
<PAGE> 2
Employee's qualifications will be enhanced by additional training, education
and experience which will be provided to Employee by the Company directly
and/or as a result of work projects assigned by the Company in which
proprietary and confidential information of the Company is utilized by
Employee.
ARTICLE 2
TERM OF EMPLOYMENT
The term of this Agreement shall commence on the date hereof and
continue until terminated pursuant to Article 4 hereof.
ARTICLE 3
COMPENSATION
3.1 Monthly Base Salary. As compensation for services rendered under
this Agreement, Employee shall be entitled to receive from the Company a
monthly base salary (before standard deductions) equal to $15,000.00, subject
to periodic review and adjustment by Employee's supervisor or the Board.
Employee's monthly base salary shall be payable at regular intervals (at least
semi-monthly) in accordance with the prevailing practice and policy of the
Company.
3.2 Performance Bonus. As additional compensation for services
rendered under this Agreement, Employee shall also be eligible to receive a
performance bonus for each of the 1996 and 1997 calendar years equal to up to
25% of the sum of all payments of monthly base salary (before standard
deductions) paid to Employee during the 1996 or 1997 calendar year, as the case
may be, based upon the Company and the Employee achieving (as determined by the
Board) certain goals to be established by the Board for such year. For
subsequent calendar years, Employee shall be eligible to receive a
discretionary performance bonus if, as and when declared by the Board.
3.3 Stock Options. Employee shall also be granted an incentive
option to purchase 75,000 shares of Common Stock of the Company at a per-share
price of $4.00 under the Company's Stock Option Plan. The options will vest
over a 4-year period at a rate of 25% per year. The terms of such stock option
grant will be set forth in a separate stock option agreement.
3.4 Benefits. Employee shall, in addition to the compensation
provided for herein, be entitled to the following additional benefits:
(a) Medical, Health and Disability Benefits. Employee shall
be entitled to receive all medical, health and disability benefits that
may, from time to time, be provided by the Company to all employees of
the Company as a group.
(b) Other Benefits. Employee shall also be entitled to
receive any other benefits that may, from time to time, be provided by
the Company to all employees of Company as a group.
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<PAGE> 3
(c) Vacation. Employee shall be entitled to an annual
vacation determined in accordance with the prevailing practice and
policy of the Company (initially 3 weeks per year).
(d) Holidays. Employee shall be entitled to holidays in
accordance with the prevailing practice and policy of the Company.
(e) Reimbursement of Business Expenses. The Company shall
reimburse Employee for all expenses reasonably incurred by Employee in
conjunction with the rendering of services at the Company's request,
provided that such expenses are incurred in accordance with the
prevailing practice and policy of the Company and are properly
deductible by the Company for federal income tax purposes. As a
condition to such reimbursement, Employee shall submit an itemized
accounting of such expenses in reasonable detail, including receipts
where required under federal income tax laws.
(f) Reimbursement of Relocation Expenses. Promptly following
the full execution of this Agreement, the Company shall pay to Employee
the sum of $25,000 (before standard deductions) to partially reimburse
Employee for incidental expenses of relocating and taxes associated with
certain reimbursed relocation expenses. Additionally, the Company shall
reimburse Employee for (i) reasonable relocation expenses incurred by
Employee and his family in connection with travel and lodging prior to
Employee's purchase of a house in San Antonio, Texas (ii) reasonable
relocation expenses incurred by Employee in connection with the moving
of Employee's household goods from Employee's current residence to San
Antonio, Texas (including temporary storage, if necessary), (iii) the
reasonable closing costs incurred by Employee in connection with the
sale of Employee's house in Creamery, Pennsylvania (the "Creamery
House"), (iv) up to $20,000 of Employee's loss, if any, on Employee's
sale of the Creamery House [such loss being an amount equal to (x) the
selling price of the Creamery House when sold by Employee minus (y) the
initial purchase price paid by Employee for the Creamery House] and (v)
such other reasonable relocation expenses as may be approved by the
Company. As a condition to such reimbursement, Employee shall submit an
itemized accounting of such expenses in reasonable detail, including
receipts.
(g) Loan. The Company agrees to arrange for and to guarantee a
loan in Employee's name provided that (i) the amount of the loan does
not exceed $55,000, (ii) the term of the loan is not longer than 1 year,
(iii) the loan requires only payments of interest during the term of the
loan and (iv) Employee repays the loan upon the sale of the Creamery
House. The Company additionally agrees to reimburse Employee an amount
equal to the monthly interest payment on such loan until the earlier to
occur of (x) the sale of the Creamery House and (y) 6 months after the
date of the loan.
3.5 Commencement of Compensation. Compensation under this Agreement
shall be payable to Employee commencing on upon Employee's commencement of
full-time service to the Company.
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<PAGE> 4
ARTICLE 4
TERMINATION
4.1 Termination With Notice. This Agreement may be terminated by the
Company or Employee, without cause, upon 30 days prior written notice thereof
given by one party to the other party. In the event of termination pursuant to
this Section 4.1, the Company shall pay Employee his or her monthly base salary
(subject to standard deductions) earned pro rata to the date of such
termination and the Company shall have no further obligations to Employee
hereunder. Notwithstanding the foregoing:
(a) in lieu of continuing the employment of Employee for a period of
30 days after notice of termination is given under this Section 4.1, the
Company may, in its sole discretion, elect to terminate this Agreement
immediately and pay Employee a lump-sum equal to (a) Employee's monthly base
salary (subject to standard deductions) earned pro rata to the date of such
notification of termination plus (b) 30 days of Employee's then effective base
salary (subject to standard deductions), whereupon the Company shall no further
obligations to Employee hereunder; and
(b) in the event of a termination by the Company pursuant to this
Section 4.1 within 4 years of the date hereof, the Company shall pay to
Employee an additional amount equal to Employee's current base monthly base
salary (subject to standard deductions) multiplied by 6.
4.2 Termination For Cause. This Agreement may be terminated by the
Company for "Cause" (hereinafter defined) upon written notice thereof given by
the Company to Employee. In the event of termination pursuant to this Section
4.2, the Company shall pay Employee his or her monthly base salary (subject to
standard deductions) earned pro rata to the date of such termination and the
Company shall have no further obligations to Employee hereunder. The term
"Cause" shall include, without limitation, the following, as determined by the
Board in its sole judgment: (i) Employee breaches any of the terms of this
Agreement; (ii) Employee is convicted of a felony; (iii) Employee fails, after
at least one warning, to satisfactorily perform duties assigned under this
Agreement as determined by the Chief Executive Officer or the Board (other than
a failure due to death or physical or mental disability); (iv) Employee
intentionally engages in conduct which is demonstrably and materially injurious
to the Company; (v) Employee commits fraud or theft of personal or Company
property from Company premises; (vi) Employee falsifies Company documents or
records; (vii) Employee engages in acts of gross carelessness or willful
negligence to endanger life or property on Company premises; (viii) Employee
engages in sexual harassment; (ix) Employee uses, distributes, possesses or is
under the influence of illegal drugs, alcohol or any other intoxicant on
Company premises; or (x) Employee intentionally violates state, federal or
local laws and regulations.
4.3 Termination Upon Death or Disability. In the event that Employee
dies, this Agreement shall terminate upon Employee's death. Likewise, if
Employee becomes "disabled" as determined in accordance with the Company's
disability insurance policies and plans, the Company may, upon notice to
Employee, terminate this Agreement. In
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<PAGE> 5
the event of termination pursuant to this Section 4.3, Employee (or his or her
legal representatives) shall be entitled only to his or her monthly base salary
earned pro rata for services actually rendered prior to the date of such
termination; provided, however, Employee shall not be entitled to his or her
monthly base salary for any period with respect to which Employee has received
short-term or long-term disability benefits under employee benefit plans
maintained from time to time by the Company.
4.4 Survival of Provisions. The covenants and provisions of Articles
5, 6 and 7 hereof shall survive any termination of this Agreement and continue
for the periods indicated, regardless of how such termination may be brought
about.
ARTICLE 5
PROPRIETARY PROPERTY; CONFIDENTIAL INFORMATION
5.1 Duties. Employee understands and agrees that during the term of
this Agreement Employee's duties will include the conception of improvements
and inventions (whether or not ultimately issuing as Letters Patent in any
country), the creation of confidential information protected by the Company as
trade secrets and the authoring of "works" as defined under the copyright laws
of the United States of America found in 17 United States Code. Such
information is collectively referred to in this Agreement as "Proprietary
Information".
5.2 Ownership. Employee understands and agrees that for all
Proprietary Information created within the scope of Employee's employment, the
Company shall own all right, title and interest thereto. In the case of works
authored or created by Employee, such works are considered a "work made for
hire" under 17 United States Code Section 101 - the copyright laws. All
Proprietary Information, if any, created by Employee prior to his or her
employment with the Company, and in which Employee claims ownership, is shown
in Schedule 5.2 attached hereto.
5.3 Notice and Assistance. Employee shall give adequate written
notice to the Company as soon as practicable of all Proprietary Information
created by Employee during Employee's employment with the Company, assist the
Company in evaluating the Proprietary Information for patent, trade secret and
copyright protection and sign all documents and do all things necessary at the
expense of the Company to assist the Company in the protection, development,
marketing or transfer of such Proprietary Information.
5.4 Assignment. Employee hereby assigns and agrees to assign all
right, title and interest into such Proprietary Information to the Company or
its nominee. At the request of the Company, whether during or after the
termination of Employee's employment, Employee shall timely execute or join in
executing all papers or documents required for the filing of patent
applications and copyright registrations in the United States of America and
such foreign countries as the Company may in its sole discretion select, and
shall assign all such patent applications and copyrights to the Company or its
nominee, and shall provide the Company or its agent or attorneys with all
reasonable assistance in the preparation and prosecution of patent applications
and copyright registrations, including drawings, specifications, and the like,
all at the
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<PAGE> 6
expense of the Company, and shall do all that may be necessary to establish,
protect or maintain the rights of the Company or its nominee in the inventions,
patent applications, Letters Patent and copyrights in accordance with the
spirit of this Agreement.
5.5 Confidential Information. Employee agrees to keep confidential
all information protected by the Company as trade secrets during the term of
this Agreement (including any leaves of absence) and will neither use nor
disclose the confidential information without written authorization by the
Company for ten years thereafter. For the purposes of this Agreement, such
confidential information shall include information set forth in any application
for Letters Patent unless and until such information is ultimately published.
The Company and Employee mutually agree that the following types of information
shall not be protected by this Agreement:
(a) Information already in the public domain at the time
Employee received it;
(b) Information which although disclosed in confidence to
Employee is later disseminated by the Company into the public domain;
(c) Information which although received in confidence by
Employee is subsequently disseminated into public domain by a third
party who has not breached any duty to any other party in disseminating
such information;
(d) Information given by the Company in confidence to Employee
which Employee is expressly authorized in writing by the Company to use
or disclose thereafter; and
(e) Information required by law to be disclosed, provided that
Employee will promptly advise the Company of any such required
disclosure and cooperate fully with the Company to avoid such
disclosure, if legally possible, or to obtain confidential treatment of
such Information disclosed.
Employee also understands and agrees that he or she will maintain in confidence
all information known to him or her by reason of his or her employment even if
such information is included in a redacted deposit of a work filed with an
application for copyright registration, if such deposit has been abridged in
order to protect the confidentiality of the information deposited with the
Copyright Office. For purposes of this Agreement, a trade secret "...may
consist of any formula, pattern, device or compilation of information which is
used in one's business, and which gives him or her an opportunity to obtain an
advantage over competitors who do not know or use it. It may be a formula for
a chemical compound, a process of manufacturing, trading or preserving
materials, a pattern for machine or other device, or a list of customers..." as
commonly interpreted by the courts of the State of Texas. Upon the termination
of this Agreement, regardless of how such termination may be brought about,
Employee shall deliver to the Company any and all documents, instruments,
notes, papers or other expressions or embodiments of Proprietary Property or
confidential information which are in Employee's possession or control.
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<PAGE> 7
5.6 Publicity. During the term of this Agreement and for a period of
ten years thereafter, Employee shall not, directly or indirectly, originate or
participate in the origination of any publicity, news release or other public
announcements, written or oral, whether to the public press or otherwise,
relating to this Agreement, to any amendment hereto, to Employee's employment
hereunder or to the Company, without the prior written approval of the Company.
5.7 Fiduciary Relationship. Employee, by virtue of his or her high
position of trust and reliance on him or her by the Company, understands that
Employee enjoys a fiduciary relationship with the Company in carrying out his
or her obligations under this Article 5. Accordingly, Employee agrees to honor
his or her obligations under this Agreement by conducting himself or herself
with the highest degree fairness and trust toward the Company.
ARTICLE 6
RESTRICTIVE COVENANTS
6.1 Non-Competition. In consideration of the benefits of this
Agreement, including Employee's access to and limited use of proprietary and
confidential information of the Company, as well as training, education and
experience provided to Employee by the Company directly and/or as a result of
work projects assigned by the Company with respect thereto, Employee hereby
covenants and agrees that during the term of this Agreement and for a period of
one year following termination of this Agreement, regardless of how such
termination may be brought about, Employee shall not, directly, as proprietor,
partner, stockholder, director, officer, employee, consultant, joint venturer,
investor or in any other capacity, engage in, or own, manage, operate or
control, or participate in the ownership, management, operation or control, of
any entity which engages, as its primary business, in the development of
products which compete directly with the Company's products; provided, however,
the foregoing shall not prohibit Employee from purchasing and holding as an
investment not more than 1% of any class of publicly traded securities of any
entity which conducts a business in competition with the business of the
Company, so long as Employee does not participate in any way in the management,
operation or control of such entity.
6.2 Judicial Reformation. Employee acknowledges that, given the
nature of the Company's business, the covenants contained in Section 6.1
establish reasonable limitations as to time, geographic area and scope of
activity to be restrained and do not impose a greater restraint than is
reasonably necessary to protect and preserve the goodwill of the Company's
business and to protect its legitimate business interests. If, however,
Section 6.1 is determined by any court of competent jurisdiction to be
unenforceable by reason of its extending for too long a period of time or over
too large a geographic area or by reason of it being too extensive in any other
respect or for any other reason, it will be interpreted to extend only over the
longest period of time for which it may be enforceable and/or over the largest
geographic area as to which it may be enforceable and/or to the maximum extent
in all other aspects as to which it may be enforceable, all as determined by
such court.
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<PAGE> 8
6.3 Customer Lists; Non-Solicitation. In consideration of the
benefits of this Agreement, including Employee's access to and limited use of
proprietary and confidential information of the Company, as well as training,
education and experience provided to Employee by the Company directly and/or as
a result of work projects assigned by the Company with respect thereto,
Employee hereby further covenants and agrees that for a period of one year
following the termination of this Agreement, regardless of how such termination
may be brought about, Employee shall not, directly or indirectly, (a) use or
make known to any person or entity the names or addresses of any clients or
customers of the Company or any other information pertaining to them, other
than information that Employee can demonstrate was known to Employee prior to
his employment with the Company and with respect to which the Company has no
obligation of confidentiality, (b) call on, solicit, take away or attempt to
call on, solicit or take away any clients or customers of the Company on whom
Employee called or with whom he or she became acquainted during his or her
employment with the Company, nor (c) recruit, hire or attempt to recruit or
hire any employees of the Company.
ARTICLE 7
ARBITRATION
Except for the provisions of Articles 5 and 6 of this Agreement dealing
with proprietary property, confidential information and restrictive covenants,
with respect to which the Company expressly reserves the right to petition a
court directly for injunctive and other relief, any claim, dispute or
controversy of any nature whatsoever, including but not limited to tort claims
or contract disputes, between the parties to this Agreement or their respective
heirs, executors, administrators, legal representatives, successors and
assigns, as applicable, arising out of or relating to your employment or the
termination of your employment with the Company and/or the terms and conditions
of this Agreement, including the implementation, applicability and
interpretation thereof, shall be resolved as follows: upon the written request
of one party served upon the other, any such claim, dispute or controversy
shall be submitted to and settled by arbitration in accordance with the
provisions of the Federal Arbitration Act, 9 U.S.C. Sections 1-15, as amended.
If arbitration is requested, each of the parties to this Agreement shall
appoint one person as an arbitrator to hear and determine any such disputes,
and if they should be unable to agree, then the two arbitrators shall choose a
third arbitrator from a panel made up of experienced arbitrators selected
pursuant to the procedures of the American Arbitration Association (the "AAA")
and, once chosen, the third arbitrator's decision shall be final, binding and
conclusive upon the parties to this Agreement. Each party shall be responsible
for the fees and expenses of its arbitrator and the fees and expenses of the
third arbitrator shall be shared equally by the parties. The terms of the
commercial arbitration rules of AAA shall apply except to the extent they
conflict with the provisions of this paragraph. It is further agreed that any
of the parties hereto may petition the United States District Court for the
Western District of Texas, San Antonio Division, for a judgment to be entered
upon any award entered through such arbitration proceedings.
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<PAGE> 9
ARTICLE 8
MISCELLANEOUS
8.1 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered personally,
mailed by certified mail (return receipt requested) or sent by an overnight
delivery service with tracking procedures or by facsimile to the parties at the
following addresses or at such other addresses as shall be specified by the
parties by like notice: If to Employee, at the address set forth below his or
her name on the signature page hereof; and if to the Company, at 14785 Omicron
Drive, Suite 100, San Antonio, Texas 78245-3217, Attention: President and Chief
Executive Officer.
8.2 Equitable Relief. In the event of a breach or a threatened
breach by Employee of any of the provisions contained in Article 5 or 6 of this
Agreement, Employee acknowledges that the Company will suffer irreparable
injury not fully compensable by money damages and, therefore, will not have an
adequate remedy available at law. Accordingly, the Company shall be entitled
to obtain such injunctive relief or other equitable remedy from any court of
competent jurisdiction as may be necessary or appropriate to prevent or curtail
any such breach, threatened or actual. The foregoing shall be in addition to
and without prejudice to any other rights that the Company may have under this
Agreement, at law or in equity, including, without limitation, the right to sue
for damages.
8.3 Assignment. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Company. Employee's rights under this Agreement
are not assignable and any attempted assignment thereof shall be null and void.
8.4 Governing Law; Venue. This Agreement shall be subject to and
governed by the laws of the State of Texas. Non-exclusive venue for any action
permitted hereunder shall be proper in San Antonio, Bexar County, Texas, and
Employee hereby consents to such venue.
8.5 Entire Agreement; Amendments. This Agreement constitutes the
entire agreement between the parties and supersedes all other agreements
between the parties which may relate to the subject matter contained in this
Agreement. This Agreement may not be amended or modified except by an
agreement in writing which refers to this Agreement and is signed by both
parties.
8.6 Headings. The headings of sections and subsections of this
Agreement are for convenience only and shall not in any way affect the
interpretation of any provision of this Agreement or of the Agreement itself.
8.7 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law. If any provision of this Agreement shall be prohibited
by or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without
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<PAGE> 10
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
8.8 Waiver. The waiver by any party of a breach of any provision
hereof shall not be deemed to constitute the waiver of any prior or subsequent
breach of the same provision or any other provisions hereof. Further, the
failure of any party to insist upon strict adherence to any term of this
Agreement on one or more occasions shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement unless such party expressly waives such
provision pursuant to a written instrument which refers to this Agreement and
is signed by such party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
ILEX ONCOLOGY, INC.
By: /s/ RICHARD L. LOVE
----------------------------------
Richard L. Love,
President and Chief Executive
Officer
EMPLOYEE:
/s/ PEDRO SANTABARBARA
-------------------------------------
Pedro Santabarbara, M.D., Ph.D.
Address:
-----------------------
-----------------------
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<PAGE> 11
SCHEDULE 5.2
PROPRIETARY PROPERTY CLAIMED BY EMPLOYEE
Proprietary Property Claimed:*
------------------------------------------------
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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* None, if left blank
<PAGE> 1
EXHIBIT 10.44
[ALEXANDER L. WEIS, PH.D. LETTERHEAD]
November 2, 1994
Richard L. Love
President and CEO
Biovensa Inc.
14960 Omicron Drive
San Antonio, Texas 78245
Dear Dick:
This is a side letter referred to in an Employment Agreement executed
today but dated effective November 2, 1994 (the "Employment Agreement"),
between Biovensa Inc. (the "Company") and Alexander L. Weis, Ph.D. ("Employee").
This letter sets forth certain special agreements between the Company and
Employee with respect to the research activities of Lipitek International, Inc.
("Lipitek"), as follows:
(i) Employee is the owner and chief executive officer of
Lipitek which, among other activities, engages in research to identify
potential new compounds or drugs for development.
(ii) Lipitek may conduct such research as it deems
appropriate, provided that, unless expressly authorized by the Company,
Employee agrees that, during the term of the Employment Agreement, he
will not permit Lipitek to (A) engage in research with respect to any
specific (e.g. not by class or category) compound or molecule for use in
the treatment of cancer if, prior to initiating such research, the
Institute for Drug Development ("IDD"), an affiliate of the Company, has
disclosed to Employee, or Employee otherwise has actual knowledge, that
IDD is actively engaged in research with respect to such specific
compound or molecule for use in the treatment of cancer, or (B) engage
in a research program with respect to a class or category of compounds
or molecules for the treatment of cancer (a "Research Program") if,
prior to initiating such Research Program, IDD has disclosed to
Employee, or Employee otherwise has actual knowledge, that IDD is
actively engaged in a substantially similar Research Program, provided
that, notwithstanding clause (B), if Lipitek makes a discovery with
respect to a specific compound or molecule as a result of research not
restricted under clause (A) and such discovery dictates, in Lipitek's
reasonable opinion, further research under a Research Program restricted
under clause (B), Lipitek may conduct such Research Program for the
limited purpose of conducting further research of such compound or
molecule or derivatives related thereto.
<PAGE> 2
Mr. Richard L. Love
November 2, 1994
Page -2-
(iii) As to research, during the term of the Employment
Agreement, Employee agrees to cause Lipitek to grant to the Company a
60-day right of first refusal to develop, on competitive terms, any
compounds or drugs which Lipitek discovers for use in the treatment of
cancer and, with respect to which, Lipitek is the owner of the rights to
the compound or drug discovered. With respect to such right of first
refusal for a particular compound or drug, unless a development
agreement is entered into with another party within 60 days of the
Company's election not to exercise the right of first refusal, or within
60 days of the expiration of the 60-day period of the right of first
refusal, whichever occurs first, Employee will not, during the term of
the Employment Agreement, permit Lipitek to enter into a development
agreement with another party covering such compound or drug for use in
the treatment of cancer without first reoffering the development to the
Company, on competitive terms.
(iv) As used in this side letter, the phrase "use in the
treatment of cancer" shall exclude any use in the diagnosis of cancer.
Please confirm that the above represents our agreement with respect to
the research activities of Lipitek by executing this letter where indicated
below and returning a signed copy to me at your earliest convenience.
Very truly yours,
/s/ ALEXANDER L. WEIS
Alexander L. Weis, Ph.D.
AGREED:
BIOVENSA INC.
By /s/ RICHARD L. LOVE
---------------------------
Richard L. Love,
President and CEO
<PAGE> 1
EXHIBIT 10.45
CONSULTING SERVICES AGREEMENT
BETWEEN
ILEX ONCOLOGY, INC.
AND
CHARLES A. COLTMAN, JR., M.D.
THIS AGREEMENT is made and entered into as of the 16th day of March,
1996, (the "Effective Date") by and between Ilex Oncology, Inc., a Delaware
corporation ("Ilex Oncology"), and Charles A. Coltman, Jr., M.D., an individual
residing in San Antonio, Texas ("Dr. Coltman").
IN CONSIDERATION of the mutual agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is agreed as follows:
1.0 Engagement. Ilex Oncology hereby engages Dr. Coltman to serve
as a consultant to Ilex Oncology, and Dr. Coltman hereby accepts such
engagement, upon and subject to the terms and conditions set forth herein. The
parties understand and acknowledge that Dr. Coltman is a respected faculty
member of the University of Texas Health Science Center at San Antonio
("UTHSCSA"). The parties will endeavor to ensure that the terms of this
Agreement do no interfere with Dr. Coltman's obligations to UTHSCSA or any
other institution or entity with which Dr. Coltman is affiliated. As it is
recognized that Dr. Coltman must obtain certain approvals for this consulting
agreement from UTHSCSA and/or the University of Texas System, Ilex Oncology
will assist Dr. Coltman in obtaining such approvals. Additionally, Dr.
Coltman is affiliated with CTRC Research Foundation, and as a consultant to
other pharmaceutical companies. To the extent that those engagements also
require approvals for this agreement, Dr. Coltman shall be primarily
responsible for securing the same, with the assistance of Ilex Oncology. This
agreement is expressly conditional upon obtaining such approvals, and shall
terminate if such approvals cannot be obtained within a reasonable period of
time after the Effective Date.
2.0 Affiliations. From and following the Effective Date of this
Agreement, Dr. Coltman shall not undertake any further affiliations that would
conflict with his duties and responsibilities hereunder without Ilex Oncology's
written consent, which consent shall not be unreasonably withheld. Dr. Coltman
shall, upon execution of this agreement, disclose to Ilex Oncology all
consulting engagements of Dr. Coltman and disclose all new consulting
engagements of Dr. Coltman which are undertaken during the term of this
agreement. Such disclosures shall be made in writing to the President of Ilex
Oncology.
<PAGE> 2
3.0. Duties. Dr. Coltman agrees to provide the services set forth
on Exhibit A which is incorporated herein for all purposes. The parties
understand and acknowledge that potential conflicts or duality of interest, or
the appearance of such conflict or duality of interest, may arise during Dr.
Coltman's performance of those duties and services as a result of Dr. Coltman's
other affiliations. Both parties recognize the importance of avoiding both
actual conflicts and the appearance of conflicts of interest. The parties will
therefore mutually develop procedures for identifying and evaluating actual,
potential and apparent conflicts of duality of interests, as well as procedures
for ensuring strict compliance with all applicable conflicts of interest laws,
rules, regulations and policies adopted by the State of Texas, the University
of Texas System, UTHSCSA, the Cancer Therapy and Research Foundation of South
Texas (and its affiliated entities), and other interested institutions,
companies or concerns. In discharging his duties and responsibilities
hereunder, Dr. Coltman will advise Ilex Oncology when and if an actual or
potential conflict arises. The parties will then mutually work at attempting
to resolve the conflict. If a resolution is not possible, Dr. Coltman shall be
excused from performing whatever duties or services which gave rise to the
actual, potential or apparent conflict.
4.0 Compensation. Compensation for Dr. Coltman's services shall
be in accordance with Exhibit B, which is attached hereto and incorporated
herein for all purposes.
5.0 Independent Contractor. The parties understand and
acknowledge that Dr. Coltman is an independent contractor and is not an
employee of Ilex Oncology for the purposes of this Agreement, the Social
Security Act, the income withholding provisions of the Internal Revenue Code of
1986, as amended, or other federal or state laws relating to compensation,
insurance, unemployment, or workman's compensation. Dr. Coltman acknowledges
and agrees that it shall be his obligation to report as self-employment income
all compensation received or accrued as a result of this Agreement. Dr.
Coltman acknowledges that he will not be entitled to any insurance, pension,
profit sharing, retirement or other employee benefits which Ilex Oncology may
provide to its employees during the term of this Agreement. This Agreement
shall not be construed as creating a partnership, joint venture, agency or
employment relationship, or as granting a franchise under either federal or
state law.
6.0 Inventions. The parties acknowledge that the terms of Dr.
Coltman's affiliation with other companies and institutions may require, to
varying degrees and under certain conditions, that Dr. Coltman assign his
rights to any discoveries, inventions or developments to such companies and
institutions. IN the performance of his duties and responsibilities hereunder,
Dr. Coltman may conceive, make or develop products, processes or other
intellectual property. It is the intent of the parties that intellectual
property conceived, made or developed by Dr. Coltman during the performance of
his duties and responsibilities hereunder that related to Ilex Oncology's
business, or that is conceived, make or developed using Ilex Oncology's funds,
facilities, materials or information, shall be owned by Ilex Oncology. Dr.
Coltman will use his best good faith efforts to ensure that his obligations
under affiliations with other
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<PAGE> 3
companies or institutions do not extend to intellectual property rightfully
owned by Ilex Oncology. Dr. Coltman will assist Ilex Oncology in obtaining
legal protection for such intellectual property as part of his duties and
responsibilities hereunder, and will execute such documents as reasonably
necessary to secure such protection and confirm ownership in Ilex Oncology.
The parties will develop procedures for identifying and reporting such
intellectual property to Ilex Oncology, as well as identifying any potentially
conflicting claims to such intellectual property. In the event of such
potentially conflicting claims, the parties will mutually cooperate in
resolving such conflicts.
7.0 Confidential Information. Dr. Coltman agrees to maintain in
confidence all information and materials provided by, or obtained from or
through, Ilex Oncology including, without limitation, all information regarding
drugs; pharmaceuticals; gene manipulations and/or therapy; products, compounds
and compositions resulting from chemical, DNA, genetic engineering or other
methods; potential new uses of existing drugs, compounds or compositions;
medical devices; and all financial information, computer software and
documentation; and other information relating to the business of Ilex Oncology
(collectively, the "Confidential Information"). Dr. Coltman shall not publish,
use or disclose Confidential Information learned, developed or acquired as a
result of services offered under this Agreement without Ilex Oncology's prior
written consent. Confidential Information shall not include (i) information
which was rightfully in Dr. Coltman's possession without an obligation of
confidentiality prior to disclosure by or through Ilex Oncology' (ii)
information which lawfully becomes part of the public knowledge, literature or
generally available to the public through no act of Dr. Coltman' or (iii)
information obtained from any third party, provided that any such third party
did not obtain such information from Ilex Oncology or obtain such information
in confidence. Dr. Coltman shall protect the Confidential Information and
shall take all reasonable steps to prevent the unauthorized disclosure,
dissemination, or publication of the Confidential Information.
All data, records, analyses, reports and material prepared or compiled
by Dr. Coltman or furnished to Dr. Coltman during the term hereof shall be the
sole and exclusive property of Ilex Oncology, and all of such data, records,
analyses, reports and materials, and all copies thereof, shall be delivered to
Ilex Oncology at its request or on the termination of this Agreement.
The parties acknowledge that the terms of Dr. Coltman's other
affiliations also contain or require certain obligations of confidentiality.
In discharging his duties relative to Confidential Information, Dr. Coltman
shall advise Ilex Oncology when and if an actual or potential conflict with
such other obligations arise. The parties will then mutually work at
attempting to resolve the conflict. If such conflict cannot be resolved, Dr.
Coltman is expressly excused from performing any services hereunder that would
result in a breach or potential breach of his confidentiality obligations owed
to another entity.
8.0 Term and Termination.
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<PAGE> 4
8.1 Term. Subject to the rights of termination set forth in this
Section 8.0, this Agreement shall remain in full force and effect from November
1, 1994 until October 31, 1998, unless sooner terminated by Dr. Coltman's death
or continuing inability to discharge the duties hereunder for three (3)
consecutive months. Ninety (90) days prior to the end of the term of this
Agreement, the parties shall enter into negotiations regarding the renewal of
this Agreement or the execution of a new agreement, which renewal or new
agreement shall contain such terms and conditions as may be agreed by the
parties.
8.2 Voluntary Termination. During the term of this Agreement,
either party may terminate the Agreement without cause, by giving sixty (60)
days written notice of termination to the other party.
8.3 Termination With Cause. In the event of breach of this
Agreement by either party, the non-breaching party may, at its option, cancel
this Agreement for such breach by giving written notice of cancellation to the
breaching party, which cancellation shall be effective thirty (30) days
following the delivery of such notice or such later time as may be specified in
such notice, unless the breaching party shall have cured such breach prior to
the expiration of the notice.
8.4 Limited Survival Upon Termination. Sections 6 and 7 shall
survive termination of this Agreement and shall remain in full force and
effect.
9.0 Miscellaneous.
9.1 Notices. All notices, requests, demands, and other
communications hereunder shall be in writing and, unless otherwise provided
herein, shall be deemed to have been duly given upon hand delivery or upon
deposit in the United States Mail, postage prepaid, certified or registered
mail, return receipt requested, as follows:
If to Ilex Oncology:
Ilex Oncology, Inc.
14960 Omicron
San Antonio, Texas 78245
Attention: Richard L. Love
If to Dr. Coltman:
Charles A. Coltman, Jr., M.D.
13206 Hunters View
San Antonio, Texas 78230
or at such other address as shall have been furnished to the other in writing
in accordance herewith, except that such notice of such change shall be
effective only upon receipt.
-4-
<PAGE> 5
9.2 Amendments and Waiver. This Agreement may be amended or
modified by, and only by, a written instrument executed by all the parties
hereto. The terms of this Agreement may be waived by, and only by, a written
instrument executed by the party against whom such waiver is sought to be
enforced.
9.3 Section and Other Headings. The section and other headings
contained in this Agreement are for convenience of reference only and shall not
in any way affect the meaning or interpretation of this Agreement.
9.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
9.5 Assignments and Parties in Interest. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns. This Agreement calls for Dr. Coltman's
personal services and may not be assigned by Dr. Coltman without the prior
written consent of Ilex Oncology.
9.6 No Implied Rights or Remedies. Except as otherwise expressly
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any person, firm, or corporation, other
than the parties hereto and their respective successors and assigns, any rights
or remedies under or by reason of this Agreement.
9.7 Agreement of Further Cooperation. Each of the parties agrees
to execute and deliver such further documents and to cooperate in such manner
as may be necessary to implement and give effect to the agreements contained
herein.
9.8 Entire Agreement. This Agreement, together with all exhibits
hereto, embodies the entire agreement and understanding between the parties
hereto relating to the subject matter hereof and supersedes any prior
agreements and understandings relating to the subject matter hereof.
9.9 Severability. If any part or provision of this Agreement is
or shall be deemed violative of any applicable laws, rules or regulations, such
legal invalidity shall not void this Agreement or affect the remaining terms
and provisions of this Agreement, and this Agreement shall be construed and
interpreted to comport with all such laws, rules or regulations to the maximum
extent possible.
9.10 Applicable Law. This Agreement has been accepted and made
performable in Bexar County, Texas. This Agreement and the rights and
obligations of the parties hereto shall be construed under and governed by the
laws of the State of Texas, without giving effect to principles of conflict of
laws. The exclusive venue for resolution of any dispute between the parties
related to the subject matter of this Agreement shall be in Bexar County,
Texas.
-5-
<PAGE> 6
9.11 IRS Contingency. Notwithstanding anything contained herein to
the contrary, Ilex Oncology and Dr. Coltman agree that they shall negotiate in
good faith to reach an equitable adjustment to the provisions of this Agreement
in the event that either (a) the United State Internal Revenue Service notifies
the Cancer Therapy and Research Foundation of South Texas ("CTRF") and/or CTRC
Research Foundation ("CTRC"), or any affiliate thereof that it will not rule
that the establishment and operation of Ilex Oncology will not adversely affect
CTRF's, CTRC's or any such affiliate's status as an exempt organization under
Section 501(c)(3) of the Internal Revenue Code, or the Internal Revenue Service
otherwise asserts that the establishment and operation of Ilex Oncology may
adversely affect CTRF's, CTRC's or any such affiliate's status as an exempt
organization under Section 501(c)(3) of the Internal Revenue Code; or (b) Ilex
Oncology fails to receive at least three million dollars ($3,000,000) by June
30, 1996 from the sale to persons other than CTRF, CTRC and their affiliates of
its common or preferred stock. If Ilex Oncology and Dr. Coltman cannot reach
such an agreement within ninety (90) days subsequent to the occurrence of such
an event, this Agreement shall automatically terminate as of the expiration of
that ninety (90) day period.
EXECUTED as of the day and year first above written.
ILEX ONCOLOGY, INC.
By: /s/ RICHARD LOVE
--------------------------------
Name: Richard Love
------------------------------
Title: President
-----------------------------
CONSULTANT:
/s/ CHARLES A. COLTMAN, JR.
-----------------------------------
Charles A. Coltman, Jr., M.D.
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<PAGE> 7
EXHIBIT A
DUTIES AND SERVICES
1.0 Consultation Services. Dr. Coltman shall perform the
following services for Ilex Oncology:
1.1 Committee Co-Chairman. Dr. Coltman shall be a member
of the Scientific Advisory Committee ("SAC") and serve as co-chairman of the
committee. Dr. Coltman shall attend all meetings of the SAC which shall meet
at least four times per year.
1.2 Drug Acquisition. Dr. Coltman shall, consistent with
the terms of this Agreement and in collaboration with the SAC, advise the
management of Ilex Oncology of viable opportunities for Ilex Oncology to
acquire for the purpose of commercialization chemotherapy compounds and drugs
as well as therapeutic or supportive care compounds.
1.3 Clinical Development Strategies. Dr. Coltman shall,
consistent with the terms of this Agreement and as part of his duties with the
SAC, assist Ilex Oncology in the development of clinical development
strategies.
1.4 Scientific Review. In conjunction with the SAC, Dr.
Coltman shall review scientific and clinical data on compounds acquired by Ilex
Oncology. As co-chairman of the SAC, Dr. Coltman shall assist in reporting to
the management of Ilex Oncology the results of the SAC findings and
recommendations relative to such requisite standards of conduct.
2.0 Requisites. In providing services under this Agreement, Dr.
Coltman shall at all times perform his duties and responsibilities in
conformance with the following requisite standards of conduct:
2.1 Dr. Coltman shall not make any recommendations about,
or actively participate in decisions regarding the acquisition of technologies
or compounds owned or discovered by or licensed to CTRC Research Foundation
("CTRC Research"), when such actions would constitute a conflict of interest,
give the appearance of a conflict of interest or a breach of any policy of CTRC
Research of Ilex Oncology.
2.2 Dr. Coltman shall not make any recommendations about,
or actively participate in decisions regarding the acquisition of technologies
or compounds owned or discovered by or licensed to The University of Texas
Health Science Center at San Antonio ("UTHSCSA"), when such actions would
constitute a conflict of interest, give the appearance of a conflict of
interest or a breach of any policy of UTHSCSA or Ilex Oncology.
<PAGE> 8
2.3 Dr. Coltman shall not make any recommendations about,
or actively participate in decisions regarding the acquisition of technologies
or compounds for which Dr. Coltman was the Principal Investigator, supervised
the Principle Investigator or provided leadership for the clinical or
preclinical studies for such compounds or technologies, when such actions would
constitute a conflict of interest, give the appearance of a conflict of
interest or a breach of any policy of Ilex Oncology or the sponsor of the
study, including in particular Dr. Coltman's affiliation with Southwest
Oncology Group.
2.4 Dr. Coltman shall not function as the Principal
Investigator for or supervise the Principal Investigator for clinical or
preclinical studies conducted by Ilex Oncology.
2.5 If Dr. Coltman publishes an article, paper or other
work regarding technologies or compounds owned or discovered by Ilex Oncology
or licensed to Ilex Oncology, Dr. Coltman shall make an appropriate disclosure
of the fact that he has a financial interest in the company.
<PAGE> 9
EXHIBIT B
COMPENSATION
1. Ilex Oncology shall pay to Dr. Coltman the following fees for Dr.
Coltman's services:
a. A retainer of fifteen thousand dollars ($15,000.00) per year,
which shall be paid within thirty (30) days of the execution
of this Agreement and on the anniversary thereof;
b. Two thousand dollars ($2,000.00) per day for every full day in
which services are provided pursuant to this Agreement and for
partial days. Dr. Coltman shall be compensated at the rate of
two hundred fifty dollars ($250.00) per hour; and
c. Two thousand dollars ($2,000.00) per meeting for attending
meetings of the SAC.
2. a. Right to Purchase Common Stock. In addition to the fees
described above, Dr. Coltman shall be entitled, for a period
of thirty (30) days from the date of this Agreement, to
purchase up to 480,000 shares (the "Shares") of common stock,
par value $.01 per share, of Ilex Oncology at a price of $.10
per share (the "Purchase Price").
b. Financing. Ilex Oncology will loan Dr. Coltman up to
forty-eight thousand dollars ($8,000.00) for the purchase of
the Shares. Such loan will be evidenced by a promissory note
(the "Note") and related agreements as required by Ilex
Oncology. The Note will bear interest at a rate of eight
percent (8%) simple interest (i.e. not compounded) and will be
payable in quarterly installments based upon a ten (10) year
amortization schedule and will mature on the fourth
anniversary of this Agreement. The Note shall be secured by a
pledge of that number of Shares basis determined by dividing
the outstanding principal balance of the Note by the per share
purchase price of the Shares (e.g. if the Note balance is
$20,000, the number of Shares pledged would be 200,000), with
a mechanism for partial releases of pledged shares to reflect
reductions in the unpaid balance of the Note on the same
basis.
c. Restrictions on Shares. Dr. Coltman's ownership of the Shares
shall be subject to the following restrictions, in addition to
restrictions on transfer that might be imposed by applicable
state or federal securities laws:
(1) For a period of four (4) years from the date Dr.
Coltman purchases the Shares (the "Purchase Date"),
Dr. Coltman shall not sell,
<PAGE> 10
transfer, pledge or otherwise dispose of or encumber
the Shares, or any of them, other than as provided in
this Agreement.
(2) In the event this Agreement is terminated during the
term hereof for cause by Ilex Oncology or without
cause by Dr. Coltman, Ilex Oncology shall have the
right, but not the obligation, to purchase the Shares
from Dr. Coltman; provided, however, that the number
of Shares to which such right to purchase applies
shall be reduced by 25% for each year of the term
hereof which has been completed as of the effective
date of such termination (the "Termination Date").
For example, if three years have been completed under
this Agreement as of the Termination Date, Ilex
Oncology shall have the right to purchase a number of
Shares equal to 25% of the number of Shares
originally purchased by Dr. Coltman pursuant to this
Agreement. The price per share to be paid by Ilex
Oncology for any Shares purchased by it pursuant to
this paragraph shall be equal to the Purchase Price
plus interest at the Agreed Rate from the Purchase
Date through the Termination Date.
3. Stock Option
a. As additional compensation for services rendered under this
Agreement, Ilex Oncology shall grant to Dr. Coltman an option
to acquire up to a certain number of shares of common stock
("Common Stock") of Ilex Oncology. The exercise price of the
option shall be equal to the Common Stock equivalent purchase
price per share of equity securities (anticipated to be
preferred stock) issued by Ilex Oncology pursuant to its
initial private placement or other offering which results in
gross proceeds to Ilex Oncology in excess of $3 million. The
number of shares of Common Stock covered by the option shall
be equal to $100,000 divided by the Common Stock equivalent
purchase price per share applicable to such offering (for
example, if the private placement price is $1.50 per share,
Dr. Coltman would receive an option to acquire up to 66,667
shares). The option shall vest over four (4) years as
follows: 25% on the first anniversary of this Agreement, 25%
on the second anniversary of this Agreement, 25% on the third
anniversary of this Agreement, and 25% on the fourth
anniversary of this Agreement. All options must be exercised
upon the later of (i) the fifty year anniversary of this
Agreement, (ii) one year subsequent to the termination of
employment, for any reason, from Ilex Oncology, or (iii) one
year subsequent to the termination of the "lock-up period"
that is negotiated by Ilex Oncology and its underwriters in
connection with an initial public offering of Ilex Oncology's
Common Stock (the "Option Term"). The option will be granted
contemporaneously with the completion of such initial private
placement or other offering pursuant to a separate instrument
which shall make reference to the provision of this Agreement.
<PAGE> 11
b. The stock option issued by Dr. Coltman pursuant to this
Section shall be consistent with Ilex Oncology's stock option
plan (the "Plan") to be adopted for key employees of Ilex
Oncology. Accordingly, Dr. Coltman shall have the following
rights relating to termination of this Agreement pursuant to
the provisions of Article 8:
(1) In the event of termination by Ilex Oncology without
cause under Section 8.2; (i) outstanding stock
options held by Dr. Coltman which are then vested
shall remain exercisable for the Option Term, (ii)
if, within ten (10) days of such termination, Dr.
Coltman notifies Ilex Oncology that he is making an
election under this Section, outstanding stock
options held by Dr. Coltman which would vest within
one year from the date of termination shall
automatically become vested and remain exercisable
for the Option Term, and (iii) after giving effect to
any accelerated vesting under clause (ii) above, any
then unvested portion of Dr. Coltman's outstanding
stock options shall lapse.
(2) In event of termination by Ilex Oncology for "cause"
under Section 8.3, upon death or disability of Dr.
Coltman or by Dr. Coltman pursuant to a voluntary
resignation under Section 8.2, (i) any portion of Dr.
Coltman's outstanding stock options which are vested
as of the date of termination shall remain
exercisable for the Option Term, and (ii) any then
unvested portion of Dr. Coltman's outstanding stock
options shall lapse.
<PAGE> 1
EXHIBIT 10.46
CONSULTING SERVICES AGREEMENT
BETWEEN
ILEX ONCOLOGY, INC.
AND
DANIEL VON HOFF, M.D.
THIS AGREEMENT is made and entered into as of the 1st day of January,
1995 (the "Effective Date") by and between Ilex Oncology, Inc., a Delaware
corporation ("Ilex Oncology"), and Daniel Von Hoff, M.D., an individual
residing in San Antonio, Texas ("Dr. Von Hoff").
IN CONSIDERATION of the mutual agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is agreed as follows:
1.0 Engagement. Ilex Oncology hereby engages Dr. Von Hoff to
serve as a consultant to Ilex Oncology, and Dr. Von Hoff hereby accepts such
engagement, upon and subject to the terms and conditions set forth herein. Dr.
Von Hoff currently serves as Director of the Institute for Drug Development
("IDD"), a division of the CTRC Research Foundation, and as a consultant to
other pharmaceutical companies. To the extent that those engagements require
approvals for this agreement, Dr. Von Hoff shall be primarily responsible for
securing the same, with the assistance of Ilex Oncology. This agreement is
expressly conditional upon obtaining such approvals, and shall terminate if
such approvals cannot be obtained within a reasonable period of time after the
Effective Date.
2.0 Affiliations. From and following the Effective Date of this
Agreement, Dr. Von Hoff shall not undertake any further affiliations that would
conflict with his duties and responsibilities hereunder without Ilex Oncology's
written consent, which consent shall not be unreasonably withheld. Dr. Von
hoff shall, upon execution of this agreement, disclose to Ilex Oncology all
consulting engagements of Dr. Von Hoff and disclose all new consulting
engagements of Dr. Von Hoff which are undertaken during the term of this
agreement. Such disclosures shall be made in writing to the President of Ilex
Oncology.
3.0 Duties. Dr. Von Hoff agrees to provide the services set forth
on Exhibit A which is incorporated herein for all purposes. The parties
understand and acknowledge that potential conflicts or duality of interest, or
the appearance of such conflict or duality of interest, may arise during Dr.
Von Hoff's performance of those duties and services as a result of Dr. Von
Hoff's other affiliations. Both parties recognize the importance of avoiding
both actual conflicts and the appearance of
<PAGE> 2
conflicts of interest. The parties will therefore mutually develop procedures
for identifying and evaluating actual, potential and apparent conflicts of
duality of interests, as well as procedures for ensuring strict compliance with
all applicable conflicts of interest laws, rules, regulations and policies
adopted by the Cancer Therapy and Research Foundation of South Texas (and its
affiliated entities), and other interested institutions, companies or concerns.
In discharging his duties and responsibilities hereunder, Dr. Von Hoff will
advise Ilex Oncology when and if an actual or potential conflict arises. The
parties will then mutually work at attempting to resolve the conflict. If a
resolution is not possible, Dr. Von Hoff shall be excused from performing
whatever duties or services which gave rise to the actual, potential or
apparent conflict.
4.0 Compensation. Compensation for Dr. Von Hoff's services shall
be in accordance with Exhibit B, which is attached hereto and incorporated
herein for all purposes.
5.0 Independent Contractor. The parties understand and
acknowledge that Dr. Von Hoff is an independent contractor and is not an
employee of Ilex Oncology for the purposes of this Agreement, the Social
Security Act, the income withholding provision of the Internal Revenue Code of
1986, as amended, or other federal or state laws relating to compensation,
insurance, unemployment, or workman's compensation. Dr. Von Hoff acknowledges
and agrees that it shall be his obligation to report as self-employment income
all compensation received or accrued as a result of this Agreement. Dr. Von
Hoff acknowledges that he will not be entitled to any insurance, pension,
profit sharing, retirement or other employee benefits which Ilex Oncology may
provide to its employees during the term of this Agreement. This Agreement
shall not be construed as creating a partnership, joint venture, agency or
employment relationship, or as granting a franchise under either federal or
state law.
6.0 Inventions. The parties acknowledge that the terms of Dr. Von
Hoff's affiliation with other companies and institutions may require, to
varying degrees and under certain conditions, that Dr. Von Hoff assign his
rights to any discoveries, inventions or developments to such companies and
institutions. In the performance of his duties and responsibilities hereunder,
Dr. Von Hoff may conceive, make or develop products, processes or other
intellectual property. It is the intent of the parties that intellectual
property conceived, made or developed by Dr. Von Hoff during the performance of
his duties and responsibilities hereunder that relates to Ilex Oncology's
business, or that is conceived, made or developed using Ilex Oncology's funds,
facilities, materials or information, shall be owned by Ilex Oncology. Dr. Von
Hoff will use his best good faith efforts to ensure that his obligations under
affiliations with other companies or institutions do not extend to intellectual
property rightfully owned by Ilex Oncology. Dr. Von Hoff will assist Ilex
Oncology in obtaining legal protection for such intellectual property as part
of his duties and responsibilities hereunder, and will execute such documents
as reasonably necessary to secure such protection and confirm ownership in Ilex
Oncology. The parties will develop procedures for identifying any potentially
conflicting claims to such intellectual property. In the event of such
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<PAGE> 3
potentially conflicting claims, the parties will mutually cooperate in
resolving such conflicts.
7.0 Confidential Information. Dr. Von Hoff agrees to maintain in
confidence all information and materials provided by, or obtained from or
through, Ilex Oncology including, without limitation, all information regarding
drugs; pharmaceuticals; gene manipulations and/or therapy; products, compounds
and compositions resulting from chemical, rDNA, genetic engineering or other
methods; potential new uses of existing drugs, compounds or compositions;
medical devices; and all financial information, computer software and
documentation; and other information relating to the business of Ilex Oncology
(collectively, the "Confidential Information"). Dr. Von Hoff shall not
publish, use or disclose Confidential Information learned, developed or
acquired as a result of services offered under this Agreement without Ilex
Oncology's prior written consent. Confidential Information shall not include
(i) information which was rightfully in Dr. Von Hoff's possession without an
obligation of confidentiality prior to disclosure by or through Ilex Oncology;
(ii) information which lawfully becomes part of the public knowledge,
literature or generally available to the public through no act of Dr. Von Hoff;
or (iii) information obtained from any third party, provided that any such
third party did not obtain such information from Ilex Oncology or obtain such
information in confidence. Dr. Von Hoff shall protect the Confidential
information and shall take all reasonable steps to prevent the unauthorized
disclosure, dissemination, or publication of the Confidential Information.
All data, records, analyses, reports and material prepared or complied
by Dr. Von Hoff or furnished to Dr. Von Hoff, in connection with this Agreement
during the term hereof shall be the sole and exclusive property of Ilex
Oncology, and all of such data, records, analyses, reports and materials, and
all copies thereof, shall be delivered to Ilex Oncology at its request or on
the termination of this Agreement.
The parties acknowledge that the terms of Dr. Von Hoff's other
affiliations also contain or require certain obligations of confidentiality.
In discharging his duties relative to Confidential Information, Dr. Von Hoff
shall advise ilex Oncology when and if an actual or potential conflict with
such other obligations arise. The parties will then mutually work at
attempting to resolve the conflict. If such conflict cannot be resolved, Dr.
Von Hoff is expressly excused from performing any services hereunder that would
result in a breach or potential breach of his confidentiality obligations owed
to another entity.
8.0 Term and Termination.
8.1 Term. Subject to the rights of termination set forth in this
Section 8.0, this Agreement shall remain in full force and effect from January
1, 1995 until December 31, 1998, unless sooner terminated by Dr. Von Hoff's
death or continuing inability to discharge the duties hereunder for three (3)
consecutive months. Ninety (90) days prior to the end of the term of this
Agreement, the parties shall enter into negotiations regarding the renewal of
this Agreement or the execution of a new
-3-
<PAGE> 4
agreement, which renewal or new agreement shall contain such terms and
conditions as may be agreed by the parties.
8.2 Voluntary Termination. During the term of this Agreement,
either party may terminate the Agreement without cause, by giving sixty (60)
days written notice of termination to the other party.
8.3 Termination With Cause. In the event of breach of this
agreement by either party, the non-breaching party may, at its option, cancel
this agreement for such breach by giving written notice of cancellation to the
breaching party, which cancellation shall be effective thirty (30) days
following the delivery of such notice or such later time as may be specified in
such notice, unless the breaching party shall have cured such breach prior to
the expiration of the notice.
8.4 Limited Survival Upon Termination. Sections 6 and 7 shall
survive termination of this Agreement and shall remain in full force and
effect.
9.0 Miscellaneous.
9.1 Notices. All notices, requests, demands, and other
communications hereunder shall be in writing and, unless otherwise provided
herein, shall be deemed to have been duly given upon hand delivery or upon
deposit in the United States Mail, postage prepaid, certified or registered
mail, return receipt requested, as follows:
If to Ilex Oncology:
Ilex Oncology, Inc.
14960 Omicron
San Antonio, Texas 78245
Attention: Richard L. Love
If to Dr. Von Hoff:
Daniel Von Hoff, M.D.
226 Branch Oak Way
San Antonio, Texas 78230
or at such other address as shall have been furnished to the other in writing
in accordance herewith, except that such notice of such change shall be
effective only upon receipt.
9.2 Amendments and Waiver. This Agreement may be amended or
modified by, and only by, a written instrument executed by all the parties
hereto. The terms of this Agreement may be waived by, and only by, a written
instrument executed by the party against whom such waiver is sought to be
enforced.
-4-
<PAGE> 5
9.3 Section and Other Headings. The section and other headings
contained in this Agreement are for convenience of reference only and shall not
in any way affect the meaning or interpretation of this Agreement.
9.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
9.5 Assignments and Parties in Interest. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and assigns. This Agreement calls for Dr. Von Hoff's
personal services and may not be assigned by Dr. Von Hoff without the prior
written consent of Ilex Oncology.
9.6 No Implied Rights or Remedies. Except as otherwise expressly
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any person, firm, or corporation, other
than the parties hereto and their respective successors and assigns, any rights
or remedies under or by reason of this Agreement.
9.7 Agreement of Further Cooperation. Each of the parties agrees
to execute and deliver such further documents and to cooperate in such manner
as may be necessary to implement and give effect to the agreements contained
herein.
9.8 Entire Agreement. This Agreement, together with all exhibits
hereto, embodies the entire agreement and understanding between the parties
hereto relating to the subject matter hereof and supersedes any prior
agreements and understandings relating to the subject matter hereof.
9.9 Severability. If any part or provision of this Agreement is
or shall be deemed violative of any applicable laws, rules or regulations, such
legal invalidity shall not void this Agreement or affect the remaining terms
and provisions of this Agreement, and this Agreement shall be construed and
interpreted to comport with all such laws, rules or regulations to the maximum
extent possible.
9.10 Applicable Law. This Agreement has been accepted and made
performable in Bexar County, Texas. This Agreement and the rights and
obligations of the parties hereto shall be construed under and governed by the
laws of the State of Texas, without giving effect to principles of conflict of
laws. The exclusive venue for resolution of any dispute between the parties
related to the subject matter of this Agreement shall be in Bexar County,
Texas.
9.11 IRS Contingency. Notwithstanding anything contained herein to
the contrary, Ilex Oncology and Dr. Von Hoff agree that they shall negotiate in
good faith to reach an equitable adjustment to the provisions of this Agreement
in the event that either (a) the United State Internal Revenue Service notifies
the Cancer Therapy and Research Foundation of South Texas ("CTRF") and/or CTRC
Research Foundation
-5-
<PAGE> 6
("CTRC"), or any affiliate thereof that it will not rule that the establishment
and operation of Ilex Oncology will not adversely affect CTRF's, CTRC's or any
such affiliate's status as an exempt organization under Section 501(c)(3) of
the Internal Revenue Code, or the Internal Revenue Service otherwise asserts
that the establishment and operation of Ilex Oncology may adversely affect
CTRF's, CTRC's or any such affiliate's status as an exempt organization under
Section 501(c)(3) of the Internal Revenue Code; or (b) Ilex Oncology fails to
receive at least three million dollars ($3,000,000) by June 30, 1996 from the
sale to persons other than CTRF, CTRC and their affiliates of its common or
preferred stock. If Ilex Oncology and Dr. Von Hoff cannot reach such an
agreement within ninety (90) days subsequent to the occurrence of such an
event, this Agreement shall automatically terminate as of the expiration of
that ninety (90) day period.
EXECUTED as of the day and year first above written.
ILEX ONCOLOGY, INC.
By: /s/ RICHARD LOVE
-----------------------------------------
Name: Richard Love
---------------------------------------
Title: President
--------------------------------------
CONSULTANT:
/s/ DANIEL VON HOFF
--------------------------------------------
Daniel Von Hoff, M.D.
-6-
<PAGE> 7
EXHIBIT A
DUTIES AND SERVICES
1.0 Consultation Services. Dr. Von Hoff shall perform the
following services for Ilex Oncology.
1.1 Scientific Advisory Committee. Dr. Von Hoff shall
organize for the benefit of Ilex Oncology a Scientific Advisory Committee (the
"SAC") which shall be composed of such persons as may be appointed by Ilex
Oncology in consultation with Dr. Von Hoff. The SAC shall be organized and
operate pursuant to a policy developed by Dr. Von Hoff and approved by Ilex
Oncology. The SAC shall hold at least four (4) meetings per year, at such time
and place as designated by the SAC.
1.2 Committee Co-Chairman. Dr. Von Hoff shall be a
member of the SAC and serve as co-chairman of the committee. Dr. Von Hoff
shall attend all meetings of the SAC and in accordance with the terms of this
Agreement report to Ilex Oncology the action and recommendations of the SAC.
1.3 Drug Acquisition. Dr. Von Hoff shall, consistent
with the terms of this Agreement and in collaboration with the SAC, advise the
management of Ilex Oncology of viable opportunities for Ilex Oncology to
acquire for the purpose of commercialization chemotherapy compounds and drugs
as well as other therapeutic or supportive care compounds.
1.4 Clinical Development Strategies. Dr. Von Hoff shall,
consistent with the terms of this Agreement and as part of his duties with the
SAC, assist Ilex Oncology in the development of clinical development
strategies.
1.5 Scientific Review. In conjunction with the SAC, Dr.
Von Hoff shall review scientific and clinical data on compounds acquired by
Ilex Oncology. As co-chairman of the SAC, Dr. Von Hoff shall report to the
management of Ilex Oncology the results of the SAC findings and recommendations
relative to such compounds.
1.6 Presentations. Dr. Von Hoff shall, consistent with
the terms of this Agreement, make presentations for and on behalf of Ilex
Oncology to potential financial investors regarding Ilex Oncology's portfolio
of compounds provided that such presentations shall include an appropriate
disclosure of Dr. Von Hoff's financial relationship with Ilex Oncology.
2.0 Requisites. In providing services under this Agreement, Dr.
Von Hoff shall at all times perform his duties and responsibilities in
conformance with the following requisite standards of conduct:
-7-
<PAGE> 8
2.1 Dr. Von Hoff shall not make any recommendations
about, or actively participate in decisions regarding the acquisition of
technologies or compounds owned or discovered by or licensed to the Institute
for Drug Development ("IDD"), when such actions would constitute a conflict of
interest, give the appearance of a conflict of interest or a breach of any
policy of IDD or Ilex Oncology.
2.2 Dr. Von Hoff shall not make an recommendations about,
or actively participate in decisions regarding the acquisition of technologies
or compounds for which Dr. Von Hoff was the Principal Investigator, supervised
the Principle Investigator or provided leadership for the clinical or
preclinical studies for such compounds or technologies, when such actions would
constitute a conflict of interest, give the appearance of a conflict of
interest or a breach of any policy of Ilex Oncology or the sponsor of the
study.
2.3 Dr. Von Hoff shall not function as the Principal
Investigator for or supervise the Principal Investigator or clinical or
preclinical studies conducted by Ilex Oncology.
2.4 If Dr. Von Hoff publishes an article, paper or other
work regarding technologies or compounds owned or discovered by Ilex Oncology
or licensed to Ilex Oncology, Dr. Von Hoff shall make an appropriate disclosure
of the fact that he has a financial interest in the company.
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EXHIBIT B
COMPENSATION
1. Ilex Oncology shall pay to Dr. Von Hoff the following fees for Dr. Von
Hoff's services:
a. A retainer of fifteen thousand dollars ($15,000.00) per year,
which shall be paid within thirty (30) days of the execution
of this Agreement and on the anniversary thereof;
b. Two thousand dollars ($2,000.00) per day for every full day in
which services are provided pursuant to this Agreement and for
partial days, Dr. Von Hoff shall be compensated at the rate of
two hundred fifty dollars ($250.00) per hour; and
c. Two thousand dollars ($2,000.00) per meeting for attending
meetings of the SAC.
2. a. Right to Purchase Common Stock. In addition to the fees
described above, Dr. Von Hoff shall be entitled, for a period
of thirty (30) days from the date of this Agreement, to
purchase up to 640,000 shares (the "Shares") of common stock,
par value $.01 per share, of Ilex Oncology at a price of $.10
per share (the "Purchase Price").
b. Financing. Ilex Oncology will loan Dr. Von Hoff up to
sixty-four thousand dollars ($64,000.00) for the purchase of
the Shares. Such loan will be evidenced by a promissory note
(the "Note") and related agreements as required by Ilex
Oncology. The Note will bear interest at a rate of eight
percent (8%) simple interest per annum (i.e. not compounded)
(the "Agreed Rate") and will be payable in quarterly
installments based upon a ten (10) year amortization schedule
and will mature on the fourth anniversary of this Agreement.
The Note shall be secured by a pledge of that number of Shares
basis determined by dividing the outstanding principal balance
of the Note by the per share purchase price of the Shares
(e.g. if the Note balance is $20,000, the number of Shares
pledged would be 200,000), with a mechanism for partial
releases of pledged shares to reflect reductions in the unpaid
balance of the Note on the same basis.
c. Restrictions on Shares. Dr. Von Hoff's ownership of the
Shares shall be subject to the following restrictions, in
addition to restrictions on transfer that might be imposed by
applicable state or federal securities laws.
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(1) For a period of four (4) years from the date Dr. Von
Hoff purchases the Shares (the "Purchase Date"), Dr.
Von Hoff shall not sell, transfer, pledge or
otherwise dispose of or encumber the Shares, or any
of them, other than as provided in this Agreement.
(2) In the event this Agreement is terminated pursuant to
Section 9.11 of the Agreement, during the term hereof
for cause by Ilex Oncology or without cause by Dr.
Von Hoff, Ilex Oncology shall have the right, but not
the obligation, to purchase the Shares from Dr. Von
Hoff; provided, however, that the number of Shares to
which such right to purchase applies shall be reduced
by 25% for each year of the term hereof which has
been completed as of the effective date of such
termination (the "Termination Date"). For example,
if three years have been completed under this
Agreement as of the Termination Date, Ilex Oncology
shall have the right to purchase a number of Shares
equal to 25% of the number of Shares originally
purchased by Dr. Von Hoff pursuant to this Agreement.
the price per share to be paid by Ilex Oncology for
any Shares purchased by it pursuant to this paragraph
shall be equal to the Purchase Price plus interest at
the Agreed Rate from the Purchase Date through the
Termination Date.
3. Stock Option.
a. As additional compensation for services rendered under this
Agreement, Ilex Oncology shall grant to Dr. Von Hoff an
option to acquire up to a certain number of shares of common
stock ("Common Stock") of Ilex Oncology. The exercise price
of the option shall be equal to the Common Stock equivalent
purchase price per share of equity securities (anticipated to
be preferred stock) issued by Ilex Oncology pursuant to its
initial private placement or other offering which results in
gross proceeds to Ilex Oncology in excess of $3 million. The
number of shares of Common Stock covered by the option shall
be equal to $100,000 divided by the Common Stock equivalent
purchase price per share applicable to such offering (for
example, if the private placement price is $1.50 per share,
Dr. Von Hoff would receive an option to acquire up to 66,667
shares). The option shall vest over four (4) years as
follows: 25% on the first anniversary of this Agreement, 25%
on the second anniversary of this Agreement, 25% on the third
anniversary of this Agreement, and 25% on the fourth
anniversary of this Agreement. All options must be exercised
upon the later of (i) the fifth year anniversary of this
Agreement, (ii) one year subsequent to the termination of
employment, for any reason, from Ilex Oncology, or (iii) one
year subsequent to the termination of the "lock-up period"
that is negotiated by Ilex Oncology and its underwriters in
connection with an initial public offering of Ilex Oncology's
Common Stock (the "Option Term"). The option will be granted
contemporaneously with the
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completion of such initial private placement or other offering
pursuant to a separate instrument which shall make reference
to the provision of this Agreement.
b. The stock option issued to Dr. Von Hoff pursuant to this
Section shall be consistent with Ilex Oncology's stock option
plan (the "Plan") to be adopted for key employees of Ilex
Oncology. Accordingly, Dr. Von Hoff shall have the following
rights relating to termination of this Agreement pursuant to
the provisions of Article 8:
(1) In the event of termination by Ilex Oncology without
cause under Section 8.2; (i) outstanding stock
options held by Dr. Von Hoff which are then vested
shall remain exercisable for the Option Term, (ii)
if, within ten (10) days of such termination, Dr. Von
Hoff notifies Ilex Oncology that he is making an
election under this Section, outstanding stock
options held by Dr. Von Hoff which would vest within
one year from the date of termination shall
automatically become vested and remain exercisable
for the Option Term, and (iii) after giving effect to
any accelerated vesting under clause (ii) above, any
then unvested portion of Dr. Von Hoff's outstanding
stock options shall lapse.
(2) In event of termination by Ilex Oncology for "cause"
under Section 8.3, upon death or disability of Dr.
Von Hoff or by Dr. Von Hoff pursuant to a voluntary
resignation under Section 8.2, (i) any portion of Dr.
Von Hoff's outstanding stock options which are vested
as of the date of termination shall remain
exercisable for the Option Term, and (ii) any then
unvested portion of Dr. Von Hoff's outstanding stock
options shall lapse.
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EXHIBIT 10.53
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
This Convertible Preferred Stock Purchase Agreement (the "Agreement")
dated as of November 11, 1996 is entered into by and between ILEX Oncology,
Inc., a Delaware corporation (the "Company"), and Johnson & Johnson Development
Corporation (the "Purchaser"), whose mailing address and principal office is
set forth on Exhibit A.
W I T N E S S E T H:
WHEREAS, the Company desires to sell 199,601 shares of Series D
Convertible Preferred Stock, $.01 par value per share, having the rights,
preferences, privileges and restrictions described herein and in the Exhibits
and Schedules hereto (the "Series D Preferred"); the purchase price for such
shares of Series D Preferred shall be $5.01 per share.
WHEREAS, the Purchaser desires to enter into this Agreement pursuant
to which the Purchaser will purchase shares of Series D Preferred on the terms
set forth herein and in the amount and for the aggregate consideration set
forth in Exhibit A.
NOW, THEREFORE, the Company and the Purchaser agree as follows:
1. Purchase and Sale. Subject to the provisions of this
Agreement (including the last sentence of this SECTION 1) and on the basis of
the representations and warranties contained herein, on the Closing Date (as
hereinafter defined), the Company will sell to the Purchaser and the Purchaser
will purchase from the Company that number of shares of the Series D Preferred
set forth adjacent to the Purchaser's name on Exhibit A. The purchase price to
be paid by the Purchaser for such shares of Series D Preferred shall be equal
to the product of $5.01 per share times the number of shares of Series D
Preferred purchased at the Closing by the Purchaser (the "Purchase Price").
2. Closing of Purchase and Sale.
2.1 Closing; Closing Date. The purchase and sale of the Series D
Preferred (the "Closing") shall occur at the offices of Fulbright & Jaworski
L.L.P., 300 Convent Street, Suite 2200, San Antonio, Texas 78205, and shall
occur at 10:00 a.m. local time on November 11, 1996 or such other time and date
as may be agreed upon by the Company and the Purchaser (the "Closing Date").
2.2 Transactions at Closing. The Closing of the purchase and sale
of shares of Series D Preferred to be made to the Purchaser shall be effected
on the Closing Date. On the Closing Date (a) the Company and the Purchaser
shall execute and deliver each agreement included as an exhibit hereto to which
they are a party, (b) the Company shall deliver to the Purchaser a
<PAGE> 2
stock certificate for the Series D Preferred to be issued and sold to the
Purchaser, duly registered in the Purchaser's name, and (c) the Purchaser shall
deposit by wire transfer of immediately available funds or bank certified or
cashier's check the aggregate Purchase Price called for in SECTION 1 of this
Agreement into one or more bank accounts of the Company as shall be designated
by the Company prior to the Closing.
3. Representations and Warranties of Company. The Company
represents and warrants to the Purchaser as follows:
3.1 Organization, Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has full power and authority to own, lease
and operate its properties and assets and to conduct its business as presently
conducted and as proposed to be conducted, and to enter into this Agreement and
the Registration Rights Agreement (as defined in SECTION 5.7) and to carry out
the transactions contemplated by such agreements. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
the State of Texas and in every other jurisdiction in which the failure to so
qualify would have a material adverse effect on the business, assets,
operations or financial condition of the Company.
3.2 Capitalization. The authorized capital stock of the Company
consists of (a) 20,000,000 shares of preferred stock, $.01 par value per share
("Preferred Stock"), of which (i) 5,239,900 shares have been designated as
Series A Convertible Preferred Stock, $.01 par value per share (the "Series A
Preferred"), all of which are issued and outstanding, (ii) 5,432,500 shares
have been designated as Series B Convertible Preferred Stock, $.01 par value
per share (the "Series B Preferred"), all of which are issued and outstanding,
(iii) 2,293,578 shares have been designated as Series C Convertible Preferred
Stock, $.01 par value per shared (the "Series C Preferred"), all of which are
issued and outstanding, (iv) 199,601 shares have been designated as the Series
D Preferred, to be issued pursuant to the terms of this Agreement and (b)
40,000,000 shares of Common Stock, $.01 par value per share ("Common Stock") of
which (i) 2,080,100 shares are issued and outstanding, (ii) 5,239,900 shares
are reserved for issuance on conversion of the Series A Preferred, (iii)
5,432,500 shares are reserved for issuance on conversion of the Series B
Preferred, (iv) 2,293,578 shares are reserved for issuance on conversion of the
Series C Preferred, (v) 199,601 shares are reserved for issuance on conversion
of the Series D Preferred, (vi) 2,300,000 shares are reserved for issuance on
exercise of options issued or to be issued to employees, advisors, officers,
directors and consultants of, and other persons performing services for, the
Company pursuant to stock option plans approved by the Board of Directors of
the Company, (vii) 170,000 shares are reserved for issuance on exercise of
outstanding warrants issued to Vector Securities International, Inc., (viii)
50,000 shares are reserved for issuance on exercise of warrants to be issued to
Chestnut Partners, Inc. and (ix) 573,395 shares are reserved for issuance on
exercise of warrants issued to the holders of the Series C Preferred (the
"Investor Warrants") (the reserved shares referred to in (ii) through (ix) are
collectively referred to as the "Reserved Shares"). The record owners of the
Company's issued and outstanding Common Stock and the holders of all options
and warrants to purchase
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<PAGE> 3
Common Stock are set forth on Schedule 3.2 hereto. The issued and outstanding
shares of the Company's capital stock have been duly authorized and validly
issued and are fully paid and non-assessable. Holders of shares of the
Company's capital stock have no preemptive rights and, except as set forth in
SECTION 7.6 of this Agreement, SECTION 7.6 of the Series B Convertible
Preferred Stock Purchase Agreement dated September 29, 1995 (the "Series B
Purchase Agreement"), among the Company and the persons identified on Exhibit A
thereto and SECTION 7.6 of the Series C Convertible Preferred Stock Purchase
Agreement dated July 22, 1996 (the "Series C Purchase Agreement"), among the
Company and the persons identified on Exhibit A thereto, no holder of shares of
the Company's capital stock has any right of first refusal to purchase
securities sold by the Company. Except for the shares of Common Stock to be
issued upon the conversion of the Series A Preferred, the Series B Preferred,
the Series C Preferred and the transactions contemplated by this Agreement
(including the exhibits hereto) and except for the shares reserved for issuance
as set forth in this section, there are no outstanding warrants, options,
convertible securities or rights (contingent or otherwise) to subscribe for or
purchase any capital stock or other securities from the Company. The Company
is not required to register any of its equity securities under Section 12(a) or
12(g) of the Securities Exchange Act of 1934. The designations, powers,
preferences, rights, qualifications, limitations and restrictions in respect of
each class and series of authorized capital stock of the Company are as set
forth in the Certificate of Incorporation (as defined in SECTION 3.3), and of
the Series D Preferred will be set forth in the Certificate of Incorporation
prior to the Closing, and, all such designations, powers, preferences, rights,
qualifications, limitations and restrictions are valid, binding and enforceable
and in accordance with all applicable laws. Except as contemplated by this
Agreement, Section 7.6 of the Series B Purchase Agreement, Section 7.6 of the
Series C Purchase Agreement, the Second Amended and Restated Preferred
Stockholders' Sales Agreement among the Company, CTRC Research Foundation, and
the holders of the Series B Preferred, the holders of the Series C Preferred
and the holders of the Series D Preferred executed herewith, as amended (the
"Preferred Stockholders' Sales Agreement"), the Second Amended and Restated
Founders' Sales Agreement among Richard L. Love, Daniel D. Von Hoff, Alexander
L. Weis, Charles A. Coltman, Jr., the holders of the Series B Preferred, the
holders of the Series C Preferred and the holders of the Series D Preferred
(the "Founders' Sales Agreement"), or set forth in Schedule 3.2, (x) there are
no restrictions on the transfer of shares of capital stock of the Company other
than those imposed by relevant state and federal securities laws, (y) there are
no agreements, understandings, proxies, trusts or other collaborative
arrangements concerning the voting, pledge or purchase and sale of the capital
stock of the Company to which the Company is a party or, to the Company's
knowledge, to which any other Person is a party, (z) no holder of any security
of the Company is entitled to preemptive, first refusal or similar statutory or
contractual rights, either arising pursuant to any agreement or instrument to
which the Company is a party, or which are otherwise binding upon the Company,
or, to the Company's knowledge, to which any other Person is a party. Except
as provided for in the Certificate of Incorporation, the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interest therein or to pay any dividend or
make any other distribution in respect thereof. Other than pursuant to the
terms of the Registration Rights Agreement, no Person has demand or other
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<PAGE> 4
rights to cause the Company to file any registration statement under the
Securities Act of 1933, as amended, relating to any securities of the Company
or any right to participate in any such registration.
3.3 Validity of Stock. Prior to the Closing, the Certificate of
Designation, Preferences and Rights of Series D Convertible Preferred Stock in
the form attached hereto as Exhibit 3.3(A) will have been duly filed with the
Delaware Secretary of State. On the Closing Date, the Series D Preferred will
be duly authorized and, when issued and sold in accordance with the terms of
this Agreement, will be duly and validly issued, and fully paid and
non-assessable and will be free and clear of all liens, charges, encumbrances
or restrictions imposed by or through the Company except as set forth in this
Agreement, the Registration Rights Agreement or applicable securities laws. On
the Closing Date, the Common Stock issuable upon conversion of the Series D
Preferred will be duly authorized and reserved for issuance by all necessary
action and when issued and sold upon such conversion in accordance with the
terms of this Agreement and the Company's Certificate of Incorporation, as
amended (including the Certificate of Designation, Preferences and Rights of
Series D Convertible Preferred Stock), in the form of Exhibit 3.3(B) (the
"Certificate of Incorporation") will be duly and validly issued, fully paid and
non-assessable.
3.4 Subsidiaries. The Company has no subsidiaries and does not
own or control, directly or indirectly, any other corporation, partnership,
association, joint venture or entity.
3.5 Financial Statements. The Company has furnished the Purchaser
with the Company's (a) consolidated audited balance sheet (the "Audited Balance
Sheet") as of December 31, 1995 (the "Audited Balance Sheet Date") and
consolidated audited statements of operations for the year ended December 31,
1995 ("Audited Income Statement") and (b) consolidated unaudited balance sheet
(the "Unaudited Balance Sheet") as of June 30, 1996 (the "Unaudited Balance
Sheet Date") and consolidated unaudited statements of operations for the six
months ended June 30, 1996 ("Unaudited Income Statement") (each of which in (a)
and (b) above are collectively referred to as the "Financial Statements" and
are attached hereto as Schedule 3.5). The Financial Statements are true and
correct in all material respects, are in accordance with the books and records
of the Company, have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied, and fairly and accurately
present in all material respects the financial position of the Company as of
such dates and the results of its operations for the periods then ended,
provided that the Unaudited Financial Statements may not contain all footnotes
required by GAAP and the Unaudited Balance Sheet and the Unaudited Income
Statement are subject to normal year-end audit adjustments, none of which will
be material. Since the Unaudited Balance Sheet Date, the Company has not
incurred or otherwise become subject to any liabilities, debts or obligations
other than in the ordinary course of business consistent with past practice,
except for those listed on Schedule 3.5 attached hereto and those that would
not individually or in the aggregate have a material adverse effect on the
financial condition of the Company.
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<PAGE> 5
3.6 Insurance. Schedule 3.6 contains a list of all insurance
policies (specifying (a) the Insurer, (b) the amount of coverage and (c) the
type of insurance) maintained by or on behalf of the Company on the properties,
assets, business or personnel of the Company, all of which are (and pending
Closing will continue to be) in full force and effect.
3.7 Authorization; Approvals. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and the
Registration Rights Agreement, to perform its obligations hereunder and
thereunder and to engage in the transactions contemplated hereby and thereby.
The execution, delivery and performance by the Company of this Agreement and
the Registration Rights Agreement, have been duly authorized by all necessary
corporate action, and this Agreement has been, and at the Closing the
Registration Rights Agreement will have been, duly executed and delivered by
the Company. This Agreement constitutes, and at the Closing the Registration
Rights Agreement will constitute, the legal, valid and binding obligation of
the Company legally enforceable against the Company in accordance with their
respective terms. The Company has obtained all material consents,
authorizations and approvals of, and has made or will make all material
declarations and filings with, all federal and state governmental authorities
required on the part of the Company in connection with the consummation of the
transactions contemplated by this Agreement, except to the extent any failure
by the Company to comply with the foregoing is due to misrepresentations or
nondisclosure of the Purchaser.
3.8 No Conflict with Other Instruments and Laws. Except as set
forth on Schedule 3.8 or any other Schedules hereto, the execution of and
performance by the Company of its obligations under this Agreement and the
Registration Rights Agreement will not violate any provision of law or
governmental rule or regulation and will not conflict with or result in any
breach of any of the terms, conditions or provisions of, or constitute a
default (with notice, lapse of time or both) under (a) the Certificate of
Incorporation, (b) the Company's by-laws as currently in effect which are
attached hereto as Exhibit 3.8 (the "By-laws"), (c) any statute, law, rule,
regulation, judgment, decree or order to which the Company is bound or
applicable to the Company or its assets or (d) any agreement, contract, lease,
indenture or other instrument to which the Company is a party.
3.9 Absence of Undisclosed Liabilities; Changes. Except as
otherwise described in Schedule 3.9 or any other Schedule hereto, the Company
does not have any liability or obligation (whether accrued, contingent or
otherwise), which individually or in the aggregate exceeds $100,000 (including,
without limiting the generality of the foregoing, any tax liabilities due or to
become due to the extent they relate to the conduct of the business of the
Company through the date hereof) not reflected in the Financial Statements,
except (a) obligations and liabilities incurred after the Unaudited Balance
Sheet Date in the ordinary course of business consistent with past practice;
(b) obligations under contracts made in the ordinary course of business
consistent with past practice that would not be required to be reflected or
disclosed in financial statements prepared in accordance with GAAP; and (c)
obligations under or
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<PAGE> 6
contemplated by this Agreement. The Company has not become directly or
contingently liable on any indebtedness, liability or obligations of any other
Person.
Since the Unaudited Balance Sheet Date there has been no occurrence or
development that has had or is reasonably likely to have a material adverse
effect on the Company's business, assets, operations or financial condition or
prospects, and there has been no material adverse change in the business,
assets, operations or financial condition or prospects of the Company.
3.10 Labor Agreement and Actions. The Company is not bound by or
subject to any contract with any labor union and, to the knowledge of the
Company, no labor union has requested or has sought to organize or represent
any of the employees of the Company. There is no strike or other labor dispute
involving the Company pending, or to the knowledge of the Company threatened,
which could reasonably be expected to have a material adverse effect on the
business, assets, operations or financial condition of the Company, nor is the
Company aware of any labor organization activity involving its employees.
3.11 Compliance with Law and Other Instruments. The Company has
complied with and is not in violation of (with due notice or lapse of time or
both) any agreement, instrument, statute or governmental rule or regulation
(including, without limitation, its Certificate of Incorporation and By-laws)
or any governmental order, judgment, decree, writ, injunction or award of any
arbitration, court or governmental authority applicable to it or its business,
operations, assets or services, applicable to it or its assets that has or
could reasonably be expected to have a material adverse effect on the business,
assets, operations or financial condition of the Company. To the knowledge of
the Company, no employee of the Company is in violation of any term of any
employment contract or any other contract or agreement relating to the
employment of such employee with the Company, as applicable, the violation of
which could reasonably be expected to have a material adverse effect on the
business, assets, operations or financial condition of the Company. Except for
governmental licenses, permits, approvals and consents, the failure to obtain
any of which alone or in the aggregate could not reasonably be expected to have
a material adverse effect on the business, assets, operations or financial
condition of the Company, Schedule 3.11 hereto lists all governmental licenses,
permits, franchises, approvals and consents required to be received or obtained
by the Company to conduct its business as presently conducted, all of which the
Company currently possesses.
3.12 Proprietary Rights. Schedule 3.12 contains a list of all
patents, trademarks, trade names and service marks (and all applications
therefor), whether or not registered ("Proprietary Rights"), used by the
Company in the conduct of its business. The Company owns or has the right to
use without the payment of royalties or fees or other consideration (except as
disclosed on Schedule 3.12 or any other Schedules hereto), all Proprietary
Rights (as defined below) and Intellectual Property Rights necessary for or
used by it in the conduct of its business as now conducted, and with respect to
Mitoguazone, Crisnatol Mesylate, Dihydro-5-Azacytide, piritrexim, oxypurinol
and difluoromethylornithine as proposed to be conducted. Except as set forth
on Schedule 3.12 or any other Schedules hereto, none of the Proprietary Rights
or
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<PAGE> 7
Intellectual Property Rights has been declared invalid, been limited by order
of any court or by agreement, or is the subject of any infringement,
interference or similar proceeding or challenge. The Company has not
infringed, and is not infringing, on the Proprietary Rights or Intellectual
Property Rights of others which could have a material adverse effect on the
business, assets, operations or financial condition of the Company. The
conduct of the Company's business as proposed to be operated is not expected to
conflict with or infringe upon the Proprietary Rights and Intellectual Property
Rights of others. Except as set forth on Schedule 3.12 or any other Schedules
hereto, the Company has no obligation to compensate any Person for the use of
any such Proprietary Rights or other Intellectual Property Rights and the
Company has not granted to or assigned to any Person any license or other right
to use any of the Proprietary Rights or other Intellectual Property Rights of
the Company. The consummation of the transactions contemplated by this
Agreement will not terminate or alter the ability of the Company to utilize the
Proprietary Rights or the terms of such use. Listed on Schedule 3.12 are all
corporate, trade and fictitious names under which the Company or its business
is operated. The Company has taken all reasonable measures to protect and
preserve the security, confidentiality and value of its Proprietary Rights or
other Intellectual Property Rights. All key employees and consultants of the
Company have executed Employment Provision Agreements in the form attached
hereto as Exhibit 3.12(a) and all members of the Company's Scientific Advisory
Board who have not entered into Consulting Agreements with the Company have
executed Non-Disclosure Confidentiality Agreements in the form attached hereto
as Exhibit 3.12(b). To the Company's knowledge, all trade secrets and other
confidential information of the Company are presently protectable and are not
part of the public domain or knowledge, nor, to the Company's knowledge, have
they been used, divulged or appropriated for the benefit of any Person other
than the Company or otherwise to the detriment of the Company. The Company is
the exclusive owner of all rights, titles and interests in its Proprietary
Rights and other Intellectual Property Rights as purported to be exclusively
owned by the Company and insofar as such Proprietary Rights and other
Intellectual Property Rights involve patents, copyrights, licenses, permits,
license rights, contract rights, tradenames or trademarks, such Proprietary
Rights and other Intellectual Property Rights are valid and in full force and
effect. Neither the Company nor, to the Company's knowledge, any of its
officers, employees or consultants, has received notice of, and to the
Company's knowledge there are no claims pending or threatened that the
Proprietary Rights or other Intellectual Property Rights owned or licensed by
the Company or the use or ownership thereof by the Company infringes, violates
or conflicts with any such right of any third party or, with respect to
Proprietary Rights or other Intellectual Property Rights which involved
patents, copyrights, licenses, permits, license rights, contract rights,
tradenames or trademarks, that such Proprietary Rights or other Intellectual
Property Rights are invalid or unenforceable.
"Intellectual Property Rights" shall mean, in addition to Proprietary
Rights, any and all intellectual property rights relating to trade secrets,
confidential business information, formula, biological or chemical processes,
compounds, cell lines, fungi, yeast, laboratory notebooks, algorithms,
copyrights, claims of infringement against third parties, licenses, permits,
license rights to or of technologies, contract rights with employees,
consultants or third parties,
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<PAGE> 8
inventions and discoveries, and other such rights generally classified as
intangible, intellectual property assets in accordance with GAAP.
To the Company's knowledge, no third party has claimed or has reason
to claim that any Person employed by or affiliated with the Company has in the
course of such Person's employment by or affiliation with the Company (a)
violated or may be violating any of the terms or conditions of his or her
employment, non-competition, non-disclosure or inventions agreement with such
third party, (b) disclosed or may be disclosing or utilized or may be utilizing
any trade secret or proprietary information or documentation of such third
party or (c) interfered or may be interfering in the employment relationship
between such third party and any of its present or former employees. To the
Company's knowledge, no third party has requested information from the Company
which suggests that such a claim might be contemplated. To the Company's
knowledge, no Person employed by or affiliated with the Company has employed or
proposes to employ any trade secret or any information or documentation
proprietary to any former employer, and to the Company's knowledge, no Person
employed by or affiliated with the Company has violated any confidential
relationship which such Person may have had with any third party, in connection
with the development, manufacture or sale of any product or proposed product or
the development or sale of any service or proposed service of the Company, and
the Company has no reason to believe there will be any such employment or
violation. To the Company's knowledge, none of the execution or delivery of
this Agreement or the Registration Rights Agreement, or the carrying on of the
business of the Company as officers, employees or agents by any officer,
director or key employee of the Company, or the conduct or proposed conduct of
the business of the Company, will conflict with or result in a breach of the
terms, conditions or provisions of or constitute a default under any contract,
covenant or instrument under which any such Person is obligated.
3.13 Taxes. Except where the failure to do so would not have a
material adverse effect on the Company's business, the Company has accurately
prepared and timely filed all federal income tax returns and all state and
municipal tax returns that are required to be filed by it and has paid or made
provision for the payment of all amounts due pursuant to such returns, which
are not reflected nor reserved for on the Financial Statements and of all other
taxes, assessments and other governmental charges imposed upon it or upon any
of its assets, income, other than any such charges that are currently payable
without penalty or interest, including, without limitation, all taxes which the
Company is obligated to withhold from amounts owing to employees, creditors and
third parties. There is no tax lien outstanding against the assets of the
Company, except for liens for taxes not yet due and payable. The federal
income tax returns of the Company have not been audited by the Internal Revenue
Service, and there are no waivers in effect of the applicable statute of
limitations for any period. No deficiency, assessment or proposed adjustment
of federal income taxes or state or local taxes of the Company is pending, and
the Company has no knowledge of any proposed liability for any tax to be
imposed.
3.14 Contracts. Except as set forth in Schedule 3.14 or any other
Schedule hereto, the Company is not a party to any contract and has no
obligation or commitment (a) involving
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aggregate future payments by the Company of more than $25,000, which is not
cancelable on 60 days' notice by the Company or (b) that is otherwise material
to the business of the Company (collectively, the "Material Agreements").
Except as set forth on Schedule 3.14 or any other Schedule hereto, the Company
has no employment contracts, deferred compensation agreements or bonus,
incentive, profit-sharing, or pension plans currently in force and effect, or
any understanding with respect to any of the foregoing. Except as set forth on
Schedule 3.14 or any other Schedules hereto, no default or defaults (without
regard to notice or lapse of time or both) exist by the Company (including
without limitation the Company's predecessor in interest) in the due
performance by it, or to the knowledge of the Company by the other party or
parties thereto, of any term, covenant or condition of any contract to which
the Company is a party that individually or in the aggregate would have a
materially adverse effect on the business, assets, operations or financial
condition of the Company. All of the Material Agreements are in full force and
effect.
3.15 Litigation. Except as provided in Schedule 3.15 or any other
Schedule hereto, no action, proceeding or governmental inquiry or investigation
(a "Proceeding") before any court, arbitrator or tribunal or administrative or
other governmental agency is (a) pending, or to the knowledge of the Company,
threatened against the Company or any of its officers, directors or employees
(in their capacity as such) or affecting any of its owned or leased assets, or
(b) to the knowledge of the Company, pending or threatened against any
consultant or shareholder of the Company (in their capacity as such) or
affecting any of its other assets, nor is the Company aware of any such
threatened or contemplated action, proceeding, inquiry or investigation nor, to
the knowledge of the Company, has there occurred any event or does there exist
any condition on the basis of which it is reasonably likely that any such
Proceeding might properly be instituted. There is no Proceeding by the Company
pending or threatened against others.
3.16 Fees and Commissions. Except as described in Schedule 3.16,
the Company has not retained any finder, broker, agent, financial advisor or
other intermediary (collectively, "Intermediary") in connection with the
transactions contemplated by this Agreement. Notwithstanding any disclosure on
Schedule 3.16, the Company agrees to indemnify and hold harmless the Purchaser
from liability for any compensation to any Intermediary retained by the Company
and the fees and expenses of defending against such liability or any such
alleged liability.
3.17 ERISA. Except as disclosed on Schedule 3.17, the Company does
not maintain, sponsor, or contribute (and has not during the last five years
been obligated to maintain, sponsor or contribute or maintained, sponsored or
contributed) to any program or arrangement that is an "employee pension benefit
plan," an "employee welfare benefit plan," a "multiple employer welfare
arrangement," or a "multi-employer plan," as those terms are defined in
Sections 3(1), 3(2), 3(4) or 3(37) of the Employee Retirement Income Security
Act of 1974, as amended, bonus or incentive award or compensation plan or
arrangement, severance pay policy or agreement, deferred compensation agreement
or arrangement, supplemental executive retirement
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program, vacation plan, cafeteria plan, educational assistance plan, and any
other employee benefit plans, agreements, or arrangements (collectively,
"Employee Programs"). The Company has complied with all applicable legal
requirements, including, without limitation, ERISA and the Code, with respect
to all Employee Programs.
3.18 Title to Properties; Encumbrances. Except as set forth in
Schedule 3.18 or any other schedule attached hereto, the Company has good and
marketable title to all of the assets owned by it and used in its business,
including, without limitation, all the material properties and assets reflected
in the Financial Statements, subject to no encumbrance, lien, charge or other
restriction of any kind or character, except for (a) liens reflected in the
Financial Statements or on Schedule 3.18 or any other Schedules hereto, (b)
liens consisting of zoning or planning restrictions, easements, permits and
other restrictions or limitations on the use of real property or irregularities
in title thereto which do not materially detract from the value of, or impair
the use of, such property by the Company, as applicable, (c) liens for current
taxes, assessments or governmental charges or levies on property not yet due
and delinquent and (d) liens which do not materially affect the operation of
the business of the Company, as applicable (liens of the type described in
clauses (a) through (d) above, inclusive, are hereinafter sometimes referred to
as "Permitted Liens"). Except as set forth in Schedule 3.18, the assets of the
Company are in good working order and condition, ordinary wear and tear
excepted.
3.19 Environmental Compliance. Except as disclosed in Schedule
3.19 and to the best of their knowledge:
(a) The Company has not released, emitted, discharged,
dumped or disposed of any hazardous substances onto or into the assets
of the Company, or any part thereof, or onto or into the air, surface
or groundwater, land or soil in violation of Environmental Laws. For
purposes of this Agreement, "Hazardous Substances" has the meaning set
forth in Section 101(14) of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and shall also
expressly include (i) petroleum, crude oil and any fraction thereof or
radioactive material; (ii) any other chemical, material or substance
defined as or included in the definition of "medical waste,"
"infectious waste," "hazardous substance," "hazardous waste,"
"hazardous material," "toxic substance," "special waste,"
"contaminant" or "pollutant," or word or term of similar import, under
any applicable Environmental Law; and (iii) any other chemical,
material or substance, exposure to which is regulated by any
governmental authority having jurisdiction over the Company or is
reasonably likely to give rise to any liability of the Company, in
either case under any Environmental Law. The term "Environmental
Laws" means all applicable foreign, federal, state, county and local
statutes, regulations or ordinances (including common law duties
established by courts or any published judicial or administrative
interpretation thereof) relating to human health and the environment
or the generation, treatment, storage, recycling, transportation,
release or disposal of Hazardous Substances.
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<PAGE> 11
(b) No Hazardous Substances resulting from the Company's
operations have been or are currently located at, in, under or about
either the assets of the Company or any other property currently or
previously owned or operated by the Company in a manner which: (i)
violates in any material respect applicable Environmental Laws or (ii)
requires any material response, remedial, corrective action or cleanup
of any kind under any applicable Environmental Laws.
(c) With respect to the assets or other property owned or
leased by the Company, whether previously or currently owned or
operated or used by the Company for the treatment, storage or disposal
of Hazardous Substances, no litigation, investigation, administrative
or other proceeding of any kind is pending or threatened by any
federal, foreign, state or local governmental entity or private party
arising from: (i) any applicable Environmental Laws; (ii) any
response, remedial or cleanup activities or (iii) any release or
threatened release of Hazardous Substances. In addition, the Company
is not now aware of any facts on which such litigation, investigation,
administrative or other proceeding of any kind might reasonably be
based.
(d) With respect to the assets or other property owned or
leased by the Company, whether previously or currently owned or
operated or used by the Company for the treatment, storage or disposal
of Hazardous Substances, the Company is not subject to any judgment,
injunction, writ, order or agreement arising from: (i) any applicable
Environmental Laws; (ii) any remedial, response or cleanup activities
or (iii) any liabilities, damages, costs, fees or expenses related to
the release or threatened release of Hazardous Substances. In
addition, the Company is not aware of any facts on which such a
judgment, injunction, writ, order or agreement might reasonably be
based.
(e) The assets of the Company do not contain any asbestos
or PCB containing materials in material violation of any applicable
Environmental Laws.
(f) The Company has not caused or allowed, and the
Company has not contracted with any party for, the manufacture,
processing, handling, distribution, use, transportation, treatment or
storage of any Hazardous Substances, except in compliance in all
material respects with applicable Environmental Laws. The Company
does not own any real property.
(g) The Company has obtained and is maintaining in full
force and effect all Environmental Permits and is in compliance in all
material respects therewith "Environmental Permit" shall mean any
necessary permit, license, approval or other authorization or filing
required by the Environmental Laws applicable to the premises leased
by the Company and the business operations currently conducted thereon
and as currently proposed to be conducted.
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<PAGE> 12
(h) The Company and the operations of its business are
being conducted in compliance in all material respects with all
applicable Environmental Laws and orders or directives of any
governmental authority having jurisdiction under such Environmental
Laws. To the Company's knowledge, the premises leased by the Company
are in compliance in all material respects with all applicable
Environmental Laws and orders or directives of any governmental
authorities having jurisdiction under such Environmental Laws.
3.20 Affiliate Transactions. Schedule 3.20 describes all material
contracts, arrangements or transactions between the Company and to the
Company's knowledge, between any customer, licensor, licensee or supplier of
the Company, and any of the Company's Affiliates.
3.21 Exemption from Registration. In sole reliance, as to factual
matters concerning the Purchaser, upon representations and warranties by the
Purchaser in SECTION 4 hereof and without independent investigation, the offer
and sale of the Series D Preferred, and the Common Stock issuable upon
conversion of the Series D Preferred, in the manner contemplated by the
Agreement are, and upon conversion will be, (a) exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended, and (b)
either exempt from, or registered or qualified in compliance with, the
registration requirements of all applicable state "blue sky" securities laws.
3.22 Prior Exemptions from Registration. All offers and sales of
the Company's capital stock prior to the date hereof (a) were exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended, and (b) were made in compliance with all applicable federal and state
securities laws.
3.23 Disclosure. Neither this Agreement, nor any other agreement,
document or certificate furnished to any Purchaser or its counsel by the
Company or on behalf of the Company by any of its officers or counsel in
connection with the transactions contemplated hereby, including, without
limitation, the Financial Statements, when taken as a whole, contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein and therein, in light of the
circumstances under which they were made, not misleading. There is no
currently existing fact which materially and adversely affects, or which in the
future may (so far as the Company can reasonably foresee) materially and
adversely affect, the business, properties, operations or condition, financial
or otherwise, of the Company (except for industry and general economic
conditions and climate which are beyond the control of the Company), which has
not been set forth in this Agreement, including the Schedules and Exhibits
hereto. Without limiting the foregoing, the Company does not have knowledge
that there exists, or that there is pending or planned, any patent, invention,
device or application of a technology or any statute, rule, law, regulation,
standard or code which will, based solely on information currently known by the
Company, materially adversely affect the
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<PAGE> 13
business, prospects, operations, Proprietary Rights, Intellectual Property
Rights, affairs or financial condition of the Company.
3.24 Additional Representations.
(a) Since the Unaudited Balance Sheet Date, (i) the Company
has not entered into any material transaction, made any distribution
on its capital stock, or redeemed or repurchased any of its capital
stock; (ii) paid or cancelled any obligations or liability, other than
current liabilities paid in the ordinary course of the business
consistent with past practice; (iii) suffered any substantial losses
or waived any rights of material value, whether or not in the ordinary
course of business or covered by insurance; or (iv) purchased any
properties or assets, except in the ordinary course of business in
immaterial amounts.
(b) No officer or key employee of the Company has advised
the Company (orally or in writing) that he intends to terminate
employment with the Company.
(c) Each of the Material Agreements is in full force and
effect. There is no anticipated or threatened default of the Material
Agreements and none of the parties nor the Company has provided any
notice of default or of its intention to terminate any Material
Agreement. The Company is not bound by any agreement or instrument or
subject to any charge or other corporate restriction which materially
and adversely affects the business, properties, operations, condition
or prospects, financial or otherwise, of the Company.
(d) The Company is not now and has never been a "United
States real property holding corporation," as defined in Section
897(c)(2) of the Code and Section 1.897-2(b) of the Regulations
promulgated by the Internal Revenue Service.
(e) To the extent reasonably within its control, the
Company shall endeavor to meet the active business requirements of
Section 1202(e) of the Code, provided that (i) the Company does not
represent that it is or will be a "qualified small business" within
the meaning of Section 1202(d) of the Code or that the Series D
Preferred Stock is or will be qualified small business stock as
defined in Section 1202(c) of the Code, (ii) the Company shall not be
required to cause any of its stockholders to reduce its holdings of
Company capital stock, and (iii) the Company shall not be required to
change its core business as currently conducted. The value of the
assets owned directly by the Company does not exceed Fifty Million
Dollars ($50,000,000) as of the date hereof.
4. Representations, Warranties and Covenants of the Purchaser.
The Purchaser represents and warrants to the Company as follows:
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<PAGE> 14
4.1 Authorization. It has full power and authority to enter into
and to perform this Agreement and the Registration Rights Agreement (as defined
in Section 5.7) in accordance with their respective terms. This Agreement has
been, and at the Closing the Registration Rights Agreement will have been, duly
executed and delivered by it, and constitute valid and legally binding
obligations of the Purchaser, legally enforceable against the Purchaser in
accordance with their respective terms, subject to laws of general application
from time to time in effect affecting creditors' rights and the exercise of
judicial discretion in accordance with general equitable principles.
4.2 Investment Representations. It is acquiring the Series D
Preferred purchased by it (and any Common Stock into which Series D Preferred
may be converted) for its own account, for investment, and not with a view to,
or for sale in connection with, any distribution of such Series D Preferred (or
related Common Stock) or any part thereof in violation of federal or state
securities laws. The Purchaser has no present or contemplated agreement,
arrangement or commitment to dispose of Series D Preferred (or any Common Stock
into which the Series D Preferred may be converted) in violation of federal or
state securities laws.
4.3 Investment Experience; Access to Information. It (a) is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D as
promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), (b) alone or together with its advisors is an investor experienced in
the evaluation of businesses similar to the Company's business, and has such
knowledge and experience in financial, business and other relevant matters as
to be competent and fully capable of examining all the merits, risks and other
aspects of the investment contemplated by this Agreement on its own and to make
an informed decision with respect thereto, (c) has the ability to bear the
economic risks of this investment which could include the loss of some or all
of its investment and has sufficient other assets such that the loss of all its
investment in the Company would not have a material adverse effect on its
financial condition or adversely affect its ability to maintain its present
operations, (d) has been afforded prior to the date hereof the opportunity to
ask questions of, and to receive answers from, the Company and its
representatives and has received from the Company all other information
concerning the investment contemplated by this Agreement that it has requested,
and (e) acknowledges that no assurances, representations or guaranties of any
nature whatsoever (including those relating to capital appreciation, dividends
or tax aspects) have been made by the Company or anyone else to it with regard
to the performance of the investment contemplated by this Agreement. The
Purchaser agrees that it will indemnify and hold harmless the Company and its
directors, officers, controlling persons and affiliates (the "indemnities")
from any liability or damage (including reasonable attorney's fees and
expenses) to any third party suffered or incurred by any of the indemnities
solely as a result of the inaccuracy of any of the foregoing representations
and warranties made by the Purchaser, including any liability or damage arising
from or under federal or state securities laws. No investigation pursuant to
this SECTION 4.3 shall affect any representation or warranty given by the
Company in this Agreement.
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<PAGE> 15
4.4 Absence of Registration. The Purchaser understands that:
The Series D Preferred to be sold and issued hereunder (and the Common
Stock into which the Series D Preferred may be converted) have not been
registered under the Securities Act or any applicable state securities or "Blue
Sky" laws, and may be required to be held indefinitely, unless subsequently
registered under the Securities Act and such applicable Blue Sky laws, or an
exemption from such registration is available.
Except as may be required by the Registration Rights Agreement, the
Company is under no obligation to the Purchaser to file a registration
statement with the Securities and Exchange Commission (the "Commission") or any
state securities commission with respect to the Series D Preferred (or the
Common Stock into which the Series D Preferred may be converted).
4.5 Economic Risk. The Purchaser understands that it must bear
the economic risk of the investment represented by the purchase of Series D
Preferred (and any Common Stock into which the Series D Preferred may be
converted) for an indefinite period.
4.6 Fees and Commissions. Except as described in Schedule 4.6,
the Purchaser represents and warrants that it has retained no Intermediary in
connection with the transactions contemplated by this Agreement.
Notwithstanding any disclosure on Schedule 4.6, the Purchaser agrees to
indemnify and hold harmless the Company from liability for any compensation to
any Intermediary retained by the Purchaser and the fees and expenses of
defending against such liability or any such alleged liability.
5. Conditions to Closing of the Purchaser. The obligation of the
Purchaser on the Closing Date to pay the Purchase Price required by SECTION 2
hereof shall be subject to each of the following conditions precedent, any one
or more of which may be waived by the Purchaser:
5.1 Representations and Warranties. The representations and
warranties made by the Company herein shall be true and accurate on and as of
the Closing Date.
5.2 Performance. The Company shall have performed and complied
with all agreements and conditions contained herein required to be performed or
complied with by it prior to or at the Closing.
5.3 Consents, Amendments, etc. The Company shall have secured all
permits, consents and authorizations that shall be necessary or lawfully
required to consummate the transactions contemplated by this Agreement
(including consents or approvals required under federal or state securities
laws and from the holders of the Company's outstanding shares of Common Stock,
Series A Preferred, Series B Preferred and Series C Preferred), to issue the
Series D Preferred to be purchased by the Purchaser, and to issue the Common
Stock into which the Series D Preferred may be converted. The Company shall
have filed with the Secretary of State of the State of Delaware the Certificate
of Designation, Preferences and Rights of Series A
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<PAGE> 16
Convertible Preferred Stock, the Certificate of Designation, Preferences and
Rights of Series B Convertible Stock, the Certificate of Designation,
Preferences and Rights of Series C Convertible Preferred Stock and the
Certificate of Designation, Preferences and Rights of Series D Convertible
Preferred Stock in the form set forth on Exhibit 5.5.
5.4 Compliance Certificates. The Company shall have delivered to
the Purchaser or its representative at the Closing a certificate signed by the
President and by the Secretary of the Company to the effect that the
representations and warranties of the Company contained in this Agreement
continue to be true and accurate on the Closing Date, and that all conditions
specified in Sections 5.2, 5.3, 5.7, 5.8 AND 5.9 have been fulfilled, including
a list of any permits, consents or authorizations required thereby.
5.5 Proceedings and Documents. All corporate and other
proceedings, and all documentation relating thereto, necessary to consummate
the transactions contemplated by this Agreement (including but not limited to
the filing by the Company with the Delaware Secretary of State of the
Certificate of Designation, Preferences and Rights of Series D Convertible
Preferred Stock) shall be reasonably satisfactory in substance and form to the
Purchaser and the Purchaser's counsel, and the Purchaser and the Purchaser's
counsel shall have received all such counterpart originals or certified or
other copies of the documents as the Purchaser or the Purchaser's counsel may
reasonably request, including, without limitation, a certificate of the
Secretary of the Company attesting to the accuracy of each of the following
documents which shall be attached hereto as Exhibit 5.5: (a) the Certificate
of Incorporation of the Company, including all amendments thereto, the
Certificate of Designation, Preferences and Rights of Series A Convertible
Preferred Stock, the Certificate of Designation, Preferences and Rights of
Series B Convertible Stock, the Certificate of Designation, Preferences and
Rights of Series C Convertible Preferred Stock, and the Certificate of
Designation, Preferences and Rights of Series D Convertible Preferred Stock,
each certified as of a recent date by the Delaware Secretary of State, (b) the
By-laws of the Company, and (c) the authorizations of the Board of Directors
and stockholders of the Company relating to the Company's execution, delivery
and performance of its respective obligations, if any, under this Agreement and
the Registration Rights Agreement and all other agreements and transactions
contemplated hereby.
5.6 Opinion of Company's Counsel. The Purchaser or its
representative shall have received an opinion from counsel for the Company,
dated the Closing Date and addressed to the Purchaser in substantially the form
attached hereto as Exhibit 5.6.
5.7 Registration Rights Agreement. The holders of the Series B
Preferred, the holders of the Series C Preferred, CTRC Research Foundation and
the Company shall have executed and delivered amendments to the Amended &
Restated Registration Rights Agreement in compliance with the requirements of
SECTION 16.1 therein, substantially in the form attached hereto as Exhibit 5.7
(the "Registration Rights Agreement"), and the Purchaser shall have executed
and delivered the Registration Rights Agreement.
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5.8 Founders' Sales Agreement. Richard L. Love, Alexander L.
Weis, Daniel D. Von Hoff and Charles A. Coltman, Jr. (the "Founders"), the
holders of the Series B Preferred, the holders of the Series C Preferred and
CTRC Research Foundation shall have executed and delivered amendments to the
Amended and Restated Founders' Sales Agreement in compliance with the
requirements of SECTION 15 therein substantially in the form attached hereto as
Exhibit 5.8 (the "Founders' Sales Agreement"), and the Purchaser shall have
executed and delivered the Founders' Sales Agreement.
5.9 Preferred Stockholders' Sales Agreement. The holders of the
Series B Preferred, the holders of the Series C Preferred and CTRC Research
Foundation shall have executed and delivered amendments to the Amended and
Restated Preferred Stockholders' Sales Agreement in compliance with the
requirements of SECTION 15 therein, substantially in the form attached hereto
as Exhibit 5.9, and the Purchaser shall have executed and delivered the
Preferred Stockholders' Sales Agreement.
6. Conditions to Closing of Company. The obligation of the
Company on the Closing Date to issue and sell the Series D Preferred to be
purchased under this Agreement shall be subject to each of the following
conditions precedent, any one or more of which may be waived by the Company:
6.1 Representations and Warranties. The representations and
warranties made herein by the Purchaser shall be true and accurate in all
material respects on and as of the Closing Date and the Purchaser shall be
deemed to have restated and confirmed such representations and warranties as of
the Closing Date by authorizing or permitting the Closing to be effected
without delivering in writing to the Company a notice of change prior to the
Closing.
6.2 Consents, etc. The Company shall have secured all material
permits, consents and authorizations that shall be necessary or lawfully
required to consummate the transactions contemplated by this Agreement
(including, but not limited to, consents or approvals required under federal or
state securities laws.)
7. Affirmative Covenants.
The Company covenants and agrees that it will perform and observe the
following covenants and provisions, and will cause each Subsidiary, if and when
such Subsidiary exists, to perform and observe the following covenants and
provisions, as if they applied to it in the same manner as they apply to the
Company.
7.1 Inspection. For so long as the Purchaser (or a Permitted
Holder, as defined in SECTION 14) holds at least One Hundred Thousand (100,000)
shares of the Series D Preferred (or Common Stock into which it has been
converted), as adjusted for Recapitalization Events, the Company will permit an
authorized representative of the Purchaser (or such Permitted Holder)
reasonable access during the normal business hours of the Company and upon
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reasonable notice (which notice in no event shall be provided less than three
business days in advance) to the books, records, personnel and properties of
the Company, for any reasonable purpose whatsoever related to the Purchaser's
(or such Permitted Holder's) investment in the Company. The Company will
furnish to Permitted Holder such other information as it from time to time may
reasonably request. For purposes of this SECTION 7.1, "Recapitalization
Events" means stock splits, stock dividends, recapitalizations,
reclassifications and similar events.
7.2 Accounting. The Company will maintain a system of accounting
established and administered in accordance with GAAP consistently applied, and
will set aside on its books such proper reserves as shall be required by GAAP.
In the event the services of the independent public accountants, so selected,
or any firm of independent public accountants hereafter employed by the Company
are terminated, the Company will promptly thereafter notify the Permitted
Holder and will request the firm of independent public accountants whose
services are terminated to deliver to the Permitted Holder a letter of such
firm setting forth the reasons for the termination of their services.
7.3 Monthly and Annual Financial Statements. For so long as any
Series D Preferred remains outstanding, the Company will deliver to the
Purchaser for so long as the Purchaser continues as a stockholder of the
Company:
(a) upon the written request of the Purchaser to the
Company (but in any event only so long as Purchaser owns greater than
100,000 shares of Series D Preferred), within 30 days after the end of
each month and each fiscal quarter an unaudited balance sheet of the
Company as at the end of each such month or fiscal quarter and
unaudited consolidated statements of income and of cash flow of the
Company for each such month or fiscal quarter compared to budget;
(b) within 90 days after the end of each fiscal year of
the Company, a balance sheet of the Company as at the end of such year
and statements of income and of cash flow of the Company for such
year, audited by such firm of independent public accountants of
national recognition that is appointed by the Company's Board of
Directors or an authorized committee thereof, and a report summarizing
the Company's development activities during the period, and a
certificate executed by the President confirming that during such
period the Company has been in compliance with the terms of this
Agreement;
(c) promptly upon receipt thereof, any written report
submitted to the Company by independent public accountants in
connection with an annual or interim audit of the books of the Company
and its Subsidiaries made by such accountants; and
(d) prior to the commencement of each fiscal year, a
reasonably detailed business plan for such fiscal year including
monthly operating expenses and profit and
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loss projections and a capital expenditure budget for the fiscal year
as approved by the Board of Directors, and promptly after any
revisions to such budget approved by the Board of Directors, a copy of
such revisions.
None of the foregoing provisions of this SECTION 7 nor any other
provision of this Agreement shall be in limitation of any rights which a holder
of Series D Preferred may have with respect to the books and records of the
Company, or to inspect its properties or discuss its affairs, finances and
accounts, under the laws of the jurisdiction of its incorporation.
7.4 Use of Proceeds. The Company shall use the proceeds from the
sale of Series D Preferred for purposes of expanding the development of the
Company's cancer pharmaceutical and research business and to fulfill general
corporate working capital purposes consistent therewith.
7.5 Confidentiality and Restrictions on Trading. Any confidential
or proprietary information concerning the Company provided to the Purchaser or
a representative thereof pursuant to this Agreement or otherwise, including
SECTIONS 7.1 and 7.3 hereof, shall be used by the Purchaser or any
representative or affiliate thereof solely in furtherance of its interests as
an investor in the Company, and the Purchaser or representative or affiliate
thereof shall (except as otherwise required by law to which the Purchaser or
representative or affiliate thereof may be subject) maintain the
confidentiality of all non-public information of the Company, provided that,
notwithstanding any other term of this Agreement to the contrary, (a) the
Company shall not be obligated to disclose any information, the disclosure of
which its Board of Directors or President believes in good faith could have a
material adverse effect on the Company or its stockholders, or both and (b) the
Purchaser shall be entitled to disclose such non-public information (i) as is
reasonably necessary to enforce their rights under this Agreement, (ii) on a
confidential basis to their attorneys and other professionals to the extent
reasonably necessary in connection with the Purchaser's investment in the
Company, and (iii) to any prospective purchaser of the Series D Preferred, or
any affiliate or partner of the Purchaser, provided that such third party
agrees to be bound by the confidentiality provisions hereof, and such third
party is not a competitor of the Company. No Purchaser or representative,
affiliate or transferee thereof shall purchase, sell or take any other action
relating to any capital stock or other securities issued by the Company if any
such purchase, sale or other action would be in violation of any federal or
state "insider trading" or other securities laws.
7.6 Right of First Refusal. So long as there are any shares of
Series D Preferred outstanding, the Company hereby grants to the Purchaser the
right of first refusal to purchase such amount of New Securities (as defined in
paragraph (a) below) that the Company may, from time to time, propose to sell
and issue that will enable the Purchaser, to maintain its percentage equity
interest in the Company. This right of first refusal shall be subject to the
following provisions:
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<PAGE> 20
(a) "New Securities" shall mean any Common Stock,
preferred stock or other security which is convertible into or
exchangeable for shares of Common Stock of the Company or any option,
warrant or other right to acquire such security or Common Stock of the
Company; provided, however, that "New Securities" shall not include
(i) Common Stock issuable upon conversion of or with respect to the
Series D Preferred or upon conversion of any other convertible
security of the Company (including the Series A Preferred, the Series
B Preferred and the Series C Preferred) that is outstanding from time
to time, (ii) securities issued upon the exercise of any warrants or
options issued or granted by the Company that are referred to in or
contemplated by SECTION 3.2 or SECTION 8.3 of this Agreement, (iii)
637,625 shares of Common Stock to be issued by the Company at fair
market value, (iv) securities offered to the public in an underwritten
offering pursuant to a registration statement filed under the
Securities Act, (v) securities issued by the Company as consideration
for an acquisition of a portion or all of the equity or other
interests in another corporation, partnership, business entity or line
of business of another business entity by the Company by merger,
reorganization, stock- for-equity or stock-for-assets exchange or any
other similar transaction and (vi) any option issued pursuant to a
plan as permitted by and subject to SECTION 8.3 below.
(b) If the Company proposes to issue New Securities, it
shall give the Purchaser written notice (the "Rights Notice") of its
intention, describing the New Securities, the price, and the general
terms upon which the Company proposes to issue them. The Purchaser
shall have 15 days from the date of mailing of the Rights Notice to
agree to purchase (i) all or any part of its Pro-Rata Share (as
defined in subsection (d) below) of such New Securities and (ii) all
or any part of the Pro-Rata Share of such New Securities of all other
Purchasers to the extent that such other Purchasers do not elect to
purchase their respective full Pro- Rata Share, in each case for the
price and upon the general terms specified in the Rights Notice by
giving written notice to the Company setting forth the quantity of New
Securities it elects to purchase. If the Purchasers who elect to
purchase their full Pro-Rata Share also elect to purchase all or a
portion of the Pro- Rata Share of such New Securities of other
Purchasers who do not elect to purchase 100% of their respective
Pro-Rata Share (such other Purchasers referred to as
"Non-Participating Purchasers"), then such Purchasers shall be
entitled to purchase, in addition to their Pro-Rata Share, a
percentage of the Pro-Rata Shares of the Non-Participating Purchasers
determined by the fraction the numerator of which is the number of
shares of Common Stock then held, together with the number of shares
of Common Stock issuable upon conversion of the Series D Preferred
then held by such Purchaser as of the date of the Rights Notice, and
the denominator of which is the sum of the number of shares of Common
Stock then held, plus the number of shares of Common Stock issuable
upon the conversion of Series D Preferred then held, by all Purchasers
electing to purchase more than their Pro-Rata Share. The Purchaser
who agrees to purchase New Securities shall deliver the purchase price
for the New Securities and otherwise comply with the general terms of
sale set forth in the Rights Notice on the thirtieth (30th) day after
the date of mailing of the Rights Notice (or such other date as agreed
to by the
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Company and such Purchaser) and the Company shall deliver duly
registered share certificates for the New Securities in exchange
therefor.
(c) If the Purchaser fails to exercise in full the right
of first refusal within the period or periods specified in paragraph
(b) hereof, the Company shall have 90 days after the date of mailing
of the Rights Notice to sell the unsold New Securities and the balance
of the New Securities not subject to the Right of First Refusal
provided for herein at a price and upon general terms no more
favorable to the purchaser thereof than specified in the Rights
Notice. If the Company has not sold the New Securities within said 90
day period the Company shall not thereafter issue or sell any New
Securities without first offering such securities to the Purchaser in
the manner provided above.
(d) A Purchaser's "Pro-Rata Share" shall be the
percentage determined by a fraction the numerator of which is the
number of shares of Common Stock then held, together with the number
of shares of Common Stock issuable upon conversion of the Series D
Preferred then held, by such Purchaser as of the date of the Rights
Notice (as defined in paragraph (b) above) and the denominator of
which is the sum of the total number of shares of Common Stock then
outstanding, together with the number of shares of Common Stock
issuable upon conversion of convertible securities of the Company then
outstanding, all as of such date.
7.7 Restrictions on Transfer. The Purchaser (and each transferee,
successor or assign of a Purchaser) further agrees that (a) it will not offer,
sell or otherwise dispose of the Series D Preferred (or the Common Stock in to
which the Series D Preferred may be converted), unless such offer, sale or
other disposition is effected in accordance with the terms of this Agreement
and the Registration Rights Agreement and such offer, sale or other disposition
is (i) registered under the Securities Act and applicable state securities
laws, (ii) pursuant to Rule 144 of the Securities Act of 1933, or (iii) in
compliance with an opinion of counsel to such Purchaser delivered to the
Company and reasonably acceptable to the Company and its counsel to the effect
that such offer, sale or other disposition thereof does not violate the
Securities Act or applicable state securities laws, and (b) the certificate(s)
representing the Series D Preferred (and any Common Stock into which the Series
D Preferred maybe converted) shall bear legends in substantially the following
form:
THE TRANSFER AND VOTING OF THESE SHARES IS SUBJECT TO THE TERMS OF A
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT DATED AS OF NOVEMBER 11, 1996
AND A PREFERRED STOCKHOLDERS' SALES AGREEMENT DATED AS OF NOVEMBER 11, 1996,
COPIES OF WHICH ARE AVAILABLE FOR INSPECTION AT THE OFFICES OF THE COMPANY.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED,
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<PAGE> 22
UNLESS AND UNTIL REGISTERED UNDER THE SECURITIES ACT OF 1933 AND SUCH
APPLICABLE STATE LAW OR, IN THE OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, DOES NOT VIOLATE THE
PROVISIONS THEREOF OR UNLESS SOLD PURSUANT TO RULE 144 OF THE SECURITIES ACT OF
1933.
Upon request of the Purchaser or other person who in accordance with
the provisions of this SECTION 7.7 becomes a holder of Series D Preferred (or
the Common Stock into which the Series D Preferred has been converted), the
Company shall remove the legend set forth in the second paragraph above from
the certificates evidencing such Series D Preferred or Common Stock or issue to
such holder new certificates evidencing such Series D Preferred or Common Stock
free of such legend, if such request is accompanied by an opinion of counsel,
reasonably satisfactory to the Company and its counsel, to the effect that such
Series D Preferred or Common Stock, as applicable, is not required by the
Securities Act or other applicable law to continue to bear the legend or a
legend similar thereto.
7.8 Transfer Instructions. The Purchaser agrees that the Company
may provide for appropriate transfer instructions to implement the provisions
of SECTION 7.7 hereof.
7.9 Operation of Business. For so long as any shares of the
Series D Preferred remain outstanding, the Company shall comply with each of
the following covenants, and will cause each Subsidiary, if and when such
Subsidiary exists, to comply with each of the following covenants, as if they
applied to it in the same manner as they apply to the Company.
(a) Compliance with Laws, Etc. The Company shall comply
with all laws, rules, regulations, judgments, orders and decrees of
any governmental or regulatory authority, the violation of which could
have a material adverse effect on the business, assets or properties
of the Company and with all material contracts and agreements to which
it is a party or shall become a party and shall perform all material
obligations which it has or shall incur.
(b) Preservation of Corporate Existence and Property.
The Company shall preserve, protect and maintain: (i) its corporate
existence and good standing in its jurisdiction of incorporation, (ii)
its rights, franchises and privileges, and (iii) all of its properties
necessary or useful in the proper conduct of its business in good
working order and condition, with the exception of (y) ordinary wear
and tear, and (z) casualty losses covered by insurance, allowing for
reasonable deductibles.
(c) Insurance. The Company shall maintain or cause to be
maintained, with financially sound and reputable insurers, insurance
with respect to the properties and business of the Company, against
loss or damage of the kinds customarily insured against by
corporations of established reputation and similar size engaged in the
same or similar business, in adequate amounts.
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<PAGE> 23
(d) Payment of Indebtedness. The Company shall pay or
cause to be paid the principal of, and the interest and premium, if
any, on all indebtedness heretofore or hereafter incurred or assumed
by the Company when and as the same shall become due and payable,
unless such indebtedness shall be renewed or extended, in which case
such payments shall be made in accordance with the terms of such
renewal or extension.
(e) Further Assurance. The Company shall cooperate with
the Purchaser and shall execute and deliver all such further
instruments and documents and do all such further acts and things as
the Company may be reasonably requested to do from time to time by the
Purchaser in order to satisfy the conditions and carry out the
provisions and purposes of this Agreement and the Registration Rights
Agreement.
(f) Section 305. The Company shall not enter into any
transaction which would result in the dividend on the Purchaser's
shares under Section 305 of the Code (or any successor provision)
other than dividends accruing pursuant to the Certificate of
Incorporation, as amended from time to time.
(g) U.S. Real Property Holding Corporation. The Company
will not be a "United States real property holding corporation," as
defined in Section 897(c)(2) of the Code and Section 1.897-2(b) of the
Regulations promulgated by the Internal Revenue Service and upon
written request, will provide to any holder of Preferred Stock a
statement to the effect informing such holder whether its interest in
the Company constitutes a U.S. real property interest.
7.10 Reservation of Common Stock. For so long as any shares of the
Series D Preferred remain outstanding, the Company shall increase the
authorized amount and maintain in reserve that number of shares of Common Stock
necessary to accommodate the conversion into Common Stock of all issued and
outstanding shares of the Series D Preferred.
7.11 Public Announcements. The Company shall not make any public
announcement or disclosure relating to any Purchaser's participation in the
transactions contemplated by this Agreement or the relationship established
hereby with any Purchaser unless such announcement or disclosure is (i) in the
judgment of the Company after consultation with its legal counsel, required by
applicable law or regulation or (ii) approved by the Purchaser, which approval
shall not be unreasonably withheld.
7.12 New Developments. Subject to the other contractual
obligations of such consultants, the Company will cause all technological
developments, patentable or unpatentable inventions, discoveries or
improvements by its officers, employees or consultants to be documented in
accordance with appropriate professional standards, cause all officers,
employees and consultants to execute appropriate patent and copyright
assignment agreements to the Company, as the case may be, and, where possible
and appropriate, cause all officers, employees and consultants to file and
execute United States and foreign patent or copyright
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<PAGE> 24
applications relating to and protecting such developments on behalf of the
Company. The Company will cause each officer, key employee and key consultant
now or hereafter employed to execute and deliver an Employment Provision
Agreement in the form and substance of Exhibit 3.12(a) attached hereto, or as
otherwise approved by the Board of Directors of the Company.
7.13 Rule 144A Information. The Company covenants and agrees that,
at all times during which the Company is neither subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, nor exempt from
reporting pursuant to Rule 12(g)3-2(b) under the Exchange Act, it will provide
in written form (as promptly as practicable and in any event within 15 business
days), upon the written request of any holder of the Series D Preferred or a
prospective buyer of such shares or the Conversion Shares, all information
required by Rule 144A(d)(4)(i) of the General Regulations promulgated by the
Commission under the Securities Act ("Rule 144A Information"). The Company
further covenants, upon written request, to cooperate with and assist any
holder of the Series D Preferred or any member of the National Association of
Securities Dealers, Inc. system for Private Offerings Resales and Trading
through Automated Linkage ("PORTAL") in applying to designate and thereafter
maintain the eligibility of such shares or the Conversion Shares for trading
through PORTAL. The Company's obligations under this SECTION 7.14 shall at all
times be contingent upon the relevant holder of the Series D Preferred
obtaining from a prospective purchaser an agreement to take all reasonable
precautions to safeguard the Rule 144A Information from disclosure to anyone
other than a Person who will assist such purchaser in evaluating the purchase
of such securities.
7.14 Founders' Sales Agreement. Except as otherwise prohibited by
law, the Company agrees that it shall not permit any transfer of shares of
capital stock in violation of the Founders' Sales Agreement.
7.15 Preferred Stockholders' Sales Agreement. Except as otherwise
prohibited by law, the Company agrees that it shall not permit any transfer of
shares of capital stock in violation of the Preferred Stockholders' Sales
Agreement.
8. Additional Covenants of the Company.
8.1 Conduct of Business in the Ordinary Course. From the date of
this Agreement until the Closing, except with the prior approval of the
Purchaser, the Company will operate the business of the Company in the ordinary
course.
8.2 Reasonable Efforts. From the date of this Agreement until the
Closing, the Company shall use all reasonable efforts to obtain all necessary
consents and take all actions necessary for the consummation of the
transactions contemplated hereby.
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<PAGE> 25
9. Termination of Agreement and Survival of Representations,
Warranties and Covenants.
(a) Termination. This Agreement may be terminated prior
to Closing by the Company or the Purchaser upon written notice to the
other party:
(i) At any time by mutual written agreement of
all the parties hereto;
(ii) At any time after November 11, 1996, by any
party if the Closing shall not have occurred on or prior to
such date;
(iii) By the Company if any representation or
warranty of the Purchaser contained in this Agreement or in
any certificate or other document executed and delivered by
the Purchaser to the Company pursuant to this Agreement is or
becomes untrue or breached in any material respect or if the
Purchaser fails to comply in any material respect with any
covenant or agreement contained herein, and any such
misrepresentation, breach or noncompliance is not cured,
waived, or eliminated before Closing;
(iv) By the Purchaser if any representation or
warranty of the Company contained in this Agreement or in any
certificate or other document executed and delivered by the
Company pursuant to this Agreement is or becomes untrue or
breached in any material respect or if the Company fails to
comply in any material respect with any covenant or agreement
contained herein, and any such misrepresentation, breach or
noncompliance is not cured, waived, or eliminated before
Closing;
(v) On the Closing Date by the Purchaser if the
conditions set forth in SECTION 5 have not been satisfied; or
(vi) On the Closing Date by the Company if the
conditions stated in SECTION 6 have not been satisfied.
In the event this Agreement is terminated pursuant to
subparagraph (iii) or (iv) above, the Purchaser and the Company shall
be entitled to pursue, exercise and enforce any and all remedies,
rights, powers and privileges available at law or in equity and under
this Agreement.
(b) Survival of Representations, Warranties and
Covenants. Except as otherwise provided in this Agreement, all
covenants made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Closing and shall
continue in full force and effect thereafter. Any representation or
warranty the breach or inaccuracy of which involves fraud on the part
of the Company or the
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<PAGE> 26
Purchaser shall survive the Closing and shall continue in full force
and effect thereafter. All other representations and warranties, as
certified to by the Company pursuant to the certificate required to be
delivered under SECTION 5.4 and by the Purchaser pursuant to SECTION
6.1 of this Agreement, made hereunder or pursuant hereto or in
connection with the transactions contemplated hereby shall survive the
Closing until the expiration of the applicable statute of limitations
and notice of any claim based on a breach of any such representation
or warranty must be given prior to the expiration of such statute of
limitations.
10. Indemnification. The Company shall indemnify and hold
harmless the Purchaser against and from any losses, claims, damages or
liabilities, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon (a) the falsity or
incorrectness as of the Closing Date of any representation or warranty of the
Company contained in or made pursuant to SECTION 3 hereof, or (b) the existence
of any condition, event or fact constituting, or which with notice or passage
of time, or both, would constitute a default in the observance of any of the
Company's undertakings or covenants hereunder or under any of the documents
executed in connection herewith. The Company shall also pay all reasonable
attorney's fees and costs and court costs incurred by the Purchaser in
enforcing the indemnification provided for in this SECTION 10.
11. Notices. All notices, requests, consents and other
communications provided for herein (except as stated in the last sentence of
this SECTION 11) shall be in writing, and shall be mailed by certified mail,
postage prepaid, delivered by Federal Express or similar overnight courier, or
personally delivered, as follows:
(a) If to the Company:
ILEX Oncology, Inc.
14785 Omicron Drive, Suite 101
San Antonio, Texas 78245
Attention: Richard L. Love
with a copy to:
Fulbright & Jaworski L.L.P.
300 Convent Street, Suite 2200
San Antonio, Texas 78205
Attention: Kenneth J. Halliday
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<PAGE> 27
(b) If to the Purchaser to the person
and address set forth on Exhibit A
or such other addresses as each of the parties hereto may provide from time to
time in writing to the other parties. For purposes of computing the time
periods set forth in SECTION 7, the date of mailing shall be deemed to be the
date of delivery. The financial statements and other reports required by
SECTION 7 may be mailed by first-class regular mail.
12. Modifications; Waiver. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated (a) prior to
the Closing Date unless effected by a writing executed and delivered by the
parties hereto and (b) after the Closing Date unless effected by a writing
executed and delivered by the Company and by holders representing not less than
66-2/3% of the aggregate number of issued and outstanding shares of Series D
Preferred and shares of Common Stock issued upon the conversion of Series D
Preferred, provided that this SECTION 12 may not be modified or amended without
the written consent of all the holders of Series D Preferred and the Company,
and provided further that in any event, no amendment or change may be made to
the terms hereof that imposes additional obligations or restrictions upon a
party without its written consent.
13. Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto, including the Registration Rights Agreement, the Amended and
Restated Founders' Sales Agreement and the Amended and Restated Preferred
Stockholders' Sales Agreement, contains the entire agreements between the
parties with respect to the transactions contemplated hereby, and supersedes
all negotiations, agreements, representations, warranties, commitments, whether
in writing or oral, prior to the date hereof and shall, except as otherwise
expressly provided herein and therein, not affect the rights of the parties
under the Series B Purchase Agreement or the Series C Purchase Agreement.
14. Application to Successor Holders. The rights of the Purchaser
set forth in SECTIONS 7.1, 7.3 AND 7.6 shall inure to the benefit of any person
who becomes a holder of Series D Preferred sold pursuant to this Agreement (or
of Common Stock issued upon conversion of such Series D Preferred) in a
transfer made in accordance with the provisions of SECTION 7.7 (a "Permitted
Holder") hereof as though such holder were a Purchaser, and the obligations of
the Purchaser set forth in SECTION 7.5 shall be binding on any person who after
the date hereof becomes a holder of shares of Series D Preferred sold pursuant
to this Agreement as though such holder were a Purchaser.
15. Execution and Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, and such counterparts together shall constitute one
instrument.
16. Governing Law and Severability. This Agreement shall be
governed by the laws of the State of Texas as applied to agreements entered
into and to be performed entirely within
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<PAGE> 28
the State of Texas. In the event any provision of this Agreement or the
application of such provision to any party shall be held by a court of
competent jurisdiction to be contrary to law, the remaining provisions of this
Agreement shall remain in full force and effect.
17. Headings. The descriptive headings of the Sections hereof and
the Schedules and Exhibits hereto are inserted for convenience only and do not
constitute a part of this Agreement.
18. Waivers And Consents. Any waiver or consent hereunder shall
be effective only in the specific instance and for the purpose for which it was
given and shall not constitute a continuing waiver or consent. Notwithstanding
this Agreement, any term or condition hereof, or the consummation of the
transactions contemplated hereby, the Purchaser does not waive or relinquish
any right it may have or may acquire against the Company or any of its
Affiliates or agents in connection with the acquisition of the Series D
Preferred by such Purchaser, or the ownership thereof. All such rights shall
remain unimpaired by the execution of this Agreement and the consummation of
the transactions contemplated hereby.
19. Severability. In the event that any court of competent
jurisdiction shall determine that any provision, or any portion thereof,
contained in this Agreement shall be unenforceable in any respect, then such
provision shall be deemed limited to the extent that such court deems it
enforceable, and as so limited shall remain in full force and effect. In the
event that such court shall deem any such provision, or portion thereof, wholly
unenforceable, the remaining provisions of this Agreement shall nevertheless
remain in full force and effect.
20. No Waiver Of Rights, Powers and Remedies. Except as expressly
provided in this Agreement, no failure or delay by a party hereto in exercising
any right, power or remedy under this Agreement, and no course of dealing
between the parties hereto, shall operate as a waiver of any such right, power
or remedy of the party. No single or partial exercise of any right, power or
remedy under this Agreement by a party hereto, nor any abandonment or
discontinuance of steps to enforce any such right, power or remedy, shall
preclude such party from any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder. The election of any remedy by a
party hereto shall not constitute a waiver of the right of such party to pursue
other available remedies. No notice to or demand on a party not expressly
required under this Agreement shall entitle the party receiving such notice or
demand to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the party giving such
notice or demand to any other or further action in any circumstances without
such notice or demand.
21. Reliance. The parties hereto agree that, notwithstanding any
access to information by any party or any right of a party to this Agreement to
investigate the affairs of any other party to this Agreement, the party having
such access and right to investigate shall have the right to rely fully upon
the representations and warranties of the other party expressly contained in
this Agreement and on the accuracy of any Schedule, Exhibit or other document
attached hereto or referred to herein or delivered by such other party or
pursuant to this Agreement. The
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<PAGE> 29
Purchaser acknowledges that, based on information provided by the Company, it
has made its own analysis and decision regarding the transactions contemplated
hereby, including the execution of this Agreement.
22. Costs, Expenses and Taxes. Each of the parties hereto shall
bear such party's own costs and expenses in connection with this Agreement and
the transactions contemplated hereby.
23. Definitions. The following terms shall have the respective
meanings set forth below whenever used in this Agreement:
"Affiliate" has the meaning ascribed to that term in Rule 12b-2 under
the Exchange Act or any successor rule, and in any event with respect to the
Company shall mean any Director, officer or stockholder thereof.
"Knowledge" or "known" shall mean or refer to the actual knowledge of
the Company, its officers, directors and key employees after reasonable
diligence.
"Subsidiary" or "Subsidiaries" shall mean any corporation,
partnership, trust or other entity of which the Company and/or any of its other
Subsidiaries directly or indirectly owns at the time a majority of the
outstanding shares of any class of equity security of such corporation,
partnership, trust or other entity.
[signatures on next page]
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<PAGE> 30
This Convertible Preferred Stock Purchase Agreement is hereby executed
as of the date first above written.
ILEX ONCOLOGY, INC.
By: /s/ RICHARD L. LOVE
----------------------------------------
Richard L. Love, President
PURCHASER:
JOHNSON & JOHNSON DEVELOPMENT CORPORATION
By: /s/
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
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<PAGE> 31
EXHIBIT A
PURCHASER
-31-
<PAGE> 1
EXHIBIT 10.54
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Agreement dated as of July 22, 1996 by and among ILEX ONCOLOGY, INC., a
Delaware corporation (the "Company"), and the persons identified on Exhibit A
hereto (individually a "Purchaser" and, collectively, the "Purchasers"), whose
mailing addresses and states of principal residence are as set forth on Exhibit
A.
W I T N E S S E T H:
WHEREAS, the Company desires to sell 2,293,578 shares of Series C
Convertible Preferred Stock, $.01 par value per share, having the rights,
preferences, privileges and restrictions described herein and in the Exhibits
and Schedules hereto (the "Series C Preferred"); the purchase price for such
shares of Series C Preferred shall be $4.36 per share.
WHEREAS, the Purchasers desire to enter into this Agreement pursuant to
which each of the Purchasers will purchase shares of Series C Preferred on the
terms set forth herein and in the amounts and for the aggregate consideration
set forth in Exhibit A.
NOW, THEREFORE, the Company and the Purchasers agree severally, and not
jointly, as follows:
1. Purchase and Sale. Subject to the provisions of this Agreement
(including the last sentence of this SECTION 1) and on the basis of the
representations and warranties contained herein, on the Closing Date (as
hereinafter defined), the Company will sell to each Purchaser and each
Purchaser will purchase from the Company that number of shares of the Series C
Preferred set forth adjacent to such Purchaser's name on Exhibit A. The
purchase price to be paid by each Purchaser for such shares of Series C
Preferred shall be equal to the product of $4.36 per share times the number of
shares of Series C Preferred purchased at the Closing by the Purchaser (the
"Purchase Price").
2. Closing of Purchase and Sale.
2.1 Closing; Closing Date. The purchase and sale of the Series C
Preferred (the "Closing") shall occur at the offices of Fulbright & Jaworski
L.L.P., 300 Convent Street, Suite 2200, San Antonio, Texas 78205, and shall
occur at 10:00 a.m. local time on July 22, 1996 or such other time and date as
may be agreed upon by the Company and the Purchasers (the "Closing Date").
2.2 Transactions at Closing. The Closing of the purchase and sale of
shares of Series C Preferred to be made to Purchasers shall be effected on the
Closing Date. On the
<PAGE> 2
Closing Date, (i) the Company and each Purchaser shall execute and deliver each
agreement included as an exhibit hereto to which they are a party, (ii) the
Company shall deliver to each Purchaser a stock certificate for the Series C
Preferred to be issued and sold to each Purchaser, duly registered in such
Purchaser's name, and (iii) the Purchasers shall deposit by wire transfer of
immediately available funds or bank certified or cashier's check the aggregate
Purchase Price called for in SECTION 1 of this Agreement into one or more bank
accounts of the Company as shall be designated by the Company prior to the
Closing.
3. Representations and Warranties of Company. The Company
represents and warrants to the Purchasers as follows:
3.1 Organization, Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has full power and authority to own, lease
and operate its properties and assets and to conduct its business as presently
conducted and as proposed to be conducted, and to enter into this Agreement and
the Registration Rights Agreement (as defined in SECTION 5.7) and to carry out
the transactions contemplated by such agreements. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
the State of Texas and in every other jurisdiction in which the failure to so
qualify would have a material adverse effect on the business, assets,
operations or financial condition of the Company.
3.2 Capitalization. The authorized capital stock of the Company
consists of (a) 20,000,000 shares of preferred stock, $.01 par value per share
("Preferred Stock"), of which (i) 5,239,900 shares have been designated as
Series A Convertible Preferred Stock, $.01 par value per share (the "Series A
Preferred"), all of which are issued and outstanding, (ii) 5,432,500 shares
have been designated as Series B Convertible Preferred Stock, $.01 par value
per share (the "Series B Preferred"), all of which are issued and outstanding,
(iii) 2,293,578 shares have been designated as the Series C Preferred, to be
issued pursuant to the terms of this Agreement and (b) 40,000,000 shares of
Common Stock, $.01 par value per share ("Common Stock") of which (i) 2,080,100
shares are issued and outstanding, (ii) 5,239,900 shares are reserved for
issuance on conversion of the Series A Preferred, (iii) 5,432,500 shares are
reserved for issuance on conversion of the Series B Preferred, (iv) 2,293,578
shares are reserved for issuance on conversion of the Series C Preferred to be
issued to the Purchasers, (v) 1,000,000 shares are reserved for issuance on
exercise of options issued or to be issued to employees, advisors, officers,
directors and consultants of, and other persons performing services for, the
Company pursuant to stock option plans approved by the Board of Directors of
the Company, (vi) 170,000 shares are reserved for issuance on exercise of
outstanding warrants issued to Vector Securities International, Inc., (vii)
50,000 shares are reserved for issuance on exercise of warrants to be issued to
Chestnut Partners, Inc. and (viii) 573,395 shares are reserved for issuance on
exercise of warrants to be issued to the holders of the Series C Preferred (the
"Investor Warrants") (the reserved shares referred to in (ii) through (viii)
are collectively referred to as the "Reserved Shares"). The record owners of
the Company's issued and outstanding Common Stock and the holders
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of all options and warrants to purchase Common Stock are set forth on Schedule
3.2 hereto. The issued and outstanding shares of the Company's capital stock
have been duly authorized and validly issued and are fully paid and non-
assessable. Holders of shares of the Company's capital stock have no
preemptive rights and, except as set forth in SECTION 7.6 of this Agreement and
SECTION 7.6 of the Series B Convertible Preferred Stock Purchase Agreement
dated September 29, 1995 among the Company and the persons identified on
Exhibit A thereto, no holder of shares of the Company's capital stock has any
right of first refusal to purchase securities sold by the Company. Except for
the shares of Common Stock to be issued upon the conversion of the Series A
Preferred and the Series B Preferred and transactions contemplated by this
Agreement (including the exhibits hereto) and except for the shares reserved
for issuance as set forth in this section, there are no outstanding warrants,
options, convertible securities or rights (contingent or otherwise) to
subscribe for or purchase any capital stock or other securities from the
Company. The Company is not required to register any of its equity securities
under Section 12(a) or 12(g) of the Securities Exchange Act of 1934. The
designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of each class and series of authorized capital stock of
the Company are as set forth in the Certificate of Incorporation (as defined
below), and of the Series C Preferred will be set forth in the Certificate of
Incorporation prior to the Closing, and, all such designations, powers,
preferences, rights, qualifications, limitations and restrictions are valid,
binding and enforceable and in accordance with all applicable laws. Except as
contemplated by this Agreement or set forth in Schedule 3.2, (x) there are no
restrictions on the transfer of shares of capital stock of the Company other
than those imposed by relevant state and federal securities laws, (y) there are
no agreements, understandings, proxies, trusts or other collaborative
arrangements concerning the voting, pledge or purchase and sale of the capital
stock of the Company to which the Company is a party or, to the Company's
knowledge, to which any other Person is a party, (z) no holder of any security
of the Company is entitled to preemptive, first refusal or similar statutory or
contractual rights, either arising pursuant to any agreement or instrument to
which the Company is a party, or which are otherwise binding upon the Company,
or, to the Company's knowledge, to which any other Person is a party. Except
as provided for in the Certificate of Incorporation, the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interest therein or to pay any dividend or
make any other distribution in respect thereof. Other than pursuant to the
terms of the Registration Rights Agreement, no Person has demand or other
rights to cause the Company to file any registration statement under the
Securities Act of 1933, as amended, relating to any securities of the Company
or any right to participate in any such registration.
3.3 Validity of Stock. Prior to the Closing, the Certificate of
Designation, Preferences and Rights of Series C Convertible Preferred Stock in
the form attached hereto as Exhibit 3.3(A) will have been duly filed with the
Delaware Secretary of State. On the Closing Date, the Series C Preferred will
be duly authorized and, when issued and sold in accordance with the terms of
this Agreement, will be duly and validly issued, and fully paid
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<PAGE> 4
and non-assessable and will be free and clear of all liens, charges,
encumbrances or restrictions imposed by or through the Company except as set
forth in this Agreement, the Registration Rights Agreements or applicable
securities laws. On the Closing Date, the Common Stock issuable upon
conversion of the Series C Preferred will be duly authorized and reserved for
issuance by all necessary action and when issued and sold upon such conversion
in accordance with the terms of this Agreement and the Company's Certificate of
Incorporation, as amended (including the Certificate of Designation,
Preferences and Rights of Series C Convertible Preferred Stock), in the form of
Exhibit 3.3(B) (the "Certificate of Incorporation") will be duly and validly
issued, fully paid and non-assessable.
3.4 Subsidiaries. The Company has no subsidiaries and does not own
or control, directly or indirectly, any other corporation, partnership,
association, joint venture or entity.
3.5 Financial Statements. The Company has furnished each Purchaser
with the Company's (i) consolidated audited balance sheet (the "Audited Balance
Sheet") as of December 31, 1995 (the "Audited Balance Sheet Date") and
consolidated audited statements of operations for the year ended December 31,
1995 ("Audited Income Statement") and (ii) consolidated unaudited balance sheet
(the "Unaudited Balance Sheet") as of May 31, 1996 (the "Unaudited Balance
Sheet Date") and consolidated unaudited statements of operations for the six
(6) months ended May 31, 1996 ("Unaudited Income Statement") (each of which in
(i) and (ii) above are collectively referred to as the "Financial Statements"
and are attached hereto as Schedule 3.5). The Financial Statements are true
and correct in all material respects, are in accordance with the books and
records of the Company, have been prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied, and fairly and
accurately present in all material respects the financial position of the
Company as of such dates and the results of its operations for the periods then
ended, provided that the Unaudited Financial Statements may not contain all
footnotes required by GAAP and the Unaudited Balance Sheet and the Unaudited
Income Statement are subject to normal year-end audit adjustments, none of
which will be material. Since the Unaudited Balance Sheet Date, the Company
has not incurred or otherwise become subject to any liabilities, debts or
obligations otherwise than in the ordinary course of business consistent with
past practice, except for those listed on Schedule 3.5 attached hereto and
those that, would not individually or in the aggregate have a material adverse
effect on the financial condition of the Company.
3.6 Insurance. Schedule 3.6 contains a list of all insurance
policies (specifying (a) the Insurer, (b) the amount of coverage and (c) the
type of insurance) maintained by or on behalf of the Company on the properties,
assets, business or personnel of the Company, all of which are (and pending
Closing will continue to be) in full force and effect.
3.7 Authorization; Approvals. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and the
Registration Rights Agreement, to perform its obligations hereunder and
thereunder and to engage in the transactions
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<PAGE> 5
contemplated hereby and thereby. The execution, delivery and performance by
the Company of this Agreement and the Registration Rights Agreement, have been
duly authorized by all necessary corporate action, and this Agreement has been,
and at the Closing the Registration Rights Agreement will have been, duly
executed and delivered by the Company. This Agreement constitutes, and at the
Closing the Registration Rights Agreement will constitute, the legal, valid and
binding obligation of the Company legally enforceable against the Company in
accordance with their respective terms. The Company has obtained all material
consents, authorizations and approvals of, and has made or will make all
material declarations and filings with, all federal and state governmental
authorities required on the part of the Company in connection with the
consummation of the transactions contemplated by this Agreement, except to the
extent any failure by the Company to comply with the foregoing is due to
misrepresentations or nondisclosure of one or more Purchasers.
3.8 No Conflict with Other Instruments and Laws. Except as set forth
on Schedule 3.8 or any other Schedules hereto, the execution of and performance
by the Company of its obligations under this Agreement and the Registration
Rights Agreement will not violate any provision of law or governmental rule or
regulation and will not conflict with or result in any breach of any of the
terms, conditions or provisions of, or constitute a default (with notice, lapse
of time or both) under (i) the Certificate of Incorporation, (ii) the Company's
by-laws as currently in effect which are attached hereto as Exhibit 3.8 (the
"By-laws"), (iii) any statute, law, rule, regulation, judgment, decree or order
to which the Company is bound or applicable to the Company or its assets or
(iv) any agreement, contract, lease, indenture or other instrument to which the
Company is a party.
3.9 Absence of Undisclosed Liabilities; Changes. Except as otherwise
described in Schedule 3.9 or any other Schedule hereto, the Company does not
have any liability or obligation (whether accrued, contingent or otherwise),
which individually or in the aggregate exceeds $100,000 (including, without
limiting the generality of the foregoing, any tax liabilities due or to become
due to the extent they relate to the conduct of the business of the Company
through the date hereof) not reflected in the Financial Statements, except (i)
obligations and liabilities incurred after the Unaudited Balance Sheet Date in
the ordinary course of business consistent with past practice; (ii) obligations
under contracts made in the ordinary course of business consistent with past
practice that would not be required to be reflected or disclosed in financial
statements prepared in accordance with GAAP; and (iii) obligations under or
contemplated by this Agreement. The Company has not become directly or
contingently liable on any indebtedness, liability or obligations of any other
Person.
Since the Unaudited Balance Sheet Date there has been no occurrence or
development that has had or is reasonably likely to have a material adverse
effect on the Company's business, assets, operations or financial condition or
prospects, and there has been no material adverse change in the business,
assets, operations or financial condition or prospects of the Company.
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<PAGE> 6
3.10 Labor Agreement and Actions. The Company is not bound by or
subject to any contract with any labor union and, to the knowledge of the
Company, no labor union has requested or has sought to organize or represent
any of the employees of the Company. There is no strike or other labor dispute
involving the Company pending, or to the knowledge of the Company threatened,
which could reasonably be expected to have a material adverse effect on the
business, assets, operations or financial condition of the Company, nor is the
Company aware of any labor organization activity involving its employees.
3.11 Compliance with Law and Other Instruments. The Company has
complied with and is not in violation of (with due notice or lapse of time or
both) any agreement, instrument, statute or governmental rule or regulation
(including, without limitation, its charter and bylaws) or any governmental
order, judgment, decree, writ, injunction or award of any arbitration, court or
governmental authority applicable to it or its business, operations, assets or
services, applicable to it or its assets that has or could reasonably be
expected to have a material adverse effect on the business, assets, operations
or financial condition of the Company. To the knowledge of the Company, no
employee of the Company is in violation of any term of any employment contract
or any other contract or agreement relating to the employment of such employee
with the Company, as applicable, the violation of which could reasonably be
expected to have a material adverse effect on the business, assets, operations
or financial condition of the Company. Except for governmental licenses,
permits, approvals and consents the failure to obtain any of which alone or in
the aggregate could not reasonably be expected to have a material adverse
effect on the business, assets, operations or financial condition of the
Company, Schedule 3.11 hereto lists all governmental licenses, permits,
franchises, approvals and consents required to be received or obtained by the
Company to conduct its business as presently conducted, all of which the
Company currently possesses.
3.12 Proprietary Rights. Schedule 3.12 contains a list of all
patents, trademarks, trade names and service marks (and all applications
therefor), whether or not registered ("Proprietary Rights"), used by the
Company in the conduct of its business. The Company owns or has the right to
use without the payment of royalties or fees or other consideration (except as
disclosed on Schedule 3.12 or any other Schedules hereto), all Proprietary
Rights (as defined below) and Intellectual Property Rights necessary for or
used by it in the conduct of its business as now conducted, and with respect to
Mitoguazone, Crisnatol Mesylate, Dihydro-5-Azacytide, piritrexim, oxypurinol
and difluoromethylornithine as proposed to be conducted. Except as set forth
on Schedule 3.12 or any other Schedules hereto, none of the Proprietary Rights
or Intellectual Property Rights has been declared invalid, been limited by
order of any court or by agreement, or is the subject of any infringement,
interference or similar proceeding or challenge. The Company has not
infringed, and is not infringing, on the Proprietary Rights or Intellectual
Property Rights of others which could have a material adverse effect on the
business, assets, operations or financial condition of the Company. The
conduct of the Company's business as proposed to be operated is not expected to
conflict with or infringe upon the Proprietary Rights and Intellectual Property
Rights of others.
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Except as set forth on Schedule 3.12 or any other Schedules hereto, the Company
has no obligation to compensate any Person for the use of any such Proprietary
Rights or other Intellectual Property Rights and the Company has not granted to
or assigned to any Person any license or other right to use any of the
Proprietary Rights or other Intellectual Property Rights of the Company. The
consummation of the transactions contemplated by this Agreement will not
terminate or alter the ability of the Company to utilize the Proprietary Rights
or the terms of such use. Listed on Schedule 3.12 are all corporate, trade and
fictitious names under which the Company or its business is operated. The
Company has taken all reasonable measures to protect and preserve the security,
confidentiality and value of its Proprietary Rights or other Intellectual
Property Rights. All key employees and consultants of the Company have
executed Employment Provision Agreements in the form attached hereto as Exhibit
3.12(a) and all members of the Company's Scientific Advisory Board who have not
entered into Consulting Agreements with the Company have executed Non-
Disclosure Confidentiality Agreements in the form attached hereto as Exhibit
3.12(b). To the Company's knowledge, all trade secrets and other confidential
information of the Company are presently protectable and are not part of the
public domain or knowledge, nor, to the Company's knowledge, have they been
used, divulged or appropriated for the benefit of any Person other than the
Company or otherwise to the detriment of the Company. The Company is the
exclusive owner of all rights, titles and interests in its Proprietary Rights
and other Intellectual Property Rights as purported to be exclusively owned by
the Company and insofar as such Proprietary Rights and other Intellectual
Property Rights involve patents, copyrights, licenses, permits, license rights,
contract rights, tradenames or trademarks, such Proprietary Rights and other
Intellectual Property Rights are valid and in full force and effect. Neither
the Company nor, to the Company's knowledge, any of its officers, employees or
consultants, has received notice of, and to the Company's knowledge there are
no claims pending or threatened that the Proprietary Rights or other
Intellectual Property Rights owned or licensed by the Company or the use or
ownership thereof by the Company infringes, violates or conflicts with any such
right of any third party or, with respect to Proprietary Rights or other
Intellectual Property Rights which involved patents, copyrights, licenses,
permits, license rights, contract rights, tradenames or trademarks, that such
Proprietary Rights or other Intellectual Property Rights are invalid or
unenforceable.
"Intellectual Property Rights" shall mean, in addition to Proprietary Rights,
any and all intellectual property rights relating to trade secrets,
confidential business information, formula, biological or chemical processes,
compounds, cell lines, fungi, yeast, laboratory notebooks, algorithms,
copyrights, claims of infringement against third parties, licenses, permits,
license rights to or of technologies, contract rights with employees,
consultants or third parties, inventions and discoveries, and other such rights
generally classified as intangible, intellectual property assets in accordance
with generally accepted accounting principles.
To the Company's knowledge, no third party has claimed or has reason to claim
that any Person employed by or affiliated with the Company has in the course of
such Person's
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<PAGE> 8
employment by or affiliation with the Company (a) violated or may be violating
any of the terms or conditions of his or her employment, non-competition, non-
disclosure or inventions agreement with such third party, (b) disclosed or may
be disclosing or utilized or may be utilizing any trade secret or proprietary
information or documentation of such third party or (c) interfered or may be
interfering in the employment relationship between such third party and any of
its present or former employees. To the Company's knowledge, no third party
has requested information from the Company which suggests that such a claim
might be contemplated. To the Company's knowledge, no Person employed by or
affiliated with the Company has employed or proposes to employ any trade secret
or any information or documentation proprietary to any former employer, and to
the Company's knowledge, no Person employed by or affiliated with the Company
has violated any confidential relationship which such Person may have had with
any third party, in connection with the development, manufacture or sale of any
product or proposed product or the development or sale of any service or
proposed service of the Company, and the Company has no reason to believe there
will be any such employment or violation. To the Company's knowledge, none of
the execution or delivery of this Agreement or the Registration Rights
Agreement, or the carrying on of the business of the Company as officers,
employees or agents by any officer, director or key employee of the Company, or
the conduct or proposed conduct of the business of the Company, will conflict
with or result in a breach of the terms, conditions or provisions of or
constitute a default under any contract, covenant or instrument under which any
such Person is obligated.
3.13 Taxes. Except where the failure to do so would not have a
material adverse effect on the Company's business, the Company has accurately
prepared and timely filed all federal income tax returns and all state and
municipal tax returns that are required to be filed by it and has paid or made
provision for the payment of all amounts due pursuant to such returns, which
are not reflected nor reserved for on the Financial Statements and of all other
taxes, assessments and other governmental charges imposed upon it or upon any
of its assets, income, other than any such charges that are currently payable
without penalty or interest, including, without limitation, all taxes which the
Company is obligated to withhold from amounts owing to employees, creditors and
third parties. There is no tax lien outstanding against the assets of the
Company, except for liens for taxes not yet due and payable. The federal
income tax returns of the Company have not been audited by the Internal Revenue
Service, and there are no waivers in effect of the applicable statute of
limitations for any period. No deficiency, assessment or proposed adjustment
of federal income taxes or state or local taxes of the Company is pending, and
the Company has no knowledge of any proposed liability for any tax to be
imposed.
3.14 Contracts. Except as set forth in Schedule 3.14 or any other
Schedule hereto, the Company is not a party to any contract and has no
obligation or commitment (i) involving aggregate future payments by the Company
of more than $25,000, which is not cancelable on sixty (60) days' notice by the
Company or (ii) that is otherwise material to the business of the Company
(collectively, the "Material Agreements"). Except as set forth on
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<PAGE> 9
Schedule 3.14 or any other Schedule hereto, the Company has no employment
contracts, deferred compensation agreements or bonus, incentive, profit-
sharing, or pension plans currently in force and effect, or any understanding
with respect to any of the foregoing. Except as set forth on Schedule 3.14 or
any other Schedules hereto, no default or defaults (without regard to notice or
lapse of time or both) exist by the Company (including without limitation the
Company's predecessor in interest) in the due performance by it, or to the
knowledge of the Company by the other party or parties thereto, of any term,
covenant or condition of any contract to which the Company is a party that
individually or in the aggregate would have a materially adverse effect on the
business, assets, operations or financial condition of the Company. All of the
Material Agreements are in full force and effect.
3.15 Litigation. Except as provided in Schedule 3.15 or any other
Schedule hereto, no action, proceeding or governmental inquiry or investigation
(a "Proceeding") before any court, arbitrator or tribunal or administrative or
other governmental agency, is (i) pending, or to the knowledge of the Company,
threatened against the Company or any of its officers, directors or employees
(in their capacity as such) or affecting any of its owned or leased assets, or
(ii) to the knowledge of the Company, pending or threatened against any
consultant or shareholder of the Company (in their capacity as such) or
affecting any of its other assets, nor is the Company aware of any such
threatened or contemplated action, proceeding, inquiry or investigation nor, to
the knowledge of the Company, has there occurred any event or does there exist
any condition on the basis of which it is reasonably likely that any such
Proceeding might properly be instituted. There is no Proceeding by the Company
pending or threatened against others.
3.16 Fees and Commissions. Except as described in Schedule 3.16, the
Company has not retained any finder, broker, agent, financial advisor or other
intermediary (collectively, "Intermediary") in connection with the transactions
contemplated by this Agreement. Notwithstanding any disclosure on Schedule
3.16, the Company agrees to indemnify and hold harmless the Purchasers from
liability for any compensation to any Intermediary retained by the Company and
the fees and expenses of defending against such liability or any such alleged
liability.
3.17 ERISA. Except as disclosed on Schedule 3.17, the Company does
not maintain, sponsor, or contribute (and has not during the last five (5)
years been obligated to maintain, sponsor or contribute or maintained,
sponsored or contributed) to any program or arrangement that is an "employee
pension benefit plan," an "employee welfare benefit plan," "multiple employer
welfare arrangement," or a "multi-employer plan", as those terms are defined in
Sections 3(1), 3(2), 3(4) or 3(37) of the Employee Retirement Income Security
Act of 1974, as amended, bonus or incentive award or compensation plan or
arrangement, severance pay policy or agreement, deferred compensation agreement
or arrangement, supplemental executive retirement program, vacation plan,
cafeteria plan, educational assistance plan, and any other employee benefit
plans, agreements, or arrangements
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(collectively, "Employee Programs"). The Company has complied with all
applicable legal requirements, including without limitation ERISA and the Code,
with respect to all Employee Programs.
3.18 Title to Properties; Encumbrances. Except as set forth in
Schedule 3.18 or any other schedule attached hereto, the Company has good and
marketable title to all of the assets owned by it and used in its business,
including, without limitation, all the material properties and assets reflected
in the Financial Statements, subject to no encumbrance, lien, charge or other
restriction of any kind or character, except for (a) liens reflected in the
Financial Statements or on Schedule 3.18 or any other Schedules hereto, (b)
liens consisting of zoning or planning restrictions, easements, permits and
other restrictions or limitations on the use of real property or irregularities
in title thereto which do not materially detract from the value of, or impair
the use of, such property by the Company, as applicable, (c) liens for current
taxes, assessments or governmental charges or levies on property not yet due
and delinquent and (d) liens which do not materially affect the operation of
the business of the Company, as applicable (liens of the type described in
clauses (a) through (d) above, inclusive, are hereinafter sometimes referred to
as "Permitted Liens"). Except as set forth in Schedule 3.18, the assets of the
Company are in good working order and condition, ordinary wear and tear
excepted.
3.19 Environmental Compliance. Except as disclosed in Schedule 3.19
and to the best of their knowledge:
(a) The Company has not released, emitted, discharged, dumped
or disposed of any hazardous substances onto or into the assets of the
Company, or any part thereof, or onto or into the air, surface or
groundwater, land or soil in violation of Environmental Laws. For
purposes of this Agreement "Hazardous Substances" has the meaning set
forth in Section 101(14) of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, and shall also
expressly include (1) petroleum, crude oil and any fraction thereof or
radioactive material; (2) any other chemical, material or substance
defined as or included in the definition of "medical waste", "infectious
waste", "hazardous substance", "hazardous waste", "hazardous material",
"toxic substance", "special waste", "contaminant" or "pollutant", or
word or term of similar import, under any applicable Environmental Law;
and (3) any other chemical, material or substance exposure to which is
regulated by any governmental authority having jurisdiction over the
Company or is reasonably likely to give rise to any liability of the
Company, in either case under any Environmental Law. The term
"Environmental Laws" means all applicable foreign, federal, state,
county and local statutes, regulations or ordinances (including common
law duties established by courts or any published judicial or
administrative interpretation thereof) relating to human health and the
environment or the generation, treatment, storage, recycling,
transportation, release or disposal of Hazardous Substances.
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(b) No Hazardous Substances resulting from the Company's
operations have been or are currently located at, in, or under or about
either the assets of the Company or any other property currently or
previously owned or operated by the Company in a manner which: (i)
violates in any material respect applicable Environmental Laws or (ii)
requires any material response, remedial, corrective action or cleanup
of any kind under any applicable Environmental Laws.
(c) With respect to the assets or other property owned or
leased by the Company, whether previously or currently owned or operated
or used by the Company for the treatment, storage or disposal of
Hazardous Substances, no litigation, investigation, administrative or
other proceeding of any kind is pending or threatened by any federal,
foreign, state or local governmental entity or private party arising
from: (i) any applicable Environmental Laws; (ii) any response, remedial
or cleanup activities or (iii) any release or threatened release of
Hazardous Substances. In addition, the Company is not now aware of any
facts on which such litigation, investigation, administrative or other
proceeding of any kind might reasonably be based.
(d) With respect to the assets or other property owned or
leased by the Company, whether previously or currently owned or operated
or used by the Company for the treatment, storage or disposal of
Hazardous Substances, the Company is not subject to any judgment,
injunction, writ, order or agreement arising from: (i) any applicable
Environmental Laws; (ii) any remedial, response or cleanup activities or
(iii) any liabilities, damages, costs, fees or expenses related to the
release or threatened release of Hazardous Substances. In addition, the
Company is not aware of any facts on which such a judgment, injunction,
writ, order or agreement might reasonably be based.
(e) The assets of the Company do not contain any asbestos or
PCB containing materials in material violation of any applicable
Environmental Laws.
(f) The Company has not caused or allowed, and the Company has
not contracted with any party for, the manufacture, processing,
handling, distribution, use, transportation, treatment or storage of any
Hazardous Substances, except in compliance in all material respects with
applicable Environmental Laws. The Company does not own any real
property.
(g) The Company has obtained and is maintaining in full force
and effect all Environmental Permits and is in compliance in all
material respects therewith "Environmental Permit" shall mean any
necessary permit, license, approval or other authorization or filing
required by the Environmental Laws applicable to the premises leased by
the Company and the business operations currently conducted thereon and
as currently proposed to be conducted.
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<PAGE> 12
(h) The Company and the operations of its business are being
conducted in compliance in all material respects with all applicable
Environmental Laws and orders or directives of any governmental
authority having jurisdiction under such Environmental Laws. To the
Company's knowledge, the premises leased by the Company are in
compliance in all material respects with all applicable Environmental
Laws and orders or directives of any governmental authorities having
jurisdiction under such Environmental Laws.
3.20 Affiliate Transactions. Schedule 3.20 describes all material
contracts, arrangements or transactions between the Company and to the
Company's knowledge, between any customer, licensor, licensee or supplier of
the Company, and any of the Company's Affiliates.
3.21 Exemption from Registration. In sole reliance, as to factual
matters concerning each Purchaser, upon representations and warranties by each
Purchaser in SECTION 4 hereof and without independent investigation, the offer
and sale of the Series C Preferred, and the Common Stock issuable upon
conversion of the Series C Preferred, in the manner contemplated by the
Agreement are, and upon conversion will be, (i) exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended, and (ii)
either exempt from, or registered or qualified in compliance with, the
registration requirements of all applicable state "blue sky" securities laws.
3.22 Prior Exemptions from Registration. All offers and sales of the
Company's capital stock prior to the date hereof (i) were exempt from the
registration requirements of Section 5 of the Securities Act of 1933, as
amended, and (ii) were made in compliance with all applicable federal and state
securities laws.
3.23 Disclosure. Neither this Agreement, nor any other agreement,
document or certificate furnished to any Purchaser or its counsel by the
Company or on behalf of the Company by any of its officers or counsel in
connection with the transactions contemplated hereby, including, without
limitation, the Financial Statements, when taken as a whole, contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein and therein, in light of the
circumstances under which they were made, not misleading. The Confidential
Private Placement Memorandum dated April 20, 1995, attached as Exhibit 3.23,
was prepared in good faith and with a good faith belief in the reasonableness
of the assumptions used therein. There is no currently existing fact which
materially and adversely affects, or which in the future may (so far as the
Company can reasonably foresee) materially and adversely affect, the business,
properties, operations or condition, financial or otherwise, of the Company
(except for industry and general economic conditions and climate which are
beyond the control of the Company), which has not been set forth in this
Agreement, including the Schedules and Exhibits hereto. Without limiting the
foregoing, the Company does not have knowledge that there exists, or that there
is pending or planned, any patent, invention, device or application
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<PAGE> 13
of a technology or any statute, rule, law, regulation, standard or code which
will, based solely on information currently known by the Company, materially
adversely affect the business, prospects, operations, Proprietary Rights,
Intellectual Property Rights, affairs or financial condition of the Company.
3.24 Additional Representations.
(a) Since the Unaudited Balance Sheet Date, (i) the Company has
not entered into any material transaction, made any distribution on its
capital stock, or redeemed or repurchased any of its capital stock; (ii)
paid or cancelled any obligations or liability, other than current
liabilities paid in the ordinary course of the business consistent with
past practice; (iii) suffered any substantial losses or waived any
rights of material value, whether or not in the ordinary course of
business or covered by insurance; or (iv) purchased any properties or
assets, except in the ordinary course of business in immaterial amounts.
(b) No officer or key employee of the Company has advised the
Company (orally or in writing) that he intends to terminate employment
with the Company.
(c) Each of the Material Agreements is in full force and
effect. There is no anticipated or threatened default of the Material
Agreements and none of the parties nor the Company has provided any
notice of default or of its intention to terminate any Material
Agreement. The Company is not bound by any agreement or instrument or
subject to any charge or other corporate restriction which materially
and adversely affects the business, properties, operations, condition or
prospects, financial or otherwise, of the Company.
(d) The Company is not now and has never been a "United States
real property holding corporation", as defined in Section 897(c)(2) of
the Code and Section 1.897-2(b) of the Regulations promulgated by the
Internal Revenue Service.
(e) To the extent reasonably within its control, the Company
shall endeavor to meet the active business requirements of Section
1202(e) of the Code, provided that (i) the Company does not represent
that it is or will be a "qualified small business" within the meaning of
Section 1202(d) of the Code or that the Series C Preferred Stock is or
will be qualified small business stock as defined in Section 1202(c) of
the Code, (ii) the Company shall not be required to cause any of its
stockholders to reduce its holdings of Company capital stock, and (iii)
the Company shall not be required to change its core business as
currently conducted. The value of the assets owned directly by the
Company does not exceed Fifty Million Dollars ($50,000,000) as of the
date hereof.
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<PAGE> 14
4. Representations, Warranties and Covenants of Purchasers. Each
Purchaser severally represents and warrants solely as to itself to the Company
as follows:
4.1 Authorization. It has full power and authority to enter into and
to perform this Agreement and the Registration Rights Agreement (as defined in
Section 5.7) in accordance with their respective terms. This Agreement has
been, and at the Closing the Registration Rights Agreement will have been, duly
executed and delivered by it, and constitute valid and legally binding
obligations of the Purchaser, legally enforceable against the Purchaser in
accordance with their respective terms, subject to laws of general application
from time to time in effect affecting creditors' rights and the exercise of
judicial discretion in accordance with general equitable principles.
4.2 Investment Representations. It is acquiring the Series C
Preferred purchased by it (and any Common Stock into which Series C Preferred
may be converted) for its own account, for investment, and not with a view to,
or for sale in connection with, any distribution of such Series C Preferred (or
related Common Stock) or any part thereof in violation of Federal or state
securities laws. The Purchaser has no present or contemplated agreement,
arrangement or commitment to dispose of Series C Preferred (or any Common Stock
into which the Series C Preferred may be converted) in violation of Federal or
state securities laws.
4.3 Investment Experience; Access to Information. It (a) is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D as
promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), has completed and delivered to the Company, either previously as an
investor in the Series B Preferred or herewith if not an investor in the Series
B Preferred, the investor questionnaire attached as Exhibit 4.3 (the "Investor
Questionnaire") and certifies that the information concerning it as set forth
on Exhibit A and in the Investor Questionnaire is true and correct in all
respects, (b) alone or together with its advisors is an investor experienced in
the evaluation of businesses similar to the Company's business, and has such
knowledge and experience in financial, business and other relevant matters as
to be competent and fully capable of examining all the merits, risks and other
aspects of the investment contemplated by this Agreement on its own and to make
an informed decision with respect thereto, (c) has the ability to bear the
economic risks of this investment which could include the loss of some or all
of its investment and has sufficient other assets such that the loss of all its
investment in the Company would not have a material adverse effect on its
financial condition or adversely affect its ability to maintain its present
lifestyle or operations, as the case may be, (d) has been provided and
carefully reviewed the Company's Private Placement Memorandum dated April 26,
1995 and has been afforded prior to the date hereof the opportunity to ask
questions of, and to receive answers from, the Company and its representatives
and has received from the Company all other information concerning the
investment contemplated by this Agreement that it has requested, and (e)
acknowledges that no assurances, representations or guaranties of any nature
whatsoever (including those relating to capital appreciation, dividends or tax
aspects) have
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<PAGE> 15
been made by the Company or anyone else to it with regard to the performance of
the investment contemplated by this Agreement. Each Purchaser severally agrees
that it will indemnify and hold harmless the Company and its directors,
officers, controlling persons and affiliates (the "indemnities") from any
liability or damage (including reasonable attorney's fees and expenses) to any
third party suffered or incurred by any of the indemnities solely as a result
of the inaccuracy of any of the foregoing representations and warranties made
by the Purchaser, including any liability or damage arising from or under
Federal or state securities laws. No investigation pursuant to this SECTION
4.3 shall affect any representation or warranty given by the Company in this
Agreement.
4.4 Absence of Registration. Each Purchaser understands that:
The Series C Preferred to be sold and issued hereunder (and the Common
Stock into which the Series C Preferred may be converted) have not been
registered under the Securities Act or any applicable state securities or "Blue
Sky" laws, and may be required to be held indefinitely, unless subsequently
registered under the Securities Act and such applicable Blue Sky laws, or an
exemption from such registration is available.
Except as may be required by the Registration Rights Agreement, the
Company is under no obligation to the Purchaser to file a registration
statement with the Securities and Exchange Commission (the "Commission") or any
state securities commission with respect to the Series C Preferred (or the
Common Stock into which the Series C Preferred may be converted).
4.5 Economic Risk. Each Purchaser understands that it must bear the
economic risk of the investment represented by the purchase of Series C
Preferred (and any Common Stock into which the Series C Preferred may be
converted) for an indefinite period.
4.6 Fees and Commissions. Except as described in Schedule 4.6, each
Purchaser represents and warrants that it has retained no Intermediary in
connection with the transactions contemplated by this Agreement.
Notwithstanding any disclosure on Schedule 4.6, each Purchaser agrees to
indemnify and hold harmless the Company from liability for any compensation to
any Intermediary retained by such Purchaser and the fees and expenses of
defending against such liability or any such alleged liability.
5. Conditions to Closing of the Purchasers. The obligation of each
Purchaser on the Closing Date to pay the Purchase Price required by SECTION 2
hereof shall be subject to each of the following conditions precedent, any one
or more of which may be waived by such Purchaser:
5.1 Representations and Warranties. The representations and
warranties made by the Company herein shall be true and accurate on and as of
the Closing Date.
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<PAGE> 16
5.2 Performance. The Company shall have performed and complied with
all agreements and conditions contained herein required to be performed or
complied with by it prior to or at the Closing.
5.3 Consents, etc. The Company shall have secured all permits,
consents and authorizations that shall be necessary or lawfully required to
consummate the transactions contemplated by this Agreement (including consents
or approvals required under Federal or state securities laws and from the
holders of the Company's outstanding shares of Common Stock, Series A Preferred
and Series B Preferred), to issue the Series C Preferred to be purchased by
each Purchaser, and to issue the Common Stock into which the Series C Preferred
may be converted.
5.4 Compliance Certificates. The Company shall have delivered to
each Purchaser or their respective representative at the Closing a certificate
signed by the President and by the Treasurer of the Company to the effect that
the representations and warranties of the Company contained in this Agreement
continue to be true and accurate on the Closing Date, and that all conditions
specified in SECTIONS 5.2 and 5.3 have been fulfilled, including a list of any
permits, consents or authorizations required thereby.
5.5 Proceedings and Documents. All corporate and other proceedings,
and all documentation relating thereto, necessary to consummate the
transactions contemplated by this Agreement (including but not limited to the
filing by the Company with the Delaware Secretary of State of the Certificate
of Designation, Preferences and Rights of Series C Convertible Preferred Stock)
shall be reasonably satisfactory in substance and form to the Purchaser and
Purchasers' counsel and the Purchaser and Purchasers' counsel shall have
received all such counterpart originals or certified or other copies of the
documents as the Purchaser or Purchasers' counsel may reasonably request,
including without limitation, a certificate of the Secretary of the Company
attesting to the accuracy of each of the following documents which shall be
attached to such certificate: (a) the Certificate of Incorporation of the
Company, including all amendments thereto, the Certificate of Designation,
Preferences and Rights of Series A Convertible Preferred Stock, the Certificate
of Designation, Preferences and Rights of Series B Convertible Stock, and the
Certificate of Designation, Preferences and Rights of Series C Convertible
Preferred Stock, certified as of recent date by the Delaware Secretary of
State, (b) the By-laws of the Company, and (c) the authorizations of the Board
of Directors and stockholders of the Company relating to the Company's
execution, delivery and performance of its respective obligations, if any,
under this Agreement and the Registration Rights Agreement and all other
agreements and transactions contemplated hereby.
5.6 Opinion of Company's Counsel. The Representative shall have
received an opinion from counsel for the Company, dated the Closing Date and
addressed to the Purchasers in substantially the form attached hereto as
Exhibit 5.6.
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<PAGE> 17
5.7 Registration Rights Agreement. The Company shall have executed
and delivered a Registration Rights Agreement in substantially the form
attached hereto as Exhibit 5.7 (the "Registration Rights Agreement").
5.8 Founders' Sales Agreement Richard L. Love, Alexander L. Weis,
Daniel D. Von Hoff and Charles A. Coltman, Jr. (the "Founders") and the
Purchasers shall have entered into an Amended and Restated Founders' Sales
Agreement in substantially the form attached hereto as Exhibit 5.8 (the
"Founders' Sales Agreement").
5.9 Preferred Stockholders' Sales Agreement. The Purchasers, the
Series B Preferred Stockholders and CTRC Research Foundation shall have entered
into an Amended & Restated Preferred Stockholders' Sales Agreement in
substantially the form attached hereto as Exhibit 5.12 (the "Preferred
Stockholders' Sales Agreement").
6. Conditions to Closing of Company. The obligation of the Company
on the Closing Date to issue and sell the Series C Preferred to be purchased
under this Agreement shall be subject to each of the following conditions
precedent, any one or more of which may be waived by the Company:
6.1 Representations and Warranties. The representations and
warranties made herein by each Purchaser shall be true and accurate in all
material respects on and as of the Closing Date and each Purchaser shall be
deemed to have restated and confirmed such representations and warranties as of
the Closing Date by authorizing or permitting the Closing to be effected
without delivering in writing to the Company a notice of change prior to the
Closing.
6.2 Consents, etc. The Company shall have secured all material
permits, consents and authorizations that shall be necessary or lawfully
required to consummate the transactions contemplated by this Agreement
(including but not limited to consents or approvals required under Federal or
state securities laws.)
6.3 Registration Rights Agreement. The Company and the Purchasers
shall have executed and delivered an Amended and Restated Registration Rights
Agreement in substantially the form attached hereto as Exhibit 5.7.
7. Affirmative Covenants.
The Company covenants and agrees that it will perform and observe the
following covenants and provisions, and will cause each Subsidiary, if and when
such Subsidiary exists, to perform and observe the following covenants and
provisions, as if they applied to it in the same manner as they apply to the
Company.
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<PAGE> 18
7.1 Inspection. For so long as a Purchaser (or a Permitted Holder,
as defined in SECTION 14) holds at least One Hundred Thousand (100,000) shares
of Series C Preferred (or Common Stock into which it has been converted), as
adjusted for Recapitalization Events, the Company will permit an authorized
representative of any such Purchaser (or such Permitted Holder) reasonable
access during the normal business hours of the Company and upon reasonable
notice (which notice in no event shall be provided less than three (3) business
days in advance) to the books, records, personnel and properties of the
Company, for any reasonable purpose whatsoever related to such Purchaser's (or
such Permitted Holder's) investment in the Company. The Company will furnish
to each such Permitted Holder such other information as it from time to time
may reasonably request. For purposes of this SECTION 7.1, "Recapitalization
Events" means stock splits, stock dividends, recapitalizations,
reclassifications and similar events.
7.2 Accounting. The Company will maintain a system of accounting
established and administered in accordance with GAAP consistently applied, and
will set aside on its books such proper reserves as shall be required by GAAP.
In the event the services of the independent public accountants, so selected,
or any firm of independent public accountants hereafter employed by the Company
are terminated, the Company will promptly thereafter notify the Permitted
Holders and will request the firm of independent public accountants whose
services are terminated to deliver to the Permitted Holders a letter of such
firm setting forth the reasons for the termination of their services.
7.3 Monthly and Annual Financial Statements. For so long as any
Series C Preferred remains outstanding, the Company will deliver to each
Purchaser for so long as the Purchaser continues as a stockholder of the
Company:
(a) upon the written request of a Purchaser to the Company
(but in any event to any Purchaser owning greater than 100,000 shares of
Series C Preferred), within 30 days after the end of each month and each
fiscal quarter an unaudited balance sheet of the Company as at the end
of each such month or fiscal quarter and unaudited consolidated
statements of income and of cash flow of the Company for each such month
or fiscal quarter compared to budget;
(b) within 90 days after the end of each fiscal year of the
Company, a balance sheet of the Company as at the end of such year and
statements of income and of cash flow of the Company for such year,
audited by such firm of independent public accountants of national
recognition that is appointed by the Company's Board of Directors or an
authorized committee thereof, and a report summarizing the Company's
development activities during the period, and a certificate executed by
the President confirming that during such period the Company has been in
compliance with the terms of this Agreement;
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<PAGE> 19
(c) promptly upon receipt thereof, any written report
submitted to the Company by independent public accountants in connection
with an annual or interim audit of the books of the Company and its
Subsidiaries made by such accountants; and
(d) prior to the commencement of each fiscal year, a
reasonably detailed business plan for such fiscal year including monthly
operating expenses and profit and loss projections and a capital
expenditure budget for the fiscal year as approved by the Board of
Directors, and promptly after any revisions to such budget approved by
the Board of Directors, a copy of such revisions.
None of the foregoing provisions of this SECTION 7 nor any other
provision of this Agreement shall be in limitation of any rights which a holder
of Series C Preferred may have with respect to the books and records of the
Company, or to inspect its properties or discuss its affairs, finances and
accounts, under the laws of the jurisdiction of its incorporation.
7.4 Use of Proceeds. The Company shall use the proceeds from the
sale of Series C Preferred for purposes of expanding the development of the
Company's cancer pharmaceutical and research business and to fulfill general
corporate working capital purposes consistent therewith. It is currently
anticipated by the Company that the proceeds will be allocated for acquisition
of additional products, development expenditures and for general corporate
working capital purposes.
7.5 Confidentiality and Restrictions on Trading. Any confidential or
proprietary information concerning the Company provided to any Purchaser or a
representative thereof pursuant to this Agreement or otherwise, including
SECTIONS 7.1 and 7.3 hereof, shall be used by such Purchaser or any
representative or affiliate thereof solely in furtherance of its interests as
an investor in the Company, and the Purchaser or representative or affiliate
thereof shall (except as otherwise required by law to which the Purchaser or
representative or affiliate thereof may be subject) maintain the
confidentiality of all non-public information of the Company, provided that,
notwithstanding any other term of this Agreement to the contrary, (i) the
Company shall not be obligated to disclose any information, the disclosure of
which its Board of Directors or President believes in good faith could have a
material adverse effect on the Company or its stockholders, or both and (ii)
the Purchasers shall be entitled to disclose such non-public information (a) as
is reasonably necessary to enforce their rights under this Agreement, (b) on a
confidential basis to their attorneys and other professionals to the extent
reasonably necessary in connection with the Purchasers' investment in the
Company, and (c) to any prospective purchaser of the Series C Preferred, or any
affiliate or partner of a Purchaser, provided that such third party agrees to
be bound by the confidentiality provisions hereof, and such third party is not
a competitor of the Company. No Purchaser or representative, affiliate or
transferee thereof shall purchase, sell or take any other action relating to
any capital stock or other securities issued by the Company if any such
purchase, sale or other action would be in violation of any federal or state
"insider trading" or other securities laws.
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<PAGE> 20
7.6 Right of First Refusal. So long as there are any shares of
Series C Preferred outstanding, the Company hereby grants to the Purchasers as
a group the right of first refusal to purchase such amount of New Securities
(as defined in paragraph (a) below) that the Company may, from time to time,
propose to sell and issue that will enable the Purchasers, as a group, to
maintain their collective percentage equity interest in the Company. This
right of first refusal shall be subject to the following provisions:
(a) "New Securities" shall mean any Common Stock, preferred
stock or other security which is convertible into or exchangeable for
shares of Common Stock of the Company or any option, warrant or other
right to acquire such security or Common Stock of the Company; provided,
however, that "New Securities" shall not include (i) Common Stock
issuable upon conversion of or with respect to Series C Preferred or
upon conversion of any other convertible security of the Company
(including the Series A Preferred and the Series B Preferred) that is
outstanding from time to time, (ii) securities issued upon the exercise
of any warrants or options issued or granted by the Company that are
referred to in or contemplated by SECTION 3.2 or SECTION 8.3 of this
Agreement, (iii) 637,625 shares of Common Stock to be issued by the
Company at fair market value, (iv) securities offered to the public in
an underwritten offering pursuant to a registration statement filed
under the Securities Act, (v) securities issued by the Company as
consideration for an acquisition of a portion or all of the equity or
other interests in another corporation, partnership, business entity or
line of business of another business entity by the Company by merger,
reorganization, stock-for-equity or stock-for-assets exchange or any
other similar transaction and (vi) any option issued pursuant to a plan
as permitted by and subject to SECTION 8.3 below.
(b) If the Company proposes to issue New Securities, it shall
give each Purchaser written notice (the "Rights Notice") of its
intention, describing the New Securities, the price, and the general
terms upon which the Company proposes to issue them. Each Purchaser
shall have fifteen (15) days from the date of mailing of the Rights
Notice to agree to purchase (i) all or any part of its Pro-Rata Share
(as defined in subsection (e) below) of such New Securities and (ii) all
or any part of the Pro-Rata Share of such New Securities of all other
Purchasers to the extent that such other Purchasers do not elect to
purchase their respective full Pro-Rata Share, in each case for the
price and upon the general terms specified in the Rights Notice by
giving written notice to the Company setting forth the quantity of New
Securities it elects to purchase. If the Purchasers who elect to
purchase their full Pro-Rata Share also elect to purchase all or a
portion of the Pro-Rata Share of such New Securities of other Purchasers
who do not elect to purchase 100% of their respective Pro-Rata Share
(such other Purchasers referred to as "Non-Participating Purchasers"),
then such Purchasers shall be entitled to purchase, in addition to their
Pro-Rata Share, a percentage of the Pro-Rata Shares of the Non-
Participating Purchasers determined by the fraction the numerator of
which is the number of shares of Common Stock then
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<PAGE> 21
held, together with the number of shares of Common Stock issuable upon
conversion of the Series C Preferred then held by such Purchaser as of
the date of the Rights Notice, and the denominator of which is the sum
of the number of shares of Common Stock then held, plus the number of
shares of Common Stock issuable upon the conversion of Series C
Preferred then held, by all Purchasers electing to purchase more than
their Pro-Rata Share. Each Purchaser who agrees to purchase New
Securities shall deliver the purchase price for the New Securities and
otherwise comply with the general terms of sale set forth in the Rights
Notice on the thirtieth (30th) day after the date of mailing of the
Rights Notice (or such other date as agreed to by the Company and such
Purchaser) and the Company shall deliver duly registered share
certificates for the New Securities in exchange therefor.
(c) If the Purchasers fail to exercise in full the right of
first refusal within the period or periods specified in paragraph (b)
hereof, the Company shall have ninety (90) days after the date of
mailing of the Rights Notice to sell the unsold New Securities and the
balance of the New Securities not subject to the Right of First Refusal
provided for herein at a price and upon general terms no more favorable
to the purchasers thereof than specified in the Rights Notice. If the
Company has not sold the New Securities within said ninety (90) day
period the Company shall not thereafter issue or sell any New Securities
without first offering such securities to the Purchasers in the manner
provided above.
(d) A Purchaser's "Pro-Rata Share" shall be the percentage
determined by a fraction the numerator of which is the number of shares
of Common Stock then held, together with the number of shares of Common
Stock issuable upon conversion of the Series C Preferred then held, by
such Purchaser as of the date of the Rights Notice (as defined in
paragraph (b) above) and the denominator of which is the sum of the
total number of shares of Common Stock then outstanding, together with
the number of shares of Common Stock issuable upon conversion of
convertible securities of the Company then outstanding, all as of such
date.
7.7 Restrictions on Transfer. Each Purchaser (and each transferee,
successor or assign of a Purchaser) further agrees that (a) it will not offer,
sell or otherwise dispose of the Series C Preferred (or the Common Stock in to
which the Series C Preferred may be converted), unless such offer, sale or
other disposition is effected in accordance with the terms of this Agreement
and the Registration Rights Agreement and such offer, sale or other disposition
is (i) registered under the Securities Act and applicable state securities
laws, (ii) pursuant to Rule 144 of the Securities Act of 1933, or (iii) in
compliance with an opinion of counsel to such Purchaser delivered to the
Company and reasonably acceptable to the Company and its counsel to the effect
that such offer, sale or other disposition thereof does not violate the
Securities Act or applicable state securities laws, and (b) the certificate(s)
representing the Series C Preferred (and any Common Stock into which the Series
C Preferred maybe converted) shall bear legends in substantially the following
form:
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<PAGE> 22
THE TRANSFER AND VOTING OF THESE SHARES IS SUBJECT TO THE TERMS OF A
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT DATED AS OF JULY 22, 1996 AND A
PREFERRED STOCKHOLDERS' SALES AGREEMENT DATED AS OF JULY 22, 1996, COPIES OF
WHICH ARE AVAILABLE FOR INSPECTION AT THE OFFICES OF THE COMPANY.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, UNLESS AND UNTIL REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND SUCH APPLICABLE STATE LAW OR, IN THE OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, DOES NOT VIOLATE THE PROVISIONS THEREOF OR UNLESS SOLD PURSUANT TO
RULE 144 OF THE SECURITIES ACT OF 1933.
Upon request of a Purchaser or other person who in accordance with the
provisions of this SECTION 7.7 becomes a holder of Series C Preferred (or the
Common Stock into which the Series C Preferred has been converted), the Company
shall remove the legend set forth in the second paragraph above from the
certificates evidencing such Series C Preferred or Common Stock or issue to
such holder new certificates evidencing such Series C Preferred or Common Stock
free of such legend, if such request is accompanied by an opinion of counsel,
reasonably satisfactory to the Company and its counsel, to the effect that such
Series C Preferred or Common Stock, as applicable, is not required by the
Securities Act or other applicable law to continue to bear the legend or a
legend similar thereto.
7.8 Transfer Instructions. Each Purchaser agrees that the Company
may provide for appropriate transfer instructions to implement the provisions
of SECTION 7.7 hereof.
7.9 Operation of Business. For so long as any shares of Series C
Preferred remain outstanding, the Company shall comply with each of the
following covenants, and will cause each Subsidiary, if and when such
Subsidiary exists, to comply with each of the following covenants, as if they
applied to it in the same manner as they apply to the Company.
(a) Compliance with Laws, Etc. The Company shall comply with
all laws, rules, regulations, judgments, orders and decrees of any
governmental or regulatory authority, the violation of which could have
a material adverse effect on the business, assets or properties of the
Company and with all material contracts and agreements to which it is a
party or shall become a party and shall perform all material obligations
which it has or shall incur.
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(b) Preservation of Corporate Existence and Property. The
Company shall preserve, protect and maintain: (i) its corporate
existence and good standing in its jurisdiction of incorporation, (ii)
its rights, franchises and privileges, and (iii) all of its properties
necessary or useful in the proper conduct of its business in good
working order and condition, with the exception of (x) ordinary wear and
tear, and (y) casualty losses covered by insurance, allowing for
reasonable deductibles.
(c) Insurance. The Company shall maintain or cause to be
maintained, with financially sound and reputable insurers, insurance
with respect to the properties and business of the Company, against loss
or damage of the kinds customarily insured against by corporations of
established reputation and similar size engaged in the same or similar
business, in adequate amounts.
(d) Payment of Indebtedness. The Company shall pay or cause
to be paid the principal of, and the interest and premium, if any, on
all indebtedness heretofore or hereafter incurred or assumed by the
Company when and as the same shall become due and payable, unless such
indebtedness shall be renewed or extended, in which case such payments
shall be made in accordance with the terms of such renewal or extension.
(e) Transactions with Affiliates. Without the consent of the
directors elected by the holders of Series B Preferred, the Company will
not enter into any agreements or transactions with any Affiliate of the
Company any member of their families, or any corporation or other entity
in which any one or more of such persons holds, directly or indirectly,
five percent (5%) or more of any class of capital stock, on terms less
favorable to the Company than could be obtained by the Company in an
arm's-length transaction with a person who was not an affiliate of the
Company.
(f) Further Assurance. The Company shall cooperate with the
Purchasers and shall execute and deliver all such further instruments
and documents and do all such further acts and things as the Company may
be reasonably requested to do from time to time by any of the Purchasers
in order to satisfy the conditions and carry out the provisions and
purposes of this Agreement and the Registration Rights Agreement.
(g) Section 305. The Company shall not enter into any
transaction which would result in a dividend on a Purchaser's shares
under Section 305 of the Code (or any successor provision) other than
dividends accruing pursuant to the Certificate of Incorporation, as
amended from time to time.
(h) U.S. Real Property Holding Corporation. The Company will
not be a "United States real property holding corporation", as defined
in Section 897(c)(2) of the Code and Section 1.897-2(b) of the
Regulations promulgated by the Internal Revenue Service and upon written
request, will provide to any holder of Preferred
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<PAGE> 24
Stock a statement to the effect informing such holder whether its
interest in the Company constitutes a U.S. real property interest.
7.10 Reservation of Common Stock. For so long as any shares of Series
C Preferred remain outstanding, the Company shall increase the authorized
amount and maintain in reserve that number of shares of Common Stock necessary
to accommodate the conversion into Common Stock of all issued and outstanding
shares of Series C Preferred.
7.11 Public Announcements. The Company shall not make any public
announcement or disclosure relating to any Purchaser's participation in the
transactions contemplated by this Agreement or the relationship established
hereby with any Purchaser unless such announcement or disclosure is (i) in the
judgment of the Company after consultation with its legal counsel, required by
applicable law or regulation or (ii) approved by the Purchaser, which approval
shall not be unreasonably withheld.
7.12 Maintenance of Key Person Life Insurance. The Company will
maintain, with a financially sound and reputable insurance company or
association, term life insurance on the life of Dr. Daniel Von Hoff and the
life of Richard Love, in the amount of at least $1,000,000, which proceeds
shall be payable to the order of the Company. The Company will not cause or
permit any assignment of the proceeds of said policy, and will not borrow
against such policy. The Company will add the Purchasers as notice parties to
such policy, and will request that the issuer of such policy provide each
Purchaser with twenty (20) days' notice before such policy is terminated (for
failure to pay premiums or otherwise) or assigned, or before any change is made
in the designation of the beneficiary thereof.
7.13 New Developments. Subject to the other contractual obligations
of such consultants, the Company will cause all technological developments,
patentable or unpatentable inventions, discoveries or improvements by its
officers, employees or consultants to be documented in accordance with
appropriate professional standards, cause all officers, employees and
consultants to execute appropriate patent and copyright assignment agreements
to the Company, as the case may be, and, where possible and appropriate, cause
all officers, employees and consultants to file and execute United States and
foreign patent or copyright applications relating to and protecting such
developments on behalf of the Company. The Company will cause each officer,
key employee and key consultant now or hereafter employed to execute and
deliver an Employee Provisions Agreement in the form and substance of Exhibit
3.12 attached hereto, or as otherwise approved by the Board of Directors of the
Company.
7.14 Indemnification. The Company shall at all times maintain
provisions in its Certificate of Incorporation or By-laws indemnifying all
directors against liability and providing for the advancement of expenses to
the maximum extent permitted under the laws of the jurisdiction of its
incorporation.
-24-
<PAGE> 25
7.15 Rule 144A Information. The Company covenants and agrees that, at
all times during which the Company is neither subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, nor exempt from
reporting pursuant to Rule 12(g)3-2(b) under the Exchange Act, it will provide
in written form (as promptly as practicable and in any event within fifteen
(15) business days), upon the written request of any holder of Series C
Preferred or a prospective buyer of such shares or the Conversion Shares, all
information required by Rule 144A(d)(4)(i) of the General Regulations
promulgated by the Commission under the Securities Act ("Rule 144A
Information"). The Company further covenants, upon written request, to
cooperate with and assist any holder of Series C Preferred or any member of the
National Association of Securities Dealers, Inc. system for Private Offerings
Resales and Trading through Automated Linkage ("PORTAL") in applying to
designate and thereafter maintain the eligibility of such shares or the
Conversion Shares for trading through PORTAL. The Company's obligations under
this SECTION 7.15 shall at all times be contingent upon the relevant holder of
Series C Preferred obtaining from a prospective purchaser an agreement to take
all reasonable precautions to safeguard the Rule 144A Information from
disclosure to anyone other than a Person who will assist such purchaser in
evaluating the purchase of such securities.
7.16 Compliance with Material Agreements. The Company shall provide
notice to the Company's Board of Directors of any material breach by the
Company of any Material Agreement.
7.17 Meetings of Directors; Expenses of Directors. The Company shall
hold meetings of the Company's Board of Directors (any of which may be
conducted as telephonic meetings in accordance with the Delaware General
Corporation Law) not less frequently than six (6) times during each calendar
year.
7.18 Notice to Board of Directors. The Company shall provide notice
within a reasonable period of time to a designated representative of Perseus
Pharmaceuticals, L.L.C. of (i) any material adverse change in the Company's
business, assets, properties, management, operation or financial condition,
(ii) all actions, writs and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign affecting the Company or its assets of which the Company has knowledge,
which if resolved adversely, could result in a material adverse effect on the
Company's business. Such representative of Perseus Pharmaceuticals, L.L.C.
shall have the right to attend all meetings of the Company's Board of Directors
(the "Attendance Rights") whether such meetings are conducted in person or
telephonically, but shall not have the right to vote or participate in any
action taken at such meetings. The Attendance Rights shall not be assignable
by Perseus Pharmaceuticals, L.L.C. without the written consent of the Company.
7.19 Founders' Sales Agreement. Except as otherwise prohibited by
law, the Company agrees that it shall not permit any transfer of shares of
capital stock in violation of the Founders' Sales Agreement.
-25-
<PAGE> 26
7.20 Preferred Stockholders' Sales Agreement. Except as otherwise
prohibited by law, the Company agrees that it shall not permit any transfer of
shares of capital stock in violation of the Preferred Stockholders' Sales
Agreement.
8. Additional Covenants of the Company.
8.1 Conduct of Business in the Ordinary Course. From the date of
this Agreement until the Closing, except with the prior approval of each
Purchaser, the Company will operate the business of the Company in the ordinary
course.
8.2 Reasonable Efforts. From the date of this Agreement until the
Closing, the Company shall use all reasonable efforts to obtain all necessary
consents and take all actions necessary for the consummation of the
transactions contemplated hereby.
8.3 Stock Option Plans. From the date of this Agreement until the
first date on which shares of Series C Preferred cease to be outstanding, the
Company shall be permitted to increase from time to time the number of shares
issuable to employees, advisors, officers, directors and consultants of, and
other persons performing services for, the Company in connection with their
advisory or other relationship with the Company only pursuant to plans approved
by Company's Board of Directors, provided that without the written consent of
Purchasers representing at least 50% of the Series C Preferred, the Company
shall not permit the total number of shares issuable pursuant to such plans to
exceed 15% of the number of shares of Common Stock and Common Stock Equivalents
that are outstanding at the time of a grant, subject in any event to the
provisions of the Certificate of Incorporation. For purposes of this SECTION
8.3, "Common Stock Equivalent" shall mean (i) Common Stock issuable upon
conversion of the Series A Preferred, the Series B Preferred, the Series C
Preferred and any other convertible security that may be outstanding from time
to time, and (ii) Common Stock issuable upon exercise of warrants to acquire
Common Stock issued to Vector Securities International, Inc.
9. Termination of Agreement and Survival of Representations,
Warranties and Covenants.
(a) Termination. This Agreement may be terminated prior to
Closing by the Company with respect to some or all of the Purchasers and
by a Purchaser with respect to itself upon written notice to the other
parties:
(i) At any time by mutual written agreement of all the
parties hereto;
(ii) At any time after August 1, 1996, by any party if
the Closing shall not have occurred on or prior to such date;
-26-
<PAGE> 27
(iii) By the Company if any representation or warranty of
a Purchaser contained in this Agreement or in any certificate or
other document executed and delivered by a Purchaser to the
Company pursuant to this Agreement is or becomes untrue or
breached in any material respect or if a Purchaser fails to
comply in any material respect with any covenant or agreement
contained herein, and any such misrepresentation, breach or
noncompliance is not cured, waived, or eliminated before Closing;
(iv) By a Purchaser if any representation or warranty of
the Company contained in this Agreement or in any certificate or
other document executed and delivered by the Company pursuant to
this Agreement is or becomes untrue or breached in any material
respect or if the Company fails to comply in any material respect
with any covenant or agreement contained herein, and any such
misrepresentation, breach or noncompliance is not cured, waived,
or eliminated before Closing;
(v) On the Closing Date by a Purchaser if the
conditions set forth in SECTION 5 have not been satisfied; or
(vi) On the Closing Date by the Company if the
conditions stated in SECTION 6 have not been satisfied.
In the event this Agreement is terminated pursuant to
subparagraph (iii) or (iv) above, the Purchasers and the Company shall
be entitled to pursue, exercise and enforce any and all remedies,
rights, powers and privileges available at law or in equity and under
this Agreement.
(b) Survival of Representations, Warranties and Covenants.
Except as otherwise provided in this Agreement, all covenants made
hereunder or pursuant hereto or in connection with the transactions
contemplated hereby shall survive the Closing and shall continue in full
force and effect thereafter. Any representation or warranty the breach
or inaccuracy of which involves fraud on the part of the Company or a
Purchaser shall survive the Closing and shall continue in full force and
effect thereafter. All other representations and warranties, as
certified to by the Company pursuant to the certificate required to be
delivered under SECTION 5.4 and by the Purchasers pursuant to SECTION
6.1 of this Agreement, made hereunder or pursuant hereto or in
connection with the transactions contemplated hereby shall survive the
Closing until the expiration of the applicable statute of limitations
and notice of any claim based on a breach of any such representation or
warranty must be given prior to the expiration of such statute of
limitations.
10. Indemnification. The Company shall indemnify and hold harmless
each Purchaser against and from any losses,
-27-
<PAGE> 28
claims, damages or liabilities, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (A)
the falsity or incorrectness as of the Closing Date of any representation or
warranty of the Company contained in or made pursuant to SECTION 3 hereof, or
(B) the existence of any condition, event or fact constituting, or which with
notice or passage of time, or both, would constitute a default in the
observance of any of the Company's undertakings or covenants hereunder or under
any of the documents executed in connection herewith. The Company shall also
pay all reasonable attorney's fees and costs and court costs incurred by the
Purchasers in enforcing the indemnification provided for in this SECTION 10
(provided, however, that where more than one Purchaser is requesting the
indemnification provided for in this SECTION 10, the Company shall only be
obligated to attorney's fees of one counsel to represent all such Purchasers).
11. Notices. All notices, requests, consents and other
communications provided for herein (except as stated in the last sentence of
this SECTION 11) shall be in writing, and shall be mailed by certified mail,
postage prepaid, delivered by Federal Express or similar overnight courier, or
personally delivered, as follows:
(a) If to the Company:
Ilex Oncology, Inc.
14785 Omicron Drive, Suite 101
San Antonio, Texas 78245
Attention: Richard L. Love
with a copy to:
Fulbright & Jaworski L.L.P.
300 Convent Street, Suite 2200
San Antonio, Texas 78205
Attention: Kenneth J. Halliday
(b) If to the Purchasers to the persons
and addresses set forth on Exhibit A
or such other addresses as each of the parties hereto may provide from time to
time in writing to the other parties. For purposes of computing the time
periods set forth in SECTION 7, the date of mailing shall be deemed to be the
date of delivery. The financial statements and other reports required by
SECTION 7 may be mailed by first-class regular mail.
12. Modifications; Waiver. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated (i) prior to the
Closing Date unless effected by a writing executed and delivered by the parties
hereto and (ii) after the Closing Date unless effected by a writing executed
and delivered by the Company and by holders representing not
-28-
<PAGE> 29
less than 66-2/3% of the aggregate number of issued and outstanding shares of
Series C Preferred and shares of Common Stock issued upon the conversion of
Series C Preferred, provided that this SECTION 12 may not be modified or
amended without the written consent of all the holders of Series C Preferred
and the Company, and provided further that in any event, no amendment or change
may be made to the terms hereof that imposes additional obligations or
restrictions upon a party without its written consent.
13. Entire Agreement. This Agreement, including the Schedules and
Exhibits hereto, including the Registration Rights Agreement, the Amended and
Restated Founders' Sales Agreement and the Amended and Restated Preferred
Stockholders' Sales Agreement, contains the entire agreements between the
parties with respect to the transactions contemplated hereby, and supersedes
all negotiations, agreements, representations, warranties, commitments, whether
in writing or oral, prior to the date hereof and shall, except as otherwise
expressly provided herein and therein, not affect the rights of the parties
under the Series B Convertible Preferred Stock Purchase Agreement dated
September 29, 1995.
14. Application to Successor Holders. The rights of each Purchaser
set forth in SECTIONS 7.1, 7.3 AND 7.6 shall inure to the benefit of any person
who becomes a holder of Series C Preferred sold pursuant to this Agreement (or
of Common Stock issued upon conversion of such Series C Preferred) in a
transfer made in accordance with the provisions of SECTION 7.7 (a "Permitted
Holder") hereof as though such holder were a Purchaser, and the obligations of
each Purchaser set forth in SECTION 7.5 shall be binding on any person who
after the date hereof becomes a holder of shares of Series C Preferred sold
pursuant to this Agreement as though such holder were a Purchaser.
15. Execution and Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, and such counterparts together shall constitute one
instrument.
16. Governing Law and Severability. This Agreement shall be governed
by the laws of the State of Texas as applied to agreements entered into and to
be performed entirely within the State of Texas. In the event any provision of
this Agreement or the application of such provision to any party shall be held
by a court of competent jurisdiction to be contrary to law, the remaining
provisions of this Agreement shall remain in full force and effect.
17. Headings. The descriptive headings of the Sections hereof and
the Schedules and Exhibits hereto are inserted for convenience only, and do not
constitute a part of this Agreement.
18. Waivers And Consents. Any waiver or consent hereunder shall be
effective only in the specific instance and for the purpose for which it was
given, and shall not constitute a continuing waiver or consent.
Notwithstanding this Agreement, any term or
-29-
<PAGE> 30
condition hereof, or the consummation of the transactions contemplated hereby,
no Purchaser waives or relinquishes any right it may have or may acquire
against the Company or any of its Affiliates or agents in connection with the
acquisition of Series C Preferred by such Purchaser, or the ownership thereof.
All such rights shall remain unimpaired by the execution of this Agreement and
the consummation of the transactions contemplated hereby.
19. Severability. In the event that any court of competent
jurisdiction shall determine that any provision, or any portion thereof,
contained in this Agreement shall be unenforceable in any respect, then such
provision shall be deemed limited to the extent that such court deems it
enforceable, and as so limited shall remain in full force and effect. In the
event that such court shall deem any such provision, or portion thereof, wholly
unenforceable, the remaining provisions of this Agreement shall nevertheless
remain in full force and effect.
20. No Waiver Of Rights, Powers And Remedies. Except as expressly
provided in this Agreement, no failure or delay by a party hereto in exercising
any right, power or remedy under this Agreement, and no course of dealing
between the parties hereto, shall operate as a waiver of any such right, power
or remedy of the party. No single or partial exercise of any right, power or
remedy under this Agreement by a party hereto, nor any abandonment or
discontinuance of steps to enforce any such right, power or remedy, shall
preclude such party from any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder. The election of any remedy by a
party hereto shall not constitute a waiver of the right of such party to pursue
other available remedies. No notice to or demand on a party not expressly
required under this Agreement shall entitle the party receiving such notice or
demand to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the party giving such
notice or demand to any other or further action in any circumstances without
such notice or demand.
21. Reliance. The parties hereto agree that, notwithstanding any
access to information by any party or any right of a party to this Agreement to
investigate the affairs of any other party to this Agreement, the party having
such access and right to investigate shall have the right to rely fully upon
the representations and warranties of the other party expressly contained in
this Agreement and on the accuracy of any Schedule, Exhibit or other document
attached hereto or referred to herein or delivered by such other party or
pursuant to this Agreement. Each of the Purchasers acknowledges that, based on
information provided by the Company, it has made its own analysis and decisions
regarding the transactions contemplated hereby and that it is not relying on
any of the other Purchasers in executing this Agreement or consummating the
transactions contemplated hereby.
22. Costs, Expenses and Taxes. Each of the parties hereto shall
bear such party's own costs and expenses in connection with this Agreement and
the transactions contemplated hereby.
-30-
<PAGE> 31
23. Definitions. The following terms shall have the respective
meanings set forth below whenever used in this Agreement:
"Affiliate" has the meaning ascribed to that term in Rule 12b-2 under
the Exchange Act, or any successor rule and in any event with respect to the
Company, shall mean any Director, officer or stockholder thereof.
"Knowledge" or "known" shall mean or refer to the actual knowledge of
the Company, its officers, directors and key employees after reasonable
diligence
"Subsidiary" or "Subsidiaries" shall mean any corporation, partnership,
trust or other entity of which the Company and/or any of its other Subsidiaries
directly or indirectly owns at the time a majority of the outstanding shares of
any class of equity security of such corporation, partnership, trust or other
entity.
[signatures on next page]
-31-
<PAGE> 32
This Agreement is hereby executed as of the date first above written.
ILEX ONCOLOGY, INC.
By: /s/ RICHARD LOVE
------------------------------------------
Name: Richard Love
----------------------------------------
Title: Pres./CEO
---------------------------------------
PURCHASERS:
ROVENT II LIMITED PARTNERSHIP
By: Advent International Limited
Partnership,
General Partner
By: Advent International Corporation,
General Partner
By: /s/
-----------------------------------------
Senior Investment Manager
ADVENT PERFORMANCE MATERIALS LIMITED
PARTNERSHIP
By: Advent International Limited
Partnership,
General Partner
By: Advent International Corporation,
General Partner
By: /s/
-----------------------------------------
Senior Investment Manager
ADVENTACT LIMITED PARTNERSHIP
By: Advent International Limited
Partnership, General Partner
By: Advent International Corporation,
General Partner
By: /s/
-----------------------------------------
Senior Investment Manager
-32-
<PAGE> 33
ADVENT INTERNATIONAL INVESTORS II LIMITED
PARTNERSHIP
By: Advent International Corporation,
General Partner
By: NOT PARTICIPATING
-----------------------------------------
Senior Investment Manager
BOSTON CAPITAL VENTURES III,
LIMITED PARTNERSHIP
By: BD Partners Limited Partnership
its General Partner
By: /s/
-----------------------------------------
General Partner
CROSS ATLANTIC PARTNERS K/S
By its General Partner: CAP/HAMBRO L.P.
By its General Partner: CAP/HAMBRO, INC.
By: /s/ JOHN L. CASSIS
---------------------------------
Name: John L. Cassis
Title: Vice President
CRYSTAL PARTNERS IV
By: /s/
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
/s/ STEVE DANA
---------------------------------------------
Steve Dana
/s/ STUART POMPIAN
---------------------------------------------
Stuart Pompian
-33-
<PAGE> 34
/s/ MARY ANN DANA
---------------------------------------------
Mary Ann Dana
DRUG ROYALTY CORPORATION INC.
By: /s/
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
/s/ GERALD DUBINSKI
---------------------------------------------
Gerald Dubinski
/s/ GEORGE ENSLEY
---------------------------------------------
George Ensley
/s/ LUCILLE ENSLEY
---------------------------------------------
Lucille Ensley
/s/ JAMES GORMAN, JR.
---------------------------------------------
James Gorman, Jr.
/s/ JOHN KORBELL
---------------------------------------------
John Korbell
/s/ FRED LEPICK
---------------------------------------------
Fred Lepick
/s/ BILLY J. MCCOMBS
---------------------------------------------
Billy J. McCombs
-34-
<PAGE> 35
/s/ RUSKIN NORMAN, M.D.
---------------------------------------------
Ruskin Norman, M.D.
PERSEUS PHARMACEUTICALS, L.L.C.
By: /s/
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
/s/ ERIC STUMBERG
---------------------------------------------
Eric Stumberg
/s/ LOUIS H. STUMBERG
---------------------------------------------
Louis H. Stumberg
/s/ LOUIS H. STUMBERG, JR.
---------------------------------------------
Louis H. Stumberg, Jr.
TRINITY UNIVERSITY
By: /s/
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
/s/ ROBERT V. WEST, JR., PH.D.
---------------------------------------------
Robert V. West, Jr., Ph.D.
/s/ GARY WOODS
---------------------------------------------
Gary Woods
/s/ ROGER ZELLER
---------------------------------------------
Roger Zeller
-35-
<PAGE> 36
CROSS ATLANTIC PARTNERS II K/S
By its General Partner: CAP/HAMBRO L.P.
By its General Partner: CAP/HAMBRO, INC.
By: /s/ JOHN L. CASSIS
---------------------------------
Name: John L. Cassis
Title: Vice President
-36-
<PAGE> 1
EXHIBIT 11.1
ILEX ONCOLOGY, INC.
COMPUTATION OF NET LOSS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
NINE-MONTH
YEARS ENDED PERIODS ENDED
DECEMBER 31, SEPTEMBER 30,
--------------- ---------------
1994 1995 1995 1996
----- ----- ----- ------
<S> <C> <C> <C> <C>
Net Loss................................................. (46) (712) (478) (1,729)
===== ===== ===== ======
Weighted average number of Common Stock and Common Stock
equivalents outstanding:
Weighted average number of shares of Common Stock
outstanding......................................... 1,188 1,188 1,188 1,188
Common Stock equivalents applicable to convertible
preferred stock(1).................................. 5,753 5,992 5,768 6,874
Weighted average number of Common Stock equivalents
applicable to stock options and warrants(1)......... 603 557 597 398
----- ----- ----- ------
Common Stock and Common Stock equivalents................ 7,544 7,737 7,553 8,460
===== ===== ===== ======
Earnings per share -- primary............................ (0.01) (0.09) (0.06) (0.20)
===== ===== ===== ======
Net Loss................................................. (46) (712) (478) (1,729)
===== ===== ===== ======
Weighted average number of Common Stock and Common Stock
equivalents outstanding:
Weighted average number of shares of Common Stock
outstanding......................................... 1,188 1,188 1,188 1,188
Common Stock equivalents applicable to convertible
preferred stock(1).................................. 5,753 5,992 5,768 6,874
Weighted average number of Common Stock equivalents
applicable to stock options and warrants(1)......... 603 557 597 513
----- ----- ----- ------
Common Stock and Common Stock equivalent, assuming full
dilution............................................... 7,544 7,737 7,553 8,575
Earnings per share -- fully diluted(2)................... (0.01) (0.09) (0.06) (0.20)
===== ===== ===== ======
</TABLE>
- ---------------
(1) Convertible debt issued within one year prior to an initial public offering
with a conversion price below the estimated initial public offering price
has been included as outstanding for all periods specified by SAB No. 83
(Topic 4-D)
(2) This calculation is submitted in accordance with item 601(b)11 of regulation
S-K although it is not required by APB Opinion No. 15 because it results in
dilution of less than 3%.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of the
headnote to our report (and to all references to our firm) included in or made a
part of this Registration Statement.
ARTHUR ANDERSEN LLP
San Antonio, Texas
December 11, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AS OF DECEMBER 31, 1994 AND 1995, AND SEPTEMBER 30, 1995 AND 1996, AND
THE STATEMENTS OF OPERATIONS FOR THE PERIODS THEN ENDED AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995 DEC-31-1995 DEC-31-1996
<PERIOD-END> DEC-31-1994 DEC-31-1995 SEP-30-1995 SEP-30-1996
<CASH> 79 9,636 10,760 7,663
<SECURITIES> 0 0 0 2,358
<RECEIVABLES> 1,015 843 735 1,119
<ALLOWANCES> 0 123 120 123
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 1,101 10,750 11,670 11,524
<PP&E> 67 535 218 904
<DEPRECIATION> (2) (28) (18) (104)
<TOTAL-ASSETS> 1,166 11,257 11,871 19,715
<CURRENT-LIABILITIES> 1,223 1,746 2,129 1,793
<BONDS> 0 0 0 0
0 0 0 0
0 61 61 74
<COMMON> 0 12 12 12
<OTHER-SE> (57) 9,438 9,669 17,663
<TOTAL-LIABILITY-AND-EQUITY> 1,166 11,257 11,871 19,715
<SALES> 0 0 0 0
<TOTAL-REVENUES> 1,253 4,209 3,003 3,741
<CGS> 0 0 0 0
<TOTAL-COSTS> 1,142 3,742 2,582 4,011
<OTHER-EXPENSES> 156 1,189 766 1,914
<LOSS-PROVISION> 0 123 120 0
<INTEREST-EXPENSE> 1 (133) 13 (455)
<INCOME-PRETAX> (46) (712) (478) (1,729)
<INCOME-TAX> 0 0 0 0
<INCOME-CONTINUING> (46) (712) (478) (1,729)
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> (46) (712) (478) (1,729)
<EPS-PRIMARY> (0.01) (0.09) (0.06) (0.20)
<EPS-DILUTED> (0.01) (0.09) (0.06) (0.20)
</TABLE>
