<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
-- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
COMMISSION FILE NUMBER 0-28494
MILLENNIUM PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3177038
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
238 MAIN STREET, CAMBRIDGE, MA 02142
(Address of principal executive offices, including zip code)
617-679-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Number of shares of Common Stock, $.001 par value per share, outstanding as of
November 11, 1998 was 34,709,817.
<PAGE> 2
MILLENNIUM PHARMACEUTICALS, INC.
REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited)
Condensed Consolidated Balance Sheets
September 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Operations and
Comprehensive Loss for the three and nine months
ended September 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7
PART II - OTHER INFORMATION 11
ITEM 5. OTHER INFORMATION 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
SIGNATURES 13
EXHIBIT INDEX 14
</TABLE>
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Millennium Pharmaceuticals, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
(in thousands, except par value and shares) 1998 1997
-----------------------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 34,456 $ 69,236
Marketable securities 35,512 27,321
Due from strategic partners 9,711 778
Prepaid expenses and other current assets 3,892 4,595
-----------------------------
Total current assets 83,571 101,930
Property and equipment, net 35,615 29,030
Restricted cash and other assets 10,792 5,140
Intangible assets, net 6,386 8,413
-----------------------------
$ 136,364 $ 144,513
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,972 $ 3,165
Accrued expenses 5,570 4,294
Deferred revenue 1,970 3,053
Current portion of capital lease obligations 8,232 5,847
-----------------------------
Total current liabilities 23,744 16,359
Capital lease obligations, net of current portion 22,282 19,809
Minority interest 7,177 16,590
Commitments and contingencies -
Stockholders' equity:
Preferred Stock, $0.001 par value;
5,000,000 shares authorized;
none issued - -
Common Stock, $0.001 par value:
100,000,000 shares authorized;
29,659,335 shares in 1998 and 29,169,398 shares
in 1997 issued and outstanding 30 29
Additional paid-in capital 196,547 193,254
Deferred compensation (1,165) (1,992)
Notes receivable from officers (111) (166)
Unrealized gain (loss) on marketable securities 66 (4)
Accumulated deficit (112,206) (99,366)
-----------------------------
Total stockholders' equity 83,161 91,755
-----------------------------
Total liabilities and stockholders' equity $ 136,364 $ 144,513
=============================
</TABLE>
Note: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed consolidated financial statements.
3
<PAGE> 4
Millennium Pharmaceuticals, Inc.
Condensed Consolidated Statements of Operations and
Comprehensive Loss (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
(in thousands, except per share and share data) 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue under strategic alliances $ 26,440 $ 13,650 $ 75,719 $ 37,978
Costs and expenses:
Research and development 30,014 20,442 80,479 50,374
General and administrative 6,090 4,146 17,928 12,009
Acquired in-process research and development - - - 83,800
Amortization of intangible assets 676 675 2,027 1,721
-------------------------------------------------------------
36,780 25,263 100,434 147,904
-------------------------------------------------------------
Loss from operations (10,340) (11,613) (24,715) (109,926)
Interest income 1,274 1,174 4,060 3,227
Interest expense (565) (410) (1,689) (1,046)
Minority interest 3,418 947 9,504 947
-------------------------------------------------------------
Net loss ($ 6,213) ($ 9,902) ($ 12,840) ($ 106,798)
=============================================================
Unrealized gain on marketable securities 89 30 70 26
Comprehensive loss $ (6,124) $ (9,872) $ (12,770) $ (106,772)
=============================================================
Basic and diluted net loss per share ($ 0.21) ($ 0.34) ($ 0.44) ($ 3.80)
=============================================================
Shares used in computing basic and
diluted net loss per share 29,552,411 28,889,249 29,434,404 28,092,337
=============================================================
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
Millennium Pharmaceuticals, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1998 1997
(in thousands)
- -------------------------------------------------------------------------------
<S> <C> <C>
CASH USED IN OPERATIONS $(20,528) $(10,964)
INVESTING ACTIVITIES
Purchase of property and equipment (4,067) (5,626)
Sale of marketable securities 46,506 41,400
Purchase of marketable securities (54,697) (23,487)
-------------------------
Net cash (used in) provided by investing activities (12,258) 12,287
FINANCING ACTIVITIES
Acquisition of ChemGenics, net of cash acquired - 7,087
Sale of subsidiary stock - 20,000
Net proceeds from employee stock purchases 3,319 1,663
Repurchase of Common Stock (25) (23)
Payments of long-term debt - (1,200)
Payments of capital lease obligations (5,288) (3,635)
-------------------------
Net cash (used in) provided by financing activities (1,994) 23,892
-------------------------
(Decrease) increase in cash and cash equivalents (34,780) 25,215
Cash and cash equivalents at beginning of period 69,236 10,088
-------------------------
Cash and cash equivalents at end of period $ 34,456 $ 35,303
=========================
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Equipment acquired under capital leases $ 10,146 $ 10,252
=========================
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
MILLENNIUM PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(unaudited)
1- BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Interim results for the three and nine-month periods ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1998. For further information, refer to
the financial statements and footnotes thereto included in the Company's Annual
Report on 10-K for the fiscal year ended December 31, 1997 which was filed with
the Securities Exchange Commission on March 26, 1998.
As of January 1, 1998, the Company adopted SFAS 130, Reporting
Comprehensive Income. SFAS 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net loss or shareholders' equity.
SFAS 130 requires unrealized gains or losses on the Company's available-for-sale
securities, which prior to adoption were reported separately in shareholders'
equity, to be included in other comprehensive income. Prior year financial
statements have been reclassified to conform to the requirements of SFAS 130.
2- STRATEGIC ALLIANCE
On September 23, 1998, the Company announced the formation of an alliance
with Bayer AG ("Bayer"). Under the terms of the alliance, Bayer will receive
access to key technologies in genome research as well as a flow of
genomics-based drug development targets that are discovered by the Company
through its research efforts.
On November 10, 1998, Bayer made an equity investment of $96.6 million
representing approximately a 14% interest in Millennium and paid an initial
license fee of $33.4 million. Over the remaining five-year term of the
agreement, Millennium will undertake a research and discovery program and Bayer
will provide additional payments to Millennium which could total up to
$335.0 million in a combination of research program funding and performance
fees.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
This Report on Form 10-Q contains forward-looking statements. For this
purpose, any statements contained herein that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes," "anticipates," "plans," "expects," "intends,"
and similar expressions are intended to identify forward-looking statements.
There are a number of important factors that could cause the Company's actual
results to differ materially from those indicated by such forward-looking
statements. These factors are set forth under the caption "Factors That May
Affect Results" in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, which "Factors That May Affect Results" discussion is
expressly incorporated by reference herein.
OVERVIEW
Millennium Pharmaceuticals, Inc. ("Millennium" or the "Company"), was
incorporated in January 1993 and is applying a comprehensive platform of
genomics and related technologies to pursue multiple opportunities in the
discovery and development of life-science-based products and services. Most of
the Company's activities currently are directed at the field of human
healthcare. As used herein, the terms "the Company" and "Millennium" include the
Company's subsidiaries where appropriate in the context.
RESULTS OF OPERATIONS
QUARTERS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
Revenue under strategic alliances increased to $26.4 million for the three
months ended September 30, 1998 (the "1998 Quarterly Period") from $13.7 million
for the three months ended September 30, 1997 (the "1997 Quarterly Period"). The
increase in revenue in the 1998 Quarterly Period is due primarily to revenue
from research funding and payments for technology transfer under the Company's
alliance with Monsanto Company (the "Monsanto alliance"). The Monsanto alliance
was entered into in October 1997 and, therefore, was not in place in the 1997
Quarterly Period.
Research and development expenses increased to $30.0 million for the 1998
Quarterly Period from $20.4 million for the 1997 Quarterly Period. The increase
was attributable primarily to increased personnel expenses as the Company hired
additional research and development personnel, increased purchases of laboratory
supplies, and increased equipment depreciation and facilities expenses in
connection with the expansion of the Company's research efforts.
General and administrative expenses increased to $6.1 million for the 1998
Quarterly Period from $4.1 million for the 1997 Quarterly Period. The increase
was attributable primarily to increased personnel expenses as the Company has
hired additional management, business
7
<PAGE> 8
development, and administrative personnel, and to legal and consulting fees in
connection with the Company's business development, strategic alliances, and
information systems infrastructure.
The Company's total operating expenses increased to $36.8 million for the
1998 Quarterly Period from $25.3 million for the 1997 Quarterly Period, for the
reasons discussed above with respect to the increase in research and development
and general and administrative expenses.
Interest income was $1.3 million for the 1998 Quarterly Period and
$1.2 million for the 1997 Quarterly Period. The increase resulted from an
increase in the Company's average balance of cash, cash equivalents and
marketable securities. Interest expense increased to $.6 million for the 1998
Quarterly Period from $.4 million for the 1997 Quarterly Period due to increased
capital lease obligations.
Minority interest represents the minority shareholder interest of Eli Lilly
and Company ("Lilly") in the net loss for the 1998 and 1997 Quarterly Periods of
the Company's majority-owned subsidiary, Millennium BioTherapeutics, Inc.
("MBio").
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
Revenue under strategic alliances increased to $76.0 million for the nine
months ended September 30, 1998 (the "1998 Nine Month Period") from
$38.0 million for the nine months ended September 30, 1997 (the "1997 Nine Month
Period"). The increase is due primarily to revenue from research funding and the
achievement of mutually agreed upon technology transfer objectives relating to
the Monsanto alliance, an alliance that was not in place during the 1997 Nine
Month Period. In addition, revenue relating to MBio's alliance with Lilly during
the 1998 Nine Month Period increased compared to the 1997 Nine Month Period. The
increase in revenues in the 1998 Nine Month Period as compared to the 1997 Nine
Month Period under the alliance with Lilly is primarily due to the fact that the
research program with Lilly began late in the second quarter of 1997.
Research and development expenses increased to $80.5 million for the 1998
Nine Month Period from $50.4 million for the 1997 Nine Month Period. The
increase was attributable primarily to increased personnel expenses as the
Company hired additional research and development personnel, increased purchases
of laboratory supplies, and increased equipment depreciation and facilities
expenses in connection with the expansion of the Company's research efforts.
General and administrative expenses increased to $18.0 million for the 1998
Nine Month Period from $12.0 million for the 1997 Nine Month Period. The
increase was attributable primarily to increased personnel expenses as the
Company hired additional management, business development, and administrative
personnel, and to legal and consulting fees in
8
<PAGE> 9
connection with the Company's business development, strategic alliances, and
information systems infrastructure.
The Company's total operating expenses decreased to $100.4 million for the
1998 Nine Month Period from $148.0 million for the 1997 Nine Month Period. The
decrease is primarily attributable to a one-time charge of $83.8 million in the
1997 Nine Month Period for acquired in-process research and development
associated with the Company's acquisition of ChemGenics Pharmaceuticals, Inc.,
offset by increases in operating spending as described above.
Interest income was $4.1 million for the 1998 Nine Month Period and
$3.2 million for the 1997 Nine Month Period. The increase resulted from an
increase in the Company's average balance of cash, cash equivalents and
marketable securities. Interest expense increased to $1.7 million for the 1998
Nine Month Period from $1.0 million for the 1997 Nine Month Period due to
increased capital lease obligations.
Minority interest represents the minority shareholder interest of Lilly in
the net loss for the 1998 and 1997 Nine Month Periods of the Company's
majority-owned subsidiary, MBio.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has recognized approximately $228.3 million of
revenue under strategic alliances. As of September 30, 1998, the Company had
approximately $70.0 million in cash, cash equivalents and marketable securities.
This excludes $9.8 million of interest-bearing marketable securities classified
as restricted cash and other assets on the balance sheet which serve as
collateral for the Company's letters of credit.
During the nine months ended September 30, 1998, the Company used
$20.5 million of cash in its operations, purchased $4.1 million of property and
equipment, and used cash of $5.3 million to pay capital lease obligations. In
addition, during the nine months ended September 30, 1998, the Company acquired
equipment under capital leases of $10.1 million and received proceeds from
employee stock purchases of $3.3 million.
On November 10, 1998, in connection with the closing of the Bayer alliance,
the Company received $96.6 million as consideration for an equity investment and
$33.4 million as an initial license fee.
The Company believes that existing cash and marketable securities and
anticipated cash payments from its strategic alliances will be sufficient to
support the Company's operations for the foreseeable future.
YEAR 2000
The Year 2000 problem is the result of computer programs being written to
recognize two digits rather than four to define the applicable year, which
causes computer programs to interpret
9
<PAGE> 10
a date using "00" as the year 1900 rather than the year 2000. This incorrect
recognition of dates may lead to the Company's inability to process data and
engage in normal business activities due to system failures or data
miscalculations. Accordingly, the Company has formed a Year 2000 task force that
has expanded the scope of the Company's prior assessment of its computer
systems, commercial software, and computer infrastructure used in its business
operations and any potential Year 2000 issues of its key vendors and suppliers.
The Company has determined that it has Year 2000 exposure in the following
areas: (i) software and hardware embedded in its laboratory equipment and
employed in its research and development programs, (ii) computer software and
hardware used in its business and facilities operations and (iii) computer
systems used by key vendors and suppliers with whom the Company does business.
The Company has begun to inventory all of the software and hardware
embedded in its laboratory and facilities equipment and employed in its research
and development programs to ascertain its Year 2000 compliance. The Company is
also conducting a survey of the vendors of the computer software and hardware
used in its operations and, to date, has not been informed of any Year 2000
compliance problems. Finally, the Company has begun to formulate procedures for
querying other third party vendors and suppliers with respect to their own Year
2000 compliance.
To date, the Company has spent an immaterial amount with respect to its
Year 2000 assessment and estimates that its costs to complete its assessment as
well as its corrective plan will not be material to the Company's financial
condition, results of operations or cash flows. However, there can be no
assurance that the Company will not incur costs greater than those currently
expected as a result of the implementation of any required remediation programs
or the failure of the Company or any key supplier or vendor to adequately
address Year 2000 issues.
The Company currently does not have a contingency plan in the event that it
or any of its key suppliers and vendors is unable to become Year 2000 compliant.
The Company will develop a contingency plan if the Company determines it or any
of its key vendors or suppliers is not likely to achieve its compliance
objectives.
10
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PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Any proposal submitted pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934, as amended, that a stockholder wishes to be considered
for inclusion in the Company's proxy materials for its 1999 Annual Meeting of
Stockholders must be received by the Secretary of the Company at the principal
offices of the Company no later than December 19, 1998.
In addition, the Company's bylaws require that the Company be given
advance notice of stockholder nominations for election to the Company's Board
of Directors and of other matters of which stockholders wish to present at an
annual meeting of stockholders (other than matters included in the Company's
proxy statement in accordance with Rule 14a-8). The required notice must comply
with the Company bylaws and be received not less than 60 days nor more than 90
days prior to the annual meeting, provided, however, that if less than 70 days
notice or prior public disclosure of the date of the meeting is given to
stockholders, such notice must be received by the Company not later than the
close of business on the tenth day following the date on which the notice of
the date of the meeting was mailed or such public disclosure was made,
whichever occurs first. The persons designated in the Company's proxy statement
shall be granted discretionary authority with respect to any shareholder
proposals of which the Company does not receive timely notice.
11
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Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
The exhibits listed in the Exhibit Index are included in this report.
(b) Reports on Form 8-K
None.
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MILLENNIUM PHARMACEUTICALS, INC.
(Registrant)
Date: November 13, 1998 By: /s/ Janet C. Bush
------------------------------
Janet C. Bush
Vice President, Finance
(Principal Financial Officer)
Date: November 13, 1998 By: /s/ William J. Curry
------------------------------
William J. Curry
Controller
(Principal Accounting Officer)
13
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EXHIBIT INDEX
The following exhibits are filed as part of this Quarterly Report on
Form 10-Q:
Exhibit
No. Description
- ------- -----------
+10.1 Agreement dated September 22, 1998 by and between the Company and
Bayer AG
10.2 Investment Agreement dated September 22, 1998 by and between Bayer
AG and the Company
10.3 Registration Rights Agreement dated November 10, 1998 by and
between Bayer AG and the Company
27.1 Financial Data Schedule for the nine months ended September 30,
1998
27.2 Restated Financial Data Schedule for the nine months ended
September 30, 1997
99.1 Pages 44 through 58 of the Company's Annual Report of Form 10-K
for the year ended December 31, 1997, as filed with the Securities
Exchange Commission (which are deemed filed except to the extent
that portions are not expressly incorporated by reference herein).
- --------------
+ Confidential treatment requested with respect to certain portions
14
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Exhibit 10.1
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
AGREEMENT
BY AND BETWEEN
BAYER AG
AND
MILLENNIUM PHARMACEUTICALS, INC.
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TABLE OF CONTENTS
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PAGE
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Article I Definitions..................................................1
Section 1.1 "Above Quota QT".............................................1
Section 1.2 "Above Quota Pool"...........................................1
Section 1.3 "Additional Bayer Focus Areas"...............................1
Section 1.4 "Affiliate"..................................................2
Section 1.5 "Annual Sales Volume"........................................2
Section 1.6 "Bayer Configured Assay".....................................2
Section 1.7 "Bayer Development Program"..................................2
Section 1.8 "Bayer Returned QT Know-How".................................2
Section 1.9 "Bayer Returned QT Patent Rights"............................2
Section 1.10 "Bayer Royalty Products".....................................2
Section 1.11 "Cell-Based Assay"...........................................2
Section 1.12 "CFA" or "Collaborative Focus Area"..........................3
Section 1.13 "CFA QT".....................................................3
Section 1.14 "Change of Control"..........................................3
Section 1.15 "Confidential Information"...................................4
Section 1.16 "Configured Assay"...........................................4
Section 1.17 "Contract Quarter"...........................................4
Section 1.18 "Contract Year"..............................................4
Section 1.19 "Designated Scientific Issue"................................4
Section 1.20 "Development Candidate"......................................5
Section 1.21 "Discovery Program"..........................................5
Section 1.22 "Disease/Therapeutic Hypothesis".............................5
Section 1.23 "DOJ"........................................................5
Section 1.24 "Druggable Target"...........................................5
Section 1.25 "Effective Date".............................................6
Section 1.26 "Equity Closing Date"........................................6
Section 1.27 "Executive Officers".........................................6
Section 1.28 "Field"......................................................6
Section 1.29 "First Commercial Sale"......................................6
Section 1.30 "FTC"........................................................6
Section 1.31 "FTE"........................................................6
Section 1.32 "HSR Act"....................................................6
Section 1.33 "HSR Clearance Date".........................................6
Section 1.34 "HSR Filing".................................................6
Section 1.35 "Investment Agreement".......................................7
Section 1.36 "Know-How"...................................................7
Section 1.37 "Millennium Configured Assay"................................7
Section 1.38 "Millennium Know-How"........................................7
Section 1.39 "Millennium Patent Rights"...................................7
</TABLE>
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
<TABLE>
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Section 1.40 "Millennium Royalty Products" ................................7
Section 1.41 "Net Sales"...................................................7
Section 1.42 "[**]"........................................................9
Section 1.43 "[**]"........................................................9
Section 1.44 "Novel Protein"...............................................9
Section 1.45 "Party".......................................................9
Section 1.46 "Patent Right"................................................9
Section 1.47 "Program Director"............................................9
Section 1.48 "Program Term"................................................9
Section 1.49 "Protein".....................................................9
Section 1.50 "Public Domain"..............................................10
Section 1.51 "QT Pool"....................................................10
Section 1.52 "Qualified Target" or "QT"...................................10
Section 1.53 "Related Third Party Payments"...............................10
Section 1.54 "Required Pharmacogenomic Assay".............................10
Section 1.55 "Research Plan"..............................................11
Section 1.56 "Restricted Target"..........................................11
Section 1.57 "[**] Areas".................................................11
Section 1.58 "Royalty-Bearing Product"....................................11
Section 1.59 "Selectable QT Pool".........................................11
Section 1.60 "Selected QT"................................................11
Section 1.61 "Small Molecule".............................................11
Section 1.62 "Small Molecule Drug"........................................12
Section 1.63 "Strategic Project"..........................................12
Section 1.64 "Territory"..................................................12
Section 1.65 "Unrecognized Protein".......................................12
Section 1.66 Additional Definitions.......................................12
Article II Discovery Program; Selected QTs..............................14
Section 2.1 Overview.....................................................14
Section 2.2 Changes in CFAs..............................................14
Section 2.3 Exclusivity..................................................15
Section 2.4 Management of Research Program...............................16
Section 2.5 Research Plan................................................18
Section 2.6 Discovery Program - General..................................18
Section 2.7 Selection of Druggable Targets...............................19
Section 2.8 Identification and Selection of Qualified Targets............21
Section 2.9 Additional Activities in CFAs................................25
Section 2.10 [**] Research Activities.....................................28
Section 2.11 Extension of Program Term....................................28
</TABLE>
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
<TABLE>
<CAPTION>
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Section 2.12 Progression of Selected QT from First to Third Stages.........28
Section 2.13 Diligence Obligation..........................................30
Section 2.14 Millennium Participation in Development.......................30
Section 2.15 Reports.......................................................30
Section 2.16 Decision Making...............................................31
Article III Bayer and Millennium Rights and Obligations Relating to
Selected QTs..................................................32
Section 3.1 License Grant with Respect to Selected QTs....................32
Section 3.2 License Grant, Retained Rights and Option With
Respect to Returned QTs.......................................32
Section 3.3 [**] QTs......................................................35
Section 3.4 Use of Configured Assays......................................37
Section 3.5 Non-Suit Covenant With Respect to Use of Returned QTs.........37
Section 3.6 Non-Suit Covenant With Respect to Required
Pharmacogenomic Assays........................................37
Section 3.7 Retained Rights...............................................37
Article IV Rights of First Negotiation; Additional Development
Programs......................................................38
Section 4.1 Returned QTs..................................................38
Section 4.2 [**] Areas....................................................39
Section 4.3 Collaborative Technology Development Program..................40
Article V Financial Provisions..........................................40
Section 5.1 License Payment...............................................40
Section 5.2 Equity Investment.............................................41
Section 5.3 Program Payments..............................................41
Section 5.4 Success Fees..................................................42
Section 5.5 Royalty Payments to Millennium................................46
Section 5.6 Royalty Payments to Bayer.....................................47
Section 5.7 Related Third Party Payments..................................48
Section 5.8 Royalties Payable Only Once...................................48
Section 5.9 Sales to Affiliates and Sublicensees..........................48
Section 5.10 Royalty Reports and Accounting................................48
Section 5.11 Currency and Method of Payments; Late Payments................49
Section 5.12 Tax Withholding...............................................49
Section 5.13 Blocked Payments..............................................50
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Article VI Intellectual Property Ownership, Protection
and Related Matters...........................................50
Section 6.1 Ownership.....................................................50
Section 6.2 Prosecution and Maintenance of Patent Rights..................50
Section 6.3 Cooperation...................................................51
Section 6.4 Third Party Infringement......................................51
Section 6.5 Claimed Infringement..........................................52
Article VII Confidentiality...............................................52
Section 7.1 Confidential Information......................................52
Section 7.2 Employee and Advisor Obligations..............................53
Section 7.3 Term..........................................................53
Section 7.4 Publications..................................................53
Article VIII Representations and Warranties................................54
Section 8.1 Representations of Authority..................................54
Section 8.2 Consents......................................................54
Section 8.3 No Conflict...................................................54
Section 8.4 Employee Obligations..........................................55
Section 8.5 Know-How......................................................55
Section 8.6 Contracts.....................................................55
Section 8.7 No Warranties.................................................55
Article IX Term and Termination..........................................56
Section 9.1 Term..........................................................56
Section 9.2 Survival of Licenses..........................................56
Section 9.3 Termination For Material Breach...............................56
Section 9.4 Bayer Termination Right.......................................57
Section 9.5 Termination Upon Change of Control............................57
Section 9.6 No Effectiveness Upon HSR Denial or Termination of
Investment Agreement..........................................57
Section 9.7 Effect of Termination.........................................57
Section 9.8 Survival......................................................58
Article X Dispute Resolution............................................58
Section 10.1 General.......................................................58
Section 10.2 Independent Experts...........................................58
Section 10.3 Failure of Executive Officers to Resolve Dispute..............59
Section 10.4 Alternative Dispute Resolution................................59
Section 10.5 No Limitation.................................................60
</TABLE>
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
<TABLE>
<CAPTION>
<S> <C>
Article XI Miscellaneous Provisions....................................60
Section 11.1 Product Liability Indemnification...........................60
Section 11.2 Section 365(n) of the Bankruptcy Code.......................61
Section 11.3 Governing Law...............................................61
Section 11.4 Assignment..................................................62
Section 11.5 Amendments..................................................62
Section 11.6 Notices.....................................................62
Section 11.7 Exports.....................................................63
Section 11.8 Force Majeure...............................................63
Section 11.9 Public Announcements........................................64
Section 11.10 Independent Contractors.....................................64
Section 11.11 No Strict Construction......................................64
Section 11.12 Headings....................................................64
Section 11.13 No Implied Waivers; Rights Cumulative.......................64
Section 11.14 Severability................................................65
Section 11.15 Execution in Counterparts...................................65
Section 11.16 HSR Filing..................................................65
Exhibit A - QT Quotas
Exhibit B - Research Plan
Exhibit C - Original Partners in [**] Areas
Exhibit D - Program Payment Schedule
</TABLE>
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
AGREEMENT
This agreement (the "Agreement"), dated the 22nd day of September, 1998
(the "Execution Date"), is by and between Bayer AG, a corporation organized and
existing under the laws of Germany and having its principal office at D 51368
Leverkusen, Germany ("Bayer") and Millennium Pharmaceuticals, Inc., a
corporation organized and existing under the laws of the State of Delaware and
having its principal office at 238 Main Street, Cambridge, Massachusetts 02142
("Millennium").
INTRODUCTION
1. Millennium is engaged in the business of conducting research in
the field of human genomics, an objective of which is to discover potential
biological targets and assays for use in drug discovery.
2. Bayer is in the business of discovering, developing and marketing
pharmaceuticals.
3. Bayer and Millennium are interested in collaborating in the
discovery and development of targets and assays to identify and develop small
molecule drugs for the treatment of certain human diseases and conditions.
NOW, THEREFORE, Millennium and Bayer agree as follows:
ARTICLE I
DEFINITIONS
When used in this Agreement, each of the following terms shall have the
meanings set forth in this Article I:
Section 1.1 "ABOVE QUOTA QT" means a QT that, at the time it is entered
into the QT Pool by the Program Directors in accordance with the provisions of
Section 2.8, exceeds one or more of the quotas for CFAs, Druggable Target Class
and/or [**]set forth on EXHIBIT A to this Agreement.
Section 1.2 "ABOVE QUOTA POOL" means the pool of Above Quota QTs
available for selection by Bayer as determined by the Program Directors in
accordance with the provisions of Section 2.8.
Section 1.3 "ADDITIONAL BAYER FOCUS AREAS" means any of the following
diseases and/or conditions: [**].
<PAGE> 8
Section 1.4 "AFFILIATE" means any corporation, company, partnership,
joint venture and/or firm which controls, is controlled by, or is under common
control with a Party. For purposes of this Section 1.4, "control" shall mean (a)
in the case of corporate entities, direct or indirect ownership of at least
forty percent (40%) of the stock or shares having the right to vote for the
election of directors, and (b) in the case of non-corporate entities, direct or
indirect ownership of at least forty percent (40%) of the equity interest with
the power to direct the management and policies of such non-corporate entities.
Section 1.5 "ANNUAL SALES VOLUME" means total worldwide Net Sales of a
Royalty-Bearing Product during a calendar year.
Section 1.6 "BAYER CONFIGURED ASSAY" means a Configured Assay for which
Bayer is designated as the developing Party in accordance with the provisions of
Section 2.9(a).
Section 1.7 "BAYER DEVELOPMENT PROGRAM" means the development
activities undertaken by Bayer with respect to First, Second and Third Stage
QTs, as more fully set forth in Section 2.12.
Section 1.8 "BAYER RETURNED QT KNOW-HOW" means Know-How owned or
otherwise controlled by Bayer (as of the date Millennium exercises the option
under Section 3.2(d) with respect to the applicable Bayer Returned QT Know-How),
and in which Bayer has a licensable or sublicensable interest, relating to (a) a
Returned QT, the use of a Returned QT to discover and develop Small Molecule
Drugs, the treatment of diseases and/or conditions with Small Molecule Drugs
that interact with a Returned QT, and the Bayer Configured Assay relating to a
Returned QT, in each case which Bayer has developed or acquired as a result of
the Discovery Program and/or the Bayer Development Program, and/or (b) the lead
structure under development by Bayer and related data (as more specifically set
forth in Section 3.2(d)).
Section 1.9 "BAYER RETURNED QT PATENT RIGHTS" means a Patent Right
owned or otherwise controlled by Bayer (singly or jointly with Millennium), and
in which Bayer has a licensable or sub-licensable interest, covering an
invention that is part of the Bayer Returned QT Know-How.
Section 1.10 "BAYER ROYALTY PRODUCTS" means all Small Molecule Drugs
discovered or developed by Bayer, its Affiliates or sublicensees.
Section 1.11 "CELL-BASED ASSAY" means a Bayer Configured Assay that
uses a QT incorporated in a cell or presented on the surface of a cell (as
distinct from a biochemical assay in which the QT is assayed in a cell-free
context).
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Section 1.12 "CFA" or "COLLABORATIVE FOCUS AREA" means one or more of
the following human diseases and/or conditions:
(a) osteoporosis;
(b) liver fibrosis;
(c) hematological diseases and/or conditions (not including diseases
and/or conditions excluded under subsections (d) and (e) below);
(d) oncology, including, but not limited to, lung cancer, breast
cancer, ovarian cancer and colon cancer, but excluding prostate cancer;
(e) cardiovascular diseases and/or conditions, including, but not
limited to, arrhythmia, abnormal hemodynamics, and hypertension, PROVIDED THAT
the following diseases and/or conditions shall not be included: (i)
atherosclerosis (including the related diseases of thrombosis and restenosis);
(ii) excessive clotting, and (iii) cardiomyopathy of any origin.
(f) pain (including all therapies for relieving pain as distinct from
curing or treating the underlying diseases or conditions that cause pain); and
(g) viral diseases.
Section 1.13 "CFA QT" means a QT that has a Disease/Therapeutic
Hypothesis in a CFA (as determined by the Program Directors pursuant to Section
2.8(b)), [**].
Section 1.14 "CHANGE OF CONTROL" means (i) a merger or consolidation of
a Party which results in the voting securities of such Party outstanding
immediately prior thereto ceasing to represent at least [**] of the combined
voting power of the surviving entity immediately after such merger or
consolidation; (ii) the sale of all or substantially all of the assets of a
Party; or (iii) any "person", as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
together with any of such person's "affiliates" or "associates", as such terms
are used in the Exchange Act, becoming the beneficial owner of [**] or more of
the combined voting power of the outstanding securities of a Party (other than
such Party, any trustee or other fiduciary holding securities under an employee
benefit plan of such Party or any corporation owned directly or indirectly by
the stockholders of such Party in substantially the same proportion as their
ownership of stock of such Party).
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Section 1.15 "CONFIDENTIAL INFORMATION" means all materials, know-how
or other information, including, without limitation, proprietary information and
materials (whether or not patentable) regarding a Party's technology, products,
business information or objectives, which is designated as confidential in
writing by the disclosing Party, whether by letter or by the use of an
appropriate stamp or legend, prior to or at the time any such material, trade
secret or other information is disclosed by the disclosing Party to the other
Party. Notwithstanding the foregoing to the contrary, materials, know-how or
other information which is orally, electronically or visually disclosed by a
Party, or is disclosed in writing without an appropriate letter, stamp or
legend, shall constitute Confidential Information of a Party (a) if the
disclosing Party, within thirty (30) days after such disclosure, delivers to the
other Party a written document or documents describing the materials, know-how
or other information and referencing the place and date of such oral, visual,
electronic or written disclosure and the names of the persons to whom such
disclosure was made, or (b) such information is of the type that is customarily
considered to be confidential information by persons engaged in activities that
are substantially similar to the activities being engaged in by the Parties
pursuant to this Agreement.
Section 1.16 "CONFIGURED ASSAY" means an assay embodying or based upon
a Selected QT that has been appropriately adapted into a cell-free, membrane, or
whole-cell microtiter-based format that will reliably and robustly detect,
(e.g., via radioactivity, fluorescence, mass spectroscopic fragments,
absorbance, etc.) and identify specific Small Molecules, derived from screening
libraries of Small Molecules, that can selectively interact with the Selected QT
(or a target in a biochemical pathway in which the Selected QT participates), as
further defined in the Research Plan (which shall specify Bayer's high
throughput screening criteria and require that the assay satisfy such criteria).
Section 1.17 "CONTRACT QUARTER" means the period beginning on the first
day of the First Contract Year and ending on January 31, 1999, and each
succeeding quarter thereafter during the Program Term.
Section 1.18 "CONTRACT YEAR" means the period beginning on the
Effective Date and ending on October 31, 1999 (the "First Contract Year"), and
each succeeding twelve (12) month period thereafter during the Program Term
(referred to as the "Second Contract Year", "Third Contract Year", etc.).
Section 1.19 "DESIGNATED SCIENTIFIC ISSUE" means one or more of the
following issues: (a) whether a target has met the criteria to qualify as a QT,
including, but not limited to, [**]; (b) in which categories a QT is included
for purposes of the quotas set
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
forth in Exhibit A (i.e., [**]); (c) whether a QT has a Disease/Therapeutic
Hypothesis, including, but not limited to, (i) whether the Disease/Therapeutic
Hypothesis is [**] and (ii) whether gene expression data from diseased tissue
should be obtained; and (d) whether a Configured Assay conforms to the
applicable Assay Specifications.
Section 1.20 "DEVELOPMENT CANDIDATE" means a "development candidate"
designated by Bayer as such in accordance with Bayer's internal decision making
processes and guidelines in effect from time to time. A copy of Bayer's current
guidelines has been provided by Bayer to Millennium.
Section 1.21 "DISCOVERY PROGRAM" means collectively (a) the discovery
and development program to be undertaken by Millennium in collaboration with
Bayer during the Program Term to identify Druggable Targets and Qualified
Targets (the "Target Discovery Program"), and (b) the Assay Configuration
Activities and Screen to Clinic Validation Activities to be undertaken by Bayer
and Millennium pursuant to Section 2.9 (the "Post-Target Discovery Program"), in
each case in accordance with the Research Plan, PROVIDED THAT any activities
undertaken by either Party with respect to a Returned QT following its
designation as such shall not be considered to be part of the Discovery Program.
Section 1.22 "DISEASE/THERAPEUTIC HYPOTHESIS" means a scientifically
reasonable association of a Druggable Target with a disease/therapeutic area
where such association is based upon scientific evidence derived from gene
expression data of appropriate tissue distribution and, subject to
scientifically reasonable efforts (as mutually agreed upon by the Program
Directors), disease tissue, as further described in the Research Plan. Without
limiting the generality of the foregoing, the gene expression data upon which a
Disease/Therapeutic Hypothesis is based shall include [**].
Section 1.23 "DOJ" means the United States Department of Justice.
Section 1.24 "DRUGGABLE TARGET" means (a) a nucleic acid sequence
and/or the Protein it encodes, where there is reasonable evidence (based upon
bioinformatics analysis) to suggest that the Protein is of a class that (i) is
reasonably believed to be capable, given commercially reasonable efforts over a
[**] period, of being developed into a Configured Assay, and (ii) is reasonably
believed to be capable, given commercially reasonable efforts, of being
modulated by Small Molecules identified through high throughput screening, and
(b) any other class of nucleic acid sequences and/or the associated encoded
Proteins that is determined to be a Druggable Target by mutual agreement of the
Program Directors. Druggable Targets under subsection
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(a) consist of the following classes: [**] (each, a "Druggable Target Class").
Section 1.25 "EFFECTIVE DATE" means the later of the HSR Clearance Date
and the Equity Closing Date.
Section 1.26 "EQUITY CLOSING DATE" means the Closing Date (as defined
in the Investment Agreement).
Section 1.27 "EXECUTIVE OFFICERS" means the Head of Worldwide
Pharmaceutical Research of Bayer (or an executive of Bayer designated by Bayer)
and the Chief Executive Officer of Millennium (or an officer of Millennium
designated by Millennium).
Section 1.28 "FIELD" means therapeutic and prophylactic treatment of
all human diseases and conditions.
Section 1.29 "FIRST COMMERCIAL SALE" means, for each Royalty-Bearing
Product, the first commercial sale in a country as part of a nationwide
introduction by a Party, its Affiliates or its sublicensees. Sales for test
marketing, clinical trial purposes or compassionate or similar use shall not be
considered to constitute a First Commercial Sale.
Section 1.30 "FTC" means the United States Federal Trade Commission.
Section 1.31 "FTE" means a full time equivalent person year (consisting
of a total of one thousand eight hundred eighty (1,880) hours per year) of
scientific or technical work on or directly related to Screen to Clinic
Validation Activities as part of the Post-Target Discovery Program.
Section 1.32 "HSR ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (15 U.S.C. Sec. 18a), and the rules and
regulations promulgated thereunder.
Section 1.33 "HSR CLEARANCE DATE" means the earlier of (a) the date on
which the FTC shall notify Bayer and Millennium of early termination of the
applicable waiting period under the HSR Act or (b) the day after the date on
which the applicable waiting period under the HSR Act expires.
Section 1.34 "HSR FILING" means filings by Bayer and Millennium with
the FTC and the Antitrust Division of the DOJ of a Notification and Report Form
for Certain Mergers and Acquisitions (as that term is defined in the HSR Act)
with respect to the matters set forth in this Agreement and the Investment
Agreement, together with all required documentary attachments thereto.
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Section 1.35 "INVESTMENT AGREEMENT" means the Investment Agreement
between Bayer and Millennium dated as of the Execution Date.
Section 1.36 "KNOW-HOW" means any information, data and materials,
including, without limitation, biological materials, such as cell lines, RNA,
DNA, DNA fragments, organisms, Proteins, polypeptides, plasmids and vectors,
that are owned or otherwise controlled by a Party.
Section 1.37 "MILLENNIUM CONFIGURED ASSAY" means a Configured Assay for
which Millennium is designated as the developing Party in accordance with the
provisions of Section 2.9(a).
Section 1.38 "MILLENNIUM KNOW-HOW" means Know-How owned or otherwise
controlled by Millennium, and in which Millennium has a licensable or
sublicensable interest, relating to (a) a Selected QT, (b) the use of a Selected
QT to discover and develop Small Molecule Drugs, (c) the treatment of diseases
and/or conditions with Small Molecule Drugs that interact with a Selected QT,
(d) Millennium Configured Assays relating to a Selected QT (e) Screen to Clinic
Validation Activities relating to a Selected QT, and (f) any other Know-How
relating to a Selected QT, in each case which Millennium has introduced into the
Discovery Program or has developed or acquired in the course of the Discovery
Program.
Section 1.39 "MILLENNIUM PATENT RIGHTS" means a Patent Right owned or
otherwise controlled by Millennium (singly or jointly with Bayer), and in which
Millennium has a licensable or sublicensable interest, covering an invention
that is part of the Millennium Know-How.
Section 1.40 "MILLENNIUM ROYALTY PRODUCTS" means all Small Molecule
Drugs that have as their active therapeutic substance (a) a lead structure
provided by Bayer to Millennium pursuant to Millennium's exercise of the option
set forth in Section 3.2(d)(i)(A)(2) or (3), or (b) any modified version of such
lead structure derived therefrom.
Section 1.41 "NET SALES" means with respect to a Royalty-Bearing
Product, the gross amount invoiced by a Party, its Affiliates and/or its
sublicensees on sales or other dispositions of the Royalty-Bearing Product to
unrelated third parties, less the following items:
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(a) [**] with respect to such sales;
(b) [**] with respect to the production, sale, delivery or use of the
Royalty- Bearing Product [**];
(c) [**]; and
(d) [**] (such as [**] and any other [**] of the gross amount
invoiced.
Such amounts shall be determined from the books and records of the
applicable Party, its Affiliates and/or its sublicensees, maintained in
accordance with generally accepted accounting principles, consistently applied.
In the event the Royalty-Bearing Product is sold as part of a
Combination Product (as defined below), the Net Sales from the Combination
Product, for the purposes of determining royalty payments, shall be determined
by multiplying the Net Sales of the Combination Product (as defined in the
standard Net Sales definition), during the applicable royalty reporting period,
by the fraction, A/A+B, where A is the average sale price of the Royalty-Bearing
Product when sold separately in finished form and B is the average sale price of
the other product(s) included in the Combination Product when sold separately in
finished form, in each case during the applicable royalty reporting period or,
if sales of both the Royalty- Bearing Product and the other product(s) did not
occur in such period, then in the most recent royalty reporting period in which
sales of both occurred. In the event that such average sale price cannot be
determined for both the Royalty-Bearing Product and all other products(s)
included in the Combination Product, Net Sales for the purposes of determining
royalty payments shall be calculated by multiplying the Net Sales of the
Combination Product by the fraction of C/C+D where C is the fair market value of
the Royalty-Bearing Product and D is the fair market value of all other
pharmaceutical product(s) included in the Combination Product. In such event,
the selling Party shall in good faith make a determination of the respective
fair market values of the Royalty-Bearing Product and all other pharmaceutical
products included in the Combination Product, and shall notify the other Party
of such determination and provide the other Party with data to support such
determination. The other Party shall have the right to review such determination
and supporting data, and to notify the selling Party if it disagrees with such
determination. If the other Party does not agree with such determination and if
the Parties are unable to agree in good faith as to such respective fair market
values, then such matter shall be referred to the Executive Officers.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
As used above, the term "Combination Product" means any pharmaceutical
product which comprises the Royalty-Bearing Product and other active compounds
and/or active ingredients.
Section 1.42 "[**]" means any human disease or condition that [**].
Section 1.43 "[**] QT" means a QT that has a Disease/Therapeutic
Hypothesis [**] (as determined by the Program Directors pursuant to Section
2.8(b)) and that [**].
Section 1.44 "NOVEL PROTEIN" means the nucleic acid sequence of the
full length coding sequence supplied by Millennium (and, hence, the Protein it
encodes) where such sequence [**]. The full length coding sequence provided by
Millennium [**] of such sequence provided by Millennium [**] of the sequence
provided by Millennium [**] provided by Millennium that [**] that [**] of the
gene as a [**].
Section 1.45 "PARTY" means Bayer or Millennium; "PARTIES" means Bayer
and Millennium. As used in this Agreement, references to "third parties" do not
include a Party or its Affiliates.
Section 1.46 "PATENT RIGHT" means a patent or patent application and
all divisions, continuations, continuations-in-part, reissues, reexaminations,
extensions, Supplementary Protection Certificates and foreign counterparts
thereof that are owned or otherwise controlled by a Party.
Section 1.47 "PROGRAM DIRECTOR" means a research executive appointed by
each Party to serve as such Party's principal coordinator and liaison for the
Discovery Program. The Program Director appointed by Bayer is referred to as the
"Bayer Program Director," and the Program Director appointed by Millennium is
referred to as the "Millennium Program Director."
Section 1.48 "PROGRAM TERM" means the period commencing on the
Effective Date and ending on the last day of the Fifth Contract Year, subject to
extension as provided in Section 2.11.
Section 1.49 "PROTEIN" means a compound composed of a variety of amino
acids joined by amide linkages, including allelic variants thereof and post-
translationally modified variants thereof (e.g., glycosylated Proteins),
PROVIDED THAT a Protein shall not include any peptide that is comprised [**].
Section 1.50 "PUBLIC DOMAIN", as used with reference to a nucleic acid
sequence, means that such sequence has been made available to the general public
in
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
any manner, including without limitation (a) in a published scientific paper,
(b) in an issued patent or a published patent application, or (c) in an
electronically published database (e.g. GenBank, DBEST, etc.).
Section 1.51 "QT POOL" means the pool of QTs available for selection by
Bayer as determined by the Program Directors, in accordance with the provisions
of Section 2.8, consisting of the Selectable QT Pool and the Above Quota Pool.
Section 1.52 "QUALIFIED TARGET" or "QT" means a target for Small
Molecule drug discovery identified or developed in the course of the Target
Discovery Program that has all of the following characteristics: (a) is a
Druggable Target that is [**](except in the case of Druggable Targets for [**],
in which case the gene may be [**] in nature); (b) has a [**]; (c) is either (i)
[**], or (ii) [**] or (iii) a Druggable Target that is otherwise [**] as a
Qualified Target; and (d) the use of such target in the manner contemplated in
the Research Plan would not, at the time of its identification or annotation in
the Target Discovery Program, [**], unless such target is otherwise approved by
the Bayer Program Director.
Section 1.53 "RELATED THIRD PARTY PAYMENTS" means payments to a third
party to license patents covering such third party's technology if, in the
absence of such license, the licensed use by Bayer of the specific technology
licensed by Millennium under Section 3.1 (or, with respect to Returned QTs, the
licensed use by Millennium of the specific technology licensed by Bayer under
Section 3.2(d) of this Agreement) would or is likely to, in the reasonable
judgment of the Party seeking such license from such third party, infringe such
patents.
Section 1.54 "REQUIRED PHARMACOGENOMIC ASSAY" means a diagnostic assay
embodied in a diagnostic product used to ascertain the predisposition of an
individual to respond favorably or unfavorably to the administration of a Small
Molecule Drug where (a) the United States Food and Drug Administration (or a
comparable regulatory authority in another country) requires that an individual
be tested with the diagnostic product prior to the administration of the
associated Small Molecule Drug, as a condition of registering and approving for
commercial sale such Small Molecule Drug, or (b) it is determined, in the
reasonable judgment of the Party that has the right to commercialize or have
commercialized a Small Molecule Drug (based on written information that is made
available to the other Party), that the diagnostic product must be marketed and
sold with such Small Molecule Drug in order for such Small Molecule Drug to
achieve significant market penetration in a country in the Territory.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Section 1.55 "RESEARCH PLAN" means the research plan attached as
EXHIBIT B to this Agreement, as such plan may be updated or amended pursuant to
Section 2.5.
Section 1.56 "RESTRICTED TARGET" means a target to which Millennium is
prevented from granting to Bayer the exclusive right under Millennium Know-How
or Millennium Patent Rights to exploit Small Molecule Drugs identified using
such target for the treatment of all human diseases and conditions. A target is
NOT a Restricted Target if (i) [**]; and (ii) Millennium is not prevented (by
contract or otherwise) from granting exclusive rights under Millennium Know-How
or Millennium Patent Rights to exploit Small Molecule Drugs identified using the
target for the treatment of all human diseases and conditions.
Section 1.57 "[**] AREAS" means any of the following human diseases or
conditions: [**].
Section 1.58 "ROYALTY-BEARING PRODUCT" means a Bayer Royalty Product
and/or a Millennium Royalty Product, as applicable, together with any related
Required Pharmacogenomic Assay.
Section 1.59 "SELECTABLE QT POOL" means the pool of QTs available for
selection by Bayer as determined by the Program Directors in accordance with the
provisions of Section 2.8, PROVIDED THAT the Selectable QT Pool shall not
include the Above Quota Pool. The Selectable QT Pool shall consist of a Primary
Pool and a Holding Pool, as further described in Section 2.8(c).
Section 1.60 "SELECTED QT" means a QT selected by Bayer from the QT
Pool in accordance with the provisions of Section 2.8(d).
Section 1.61 "SMALL MOLECULE" means a compound that is non-peptidic or,
if peptidic, is comprised [**], including, without limitation, a compound that
is a natural product or is developed using medicinal chemistry or combinatorial
chemistry technologies.
Section 1.62 "SMALL MOLECULE DRUG" means any therapeutic agent, the
active ingredient in which is a Small Molecule, that (a) is identified on the
basis of its interaction with a Qualified Target in a Small Molecule screening
assay, or (b) is designed or developed using medicinal chemistry, combinatorial
chemistry, rational design techniques or other techniques to interact with a
Qualified Target. The term "Small Molecule Drug" shall not include any
pharmaceutical product in which the active ingredient is (i) a Protein, (ii) any
vaccine, (iii) an antibody (whether polyclonal or monoclonal, multiple or single
chain, whole or fragment), (iv) a nucleic acid
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
sequence encoding an expressed gene, or (v) a nucleic acid or ribozyme that acts
as an antisense code blocker.
Section 1.63 "STRATEGIC PROJECT" means a "strategic project" designated
by Bayer as such in accordance with Bayer's internal decision-making processes
and guidelines in effect from time to time. A copy of Bayer's current guidelines
has been provided by Bayer to Millennium.
Section 1.64 "TERRITORY" means all countries of the world.
Section 1.65 "UNRECOGNIZED PROTEIN" means the nucleic acid sequence of
the full length coding sequence supplied by Millennium (and, hence, the Protein
it encodes) where (a)[**] of the sequence provided by Millennium is [**] but
nevertheless (b) [**] sequence by Millennium [**] of the gene as a [**] and such
[**]. Such may occur where the [**] or where the Program Directors agree that
the [**].
Section 1.66 ADDITIONAL DEFINITIONS. Each of the following definitions
is set forth in the section of this Agreement indicated below:
Definitions Section
----------- -------
Agreement Preamble
Assay Configuration Activities 2.9(a)(i)
Assay Configuration Date 2.9(a)(iv)
Assay Specifications 2.9(a)(iii)
Bayer Preamble
Bayer Indemnified Parties 11.1(b)
Biological Materials 2.6(c)
Breaching Party 9.3
[**] 2.4(c)
Combination Product 1.41
Configuration Failure Rate 2.8(c)(iv)
Database 2.6(b)
Designated Inventions 6.3
Druggable Target Class 1.24
[**] 2.4(c)
Exchange Act 1.14
Execution Date Preamble
Extension Term 2.11
Failed QT 2.8(e)
First Stage Period 2.12(a)
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
First Stage QT 2.12(a)
Holding Pool 2.8(c)(ii)
Infringement Notice 6.5(a)
Joint Steering Committee 2.4(c)
[**] 2.4(b)
[**] 2.6(b)
Millennium Preamble
[**] 3.3(a)
Millennium Indemnified Parties 11.1(a)
New CFA Discovery Program 2.3(b)
Non-Breaching Party 9.3
[**] 3.1(b)
[**] 2.4(b)
Optional Returned QT 4.1
Post-Program Term Pool 2.8(c)(iv)
Post-Target Discovery Program 1.21
Primary Pool 2.8(c)(ii)
Program Payments 5.3(a)
[**] 2.4(c)
Recovered Bayer Net Sales 6.4(a)
Recovered Millennium Net Sales 6.4(a)
Replacement Pool 2.8(c)(iv)
Replacement QT 2.8(e)
Research Project Team 2.14
Returned QT 2.12(a)
Royalty-Paying Party 5.10(a)
Royalty Recipient 5.10(a)
Screen to Clinic Validation Activities 2.9(b)
Second Stage Information 3.2(d)(i)
Second Stage Period 2.12(b)
Second Stage QT 2.12(a)
Section 4.1 Opportunity 4.1
Section 4.1 Opportunity Negotiation Period 4.1
Section 4.1 Opportunity Response Period 4.1
Section 4.2 Opportunity 4.2
Section 4.2 Opportunity Negotiation Period 4.2
Section 4.2 Opportunity Response Period 4.2
Selection Project Team 2.4(b)
Selected QT Designation Date 2.8(d)
Selected QT Related Intellectual Property Rights 6.4(a)
Target by Class Drug Discovery Approach 2.1
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Target Discovery Program 1.18
Third Stage Information 3.2(d)(i)
Third Stage Period 2.12(c)
Third Stage QT 2.12(b)
[**] 3.1(b)
Waived QT 2.8(f)
ARTICLE II
DISCOVERY PROGRAM; SELECTED QTS
Section 2.1 OVERVIEW. The primary objective of the Target Discovery
Program is to identify and qualify a minimum of 225 Qualified Targets during the
Program Term. The principal focus of the Target Discovery Program shall be the
identification and qualification of CFA QTs, based upon a Target by Class Drug
Discovery Approach (as defined below). In addition to the foregoing, the
Discovery Program may include work directed at [**] or work utilizing approaches
for the discovery of targets for Small Molecules other than a Target by Class
Drug Discovery Approach, but only if mutually agreed upon by the Parties and
reflected in the Research Plan. Millennium shall use commercially reasonable
efforts to generate and enter into the Selectable QT Pool a minimum of 225 QTs
over the course of the Program Term. For purposes of this Agreement, a "Target
by Class Drug Discovery Approach" shall mean a program for the discovery of
targets for Small Molecules that has both of the following elements: (i) the
[**] identify Druggable Targets and/or support a Disease/Therapeutic Hypothesis
for the Druggable Targets, and (ii) the use of [**] identify or support a
Disease/Therapeutic Hypothesis for the Druggable Targets.
Section 2.2 CHANGES IN CFAS. The Parties acknowledge that, over time,
certain circumstances may result in a shift in the research interests of Bayer,
or that there may be a sufficient number of QTs in a given CFA such that Bayer
may not be interested in additional QTs in that CFA, or that there may not be a
sufficient additional number of QTs in a CFA likely to be discovered. In these
circumstances, the Parties agree to discuss in good faith changes in CFAs, such
as the removal of a CFA or the addition of a new CFA. Any change of this type
shall require the mutual agreement of the Parties, and the Parties shall take
into consideration the resources and expertise resident at or reasonably
available to Millennium and the impact of any such change on the Discovery
Program
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Section 2.3 EXCLUSIVITY.
(a) MILLENNIUM OBLIGATION. During the Program Term and subject to the
exclusions set forth in Section 2.3(b), [**] with a Disease/Therapeutic
Hypothesis in one or more CFAs. Notwithstanding the foregoing, the Parties
anticipate that, to further the goals of the Target Discovery Program,
Millennium [**] with academic, research or other non-commercial institutions
with the goal of identifying additional CFA QTs or qualifying CFA QTs identified
in the Target Discovery Program; in such cases, Millennium [**] to the
discoveries relevant to this Agreement made pursuant to such agreements [**].
If, in such cases, Millennium is [**].
(b) EXCLUSIONS. The provisions of subsection (a) are not intended to
apply to the following:
(i) the identification, discovery and/or development of Small
Molecule drugs [**] that have been [**] by third parties
(other than third parties making such [**] in
collaboration with Millennium or any of its Affiliates) as
having a Disease/Therapeutic Hypothesis relevant to a CFA,
PROVIDED THAT the foregoing shall not apply to any target
that is a Selected QT;
(ii) any activity directed to the identification of targets for
Small Molecule drug discovery for CFAs if (A) Millennium's
involvement in the activity results from Millennium's
acquisition of or by a third party (by merger or
otherwise) which, prior to such acquisition or merger, was
already engaged in such activity; and (B) [**] such
activity, if such activity is of the same type as that
being undertaken by the Parties in the course of the
Target Discovery Program or [**];
(iii) the identification, discovery, development and/or practice
of [**];
(iv) the identification, discovery and/or development of any
therapeutic product that is not a Small Molecule drug,
including any pharmaceutical product in which the active
therapeutic substance is [**]; and
(v) the development of health care or patient management
information systems and the provision of health care or
patient management information services.
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Section 2.4 MANAGEMENT OF RESEARCH PROGRAM.
(a) PROGRAM DIRECTORS. Bayer and Millennium shall each appoint a
Program Director prior to the Effective Date. Each Party shall have the right,
after consultation with the other Party, to designate a different Program
Director. The Bayer Program Director shall be resident at Millennium for at
least three (3) months of each Contract Year in order to facilitate close and
direct collaboration between the Parties. The Program Directors shall jointly
oversee the conduct of the Discovery Program and shall be responsible for
recommending to the Parties any changes to the Research Plan.
(b) PROJECT TEAMS. The Program Directors shall appoint one or more
appropriate Project Teams, in each case consisting of representatives from Bayer
and Millennium, to facilitate the conduct of elements of the Discovery Program
and the collaboration of the Parties in the following areas: (i) the design of
searches of the Database (as defined in Section 2.6) and the identification,
based upon a review of such searches, of potential Druggable Targets (the
"Selection Project Team"); (ii) review of transcript profiling data; (iii) the
identification of targets for each disease within the CFA and the use of such
targets to develop Small Molecule Drugs in such CFA; and (iv) such other areas
as may be agreed upon by the Program Directors.
(c) JOINT STEERING COMMITTEE. The Parties shall establish a joint
steering committee (the "Joint Steering Committee"), comprised of (i) three (3)
senior executives of Bayer and three (3) senior executives of Millennium, and
(ii) the Program Directors. Each Party shall make its designation of its
representatives not later than thirty (30) days after the Effective Date. The
Joint Steering Committee shall meet within forty-five (45) days after the
Effective Date and, thereafter, at least semi-annually during the Discovery
Program and the Bayer Development Program to (i) review the efforts of the
Parties in the conduct of the Discovery Program and the Bayer Development
Program and (ii) attempt to resolve any disputes relating to this Agreement that
may arise between the Parties. The location of such meetings of the Joint
Steering Committee shall alternate between Massachusetts and Germany, or as
otherwise agreed by the Parties. The Joint Steering Committee may also meet by
means of a telephone conference call. Each Party may change any one or more of
its representatives to the Joint Steering Committee at any time upon notice to
the other Party. Each Party shall use reasonable efforts to cause its
representatives to attend the meetings of the Joint Steering Committee. If a
representative of a Party is unable to attend a meeting, such Party may
designate an alternate to attend such meeting in place of the absent
representative. In addition, each Party may, at its discretion, invite
non-voting employees, and, with the consent of the other Party, consultants or
scientific advisors, to attend the meetings of the Joint Steering Committee.
Decisions of the Joint Steering Committee shall be made by majority vote of all
of the members of the Joint Steering Committee. In general, matters to be agreed
upon or approved by the Parties shall be referred to the Joint Steering
Committee. Either Party may
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convene a special meeting of the Joint Steering Committee for the purpose of
resolving disputes.
(d) DISCOVERY PROGRAM LIMITATIONS. The Parties acknowledge that
Millennium is currently a party to an agreement with [**] certain areas of [**]
which contains restrictions relating to Millennium's undertaking of genomic
research activities designed primarily to yield biological molecules likely to
be useful as targets or as pharmaceutical products in [**] based upon (i)
mechanisms of [**], (ii) [**]l mechanisms [**] and (iii) [**] ((i), (ii) and
(iii), collectively, the "[**] Mechanism Activities"). Millennium represents and
warrants that the Research Plan does not, as of the Effective Date, encompass
[**] Mechanism Activities in any manner that would be in violation of or
inconsistent with Millennium's obligations under the [**] Agreement. Millennium
agrees that,[**], it shall provide written notice to Bayer (including a
description,[**], and such [**].
(e) NO NEW RESTRICTIONS. Millennium agrees that, from and after the
Execution Date, it shall not enter into any agreements, or transfer Know-How or
any other assets to any of its Affiliates, that would, in either case, restrict
or limit its or Bayer's rights or ability to conduct the Discovery Program, as
contemplated in the Research Plan as of the Effective Date, such as an agreement
not to engage in the types of target discovery activities contemplated by the
Research Plan.
Section 2.5 RESEARCH PLAN.
(a) GENERAL; MODIFICATIONS. The Parties shall undertake the Discovery
Program in accordance with the Research Plan. The Program Directors will review
the Research Plan on at least an annual basis and submit any proposed
modifications or updates to the Parties for their approval; any such
modifications or updates shall not become effective until approved by both
Parties. The Parties agree to review and consider any such proposed
modifications or updates on an expeditious basis.
(b) CHANGE IN BAYER RESEARCH OBJECTIVES. The Parties recognize that
the Discovery Program is designed to result in the creation of a portfolio of
QTs distributed among all of the CFAs and Druggable Target Classes. The Parties
have established non-binding objectives for QT discovery with respect to each of
the CFAs and Druggable Target Classes, as set forth on EXHIBIT A to this
Agreement. In addition, the Parties have established certain quotas for entry of
QTs into the Selectable QT Pool, also as set forth on EXHIBIT A to this
Agreement. In the event that Bayer's research objectives change during the
Program Term (such as Bayer's decision to discontinue efforts in a particular
CFA or increase efforts in a particular CFA) or other relevant changes occur in
the scientific and competitive environment, the Research Plan shall be modified
to reflect such changes, and appropriate corresponding adjustments shall be made
to the objectives and quotas set forth on EXHIBIT A to this Agreement.
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Section 2.6 DISCOVERY PROGRAM - GENERAL.
(a) GENERAL. Each Party agrees to use commercially reasonable efforts
to (i) undertake the responsibilities assigned to such Party in the Research
Plan, including, but not limited to, the dedication of resources appropriate to
such efforts, and (ii) make available to the other Party those resources set
forth in the Research Plan. In addition, each Party agrees to use commercially
reasonable efforts to carry out all work done in the course of the Discovery
Program and the Bayer Development Program in material compliance with all
applicable federal, state or local laws, regulations and guidelines governing
the conduct of such work, including, without limitation, all applicable export
and import control laws.
(b) MILLENNIUM. Without limiting the generality of Section 2.6(a),
the Discovery Program is designed as a multi-disciplinary effort on the part of
Millennium, and shall include, but not be limited to, the following internal
Millennium activities (as further outlined in the Research Plan): [**]. In
particular, the sources for potential Druggable Targets will be derived from DNA
sequences from Millennium and its Affiliates (such as DNA sequences derived from
the [**] between [**] and public databases (collectively, the "Database")).
During the Program Term, Millennium shall maintain and make available adequate
technical resources and personnel to perform its obligations under the Discovery
Program in accordance with the Research Plan, including the software necessary
to perform such obligations.
(c) BIOLOGICAL MATERIALS. For the purposes of facilitating the
conduct of the Discovery Program, each Party shall provide to the other Party
animal or human tissues, cells, blood samples and other materials ("Biological
Materials") specified from time to time in the Research Plan. Each Party agrees
to provide all such Biological Materials to the other Party in accordance with
the Research Plan. The Parties agree that: (i) all Biological Materials provided
by one Party to the other shall be used solely for research purposes in material
compliance with all applicable federal, state or local laws, regulations and
guidelines; (ii) all such Biological Materials are provided without any
warranties, express or implied; (iii) the Party providing such Biological
Materials shall obtain (or cause its third party collaborators to obtain or
certify that they have obtained) all appropriate and required consents from the
source of such Biological Materials; and (iv) Biological Materials provided by
one Party to the other shall not be made available by the other Party to any
third party except pursuant to the Discovery Program or upon the prior written
consent of the Party providing such Biological Materials.
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(d) DISCLOSURE OF MILLENNIUM KNOW-HOW. Commencing on the Effective
Date and continuing during the Program Term, Millennium (consistent with its
applicable confidential disclosure obligations, if any) shall disclose to Bayer
(i) all Millennium Know-How specified in the Research Plan, and (ii) all
Millennium Know- How not specified in the Research Plan which Millennium
reasonably believes to be pertinent to the Discovery Program. Without limiting
the generality of the foregoing, promptly following the Effective Date, the
Program Directors shall review Millennium Know-How in existence as of the
Effective Date relevant to the Target Discovery Program to identify any
potential Druggable Targets with a Disease/Therapeutic Hypothesis in a CFA (not
previously disclosed in the preparation of the Research Plan), with the
intention of placing all such Druggable Targets in the Target Discovery Program.
Section 2.7 SELECTION OF DRUGGABLE TARGETS.
(a) IDENTIFICATION OF DRUGGABLE TARGETS. The Selection Project Team
will design searches of the Database in order to identify Druggable Targets,
participate in the searches of the Database, have access to all output from the
searches of the Database for the sole purpose of reviewing and selecting
Druggable Targets, review the output and select Druggable Targets for expression
profiling and other processes designed to identify QTs with potential utility in
a CFA, all as further described in the Research Plan. The Selection Project Team
shall have full access to the Database and to Millennium personnel for the
purposes provided above to enable the Selection Project Team to identify those
Druggable Targets most likely to have the highest potential utility in the CFAs.
Bayer's access to the Database shall be limited to Bayer's members of the
Selection Project Team for the purposes solely of the Discovery Program and the
Bayer Development Program.
(b) PRIORITIZATION. The Parties shall undertake further research
efforts relating to Druggable Targets (such as [**]) as provided in the Research
Plan. The Program Directors shall determine by mutual agreement which Druggable
Targets shall be subject to such further efforts. In each Contract Year, Bayer
shall have the right [**] identified during such Contract Year (as measured at
the end of such Contract Year), PROVIDED THAT the number of Druggable Targets s
[**]. At the time the Selection Project Team reviews and selects Druggable
Targets for further work (under Section 2.7(a), above), [**] s in the Target
Discovery Program. In the event that, due to resource constraints, Millennium is
unable to work on all Druggable Targets at any given time, the Program Directors
shall prioritize all such Druggable Targets;[**].
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(c) IDENTIFICATION OF RESTRICTIONS. Millennium shall identify at the
earliest possible stage of the process of reviewing potential Druggable Targets
the proprietary status of any gene sequence encoding a Druggable Target under
consideration (e.g., whether it is derived from the [**], etc.) as well as any
potential restrictions that would limit or otherwise affect Bayer's right to
exploit in all human diseases and conditions Small Molecule drugs identified or
developed using the Druggable Target.
(d) PATENT REVIEW. Each Contract Quarter during the Program Term,
Millennium shall use reasonable efforts to monitor patent issuances and patent
applications of third parties relevant to any QT and shall advise Bayer of the
results of such efforts. In addition, when a QT enters the QT Pool, Millennium
shall provide Bayer with a written report relating to the following: Millennium
Patent Rights, agreements between a third party and Millennium or any Millennium
Affiliate, and any patents or patent applications of third parties known to
Millennium, in each case to the extent that such information is material either
to the ability of Bayer to develop Small Molecule Drugs based upon such QT or to
Bayer's decision to utilize such QT to develop Small Molecule Drugs.
Section 2.8 IDENTIFICATION AND SELECTION OF QUALIFIED TARGETS.
(a) GENERAL LIMITATIONS. The following general limitations shall be
applicable with respect to the entry of QTs into the QT Pool:
(i) CFA QTs. Unless otherwise agreed by Bayer, in each
Contract Year at least [**] of the QTs entered into the QT
Pool shall be CFA QTs.
(ii) [**]. In each Contract Year, Millennium may, in its
discretion, propose that up to [**] of the QTs entered
into the QT Pool be [**], PROVIDED THAT such QTs must have
a Disease/Therapeutic Hypothesis in [**] another disease
area approved by the Bayer Program Director.
(iii) [**]. No QT may be entered into the QT Pool if it is a
[**] unless agreed upon by Bayer.
(b) QT DESIGNATIONS. The Program Directors shall, on an ongoing basis
during the Program Term, review the Druggable Targets identified in the Target
Discovery Program and determine and designate by mutual agreement (i) whether,
according to the criteria set forth in the definition of "Qualified Target" and
in the Research Plan, a target constitutes a QT, (ii) the Disease/Therapeutic
Hypothesis or
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Hypotheses associated with each such QT, and (iii) whether such QT is an Above
Quota QT and, hence, would be entered into the Above Quota Pool. The Program
Directors shall notify each Party in writing within [**] after each such
determination regarding the identity of each QT, the Disease/Therapeutic
Hypothesis or Hypotheses associated with the designated QT, whether such QT is
an Above Quota QT and the date each such determination was made.
(c) QT POOL.
(i) QTs IN QT POOL. The QT Pool shall include (A) all CFA QTs
as soon as determined by the Program Directors to meet the
criteria for status as QT's, (B) subject to the
limitations set forth in Section 2.8(a) above, all [**]
QTs proposed by Millennium that (1) are determined by the
Program Directors to meet the criteria for status as QTs,
AND (2) have a Disease/Therapeutic Hypothesis in [**]
another disease area approved by the Bayer Program
Director.
(ii) ABOVE QUOTA POOL. Each Above Quota QT included in the QT
Pool pursuant to subsection (i) above shall initially be
entered into the Above Quota Pool. Each such Above Quota
QT shall remain in the Above Quota Pool until the first to
occur of the following: (A) selection of such Above Quota
QT by Bayer pursuant to Section 2.8(d), in which event
such Above Quota QT shall be deemed to have entered into
the Selectable QT Pool immediately prior to such
selection; and (B) transfer of such Above Quota QT from
the Above Quota Pool to the Selectable QT Pool at the
beginning of the Quota Period (as defined in EXHIBIT A to
this Agreement) immediately following the Quota Period
during which such Above Quota QT entered into the Above
Quota Pool, but only to the extent consistent with the
quotas established for such Quota Period. In the event
that an Above Quota QT has not been deemed to have entered
the Selectable QT Pool pursuant to subsection (A) or been
transferred to the Selectable QT Pool pursuant to
subsection (B) within [**] after it first enters the Above
Quota Pool, such above Quota QT shall constitute a Waived
QT (as defined in subsection (f) below) for purposes of
this Agreement, unless otherwise agreed by Millennium.
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(iii) PRIMARY POOL AND HOLDING POOL. The Selectable QT Pool
shall be subdivided into a Primary Pool and a Holding
Pool. At any time, the [**] "oldest" QTs (or such fewer
number as shall then be in the Selectable QT Pool) shall
be in the Primary Pool, with the balance, if any,
remaining in the Holding Pool. The date that a QT enters
the Selectable QT Pool shall be the basis for determining
which QTs are "oldest" for purposes of including QTs in
the Primary Pool; if more than one QT enters the
Selectable QT Pool on the same date, the Program Directors
shall determine by mutual agreement the order that such
multiple QTs shall be deemed to have entered into the
Selectable QT Pool.
(iv) TIME PERIOD RELATING TO PRIMARY POOL. Once a QT enters
into the Primary Pool, it shall remain in the Primary Pool
for a period of [**] (or, if Bayer selects such QT within
such [**] period, for such shorter period of time until
such selection by Bayer). Each QT in the Primary Pool not
selected by Bayer pursuant to subsection (d) below within
[**] after such QT enters the Primary Pool shall be a
"Waived QT" (as defined in subsection (f) below). As a QT
exits the Primary Pool (either due to selection by Bayer
or because it becomes a Waived QT), the then oldest QT in
the Holding Pool shall enter the Primary Pool and become
subject to the [**] selection period. There shall be no
limits as to the amount of time that a QT shall remain in
the Holding Pool during the Program Term, PROVIDED THAT
Failed QTs (as defined in subsection (e) below) shall
remain in the Holding Pool for the period provided in
subsection (e) below. Except as provided in subsection
(iv), all QTs remaining in the QT Pool as of the
expiration of the Program Term shall be the sole property
of Millennium, and Bayer shall have no rights to such QTs,
PROVIDED THAT any QT that enters the QT Pool within [**]
prior to the expiration of the Program Term shall remain
in the QT Pool for a period of up to [**] from the date
such QT enters the QT Pool and may be selected by Bayer
pursuant to Section 2.8(d) during such [**] period.
(v) REPLACEMENT POOL. For the purposes of providing a pool of
potential Replacement QTs (as defined in subsection (e)
below) for Selected QTs for which Assay Configuration
Activities are being undertaken as of the expiration of
the Fifth Contract Year, a limited number of QTs shall
remain in the QT Pool (the
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"Replacement Pool") for a period ending on the earlier of
(x) [**] after the date of the final selection by Bayer
from the Selectable QT Pool, or (y)[**] (the "Replacement
Period"). The number of QTs in the Replacement Pool shall
be equal to (A) the number of Selected QTs for which Assay
Configuration Activities are being undertaken as of the
expiration of the Fifth Contract Year, multiplied by (B)
the "Configuration Failure Rate" (rounded up to the
nearest whole number). The Configuration Failure Rate
means the fraction whose numerator is the number of Failed
QTs through the end of the Fifth Contract Year and whose
denominator is the total number of Selected QTs through
the end of the Fifth Contract Year. In the event that the
QT Pool contains more QTs than the number to be included
in the Replacement Pool (as determined in accordance with
the preceding sentence), as necessary from time to time
Bayer shall designate those QTs that it wishes to remain
in the Replacement Pool. In the event there is an
insufficient number of QTs in the Replacement Pool to
serve as Replacement QTs during the Replacement Period,
Millennium shall use commercially reasonable efforts to
identify a sufficient number of QTs (other than Waived
QTs) to serve as Replacement QTs, PROVIDED THAT
Millennium's obligation to provide Replacement QTs shall
terminate on [**], except as provided below. If, despite
such commercially reasonable efforts, there is a Failed QT
for which Millennium has not identified a QT to serve as a
Replacement QT, Millennium shall [**] with respect to such
Failed QT under Section 5.4. In the event that the Program
Term is extended pursuant to Section 2.11 and a QT
selected by Bayer in the Sixth Contract Year becomes a
Failed QT after [**], Millennium shall either provide
Bayer with (A) a Replacement QT, or (B) [**] with respect
to such Failed QT under Section 5.4 (the choice between
(A) or (B) to be in Millennium's discretion).
(vi) PROGRAM DIRECTOR DISCRETION. The Program Directors may, by
mutual agreement, (A) leave a Waived QT in the Primary
Pool for such additional periods as they may determine,
(B) remove a QT from the Primary Pool prior to end of the
[**] period or remove a QT from the Holding Pool, (C) not
enter a QT into the QT Pool, or (D) transfer a QT from the
Above Quota Pool to the Selectable QT Pool.
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(d) BAYER SELECTIONS FROM QT POOL. Bayer shall review the QTs in the
QT Pool on a continuing basis during the Program Term and shall have the right
to select a maximum of 225 QTs (or such lower aggregate number of QTs as shall
have been entered into the QT Pool during the Program Term) from either the
Primary Pool, the Holding Pool and/or the Above Quota at any time during the
Program Term, PROVIDED THAT with respect to a QT that enters the QT Pool within
[**] prior to the expiration of the Program Term, Bayer shall have the right to
select such QT for a period of [**] after such QT enters the QT Pool. QTs
selected by Bayer pursuant to this subsection constitute "Selected QTs". The
Bayer Program Director shall notify the Millennium Program Director of each
selection of a QT as such selection occurs. The date upon which Bayer selects a
QT is referred to as a "Selected QT Designation Date".
(e) REPLACEMENT QTs. If, despite reasonable commercial efforts, a
Selected QT is not able to be developed into a Configured Assay within [**] if a
Party requests the other Party to assist it in [**], as provided in Section
2.9(a)(i)) (or, in either case, such shorter or longer period as the Program
Directors may determine by mutual agreement) of the Selected QT Designation Date
for such QT (a "Failed QT"), Bayer shall be entitled either to retain rights to
such Failed QT (e.g., [**] or make a replacement selection from the Selectable
QT Pool (a "Replacement QT") within [**] after such Selected QT becomes a Failed
QT. If Bayer does not elect to retain rights to such Failed QT, the Failed QT
shall be returned to the Holding Pool where it shall remain until [**] from its
designation as a Failed QT. Within such period, Bayer shall have the right to
undertake research activities with respect to such Failed QT (i.e. [**] and
re-select the Failed QT; if Bayer re-selects such Failed QT, the Failed QT shall
become a new Selected QT. If Bayer does not re-select the Failed QT within such
period, it shall be deemed a Waived QT. For purposes of determining the number
of QTs Bayer may select during the Program Term, (i) a Failed QT shall not be
counted towards the maximum number of selections Bayer is able to make, unless
Bayer elects to retain it or re-selects it after its return to the Holding Pool,
and (ii) a Replacement QT shall count towards such maximum number assuming such
Replacement QT can be developed into a Configured Assay.
(f) RIGHTS TO WAIVED QTs. Millennium shall retain all rights to use
all Waived QTs for all purposes. As used in this Agreement, a "Waived QT" means
a QT that is not selected by Bayer within the applicable time period during
which Bayer is entitled to select such QT from the Selectable QT Pool or the
Above Quota Pool, as the case may be.
Section 2.9 ADDITIONAL ACTIVITIES IN CFAs. As part of the Discovery
Program, Millennium shall undertake further development activities with respect
to CFA QTs
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selected by Bayer. These activities principally fall into two categories: Assay
Configuration Activities and Screen to Clinic Validation Activities.
(a) ASSAY CONFIGURATION.
(i) DESIGNATION OF DEVELOPER. Bayer and Millennium shall
determine by mutual agreement, on a Selected
QT-by-Selected QT basis, which Party has the optimal
expertise/resources to convert a CFA QT into a Configured
Assay (as delineated in the Research Plan, "Assay
Configuration Activities") and shall by mutual agreement
designate such Party as the developer of the Configured
Assay for each such Selected QT. In making such
designations, the objective of the Program Directors shall
be to allocate development responsibility equitably
between the Parties, taking into consideration the degree
of anticipated difficulty in developing a Configured Assay
for a particular QT. In addition, the Program Directors
shall allocate such development responsibility in a manner
reasonably necessary at any given time to enable
Millennium to satisfy its overall commitment to configure
the number of Configured Assays specified in subsection
(ii) below. However, if the Parties are unable to agree on
such designation, the matter shall be resolved by the
Bayer Program Director. Configured Assays may also be
configured jointly by Bayer and Millennium, in which event
the terms and conditions of Millennium's use of such
Configured Assays in relation to Returned QTs under
Section 3.2 shall be determined by mutual agreement on a
case-by-case basis at the time work on the Configured
Assay is commenced. If a Party is developing a Configured
Assay and requests the other Party to assist it in [**] in
connection with developing such assay, such other Party
shall provide such assistance. The provision of such
assistance shall not make a Configured Assay a jointly
Configured Assay. If a Party requests such assistance,
such Party shall have an [**] to develop the Configured
Assay for the Selected QT before such Selected QT becomes
a Failed QT. The Party responsible for developing a
Configured Assay shall use commercially reasonable efforts
to do so as soon as practicable. If a Party responsible
for developing a Configured Assay is unable to do so, it
shall report to the other Party on its efforts and the
reasons for such inability.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(ii) MILLENNIUM COMMITMENT. Millennium shall make available
sufficient assay configuration resources to configure [**]
Configured Assays over the term of the Discovery Program,
PROVIDED THAT in the event that Millennium is unable to
configure an assay for any of the Selected QTs for which
it is the designated developer, Millennium shall make
available assay configuration resources to configure an
additional Configured Assay (not to exceed an additional
[**] such Configured Assays). Millennium's obligation to
make available such assay configuration resources shall
terminate as of the earlier of (A) [**], or (B) [**] after
the Selected QT Designation Date for the last QT for which
Millennium is designated during the Program Term as the
developer of the related Configured Assay. However, in the
event that the Program Term is extended pursuant to
Section 2.11 and Millennium is designated as the developer
of the Configured Assay for a Selected QT selected by
Bayer in the Sixth Contract Year, Millennium shall
continue to develop such Configured Assay until the
expiration of [**] from the Selected QT Designation Date
for such Selected QT. Millennium shall provide to Bayer
the standard operating procedures, tools and reagents
necessary to use each Millennium Configured Assay, with
limits and quantities relating to such reagents to be set
forth in the Research Plan.
(iii) ASSAY SPECIFICATIONS. The Research Plan shall include
specifications for Configured Assays generally, and the
Program Directors shall by mutual agreement establish
additional specifications for each assay (collectively,
"Assay Specifications"). Each Party shall use commercially
reasonable efforts to develop Configured Assays in
conformance with the applicable Assay Specifications.
(iv) ASSAY CONFIGURATION DATE. The Program Directors shall
determine by mutual agreement whether a Configured Assay
has been developed in accordance with the Assay
Specifications. With respect to a Bayer Configured Assay,
the date of such determination by the Program Directors
(or, in the event that the Program Directors fail to reach
agreement, the date of determination pursuant to Section
2.16) shall be the "Assay Configuration Date" for such
Bayer Configured Assay. With respect to a Millennium
Configured Assay, the later of (A) the
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
date such assay is delivered to a destination
designated by Bayer (or failing any such designation,
to Bayer's facility in Wuppertal), or (B) the date of
the determination by the Program Directors (or, in
the event that the Program Directors fail to reach
agreement, the date of determination pursuant to
Section 2.16) that the Configured Assay has been
developed in conformance with the Assay
Specifications, shall be the "Assay Configuration
Date" for such Millennium Configured Assay. Bayer
shall have the right to test each such Millennium
Configured Assay to confirm that it has been
developed in conformance with the Assay
Specifications. If, within [**] after a Millennium
Configured Assay has been delivered to a Bayer
location as specified above, Bayer does not provide
written notice to Millennium that such Millennium
Configured Assay failed to conform to the Assay
Specifications based on such tests, the Assay
Configuration Date shall remain the date specified
above. However, if Bayer determines that the
Millennium Configured Assay does not conform to the
Assay Specifications based upon such tests and so
notifies Millennium within such [**] period, the
Parties shall work together for a period of [**] to
modify the Millennium Configured Assay to enable it
to conform to the Assay Specifications; in such
event, the date that the Parties agree that the
Millennium Configured Assay meets such Assay
Specifications shall be the "Assay Configuration
Date" for such Millennium Configured Assay. If the
Parties are unable to modify the Millennium
Configured Assay within such [**] period (or such
longer period as may be mutually agreed) to enable it
to meet the Assay Specifications, the Selected QT
related to such Millennium Configured Assay shall
become a Failed QT.
(b) SCREEN TO CLINIC VALIDATION. On a selective basis to be determined
by Bayer and as further described in the Research Plan, Millennium shall provide
additional resources (approximately [**] in the First Contract Year and an
average of approximately [**] in each of the Second through Sixth Contract
Years) necessary to engage in (i) additional validation of CFA QTs selected by
Bayer for which lead compounds have been discovered and/or (ii) additional
validation or optimization of the lead compounds targeted to CFA QTs
(collectively, "Screen to Clinic Validation Activities"), PROVIDED THAT no such
Screen to Clinic Validation Activities shall be undertaken under the Discovery
Program with respect to First Stage QTs (as defined in Section 2.12 below)
unless otherwise mutually agreed. Examples of Screen to Clinic Validation
Activities include, without limitation, high throughput gain or loss
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
of function studies in cell-based systems, profiling of compounds targeted to
CFA QTs and the development of animal models (e.g., through transgenic, knockout
and gene delivery methods) to further validate the CFA QTs and/or lead compounds
targeted to them.
Section 2.10 [**] RESEARCH ACTIVITIES. Unless otherwise agreed by the
Parties on a case-by-case basis, Millennium shall [**].
Section 2.11 EXTENSION OF PROGRAM TERM. Bayer shall have the option to
extend the Program Term if, at the end of the Fifth Contract Year, at least 225
QTs (excluding Failed QTs) have not been entered into the Selectable QT Pool,
such extension (the "Extension Term") to continue until the earlier of (a) such
time as an aggregate of 225 QTs have been entered into the Selectable QT Pool,
or (b) [**]. Bayer shall exercise the foregoing option by providing written
notice of such extension to Millennium no later than the end of the Fifth
Contract Year.
Section 2.12 PROGRESSION OF SELECTED QT FROM FIRST TO THIRD STAGES. For
the purpose of determining which Selected QTs shall become Returned QTs, each
Selected QT shall pass through a series of development stages or become a
Returned QT, as set forth in this Section 2.12.
(a) FIRST STAGE. After a Selected QT has been developed into a
Configured Assay, such Selected QT shall become a first stage QT ("First Stage
QT") for a maximum of [**] from the Assay Configuration Date for such QT (the
"First Stage Period"). During the First Stage Period with respect to each First
Stage QT, Bayer shall [**] after the expiration of the First Stage Period for
each First Stage QT, either (x) Bayer shall designate such First Stage QT as a
second stage QT (a "Second Stage QT") or (y) Bayer will relinquish its exclusive
rights under Section 3.1(a) with respect to such QT (a "Returned QT"). Bayer may
not designate more than [**] First Stage QTs to become Second Stage QTs.
(b) SECOND STAGE. A Second Stage QT shall remain a Second Stage QT
for a maximum of [**] from the time of its designation as a Second Stage QT (the
"Second Stage Period"). During the Second Stage Period with respect to each
Second Stage QT, Bayer shall [**] after the expiration of the Second Stage
Period for each Second Stage QT, either (x) Bayer shall designate such Second
Stage QT as a third stage QT (a "Third Stage QT"), or (y) such Second Stage QT
shall be designated by Bayer as a Returned QT. Bayer may not designate more than
[**] Second Stage QTs to become Third Stage QTs.
(c) THIRD STAGE. A Third Stage QT shall remain a Third Stage QT for a
maximum of [**] from the time of its designation as a Third Stage QT (the "Third
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Stage Period"). During the Third Stage Period, with respect to each Strategic
Project associated with a Third Stage QT, Bayer shall [**] after the expiration
of the Third Stage Period for each Third Stage QT, either (x) the Development
Candidate associated with such Third Stage QT shall be taken into further
development and be retained by Bayer, or (y) such Third Stage QT shall be
designated by Bayer as a Returned QT. Bayer may not designate more than [**]
Third Stage QTs to become Development Candidates.
(d) FAILED QTs AND NON-SCREENED QTs. With respect to each Failed QT
which Bayer has elected to retain as a Selected QT and each Selected QT which
Bayer intends to develop without using a Configured Assay (such as through
rational drug design), the Parties shall discuss in good faith and implement
timing and return standards substantially similar to the provisions of
subsections (a) through (c).
(e) EARLY DETERMINATIONS. In the case of First, Second and Third
Stage QTs, the time periods set forth in Sections 2.12(a), (b), and (c) are
intended as maximum time periods. Consequently, Bayer shall notify Millennium of
any decision it makes with respect to discontinuing permanently the activities
required to be undertaken for any First, Second or Third Stage QT within [**] of
such decision, in which instance such QT shall immediately be designated as a
Returned QT.
(f) ACTIVITIES NOT PART OF DISCOVERY PROGRAM. Any activities
undertaken by either Party with respect to a Returned QT following its
designation as such shall not be considered to be part of the Discovery Program
or the Bayer Development Program.
(g) FORCE MAJEURE. The time periods set forth in Sections 2.12(a),
(b) and (c) shall be extended in the event of (and for the duration of) delays
relating to the activities set forth in such Sections as a result of any cause
or causes beyond the control of Bayer, including, but not limited to, the events
described in Section 11.8.
Section 2.13 DILIGENCE OBLIGATION. Bayer shall use reasonable
commercial efforts to undertake the activities relating to each First, Second
and Third Stage QT that is not a Returned QT, as provided in Section 2.12,
PROVIDED THAT, Bayer may discontinue or suspend such activities from time to
time with respect to a particular Selected QT if Bayer determines that it is
commercially reasonable to do so (any such discontinuation or suspension,
however, to have no effect on the time periods set forth in Section 2.12(a), (b)
and (c)).
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Section 2.14 MILLENNIUM PARTICIPATION IN DEVELOPMENT. Millennium shall
participate with Bayer in the research and development of Small Molecule Drugs
under development by Bayer (other than Small Molecule Drugs based upon Returned
QTs) as follows: (a) for Small Molecule Drugs that have not yet reached
Development Candidate status, the Parties shall establish an appropriate forum
to provide Millennium with the opportunity to be informed of and comment on the
research and development activities relating to all such Small Molecule Drugs on
at least a quarterly basis; and (b) for Small Molecule Drugs that have reached
Development Candidate status, Bayer shall provide Millennium with the
opportunity to be informed of and comment on the development, clinical and
regulatory activities related to all such Small Molecule Drugs, PROVIDED THAT
Bayer shall have the right to make all determinations relating to research,
development, clinical and regulatory issues relating to Small Molecule Drugs.
Section 2.15 REPORTS.
(a) MONTHLY SPREADSHEETS. In order to assist the Parties in
administering the Discovery Program and the Bayer Development Program, and in
the selection and return of QTs, the Program Directors shall provide jointly
prepared spreadsheets to the Parties within five (5) business days after the end
of each calendar month covering the following matters for such month:
(i) the following matters relating to the conduct of the
Discovery Program: (A) the QTs entered into the Selectable
QT Pool and the Above Quota Pool; (B) the success fees
invoiced or paid; (C) statistical information concerning
Assay Configuration Activities relating to Selected QTs;
(D) statistical information concerning Screen to Clinic
Validation Activities; and (E) the QTs that have been
designated by Millennium as [**];
(ii) the following matters relating to the Bayer Development
Program: (A) each First Stage QT that has reached the end
of the First Stage Period, and whether such First Stage QT
has become a Second Stage QT or a Returned QT; (B) each
Second Stage QT that has reached the end of the Second
Stage Period, and whether such Second Stage QT has become
a Third Stage QT or a Returned QT; (C) each Third Stage QT
that has reached the end of the Third Stage Period and
whether such Third Stage QT has become a Development
Candidate or a Returned QT; and (D) the number of First,
Second and Third Stage QTs that have become Returned QTs
cumulatively since the Effective Date; and
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(iii) such other matters mutually deemed relevant by the Program
Directors or the Parties.
(b) SEMI-ANNUAL REPORTS. The Program Directors shall jointly prepare
and deliver summary reports to the Parties within thirty (30) days after the end
of each April and October during the Program Term and the period during which
the Bayer Development Program is being conducted summarizing the information
included in the monthly spreadsheets for such calendar half-year and providing a
narrative report on the status of the activities being conducted in the
Discovery Program and the Bayer Development Program.
(c) SPREADSHEET AND REPORT FORMATS. The Program Directors shall
establish by mutual agreement standard formats for the monthly spreadsheet and
the semi-annual report. Such formats shall be incorporated in the Research Plan.
Section 2.16 DECISION MAKING. The goal of all decision making shall be
to achieve consensus. The Program Directors and Project Teams shall decide
matters appropriate to their scope of responsibilities on a consensus basis. If
a matter cannot be resolved by a Project Team on a consensus basis, it shall be
referred to the Program Directors for resolution. In the event that the Program
Directors are unable to reach agreement on any matter within fifteen (15) days
after the matter is referred to them, the issue shall be referred for resolution
to the Joint Steering Committee and, if the Joint Steering Committee is unable
to reach agreement on such matter within thirty (30) days after the matter is
referred to it, to the Executive Officers, PROVIDED THAT the following matters
shall not be referred to the Joint Steering Committee or to the Executive
Officers or to arbitration under Article IX: (a) whether, under Section 2.1, the
Target Discovery Program should include work [**] or using target discovery
approaches other than a Target by Class Drug Discovery Approach; (b) changes in
CFAs pursuant to Section 2.2; (c) approval of any changes or modifications to
the Research Plan pursuant to Section 2.5; (d) the matters referred to in
Section 2.8(c)(v); (e) the extension or shortening of the time for the
configuration of an assay under Section 2.8(e); and (f) the matters referred to
in Section 2.10. If the Executive Officers are unable to resolve a matter
referred to them under this Section 2.16, and the issue relates to a Designated
Scientific Issue, the Parties shall resolve that matter through the use of an
expedited mediation process, in which the Parties first try to agree on a
mutually acceptable scientist to serve as the mediator (failing mutual agreement
on a single scientist, each Party appoints a scientist not affiliated with such
Party and the two so selected pick a third unaffiliated scientist). The
mediator(s) shall review the disputed matter on an expedited basis (not to
exceed 45 days), considering the relevant data, standards established by this
Agreement and the Research Plan and
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
relevant precedents. The decision of the mediator(s) shall be binding on the
Parties. If the Executive Officers are unable to resolve a matter referred to
them under this Section within thirty (30) days after the matter is referred to
them and the issue is not a Designated Scientific Issue, the provisions of
Article IX shall apply.
ARTICLE III
BAYER AND MILLENNIUM RIGHTS AND OBLIGATIONS
RELATING TO SELECTED QTs
Section 3.1 LICENSE GRANT WITH RESPECT TO SELECTED QTs.
(a) LICENSE. Subject to the terms and conditions of this Agreement,
Millennium hereby grants to Bayer and its Affiliates an exclusive license in the
Territory, under Millennium's rights to Millennium Know-How and Millennium
Patent Rights, (i) to research, develop, make and use Selected QTs ([**] and
Configured Assays that embody or are based on such Selected QTs, to the extent
necessary to discover or develop Bayer Royalty Products and (ii) to make, have
made, import, use, have used, offer for sale, sell and have sold, in the Field,
Bayer Royalty Products that are discovered or developed through the use of
Selected QTs [**], subject, in the case of both subsections (i) and (ii), to any
applicable field restrictions or exclusivity limitations in the case of any
Selected QTs that are [**].
(b) SUBLICENSE RIGHTS. Bayer shall have the right to enter into
sublicenses relating to the license granted in Section 3.1(a)(ii). Each such
sublicense shall be consistent with the provisions of this Agreement, and shall
incorporate the following provisions of this Agreement for the benefit of
Millennium: Section 3.5, Section 5.10, Article VII and Section 11.1(a). Bayer
shall provide Millennium with a copy of each such sublicense agreement promptly
after execution thereof (which copy may be redacted to reflect confidential
business or scientific terms).
Section 3.2 LICENSE GRANT, RETAINED RIGHTS AND OPTION WITH RESPECT TO
RETURNED QTs. With respect to each Returned QT, the rights of Bayer and
Millennium to such Returned QT shall be as follows:
(a) LICENSE. Subject to the terms and conditions of this Agreement,
Millennium hereby grants to Bayer and its Affiliates a non-exclusive license in
the Territory, under Millennium's rights to Millennium Know-How and Millennium
Patent Rights, (i) to research, develop, make and use the Returned QTs and
Configured Assays that embody or are based on such Returned QTs, to the extent
necessary to discover or develop Bayer Royalty Products, and (ii) make, have
made, import, use, have used, offer for sale, sell and have sold, in the Field,
Bayer Royalty
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Products that are discovered or developed through the use of Returned QTs,
subject, in the case of both subsections (i) and (ii), to any applicable field
restrictions in the case of any Restricted Targets.
(b) SUBLICENSE RIGHTS. Bayer shall have the right to enter into
sublicenses relating to the license granted in Section 3.2(a)(ii). Each such
sublicense shall be consistent with the provisions of this Agreement, and shall
incorporate the following provisions of this Agreement for the benefit of
Millennium: Section 3.5, Section 5.10, Article VII and Section 11.1(a). Bayer
shall provide Millennium with a copy of each such sublicense agreement promptly
after execution thereof (which copy may be redacted to reflect confidential
business or scientific terms).
(c) MILLENNIUM RETAINED RIGHTS. Millennium shall retain all rights in
all fields (including the Field) to each Returned QT (and, if applicable, the
Millennium Configured Assay that embodies or is based on such Returned QT),
subject to Bayer's non-exclusive rights set forth in subsections (a) and (b).
(d) OPTIONAL MILLENNIUM RIGHTS.
(i) MILLENNIUM OPTION. At Millennium's option (exercisable as
provided below), Bayer shall grant to Millennium and its
Affiliates a non-exclusive license in the Territory, under
Bayer's rights in Bayer Returned QT Know-How and Bayer
Returned QT Patent Rights to the extent necessary,
(A) to research, develop, make and use any or all of
the following (as determined by Millennium), in
connection with the use of the Returned QT to
discover or develop Small Molecule Drugs: (1) the
Bayer Configured Assay that embodies or is based on a
Returned QT, together with the standard operating
procedures and reagents necessary to use such Bayer
Configured Assay for such purpose, subject to the
limitations set forth below; (2) if a Second Stage QT
is designated as a Returned QT, the most promising
lead structure (in Bayer's reasonable judgment) under
development by Bayer, and the optimization history of
such lead structure and the data pertinent to
critical optimization decisions that relate to such
lead structure (the "Second Stage Information"),
including without limitation, information on the
major structural templates that were evaluated by
Bayer and relevant SAR data; and
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(3) if a Third Stage QT is designated as a Returned
QT, the most promising lead structure (in Bayer's
reasonable judgment) under development by Bayer, and
the optimization history of such lead structure and
the data pertinent to critical optimization decisions
that relate to such lead structure (the "Third Stage
Information"), including without limitation, [**],
related pharmacological data (including toxicology
and [**] information) and information related to
chemical synthesis, PROVIDED, HOWEVER, that, in the
case of a Second Stage QT or a Third Stage QT, Bayer
shall not be obligated to grant any such license with
respect to the most promising lead structure if such
lead structure is under development by Bayer as a
Development Candidate or later stage drug candidate
outside of the Bayer Development Program, in which
event Bayer shall be obligated to grant such a
license with respect to the next most promising lead
structure that is not a Development Candidate or
later stage drug candidate outside of the Bayer
Development Program, and
(B) to make, have made, import, use, have used, offer
for sale, sell and have sold Small Molecule Drugs
that are discovered or developed by Millennium
through the use of Returned QTs pursuant to Section
3.2(d)(i)(A).
Notwithstanding the foregoing, Millennium's option with
respect to Bayer Configured Assays under subsection (A)(1)
above shall apply to all such assays [**]. If Millennium
exercises the foregoing option with respect to subsection
(A)(1) above, Bayer shall also transfer to Millennium the
applicable cell line, standard operating procedures for
such assay, information relating to the reagents and
quantities of the applicable reagents with limits and
quantities as set forth in the Research Plan, PROVIDED
THAT Bayer shall not be obligated to provide proprietary
equipment and related Know-How (e.g., robotics and
detection systems) relating to an assay. If Millennium
exercises the foregoing option with respect to subsections
(A)(2) or (A)(3) above, Bayer shall also transfer to
Millennium as soon as practicable at least [**] of such
most promising (or such next most promising, if
applicable) lead structure, quantities of the applicable
reagents with limits and quantities consistent with the
stage of development of such lead
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
structure, as well as all of the Second Stage Information
or Third Stage Information, as the case may be.
(ii) EXERCISE OF OPTION. With respect to each Returned QT,
Millennium may exercise the option set forth in subsection
(i) by providing written notice to Bayer within[**] after
a Selected QT becomes a Returned QT. Such notice shall
indicate the specific Bayer Returned QT Know-How and Bayer
Returned QT Patent Rights (e.g., Bayer Configured Assay,
lead structure, Second Stage Information and Third Stage
Information) for which the option is being exercised. The
license shall be granted effective as of the date of the
Millennium notice of exercise.
(iii) SUBLICENSE RIGHTS. Millennium shall have the right to
enter into sublicenses relating to the license granted in
Section 3.2(d)(i)(B). Each such sublicense shall be
consistent with the provisions of this Agreement, and
shall incorporate the following provisions of this
Agreement for the benefit of Bayer: Section 3.5, Section
5.10, Article VII and Section 11.1(b). Millennium shall
provide Bayer with a copy of each such sublicense
agreement promptly after execution thereof (which copy may
be redacted to reflect confidential business or scientific
terms).
(iv) ADDITIONAL PROVISIONS. In the event that Millennium
exercises the option set forth in Section 3.2(d)(i)(A) or
(B), with respect to a Returned QT, [**] below shall apply
with respect to such Returned QT. In the event that
Millennium exercises the option set forth in Section
3.2(d)(i)(A)(2) or (3), Millennium shall pay royalties to
Bayer on Millennium Royalty Products, if any, at the
royalty rates described in Section 5.6 of this Agreement.
Section 3.3 [**].
(a) GENERAL. As used in this Agreement, (i) a "[**]" means a QT that
has a Disease/Therapeutic Hypothesis [**] and that is designated by Millennium
as a "[**]" within [**] after such QT is entered into the QT Pool and (ii) a
"[**]" means one (1) [**] that is associated (on the basis of a
Disease/Therapeutic Hypothesis) with a QT, as designated by Millennium at the
time such QT [**]. Millennium may designate [**] and may designate the same or a
different [**] after any such designation by Millennium, [**].
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(b) RIGHTS RELATING TO [**]. In the event that Bayer, under Section
2.8(d), selects a [**] QT, such Selected QT shall be deemed to be a Returned QT
effective as of the expiration of the [**] specified in subsection (a), and the
non-exclusive license grant, the retained rights and the option set forth in
Section 3.2 shall apply with respect to such Returned QT. The option set forth
in Section 3.2 with respect to a [**] that is not a [**] shall apply [**].
(c) RIGHTS RELATING TO [**]. In the event that Bayer selects a [**]
under Section 2.8(d), such Selected QT shall not be considered to be [**] for
purposes of the exclusive license grant set forth in Section 3.1(a) and,
accordingly, shall be subject to such exclusive license grant and to the
provisions of Section 2.12, PROVIDED, HOWEVER, that if such Selected QT is
subsequently designated by Bayer as a Returned QT pursuant to Section 2.12, then
the non-exclusive license grant, the retained rights and the option set forth in
Section 3.2 shall apply with respect to such Returned QT.
(d) ROYALTY RATE RELATING TO [**]. Notwithstanding the provisions of
Section 5.5 (except as provided below), the royalty rate payable on the Net
Sales in a country of a Bayer Royalty Product that (i) is discovered or
developed through the use of a [**] and (ii) is registered and approved for
commercial sale in such country by the appropriate regulatory authority for use
in the treatment of a [**] (irrespective of whether it is so registered and
approved for use in the treatment of [**]) but is not so registered and approved
for use in the treatment of any CFA shall be [**] of such Net Sales, PROVIDED,
HOWEVER, that in the event that such Bayer Royalty Product is subsequently
registered and approved for commercial sale in such country by the appropriate
regulatory authority for use in the treatment of any CFA, then (A) Millennium
shall provide Bayer ([**] Millennium on the Net Sales in such country of such
Bayer Royalty Product) [**] and the amount of the [**] paid to Millennium [**],
and (B) the royalty rate payable on all subsequent Net Sales in such country of
such Bayer Royalty Product shall be determined in accordance with the provisions
of Section 5.5.
Section 3.4 USE OF CONFIGURED ASSAYS. Millennium shall not, without the
written approval of Bayer, provide a Bayer Configured Assay to any third party.
Bayer shall not, without the written approval of Millennium, provide a
Millennium Configured Assay to any third party.
Section 3.5 NON-SUIT COVENANT WITH RESPECT TO USE OF RETURNED QTs. Each
Party covenants not to sue the other Party (or its Affiliates) for using a
Returned QT to screen for and/or develop Small Molecule Drugs, under any of its
rights to Know- How that is embodied in, or Patent Rights that cover, inventions
relating to such
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Returned QT, where such inventions were made prior to the designation of such QT
as a Returned QT.
Section 3.6 NON-SUIT COVENANT WITH RESPECT TO REQUIRED PHARMACOGENOMIC
ASSAYS.
(a) MILLENNIUM COVENANT. Millennium covenants not to sue Bayer (or
its Affiliates or sublicensees), under (i) Millennium's rights in Millennium
Know-How or Millennium Patent Rights, or (ii) other rights (owned or otherwise
controlled by Millennium) to Know-How that is embodied in, or Patent Rights that
cover, any inventions made through the use of Millennium Know-How, for the
making, developing, importing, exporting, using, offering for sale or selling of
a Required Pharmacogenomic Assay associated with a Bayer Royalty Product.
(b) BAYER COVENANT. Bayer covenants not to sue Millennium (or its
Affiliates or sublicensees), under (i) Bayer's rights in Bayer Returned QT
Know-How or Bayer Returned QT Patent Rights, or (ii) other rights (owned or
otherwise controlled by Bayer) to Know-How that is embodied in, or Patent Rights
that cover, any inventions made through the use of Bayer Returned QT Know-How,
for the making, developing, importing, exporting, using, offering for sale or
selling of a Required Pharmacogenomic Assay associated with a Small Molecule
Drug.
Section 3.7 RETAINED RIGHTS.
(a) BAYER RETAINED RIGHTS. Any of Bayer's rights to Bayer Returned QT
Know-How and Bayer Returned QT Patent Rights not specifically licensed to
Millennium under this Agreement, including without limitation, Bayer's rights to
compounds discovered by Bayer through the use of Selected QTs and/or to
Configured Assays, shall be retained by Bayer, subject, in the case of Required
Pharmacogenomic Assays, to the provisions of Section 3.6(b).
(b) MILLENNIUM RETAINED RIGHTS. Any of Millennium's rights to
Millennium Know-How and Millennium Patent Rights not specifically licensed to
Bayer under this Agreement shall be retained by Millennium, including without
limitation, Millennium's exclusive right to use QTs (including Selected QTs) for
the development of therapeutic and prophylactic products (excluding Small
Molecule Drugs) and diagnostic, information and other products and services,
subject, in the case of Required Pharmacogenomic Assays, to the provisions of
Section 3.6(a).
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
ARTICLE IV
[**]; ADDITIONAL DEVELOPMENT PROGRAMS
Section 4.1 RETURNED QTs. If Millennium intends to [**] receive
marketing rights to Small Molecule Drugs discovered through the use of one or
more Returned QTs with respect to which Millennium has exercised the option set
forth in Section 3.2(d)(i)(A)(1), (2) and/or (3) (an "Optioned Returned QT"),
whether as part of a standalone program relating to such Optioned Returned QT or
as part of a broader relationship encompassing such Optioned Returned QT and
other projects (a "Section 4.1 Opportunity"), Millennium shall [**] as to
whether it has [**] shall include information reasonably necessary [**] with
respect to such [**]. If, during the [**], the Parties shall [**] on such terms
as may be mutually agreeable. If (a) [**] in discussing such [**] or (b) [**]
but the Parties are unable to reach mutual agreement with respect to such [**],
Millennium shall be free, during the [**] commencing as of the end of the [**])
or the end of the [**], to enter into a transaction relating to such [**].
Millennium and Bayer recognize that [**] transaction relating to such [**],
numerous factors may be taken into account and given appropriate weight,
including without limitation, [**] in the relevant markets. If Millennium [**]
subsequent commercial transactions [**]. Notwithstanding the foregoing, if,
within such [**], Millennium obtains material new data relating to such Optioned
Returned QT, [**] shall discuss [**] set forth in this Section 4.1 shall [**].
Section 4.2 [**] AREAS. If, prior to the end of the Fifth Contract
Year, (a) a collaboration arrangement with respect to a [**] Area between
Millennium and one of its commercial collaborative partners as of the Effective
Date (an "Original Partner") (as detailed in Exhibit B) terminates or expires
and (b) Millennium wishes to begin negotiations with another commercial third
party(ies) (i.e., other than the Original Partner or its Affiliates) with
respect to a relationship to undertake a broad-based program with the goal of
identifying and qualifying targets for use in Small Molecule drug discovery in
such [**] Area, whether as part of a standalone [**] Area program or as part of
a broader relationship encompassing the [**] Area and other diseases and
conditions (a "Section 4.2 Opportunity"), Millennium shall [**] as to whether it
has [**] shall include information reasonably necessary [**]. If, during the
[**], the Parties shall [**] on such terms as may be mutually agreeable. If (i)
[**] in discussing such [**] or (b) [**] but the Parties are unable to reach
mutual agreement with respect to [**], Millennium shall be free, during the [**]
commencing as of the end of the [**] or the end of the[**], to enter into a
collaborative research and development arrangement relating to such [**].
Millennium and Bayer recognize that in [**], numerous factors may be taken into
account and given appropriate weight, including
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
without limitation, [**] in the relevant markets. If Millennium [**] to
subsequent commercial collaborations [**].
Section 4.3 COLLABORATIVE TECHNOLOGY DEVELOPMENT PROGRAM. In order to
facilitate the opportunity to identify and collaborate on technology development
opportunities of mutual benefit and interest to the Parties, appropriate leaders
of the Parties' respective technology development activities for drug discovery
and development may meet annually to discuss their plans for technology
development activities to be conducted in the coming year. Based on these
discussions, the Parties may identify technology development projects which,
through collaboration, maximize the value of complementary skills, expertise
and/or resources, and/or exchanges of technology of mutual benefit to the
Parties. In such instance, the Parties shall endeavor to define a mutually
acceptable collaborative technology development project or technology exchange.
In general, each Party shall be responsible for its own costs associated with
any collaborative technology development project and both Parties shall share
the right to use any resulting collaboratively developed technologies for its
own purposes. This general framework may be altered on a case-by-case basis if,
with respect to a given project, the resources to be employed by and/or
expertise of one Party on the project significantly exceeds those of the other
Party.
ARTICLE V
FINANCIAL PROVISIONS
Section 5.1 LICENSE PAYMENT.
(a) INITIAL LICENSE PAYMENT. On the Effective Date, and in partial
consideration of the grant by Millennium to Bayer of the licenses set forth in
Article III, Bayer shall make an initial license payment to Millennium of
Thirty-Three Million Four Hundred Thousand Dollars ($33,400,000).
(b) ADDITIONAL LICENSE PAYMENT. Within [**] following the entry of
the [**] , and in partial consideration of the grant by Millennium to Bayer of
the licenses set forth in Article III, Bayer shall make an additional license
payment to Millennium of [**].
Section 5.2 EQUITY INVESTMENT. On the Execution Date, Bayer and
Millennium shall execute an Investment Agreement pursuant to which Bayer shall
purchase and Millennium shall sell, as of the Effective Date, Ninety-Six Million
Six Hundred Thousand Dollars ($96,600,000) of Millennium Common Stock at a price
per share specified in the Investment Agreement.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Section 5.3 PROGRAM PAYMENTS.
(a) PROGRAM PAYMENT AMOUNTS. During the Program Term, and in
consideration of Millennium's continuing performance of the research services
under the Research Plan (as reviewed, modified or updated and approved annually
by the Parties in accordance with Section 2.5), Bayer shall make program
payments to Millennium in the installments and on the dates set forth in EXHIBIT
D to this Agreement (the "Program Payments").
(b) PROGRAM PAYMENT ADJUSTMENTS. Notwithstanding the foregoing, in
the event that,[**] in such a way as to make clear that Millennium may
collaborate with Bayer, or Millennium has not otherwise demonstrated to Bayer's
reasonable satisfaction that Millennium may collaborate with Bayer, to undertake
genomic research activities pursuant to this Agreement,[**], the Program
Payments shall be adjusted as follows:
(i) In the event that [**] are applicable as of the first day
of a Contract Quarter on which a Program Payment is due,
such Program Payment shall [**];
(ii) In the event that [**] are applicable as of the first day
of a Contract Quarter on which a Program Payment is due,
such Program Payment shall be [**];
(iii) In the event that, following the making of the first
Program Payment,[**] (or Millennium otherwise demonstrates
to Bayer's reasonable satisfaction that Millennium may
collaborate with Bayer as contemplated in the first
sentence of this Section 5.3(b)), and such termination or
modification occurs (or such demonstration is made) in the
middle of a Contract Quarter, then the amount of the
reduction in the Program Payment for such Contract Quarter
shall be proportionately adjusted by multiplying the
amount of the [**].
Millennium shall provide written notice to Bayer concerning any
termination or modification of such restrictions together with any agreements
reflecting such termination or modification.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Section 5.4 SUCCESS FEES.
(a) SUCCESS FEE PAYMENT AMOUNTS. Bayer shall pay the following
success fees to Millennium based upon entry of Qualified Targets into the
Selectable QT Pool:
Amount of
QTs Entering Selectable QT Pool Success Fee per QT
------------------------------- ------------------
[**] [**]
(b) PAYMENT OF SUCCESS FEES. Success fees shall be deemed to be
earned on the last business day of the month during which a QT enters into the
Selectable QT Pool, subject to the following adjustments: (i) [**] success fees
are earned during the First Contract Year (i.e., more than [**] QTs enter into
the Selectable QT Pool), such fees shall [**]; (ii) if an aggregate of more than
[**]) in success fees is earned prior to the end of the Second Contract Year,
then the amount in excess of [**] shall [**]; (iii) if an aggregate of more
than [**] in success fees is earned prior to the end of the Third Contract Year,
then the amount in excess of [**] shall [**]; and (iv) if an aggregate of more
than [**] in success fees is earned prior to the end of the Fourth Contract
Year, then the amount in excess of [**] shall [**]. For example, if at the end
of the Third Contract Year, a total of [**] QTs have been entered into the
Selectable QT Pool, the aggregate success fees earned by Millennium would be
[**]. Millennium shall promptly invoice Bayer, on a monthly basis, for all QT
success fees payable as of the end of each preceding month. Bayer shall pay the
invoiced amount within [**] of receipt of each invoice in accordance with
Section 5.11. Bayer shall in no event be required to pay more than an aggregate
of [**] pursuant to this Section 5.4 regardless of the number of QTs entered
into the Selectable QT Pool. For purposes of clarity, the entry of an Above
Quota QT in the Above Quota Pool shall not result in the payment of a success
fee until such QT is deemed to be transferred or is transferred to the
Selectable QT Pool, as provided in Section 2.8.
(c) SUCCESS FEE ADJUSTMENTS. Notwithstanding the foregoing, the
success fees payable by Bayer shall be adjusted as follows:
(i) QTs ENTERED INTO SELECTABLE QT POOL DURING EXTENSION TERM.
Notwithstanding the provisions of Section 5.4(a), in the
event that Qualified Targets are entered into the
Selectable QT Pool during the Extension Term, the success
fees payable for such QTs shall be in an amount equal to a
percentage of the success fee otherwise payable under
subsection (a) above, as provided in the following table:
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Percentage of
Time of Entry into Selectable Applicable
QT Pool During Extension Term Success Fee
----------------------------- -----------
First Contract Quarter [**]
Second Contract Quarter [**]
Third Contract Quarter [**]
Fourth Contract Quarter [**]
(ii) ADJUSTMENTS BASED UPON NUMBER OF QTs ENTERING SELECTABLE
QT POOL.
(A) In the event that the aggregate number of QTs
entered into the Selectable QT Pool in the First and
Second Contract Years is less than [**], the success
fees payable with respect to such QTs shall be
reduced by a percentage factor (not to exceed [**]
and the number of QTs entered into the Selectable QT
Pool in the First and Second Contract Years. For
example, if [**] QTs are entered into the Selectable
QT Pool in the First and Second Contract Years,
there would be a [**] reduction in the success fees
[**]. If [**] QTs are entered into the Selectable QT
Pool in the First and Second Contract Years, there
would be a [**] reduction in the success fees [**],
and the total success fees payable for those [**]
QTs would be [**]).
(B) The success fees payable with respect to QTs entered
into the Selectable QT Pool in the Third Contract
Year shall be reduced by a percentage factor (not to
exceed [**] and the number of QTs entered into the
Selectable QT Pool during the Third Contract Year,
if such number is less than [**], PROVIDED THAT no
such adjustment shall be made if the total number of
QTs entered into the Selectable QT Pool from the
Effective Date to the end of the Third Contract Year
is [**] or more.
(C) The success fees payable with respect to QTs entered
into the Selectable QT Pool in the Fourth Contract
Year shall be reduced by a percentage factor (not to
exceed [**] and the number of such QTs entered into
the Selectable QT Pool during the Fourth Contract
Year, if such number is less
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
than [**], PROVIDED THAT no such adjustment shall be
made if the total number of QTs entered into the
Selectable QT Pool from the Effective Date to the
end of the Fourth Contract Year is [**] or more.
(D) The success fees payable with respect to QTs entered
into the Selectable QT Pool in the Fifth Contract
Year shall be reduced by a percentage factor (not to
exceed [**] and the number of such QTs entered into
the Selectable QT Pool during the Fifth Contract
Year, if such number is less than [**], PROVIDED
THAT no such adjustment shall be made if the total
number of QTs entered into the Selectable QT Pool
from the Effective Date to the end of the Fifth
Contract Year is [**] or more.
(E) For purposes of this subsection (c), Failed QTs
shall not be considered to have been entered into
the Selectable QT Pool.
(d) OVERPAYMENT OF SUCCESS FEES.
(i) OVERPAYMENTS DUE TO SUCCESS FEE ADJUSTMENTS. If
Bayer pays to Millennium success fees that are
subsequently determined to be subject to a reduction
pursuant to subsection 5.4(c)(ii) above, Millennium
shall repay to Bayer the difference necessary to
offset such reduction within thirty (30) days after
the amount of such reduction is determined, PROVIDED
THAT if Bayer has not yet received payment, it may
reduce the amount of any success fees otherwise owed
to Millennium by the amount of such reduction.
(ii) FAILED QTS. If Bayer makes a success fee payment in
respect of a QT that is subsequently determined to
be a Failed QT, Bayer does not elect to retain such
Failed QT and there is no QT in the Selectable QT
Pool available for selection as a Replacement QT,
then [**]; PROVIDED THAT if Bayer subsequently
reselects such Failed QT pursuant to Section 2.8(e),
then such Failed QT shall count as a QT that entered
into the Selectable QT Pool [**].
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Section 5.5 ROYALTY PAYMENTS TO MILLENNIUM. Bayer shall pay to
Millennium royalties on Net Sales of Bayer Royalty Products at the following
rates (except as provided in Section 3.3(d)):.
ANNUAL SALES VOLUME BASE ROYALTY REDUCED ROYALTY
[**] [**] [**]
The Base Royalty rate set forth above shall be applicable to Net Sales of all
Bayer Royalty Products except (a) Bayer Royalty Products discovered or developed
through the use of [**], (b) Bayer Royalty Products discovered or developed
through the use of [**], and (c) Bayer Royalty Products discovered or developed
through the use of [**] and registered and approved for commercial sale in a
country by the appropriate regulatory authority for use in the treatment of a
[**]. The Reduced Royalty set forth above shall be applicable to Net Sales of
Bayer Royalty Products in subsections (a) and (b) in the preceding sentence. The
royalty rate of [**] (and royalty adjustment, if necessary) set forth in Section
3.3(d) shall be applicable to Net Sales of Bayer Royalty Products in subsection
(c) above. The obligation to make royalty payments pursuant to this Section 5.5
shall commence on the date of the First Commercial Sale of a Bayer Royalty
Product in a given country and shall continue with respect to Net Sales of such
Bayer Royalty Product sold in such country for a period of [**], PROVIDED,
HOWEVER, that such obligation to make royalty payments shall continue for an
additional period [**] of the date of such First Commercial Sale with respect to
a Bayer Royalty Product that contains an active ingredient, the use or sale of
which is covered by a Patent Right in such country that precludes the use or
sale of such active ingredient by others in such country. For purposes of
determining the Annual Sales Volume category [**], all Net Sales of such Bayer
Royalty Product in all countries during the given Contract Year shall be
aggregated. The royalty rates set forth above shall apply to [**] for all Bayer
Royalty Products on a product-by-product basis according to the Annual Sales
Volume categories [**] during any given Contract Year. For purposes of this
Section 5.5, line extensions, new formulations and Combination Products in which
the same active ingredient is present shall be the same Bayer Royalty Product as
the original Bayer Royalty Product.
Section 5.6 ROYALTY PAYMENTS TO BAYER. Millennium shall pay to Bayer
royalties on Net Sales of Millennium Royalty Products at the following rates:
ANNUAL SALES VOLUME ROYALTY RATE
[**] [**]
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
The royalty rates set forth above shall be applicable to Net Sales of all
Millennium Royalty Products. The obligation to make royalty payments pursuant to
this Section 5.6 shall commence on the date of the First Commercial Sale of a
Millennium Royalty Product in a given country and shall continue with respect to
Net Sales of such Millennium Royalty Product sold in such country for a period
of [**] PROVIDED, HOWEVER, that such obligation to make royalty payments shall
continue for an additional period [**] of the date of such First Commercial Sale
with respect to a Millennium Royalty Product that contains an active ingredient,
the use or sale of which is covered by a Patent Right in such country that
precludes the use or sale of such active ingredient by others in such country.
For purposes of determining the Annual Sales Volume category [**], all Net Sales
of such Millennium Royalty Product in all countries during the given Contract
Year shall be aggregated. The royalty rates shall apply [**] for all Millennium
Royalty Products on a product-by-product basis according to the Annual Sales
Volume categories [**] during any given Contract Year. For purpose of this
Section 5.6, [**] in which the same active ingredient is present shall be the
same Millennium Royalty Product [**].
Section 5.7 RELATED THIRD PARTY PAYMENTS. Each Party shall be entitled
to deduct, from the quarterly royalty payments made by it in respect of Net
Sales of a given Royalty-Bearing Product in a given country in accordance with
Section 5.10 below,[**] of Related Third Party Payments paid by such Party in
respect of such Royalty-Bearing Product; PROVIDED THAT in no event shall a
deduction under this Section 5.7 reduce any quarterly royalty payment made by a
Party in respect of Net Sales of a given Royalty-Bearing Product in a given
country by more than [**]. Any deduction hereunder, or portion thereof, that is
rendered not usable pursuant to the final clause of the immediately preceding
sentence may be carried forward for use in a future period.
Section 5.8 ROYALTIES PAYABLE ONLY ONCE. The obligation to pay
royalties is imposed only once with respect to the same unit of a
Royalty-Bearing Product. Except as specifically provided in this Agreement, it
is understood and agreed that there shall be no deductions from the royalties
payable under this Agreement.
Section 5.9 SALES TO AFFILIATES AND SUBLICENSEES. Sales of
Royalty-Bearing Products between a Party and its Affiliates or permitted
sublicensees, or among such Affiliates and permitted sublicensees, shall not be
subject to royalties under Sections 5.5 and 5.6, but in such cases the royalties
shall be calculated on the Net Sales by such Affiliates or sublicensees to an
independent third party.
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Section 5.10 ROYALTY REPORTS AND ACCOUNTING.
(a) ROYALTY REPORTS; ROYALTY PAYMENTS. Each Party obligated to pay
royalties to the other Party under Sections 5.5 and 5.6 above (a "Royalty-Paying
Party") shall deliver to the other Party (the "Royalty Recipient"), within sixty
(60) days after the end of each calendar quarter, reasonably detailed written
accountings of Net Sales of Royalty-Bearing Products that are subject to royalty
payments due to the Royalty Recipient for such calendar quarter. Such quarterly
reports shall indicate gross sales on a country-by-country and
product-by-product basis and the calculation of royalties from such gross sales.
When the Royalty-Paying Party delivers such accountings to the Royalty
Recipient, the Royalty-Paying Party shall also deliver all royalty payments due
under Section 5.5 or Section 5.6 to the Royalty Recipient for the calendar
quarter. With respect to sales of products invoiced in U.S. Dollars, the sales
and royalties payable shall be expressed in U.S. Dollars. With respect to sales
of products invoiced in a currency other than U.S. Dollars, the sales and
royalties payable shall be expressed in their U.S. Dollar equivalent, calculated
using the applicable conversion rates for buying United States dollars published
by THE WALL STREET JOURNAL on the last business day of the calendar quarter to
which the royalty report relates.
(b) AUDITS BY ROYALTY RECIPIENT. Each Royalty-Paying Party shall
keep, and shall require its Affiliates and sublicensees to keep, complete and
accurate records of the latest three (3) years of sales to which royalties
attach. For the sole purpose of verifying royalties payable to the Royalty
Recipient, the Royalty Recipient shall have the right annually at the Royalty
Recipient's expense to retain an independent certified public accountant
selected by the Royalty Recipient and reasonably acceptable to the
Royalty-Paying Party, to review such records in the location(s) where such
records are maintained by the Royalty-Paying Party, its Affiliates or its
sublicensees upon reasonable notice and during regular business hours and under
obligations of strict confidence. However, with respect to an audit of the
records of a sublicensee of Bayer or its Affiliates, such audit shall be
conducted by either Bayer or such independent accountant, at Bayer's election,
PROVIDED THAT if Bayer elects to conduct such audit, Bayer shall pay all
expenses thereof. Results of such review shall be made available to both the
Royalty Recipient and the Royalty-Paying Party. If the review reflects an
underpayment of royalties to the Royalty Recipient, such underpayment shall be
promptly remitted to the Royalty Recipient, together with interest calculated in
the manner provided in Section 5.11 below. If the underpayment is equal to or
greater than five percent (5%) of the royalty amount that was otherwise due, the
Royalty Recipient shall be entitled to have the Royalty-Paying Party pay all of
the costs of such review.
Section 5.11 CURRENCY AND METHOD OF PAYMENTS; LATE PAYMENTS. All
payments under this Agreement shall be made in United States dollars by transfer
to such bank account as Millennium or Bayer (as applicable) may designate from
time
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to time within no more than ten (10) days of invoice or when such payment is due
in accordance with the provisions of this Agreement. Any royalty payments due
hereunder with respect to sales outside of the United States shall be payable in
their U.S. Dollar equivalents, calculated using the applicable conversion rates
for buying United States dollars as published by THE WALL STREET JOURNAL for the
last business day of the calendar quarter for which the royalties are payable.
Millennium or Bayer, as the case may be, shall pay interest to the other Party
on the aggregate amount of any payments that are not paid on or before the date
such payments are due under this Agreement at a rate per annum equal to the
lesser of the London Interbank Offering Rate of interest plus one percent (1%),
as reported by Citibank, N.A. for the applicable period, or the highest rate
permitted by applicable law, calculated on the number of days such payment is
delinquent.
Section 5.12 TAX WITHHOLDING. The Parties shall use all reasonable and
legal efforts to reduce tax withholding on payments made to Millennium and Bayer
hereunder. Notwithstanding such efforts, if the paying Party concludes that tax
withholdings under the laws of any country are required with respect to payments
to the other Party, the paying Party shall withhold the required amount and pay
it to the appropriate governmental authority. In such a case, the paying Party
will promptly provide the other Party with original receipts or other evidence
reasonably desirable and sufficient to allow the other Party to document such
tax withholdings adequately for purposes of claiming foreign tax credits and
similar benefits.
Section 5.13 BLOCKED PAYMENTS. In the event that, by reason of
applicable laws or regulations in any country, it becomes impossible or illegal
for a Party or its Affiliates or sublicensees, to transfer, or have transferred
on its behalf, royalties or other payments to the other Party, such royalties or
other payments shall be deposited in local currency in the relevant country to
the credit of the other Party in a recognized banking institution designated by
the other Party or, if none is designated by the other Party within a period of
thirty (30) days, in a recognized banking institution selected by the paying
Party or its Affiliates or sublicensees, as the case may be, and identified in a
notice in writing given to the other Party.
ARTICLE VI
INTELLECTUAL PROPERTY OWNERSHIP, PROTECTION AND RELATED MATTERS
Section 6.1 OWNERSHIP. Bayer shall own all Know-How and inventions made
solely by its employees in the course of the Discovery Program, and Millennium
shall own all Know-How and inventions made solely by its employees in the course
of the Discovery Program. All inventions made jointly by employees of Bayer and
employees of Millennium in the course of the Discovery Program or the Bayer
Development Program shall be owned jointly on the basis of an undivided one-half
interest by Bayer and Millennium, PROVIDED THAT either Party may only sell,
license or otherwise transfer such jointly-owned invention without the consent
of the other Party in a manner that is consistent with the licenses granted
pursuant to this
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Agreement and is otherwise consistent with this Agreement. The determination of
inventorship shall be made in accordance with relevant patent laws; in the event
of a dispute regarding inventorship or the ownership of Know-How, if the Parties
are unable to resolve the inventorship dispute, mutually acceptable outside
patent counsel not regularly employed by either Party shall resolve such
dispute.
Section 6.2 PROSECUTION AND MAINTENANCE OF PATENT RIGHTS.
(a) GENERAL. Except as otherwise provided in Sections 6.2(b) and (c),
the responsibility for preparing, filing and prosecuting patent applications and
for maintaining patents (and for managing any interference proceedings relating
to the foregoing) covering inventions made in the course of the Discovery
Program or the Bayer Development Program shall be the responsibility of the
Party that makes said invention, PROVIDED, HOWEVER, that, with respect to
inventions made jointly by the Parties, such responsibility shall be shared by
the Parties as determined by agreement of the Parties on a case-by-case basis.
All patent expenses incurred by a Party in the performance of its obligations
under this Section 6.2(a) shall be borne by such Party. If either Party elects
not to participate financially in the further prosecution or maintenance of any
Patent Right that covers a joint invention, such Party shall notify the other
Party of such election at least thirty (30) days prior to the last available
date for action to preserve such Patent Right. If such other Party elects to
continue prosecution or maintenance, such Patent Right shall become the
exclusive property of such other Party and appropriate assignment documents
shall be executed.
(b) QTs AND CONFIGURED ASSAYS. The responsibility for preparing,
filing and prosecuting patent applications and for maintaining patents (and for
managing any interference proceedings relating to the foregoing) covering
inventions made in the course of the Discovery Program that pertain to QTs and
Configured Assays shall be as follows: (i) for QTs and Millennium Configured
Assays - Millennium; (ii) for Bayer Configured Assays - Bayer; and (iii) for
Configured Assays that are configured jointly by the Parties - determined by
agreement of the Parties on a case-by-case basis. All patent expenses incurred
by Millennium in the performance of its obligations under this Section 6.2(b)
shall be borne by Millennium.
(c) PRODUCTS. The responsibility for preparing, filing and
prosecuting patent applications and for maintaining patents (and for managing
any interference proceedings relating to the foregoing) (i) covering inventions
pertaining to Bayer Royalty Products shall be the responsibility of Bayer and
(ii) covering inventions pertaining to Millennium Royalty Products shall be the
responsibility of Millennium. All patent expenses incurred by a Party in the
performance of its obligations under this Section 6.2(c) shall be borne by such
Party.
Section 6.3 COOPERATION. Each Party hereby agrees to (a) make its
employees, agents and consultants available to the other Party (or to the other
Party's
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
authorized attorneys, agents or representatives), to the extent reasonably
necessary to enable the appropriate Party to prepare, file and prosecute patent
applications and maintain resulting patents that cover Selected QTs, Configured
Assays, Bayer Royalty Products and Millennium Royalty Products (the "Designated
Inventions"), and (b) cooperate, if necessary and appropriate, with the other
Party in gaining patent term extensions wherever applicable to Patent Rights
that cover Designated Inventions, and (c) cooperate, if necessary and
appropriate, with the other Party in the protection of Patent Rights that cover
Designated Inventions.
Section 6.4 THIRD PARTY INFRINGEMENT.
(a) LEGAL PROCEEDINGS. Bayer shall have the sole right and
responsibility to institute legal proceedings against any third party believed
to be infringing the intellectual property rights pertaining to Bayer Configured
Assays, Configured Assays configured jointly by the Parties and Bayer Royalty
Products. All costs relating to such legal proceedings shall be borne by Bayer.
Any recoveries in excess of Bayer's costs shall be deemed to be Net Sales (the
"Recovered Bayer Net Sales") and, as such, shall contribute to the Annual Sales
Volume for applicable Bayer Royalty Products, on a product-by-product basis,
PROVIDED, HOWEVER, that the royalty payment to be made to Millennium with
respect to any such Recovered Bayer Net Sales shall be based on a royalty rate
of [**]. Millennium shall have the sole right and responsibility to institute
legal proceedings against any third party believed to be infringing the
intellectual property rights related to QTs, Configured Assays that are neither
Bayer Configured Assays, Configured Assays configured jointly by the Parties nor
Millennium Royalty Products. All such costs relating to such legal proceedings
shall be borne by Millennium. Any recoveries in excess of Millennium's costs
shall be deemed to be Net Sales (the "Recovered Millennium Net Sales") and, as
such, shall contribute to the Annual Sales Volume for applicable Millennium
Royalty Products, on a product-by-product basis, PROVIDED, HOWEVER, that the
royalty payment to be made to Bayer with respect to any such Recovered
Millennium Net Sales shall be based on a royalty rate of [**].
(b) COOPERATION; SETTLEMENTS. In the event that either Bayer or
Millennium takes action pursuant to subsection (a) above, the other Party shall
cooperate with the Party so acting to the extent reasonably possible, including
the joining of suit if necessary or desirable. Bayer shall not settle or
compromise any claim or proceeding relating to Millennium Know-How or Millennium
Patent Rights without the prior written consent of Millennium, such consent not
to be unreasonably withheld. Millennium shall not settle or compromise any claim
or proceeding relating to Bayer Know-How or a Bayer Patent Right without the
prior written consent of Bayer, such consent not to be unreasonably withheld.
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Section 6.5 CLAIMED INFRINGEMENT.
In the event that a Party becomes aware of any claim that the practice
by Bayer of Millennium Know-How that has been licensed to Bayer pursuant to
Sections 3.1 or 3.2, or that the practice by Millennium of Bayer Returned QT
Know-How that has been licensed to Millennium pursuant to Section 3.2, infringes
the intellectual property rights of any third party, such Party shall promptly
notify the other Party. In any such instance, the Parties shall cooperate and
shall mutually agree upon an appropriate course of action.
ARTICLE VII
CONFIDENTIALITY
Section 7.1 CONFIDENTIAL INFORMATION. All Confidential Information
disclosed by a Party to the other Party during the term of this Agreement shall
not be used by the receiving Party except in connection with the activities
contemplated by this Agreement, shall be maintained in confidence by the
receiving Party (except to the extent reasonably necessary for regulatory
approval of products developed by Bayer or Millennium or any of their respective
Affiliates or for the filing, prosecution and maintenance of Patent Rights), and
shall not otherwise be disclosed by the receiving Party to any other person,
firm, or agency, governmental or private, without the prior written consent of
the disclosing Party, except to the extent that the Confidential Information (as
determined by competent documentation):
(a) was known or used by the receiving Party prior to its date of
disclosure to the receiving Party; or
(b) either before or after the date of the disclosure to the
receiving Party is lawfully disclosed to the receiving Party by sources other
than the disclosing Party rightfully in possession of the Confidential
Information; or
(c) either before or after the date of the disclosure to the
receiving Party becomes published or generally known to the public (including
information known to the public through the sale of products in the ordinary
course of business) through no fault or omission on the part of the receiving
Party or its sublicensees; or
(d) is independently developed by or for the receiving Party without
reference to or reliance upon the Confidential Information; or
(e) is required to be disclosed by the receiving Party to comply with
applicable laws, to defend or prosecute litigation or to comply with
governmental regulations, PROVIDED THAT the receiving Party provides prior
written notice of such
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disclosure to the disclosing Party and takes reasonable and lawful actions to
avoid and/or minimize the degree of such disclosure.
Section 7.2 EMPLOYEE AND ADVISOR OBLIGATIONS. Bayer and Millennium each
agree that they shall provide Confidential Information received from the other
Party only to their respective employees, consultants and advisors, and to the
employees, consultants and advisors of such Party's Affiliates, who have a need
to know and have an obligation to treat such information and materials as
confidential. Each employee of Bayer, Millennium or their respective Affiliates
who participates in the Discovery Program or the Bayer Development Program shall
be required to acknowledge in writing that the provisions of this Article VII
shall be binding upon such employee.
Section 7.3 TERM. All obligations of confidentiality imposed under this
Article VII shall expire five (5) years following termination or expiration of
this Agreement.
Section 7.4 PUBLICATIONS. The Parties acknowledge that scientific lead
time is a key element of the value of the Discovery Program and the Bayer
Development Program and further agree that scientific publications must be
strictly monitored to prevent any adverse effect of the premature publication of
results of the Discovery Program and the Bayer Development Program. The Parties
shall establish a procedure for publication review and approval and each Party
shall first submit to the other Party an early draft of all such publications,
whether they are to be presented orally or in written form, at least sixty (60)
days prior to submission for publication. Each Party shall review each such
proposed publication in order to avoid the unauthorized disclosure of a Party's
Confidential Information and to preserve the patentability of inventions arising
from the Discovery Program and the Bayer Development Program. If, as soon as
reasonably possible but no longer than sixty (60) days following receipt of an
advance copy of a Party's proposed publication, the other Party informs such
Party that its proposed publication contains Confidential Information of the
other Party, then such Party shall delete such Confidential Information from its
proposed publication. If, as soon as reasonably possible but no longer than
sixty (60) days following receipt of an advance copy of a Party's proposed
publication, the other Party informs such Party that its proposed publication
could be expected to have a material adverse effect on any Patent Rights or
Know-How of such other Party, then such Party shall delay such proposed
publication sufficiently long to permit the timely preparation and first filing
of patent application(s) on the information involved. Without limiting the
generality of the foregoing, Millennium shall not permit a publication that
includes information relating to a Bayer Development Candidate without the prior
approval of Bayer.
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ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
Section 8.1 REPRESENTATIONS OF AUTHORITY. Bayer and Millennium each
represents and warrants to the other that as of the Effective Date it has full
right, power and authority to enter into this Agreement and to perform its
respective obligations under this Agreement. Millennium represents and warrants
to Bayer that it has the right to grant to Bayer the licenses and sublicenses
granted pursuant to this Agreement, and that it has, as of the Effective Date,
access to and the right to use the technology necessary to perform its
obligations hereunder.
Section 8.2 CONSENTS. Bayer and Millennium each represents and warrants
that all necessary consents, approvals and authorizations of all government
authorities and other persons required to be obtained by such Party in
connection with execution, delivery and performance of this Agreement have been
and shall be obtained, except with respect to approvals required under the HSR
Act.
Section 8.3 NO CONFLICT. Bayer and Millennium each represents and
warrants that notwithstanding anything to the contrary in this Agreement, the
execution and delivery of this Agreement, the performance of such Party's
obligations hereunder and the conduct of the Discovery Program (a) do not
conflict with or violate any requirement of applicable laws or regulations and
(b) do not and will not conflict with, violate or breach or constitute a default
or require any consent under, any contractual obligations of such Party, except
such consents as shall have been obtained prior to the Effective Date.
Section 8.4 EMPLOYEE OBLIGATIONS. Bayer and Millennium each represents
and warrants that all of its employees, officers, and consultants have executed
agreements or have existing obligations under law requiring, in the case of
employees and officers, assignment to such Party of all inventions made during
the course of and as the result of their association with such Party and
obligating the individual to maintain as confidential such Party's Confidential
Information as well as confidential information of a third party which such
Party may receive, to the extent required to support such Party's obligations
under this Agreement.
Section 8.5 KNOW-HOW. To the knowledge of Millennium, except as
disclosed in writing by Millennium to Bayer, as of the Execution Date and the
Effective Date, the conduct by Millennium of the Target Discovery Program in
accordance with the Research Plan does not and will not infringe or conflict
with the rights of any third party in respect of Know-How or issued patents or
published patent applications owned by such third party, except where such
infringement or conflict would not materially affect the ability of Millennium
to conduct the Target Discovery Program in accordance with the Research Plan. To
the knowledge of Millennium, as of the Execution Date, none of the Know-How or
Patent Rights
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owned, controlled or used by Millennium that is expected to be utilized by
Millennium in the Target Discovery Program in accordance with the Research Plan
is being infringed by any third party, except where such infringement would not
materially affect the ability of Millennium to conduct the Target Discovery
Program in accordance with the Research Plan. As of the Execution Date, there is
no claim or demand of any person pertaining to, or any proceeding which is
pending or, to the knowledge of Millennium, threatened, that challenges the
rights of Millennium in respect of Know-How or Patent Rights owned, controlled
or used by Millennium, except where such claim, notice, demand or proceeding
would not materially adversely affect the ability of Millennium to conduct the
Target Discovery Program in accordance with the Research Plan.
Section 8.6 CONTRACTS. Millennium is not a party to any contract that,
if terminated, would materially adversely affect Millennium's ability to conduct
the Target Discovery Program in accordance with the Research Plan.
Section 8.7 NO WARRANTIES. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH
HEREIN OR IN THE INVESTMENT AGREEMENT, THE PARTIES MAKE NO REPRESENTATIONS AND
EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND PARTICULARLY
THAT PRODUCTS WILL BE SUCCESSFULLY DEVELOPED HEREUNDER, AND IF DEVELOPED, WILL
HAVE COMMERCIAL UTILITY OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
Section 8.8 SURVIVAL. The representations and warranties set forth in
this Agreement shall survive the Effective Date.
ARTICLE IX
TERM AND TERMINATION
Section 9.1 TERM. This Agreement shall become effective as of the
Effective Date, may be terminated as set forth in this Article IX, and otherwise
remains in effect until the expiration of all of the obligations to pay
royalties set forth in Article V.
Section 9.2 SURVIVAL OF LICENSES.
(a) LICENSES TO BAYER. Upon the expiration of Bayer's obligations to
pay royalties to Millennium under Section 5.5 with respect to each Bayer Royalty
Product in any country, the licenses under Millennium Know-How and Millennium
Patent Rights set forth in Section 3.1(a) and Section 3.2(a) shall be deemed to
be perpetual and fully paid up with respect to such Bayer Royalty Product in
such country.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
(b) LICENSES TO MILLENNIUM. Upon the expiration of Millennium's
obligations to pay royalties to Bayer under Section 5.6 with respect to each
Millennium Royalty Product in any country, the licenses under Bayer Returned QT
Know-How and Bayer Returned QT Patent Rights set forth in Section 3.2(d) shall
be deemed to be perpetual and fully paid-up with respect to such Millennium
Royalty Product in such country.
Section 9.3 TERMINATION FOR MATERIAL BREACH. Upon any material breach
of this Agreement by either Party (in such capacity, the "Breaching Party"), the
other Party (in such capacity, the "Non-Breaching Party") may terminate this
Agreement by providing sixty (60) days' written notice to the Breaching Party,
specifying the material breach. The termination shall become effective at the
end of the sixty (60) day period unless (a) the Breaching Party cures such
breach during such sixty (60) day period, or (b) if such breach is not
susceptible to cure within sixty (60) days of the receipt of written notice of
the breach, the Breaching Party is diligently pursuing a cure (unless such
breach, by its nature, is incurable, in which case the Agreement may be
terminated immediately). The Parties shall use reasonable efforts to work
together to cure any breach. In the event of a dispute concerning whether a
material breach has occurred, such dispute shall be resolved in accordance with
the provisions of Article X, and the 60-day cure period specified above shall be
suspended during the period commencing upon the submission of such dispute for
resolution under Section 10.1 to the Executive Officers and continuing until the
resolution of such dispute under Section 10.1 or Section 10.4, as applicable.
Without limiting the generality of the foregoing, material failure by Millennium
to maintain and make available adequate technical resources and personnel to
perform its obligations under the Discovery Program in accordance with the
Research Plan shall be considered to be a material breach of this Agreement.
Notwithstanding the foregoing, a breach of the provisions of Article VII or
Article VIII shall not be deemed to be a material breach under this Section 9.3
unless such breach has a material adverse effect on the Discovery Program, the
Bayer Development Program or the business or financial condition of the
Non-Breaching Party, PROVIDED THAT [**] shall be deemed to have a material
adverse effect on the Discovery Program and the Bayer Development Program.
Section 9.4 BAYER TERMINATION RIGHT. Bayer shall have the right to
terminate this Agreement if (a) by the end of the Second Contract Year either
(i) at least [**] QTs have not been entered into the Selectable QT Pool, or (ii)
at least [**] QTs that are [**] have not been entered into the Selectable QT
Pool or the Above Quota Pool, PROVIDED THAT the termination rights in subsection
(a)(ii) shall not be applicable if at least [**] QTs have been entered into the
Selectable QT Pool (including QTs deemed to have entered pursuant to Section
2.8); and (b) by the end of the Third Contract
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Year, either (i) at least [**] QTs have not been entered into the Selectable QT
Pool, or (ii) at least [**] QTs that are [**] have not been entered into the
Selectable QT Pool or the Above Quota Pool, PROVIDED THAT the termination right
in subsection (b)(ii) shall not be applicable if at least [**] QTs have been
entered into the Selectable QT Pool (including QTs deemed to have entered
pursuant to Section 2.8). In order to exercise its right to terminate under this
Section 9.4, Bayer shall provide written notice of such termination to
Millennium within 30 days after the end of the applicable Contract Year, such
termination to be effective immediately upon provision of such notice.
Section 9.5 TERMINATION UPON CHANGE OF CONTROL. If a Change of Control
with respect to either Party occurs during the Program Term, the other Party
may, at its sole discretion, elect to terminate this Agreement by giving the
Party which experienced such Change of Control written notice within ninety (90)
days after such Change of Control, such termination to be effective sixty (60)
days after provision of written notice of termination.
Section 9.6 NO EFFECTIVENESS UPON HSR DENIAL OR TERMINATION OF
INVESTMENT AGREEMENT. The Agreement shall not become effective (and accordingly
shall immediately terminate) in the event that (a) the FTC and/or the DOJ shall
seek a preliminary injunction under the HSR Act against Millennium and Bayer to
enjoin the transaction contemplated by this Agreement; (b) the HSR Clearance
Date shall not have occurred on or prior to [**]; or (c) the Investment
Agreement shall be terminated in accordance with Section 8.1 of the Investment
Agreement.
Section 9.7 EFFECT OF TERMINATION.
(a) GENERAL. In the event that this Agreement is terminated by either
Party, (i) the licenses set forth in Sections 3.1(a) and (b), 3.2(a) and (b) and
3.2(d) shall, except as provided in subsection (b) below, survive such
termination, subject to continued compliance with obligations related to such
licenses, such as the royalty and reporting provisions of Article V; (ii) the
performance of work under the Discovery Program shall cease as of the effective
date of such termination; (iii) all financial obligations under Sections 5.3 and
5.4 accrued or owed as of the effective date of such termination shall remain
effective and shall be paid promptly; and (iv) the right to select QTs and
Replacement QTs from the Selectable QT Pool shall terminate as of the effective
date of such termination.
(b) TERMINATION UNDER SECTION 9.3. Subject to the provisions of
Section 9.2, if this Agreement is terminated under Section 9.3 and Millennium is
the Breaching Party, the licenses granted by Bayer to Millennium under Section
3.2(d) shall terminate as of the effective date of such termination, and all
sublicenses granted by
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Millennium pursuant to Section 3.2(d)(iii) shall also terminate as of such date.
Subject to the provisions of Section 9.2, if this Agreement is terminated under
Section 9.3 and Bayer is the Breaching Party, the licenses granted by Millennium
to Bayer under Sections 3.1(a) and 3.2(a) shall terminate as of the effective
date of such termination, and all sublicenses granted by Bayer pursuant to
Sections 3.1(b) and 3.2(b) shall also terminate as of such date.
Section 9.8 SURVIVAL. Upon expiration or termination of this Agreement
for any reason, nothing in this Agreement shall be construed to release either
Party from any obligations that matured prior to the effective date of
expiration or termination; and the following provisions shall expressly survive
any such expiration or termination: Article I, Section 2.12, Section 2.13,
Section 3.1 (except as provided in Section 9.7), Section 3.2(d) (except as
provided in Section 9.7), Section 5.5, Section 5.6, Section 5.7, Section 5.10,
Section 5.11, Article VI, Article VII, Article IX, Article X and Article XI.
ARTICLE X
DISPUTE RESOLUTION
Section 10.1 GENERAL. Any controversy, claim or dispute arising out of
or relating to this Agreement shall be settled, if possible, through good faith
negotiations between the Parties. If, however, the Parties are unable to settle
such dispute after good faith negotiations, the matter shall be referred to the
Executive Officers to be resolved by negotiation in good faith as soon as is
practicable but in no event later than thirty (30) days after referral. Such
resolution, if any, of a referred issue shall be final and binding on the
Parties.
Section 10.2 INDEPENDENT EXPERTS. Each Executive Officer shall have the
right to engage the services of any number of independent experts in the field
in question (each individual so engaged by each Executive Officer to be
reasonably acceptable to the other Executive Officer in terms of independence
and expertise and to be engaged under obligations of confidentiality) to assist
the Executive Officers in making a joint determination in the best interests of
the collaboration, and each Executive Officer shall be obligated to consider in
good faith the analyses and opinions of any such independent experts engaged by
either of them in making a determination.
Section 10.3 FAILURE OF EXECUTIVE OFFICERS TO RESOLVE DISPUTE. If the
Executive Officers are unable to settle the dispute after good faith negotiation
in the manner set forth above, then the dispute shall be resolved in accordance
with Section 10.4, which resolution shall be final and binding upon the Parties,
PROVIDED THAT Designated Scientific Issues shall be resolved in accordance with
Section 2.16.
Section 10.4 ALTERNATIVE DISPUTE RESOLUTION. If the dispute has not
been resolved by the Executive Officers within thirty (30) days of referral in
accordance
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with Section 10.1, or if the Executive Officers fail to meet within such thirty
(30) days, a Party may seek resolution of the dispute by initiating arbitration
in accordance with the following provisions.
(a) All disputes arising out of this Agreement and referred to
arbitration pursuant to this Section 10.4 shall be finally resolved by
arbitration conducted in the English language in London, England in accordance
with the Arbitration Rules of the United Nations Commission on International
Trade Law (UNCITRAL). Each Party shall appoint an arbitrator and the two
arbitrators so appointed shall jointly appoint a third arbitrator; PROVIDED
HOWEVER, that if they cannot agree (or if any one Party refuses to appoint an
arbitrator), then this third arbitrator shall be appointed by the American
Arbitration Association ("AAA"). If a Party fails to appoint an arbitrator
within thirty (30) days after a dispute is referred to arbitration, the AAA
shall appoint an arbitrator for such Party. The AAA shall be the administrator
of the arbitration proceedings.
(b) The arbitrators shall rule on each disputed issue within ninety
(90) days after the third arbitrator has accepted the appointment to serve as an
arbitrator, PROVIDED THAT if the arbitrators are unable to render a decision
within such 90-day period, they shall render such decision as soon thereafter as
is practicable. The arbitrators shall issue a written decision in order to
explain the basis of the ruling. The arbitrators shall not have the authority to
award punitive damages.
(c) The arbitrators shall be paid reasonable fees plus expenses.
These fees and expenses, along with the reasonable legal fees and expenses of
the prevailing Party (including all expert witness fees and expenses), the fees
and expenses of a court reporter, and any expenses for a hearing room, shall be
paid as follows:
(i) If the arbitrators rule in favor of one Party on all
disputed issues in the arbitration, the losing Party shall
pay 100% of such fees and expenses.
(ii) If the arbitrators rule in favor of one Party on some
issues and the other Party on other issues, the
arbitrators shall issue with the ruling a written
determination as to how such fees and expenses shall be
allocated between the Parties. The arbitrators shall
allocate fees and expenses in a way that bears a
reasonable relationship to the outcome of the arbitration,
with the Party prevailing on more issues, or on issues of
greater value or gravity, recovering a relatively larger
share of its legal fees and expenses.
(d) Any decision or award of the arbitrators shall be final,
conclusive, and binding on the Parties to the dispute, and judgment may be
entered on any award in
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any court of competent jurisdiction. To the extent lawful, the Parties exclude
any right of application or appeal to the English or other courts in connection
with any question of law arising in the arbitration or in connection with any
award or decision made by the arbitrators, except as is necessary to recognize
or enforce such award or decision.
Section 10.5 NO LIMITATION. Notwithstanding the foregoing, nothing in
this Article X shall be construed as limiting in any way the right of a Party to
seek injunctive or other equitable relief from a court of competent jurisdiction
with respect to any actual or threatened breach of this Agreement.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1 PRODUCT LIABILITY INDEMNIFICATION.
(a) BAYER. Bayer agrees to defend Millennium and its Affiliates at
its cost and expense, and will indemnify and hold Millennium and its Affiliates
and their respective directors, officers, employees and agents (the "Millennium
Indemnified Parties") harmless from and against any losses, costs, damages, fees
or expenses arising out of any claim relating to (i) any breach by Bayer of any
of its representations, warranties or obligations pursuant to this Agreement or
(ii) personal injury from the development, manufacture, use, sale or other
disposition of any product or service offered by Bayer and/or its licensees or
collaborators. In the event of any such claim against the Millennium Indemnified
Parties by any third party, Millennium shall promptly notify Bayer in writing of
the claim and Bayer shall manage and control, at its sole expense, the defense
of the claim and its settlement. The Millennium Indemnified Parties shall
cooperate with Bayer and may, at their option and expense, be represented in any
such action or proceeding. Bayer shall not be liable for any litigation costs or
expenses incurred by the Millennium Indemnified Parties without Bayer's prior
written authorization. In addition, Bayer shall not be responsible for the
indemnification of any Millennium Indemnified Party arising from any negligent
or intentional acts by such party, or as the result of any settlement or
compromise by the Millennium Indemnified Parties without Bayer's prior written
consent.
(b) MILLENNIUM. Millennium agrees to defend Bayer and its Affiliates
at its cost, and will indemnify and hold Bayer and its Affiliates and its
respective directors, officers, employees and agents (the "Bayer Indemnified
Parties") harmless from and against any losses, costs, damages, fees or expenses
arising out of any claim relating to (i) any breach by Millennium of any of its
representations, warranties or obligations pursuant to this Agreement or (ii)
personal injury from the development, manufacture, use, sale or other
disposition of any product or service offered by Millennium or its licensees or
collaborators. In the event of any claim against the
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Bayer Indemnified Parties by any third party, Bayer shall promptly notify
Millennium in writing of the claim and Millennium shall manage and control, at
its sole expense, the defense of the claim and its settlement. The Bayer
Indemnified Parties shall cooperate with Millennium and may, at their option and
expense, be represented in any such action or proceeding. Millennium shall not
be liable for any litigation costs or expenses incurred by the Bayer Indemnified
Parties without Millennium's prior written authorization. In addition,
Millennium shall not be responsible for the indemnification of any Bayer
Indemnified Party arising from any negligent or intentional acts by such party,
or as the result of any settlement or compromise by the Bayer Indemnified
Parties without Millennium's prior written consent.
Section 11.2 SECTION 365(n) OF THE BANKRUPTCY CODE. All rights and
licenses granted under or pursuant to any section of this Agreement are, and
shall otherwise be, deemed to be, for purposes of Section 365(n) of the
Bankruptcy Code, licenses of rights to "intellectual property" as defined under
Section 101(35A) of the Bankruptcy Code. The Parties shall retain and may fully
exercise all of their respective rights and elections under the Bankruptcy Code.
Upon the bankruptcy of any Party, the non-bankrupt Party shall further be
entitled to a complete duplicate of (or complete access to, as appropriate) any
such intellectual property, and such, if not already in its or their possession,
shall be promptly delivered to the non-bankrupt Party, unless the bankrupt Party
elects to continue, and continues, to perform all of its obligations under this
Agreement.
Section 11.3 GOVERNING LAW. This Agreement shall be construed and the
respective rights of the Parties hereto determined (including in any arbitration
proceeding under Article X) according to the substantive laws of the
Commonwealth of Massachusetts notwithstanding the provisions governing conflict
of laws under such Commonwealth of Massachusetts law to the contrary and without
giving effect to the United Nations Convention on Contracts for the
International Sale of Goods, the 1974 Convention on the Limitation Period in the
International Sale of Goods (the "1974 Convention") and the Protocol amending
the 1974 Convention, done at Vienna April 11, 1980, except matters of
intellectual property law which shall be determined in accordance with the
national intellectual property laws relevant to the intellectual property in
question.
Section 11.4 ASSIGNMENT. Neither Millennium nor Bayer may assign this
Agreement in whole or in part without the consent of the other, except if such
assignment occurs in connection with the sale or transfer of all or
substantially all of the business and assets of Millennium, on the one hand, or
Bayer, on the other, to which the subject matter of this Agreement pertains.
Notwithstanding the foregoing, any Party may assign its rights (but not its
obligations) pursuant to this Agreement in whole or in part to an Affiliate of
such Party.
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Section 11.5 AMENDMENTS. This Agreement constitutes the entire
agreement between the Parties with respect to the subject matter hereof, and
supersedes all previous arrangements with respect to the subject matter hereof,
whether written or oral. Any amendment or modification to this Agreement shall
be made in writing signed by both Parties.
Section 11.6 NOTICES.
Notices to Millennium shall be addressed to:
Millennium Pharmaceuticals, Inc.
238 Main Street
Cambridge, Massachusetts 02139-4815
Attention: Chief Executive Officer
Facsimile No.: (617) 621-0264
with a copy to:
Attention: Legal Department
Notices to Bayer shall be addressed to:
Bayer AG
D 51368
Leverkusen, Germany
Attention: General Counsel
Facsimile No.: 011 49 214 308 1146
with a copy to:
Bayer Corporation
400 Morgan Lane
West Haven, Connecticut 06516-4175
Attention: Legal Department
Facsimile No.: (203) 812-2795
Any Party may change its address by giving notice to the other Party in
the manner herein provided. Any notice required or provided for by the terms of
this Agreement shall be in writing and shall be (a) sent by registered or
certified mail, return receipt requested, postage prepaid, (b) sent via a
reputable overnight courier service, or (c) sent by facsimile transmission, in
each case properly addressed in
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accordance with the paragraph above. The effective date of notice shall be the
actual date of receipt by the Party receiving the same.
Section 11.7 EXPORTS. The Parties acknowledge that the export of
technical data, materials or products is subject to the exporting Party
receiving any necessary export licenses and that the Parties cannot be
responsible for any delays attributable to export controls that are beyond the
reasonable control of either Party. Bayer and Millennium agree not to export or
reexport, directly or indirectly, any information, technical data, the direct
product of such data, samples or equipment received or generated under this
Agreement in violation of any governmental regulations that may be applicable.
Bayer and Millennium agree to obtain similar covenants from their Affiliates,
sublicensees and contractors with respect to the subject matter of this Section
11.7.
Section 11.8 FORCE MAJEURE. No failure or omission by the Parties
hereto in the performance of any obligation of this Agreement shall be deemed a
breach of this Agreement or create any liability if the same shall arise from
any cause or causes beyond the control of the Parties, including, but not
limited to, the following: acts of God; acts or omissions of any government; any
rules, regulations or orders issued by any governmental authority or by any
officer, department, agency or instrumentality thereof; fire; storm; flood;
earthquake; accident; war; rebellion; insurrection; riot; and invasion and
provided that such failure or omission resulting from one of the above causes is
cured as soon as is practicable after the occurrence of one or more of the
above-mentioned causes.
Section 11.9 PUBLIC ANNOUNCEMENTS. Any announcements or similar
publicity with respect to the execution of this Agreement shall be agreed upon
among the Parties in advance of such announcement. Each Party understands that
this Agreement is likely to be of significant interest to investors, analysts
and others, and that either Party therefore may make such public announcements
with respect thereto. The Parties agree that any such announcement will not
contain confidential business or technical information and, if disclosure of
confidential business or technical information is required by law or regulation,
will make reasonable efforts to minimize such disclosure and obtain confidential
treatment for any such information which is disclosed to a governmental agency
or group. Each Party agrees to provide to the other Party with a copy of any
public announcement as soon as reasonably practicable under the circumstances
prior to its scheduled release. Except under extraordinary circumstances, each
Party shall provide the other with an advance copy of any press release at least
five (5) business days prior to the scheduled disclosure. Each Party shall have
the right to expeditiously review and recommend changes to
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any announcement regarding this Agreement or the subject matter of this
Agreement, PROVIDED THAT such right of review and recommendation shall only
apply for the first time that specific information is to be disclosed, and shall
not apply to the subsequent disclosure of substantially similar information that
has previously been disclosed. Except as otherwise required by law, the Party
whose press release has been reviewed shall remove any information the reviewing
Party reasonably deems to be inappropriate for disclosure.
Section 11.10 INDEPENDENT CONTRACTORS. It is understood and agreed that
the relationship between the Parties hereunder is that of independent
contractors and that nothing in this Agreement shall be construed as
authorization for either Millennium or Bayer to act as agent for the other. The
Program Directors and members of Project Teams shall remain employees of Bayer
or Millennium, as the case may be.
Section 11.11 NO STRICT CONSTRUCTION. This Agreement has been prepared
jointly and shall not be strictly construed against any Party.
Section 11.12 HEADINGS. The captions or headings of the sections or
other subdivisions hereof are inserted only as a matter of convenience or for
reference and shall have no effect on the meaning of the provisions hereof.
Section 11.13 NO IMPLIED WAIVERS; RIGHTS CUMULATIVE. No failure on the
part of Millennium or Bayer to exercise, and no delay in exercising, any right,
power, remedy or privilege under this Agreement, or provided by statute or at
law or in equity or otherwise, shall impair, prejudice or constitute a waiver of
any such right, power, remedy or privilege or be construed as a waiver of any
breach of this Agreement or as an acquiescence therein, nor shall any single or
partial exercise of any such right, power, remedy or privilege preclude any
other or further exercise thereof or the exercise of any other right, power,
remedy or privilege.
Section 11.14 SEVERABILITY. If any provision hereof should be held
invalid, illegal or unenforceable in any respect in any jurisdiction, then, to
the fullest extent permitted by law, (a) all other provisions hereof shall
remain in full force and effect in such jurisdiction and shall be liberally
construed in order to carry out the intentions of the Parties as nearly as may
be possible and (b) such invalidity, illegality or unenforceability shall not
affect the validity, legality or enforceability of such provision in any other
jurisdiction. To the extent permitted by applicable law, Millennium and Bayer
hereby waive any provision of law that would render any provision hereof
prohibited or unenforceable in any respect.
Section 11.15 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in counterparts, each of which counterparts, when so executed and
-62-
<PAGE> 69
delivered, shall be deemed to be an original, and all of which counterparts,
taken together, shall constitute one and the same instrument.
Section 11.16 HSR FILING. As soon as practicable after the Execution
Date, each of Bayer and Millennium shall promptly file any Notification and
Report Forms and related materials that either such Party may be required to
file with the FTC and the DOJ under the HSR Act, shall use its best efforts to
obtain an early termination of the applicable waiting period, and shall promptly
make any further filings or information submissions pursuant thereto, or
responses to requests to additional information thereunder, that may be
necessary, proper or advisable.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first set forth above.
BAYER AG
By: [Illegible]
----------------------------
Title: GENERAL MANAGER
By: [ILLEGIBLE]
----------------------------
Title: SENIOR COUNSEL
MILLENNIUM PHARMACEUTICALS, INC.
By: Steven M. Holzman
----------------------------
Title: CHIEF BUSINESS OFFICER
-63-
<PAGE> 70
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
EXHIBIT A
QT QUOTAS
The Parties have established the following objectives and quotas
relating to QTs. [**] and relevant to the entry of QTs into the Selectable QT
Pool.
A. CFA OBJECTIVES AND QUOTAS
1. OBJECTIVES. In each year of the Discovery Program, QTs should be
distributed among the various CFAs according to the following distribution:
[**].
2. QUOTAS. No more than the following numbers of QTs for the various
CFAs shall be entered into the Selectable QT Pool during the applicable periods
set forth below unless otherwise agreed upon by Bayer:
CFA Contract Years
--------------
[**] [**]
B. DRUGGABLE TARGET CLASS
1. OBJECTIVES. In each year of the Discovery Program, QTs should be
distributed among the various Druggable Target Classes according to the
following distribution: [**].
2. QUOTAS. No more than the following numbers of QTs in the various
Druggable Target Classes shall be entered into the Selectable QT Pool during the
applicable periods set forth below unless otherwise agreed upon by Bayer:
CLASS Contract Years
--------------
[**] [**]
C. [**].
1. OBJECTIVES. It is desirable that as many QTs as possible be [**].
-64-
<PAGE> 71
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
2. QUOTAS. No more than the following numbers of QTs that are [**]
shall be entered into the Selectable QT Pool during the applicable periods set
forth below unless otherwise agreed upon by Bayer:
Contract Years
---------------------------------------
1 - 2 3 4 5
[**] [**] [**] [**]
The quotas set forth above in Paragraph C shall cease to apply at such time as
[**] QTs that are [**] have been entered into the Selectable QT Pool.
-65-
<PAGE> 72
EXHIBIT B
Bayer Bayer-Millennium
Collaboration
Small Molecule Drug
Discovery Research
Plan
CONFIDENTIAL
THIS EXHIBIT CONTAINS CONFIDENTIAL MATERIALS WHICH HAVE
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
September 22, 1998
Millennium Pharmaceuticals
640 Memorial Drive
Cambridge, MA 02139
<PAGE> 73
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
EXHIBIT C
ORIGINAL PARTNERS IN [**] AREAS
[**] AREA ORIGINAL PARTNER
- --------- ----------------
[**] [**]
<PAGE> 74
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
EXHIBIT D
PROGRAM PAYMENT SCHEDULE
Date PAYMENT DUE
[**] [**]
<PAGE> 1
EXHIBIT 10.2
- --------------------------------------------------------------------------------
INVESTMENT AGREEMENT
dated as of September 22, 1998
by and between
BAYER AG
a corporation of the Federal Republic of Germany
and
MILLENNIUM PHARMACEUTICALS, INC.,
a Delaware corporation
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
PURCHASE AND SALE OF SHARES................................................. 1
Section 1.1 PURCHASE AND SALE............................................ 1
Section 1.2 CLOSING DATE................................................. 1
Section 1.3 TRANSACTIONS AT THE CLOSING.................................. 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES.............................................. 2
Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY................ 2
Section 2.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER.................. 11
ARTICLE III
EQUITY PURCHASES FROM THE COMPANY............................................ 12
Section 3.1 SUBSCRIPTION RIGHTS........................................... 12
Section 3.2 ISSUANCE AND DELIVERY OF NEW SECURITIES AND VOTING STOCK...... 13
Section 3.3 TERMINATION OF ARTICLE III.................................... 13
ARTICLE IV
LIMITATIONS ON PURCHASES OF ADDITIONAL EQUITY SECURITIES..................... 13
Section 4.1 PURCHASES OF EQUITY SECURITIES................................ 13
ARTICLE V
TRANSFER OF COMMON STOCK..................................................... 16
Section 5.1 LIMITATIONS ON TRANSFER....................................... 16
ARTICLE VI
COVENANTS AND ADDITIONAL AGREEMENTS.......................................... 18
Section 6.1 ORDINARY COURSE............................................... 18
Section 6.2 ACCESS AND INFORMATION........................................ 18
Section 6.3 FURTHER ACTIONS............................................... 18
Section 6.4 FURTHER ASSURANCES............................................ 19
Section 6.5 BOARD ATTENDANCE RIGHTS AND RIGHTS TO INFORMATION ABOUT
BOARD AND THE COMPANY......................................... 19
</TABLE>
ii
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VII
CONDITIONS PRECEDENT......................................................... 19
Section 7.1 EACH PARTY'S OBLIGATIONS...................................... 20
Section 7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY.................. 20
Section 7.3 CONDITIONS TO THE OBLIGATIONS OF PURCHASER.................... 20
ARTICLE VIII
TERMINATION.................................................................. 21
Section 8.1 TERMINATION................................................... 21
Section 8.2 EFFECT OF TERMINATION......................................... 23
ARTICLE IX
INDEMNIFICATION.............................................................. 23
Section 9.1 INDEMNIFICATION OF PURCHASER.................................. 23
Section 9.2 INDEMNIFICATION PROCEDURES.................................... 23
Section 9.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES................... 24
ARTICLE X
INTERPRETATION; DEFINITIONS.................................................. 24
Section 10.1 INTERPRETATION................................................ 24
Section 10.2 DEFINITIONS................................................... 25
ARTICLE XI
MISCELLANEOUS................................................................ 29
Section 11.1 SEVERABILITY.................................................. 30
Section 11.2 SPECIFIC ENFORCEMENT.......................................... 30
Section 11.3 ENTIRE AGREEMENT.............................................. 30
Section 11.4 COUNTERPARTS.................................................. 30
Section 11.5 NOTICES....................................................... 30
Section 11.6 AMENDMENTS.................................................... 32
Section 11.7 COOPERATION................................................... 32
Section 11.8 SUCCESSORS AND ASSIGNS........................................ 32
Section 11.9 EXPENSES AND REMEDIES......................................... 32
Section 11.10 TRANSFER OF SHARES............................................ 32
Section 11.11 GOVERNING LAW................................................. 33
Section 11.12 PUBLICITY..................................................... 33
Section 11.13 NO THIRD PARTY BENEFICIARIES.................................. 33
Section 11.14 CONSENT TO JURISDICTION....................................... 33
</TABLE>
iii
<PAGE> 4
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT (the "Agreement") is made as of September 22,
1998 by and between MILLENNIUM PHARMACEUTICALS, INC., a Delaware corporation
(the "Company"), and BAYER AG, a corporation organized under the laws of the
Federal Republic of Germany ("Purchaser").
WHEREAS, the Company and Purchaser are parties to that certain
Agreement, dated as of the date hereof (the "Collaboration Agreement"), which
contains the terms and conditions on which the parties have agreed to
collaborate on a small molecule drug discovery program; and
WHEREAS, in connection with the execution of the Collaboration
Agreement, Purchaser wishes to purchase from the Company, and the Company wishes
to sell to Purchaser, shares of the Company's Common Stock, $.001 par value per
share ("Common Stock"), on the terms and subject to the conditions set forth
herein;
WHEREAS, in connection with such sale and purchase of shares of Common
Stock, the Company and Purchaser wish to enter into a registration rights
agreement (the "Registration Rights Agreement"), substantially in the form
attached hereto as Exhibit A.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, the Company and Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
Section 1.1 PURCHASE AND SALE. Subject to the terms and conditions of
this Agreement, the Company agrees to issue and sell to Purchaser and Purchaser
agrees to purchase from the Company 4,957,660 shares of the Company's Common
Stock (the "Shares"), at a purchase price of $19.485 per share (which purchase
price reflects the greater of (i) 115% of the average daily closing price of a
share of the Company's Common Stock over the period from March 1, 1998 to August
31, 1998 or (ii) 100% of the closing price of a share of the Company's Common
Stock on September 21, 1998) for an aggregate purchase price of Ninety Six
Million, Six Hundred Thousand Dollars ($96,600,000) (the "Purchase Price").
Section 1.2 CLOSING DATE. The closing of the purchase and sale of the
Shares hereunder (the "Closing") shall be held at the offices of Hale and Dorr,
60 State Street, Boston, Massachusetts, at 10:00 a.m., Boston time, on the third
Business Day following the first date on which all the conditions to Closing set
forth in Article VII have been satisfied or
<PAGE> 5
waived, or at such other, place, time and date as the Company and Purchaser
shall agree. The Company shall give Purchaser three (3) Business Days prior
notice of the date the Closing is scheduled to occur. The date of the Closing is
hereinafter referred to as the "Closing Date."
Section 1.3 TRANSACTIONS AT THE CLOSING. At the Closing, subject to the
terms and conditions of this Agreement, (a) the Company shall issue and sell to
Purchaser and Purchaser shall purchase the Shares; (b) the Company shall deliver
to Purchaser a certificate representing the Shares, registered in the name of
Purchaser against payment of the Purchase Price by wire transfer of immediately
available funds to an account or accounts previously designated by the Company
no less than five (5) Business Days prior to the Closing Date; and (c) the
Company and Purchaser shall enter into the Registration Rights Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to Purchaser as follows:
(a) CORPORATE ORGANIZATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. Each Subsidiary is duly organized and validly
existing and, if applicable, is in good standing, under the laws of the
jurisdiction of its incorporation or organization. Each of the Company
and its Subsidiaries is duly qualified or licensed and, if applicable,
is in good standing as a foreign corporation, in each jurisdiction in
which the properties owned, leased or operated, or the business
conducted, by it require such qualification or licensing, except for
any such failure so to qualify or be in good standing which,
individually or in the aggregate, would not have a Material Adverse
Effect on the Company and its Subsidiaries, taken as a whole. Each of
the Subsidiaries has the requisite power and authority to carry on its
business as it is now being conducted. The Company has heretofore made
available to Purchaser complete and correct copies of the Certificate
of Incorporation of the Company (the "Company Charter") and the By-laws
of the Company (the "Company By-Laws") and the certificate of
incorporation and by-laws, or the comparable organizational documents,
of each of its Subsidiaries, each as amended to date and currently in
full force and effect.
(b) Corporate Authority. The Company has the requisite
corporate power and authority to execute, deliver and perform this
Agreement and the Registration Rights Agreement and to consummate the
transactions contemplated hereby and thereby. The execution, delivery
and performance of this Agreement and the Registration Rights Agreement
by the Company, the issuance and sale by the Company of the Shares and
the performance by the Company of the other transactions
2
<PAGE> 6
contemplated hereby and thereby have been duly authorized by the
Company's Board of Directors, and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or the
Registration Rights Agreement or for the Company to consummate the
transactions so contemplated herein and therein. This Agreement is, and
the Registration Rights Agreement, when executed or delivered will be,
valid and binding agreements of the Company, enforceable against the
Company in accordance with their respective terms, assuming that this
Agreement and the Registration Rights Agreement are valid and binding
agreements of Purchaser, subject as to enforcement of remedies to
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting generally the enforcement of creditors' rights
and subject to a court's discretionary authority with respect to the
granting of a decree ordering specific performance or other equitable
remedies.
(c) NO VIOLATIONS; CONSENTS AND APPROVALS. (i) Neither the
execution, delivery or performance by the Company of this Agreement or
the Registration Rights Agreement or the consummation by the Company of
the transactions contemplated hereby or thereby (A) will result in a
violation or breach of the Company Charter or the Company By-Laws or
the charter or by-laws of any of the Company's Subsidiaries or (B) will
result in a violation or breach of (or give rise to any right of
termination, revocation, cancellation or acceleration under or
increased payments under), or constitute a default (with or without due
notice or lapse of time or both) under, or result in the creation of
any lien, mortgage, charge, encumbrance or security interest of any
kind (a "Lien") upon any of the properties or assets of the Company or
any of its Subsidiaries under, (1) any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, contract, agreement,
obligation, instrument, offer, commitment, understanding or other
arrangement (each a "Contract") or of any license, waiver, exemption,
order, franchise, permit or concession (each a "Permit") to which the
Company or any of its Subsidiaries is a party or by which any of their
properties or assets may be bound, or (2) subject to the governmental
filings and other matters referred to in clause (ii) below, any
judgment, order, decree, statute, law, regulation or rule applicable to
the Company or any of its Subsidiaries, except, in the case of clause
(B), for violations, breaches, defaults, rights of cancellation,
termination, revocation or acceleration or Liens that would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole.
(ii) Except for filings as may be required under, and other
applicable requirements of, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), no consent,
approval, order or authorization of, or registration, declaration or
filing with, any government or any court, administrative agency or
commission or other governmental authority or agency, federal, state,
local or foreign (a "Governmental Entity"), is required with respect to
the Company in connection with the execution, delivery or performance
by the Company of this Agreement or the consummation by the Company of
the transactions contemplated hereby (except where the failure to
obtain such consents, approvals, orders or
3
<PAGE> 7
authorizations, or to make such filings would not, individually or in
the aggregate, have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole).
(d) CAPITAL STOCK. The authorized capital stock of the Company
consists of (i) 100,000,000 shares of Common Stock, of which an
aggregate 29,550,646 shares of Common Stock were issued and outstanding
as of the close of business on August 31, 1998, and (ii) 5,000,000
shares of preferred stock, $.001 par value per share, of which none
were issued and outstanding as of the close of business on August 31,
1998. As of the close of business on August 31, 1998, there were
outstanding under the Company's stock option and incentive plans
(collectively, the "Company Stock Plans"), options to acquire an
aggregate of 6,215,608 shares of Common Stock (subject to adjustment on
the terms set forth therein). All of the outstanding shares of Common
Stock have been duly authorized and validly issued, and are fully paid
and nonassessable. Except as set forth on Schedule 2.1(d), there are no
preemptive or similar rights on the part of any holders of any class of
securities of the Company or of any of its Subsidiaries. Except for the
Common Stock, the Company has outstanding no bonds, debentures, notes
or other obligations or securities the holders of which have the right
to vote (or are convertible or exchangeable into or exercisable for
securities having the right to vote) with the stockholders of the
Company on any matter. Except as set forth above or on Schedule 2.1(d),
as of the date of this Agreement, there are no securities convertible
into or exchangeable for, or options, warrants, calls, subscriptions,
rights, contracts, commitments, arrangements or understandings of any
kind to which the Company or any of its Subsidiaries is a party or by
which any of them is bound obligating the Company or any of its
Subsidiaries contingently or otherwise to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital
stock or other voting securities of the Company or of any of its
Subsidiaries. Except as set forth on Schedule 2.1(d), there are no
outstanding agreements of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of
the Company or any of its Subsidiaries.
(e) SUBSIDIARIES. (i) Schedule 2.1(e) contains a complete and
correct description of the shares of stock or other equity interests
that are authorized, or issued and outstanding, of each of the
Company's Subsidiaries. The Company has no equity interests with a
value of $100,000 or more in any Person other than its Subsidiaries,
and there are no commitments on the part of the Company or any
Subsidiary to contribute additional capital in respect of any equity
interest in any Person. Each of the outstanding shares of capital stock
of each of the Subsidiaries has been duly authorized and validly
issued, and is fully paid and nonassessable. Except as set forth on
Schedule 2.1(e), all of the outstanding shares of capital stock of each
Subsidiary are owned, either directly or indirectly, by the Company
free and clear of all Liens.
4
<PAGE> 8
(ii) Schedule 2.1(e)(ii) contains a complete
and correct list of all Subsidiaries of the Company.
(f) SEC FILINGS. The Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed
by it with the SEC under the Securities Act and the Exchange Act since
May 1996 (the "Company SEC Documents"). As of its filing date, each
Company SEC Document filed, as amended or supplemented, if applicable,
(i) complied in all material respects with the applicable requirements
of the Securities Act or the Exchange Act, as applicable, and the rules
and regulations thereunder and (ii) did not, at the time it was filed,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances under which they were
made, not misleading.
(g) ABSENCE OF CERTAIN EVENTS AND CHANGES. Except as disclosed
in the Company SEC Documents filed with the SEC and publicly available
prior to the date hereof, or as otherwise contemplated or permitted by
this Agreement, and except for any items referred to in Schedule
2.1(g), since June 30, 1998, the Company and its Subsidiaries have
conducted their respective businesses in the ordinary course consistent
with past practice and there has not been any event, change or
development which, individually or in the aggregate, would have a
Material Adverse Effect on the Company and its Subsidiaries, taken as a
whole.
(h) COMPLIANCE WITH APPLICABLE LAW. Except as disclosed in the
Company SEC Documents, each of the Company and its Subsidiaries is in
compliance with all statutes, laws, regulations, rules, judgments,
orders and decrees of all Governmental Entities applicable to it that
relate to its respective business, and neither the Company nor any of
its Subsidiaries has received any notice alleging noncompliance except,
with reference to all the foregoing, where the failure to be in
compliance would not, individually or in the aggregate, have a Material
Adverse Effect on the Company and its Subsidiaries, taken as a whole.
This Section 2.1(h) does not relate to employee benefits matters (for
which Section 2.1(l) is applicable, environmental matters, (for which
Section 2.1(m) is applicable) or tax matters (for which Section 2.1(k)
is applicable). Each of the Company and its Subsidiaries has all
Permits that are required in order to permit it to carry on its
business as it is presently conducted, except where the failure to have
such Permits or rights would not, individually or in the aggregate,
have a Material Adverse Effect on the Company and its Subsidiaries,
taken as a whole. All such Permits are in full force and effect and the
Company and its Subsidiaries are in compliance with the terms of such
Permits, except where the failure to be in full force and effect or in
compliance would not, individually or in the aggregate, have a Material
Adverse Effect on the Company and its Subsidiaries, taken as a whole.
(i) LITIGATION. Except as disclosed in the Company SEC
Documents filed
5
<PAGE> 9
with the SEC and publicly available prior to the date hereof or
referred to in Schedule 2.1(i), there are no civil, criminal or
administrative actions, suits, or proceedings pending or, to the
Knowledge of the Company, threatened, against the Company or any of its
Subsidiaries that, individually or in the aggregate, are likely to have
a Material Adverse Effect on the Company and its Subsidiaries, taken as
a whole. Except as disclosed in the Company SEC Documents filed with
the SEC and publicly available prior to the date hereof, there are no
outstanding judgments, orders, decrees, or injunctions of any
Governmental Entity against the Company or any of its Subsidiaries
that, insofar as can reasonably be foreseen, individually or in the
aggregate, in the future would have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole.
(j) CONTRACTS. (i) The Company has filed as exhibits to the
Company SEC Documents all material agreements required to be filed
under the rules and regulations of the SEC (the "Material Contracts").
(ii) All Material Contracts are legal, valid, binding, in full
force and effect and enforceable against each party thereto, except to
the extent that any failure to be enforceable, individually or in the
aggregate, would not reasonably be expected to have or result in a
Material Adverse Effect on the Company and its Subsidiaries, taken as a
whole, PROVIDED that no representation is made as to the enforceability
of any non-competition provision in any employment agreement. There
does not exist under any Material Contract any violation, breach or
event of default, or event or condition that, after notice or lapse of
time or both, would constitute a violation, breach or event of default
thereunder, on the part of any of the Company or its Subsidiaries or,
to the Knowledge of the Company or any of its Subsidiaries, any other
Person, other than such violations, breaches or events of default as
would not, individually or in the aggregate, have a Material Adverse
Effect on the Company and its Subsidiaries, taken as a whole. The
enforceability of all Material Contracts will not be adversely affected
in any manner by the execution, delivery or performance of this
Agreement or the Registration Rights Agreement or the consummation of
the transactions contemplated hereby or thereby, and no Material
Contract contains any change in control or other terms or conditions
that will become applicable or inapplicable as a result of the
consummation of such transactions. Except as set forth on Schedule
2.1(j), neither the Company nor the Subsidiaries are a party to any
contract prohibiting or materially restricting the ability of the
Company or any of its Subsidiaries to conduct its business, to engage
in any business or operate in any geographical area or compete with any
person.
(k) TAXES. (i) Except as set forth on Schedule 2.1(k), (A) all
Tax Returns required to be filed by or on behalf of each of the Company
and its Subsidiaries have been filed except to the extent that a
failure to file, individually or in the aggregate, would not have a
Material Adverse Effect on the Company and its Subsidiaries, taken as a
whole; (B) all such filed Tax Returns are complete and accurate in all
respects,
6
<PAGE> 10
other than any incompleteness or any inaccuracy that would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole, and all Taxes shown to
be due on such Tax Returns have been paid; (C) no written claim (other
than a claim that has been finally settled) has been made by a taxing
authority that any of the Company or its Subsidiaries is subject to an
obligation to file Tax Returns or to pay or collect Taxes imposed by
any jurisdiction in which either the Company or its Subsidiaries does
not file Tax Returns or pay or collect Taxes, other than any such claim
that would not have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole, or for which adequate reserves have
been provided on the balance sheets contained in the Company SEC
Documents filed with the SEC and publicly available prior to the date
hereof; (D) there is no deficiency with respect to any Taxes which
would, individually or in the aggregate, have a Material Adverse Effect
on the Company and its Subsidiaries, taken as a whole, other than any
such deficiency for which adequate reserves have been provided on the
balance sheet contained in the financial statements in the SEC Company
Documents filed with the SEC and publicly available prior to the date
hereof; and (E) all material assessments for Taxes due with respect to
completed and settled examinations or concluded litigation have been
paid which, individually or in the aggregate, exceed $100,000. As used
in this Agreement, "Taxes" shall include all federal, state, local and
foreign income, franchise, property, sales, excise and other taxes,
tariffs or governmental charges of any nature whatsoever, including
interest and penalties, and additions thereto; and "Tax Returns" shall
mean all federal state, local and foreign tax returns, declarations,
statements, reports, schedules, forms and information returns relating
to Taxes.
(ii) Except as set forth on Schedule 2.1(k), each of the
Company and its Subsidiaries has duly and timely withheld all Taxes
required to be withheld in connection with its business and assets, and
such withheld Taxes have been either duly and timely paid to the proper
governmental authorities or properly set aside in accounts for such
purpose, except to the extent that any failure to do so would not have
a Material Adverse Effect on the Company and its Subsidiaries, taken as
a whole.
(iii) Except as set forth on Schedule 2.1(k), (A) all taxable
periods of each of the Company and its Subsidiaries ending before
December 31, 1993 are closed or no longer subject to audit; (B) none of
the Company or any of its Subsidiaries is currently under any audit by
any taxing authority as to which such taxing authority has asserted in
writing any claim which, if adversely determined, could have a Material
Adverse Effect on the Company and its Subsidiaries, taken as a whole;
and (C) no waiver of the statute of limitations is in effect with
respect to any taxable year of the Company or any of its Subsidiaries.
(iv) Except as set forth on Schedule 2.1(k), (A) none of the
Company or its Subsidiaries is a party to or bound by or has any
obligation under any Tax allocation,
7
<PAGE> 11
sharing, indemnification or similar agreement or arrangement with any
Person which might result in a Material Adverse Effect to the Company
or Subsidiary which entered into such agreement or arrangement; and (B)
none of the Company or its Subsidiaries is or has been at any time a
member of any group of companies filing a consolidated, combined or
unitary income tax return other than any such group the common parent
of which is the Company.
(l) EMPLOYEE BENEFIT PLANS AND RELATED MATTERS; ERISA. (i)
Employee Benefit Plans. Each Employee Benefit Plan that provides for
equity-based compensation or that has associated costs that are
expected to be material to the Company or its Subsidiaries in the
aggregate and that is expected to provide for contributions to be made
by the Company or its Subsidiaries or their Employees after the date
hereof or to permit the accrual of additional benefits by any Employee
of the Company or its Subsidiaries after the date hereof is either
listed on Schedule 2.1(l) or has been filed with the SEC as a material
contract (collectively, the "Plans").
(ii) QUALIFICATION. Except to the extent that failure to meet
the requirements of Section 401(a) of the Code would not result in any
material liability as to which adequate reserves have not been
established, each Employee Benefit Plan intended to be qualified under
section 401(a) of the Code, and the trust (if any) forming a part
thereof, (A) has received a favorable determination letter from the IRS
as to its qualification under the Code and to the effect that each such
trust is exempt from taxation under section 501(a) of the Code, and
nothing has occurred since the date of such determination letter that
could adversely affect such qualification or tax-exempt status or (B) a
timely application for such a favorable determination letter was filed
and the Company has no reason to believe that such a favorable
determination letter will not be granted.
(iii) COMPLIANCE; LIABILITY. (A) No liability has been or is
reasonably expected to be incurred under or pursuant to Title I or IV
of ERISA or the penalty, excise Tax or joint and several liability
provisions of the Code relating to employee benefit plans that is or
would be material to the Company and its Subsidiaries, taken as a
whole.
(B) Each of the Employee Benefit Plans has been
operated and administered in all respects in compliance with
its terms, all applicable laws and all applicable collective
bargaining agreements, except for any failure so to comply
that, individually and in the aggregate, could not reasonably
be expected to result in a material liability or obligation on
the part of the Company and its Subsidiaries in the aggregate.
There are no pending or threatened claims by or on behalf of
any of the Employee Benefit Plans, by any Employee or
otherwise involving any such Employee Benefit Plan or the
assets of any Employee Benefit Plan (other than routine claims
for benefits or actions seeking qualified domestic relations
orders or qualified medical child
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support orders, all of which have been fully reserved for on
the regularly prepared balance sheets of the Company or its
Subsidiaries, as applicable) which would reasonably be
expected to result in any material liability to the Company
and its Subsidiaries in the aggregate.
(C) Except to the extent that it would not give rise
to a material liability or obligation on the part of the
Company and it Subsidiaries in the aggregate, no Employee is
or will become entitled to post-employment benefits of any
kind by reason of employment with the Company or its
Subsidiaries, including, without limitation, death or medical
benefits (whether or not insured), other than (x) coverage
mandated by section 4980B of the Code or other applicable
laws, (y) retirement benefits payable under any Plan qualified
under section 401 (a) of the Code or (z) accrued deferred
compensation. The consummation of the transactions hereunder
and under the Registration Rights Agreement will not result in
an increase in the amount of compensation or benefits or the
acceleration of the vesting or timing of payment of any
compensation or benefits payable to or in respect of any
Employee by any of the Company or its Subsidiaries.
(iv) EMPLOYEES, LABOR MATTERS, ETC. Neither the Company nor
any of its Subsidiaries is a party to or bound by any collective
bargaining agreement, and there are no labor unions or other
organizations representing, purporting to represent or attempting to
represent any employees employed by the Company or any of its
Subsidiaries. Since June 30, 1998, there has not occurred or been
threatened any strike, slowdown, picketing, work stoppage, concerted
refusal to work overtime or other similar labor activity with respect
to any employees of the Company or any of its Subsidiaries. Except as
set forth on Schedule 2.1(l), there are no labor disputes currently
subject to any grievance procedure, arbitration or litigation and there
is no petition pending or threatened with respect to any employee of
the Company or its Subsidiaries. The Company and each of its
Subsidiaries has complied with all applicable laws pertaining to the
employment or termination of employment of their respective employees,
including, without limitation, all such laws relating to labor
relations, equal employment opportunities, fair employment practices,
prohibited discrimination or distinction and other similar employment
activities, except for any failure so to comply that, individually and
in the aggregate, could not result in a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole.
(m) ENVIRONMENTAL MATTERS. Except as disclosed in the Company
SEC Documents filed with the SEC and publicly available prior to the
date hereof and except for such matters that, individually or in the
aggregate, would not have a Material Adverse Effect on the Company and
its Subsidiaries, taken as a whole, (i) the Company and its
Subsidiaries are in compliance with all applicable Environmental Laws
(as defined below), (ii) the Company and its Subsidiaries have all
Permits required under Environmental Laws for the operation of their
respective businesses as
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presently conducted ("Environmental Permits"), (iii) neither the
Company nor its Subsidiaries has received notice from any Governmental
Entity asserting that either the Company or any of its Subsidiaries may
be in violation of, or liable under, any Environmental Law, and (iv)
there are no actions, proceedings or claims pending (or, to the
Knowledge of the Company or any of its Subsidiaries, threatened)
seeking to impose any liability on Environmental Permits or Hazardous
Substances (as defined below).
For purposes of this Agreement, "Environmental Law" means any
federal, state, local or foreign law, statute, regulation or decree
relating to (x) the protection of the environment or (y) the use,
storage, treatment, generation, transportation, processing, handling,
release or disposal of Hazardous Substances in each case as in effect
on the date hereof. "Hazardous Substance" means any waste, substance,
material, pollutant or contaminant listed, defined, designated or
classified as hazardous, toxic or radioactive, or otherwise regulated,
under any Environmental Law.
(n) DELAWARE LAW. The Company has taken all action necessary
to ensure that the provisions of Section 203 of the Delaware General
Corporation law (the "DGCL") will not be applicable to Purchaser or its
Affiliates as a result of the transactions contemplated by this
Agreement.
(o) STATUS OF SHARES. The Shares being issued at the Closing
have been duly authorized by all necessary corporate action on the part
of the Company, and at Closing such Shares will have been validly
issued and, assuming payment therefor has been made, will be fully paid
and nonassessable, and the issuance of such Shares will not be subject
to preemptive rights of any other stockholder of the Company. The
Shares will be eligible for listing on the Nasdaq Stock Market.
(p) INTELLECTUAL PROPERTY. The Intellectual Property that is
owned by the Company or any of its Subsidiaries is owned free from any
Liens (other than Permitted Liens), except where the failure to be free
from liens would not have a Material Adverse Effect on the Company and
its Subsidiaries, taken as a whole. All material Intellectual Property
Licenses are in full force and effect in accordance with their terms,
and are free and clear of any Liens (other than Permitted Liens),
except where the failure to be free from Liens or to be in full force
and effect would not have a Material Adverse Effect on the Company and
its Subsidiaries, taken as a whole. To the Knowledge of the Company,
the conduct of the business of the Company and its Subsidiaries does
not infringe or conflict with the rights of any third party in respect
of any Intellectual Property, except where such conduct would not
materially affect the ability of the Company and its Subsidiaries to
conduct their business as presently conducted. To the Knowledge of the
Company, none of the Company Intellectual Property is being infringed
by any third party except where such infringement would not have a
Material Adverse Effect on Company and its Subsidiaries, taken as a
whole. There is no claim or demand of any Person pertaining to, or any
proceeding
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which is pending or, to the Knowledge of the Company, threatened, that
challenges the rights of the Company or any of its Subsidiaries in
respect of any Company Intellectual Property, or that claims that any
default exists under any Intellectual Property License, except where
such claim, demand or proceeding would not materially affect the
ability of the Company and its Subsidiaries to conduct their business
as presently conducted. For purposes of this Agreement, "Company
Intellectual Property" means the Intellectual Property that is owned by
the Company and its Subsidiaries and the Intellectual Property subject
to written or oral licenses, agreements or arrangements pursuant to
which its use by the Company or any of its Subsidiaries is permitted by
any Person.
(q) BROKERS OR FINDERS. No agent, broker, investment banker or
other firm is or will be entitled to any broker's or finder's fee or
any other commission or similar fee in connection with any of the
transactions contemplated by this Agreement.
Section 2.2 REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser hereby represents and warrants to the Company as follows:
(a) ORGANIZATION. Purchaser is a corporation duly organized and validly
existing and in good standing under the laws of the Federal Republic of Germany,
with all requisite power and authority to own, lease and operate its properties
and to conduct its business as now being conducted.
(b) AUTHORITY. Purchaser has the requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby and thereby. All
necessary corporate action required to have been taken by or on behalf of
Purchaser by applicable law or otherwise to authorize the approval, execution,
delivery and performance by Purchaser of this Agreement and the Registration
Rights Agreement and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized, and no other proceedings on its
part are or will be necessary to authorize this Agreement or the Registration
Rights Agreement or for it to consummate such transactions. This Agreement is,
and the Registration Rights Agreement, when executed and delivered will be,
valid and binding agreements of Purchaser, enforceable against Purchaser in
accordance with their respective terms, assuming that this Agreement and the
Registration Rights Agreement are valid and binding agreements of the Company,
subject as to enforcement of remedies to applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting generally the enforcement
of creditors' rights and subject to a court's discretionary authority with
respect to the granting of a decree ordering specific performance or other
equitable remedies.
(c) CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the execution and
delivery of this Agreement or the Registration Rights Agreement nor the
performance by Purchaser of its obligations hereunder or thereunder will
conflict with, result in a breach of the terms,
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<PAGE> 15
conditions or provisions of, constitute a default under, result in the creation
of any Lien upon any of the properties or assets of Purchaser pursuant to, or
require any consent, approval or other action by or any notice to or filing with
any Government Entity pursuant to, the organizational documents or agreements of
Purchaser or any agreement, instrument, order, judgment, decree, statute, law,
rule or regulation by which Purchaser is bound (assuming that the Company shall
have made or obtained all consents, approvals, orders, authorizations or filings
referred to in Section 2.1(c)(ii)), except for filings after the Closing under
Section 13(d) of the Exchange Act and filings under the HSR Act.
(d) ACQUISITION FOR INVESTMENT. (i) Purchaser is acquiring the Shares
for its own account for the purpose of investment and not with a view to or for
sale in connection with any distribution thereof, and Purchaser has no present
intention to effect, or any present or contemplated plan, agreement,
undertaking, arrangement, obligation, indebtedness, or commitment providing for,
any distribution of Shares, (ii) Purchaser is an "accredited investor" as
defined in Rule 501(a) under the Securities Act, (iii) Purchaser has carefully
reviewed the representations concerning the Company contained in this Agreement
and has made detailed inquiry concerning the Company, its business and its
personnel, and (iv) Purchaser has sufficient knowledge and experience in finance
and business that it is capable of evaluating the risks and merits of its
investment in the Company and is able financially to bear the risks thereof.
(e) BROKERS OR FINDERS. Except as set forth on Schedule 2.2(e), no
agent, broker, investment banker or other firm is or will be entitled to any
broker's or finder's fee or any other commission or similar fee from Purchaser
in connection with any of the transactions contemplated by this Agreement
ARTICLE III
EQUITY PURCHASES FROM THE COMPANY
Section 3.1 SUBSCRIPTION RIGHTS. So long as Purchaser has not sold more
than 1,000,000 Shares (as adjusted to reflect any stock splits, stock dividends
and similar recapitalizations) (other than sales to Affiliates), if the Company
proposes the issuance of New Securities (other than any New Securities issued
(i) to officers, employees, directors, consultants or advisors of the Company or
any of its Subsidiaries pursuant to any employee stock offering, plan or
arrangement, (ii) in connection with any acquisition of another corporation by
the Company by merger, purchase of all or substantially all of such
corporation's assets or other reorganization (iii) in connection with
Pharmaceutical Alliances, (iv) in connection with Research and Development
Funding Transactions, (v) in connection with equipment leasing or equipment
financing arrangements, to the Person who leased or financed such equipment and
(vi) to Purchaser or its Affiliates) then, prior to each such issuance of New
Securities, the Company shall offer to Purchaser a Pro Rata Share of such New
Securities. Any offer of New Securities made to Purchaser under this Section 3.1
shall
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<PAGE> 16
be made by notice in writing (the "Subscription Notice"). The Subscription
Notice shall set forth (i) the number of New Securities proposed to be issued to
Persons other than Purchaser and the terms of such New Securities, (ii) the
consideration (or manner of determining the consideration), if any, for which
such New Securities are proposed to be issued and the terms of payment, (iii)
the number of New Securities offered to Purchaser in compliance with the
provisions of this Section 3.1 and (iv) the proposed date of issuance of such
New Securities. Not later than 20 Business Days after its receipt of a
Subscription Notice, Purchaser shall notify the Company in writing whether it
elects to purchase all or any portion of the New Securities offered to Purchaser
pursuant to the Subscription Notice. If Purchaser shall elect to purchase any
such New Securities, the New Securities which it shall have elected to purchase
shall be issued and sold to Purchaser by the Company at the same time and on the
same terms and conditions as the New Securities are issued and sold to any other
Person. If, for any reason, the issuance of such New Securities is not
consummated, Purchaser's right to its Pro Rata Share of such issuance shall
lapse, subject to Purchaser's ongoing subscription right with respect to
issuances of New Securities at later dates or times.
Section 3.2 ISSUANCE AND DELIVERY OF NEW SECURITIES AND VOTING STOCK.
The Company represents and covenants to Purchaser that (i) upon issuance, all
the shares of New Securities sold to Purchaser pursuant to this Article III
shall be duly authorized, validly issued, fully paid and nonassessable and shall
be approved (if outstanding securities of the Company of the same type are at
the time already approved and the New Securities are registered under the
Securities Act) for listing on the Nasdaq Stock Market or for quotation or
listing on the principal trading market for the securities of the Company at the
time of issuance, (ii) upon delivery of such shares, they shall be free and
clear of all claims and Liens of any nature and shall not be subject to any
preemptive right of any stockholder of the Company and (iii) in connection with
any such issuance, the Company shall take such actions as are specified in
Section 2.1(o) with respect to such shares. Each share issued or delivered by
the Company hereunder shall bear the legends set forth in Section 11.10.
Section 3.3 TERMINATION OF ARTICLE III. This Article III shall
terminate upon the earlier of (i) a sale of all or substantially all of the
assets or business of the Company, by merger, sale of assets or otherwise, or
(ii) termination of the Program Term.
ARTICLE IV
LIMITATIONS ON PURCHASES OF ADDITIONAL EQUITY SECURITIES
Section 4.1 PURCHASES OF EQUITY SECURITIES. (a) Prior to the third
anniversary of the Closing, except as permitted by Section 4.1(b), (c) or (d),
Purchaser and its Affiliates will not (and will not assist or encourage other
to) directly or indirectly in any manner:
(i) acquire, or agree to acquire, directly or indirectly,
alone or in concert with others, by purchase, gift or otherwise, any direct or
indirect beneficial ownership
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(within the meaning of Rule 13d-3 under the Exchange Act) or interest in any
securities or direct or indirect rights, warrants or options to acquire, or
securities convertible into or exchangeable for, any securities of the Company;
(ii) make, or in any way participate in, directly or
indirectly, alone or in concert with others, any "solicitation" of "proxies" to
vote (as such terms are used in the proxy rules of the SEC promulgated pursuant
to Section 14 of the Exchange Act); provided, however, that the prohibition in
this subparagraph (ii) shall not apply to solicitations exempted from the proxy
solicitation rules by Rule 14a-2 under the Exchange Act as such Rule is in
effect as of the date hereof.
(iii) form, join or in any way participate in a
"group" within the meaning of Section 13(d)(3) of the Exchange Act with respect
to any voting securities of the Company; or
(iv) acquire or agree to acquire, directly or indirectly,
alone or in concert with others, by purchase, exchange or otherwise, (i) any of
the assets, tangible or intangible, of the Company or (ii) direct or indirect
rights, warrants or options to acquire any assets of the Company, except for
such assets as are then being offered for sale by the Company;
(v) enter into any arrangement or understanding with
others to do any of the actions restricted or prohibited under clauses (i), (ii)
or (iii) of this Section 4.1(a); or
(vi) otherwise act in concert with others, to seek to
offer to the Company or any of its stockholders any business combination,
restructuring, recapitalization or similar transaction to or with the Company or
otherwise seek in concert with others, to control, change or influence the
management, board of directors or policies of the Company or nominate any person
as a director of the Company who is not nominated by the then incumbent
directors, or propose any matter to be voted upon by the stockholders of the
Company; provided, however, that nothing in this subparagraph (vi) shall prevent
Purchaser or any Affiliate of Purchaser, either acting alone or in concert with
each other, from taking any action..
(b) Nothing herein shall prevent Purchaser from purchasing any
securities of the Company pursuant to the terms of this Agreement (including
through exercise of its rights under Section 3.1 hereof) and Purchaser shall not
be treated as having breached any covenant in this Agreement solely as a result
of such purchase.
(c) Nothing herein shall prevent Purchaser from purchasing
additional Equity Securities of the Company if (i) prior thereto Purchaser has
not sold any Shares (other than to an Affiliate of Purchaser) and (ii) after
such purchase Purchaser and its Affiliates would own fourteen and three-tenths
percent (14.3%) or less of the Total Voting Power of all Voting
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Securities of the Company then outstanding.
(d) This Section 4.1 shall terminate and Purchaser and its
Affiliates shall have the right to acquire any securities of the Company without
regard to the limitation on share ownership set forth in Section 4.1 in the
event that:
(i) the Company has entered into (A) a merger agreement in
which the holders of the Company's Voting Securities would cease to hold a
majority of the voting securities of the surviving corporation, (B) an agreement
to sell all or substantially all its assets, or (C) an agreement to be acquired,
business combination, consolidation or any such similar transaction, in each
case with any Person other than a wholly-owned subsidiary of the Company;
PROVIDED, HOWEVER, the limitation shall continue if (i) the merger agreement is
with a majority-owned subsidiary of the Company and the Company is to be the
surviving corporation in the merger, or (ii) the merger agreement or other
agreements referred to in sections (A), (B), or (C) is subsequently terminated
or the transactions contemplated thereunder are not consummated; or
(ii) a tender or exchange offer (other than a tender or
exchange offer that the Company's Board of Directors has recommended be
rejected) is made by any Person or 13D Group (as hereinafter defined) (other
than an Affiliate of, or any Person acting in concert with, Purchaser) to
acquire Voting Securities which, if added to the Voting Securities (if any)
already owned by such Person or 13D Group, would result, if consummated in
accordance with its terms, in the Beneficial Ownership by such Person or 13D
Group of more than 30% of the Total Voting Power of all Voting Securities of the
Company then outstanding, PROVIDED THAT the limitation shall be reinstated if
such tender or exchange offer is withdrawn or terminated without such Person or
13D Group acquiring such 30% ownership level; or
(iii) it is publicly disclosed or Purchaser otherwise learns that
Voting Securities representing more than 35% of the Total Voting Power of all
Voting Securities of the Company then outstanding are Beneficially Owned by any
Person or 13D Group (other than an Affiliate of, or any person acting in concert
with, Purchaser); or
(iv) a proxy contest (or similar incident) is made by any Person of 13D
Group (other than an Affiliate of, or any Person acting in concert with,
Purchaser) to elect individuals who at the beginning of any calendar year did
not constitute the majority of the members of the Board of Directors of the
Company then in office and the Purchaser, upon the advice of legal counsel and
financial advisors, reasonably believes in good faith, that such proxy contest
will result in the election of individuals who will constitute a majority of
members of the Board of Directors of the Company, but who did not, at the
beginning of the calendar year, constitute the majority of the members of the
Board of Directors of the Company then in office, PROVIDED THAT the limitation
shall be reinstated if such proxy contest or similar incident is terminated or
withdrawn without affecting the change in the Board of Directors referred to
above.
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(e) As used herein, the term "13D Group" shall mean any group of
Persons formed for the purpose of acquiring, holding, voting or disposing of
Voting Securities which would be required under Section 13(d) of the Exchange
Act and the rules and regulations thereunder (as now in effect and based on
present legal interpretations thereof) to file a statement on Schedule 13D with
the SEC as a "person" within the meaning of Section 13(d)(3) of the Exchange
Act. Ownership of Voting Securities under Section 4.1(d) above and Section
5.1(d) below shall be determined in accordance with Rule 13d-3 of the Exchange
Act as currently in effect.
ARTICLE V
TRANSFER OF COMMON STOCK
Section 5.1 LIMITATIONS ON TRANSFER. (a) Prior to the second
anniversary of the Closing, Purchaser will not, directly or indirectly, sell,
transfer or otherwise dispose of any Shares (except to any Affiliate of
Purchaser).
(b) After the second anniversary of the Closing and prior to the
expiration of the Program Term, Purchaser will not, directly or indirectly,
sell, transfer or otherwise dispose of, in any one calendar year, more than
2,500,000 Shares (as adjusted to reflect any stock splits, stock dividends and
similar recapitalizations) (except to an Affiliate of Purchaser).
(c) (i) After the second anniversary of the Closing and prior to the
expiration of the Program Term, if Purchaser proposes to sell any Shares other
than pursuant to a registration statement under the Securities Act, the Company
shall have a right of first negotiation with respect to the acquisition of those
Shares proposed to be sold. Said right of first negotiation must be asserted by
the Company within fifteen (15) Business Days of its receipt of written notice
from Purchaser of its intention to sell any Shares other than pursuant to a
registration statement under the Securities Act. Such notice shall specify the
general terms and conditions on which Purchaser intends to sell such Shares. If
the Company and Purchaser are unable to agree on the terms and conditions of the
Company's acquisition of such Shares within fifteen (15) Business Days of
Purchaser's notification to the Company of its intention to sell Shares,
Purchaser may sell such Shares at any time within the next 120 days on terms and
conditions no more favorable, taken as a whole, than those originally proposed
to the Company. (ii) After the second anniversary of the Closing and prior to
the expiration of the Program Term, if Purchaser proposes to sell any Shares
pursuant to a registration statement under the Securities Act, the Company shall
have a right of first negotiation with respect to the acquisition of those
Shares proposed to be sold. Said right of first negotiation must be asserted by
the Company within fifteen (15) Business Days of its receipt of written notice
from Purchaser of its intention to sell any Shares pursuant to a registration
statement under the Securities Act. Such notice shall specify the price for such
Shares, which shall be equal to the average closing price of the Common Stock
over the 30-day period ending on the date of such notice. If the Company does
not agree to purchase such Shares at such price within
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fifteen (15) Business Days of Purchaser's notification to the Company of its
intention to sell Shares, Purchaser may sell such Shares at any time within the
next 180 days pursuant to a registration statement without restriction as to the
price at which such Shares may be sold.
(d) The limitation on share transfer set forth in this Section
5.1 shall terminate and Purchaser and its Affiliates shall have the right,
directly or indirectly, to sell, transfer or otherwise dispose of any Shares
without regard to any limitation on share transfer set forth in Section 5.1 in
the event that:
(i) the Company has entered into (A) a merger agreement in
which the holders of the Voting Securities would cease to hold a majority of the
voting securities of the surviving corporation, (B) an agreement to sell all or
substantially all its assets, or (C) an agreement to be acquired, business
combination, consolidation or any such similar transaction, in each case with
any Person other than a wholly-owned subsidiary of the Company; PROVIDED,
HOWEVER, the limitation shall (1) continue if (x) the merger agreement is with a
majority-owned subsidiary of the Company and the Company is to be the surviving
corporation in the merger or (y) the majority of the directors of the Company,
who have held that position for at least nine (9) months prior to the entering
into of the merger agreement continue as the directors of the surviving company
after the merger or (2) be reinstated if such merger agreement or other
agreements referred to in sections (A), (B) or (C) is subsequently terminated or
the transactions contemplated thereunder are not consummated;
(ii) a tender or exchange offer (other than a tender or
exchange offer that the Company's Board of Directors has recommended be
rejected) is made by any Person or 13D Group (other than an Affiliate of, or any
Person acting in concert with, Purchaser) to acquire Voting Securities which, if
added to the Voting Securities (if any) already owned by such Person or 13D
Group, would result, if consummated in accordance with its terms, in the
Beneficial Ownership by such Person or 13D Group of more than 50% of the Total
Voting Power of all Voting Securities of the Company then outstanding, PROVIDED
THAT the limitation shall be reinstated if such tender or exchange offer is
withdrawn or terminated without such Person or 13D Group acquiring such 50%
ownership level; or
(iii) a tender or exchange offer, which the Company's Board of
Directors has not approved or recommended, is made by any Person or 13D Group
(other than an Affiliate of, or any Person acting in concert with, Purchaser) to
acquire Voting Securities which, if added to the Voting Securities (if any)
already owned by such Person or 13D Group, would result, if consummated in
accordance with its terms, in the Beneficial Ownership by such Person or 13D
Group of more than 50% of the Total Voting Power of all Voting Securities of the
Company then outstanding and the Purchaser, upon the advice of legal counsel and
financial advisors, reasonably believes in good faith, taking into account the
conditions of the offer, that such tender or exchange offer will result in
Voting Securities being purchased, PROVIDED THAT the limitation shall be
reinstated if such tender or exchange offer is withdrawn or terminated without
such Person or 13D Group acquiring such 50% ownership level.
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ARTICLE VI
COVENANTS AND ADDITIONAL AGREEMENTS
Section 6.1 ORDINARY COURSE. During the period from the date of this
Agreement and continuing until the Closing, the Company agrees as to itself and
its Subsidiaries that, except as set forth in Schedule 6.1, or to the extent
that Purchaser otherwise consents in writing, the Company and its Subsidiaries
shall conduct their respective businesses in the ordinary course in
substantially the same manner as presently conducted.
Section 6.2 ACCESS AND INFORMATION. So long as this Agreement remains
in effect, prior to the Closing, the Company will (and will cause each of its
Subsidiaries and each of their respective accountants, counsel, consultants,
officers, directors, employees, agents and representatives of or to any of the
Subsidiaries, to) give Purchaser and its Representatives, reasonable access
during reasonable business hours to all of their respective properties, assets,
books, contracts, reports and records relating to the Company and its
Subsidiaries, and furnish to them all such documents, records and information
with respect to the properties, assets and business of the Company and its
Subsidiaries, as Purchaser shall from time to time reasonably request. The
Company will keep Purchaser generally informed as to the business of the Company
and its Subsidiaries.
Section 6.3 FURTHER ACTIONS. (a) Each of the Company and Purchaser
shall use reasonable best efforts to take or cause to be taken all actions, and
to do or cause to be done all other things, necessary, proper or advisable in
order to fulfill and perform its obligations in respect of this Agreement and
the Registration Rights Agreement, or otherwise to consummate and make effective
the transactions contemplated hereby and thereby.
(b) Each of the Company and Purchaser shall, as promptly as
practicable, (i) make, or cause to be made, all filings and submissions
(including but not limited to under the HSR Act and foreign antitrust filings)
required under any law applicable to it or any of its Subsidiaries, and give
such reasonable undertakings as may be required in connection therewith, and
(ii) use all reasonable efforts to obtain or make, or cause to be obtained or
made, all Permits necessary to be obtained or made by it or any of its
Subsidiaries, in each case in connection with this Agreement and the
Registration Rights Agreement, the sale and transfer of the Shares pursuant
hereto and the consummation of the other transactions contemplated hereby or
thereby.
(c) Each of the Company and Purchaser shall coordinate and cooperate
with the other party in exchanging such information and supplying such
reasonable assistance as may be reasonably requested by such other party in
connection with the filings and other actions contemplated by this Agreement and
the Registration Rights Agreement.
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(d) At all times prior to the Closing Date, the Company and Purchaser
shall promptly notify each other in writing of any fact, condition, event or
occurrence that could reasonably be expected to result in the failure of any of
the conditions contained in Article VII to be satisfied, promptly upon becoming
aware of the same.
Section 6.4 FURTHER ASSURANCES. Following the Closing Date, the Company
shall, from time to time, execute and deliver such additional instruments,
documents, conveyances or assurances and take such other actions as shall be
necessary, or otherwise reasonably be requested by Purchaser, to confirm and
assure the rights and obligations provided for in this Agreement and the
Registration Rights Agreement and render effective the consummation of the
transactions contemplated hereby and thereby, or otherwise to carry out the
intent and purposes of this Agreement.
Section 6.5 BOARD ATTENDANCE RIGHTS AND RIGHTS TO INFORMATION ABOUT
BOARD AND THE COMPANY. (a) The Company shall permit a Representative (which
Representative shall be designated by Purchaser) to attend two (2) regular
meetings of the Company's Board of Directors each year during the Program Term
(one such meeting to be held between January and June of each year, and the
second such meeting to be held between July and December of each year);
PROVIDED, HOWEVER, that, at the request of the Board of Directors, the
Representative shall excuse himself or herself from such portions of the Board
of Directors meeting that he or she is attending if the Board of Directors and
its legal counsel believe it to be necessary so to conduct the Board=s business
(i) in order to avoid conflict with the Company's obligations to third parties
(such as, but not limited to, discussions of proprietary aspects of
collaborations with third parties), (ii) discussions of disputes with Purchaser
and/or its Affiliates, and (iii) any other matters in which the Board of
Directors and such legal counsel reasonably conclude that the exercise of the
fiduciary duties of the Board of Directors requires such Representative to
excuse himself or herself.
(b) The Company shall provide to the Purchaser copies of agendas for
all Board meetings prior to such meetings and the minutes for all Board
meetings, including meetings of committees of the Board, as soon as practicable
after the conclusion of any such meeting.
(c) Once during each calendar quarter, at the request of Purchaser, a
Representative (which Representative shall be designated by Purchaser) will be
entitled to receive a confidential briefing from officers of the Company
concerning the Company's business and strategy, including a report on the status
of the Discovery Program and the Company's other collaborative programs (to the
extent not precluded by the terms and conditions under any such collaboration
program) and the Company's consolidated corporate strategic overview.
ARTICLE VII
CONDITIONS PRECEDENT
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Section 7.1 EACH PARTY'S OBLIGATIONS. The obligations of the Company
and Purchaser to consummate the transactions contemplated to occur at the
Closing shall be subject to the satisfaction prior to the Closing of each of the
following conditions, each of which may be waived only if it is legally
permissible to do so:
(a) HSR AND OTHER APPROVALS. Any applicable waiting period under the
HSR Act relating to the transactions contemplated hereby shall have expired or
been terminated, and all other material authorizations, consents, orders or
approvals of, or regulations, declarations or filings with, or expirations of
applicable waiting periods imposed by, any Governmental Entity (including,
without limitation, any foreign antitrust filing) necessary for the consummation
of the transactions contemplated hereby, shall have been obtained or filed or
shall have occurred.
(b) NO LITIGATION, INJUNCTIONS, OR RESTRAINTS. No statute, rule,
regulation, executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order enacted, entered. promulgated, enforced or
issued by any Governmental Entity or other legal restraint or prohibition
preventing the consummation of the transactions contemplated by this Agreement
and the Registration Rights Agreement shall be in effect.
(c) COLLABORATION AGREEMENT. The Collaboration Agreement shall have
become effective in accordance with the terms and conditions thereof.
(d) NASDAQ LISTING. The Shares shall have been approved for listing on
the Nasdaq Stock Market, subject only to official notice of issuance.
Section 7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the transactions contemplated to occur
at the Closing shall be subject to the satisfaction or waiver thereof prior to
the Closing of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Purchaser that are qualified as to materiality shall be true and correct, and
those that are not so qualified shall be true and correct in all material
respects, as of the date of this Agreement and as of the time of the Closing as
though made at and as of such time, except to the extent such representations
and warranties expressly relate to an earlier date (in which case such
representations and warranties that are qualified as to materiality shall be
true and correct, and those that are not so qualified shall be true and correct
in all material respects, on and as of such earlier date) and the Company shall
have received a certificate signed by an authorized officer of Purchaser to such
effect.
(b) REGISTRATION RIGHTS AGREEMENT. Purchaser shall have executed and
delivered the Registration Rights Agreement.
Section 7.3 CONDITIONS TO THE OBLIGATIONS OF PURCHASER. The obligations
of
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<PAGE> 24
Purchaser to consummate the transactions contemplated to occur at the Closing
shall be subject to the satisfaction or waiver thereof prior to the Closing of
each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company set forth in this Agreement that are qualified as to materiality
shall be true and correct, and those that are not so qualified shall be true and
correct in all material respects, as of the date of this Agreement and as of the
time of the Closing as though made at and as of such time, except to the extent
such representations and warranties expressly relate to an earlier date (in
which case such representations and warranties that are qualified as to
materiality shall be true and correct, and those that are not so qualified shall
be true and correct in all material respects, on and as of such earlier date),
and Purchaser shall have received a certificate signed by the chief executive
officer and chief financial officer of the Company to such effect.
(b) OPINION OF THE COMPANY'S COUNSEL. Purchaser shall have received the
opinion dated as of the Closing of Hale and Dorr, counsel to the Company, in
form and substance reasonably satisfactory to Purchaser.
(c) REGISTRATION RIGHTS AGREEMENT. The Company shall have executed and
delivered the Registration Rights Agreement.
(d) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed or complied in all material respects with all obligations and
covenants required to be performed or complied with by the Company under this
Agreement and the Purchaser shall have received a certificate signed by the
chief executive officer and chief financial officer of the Company to such
effect.
(e) CORPORATE PROCEEDINGS. All corporate proceedings of the Company in
connection with the transactions contemplated by this Agreement and the
Registration Rights Agreement, and all documents and instruments incident
thereto, shall be satisfactory in form and substance to Purchaser and its
counsel, and Purchaser and its counsel shall have received all such documents
and instruments, or copies thereof, certified or requested, as may be reasonably
requested.
ARTICLE VIII
TERMINATION
Section 8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual written consent of Purchaser and the Company;
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(b) by Purchaser or the Company;
(i) if the Closing shall not have occurred prior to
December 31, 1998, PROVIDED, THAT the right to terminate this
Agreement pursuant to this clause (i) shall not be available
to any party whose failure to fulfill any obligation under
this Agreement results in the failure of the Closing to occur;
(ii) if there shall be any statute, law, regulation or
rule that makes consummating the transactions contemplated
hereby illegal or if any court or other Governmental Entity of
competent jurisdiction shall have issued a judgment, order,
decree or ruling, or shall have taken such other action
restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby and such
judgment, order, decree or ruling shall have become final and
non-appealable; or
(iii) if the Collaboration Agreement shall have
terminated;
(c) by Purchaser:
(i) if the Company shall have failed to perform in any
material respect any of its obligations hereunder or shall
have breached in any respect any representation or warranty
contained herein qualified by materiality or shall have
breached in any material respect any representation or
warranty not so qualified, and the Company has failed to
perform such obligation or cure such breach, within 30 days of
its receipt of written notice thereof from Purchaser, and such
failure to perform shall not have been waived in accordance
with the terms of this Agreement; or
(ii) if any of the conditions set forth in Section 7.1 or
7.3 shall become impossible to fulfill (other than as a result
of any breach by Purchaser of the terms of this Agreement) and
shall not have been waived in accordance with the terms of
this Agreement;
(d) by the Company:
(i) if Purchaser shall have failed to perform in any
material respect any of its obligations hereunder or shall
have breached in any respect any representation or warranty
contained herein qualified by materiality or shall have
breached any material respect any representation or warranty
not so qualified, and Purchaser has failed to perform such
obligation or cure such breach, within 30 days of its receipt
of written notice thereof from the Company, and such failure
to perform shall not have been waived in accordance with the
terms of this Agreement; or
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(ii) if any of the conditions set forth in Section 7.1 or
7.2 shall become impossible to fulfill (other than as a result
of any breach by the Company of the terms of this Agreement)
and shall not have been waived in accordance with the terms of
this Agreement;
Section 8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Company or Purchaser as provided in Section 8.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Purchaser or the Company, other than the provisions
of this Section 8.2, Section 11.9 and Article IX and except to the extent that
such termination results from the willful and material breach by a party of any
of its representations, warranties, covenants or agreements set forth in this
Agreement.
ARTICLE IX
INDEMNIFICATION
Section 9.1 INDEMNIFICATION OF PURCHASER. The Company covenants and
agrees to defend, indemnify and hold harmless each of Purchaser, its Affiliates
(other than the Company and any of its Subsidiaries), and their respective
officers, directors, partners, employees, agents, advisers and representatives
(collectively, the "Purchaser Indemnities") from and against, and pay or
reimburse the Purchaser Indemnitees for, any and all claims, demands,
liabilities, obligations, losses, costs, expenses, fines or damages (whether
absolute, accrued, conditional or otherwise and whether or not resulting from
third party claims), including interest and penalties with respect thereto and
all expenses incurred in the investigation or defense of any of the same or in
asserting, preserving or enforcing any of their respective rights hereunder
(collectively, "Losses"), resulting from or based on (or allegedly resulting
from or based on) any breach by the Company of any representation, warranty,
covenant or obligation of the Company hereunder. The Losses described in this
Section 9.1 are herein referred to as "Purchaser Indemnifiable Losses". The
Company shall reimburse the Purchaser Indemnitees for any legal or other
expenses incurred by such Purchaser Indemnitees in connection with investigating
or defending any such Purchaser Indemnifiable Losses as such expenses are
incurred.
Section 9.2 INDEMNIFICATION PROCEDURES. Promptly after receipt by a
Purchaser Indemnitee of notice of the commencement of any action or the written
assertion of any claim, such Purchaser Indemnitee shall, if a claim in respect
thereof is to be made against the Company, as the case may be (the "Indemnifying
Person"), notify the Indemnifying Person in writing of the commencement or the
written assertion thereof. Failure by a Purchaser Indemnitee to so notify the
Indemnifying Person shall relieve the Indemnifying Person from the obligation to
indemnify such Purchaser Indemnitee only to the extent that the Indemnifying
Person suffers actual and material prejudice as a result of such failure but in
no event shall such failure to notify the Indemnifying Person (i) constitute
prejudice suffered by
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the Indemnifying Person if it has otherwise received notice of the actions
giving rise to such obligation to indemnify or (ii) relieve it from any
liability or obligation that it may otherwise have to such Purchaser Indemnitee.
In case any such action or claim shall be brought or asserted against any
Purchaser Indemnitee and it shall notify the Indemnifying Person of the
commencement or assertion thereof, the Indemnifying Person shall be entitled to
participate therein but the defense of such action or claim shall be conducted
by counsel to the Purchaser Indemnitee, PROVIDED, HOWEVER, that the Indemnifying
Person shall not, in connection with any one such action or proceeding or
separate but substantially similar actions or proceedings arising out of the
same general allegations, be liable for the fees and expenses of more than one
separate firm of attorneys at any time for all Purchaser Indemnitees, except to
the extent that local counsel, in addition to regular counsel, is required in
order to effectively defend against such action or proceeding and PROVIDED
FURTHER that a Purchaser Indemnitee shall not enter into any settlement of any
such claim without the prior consent of the Company, such consent not to be
unreasonably withheld or delayed. In no event shall the Company be liable under
this Article IX, and the Company's obligation to defend, indemnify and hold
harmless the Purchaser Indemnitee shall not apply to: (a) any special,
incidental or consequential damages resulting from or based upon any breach by
the Company of any representation, warranty, covenant or obligation of the
Company hereunder, (b) any Purchaser Indemnifiable Losses until the aggregate
amount of such Losses exceeds $5,000,000, and (c) any Purchaser Indemnifiable
Losses in excess of $50,000,000. The remedies set forth in this Article 9 are
cumulative and shall not be construed to restrict or otherwise affect any other
remedies that may be available to a Purchaser Indemnitee or a Party under any
other agreement, pursuant to statutory or common law or equity. Notwithstanding
anything to the contrary in this Agreement, any claim for indemnification under
this Article IX must be brought prior to the second anniversary of the Closing
Date, except for claims relating to the representations and warranties in
Sections 2.1(d), 2.1(k) and 2.1 (m) which can be brought any time prior to the
expiration of the applicable statute of limitations.
Section 9.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company contained in this Agreement shall
expire for all purposes on the second anniversary of the Closing Date, except
for the representations and warranties contained in Sections 2.1(d), 2.1(k) and
2.1(m) which shall expire for all purposes upon expiration of the applicable
statute of limitations.
ARTICLE X
INTERPRETATION; DEFINITIONS
Section 10.1 INTERPRETATION. As used in this Agreement, unless the
context otherwise requires:
(a) any reference to the Company and its Subsidiaries means the Company
and each of its Subsidiaries;
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(b) words of any gender include all genders;
(c) words using the singular or plural number also include the plural
or singular number, respectively; and
(d) the terms "hereof" "herein", and "hereby" and derivative or similar
words refer to this entire Agreement.
Section 10.2 DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following meanings:
"13D GROUP" is defined in Section 4.1(e).
"AFFILIATE" shall have the meaning set forth in Rule 12b-2 under the
Exchange Act (as in effect on the date of this Agreement).
"AGREEMENT" is defined in the recitals to this agreement.
"BENEFICIALLY OWNED," "BENEFICIAL OWNERSHIP" or any like expression
with respect to any securities means having "beneficial ownership" of such
securities (as determined pursuant to Rule 13d-3 under the Exchange Act),
including pursuant to any agreement, arrangement or understanding, whether or
not in writing.
"BUSINESS DAY" means any day on which banking institutions are open in
the City of Boston.
"CLOSING" is defined in Section 1.2.
"CLOSING DATE" is defined in Section 1.2.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder, as amended.
"COLLABORATION AGREEMENT" is defined in the recitals to this Agreement.
"COMMON STOCK" is defined in the recitals to this Agreement.
"COMPANY" is defined in the recitals to this Agreement.
"COMPANY INTELLECTUAL PROPERTY" is defined in Section 2.1(p).
"COMPANY STOCK PLANS" is defined in Section 2.1(d).
"COMPANY SEC DOCUMENTS" is defined in Section 2.1(f).
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"CONTRACT" is defined in Section 2.1(c).
"DISCOVERY PROGRAM" shall have the meaning set forth in the
Collaboration Agreement.
"EMPLOYEE" means any employee or former employee of the Company or any
of its Subsidiaries or any beneficiary or dependent of any such employee or
former employee.
"EMPLOYEE BENEFIT PLANS" means all defined contribution, defined
benefit, welfare benefit, bonus, incentive compensation, stock option, stock
purchase, stock appreciation right, stock bonus, incentive, deferred
compensation, insurance, medical, dental, vision, life, death benefit, fringe
benefit or other employee benefit plans, programs, policies or arrangements,
including without limitation, any employment, consulting, offer, secondment,
severance or other termination agreement, whether or not an employee benefit
plan within the meaning of section 3(3) of ERISA, maintained by the Company or
any of its Subsidiaries.
"ENVIRONMENTAL LAWS" is defined in Section 2.1(m).
"ENVIRONMENTAL PERMITS" is defined in Section 2.1(m).
"EQUITY SECURITY" means (i) any Common Stock or other Voting
Securities, (ii) any securities of the Company convertible into or exchangeable
for Common Stock or other Voting Securities or (iii) any options, rights or
warrants (or any similar securities) issued by the Company to acquire Common
Stock or other Voting Securities.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any successor federal statute and the rules and regulations of the SEC
promulgated thereunder, all as the same shall be in effect from time to time.
"GAAP" means United States generally accepted accounting principles.
"GOVERNMENTAL ENTITY" is defined in Section 2.1(c).
"HAZARDOUS SUBSTANCES" is defined in Section 2.1(m).
"HSR ACT" is defined in Section 2.1(c).
"INDEMNIFYING PERSON" is defined in Section 9.2.
"INTELLECTUAL PROPERTY" means trademarks, trade names, trade dress,
service marks, copyrights, domain names, and similar rights (including
registrations and applications to register or renew the registration of any of
the foregoing), patents and patent applications, trade secrets, ideas,
inventions, improvements, practices, processes, formulas, designs, know-
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how, confidential business and technical information, computer software,
firmware, data and documentation, licenses of or agreements relating to any of
the foregoing, rights of privacy and publicity, moral rights, and any other
similar intellectual property rights and tangible embodiments of any of the
foregoing (in any medium including electronic media.)
"INTELLECTUAL PROPERTY LICENSE" means any license, permit,
authorization, approval, Contract or consent granted, issued by or with any
Person relating to the use of Intellectual Property.
"IRS" means the Internal Revenue Service.
"KNOWLEDGE OF THE COMPANY," "KNOWLEDGE OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES" or any like expression means to the actual knowledge of the
persons listed on Schedule 10.2.
"LIEN" is defined in Section 2.1(c).
"LOSSES" is defined in Section 9.1.
"MATERIAL ADVERSE EFFECT" on or with respect to an entity (or group of
entities taken as a whole) means any state of facts, event, change or effect
that has had, or would reasonably be expected to have, a material adverse effect
on (a) the business, properties, results of operations or financial condition of
such entity (or, if with respect thereto, of such group of entities taken as a
whole), other than any state of facts, event, change or effect attributable to
changes in general economic or market conditions affecting the biotechnology and
pharmaceutical industries, or (b) the ability of such entity (or group of
entities) to consummate the transactions contemplated under this Agreement or
the Registration Rights Agreement.
"MATERIAL CONTRACT" is defined in Section 2.1(j).
"NEW SECURITY" means any Equity Security issued by the Company after
the Closing; provided that "New Security" shall not include (i) any securities
issuable upon conversion of any convertible Equity Security, (ii) any securities
issuable upon exercise of any option, warrant or other similar Equity Security,
or (iii) any securities issuable in connection with any stock split, stock
dividend or recapitalization of the Company where such securities are issued to
all stockholders of the Company on a pro rata basis.
"PERMIT" is defined in Section 2.1(c).
"PERMITTED LIENS" means those Liens (A) securing debt that is reflected
on the balance sheets or the notes thereto contained in the Company SEC
Documents filed with the SEC and publicly available prior to the date hereof,
(B) referred to in Schedule 2.1(j), (c) for Taxes not yet due or payable or
being contested in good faith and for which adequate reserves have
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been established in accordance with GAAP, (D) that constitute mechanics',
carriers', workmens' or like liens, liens arising under original purchase price
conditional sales contracts and equipment leases with third parties entered into
in the ordinary course, (E) Liens incurred or deposits made in the ordinary
course of business consistent with past practice in connection with workers'
compensation, unemployment insurance and social security, retirement and other
legislation and (F) easements, covenants, declarations, rights or way,
encumbrances, or similar restrictions in connection with real property owned by
the Company of any of its Subsidiaries that do not materially impair the use of
such real property by the Company and any of its Subsidiaries, and in the case
of Liens described in clauses (B), (C), (D), (E) or (F) that, individually or in
the aggregate, would not have a material Adverse Effect on the Company and its
Subsidiaries, taken as a whole.
"PERSON" means any individual, partnership, joint venture, corporation,
limited liability company, trust, unincorporated organization, government or
department or agency of a government or other entity.
"PHARMACEUTICAL ALLIANCES" means a research, development,
commercialization and/or similar agreement or arrangement between the Company
and a pharmaceutical, biopharmaceutical, biotechnology or similar entity in
which Equity Securities are sold to such entity or an Affiliate of such entity.
"PLANS" is defined in Section 2.1(l).
"PRO RATA SHARE" means the fraction of an entire issuance of New
Securities, the numerator of which shall be the number of shares of Common Stock
and other Voting Securities owned by Purchaser and its Affiliates (other than
the Company and its Subsidiaries) on a fully-diluted basis immediately prior to
such issuance of such New Securities and the denominator of which shall be the
aggregate number of shares of Common Stock and other Voting Securities
outstanding on a fully-diluted basis (giving effect to the conversion of all
then-outstanding options, warrants and other convertible securities) immediately
prior to such issuance of such New Securities.
"PROGRAM TERM" shall have the meaning set forth in the Collaboration
Agreement.
"PURCHASE PRICE" is defined in Section 1.1.
"PURCHASER" is defined in the recitals to this Agreement.
"PURCHASER INDEMNIFIABLE LOSSES" is defined in Section 9.1.
"PURCHASER INDEMNITEES" is defined in Section 9.1.
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"REGISTRATION RIGHTS AGREEMENT" is defined in the recitals to this
Agreement.
"REPRESENTATIVE" means an agent or employee of Purchaser, or of an
independent public accounting firm, law firm, or other consulting company or
advisor of Purchaser.
"RESEARCH AND DEVELOPMENT FUNDING TRANSACTION" means a transaction to
raise funding for the research and development of one or more specific products,
products in one or more disease areas and/or one or more specific technologies,
in each case structured as an "off balance sheet" financing. Examples of
Research and Development Funding Transactions are R&D partnerships, SWORDs and
SPARCs.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the SEC promulgated
thereunder, all as the same shall be in effect from time to time.
"SHARES" is defined in Section 1.1.
"SUBSIDIARY" means, as to any Person, any corporation at least a
majority of the shares of stock of which having general voting power under
ordinary circumstances to elect a majority of the Board of Directors of such
corporation (irrespective of whether or not at the time stock of any other class
or classes shall have or might have voting power by reason of the happening of
any contingency) is, at the time as of which the determination is being made,
owned by such Person, or one or more of its Subsidiaries or by such Person and
one or more of its Subsidiaries.
"SUBSCRIPTION NOTICE" is defined in Section 3.1.
"TAXES" is defined in Section 2.1(k).
"TAX RETURNS" is defined in Section 2.1(k).
"TOTAL VOTING POWER" means at any time the total combined voting power
in the general election of directors of all the Voting Securities then
outstanding.
"VOTING SECURITIES" means at any time shares of any class of capital
stock of the Company which are then entitled to vote generally in the election
of directors.
ARTICLE XI
MISCELLANEOUS
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Section 11.1 SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants, and restrictions without
including any of such which may be hereafter declared invalid, void or
unenforceable.
Section 11.2 SPECIFIC ENFORCEMENT. Purchaser, on the one hand, and the
Company, on the other, acknowledge and agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions hereof in any court of the
United States or any state thereof having jurisdiction, this being in addition
to any other remedy to which they may be entitled at law or equity.
Section 11.3 ENTIRE AGREEMENT. This Agreement (including the documents
set forth in the Exhibits and Schedules hereto) and the Collaboration Agreement
contain the entire understanding of the parties with respect to the transactions
contemplated hereby.
Section 11.4 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more of the counterparts have been signed
by each party and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 11.5 NOTICES. All notices and other communications required or
permitted under this Agreement shall be effective upon receipt and shall be in
writing and may be delivered in person, by telecopy, overnight delivery service
or registered or certified United States mail, addressed to the Company or the
Purchaser, as the case may be, at their respective addresses set forth below:
If to the Company:
MILLENNIUM PHARMACEUTICALS, INC.
238 Main Street
Cambridge, Massachusetts 02139-4815
Attn: Chief Executive Officer
Telephone (617) 679-7000
Facsimile: (617) 621-0264
With copies to:
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Attention: Legal Department
and to
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 01209
Attn: Steven Singer
Telephone (617) 526-6000
Facsimile: (617) 526-5000
If to Purchaser:
BAYER AG
D 51368
Leverkeusen
Federal Republic of Germany
Attn: General Counsel
Telephone: 011 49 214 30 81803
Facsimile: 011 49 214 30 50848
With copies to:
Bayer Corporation, Inc.
400 Morgan Lane
West Haven, CT
Attn: Legal Department
Telephone: (203) 812 - 2401
Facsimile: (203) 812 - 2795
and to:
Wilmer, Cutler & Pickering
2445 M Street
Washington, D.C. 20037
Attn: Richard W. Cass
Telephone (202) 663-6503
Facsimile: (202) 663-6363
All notices and other communications shall be effective upon the earlier of
actual receipt thereof by the person to whom notice is directed or (a) in the
case of notices and
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communications sent by personal delivery or telecopy, one business day after
such notice or communication arrives at the applicable address or was
successfully sent to the applicable telecopy number, (b) in the case of notices
and communications sent by overnight delivery service, at noon (local time) on
the second business day following the day such notice or communications was
delivered to such delivery service, and (c) in the case of notices and
communications sent by United States mail, seven days after such notice or
communication shall have been deposited in the United States mail. Any notice
delivered to a party hereunder shall be sent simultaneously, by the same means,
to such party's counsel as set forth above.
Section 11.6 AMENDMENTS. This Agreement may be amended as to Purchaser
and their successors and assigns (determined as provided in Section 11.8), and
the Company may take any action herein prohibited, or omit to perform any act
required to be performed by it, if the Company shall obtain the written consent
of Purchaser. This Agreement may not be waived, changed, modified, or discharged
orally, but only by an agreement in writing signed by the party or parties
against whom enforcement of any waiver, change, modification or discharge is
sought or by parties with the right to consent to such waiver, change,
modification or discharge on behalf of such party.
Section 11.7 COOPERATION. Purchaser and the Company agree to take, or
cause to be taken, all such further or other actions as shall reasonably be
necessary to make effective and consummate the transactions contemplated by this
Agreement, including, without limitation, making all required filings under the
HSR Act, if any.
Section 11.8 SUCCESSORS AND ASSIGNS. All covenants and agreements
contained herein shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns; PROVIDED, HOWEVER, that Purchaser may
assign its rights hereunder (including its right to purchase the Shares) to an
Affiliate of Purchaser, provided that such Affiliate agrees in writing to be
bound by the terms and conditions set forth herein, and the Company may not
assign any of its rights under this Agreement without the written consent of
Purchaser, which consent shall not be unreasonably withheld.
Section 11.9 EXPENSES AND REMEDIES. Whether or not the Closing takes
place, all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be borne by the party incurring such
expense.
Section 11.10 TRANSFER OF SHARES. Purchaser understands and agrees that
the Shares have not been registered under the Securities Act or the securities
laws of any state and that they may be sold or otherwise disposed of only in one
or more transactions registered under the Securities Act and, where applicable,
such laws or as to which an exemption from the registration requirements of the
Securities Act and, where applicable, such laws is available. Purchaser
acknowledges that except as provided in the Registration Rights Agreement,
Purchaser has no right to require the Company to register the Shares and
understands and agrees that each certificate representing the Shares (other
than, with respect to the first legend,
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<PAGE> 36
Shares that are no longer subject to the provisions of Article V and other than,
with respect to the second legend, Shares which have been transferred in a
transaction registered under the Securities Act or exempt from the registration
requirements of the Securities Act pursuant to Rule 144 thereunder or any
similar rule or regulation) shall bear the following legends:
"THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED BY AN AGREEMENT ON FILE AT THE
OFFICE OF THE CORPORATION."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF
SUCH ACT OR SUCH LAWS."
and Purchaser agrees to transfer the Shares only in accordance with the
provisions of such legends.
Section 11.11 GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
without regard to conflicts of law principles.
Section 11.12 PUBLICITY. The Company and Purchaser will consult and
cooperate with each other before issuing, and provide each other the opportunity
to review and comment upon, any press release or otherwise making any public
statement with respect to the transactions contemplated by this Agreement.
Section 11.13 NO THIRD PARTY BENEFICIARIES. Nothing contained in this
Agreement is intended to confer upon any Person other than the parties hereto
and their respective successors and permitted assigns, any benefit, right or
remedies under or by reason of this Agreement; PROVIDED, HOWEVER, that the
parties hereto hereby acknowledge and agree that the Purchaser Indemnities
(other than Purchaser) are third party beneficiaries of Article IX of this
Agreement.
Section 11.14 CONSENT TO JURISDICTION. Each of the Company and
Purchaser irrevocably submits to the personal exclusive jurisdiction of the
United States District Court for the District of Delaware for the purposes of
any suit, action or other proceeding arising out of this Agreement or any
transaction contemplated hereby (and, to the extent permitted under applicable
rules of procedure, agrees not to commence any action, suit or proceeding
relating hereto except in such court). Each of the Company and Purchaser further
agrees that service of any process, summons, notice or document hand delivered
or sent by registered mail to such party's respective address set forth in
Section 11.5 will be effective service of
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<PAGE> 37
process for any action, suit or proceeding in Delaware with respect to any
matters to which it has submitted to jurisdiction as set forth in the
immediately preceding sentence. Each of the Company and Purchaser irrevocably
and unconditionally waives any objection to the laying of venue of any action,
suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in the United States District court for the District of
Delaware, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in such court that any such action, suit or proceeding
brought in such court has been brought in an inconvenient forum.
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<PAGE> 38
IN WITNESS WHEREOF, PURCHASER and the COMPANY have caused this Agreement to be
executed as of the day and year first above written.
BAYER AG
By: /s/
---------------------------------------
General Manager Business Group
Pharmaceuticals
------------------------------------------
Authorized Signature
By: /s/
---------------------------------------
Senior Counsel
------------------------------------------
Authorized Signature
MILLENNIUM PHARMACEUTICALS, INC.
By: /s/ Steven H. Holtzman
---------------------------------------
Title: Chief Business Officer
------------------------------------
35
<PAGE> 1
EXHIBIT 10.3
MILLENNIUM PHARMACEUTICALS, INC.
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is entered into
as of November 10, 1998 by and among Millennium Pharmaceuticals, Inc., a
Delaware corporation (the "COMPANY"), and Bayer AG, a Federal Republic of
Germany corporation ("PURCHASER").
RECITALS
WHEREAS, the Company and the Purchaser have entered into an Investment
Agreement, dated as of September 22, 1998 (the "INVESTMENT AGREEMENT"), pursuant
to which the Purchaser has agreed to purchase 4,957,660 shares (the "Shares") of
common stock, par value $.001 per share, of the Company, upon the terms and
conditions set forth therein;
WHEREAS, in order to induce the Purchaser to enter into the Investment
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement for the benefit of Purchaser and its direct and indirect
transferees upon the terms and conditions set forth herein; and
WHEREAS, the execution and delivery of this Agreement is a condition to
the Purchaser's obligations pursuant to the Investment Agreement.
NOW, THEREFORE, in consideration of the mutual premises, covenants and
conditions set forth herein, the parties hereby agree as follows:
1. DEFINITIONS. Capitalized terms used herein without definition shall
have the meanings assigned to such terms in the Investment Agreement. For the
purposes of this Agreement:
"COMMISSION" means the U.S. Securities and Exchange Commission or any
other governmental authority from time to time administering the Securities Act.
"COMMON STOCK" means the common stock, par value $.001 per share, of
the Company.
"DTC" means the Depository Trust Company.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any successor federal statute and the rules and the regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time.
<PAGE> 2
"HOLDER" means any Person owning or having the right to acquire
Registrable Securities, including an Affiliate or any successor, assignee or
transferee of Purchaser or a Holder that has received Registrable Securities in
accordance with Section 13 hereof.
"NASD" means the National Association of Securities Dealers, Inc.
"PERSON" means any natural person, firm, partnership, association,
corporation, company, joint venture, unincorporated association, trust, business
trust, government or department or agency of a government, limited liability
company or other entity.
"PROSPECTUS" means the prospectus included in any Registration
Statement (including without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering or any portion
of the Registrable Securities covered by such Registration Statement and all
other amendments and supplements to the prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such prospectus.
"REGISTRABLE SECURITIES" means (a) the Shares of Common Stock received
by the Purchaser pursuant to the Investment Agreement and (b) any capital stock
or other securities of the Company issued or issuable with respect to the
Shares, (i) upon any conversion or exchange thereof, (ii) by way of stock
dividend or other distribution, stock split or reverse stock split, or (iii) in
connection with a combination of shares, recapitalization, merger,
consolidation, exchange offer or other reorganization. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (A) a Registration Statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such Registration
Statement, (B) such securities shall have been distributed to the public in
reliance upon Rule 144 (or any successor provision) under the Securities Act,
provided that at the time such securities are proposed to be disposed of, they
may be sold under Rule 144 without any limitation on the amount of such
securities which may be sold or (C) they shall have ceased to be outstanding.
"REGISTRATION EXPENSES" means all fees and expenses incident to the
performance of or compliance with the provisions of this Agreement, whether or
not any Registration Statement is filed or becomes effective, including, without
limitation, all (a) registration and filing fees (including, without limitation,
(i) fees with respect to filings required to be made and other expenses
associated with the NASD and any other applicable exchange in connection with an
underwritten offering, and (ii) fees and expenses of compliance with state
securities or blue sky laws (including, without limitation, fees and
distributions of counsel for the underwriter or underwriters in connection with
blue sky qualifications of the Registrable Securities and determination of
eligibility of the Registrable Securities for investment under the laws of such
jurisdictions as are provided in Section 5(e)), (b) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities in a form eligible for deposit with DTC and of printing
prospectuses), (c) fees and disbursements of all independent certified public
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<PAGE> 3
accountants referred to in Section 5 (including, without limitation, the
reasonable expenses of any special audit and "cold comfort" letters required by
or incident to such performance), (d) the fees and expenses of any "qualified
independent underwriter" or other independent appraiser participating in an
offering pursuant to the NASD Rules of Conduct and the corresponding rules of
any other applicable exchange, (e) liability insurance under the Securities Act
or any other securities laws, if the Company desires such insurance, (f) fees
and expenses of all attorneys, advisers, appraisers and other persons retained
by the Company or any Subsidiary of the Company, (g) internal expenses of the
Company and its Subsidiaries (including, without limitation, all salaries and
expenses of officers and employees of the Company and its Subsidiaries, other
general overhead expenses of the Company and its Subsidiaries, and other
expenses for the performance of legal or accounting duties), (h) the expense of
any annual audit and the preparation of historical and pro forma financial
statements or other data normally prepared by the Company in the ordinary course
of business, (i) the expenses relating to printing, word processing and
distributing all Registration Statements, underwriting agreements, securities
sales agreements, and any other documents necessary in order to comply with this
Agreement, (j) any fees and disbursements of any other underwriters and
broker-dealers customarily paid by issuers or sellers of securities, and (k) the
fees and disbursements of not more than one (1) counsel (together with
appropriate local counsel) chosen by the Holders of a majority of the
Registrable Securities to be included in such Registration Statement; PROVIDED,
HOWEVER, that in all cases in which the Company is required to pay Registration
Expenses hereunder, Registration Expenses shall exclude any underwriting
discounts, selling commissions or any transfer taxes payable in respect of the
sale of the Registrable Securities by the Holders thereof.
"REGISTRATION STATEMENT" means any registration statement of the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Agreement, and all amendments and supplements to any such registration
statement, including post-effective amendments, in each case including the
Prospectus, all exhibits and all material incorporated by reference or deemed to
be incorporated by reference in such registration statement.
"RULE 144" means Rule 144 (or any successor provision) under the
Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.
"SPECIAL REGISTRATION" means the registration of share of equity
securities and/or options or other rights in respect thereof to be offered
solely to directors, members of management, employees, consultants or sales
agents, distributors or similar representatives of the Company or its direct or
indirect Subsidiaries, solely on Form S-8 or any successor form, a registration
on Form S-4 with respect to any merger, consolidation or acquisition, or a
registration on another form not available for registering Registrable
Securities for sale to the public.
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<PAGE> 4
"UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" means a
registration in which securities of the Company (including Registrable
Securities) are sold to an underwriter for reoffering to the public.
2. DEMAND REGISTRATION.
(a) REQUEST FOR REGISTRATION. Subject to the provisions of
Sections 2(d) and 8, at any time or from time to time as of the date hereof,
Holders of Registrable Securities shall have the right to make a written request
that the Company effect a registration under the Securities Act of all or part
of its Registrable Securities of the Holders making such request. A request for
registration pursuant to this Section 2 (a "DEMAND REGISTRATION") shall specify
the approximate number of Registrable Securities requested to be registered, the
anticipated per share price range for such offering and the intended method or
disposition thereof by such Holders.
(b) OBLIGATION TO EFFECT REGISTRATION. Within five (5) days
after receipt by the Company of any request for Demand Registration, the Company
shall promptly give written notice of such requested registration to all
Holders. Such Holders shall have the right, by giving written notice to the
Company within twenty (20) days after the Company provides its notice, to elect
to have included in such registration such of their Registrable Securities as
such Holders may request in such notice of election. Thereupon, the Company
shall, as expeditiously as possible, use reasonable best efforts to effect the
registration under the Securities Act of all Registrable Securities that the
Company has been requested to so register; PROVIDED, that if the underwriter (if
any) managing the offering determines that, because of marketing factors, all of
the Registrable Securities requested to be registered by all Holders may not be
included in the offering, then all Holders who have requested registration shall
participate in the offering pro rata based upon the number of Registrable
Securities that they have requested to be so registered.
(c) REGISTRATION STATEMENT FORM. Registrations under this
Section 2 shall be on such appropriate form of Registration Statement of the
Commission as shall be selected by the Company and available to it under the
Securities Act. The Company agrees to include in any such Registration Statement
all information which, in the opinion of counsel to the Company, is required to
be included therein under the Securities Act.
(d) LIMITATIONS ON REGISTRATION. The Company shall not be
required to effect more than two (2) Demand Registrations pursuant to this
Section 2. In addition, the Company shall not be required to effect any
registration (other than on Form S-3 or any successor form relating to secondary
offerings) during the period starting with the date sixty (60) days prior to the
Company's estimated date of filing of, and ending on the date ninety (90) days
immediately following the effective date of, any registration statement (other
than a Special Registration) pertaining to the securities of the Company,
provided that the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective.
Notwithstanding any other provision of this Agreement, the Company shall not be
required to effect the Demand Registration of any Registrable Securities prior
to the second anniversary of the closing date of the Investment Agreement.
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<PAGE> 5
(e) INCLUSION OF OTHER SECURITIES. The Company shall not
register securities (other than Registrable Securities) for sale for the account
of any Person in any request for Demand Registration, unless permitted to do so
by the written consent of the Holders of at least a majority of the Registrable
Securities proposed to be sold in such Demand Registration.
(f) EFFECTIVE REGISTRATION STATEMENT. A Demand Registration
shall not be deemed to have been effected unless a Registration Statement
covering all of the Registrable Securities requested to be included in such
registration by the Holders thereof and as reduced, if necessary, in accordance
with Section 2(g) hereto has been declared effective by the Commission and
remains continually effective for the period specified in Section 5(b).
(g) SUSPENSION. If the Board of Directors of the Company, in
its good faith judgment, determines that any registration under the Securities
Act of Registrable Securities should not be made or continued because it would
materially interfere with any material financing, acquisition, corporation
reorganization, merger, or other transaction involving the Company or any of its
subsidiaries (a "VALID BUSINESS REASON"), (i) the Company may postpone filing a
Registration Statement relating to a Demand Registration until such Valid
Business Reason no longer exists, but in no event for more than 60 days, and
(ii) in case a Registration Statement has been filed relating to a Demand
Registration, the Company may cause such Registration Statement to be withdrawn
and its effectiveness terminated or may postpone amending or supplementing such
Registration Statement until such Valid Business Reason no longer exists, but in
no event for more than 60 days (the "POSTPONEMENT PERIOD"); PROVIDED, HOWEVER,
that in no event shall the Company be permitted to postpone or withdraw a
Registration Statement within 120 days after the expiration of any Postponement
Period.
(h) ALLOCATION. If any Demand Registration involves an
underwritten offering and the managing underwriter of such offering shall advise
the Company that, in its view, the number of securities requested to be included
in such registration exceeds the largest number (the "SECTION 2(h) NUMBER") that
can be sold in an orderly manner in such offering within a price range
acceptable to the Holders of Registrable Securities requesting the registration,
the Company shall include in such registration:
(i) first, all Registrable Securities requested to be
included in such Registration by the Holders of Registrable Securities
requesting such registration; PROVIDED, HOWEVER, that, if the number of such
Registrable Securities exceeds the Section 2(h) Number, the number of such
Registrable Securities (not to exceed the Section 2(h) Number) shall be
allocated to the Holders of Registrable Securities requesting such registration;
PROVIDED FURTHER, HOWEVER, that if the number of Registrable Securities
requested to be included by all Holders of Registrable Securities requesting
such registration exceeds the Section 2(h) Number, then the number of such
Registrable Securities included in such registration shall be allocated on a pro
rata basis among all Holders of Registrable Securities requesting such
registration, based on the number of Registrable Securities that each such
Holder requesting registration then owned by all such Holders requesting such
registration; and
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<PAGE> 6
(ii) second, to the extent that consent has been
granted in accordance with Section 2(e) and the number of Registrable Securities
to be included by all Holders of Registrable Securities requesting such
registration is less than the Section 2(h) Number, securities that the Company
proposes to register.
3. PIGGYBACK REGISTRATION.
(a) INCLUSION IN PIGGYBACK REGISTRATION. If the Company at any
time proposes to register any of its securities under the Securities Act (other
than pursuant to Section 2 or a Special Registration), whether or not for sale
for its own account, (a "COMPANY REGISTRATION"), it shall each such time, prior
to such filing, give prompt written notice to all Holders of Registrable
Securities of its intention to do so and, upon the written request of any Holder
of Registrable Securities given to the Company within twenty (20) days after the
Company has provided such notice (which request shall state the intended method
of disposition of such Registrable Securities), the Company shall use reasonable
best efforts to cause all Registrable Securities that the Company has been
requested by the Holders thereof to register to be so registered under the
Securities Act to the extent necessary to permit their disposition in accordance
with the intended methods of distribution specified in the request of such
Holder or Holders; PROVIDED, that if at any time after giving written notice of
its intention to register any securities and prior to the effective date of the
Registration Statement filed in connection with such registration, the Company
shall determine for any reason not to register such securities, the Company may,
at its election, give written notice of such determination to each Holder that
was previously notified of such registration, and, thereupon, shall not register
any Registrable Securities in connection with such registration (but shall
nevertheless pay the Registration Expenses in connection therewith), without
prejudice, however, to the rights of any Holders to request that a registration
be effect under Section 2 and PROVIDED FURTHER, that no registration effected
under this Section 3 shall relieve the Company from its obligations to effect
Registration upon request under Section 2.
(b) TERMS OF UNDERWRITING. In connection with any offering
under this Section 3 involving an underwritten offering, the Company shall not
be required to include any Registrable Securities in such offering unless the
Holder thereof accepts the terms, if any, of the underwriting as agreed upon
between the Company and the underwriters selected by it provided that such terms
must be reasonably satisfactory in substance and form to the Holder and
consistent with this Agreement, and then only in such quantity as will not, in
the opinion of the managing underwriter, jeopardize the success of the offering
by the Company.
(C) ALLOCATION. If any Company Registration involves an
underwritten offering and the managing underwriter of such offering shall advise
the Company that, in its view, the number of securities requested to be included
in such registration exceeds the largest number (the "SECTION 3(c) NUMBER") that
can be sold in an orderly manner in such offering within a price range
acceptable to the Company, the Company shall include in such registration:
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<PAGE> 7
(i) first, all securities that the Company proposes
to register for its own account (the "COMPANY SECURITIES"); and
(ii) second, to the extent that the number of Company
Securities is less than the Section 3(c) Number, the remaining securities to be
included in such registration shall be allocated on a pro rate basis among (i)
all Holders of Registrable Securities requesting that Registrable Securities be
included in such Registration, and (ii) all other holders ("Other Holders") of
the Company's securities who have been granted "piggy-back" registration rights
with respect to such securities (the "Other Securities") and have requested that
such Other Securities be included in such registration, based on the number of
Registrable Securities and Other Securities that each such Holder and Other
Holder requesting such registration bears to the aggregate number of Registrable
Securities and Other Securities then owned by all such Holders and Other Holders
requesting such registration.
4. ALLOCATION OF EXPENSES. The Company will pay all Registration
Expenses of all registrations under this Agreement.
5. OBLIGATIONS OF THE COMPANY. If and whenever the Company is required
to use best efforts to effect the registration under the Securities Act of any
Registrable Securities pursuant to Section 2 and 3 of this Agreement, the
Company shall:
(a) file with the Commission, as soon as practicable, a
Registration Statement with respect to such Registrable Securities, make all
required filings with the NASD and any other applicable exchange, and use best
efforts to cause such Registration Statement to become effective at the earliest
possible date and remain effective;
(b) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the Prospectus used in connection
therewith and such other documents as may be necessary to keep the Registration
Statement effective until the earlier of (i) 210 days after the effective date
of such Registration Statement or (ii) the consummation of the disposition by
the Holders of all the Registrable Securities covered by such Registration
Statement and otherwise comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement;
(c) furnish to counsel (if any) selected by the Holders of a
majority of the Registrable Securities covered by such Registration Statement
and to counsel for the underwriters in any underwritten offering copies of all
documents proposed to be filed with the Commission in connection with such
registration a reasonable time prior to the proposed filing thereof and give
reasonable consideration in good faith to any comments of such Holders, counsel
and underwriters.
(d) furnish to each seller of such securities, without charge,
such number of conformed copies of such Registration Statement and of each such
amendment and supplement thereto (in each case, including all exhibits
(including all exhibits incorporated by reference),
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<PAGE> 8
financial statements, schedules, and all documents incorporated therein, deemed
to be incorporated therein by reference or filed therewith, except that the
Company shall not be obligated to furnish any seller of securities with more
than two copies of such exhibits and documents), such numbers of copies of the
Prospectus included in such Registration Statement (including each preliminary
prospectus) in conformity with the requirements of the Securities Act, and such
other documents, as such seller may reasonably request in order to facilitate
the disposition of the Registrable Securities owned by such seller;
(e) use its reasonable best efforts to register or qualify and
cooperate with the Holders of Registrable Securities, the underwriters and their
respective counsels in connection with the registration or qualification (or
exemption from such registration or qualification) of the securities covered by
such Registration Statement under such other securities or blue sky laws of such
jurisdictions as each seller shall request; PROVIDED, HOWEVER, that where
Registrable Securities are offered other than through an underwritten offering,
the Company agrees to cause its counsel to perform blue sky investigations and
file registrations and qualification required to be filed pursuant to this
Section 5(e); keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is required
to be effective hereunder and do any and all other acts and things which may be
necessary or advisable to enable such seller to consummate the disposition in
such jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified, subject itself to taxation in any jurisdiction wherein it is not so
subject, or take any action which would subject it to general service of process
in any jurisdiction wherein it is not so subject;
(f) in connection with an underwritten public offering only,
furnish to each seller in a signed counterpart, addressed to the sellers, of
(i) an opinion of counsel for the Company experienced
in securities law matters, dated the effective date of the
Registration Statement, and
(ii) a "cold comfort" letter signed by the
independent public accountants who have issued an audit report
on the Company's financial statements included in the
Registration Statement, subject to such seller having executed
and delivered to the independent public accountants such
certificates and documents as such accountants shall
reasonably request,
covering substantially the same matters with respect to the Registration
Statement (and the Prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to the underwriters in underwritten public
offerings of securities;
(g) (i) notify each Holder of Registrable Securities subject
to such Registration Statement if such Registration Statement, at the time it or
any amendment thereto became
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<PAGE> 9
effective, (x) contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading upon discovery by the Company of such material
misstatement or omission or (y) upon discovery by the Company of the happening
of any event as a result of which the Company believes there would be such a
material misstatement or omission, and, as promptly as practicable, prepare and
file with the Commission a post-effective amendment to such Registration
Statement and use reasonable best efforts to cause such post-effective amendment
to become effective such that such Registration Statement, as so amended, shall
not contain an untrue statement or a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and (ii) notify each Holder of Registrable Securities subject to
such Registration Statement, at any time when a Prospectus related therefor is
required to be delivered under the Securities Act, if the Prospectus included in
such Registration Statement, as then in effect, includes an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading upon discovery by the Company of such
material misstatement or omission or upon the discovery by the Company of the
happening of any event as a result of which the Company believes that there
would be a material misstatement or omission, and, as promptly as is
practicable, prepare and furnish to such Holder a reasonable number of copies of
a supplement to or an amendment of such Prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such securities, such Prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading;
(h) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings statement
of the Company complying with the provisions of Section 11(a) of the Securities
Act and Rule 158 under the Securities Act (or any similar rule promulgated under
the Securities Act) no later than 45 days after the end of any 12-month period
(or 90 days after the end of any 12-month period if such period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which Registrable
Securities are sold to an underwriter or to underwriters in a firm commitment or
best efforts underwritten offering, and (ii) if not sold to an underwriter or to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of the relevant
Registration Statement, which statements shall cover said 12-month periods;
(i) promptly notify each Holder of Registrable Securities
covered by such Registration Statement, their counsel and the underwriters (i)
when such Registration Statement, or any post-effective amendment to such
Registration Statement, shall have become effective, or any amendment of or
supplement to the Prospectus used in connection therewith shall be filed, (ii)
of any request by the Commission to amend such Registration Statement or to
amend or supplement such Prospectus or for additional information, (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of
such Registration Statement or of any order preventing or suspending the use of
any preliminary prospectus or the initiation or threatening
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<PAGE> 10
of any proceedings for any of such purposes, (iv) of the suspension of the
qualification of such securities for offering or sale in any jurisdiction, or of
the institution of any proceedings for any of such purposes and (v) if at any
time when a Prospectus is to be required by the Securities Act to be delivered
in connection with the sale of the Registrable Securities, the representations
and warranties of the Company contained in any agreement (including the
underwriting agreement contemplated in Section 6(b) below), to the knowledge of
the Company, cease to be true and correct in any material respect;
(j) use its reasonable best efforts to prevent the issuance of
any order suspending the effectiveness of the Registration Statement or of any
order preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable
Securities covered thereby for sale in any jurisdiction, and, if any such order
is issued, to obtain the withdrawal of any such order at the earliest possible
moment;
(k) if requested by the managing underwriter, if any, (i)
promptly incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter, if any, reasonably requests to be
included therein to comply with applicable law, and (ii) make all required
filings of such prospectus supplement or such post-effective amendment as soon
as practicable after the Company has received notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment;
(l) cooperate with the Holders and the managing underwriter,
if any, to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold, which certificates shall not
bear any restrictive legends whatsoever and shall be in a form eligible for
deposit with DTC, and enable such Registrable Securities to be in such
denominations and registered in such names as the underwriters, if any, or
Holders may reasonably request at least two (2) business days prior to any sale
of Registrable Securities in a firm commitment underwritten public offering;
(m) use its reasonable best efforts to cause the Registrable
Securities covered by a Registration Statement to be registered with, and to
obtain the consent or approval of, each governmental agency or authority,
whether federal, state, local or foreign, which may be required to effect such
registration or the offering or sale in connection therewith or to enable the
sellers to offer, or to consummate the disposition of, the Registrable
Securities subject to such Registration Statement, except as may be required
solely as a consequence of the nature of such seller's business, in which case
the Company will cooperate with all reasonable respects with the filing of the
Registration Statement and the granting of such approvals;
(n) prior to the effective date of the Registration Statement,
(i) provide the registrar for the Common Stock or such other Registrable
Securities with printed certificates for such securities in a form eligible for
deposit with DTC and (ii) provide a CUSIP number for such securities.
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<PAGE> 11
(o) The Company agrees not to file or make any amendment to
any Registration Statement with respect to any Registrable Securities, or any
amendment of or supplement to the Prospectus used in connection therewith, which
refers to any seller of any securities covered thereby by name, or otherwise
identifies such seller as the holder of any securities of the Company, without
the consent of such seller, such consent not to be unreasonably withheld, except
that no such consent shall be required for any disclosure that is required by
law.
6. UNDERWRITTEN OFFERINGS. The provisions of this Section 6 do not
establish additional registration rights but instead set forth procedures
applicable, in addition to those set forth in Sections 2, 3 and 5, to any
registration that is an underwritten offering.
(a) UNDERWRITTEN OFFERINGS EXCLUSIVE. Whenever a request for
Demand Registration is for an underwritten offering, only securities that are
to be distributed by the underwriters may be included in the Registration.
(b) UNDERWRITING AGREEMENT. If requested by the underwriters
for any underwritten offering by Holders pursuant to a request for Demand
Registration, the Company shall enter into an underwriting agreement with such
underwriters for such offering, such agreement to be reasonably satisfactory in
substance and form to the Holders of a majority of the Registrable Securities to
be covered by such registration and to the underwriters and to contain such
representations and warranties by the Company and such other terms and
provisions as are customarily contained in agreements of this type, including,
but not limited to, indemnities to the effect and to the extent provided in
Section 10, provisions for the delivery of officers' certificates, opinions of
counsel and accountants' "cold comfort" letters, and hold-back arrangements. The
Holders of Registrable Securities to be distributed by such underwriters shall
be parties to such underwriting agreement and may, at their option, require that
any or all the representations and warranties by, and the agreements on the part
of, the Company to and for the benefit of such underwriters be made to and for
the benefit of such Holders and that any or all of the conditions precedent to
the obligations of such underwriters under such underwriting agreements shall
also be conditions precedent to the obligations of such Holders. No such Holders
shall be required by the Company to make any representations or warranties to,
or agreements with, the Company or the underwriters other than as set forth in
Section 6(d) and representations, warranties or agreements regarding such Holder
and such Holders's intended method of distribution.
(c) SELECTION OF UNDERWRITERS. Whenever a request for Demand
Registration is for an underwritten offering, the Holders of a majority of the
Registrable Securities to be Registered pursuant to such offering shall have the
right to select one or more underwriters to administer the offering, subject to
the consent of the Company, which shall not be unreasonably withheld. If the
Company at any time proposes to register any of its securities under the
Securities Act for sale for its own account and such securities are to be
distributed by or through one or more underwriters, the Company shall have the
right to select one or more underwriters to administer the offering, subject to
the consent of the Holders of a majority of the Registrable Securities to be
registered pursuant to such offering, which shall not be unreasonably withheld.
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<PAGE> 12
In all cases in this Section 6(c), at least one of the underwriters chosen by
the Holders or the Company shall be an underwriter of nationally-recognized
standing.
(d) HOLD BACK AGREEMENTS. If and whenever the Company proposes
to register any of its equity securities under the Securities Act, whether or
not for its own account (other than pursuant to a Special Registration), or is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act pursuant to Section 2 or 3, each Holder, if
required by the managing underwriter in an underwritten offering, agrees by
acquisition of such Registrable Securities not to effect (other than pursuant to
such registration) any public sale or distribution, including, without
limitation, any sale pursuant to Rule 144, of any Registrable Securities, any
other equity securities of the Company or any securities convertible into or
exchangeable or exercisable for any equity securities of the Company during the
ten (10) days prior to, and for ninety (90) days after, the effective date of
such registration, to the extent timely notified in writing by the Company or
the managing underwriter, and the Company agrees to cause each director and
executive officer of the Company to enter into a similar agreement with the
Company. The foregoing provisions shall not apply to any Holder if such Holder
is prevented by applicable statute or regulation from entering into any such
agreement; PROVIDED, HOWEVER, that any such Holder shall undertake, in its
request to participate in any such underwritten offering, not to effect any
public sale or distribution of any applicable class of Registrable Securities
commencing on the date of sale of such applicable class of Registrable
Securities unless it has provided forty-five (45) days prior written notice of
such sale or distribution to the underwriter or underwriters. The Company
further agrees not to effect (other than pursuant to such registration or
pursuant to a Special Registration) any public sale or distribution, or to file
any Registration Statement (other than such registration or Special
Registration) covering any, of its equity securities, or any securities
convertible into or exchangeable or exercisable for such securities, during the
ten (10) days prior to, and for ninety (90) days after, the effective date of
such registration if required by the managing underwriter.
7. PREPARATION, REASONABLE INVESTIGATION. In connection with the
preparation and filing of each Registration Statement registering Registrable
Securities under the Securities Act, the Company shall give the Holders of
Registrable Securities to be so registered and their underwriters, if any, and
their respective counsel and accountants, the opportunity to participate in the
preparation of such Registration Statement, each Prospectus included therein or
filed with the Commission, and each amendment thereof or supplement thereto, and
shall give each of them such access to all pertinent financial, corporate, and
other documents and properties of the Company and its Subsidiaries, and such
opportunities to discuss the business of the Company with its officers,
directors, employees and the independent public accountants who have issued
audit reports on its financial statements as shall be necessary, in the opinion
of such Holders' and such underwriters' respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.
8. OTHER REGISTRATIONS. If and whenever the Company is required to use
its best efforts to effect the registration under the Securities Act of any
Registrable Securities pursuant
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<PAGE> 13
to Section 2 or 3, and if such registration shall not have been withdrawn or
abandoned, the Company shall not be obligated to and shall not file any
Registration Statement with respect to any of its securities (including
Registrable Securities) under the Securities Act (other than a Special
Registration), whether of its own accord or at the request or demand of any
holder or holders of such securities, until a period of 180 days shall have
elapsed from the effective date of such previous registration, PROVIDED that the
Company shall not be excused from filing a Registration Statement by virtue of
this Section 8 more than once in a 360 day period.
9. CERTAIN OBLIGATIONS OF HOLDERS.
(a) The Company may require each Holder of any Registrable
Securities as to which any registration is being effected to furnish to the
Company such information regarding such Holder and the intended method of
disposition of such securities as the Company may from time to time reasonably
request in writing and as shall be required to effect the registration of such
Holder's Registrable Securities. Each such Holder agrees to furnish promptly to
the Company all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading.
(b) Each Holder of Registrable Securities covered by a
Registration Statement agrees that, upon receipt of any notice from the Company
pursuant to Section 5(g), such Holder will promptly discontinue the disposition
of Registrable Securities pursuant to such Registration Statement until such
Holder shall have received, in the case of clause (i) of Section 5(g), notice
from the Company that such Registration Statement has been amended, as
contemplated by Section 5(g), and, in the case of clause (ii) of Section 5(g),
copies of the supplemented or amended Prospectus contemplated by Section 5(g).
If so directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, in such
Holder's possession of the Prospectus covering such Registrable Securities at
the time of receipt of such notice. In the event that the Company shall give any
such notice, the period mentioned in Section 5(b) shall be extended by the
number of days during the period from and including the date of the giving of
such notice to and including the date when each seller of any Registrable
Securities covered by such Registration Statement shall have received copies of
the supplemented or amended Prospectus covering such Registrable Securities
contemplated by Section 5(g).
10. INDEMNIFICATION AND CONTRIBUTION.
(a) In the event of any registration of any of the Registrable
Securities under the Securities Act pursuant to this Agreement, the Company will
indemnify and hold harmless the seller of such securities, its directors,
officers, and employees, each other Person who participates as an underwriter,
broker or dealer in the offering or sale of such securities, and each other
person, if any, who controls such seller, underwriter, broker, dealer or any
such participating Person within the meaning of the Securities Act or the
Exchange Act, against any losses, claims, damages, or liabilities, joint or
several, to which such seller or any such director, officer, employee,
underwriter, broker, dealer, participating Person, or controlling Person may
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<PAGE> 14
become subject under the Securities Act, the Exchange Act, state securities or
blue sky laws, or otherwise, insofar as such losses, claims, damages, or
liabilities (or actions or proceedings in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement under which such Registrable Securities
were registered under the Securities Act, any preliminary prospectus, or
Prospectus contained in the Registration Statement, or any amendment or
supplement to such Registration Statement, or arise out of or are based upon the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and the
Company shall reimburse such seller and each such director, officer, employee,
underwriter, broker, dealer, participating Person, and controlling Person in
connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding as such expenses are incurred; PROVIDED,
HOWEVER, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage, liability or expense arises out of or is based
upon any untrue statement or omission made in such Registration Statement,
preliminary prospectus, or Prospectus, or any such amendment or supplement, in
reliance upon and in conformity with information furnished to the Company, in
writing, by or on behalf of such seller, underwriter, participating Person or
controlling Person specifically for use in the preparation thereof.
(b) In the event of any registration of any of the Registrable
Securities under the Securities Act pursuant to this Agreement, each seller of
such securities, severally and not jointly, will indemnify and hold harmless the
Company, each of its directors and officers and each underwriter (if any) and
each person, if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses, claims,
damages, or liabilities, joint or several, to which the Company, such directors
and officers, underwriters, or controlling Persons may become subject under the
Securities Act, Exchange Act, state securities or blue sky laws, or otherwise,
insofar as such losses, claims, damages, or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement under which such securities were registered under the
Securities Act, any preliminary prospectus or Prospectus contained in the
Registration Statement, or any amendment or supplement to the Registration
Statement, or arise out of or are based upon any omission or alleged omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, if the statement or omission was made in
reliance upon and in conformity with information relating to such seller
furnished in writing to the Company by or on behalf of such seller expressly for
use in connection with the preparation of such Registration Statement,
preliminary prospectus, Prospectus, amendment, or supplement; PROVIDED, HOWEVER,
that the liability of each such seller hereunder shall be in proportion to and
limited to the net amount received by such seller (after deducting any
underwriting discount and expenses) from the sale of Registrable Securities sold
in connection with such registration.
(c) Each party entitled to indemnification under this Section
10 (the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the
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<PAGE> 15
defense of any such claim or any litigation resulting therefrom; PROVIDED, that
counsel for the Indemnifying Party, who shall conduct the defense of such claim
or litigation, shall be approved by the Indemnified Party (whose approval shall
not be unreasonably withheld); and, PROVIDED, FURTHER, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 10, except to the
extent that the Indemnifying Party is adversely affected by such failure. The
Indemnified Party may participate in such defense at such party's expense;
PROVIDED, HOWEVER, that the Indemnifying Party shall pay such expense if
representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests or conflicts between the Indemnified Party and any other party
represented by such counsel in such proceeding. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect of such claim or litigations, and no Indemnified Party shall consent
to entry of any judgment or settle such claim or litigation without the prior
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld.
(d) If for any reason the foregoing indemnity is unavailable,
or is insufficient to hold harmless an Indemnified Party, other than by reason
of the exceptions provided in this Section 10, then the Indemnifying Party
shall, in lieu of indemnifying such Indemnified Party, contribute to the amount
paid or payable by the Indemnifying Party as a result of such losses, claims,
damages liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the Indemnifying Party on the one hand and the Indemnified
Party on the other in connection with the statements or omissions which resulted
in such losses, claims, damages, or liabilities, as well as any other relevant
equitable considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Holders of Registrable
Securities covered by the Registration Statement in question and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(e) The Company and the Holders agree that it would not be
just and equitable if contribution pursuant to this Section 10 were determined
by pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in Section 10(d). The amount
paid or payable by an Indemnified Party as a result of the losses, claims,
damages and liabilities referred to in Section 10(d) shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such Indemnified Party in connection with investigating
or defending any such claim or litigation. Notwithstanding anything to the
contrary in this Section 10, (A) no such Holder will be required to contribute
any amount in excess of the proceeds it received from the sale of its
Registrable Securities pursuant to such Registration Statement, (B) no Person
guilty of fraudulent misrepresentation, within the meaning of Section 11(f) of
the Securities Act, shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation and (C)
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<PAGE> 16
no party shall be liable for contribution under this Section 10 except to the
extent and under such circumstances as such party would have been liable to
indemnify under this Section 10 if such indemnification were enforceable under
applicable law. Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such party
in respect to which a claim for contribution may be made against another party
or parties under this Section, notify such party or parties from whom
contribution may be sought, but the omission so to notify such party or parties
from whom contribution may be sought shall not relieve such party from any other
obligation it or they may have thereunder or otherwise under this Section. No
party shall be liable for contribution with respect to any action, suit,
proceeding or claim settled without its prior written consent, which consent
shall not be unreasonably withheld.
11. INDEMNIFICATION WITH RESPECT TO UNDERWRITTEN OFFERING. In the event
that Registrable Securities are sold pursuant to a Registration Statement in an
underwritten offering, the Company agrees to enter into an underwriting
agreement containing customary representations and warranties with respect to
the business and operations of an issuer of the securities being registered and
customary covenants and agreements to be performed by such issuer, including
without limitation customary provisions with respect to indemnification by the
Company of the underwriters of such offering.
12. REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the Commission that may at
any time permit a Holder to sell Registrable Securities of the Company to the
public without Registration, the Company agrees to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(b) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act; and
(c) furnish to any Holder, so long as such Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144 under
the Securities Act, any other such applicable reporting requirements under the
Securities Act and all applicable reporting requirements under the Exchange Act,
(ii) a copy of the most recent annual or quarterly report of the Company and
such other reports and documents so filed by the Company, and (iii) such other
information as may be reasonably requested in availing any Holder of any rule or
regulation of the Commission which permits the selling of any such securities
without Registration or pursuant to such form.
13. SUCCESSORS, ASSIGNS AND TRANSFEREES. This Agreement shall be
binding upon and shall inure to the benefit of each party hereto, and their
respective successors, assigns and transferees. The Purchaser or any other
Holder under this Agreement may assign its rights under this Agreement to any
Affiliate or to other successors, assigns and transferees of the Purchaser
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<PAGE> 17
or any such Holder; PROVIDED, HOWEVER, that the Company is given
written notice from the Purchaser or any such Holder at the time of such
transfer stating the name and address of the transferee or assign and
identifying the securities with respect to which the rights hereunder are being
transferred. As a condition to the effectiveness of any transfer permitted
hereunder (i) the transferee or assign shall agree, in writing, upon request of
the Company, to be bound by the provisions of this Agreement, and (ii) the
Company shall be given written notice at the time of or within a reasonable time
after said transfer or assignment, stating the name and address of said
transferee or assign and identifying the securities with respect to which such
registration rights are being assigned. Provided that the Purchaser or any
Holder and any transferee or assignee has complied with the foregoing
conditions, this Agreement shall survive any transfer of Registrable Securities
to and shall inure to the benefit of an Affiliate or such other successors,
assigns and transferees of the Purchase or any such Holder. In addition, and
whether or not any express transfer or assignment shall have been made, the
provisions of this Agreement which are for the benefits of the parties hereto
other than the Company shall also be for the benefit of and enforceable by any
subsequent Holder or Registrable Securities.
14. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with or violates the rights granted to the Holders in this Agreement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company
will not take any action, or permit any change to occur, with respect to its
securities that would adversely affect the ability of the Holders to include
such Registrable Securities in a registration undertaken pursuant to this
Agreement or which would adversely affect the marketability of such Registrable
Securities in any such registration (including, without limitation, effecting a
stock split or a combination of shares).
(c) SPECIFIC PERFORMANCE; OTHER RIGHTS. The parties recognize
that various of the rights of the Purchaser and any other Holder under this
Agreement are unique and agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. Accordingly, the parties
agree that each of the Purchaser and any such Holder shall, in addition to such
other remedies as may be available to it at law or in equity, have the right to
enforce its rights hereunder by actions for injunctive relief and specific
performance in any court of the United States or any state thereof having
jurisdiction, to the extent permitted by law. The Company hereby waives any
requirement for security or the posting of any bond in connection with any
temporary or permanent award of injunctive, mandatory or other equitable relief.
(d) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated. It is hereby
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<PAGE> 18
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants, and restrictions without
including any of such which may be hereafter declared invalid, void or
unenforceable.
(e) NOTICES. All notices and other communications required or
permitted under this Agreement shall be effective upon receipt and shall be in
writing and may be delivered in person, by telecopy, overnight delivery service
or registered or certified United States mail, addressed to the Company or the
Purchaser (or to any other Holder not a party hereto on the date hereof, to the
address of such Holder in the stock record books of the Company), as the case
may be, at their respective addresses set forth below:
(i) If to the Purchaser to:
MILLENNIUM PHARMACEUTICALS, INC.
238 Main Street
Cambridge, Massachusetts 02139-4815
Attn: Chief Executive Officer
Telephone: (617) 679-7000
Facsimile: (617) 621-0264
with a required copy to:
Attention: Legal Department
and to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 01209
Attn: Steven Singer
Telephone: (617) 526-6000
Facsimile: (617) 526-5000
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<PAGE> 19
(ii) If to Purchaser to:
BAYER AG
D 51368
Leverkeusen
Federal Republic of Germany
Attn: General Counsel
Telephone: 011 49 214 30 81803
Facsimile: 011 49 214 30 50848
With copies to:
Bayer Corporation, Inc.
400 Morgan Lane
West Haven, CT
Attn: Legal Department
Telephone: (203) 812 - 2401
Facsimile: (203) 812 - 2795
and to:
Wilmer, Cutler & Pickering
2445 M Street
Washington, DC 20037
Attn: Richard W. Cass
Telephone: (202) 663-6503
Facsimile: (202) 663-6363
All notices and other communications shall be effective upon the earlier of
actual receipt thereof by the person to whom notice is directed or (a) in the
case of notices and communications sent by personal delivery or telecopy, one
business day after such notice or communication arrives at the applicable
address or was successfully sent to the applicable telecopy number, (b) in the
case of notices and communications sent by overnight delivery service, at noon
(local time) on the second business day following the day such notice or
communications was delivered to such delivery service, and (c) in the case of
notices and communications sent by United States mail, seven days after such
notice or communication shall have been deposited in the United States mail. Any
notice delivered to a party hereunder shall be sent simultaneously, by the same
means, to such party's counsel as set forth above.
(f) ENTIRE AGREEMENT. This Agreement contain the entire
understanding of the parties with respect to the matters covered hereby.
(g) AMENDMENTS AND WAIVERS. This Agreement may be amended as
to the Holders and their successors and assigns (determined as provided in
Section 13), and the
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<PAGE> 20
Company may take any action herein prohibited, or omit to perform any act
required to be performed by it, only if the Company shall obtain the written
consent of the Holders of 75% of the Registrable Securities. This Agreement may
not be waived, changed, modified, or discharged orally, but only by an agreement
in writing signed by the party or parties against whom enforcement of any
waiver, change, modification or discharge is sought or by parties with the right
to consent to such waiver, change, modification or discharge on behalf of such
party; PROVIDED, HOWEVER, that any consent required by the Holders shall require
the consent in writing of no less than the Holders of 75% of the Registrable
Securities.
(h) HEADINGS; COUNTERPARTS. Headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof. This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same instrument, and shall become effective when one or more of the
counterparts have been signed by each party and delivered to the other parties,
it being understood that all parties need not sign the same counterpart.
(i) GENDER. Whenever used herein the singular number shall
include the plural, the plural shall include the singular, and the use of any
gender shall include all genders.
(j) FURTHER ASSURANCES. Each of the parties hereto agrees to
execute and deliver those writings and documents reasonably required to more
fully carry out the purposes of this Agreement and the transactions contemplated
hereby.
(k) GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD
TO CONFLICTS OF LAW PRINCIPLES.
(l) NO THIRD PARTY BENEFICIARIES. Except as provided by
Sections 10 and 13, nothing contained in this Agreement is intended to confer
upon any Person other than the parties hereto and their respective successors
and permitted assigns and transferees, any benefit, right or remedies under or
by reason of this Agreement.
(m) CONSENT TO JURISDICTION. Each of the parties hereto
irrevocably submits to the personal exclusive jurisdiction of the United States
District Court for the District of Delaware for the purposes of any suit, action
or other proceeding arising out of this Agreement or any transaction
contemplated hereby (and, to the extent permitted under applicable rules of
procedure, agrees not to commence any action, suit or proceeding relating hereto
except in such court). Each of the parties hereto further agrees that service of
any process, summons, notice or document hand delivered or sent by registered
mail to such party's respective address set forth in Section 14(e) will be
effective service of process for any action, suit or proceeding in Delaware with
respect to any matters to which it has submitted to jurisdiction as set forth in
the immediately preceding sentence. Each of the parties hereto irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in the United States District court for the
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<PAGE> 21
District of Delaware, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in such court that any such action, suit or
proceeding brought in such court has been brought in an inconvenient forum.
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<PAGE> 22
IN WITNESS WHEREOF, each of the parties has executed this Agreement or
caused this Agreement to be executed on its behalf as of the day and year first
above written.
MILLENNIUM PHARMACEUTICALS, INC. BAYER AG
By: /s/ Mark J. Levin By: /s/
--------------------------- --------------------------------
Title: Chief Executive Officer Title: Head Pharmaceutical Business
Group
By: /s/
--------------------------------
Title: Senior Counsel
-----------------------------
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<PAGE> 1
Exhibit 99.1
As of March 1, 1998, the Company and its subsidiaries had approximately
520 full-time employees, of whom approximately 145 hold Ph.D. or M.D. degrees
and approximately 120 hold other advanced degrees, approximately 390 are engaged
in research and development activities and approximately 130 are engaged in
business development, finance, operations support and administration. The
Company and its subsidiaries currently plan to hire up to approximately 200
additional employees by the end of 1998.
FACTORS THAT MAY AFFECT RESULTS
This Annual Report on Form 10-K contains forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects,"
"intends," and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the
Company's actual results to differ materially from those indicated by such
forward-looking statements. Those factors include, without limitation, those set
forth below and elsewhere in this Annual Report on Form 10-K.
UNCERTAINTIES RELATING TO TECHNOLOGICAL APPROACHES; RISKS RELATED TO
PRODUCT DEVELOPMENT. To date, the Company has not developed or commercialized
any products or services based on its genomics and related technologies. The
Company's lead programs and development focus have been primarily directed to
complex polygenic and multifactorial diseases in the field of human healthcare.
There is limited scientific understanding generally relating to the role of
genes in these diseases and relatively few products and services based on gene
discoveries have been developed and commercialized. There can be no assurance
that the Company's technological approach to gene identification and target
validation will consistently enable the Company to successfully identify and
characterize genes that predispose individuals to diseases.
Any therapeutic and diagnostic products and services based on the
Company's gene discoveries which may in the future be developed by the Company
or any of its current and future strategic partners will require significant
research, development, testing and regulatory approvals prior to
commercialization. The development of these products and services will be
subject to the risks of failure inherent in the development of products and
services based on new technologies. These risks include the possibilities that
any products or services based on these technologies will be found to be
ineffective, unreliable or unsafe, or otherwise fail to receive necessary
regulatory approvals; that products or services, if safe and effective, will be
difficult to manufacture on a large scale or will be uneconomical to market;
that proprietary rights of third parties will preclude the Company or its
strategic partners from
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<PAGE> 2
marketing products or services; and that third parties will market superior or
equivalent products or services.
Accordingly, even if the Company is successful in identifying genes
associated with specific diseases, there can be no assurance that its gene
discoveries will lead to the development of therapeutic and diagnostic products
and services capable of addressing these diseases. The failure to successfully
commercialize products based on Company-discovered genes would have a material
adverse effect on the Company's business, financial condition and operating
results.
HISTORY OF OPERATING LOSSES; ANTICIPATION OF FUTURE LOSSES; UNCERTAINTY OF
ADDITIONAL FUNDING. To date, substantially all of the Company's revenues have
resulted from payments from strategic partners. The Company has not yet
generated any therapeutic or diagnostic products or services which have entered
preclinical studies or generated any revenue from therapeutic or diagnostic
product or service sales. The Company anticipates that it will be a number of
years, if ever, before it will recognize revenue from therapeutic or diagnostic
product or service sales or royalties.
As of December 31, 1997, the Company had an accumulated deficit of
approximately $99,366,000 (including a non-recurring charge of $83,800,000 for
acquired in-process research and development related to the acquisition of
ChemGenics). Even if the Company succeeds in developing a therapeutic or
diagnostic product or service, the Company expects to incur losses for at least
the next several years and that such losses are likely to increase as the
Company expands its infrastructure and its research and development activities.
To achieve profitability, the Company, alone or with others, must successfully
develop therapeutic or diagnostic products or services, conduct clinical trials,
obtain required regulatory approvals and successfully manufacture, market and
sell such therapeutic or diagnostic products or services. The time required to
reach commercial revenue and profitability is highly uncertain and there can be
no assurance that the Company will be able to achieve any such revenue and
profitability on a sustained basis, if at all.
The Company's approach of applying a comprehensive platform of genomics
and related technologies in the discovery of life-science based products and
services has required that Millennium establish a substantial scientific
infrastructure. The Company has consumed substantial amounts of cash to date and
expects capital and operating expenditures to increase over the next several
years as it expands its infrastructure and its research and development
activities.
The Company believes that existing cash and investment securities and
anticipated cash flow from existing strategic alliances will be sufficient to
support the Company's operations through at least 1999. The Company's actual
future capital requirements, however, will depend on many factors, including
progress of its
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<PAGE> 3
development and discovery programs, the number and breadth of these programs,
achievement of milestones under strategic alliance arrangements, the ability of
the Company to establish and maintain additional strategic alliance and
licensing arrangements, and the progress of the development efforts of the
Company's strategic partners. Other factors that may affect the Company's future
capital requirements include the level of the Company's activities relating to
commercialization rights it has retained in its strategic alliance arrangements,
competing technological and market developments, costs associated with acquiring
rights to technologies developed outside the Company, costs associated with
facility expansion, costs associated with collection of patient information and
DNA samples, costs involved in enforcing patent claims and other intellectual
property rights and the costs and timing of regulatory approvals.
The Company expects that it will require significant additional financing
in the future, which it may seek to raise through public or private equity
offerings, debt financings or additional strategic alliance and licensing
arrangements. Such additional financing may not be available when needed, or may
not be available on terms favorable to the Company or its stockholders. To the
extent the Company raises additional capital by issuing equity securities,
ownership dilution to stockholders will result. To the extent that the Company
raises additional funds through strategic alliance and licensing arrangements,
the Company may be required to relinquish rights to certain of its technologies
or product candidates, or to grant licenses on terms that are not favorable to
the Company, either of which could have a material adverse effect on the
Company's business, financial condition and results of operations. In the event
that adequate funds are not available, the Company's business would be adversely
affected.
RELIANCE ON STRATEGIC PARTNERS. The Company's strategy for development and
commercialization of therapeutic and diagnostic products and services based upon
its gene discoveries depends upon the formation of various strategic alliances,
such as the Company's strategic alliances with Roche, Lilly, Astra, AHP, Pfizer
and Monsanto. There can be no assurance that the Company will be able to
establish additional strategic alliance or licensing arrangements necessary to
develop and commercialize products and services based upon the Company's
discovery and development programs, that any such arrangements or licenses will
be on terms favorable to the Company or that the current or any future strategic
alliances or licensing arrangements ultimately will be successful.
In certain of its strategic alliances, the Company is dependent on its
strategic partners for the preclinical study, clinical development, regulatory
approval, manufacturing, marketing and sale of therapeutic and diagnostic
products and services based on the results of these collaborative programs. The
agreements with these strategic partners allow them significant discretion in
electing whether to pursue any of these activities. The Company cannot control
the amount and timing of resources its strategic partners devote to the
Company's discovery and
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<PAGE> 4
development programs or to the potential products or services which may result
from these programs. If any of the Company's strategic partners were to breach
or terminate its agreement with the Company or otherwise fail to conduct its
collaborative activities successfully in a timely manner, the Company's
discovery and development programs, including the preclinical or clinical
development or commercialization of products or services, would be delayed or
terminated. Any such delay or termination could have a material adverse effect
on the Company's business, financial condition and results of operations.
The Company relies on its strategic partners for significant funding in
support of the Company's discovery and development programs. See " --
Significant Customers." The Company could be required to devote additional
internal resources to its product and service development, or scale back or
terminate certain development programs or seek alternative collaborative
partners, if funding from one or more of its collaborative programs were reduced
or terminated.
Disputes may arise in the future with respect to the ownership of rights
to any technology developed with strategic partners. These and other possible
disagreements between strategic partners and the Company could lead to delays in
the collaborative research, development or commercialization of certain products
and services, or could require or result in litigation or arbitration, which
could be time-consuming and expensive, in which case it would have a material
adverse effect on the Company's business, financial condition and results of
operations.
Recently there have been a significant number of consolidations among
pharmaceutical companies. Any such consolidation involving a company with which
the Company is collaborating could result in the diminution or termination of,
or delays in, the development or commercialization of products or research
programs under one or more of the Company's strategic alliances.
In each of its strategic alliances, the Company generally agrees not to
conduct certain research and development, independently or with any commercial
third party, that is in the same field as the research and development conducted
under the alliance agreement. Consequently, these arrangements may have the
effect of limiting the areas of research and development the Company may pursue,
either alone or with others. The Company's strategic partners, however, may
develop, either alone or with others, products and services that are similar to
or competitive with the products and services that are the subject of the
Company's collaborations with such partners. Competing products and services,
either developed by a strategic partner or to which the strategic partner has
rights, may result in the partner withdrawing financial and related support for
the Company's product and service candidates, which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
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<PAGE> 5
All of the Company's strategic alliance agreements are subject to
termination under various circumstances. Each strategic partner has the right to
terminate its agreement with the Company (while maintaining rights and licenses
to certain Company discoveries) should the Company fail to meet certain
performance criteria specified in the relevant strategic alliance agreement.
Certain of the Company's strategic alliance agreements provide that, upon
expiration of a specified period after commencement of the agreement, its
strategic partner has the right to terminate the agreement on short notice
without cause. Certain of the Company's strategic alliance agreements have
initial terms that expire in the next 12 months, including its strategic
alliance agreements with Astra (expiring in December 1998), Pfizer (expiring in
December 1998), Roche (expiring in March 1999) and Lilly in the area of oncology
(expiring in April 1999). There can be no assurance that the Company will be
able to successfully negotiate a continuation of such agreements, if it seeks to
do so. The termination or non-renewal of any strategic alliance could have a
material adverse effect on the Company's business, financial condition and
results of operations.
RISKS ASSOCIATED WITH ESTABLISHMENT OF DIVISIONS AND SUBSIDIARIES.
Millennium has adopted a strategy of establishing business divisions and
subsidiaries in order to pursue multiple business opportunities and increase its
capabilities and involvement in the later stages of drug discovery and
development. In 1997, the Company organized MPharma, its pharmaceutical
division, and three subsidiaries, MBio, MPMx and MInfo. The Company does not
hold all of the equity in one of these subsidiaries and anticipates that there
will be minority stockholders in other subsidiaries in the future.
Millennium has sought to develop both informal and formal relationships
between and among subsidiaries and divisions to provide each unit within the
overall group with access to the assets and capabilities of the overall group
that are relevant to the business of the particular unit. However, conflicts
could arise in the future between or among Millennium and its divisions and
subsidiaries with respect to, among other things, future business opportunities
and the sharing of technologies, facilities, administrative services or other
resources.
Certain officers and directors of the Company, including Mark Levin, Chief
Executive Officer and Chairman of the Board of Directors of the Company, and
Steven Holtzman, Chief Business Officer of the Company, currently serve as
directors of each of the subsidiaries. Mr. Levin also serves as the President of
MBio. The Company's present executive officers and managers may assume other
positions within Millennium's current or future subsidiaries, causing them to be
unavailable to serve the Company or to reduce the amount of time they devote to
the affairs of the Company. Furthermore, members of the Board of Directors of
Millennium and the officers of Millennium who are also affiliated with one or
more of the subsidiaries will be required to consider not only the short-term
and long-term impact of operating decisions on the Company, but also the impact
of such decisions on the subsidiaries. In some cases, the impact of such
decisions could be disadvantageous
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<PAGE> 6
to the Company or to any or all of the subsidiaries. Conflicts which may arise
among the Company and such divisions or subsidiaries could have a material
adverse effect on the Company's business, financial condition or results of
operations.
EXPANSION OF OPERATIONS; MANAGEMENT OF GROWTH. The Company recently has
significantly increased the scale of its operations to support the expansion of
its disease research programs and its strategic alliances, including expansion
due to the acquisition of ChemGenics in February 1997, the organization during
1997 of three new subsidiaries, MBio, MPMx and MInfo, and the initiation of a
major strategic alliance with Monsanto in October 1997. This expansion has
included the hiring of a significant number of additional personnel. As of March
1, 1998, the Company and its subsidiaries had approximately 520 full-time
employees, an increase of 160 employees since March 1, 1997. The Company plans
to hire up to approximately 200 new employees by the end of 1998. In addition to
hiring new employees, the Company's growth has and will require the acquisition
of significant amounts of additional equipment, including software and
informatics resources, and the leasing of additional facilities.
The Company's growth has resulted in an increase in responsibilities
placed upon the Company's management and has placed added pressures on the
Company's operational and financial systems. The Company's ability to manage
such growth effectively will depend upon its ability to broaden its management
team and to attract, hire and retain skilled employees. The Company's success
will also depend on the ability of its officers and key employees to continue to
implement and improve its operational, management information and financial
control systems and to expand, train and manage its employee base. Inability to
manage growth effectively could have a material adverse effect on the Company's
business, financial condition and operating results.
INTENSE SCIENTIFIC AND COMMERCIAL COMPETITION. The field of genomics is
highly competitive. Competitors of the Company in the genomics area include,
among others, public companies, private biotechnology and diagnostic companies
and major pharmaceutical companies. Universities and other research
institutions, including those receiving funding from the federally funded Human
Genome Project, also compete with Millennium. A number of entities are
attempting to rapidly identify and patent randomly sequenced genes and gene
fragments, typically without specific knowledge of the function of such genes or
gene fragments. In addition, certain other entities are pursing a gene
identification, characterization and product development strategy based on
positional cloning and other genomics technologies.
Many of the organizations competing against the Company have greater
capital resources, research and development staffs and facilities, and greater
experience in drug discovery and development, obtaining regulatory approvals and
product manufacturing and greater marketing capabilities than the Company. The
Company's competitors may discover, characterize or develop therapeutic or
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diagnostic products or services for important genes in advance of Millennium or
may make discoveries which render non-competitive or obsolete the products or
services that the Company or its strategic alliance partners may seek to
develop, any of which could have a material adverse effect on any related
Millennium disease research program. The Company expects competition to
intensify in genomics research as technical advances in the field are made and
become more widely known.
Generally, the Company's strategic alliance agreements do not restrict the
strategic partner from pursuing competing development efforts. Any product
candidate of the Company, therefore, may be subject to competition with a
potential product under development by a strategic partner.
PATENTS AND PROPRIETARY RIGHTS; THIRD PARTY RIGHTS. The Company's
commercial success will depend in part on obtaining patent protection on gene
discoveries and on products, methods and services based on such discoveries. As
of March 1, 1998, Millennium and its subsidiaries had more than 200 pending
United States and foreign patent applications and seven issued United States
patents. The patent positions of pharmaceutical, biopharmaceutical and
biotechnology companies, including Millennium, are generally uncertain and
involve complex legal and factual questions. There can be no assurance that any
of the Company's pending patent applications will result in issued patents, that
the Company will develop additional proprietary technologies that are
patentable, that any patents issued to the Company or its strategic partners
will provide a basis for commercially viable products or will provide the
Company with any competitive advantages or will not be challenged by third
parties, or that the patents of others will not have an adverse effect on the
ability of the Company to do business. In addition, patent law relating to the
scope of claims in the technology fields in which the Company operates is still
evolving. The degree of future protection for the Company's proprietary rights,
therefore, is uncertain. Furthermore, there can be no assurance that others will
not independently develop similar or alternative technologies, duplicate any of
the Company's technologies, or design around the patented technologies developed
by the Company. In addition, the Company could incur substantial costs in
litigation if it is required to defend itself in patent suits brought by third
parties or if it initiates such suits.
The Company has applied for patent protection for novel genes, partial
gene sequences ("ESTs") of novel genes and novel uses for known genes identified
through its research programs. There is substantial uncertainty regarding the
patentability of ESTs or full-length genes absent biological data demonstrating
functional relevance. Based on recent technological advances in gene sequencing
technology, a number of groups other than the Company are attempting to rapidly
identify ESTs and full-length genes, the functions of which have not been
characterized. Washington University, for example, is currently identifying ESTs
through partial sequencing pursuant to funding provided by Merck & Co., Inc.,
and depositing the ESTs identified in a public database. The public availability
of EST information prior to the time the Company applies for patent protection
on a
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<PAGE> 8
corresponding full-length gene could adversely affect the Company's ability to
obtain patent protection with respect to such gene. To the extent any patents
issue to other parties on such partial or full-length genes, the risk increases
that the potential products and processes of the Company or its strategic
partners may give rise to claims of patent infringement.
Others may have filed and in the future are likely to file patent
applications covering genes or gene products that are similar or identical to
those of the Company. No assurance can be given that any such patent application
will not have priority over patent applications filed by the Company. Any legal
action against the Company or its strategic partners claiming damages and
seeking to enjoin commercial activities relating to the affected products and
processes could, in addition to subjecting the Company to potential liability
for damages, require the Company or its strategic partner to obtain a license in
order to continue to manufacture or market the affected products and processes.
There can be no assurance that the Company or its strategic partners would
prevail in any such action or that any license required under any such patent
would be made available on commercially acceptable terms, if at all. The Company
believes that there may be significant litigation in the industry regarding
patent and other intellectual property rights. If the Company becomes involved
in such litigation, it could consume a substantial portion of the Company's
managerial and financial resources.
There is substantial uncertainty concerning whether human clinical data
will be required for issuance of patents for human therapeutics. If such data is
required, the Company's ability to obtain patent protection could be delayed or
otherwise adversely affected. Although the United States Patent and Trademark
Office ("USPTO") issued new utility guidelines in July 1995 that address the
requirements for demonstrating utility for biotechnology inventions,
particularly for inventions relating to human therapeutics, utility will be
determined on a case-by-case basis. Moreover, there can be no assurance that the
USPTO's position will not change with respect to what is required to establish
utility for gene sequences and products and methods based on such sequences.
Furthermore, the enactment of the legislation implementing the General Agreement
on Trade and Tariffs has resulted in certain changes to United States patent
laws that became effective on June 8, 1995. Most notably, the term of patent
protection for patent applications filed on or after June 8, 1995 is no longer a
period of seventeen years from the date of grant. The new term of United States
patents will commence on the date of issuance and terminate twenty years from
the earliest effective filing date of the application. Because the time from
filing to issuance of biotechnology patent applications is often more than three
years, a twenty-year term from the effective date of filing may result in a
substantially shortened term of patent protection, which may adversely impact
the Company's patent position. If this change results in a shorter period of
patent coverage, the Company's business could be adversely affected to the
extent that the duration and level of the royalties it is entitled to receive
from its strategic partners is based on the existence of a valid patent.
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<PAGE> 9
The Company relies upon trade secret protection for its confidential and
proprietary information. The Company believes that it has developed proprietary
technology for use in gene discovery and characterization, including proprietary
genetic marker sets, proprietary software (including proprietary software for
the capture, storage and analysis of DNA and protein sequence data) and an
integrated informatics system. The Company has not sought patent protection for
these technologies. In addition, the Company has developed databases of
proprietary gene sequences and biological information which are updated on an
ongoing basis. The Company has taken security measures to protect its data and
continues to explore ways to further enhance the security for its data. There
can be no assurance, however, that such measures will provide adequate
protection for the Company's trade secrets or other proprietary information.
While the Company requires employees, academic collaborators and consultants to
enter into confidentiality agreements, there can be no assurance that
proprietary information will not be disclosed, that others will not
independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to the Company's trade secrets or disclose
such technology, or that the Company can meaningfully protect its trade secrets.
The Company's academic collaborators have certain rights to publish data
and information in which the Company has rights. While the Company believes that
the limitations on publication of data developed by its collaborators pursuant
to its collaboration agreements will be sufficient to permit the Company to
apply for patent protection, there is considerable pressure on academic
institutions to publish discoveries in the genetics and genomics fields. There
can be no assurance that such publication would not affect the Company's ability
to obtain patent protection for some inventions in which it may have an
interest.
The Company is party to various license agreements which give it rights to
use certain technologies in its research and development processes. There can be
no assurance that the Company will be able to continue to license such
technology on commercially reasonable terms, if at all. Failure by the Company
to maintain rights to such technology could have a material adverse effect on
the Company's business, financial condition and results of operations.
UNCERTAINTY OF GOVERNMENT REGULATORY APPROVALS. The FDA and comparable
agencies in foreign countries impose substantial requirements upon the
manufacturing and marketing of human therapeutic, diagnostic and vaccine
products and services such as those proposed to be developed by the Company or
its strategic alliance partners. The process of obtaining FDA and other required
regulatory approvals is lengthy and expensive. The time required for FDA and
other approvals is uncertain and typically takes a number of years, depending on
the complexity and novelty of the product. The Company and/or its strategic
alliance partners may encounter significant delays or excessive costs in their
efforts to secure necessary approvals or licenses.
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<PAGE> 10
Because certain of the products likely to result from the Company's
research and development programs involve the application of new technologies
and may be based on a new therapeutic approach, such products may be subject to
substantial additional review by various governmental regulatory authorities
and, as a result, regulatory approvals may be obtained more slowly than for
products using more conventional technologies. For example, proposals to conduct
clinical research involving gene therapy at institutions supported by the
National Institutes of Health ("NIH") must be approved by the Recombinant DNA
Advisory Committee ("RAC") and the NIH. In addition, the U.S. Government has
recently established a working group to assess whether additional regulations in
the area of genetic testing may be appropriate, which could result in further
regulation.
There can be no assurance that FDA or other approvals will be obtained in
a timely manner, if at all. Any delay in obtaining, or the failure to obtain,
such approvals could materially adversely affect the Company's ability to
generate product or service or royalty revenues. Even if FDA or other approvals
are obtained, the marketing and manufacturing of diagnostic and therapeutic
products are subject to continuing FDA and other regulatory review. Later
discovery of previously unknown problems with a product, manufacturer or
facility may result in restrictions on the product or manufacturer, including
withdrawal of the product from the market. Additional governmental regulations
may be promulgated which could delay regulatory approval of the Company's or a
strategic partner's potential products. The Company cannot predict the impact of
adverse governmental regulations which might arise from future legislative or
administrative action.
The Company's research and development activities involve the controlled
use of hazardous materials, chemicals and various radioactive materials. The
Company is subject to federal, state and local laws and regulations governing
the use, storage, handling and disposal of such materials and certain waste
products. Although the Company believes that its safety procedures for handling
and disposing of such materials comply with the standards prescribed by federal,
state and local laws and 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 liability could exceed the resources of the Company.
UNCERTAINTY ASSOCIATED WITH PRECLINICAL AND CLINICAL TESTING. The grant of
regulatory approval for the commercial sale of any of the Company's potential
products will depend in part on the Company and/or its strategic alliance
partner successfully conducting extensive preclinical and clinical testing to
demonstrate the product's safety and efficacy in humans. The Company has limited
experience in conducting preclinical and clinical development activities.
Neither the Company nor any strategic alliance partner has submitted an IND to
the FDA for any product candidate under development by the Company.
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The results of preclinical studies by the Company and/or its strategic
alliance partners may be inconclusive and may not be indicative of results that
will be obtained in human clinical trials. In addition, results attained in
early human clinical trials relating to the products under development by the
Company may not be indicative of results that will be obtained in later clinical
trials. As results of particular preclinical studies and clinical trials are
received, the Company and/or its strategic alliance partners may abandon
projects which they might otherwise have believed to be promising.
There can be no assurance that the Company will be permitted to undertake
and complete human clinical trials of any of the Company's potential products,
either in the U.S. or elsewhere. If such trials are permitted, there can be no
assurance that the products under development will not have undesirable side
effect or other characteristics that may prevent them from being approved or
limit their commercial use if approved. Clinical testing is very expensive, and
the Company and/or its strategic alliance partners will have to devote
substantial resources for the payment of clinical trial expenses.
In certain circumstances the Company may rely, in part, on its strategic
alliance partners, academic institutions and on clinical research organizations
to conduct and monitor certain clinical trials. There can be no assurance that
such entities will conduct the clinical trials successfully. Furthermore, the
Company will have less control over such trials than if the Company were the
sole sponsor thereof. As a result, there can be no assurance that these trials
will commence or be completed as planned. Failure to commence or complete any of
its planned clinical trials could have a material adverse effect on the
Company's business, financial condition or results of operations.
ABSENCE OF SALES AND MARKETING EXPERIENCE; LIMITED MANUFACTURING
CAPABILITY. Although Millennium plans to rely significantly on strategic
alliance partners for the marketing and distribution of its products and
services, the Company may market and sell certain of its products and services
directly and may engage in certain other marketing activities in collaboration
with its strategic alliance partners. The Company has no experience in sales,
marketing or distribution. The Company does not expect to establish a direct
sales capability until such time as it has one or more products or services in
development which are approaching marketing approval.
To the extent the Company enters into marketing or distribution
arrangements with strategic alliance partners, any revenues the Company receives
will depend upon the efforts of third parties. There can be no assurance that
any third party would market the Company's products and services successfully or
that any third-party collaboration would be on terms favorable to the Company.
If any marketing partner did not market a product or service successfully, the
Company's business would be materially adversely affected. If Millennium's plan
to rely on
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<PAGE> 12
strategic alliance partners for significant aspects of marketing and selling the
Company's products were unsuccessful for any reason, Millennium would need to
recruit and train a marketing and sales force which would entail the incurrence
of significant additional costs.
There can be no assurance that the Company would be able to attract and
build a sufficient marketing staff or sales force, that the cost of establishing
such a marketing staff or sales force would be justifiable in light of any
product or service revenues or that the Company's direct sales and marketing
efforts would be successful. In addition, if the Company succeeds in bringing
one or more products or services to market, it may compete with other companies
that currently have extensive and well-funded marketing and sales operations.
There can be no assurance that the Company's marketing and sales efforts would
enable it to compete successfully against such other companies.
The Company lacks commercial-scale facilities to manufacture any products
under development in accordance with current Good Manufacturing Practices
("GMP") requirements prescribed by the FDA. The Company expects to be dependent
on third party manufacturers or collaborative partners for all of its clinical
trials and commercial production of products. In the event that the Company were
unable to obtain contract manufacturing, it may not be able to commercialize its
products. Where third-party arrangements are established, the Company will
depend upon such third parties to perform their obligations in a timely manner.
There can be no assurance that third parties depended upon by the Company would
perform and any failures by third parties could delay clinical trial development
or the submission of products for regulatory approval, impair the Company's
ability to commercialize its products as planned and deliver products on a
timely basis, or otherwise impair the Company's competitive position, which
could have a material adverse effect on the Company' business, financial
condition or result or operation.
If the Company determined to develop its own manufacturing capabilities,
it would need to recruit qualified personnel and build or lease the requisite
facilities and equipment because it has no experience in manufacturing on a
commercial scale and no facilities or equipment therefor. There can be no
assurance that Millennium would be able to successfully develop its own
manufacturing capabilities in a cost-effective or timely manner. In addition,
the manufacture of any products by the Company is subject to regulation by the
FDA and comparable agencies in foreign countries. Delay in complying or failure
to comply with such manufacturing requirements could materially adversely affect
the marketing of the Company's products and the Company's business, financial
condition and results of operations.
AVAILABILITY OF, AND COMPETITION FOR, FAMILY RESOURCES. The Company's gene
identification strategy includes genetic studies of families and populations
prone to particular diseases. These studies are based upon statistical analyses
of disease inheritance patterns and require the collection of large numbers of
DNA samples
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<PAGE> 13
from affected individuals, their families and other suitable populations. The
Company is dependent upon collaborations with a number of academic centers for
the identification of donor populations and the collection and supply of the DNA
samples used in its human disease gene research programs. The availability of
DNA samples from large, family-based or other suitable populations is therefore
critical to the Company's ability to discover the genes responsible for human
diseases through human genetic approaches. The competition for these resources
is intense and certain of the Company's competitors have obtained rights to
significantly more family resources than the Company. There can be no assurance
that the Company will be able to obtain access to DNA samples necessary to
support its human gene discovery programs and any material lack of availability
of such DNA samples would have an adverse effect on the Company's business.
ATTRACTION AND RETENTION OF KEY EMPLOYEES AND CONSULTANTS. The Company is
highly dependent on the principal members of its management and scientific
staff, none of whom is bound by a long-term employment agreement with the
Company. The loss of services of any of these personnel could impede
significantly the achievement of the Company's development objectives and could
have a material adverse effect on the Company's business, financial condition
and operating results. Furthermore, recruiting and retaining qualified
scientific personnel to perform research and development work in the future will
also be critical to the Company's success. There is intense competition among
pharmaceutical and health care companies, universities and nonprofit research
institutions for experienced scientists, and there can be no assurance that the
Company will be able to attract and retain personnel on acceptable terms.
In addition, the Company relies on its scientific advisors to assist the
Company in formulating its discovery and developing strategy. All of the
scientific advisors are employed by employers other than the Company and have
commitments to other entities that may limit their availability to the Company.
Some of the Company's scientific advisors also consult for companies that may be
competitors of the Company.
DEPENDENCE ON RESEARCH COLLABORATORS AND SCIENTIFIC ADVISORS. The Company
has relationships with collaborators at academic and other institutions who
conduct research at the Company's request. Such collaborators are not employees
of the Company. All of Millennium's consultants are employed by employers other
than the Company and may have commitments to, or consulting or advisory
contracts with, other entities that may limit their availability to the Company.
As a result, the Company has limited control over their activities and, except
as otherwise required by its collaboration and consulting agreements, can expect
only limited amounts of their time to be dedicated to the Company's activities.
The Company's ability to discover genes involved in human disease and
commercialize products based on those discoveries may depend in part on
continued collaborations with researchers at academic and other institutions.
There can be no assurance that the Company will be
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<PAGE> 14
able to negotiate additional acceptable collaborations with collaborators at
academic and other institutions or that its existing collaborations will be
successful.
The Company's research collaborators and scientific advisors sign
agreements which provide for confidentiality of the Company's proprietary
information and results of studies. There can be no assurance, however, that the
Company will be able to maintain the confidentiality of its technology and other
confidential information in connection with every collaboration, and any
unauthorized dissemination of the Company's confidential information could have
an adverse effect on the Company's business.
UNCERTAINTY OF THERAPEUTIC AND DIAGNOSTIC PRICING, REIMBURSEMENT AND
RELATED MATTERS. The Company's business, financial condition and results of
operations may be materially adversely affected by the continuing efforts of
government and third party payors to contain or reduce the costs of health care
through various means. For example, in certain foreign markets pricing and
profitability of prescription pharmaceuticals are subject to government control.
In the United States, the Company expects that there will continue to be a
number of federal and state proposals to implement similar government control.
In addition, increasing emphasis on managed care in the United States will
continue to put pressure on the pricing of therapeutic and diagnostic products
and services. Cost control initiatives could decrease the price that the Company
or any of its strategic partners receives for any therapeutic and diagnostic
products or services in the future and have a material adverse effect on the
Company's business, financial condition and results of operations. Further, to
the extent that cost control initiatives have a material adverse effect on the
Company's strategic partners, the Company's ability to commercialize its
products and to realize royalties may be adversely affected.
The ability of the Company and any strategic partner to commercialize
therapeutic and diagnostic products and services may depend in part on the
extent to which reimbursement for the products and services will be available
from government and health administration authorities, private health insurers
and other third party payors. Significant uncertainty exists as to the
reimbursement status of newly approved health care products and services. Third
party payors, including Medicare, increasingly are challenging the prices
charged for medical products and services. Government and other third party
payors are increasingly attempting to contain health care costs by limiting both
coverage and the level of reimbursement for new therapeutic and diagnostic
products and services and by refusing in some cases to provide coverage for uses
of approved products for disease indications for which the FDA has not granted
labeling approval. There can be no assurance that any third party insurance
coverage will be available to patients for any products and services discovered
and developed by the Company or its strategic partners. If adequate coverage and
reimbursement levels are not provided by government and other third party payors
for the Company's products and services, the market acceptance of these products
and services may be reduced, which may have a
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<PAGE> 15
material adverse effect on the Company's business, financial condition and
results of operations.
PRODUCT LIABILITY EXPOSURE. Clinical trials, manufacturing, marketing and
sale of any of the Company's or its strategic partners' potential therapeutic
products may expose the Company to liability claims from the use of such
therapeutic products. The Company currently does not carry product liability
insurance. There can be no assurance that the Company or its strategic partners
will be able to obtain such insurance or, if obtained, that sufficient coverage
can be acquired at a reasonable cost. An inability to obtain sufficient
insurance coverage at an acceptable cost or otherwise to protect against
potential product liability claims could prevent or inhibit the
commercialization of therapeutic products developed by the Company or its
strategic partners. A product liability claim or recall could have a material
adverse effect on the business or financial condition of the Company. While
under certain circumstances the Company is entitled to be indemnified against
losses by its strategic partners, there can be no assurance that this
indemnification would be available or adequate should any such claim arise.
RISKS ASSOCIATED WITH ACQUISITIONS. As part of its business strategy, the
Company may from time to time acquire assets and businesses principally relating
to or complementary to its operations, including for the purpose of acquiring
specific technology. Any acquisitions by the Company will be accompanied by the
risks commonly encountered in acquisitions of companies. Such risks include,
among other things, potential exposure to unknown liabilities of acquired
companies or to acquisition costs and expenses exceeding amounts anticipated for
such purposes, the difficulty and expense of assimilating the operations,
acquired technology and personnel of the acquired businesses, the potential
disruption of the Company's ongoing business and diversion of management time
and attention, and the potential failure to achieve anticipated financial,
operating and strategic benefits from such acquisitions.
In order to finance any such acquisition, it may be necessary for the
Company to raise additional funds through public or private financing. Such
financing, if available at all, may be on terms which are not favorable in the
Company, and, in the case of equity financings, may result in dilution to the
Company's stockholders.
There can be no assurance that the Company would be successful in
overcoming these risks or any other problems encountered in connection with any
such acquisitions. If the Company is unsuccessful in doing so, its business,
financial condition and results of operations could be materially and adversely
affected.
ITEM 2. PROPERTIES
The Company's facilities currently consist of an aggregate of
approximately 242,000 square feet of office, research and laboratory space and
an animal facility in
-58-
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