<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 11, 1998.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
PRAECIS PHARMACEUTICALS INCORPORATED
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 2834 04-3200305
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------
ONE HAMPSHIRE STREET
CAMBRIDGE, MASSACHUSETTS 02139-1572
(617) 494-8400
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------
MALCOLM L. GEFTER, PH.D.
CHAIRMAN OF THE BOARD,
CHIEF EXECUTIVE OFFICER AND PRESIDENT
ONE HAMPSHIRE STREET
CAMBRIDGE, MASSACHUSETTS 02139-1572
(617) 494-8400
(Name, address, including zip code,
and telephone number, including area code, of agent for service)
COPY TO:
<TABLE>
<S> <C>
KENT A. COIT, ESQ. LESLIE E. DAVIS, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP TESTA, HURWITZ & THIBEAULT, LLP
ONE BEACON STREET HIGH STREET TOWER, 125 HIGH STREET
BOSTON, MASSACHUSETTS 02108 BOSTON, MASSACHUSETTS 02110
(617) 573-4800 (617) 248-7000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / _________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS TO BE OFFERING PRICE AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share............ 4,025,000 $16.00 $64,400,000 $18,998
</TABLE>
(1) Includes 525,000 shares which may be purchased by the Underwriters to cover
over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933, as amended.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE AS MAY
BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION
AUGUST 11, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
3,500,000 Shares
[LOGO]
Common Stock
------------
All of the 3,500,000 shares of Common Stock offered hereby are being sold by
PRAECIS-TM- PHARMACEUTICALS INCORPORATED ("PRAECIS" or the "Company"). Prior to
this offering, there has been no public market for the Common Stock of the
Company. It is presently estimated that the initial public offering price will
be between $14.00 and $16.00 per share. See "Underwriting" for the factors to be
considered in determining the initial public offering price. Application has
been made for quotation of the Common Stock on the Nasdaq National Market under
the symbol "PRCS."
-------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS COMPANY(1)
<S> <C> <C> <C>
Per Share................................ $ $ $
Total(2)................................. $ $ $
</TABLE>
(1) Before deducting expenses of the offering estimated at $750,000, payable by
the Company.
(2) The Company has granted the Underwriters a 30-day option to purchase up to
525,000 additional shares of Common Stock solely to cover over-allotments,
if any. To the extent the option is exercised, the Underwriters will offer
the additional shares at the Price to Public shown above. If the option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
-------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made through the
facilities of the Depository Trust Company in New York, New York, on or about
, 1998 against payment therefor in immediately available funds.
BT ALEX. BROWN NATIONSBANC MONTGOMERY SECURITIES LLC
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the shares of Common Stock being offered hereby. This Prospectus
does not contain all the information set forth in the Registration Statement and
the exhibits and schedules thereto, to which reference is hereby made.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document are not necessarily complete, and, with respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description
thereof, and each such statement is qualified in all respects by such reference.
The Registration Statement and the exhibits and schedules thereto may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and will also be available for inspection and copying at the regional
offices of the Commission located at 7 World Trade Center, New York, New York
10048 and at Northwestern Atrium Center, 500 West Madison Street (Suite 1400),
Chicago, Illinois 60661. Copies of such material may also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Additionally, the Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission at (http://www.sec.gov). Upon consummation of this offering,
the Company will become subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith will be required to file periodic reports and other
information with the Commission.
------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------
PRAECIS-TM-, MASTRscreen-TM- and Rel-Ease-TM- are trademarks of the Company.
Tradenames and trademarks of other companies appearing in this Prospectus are
the property of their respective holders.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN
THIS PROSPECTUS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER
SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS.
FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO,
THOSE DISCUSSED IN "RISK FACTORS."
THE COMPANY
PRAECIS is engaged in the development of peptide-based therapeutics for the
treatment of human diseases. The Company's lead program is the development of
abarelix, a synthetically modified peptide, for the treatment of diseases
exacerbated by testosterone or estrogen. Abarelix-depot-M, a sustained delivery
depot formulation of abarelix, is entering Phase III clinical trials for the
treatment of hormonally responsive prostate cancer. PRAECIS has entered into
strategic alliances with each of Roche Products Inc. and Synthelabo for the
further development and commercialization of abarelix products.
Prostate cancer is one of the most commonly diagnosed human cancers.
According to the American Cancer Society, approximately 209,900 new diagnoses
of, and 41,800 deaths from, prostate cancer occurred in the United States in
1997. Based on worldwide IMS data, approximately $2.0 billion of prescriptions
were written in 1997 for the currently available hormonal therapies for the
treatment of hormonally responsive prostate cancer. These therapeutics reduce
testosterone to castrate levels, and are delivered by injection as a sustained
delivery depot formulation. However, these therapies result in testosterone
reduction only after causing an initial "surge" in testosterone levels. This
surge may result in stimulation of cancer growth and a temporary exacerbation of
the disease, known as a clinical "flare". Although many physicians prescribe a
supplemental therapy to mitigate the flare, this supplemental therapy may be
only partially effective, has significant side effects and is not reimbursed by
government sources. Based on interim results of the Company's ongoing Phase I/II
clinical trial, abarelix-depot-M has been shown to reduce testosterone levels
immediately, without a testosterone surge and without the need for supplemental
therapy.
Interim results from the Company's ongoing Phase I/II clinical trial
indicate that of those patients who received abarelix-depot-M, more than 75%
achieved castrate testosterone levels within one week after administration, and
more than 90% achieved such levels within four weeks. These interim results also
indicate that castrate testosterone levels can be maintained by administration
of abarelix-depot-M once every four weeks. By contrast, patients receiving
currently available hormonal therapies in this trial experienced an initial
surge of testosterone levels and did not consistently reach castrate
testosterone levels until three to four weeks after administration. The Company
is commencing multi-center pivotal Phase III clinical trials of abarelix-depot-M
randomized against currently available hormonal therapies. The Company believes
that abarelix may also have application as a therapeutic for endometriosis,
benign prostatic hyperplasia, breast cancer, and other diseases where reduction
of testosterone or estrogen is an accepted goal of therapy.
PRAECIS was founded on the premise that by taking advantage of the
structural properties of peptides, and by overcoming certain limitations of
peptide-based therapeutics, the Company could successfully develop commercially
viable drugs that address significant clinical needs. The Company has
demonstrated success in developing technologies to overcome several critical
pharmacological and technical hurdles associated with specific peptide
compounds. Examples of such technologies include Rel-Ease-TM-, the Company's
proprietary sustained delivery depot system for abarelix; MASTRscreen-TM-, a
high-throughput screening assay used to identify and evaluate abarelix; and
beta-amyloid assays used for the screening and optimization of the Company's
pre-clinical Alzheimer's Disease compound. In addition, the Company has
developed a proprietary peptide-based combinatorial chemistry system
3
<PAGE>
called LEAP, which the Company expects will enhance the identification and
optimization of future lead compounds.
The Company's primary objective is to use its technology-development skills
and clinical expertise to rapidly develop and commercialize peptide-based drugs
that address significant clinical needs. The Company's strategy is to: (i)
pursue approval of abarelix-depot-M; (ii) seek approval of abarelix for
additional indications; (iii) selectively develop proprietary technologies to
further drug candidate development; (iv) pursue strategic collaborations to
leverage development and commercialization capabilities; (v) focus its drug
discovery efforts on diseases with substantial market opportunities; and (vi)
acquire complementary technologies and products.
The Company was incorporated in Delaware in July 1993. The Company's
headquarters and primary research facilities are located at One Hampshire
Street, Cambridge, Massachusetts 02139, and its telephone number is (617)
494-8400.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company........... 3,500,000 shares
Common Stock outstanding after the offering... 19,249,309 shares(1)
Use of proceeds............................... For the purchase of raw materials and
equipment to be used in the production of
abarelix, clinical trials, preclinical
testing and other research and development
activities, acquisition of technologies,
working capital and other general corporate
purposes. See "Use of Proceeds."
Proposed Nasdaq National Market symbol........ PRCS
</TABLE>
- ------------
(1) Based on shares outstanding as of July 31, 1998. Includes an aggregate of
12,819,243 shares of Common Stock to be issued upon conversion of all
outstanding shares of Preferred Stock upon the closing of this offering.
Excludes, as of July 31, 1998, (i) 3,316,242 shares of Common Stock issuable
upon exercise of outstanding options at a weighted average exercise price of
$3.50 per share and 818,254 shares of Common Stock which are reserved for
future grant under the Company's Amended and Restated 1995 Stock Plan, as
amended (the "Plan"), (ii) 55,955 shares of Common Stock issuable upon
exercise of outstanding warrants issued to Comdisco, Inc. (the "Comdisco
Warrants") at an exercise price of $2.69 per share and (iii) 202,223 shares
of Common Stock issuable upon exercise of an outstanding warrant held by
Sylamerica, Inc. (the "Sylamerica Warrant") at an exercise price of $25.76
per share. Also excludes 60,000 shares of Common Stock reserved for issuance
under the Company's Employee Stock Purchase Plan (the "Stock Purchase Plan,"
and together with the Plan, the "Plans"). See "Capitalization," "Management
-- Incentive Plans," "Description of Capital Stock -- Warrants" and Note 6
of Notes to Financial Statements.
4
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS ENDED
JULY 16, 1993
(INCEPTION) TO YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------------------------------ --------------------
1993 1994 1995 1996 1997 1997 1998
--------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Strategic alliances........................ $ -- $ -- $ -- $ -- $ 18,118 $ 4,750 $ 19,373
Contract services.......................... -- -- -- 876 2,615 1,279 1,675
------- --------- --------- --------- --------- --------- ---------
Total revenue............................ -- -- -- 876 20,733 6,029 21,048
Costs and expenses:
Research and development................... 152 1,795 3,687 7,947 15,013 6,265 15,854
General and administrative................. -- 955 1,609 2,120 3,780 1,516 1,415
------- --------- --------- --------- --------- --------- ---------
Operating income (loss)...................... (152) (2,750) (5,296) (9,191) 1,940 (1,752) 3,779
Net income (loss)............................ $ (147) $ (2,411) $ (5,099) $ (8,564) $ 3,204 $ (1,295) $ 5,056
Net income (loss) per share(1):
Basic.................................... $ (0.11) $ (1.54) $ (3.19) $ (5.25) $ 1.44 $ (0.68) $ 1.80
Diluted.................................. (0.11) (1.54) (3.19) (5.25) 0.23 (0.68) 0.31
Weighted average number of common shares(1):
Basic.................................... 1,349 1,564 1,599 1,631 2,220 1,914 2,806
Diluted.................................. 1,349 1,564 1,599 1,631 13,999 1,914 16,070
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1998
---------------------------------------------
PRO FORMA
ACTUAL(2) PRO FORMA(3) AS ADJUSTED(3)(4)
----------- ------------- -----------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................ $ 82,150 $ 82,150 $ 130,225
Total assets..................................................... 89,880 89,880 137,955
Accumulated deficit.............................................. (7,961) (7,961) (7,961)
Total stockholders' equity....................................... 80,725 80,725 128,800
</TABLE>
- ------------
(1) See Note 2 of Notes to Financial Statements for an explanation of the method
for determining the number of shares used to compute net income (loss) per
share amounts. Basic net income (loss) per share and basic weighted average
number of common shares do not give effect to the conversion of all
outstanding shares of Preferred Stock into Common Stock upon the closing of
this offering.
(2) Does not give effect to the automatic conversion of all outstanding shares
of Preferred Stock into Common Stock upon the closing of this offering.
(3) Gives effect to the automatic conversion of all outstanding shares of
Preferred Stock into Common Stock upon the closing of this offering.
(4) Adjusted to reflect the sale of 3,500,000 shares of Common Stock offered by
the Company hereby at an assumed initial public offering price of $15.00 per
share and the application of the estimated net proceeds therefrom. See "Use
of Proceeds" and "Capitalization."
EXCEPT AS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS (I)
REFLECTS A FIVE-FOR-FOUR STOCK SPLIT OF THE COMMON STOCK TO BE EFFECTED PRIOR TO
THE EFFECTIVENESS OF THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A
PART (THE "STOCK SPLIT"), (II) ASSUMES NO EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION AND (III) GIVES EFFECT TO (A) THE CONVERSION OF ALL
OUTSTANDING SHARES OF PREFERRED STOCK INTO COMMON STOCK UPON THE CLOSING OF THIS
OFFERING AND (B) THE ADJUSTMENT OF THE COMDISCO WARRANTS PURSUANT TO THE TERMS
THEREOF SUCH THAT IMMEDIATELY UPON THE CLOSING OF THIS OFFERING, THE COMDISCO
WARRANTS SHALL BE EXERCISABLE FOR 55,955 SHARES OF COMMON STOCK INSTEAD OF FOR
PREFERRED STOCK, SUBJECT TO FURTHER ADJUSTMENT IN ACCORDANCE WITH THE TERMS
THEREOF.
5
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE SHARES
OF COMMON STOCK OFFERED BY THIS PROSPECTUS. REALIZATION OF ANY OF THESE RISK
FACTORS COULD HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY'S BUSINESS,
FINANCIAL CONDITION OR RESULTS OF OPERATIONS.
HISTORY OF LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY
The Company had annual net operating losses since its inception in 1993
through December 1996. At December 31, 1997 and June 30, 1998, the Company's
accumulated deficit was approximately $13.0 million and $8.0 million,
respectively. The Company expects to incur substantial additional and increasing
operating expenses over the next several years whether or not it has revenues.
The Company may not be profitable in future quarters or years. The Company
expects its quarterly and annual results to fluctuate, depending on factors such
as the receipt of payments from corporate collaborators and the commercial
introduction of its products. All of the Company's potential products are in the
research or development stage, and no product sales have occurred. The Company
may not succeed in developing and marketing any product. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
UNCERTAINTIES RELATED TO CLINICAL TRIALS
To gain regulatory approval for the commercial sale of any potential
therapeutic product, the Company must show safety and efficacy data for the
potential product. If the product is intended to treat a chronic disease, such
as cancer, or Alzheimer's Disease, the data must be gathered over an extended
period of time. Abarelix-depot-M is currently undergoing a Phase I/II clinical
trial for hormonally responsive prostate cancer and the Company is commencing
Phase III clinical trials. The Company may not be successful in obtaining the
data necessary for regulatory marketing approval. There are many clinical trial
risks. Promising results in early trials may not be repeated in later trials.
Patients studied in clinical trials often have advanced disease and may die or
suffer other adverse medical events not related to the drug being studied. These
events may affect the statistical analysis of the drug's safety and efficacy.
The Company has focused its drug discovery programs principally on the treatment
of prostate cancer and Alzheimer's Disease. Patients with either of these
diseases have a high risk of death or age-related disease. The Company must show
that its depot formulation for sustained drug delivery of abarelix, in addition
to abarelix itself, is safe and efficacious. The Company has not completed
clinical testing of this depot formulation, and it is subject to similar risks
as abarelix. The Company is aware that other companies have achieved effective
results with liquid formulations of drugs with the same mechanism of action as
abarelix, but believes they have not yet developed adequate sustained delivery
formulations. None has received United States Food and Drug Administration
("FDA") marketing approval. Finally, delay or termination of the Company's
clinical trials may occur. Many factors can cause delay or termination,
including slow patient enrollment, lack of sufficient supplies of drug, adverse
medical events or side effects in treated patients and real or perceived lack of
effectiveness of the drug being tested. Except as otherwise indicated herein,
the results described herein of the Company's clinical trials are based upon
interim data or preliminary analyses of data. No assurance can be given that the
Company's clinical results from ongoing or future clinical trials, or that the
final analyses of data from completed, ongoing or future clinical trials, will
be consistent with the results and analyses to date as described herein. See
"Business -- Abarelix Program -- Abarelix-Depot-M/Abarelix-L" and "-- Government
Regulation; No Assurance of Regulatory Approvals."
GOVERNMENT REGULATION; NO ASSURANCE OF REGULATORY APPROVALS
The Company's research, preclinical testing and clinical trials of potential
products, and the manufacturing, distribution, advertising and marketing of such
products are subject to extensive and
6
<PAGE>
rigorous regulation by numerous government authorities in the United States and
in other countries. The process of obtaining and maintaining required regulatory
approval is expensive, uncertain and takes several years. Regulatory authorities
have substantial discretion and may not agree that the Company or its
collaborators have demonstrated the safety and efficacy of potential products or
have satisfied manufacturing or other regulatory requirements. Regulatory
authorities may also delay or terminate clinical trials and mandate product
recalls. See "Business -- Government Regulation."
LIMITED CLINICAL TESTING AND REGULATORY COMPLIANCE RESOURCES AND EXPERIENCE
The Company has limited clinical testing and regulatory compliance resources
and experience. The Company will need to hire additional personnel skilled in
clinical testing and regulatory compliance, but the Company may not be
successful in doing so. The Company intends to rely on third parties to conduct
a significant portion of its clinical activities, but may not succeed in
entering into contracts on acceptable terms or on a timely basis. The third
parties may not successfully carry out their contractual duties. See "Business
- -- Government Regulation."
TECHNOLOGICAL UNCERTAINTY
The Company's lead product candidates consist of a Gonadotropin Hormone
Releasing Hormone ("GnRH") (also known as Luteinizing Hormone Releasing Hormone)
antagonist, abarelix, for the treatment of prostate cancer and endometriosis and
a beta-amyloid aggregation inhibitor for the treatment of Alzheimer's Disease.
To the Company's knowledge, no Company has obtained marketing approval for a
GnRH antagonist or a beta-amyloid aggregation inhibitor. The theory that
beta-amyloid aggregation leads to the development of Alzheimer's Disease and,
consequently, that inhibiting beta-amyloid aggregation would prevent, delay the
progression of or treat the disease could be incorrect. In addition, the
Company's beta-amyloid aggregation inhibitor may not cross the blood-brain
barrier in humans in sufficient quantity for therapeutic efficacy. The delivery
mechanism for the Company's beta-amyloid aggregation inhibitor has yet to be
determined. The Company has not used any of its proprietary drug discovery
technologies in the development of any approved drug. The Company may not be
successful in solving technological problems including those related to finding
new lead compounds and appropriate delivery systems.
DEPENDENCE ON MARKET ACCEPTANCE
Even if Company products are approved for marketing, they may not be
commercially successful. A number of factors may affect the rate and overall
market acceptance of any potential product of the Company, including the rate of
adoption by health care practitioners, the rate of acceptance by the target
population, the timing of market entry relative to competitive products, the
availability and price of alternative products, the means and frequency of
administration, the availability of third-party reimbursement, the extent of
marketing efforts and side effects and unfavorable publicity concerning the
products or any similar product. Unlike currently available hormonal therapies
for the treatment of hormonally responsive prostate cancer which require an
injection once every four weeks, abarelix-depot-M, the Company's drug candidate
for such cancer, requires an injection on day one, day fifteen, day twenty-nine
and once every twenty-eight days thereafter, which physicians, patients and
payors could find less acceptable than competitive products. See "Business --
Competition."
INTENSE COMPETITION
The Company competes for funding, access to new technology, research
personnel and in product development, with companies with greater financial
resources and more drug development, manufacturing and marketing experience. The
Company's corporate collaborators, with only limited restrictions, are free to
develop products that compete with products the Company develops. The Company
expects that all of its products under development will compete with existing or
future drugs.
7
<PAGE>
The FDA has approved two hormonal therapies, known as "superagonists", for
the treatment of hormonally responsive prostate cancer in the United States. Of
the two, the active component in one is already off-patent and the other will
come off-patent in April 1999. It is possible that additional companies could
introduce competing formulations of these off-patent superagonists. Under
certain circumstances, competitors might be eligible to obtain FDA marketing
approval without extensive clinical trials under the abbreviated new drug
application ("ANDA") approval process for generic drugs. Two additional
superagonists are available in Europe. The Company is aware of three additional
compounds in clinical trials and others in preclinical development for
hormonally responsive prostate cancer with the same mechanism of action as
abarelix.
To date, the only compounds approved by the FDA for the treatment of
Alzheimer's Disease are acetylcholinesterase inhibitors, which aim to improve a
patient's cognition and daily living function by boosting the level of
acetylcholine in the brain. The Company is aware of efforts by many companies to
develop therapies for Alzheimer's Disease, including many seeking to affect
beta-amyloid. The Company and its products may not compete successfully. See
"Business -- Competition."
RISK OF TECHNOLOGICAL OBSOLESCENCE
Research, discoveries and commercial developments by others may render any
or all the Company's drug discovery technologies, specific programs and
potential products obsolete. Alternative approaches to the treatment of disease
may also make any products the Company develops noncompetitive. See "Business --
Competition."
DEPENDENCE ON STRATEGIC PARTNERS; CONFLICT OF INTEREST
The Company depends on its corporate collaborators to provide substantial
financial support for the development of its potential products, and to market,
distribute and sell such products. However, the Company cannot control the
amount and timing of resources that its corporate collaborators devote to their
obligations. Corporate collaborators may also terminate their agreements with
the Company prior to the commercialization of any product. For instance, Roche
Products, Inc. ("Roche") is entitled to terminate its agreement with the Company
in any country upon 180 days' prior notice if it has not previously sold a
commercial quantity of abarelix products in the given country. Synthelabo is
entitled to terminate its agreement with the Company under various
circumstances, including the occurrence of certain material adverse events
relating to the commercial prospects or patentability of abarelix products. If a
collaborator terminates its agreement or fails to perform its obligations
effectively and on time, the development or commercialization of the potential
product or research program may be delayed. The Company may need either to
devote unforeseen additional resources to development and commercialization or
to terminate the programs. Disputes may arise in the future with respect to the
ownership of rights to any technology developed during the collaborations or
with respect to other matters. Disagreements could lead to delays in the
research, development or commercialization of products. The Company's
collaborators may compete with the Company. See "Business -- Strategic
Alliances."
UNCERTAINTIES ASSOCIATED WITH PATENTS AND PROPRIETARY TECHNOLOGY
Proprietary rights relating to the Company's potential products and
technology will be protected from unauthorized use by third parties only if (i)
they are covered by valid and enforceable patents in the United States and other
countries or are maintained as trade secrets and (ii) the Company successfully
enforces its rights. To date, the Company holds only one issued patent. The
Company cannot guarantee that other patents will issue from its or its
licensors' applications or that its patents will effectively cover its products.
8
<PAGE>
The Company relies on trade secrets to protect part of its technology. Third
parties may independently develop similar technology and would be free to use
it. Confidentiality arrangements to which the Company is a party may not be
effective in protecting the Company's confidential information or trade secrets.
The Company is aware of U.S. patents owned by third parties which could
potentially be construed to cover certain of the Company's activities involving
the use of phage display and its activities relating to the use of hormonal
therapy in conjunction with prostate cancer surgery. There can be no assurance
that: (i) an owner or licensee of these patents will not threaten or file an
infringement action claiming that the Company's activities infringe or encourage
others to infringe such patents, request an injunction against the Company's
activities or file a validity action or that the Company would prevail in any
such action; (ii) that the cost of defending an action would not be substantial;
(iii) that any required licenses would be available on commercially viable
terms, if at all; or (iv) that absent a license, the Company would be able to
continue its current activities relating to phage display or hormonal therapy in
conjunction with prostate cancer surgery.
The patent position of biotechnology and pharmaceutical firms is often
highly uncertain and usually involves complex legal and factual questions. The
Company cannot be certain that it or its licensors were the first to make the
inventions covered by applicable pending patent applications or that it or its
licensors were the first to file patent applications for such inventions. The
Company could infringe, or others could claim that it is infringing, upon the
patent or other proprietary intellectual property rights of third parties. The
Company could incur substantial costs in defending against claims of
infringement or enforcing its rights against others. The outcome of any
litigation could be adverse to the Company. The Company may not be successful in
obtaining licenses to third-party rights needed to avoid infringement. In
addition, failure to obtain patents or licenses could result in the Company's
corporate collaborators terminating their agreements with the Company.
Synthelabo has a right to terminate its License Agreement dated May 13, 1997, as
amended by a letter dated July 31, 1997 (the "Synthelabo Agreement"), with the
Company if it reasonably determines that it is not reasonably likely that
European patents will be issued with respect to abarelix or Rel-Ease. See
"Business -- Strategic Alliances -- Synthelabo."
The Company licenses some of the technology it uses from third parties. For
example, Indiana University Foundation ("IUF") owns, and PRAECIS has licensed
from IUF on a worldwide exclusive basis, the rights to abarelix. In addition,
PRAECIS licenses certain phage display technology from other companies and
institutions. Termination of these licenses could terminate or delay certain of
the Company's development programs. In addition, the Company may not succeed in
obtaining other licenses it deems necessary. See "Business -- Patents and
Proprietary Rights."
UNCERTAINTY OF PHARMACEUTICAL PRICING AND REIMBURSEMENT
Successful commercialization of the Company's products will depend in part
on the extent to which government health administration authorities, private
health insurers and other third-party payors agree to pay for the products.
Significant uncertainty exists as to the reimbursement status of newly approved
health care products, and third-party payors are increasingly challenging the
prices of pharmaceuticals. The Company's potential products may not receive
approval for reimbursement. Reimbursement rates could create price pressure,
especially if generic GnRH products are introduced.
RELIANCE ON THIRD-PARTY MANUFACTURING; NO MANUFACTURING CAPACITY
The Company currently has short-term and long-term arrangements with
third-party manufacturers for the manufacture of abarelix products. The Company
anticipates that it will continue for a significant period of time to be
dependent on contract manufacturers to produce abarelix products and any other
potential product. If the Company does not have satisfactory long-term supply
agreements, it may not be
9
<PAGE>
able to develop or commercialize potential products as planned. The manufacture
of the Company's potential products will be subject to current good
manufacturing practices ("cGMP") regulations prescribed by the FDA and similar
foreign standards. Third-party manufacturers might not comply with cGMP. Changes
in manufacturers could require new product testing and facility compliance
inspections. Any of these factors could cause delay in clinical trials and
commercialization and higher costs. The Company does not have the resources,
cGMP systems or experience to manufacture potential products itself. Failure of
the Company to meet its manufacturing and supply obligations under the
Synthelabo Agreement or under the supply agreement to be negotiated with Roche
Products Inc. ("Roche") could result in Synthelabo or Roche obtaining
manufacturing rights and the Company absorbing some or all of their costs. The
manufacturing processes for abarelix products and the Company's other planned
products have not been tested in quantities needed for commercial sales. Delays
in formulation and scale-up to commercial quantities could result in delays in
clinical trials, regulatory submissions and commercialization. See "Business --
Manufacturing."
UNCERTAINTIES RELATED TO MARKETING AND SALES
The Company has no experience in marketing or selling pharmaceutical
products, has a limited marketing and sales staff and will be substantially
dependent on its corporate collaborators for the marketing, distribution and
sale of its products. The Company might not succeed in developing an efficient
sales and marketing organization to market its own products. See "Business --
Strategic Alliances" and "-- Marketing and Sales."
NEED FOR ADDITIONAL FUNDING; UNCERTAINTY OF ACCESS TO CAPITAL
The Company will require substantial funding in addition to the proceeds of
this offering to continue its research and drug development programs, including
preclinical testing and clinical trials of its drug candidates, for operating
expenses, for the pursuit of regulatory approvals for its drug candidates, and
for securing or developing manufacturing and marketing capabilities. The Company
does not know how much additional funding it may require. The Company may seek
additional funding through public or private financing and through additional
collaborative agreements. Additional funds may not be available on acceptable
terms or at all. Insufficient funds would require the delay, scale-back or
elimination of research and drug development programs or the disposition of
product rights. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
DEPENDENCE UPON QUALIFIED PERSONNEL
The Company depends in significant part upon the continued service of key
scientific, technical and managerial personnel and upon the Company's continuing
ability to attract, retain and motivate highly-qualified scientific, technical
and managerial personnel. Competition for such personnel is intense. The Company
could fail to attract, assimilate or retain the necessary scientific, technical
and managerial personnel in the future. See "Management -- Officers and
Directors."
POTENTIAL PRODUCT LIABILITY; UNCERTAINTIES RELATED TO INSURANCE
The use of any of the Company's potential products in clinical trials and
their sale and commercial use may expose the Company to product liability
litigation and drug recalls. The Company has only limited product liability
insurance coverage for its clinical trials. The Company cannot be sure it will
be able to obtain commercially reasonable product liability insurance for any
product approved for marketing. Insurance may not be adequate to protect the
Company from the adverse consequences of product liability suits or product
recalls. See "Business -- Product Liability Insurance."
10
<PAGE>
CURRENCY EXCHANGE FLUCTUATIONS
Payments to the Company by Synthelabo for its contributions to core
development costs and other future payments pursuant to the Synthelabo Agreement
(as defined herein) will be made in French francs. Future currency exchange
fluctuations which increase the relative value of the dollar compared to the
franc could result in a decrease in the value of payments received from
Synthelabo. See "Business -- Strategic Alliances -- Synthelabo."
NO PRIOR PUBLIC MARKET FOR COMMON STOCK
Prior to this offering, there has been no public market for the Common
Stock. A regular trading market may not develop and continue after this offering
or the market price of the Common Stock could decline below the initial public
offering price. The initial public offering price will be determined through
negotiations between the Company and the Underwriters and may not be indicative
of the market price of the Common Stock after this offering. See "Underwriting."
CONCENTRATION OF OWNERSHIP
As of July 31, 1998, directors, executive officers and stockholders of the
Company affiliated with members of the Board of Directors of the Company (the
"Board of Directors") beneficially own over 57.1% of the outstanding Common
Stock, including options held by such persons that are currently exercisable or
exercisable within 60 days of July 31, 1998, and will beneficially own
approximately 46.8% of the outstanding Common Stock upon completion of this
offering. These stockholders effectively will be able to control the election of
the entire Board of Directors and other corporate actions submitted to
stockholders for approval, including the sale of the Company. See "Principal
Stockholders."
VOLATILITY OF COMMON STOCK PRICE
The market prices for securities of biotechnology and pharmaceutical
companies historically have been highly volatile, and the market has from time
to time experienced significant price and volume fluctuations that may be
unrelated to the operating performance of particular companies. Factors such as
fluctuations in the Company's operating results, announcements of technological
innovations or new therapeutic products by the Company or others, clinical trial
results, developments concerning strategic alliance agreements, government
regulation, developments in patent or other proprietary rights, public concern
as to the safety of products developed by the Company or others, future sales of
substantial amounts of Common Stock by existing stockholders, comments by
securities analysts and general market conditions could have an adverse effect
on the market price of the Common Stock.
POTENTIAL ADVERSE EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public
market, or the threat that substantial sales might occur, could cause the market
price of the Common Stock to decrease. These factors could also make it
difficult for the Company to raise capital by selling stock or pay for
acquisitions using stock. There will be 19,249,309 shares of Common Stock
outstanding immediately after this offering and [ ] shares subject to
options exercisable within 180 days from the date appearing on the final
prospectus relating to this offering. Of the aggregate [ ] shares: (i)
3,500,000 shares will be freely tradeable immediately after this offering if not
held by affiliates of the Company, as defined in Rule 144 of the Securities Act
("Rule 144") ; (ii) [ ] shares will be freely tradeable beginning on the
91st day after the date of this Prospectus; and (iii) [ ] shares are
subject to 180-day lock-up agreements. BT Alex. Brown Incorporated may release
any or all shares subject to lock-up agreements at any time without notice. Upon
expiration of the lock-up period, [ ] shares will become freely
tradeable, and [ ] shares will be subject to the trading restrictions of
Rule 144.
11
<PAGE>
After the 180-day lock-up period expires, the Company expects to file a
registration statement covering shares of Common Stock issuable upon exercise of
options granted pursuant to the Plan and shares of Common Stock issuable
pursuant to the Stock Purchase Plan. The Company may issue additional shares to
employees, in connection with corporate alliances and acquisitions and to raise
capital. Holders of 15,139,544 shares have registration rights. As a result of
these factors, sales of a substantial number of shares of Common Stock in the
public market could occur at any time. See "Description of Capital Stock --
Registration Rights" and "Shares Eligible for Future Sale."
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER, BY-LAW AND OTHER PROVISIONS
Certain provisions of the Company's Amended and Restated Certificate of
Incorporation and Amended and Restated By-Laws, each to be effective immediately
after the closing of this offering, and the anti-takeover provisions of Section
203 of the Delaware General Corporation Law, could have the effect of delaying
or preventing an acquisition of the Company or a change in the Company's
management, even if an acquisition or such changes would be beneficial to
stockholders. These factors could also reduce the price that certain investors
might be willing to pay for shares of the Common Stock and result in the market
price being lower than it would be without these provisions. See "Description of
Capital Stock."
DILUTION
Investors purchasing shares of Common Stock in this offering will incur
immediate and substantial dilution. Based on the net tangible book value of the
Common Stock as of June 30, 1998, dilution in net tangible book value to
investors purchasing shares of Common Stock in this offering would be $8.31 per
share (assuming an initial public offering price of $15.00 per share). In
addition, investors purchasing shares of Common Stock in this offering may incur
additional dilution to the extent outstanding options, the Comdisco Warrants or
the Sylamerica Warrant are exercised or additional shares of capital stock of
the Company are issued. See "Dilution."
ABSENCE OF DIVIDENDS
The Company has never declared nor paid cash dividends on any of its capital
stock. The Company currently intends to retain its earnings for future growth
and therefore does not anticipate paying cash dividends in the foreseeable
future. See "Dividend Policy."
POTENTIAL ADVERSE EFFECTS OF YEAR 2000 PROBLEM
It is possible that the Company's currently installed computer systems,
software products or other business systems, or those of the Company's suppliers
or service providers, working either alone or in conjunction with other software
or systems, will not accept input of, store, manipulate and output dates for the
years 1999, 2000 or thereafter without error or interruption (commonly known as
the "Year 2000" problem). The Company does not have a comprehensive or formal
Year 2000 plan for its operations. However, during 1998, the Company upgraded
its critical data processing systems and believes that such systems will
function properly with respect to dates in the years 1999, 2000 and thereafter.
Some risks associated with the Year 2000 problem are beyond the ability of the
Company to control, including the extent to which the Company's suppliers and
service providers can address the Year 2000 problem. The failure by a third
party to adequately address the Year 2000 issue could have a material adverse
impact on a third party, and could have an adverse impact on the Company. The
Company is assessing the possible effects on the Company's operations of the
possible failure of the Company's key suppliers and providers, contractors and
collaborators to identify and remedy potential Year 2000 problems.
12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of Common Stock offered
hereby, assuming the sale of all 3,500,000 shares offered hereby, are estimated
to be approximately $48,075,000 ($55,398,750 if the Underwriters' over-allotment
option is exercised in full), based on an assumed initial public offering price
of $15.00 per share, after underwriting discounts and commissions and estimated
offering expenses payable by the Company.
Of the net proceeds of this offering, the Company plans to use approximately
$38.0 million to purchase raw materials and equipment for the production of
abarelix, approximately $10.0 million for the expansion of its laboratory and
related facilities, and the remaining net proceeds for clinical trial expenses
related to abarelix, other preclinical testing and research and development
activities, working capital and other general corporate purposes. The Company
may also use a portion of the net proceeds for the acquisition of businesses,
products and technologies that are complementary to those of the Company.
Although the Company has not identified any specific businesses, products or
technologies that it may acquire, nor are there currently any agreements or
negotiations with respect to such transactions, the Company evaluates such
opportunities from time to time. Pending use in its business, the Company
intends to invest the net proceeds of this offering in short-term,
interest-bearing, investment-grade securities. Although the Company believes
that its cash reserves and other liquid assets, the net proceeds of this
offering, funds that may be received pursuant its existing collaboration
agreements and interest income earned thereon will be adequate to satisfy its
capital and operating requirements for the foreseeable future, there can be no
assurance that these funds will be sufficient. Companies in the biotechnology
industry generally expend significant capital resources on product research and
development and clinical trials. The Company will require substantial additional
funds to conduct its operations in the future.
The amounts and timing of the Company's actual expenditures for the purposes
described above will depend upon a number of factors, including the progress of
the Company's research and development activities, the scope and results of
preclinical testing and clinical trials, the cost, timing and outcomes of
regulatory reviews, the rate of technological advances, determinations as to the
commercial potential of the Company's products under development, the status of
competitive products, defending and enforcing intellectual property rights, the
establishment, continuation or termination of third-party manufacturing
arrangements, the development of sales and marketing resources or the
establishment, continuation or termination of third-party sales and marketing
arrangements, the establishment of additional strategic or licensing
arrangements with other companies, acquisitions, the availability of other
financing and other factors.
DIVIDEND POLICY
The Company has not declared or paid any dividends since its inception and
does not intend to pay
any dividends in the foreseeable future. The Company currently intends to retain
its future earnings to fund the development of its business.
13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
June 30, 1998 (without giving effect to the automatic conversion of all
outstanding shares of Preferred Stock into Common Stock upon the closing of this
offering), (ii) on a pro forma basis to give effect to the automatic conversion
of all outstanding shares of Preferred Stock into Common Stock upon the closing
of this offering and the effectiveness of the Amended and Restated Certificate
of Incorporation, and (iii) on a pro forma as adjusted basis to give effect to
the sale by the Company of 3,500,000 shares of Common Stock offered hereby at an
assumed initial public offering price of $15.00 per share, after deducting
underwriting discounts and commissions and estimated offering expenses payable
by the Company, and the application of the estimated net proceeds therefrom.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt(1):
Capital lease obligations, net of current portion......... $ 105 $ 105 $ 105
Stockholders' equity:
Preferred Stock-Unallocated, $0.01 par value, 312,700
shares authorized on an actual basis and 5,000,000
shares authorized on a pro forma and pro forma as
adjusted basis; none issued and outstanding on an
actual, pro forma and pro forma as adjusted basis....... -- -- --
Series A, B, C, D and E Convertible Preferred Stock, $0.01
par value, 3,437,300 shares authorized on an actual
basis and none authorized on a pro forma and pro forma
as adjusted basis; 3,417,300 shares issued and
outstanding on an actual basis and none issued and
outstanding on a pro forma and pro forma as adjusted
basis................................................... 35 -- --
Common Stock, $0.01 par value, 60,000,000 shares
authorized on an actual basis and 75,000,000 shares
authorized on a pro forma and pro forma as adjusted
basis; 2,924,441 shares issued and outstanding on an
actual basis; 15,743,684 shares issued and outstanding
on a pro forma basis, and 19,243,684 shares issued and
outstanding on a pro forma as adjusted basis(2)......... 29 157 192
Additional paid-in capital................................ 88,622 88,529 136,569
Accumulated deficit....................................... (7,961) (7,961) (7,961)
--------- ----------- -----------
Total stockholders' equity.............................. 80,725 80,725 128,800
--------- ----------- -----------
Total capitalization.................................. $ 80,830 $ 80,830 $ 128,905
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
- ------------
(1) See Note 4 of Notes to Financial Statements.
(2) Excludes at June 30, 1998: (i) 3,286,240 shares of Common Stock issuable
upon exercise of outstanding options, at a weighted average exercise price
of $3.40 per share, and 853,881 shares of Common Stock which are reserved
for future grant under the Plan, (ii) 55,955 shares of Common Stock issuable
upon exercise of the Comdisco Warrants, at an exercise price of $2.69 per
share, and (iii) 202,223 shares of Common Stock issuable upon exercise of
the Sylamerica Warrant, at an exercise price of $25.76 per share. Also
excludes 60,000 shares of Common Stock reserved for issuance under the Stock
Purchase Plan. See "Management -- Incentive Plans," "Description of Capital
Stock -- Warrants" and Note 6 of Notes to Financial Statements.
14
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of June 30, 1998 was
approximately $80.7 million or $5.13 per share of Common Stock. Pro forma net
tangible book value per share of Common Stock represents the amount of total
tangible assets less total liabilities divided by the number of shares of Common
Stock outstanding. After giving effect to the sale by the Company of the
3,500,000 shares of Common Stock offered hereby (at an assumed initial public
offering price of $15.00 per share) and the application of the estimated net
proceeds therefrom, the pro forma net tangible book value of the Company as of
June 30, 1998 would have been $128.8 million, or $6.69 per share of Common
Stock. This represents an immediate increase in pro forma net tangible book
value of $1.56 per share to existing stockholders and an immediate dilution of
$8.31 per share to investors purchasing Common Stock in the offering as
illustrated by the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................. $ 15.00
Pro forma net tangible book value per share as of June 30, 1998(1)........ $ 5.13
Increase per share attributable to new investors.......................... 1.56
---------
Pro forma net tangible book value per share after the offering.............. 6.69
---------
Dilution per share to new investors(2)...................................... $ 8.31
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1998,
the number of shares of Common Stock purchased from the Company, the total
consideration received and the average price per share paid by the existing
stockholders, and by the new investors based upon an assumed initial public
offering price of $15.00 per share (before deducting underwriting discounts and
commissions and estimated offering expenses payable by the Company):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------------- ------------------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------- ----------- ------------------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Existing investors(1).................... 15,743,684 81.8% $ 89,192,621 62.9% $ 5.67
New investors............................ 3,500,000 18.2 52,500,000 37.1 $ 15.00
------------- ----- ------------------- -----
Total................................ 19,243,684 100.0% $ 141,692,621 100.0%
------------- ----- ------------------- -----
------------- ----- ------------------- -----
</TABLE>
- ---------------
(1) Excludes at June 30, 1998: (i) 3,286,240 shares of Common Stock issuable
upon the exercise of outstanding options, at a weighted average exercise
price of $3.40 per share, and 853,881 shares of Common Stock reserved for
future grant under the Plan; (ii) 55,955 shares of Common Stock issuable
upon exercise of the Comdisco Warrants, at an exercise price of $2.69 per
share; and (iii) 202,223 shares of Common Stock issuable upon exercise of
the Sylamerica Warrant, at an exercise price of $25.76 per share. In
addition, 60,000 shares of Common Stock are reserved for issuance under the
Stock Purchase Plan. To the extent that any of these options and warrants
are exercised, or shares are issued, there may be further dilution to new
investors.
(2) Dilution is determined by subtracting pro forma net tangible book value per
share after giving effect to this offering from the assumed initial public
offering price per share. Dilution to new investors will be $8.11 if the
Underwriter's over-allotment option is exercised in full.
15
<PAGE>
SELECTED FINANCIAL DATA
The following table presents selected financial data for the Company. The
statement of operations data for each of the three years in the period ended
December 31, 1997 and the balance sheet data at December 31, 1996 and 1997 are
derived from the financial statements of the Company that have been audited by
Ernst & Young LLP, independent auditors, which are included elsewhere herein and
are qualified by reference to such Financial Statements. The statement of
operations data for the period from July 16, 1993 (inception) to December 31,
1993, for the years ended December 31, 1994 and 1995 and the balance sheet data
at December 31, 1993, 1994 and 1995 have been derived from audited financial
statements which are not included herein. The statement of operations data for
the six months ended June 30, 1997 and 1998 and the balance sheet data at June
30, 1998 are derived from unaudited financial statements which are included
elsewhere herein. The unaudited financial statements include all adjustments,
consisting only of normal recurring adjustments, that the Company considers
necessary for a fair presentation of the financial position and results of
operations for these periods. Operating results for the six months ended June
30, 1998 are not necessarily indicative of the results that may be expected for
the entire year ending December 31, 1998. The selected financial data set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Company's Financial
Statements and Notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
JULY 16, 1993 SIX MONTHS
(INCEPTION) TO YEAR ENDED DECEMBER 31, ENDED JUNE 30,
DECEMBER 31, ------------------------------------------ --------------------
1993 1994 1995 1996 1997 1997 1998
--------------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Strategic alliances................ $ -- $ -- $ -- $ -- $ 18,118 $ 4,750 $ 19,373
Contract services.................. -- -- -- 876 2,615 1,279 1,675
--------------- --------- --------- --------- --------- --------- ---------
Total revenue.................... -- -- -- 876 20,733 6,029 21,048
Costs and expenses:
Research and development........... 152 1,795 3,687 7,947 15,013 6,265 15,854
General and administrative......... -- 955 1,609 2,120 3,780 1,516 1,415
--------------- --------- --------- --------- --------- --------- ---------
Total operating expenses......... 152 2,750 5,296 10,067 18,793 7,781 17,269
--------------- --------- --------- --------- --------- --------- ---------
Operating income (loss).............. (152) (2,750) (5,296) (9,191) 1,940 (1,752) 3,779
Interest income, net................. 5 339 197 627 1,364 457 1,427
--------------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes.... (147) (2,411) (5,099) (8,564) 3,304 (1,295) 5,206
Provision for income taxes........... -- -- -- -- 100 -- 150
--------------- --------- --------- --------- --------- --------- ---------
Net income (loss).................... $ (147) $ (2,411) $ (5,099) $ (8,564) $ 3,204 $ (1,295) $ 5,056
--------------- --------- --------- --------- --------- --------- ---------
--------------- --------- --------- --------- --------- --------- ---------
Net income (loss) per share(1):
Basic............................ $ (0.11) $ (1.54) $ (3.19) $ (5.25) $ 1.44 $ (0.68) $ 1.80
Diluted.......................... (0.11) (1.54) (3.19) (5.25) 0.23 (0.68) 0.31
Weighted average number of common
shares(1):
Basic............................ 1,349 1,564 1,599 1,631 2,220 1,914 2,806
Diluted.......................... 1,349 1,564 1,599 1,631 13,999 1,914 16,070
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------- JUNE 30,
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents, and short-term investments.... $ 8,960 $ 6,529 $ 2,595 $ 15,220 $ 40,190 $ 82,150
Total assets.......................................... 8,968 9,217 5,250 18,213 46,289 89,880
Capital lease obligations, net of current portion..... -- -- 864 717 249 105
Accumulated deficit................................... (147) (2,558) (7,657) (16,221) (13,017) (7,961)
Total stockholders' equity............................ 8,968 8,571 3,486 14,761 37,907 80,725
</TABLE>
- ------------
(1) See Note 2 of Notes to Financial Statements for an explanation of the method
for determining the number of shares used to compute net income (loss) per
share amounts. Basic net income (loss) per share and basic weighted average
number of common shares do not give effect to the conversion of all
outstanding shares of Preferred Stock into Common Stock upon the closing of
this offering.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF
CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN
THIS PROSPECTUS.
OVERVIEW
PRAECIS was incorporated in July 1993 as Pharmaceutical Peptides, Inc. and
began operations in January 1994. Since its inception, the Company has been
engaged in the development of peptide-based therapeutics for the treatment of
human diseases. The Company was founded on the premise that by taking advantage
of the structural properties of peptides and by overcoming the traditional
limitations of peptide-based therapeutics, the Company could successfully
develop commercially viable pharmaceuticals that address significant clinical
needs. The Company's lead program is the development of abarelix for the
treatment of diseases exacerbated by testosterone or estrogen. PRAECIS has
entered into strategic alliances with Roche and Synthelabo for the further
development and commercialization of abarelix products.
Since its inception, the Company has had no revenue from product sales. The
Company received revenue in the form of milestone payments, cost sharing and
contract services from three corporate agreements which enabled the Company to
operate profitably during 1997 and for the first six months of 1998. Through
June 30, 1998, the Company recognized revenues pursuant to these agreements in
the amount of $42.7 million. Subject to certain terms of the Company's corporate
agreements, the Company could receive up to an additional $119.4 million in
non-refundable milestone payments as well as a percentage of future revenues and
reimbursement for certain ongoing development costs. Success of future
operations will depend on the Company developing, obtaining regulatory approval
for and commercializing its products. See "Business -- Strategic Alliances."
The Company incurred losses from its inception through June 30, 1997 and had
an accumulated deficit of approximately $8.0 million at June 30, 1998. The
Company has funded its operations primarily through the net proceeds of various
private placements of Common Stock, warrants to purchase Common Stock, and
Preferred Stock aggregating $88.5 million and through revenue from corporate
agreements. Substantially all of the Company's expenditures to date have been
for pharmaceutical development activities and general and administrative
expenses.
In August 1996, the Company entered into a collaboration and license
agreement (the "BI Agreement") with Boehringer Ingelheim International GmbH
("BI"), which provided for up to $5.5 million in payments from BI to the Company
over approximately two years, consisting of an initial signing payment and
additional payments for the screening of BI compounds and reimbursement of
personnel and related materials expenses. In May 1997, PRAECIS entered into an
agreement with Synthelabo for the development and commercialization of abarelix
products in Europe, Latin America, the Middle East and certain African countries
(the "Synthelabo Territory"). Under the terms of the Synthelabo Agreement, the
Company could receive up to approximately $64.6 million in non-refundable fees
and milestone payments, as well as a percentage of future revenues and
reimbursement for certain ongoing development costs. In August 1997, PRAECIS
entered into an agreement with Roche (the "Roche Agreement" for the development
and commercialization of abarelix products in all countries outside the
Synthelabo Territory (the "Roche Territory"). Under the terms of the Roche
Agreement, the Company could receive up to approximately $85.0 million in
non-refundable fees and milestone payments, as well as a percentage of future
revenues and reimbursement for certain ongoing development costs.
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<PAGE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
Revenues for the six months ended June 30, 1998 were $21.0 million as
compared to revenues of $6.0 million for the six months ended June 30, 1997.
Revenues for the six months ended June 30, 1998 included approximately $19.3
million of revenues earned under the Company's strategic alliances and $1.7
million in revenues earned under the BI Agreement. Revenues for the six months
ended June 30, 1997 included approximately $4.7 million of revenues earned under
the Company's strategic alliances and $1.3 million in revenues earned under the
BI Agreement.
Research and development expenses for the six months ended June 30, 1998
were $15.9 million as compared to $6.3 million for the six months ended June 30,
1997. The increase in expenses was attributable to the expansion of clinical
trials relating to abarelix, the hiring of additional research and development
personnel and increased expenditures relating to the Alzheimer's Disease and
basic Fibroblast Growth Factor programs.
General and administrative expenses for the six months ended June 30, 1998
were $1.4 million as compared to $1.5 million for the six months ended June 30,
1997. The decrease in expenses was attributable to reduced legal expenses
related to collaboration efforts and reduced expenses related to trademark and
patent activities.
Net interest income for the six months ended June 30, 1998 was $1.4 million
as compared to $0.5 million for the six months ended June 30, 1997. The increase
in interest income was attributable to an increase in the amount of cash
available for investing resulting from the net proceeds of the private placement
of Series E Preferred Stock (as defined herein) and payments received pursuant
to strategic alliances.
The provision for income taxes for the six months ended June 30, 1998 was
approximately $0.2 million compared to zero for the six months ended June 30,
1997. The provision for income taxes for the six months ended June 30, 1998
reflects utilization of net operating loss carryforwards subject to the
alternative minimum tax.
YEARS ENDED DECEMBER 31, 1997 AND 1996
Revenues for the year ended December 31, 1997 were $20.7 million as compared
to $0.9 million for the corresponding period in 1996. The increase in revenue
was due to $18.1 million of signing, milestone and cost-sharing payments
recognized as revenues pursuant to the Company's strategic alliances and $2.6
million of revenues earned under the BI Agreement.
Research and development expenses for the year ended December 31, 1997 were
$15.0 million as compared to $7.9 million for the corresponding period in 1996.
The increase in expenses was attributable primarily to the hiring of additional
research and development personnel, costs associated with the development of
abarelix and PPI-558 (the Company's lead compound for the treatment of
Alzheimer's Disease), increased purchases of research supplies and the increase
of clinical trial related expenses associated with abarelix.
General and administrative expenses for the year ended December 31, 1997
were $3.8 million as compared to $2.1 million for the corresponding period in
1996. The increase in expenses was primarily due to the recruitment and hiring
of additional administrative personnel and increased legal and other
professional fees associated with collaborative agreements, trademark and patent
activities and the expansion of the Company's operations.
Net interest income for the year ended December 31, 1997 was $1.4 million as
compared to $0.6 million for the corresponding period in 1996. The increase
resulted from the investment of the net proceeds from the private placement of
Series D Preferred Stock (as defined herein), the sale of Common
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Stock and Warrants to Sylamerica, Inc., a wholly owned subsidiary of Synthelabo
("Sylamerica") and the funds received pursuant to the Roche Agreement and the
Synthelabo Agreement.
The provision for income taxes for the year ended December 31, 1997 was $0.1
million compared to zero for the year ended December 31, 1996. The provision for
income taxes for the year ended December 31, 1997 reflects utilization of net
operating loss carryforwards subject to the alternative minimum tax.
YEARS ENDED DECEMBER 31, 1996 AND 1995
Revenues for the year ended December 31, 1996 were $0.9 million as compared
to zero for the corresponding period in 1995. Revenues resulted from the
performance of contract services pursuant to the BI Agreement.
Research and development expenses for the year ended December 31, 1996 were
$7.9 million as compared to $3.7 million for the corresponding period in 1995.
The increase in expenses was attributable primarily to the hiring of additional
research and development personnel, costs associated with the development of
abarelix and PPI-558, increased purchases of research supplies, preclinical
expenses associated with the filing of an Initial New Drug application ("IND")
for abarelix and the commencement of clinical trials and related expenses
associated with abarelix.
General and administrative expenses for the year ended December 31, 1996
were $2.1 million as compared to $1.6 million for the corresponding period in
1995. The increase in expenses was primarily due to the recruitment and hiring
of additional administrative personnel and increased legal and other
professional fees associated with the expansion of the Company's operations.
Net interest income for the year ended December 31, 1996 was $0.6 million as
compared to $0.2 million for the corresponding period in 1995. The increase
resulted from the investment of the net proceeds from the private placement of
Series C Preferred Stock (as defined herein) in April 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since inception principally through
various private placements of its Common Stock, warrants to purchase Common
Stock, and Preferred Stock, with net proceeds totaling $9.5 million, $0.5
million and $78.5 million, respectively. Additionally, the Company has received
approximately $39.1 million of signing and milestone payments, cost
reimbursements and contract service payments under the Synthelabo Agreement,
Roche Agreement and the BI Agreement and $4.3 million from interest on invested
cash balances. As of June 30, 1998, the Company had cash and cash equivalents of
$82.2 million and working capital of $77.6 million. In March 1998, the Company
entered into an equipment leasing arrangement which allows for borrowings of up
to $1.5 million. The Company anticipates that these existing capital resources,
together with the net proceeds of this offering, interest income thereon and the
continuation of the collaborations with, and associated payments from, Roche and
Synthelabo, will enable it to maintain currently planned operations for the
foreseeable future.
For the six months ended June 30, 1998 and the year ended December 31, 1997,
net cash of $4.8 million and $7.3 million, respectively, was provided by
operating activities principally due to net income and an increase in accounts
payable and accrued expenses.
PRAECIS expects its funding requirements to increase over the next several
years as it expands its research and development efforts. The Company's
expenditure requirements will depend on numerous factors, including the progress
of the Company's research and development activities, the scope and results of
preclinical testing and clinical trials, the cost, timing and outcomes of
regulatory reviews, the rate of technological advances, determinations as to the
commercial potential of the Company's products under development, the status of
competitive products, defending and enforcing intellectual property rights, the
establishment, continuation or termination of third-party manufacturing
arrangements, the development of sales and marketing resources or the
establishment, continuation or termination of
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<PAGE>
third-party sales and marketing arrangements, the establishment of additional
strategic or licensing arrangements with other companies, acquisitions, the
availability of other financing and other factors.
The Company accounts for income taxes under Statement of Financial
Accounting Standards ("SFAS") No. 109. Realization of deferred taxes is
dependent on future events and earnings, if any, the timing and extent of which
are uncertain. At December 31, 1997, the Company's net operating loss
carryforwards and research tax credit carryforwards for income tax purposes were
approximately $11.1 million and $1.0 million, respectively. These amounts expire
at various times through 2011. As a result of ownership changes resulting from
sales of equity securities, the Company's ability to use the loss carryforwards
may be subject to limitations as defined in Sections 382 and 383 of the Internal
Revenue Code of 1986, as amended. The annual limitation and the timing of
attaining profitability, if at all, may result in the expiration of net
operating loss and tax credit carryforwards before utilization.
The Company has entered into a License Agreement effective as of October 17,
1996 by and between the Company and IUF, as amended as of June 3, 1998 (the "IUF
License Agreement") which provides for future payments to IUF of up to $4.6
million upon achievement of specific milestones as well as a royalty percentage
of net sales of licensed products. During 1998, the Company also entered into
agreements with UCB-Bioproducts S.A. and Salsbury Chemicals, Inc. for the supply
of materials to be used in the production of abarelix. In connection with these
supply agreements, the Company entered into binding commitments for
approximately $38.3 million for raw materials and equipment.
RECENT ACCOUNTING PRONOUNCEMENTS
In 1998, the Company adopted SFAS No. 130, REPORTING COMPREHENSIVE INCOME,
and SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION, which did not have any impact on the Company's financial
statements.
IMPACT OF YEAR 2000
It is possible that the Company's currently installed computer systems,
software products or other business systems, or those of the Company's suppliers
or service providers, working either alone or in conjunction with other software
or systems, will not accept input of, store, manipulate and output dates for the
years 1999, 2000 or thereafter without error or interruption (commonly known as
the "Year 2000" problem). The Company does not have a comprehensive or formal
Year 2000 plan for its operations. However, during 1998, the Company upgraded
its critical data processing systems and believes that such systems will
function properly with respect to dates in the years 1999, 2000 and thereafter.
Some risks associated with the Year 2000 problem are beyond the ability of the
Company to control, including the extent to which the Company's suppliers and
service providers can address the Year 2000 problem. The failure by a third
party to adequately address the Year 2000 issue could have a material adverse
impact on a third party, and could have an adverse impact on the Company. The
Company is assessing the possible effects on the Company's operations of the
possible failure of the Company's key suppliers and providers, contractors and
collaborators to identify and remedy potential Year 2000 problems.
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BUSINESS
THE FOLLOWING BUSINESS SECTION CONTAINS FORWARD-LOOKING STATEMENTS WHICH
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND
ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
PRAECIS is engaged in the development of peptide-based therapeutics for the
treatment of human diseases. The Company's lead program is the development of
abarelix, a synthetically modified peptide, for the treatment of diseases
exacerbated by testosterone or estrogen. Abarelix-depot-M, a sustained delivery
depot formulation of abarelix, is entering Phase III clinical trials for the
treatment of hormonally responsive prostate cancer. PRAECIS has entered into
strategic alliances with each of Roche and Synthelabo for the further
development and commercialization of abarelix products.
Prostate cancer is one of the most commonly diagnosed human cancers.
According to the American Cancer Society, approximately 209,900 new diagnoses
of, and 41,800 deaths from, prostate cancer occurred in the United States in
1997. Based on worldwide IMS data, approximately $2.0 billion of prescriptions
were written in 1997 for the currently available hormonal therapies for the
treatment of hormonally responsive prostate cancer. These therapeutics reduce
testosterone to castrate levels, and are delivered by injection as a sustained
delivery depot formulation. However, these therapies result in testosterone
reduction only after causing an initial "surge" in testosterone levels. This
surge may result in stimulation of cancer growth and a temporary exacerbation of
the disease, known as a clinical "flare". Although many physicians prescribe a
supplemental therapy to mitigate the flare, this supplemental therapy may be
only partially effective, has significant side effects and is not reimbursed by
government sources. Based on interim results of the Company's ongoing Phase I/II
clinical trial, abarelix-depot-M has been shown to reduce testosterone levels
immediately, without a testosterone surge and without the need for supplemental
therapy.
Interim results from the Company's ongoing Phase I/II clinical trial
indicate that of those patients who received abarelix-depot-M, more than 75%
achieved castrate testosterone levels within one week after administration, and
more than 90% achieved such levels within four weeks. These interim results also
indicate that castrate testosterone levels can be maintained by administration
of abarelix-depot-M once every four weeks. By contrast, patients receiving
currently available hormonal therapies in this trial experienced an initial
surge of testosterone levels and did not consistently reach castrate
testosterone levels until three to four weeks after administration. The Company
is commencing multi-center pivotal Phase III clinical trials of abarelix-depot-M
randomized against currently available hormonal therapies. The Company believes
that abarelix may also have application as a therapeutic for endometriosis,
benign prostatic hyperplasia, breast cancer and other diseases where reduction
of testosterone or estrogen is an accepted goal of therapy.
BACKGROUND
Nearly all currently marketed pharmaceuticals have been discovered and
developed using an empirical process which generally consists of: (i) selecting
a biological target; (ii) screening libraries of compounds against the target to
identify one or more compounds that bind to the target and modify its activity
in a desired manner (a "hit"); and (iii) optimizing the hit by a sequential
synthesis and testing of variations of the hit to identify promising drug
candidates. During the past two decades, the discovery of biological targets has
dramatically increased due to the advancement of genomics and a greater
understanding of molecular processes. However, these advances have not led to a
corresponding increase in the number of new therapeutics, which highlights the
inefficiencies inherent in traditional drug discovery techniques and the
difficulties associated with compound by compound synthesis and screening.
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Also during the past two decades, molecular biology and solid phase
combinatorial chemistry have given scientists the tools necessary to rapidly and
cost-effectively generate and screen a class of compounds known as peptides for
the purpose of drug discovery. Peptides are compounds comprised of a short
sequence of amino acids. Using "phage display" and other advanced screening
technologies, extremely large libraries of peptides can be quickly and
inexpensively created and screened, increasing the probability of generating
hits. Furthermore, the structural properties of a peptide allow it to be easily
and rapidly modified and manipulated by replacing individual units of the amino
acid peptide chain with synthetic chemical units. Thus, a structurally more
diverse library of compounds can be created whose members may have improved
pharmacological properties, including improved functionality, binding affinity
and stability.
There are currently a number of commercially available peptide-based drugs,
including insulin, human growth hormone and the GnRH superagonists', Lupron and
Zoladex. However, the pharmaceutical industry has generally preferred to pursue
non-peptide drugs due to practical issues associated with peptides. For example,
the generally large molecular size and negative charge of peptides may prevent
them from crossing cell membranes or the blood-brain barrier, which may be
required to provide a desired therapeutic effect. In addition, peptides are
typically degraded rapidly in the digestive tract and, as a result, are
generally injected into the patient rather than delivered orally. Frequent
delivery by injection has generally been viewed by the pharmaceutical industry
as a practical drawback. Finally, producing large volumes of peptides for
commercial applications has been costly compared to the manufacture of
non-peptide-based drugs.
PRAECIS was founded on the premise that by taking advantage of the
structural properties of peptides, and by overcoming certain limitations of
peptide-based therapeutics, the Company could successfully develop commercially
viable drugs that address significant clinical needs.
Since its formation, the Company has demonstrated success at solving the
pharmacological and technological drawbacks related to specific peptide
compounds. For example, in response to degradation and related drug delivery
difficulties associated with peptide-based drugs, the Company developed
Rel-Ease, a proprietary sustained delivery depot formulation, for its lead drug
candidate, abarelix-depot-M. See "-- Technology."
BUSINESS STRATEGY
PRAECIS' objective is to use its technology-development skills and clinical
expertise to rapidly develop and commercialize peptide-based drugs that address
significant clinical needs. The Company is pursuing the following strategy to
achieve this objective:
PURSUE APPROVAL OF ABARELIX-DEPOT-M. The Company will seek to gain
regulatory approval of abarelix-depot-M as a safe and efficacious therapy for
hormonally responsive prostate cancer. The Company is commencing multi-center
pivotal Phase III clinical trials of abarelix-depot-M, randomized against
currently available hormonal therapy, for the treatment of hormonally responsive
prostate cancer. Interim results from the Company's Phase I/II abarelix-depot-M
clinical trial indicate that of those patients who received abarelix-depot-M,
more than 75% achieved castrate testosterone levels within one week after
administration, and more than 90% achieved such levels within four weeks. These
interim results also indicate that castrate testosterone levels can be
maintained by administration of abarelix-depot-M once every four weeks. By
contrast, patients receiving currently available hormonal therapies in this
trial experienced an initial surge of testosterone levels and did not
consistently reach castrate testosterone levels until three to four weeks after
administration.
SEEK APPROVAL OF ABARELIX FOR ADDITIONAL INDICATIONS. The Company believes
that interim results of its abarelix-depot-M studies to date support the
expansion of the abarelix program to additional therapeutic targets such as
endometriosis, benign prostatic hyperplasia ("BPH"), breast cancer, and other
diseases where reduction of testosterone or estrogen is an accepted goal of
therapy. The Company
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is developing abarelix-depot-F for the treatment of endometriosis and is
commencing a Phase I/II clinical trial for this indication. The Company is
considering future studies in BPH, breast cancer, uterine fibroids and certain
other disorders.
SELECTIVELY DEVELOP PROPRIETARY TECHNOLOGIES TO FURTHER DRUG CANDIDATE
DEVELOPMENT. The Company has developed specific proprietary technologies when
it has encountered development hurdles or inefficiencies in the drug discovery
or development process. Examples of such technologies include its MASTRscreen
assay and Rel-Ease drug delivery technology, as well as its proprietary amyloid
aggregation inhibition assays. The Company intends to continue to develop
technologies on an as-needed basis in connection with its discovery and
development of drug candidates.
PURSUE STRATEGIC COLLABORATIONS TO LEVERAGE DEVELOPMENT AND
COMMERCIALIZATION CAPABILITIES. In order to enhance its own capabilities, the
Company intends to continue to selectively pursue strategic collaborations on
favorable terms with pharmaceutical or other companies. These collaborations may
encompass some or all of the various aspects of drug discovery, development and
commercialization. The Company has entered into collaborations with each of
Roche and Synthelabo for the further development and commercialization of
abarelix products.
FOCUS ITS DRUG DISCOVERY EFFORTS ON DISEASES WITH SUBSTANTIAL MARKET
OPPORTUNITIES. PRAECIS focuses its drug discovery efforts on diseases with
large market opportunities where current therapies are non-existent or have
significant limitations and where a peptide-based product could be effective and
commercially advantageous. Before embarking on a new drug discovery program, the
Company evaluates commercial potential, clinical feasibility, research timeline,
patent protection, process development and manufacturing considerations, in
light of its expertise with peptides and experience in developing abarelix. The
Company has initially focused on therapeutics to treat diseases such as prostate
cancer, endometriosis and Alzheimer's Disease.
ACQUIRE COMPLEMENTARY TECHNOLOGIES AND PRODUCTS. The Company believes that
it has demonstrated distinct core competencies in the discovery and development
of peptide-based drugs and project management and clinical development in
certain therapeutic areas. The Company intends to license-in or acquire
complementary technologies, new products and late-stage preclinical and early
clinical-stage compounds that can be included in the Company's development
pipeline and to which the Company can apply its discovery and clinical
expertise.
PRODUCT CANDIDATES
PRAECIS' product candidates and research and development programs to date
concentrate in four areas of human disease: (i) diseases which are aggravated by
testosterone or estrogen, including prostate cancer and endometriosis; (ii)
Alzheimer's Disease; (iii) hormonally refractory prostate cancer; and (iv)
inflammatory diseases, such as arthritis. All of the Company's product
candidates and research and development programs apply the Company's
technological and scientific expertise in the synthetic modification of peptides
in an effort to produce safe and efficacious therapeutics.
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The following table outlines the Company's research and development
programs.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
COMPOUND/PROGRAM INDICATION STATUS PARTNER(S)
- -------------------------- ------------------------------------------ --------------------- -----------------
Abarelix-Depot-M Hormonally responsive prostate cancer Commencing Phase III Roche/Synthelabo
Phase I/II(1)
Abarelix-Depot-M Advanced stage hormonally responsive Commencing Phase III Roche/Synthelabo
prostate cancer
Abarelix-L Prostate gland volume reduction Phase I/II completed Roche/Synthelabo
Abarelix-Depot-F Endometriosis Commencing Phase I/II Roche/Synthelabo
PPI-558 Alzheimer's Disease Preclinical --
bFGF antagonist Hormonally refractory prostate cancer Research --
TNF antagonist Rheumatoid arthritis Research --
TNF antagonist Crohn's Disease Research --
- ---------------
(1) The Company has completed enrollment and submitted interim results to the FDA.
</TABLE>
ABARELIX PROGRAM
The Company's lead program is the development of abarelix, a synthetically
modified peptide, for the treatment of diseases exacerbated by testosterone or
estrogen. The elimination of these hormones through the use of pharmaceuticals,
known as "hormonal therapy", results in a therapeutic benefit to the patient.
Abarelix and currently available hormonal therapies achieve their effect by
inhibiting the body's production of testosterone or estrogen. Currently
available hormonal therapies inhibit the production of these hormones only after
an initial increase or "surge" of hormone production occurs. This initial surge
may result in stimulation of the disease and a temporary exacerbation of its
symptoms. Accordingly, current hormonal therapies, known as "superagonists",
have precautionary labeling to this effect. Biologically, superagonists
hyperstimulate the GnRH receptor, which mediates the production of testosterone
or estrogen, to achieve their desired medical effect. This hyperstimulation
causes the initial surge associated with superagonist therapies. In contrast,
abarelix has a blocking or "antagonist" effect on the GnRH receptor, thereby
achieving the desired medical effect without any hormonal surge. Based on
results of the Company's prostate cancer clinical trials to date, abarelix has
been shown to rapidly inhibit hormone production without the initial surge in
hormone levels and exacerbation of symptoms associated with the use of
superagonists.
The abarelix program currently includes two potential products,
abarelix-depot-M (male) and abarelix-depot-F (female). In addition, the Company
has developed a non-depot or liquid formulation of abarelix, abarelix-L.
Abarelix-depot-M is entering two pivotal Phase III clinical trials for the
treatment of hormonally responsive prostate cancer, and an additional Phase III
clinical trial evaluating its use in advanced stage hormonally responsive
prostate cancer where superagonists are contraindicated. Abarelix-depot-M is
also undergoing a Phase I/II clinical trial for the treatment of hormonally
responsive prostate cancer, enrollment in which has been completed. The Company
has completed Phase I/II clinical trials of abarelix-L for prostate gland volume
reduction and advanced stage hormonally responsive prostate cancer.
Abarelix-depot-F is also entering a Phase I/II clinical trial for the treatment
of endometriosis. The Company believes that both abarelix-depot-M and
abarelix-depot-F show promise as safe and effective therapeutics for the
treatment of other diseases in which hormone elimination is the intended goal of
therapy. These potential product extensions include benign prostatic
hyperplasia, breast cancer, uterine fibroids, precocious puberty, IN VITRO
fertilization in association with infertility and polycystic ovarian disease.
The Company has granted Roche and Synthelabo co-development rights with the
Company, and exclusive marketing and distribution rights, with respect to
abarelix products for all indications. Under
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these arrangements, PRAECIS is to receive development and commercialization
milestone payments and a share of net sales revenues. See "-- Strategic
Alliances."
ABARELIX-DEPOT-M/ABARELIX-L
The Company's primary focus to date has been the development of
abarelix-depot-M as a therapeutic for hormonally responsive prostate cancer. The
Company believes that abarelix-depot-M addresses the detrimental consequences
associated with current hormonal therapies. Specifically, abarelix-depot-M is
designed to reduce the time required to achieve medical castration without the
testosterone surge and associated symptoms, and accordingly, without the need
for supplemental therapies. The Company believes that abarelix-depot-M, if
approved for marketing, will be the first commercially available GnRH receptor
antagonist in a sustained delivery depot formulation.
Prostate cancer is one of the most commonly diagnosed human cancers.
According to the American Cancer Society, approximately 209,900 new diagnoses
of, and 41,800 deaths from, prostate cancer occurred in the United States in
1997. According to several studies, approximately 40% of newly diagnosed
prostate cancer patients have non-localized prostate cancer and are treated with
long-term hormonal therapy to achieve medical castration. Medical castration
reduces testosterone levels to equivalent levels achieved through removal of the
testicles (surgical castration). Hormonal therapy is also increasingly being
used as an adjunct to other therapies, such as radiation therapy and radical
prostatectomy. The market for hormonal treatment of prostate cancer was
approximately $2.0 billion worldwide in 1997, the majority of which was related
to treatment for non-localized prostate cancer.
As noted above, currently available hormonal therapeutics, such as Lupron
and Zoladex, achieve medical castration but have a number of drawbacks and
associated side effects. These therapies act only after causing an initial surge
in testosterone levels and a three to four week delay in achieving the
therapeutic objective of medical castration. In addition, this initial surge in
testosterone levels may result in stimulation of the cancer growth and a
temporary exacerbation of the disease known as a clinical "flare".
In an attempt to mitigate the flare, many physicians prescribe a
supplemental therapy ("anti-androgens") intended to reduce the exacerbation of
cancer cell growth caused by a superagonist therapeutic. This additional
therapy, however, may be only partially effective and has side effects,
including liver damage and gastrointestinal distress. In addition, successive
administrations of a superagonist, even when combined with an anti-androgen, may
again produce a small surge in testosterone and, therefore, another undesirable
flare reaction. Finally, anti-androgens represent a significant additional
expense for patients which is generally not reimbursed by government sources.
In certain patients with advanced stage hormonally responsive prostate
cancer, treatment with superagonists may result in serious adverse effects. In
these patients, the testosterone surge may lead to urinary obstruction,
paralysis due to spinal cord nerve compression and even death. In these cases,
immediate surgical castration must be performed to reduce testosterone levels.
The Company believes that abarelix-depot-M may have the potential to provide a
non-surgical alternative for these patients.
The Company is commencing two pivotal Phase III clinical trials of
abarelix-depot-M for the treatment of hormonally responsive prostate cancer. The
primary endpoint of these trials is efficacy, as measured by the rate and
magnitude of testosterone reduction, the avoidance of testosterone surge and the
maintenance of medical castration. In addition, abarelix-depot-M is entering a
Phase III clinical trial evaluating its use in certain patients with advanced
stage hormonally responsive prostate cancer.
In October 1997, the Company began a Phase I/II clinical trial of
abarelix-depot-M for the treatment of hormonally responsive prostate cancer.
Enrollment in this ongoing clinical trial has been completed, with over 200
patients having received abarelix-depot-M. Patients receive dosing by injection
of abarelix-depot-M on day one, day fifteen, day twenty-nine and once every
twenty-eight days thereafter. As part of this trial, a non-randomized
prospective concurrent control is being conducted using either Lupron or
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Zoladex, with or without anti-androgens. Interim results from this trial
indicate that of those patients who received abarelix-depot-M, more than 75%
achieved castrate testosterone levels within one week after administration, and
more than 90% achieved such levels within four weeks. These interim results also
indicate that such castrate testosterone levels can be maintained by
administration of abarelix-depot-M on a once every four weeks dosing schedule.
By contrast, patients receiving Lupron or Zoladex in this trial typically
experienced an initial surge of testosterone levels of 10-60% over
pre-administration levels. In these patients, testosterone did not return to
pre-administration levels for over a week and did not consistently reach
castrate levels until three to four weeks after administration. To date, no
serious adverse events related to abarelix-depot-M have been observed in this
trial.
In August 1997, the Company began a 36 patient Phase I/II clinical trial of
abarelix-L in patients with locally confined prostate cancer prior to radiation
therapy or radical prostatectomy. The primary endpoints of this clinical trial
were safety, rate of prostate gland volume reduction and reduction of hormone
levels. The Company believes, based upon preliminary analysis of the data from
this trial, that abarelix-L has shown preliminary evidence of safety, and the
ability to substantially reduce the volume of the prostate gland within one to
three months of commencing treatment and reduction of hormone levels.
In October 1996, the Company began a Phase I/II clinical trial with
abarelix-L for advanced stage hormonally responsive prostate cancer. Analysis
was completed in November 1997 of the data for the 26 patients treated. The
primary endpoints of this clinical trial were safety, and efficacy as measured
by the rate and magnitude of testosterone reduction and the avoidance of
testosterone surge. No serious adverse events related to abarelix-L were
observed, and the Company believes, based upon the data from such trial, that
abarelix-L has shown preliminary evidence of safety and efficacy.
The results described herein of the Company's Phase I/II clinical trial of
abarelix-depot-M for the treatment of hormonally responsive prostate cancer are
based upon interim data which have been submitted to the FDA, and have not yet
been published in a peer review publication. The results described herein of the
Company's Phase I/II clinical trials of abarelix-L are based upon data which
have been submitted to the FDA, the details of which have not yet been published
in a peer review publication. In the case of such Phase I/II clinical trial of
abarelix-L in patients with locally confined prostate cancer prior to radiation
therapy or radical prostatectomy, final analysis of such data has not yet been
completed. No assurance can be given that the Company's clinical results from
ongoing or future clinical trials, or that the final analysis of data from
completed, ongoing or future clinical trials, will be consistent with the
results and analyses to date as described herein.
ABARELIX-DEPOT-F
The Company has also focused on the development of abarelix-depot-F as a
therapeutic for endometriosis. The Company believes that abarelix-depot-F, if
approved for marketing, will be the first commercially available GnRH receptor
antagonist in a sustained delivery depot formulation for the suppression of
estrogen in women. Abarelix-depot-F functions through a mechanism analogous to
testosterone suppression in men using abarelix-depot-M. The Company is
commencing a Phase I/II clinical trial of abarelix-depot-F for the treatment of
endometriosis.
Endometriosis is a condition where endometrial tissue migrates beyond the
uterine lining, most often to the pelvic cavity. Endometrial tissues, regardless
of location in the body, respond to the normal hormonal cycling of women. When
the location of the endometrial tissue prevents appropriate sloughing of tissue,
which otherwise normally occurs during menstruation, inflammation and internal
scarring occurs, causing, among other things, pain, fatigue, heavy menstrual
bleeding and fertility problems. An estimated 5.5 million women in the United
States and Canada have endometriosis. The Company estimates, based on IMS data,
that approximately $100 million is spent in the United States annually on GnRH
superagonists for the treatment of endometriosis. In addition, as a result of
increased awareness of
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female medical issues, the Company believes that the number of patients
diagnosed with and treated for endometriosis will increase.
Treatments for endometriosis include pain management using analgesics,
standard birth control pills and hormonal therapy using GnRH superagonists,
including Lupron and Zoladex. However, the use of a GnRH superagonist to
suppress estrogen production causes an estrogen surge in women, similar to the
testosterone surge in men, which may exacerbate the symptoms of endometriosis
described above and delays the effective onset of symptomatic relief. The
Company believes that abarelix-depot-F, compared to superagonist therapy, may be
of significant value in the treatment of endometriosis since it should have more
rapid onset of action and consequent relief of symptoms and it should not cause
the estrogen surge that may exacerbate the symptoms associated with the disease.
ADDITIONAL INDICATIONS FOR ABARELIX
Since testosterone and estrogen are known mediators of several diseases, the
Company believes that abarelix may also have applications as a therapeutic for
benign prostatic hyperplasia, breast cancer, and other diseases where hormone
reduction is an accepted goal of therapy.
It is estimated that at least ten million men in the United States are
afflicted with benign prostate hyperplasia, symptoms of which include impaired
urinary flow and, in the most severe cases, urinary retention. According to
several studies, approximately 25% of patients with this disease could benefit
from a reduction in prostate volume. Existing prostate gland volume reduction
therapies such as Proscar require up to six months to achieve a volume reduction
sufficient for symptomatic relief. Based on data from the Company's Phase I/II
clinical trial of abarelix-L, the Company believes that a GnRH antagonist, such
as abarelix, has the potential to achieve volume reduction faster than existing
therapies.
The American Cancer Society estimates that there will be 178,700 newly
diagnosed cases of, and 43,500 deaths from, female breast cancer in the United
States in 1998. Approximately one-third of all newly diagnosed patients are pre-
or peri-menopausal and, in these cases, estrogen stimulates the breast cancer.
GnRH superagonists have been studied in patients and appear to have a benefit
due to their ability to suppress estrogen. One GnRH superagonist, Zoladex, has
received FDA marketing approval for this indication. The Company believes that a
GnRH antagonist, such as abarelix, has the potential to provide greater benefit
due to the absence of an estrogen surge and more rapid reduction in estrogen
levels.
Other diseases where hormone reduction is an accepted goal of therapy and
for which the Company believes GnRH antagonists should provide a meaningful
benefit include uterine fibroids, precocious puberty, IN VITRO fertilization in
association with infertility and polycystic ovarian disease.
PPI-558 -- ALZHEIMER'S DISEASE
The Company is conducting preclinical studies with PPI-558, the Company's
lead compound for the treatment of Alzheimer's Disease. The Company identified
PPI-558 using its proprietary amyloid aggregation inhibition assays and a
cell-based neurotoxicity assay. The Company developed the amyloid aggregation
assays in its effort to identify a lead compound to treat this disease.
Alzheimer's Disease affects an estimated four million people in the United
States alone. According to the Alzheimer's Association, the prevalence of
Alzheimer's Disease is expected to increase as the population ages. Alzheimer's
Disease is characterized by the abnormal accumulation in brain tissue of
neurofibrillary tangles and senile plaques which mainly consist of beta-amyloid,
a family of closely-related peptides. According to a widely held theory in the
scientific community known as the "Amyloid Hypothesis," an increase in
beta-amyloid peptide leads to its aggregation into beta-amyloid fibrils, which
in turn leads to the deposition of senile plaques, neuronal death, atrophy of
brain tissue and cognitive dysfunction. According to the Amyloid Hypothesis,
aggregated beta-amyloid is central to the development of Alzheimer's Disease.
Current therapies, which do not address aggregation of beta-amyloid, have been
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shown to only marginally improve cognitive function on a temporary basis for a
subgroup of patients and have not been shown to significantly retard the course
of the disease.
The Company has chosen to address the aggregation of beta-amyloid monomers
into fibrils and anticipates that even modest inhibition of beta-amyloid
aggregation should retard or halt the progression of Alzheimer's Disease. In
preclinical studies, PPI-558 has been shown to specifically inhibit aggregation
of beta-amyloid IN VITRO and its associated cell toxicity. In addition, the
Company has demonstrated in preclinical studies that PPI-558 will pass through
the blood-brain barrier. However, the quantities of PPI-558 necessary to achieve
efficacy are unknown, and the Company has not demonstrated in any preclinical
studies that PPI-558 will achieve efficacy.
BFGF RECEPTOR ANTAGONIST -- HORMONALLY REFRACTORY PROSTATE CANCER AND OTHER
DISEASES
Basic Fibroblast Growth Factor ("bFGF") is a growth factor critical in the
development and maintenance of the nervous, vascular and skeletal systems and is
also important for tissue repair and wound healing. Distinct forms of bFGF
receptors are observed in patients who develop hormonally refractory prostate
cancer. PRAECIS has discovered and is developing a series of compounds that act
as bFGF antagonists. The Company intends to pursue one compound for further
development as a therapeutic for hormonally refractory prostate cancer. The
Company is evaluating these compounds in EX VIVO studies. The Company estimates
that approximately 40,000 new prostate cancer patients become hormonally
refractory each year in the United States alone. In these patients, growth of
prostate cancer cells has become independent of testosterone and, as a result,
hormonal therapy is no longer effective. Existing treatments for these patients
are only minimally effective and rarely affect survival rate. The Company
believes that a bFGF antagonist may be more efficacious than current therapies.
bFGF is known to be involved in other diseases, including other cancers,
stroke and arterial diseases. The Company believes that bFGF antagonists may be
effective as therapeutics for these diseases as well.
TNF ANTAGONIST -- RHEUMATOID ARTHRITIS AND CROHN'S DISEASE
The Company has recently initiated a program to discover peptides that act
as Tumor Necrosis Factor ("TNF") antagonists for the treatment of rheumatoid
arthritis and Crohn's Disease.
Rheumatoid arthritis is an autoimmune disease whereby inflammation of the
joint lining causes damage to the cartilage and bone which results in joint
pain, reduced mobility and in severe cases, disfigurement. Approximately 2.1
million individuals are afflicted with rheumatoid arthritis in the United
States. Crohn's Disease is an inflammation of the bowel which can extend into
the deeper layers of the bowel causing ulcerations. In the United States,
approximately 200,000 people suffer from Crohn's Disease. Crohn's Disease is a
less prevalent, more severe form of Inflammatory Bowel Disease, a broader based
medical condition affecting approximately 2.0 million people in the United
States. The Company believes that TNF antagonists may also be useful for the
treatment of Inflammatory Bowel Disease generally. For both rheumatoid arthritis
and Crohn's Disease, therapeutic options are limited and the therapeutic focus
is on the management of disease symptoms with anti-inflammatory agents, immune
suppressants, analgesics and surgery. Recent clinical data from several
companies and academic institutions has validated TNF as a key mediator of these
diseases and as an appropriate therapeutic target. To date, such anti-TNF
therapies have centered on antibodies to TNF and on soluble receptors of TNF.
The Company believes that a TNF peptide antagonist may have certain advantages
over other therapies, including delivery, cost and duration of response.
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TECHNOLOGY
PRAECIS has developed a number of technologies and uses generally available
technology to support the pursuit of its goal to develop and commercialize
peptide-based drugs that target significant clinical needs. The Company has
developed and intends to continue to develop technology on an as-need basis in
connection with its pursuit of peptide-based therapeutics.
REL-EASE DRUG DELIVERY TECHNOLOGY. In connection with the development of
abarelix, the Company developed Rel-Ease, a proprietary sustained delivery depot
system. The key limitation of current depot technologies as applied to GnRH
antagonists is the ability to "load" a sufficient amount of drug substance
within an acceptable injection volume. The Rel-Ease system forms an injectable
depot with abarelix, releasing abarelix over time. The materials used in the
Rel-Ease system are widely used in other injectible pharmaceutical products and
are classified by the FDA as GRAS (Generally Regarded As Safe). Abarelix-depot-M
is administered by injection on day one, day fifteen, day twenty-nine and once
every twenty-eight days thereafter. Based on results of IN VITRO and IN VIVO
pharmacokinetics studies to date, as well as the Phase I/II clinical trial
results to date with abarelix-depot-M, the Company believes Rel-Ease will
constitute an acceptable delivery system which will enable plasma levels of
abarelix required for sustained therapeutic effect. The Company will use the
Rel-Ease system in its abarelix-depot-M Phase III clinical trials and the
abarelix-depot-F Phase I/II clinical trial.
MASTRSCREEN. MASTRscreen is a proprietary high-throughput screening assay
which identifies and evaluates superagonists and antagonists of Seven
Transmembrane G-Protein Coupled Receptors, such as the GnRH receptor.
MASTRscreen was developed in connection with the Company's abarelix program and
was instrumental in the Company's identification of abarelix. MASTRscreen is
useful because of its sensitivity to low concentrations of screened material,
easily measureable endpoints, ability to use standard cloned genes as receptors
and adaptability to various high-throughput screening configurations.
ALZHEIMERS' ASSAYS. The Company's proprietary amyloid aggregation
inhibition assays measure the aggregation of beta-amyloid and the ability of
inhibitors to affect beta-amyloid aggregation. These assays were used in the
identification of PPI-558. The Company and many researchers in the scientific
community believe that aggregation of beta-amyloid is a central cause in the
development of Alzheimer's Disease. Beta-amyloid is difficult to work with as a
research compound because, among other things, it is generally unstable.
Consequently, assays employing beta-amyloid are often not consistent or
reproducible. PRAECIS believes it has overcome these common obstacles with its
assays based upon the consistency and reproducibility of the assays to date. The
Company used these assays to screen non-peptide compounds provided by BI for
beta-amyloid aggregation inhibition activity. See "-- Product Candidates --
PPI-558 -- Alzheimer's Disease" and "-- Strategic Alliances -- Boehringer
Ingelheim International GmbH."
PEPTIDE-BASED PHAGE DISPLAY. The Company uses generally available
gene-encoded peptide library technology to rapidly develop and screen large and
diverse libraries of peptides, thereby increasing the probability of generating
one or more hits in the initial screening process. The Company generally screens
libraries of compounds against a target using a screening technology known as
"phage display" to identify hits. A "phage library" can be easily constructed in
several weeks by inserting combinatorially generated DNA sequences into the
genome of an organism using standard genetic engineering techniques and then
allowing that organism to produce the corresponding peptide sequence. These
peptide libraries can theoretically consist of 10(8) to 10(9) different peptides
and thus are typically 10,000 times more diverse than standard chemical
libraries used in traditional drug screening. Each phage within a phage library
displays on its surface a single peptide sequence. This methodology allows for
the construction of libraries of peptides containing very large numbers of
distinct biochemical entities, limited in theory only by the length of the amino
acid chain. Since the number of hits identified generally increases with the
size and diversity of the library of compounds screened, the Company believes
that its
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ability to rapidly screen large numbers of peptides with phage display enhances
the probability of identifying one or more hits.
LEAP SYSTEM. The LEAP system is a proprietary, chemical-based combinatorial
system which extends structural diversity and pharmacological properties beyond
those associated with peptides. Peptides can be designed and easily optimized
through combinatorial chemistry to improve their pharmacological features
because the units of a peptide can be easily interchanged with different
chemical units, thereby making the compound structurally more diverse. LEAP
enables the power of a combinatorial approach to be applied to the optimization
process. In the LEAP process, the amino acid sequence of a hit is used as a
starting point or template for the construction of a chemically synthesized
combinatorial library containing both natural and non-natural amino acids. This
chemically synthesized LEAP library is then screened to select compounds which
bind to the molecular target and which, due to such chemical synthesis and the
presence of both natural and non-natural amino acids in the library, may have
improved pharmaceutical characteristics, including potency, bioavailability,
pharmacodynamics and pharmacokinetics. Since the quantity of any individual
compound selected out of the LEAP library is exceedingly small, and therefore
cannot be identified using standard sequencing or deconvolution techniques, the
LEAP process uses tandem mass spectroscopy techniques to identify such
compounds. The Company has already demonstrated the feasibility of LEAP and has
filed a patent application covering LEAP.
PROVID RESEARCH. The Company recently established a new division, the
Provid Research division, that has expertise in peptide mimetic chemistry,
including expertise in medicinal chemistry, molecular modeling and computational
chemistry ("Provid Mimetic Expertise"). A peptide mimetic is a modified peptide
that contains the pharmacological advantages of a peptide with fewer of its
pharmacological drawbacks. Provid Mimetic Expertise will be used in series or in
parallel with the LEAP process. Using as a starting point either the amino acid
sequence of a hit or the end product of a LEAP cycle, the Company intends to use
its Provid Mimetic Expertise to improve pharmaceutical characteristics of
compounds, including potency, bioavailability, pharmacodynamics,
pharmacokinetics, stability and ease of synthesis.
STRATEGIC ALLIANCES
To enhance its research, development and commercialization capabilities, and
its financial assets, the Company has entered into, and intends to continue to
enter into, strategic alliances. The Company frequently engages in discussions
with other companies regarding possible collaborations with respect to the
Company's potential products. To date, the Company has entered into the
strategic alliances described below.
ROCHE
Effective as of August 21, 1997, the Company entered into the Roche
Agreement pursuant to which the Company granted Roche co-development rights with
the Company, and exclusive marketing and distribution rights, with respect to
abarelix products in the Roche Territory, which includes principally the United
States, Canada and the Pacific Rim. The Company retains manufacturing rights and
will enter into an exclusive supply agreement with Roche or an affiliate thereof
to supply Roche's requirements for abarelix products in the Roche Territory.
In connection with the Roche Agreement, Roche has made up-front,
non-refundable payments to the Company of $16.0 million, and is obligated to
make additional non-refundable payments of up to $69.0 million, subject to the
achievement of certain clinical, regulatory and commercialization milestones. In
addition, the Company is entitled to receive a share of annual net sales
revenues from the sale by Roche, its affiliates and sublicensees of abarelix
products in the United States. Such share is 25% with respect to such annual net
sales revenues up to a specified threshold, and increases incrementally with
respect to specified additional annual net sales revenue amounts, to a specified
percentage maximum. A royalty applies with respect to such net sales revenues
from sales in the Roche Territory
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outside the United States. Roche is also required to pay IUF directly the
running royalty due to IUF pursuant to the IUF License Agreement in connection
with the sale by Roche, its affiliates and sublicensees of abarelix products,
subject to a percentage cap. In addition, Roche is responsible for the cost of
goods of abarelix products to be sold pursuant to the collaboration, subject to
a specified limitation. Roche and the Company will generally share equally all
development costs associated with obtaining regulatory approvals in the Roche
Territory for abarelix products for the treatment of prostate cancer and other
mutually agreed indications, net of Synthelabo's payments to the Company of such
costs pursuant to the Synthelabo Agreement. Through July 31, 1998, such
development cost payments by Roche have totaled approximately $3.0 million.
Commencing three full years after the first commercial sale by Roche, its
affiliates or sublicensees of abarelix products in the United States, the
Company has an option to co-promote and detail abarelix products in the United
States, subject to achievement of a specified threshold amount of sales of
abarelix products by Roche, its affiliates and sublicensees in the United States
in the full calendar year prior to the Company's exercise of the co-promotion
option and to certain performance conditions.
The Company has agreed that if in the third or any subsequent full calendar
year through the eighth calendar year following the first commercial sale by
Roche, its affiliates and sublicensees of abarelix products in the United
States, annual net sales revenues with respect to such sales in the United
States are less than a specified threshold amount, at Roche's request the
parties will meet and in good faith consider whether modifications to the
consideration under the Roche Agreement are required in light of a goal for an
equal sharing between the parties of the net present value as of the effective
date of the Roche Agreement of the pretax net income for abarelix products in
the Roche Territory during the term of the Roche Agreement. If the parties agree
that such a modification is required, they will negotiate modifications in light
of the aforementioned goal, taking into account, without limitation, prudent
business practices and all amounts paid or to be paid by a party to the other
under the Roche Agreement including development costs. Any such modifications
would be prospective only and would not apply for any calendar year in which net
sales revenues of abarelix products by Roche, its affiliates and sublicensees in
the United States exceed the aforesaid threshold amount.
A joint steering committee and a development project team with equal
representation from the Company and Roche coordinate and oversee the
collaboration and will determine which indications in addition to prostate
cancer will be developed jointly pursuant to the Roche Agreement. Subject to
certain restrictions and opt-in rights of the other party, if a party proposes
that the collaboration develop an indication other than prostate cancer and such
development is not agreed to by the other party, the proposing party may itself
or in collaboration with third parties pursue development and commercialization
of such indication.
The term of the Roche Agreement expires, and the licenses thereunder become
fully paid-up, on a country-by-country basis, upon the later of (A) ten years
after the first sale by Roche, its affiliates or sublicensees in the given
country of a commercial quantity of an abarelix product, (B) the expiration date
of the last valid claim under a Company owned or licensed patent covering the
applicable abarelix product in the given country or (C) if there is no such
claim under an unexpired and issued patent, the seventh anniversary of the
earlier of (1) the filing date of a Company owned or licensed patent application
which includes a claim covering the applicable abarelix product in the given
country or (2) the date such patent application claims priority.
The Roche Agreement may be terminated by either party upon material breach
by the other party. In addition, Roche may terminate the Roche Agreement on a
country-by-country basis upon one-year's notice if Roche has already sold a
commercial quantity of abarelix products in the given country, or upon 180 days'
notice if Roche has not theretofore sold a commercial quantity of abarelix
products in the given country.
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SYNTHELABO
In May 1997, the Company entered into the Synthelabo Agreement pursuant to
which PRAECIS granted Synthelabo co-development rights with the Company, and
exclusive marketing and distribution rights, with respect to abarelix products
in the Synthelabo Territory, which includes principally Europe, Latin America,
the Middle East and certain countries in Africa. The Company retains
manufacturing rights and is required to supply Synthelabo's requirements for
abarelix products in the Synthelabo Territory. Concurrently with entering into
the Synthelabo Agreement, the Company entered into a Stock and Warrant Purchase
Agreement (the "Stock and Warrant Purchase Agreement") with Sylamerica, whereby
Sylamerica purchased from the Company for an aggregate purchase price of $10.0
million, 808,886 shares of Common Stock and the Sylamerica Warrant to purchase
202,223 shares of Common Stock at an exercise price of $25.76 per share. See
"Certain Transactions -- Private Placements of Securities."
In connection with the Synthelabo Agreement, Synthelabo has made
non-refundable up-front and milestone payments to the Company totaling
approximately $14.2 million, and is obligated to make additional non-refundable
payments of up to approximately $50.4 million, subject to the achievement of
certain clinical and regulatory milestones. Synthelabo is required to pay the
Company a transfer price for abarelix products to be sold pursuant to the
collaboration, equal to a percentage of annual net sales revenues from the sale
by Synthelabo, its affiliates and sublicensees of such products in the
Synthelabo Territory. Such percentage ranges from a specified maximum with
respect to such annual net sales revenues up to a specified threshold, and
decreases incrementally with respect to specified additional annual net sales
revenue amounts, to a minimum of 33%. However, for sales in Latin America such
percentage is fixed at 33%. The Company is responsible for the costs of goods of
abarelix products to be sold pursuant to the collaboration. In no event will the
transfer price be less than the Company's cost of goods plus 6%. Synthelabo is
also required to pay PRAECIS the running royalty due to IUF pursuant to the IUF
License Agreement in connection with Synthelabo's sale of abarelix products,
subject to a percentage cap. Synthelabo will pay 30 million French francs
(approximately U.S. $5 million based on current exchange rates) of development
costs associated with obtaining FDA approval for abarelix products for the
treatment of prostate cancer and 25% of development costs for all other
indications developed pursuant to the collaboration. In general, Synthelabo will
pay all costs associated with additional development activities required to
obtain regulatory approval in the Synthelabo Territory for abarelix products
developed pursuant to the collaboration. Through July 31, 1998, development cost
payments by Synthelabo have totaled approximately $1.6 million.
A joint steering committee and a development subcommittee with equal
representation from the Company and Synthelabo coordinate and oversee the
collaboration and will determine which indications in addition to prostate
cancer and endometriosis or uterine fibroids will be developed jointly pursuant
to the Synthelabo Agreement.
The term of the Synthelabo Agreement expires, and the licenses granted by
the Company to Synthelabo thereunder become fully paid-up, perpetual and royalty
free, with respect to a country in the Synthelabo Territory, upon the last to
expire of the patents licensed in such country to Synthelabo, or, if no such
patents cover an abarelix product in such country, ten years after the date of
governmental approval for the marketing and sale of such abarelix product in
such country.
The Synthelabo Agreement may be terminated by either party upon material
breach by the other party. In addition, Synthelabo is entitled to terminate the
Synthelabo Agreement with respect to an abarelix product for a particular
indication in any country within the Synthelabo Territory if the results of
clinical trials of such abarelix product with respect to such indication in such
country constitute a material adverse change in the commercial prospects of such
abarelix product for such indication, or if annual sales in such country of a
competitor's product containing the same GnRH antagonist as such abarelix
product in a functionally equivalent delivery system exceeds more than a
specified percentage of annual sales of such abarelix product in such country.
Synthelabo may also terminate the Synthelabo Agreement by notice to the Company
within nine months after first becoming aware of a "Material
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Adverse Patent Development," which includes (i) a reasonable determination by
Synthelabo that it is not reasonably likely that a European patent will issue
covering abarelix or Rel-Ease, (ii) no such European patents having issued and
the European patent applications relating to abarelix or Rel-Ease having been
permanently abandoned or such European patents having been finally and
unappealably declared invalid or unenforceable or having prematurely expired for
failure to pay maintenance fees or annuities or (iii) a timely filed action by a
third party to annul, cancel or revoke any such European patent, other than any
such action which has no reasonable likelihood of success on the merits.
BOEHRINGER INGELHEIM INTERNATIONAL GMBH
In August 1996, the Company entered into the BI Agreement. Under the BI
Agreement, the Company employed certain Company developed assays to screen
compounds supplied by BI for beta-amyloid aggregation inhibition activity.
Pursuant to the BI Agreement, the Company received payments for its screening
services of $3.0 million, as well as reimbursement for the Company's personnel,
equipment and materials costs in connection with such screening. BI is
responsible for all development, marketing and other costs with respect to any
BI compound screened by the Company and developed and commercialized by BI or
its licensee. The Company is entitled to receive royalties on net sales of any
product containing such a BI compound which is developed and commercialized by
BI or its licensee.
PATENTS AND PROPRIETARY RIGHTS
Proprietary protection for the Company's products, technology and processes
is essential to its business. The Company's policy is to protect its technology
by, among other things, filing or causing to be filed patent applications for
technology that it considers important to the development of its business. As of
July 15, 1998, the Company had filed or held exclusive licenses to 21 U.S.
patent applications, as well as 45 related foreign patent applications,
including both Patent Cooperative Treaty filings and national filings. As of
such date, the Company has one issued U.S. patent and also has a nonexclusive
license to three issued U.S. patents and one issued foreign patent, and related
U.S. and foreign applications, directed to phage display screening technology.
The Company files patent applications that claim inventions directed to all
aspects of the Company's proprietary technology. The Company intends to file, or
cause to be filed, additional U.S. and foreign patent applications, where
appropriate, relating to new product discoveries or improvements. The use of
patents to protect proprietary positions for lead compounds is well established
within the pharmaceutical industry. There can be no assurance, however, that the
claims of such patents, if issued, will provide meaningful proprietary
protection to the Company given the uncertain and complex legal and factual
questions relating to their breadth and enforceability.
Competitors have filed patent applications, may have been issued patents or
may obtain additional patents and proprietary rights relating to products or
processes competitive with those being developed or in-licensed by the Company.
There can be no assurance that the Company's patent applications will issue,
that the Company will develop products or processes that are patentable, that
any issued patents (on the Company's own inventions or those licensed from third
parties) will provide the Company with adequate protection for its inventions or
will not be challenged, circumvented or narrowed by others, or that the patents
of others will not impair or block the ability of the Company to do business.
There can be no assurance that others will not independently develop similar
products, duplicate any of the Company's unpatented products or design around
any patented products in development by the Company.
The Company is aware of U.S. patents owned by third parties which could
potentially be construed to cover (i) certain of the Company's activities
involving the use of phage display and (ii) its activities relating to the use
of hormonal therapy in conjunction with prostate cancer surgery. There can be no
assurance that (i) an owner or licensee of these patents will not threaten or
file an infringement action claiming that the Company's activities infringe or
encourage others to infringe such patents, request an
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injunction against the Company's activities or file a validity action or that
the Company would prevail in any such action, (ii) that the cost of defending an
infringement action would not be substantial, (iii) that any required licenses
would be available on commercially viable terms, if at all, or (iv) that absent
a license, the Company would be able to continue its current activities relating
to phage display or the use of hormonal therapy in conjunction with prostate
surgery.
Patents granted to the Company in any areas of the Company's technology may
be subject to interference or reexamination proceedings in the United States or
opposition proceedings in foreign countries brought by third parties. There can
be no assurance that the Company would prevail in any such proceedings or that
such proceedings would not result in a material adverse effect on the Company's
business, financial condition or results of operations. An unfavorable decision
in an interference, reexamination or opposition proceeding may have a material
adverse effect on the business, financial condition and results of operations of
the Company.
In December 1993, in connection with the Company's initial financing, the
Company entered into a license agreement (the "MIT License Agreement") with the
Massachusetts Institute of Technology ("MIT"), whereby MIT granted the Company
an exclusive worldwide license with respect to certain technology and future
patent rights derived from or arising out of the technology in exchange for
shares of Common Stock and Series B Convertible Preferred Stock, par value $0.01
per share, of the Company. Such licensed technology includes biological
gene-based phage display and related methodologies developed at MIT by Dr.
Malcolm Gefter, a founder of the Company and the Company's Chairman of the
Board, Chief Executive Officer and President, and Dr. Ethan Signer, a founder of
the Company. No royalties are payable to MIT under the MIT License Agreement. In
the MIT License Agreement, MIT has acknowledged and agreed that it has, and will
have, no rights of any kind with respect to any intellectual property generated
by the Company, including any and all enhancements, modifications, or additions
of, to, or respecting the licensed technology or any product or process covered
by the licensed future patents.
Pursuant to the IUF License Agreement, IUF granted the Company exclusive
worldwide rights, with the right to grant sublicenses with respect to patent
applications and future patents, and technology, relating to GnRH antagonist
compounds, including abarelix and methods of use thereof. Pursuant to the IUF
License Agreement, the Company has made non-refundable fee payments to IUF of
approximately $0.3 million, and has agreed to make additional payments of up to
$4.3 million upon the achievement of certain clinical, regulatory and
commercialization milestones and to pay royalties to IUF on net sales by the
Company or its sublicensees of products subject to the license grant. IUF
reserves an irrevocable, non-transferable, royalty free license for research and
educational purposes only at facilities owned or operated by Indiana University,
with respect to the subject matter of the license, improvements thereon and
technical information related thereto. The term of the IUF License Agreement is
until the date of the last to expire of the future patents licensed to the
Company.
Pursuant to the Roche Agreement and the Synthelabo Agreement, the Company
has granted Roche and Synthelabo licenses in the Roche Territory and the
Synthelabo Territory, respectively, under all of the Company's current and
future patent and other intellectual property rights covering abarelix products.
Such licenses are co-exclusive with the Company with respect to development and
exclusive with respect to marketing and distribution. See "-- Strategic
Alliances."
The Company also relies upon trade secrets, know-how and continuing
technological advances to develop and maintain its competitive position with
respect to certain aspects of its core technology. To maintain the
confidentiality of trade secrets and proprietary information, the Company
maintains a policy of requiring employees, consultants and collaborators to
execute confidentiality and invention assignment agreements upon commencement of
a relationship with the Company. These agreements are designed both to enable
the Company to protect its proprietary information by controlling the disclosure
and use of technology to which it has rights and to provide for ownership in the
Company of proprietary technology developed at the Company. There can be no
assurance, however, that these agreements will
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provide meaningful protection for the Company's trade secrets in the event of
unauthorized use or disclosure of such information. In addition, whenever the
U.S. government funds research programs, it may obtain nonexclusive rights to
patented subject matter otherwise subject to exclusive rights.
MANUFACTURING
The Company currently undertakes in-house manufacture of drug supply to
support preclinical animal studies. All clinical supplies are currently supplied
by external contractors and are manufactured in accordance with cGMP.
The Company anticipates that New Drug Application ("NDA") and Marketing
Authorization Application filings will initially utilize supplies sourced from
external contractors in compliance with all FDA and European regulations. The
Company currently has long-term arrangements with third-party manufacturers for
the commercial manufacture of abarelix compound and abarelix-depot-M. The
Company has entered into a supply agreement with each of UCB Bioproducts S.A.
("UCB") and Salsbury Chemicals, Inc. ("Salsbury"), whereby each of UCB and
Salsbury have agreed to supply the Company with abarelix compound and
abarelix-depot-M, respectively. In addition, the Company has entered into a
short-term supply agreement with Cook Imaging Corporation with respect to the
filling of abarelix-depot-M until NDA approval of abarelix-depot-M. In order to
effect a favorable pricing environment and to help secure supply, the Company
intends to have a second source of supply of abarelix compound, abarelix-depot-M
and for filling of abarelix-depot-M.
No assurance can be given as to the ability of the Company to produce
commercial quantities of its potential products in compliance with applicable
regulations or at an acceptable cost, if at all. Moreover, failure of the
Company to meet its manufacturing and supply obligations in connection with the
Roche Agreement or the Synthelabo Agreement, respectively, which the Company is
entitled to meet through arrangements with contract manufacturers, could result
in Roche or Synthelabo, respectively, obtaining manufacturing rights in the
Roche Territory or the Synthelabo Territory, respectively, and the Company
absorbing some or all of Roche's or Synthelabo's respective costs associated
therewith. As part of the Roche Agreement, the Company will establish a separate
definitive agreement for the supply of abarelix products to Roche. See "--
Strategic Alliances."
The Company intends to utilize external contractors for the foreseeable
future for the manufacture of abarelix products, as well as for the production
of PPI-558 or any other potential product. Such arrangements minimize the need
for the Company to invest capital in the manufacturing facilities, as well as
support the ongoing costs of large manufacturing staffs. However, if the Company
is unable to secure long-term supply agreements or retain agreements on terms
satisfactory to the Company, it may not be able to develop or commercialize its
potential products as planned. The manufacture of the Company's potential
products must be in accordance with cGMP regulations prescribed by the FDA or
other standards prescribed by the appropriate regulatory authorities in the
country of use.
The Company's capacity to conduct clinical trials and its ability to
commercialize its products will depend in part on its ability to manufacture its
products on a large scale, either directly or through third parties, at a
competitive cost and in accordance with FDA and other regulatory requirements.
Furthermore, for all of the Company's potential products, completion of clinical
trials and submission of an NDA will be subject to the establishment of a
commercial scale formulation and manufacturing process. As such formulation and
process activities are on-going throughout the development process, the Company
or any of its collaborators or third party manufacturers may encounter
difficulties at any time that could result in delays in clinical trials,
regulatory submissions or in the commercialization of potential products, which
could have material negative competitive and financial consequences. The failure
to complete such activities in a timely and successful manner could have a
material adverse effect on the Company's business, financial condition and
results of operations.
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MARKETING AND SALES
The Company has no experience in marketing or selling pharmaceutical
products and has a limited marketing and sales staff. In order to achieve
commercial success for any product approved by the FDA or comparable foreign
agency, the Company must either develop a marketing and sales force or, where
appropriate and permissible, enter into arrangements with third parties to
market and sell such product. As noted above, the Company has granted to Roche
and Synthelabo exclusive marketing and distribution rights in the Roche
Territory and Synthelabo Territory with respect to abarelix products. There can
be no assurance that the marketing and distribution arrangements with Roche and
Synthelabo will be successful or result in any revenues to the Company. For
other compounds that the Company is developing and may seek to commercialize,
there can be no assurance that the Company will successfully develop a marketing
and sales staff or that it will be able to enter into marketing and sales
agreements under acceptable terms, if at all. If the Company develops its own
marketing and sales capabilities for abarelix products or other future products,
it will compete with other companies that currently have experienced and
well-funded marketing and sales operations and resources. Under the Roche
Agreement and Synthelabo Agreement, and to the extent that the Company enters
into co-promotion or other marketing and sales arrangements with other companies
which provide for a sharing of, or for royalties based on, sales revenues, any
revenue sharing or royalty amounts to be received by the Company will be
dependent on the efforts of others, and there can be no assurance that such
efforts will be successful.
In the future, the Company may develop its own marketing and sales
capability in the United States. PRAECIS believes that the nature of the
prostate cancer market, endometriosis market, Alzheimer's Disease market and
other therapeutic areas where PRAECIS is likely to compete are conducive to such
a strategy. The target audiences in the relevant medical and associated health
care communities are highly concentrated in major metropolitan areas. As part of
the Roche Agreement, the Company has the opportunity, after the third year
following the launch of an abarelix product in the United States and contingent
on sales volume, to co-promote abarelix products in the United States. See "--
Strategic Alliances -- Roche."
COMPETITION
The fields in which the Company is involved are characterized by rapid
technological progress. New developments are expected to continue at a rapid
pace in both industry and academia. There are many companies, both public and
private, including large pharmaceutical companies, chemical companies and
biotechnology companies engaged in developing products or technologies
competitive with products or technologies under development by the Company. Many
of these companies have greater capital, human resources, research and
development, manufacturing and marketing experience than PRAECIS. Such companies
may succeed in developing products that are more effective or less costly than
any that the Company may develop and may also prove to be more successful than
the Company in production and marketing. Competition may increase further as a
result of advances in the commercial applicability of biotechnology and greater
availability of capital for investment. In addition, academic, government and
industry-based research is intense, resulting in considerable competition in
obtaining qualified research personnel, submitting patent filings for protection
of intellectual property rights and establishing corporate strategic alliances.
There can be no assurance that research, discoveries and commercial developments
by others will not render any of the Company's drug discovery technology,
specific programs or potential products noncompetitive.
Pharmaceutical companies, chemical companies, biotechnology companies and
research and academic institutions have developed or are developing
methodologies to improve productivity in the development of drugs. Such
companies or institutions are conducting research in areas in which the Company
is working or may wish to work in the future, either on their own or in
collaboration with others. The Company anticipates that it will face increased
competition in the future as new companies
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enter the market with advanced technologies. The Company's future success will
depend in large part on its ability to maintain a competitive position with
respect to such technologies. Rapid technological development by the Company or
others may result in compounds, products or processes becoming obsolete before
the Company recovers any expenses it incurred in connection with developing such
compounds, products or processes.
The Company is aware of competitors or potential competitors with respect to
each of its potential products in research or development, and there may be
other competitors of which the Company is not aware. At this time, three GnRH
superagonists are approved and are being marketed for the treatment of
hormonally responsive prostate cancer or endometriosis in the United States and
Europe, including leuprorelin (TAP Pharmaceuticals Inc.), goserelin (Zeneca
Group plc) and nafarelin (Monsanto Company). In addition, in Europe or certain
other parts of the world, triptorelin (Debiopharm S.A.) and buserelin (Hoechst
Marion Roussel, Inc.) are also approved and being marketed. Triptorelin is in
pre-registration in the United States. GnRH superagonists are also used in
combination with anti-androgens for the treatment of hormonally responsive
prostate cancer. Of the GnRH superagonist therapies, two are approved in the
United States for hormonally responsive prostate cancer. The active component in
one is already off-patent and the other will come off-patent in April 1999. It
is possible that additional companies could introduce competing formulations of
these off-patent GnRH superagonists. Under certain circumstances, competitors
might be eligible to obtain FDA marketing approval without extensive clinical
trials under the ANDA approval process for generic drugs. The Company is aware
that ALZA Corporation is in Phase III clinical trials with a one year
implantable formulation of leuprorelin.
In addition, the Company is aware of several GnRH antagonists that are in
various stages of development and clinical trials for a number of indications,
including hormonally responsive prostate cancer. To the Company's knowledge,
none of these products have shown significant promise as a four week or greater
depot formulation. However, the Company's competitors may be developing
alternate delivery mechanisms which could enable other GnRH antagonists to be
used and to compete with abarelix.
To date, the only compounds approved by the FDA for the treatment of
Alzheimer's Disease are acetylcholinesterase inhibitors, which aim to improve a
patient's cognition and daily living function by boosting the level of
acetylcholine in the brain, which becomes depleted with Alzheimer's Disease.
Cognex (Warner-Lambert Company) and Aricept (Eisai Co. Ltd/Pfizer Inc.) are
commercially available acetylcholinesterase inhibitors. Many pharmaceutical
companies are currently performing research directed at developing anti-amyloid
therapies. These approaches include attempts to reduce production of
beta-amyloid through inhibition of processing enzymes involved in its
production, and efforts similar to those of PRAECIS to inhibit the aggregation
and resulting toxicity of beta-amyloid fibrils.
With respect to each of the Company's TNF and bFGF antagonist programs, the
Company is aware of competitors or potential competitors, some of which have
programs in more advanced stages of development than the Company's programs.
At the present time, the Company has no commercial manufacturing capability,
sales force or marketing experience. In addition, many of the Company's
competitors or potential competitors with respect to each of the Company's
products in development, have substantially greater capital resources, research
and development resources, manufacturing and marketing experience and production
facilities than PRAECIS. Many of these competitors also have significantly
greater experience than PRAECIS in undertaking preclinical testing and clinical
trials of new pharmaceutical products and obtaining FDA and other regulatory
approvals.
GOVERNMENT REGULATION
The manufacture and marketing of pharmaceutical products and the Company's
ongoing research and development activities in the United States require the
approval of numerous governmental
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authorities, including the FDA. Similar approvals by comparable agencies are
required in most foreign countries. The FDA has established mandatory procedures
and safety standards which apply to the preclinical testing and clinical trials,
as well as to the manufacture and marketing, of pharmaceutical products.
Pharmaceutical manufacturing facilities are also regulated by state, local and
other authorities.
As an initial step in the FDA regulatory approval process, preclinical
studies are typically conducted in animal models to assess a drug's efficacy and
to identify potential safety problems. Certain preclinical laboratory and animal
studies must be conducted in compliance with the FDA's Good Laboratory Practice
regulations. The results of these studies must be submitted to the FDA as part
of an IND application, which must be reviewed by the FDA and become effective
and receive clearance before proposed clinical testing can begin. There is no
assurance that submission of an IND will result in FDA authorization to conduct
the clinical trial. Clinical testing must meet requirements for Institutional
Review Board oversight and informed consent, as well as FDA prior review,
oversight and good clinical practice requirements. Typically, clinical testing
involves a three-phase process, although the phases may overlap. Phase I
clinical trials are conducted with a small number of subjects and are designed
to provide information about both product safety and the expected dose of the
drug. Phase II clinical trials are designed to provide additional information on
dosing and safety in a limited patient population; on occasion, they may provide
preliminary evidence of product efficacy. Phase III clinical trials are large-
scale, well-controlled studies designed to provide statistically valid proof of
efficacy as well as safety in the target patient population. The results of the
preclinical testing and clinical trials of a pharmaceutical product are then
submitted to the FDA in the form of an NDA, for approval to commence commercial
sales. Preparing such applications involves considerable data collection,
verification, analysis and expense. In responding to an NDA, the FDA may grant
marketing approval, request additional information or deny the application if it
determines that the application does not satisfy its regulatory approval
criteria. After approval for the initial indications, further clinical trials
would be necessary to gain approval for the use of the product for any
additional indications.
This regulatory process can require many years and the expenditure of
substantial resources. Data obtained from preclinical testing and clinical
trials are subject to varying interpretations, which can delay, limit or prevent
FDA approval. Furthermore, the FDA may suspend clinical trials at any time if it
determines that patients are being exposed to a significant health risk. In
addition, changes in FDA approval policies or requirements may occur or new
regulations may be promulgated which may result in delay or failure to receive
FDA approval. Similar delays or failures may be encountered in foreign
countries. Delays and costs in obtaining regulatory approvals would have a
material adverse effect on the Company's business, financial condition and
results of operations. Further, the rate of completion of clinical trials of the
Company's products is dependent upon, among other factors, obtaining adequate
clinical supplies and the rate of patient accrual. Patient accrual is a function
of many factors, including the size of the patient population, the proximity of
patients to the clinical sites and the eligibility criteria for the trial. Delay
in patient enrollment in clinical trials may result in increased costs, program
delays or both, which could have a material adverse effect on the Company's
business, financial condition and results of operations.
Among the conditions for NDA approval is the requirement that the
prospective manufacturer's quality control and manufacturing procedures conform
on an ongoing basis with cGMP. In complying with cGMP, manufacturers must
continue to expend time, money and effort in the areas of production and quality
control to ensure full technical compliance. Manufacturing facilities are
subject to periodic inspections by the FDA.
FDA approval of the Company's products, including a review of the
manufacturing processes and facilities used to produce such products, will be
required before such products may be marketed in the United States. The process
of obtaining approvals from the FDA can be costly, time consuming and subject to
unanticipated delays. The FDA may refuse to approve an application if it
believes that applicable regulatory criteria are not satisfied. The FDA may also
require additional testing for safety and
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efficacy of the drug. Moreover, if regulatory approval of a drug product is
granted, the approval will be limited to specific indications. There can be no
assurance that approvals of the Company's potential products, processes or
facilities will be granted on a timely basis, if at all. Any failure to obtain
or delay in obtaining such approvals would have a material adverse effect on the
Company's business, financial condition and results of operations. Moreover,
even if regulatory approval is granted, such approval may include significant
limitations on indicated uses for which a product could be marketed.
If marketing approval is granted, the Company will be required to comply
with FDA requirements for manufacturing, labeling, advertising, record keeping
and reporting of adverse experiences and other information. In addition, the
Company would be required to comply with federal and state anti-kickback and
other health care fraud and abuse laws that pertain to the marketing of
pharmaceuticals. For all pharmaceutical products, failure to comply with
applicable regulatory requirements after obtaining regulatory approval could,
among other things result in suspension of regulatory approval, as well as
possible recalls, product seizures, injunctions and civil and criminal
sanctions. In addition, changes in regulations could have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition to regulations enforced by the FDA, the Company is also subject
to various laws and regulations relating to safe working conditions, laboratory
and manufacturing practices, the experimental use of animals, and the use and
disposal of hazardous or potentially hazardous substances, including chemicals,
micro-organisms and various radioactive compounds used in connection with the
Company's research and development activities. Although the Company believes
that its safety procedures for handling and disposing of such materials comply
with the standards prescribed by state and federal regulations, there can be no
assurance that accidental contamination or injury from these materials will not
occur. In the event of such an accident, the Company could be held liable for
any damages that result and any such liability could exceed the resources of the
Company. Compliance with laws and regulations relating to the protection of the
environment has not had a material effect on capital expenditures or the
competitive position of the Company. However, the extent of government
regulation, and the cost, and effect thereof on the competitive position of the
Company, which might result from any legislative or administrative action cannot
be accurately predicted.
Whether or not FDA approval has been obtained, approval of a product by
comparable regulatory authorities may be necessary in foreign countries prior to
the commencement of marketing of the product in such countries. The approval
procedure varies among countries, may involve additional testing and the time
required may differ from that required for FDA approval. Although there is now a
centralized European Union approval mechanism in place, each European country
may nonetheless impose its own procedures and requirements, many of which could
be time consuming and expensive. Thus, there can be substantial delays in
obtaining required approvals from both the FDA and foreign regulatory
authorities after the relevant applications are filed. The Company expects to
rely on corporate partners and licensees, along with Company expertise, to
obtain governmental approval in foreign countries of drug formulations utilizing
its candidates. Under the Synthelabo Agreement, Synthelabo has responsibility
for filing and obtaining necessary governmental marketing reimbursement and
pricing approvals for any abarelix product developed as contemplated by such
agreement in each country in the Synthelabo Territory in which such abarelix
product will be commercialized pursuant to such agreement.
PRODUCT LIABILITY INSURANCE
The Company maintains product liability insurance for clinical trials in the
amount of $10.0 million per occurrence and $10.0 million in the aggregate. The
Company intends to expand its insurance coverage to include the manufacture,
marketing and sale of commercial products if marketing approval is obtained for
products in development. However, insurance coverage is becoming increasingly
expensive, and no assurance can be given that the Company will be able to
maintain insurance coverage at a reasonable cost or in sufficient amounts to
protect the Company against losses due to liability. There
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can also be no assurance that the Company will be able to obtain commercially
reasonable product liability insurance for any products approved for marketing.
A successful product liability claim or series of claims brought against the
Company could have a material adverse effect on its business, financial
condition and results of operations.
EMPLOYEES
As of July 31, 1998, the Company had a total of 71 full-time employees (64
of whom were employed at the Company's facility in Cambridge, Massachusetts and
seven of whom were employed at the Company's facility in Piscataway, New
Jersey). A total of 59 of the Company's employees are engaged in research
activities. The Company believes its relationship with its employees is good.
FACILITIES
The Company's headquarters and primary research facilities are located in
Cambridge, Massachusetts, where the Company leases and occupies a total of
approximately 25,000 square feet of space. Such lease will expire in September
2004. The Company expects to sign a lease for approximately 80,000 additional
square feet adjacent to current facilities in Cambridge, Massachusetts.
Following renovations, the Company expects to occupy this facility during 1999.
Such lease will expire in 2009. The Company also leases temporary research
facilities for the Provid Research division in Piscataway, New Jersey. The
Company is currently finalizing a lease for a total of approximately 15,000
square feet of space in Piscataway, New Jersey, and expects that the Provid
Research division will commence operations in that facility in early 1999. Such
lease will expire in 2008.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
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MANAGEMENT
OFFICERS AND DIRECTORS
Certain information concerning officers and directors of the Company, and
their ages as of July 31, 1998, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Malcolm L. Gefter, Ph.D................... 56 Chairman of the Board, Chief Executive Officer and President
Kevin F. McLaughlin....................... 42 Chief Financial Officer, Senior Vice President, Secretary and
Treasurer
Marc B. Garnick, M.D...................... 51 Executive Vice President and Chief Medical Officer
G. Leonard Baker, Jr.(1).................. 55 Director
William J. Laverack, Jr.(1)............... 41 Director
Henry F. McCance(2)....................... 55 Director
David B. Sharrock(2)...................... 62 Director
Damion E. Wicker, M.D.(1)................. 37 Director
Albert L. Zesiger(2)...................... 69 Director
OTHER OFFICERS
Nicholas P. Barker, Ph.D.................. 42 Vice President of Development
Dean A. Falb, Ph.D........................ 37 Senior Vice President, Research
Gary L. Olson, Ph.D....................... 53 Senior Vice President, Chemistry Research and Development and
President of the Company's Provid Research division
Marc A. Silver............................ 40 Vice President, Corporate Development
Janice M. Swirski......................... 36 Vice President, Operations
</TABLE>
- ------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
DR. GEFTER is a founder of the Company and has served as a Director of the
Company since July 1993, as Chairman of the Board since February 1994, as Chief
Executive Officer since July 1996 and as President since July 1998. From July
1993 until July 1998, Dr. Gefter was Treasurer of the Company. Dr. Gefter has
been a Professor of Biology at MIT since 1972. Dr. Gefter was a founder of
ImmuLogic Pharmaceutical Corporation, a biotechnology company formed in March
1987 ("ImmuLogic"). As of March 1997, Dr. Gefter resigned from his positions at
ImmuLogic. Dr. Gefter served as Chairman of the Board of Directors of ImmuLogic
from 1987 until March 1997, Chief Scientist from 1987 until February 1996 and
Senior Consultant from February 1996 until March 1997. Dr. Gefter received his
B.S. in Chemistry from the University of Maryland and his Ph.D. in Molecular
Biology from Albert Einstein College of Medicine.
MR. MCLAUGHLIN has been Chief Financial Officer of the Company since joining
the Company in September 1996. Since January 1997, he has also been Secretary of
the Company and since July 1998, he has been Senior Vice President and Treasurer
of the Company. From September 1996 until July 1998, Mr. McLaughlin was a Vice
President of the Company. From March 1996 to August 1996, he was Vice President
and Chief Financial Officer of Advanced Techcom, Inc., a privately-held
communications company. From 1980 to 1996, he held senior level financial
positions at Computervision Corporation and its predecessor Prime Computer,
Inc., including Vice President, Treasurer and Director of Corporate Planning,
where he was directly involved with financial, accounting and investor relations
management, as well as public and private financing. Mr. McLaughlin received his
B.S. in Accounting from Northeastern University and his MBA from Babson College.
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DR. GARNICK joined PRAECIS in April 1994 as Executive Vice President and
Chief Medical Officer of the Company. From 1987 to 1994, he was Vice President,
Clinical Development at Genetics Institute, Inc., a biotechnology company. Dr.
Garnick was a leader in the clinical development of Lupron as a treatment for
hormonally responsive prostate cancer. He is on the faculty of the Harvard
Medical School as a clinical professor of medicine and maintains a clinical
practice at the Beth Israel Deaconess Medical Center, a teaching hospital of the
Harvard Medical School. Dr. Garnick has lectured widely and written over 300
papers, four books and numerous articles. Dr. Garnick received his A.B. in
Biology from Bowdoin College and his M.D. from the University of Pennsylvania
School of Medicine.
MR. BAKER has served as a Director of the Company since March 1994. Since
1974, Mr. Baker has been a Managing Director of the General Partner of Sutter
Hill Ventures, a venture capital firm. Mr. Baker is also a director of Banyan
Systems Incorporated.
MR. LAVERACK has served as a Director of the Company since December 1993.
Since 1993, Mr. Laverack has been a General Partner at J.H. Whitney & Co., a
private investment firm. From 1991 to 1993, Mr. Laverack served as a Managing
Director of Gleacher & Co., Inc., an investment banking firm. From 1985 to 1991,
Mr. Laverack served as a Principal in the merchant banking department of Morgan
Stanley & Co. Incorporated, an investment banking firm. Mr. Laverack is also a
director of Steel Dynamics, Inc.
MR. MCCANCE has served as a Director of the Company since December 1993. Mr.
McCance has been employed at Greylock Management Corporation, a private venture
capital group ("Greylock"), since 1969 where he has been Treasurer since 1969,
President since 1990 and Chairman of the Board since 1997. Mr. McCance is a
general partner of several venture capital funds affiliated with Greylock. Mr.
McCance is also a director of Peritus Software Services, Inc.
MR. SHARROCK has served as a Director of the Company since February 1994.
Since 1994, Mr. Sharrock has been a privately employed business consultant. From
1990 to 1994, Mr. Sharrock was Executive Vice President and Chief Operating
Officer of Marion Merrell Dow Inc. and from 1988 to 1989, he was President and
Chief Operating Officer of Merrell Dow Pharmaceuticals, Inc. Mr. Sharrock also
serves as a director of Cincinnati Bell Inc., Interneuron Pharmaceuticals, Inc.,
Intercardia, Inc. and Progenitor, Inc.
DR. WICKER has served as a Director of the Company since April 1998. Dr.
Wicker has been a General Partner of Chase Capital Partners, a private equity
and mezzanine capital group, since January 1997 and was a principal of Chase
Capital Partners from April 1993 until December 1996. Previously, Dr. Wicker
was President of Adams Scientific from July 1991 until December 1992, and, prior
to that, held positions with MBW Venture Partners and Alexon, Inc. Dr. Wicker
was also a Commonwealth Fund Medical Fellow for the National Institute of
Health. He currently is a director of Landec Corporation, V.I. Technologies,
Inc. and several privately-held health care companies.
MR. ZESIGER has served as a Director of the Company since July 1996. Since
October 1995, Mr. Zesiger has been a Principal of Zesiger Capital Group LLC, a
global money management firm. From December 1990 to September 1995, Mr. Zesiger
was Managing Director of BEA Associates, an investment advisory firm.
DR. BARKER joined PRAECIS in June 1996 as Vice President of Development.
From July 1991 to May 1996, Dr. Barker was employed at Rhone-Poulenc Rorer Inc.
where from July 1991 until September 1994, he was Director, Pharmaceutical
Sciences and thereafter, Worldwide Director, Product Devel-
opment. He has also held senior level positions with Fisons Pharmaceuticals and
Smith, Kline & French (U.K.). Dr. Barker has more than 15 years of managerial
and technical experience in the U.K. and U.S. pharmaceutical industries. Dr.
Barker received his Bachelor of Pharmacy from the University of Bath (U.K.) and
his Ph.D. in Transdermal Drug Delivery/Pharmaceutics from Nottingham University
(U.K.).
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Dr. Barker is a licensed U.K. pharmacist with membership in the Royal
Pharmaceutical Society of Great Britain.
DR. FALB joined PRAECIS in January 1998 as Senior Vice President, Research.
Dr. Falb was a founding employee of Millennium Pharmaceuticals, Inc.
("Millennium"), a biotechnology company formed in 1993 and was responsible for
establishing its program in cardiovascular diseases. At Millennium, he held the
position of Director of Cardiovascular Diseases and served on the Millennium/Eli
Lilly Joint Management Team. Prior to joining Millennium, he was a scientist at
ImmuLogic. Dr. Falb received his B.S. in Chemistry from Purdue University and
his Ph.D. in Biochemistry and Molecular Biology from Harvard University.
DR. OLSON joined PRAECIS in March 1998 as Senior Vice President, Chemistry
Research and Development and President of the Company's Provid Research
division. From 1971 to February 1998, Dr. Olson held a series of research
positions at Hoffmann-La Roche, including Research Director for chemistry in the
Inflamation/Autoimmune Diseases and the Oncology departments. Dr. Olson has
published over 30 papers in scientific journals, holds 24 United States patents
and has lectured widely. He is a member of the board of the Residential School
on Medicinal Chemistry at Drew University, holds the position of Editor-in-chief
of DRUG DESIGN AND DISCOVERY and is a member of the editorial boards of several
scientific journals. Dr. Olson received his A.B. in Chemistry from Columbia
University and his Ph.D. from Stanford University.
MR. SILVER joined PRAECIS in October 1994. Since September 1996, he has
served as Vice President for Corporate Development and from October 1994 until
September 1996, as Vice President. From 1992 to 1994, he was Vice President at
Harvard Management Corp., an investment management company. Prior thereto, he
was involved in the founding and successful development of a number of companies
including Arris Pharmaceutical Corporation, Envirogen, Inc. and TargeTech, Inc.
Mr. Silver received his B.S. in Biochemistry from Carnegie Mellon University and
his MBA from MIT Sloan School of Management.
MS. SWIRSKI joined PRAECIS in May 1998 as Vice President, Operations. Since
May 1985, she has served in a variety of management positions at TAP
Pharmaceuticals Inc. (a joint venture between Abbott Laboratories and Takeda
Chemical Industries Ltd.) involved in Managed Care, Hospital Markets and Sales
Training. Her most recent role was as Regional Business Unit Manager for a
Lupron and Prevacid Sales Team in the mid-Atlantic Region. Ms. Swirski received
her B.S. in Pharmacy from the Massachusetts College of Pharmacy and Allied
Health Sciences and did her clinical rotations at Harvard Medical School.
Pursuant to the Amended and Restated Stockholders Agreement dated as of
April 30, 1998 by and among the Company and certain stockholders of the Company,
as amended (the "Stockholders Agreement"), Messrs. Gefter, Laverack, McCance,
Baker and Wicker were designated directors of the Company and were elected to
the Board. The Stockholders Agreement provides that the Company will use its
best efforts to cause such persons or such other persons designated in
accordance with the Stockholders Agreement to be nominated for election and
elected as directors of the Company and that the stockholders who are parties to
such Stockholders Agreement will vote their shares in favor of such designees.
Upon consummation of this offering, these obligations will terminate.
All of the directors hold office until the first annual meeting of
stockholders following this offering (or, in each case, until their successors
are duly elected and qualified or their earlier resignation, retirement,
disqualification or removal from office for cause or death), and, after election
at such annual meeting, will then serve for succeeding terms expiring at each
successive annual meeting of stockholders and until they or their successors are
duly elected and qualified. Officers of the Company serve at the discretion of
the Board of Directors. There are no family relationships among the Company's
directors and officers.
43
<PAGE>
BOARD OF DIRECTORS COMMITTEES AND OTHER INFORMATION
The Board of Directors has an Audit Committee and a Compensation Committee.
The Audit Committee, currently comprised of Messrs. Baker, Laverack and Wicker,
determines the Company's accounting policies and practices and financial
reporting and internal control structures, recommends to the Board of Directors
the appointment of independent auditors to audit the financial statements of the
Company each year and confers with the auditors and officers of the Company for
purposes of reviewing internal controls, accounting practices, financial
structure and financial reporting of the Company. The Compensation Committee,
currently comprised of Messrs. McCance, Sharrock and Zesiger, is responsible for
determining salaries, incentives and other forms of compensation for executive
officers of the Company and administers the Company's incentive compensation
plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
While the Company did not formally have a Compensation Committee for the
1997 fiscal year, Messrs. McCance and Sharrock, non-employee directors of the
Company, determined the compensation for executive officers of the Company.
DIRECTOR COMPENSATION
Except as otherwise provided below, members of the Board of Directors have
not received any cash compensation from the Company for their services as
directors of the Company. David Sharrock has received $10,000 each year in
connection with his services as a director of the Company. In addition, in
January 1997, the Company granted to Mr. Sharrock options to purchase 11,250
shares of Common Stock at an exercise price of $3.20 per share. Mr. Sharrock
also received $20,000 during the 1997 fiscal year in connection with a
consulting service provided to the Company during 1997. Directors are reimbursed
for certain expenses in connection with attendance at Board and Committee
meetings. The Plan provides that options may be granted to directors of the
Company. Upon consummation of this offering, non-employee directors will, to the
extent permitted by the internal policies of their respective organizations,
each be granted options under the Plan for 15,000 shares of Common Stock at an
exercise price per share equal to the initial public offering price, which will
vest at the rate of 5,000 shares per year so long as such person continues as a
director of the Company. In addition, non-employee directors will each receive
an annual director's fee of $12,000, plus $1,000 for each meeting of the Board.
See "Certain Transactions -- Transactions and Relationships with Directors and
Executive Officers."
44
<PAGE>
EXECUTIVE COMPENSATION
The following table shows, for the fiscal year ended December 31, 1997,
certain compensation paid by the Company, including salary, bonuses, stock
options, and certain other compensation, to the Chief Executive Officer and the
other executive officers of the Company during such fiscal year who earned in
excess of $100,000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ---------------------
---------------------- NUMBER OF SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS UNDERLYING OPTIONS COMPENSATION
- ------------------------------------------------- ----------- --------- --------------------- --------------
<S> <C> <C> <C> <C>
Malcolm L. Gefter, Ph.D.......................... $ 269,462 $ 65,000 65,001 --
Chairman of the Board, Chief Executive Officer
and President
Kevin F. McLaughlin.............................. $ 168,046 $ 22,500 32,500 --
Chief Financial Officer, Senior Vice President,
Secretary and Treasurer
Marc B. Garnick, M.D............................. $ 195,000 $ 50,000 346,876 --
Executive Vice President and Chief Medical
Officer(1)
Joseph M. Limber................................. $ 203,692 -- 41,250 $ 82,980(3)
President and Chief Operating Officer(2)
</TABLE>
- ---------------
(1) Terms of Dr. Garnick's employment are described under "-- Executive Officer
Employment Agreements."
(2) Mr. Limber resigned as President and Chief Operating Officer on April 3,
1998.
(3) Includes moving expense reimbursement and tax normalization adjustments paid
to Mr. Limber in connection with his move to Massachusetts.
45
<PAGE>
STOCK OPTION GRANTS
The following table sets forth certain information concerning grants of
stock options made during the year ended December 31, 1997 by the Company to the
Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE
-------------------------------------------------------- AT ASSUMED ANNUAL
PERCENT OF RATES OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ----------------------
NAME GRANTED(2) FISCAL YEAR(3) SHARE(4) DATE 5% 10%
- ------------------------------- ------------- --------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Malcolm L. Gefter, Ph.D. ...... 56,250(5) 6.4% $ 3.20 1/9/07 $1,194,380 $2,008,470
8,751(6) 1.0% 8.00 11/6/07 143,809 270,460
Kevin F. McLaughlin............ 30,000 (5) 3.4% 3.20 1/9/07 637,003 1,071,184
2,500 (6) 0.3% 8.00 11/6/07 41,084 77,265
Marc B. Garnick, M.D. ......... 46,875 (5) 5.3% 3.20 1/9/07 995,317 1,673,725
270,001 (7) 30.6% 7.42 5/1/07 4,593,280 8,500,928
30,000 (8) 3.4% 7.42 5/2/08 510,363 944,544
Joseph M. Limber............... 41,250 (9) 4.7% 3.20 1/9/07 (9) --(9) --(9)
</TABLE>
- ------------
(1) Potential realizable value is based on a value of $15.00 for each share of
Common Stock (the assumed initial public offering price per share of Common
Stock in the offering) on the date of grant and on the assumption that the
Common Stock of the Company appreciates at the annual rate shown (compounded
annually) from the date of the grant until the expiration of the ten-year
option term. Potential gains are net of the exercise price but before taxes
associated with the exercise. The 5% and 10% assumed annual rates of
compounded stock appreciation are mandated by the rules of the Commission
and do not represent the Company's rate of projection of the future Common
Stock price. Actual gains, if any, on stock option exercises are dependent
on the future financial performance of the Company, overall market
conditions and the option holders' continued employment with the Company
through the vesting period.
(2) The maximum term of each option granted is ten years from the date of grant.
(3) Based on an aggregate of 880,988 options granted to employees, directors and
consultants of the Company in fiscal 1997, including the Named Executive
Officers set forth in the "Summary Compensation Table" under "-- Executive
Compensation."
(4) The exercise price of each option was equal to the fair market value per
share of Common Stock on the date of grant as determined by the Board of
Directors.
(5) The first 33 1/3% of these options become exercisable on January 9, 1999 and
the remaining 66 2/3% of the options have or will vest in equal bi-annual
installments over a two-year period thereafter.
(6) These options vested immediately upon the date of grant.
(7) These options vest in equal monthly installments over a nine-year period,
the first installment of which became exercisable on June 1, 1998.
(8) These options will vest in equal monthly installments over a one-year period
with the first installment becoming exercisable on June 1, 2007.
(9) These options effectively expired on February 2, 1998.
46
<PAGE>
The following table sets forth certain information regarding the stock
options held at December 31, 1997 by each of the Named Executive Officers. The
Company has not granted any stock appreciation rights.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT DECEMBER 31, 1997 AT DECEMBER 31, 1997(3)
ACQUIRED VALUE ---------------------------- ---------------------------
NAME ON EXERCISE(1) REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------- ----------------- ------------- ----------- --------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Malcolm L. Gefter, Ph.D.......... -- -- 140,001 487,500 $1,960,006 $ 6,902,497
Kevin F. McLaughlin.............. 3,125 $ 23,333 36,875 142,500 514,791 1,981,499
Marc B. Garnick, M.D............. -- -- 209,813 427,523 3,091,245 4,449,935
Joseph M. Limber................. 2,481 18,525 62,832 257,188 908,941 3,610,666
</TABLE>
- ------------
(1) Other than Messrs. McLaughlin and Limber, none of the other Named Executive
Officers exercised any options in 1997.
(2) Based upon fair market value per share of Common Stock on the date of
exercise, minus the per share exercise price, multiplied by the number of
shares of Common Stock underlying such option.
(3) Based upon an assumed initial public offering price of $15.00 per share,
minus the per share exercise price, multiplied by the number of shares of
Common Stock underlying the option.
EXECUTIVE OFFICER EMPLOYMENT AGREEMENTS
The Company's offer of employment to Joseph M. Limber, the Company's
President and Chief Operating Officer, in April 1996, provided for an initial
annual salary of $200,000. The Company also agreed to reimburse Mr. Limber for
brokerage fees (not to exceed 6%) associated with the sale of his home and to
pay certain other of his relocation expenses, including the normalization of all
associated tax consequences to Mr. Limber. Mr. Limber resigned as President and
Chief Operating Officer on April 3, 1998.
Dr. Marc B. Garnick, the Company's Executive Vice President and Chief
Medical Officer, has a one-year employment agreement, with automatic annual
renewals unless either party terminates, at a current annual salary of $195,000.
Dr. Garnick is entitled to certain bonuses which may aggregate approximately
$500,000 upon the achievement of certain clinical and regulatory success
milestones with respect to abarelix and abarelix in a depot formulation for the
treatment of prostate cancer and other indications. The vesting of certain of
Dr. Garnick's stock options will accelerate upon the achievement of a
predetermined per share stock price. Under the agreement, the Company has a
right of repurchase at fair market value with respect to Dr. Garnick's vested
shares if Dr. Garnick is terminated for cause. If Dr. Garnick's employment is
terminated (other than due to Company non-renewal of the term), or terminates
due to the disability or death of Dr. Garnick, he is entitled to a lump sum
payment equal to his then annual base salary plus most recent annual bonus (in
the case of disability or death, net of insurance payments), and, except in the
case of Dr. Garnick's death, the continuation of medical and insurance benefits
for one year. If Dr. Garnick's employment is terminated due to the Company's
non-renewal of the term, Dr. Garnick is entitled to receive at least $185,000,
plus the continuation of medical and insurance benefits, over a twelve-month
period.
INCENTIVE PLANS
AMENDED AND RESTATED 1995 STOCK PLAN. A total of 4,687,500 shares of Common
Stock has been reserved for issuance under the Plan to officers, directors,
employees and consultants of the Company and its subsidiaries. As of July 31,
1998, 553,004 shares of Common Stock have been issued upon the exercise of
options granted under the Plan, options for 3,316,242 shares of Common Stock
were
47
<PAGE>
outstanding under the Plan and 818,254 shares of Common Stock remained available
for future issuance of options under the Plan. Under the terms of the Plan,
"incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), "nonqualified stock
options" or options which do not qualify as ISOs ("NQSOs"), awards of Common
Stock, and opportunities to make direct purchases of Common Stock ("Awards") may
be granted by the Board to employees (including officers and directors who are
employees), directors and consultants of the Company, except that ISOs may be
granted only to persons who are employees of the Company at the time the ISOs
are granted.
Initially, each ISO will be exercisable over a period, determined by the
Board of Directors in its discretion, not to exceed ten years from the date of
grant, as required by the Code. In addition, in the case of an ISO granted to an
individual who, at the time such ISO is granted, owns shares of capital stock of
the Company representing more than ten percent of the total combined voting
power of all classes of stock of the Company, the exercise period for an ISO may
not exceed five years from the date of grant. Options may be exercisable during
the exercise period at such times, in such amount, in accordance with such terms
and conditions, and subject to such restrictions as are set forth in the option
agreement evidencing the grant of such options. The Board of Directors or the
Compensation Committee generally has the right to accelerate the exercisability
of any options granted under the Plan which would otherwise be unexercisable.
Upon certain consolidations or mergers, the board of directors of any entity
assuming the obligations of the Company may make equitable adjustments to the
options, accelerate the exercisability of options or terminate them in exchange
for a cash payment.
The Plan shall expire on January 5, 2005, except with respect to options or
Awards outstanding on such date. The Board of Directors may terminate the Plan
sooner at any time or amend the Plan at any time, subject to the terms of the
Plan.
EXECUTIVE MANAGEMENT BONUS PLAN. In November 1997, the Board of Directors
adopted the Executive Management Bonus Plan (the "Bonus Plan"), which became
effective in 1998 and will continue from year to year, unless terminated by the
Board of Directors. The Bonus Plan was established as a means for the Company to
attract and retain senior level executives. Pursuant to the Bonus Plan,
individuals holding senior management positions, including the President and
Chief Executive Officer, Chief Financial Officer and Executive Vice President
(collectively, the "Participants"), are entitled to annual bonus payments which
link performance oriented objectives (defined and approved annually by the Board
of Directors) to a variable compensation award which is based upon a percentage
of the annual base salary of each Participant (a "Bonus Award"). The Board of
Directors has the right to review and recommend other positions for inclusion as
Participants in the Bonus Plan.
Under the terms of the Bonus Plan, each Bonus Award granted to a Participant
will be paid as follows: (i) a minimum of 30% of the total value shall be in the
form of stock options, which shall have a Bonus Award value equal to the
exercise price of each such option multiplied by the number of shares of Common
Stock subject to such option; and (ii) the remaining 70% of the total value
shall be in the form of cash or stock options, to the extent elected by the
Participant. Elections with respect to the form of payment of a Bonus Award
shall be made by the Participant each year prior to the time a Bonus Award is
granted in respect of such year. Stock options awarded in accordance with the
Bonus Plan will be granted under the Plan, will be intended to be ISOs to the
extent possible and will fully vest immediately upon grant. The grant of Bonus
Awards under the Bonus Plan shall be in the sole discretion of the Board of
Directors. The Board of Directors may terminate the Bonus Plan at any time or
amend the Bonus Plan in any manner, at any time, without the consent of any
Participant.
EMPLOYEE STOCK PURCHASE PLAN. In August 1998, the Board of Directors adopted
the Stock Purchase Plan which commences on January 4, 1999 (the "Commencement
Date") and, unless earlier terminated, terminates on December 29, 2000 (the
"Termination Date"). The Stock Purchase Plan provides that 15,000 shares of
Common Stock are available for purchase under the Stock Purchase Plan during a
six-
48
<PAGE>
month period commencing on the Commencement Date. An additional 15,000 shares of
Common Stock (as well as any shares not purchased from a prior six-month period)
will be made available in each subsequent six-month period until the Termination
Date. The Stock Purchase Plan generally provides that those employees of the
Company or an affiliate thereof (i) who have completed six months of service
with the Company or an affiliate thereof, (ii) whose customary employment is at
least twenty hours per week and five months in any calendar year and (iii) who
are not five percent or more stockholders of the Company or an affiliate
thereof, are eligible to participate.
Pursuant to the Stock Purchase Plan, each eligible employee is permitted to
purchase shares of Common Stock through regular payroll deductions in an amount
equal to 1% to 10% of the employee's compensation (as elected by the employee)
for each payroll period. At the end of each semiannual cycle, the Company will
issue shares of Common Stock on behalf of participating employees, using the
amounts so deducted, at a purchase price equal to the lesser of: (i) 85% of the
fair market value of Common Stock on the date the semiannual cycle begins or
(ii) 85% of the fair market value of the Common Stock on the date the semiannual
cycle ends. Under the Stock Purchase Plan, the fair market value of the shares
of Common Stock which may be purchased by any employee during any calendar year
may not exceed $25,000.
The Board of Directors may from time to time amend or terminate the Stock
Purchase Plan, provided that (i) no such amendment or termination may affect
shares purchased under the Stock Purchase Plan or the right of a participant to
acquire shares during the current semiannual cycle without the consent of such
participant, and (ii) to the extent required by Rule 16b-3 of the Exchange Act,
or any other law, regulation or stock exchange rule, no such amendment shall be
effective without the approval of the Company's stockholders. The Stock Purchase
Plan provides that amendments which increase the aggregate number of shares of
Common Stock which may be issued thereunder or which expand the class of persons
entitled to participate thereunder as of the effective date of the Stock
Purchase Plan must generally be approved by stockholders within twelve months
after their adoption.
49
<PAGE>
CERTAIN TRANSACTIONS
PRIVATE PLACEMENTS OF SECURITIES
In April 1996, the Company sold an aggregate of 3,952,546 shares of Series C
Convertible Preferred Stock, par value $0.01 per share, of the Company ("Series
C Preferred Stock") at $5.06 per share in a private placement transaction.
The purchasers of the Series C Preferred Stock included the following
investors known to own beneficially more than five percent of the outstanding
Common Stock (see "Principal Stockholders"):
<TABLE>
<CAPTION>
NAME OF STOCKHOLDER NUMBER OF SHARES PURCHASED
- --------------------------------------------------------------- -----------------------------
<S> <C>
Zesiger Capital Group LLC(1)................................... 769,377
Vulcan Ventures, Inc. ......................................... 731,225
Chase Venture Capital Associates, L.P. ........................ 620,552
J.H. Whitney & Co.(2).......................................... 324,110
Greylock Limited Partnership................................... 296,441
Sutter Hill Ventures(3)........................................ 219,014
</TABLE>
- ------------
(1) Consists of 769,377 shares purchased by persons or entities who hold
accounts managed by Zesiger Capital Group LLC, an investment adviser.
(2) Consists of 64,821 shares purchased by J.H. Whitney & Co. and 259,289 shares
purchased by Whitney 1990 Equity Fund.
(3) Consists of 143,607 shares purchased by Sutter Hill Ventures, 23,723 shares
purchased by G. Leonard Baker, Jr., a director of the Company and a managing
director of the general partner of Sutter Hill Ventures, and 51,684 shares
purchased by other managing directors of the general partner of Sutter Hill
Ventures and their related family entities.
In May 1997, the Company sold in a private placement transaction an
aggregate of 808,886 shares of Common Stock and the Sylamerica Warrant to
Sylamerica, a holder of greater than five percent of the outstanding Common
Stock, for an aggregate purchase price of $10.0 million. See "Principal
Stockholders."
In June 1997, the Company sold an aggregate of 1,347,707 shares of Series D
Convertible Preferred Stock, par value $0.01 per share, of the Company ("Series
D Preferred Stock") to Quantum Industrial Partners LDC, a holder of greater than
five percent of the outstanding Common Stock, for a purchase price of $10.0
million at $7.42 per share in a private placement transaction. See "Principal
Stockholders."
In April 1998, the Company sold an aggregate of 3,376,785 shares of Series E
Convertible Preferred Stock, par value $0.01 per share, of the Company ("Series
E Preferred Stock") at $11.20 per share in a private placement transaction.
The purchasers of the Series E Preferred Stock included the following
investors known to own beneficially more than five percent of the outstanding
Common Stock (see "Principal Stockholders"):
<TABLE>
<CAPTION>
NAME OF STOCKHOLDER NUMBER OF SHARES PURCHASED
- --------------------------------------------------------------- -----------------------------
<S> <C>
Chase Venture Capital Associates, L.P.......................... 2,678,572
Sutter Hill Ventures(1)........................................ 43,400
J.H. Whitney & Co.(2).......................................... 267,858
Greylock Limited Partnership................................... 44,643
Zesiger Capital Group LLC(3)................................... 133,927
</TABLE>
- ------------
(1) Consists of 28,455 shares purchased by Sutter Hill Ventures, 3,585 shares
purchased by G. Leonard Baker, Jr., a director of the Company and a managing
director of the general partner of Sutter Hill Ventures, and 11,360 shares
purchased by other managing directors of the general partner of Sutter Hill
Ventures and their related family entities.
(2) Consists of 142,856 shares purchased by J.H. Whitney & Co. and 125,002
shares purchased by Whitney 1990 Equity Fund.
(3) Consists of 133,927 shares purchased by persons or entities who hold
accounts managed by Zesiger Capital Group LLC, an investment adviser.
50
<PAGE>
TRANSACTIONS AND RELATIONSHIPS WITH DIRECTORS AND EXECUTIVE OFFICERS
In May 1996, July 1996, January 1997 and November 1997, the Company granted
Malcolm L. Gefter, the Company's Chairman of the Board, Chief Executive Officer
and President, options to purchase 281,250, 281,250, 56,250 and 8,751 shares of
Common Stock, respectively, at exercise prices of $0.53 per share, $0.53 per
share, $3.20 per share and $8.00 per share, respectively.
In September 1996, January 1997 and November 1997, the Company granted Kevin
F. McLaughlin, the Company's Chief Financial Officer, Senior Vice President,
Secretary and Treasurer, options to purchase 150,000, 30,000 and 2,500 shares of
Common Stock, respectively, at exercise prices of $0.53 per share, $3.20 per
share and $8.00 per share, respectively.
In January 1995, July 1996, January 1997 and May 1997, the Company granted
Marc B. Garnick, the Company's Executive Vice President and Chief Medical
Officer, options to purchase 234,210, 56,250, 46,875 and 270,001 and 30,000
shares of Common Stock, respectively, at exercise prices of $0.26 per share,
$0.53 per share, $3.20 per share and $7.42 per share, respectively.
In May 1996, July 1996 and January 1997, the Company granted Joseph M.
Limber, the Company's President and Chief Operating Officer at those times,
options to purchase 206,250, 75,000 and 41,250 shares of Common Stock,
respectively, at exercise prices of $0.53 per share, $0.53 per share and $3.20
per share, respectively.
In January 1997, the Company granted to David B. Sharrock, a Director of the
Company, options to purchase 11,250 shares of Common Stock, at an exercise price
of $3.20 per share.
The Certificate of Incorporation and By-laws provide that the Company will
indemnify each of its directors and officers to the fullest extent permitted by
the Delaware General Corporation Law. See "Description of Capital Stock --
Limitation of Liability and Indemnification" and "-- Registration Rights." See
also "Management -- Executive Officer Employment Agreements."
51
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of July 31, 1998, and as adjusted to
reflect the sale of the shares of Common Stock offered hereby by (i) each person
who is known by the Company to be the beneficial owner of more than 5% of the
Common Stock, (ii) each of the Company's directors, (iii) each of the Company's
Named Executive Officers and (iv) all current directors and executive officers
as a group. Except as otherwise noted below, the address of each person listed
below is c/o the Company, One Hampshire Street, Cambridge, Massachusetts 02139.
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING SHARES
(1)(2)
NUMBER OF SHARES ------------------------
OF COMMON STOCK BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OFFERING OFFERING
- -------------------------------------------------------------- ---------------------- ----------- -----------
<S> <C> <C> <C>
Chase Venture Capital Associates, L.P......................... 3,670,878 23.3% 19.1%
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, NY 10017
J.H. Whitney & Co.(3)......................................... 1,707,225 10.8% 8.9%
177 Broad Street
Stamford, CT 06901
Quantum Industrial Partners LDC............................... 1,347,707 8.6% 7.0%
888 Seventh Avenue
New York, NY 10106
Sutter Hill Ventures(4)....................................... 985,174 6.3% 5.1%
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Zesiger Capital Group LLC(5).................................. 903,304 5.7% 4.7%
320 Park Avenue
New York, NY 10022
Greylock Limited Partnership.................................. 898,713 5.7% 4.7%
One Federal Street, 26th Floor
Boston, MA 02110
Vulcan Ventures, Inc.......................................... 820,512 5.2% 4.3%
110-110th Avenue Northeast
Suite 550
Bellevue, WA 98004
Sylamerica, Inc............................................... 808,886 5.1% 4.2%
660 White Plains Road
Suite 400
Tarrytown, NY 10591
Malcolm L. Gefter, Ph.D.(6)................................... 620,938 3.9% 3.2%
Kevin F. McLaughlin(7)........................................ 62,500 * *
Marc B. Garnick, M.D.(8)...................................... 246,085 1.6% 1.3%
Joseph M. Limber.............................................. 72,186 * *
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING SHARES
(1)(2)
NUMBER OF SHARES ------------------------
OF COMMON STOCK BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OFFERING OFFERING
- -------------------------------------------------------------- ---------------------- ----------- -----------
<S> <C> <C> <C>
G. Leonard Baker, Jr.(9)...................................... 985,174 6.3% 5.1%
c/o Sutter Hill Ventures
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
William J. Laverack, Jr.(10).................................. 1,707,225 10.8% 8.9%
c/o J.H. Whitney & Co.
177 Broad Street
Stamford, CT 06901
Henry F. McCance(11).......................................... 898,713 5.7% 4.7%
c/o Greylock Limited Partnership
One Federal Street
Boston, MA 02110
David B. Sharrock(12)......................................... 32,500 * *
8171 Bay Colony Drive, #303
Naples, FL 33963
Damion E. Wicker, M.D.(13).................................... 3,670,878 23.3% 19.1%
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, NY 10017
Albert L. Zesiger(14)......................................... 903,304 5.7% 4.7%
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
All current directors and executive officers
as a group (9 persons) (15)................................. 9,127,317 57.1% 46.8%
</TABLE>
- ------------
* Represents beneficial ownership of less than one percent of the Common
Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares of Common Stock beneficially
owned by a person and the percentage of ownership of that person, shares of
Common Stock subject to options held by that person that are currently
exercisable or exercisable within 60 days of July 31, 1998 are deemed
outstanding. Such shares, however, are not deemed outstanding for the
purpose of computing the percentage ownership of each other person. The
persons named in this table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and except as indicated
in the other footnotes to this table.
(2) Percentage of beneficial ownership is based on 15,749,309 shares of Common
Stock outstanding as of July 31, 1998 and 19,249,309 shares of Common Stock
outstanding after completion of this offering.
(3) Consists of 430,727 shares of Common Stock held by J.H. Whitney & Co. and
1,276,498 shares of Common Stock held by Whitney 1990 Equity Fund, L.P., an
affiliated entity of J.H. Whitney & Co.
(4) Consists of 645,940 shares of Common Stock held by Sutter Hill Ventures,
over which G. Leonard Baker, Jr., a director of the Company and a managing
director of the general partner of Sutter Hill Ventures, shares voting and
investment power with four other managing directors of the general partner
of Sutter Hill Ventures; 105,571 shares of Common Stock held by Mr. Baker
and his related family entities; and 233,663 shares of Common Stock held by
the other four managing directors and their related family entities.
(5) Consists of 903,304 shares of Common Stock held in accounts managed for
certain parties by Zesiger Capital Group LLC, a registered investment
advisor under the Investment Advisors Act of 1940, as amended. Zesiger
Capital Group LLC disclaims beneficial ownership of all such shares.
(6) Includes 182,188 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of July 31, 1998.
(7) Includes 37,500 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of July 31, 1998.
(8) Includes 16,758 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of July 31, 1998.
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(9) Consists of 645,940 shares of Common Stock held by Sutter Hill Ventures,
over which Mr. Baker, a director of the Company and a managing director of
the general partner of Sutter Hill Ventures, shares voting and investment
power with four other managing directors of the general partner of Sutter
Hill Ventures; 105,571 shares of Common Stock held by Mr. Baker and his
related family entities; and 233,663 shares of Common Stock held by the
other four managing directors and their related family entities. Mr. Baker
disclaims beneficial ownership of the shares of Common Stock held by Sutter
Hill Ventures and the other persons or entities, except to the extent of his
proportionate partnership interest therein.
(10) Consists of 430,727 shares of Common Stock held by J.H. Whitney & Co. and
1,276,498 shares of Common Stock held by Whitney 1990 Equity Fund. Mr.
Laverack is a general partner of each entity and has voting and investment
power with respect to such shares. Mr. Laverack disclaims beneficial
ownership of such shares, except to the extent of his proportionate
pecuniary interest therein.
(11) Consists of 898,713 shares of Common Stock held by Greylock Limited
Partnership, a private venture capital firm of which Mr. McCance is a
Managing Partner. Mr. McCance disclaims beneficial ownership of such shares,
except as to his proportionate partnership interest therein.
(12) Includes 625 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of July 31, 1998.
(13) Consists of 3,670,878 shares of Common Stock held by Chase Venture Capital
Associates, L.P., a private equity and mezzanine capital group of which Dr.
Wicker is a general partner. Dr. Wicker disclaims beneficial ownership of
the shares held by Chase Capital Partners, except to the extent of his
pecuniary interest in such shares.
(14) Consists of 873,640 shares of Common Stock held in accounts managed for
certain parties by Zesiger Capital Group LLC, an investment advisor, for
which Albert L. Zesiger is a Principal. Mr. Zesiger, in his capacity as
Managing Director, has voting and investment power with respect to such
shares but disclaims beneficial ownership with respect thereto.
(15) Includes 237,071 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of July 31, 1998.
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DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company and certain
provisions of the Amended and Restated Certificate of Incorporation to be
effective immediately after the closing of this offering (the "Certificate of
Incorporation") and Amended and Restated By-laws to be effective immediately
after the closing of this offering (the "By-Laws") is a summary and is qualified
in its entirety by the provisions of the Certificate of Incorporation and
By-laws, which have been filed as exhibits to the Company's Registration
Statement of which this Prospectus is a part.
Upon the completion of this offering, the authorized capital stock of the
Company will consist of 75,000,000 shares of Common Stock, par value $0.01 per
share, and 5,000,000 shares of Preferred Stock, par value $0.01 per share. As of
July 31, 1998, the Common Stock was held by 103 stockholders of record.
COMMON STOCK
Upon completion of this offering, there will be 19,249,309 shares of Common
Stock outstanding (plus up to 3,406,242 shares that may be issued upon exercise
of outstanding options, 55,955 shares that may be issued upon exercise of the
Comdisco Warrants and 202,223 shares that may be issued upon exercise of the
Sylamerica Warrant). Holders of Common Stock are entitled to one vote per share
for each share held of record on all matters submitted to a vote of
stockholders. Holders of the Common Stock do not have cumulative voting rights,
and therefore the holders of a majority of the shares of Common Stock voting for
the election of directors may elect all of the Company's directors. Subject to
preferences that may be applicable to the holders of outstanding shares of
Preferred Stock, if any, the holders of Common Stock are entitled to receive
such lawful dividends as may be declared by the Board of Directors. In the event
of a liquidation, dissolution or winding up of the affairs of the Company,
whether voluntary or involuntary, and subject to the rights of the holders of
outstanding shares of Preferred Stock, if any, the holders of shares of Common
Stock shall be entitled to receive pro rata all of the remaining assets of the
Company available for distribution to its stockholders. The Common Stock has no
preemptive, redemption, conversion or subscription rights. All outstanding
shares of Common Stock are, and the shares of Common Stock to be issued pursuant
to this offering will be, fully paid and non-assessable. The issuance of Common
Stock could have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from attempting to acquire, a majority
of the outstanding voting stock of the Company.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of Preferred Stock
will be converted into Common Stock. The Board of Directors will have the
authority, subject to any limitations prescribed by Delaware law, without
further action by the stockholders of the Company, to issue up to 5,000,000
shares of Preferred Stock in one or more classes or series, and to fix for each
such class or series such voting powers, full or limited, or no voting powers,
and such distinctive designations, preferences and relative, participating,
optional or other special rights and such qualifications, limitations or
restrictions thereof, of the shares of each such class or series. The Board of
Directors is authorized to issue Preferred Stock with voting, conversion and
other rights and preferences that could adversely affect the voting power or
other rights of the holders of Common Stock. Although the Company has no current
plans to issue such shares, the issuance of Preferred Stock could have the
effect of making it more difficult for a third party to acquire, or of
discouraging a third party from attempting to acquire, a majority of the
outstanding voting stock of the Company.
WARRANTS
In connection with a Master Lease Agreement dated March 29, 1995, as
amended, between the Company and Comdisco, Inc. ("Comdisco"), the Company issued
to Comdisco the Comdisco Warrants,
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which are currently exercisable for 55,955 shares of Series A Convertible
Preferred Stock, par value $0.01 per share, of the Company (the "Series A
Preferred Stock") at an exercise price of $2.69 per share. The Comdisco Warrants
are subject to adjustment in accordance with the terms thereof and expire on
March 29, 2005. Upon the closing of this offering, the Comdisco Warrants shall
convert to warrants to purchase Common Stock at an exercise price of $2.69 per
share.
Pursuant to the Stock and Warrant Purchase Agreement, the Company issued to
Sylamerica the Sylamerica Warrant, which is currently exercisable for 202,223
shares of Common Stock at an exercise price of $25.76 per share. The Sylamerica
Warrant is subject to adjustment in accordance with the terms thereof and
expires on May 13, 2002.
REGISTRATION RIGHTS
Pursuant to the Stockholders Agreement and the Stock and Warrant Purchase
Agreement, the holders of 15,139,544 shares of Common Stock (assuming the
conversion of all outstanding shares of Preferred Stock) (the "Piggyback
Holders") are entitled to certain rights with respect to the registration of
their shares of Common Stock ("Registrable Securities") under the Securities
Act. Under the terms of the Stockholders Agreement and the Stock and Warrant
Purchase Agreement, if the Company proposes to register any of its securities
under the Securities Act, subject to certain conditions, the Piggyback Holders
are entitled to notice of such registration and to include Registrable
Securities therein; provided, however that the Company has the right to cut back
or completely exclude shares proposed to be registered in an underwritten public
offering to the extent the managing underwriter so advises due to market
conditions.
If at any time, but only on three occasions, holders of at least 66 2/3% of
the then outstanding Registrable Securities issued upon conversion of the Series
A Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series
E Preferred Stock (the "Requesting Holders") request that the Company file a
registration statement, the Company will use its best efforts to cause such
shares requested and all other shares held by holders of Registrable Securities
under the Stockholders Agreement (such holders, together with the Requesting
Holders are referred to here as the "Demand Holders") requested to be included
in the registration statement to be registered; provided that the aggregate
offering price of the securities to be sold thereunder exceeds certain minimum
amounts and subject to certain other customary restrictions and limitations,
including cutback and deferral provisions. In addition, if at any time after the
first anniversary of the consummation of this offering, but only on one
occasion, holders of at least a majority of the then outstanding Registrable
Securities issued upon conversion of the Series E Preferred Stock (the
"Requesting Series E Holders") request that the Company file a registration
statement, the Company will use its best efforts to cause such shares requested
and all other shares held by Demand Holders requested to be included in the
registration statement to be registered; provided that the aggregate offering
price of the securities to be sold thereunder exceeds certain minimum amounts
and subject to certain other customary restrictions and limitations, including
cutback and deferral provisions. The Holders of 10% of the then outstanding
Registrable Securities which are subject to registration rights under the
Stockholders Agreement may require the Company, on not more than one occasion
per each twelve month period and only on three occasions, to register all or a
portion of their Registrable Securities on a Registration Statement on Form S-3
when such form becomes available to the Company and may participate in such
registration by the Company, subject to certain conditions and limitations.
Further, the Requesting Series E Holders may require the Company, but only on
one occasion, to register all or a portion of their Registrable Securities on a
Registration Statement on Form S-3 when such form becomes available to the
Company and may participate in such registration by the Company, subject to
certain conditions and limitations.
The exercise of any of the foregoing registration rights may hinder efforts
by the Company to arrange future financing of the Company and may have an
adverse effect on the market price of the Common Stock.
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ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CHARTER AND BY-LAWS AND OF DELAWARE
LAW
CERTIFICATE OF INCORPORATION AND BY-LAWS
The Certificate of Incorporation and the By-laws, together with certain
provisions of Delaware law, contain certain provisions that could discourage
potential takeover attempts and make more difficult the acquisition of a
substantial block of the Common Stock.
The Certificate of Incorporation authorizes the directors to issue, without
stockholder approval, shares of Preferred Stock in one or more classes or
series, and to fix for each such class or series such voting powers, full or
limited, or no voting powers, and such distinctive designations, preferences and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions thereof, of the shares of each such
class or series. Although the Company has no current plans to issue such shares,
the issuance of Preferred Stock could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
attempting to acquire, a majority of the outstanding voting stock of the
Company. The Certificate of Incorporation provides that stockholders may act
only at meetings of stockholders and not by written consent in lieu of a
stockholders' meeting. The Certificate of Incorporation further provides that
stockholders are unable to call a special meeting of the Company's stockholders,
and the By-laws provide that special meetings of the Company's stockholders may
be called only by the Chairman of the Board (if there be one), the President,
any Vice President (if there be one), the Secretary or any Assistant Secretary
(if there be one) and must be called by any such officer at the written request
of a majority of the directors. The By-laws also provide that at a special
meeting of the Company's stockholders, only such business shall be conducted as
shall be specified in the notice of meeting (or any supplement thereto). These
provisions may discourage another person or entity from making a tender offer
for the Common Stock because such person or entity, even if it acquired a
majority of the outstanding stock of the Company, could only take action at a
duly called stockholders' meeting with respect to the business specified in the
notice of meeting and not by written consent. The By-laws also provide that
nominations for directors may not be made by stockholders at any annual or
special meeting thereof unless the stockholder intending to make a nomination
notifies the Company of its intentions a specified number of days in advance of
the meeting and furnishes to the Company certain information regarding itself
and the intended nominee. The By-laws also require a stockholder to provide to
the Secretary of the Company advance notice of business to be brought by such
stockholder before any annual or special meeting of stockholders as well as
certain information regarding such stockholder and others known to support such
proposal and any material interest they may have in the proposed business. These
provisions could delay stockholder actions that are favored by the holders of a
majority of the outstanding stock of the Company until the next stockholders'
meeting.
DELAWARE ANTI-TAKEOVER STATUTE
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203") which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the time that such stockholder
became an interested stockholder, unless (i) prior to such time, the board of
directors of the corporation approved either the business combination or the
transaction which resulted in the stockholder becoming an interested
stockholder; (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (x) by persons who are directors and also
officers and (y) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (iii) at or subsequent
to such time, the business combination is approved by the corporation's board of
directors and authorized at an annual or special meeting of stockholders, and
not by written consent, by the affirmative vote of at least two-thirds of the
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outstanding voting stock which is not owned by the interested stockholder. The
application of Section 203 may limit the ability of stockholders to approve a
transaction that they may deem to be in their best interests.
In general, Section 203 defines "business combination" to include (i) any
merger or consolidation involving the corporation and the interested
stockholder; (ii) any sale, transfer, pledge or other disposition of 10% or more
of the assets of the corporation to or with the interested stockholder; (iii)
subject to certain exceptions, any transaction which results in the issuance or
transfer by the corporation of any stock of the corporation to the interested
stockholder; (iv) any transaction involving the corporation which has the effect
of increasing the proportionate share of the stock of any class or series of the
corporation beneficially owned by the interested stockholder; or (v) the receipt
by the interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an "interested stockholder" as any entity or person
who, together with affiliates or associates, owns (or within the prior three
years did own) 15% or more of the outstanding voting stock of the corporation.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Certificate of Incorporation provides that no director of the Company
shall be personally liable to the Company or to any stockholder for monetary
damages for breach of fiduciary duty as a director, except to the extent such
exemption from liability or limitation thereto is not permitted under the
Delaware General Corporation Law as it exists or may hereafter be amended. The
Delaware General Corporation Law, as currently in effect, permits charter
provisions eliminating the liability of directors for breach of fiduciary duty,
except that such charter provisions may not eliminate or limit the liability of
directors for (i) any breach of the director's duty of loyalty to a corporation
or its stockholders, (ii) any acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) any payment
of a dividend or approval of a stock purchase or other transaction that is
illegal under Section 174 of the Delaware General Corporation Law or (iv) any
transaction from which the director derived an improper personal benefit. A
principal effect of this provision of the Certificate of Incorporation is to
limit or eliminate the potential liability of the Company's directors for
monetary damages arising from any breach of their duty of care, unless the
breach involves one of the four exceptions described in clauses (i) through (iv)
of the immediately preceding sentence.
The Certificate of Incorporation and the By-laws further provide for the
indemnification of the Company's directors and officers to the fullest extent
authorized or permitted by law, as now or hereafter in effect. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers or persons controlling the Company pursuant to
the foregoing provisions, or otherwise, the Company has been informed that in
the opinion of the Commission, such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. The By-laws also
permit the Company to purchase and maintain insurance on behalf of any person
who is or was a director or officer of the Company against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the Company would
have the power or obligations to indemnify such person against such liability
under the By-laws.
There is no pending litigation or proceeding involving any director,
officer, employee or agent of the Company in which indemnification will be
required or permitted. The Company is not aware of any threatened litigation or
proceeding which may result in a claim for such indemnification.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon the closing of this offering, the Company will have 19,249,309 shares
of Common Stock outstanding (assuming no exercise of the warrants or options
outstanding as of July 31, 1998). Of these shares, the 3,500,000 shares of
Common Stock sold in this offering (plus an additional 525,000 shares which will
be outstanding if the Underwriters' over-allotment option is exercised in full)
will be freely tradeable in the United States without restriction under the
Securities Act, unless purchased or held by "affiliates" (as that term is
defined in Rule 144) of the Company. The remaining 15,749,309 shares of Common
Stock outstanding held by officers, directors, employees, consultants and the
remaining stockholders are "restricted securities" within the meaning of Rule
144 (the "Restricted Shares").
Restricted Shares may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rules 144, 144(k) or 701
promulgated under the Securities Act, which are summarized below. Sales of the
Restricted Shares in the public market, or the availability of such shares for
sale, could adversely affect the market price of the Common Stock. [ ] of the
Restricted Shares will be available for sale upon the effective date of the
Registration Statement of which this Prospectus is a part (the "Effective
Date").
In general, under Rule 144, as currently in effect, beginning 90 days after
the Effective Date, a person (or persons whose shares are aggregated) who has
beneficially owned Restricted Shares for at least one year would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of: (i) one percent of the number of shares of Common Stock then
outstanding (which will equal approximately [ ]shares immediately after this
offering); or (ii) the average weekly trading volume of the Common Stock during
the four calendar weeks preceding the filing of a Form 144 with respect to such
sale. Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about the Company. Under Rule 144(k), a person who is not deemed to have been an
affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two
years, is entitled to sell such shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.
In general, under Rule 701, beginning 90 days after the Effective Date,
certain shares issued upon exercise of options granted by the Company prior to
the date of this Prospectus will also be available for sale in the public
market. Any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
may be entitled to rely on the resale provisions of Rule 701. Rule 701 permits
affiliates to sell their Rule 701 shares under Rule 144 without complying with
the holding period requirements of Rule 144. Rule 701 further provides that
non-affiliates may sell such shares in reliance on Rule 144 without having to
comply with the public information, volume limitation or notice provisions of
Rule 144. In both cases, a holder of Rule 701 shares is required to wait until
90 days after the Effective Date before selling such shares.
Holders of [ ]% of the outstanding capital stock (including holders of
options exercisable within 180 days of the Effective Date) have entered into
contractual "lock-up" agreements generally providing that they will not offer,
sell, contract to sell or grant any option to purchase or otherwise dispose of
the shares of Common Stock or any securities exercisable for or convertible into
Common Stock owned by them for a period of 180 days from the date appearing on
this Prospectus related to this offering without the prior written consent of BT
Alex. Brown Incorporated. BT Alex. Brown Incorporated may, in its sole
discretion and at any time without notice, release all or any portion of the
securities subject to lock-up agreements.
As a result of these contractual restrictions, notwithstanding possible
earlier eligibility for sale under the provisions of Rules 144, 144(k) and 701,
shares subject to lock-up agreements will not be saleable until such agreements
expire or are waived by BT Alex. Brown Incorporated. Beginning 180 days from the
date appearing on the final prospectus relating to the offering, approximately
[ ] additional
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Restricted Shares will become eligible for sale subject to the provisions of
Rule 144 or Rule 701 upon the expiration of the lock-up agreements not to sell
such shares. In addition, beginning 180 days from the date appearing on the
final prospectus relating to this offering, an additional [ ] shares
subject to vested options will be available for sale subject to compliance with
Rule 701 upon the expiration of lock-up agreements not to sell such shares. BT
Alex. Brown Incorporated may, in its sole discretion and at any time without
notice, release all or any portion of the securities subject to lock-up
agreements.
The Company intends to file one or more registration statements on Form S-8
with respect to [ ] shares of Common Stock issuable under the Plans. The
registration statements are expected to be filed approximately 180 days after
the date of this Prospectus and will become effective immediately upon filing.
Shares covered by any such registration statement will be eligible for sale in
the public market upon the effectiveness of such registration statement, subject
to the limitations of Rule 144 that are applicable to affiliates. See
"Management -- Incentive Plans."
As of July 31, 1998, the holders of approximately 15,139,544 shares are
entitled to certain registration rights with respect to such shares. If a large
number of such shares were registered and sold in the public market, such sales
could have an adverse effect on the market price for the Common Stock. If the
Company were required to include in a Company-initiated registration the shares
held by such holders pursuant to the exercise of their registration rights, such
sales may have an adverse effect on the Company's ability to raise needed
capital. See "Description of Capital Stock -- Registration Rights."
Prior to this offering there has been no public market for the Common Stock
and no prediction can be made as to the effect, if any, that market sales or the
availability for sale of such shares will have on the market price of the Common
Stock prevailing from time to time. Nevertheless, sales of substantial numbers
of shares of Common Stock in the public market could adversely affect the market
price of the Common Stock and could impair the Company's ability to raise
capital through sales of its equity securities. See "Risk Factors -- No Prior
Public Market for Common Stock" and "-- Volatility of Common Stock Price."
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives, BT
Alex. Brown Incorporated and NationsBanc Montgomery Securities LLC, have
severally agreed to purchase from the Company the following respective numbers
of shares of Common Stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus:
<TABLE>
<CAPTION>
NUMBER
OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------------------------- -------------
<S> <C>
BT Alex. Brown Incorporated........................................................................
NationsBanc Montgomery Securities LLC..............................................................
-------------
Total........................................................................................ 3,500,000
-------------
-------------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all shares of the Common Stock offered hereby if any of such shares are
purchased.
The Company has been advised by the Representatives of the Underwriters that
the Underwriters propose to offer the shares of Common Stock to the pubic at the
initial public offering price set forth on the cover page of this Prospectus and
to certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $ per share to certain other dealers. After the initial public
offering, the offering price and other selling terms may be changed by the
Representatives of the Underwriters.
The Company has granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 525,000
additional shares of Common Stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to 3,500,000, and the Company will be
obligated, pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 3,500,000 shares are being offered.
The Company has agreed to indemnify the Underwriters and their controlling
persons against certain liabilities, including liabilities under the Securities
Act.
The Company and certain stockholders of the Company, holding in the
aggregate [ ] shares of Common Stock and warrants to purchase [ ]
shares of Common Stock, have agreed, subject to certain exceptions, not to
offer, sell or otherwise dispose of any of shares of Common Stock for a period
of 180 days after the date of this Prospectus without the prior written consent
of BT Alex. Brown Incorporated. See "Shares Eligible for Future Sale."
In connection with the offering, the Underwriters and certain other persons
participating in this offering may purchase and sell the Common Stock in the
open market in accordance with Regulation M under the Exchange Act. These
transactions may include over-allotment and stabilizing transactions and
purchases to cover syndicate short positions created in connection with the
offering. Stabilizing transactions consist of certain bids or purchases for the
purpose of preventing or retarding a decline in the market price of the Common
Stock; and syndicate short positions involve the sale by the Underwriters of a
greater number of shares of Common Stock than they are required to purchase from
the Company in the offering. The Underwriters also may impose a penalty bid,
whereby selling concessions allowed to
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syndicate members or other broker-dealers in respect of the securities sold in
the offering for their account may be reclaimed by the syndicate if such
securities are repurchased by the syndicate in stabilizing or covering
transactions. These activities may stabilize, maintain or otherwise affect the
market price of the Common Stock, and, as a result, such price may be higher
than the price that might otherwise prevail in the open market. The Underwriters
and such other persons are not required to engage in these activities, and may
end any of these activities at any time. These transactions may be effected on
the Nasdaq National Market in the over-the-counter market or otherwise.
The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock has been determined by negotiations among the Company and the
Representatives of the Underwriters. Among the factors considered in such
negotiations were prevailing market conditions, the results of operations of the
Company in recent periods, the market capitalizations and stages of development
of other companies that the Company and the Representatives of the Underwriters
believe to be comparable to the Company, estimates of the business potential of
the Company, the present state of the Company's development and other factors
deemed relevant. The estimated initial public offering price range set forth on
the cover page of this preliminary prospectus is subject to change as a result
of market conditions and other factors.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Skadden, Arps, Slate, Meagher & Flom LLP, Boston, Massachusetts.
Certain legal matters relating to the offering will be passed upon for the
Underwriters by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.
EXPERTS
The financial statements of the Company at December 31, 1996 and 1997 and
for each of the three years in the period ended December 31, 1997, appearing in
this Prospectus and Registration Statement have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The statements in this Prospectus relating to patents under the captions
"Risk Factors -- Uncertainty Associated with Patents and Proprietary Technology"
and "Business -- Patents and Proprietary Rights" and other references herein
concerning patents have been examined by and passed upon for the Company by
Lahive & Cockfield, LLP, and are included in reliance upon such examination and
upon the authority of such counsel as experts on patents.
62
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
INDEX TO FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors......................................................... F-2
Balance Sheets at December 31, 1996, and 1997 and unaudited June 30, 1998.............. F-3
Statements of Operations for the years ended December 31, 1995, 1996 and 1997 and the
unaudited six months ended June 30, 1997 and 1998.................................... F-4
Statements of Stockholders' Equity for the years ended December 31, 1995, 1996 and 1997
and the unaudited six months ended June 30, 1998..................................... F-5
Statements of Cash Flows for the years ended December 31, 1995, 1996 and 1997 and the
unaudited six months ended June 30, 1997 and 1998.................................... F-6
Notes to Financial Statements.......................................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
PRAECIS PHARMACEUTICALS INCORPORATED
We have audited the accompanying balance sheets of PRAECIS PHARMACEUTICALS
INCORPORATED as of December 31, 1997 and 1996, and the related statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of PRAECIS PHARMACEUTICALS
INCORPORATED at December 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
Boston, Massachusetts
February 4, 1998, except for the first paragraph of Note 6
as to which the date is August 7, 1998
F-2
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1996 1997 1998
--------- --------- ------------
<S> <C> <C> <C>
(UNAUDITED)
Current assets:
Cash and cash equivalents................................................... $ 10,260 $ 40,190 $ 82,150
Short-term investments...................................................... 4,960 -- --
Accounts receivable......................................................... 334 2,547 3,907
Prepaid expenses and other assets........................................... 313 198 570
--------- --------- ------------
Total current assets.......................................................... 15,867 42,935 86,627
Property and equipment, net................................................... 2,346 3,354 3,253
--------- --------- ------------
Total assets.................................................................. $ 18,213 $ 46,289 $ 89,880
--------- --------- ------------
--------- --------- ------------
Liabilities and stockholders' equity
Current liabilities:
Accounts payable............................................................ $ 167 $ 1,419 $ 1,786
Accrued expenses............................................................ 1,483 4,763 6,453
Deferred revenues........................................................... 671 1,531 453
Current portion of capital lease obligations................................ 414 420 358
--------- --------- ------------
Total current liabilities..................................................... 2,735 8,133 9,050
Capital lease obligations, net of current portion............................. 717 249 105
Commitments
Stockholders' equity:
Preferred Stock--Unallocated, $0.01 par value, 312,700 shares authorized; no
shares issued or outstanding
Series A Convertible Preferred Stock, $0.01 par value; 1,061,166 shares
authorized; 1,041,166 shares issued and outstanding ($10,500 aggregate
liquidation preference)................................................... 10 10 10
Series B Convertible Preferred Stock, $0.01 par value; 63,700 shares
authorized, issued and outstanding ($642 aggregate liquidation
preference)............................................................... 1 1 1
Series C Convertible Preferred Stock, $0.01 par value; 1,052,632 shares
authorized, issued and outstanding ($20,000 aggregate liquidation
preference)............................................................... 11 11 11
Series D Convertible Preferred Stock, $0.01 par value; 359,324 shares
authorized, issued and outstanding in 1997 and 1998 ($10,000 aggregate
liquidation preference)................................................... -- 4 4
Series E Convertible Preferred Stock, $0.01 par value; 900,478 shares
authorized, issued and outstanding in 1998................................ -- -- 9
Common Stock, $0.01 par value; 60,000,000 shares authorized; 1,670,701
shares in 1996, 2,532,379 shares in 1997 and 2,924,441 shares in 1998
issued and outstanding.................................................... 17 25 29
Additional paid-in capital.................................................. 30,943 50,873 88,622
Accumulated deficit......................................................... (16,221) (13,017) (7,961)
--------- --------- ------------
Total stockholders' equity.................................................... 14,761 37,907 80,725
--------- --------- ------------
Total liabilities and stockholders' equity.................................... $ 18,213 $ 46,289 $ 89,880
--------- --------- ------------
--------- --------- ------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-3
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- ---------------------
1995 1996 1997 1997 1998
--------- --------- ---------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Strategic alliances............. $ -- $ -- $ 18,118 $ 4,750 $ 19,373
Contract services............... -- 876 2,615 1,279 1,675
--------- --------- ---------- --------- ----------
-- 876 20,733 6,029 21,048
Costs and expenses:
Research and development........ 3,687 7,947 15,013 6,265 15,854
General and administrative...... 1,609 2,120 3,780 1,516 1,415
--------- --------- ---------- --------- ----------
5,296 10,067 18,793 7,781 17,269
--------- --------- ---------- --------- ----------
Operating income (loss)........... (5,296) (9,191) 1,940 (1,752) 3,779
Interest income................... 283 738 1,466 524 1,453
Interest expense.................. (86) (111) (102) (67) (26)
--------- --------- ---------- --------- ----------
Income (loss) before income
taxes........................... (5,099) (8,564) 3,304 (1,295) 5,206
Provision for income taxes........ -- -- 100 -- 150
--------- --------- ---------- --------- ----------
Net income (loss)................. $ (5,099) $ (8,564) $ 3,204 $ (1,295) $ 5,056
--------- --------- ---------- --------- ----------
--------- --------- ---------- --------- ----------
Net income (loss) per share:
Basic........................... $ (3.19) $ (5.25) $ 1.44 $ (0.68) $ 1.80
Diluted......................... (3.19) (5.25) 0.23 (0.68) 0.31
Weighted average number of common
shares:
Basic........................... 1,599 1,631 2,220 1,914 2,806
Diluted......................... 1,599 1,631 13,999 1,914 16,070
</TABLE>
SEE ACCOMPANYING NOTES.
F-4
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PREFERRED STOCK
--------------------------------------------------------------------------------------------------
SERIES A SERIES B SERIES C SERIES D SERIES E
----------------- -------------- ----------------- --------------------- -----------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ------ ------ ------ --------- ------ --------- --------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1994........................ 1,041,166 $10 63,700 $1
Common Stock issued upon
exercise of stock options...
Common Stock issued as
compensation................
Net loss......................
--------- ------ ------ ------ --------- ------ --------- --- --------- ------
Balance at December 31,
1995........................ 1,041,166 10 63,700 1
Issuance of Series C
Convertible Preferred
Stock....................... 1,052,632 $11
Common Stock issued upon
exercise of stock options...
Common Stock issued as
compensation................
Retirement of Treasury
Stock.......................
Net loss......................
--------- ------ ------ ------ --------- ------ --------- --- --------- ------
Balance at December 31,
1996........................ 1,041,166 10 63,700 1 1,052,632 11
Issuance of Common Stock......
Issuance of warrants to
purchase Common Stock.......
Common Stock issued upon
exercise of stock options...
Repurchase of Treasury
Stock.......................
Retirement of Treasury
Stock.......................
Issuance of Series D
Convertible Preferred
Stock....................... 359,324 $ 4
Net income....................
--------- ------ ------ ------ --------- ------ --------- --- --------- ------
Balance at December 31,
1997........................ 1,041,166 10 63,700 1 1,052,632 11 359,324 4
Issuance of Series E
Convertible Preferred Stock
(unaudited)................. 900,478 $ 9
Common Stock issued upon
exercise of stock options
(unaudited).................
Net income (unaudited)........
--------- ------ ------ ------ --------- ------ --------- --- --------- ------
Balance at June 30, 1998
(unaudited)................. 1,041,166 $10 63,700 $1 1,052,632 $11 359,324 $ 4 900,478 $ 9
--------- ------ ------ ------ --------- ------ --------- --- --------- ------
--------- ------ ------ ------ --------- ------ --------- --- --------- ------
<CAPTION>
COMMON STOCK
---------------
SHARES AMOUNT
--------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1994........................ 1,739,415 $17
Common Stock issued upon
exercise of stock options... 41,250 1
Common Stock issued as
compensation................ 11,160
Net loss......................
--------------
Balance at December 31,
1995........................ 1,791,825 18
Issuance of Series C
Convertible Preferred
Stock.......................
Common Stock issued upon
exercise of stock options... 52,516 1
Common Stock issued as
compensation................ 1,860
Retirement of Treasury
Stock....................... (175,500) (2 )
Net loss......................
--------------
Balance at December 31,
1996........................ 1,670,701 17
Issuance of Common Stock...... 808,886 8
Issuance of warrants to
purchase Common Stock.......
Common Stock issued upon
exercise of stock options... 61,541
Repurchase of Treasury
Stock.......................
Retirement of Treasury
Stock....................... (8,749)
Issuance of Series D
Convertible Preferred
Stock.......................
Net income....................
--------------
Balance at December 31,
1997........................ 2,532,379 25
Issuance of Series E
Convertible Preferred Stock
(unaudited).................
Common Stock issued upon
exercise of stock options
(unaudited)................. 392,062 4
Net income (unaudited)........
--------------
Balance at June 30, 1998
(unaudited)................. 2,924,441 $29
--------------
--------------
<CAPTION>
TREASURY STOCK ADDITIONAL TOTAL
---------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
-------- ------ ---------- ----------- -------------
Balance at December 31,
1994........................ 175,500 $(5) $11,106 $(2,558) $8,571
Common Stock issued upon
exercise of stock options... 10 11
Common Stock issued as
compensation................ 3 3
Net loss...................... (5,099) (5,099)
--
-------- ---------- ----------- -------------
Balance at December 31,
1995........................ 175,500 (5) 11,119 (7,657) 3,486
Issuance of Series C
Convertible Preferred
Stock....................... 19,814 19,825
Common Stock issued upon
exercise of stock options... 13 14
Common Stock issued as
compensation................
Retirement of Treasury
Stock....................... (175,500) 5 (3)
Net loss...................... (8,564) (8,564)
--
-------- ---------- ----------- -------------
Balance at December 31,
1996........................ -- -- 30,943 (16,221) 14,761
Issuance of Common Stock...... 9,456 9,464
Issuance of warrants to
purchase Common Stock....... 500 500
Common Stock issued upon
exercise of stock options... 19 19
Repurchase of Treasury
Stock....................... 8,749 (2) (2)
Retirement of Treasury
Stock....................... (8,749) 2 (2)
Issuance of Series D
Convertible Preferred
Stock....................... 9,957 9,961
Net income.................... 3,204 3,204
--
-------- ---------- ----------- -------------
Balance at December 31,
1997........................ -- -- 50,873 (13,017) 37,907
Issuance of Series E
Convertible Preferred Stock
(unaudited)................. 37,622 37,631
Common Stock issued upon
exercise of stock options
(unaudited)................. 127 131
Net income (unaudited)........ 5,056 5,056
--
-------- ---------- ----------- -------------
Balance at June 30, 1998
(unaudited)................. -- -- $88,622 $(7,961) $80,725
--
--
-------- ---------- ----------- -------------
-------- ---------- ----------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)....................................... $ (5,099) $ (8,564) $ 3,204 $ (1,295) $ 5,056
Adjustments to reconcile net income (loss) to cash
provided by (used in) operating activities:
Depreciation and amortization......................... 487 597 754 349 534
Stock issued for compensation......................... 3 -- -- -- --
Changes in operating assets and liabilities:
Prepaid expenses and other assets................... (59) (242) 115 (176) (372)
Accounts receivable................................. -- (334) (2,213) 14 (1,360)
Accounts payable.................................... (149) (126) 1,252 532 367
Accrued expenses.................................... 112 1,167 3,280 661 1,690
Deferred revenues................................... -- 671 860 (639) (1,078)
--------- --------- --------- --------- ---------
Net cash provided by (used in) operating activities..... (4,705) (6,831) 7,252 (554) 4,837
INVESTING ACTIVITIES
Purchase of property and equipment...................... (87) (71) (1,819) (465) (433)
Purchase of short-term investments...................... -- (4,960) -- --
Sale of short-term investments.......................... -- -- 4,960 4,960 --
--------- --------- --------- --------- ---------
Net cash provided by (used in) investing activities..... (87) (5,031) 3,141 4,495 (433)
FINANCING ACTIVITIES
Proceeds from sale of Convertible Preferred Stock....... -- 19,825 9,961 9,963 37,631
Principal repayments of capital lease obligations....... (228) (312) (405) (202) (206)
Proceeds from the issuance of Common Stock, options and
warrants.............................................. 11 14 9,983 9,975 131
Proceeds from lease financing........................... 1,075 -- -- -- --
Repurchase of treasury stock............................ -- -- (2) (2) --
--------- --------- --------- --------- ---------
Net cash provided by financing activities............... 858 19,527 19,537 19,734 37,556
--------- --------- --------- --------- ---------
Increase (decrease) in cash and cash equivalents........ (3,934) 7,665 29,930 23,675 41,960
Cash and cash equivalents at beginning of period........ 6,529 2,595 10,260 10,260 40,190
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of period.............. $ 2,595 $ 10,260 $ 40,190 $ 33,935 $ 82,150
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Noncash investing and financing activities:
Equipment acquired under capital leases............... $ 1,384 $ 288 -- -- --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
SEE ACCOMPANYING NOTES.
F-6
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and unaudited June 30, 1998
1. BASIS OF PRESENTATION
THE COMPANY
PRAECIS PHARMACEUTICALS INCORPORATED (the "Company") was incorporated under
the name Pharmaceutical Peptides, Inc. in July 1993 under the laws of the State
of Delaware. The Company is a biopharmaceutical company engaged in the
development of peptide-based therapeutics for the treatment of human diseases.
Prior to 1997, the Company had presented its financial statements in
accordance with Statement of Financial Accounting Standards (SFAS) No. 7,
ACCOUNTING AND REPORTING BY DEVELOPMENT-STAGE ENTERPRISES. In 1997, the Company
began to derive significant revenues from its principal operations, and
therefore no longer considers itself to be in the development stage.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The balance sheet as of June 30, 1998 and the statements of operations,
stockholders' equity and cash flows for the six months ended June 30, 1997 and
1998 are unaudited and in the opinion of management, include all adjustments,
consisting of normal recurring accruals, necessary for the fair presentation of
the Company's financial position, results of operations and its cash flows. The
results of operations for the six months ended June 30, 1998 are not necessarily
indicative of the results to be expected for the entire year.
2. SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash equivalents consist principally of money market funds with original
maturities of three months or less at the date of purchase. Short-term
investments consist of high-grade corporate bonds maturing within one year from
the date of purchase. Short-term investments at December 31, 1996 are classified
as available-for-sale. The estimated fair market value is equal to the cost of
the securities and, due to the nature of these securities, there were no
unrealized gains or losses at the balance sheet date.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to concentration
of credit risk consist principally of cash equivalents and accounts receivable.
The Company places its cash equivalents with high credit quality financial
institutions and, by policy, limits the credit exposure to any one financial
instrument; accounts receivable are limited to amounts due from collaborators.
F-7
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Equipment is recorded at cost, and includes capitalized leases which are
stated at the present value of future minimum lease obligations at the date of
inception of the lease. Depreciation is recorded over the shorter of the
estimated useful life of the asset or the term of the lease (four years) using
the straight-line method. Leasehold improvements are stated at cost and are
amortized over the remaining life of the building lease (ten years).
REVENUE RECOGNITION
The Company recognizes revenue as follows:
STRATEGIC ALLIANCES: Revenues are earned based upon research expenses
incurred and milestones achieved. Amounts received in advance of expenses to be
incurred are recorded as deferred revenue until the related expenses are
incurred. Milestone payments are recognized as revenue in the period in which
the parties agree that the milestone has been achieved.
CONTRACT SERVICES: Revenues are earned as services are performed or the
related expenses are incurred. Amounts received in advance of services to be
performed are recorded as deferred revenue until the related services are
performed.
INCOME TAXES
The Company provides for income taxes under SFAS No. 109, ACCOUNTING FOR
INCOME TAXES. Under this method, deferred taxes are recognized using the
liability method, whereby tax rates are applied to cumulative temporary
differences between carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes based on when
and how they are expected to affect the tax return.
TECHNOLOGY, LICENSES AND PATENTS
Costs associated with acquired technology, licenses and patents are expensed
as incurred.
STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No.
25. ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES (APB 25) in accounting for its
stock-based employee compensation plans, rather than the alternative fair value
accounting method provided for under SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, as this alternative requires the use of option valuation models
that were not developed for use in valuing employee stock options. Under APB 25,
when the exercise price of options granted under these plans equals the market
price of the underlying stock on the date of grant, no compensation expense is
required.
ACCOUNTING PRONOUNCEMENTS
In 1998, the Company adopted SFAS No. 130, REPORTING COMPREHENSIVE INCOME,
and SFAS No. 131 DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION, which did not have any impact on the Company's financial
statements.
F-8
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share represents net income (loss) divided by
the weighted average shares of common stock outstanding during the period.
Diluted net income per share includes the effect of all dilutive, potentially
issuable common shares using the treasury stock method. The difference between
basic and diluted shares used in the computation of net income per share is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
------------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Weighted average number of common shares used in
basic net income per share........................ 2,220 2,806
Effect of dilutive securities:
Convertible Preferred Stock....................... 8,852 10,587
Stock options..................................... 2,881 2,631
Warrants.......................................... 46 46
------- -------
Weighted average number of common shares used in
diluted net income per share...................... 13,999 16,070
------- -------
------- -------
</TABLE>
Warrants to purchase 202,223 shares of Common Stock at $25.76 per share were
outstanding at December 31, 1997 and June 30, 1998 but were not included in the
computation of diluted net income per share because the exercise price was
greater than the assumed market price for shares of Common Stock and, therefore,
the effect would be antidilutive.
PRO FORMA NET INCOME (LOSS) PER SHARE (UNAUDITED)
Pro forma net income (loss) per share is computed using the historical basic
and diluted weighted average number of outstanding shares of Common Stock
assuming conversion of the outstanding shares of Series A, B, C, D and E
Convertible Preferred Stock into a total of 12,819,243 shares of Common Stock
(as of their respective original dates of issuance), which will occur upon the
closing of the initial public offering as contemplated herein (See Note 6).
The pro forma net income (loss) per share calculations are as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED JUNE 30,
DECEMBER 31, ----------------------------
1997 1997 1998
-------------- ------------- -------------
<S> <C> <C> <C>
Basic.......................................... $ 0.29 $ (0.13) $ 0.38
-------------- ------------- -------------
-------------- ------------- -------------
Diluted........................................ $ 0.23 $ (0.13) $ 0.31
-------------- ------------- -------------
-------------- ------------- -------------
Weighted average number of Common
Shares--basic................................ 11,072,178 10,165,683 13,393,085
-------------- ------------- -------------
-------------- ------------- -------------
Weighted average number of Common
Shares--diluted.............................. 13,998,897 10,165,683 16,070,167
-------------- ------------- -------------
-------------- ------------- -------------
</TABLE>
F-9
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Laboratory and office equipment.......................................... $ 1,849 $ 3,137
Leasehold improvements................................................... 1,667 2,071
--------- ---------
3,516 5,208
Less accumulated depreciation and amortization........................... 1,170 1,854
--------- ---------
$ 2,346 $ 3,354
--------- ---------
--------- ---------
</TABLE>
4. LEASES
The Company has capitalized leased equipment totaling approximately $1.7
million and $1.6 million and related accumulated amortization of approximately
$0.8 million and $1.1 million at December 31, 1996 and 1997, respectively.
The Company leases its laboratory and office space under an operating lease
agreement with a fixed term of ten years. In addition to the minimum lease
commitment, the lease requires payment of the Company's pro rata share of
property taxes and building operating expenses. The lease also contains certain
rent inducements, which are being amortized over the term of the agreement using
the straight-line method.
At December 31, 1997, future minimum commitments under leases with
noncancelable terms of more than one year are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR LEASES LEASES
- ------------------------------------------------------------------------ ----------- -----------
(IN THOUSANDS)
<S> <C> <C>
1998.................................................................... $ 464 $ 322
1999.................................................................... 200 330
2000.................................................................... 61 347
2001.................................................................... -- 347
2002.................................................................... -- 347
Thereafter.............................................................. -- 593
----------- -----------
Total................................................................... 725 $ 2,286
-----------
-----------
Less amount representing interest....................................... (56)
-----------
Present value of minimum lease payments................................. 669
Less current portion of capital lease obligation........................ (420)
-----------
$ 249
-----------
-----------
</TABLE>
Total rent expense amounted to approximately $0.3 million in each of 1995,
1996 and 1997. Interest paid under all financing and leasing arrangements during
each of the periods presented approximated interest expense. In March 1998, the
Company entered into an equipment leasing arrangement which allows for
borrowings of up to $1.5 million through 2002 and bears interest at an effective
annual rate of 12.9%.
F-10
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Clinical trial costs..................................................... $ 285 $ 2,760
Professional fees........................................................ 275 745
Compensation and relocation.............................................. 477 355
Deferred rent............................................................ 205 196
Other.................................................................... 241 707
--------- ---------
$ 1,483 $ 4,763
--------- ---------
--------- ---------
</TABLE>
6. STOCKHOLDERS' EQUITY
STOCK SPLIT
On August 7, 1998, the Company's Board of Directors authorized a
five-for-four stock split of the Common Stock which, subject to stockholder
approval, will be effected in the form of a stock dividend prior to the
effectiveness of the registration statement for the Company's initial public
offering. All common share and per share data in the accompanying financial
statements have been retroactively adjusted to reflect the stock split.
CONVERTIBLE PREFERRED STOCK
Each share of Series A, C, D, and E Convertible Preferred Stock is
convertible at the option of the stockholder. The shares of Series A, B, C, D
and E Convertible Preferred Stock shall, by action of the Board of Directors,
subject to the initial public offering price per share of Common Stock being at
least $13.44, be automatically converted into a total of 12,819,243 shares of
Common Stock upon the closing of the initial public offering as contemplated
herein.
Each Series A, C, D, and E Convertible Preferred stockholder is entitled to
vote on all matters and is entitled to that number of votes equal to the number
of shares of Common Stock into which such Preferred Stock can be converted.
Series B Convertible Preferred Stockholders have no voting rights, except as
otherwise provided by law. In the event of a liquidation, the Convertible
Preferred stockholders would be entitled to receive an amount equal to the price
per share originally paid to the Company for those shares, plus all declared,
but unpaid, dividends, if any. After payments of certain amounts to holders of
Common Stock, the holders of Preferred Stock are entitled to participate with
the holders of Common Stock in any dividend paid or set aside for payment based
on the number of shares of Common Stock into which the Preferred Stock is then
convertible.
WARRANTS
In connection with its lease financing arrangement, the Company issued
warrants to purchase 14,925 shares of Series A Convertible Preferred Stock at
$10.085 per share, which, pursuant to the terms thereof will convert into
warrants to purchase 55,955 shares of Common Stock at $2.69 per share upon the
completion of the initial public offering contemplated herein. These warrants
expire on March 29, 2005 or two years from the date of an initial public
offering, whichever is later.
F-11
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
In May 1997, Sylamerica Inc. (a wholly owned subsidiary of Synthelabo)
purchased 808,886 shares of Common Stock and a warrant to purchase 202,223
shares of Common Stock, for an aggregate purchase price of $10.0 million. The
warrant has a five-year term and is exercisable at a price of $25.76 per share.
The Company has allocated $0.5 million to the value of the warrant.
STOCK OPTION PLAN
The Amended and Restated 1995 Stock Plan (the "Plan") allows for the
granting of incentive and nonqualified options and awards to purchase shares of
Common Stock. At December 31, 1997, the Plan provided for the issuance of up to
3,750,000 shares of Common Stock. On January 8, 1998, the Board of Directors
increased the number of shares issuable under the Plan to 4,687,500. Incentive
options granted to employees generally vest at 20% on the first anniversary of
the date of employment, with the remaining shares vesting ratably over four
years following such anniversary date. However, options to purchase 300,001
shares of Common Stock for $7.42 per share vest ratably over ten years or
immediately upon the attainment of a targeted price per share of Common Stock,
whichever occurs first. Nonqualified options granted to consultants and other
nonemployees generally vest over the period of service to the Company.
Information regarding options under the Plan is summarized below:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Granted.............................................................. 1,552 $ 0.27
Canceled............................................................. (392) 0.27
Exercised............................................................ (41) 0.27
-----------
Outstanding at December 31, 1995..................................... 1,119 0.27
Granted.............................................................. 1,698 0.64
Canceled............................................................. (180) 0.37
Exercised............................................................ (52) 0.27
-----------
Outstanding at December 31, 1996..................................... 2,585 0.50
Granted.............................................................. 881 5.54
Canceled............................................................. (85) 0.98
Exercised............................................................ (62) 0.30
-----------
Outstanding at December 31, 1997..................................... 3,319 $ 1.83
-----------
-----------
Exercisable at December 31, 1997..................................... 1,025 $ 0.48
-----------
-----------
Available for grant at December 31, 1997............................. 276
-----------
-----------
</TABLE>
At December 31, 1997, the Company has reserved 13,295,322 shares of Common
Stock for the exercise of stock options and warrants and the conversion of
preferred shares.
F-12
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
The following table presents weighted average price and life information
about significant option groups outstanding at December 31, 1997:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
REMAINING
OPTIONS CONTRACTUAL OPTIONS
EXERCISE PRICE OUTSTANDING LIFE (YEARS) EXERCISABLE
- ---------------------------------------------------- ------------ --------------- -----------
<S> <C> <C> <C>
$0.27-$3.20......................................... 2,840,358 8.2 1,013,638
7.42-9.52.......................................... 478,315 9.6 11,251
</TABLE>
Pursuant to the requirements of SFAS No. 123, the following are the pro
forma net income (loss) for each year as if the compensation cost for the stock
option plans had been determined based on the fair value at the grant date for
grants for each year:
<TABLE>
<CAPTION>
1995 1996 1997
------------------------ ------------------------ ------------------------
SFAS NO. SFAS NO. SFAS NO.
AS 123 PRO AS 123 PRO AS 123 PRO
REPORTED FORMA REPORTED FORMA REPORTED FORMA
----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net income (loss)................................. $ (5,099) $ (5,277) $ (8,564) $ (8,703) $ 3,204 $ 2,322
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Diluted net income (loss) per common share........ $ (3.19) $ (3.30) $ (5.25) $ (5.33) $ 0.23 $ 0.17
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
The fair value of the stock options at the date of grant was estimated using
the Black-Scholes option pricing model with the following weighted average
assumptions: risk-free interest rate of 6%, the volatility factor of the
expected market price of the Company's Common Stock of 60%, and a weighted-
average expected life of the options of five years. The Company has never
declared dividends on any of its capital stock and does not expect to do so in
the foreseeable future.
The effects on pro forma net income (loss) of expensing the fair value of
stock options are not necessarily representative of the effects on reported
results of operations for future years as the periods presented include only
one, two, and three years, respectively, of option grants under the Company's
plans.
7. INCOME TAXES
In 1995 and 1996, the Company incurred net losses. Due to the degree of
uncertainty related to the use of the net operating loss carryforwards and other
tax benefits, based largely on the timing of milestone achievements, the Company
fully reserved such tax benefits. In 1997, the Company utilized approximately
$1.1 million of such loss carryforwards to offset taxable income.
At December 31, 1997, the Company has tax net operating loss carryforwards
of approximately $11.1 million and research and development tax credit
carryforwards of approximately $1.0 million, which expire at various times
through the year 2011. The use of the above carryforwards may be subject to
annual limitations under Section 382 of the Internal Revenue Code based on
ownership changes of the Company's stock.
F-13
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards....................................... $ 5,793 $ 4,524
Research and development tax credit carryforwards...................... 605 978
Other.................................................................. 588 559
--------- ---------
Total deferred tax assets................................................ 6,986 6,061
Valuation allowance...................................................... (6,986) (6,061)
--------- ---------
Net deferred tax asset................................................... $ -- $ --
--------- ---------
--------- ---------
</TABLE>
The valuation allowance decreased by approximately $0.9 million during 1997
due primarily to the increase in research and development tax credits and
utilization of net operating loss carryforwards in 1997.
A reconciliation of the Company's effective tax rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Federal statutory rate................................................. (34)% (34 )% 34%
Valuation allowance.................................................... 34 34 --
Utilization of net operating losses.................................... -- -- (31 )
-- -- --
Effective tax rate..................................................... --% --% 3%
-- -- --
-- -- --
</TABLE>
8. STRATEGIC ALLIANCES
SYNTHELABO AGREEMENT
In May 1997, the Company entered into a license agreement with Synthelabo
for the development and commercialization of the Company's abarelix products.
Synthelabo received marketing rights in Europe, Latin America, the Middle East
and certain countries in Africa in exchange for (a) a one time, non-refundable
$4.7 million payment to the Company upon initiation; (b) 30 million French
Francs (approximately US $5 million) funding over three years to be applied
toward future research and development costs; (c) funding of certain additional
research and development expenses; (d) payments of up to $59.9 million upon
achievement of specific milestones; (e) specified percentages of product sales,
if any, representing product cost payment; and (f) a royalty percentage of
Synthelabo net sales, if any, which the Company will remit to Indiana University
Foundation ("IUF") under terms of that licensing agreement (see Note 10 below).
The Company retained worldwide manufacturing rights. The Company recognized
$14.7 million and $0.8 million in revenues under the Synthelabo agreement in
1997 and for the six months ended June 30, 1998, respectively.
F-14
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. STRATEGIC ALLIANCES (CONTINUED)
ROCHE AGREEMENT
In August 1997, the Company entered into an agreement with Roche Products
Inc. ("Roche") in return for a non-refundable $2.0 million fee and reimbursement
of certain development costs. The agreement provided Roche with the option to
enter into a definitive collaboration agreement with the Company. In 1997, the
Company recognized $3.3 million in revenues under the option agreement.
In June 1998, Roche exercised this option and entered into a definitive
agreement with the Company for the development and commercialization of the
Company's abarelix products. Roche received marketing rights in the United
States, Canada and the Pacific Rim in exchange for (a) a one time,
non-refundable $14.0 million payment to the Company upon initiation, (b)
generally equal funding of additional research and development expenses, net of
Synthelabo reimbursements; (c) payments of up to $69.0 million upon achievement
of specific milestones; (d) specified percentages of product sales, if any,
representing product cost payment; and (e) a royalty percentage of Roche net
sales, if any, which will be remitted by Roche directly to IUF. The Company
retained worldwide manufacturing rights. Prior to initiation of product sales,
Roche may terminate the agreement upon 180 days notice to the Company. The
Company recognized $18.6 million of revenues under the agreement for the six
months ended June 30, 1998.
9. CONTRACT SERVICES
In August 1996, the Company entered into a service agreement with Boehringer
Ingelheim International GmBH ("BI") for the screening of certain compounds for
$3.0 million of fees as well as reimbursement of certain research personnel,
equipment and materials expenses in connection with the screening of those
compounds. BI is responsible for all development, marketing and other costs with
respect to any compound screened by the Company and developed and commercialized
by BI or its licensee. The Company is entitled to receive royalties on net sales
of any product containing a BI compound and commercialized by BI or its
licensee.
10. COMMITMENTS
INDIANA UNIVERSITY FOUNDATION LICENSE AGREEMENT
The Company has a license agreement with IUF with respect to rights to
abarelix and certain related technology. In exchange for the license, the
Company agreed to pay (a) fees of $0.3 million; (b) up to $4.3 million upon
achievement of specific milestones; and (c) a royalty percentage of net sales of
licensed products, if any. As of June 30, 1998, the Company has made fee
payments of $50,000 under the IUF agreement.
UCB SUPPLY AGREEMENT
In March 1998, the Company entered into an agreement with UCB-Bioproducts
S.A. (the "UCB Agreement") for the development and supply of clinical and
commercial volumes of pharmaceutical grade peptide. Under the UCB Agreement, the
Company is committed to purchase $32.0 million of pharmaceutical grade peptide
from February 1999 to February 2000.
F-15
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. COMMITMENTS (CONTINUED)
SALSBURY SUPPLY AGREEMENT
In July 1998, the Company entered into a seven year agreement with Salsbury
Chemicals, Inc. for the development and supply of clinical and commercial depot
formulation. Under the agreement, the Company will contribute up to $4.9 million
toward the construction and outfitting of a dedicated manufacturing facility by
Salsbury as to which the Company will retain manufacturing process rights. The
Company has committed to purchase $1.4 million of clinical depot formulation
through October 1998.
11. SUBSEQUENT EVENTS
On August 7, 1998, the Board of Directors adopted, subject to consummation
of the initial public offering, an Employee Stock Purchase Plan (the "Purchase
Plan") and authorized the reservation of a total of 60,000 shares of Common
Stock for issuance thereunder. Under the Purchase Plan commencing January 4,
1999, eligible employees may purchase shares of Common Stock at a price per
share equal to 85% of the lower of the fair market value per share of the Common
Stock at the beginning or the end of each six month period during the two-year
term of the Purchase Plan. Participation is limited to the lesser of 10% of the
employee's compensation or $25,000 in any calendar year.
On August 7, 1998, the Board of Directors approved an Amended and Restated
Certificate of Incorporation, which, subject to stockholder approval, will
become effective immediately after consummation of the initial public offering,
and which increases the Company's authorized shares of Common Stock by
15,000,000 shares (for a total of 75,000,000 authorized shares of Common Stock)
and provides for a total of 5,000,000 authorized shares of Preferred Stock, par
value $0.01 per share. The Preferred Stock will be issuable in one or more
classes or series, each of such classes or series to have such rights and
preferences, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences, as may be determined by the
Board of Directors.
F-16
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES, OR AN OFFER TO SELL TO, OR A SOLICITATION OF,
ANY PERSON IN ANY CIRCUMSTANCES IN WHICH SUCH AN OFFER OR SOLICITATION IS
UNLAWFUL.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Additional Information........................... 2
Prospectus Summary............................... 3
Risk Factors..................................... 6
Use of Proceeds.................................. 13
Dividend Policy.................................. 13
Capitalization................................... 14
Dilution......................................... 15
Selected Financial Data.......................... 16
Management's Discussion and Analysis of Financial
Condition and Results of Operations............ 17
Business......................................... 21
Management....................................... 41
Certain Transactions............................. 50
Principal Stockholders........................... 52
Description of Capital Stock..................... 55
Shares Eligible For Future Sale.................. 59
Underwriting..................................... 61
Legal Matters.................................... 62
Experts.......................................... 62
Index to Financial Statements.................... F-1
</TABLE>
------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
3,500,000 Shares
[LOGO]
Common Stock
-------------
PROSPECTUS
-------------
BT Alex. Brown
NationsBanc Montgomery
Securities LLC
[ ], 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions (all of which (other than selling
commissions) will be borne by the Company). All amounts shown are estimates
except for the Securities and Exchange Commission registration fee, the NASD
filing fee, and The Nasdaq Stock Market listing fee:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.............. $ 18,998
NASD Filing Fee.................................................. 5,750
The Nasdaq Stock Market Listing Fee.............................. 95,000
Blue Sky Fees and Expenses....................................... 10,000
Transfer Agent and Registrar's Fees and Expenses................. 3,500
Accounting Fees and Expenses..................................... 125,000
Legal Fees and Expenses.......................................... 300,000
Printing, Engraving and Mailing Expenses......................... 110,000
Miscellaneous.................................................... 81,752
---------
Total........................................................ $ 750,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102 of the Delaware General Corporation Law, as amended, allows a
corporation to eliminate the personal liability of directors of a corporation to
the corporation or its stockholders for monetary damages for a breach of
fiduciary duty as a director, except where the director breached his duty of
loyalty, failed to act in good faith, engaged in intentional misconduct or
knowingly violated a law, authorized the payment of a dividend or approved a
stock repurchase in violation of Delaware corporate law or obtained an improper
personal benefit.
Section 145 of the Delaware General Corporation Law, as amended, provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation), by reason of the
fact that he is or was a director, officer, employee or agent of the corporation
or is or was serving at its request in such capacity in another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
Article NINTH of the Registrant's Amended and Restated Certificate of
Incorporation, which shall become effective immediately after the closing of the
offering (the "Certificate of Incorporation"), provides for indemnification of
directors and officers to the fullest extent authorized or permitted by law as
follows:
"The Corporation shall indemnify its directors and officers to the
fullest extent authorized or permitted by law, as now or hereafter in
effect, and such right to indemnification shall continue as to a person
who has ceased to be a director or officer of the Corporation and shall
inure to the benefit of his or her heirs, executors and personal and
legal representatives;
II-1
<PAGE>
provided however, that, except for proceedings to enforce rights to
indemnification, the Corporation shall not be obligated to indemnify or
to advance expenses to any director or officer (or his or her heirs,
executors or personal or legal representatives) in connection with a
proceeding (or part thereof) initiated by such person unless such
proceeding (or part thereof) was authorized or consented to by the Board
of Directors. The right to indemnification conferred by this Article
NINTH shall include the right to be paid by the Corporation the expenses
incurred in defending or otherwise participating in any proceeding in
advance of its final disposition.
The Corporation may, to the extent authorized from time to time by
the Board of Directors, provide rights to indemnification and to the
advancement of expenses to employees and agents of the Corporation
similar to those conferred in this Article NINTH to directors and
officers of the Corporation.
The rights to indemnification and to the advancement of expenses
conferred in this Article NINTH shall not be exclusive of any other right
which any person may have or hereafter acquire under this Amended and
Restated Certificate of Incorporation, the By-Laws of the Corporation,
any statute, agreement, vote of stockholders or disinterested directors
or otherwise.
Any repeal or modification of this Article NINTH or Article VIII of
the By-Laws of the Corporation shall not adversely affect any rights to
indemnification and to the advancement of expenses of a director or
officer of the Corporation existing at the time of such repeal or
modification with respect to any acts or omissions occurring prior to
such repeal or modification."
Article TENTH of the Registrant's Certificate of Incorporation provides for
elimination of directors' personal liability and indemnification as follows:
"No director shall be personally liable to the Corporation or any of
its stockholders for monetary damages for breach of fiduciary duty as a
director, except to the extent such exemption from liability or
limitation thereto is not permitted under the DGCL as the same exists or
may hereafter be amended. If the DGCL is amended hereafter to authorize
the further elimination or limitation of the liability of directors, then
the liability of a director of the Corporation shall be eliminated or
limited to the fullest extent authorized by the DGCL, as so amended. Any
repeal or modification of this Article TENTH shall not adversely affect
any right or protection of a director of the Corporation existing at the
time of such repeal or modification with respect to acts or omissions
occurring prior to such repeal or modification."
In addition, Article VIII of the Amended and Restated By-Laws of the
Registrant, which shall become effective immediately after the closing of this
offering, provides for indemnification of officers and directors of the Company
and certain other persons against liabilities and expenses incurred by any of
them in certain stated proceedings and under certain stated conditions.
Section 8 of the Underwriting Agreement by and between BT Alex. Brown
Incorporated and NationsBanc Montgomery Securities LLC (the "Underwriters") and
the Registrant, a copy of which is to be filed herewith (pursuant to an
amendment hereof) as Exhibit 1.1, will provide for indemnification by the
Registrant of the Underwriters and each person, if any, who controls the
Underwriters against certain liabilities, as stated therein, which may include
liabilities under the Securities Act. The Underwriting Agreement also will
provide that the Underwriters shall similarly indemnify the Company and its
directors, officers and controlling persons, to the extent set forth therein.
William Laverack, Jr., a director of the Company, is indemnified for certain
liabilities which may be incurred in his capacity as such pursuant to agreements
with J.H. Whitney & Co. and affiliated entities.
II-2
<PAGE>
The Registrant's directors and officers will be covered by liability
insurance which will indemnify the directors and officers of the Company against
damages arising out of certain kinds of claims which might be made against them
based on their negligent acts or omissions while acting in their capacity as
directors or officers of the Registrant.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1995, the Registrant has issued the securities set forth below
which were not registered under the Securities Act. The share amounts (and
purchase and option and warrant exercise prices) set forth below have been
adjusted to give effect to the 5 for 4 stock split of the Common Stock to be
effected prior to the closing of the offering, and the corresponding adjustments
to the conversion price of the Preferred Stock.
1. From March 1995 until April 1996, the Registrant issued an aggregate of
13,020 shares of Common Stock to seven consultants in consideration of past
services rendered to the Registrant.
2. From March 1995 until January 1997, the Registrant issued to Comdisco,
Inc., in consideration of entering into a Master Lease Agreement, warrants to
purchase an aggregate of 55,955 shares of Series A Preferred Stock at an
exercise price of $2.69 per share.
3. In April 1996, the Registrant issued an aggregate of 3,952,546 shares of
Series C Convertible Preferred Stock, par value $.01 per share, of the
Registrant to fifty-one accredited investors at $5.06 per share.
4. In May 1997, the Registrant issued 808,886 shares of Common Stock and a
warrant to purchase 202,223 shares of Common Stock at an exercise price of
$25.76 per share for an aggregate purchase price of $10,000,000 to one
accredited investor.
5. In June 1997, the Registrant issued 1,347,707 shares of Series D
Convertible Preferred Stock, par value $.01 per share, of the Registrant for an
aggregate purchase price of $10,000,000 to one accredited investor.
6. In April 1998, the Registrant issued 3,376,785 shares of Series E
Convertible Preferred Stock, par value $.01 per share, of the Registrant to
twenty-three accredited investors at $11.20 per share.
7. On the dates set forth below the Company issued the number of shares of
Common Stock indicated upon exercise of stock options held by certain employees
of the Company.
<TABLE>
<CAPTION>
DATE OF ISSUANCE NUMBER OF SHARES ISSUED EXERCISE PRICE PER SHARE
- ----------------------------------------- ------------------------- -------------------------
<S> <C> <C>
April 15, 1995 37,500 $ 0.27
December 4, 1995 3,750 0.27
April 26, 1996 7,811 0.27
September 5, 1996 2,343 0.27
October 15, 1996 19,998 0.27
November 14, 1996 2,366 0.27
December 2, 1996 19,998 0.27
February 11, 1997 30,375 0.27
March 21, 1997 17,625 0.27
August 15, 1997 4,935 0.27
October 26, 1997 3,000 0.53
December 23, 1997 2,481 0.53
December 30, 1997 3,125 0.53
January 7, 1998 69,393 0.53
January 8, 1998 33,750 0.27
January 13, 1998 11,250 0.27
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
DATE OF ISSUANCE NUMBER OF SHARES ISSUED EXERCISE PRICE PER SHARE
- ----------------------------------------- ------------------------- -------------------------
<S> <C> <C>
February 3, 1998 3,437 0.53
February 24, 1998 18,750 0.53
February 25, 1998 2,250 0.27
March 4, 1998 187,500 0.27
March 9, 1998 5,031 0.27
March 30, 1998 1,250 0.27
April 17, 1998 3,750 0.27
May 4, 1998 3,750 0.27
June 5, 1998 41,827 0.27
June 12, 1998 2,531 0.27
June 18, 1998 7,500 0.53
June 30, 1998 93 0.27
July 23, 1998 5,625 $ 3.20
</TABLE>
No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon an exemption from the registration provisions
of the Securities Act set forth in Section 4(2) thereof relative to sales by an
issuer not involving any public offering or the rules and regulations
thereunder, or, in the case of options to purchase Common Stock and in the case
of Common Stock purchased pursuant to the Plan or an agreement, Rule 701 of the
Securities Act. Additionally, the issuances described in Item 15(3) and 15(6)
above were exempt from registration under the Securities Act in reliance upon
Regulation D promulgated thereunder. All of the foregoing securities are deemed
restricted securities for purposes of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement
*3.1 Form of Amended and Restated Certificate of Incorporation (to become effective immediately after the
closing of the offering)
*3.2 Form of Amended and Restated By-laws (to become effective immediately after the closing of the offering)
*4.1 Specimen certificate representing the Common Stock
*5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
10.1 Amended and Restated 1995 Stock Plan, as amended
10.2 Executive Management Bonus Plan
10.3 Employee Stock Purchase Plan
10.4 Amended and Restated Stockholders Agreement dated as of April 30, 1998 by and among the Company and
certain stockholders of the Company referred to therein, as amended by Amendments No. 1 and No. 2
10.5 Stock and Warrant Purchase Agreement dated as of May 13, 1997 by and between the Company and Sylamerica,
Inc.
+10.6 Agreement effective as of August 21, 1997 by and between Roche Products Inc. and the Company
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
+10.7 License Agreement dated May 13, 1997 by and between the Company and Synthelabo, as amended by a letter
dated July 31, 1997
+10.8 Collaboration and License Agreement dated as of August 1, 1996 by and between the Company and Boehringer
Ingelheim International GmbH
+10.9 License Agreement effective as of October 17, 1996 by and between the Company and Indiana University
Foundation, as amended as of June 3, 1998
+10.10 Development and Supply Agreement dated as of March 12, 1998 between UCB-Bioproducts S.A. and the Company
+10.11 Supply Agreement dated as of March 16, 1998 by and between Cook Imaging Corporation and the Company
+10.12 Supply Agreement dated as of July 23, 1998 by and between the Company and Salsbury Chemicals, Inc.
10.13 Lease dated as of April 28, 1994 by and between the Company and The Charles Stark Draper Laboratory,
Inc.
*10.14 Lease dated as of [ ], 1998 by and between the Company and BDG Piscataway, LLC
*10.15 Lease dated as of [ ], 1998 by and between the Company and Boston Properties, Inc.
10.16 Employment Agreement dated as of April 4, 1994 by and between the Company and Marc B. Garnick, M.D., as
amended as of April 1, 1997
*23.1 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1)
23.2 Consent of Ernst & Young LLP
23.3 Consent of Lahive & Cockfield, LLP
24.1 Power of Attorney (included on the signature page of this Registration Statement)
27 Financial Data Schedule
</TABLE>
- ------------
* To be filed by amendment
+ Confidential treatment requested as to certain portions of this exhibit.
Omitted portions have been filed separately with the Securities and Exchange
Commission.
(B) FINANCIAL STATEMENT SCHEDULES:
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a) To provide to the underwriter at the closing specified in the
underwriting agreement, certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to its Articles of Incorporation,
By-laws, by agreement or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in
II-5
<PAGE>
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(c) (1) That for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE
offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cambridge, Commonwealth
of Massachusetts on August 11, 1998.
PRAECIS PHARMACEUTICALS INCORPORATED
By /s/ MALCOLM L. GEFTER, PH.D.
-----------------------------------------
Malcolm L. Gefter, Ph.D.
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE
OFFICER AND PRESIDENT
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Malcolm L. Gefter and Kevin F. McLaughlin and
each of them, as such person's true and lawful attorney-in-fact and agent with
full power of substitution and revocation for such person and in such person's
name, place and stead, in any and all capacities, to execute any and all
amendments (including any post-effective amendment) to this Registration
Statement (or any other registration statement for the same offering that is to
be effective upon filing pursuant to Rule 462(b) under the Securities Act), and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as such person might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on August 11, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<C> <S>
Chairman of the Board,
/s/ MALCOLM L. GEFTER, PH.D. Chief Executive Officer
- ------------------------------ and President (PRINCIPAL
Malcolm L. Gefter, Ph.D. EXECUTIVE OFFICER)
Chief Financial Officer,
/s/ KEVIN F. MCLAUGHLIN Senior Vice President,
- ------------------------------ Secretary and Treasurer
Kevin F. McLaughlin (PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
/s/ G. LEONARD BAKER, JR.
- ------------------------------ Director
G. Leonard Baker, Jr.
/s/ WILLIAM LAVERACK, JR.
- ------------------------------ Director
William Laverack, Jr.
/s/ HENRY F. MCCANCE
- ------------------------------ Director
Henry F. McCance
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<C> <S>
/s/ DAVID B. SHARROCK
- ------------------------------ Director
David B. Sharrock
/s/ DAMION E. WICKER, M.D.
- ------------------------------ Director
Damion E. Wicker, M.D.
/s/ ALBERT L. ZESIGER
- ------------------------------ Director
Albert L. Zesiger
</TABLE>
II-8
<PAGE>
Exhibit 10.1
PRAECIS PHARMACEUTICALS INCORPORATED
AMENDED AND RESTATED 1995 STOCK PLAN
1. Purpose. This Amended and Restated 1995 Stock Plan (the "Plan") is
intended to benefit and provide incentives:
(a) to the employees of PRAECIS PHARMACEUTICALS INCORPORATED (the
"Company"), its parent (if any) and any present or future
subsidiaries of the Company (collectively, "Related Corporations"),
by providing them with opportunities to purchase stock in the Company
pursuant to options granted hereunder which qualify as "incentive
stock options" ("ISO" or "ISOs") under Section 422(b) of the Internal
Revenue Code of 1986, as amended (the "Code");
(b) to employees, directors and consultants of the Company and Related
Corporations by providing them with opportunities to purchase stock in
the Company pursuant to options granted hereunder which do not qualify
as ISOs ("Non-Qualified Option" or "Non-Qualified Options"); and
(c) to employees, directors and consultants of the Company and Related
Corporations by providing them with awards, or opportunities to make
direct purchases, of stock in the Company ("Awards").
Both ISOs and Non-Qualified Options are referred to hereinafter
individually as an "Option" and collectively as "Options." Options and Awards
are referred to hereinafter collectively as "Stock Rights." As used herein, the
terms "parent" and "subsidiary" mean "parent corporation" and "subsidiary
corporation," respectively, as those terms are defined in Section 424 of the
Code.
2. Administration of the Plan.
A. Board or Committee Administration. The Plan shall be
administered by a Committee of not less than two (2) persons,
each of whom shall be a "Non-Employee Director" within the
meaning of Rule 16b-3(b)(3)(i) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and an
"outside director" within the meaning of Section 162(m) of the
Code. The members of the Committee shall be appointed by the
Company's Board of Directors (the "Board") and shall serve at the
pleasure of the Board.
<PAGE>
If no Committee has been appointed to administer the Plan, the
functions of the Committee specified in the Plan shall be carried
time after a registration of any of the Company's stock under the
out by the Board, except that at any Exchange Act or the Company
otherwise becomes subject to the reporting requirements of the
Exchange Act, administration by a Committee is required.
Subject to the terms of the Plan, theCommittee shall have the
authority to:
(i) determine the employees of the Company and Related
Corporations (from among the class of employees eligible
under paragraph 3 to receive ISOs) to whom ISOs may be
granted, and to determine (from among the class of
individuals and entities eligible under paragraph 3 to
receive Non-Qualified Options and Awards) to whom
Non-Qualified Options and Awards may be granted;
(ii) determine the time or times at which Options or Awards may
be granted;
(iii) determine the option price of shares subject to each
Option, which price shall not be less than the minimum
price specified in paragraph 6, and the purchase price
(if any) of shares subject to each Award;
(iv) determine whether each Option granted shall be an ISO or a
Non-Qualified Option;
(v) determine (subject to paragraph 7) the time or times when
each Option shall become exercisable and the duration of
the exercise period;
(vi) determine whether restrictions such as repurchase rights
and other vesting restrictions are to be imposed on shares
subject to Options and Awards and the nature of such
restrictions, if any; and
(vii) interpret the Plan and prescribe and rescind rules and
regulations relating to it.
2
<PAGE>
If the Committee determines to issue a Non-Qualified Option, it
shall designate the Non-Qualified Option as such upon grant and in the
agreement governing such Non-Qualified Option. The interpretation and
construction by the Committee of any provisions of the Plan or of any Stock
Right granted under it shall be final unless otherwise determined by the
Board. The Committee may from time to time adopt such rules and
regulations for carrying out the Plan as it may deem best. No member of
the Board or the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any Stock Right granted
under the Plan.
B. Committee Actions. The Committee may select one of its members
as its chairman, and shall hold meetings at such time and place
as it may determine. Acts by a majority of the Committee, or
acts reduced to or approved in writing by a majority of the
members of the Committee, shall be the valid acts of the
Committee. All references in this Plan to the Committee shall
mean the Board if no Committee has been appointed.
3. Eligible Employees and Others. ISOs may be granted to any employee
(including an employee who serves as an officer or director) of the Company
or any Related Corporation. Non-Qualified Options and Awards may be
granted to any employee (including an employee who serves as an officer or
director), director or consultant (including a consultant who also serves
as a director) of the Company or any Related Corporation. The Committee
may take into consideration a recipient's individual circumstances in
determining whether to grant a Stock Right. No participant in the Plan
shall be granted Stock Rights which in the aggregate exceed 50% of the
total number of shares of common stock, par value $.01 per share (the
"Common Stock"), of the Company authorized to be issued with respect to
such Stock Rights pursuant to the Plan. The granting of any Stock Right to
any individual or entity shall neither entitle that individual or entity
to, nor disqualify him from, participation in any other grant of Stock
Rights.
4. Stock. The stock subject to Options and Awards shall be authorized but
unissued shares of Common Stock or shares of Common Stock reacquired by the
Company in any manner. The aggregate number of shares which may be issued
pursuant to the Plan is 1,000,000, subject to adjustment as provided in
paragraph 13. Any such shares may be issued pursuant to ISOs,
Non-Qualified Options or Awards, so long
3
<PAGE>
as the number of shares so issued does not exceed such number, as
adjusted. If any Option granted under the Plan shall expire or terminate
for any reason without having been exercised in full or shall cease for any
reason to be exercisable in whole or in part, or if the Company shall
reacquire any unvested shares issued pursuant to Awards, the unpurchased
shares subject to such Options and any unvested shares so reacquired by the
Company shall again be available for grants of Stock Rights under the Plan.
5. Granting of Stock Rights. Stock Rights may be granted under the Plan at
any time on or after January 5, 1995 and prior to January 5, 2005. The
date of grant of a Stock Right under the Plan will be the date specified by
the Committee at the time it grants the Stock Right; provided, however,
that such date shall not be prior to the date on which the Committee acts
to approve the grant. The Committee shall have the right, with the consent
of the optionee, to convert an ISO granted under the Plan to a
Non-Qualified Option pursuant to paragraph 16.
6. Minimum Option Price; ISO Limitations.
A. Exercise Price for Non-Qualified Options. The exercise price per
share specified in the agreement relating to each Non-Qualified
Option granted under the Plan shall in no event be less than the
par value per share of Common Stock as of the date of grant.
B. Exercise Price for ISOs. The exercise price per share of Common
Stock specified in the agreement relating to each ISO granted
under the Plan shall not be less than the fair market value per
share of Common Stock on the date of such grant. In the case of
an ISO to be granted to an employee owning stock possessing more
than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or any Related Corporation, the
price per share specified in the agreement relating to such ISO
shall not be less than one hundred ten percent (110%) of the fair
market value per share of Common Stock on the date of such grant.
C. $100,000 Annual Limitation on ISOs. Each eligible employee may
be granted ISOs only to the extent that, in the aggregate under
this Plan and all incentive stock option plans of the Company and
any Related Corporation, such ISOs
4
<PAGE>
do not become exercisable for the first time by such employee
during any calendar year in a manner which would entitle the
employee to purchase more than $100,000 in fair market value
(determined at the time the ISOs were granted) of Common Stock
in that year. Any options granted to an employee in excess of
such amount will be granted as Non-Qualified Options.
D. Determination of Fair Market Value. If, at the time an Option is
granted under the Plan, the Company's Common Stock is publicly
traded, "fair market value" shall be determined as of the last
business day for which the prices or quotes referred to in this
sentence are available prior to the date such Option is granted
and shall mean (i) the average (on that date) of the high and low
prices of the Common Stock on the principal national securities
exchange on which the Common Stock is traded, if the Common Stock
is then traded on a national securities exchange; or (ii) the
last reported sale price (on that date) of the Common Stock on
the Nasdaq National Market, if the Common Stock is not then
traded on a national securities exchange; or (iii) the closing
bid price (or average bid prices) last quoted (on that date) by
an established quotation service for over-the-counter securities,
if the Common Stock is not then listed on the Nasdaq National
Market. However, if the Common Stock is not publicly traded at
the time an Option is granted under the Plan, "fair market value"
shall be deemed to be the fair value of the Common Stock as
determined by the Committee after taking into consideration all
factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in
private transactions negotiated at arm's length.
7. Option Duration. Subject to earlier termination as provided in paragraphs
9 and 10, each Option shall expire on the date specified by the Committee,
but not more than (i) ten years from the date of grant in the case of ISOs
generally (to the extent such Option is intended to be an ISO), and (ii)
five years from the date of grant in the case of ISOs granted to an
employee owning stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Related
Corporation. Subject to earlier termination as
5
<PAGE>
provided in paragraphs 9 and 10, the term of each ISO shall be the term
set forth in the originalinstrument granting such ISO, except with
respect to any part of such ISO that is converted into a Non-Qualified
Option pursuant to paragraph 16.
8. Exercise of Option. Subject to the provisions of paragraphs 9 through 12,
each Option granted under the Plan shall be exercisable as follows:
A. Vesting. The Option (or any portion thereof) shall be fully
exercisable on the date of grant or shall become exercisable
thereafter in such installments as the Committee may specify.
B. Full Vesting of Installments. Once an installment becomes
exercisable, it shall remain exercisable until expiration or
termination of the Option, unless otherwise specified by the
Committee.
C. Partial Exercise. Each Option or installment may be exercised at
any time or from time to time, in whole or in part, for up to the
total number of shares with respect to which it is then
exercisable.
D. Acceleration of Vesting. The Committee shall have the right to
accelerate the date of exercise of any installment of any Option;
provided, that the Committee shall not, without the consent of an
optionee, accelerate the exercise date of any installment of any
Option granted to any employee as an ISO (and not previously
converted into a Non-Qualified Option pursuant to paragraph 16)
if such acceleration would violate the annual vesting limitation
contained in Section 422(d) of the Code, as described in
paragraph 6(C).
9. Termination of Employment. If an ISO optionee ceases to be employed by the
Company and all Related Corporations, except as provided in paragraph 10,
no further installments of his ISOs shall become exercisable (unless
otherwise approved by the Committee), and his ISOs which are exercisable on
the date of termination of his employment shall terminate after the passage
of three months from the date of termination of his employment, but in no
event later than on their specified expiration dates, except (i) in the
case of termination for "Misconduct," as defined in
6
<PAGE>
the instrument granting such ISOs, in which case such ISOs shall
terminate automatically on the date of such termination, and (ii) to the
extent that such ISOs (or unexercised installments thereof) have been
converted into Non-Qualified Options pursuant to paragraph 16.
Employment shall be considered as continuing uninterrupted during any
bona fide leave of absence (such as those attributable to illness,
military obligations or governmental service); provided, that the period
of such leave does not exceed three months or, if longer, any period
during which such optionee's right to reemployment is guaranteed by
statute. A bona fide leave of absence with the written approval of the
Committee shall not be considered an interruption of employment under
the Plan, provided, that such written approval contractually obligates
the Company or any Related Corporation to continue the employment of the
optionee after the approved period of absence. ISOs granted under the
Plan shall not be affected by any change of employment within or among
the Company and Related Corporations, so long as the optionee continues
to be an employee of the Company or any Related Corporation. Nothing in
the Plan shall be deemed to give any grantee of any Stock Right the
right to be retained in employment or other service by the Company or
any Related Corporation for any period of time.
10. Death; Disability.
A. Death. If an ISO optionee ceases to be employed by the Company
and all Related Corporations by reason of his death, any ISO of
his may be exercised, to the extent of the number of shares with
respect to which he could have exercised it on the date of his
death, by his estate, personal representative or beneficiary who
has acquired the ISO by will or by the laws of descent and
distribution, at any time prior to the earlier of the specified
expiration date of the ISO or 180 days from the date of the
optionee's death or such longer period not in excess of one year
as the Committee shall determine.
B. Disability. If an ISO optionee ceases to be employed by the
Company and all Related Corporations by reason of his disability,
he shall have the right to exercise any ISO held by him on the
date of termination of employment, to the extent of the number of
shares with respect to which he could have exercised it on that
date, at any time prior to the earlier of the specified
7
<PAGE>
expiration date of the ISO or 180 days from the date of the
termination of the optionee's employment or such longer period
not in excess of one year as the Committee shall determine. For
the purposes of the Plan, the term "disability" shall mean
"permanent and total disability" as defined in Section 22(e)(3)
of the Code or successor statute.
11. Assignability. No Option shall be assignable or transferable by the
optionee except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined under the Code
or Title I of the Employee Retirement Income Security Act, or the rules
thereunder. The Option shall be exercisable during the lifetime of the
optionee only by such optionee or his guardian or legal representative.
Notwithstanding the foregoing, to the extent the instrument evidencing any
Non-Qualified Option so provides, and subject to the conditions that the
Committee may prescribe, an optionee may, upon providing written notice to
the President of the Company, elect to transfer the Options granted to such
optionee pursuant to such instrument, without consideration therefor. The
terms of such Option shall be binding upon any recipient of such Option.
12. Terms and Conditions of Options. Options shall be evidenced by instruments
(which need not be identical) in such forms as the Committee may from time
to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not
inconsistent with the Plan, including restrictions applicable to shares of
Common Stock issuable upon exercise of Options (including, without
limitation, rights of repurchase by the Company and, in the event of an
underwritten public offering of the Company's securities, restrictions on
any sale or distribution by the optionee of any of the Company's common
equity for a period of time as the underwriters in such public offering
shall determine). In granting any Non-Qualified Option, the Committee may
specify that such Non-Qualified Option shall be subject to the restrictions
set forth herein with respect to ISOs, or to such other termination,
cancellation and other provisions not inconsistent with the Plan as the
Committee may determine. The Committee may from time to time confer
authority and responsibility on one or more of its own members or one or
more officers of the Company to execute and deliver such instruments. The
proper officers of the Company are authorized and directed
8
<PAGE>
to take any and all action necessary or advisable from time to time to
carry out the terms of such instruments.
13. Adjustments. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to him hereunder shall be
adjusted as and to the extent hereinafter required, unless otherwise
specifically provided in the written agreement between the optionee and the
Company relating to such Option:
A. Stock Dividends and Stock Splits. If the shares of Common Stock
shall be subdivided or combined into a greater or smaller number
of shares or if the Company shall issue any shares of Common
Stock as a stock dividend on its outstanding Common Stock, the
number of shares of Common Stock deliverable upon the exercise of
Options shall be appropriately increased or decreased
proportionately and appropriate adjustments shall be made in the
purchase price per share to reflect such subdivision, combination
or stock dividend.
B. Consolidations or Mergers. If the Company is to be consolidated
with or acquired by another entity in a merger, sale of all or
substantially all of the Company's assets or otherwise (an
"Acquisition"), the committee or the board of directors of any
entity assuming the obligations of the Company hereunder (the
"Successor Board"), shall, as to outstanding Options, either (i)
make appropriate provision for the continuation of such Options
by substitution on an equitable basis for the shares then subject
to such Options the consideration payable with respect to the
outstanding shares of Common Stock in connection with the
Acquisition; (ii) upon written notice to the optionees, provide
that all Options must be exercised, to the extent then
exercisable (or in the discretion of the Committee or the
Successor Board, also provide that all unvested Options shall be,
or become at the time which the Committee shall determine,
immediately exercisable), within a specified number of days of
the date of such notice, at the end of which period the Options
shall terminate; or (iii) terminate all Options in exchange for a
cash payment or other consideration equal to the excess of the
fair market value of the shares subject to such
9
<PAGE>
Options (to the extent then exercisable, or in the discretion of the
Committee or the Successor Board, whether or not then exercisable) over
the exercise price thereof.
C. Recapitalization or Reorganization. In the event of a
recapitalization or reorganization of the Company (other than a
transaction described in subparagraph B above) pursuant to which
securities of the Company or of another corporation are issued
with respect to the outstanding shares of Common Stock, an
optionee upon exercising an Option shall be entitled to receive
for the purchase price paid upon such exercise, the securities he
would have received if he had exercised his Option immediately
prior to such recapitalization or reorganization.
D. Modification of ISOs. Notwithstanding the foregoing, any
adjustments made pursuant to subparagraphs A, B or C with respect
to ISOs shall be made only after the Committee, after consulting
with counsel for the Company, determines whether such adjustments
would constitute a "modification" of such ISOs (as that term is
defined in Section 424 of the Code) or would cause any adverse
tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would
constitute a modification of such ISOs, it may refrain from
making such adjustments.
E. Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, each Option will
terminate immediately prior to the consummation of such proposed
action or at such other time and subject to such other conditions
as shall be determined by the Committee.
F. Issuances of Securities. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to Options. No
adjustments shall be made for dividends paid in cash or in
property other than securities of the Company.
10
<PAGE>
G. Fractional Shares. No fractional shares shall be issued under
the Plan and the optionee shall receive from the Company cash in
lieu of such fractional shares.
H. Adjustments. Upon the happening of any of the events described
in subparagraphs A, B or C above, the class and aggregate number
of shares set forth in paragraph 4 hereof that are subject to
Stock Rights which previously have been or subsequently may be
granted under the Plan shall also be appropriately adjusted to
reflect the events described in such subparagraphs. If changes
in the capitalization of the Company shall occur other than those
referred to above in this Paragraph 13, the Committee shall make
such adjustments, if any, in the number of shares covered by each
Option and in the per share purchase price as the Committee in
its discretion may consider appropriate. The Committee or, if
applicable, the Successor Board, shall determine the specific
adjustments to be made under this paragraph 13 and its
determination shall be conclusive.
If any person or entity owning restricted Common Stock obtained by
exercise of a Stock Right made hereunder receives shares or securities or cash
in connection with a corporate transaction described in subparagraphs A, B or C
above as a result of owning such restricted Common Stock, such shares or
securities or cash shall be subject to all of the conditions and restrictions
applicable to the restricted Common Stock with respect to which such shares or
securities or cash were issued, unless otherwise determined by the Committee or
the Successor Board.
14. Means of Exercising Options. An Option (or any part or installment
thereof) shall be exercised by giving written notice to the Company at its
principal executive office or to the transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and
specify the number of shares as to which such Option is being exercised,
accompanied by full payment of the purchase price therefor either (a) in
United States dollars in cash or by check, (b) at the discretion of the
Committee, through delivery of shares of Common Stock having a fair market
value equal as of the date of the exercise to the cash exercise price of
the Option, (c) at the discretion of the Committee, by delivery of the
grantee's per-
11
<PAGE>
sonal recourse note bearing interest payable not less than annually at
no less than 100% of the lowest applicable Federal rate, as defined in
Section 1274(d) of the Code or (d) at the discretion of the Committee,
by any combination of (a), (b) or (c) above. If the Committee exercises
its discretion to permit payment of the exercise price of an Option by
means of the methods set forth in clauses (b), (c) or (d) of the
preceding sentence, such discretion shall be exercised in writing at the
time of the grant of the Option in question. In connection with any
payment pursuant to clause (c) above, the Committee may require the
optionee to concurrently execute and deliver to the Company a pledge
agreement in a form reasonably satisfactory to the Company, together
with a stock certificate or certificates representing shares of the
Company's Common Stock (having an aggregate fair market value equal as
of the date of exercise to at least the value of the principal amount of
the note), duly endorsed or accompanied by a stock power or powers duly
endorsed, to secure the optionee's obligations under such personal
recourse note. The holder of an Option shall not have the rights of a
shareholder with respect to the shares covered by his Option until the
date of issuance of a stock certificate to him for such shares. Except
as expressly provided above in paragraph 13 with respect to changes in
capitalization and stock dividends, no adjustment shall be made for
dividends or similar rights for which the record date is before the date
such stock certificate is issued.
15. Term and Amendment of Plan. The Plan was originally adopted by the Board
on January 5, 1995 and approved by the stockholders of the Company on
November 2, 1995. Certain amendments to the Plan were approved by the
Board on July 11, 1996 and September 5, 1996, and approved by the
stockholders of the Company on November 7, 1996. The Plan as currently in
effect was approved by the Board effective as of March 1, 1997. The Plan
shall expire at the end of the day on ten years from date of adoption
(except as to Stock Rights outstanding on that date). The Board may
terminate or amend the Plan in any respect at any time; provided, that no
such amendment or termination shall adversely affect any Plan participant's
rights under any Stock Right previously granted, without such participant's
written consent. If the scope of any amendment is such as to require
stockholder approval in order to comply with Section 162(m) of the Code or
any other law, regulation or stock exchange requirement, then such
amendment shall not be effective unless and until such stockholder approval
is obtained.
12
<PAGE>
16. Conversion of ISOs into Non-Qualified Options; Termination of ISOs. The
Committee, at the written request of any optionee, may in its discretion,
take such actions as may be necessary to convert such optionee's ISOs (or
any installments or portions of installments thereof) that have not been
exercised on the date of conversion into Non-Qualified Options at any time
prior to the expiration of such ISOs, regardless of whether the optionee is
an employee of the Company or a Related Corporation at the time of such
conversion. Such actions may include, but not be limited to, extending the
exercise period or reducing the exercise price of the appropriate
installments of such ISOs. At the time of such conversion, the Committee
(with the consent of the optionee) may impose such conditions on the
exercise of the resulting Non-Qualified Options as the Committee in its
discretion may determine; provided, that such conditions shall not be
inconsistent with this Plan. Nothing in the Plan shall be deemed to give
any optionee the right to have such optionee's ISOs converted into
Non-Qualified Options, and no such conversion shall occur until and unless
the Committee takes appropriate action. The Committee, with the consent of
the optionee, may also terminate any portion of any ISO that has not been
exercised at the time of such conversion.
17. Governmental Regulation. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
18. Tax Withholding. Upon the exercise of a Non-Qualified Option, the grant of
an Award or the making of a purchase of Common Stock for less than its fair
market value pursuant to an Award, the making of a Disqualifying
Disposition (as defined in paragraph 19) or the vesting of Restricted Stock
(as defined in paragraph 20), the Company, in accordance with Section
3402(a) of the Code, may require the optionee or Award recipient to pay
withholding taxes in respect of the amount that is considered compensation
required to be included in such person's gross income. The Committee, in
its discretion, may condition (i) the exercise of an Option, (ii) the grant
of an Award, (iii) the making of a purchase of Common Stock for less than
its fair market value pursuant to an Award or (iv) the vesting of
Restricted Stock on the grantee's payment of such withholding taxes. The
Committee shall have the sole discretion to determine the form in which
payment of such
13
<PAGE>
withholding taxes will be made (i.e., cash, securities or a combination
thereof).
19. Notice to Company of Disqualifying Disposition. Each employee who receives
an ISO must agree to notify the Company in writing immediately after the
employee makes a Disqualifying Disposition of any Common Stock acquired
pursuant to the exercise of an ISO. A Disqualifying Disposition is any
disposition (including any sale) of such Common Stock before the later of
(a) two years after the date the employee was granted the ISO or (b) one
year after the date the employee acquired Common Stock by exercising the
ISO. If the employee has died before such stock is sold, these holding
period requirements do not apply and no Disqualifying Disposition can occur
thereafter.
20. Provisions Related to Restricted Stock and Other Awards.
A. Awards of shares of Common Stock may be granted either alone, in
addition to or in tandem with other awards granted under the Plan
or cash awards made outside the Plan, and such shares may be
subject to repurchase by the Company upon such terms and
conditions as the Committee may determine (such shares subject to
such repurchase being referred to as "Restricted Stock"). The
Committee shall determine the eligible persons to whom, and the
time or times at which, Awards will be made, the number of shares
to be awarded, the price (if any) to be paid by the Award
recipient, in the case of Restricted Stock, the time or times
within which such shares of Restricted Stock may be subject to
forfeiture and all other terms and conditions of any such Award.
The Committee may condition an Award or the vesting of Restricted
Stock upon the attainment of specified performance goals or such
other factors as the Committee may determine in its sole
discretion. The terms and conditions of Awards need not be the
same for each recipient.
B. The prospective recipient of an Award shall not have any rights
with respect to such Award, unless and until such recipient has
executed an agreement evidencing the Award and has delivered a
fully executed copy thereof to the Company, and has otherwise
complied with the applicable terms and conditions of such Award.
14
<PAGE>
(i) The consideration for shares issued pursuant to an Award
shall be equal to or greater than their par value.
(ii) Awards must be accepted within a period of sixty (60) days
(or such shorter period as the Committee may specify
at grant) after the Award date, by executing an Award
agreement and paying whatever price (if any) is required
under the Award.
(iii) A stock certificate in respect of shares of Common
Stock which are the subject of an Award shall be issued
in the name of the participant receiving such Award,
and shall bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such
Award.
(iv) The Committee may require that the stock certificates
evidencing shares of Restricted Stock be held in custody by
the Company until the restrictions thereon shall have
lapsed, and that, as a condition of any Restricted Stock
Award, the participant shall have delivered a stock power,
endorsed in blank, relating to the shares of Restricted
Stock covered by such Award.
C. Awards of shares of Restricted Stock under the Plan shall be
subject to the following restrictions and conditions (in addition
to other restrictions and conditions set forth in the Award
agreement with respect to such shares not inconsistent with this
Plan which the Committee shall determine in its sole discretion):
(i) Subject to the provisions of the Plan and the Award
agreement, during a period set by the Committee commencing
with the date of such Award (the "Restricted Period"), the
participant shall not be permitted to sell, transfer,
pledge or assign shares of Restricted Stock issued pursuant
to an Award. The Committee, in its sole discretion, may
provide for the lapse of such restrictions in installments
and may accelerate or waive such restrictions in whole or
in part,
15
<PAGE>
based on service, performance or such other factors or
criteria as the Committee may determine, in its sole
discretion. The Award agreement may contain other
restrictions and conditions not inconsistent with the Plan
as the Committee shall deem appropriate, including without
limitation, rights of repurchase by the Company and, in the
event of an underwritten public offering of the Company's
securities, restrictions on any sale or distribution by the
Award recipient of any of the Company's common equity for a
period of time as the underwriters in such public offering
shall determine.
(ii) Except as provided herein, the recipient shall have, with
respect to shares of Restricted Stock issued pursuant to an
Award, all of the rights of a stockholder of the Company,
including the right to vote the shares, and the right to
receive any cash dividends. The Committee may, in its sole
discretion, at the time of the grant of an Award of
Restricted Stock, permit or require the payment of cash
dividends with respect to such Restricted Stock to be
deferred and, if the Committee so determines, reinvested,
in additional shares of Restricted Stock to the extent
shares are available under the Plan, or otherwise
reinvested. Stock dividends issued with respect to
Restricted Stock shall be treated as additional shares
of Restricted Stock that are subject to the same
restrictions and other terms and conditions that apply
to the shares with respect to which such dividends are
issued.
(iii) Subject to the applicable provisions of the Award
agreement, if and when the Restricted Period expires
without a prior forfeiture of the Restricted Stock
subject to such Restricted Period, certificates for an
appropriate number of unrestricted shares (without any
legend referred to in subparagraph (iii) of subsection
B of Section 20) shall be delivered to the participant
16
<PAGE>
promptly upon the surrender and cancellation of the
previously issued certificate(s) representing such
shares.
21. Governing Law; Construction. The validity and construction of the Plan and
the instruments evidencing Stock Rights shall be governed by the laws of
the Commonwealth of Massachusetts, or the laws of any jurisdiction in which
the Company or its successors in interest may be organized. In construing
this Plan, the singular shall include the plural and the masculine gender
shall include the feminine and neuter, unless the contest otherwise
requires.
17
<PAGE>
AMENDMENT NO. 1 TO
PRAECIS PHARMACEUTICALS INCORPORATED
AMENDED AND RESTATED 1995 STOCK PLAN
AMENDMENT NO. 1 dated as of January 8, 1998 to the PRAECIS
PHARMACEUTICALS INCORPORATED Amended and Restated 1995 Stock Plan (the "Plan").
Pursuant to certain resolutions adopted by the Board of Directors (the
"Board") of PRAECIS PHARMACEUTICALS INCORPORATED at a meeting of the Board held
on January 8, 1998, the Board amended the second sentence of paragraph 4 of the
Plan as follows: "The aggregate number of shares which may be issued pursuant
to the Plan is 3,750,000, subject to adjustment as provided in paragraph 13."
<PAGE>
Exhibit 10.2
PRAECIS PHARMACEUTICALS INCORPORATED
Executive Management Bonus Plan
(the "Bonus Plan")
Purpose: To establish a bonus program for the senior executives of
the Company which links performance oriented objectives (defined and
approved annually by the Board of Directors) to a variable
compensation award which is granted on an annual basis, as a means to
attract and retain senior level executives.
Eligible Participants: Participation in the Bonus Plan shall be
limited to the most senior level positions in the Company. The
positions eligible include the Chairman (assuming the Chairman is a
member of the Company's management), President, CEO, COO, CFO and
Executive Vice President. The Board (or a Compensation Committee if
one is established which administers the Bonus Plan) will have the
continuing right to review and recommend other positions for inclusion
in the Bonus Plan. The grant of awards will be in the sole discretion
of the Board (or Compensation Committee).
Participation Level: The targeted value of an award granted under the
Bonus Plan (an "Award") as a percent of annual base salary by position
is as follows (and shall be subject to modification as the Board of
Directors (or the Compensation Committee) shall determine):
<TABLE>
<CAPTION>
<S> <C>
Chairman and Chief Executive Officer 50%
President and Chief Operating Officer 30%
Chief Financial Officer and Executive
Vice President Levels 25%
</TABLE>
The foregoing targeted Award values as a percent of annual base salary
are based on the attainment of the performance related objectives
established at the start of each year.
Form of Award: A minimum of 30% of the total value of each Award
shall be in the form of stock options, which shall be deemed to have
an Award value equal to the exercise price of each such option
multiplied by the number of shares of common stock subject to such
option. The remaining 70% of the total value of each Award shall be
in the form of cash or stock options, to the extent elected by the
participant. Such election will be required to be made in each year
at such time as the Board of Directors (or the Compensation Committee)
determines, which in all cases shall be
<PAGE>
prior to the time an Award is granted in respect of such year. Stock
options awarded in accordance with the Bonus Plan will be granted
under the Company's Amended and Restated 1995 Stock Option Plan, will
be intended to be Incentive Stock Options (ISOs) to the extent
possible and will vest fully immediately upon grant.
<TABLE>
<CAPTION>
<S> <C> <C>
Example of a
Bonus Plan Award: Base Salary: $200,000
Participation Eligible: 50%
Current FMV per share: $10.00
Total value of Award: $100,000
First 30% awarded as Stock Options
($100,000 x .30)/$10.00 3,000 shares at $10.00
per share exercise price
Next 70% ($70,000) divided between
stock options and cash as the
participant elects (such election
to be made prior to the grants of
the Award at the time required by
the Board (or Compensation Committee))
Example:
Cash $35,000
Stock options ($35,000/$10.00) 3,500 shares at $10.00
per share exercise price
Summary of Award:
Cash Payment of $35,000
Stock options--Quantity; Exercise 6,500 shares
Price; Vesting $10.00 per share
Immediate
</TABLE>
Term: The first year of the Bonus Plan will be 1998; the Bonus Plan
will continue from year to year unless terminated by the Board of
Directors, which it may do at any time.
Administration; Amendment: The Bonus Plan will be administered by the
Board of Directors or, if established and delegated such authority, a
Compensation Committee, which in either case, shall have full power
and authority to interpret and make all
2
<PAGE>
decisions regarding the Bonus Plan, which decisions and interpretations
shall be final and binding on all participants. The Board of Directors
or such Committee, may amend the Bonus Plan in any manner at any time
without the consent of any participant.
3
<PAGE>
Exhibit 10.3
PRAECIS PHARMACEUTICALS INCORPORATED
EMPLOYEE STOCK PURCHASE PLAN
PRAECIS PHARMACEUTICALS INCORPORATED, a Delaware corporation (the
"Company"), establishes this Employee Stock Purchase Plan (the "Plan") so
that Eligible Employees (as defined herein), if any, may be granted options
to purchase Common Stock, par value $.01 per share, of the Company ("Common
Stock").
1. Purpose.
The Plan provides Eligible Employees an opportunity to acquire shares of
Common Stock under circumstances which enable them to obtain the income tax
benefits described in Section 423 of the Internal Revenue code of 1986, as
amended (the "Code"). The Plan is intended to provide employees an incentive
to continue to promote the Company's best interests and to enhance its
long-term performance.
2. Definitions.
Wherever used, the following words and phrases will have the meanings
stated below unless a different meaning is plainly required by the context:
"Affiliated Company" means any subsidiary corporation of the Company, as
defined in Section 424(f) of the Code.
"Applicable Grant Date" means for any Option the date on which such Option
was granted, which shall be a Semiannual Grant Date.
"Board" means the Board of Directors of the Company.
"Committee" means a committee appointed by the Board to which the Board may
(but shall not be required to) delegate its powers to administer the Plan.
"Compensation" means the total cash remuneration a Participant receives
during an Exercise Period as salary or wages, including overtime pay and
bonuses and excluding all other forms of remuneration.
"Disability" means permanent and total disability as defined in Section
22(e)(3) of the Code.
<PAGE>
"Effective Date" means January 4, 1999.
"Eligible Employee" means each person who, on an applicable Semiannual Grant
Date, is employed by the Company or an Affiliated Company and has been an
employee for six (6) or more months at that date. An employee will not be
eligible to participate during an Exercise Period if his or her customary
employment as of the first day of the period is either (i) less than 20 hours
per week or (ii) 5 months or less on a calendar year basis. No employee will
be eligible if he or she is an owner of 5% or more of the outstanding capital
stock of the Company or an Affiliated Company, as determined under Section
423(b)(3) of the Code.
"Exercise Date" means any date on which an Eligible Employee purchases Common
Stock pursuant to an Option under the Plan, which shall, with respect to each
Option, be the last day of the Exercise Period in which such Option is
granted.
"Exercise Period" means the approximate six-month period commencing on each
of January 4, 1999, July 5, 1999, January 3, 2000 and July 3, 2000 and ending
at 5 p.m. (Boston time) on each of July 2, 1999, December 31, 1999, June 30,
2000 and December 29, 2000, respectively. If the Plan is terminated, then the
Exercise Period in which it is terminated shall end on the date immediately
preceding the effective date of such termination.
"Fair Market Value Per Share of Common Stock" on the day of determination
shall mean the last sale price per share of Common Stock on such day reported
on the Nasdaq National Market as published in the Wall Street Journal or, if
no such sale is so reported, the average of the reported closing bid and
asked prices on such day in the over-the-counter market, as furnished by the
National Association of Securities Dealers Automated Quotation System, or, if
such price at the time is not available from such system, as furnished by any
similar system then engaged in the business of reporting such prices and
selected by the Board or, if there is no such system, as furnished by any
member of the National Association of Securities Dealers, selected by the
Board. If the Common Stock is neither reported on the Nasdaq National Market
nor traded on the over-the-counter market, fair market value shall be such
value as the Board, in good faith, determines. Notwithstanding any provision
of the Plan to the contrary, no determination made with respect to the Fair
Market Value Per Share of Common Stock subject to an Option shall be
inconsistent with Section 423 of the Code.
2
<PAGE>
"Initial Notice Period" means the period beginning on the Effective Date and
ending on the 15th day thereafter.
"Notice Period" means that period beginning 30 days prior to the applicable
Semiannual Grant Date (other than the first Semiannual Grant Date) and ending
on the 15th day prior to said date.
"Option" means an option granted hereunder which will entitle an Eligible
Employee to purchase shares of Common Stock.
"Option Price" means the lower of: (1) 85% of the Fair Market Value Per Share
of Common Stock as of the Applicable Grant Date on which the Option being
exercised was granted or (2) 85% of the Fair Market Value Per Share of Common
Stock as of the Exercise Date on which such Option is exercised.
"Participant" means an Eligible employee who has elected to participate in
the Plan during the period between such election and the termination of such
Eligible Employee's participation in the Plan.
"Retirement" means a termination of a Participant's employment with the
Company on or after the first day of the month of a Participant's 65th
birthday.
"Semiannual Grant Date" means each of January 4, 1999, July 5, 1999, January
3, 2000 and July 3, 2000.
"Withholding Account" means a bookkeeping record of all amounts withheld
during an Exercise Period for a specific Eligible Employee, which are
available for the exercise of an Option granted hereunder. Specific
segregation of funds is not required.
3. Administration.
The Plan shall be administered by the Board, which, to the extent it
shall determine, may delegate its powers with respect to the administration
of the Plan (except its powers to terminate or amend the Plan) to the
Committee. If the Board chooses to appoint a Committee, references
hereinafter to the Board shall be deemed to refer to the Committee. Subject
to the express provisions of the Plan, the Board may interpret the Plan,
prescribe, amend and rescind rules and regulations relating to it, determine
the terms and provisions of the Options granted hereunder and make all other
determinations necessary or advisable for the administration of the Plan;
provided, however, that all such interpretations, rules, determinations,
3
<PAGE>
terms and conditions shall be made and prescribed in the context of
preserving the tax treatment of the Options under this Plan granted to
Eligible Employees subject to United States federal income taxation and
preserving the tax treatment of the Plan itself under Section 423 of the
Code. The determinations of the Board on all matters regarding the Plan shall
be conclusive.
4. Maximum Shares to be Granted under the Plan.
The aggregate number of shares of Common Stock available for issuance
upon the exercise of Options granted pursuant to Section 5 shall be Fifteen
Thousand (15,000) as of January 4, 1999, with an additional Fifteen Thousand
(15,000) shares available as of each of July 5, 1999, January 3, 2000 and
July 3, 2000, subject to adjustment as set forth below or pursuant to
Section 9. Shares of Common Stock delivered pursuant to the Plan will be
authorized but unissued shares or treasury shares. In the event that any
Option granted pursuant to Section 5 expires or is terminated, surrendered or
cancelled without being exercised, in whole or in part, for any reason, the
number of shares of Common Stock theretofore subject to such Option shall
again be available as shares underlying Options which may be granted for
grant at the next Semiannual Grant Date pursuant to Section 5 and shall
increase the aggregate number of shares of Common Stock underlying Options
available for grant during the succeeding Exercise Period.
5 Eligibility for Participation and Granting of Options.
(a) Each employee of the company who enrolls in the Plan and who is an
Eligible Employee on an applicable Semiannual Grant Date is granted without
any further action by the Board an Option hereunder which will entitle him or
her to purchase, on the immediately following Exercise Date at the Option
Price per share for Options granted on such date, shares of Common Stock
equal in value up to ten percent (10%) of the Eligible Employee's
Compensation during the Exercise Period divided by such applicable Option
Price per share of Common Stock.
(b) If the number of shares of Common Stock for which Options are
granted pursuant to Section 5(a) exceeds the applicable number provided for
in Section 4, then the Options granted under Section 5(a) to all Eligible
Employees shall, in a nondiscriminatory manner, be reduced on a pro rata
basis in a manner which the Board determines to be consistent with Section
423 of the Code.
4
<PAGE>
(c) No Eligible Employee shall be granted an Option under the Plan which
permits his or her rights to purchase stock under all employee stock purchase
plans (as defined in Section 423 of the Code) of the company and any
Affiliated Company to accrue at a rate which exceeds $25,000 of fair market
value of such stock (determined at the time of the grant of such Option) for
each calendar year in which such Option is outstanding at any time. Any
Option granted under the Plan shall be deemed to be modified to the extent
necessary to satisfy this Section 5(c).
6. Terms of Options.
(a) Each Option shall automatically be exercised on the last day of the
Exercise Period for such Option, using the funds which have accrued in a
Participant's Withholding Account as of such day, unless the Participant
withdraws from the Plan or is deemed to withdraw during the Exercise Period.
An Option granted hereunder may be exercised only through the use of the
funds which have accrued in a Participant's Withholding Account. Any Option,
to the extent unexercised on the Exercise Date, shall expire on the Exercise
Date.
(b) As soon as reasonably possible following exercise in accordance with
Section 6(a) and upon the Participant's written request, a certificate
representing the whole number of shares of Common Stock purchased, registered
in the name of the Participant, shall be delivered to the Participant or to
such other person designated by the Participant, including, without
limitation, the Participant's broker.
(c) A Participant shall be deemed to have withdrawn from participation
in the Plan upon the occurrence of any of the following events:
(i) Voluntary Discontinuance while Employed. A Participant may
discontinue his or her election and withdraw from the Plan by giving written
notice to the Company no later than the last day of the Notice Period within
that Exercise Period, specifying that the Participant is so withdrawing from
the Plan; provided, however, that a Participant who shall have discontinued
his or her election to participate and withdrawn from the Plan may not
participate in the Plan during the next following Exercise Period.
(ii) Termination of Employment. Unless employment has terminated
due to Retirement, Disability or death, a Participant will be deemed to have
discontinued
5
<PAGE>
participation on the first day of the Exercise Period in which such
Participant's termination of employment occurs and amounts withheld from
compensation during the Exercise Period will be refunded.
(iii) Retirement. In the event a Participant's employment terminates
because of Retirement during the first three months of an Exercise Period,
the Participant will be deemed to have discontinued participation on the
first day of the Exercise Period in which Retirement occurs and amounts
withheld from Compensation during the Exercise Period will be refunded. If
Retirement occurs during the last three months of the Exercise Period, the
Participant will continue to participate through the balance of the Exercise
Period in which Retirement occurs (without further withholding) unless he or
she elects a voluntary discontinuance within the Notice Period for that
Exercise Period.
(iv) Death or Disability. In the event the employment of the
Participant by the Company or an Affiliated Company terminates as a result of
the Participant's Disability or death, the Participant will be deemed to
participate (without further withholding) through the balance of the Exercise
Period in which death or Disability occurs, unless he or she (or the
executor, administrator or representative, as the case may be) elects a
voluntary discontinuance within the Notice Period for that Exercise Period.
(v) Levy or Attachment. The filing with or levying upon the
Company or the custodian of any judgment, attachment, garnishee or other
court order affecting the Participant's account under the Plan will
automatically terminate such Participant's participation in the Plan.
(vi) Plan Termination/Expiration. Subject to Section 12(b),
termination of the Plan will terminate the participation of all Participants
in the Plan.
(d) A Participant's employment shall not be deemed terminated by reason
of a transfer to another employer which is related to the Company within the
meaning of Sections 424(e) or (f) of the Code. A Participant who has elected
participation under the Plan who is absent from work with the Company or with
an Affiliated Company because of temporary disability (any disability other
than a permanent and total Disability) or who is on leave of absence for a
period of less than 90 days shall not, during the period of any such absence,
be deemed, by virtue of such absence alone, to have terminated employment.
6
<PAGE>
In the case of a leave of absence which is longer than 90 days, a
Participant will not be deemed to have terminated employment until the later
of the 91st day of such leave or, if later, such date as the Participant's
reemployment rights are not protected by contract or law.
(e) Upon the discontinuance of an election and withdrawal from the Plan
by a Participant, all withheld amounts in such Participant Withholding
Account shall be transferred to such Participant within thirty (30) days of
such discontinuance and withdrawal, except to the extent such withheld
amounts are applied to the exercise of an Option as provided above. In no
event shall any amounts be withheld from a Participant's Compensation for
allocation to such Participant's Withholding Account after the date such
Participant's employment shall cease.
(f) In no event may any discontinuance of a Participant's election and
withdrawal from the Plan be in respect to a portion rather than all of such
Participant's Withholding Account on such date.
7. Payment for Common Stock Through Withholding.
(a) Employee Contributions
Each Eligible Employee may elect to participate in the Plan by filing an
enrollment application and payroll withholding form with his or her
employer's payroll department during the Initial Notice Period or during a
Notice Period, which election shall be effective in the case of an election
filed during the Initial Notice Period, for the Exercise Period commencing on
the Effective Date and all subsequent Exercise Periods, or, in the case of an
election filed during a Notice Period, for the next Exercise Period and for
all subsequent Exercise Periods, until, in any case, such Participant's
participation in the Plan terminates. Each Eligible Employee who elects to
participate shall specify the amount of his or her contributions to be made
by payroll deduction by specifying a whole percentage from 1% to 10% of such
Participant's Compensation payable for each payroll period.
No interest shall accrue or be payable to any Participant in the Plan
with respect to any sums withheld at the Participant's election, whether
such sums be applied to purchase Common Stock, or are returned to the
Participant.
Payroll deductions may be increased by a Participant only during a
subsequent Notice Period, but may be decreased, upon the Participant's
written election, effective
7
<PAGE>
as of the first payroll period for which it is administratively
practical to put the decrease into effect.
(b) Application of Payroll Contributions
The Company shall maintain a separate account into which it shall
deposit all amounts withheld for payment of shares of Common Stock and shall
maintain sufficient records reflecting each Participant's Withholding Account.
On the last day of each Exercise Period all amounts in a Participant's
Withholding Account shall be paid over to the Company in payment of the
Option Price for the number of whole shares of Common Stock which can be
purchased on such date with such withheld total amount, unless otherwise
directed in accordance with Section 6 above. In lieu of fractional shares,
unapplied cash shall be carried forward to the next Exercise Period unless
the Participant requests a cash payment.
8. Transferability of Options and Common Stock.
(a) No Option may be transferred, assigned, pledged or hypothecated
(whether by operation of law or otherwise), except as provided by will or
the applicable laws of descent or distribution, and no Option shall be
subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of an
Option, or levy of attachment or similar process upon the Option not
specifically permitted herein shall be null and void and without effect. An
Option may be exercised only by the Eligible Employee during his or her
lifetime, or by his or her legal representative if permitted by Section 423
of the Code, or pursuant to Section 6 by his or her estate or the person who
acquires the right to exercise such Option upon his or her death by bequest or
inheritance.
(b) Participants in the Plan who wish to avail themselves of the
favorable tax benefits of Section 423 of the Code may not transfer or
otherwise dispose of shares of Common Stock acquired by them or on their
behalf under the Plan (other than in the case of a Participant's death) until
after the later of one year from the date of acquisition of said shares and
two years after the Applicable Grant Date of the Option pursuant to which
said shares of Common Stock were acquired.
(c) Each Eligible Employee who receives shares of Common Stock pursuant
to the Plan agrees, by electing to
8
<PAGE>
participate, to notify the Company, in writing, immediately after such
Participant makes a Disqualifying Disposition of any shares acquired pursuant
to the exercise of an Option under the Plan. A Disqualifying Disposition is
any disposition (including any sale) of such shares before the later of two
years after the Applicable Grant Date for said Option or one year after the
receipt of shares pursuant to the exercise of said Option. If the Participant
has died before such stock is sold, these holding period requirements do not
apply and no Disqualifying Disposition can occur thereafter.
9. Adjustment Provisions.
The aggregate number of shares of Common Stock with respect to which
Options may be granted, the aggregate number of shares of Common Stock
subject to each outstanding Option and the Option Price per share of each
Option shall all be appropriately adjusted if any of the following occur
after the Plan's adoption by the Board: any increase or decrease in the
number of shares of issued Common Stock resulting from a subdivision or
consolidation of shares, whether through reorganization, recapitalization,
stock split, stock distribution or combination of shares, or the payment of a
share dividend or other increase or decrease in the number of such shares
outstanding effected without receipt of consideration by the Company.
Adjustments shall be made according to the sole discretion of the Board, and
its decision shall be binding and conclusive.
10. Dissolution, Merger and Consolidation
Upon the dissolution or liquidation of the Company, or upon a merger or
consolidation of the Company in which the Company is not the surviving
corporation, the holder of each Option then outstanding under the Plan will
thereafter be entitled to receive at the next Exercise Date upon the exercise
of such Option for each share of Common Stock as to which such Option shall
be exercised, as nearly as reasonably may be determined, the cash, securities
and/or property which a holder of one share of the Common Stock was entitled
to receive upon and at the time of such transaction. The Board shall take
such steps in connection with such transactions as the Board shall deem
necessary to assure that the provisions of this Section 10 shall thereafter
be applicable, as nearly as reasonably may be determined, in relation to the
said cash, securities and/or property as to which such holder of such Option
might thereafter be entitled to receive.
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11. Stockholder Approval.
The Plan is subject to approval by the holders of a majority of the
outstanding shares of Common Stock (and the holders of any other class of
stock to the extent required by law, agreement or Section 423 of the Code)
within 12 months before or after the date of adoption of the Plan by the
Board. The Plan shall be null and void and of no effect if the foregoing
condition is not fulfilled.
12. Miscellaneous
(a) Legal and Other Requirements. The obligations of the Company to
sell and and deliver Common Stock under the Plan shall be subject to all
applicable laws, regulations, rules and approvals, including, but not by way
of limitation, the effectiveness of a registration statement under the
Securities Act of 1933, as amended, if deemed necessary or appropriate by
the Company. Certificates for shares of Common Stock issued hereunder may be
legended to such effect as the Board shall deem appropriate.
(b) Termination and Amendment of Plan. Except as provided in the
following sentence, the Plan may be terminated or amended by the stockholders
of the Company, by the Board, or by the Committee, including amendment of the
Plan from time to time to designate corporations whose employees may be
offered options under the Plan from among a group consisting of the Company
and any corporation which is or becomes its Affiliate. Amendments effecting:
(1) any increase in the aggregate number of shares of Common Stock which may
be issued under the Plan (other than an increase merely reflecting a change
in capitalization such as a stock dividend or stock split) or (2) changing
the designation of corporations whose employees may be offered options under
the plan, except designations described in the preceding sentence, must be
approved by the stockholders of the Company within twelve (12) months after
such amendment is adopted by the Board or by the Committee or such amendment
is void ab initio. No amendment to the Plan shall affect any Options
theretofore granted or any Common Stock theretofore acquired by a
Participant, unless such amendment shall expressly so provide and unless any
Participant to whom an Option has been granted who would be adversely
affected by such amendment consents in writing thereto. Unless otherwise
determined by the Board, no Options will be granted under the Plan after
July 3, 2000. The Plan shall expire on December 29,
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2000, unless extended or earlier terminated in accordance with the terms
hereof.
(c) Withholding Taxes. Upon a Disqualifying Disposition, within the
meaning of Section 8(d), of any shares of Common Stock received pursuant to
the exercise of any Option under the Plan, the Company shall have the right
to require the Participant to remit to the Company an amount sufficient to
satisfy all federal, state and local requirements as to income tax
withholding and employee contributions to employment taxes or, alternatively,
in the Board's sole discretion, the Company may withhold all such amounts
from other cash compensation then being paid to the Participant by the
Company.
(d) Right to Terminate Employment. Nothing in the Plan or any
agreement entered into pursuant to the Plan shall confer upon any Eligible
Employee or other optionee the right to continue in the employment of the
Company or any Affiliated Company or affect any right which the Company or
any Affiliated Company may have to terminate the employment of such Eligible
Employee or other optionee.
(e) Rights as a Stockholder. A Participant shall not have any right as
a stockholder of the Company with respect to shares of Common Stock issuable
pursuant to the exercise of an Option hereunder, unless and until a
certificate or certificates for such shares of Common Stock are issued to him
or her or the Company reflects the Participant's ownership in its stock
ledger or other appropriate record of Common Stock ownership.
(f) Leaves of Absence. The Board shall be entitled to make such rules,
regulations and determinations as it deems appropriate under the Plan in
respect of any leave of absence taken by any Eligible Employee, provided such
rules are consistent with Section 423 of the Code.
(g) Notices. Every direction, revocation or notice authorized or
required by the Plan shall be deemed delivered to the Company (1) on the date
it is personally delivered to the Treasurer of the Company (or such other
person as may be designated by the Company from time to time with notice
given to each Participant) at its principal executive offices or (2) three
business days after it is sent by registered or certified mail, postage
prepaid, addressed to the Treasurer of the Company (or such other person as
may be designated by the Company from time to time with notice given to each
Participant) at such offices or (3) on the date on which delivery was
guaranteed by a third party business (such as Federal
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Express and including the postage service); and shall be deemed delivered to
a Participant (A) on the date it is personally delivered to him or her or
(B) three business days after it is sent by registered or certified mail,
postage prepaid, addressed to him or her at the last address shown for him or
her on the records of the Company or of any Affiliate or (C) on the date on
which delivery was guaranteed by a third party business (such as Federal
Express and including the postal service), provided that the documents were
sent to him or her at the last address shown for him or her on the records of
the Company or of any Affiliate.
(h) All Eligible Employees shall have the same rights and privileges
under the Plan, except that the amount of Common Stock which may be purchased
under Options granted under the Plan shall bear a uniform relationship to the
Compensation of Eligible Employees. All rules and determinations of the Board
in the administration of the Plan shall be uniformly and consistently applied
to all persons in similar circumstances.
(i) Applicable Law. All questions pertaining to the validity,
construction and administration of the Plan and Options granted hereunder
shall be determined in conformity with the laws of the Commonwealth of
Massachusetts, to the extent not inconsistent with Section 423 of the Code
and the regulations thereunder.
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Exhibit 10.4
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT dated as of
April 30, 1998 (the "Agreement") by and among PRAECIS PHARMACEUTICALS
INCORPORATED, a Delaware corporation (the "Company"), Malcolm L. Gefter ("Dr.
Gefter"), Ethan R. Signer ("Dr. Signer"), A. Donny Strosberg ("Dr.
Strosberg"), the other current Stockholders (as defined herein) as set forth
on Schedule 1 attached hereto (the "Existing Investors"), the additional
parties as set forth on Schedule 2 attached hereto (the "New Investors"), and
any additional Persons (as defined herein) who shall become parties to this
Agreement as Stockholders in accordance with the terms hereof.
WHEREAS, the Company, Dr. Gefter, Dr. Signer, Dr. Strosberg
and certain of the Existing Investors were parties to a Stockholders
Agreement dated as of December 23, 1993, as supplemented as of March 3, 1994
and amended as of December 2, 1994 (the "Original Stockholders Agreement");
and
WHEREAS, pursuant to Section 9.2 of the Original
Stockholders Agreement, the Original Stockholders Agreement was amended by
the Amended Stockholders Agreement, dated as of April 4, 1996, as amended by
Amendment No. 1 thereto dated as of February 13, 1997 and Amendment No. 2
thereto dated as of June 9, 1997 (such agreement as so amended, the "Amended
Stockholders Agreement"); and
WHEREAS, pursuant to Section 9.2 of the Amended
Stockholders Agreement, the Amended Stockholders Agreement may be amended by
a written instrument duly executed by the Company and the holders of a
majority of the then outstanding shares of the Company's common stock, par
value $.01 per share (the "Common Stock"), and 66 2/3% of the shares of
Common Stock issued or issuable upon conversion of the Company's Series A
Convertible Preferred Stock, par value $.01 per share (the "Series A
Preferred Stock"), Series C Convertible Preferred Stock, par value $.01 per
share (the "Series C Preferred Stock"), and Series D Convertible Preferred
Stock, par value $.01 per share (the "Series D Preferred Stock"); and
WHEREAS, the Company and certain Investors (as defined
herein) have entered into a Series E Preferred Stock Purchase Agreement dated
March 27, 1998 whereby, upon the terms and subject to the conditions set
forth therein, such
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Investors have agreed to purchase an aggregate of 900,478 shares (the
"Preferred Shares") of the Company's Series E Convertible Preferred Stock,
par value $.01 per share (the "Series E Preferred Stock"); and
WHEREAS, the parties hereto, representing a majority of the
out standing shares of Common Stock and 66 2/3% of the outstanding shares of
Common Stock issued or issuable upon conversion of the Series A Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock, desire to amend
and restate, as of the date hereof, the Amended Stockholders Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the par ties hereto, intending to be legally bound, hereby
agree to amend and restate the Amended Stockholders Agreement to read in its
entirety as set forth herein:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have
the following respective meanings:
Affiliate shall mean, with respect to any person, any other
person controlling, controlled by or under common control with such person.
Board shall mean the Board of Directors of the Company.
Canaan shall mean Canaan Ventures II Offshore C.V., a
Netherland Antilles limited partnership and Canaan Ventures II Limited
Partnership, a Delaware limited partnership.
Certificate of Incorporation shall mean the Amended and
Restated Certificate of Incorporation of the Company, as filed with the
Secretary of State of the State of Delaware.
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Chase shall mean Chase Venture Capital Associates, L.P., a
California limited partnership, or one or more other funds affiliated with
Chase Capital Partners, a New York general partnership.
Commission shall mean the United States Securities and
Exchange Commission and any successor federal commission or agency having
similar powers.
Company Stock shall mean the Common Stock, the Preferred
Stock and any other common or preferred stock of the Company.
Effective Date shall mean the date of filing of the
Certificate of Incorporation with the Secretary of State of the State of
Delaware.
Equity Fund shall mean Whitney 1990 Equity Fund, L.P., a
Delaware limited partnership.
Exchange Act shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder.
Founders shall mean Dr. Gefter, Dr. Signer and Dr.
Strosberg.
Greylock shall mean Greylock Limited Partnership, a
Delaware limited partnership.
Highland shall mean Highland Capital Partners II Limited
Partner ship, a Delaware limited partnership.
Independent Director shall mean a director of the Company
who is not (apart from such directorship) an officer, Affiliate, employee,
principal stockholder, consultant or partner of the Company, of any Affiliate
of the Company, of any Stockholder or of any entity that was dependent upon
the Company or any Stock holder for more than 5% of its revenues or earnings
in its most recent fiscal year.
Initial Public Offering shall mean when the Company shall
consummate a public offering of shares of Common Stock registered under the
Securities Act which yields aggregate gross proceeds to the Company of not
less than $20,000,000 and which is at a price per share of Common Stock equal
to or greater than the minimum price per share (in each case, the "Minimum
Per Share Offering Price") for each applicable time period set forth below.
The Minimum Per Share
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Offering Price (which shall be subject to appropriate adjustment as set forth
in Section 4(f) of ARTICLE FIFTH of the Certificate of Incorporation) (i) for
the period commencing upon the Effective Date and ending at the close of
business on the first anniversary of the Effective Date shall be $16.80 per
share of Common Stock; (ii) for the period commencing on the day after the
first anniversary of the Effective Date and ending at the close of business
on the second anniversary of the Effective Date shall be $18.90 per share of
Common Stock; and (iii) at any time after the close of business on the second
anniversary of the Effective Date shall be $21.00 per share of Common Stock.
Notwithstanding the foregoing, in the event that the Company shall file with
the Securities and Exchange Commission a registration statement with respect
to a public offering of Common Stock on or before the close of business on
the second anniversary of the Effective Date, the Minimum Per Share Offering
Price applicable at the time of such filing of such registration statement
(the "Initial Filing Date") shall be the Minimum Per Share Offering Price for
the purposes of this definition of Initial Public Offering unless such public
offering is not consummated within 150 calendar days after the Initial
Filing Date.
Investors shall mean the Existing Investors, the New Investors
and their respective permitted transferees or assignees hereunder.
MIT shall mean Massachusetts Institute of Technology.
Person shall mean a corporation, association, partnership,
joint venture, organization, business, individual, trust or any other entity
or organization, including a government or any subdivision or agency thereof.
Preferred Stock shall mean the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock.
Registrable Securities shall mean (i) shares of Common
Stock issued or issuable, upon conversion of any Preferred Stock, (ii) the
shares of Common Stock owned by MIT and the Founders and (iii) any equity
securities issued in exchange or substitution for, or in payment of dividends
on, any such shares referred to in clauses (i) and (ii) of this definition.
Any particular Registrable Securities shall cease to be Registrable
Securities when either (i) 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 under such registration
statement, (ii) they shall have been transferred pursuant to Rule 144, (iii)
they shall have been otherwise
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transferred or disposed of, and new certificates therefor not bearing a
legend restricting further transfer thereof under the Securities Act shall
have been delivered by the Company and subsequent transfer or disposition
thereof shall not require their registration or qualification under the
Securities Act or any similar state law then in force, or (iv) they shall
have ceased to be outstanding.
Registration Expenses shall mean any and all out-of-pocket
expenses incident to the Company's performance of or compliance with Article
6 hereof, including, without limitation, all Commission, stock exchange or
National Association of Securities Dealers, Inc. ("NASD") registration and
filing fees, all fees and expenses of complying with securities and blue sky
laws (including the reasonable fees and disbursements of underwriters'
counsel in connection with blue sky qualification and NASD filings), all fees
and expenses of the transfer agent and registrar for Company Stock, all
printing expenses, the fees and disbursements of counsel for the Company and
of its independent public accountants, including the expenses of any special
audits and/or "cold comfort" letters required by or incident to such
performance and compliance, and the reasonable fees and disbursements of one
counsel (other than house counsel) retained by the holders of Registrable
Securities being registered to represent such group of holders (which counsel
shall be satisfactory to the holders of a majority of the shares of
Registrable Securities being registered), but excluding (a) any allocation of
the personnel or other general overhead expenses of the Company or other
expenses for the preparation of financial statements or other data normally
prepared by the Company in the ordinary course of its business, which shall
be borne by the Company in all cases, and (b) underwriting discounts and
commissions and applicable transfer and documentary stamp taxes, if any,
which shall be borne by the seller of the Registrable Securities in all cases.
Related Party shall mean:
(i) In the case of an individual, (A) such person,
(B) such person's spouse, (C) the family members (i.e., spouse,
parents, parents-in-law, issue, nephews, nieces, brothers,
brothers-in-law, sisters, sisters-in-law, children-in-law and
grandchildren-in-law) of such person and such person's spouse, (D) a
trust for the benefit of any of the foregoing, (E) the estate or legal
representatives of such person and (F) any corporation or partnership
con trolled by such person;
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(ii) In the case of a partnership, (A) such
partnership and any of its partners (limited or general), (B) any
retired partners of such partnership, (C) the estates or legal
representatives of any such limited or general partners or retired
partners, (D) any corporation or other business organization to which
such partnership shall sell all or substantially all of its assets or
with which it shall be merged and (E) any Affiliate of such
partnership;
(iii) In the case of a corporation, (A) any such
corporation and any of its subsidiaries, (B) any stockholder of such
corporation, (C) any corporation or other business organization to
which such corporation shall sell all or substantially all of its
assets or with which it shall be merged and (D) any Affiliate of such
corporation; and
(iv) In the case of the Series D Purchaser (as
defined herein), in addition to the above, one or more of George Soros
or Soros Fund Management LLC or affiliates thereof, and any person or
entity for which any of George Soros, Soros Fund Management LLC or
affiliates thereof act as investment advisor or investment manager.
Securities Act shall mean the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
Series A Preferred Stock shall have the meaning specified
in the third preamble paragraph hereof.
Series B Preferred Stock shall mean the Company's Series B
Convertible Preferred Stock, par value $.01 per share.
Series C Preferred Stock shall have the meaning specified
in the third preamble paragraph hereof.
Series D Preferred Stock shall have the meaning specified
in the third preamble paragraph hereof.
Series D Purchaser shall have the meaning specified in
Section 5.3 hereof.
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Series E Preferred Stock shall have the meaning specified
in the fourth preamble paragraph hereof.
Stockholder shall mean any of the Investors and the
Founders, as long as they hold any Common Stock, Preferred Stock or other
authorized and validly issued shares of any series of the Company's common or
preferred stock (including any permitted transferees or assignees hereunder
of any such holder).
Sutter Hill shall mean Sutter Hill Ventures, a California
limited partnership.
Underwritten Offering shall have the meaning specified in
Section 6.1.
ARTICLE 2
TRANSFERS
Section 2.1 Transfers. No Stockholder shall, directly or
indirectly, sell, assign, transfer, hypothecate, pledge, mortgage, encumber
or dispose of (each, a "Transfer") any shares of Company Stock except as
permitted by Section 2.2 hereof or Article 3 hereof.
Section 2.2 Permitted Transfers. (a) Any Stockholder may
Transfer any shares of Company Stock owned by such Stockholder to any of such
Stock holder's Related Parties.
(b) No Transfers of Company Stock shall be made
pursuant to the foregoing Section 2.2(a) unless, prior to the consummation of
any such Transfer, each such transferring Stockholder shall have caused the
transferee to execute and deliver to the Company a Stock Transfer Agreement
in the form attached hereto as Exhibit A.
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ARTICLE 3
COMPANY AND STOCKHOLDER RIGHT OF FIRST REFUSAL
Section 3.1 Right of First Refusal. If at any time any
Stockholder de sires to Transfer any shares of Company Stock to any Person
other than as permitted by Section 2.2 hereof and other than in connection
with a Sale of the Corporation (as defined in the Certificate of
Incorporation), such Stockholder (the "Offering Stockholder") will notify the
Company in writing (the "Notification") of such Stockholder's intention to do
so, specifying the number of shares of Company Stock proposed to be
transferred (the "Offered Shares"), the name of the Person or Persons to whom
such Stockholder proposes to Transfer the Offered Shares (or if no particular
purchaser is identified, then the general class of persons to whom such Stock
holder proposes to Transfer the Offered Shares), and a price per share which
shall be the minimum price at which such Stockholder proposes to effect the
Transfer (the "Minimum Price"). The Company shall promptly forward a copy of
the Notification to all other Stockholders. The Notification shall contain an
affirmation by the Offering Stockholder that such Stockholder has a
reasonable expectation of being able to effect the proposed Transfer to such
Person or Persons (or class of Persons) at the Minimum Price, and shall
recite the basis for such expectation. The Notification shall offer to sell
to the Company and, to the extent provided in this Article 3, the other
Stockholders, all of the Offered Shares, free and clear of any liens or
encumbrances in favor of third Persons, at the Minimum Price and on such
other terms and conditions, if any, not less favorable to the Company and the
other Stockholders than those proposed to be offered to such other Person or
Persons (or class of Persons). In the event all or any part of the
consideration for the proposed Transfer shall consist of other than cash, the
Minimum Price shall mean the fair value of such consideration, including the
fair value of any promissory notes of the prospective purchaser (taking into
account, among other matters, the terms of the notes and the credit
worthiness of the prospective purchaser).
Section 3.2 Notification by Company and Stockholders. The
Company and each Stockholder (other than the Offering Stockholder) shall have
the right and option (subject to the provisions of Section 3.3 hereof), for a
period of 30 days after delivery of the Notification, (i) in the case of the
Company, to elect to purchase all or any part of the Offered Shares at the
Minimum Price and on the terms and conditions stated therein and (ii) in the
case of each such Stockholder, to elect to purchase at the Minimum Price and
on the terms and conditions stated therein (A) up to its Proportionate
Percentage (as defined below) of any Offered Shares which the
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Company does not elect to purchase ("Remaining Shares") and (B) if such Stock
holder elects to purchase its full Proportionate Percentage, all or any part
of any other Stockholders' Proportionate Percentages of any Remaining Shares
to the extent that such other Stockholders do not elect to purchase their
full Proportionate Percentages of the Remaining Shares. "Proportionate
Percentage" shall mean as to each Stock holder, the percentage figure which
expresses the ratio between the number of shares of outstanding Company Stock
(on an as-converted basis) owned by such Stock holder and the aggregate
number of such shares of Company Stock (on an as-converted basis) owned by
all Stockholders with respect to which the calculation is being made. For
purposes of computing a Stockholder's Proportionate Percentage, each
Stockholder which is a partnership shall be deemed to be the owner of all
shares of Company Stock which have been transferred to and are held by such
Stockholder's Related Parties and the Related Parties of such Related
Parties. Such elections by the Company and such other Stockholders shall be
made by delivering a written notice to the Offering Stockholder within the
aforesaid 30-day period. The Company shall be entitled to purchase all
Offered Shares which it elects to purchase. Each such Stockholder shall be
entitled to purchase up to (i) its Proportionate Percentage of any Remaining
Shares and (ii) the Remaining Shares which such Stockholder elects to
purchase pursuant to clause (ii)(B) of the first sentence of this Section
3.2. If the Stockholders who elect to purchase their full Proportionate
Percentages of any Remaining Shares also elect to purchase in the aggregate
more than 100% of any Remaining Shares referred to in clause (ii)(B) of the
first sentence of this Section 3.2, such Remaining Shares will be sold to
such Stockholders in accordance with their respective Proportionate
Percentages; provided, however, that no such Stockholder may purchase a
greater number of such Remaining Shares than the amount which such
Stockholder elects to purchase pursuant to clause (ii)(B) of the first
sentence of this Section 3.2. Sales of Offered Shares under the terms of this
Section 3.2 hereof shall be made at the offices of the Company on a mutually
satisfactory business day within 30 days after the earlier of (i) the
expiration of the 30-day period referred to in Section 3.2 hereof, or (ii)
the receipt of written notices from the Company and all other Stockholders
responding to the Notification. Delivery of certificates or other instruments
evidencing such Offered Shares duly endorsed for transfer to the Company or
the other Stockholders shall be made on such date against payment of the
purchase price therefor.
Section 3.3 Third Party Sales. If effective acceptance
shall not be received pursuant to Section 3.2 hereof with respect to all
Offered Shares pursuant to any Notification, then the Offering Stockholder
may sell all or any part of such Offered Shares as to which such an effective
acceptance has not been so received
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(the "Saleable Offered Shares") at a price not less than the Minimum Price,
and on other terms not materially more favorable to the purchaser thereof
than the terms stated in such Notification, at any time within 90 days after
the expiration of the offer pursuant to the Notification. In the event such
Saleable Offered Shares are not sold by the Offering Stockholder during such
90-day period, the right of the Offering Stockholder to sell such Saleable
Offered Shares shall expire and the obligations of this Article 3 shall be
reinstated; provided, however, that in the event the Offering Stockholder
determines, at any time during such 90-day period, that the sale of all or
any part of the Saleable Offered Shares on the terms set forth in the
preceding sentence is impractical, the Offering Stockholder can terminate the
offer and reinstate the procedure provided in this Article 3, without waiting
for the expiration of such 90-day period. The Offering Stockholder may
specify in the Notification that all Offered Shares must be sold, in which
case acceptances received pursuant to Section 3.2 hereof shall be deemed
conditioned upon (i) receipt of written notices of acceptance with respect
to all Offered Shares mentioned in such Notification and/or (ii) the sale of
all or the remaining Offered Shares pursuant to this Section 3.3.
Section 3.4 Stock Transfer Agreement. It shall be a
condition of any Transfer of Offered Shares to a third Person or Persons that
the Offering Stockholder shall cause such Person or Persons to execute and
deliver to the Company a Stock Transfer Agreement in the form attached hereto
as Exhibit A.
Section 3.5 Legend. Each certificate representing shares of
Company Stock shall be stamped or otherwise imprinted with a legend
substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not be
transferred or otherwise disposed of unless they have been registered
under said Act or an exemption from registration is available. The
securities represented by this certificate are subject to and shall be
transferable only upon the terms and conditions of an Amended and
Restated Stockholders Agreement by and among the issuer and certain
stock holders of the issuer, dated as of April 30, 1998, a copy of
which is on file with the Secretary of the issuer."
Section 3.6 Restrictions on Transferability.
Notwithstanding any other provision of this Agreement, Company Stock shall
not be Transferred, and the Company shall not be required to register any
Transfer of Company Stock on the
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books of the Company, unless the Company shall have been provided with an
opinion of counsel reasonably satisfactory to it prior to such Transfer that
registration under the Securities Act is not required in connection with the
transaction resulting in such Transfer; provided, however, that no such
opinion of counsel shall be required for a Transfer by an Investor which is a
partnership to a partner of such Purchaser or a retired partner of such
Purchaser who retires after the date hereof, or to the estate of any such
partner or retired partner, or a Transfer by gift, will or intestate
succession from any such partner to his spouse or members of his or his
spouse's family, if the transferee executes and delivers to the Company a
Stock Transfer Agreement in the form attached hereto as Exhibit A except if
the Company reasonably determines that it is not free from doubt as to
whether an exemption from registration under the Securities Act is available
for any such proposed Transfer.
Section 3.7 No Recognition of Transfer. The Company agrees
that it will not at any time permit any Transfer to be made on its books or
records of the certificates representing shares of Company Stock subject to
this Agreement, and that it will refuse to recognize any claims of ownership
of any purported direct or indirect transferee of such Company Stock, unless
such Transfer is made pursuant to and in accordance with the terms and
conditions of this Agreement.
ARTICLE 4
BOARD OF DIRECTORS
Section 4.1 Size of Board; Composition; Observer Rights.
The current members of the Board are: Dr. Gefter, Henry F. McCance, William
Laverack, Jr., David Sharrock, Albert L. Zesiger, G. Leonard Baker and Damion
E. Wicker. Each of Highland and Canaan (i) shall be entitled to have a
representative attend all meetings of the Board, and (ii) will be sent copies
of all notices of Board meetings and actions.
Section 4.2 Voting Agreement. (a) At every annual or
special meeting called (or written consent solicited) for the purpose of
electing directors of the Company, the Company shall use its best efforts to
cause to be nominated for election and elected as a director of the Company,
and thereafter to continue in office, (i) Dr. Gefter (so long as he is an
employee of or consultant to the Company), (ii) one person designated by
Equity Fund (the "Whitney Designee"), (iii) one person designated by
Greylock (the "Greylock Designee"), (iv) one person designated by Sutter
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Hill (the "Sutter Hill Designee") and (v) one person designated by Chase (the
"Chase Designee"). The current Whitney Designee is William Laverack, Jr., the
current Greylock Designee is Henry F. McCance, the current Sutter Hill
Designee is G. Leonard Baker, Jr. and the current Chase designee is Damion E.
Wicker. The Whitney Designee, the Greylock Designee, the Sutter Hill
Designee and the Chase Designee together are referred to collectively herein
as the "Designees" and individually as a "Designee". The current Independent
Director is David Sharrock.
(b) Each Stockholder entitled to vote agrees to
vote (or cause to be voted) all shares of Company Stock then owned by such
Stockholder so as to continue in office Dr. Gefter (so long as he is an
employee of, or consultant to, the Company) and the Designees.
(c) Each of Greylock, Equity Fund, Sutter Hill and
Chase may at any time by written notice to the Company designate their
respective Designees for removal as a member of the Board with or without
cause and, upon such designation, (i) each Stockholder entitled to vote
agrees to vote all shares of Company Stock then owned by such Stockholder to
effect such removal and (ii) the Stock holders and the Company shall use
their respective best efforts to effect, or cause the stockholders of the
Company to effect, such removal.
(d) If there is a vacancy in the Board caused by
the death, resignation or removal of a Designee, (i) each Stockholder
entitled to vote agrees to vote all shares of Company Stock then owned by
such Stockholder to elect to the Board, and thereafter to vote all such
shares to continue in office, such substitute director as the Person or
entity entitled to designate such Designee may designate and (ii) the Company
shall use its best efforts to elect or nominate for election by stockholders,
and thereafter to continue in office, such substitute director as the Person
or entity entitled to designate such Designee may so designate.
ARTICLE 5
RIGHT OF FIRST OFFER
Section 5.1 Right of First Offer. The Company grants to
each of the Stockholders the right of first offer to purchase (a) up to such
Stockholder's pro-rata share, as defined below, of any equity securities of
the Company, including shares of Common Stock or securities of any type
convertible into, or entitling the holder
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thereof to purchase shares of, Common Stock, proposed to be issued by the
Company subsequent to the date hereof (such securities being sometimes
hereinafter referred to as the "Equity Securities"), and (b) to the extent
specified in Section 5.2 hereof, all or any part of any other Stockholders'
respective pro-rata shares of such Equity Securities to the extent that such
other Stockholders do not elect to purchase their full pro-rata shares. A
Stockholder's "pro-rata share" shall be that portion of the Equity Securities
proposed to be issued which bears the same relation to all of the Equity
Securities proposed to be issued as the number of shares of Common Stock held
by such Stockholder bears to the outstanding shares of Common Stock held by
all Stockholders (assuming in each case the conversion of all outstanding
securities which are convertible into Common Stock, all determined
immediately prior to the offering of the Equity Securities). For purposes of
computing an Investor's pro-rata share, each Investor which is a partnership
shall be deemed to be the owner of all shares of Company Stock which have
been transferred to and are held by such Investor's Related Parties and the
Related Parties of such Related Parties in accordance with Section 2.2.
Section 5.2 Notice. In the event that the Company proposes
to undertake an issue of Equity Securities, it shall deliver to each
Stockholder written notice of its intention, describing such Equity
Securities, specifying such Stock holder's pro-rata share and stating the
purchase price and other material terms upon which it proposes to issue the
same (the "First Offer Notice"). For a period of 20 days from the date the
First Offer Notice is given, each Stockholder shall have the right to elect,
by written notice to the Company, to purchase (a) all or any portion of its
pro-rata share of the Equity Securities described in the First Offer Notice
and (b) if such Stockholder elects to purchase its full pro-rata share, all
or any part of the pro-rata share of any other Stockholder to the extent that
such other Stockholder does not elect to purchase its full pro-rata share,
upon the terms and condition specified in the First Offer Notice. If the
Stockholders who elect to purchase their full pro-rata shares also elect to
purchase in the aggregate more than 100% of the Equity Securities referred
to in clause (b) of the preceding sentence, the Equity Securities referred to
in clause (b) of the preceding sentence will be sold to such Stockholders in
accordance with their respective pro-rata shares; provided, however, that no
Stock holder may purchase a greater amount of such Equity Securities than the
amount which such Stockholder elects to purchase pursuant to clause (b) of
the preceding sentence. In the event the Stockholders fail to exercise their
right of first offer within the specified period, or the Stockholders elect
to acquire less than their aggregate pro-rata shares pursuant to the exercise
of such right, then, during the 90-day period following the expiration of
such 20-day period, the Company may sell, free of any
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right of first offer on the Stockholders' part, the portion of the
Stockholders' pro-rata shares not purchased pursuant to such right of first
offer (the "Third Party Shares"), at not less than the price, and on other
terms not more favorable to the purchasers in any material respect than the
other terms, stated in the First Offer Notice. The closing of sales of
Equity Securities to the Stockholders pursuant to this Article 5 shall take
place at the offices of the Company on a mutually satisfactory business day
within 15 days after the expiration of the aforesaid 20-day period, or, at
the Company's election, at the same time as the closing of the issuance and
sale of any Third Party Shares.
Section 5.3 Exceptions. The right of first offer granted
under this Article V shall not apply to (i) any shares of Common Stock issued
upon conversion of the Preferred Stock; (ii) the issuance of Equity
Securities to employees, consultants, directors or persons performing
similar functions, if such issuances are approved by the Board or such
issuances are pursuant to a plan or plans approved by the Board; (iii) the
issuance of Equity Securities upon a stock split, stock dividend or
combination with respect to the Common Stock; (iv) the issuance of any
Purchase Rights (as defined in the Certificate of Incorporation) pro-rata to
recordholders of Common Stock and Preferred Stock, or the issuance of Equity
Securities upon the conversion, exercise or exchange of any Purchase Rights;
(v) the issuance of Equity Securities upon the conversion, exercise or
exchange of any outstanding Equity Securities to which the right of first
offer set forth in this Article 5 applied at the time of issuance thereof;
(vi) the issuance of any Equity Securities in a public offering pursuant to a
registration statement under the Securities Act; (vii) the issuance of Equity
Securities pursuant to the acquisition by the Company of another corporation
by merger, acquisition of more than 51% of such corporation's outstanding
stock or purchase of all or substantially all of its assets; (viii) the
issuance of Equity Securities in connection with a strategic business
arrangement or lease arrangement in which the Person receiving such Equity
Securities or an Affiliate of such Person enters into a contractual
relationship with the Company relating to research and development,
manufacturing, marketing, licensing or leasing, which issuance and
transaction are approved in good faith by the Board; (ix) the issuance of
Series D Convertible Preferred Stock, par value $.01 per share, of the
Company pursuant to a Series D Preferred Stock Purchase Agreement dated June
9, 1997 by and between the Company and the purchaser listed on Schedule I
thereto (the "Series D Purchaser"); or (x) the issuance of Series E
Convertible Preferred Stock, par value $.01 per share, of the Company
pursuant to a Series E Preferred Stock Purchase Agreement dated March 27,
1998 by and among the Company and the purchasers listed on Schedules A and B
thereto.
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ARTICLE 6
REGISTRATION RIGHTS
Section 6.1 Demand Registration. (a) After the first to
occur of the consummation of the Initial Public Offering and December 23,
1996, upon the writ ten request of any holder or holders of at least 662/3%
of the outstanding Registrable Securities issued or issuable upon conversion
of the Series A Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock requesting that the Company effect the
registration under the Securities Act of all or part of such holder's or
holders' Registrable Securities and specifying the number thereof to be
registered by each such holder and the intended method of disposition
thereof, the Company will, as expeditiously as possible, give written notice
of such request to all holders of Registrable Securities, and shall thereupon
use its reasonable best efforts to effect the registration under the
Securities Act, subject to Section 6.1(e), of:
(i) the Registrable Securities which the Com
pany has been so requested to register by such holder or holders; and
(ii) all other Registrable Securities which the
Company has been requested to register by any other holder thereof by
written request given to the Company within 30 calendar days after the
giving of such written notice by the Company (which request shall
specify the intended method of disposition of such Registrable
Securities),
all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered. Notwithstanding the foregoing provisions of subsection 6.1(a),
the Company shall not be obligated to file more than three registration
statements pursuant to this Section 6.1(a) and shall not be obligated to
file any registration statement pursuant to this Section 6.1(a) where the
proposed aggregate offering price of the securities to be sold thereunder is
less than $5 million.
(b) After the first anniversary of the Initial
Public Offering, upon the written request of any holder or holders of a
majority of the outstanding Registrable Securities issued or issuable upon
conversion of the Series E Preferred Stock (the "Requesting Series E
Holders") requesting that the Company effect the
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registration under the Securities Act of all or part of the Requesting Series
E Holders' Registrable Securities and specifying the number thereof to be
registered by each such holder and the intended method of disposition
thereof, the Company will, as expeditiously as possible, give written notice
of such request to all holders of Registrable Securities, and shall
thereupon use its reasonable best efforts to effect the registration under
the Securities Act, subject to Section 6.1(f), of:
(i) the Registrable Securities which the Com
pany has been so requested to register by the Requesting Series E
Holders; and
(ii) all other Registrable Securities which the
Company has been requested to register by any other holder thereof by
written request given to the Company within 30 calendar days after the
giving of such written notice by the Company (which request shall
specify the intended method of disposition of such Registrable
Securities),
all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered. Notwithstanding the foregoing provisions of subsection 6.1(b),
the Company shall not be obligated to file more than one registration
statement pursuant to this Section 6.1(b) and shall not be obligated to file
any registration statement pursuant to this Section 6.1(b) where the proposed
aggregate offering price of the securities to be sold thereunder is less than
$5 million.
(c) At such time as the Company shall have
qualified for the use of Form S-3 (or any similar form or forms promulgated
by the Commission), the holders of 10% of the then outstanding Registrable
Securities shall have the right to request the registration of Registrable
Securities on Form S-3. The Company shall give prompt written notice of each
such proposed registration to all other record holders of Registrable
Securities. Subject to Section 6.1(e) hereof, such other holders shall have
the right, by giving written notice to the Company within 30 days from
receipt of the Company's 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 its reasonable best efforts to effect the registration on Form
S-3 of all Registrable Securities which the Company has been requested to
register; provided, however, that the Company shall not be obligated to file
and use its reasonable best efforts to
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cause to become effective (i) more than one registration on Form S-3 in any
one year period or (ii) any such registration statement where the proposed
aggregate offering price of the securities to be sold thereunder is less than
$2 million. In addition, the Company shall not be obligated to file and use
its reasonable best efforts to cause to become effective more than three
registration statements pursuant to which Registrable Securities are to be
sold pursuant to this Section 6.1(b). Three registrations effected on Form
S-3 pursuant to this Section 6.1(b) shall not be counted as demand
registrations pursuant to Section 6.1(a) hereof.
(d) At such time as the Company shall have
qualified for the use of Form S-3 (or any similar form or forms promulgated
by the Commission), the Requesting Series E Holders shall have the right to
request the registration of Registrable Securities on Form S-3. The Company
shall give prompt written notice of such proposed registration to all other
record holders of Registrable Securities. Subject to Section 6.1(f) hereof,
such other holders shall have the right, by giving written notice to the
Company within 30 days from receipt of the Company's 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 its reasonable best efforts to effect the
registration on Form S-3 of all Registrable Securities which the Company has
been requested to register; provided, however, that the Company shall not be
obligated to file and use its reasonable best efforts to cause to become
effective (i) more than one registration on Form S-3 pursuant to this Section
6.1(d) or (ii) any such registration statement where the proposed aggregate
offering price of the securities to be sold thereunder is less than $2
million. A registration effected pursuant to this Section 6.1(d) shall not be
counted as a demand registration pursuant to Section 6.1(b) hereof.
(e) The Company may include in a registration
requested under Sections 6.1(a) or 6.1(c) any authorized but unissued shares
of Common Stock for sale by the Company; provided, however, that such shares
shall not be included to the extent that the holders of a majority of the
Registrable Securities included therein determine in good faith that the
inclusion of such shares will interfere with the successful marketing of the
Registrable Securities to be included therein. If the offering to which a
registration statement under either Section 6.1(a) or Section 6.1(c) relates
is an underwritten offering (an "Underwritten Offering"), and if, after all
shares of Common Stock proposed to be offered by the Company have been
excluded from such registration, a greater number of Registrable Securities
is offered for participation in such underwriting than in the opinion of the
investment banker or bankers that shall manage the offering (the "Managing
Underwriter") can be accom-
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modated without adversely affecting the underwriting, the amount of
Registrable Securities proposed to be offered in the underwriting shall be
reduced, pro-rata (based upon the amount of Registrable Securities owned)
among the holders requesting the inclusion of Registrable Securities in such
registration, to a number deemed satisfactory by the Managing Underwriter;
provided, however, that for purposes of making any such reduction, each
Investor which is a partnership, together with the affiliates, partners and
retired partners of such Investor, the estates and family members of any
such partners and retired partners and of their spouses, and any trusts for
the benefit of any of the foregoing Persons shall be deemed to be a single
"holder" of Registrable Securities and any pro-rata reduction with respect to
such "holder" shall be based upon the aggregate amount of Registrable
Securities owned by all entities and individuals included in such "holder",
as defined in this proviso (and the aggregate amount so allocated to such
"holder" shall be allocated among the entities and individuals included in
such "holder" in such manner as such Investor may reason ably determine); and
provided, further, that any such reduction may be greater than pro-rata with
respect to Registrable Securities held by officers, employees and consultants
of the Company if, in the reasonable opinion of the Managing Under writer,
without such greater reduction, the proposed offering could not proceed on
terms reasonably acceptable to the Managing Underwriter.
(f) The Company may include in a registration
requested under Sections 6.1(b) or 6.1(d) any authorized but unissued shares
of Common Stock for sale by the Company; provided, however, that such shares
shall not be included to the extent that the holders of a majority of the
Registrable Securities issued or issuable upon conversion of the Series E
Preferred Stock included therein determine in good faith that the inclusion
of such shares will interfere with the successful marketing of the
Registrable Securities to be included therein. If the offering to which a
registration statement under either Section 6.1(b) or Section 6.1(d) relates
is an Underwritten Offering, and if, after all shares of Common Stock
proposed to be offered by the Company have been excluded from such
registration, a greater number of Registrable Securities is offered for
participation in such underwriting than in the opinion of the Requesting
Series E Holders, based on advice of the Managing Underwriter, can be
accommodated without adversely affecting the underwriting, the amount of
Registrable Securities proposed to be offered in the underwriting shall be
reduced by excluding on a pro-rata basis (based upon the amount of
Registrable Securities owned, provided, however, that any such reduction may
be greater than pro-rata with respect to Registrable Securities held by
officers, employees and consultants of the Company if, in the reasonable
opinion of the Requesting Series E Holders, based on advice of the Managing
Underwriter, without such greater
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reduction, the proposed offering could not proceed on terms reasonably
acceptable to the Requesting Series E Holders) Registrable Securities offered
to be included in such registration which are held by persons (the
"Non-Series E Holders") other than the holders of Registrable Securities
issued or issuable upon conversion of the Series E Preferred Stock to a
number which is reasonably satisfactory to the Requesting Series E Holders,
based on advice of the Managing Underwriter. If after all Registrable
Securities held by Non-Series E Holders have been excluded from such
registration, a greater number of Registrable Securities is offered for
participation in such underwriting than in the opinion of the Managing
Underwriter can be accom modated without adversely affecting the
underwriting, the amount of Registrable Securities proposed to be offered in
the underwriting shall be reduced, pro-rata (based upon the amount of
Registrable Securities owned) among the holders of Registrable Securities
issued or issuable upon conversion of the Series E Preferred Stock requesting
the inclusion of Registrable Securities in such registration, to a number
deemed satisfactory by the Managing Underwriter; provided, however, that for
purposes of making any such reduction referred to in this Section 6.1(f),
each Investor which is a partnership, together with the affiliates, partners
and retired partners of such Investor, the estates and family members of any
such partners and retired partners and of their spouses, and any trusts for
the benefit of any of the foregoing Persons shall be deemed to be a single
"holder" of Registrable Securities and any pro-rata reduction with respect to
such "holder" shall be based upon the aggregate amount of Registrable
Securities owned by all entities and individuals included in such "holder",
as defined in this proviso (and the aggregate amount so allocated to such
"holder" shall be allocated among the entities and individuals included in
such "holder" in such manner as such Investor may reasonably deter mine).
(g) A registration requested pursuant to this
Section 6.1 will not be deemed to have been effected unless it has become
effective; provided that if, after it has become effective, the offering of
Registrable Securities pursuant to such registration is interfered with by
any stop order, injunction or other order or requirement of the Commission
or other governmental agency or court which prevents the successful
completion of such offering, such registration will be deemed not to have
been effected.
(h) The Company will pay all Registration Expenses
in connection with any registration of Registrable Securities effected by it
pursuant to this Section 6.1.
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(i) If a requested registration pursuant to this
Section 6.1 involves an Underwritten Offering, the Persons holding a majority
of the Registrable Securities to be included in such registration shall have
the right to select the Managing Underwriter, subject to the approval of the
Company which shall not be unreasonably withheld.
(j) If at the time a registration request pursuant
to this Section 6.1 is made or is pending, the Board determines that the
filing of a registration statement would require the disclosure of material
information regarding a possible financing, business combination or other
material transaction, which disclosure the Board determines in its good faith
judgment would be detrimental to the Company, the Company may delay a
registration pursuant to this Section 6.1 until the date upon which such
material information is disclosed to the public or ceases to be material.
(k) Notwithstanding the foregoing, in the event
that the Company intends to commence a public offering of securities to which
Section 6.2 hereof will apply, it shall so notify the holders of Registrable
Securities in writing and such holders shall be deemed to have waived their
rights to demand registration under this Section 6.1 for a period of 120 days
following such notice.
Section 6.2 Piggyback Registration. (a) If at any time the
Company proposes to register (other than a registration pursuant to Section
6.1 hereof) any of its Equity Securities under the Securities Act on Forms
S-1, S-2, S-3, SB-1, SB-2 or any other registration form at the time in
effect on which Registrable Securities could be registered for sale by the
holders thereof (other than a registration in connection with an acquisition
of or merger with another entity or the sale of shares to employees,
consultants or directors of the Company pursuant to employee stock option,
stock purchase or other employee benefit plans, provided that the only
securities covered by such registration are the securities to be issued as
part of such acquisition or merger or the securities to be sold to such
employees, consultants or directors), the Company shall on each such occasion
give written notice to all holders of Registrable Securities of its intention
so to do, describing such Equity Securities and specifying the form and
manner and the other relevant facts involved in such proposed registration
(including, without limitation, (x) whether or not such pro posed registered
offering will be an underwritten offering and, if so, the identity of the
Managing Underwriter and whether such offering will be pursuant to a "best
efforts" or "firm commitment" underwriting and (y) the price (net of any
underwriting commissions, discounts and the like) at which the Registrable
Securities, if any, are reasonably expected to be sold) if such disclosure is
acceptable to the Managing
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Underwriter. Upon the written request of any such holder delivered to the
Company within 30 calendar days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed of by
such holder and the intended method of disposition thereof), the Company will
use its reasonable best efforts to effect the registration under the Securities
Act of all of the Registrable Securities that the Company has been so requested
to register; provided, however, that:
(i) If, at any time after giving such 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 of Registrable
Securities who made a request as hereinabove provided and thereupon
shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its
obligation to pay the Registration Expenses in connection therewith),
without prejudice, however, to the rights, if any, of any one or more
holders to request that such registration be effected as a registration
under Section 6.1; and
(ii) If such registration involves an Underwritten Offering,
all holders of Registrable Securities requesting to be included in the
Company's registration must sell their Registrable Securities to the
underwriters selected by the Company on the same terms and conditions
as apply to the Company.
No registration effected under this Section 6.2 shall relieve
the Company of its obligation to effect any registration upon request under
Section 6.1.
(b) The Registration Expenses incurred in connection
with each registration of Registrable Securities requested pursuant to this
Section 6.2 shall be paid by the Company.
(c) If a registration pursuant to this Section 6.2
involves an Underwritten Offering and the Managing Underwriter advises the
Company that, in its opinion, the number of shares proposed to be included in
such registration should be limited due to market conditions, then the Company
will include in such registration to the extent of the number which the Company
is so advised can be sold in such
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offering (i) first, the securities the Company proposes to sell and (ii) second,
the number of shares of Common Stock requested to be included in such
registration; provided, however, that if a greater number of Registrable
Securities and other shares proposed to be offered by other Stockholders is
offered for inclusion in the proposed underwriting than in the opinion of the
Managing Underwriter proposing to underwrite securities to be sold by the
Company can be accommodated without adversely affecting the proposed
underwriting, the Company may elect to reduce pro-rata (based upon the amount of
shares owned which carry registration rights) the amount of all securities
(including shares of Registrable Securities) proposed to be offered in the
underwriting for the accounts of all Persons other than the Company to a number
deemed satisfactory by the Managing Underwriter. With respect to the proviso of
the preceding sentence, if the Company elects to reduce pro-rata the amount of
securities proposed to be offered in the underwriting for the accounts of all
Persons other than the Company, for purposes of making any such reduction, (i)
each Investor which is a partnership, together with the Affiliates, partners and
retired partners of such Investor, the estates and family members of any such
partners and retired partners and of their spouses, and any trusts for the
benefit of any of the foregoing Persons shall be deemed to be a single "Person",
and any pro-rata reduction with respect to such "Person" shall be based upon
the aggregate amount of shares carrying registration rights owned by all
entities and individuals included as such "Person", as defined in this sentence
(and the aggregate amount so allocated to such "Person" shall be allocated among
the entities and individuals included in such "Person" in such manner as such
Investor may reasonably determine), and (ii) any such reduction may be greater
than pro-rata with respect to Registrable Securities held by officers, employees
and consultants of the Company if, in the reasonable opinion of the Managing
Underwriter without such greater reduction, the proposed offering could not
proceed on terms reasonable acceptable to the Managing Underwriter.
(d) In connection with any Underwritten Offering with
respect to which holders of Registrable Securities shall have requested
registration pursuant to subsection 6.2(a), the Company shall have the right to
select the Managing Underwriter with respect to the offering.
Section 6.3 Registration Procedures. (a) If and whenever the
Company is required to use its reasonable best efforts to effect or cause the
registration of any Registrable Securities under the Securities Act as provided
in Section 6.1 or 6.2, the Company will, as expeditiously as possible:
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(i) Prepare and, in any event within 60 calendar days after
the end of the period within which requests for registration may be
given to the Company, file with the Commission a registration
statement with respect to such Registrable Securities and use its
reasonable best efforts to cause such registration statement to become
and remain effective; provided, however, that the Company may
discontinue any registration of its securities that is being effected
pursuant to Section 6.2 at any time prior to the effective date of the
registration statement relating thereto.
(ii) Prepare and file with the Commission such amendments
(including post-effective amendments) and supplements to such
registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a
period not in excess of ninety days and to comply with the provisions
of the Securities Act with respect to the disposition of all securities
covered by such registration statement during such period in accordance
with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement.
(iii) Furnish to each holder of Registrable Securities covered
by the registration statement and to each underwriter, if any, of such
Registrable Securities, such number of copies of a prospectus and
preliminary prospectus for delivery in conformity with the requirements
of the Securities Act, and such other documents, as such Person may
reasonably request, in order to facilitate the public sale or other
disposition of the Registrable Securities.
(iv) Use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
reasonably necessary to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities.
(v) Immediately notify each seller of Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in
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Section 6.3(a)(ii), if the Company becomes aware that the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits 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, and at the request of any such seller, deliver a reasonable
number of copies of an amended or supplemental prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
Registrable 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.
(vi) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make generally
available to its security holders, in each case as soon as practicable,
but not later than 45 calendar days after the close of the period
covered thereby (90 calendar days in case the period covered
corresponds to a fiscal year of the Company), an earnings statement of
the Company which will satisfy the provisions of subsection 11(a) of
the Securities Act.
(vii) In the event the offering is an Underwritten Offering,
use its best efforts to obtain a "cold comfort" letter from the
independent public accountants for the Company in customary form and
covering such matters as are customarily covered by such letters.
(viii) Execute and deliver all instruments and documents
(including in an Underwritten Offering an underwriting agreement in
customary form) and take such other actions and obtain such
certificates and opinions as are customary in underwritten public
offerings.
(b) Each holder of Registrable Securities will, upon
receipt of any notice from the Company of the happening of any event of the kind
described in subsection 6.3(a)(v), forthwith discontinue disposition of the
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such
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holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 6.3(a)(v).
(c) If a registration pursuant to Section 6.1 or 6.2
involves an Underwritten Offering, each holder of Registrable Securities,
whether or not such holder's Registrable Securities are included in such
registration, will, if requested by the Managing Underwriter, enter into an
agreement not to effect any public sale or distribution, including any sale
pursuant to Rule 144 under the Securities Act, of any Registrable Securities, or
of any security convertible into or exchangeable or exercisable for any
Registrable Securities (other than as part of such Underwritten Offering),
without the consent of the Managing Underwriter, during a period commencing on
the effective date of such registration and ending a number of calendar days
thereafter not exceeding 180 as the Board and the Managing Underwriter shall
reasonably determine is required to effect a successful offering.
(d) If a registration pursuant to Section 6.1 or 6.2
involves an Underwritten Offering, the Company agrees, if so required by the
Managing Underwriter, not to effect any public sale or distribution of any of
its Equity Securities or securities convertible into or exchangeable or
exercisable for any of such Equity Securities during a period commencing on the
effective date of such registration and ending not more than 180 calendar days
thereafter, except for such Underwritten Offering or in connection with a stock
option plan, stock purchase plan, savings or similar plan, or an acquisition,
merger or exchange offer.
Section 6.4 Indemnification. (a) In the event of any
registration of any securities of the Company under the Securities Act, the
Company will, and hereby does, indemnify and hold harmless the holder of any
Registrable Securities covered by such registration statement, its directors and
officers, each other Person who participates as an underwriter in the offering
or sale of such securities and each other Person, if any, who controls such
holder or any such underwriter within the meaning of the Securities Act against
any losses, claims, damages or liabilities, joint or several, to which such
holder or any such director or officer or underwriter or controlling person may
become subject under the Securities Act, state securities or blue sky laws, or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, 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
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, any amendment or
supplement thereto, or
25
<PAGE>
any document filed in connection therewith or in connection with any
qualification pursuant to Section 6.3(a)(iv), or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a prospectus, in light
of the circumstances under which they were made) not misleading, and the Company
will reimburse such holder and each such director, officer, underwriter and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that the Company shall not be liable
with respect to any holder of Registrable Securities in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of or is based upon an untrue statement
or omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement, or
any document incident thereto or incident to registration or qualification of
any Registrable Securities pursuant to Section 6.3(a)(iv), in reliance upon and
in conformity with written information furnished to the Company by the holder
of Registrable Securities specifically for use in the preparation thereof; and
provided, further, that the Company shall not be liable to any Person who
participates as an underwriter, in the offering or sale of Registrable
Securities or to any other Person, if any, who controls such underwriter within
the meaning of the Securities Act, in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of such Person's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in such
final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such holder of
Registrable Securities or any such director, officer, underwriter or controlling
person and shall survive the transfer of such securities by such holder.
(b)The Company may require, as a condition to
including any Registrable Securities in any registration statement filed
pursuant to Section 6.3, that the Company shall have received an undertaking
satisfactory to it from the prospective seller of such Registrable Securities,
to indemnify and hold harmless (in the same manner and to the same extent as set
forth in subdivision (a) of this Section 6.4) the Company, each director of the
Company, each officer of the Company and each other Person, if any, who controls
the Company within the meaning of the Securities Act, with respect to any
statement in or omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus con-
26
<PAGE>
tained therein, or any amendment or supplement thereto, or any qualification
pursuant to Section 6.3(a)(iv), if such statement or omission was made in
reliance upon and in conformity with written information furnished to the
Company by the seller of such Registrable Securities specifically for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect, regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling person and
shall survive the Transfer of such securities by such seller. In no event shall
the liability of any such seller of Registrable Securities hereunder be greater
in amount than the dollar amount of the proceeds received by such seller upon
the sale of the Registrable Securities giving rise to such indemnification
obligation.
(c) Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 6.4, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement
of such action, provided that the failure of any indemnified party to give
notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section 6.4, except to
the extent that the indemnifying party is actually prejudiced by such failure
to give notice. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties exists in respect
of such claim, the indemnifying party shall be entitled to participate in and
to assume the defense thereof, jointly with any other indemnifying party
similarly notified, to the extent that the indemnifying party may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred
by the latter in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
its own counsel in any such action, but the fees and expenses of such counsel
shall be at the expense of such indemnified party, when and as incurred,
unless (i) the employment of counsel by such indemnified party has been
authorized by the indemnifying parties, (ii) the indemnified party shall have
reasonably concluded that there is a conflict of interest between the
indemnifying parties and the indemnified party in the conduct of the defense
of such action (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified
party) or (iii)
27
<PAGE>
the indemnifying parties shall not in fact have employed counsel to assume the
defense of such action. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
of any such action which 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 to such claim or litigation. No indemnified party shall
consent to entry of any judgment or enter into any settlement of any such action
the defense of which has been assumed by an indemnifying party or for which an
indemnifying party may have liability hereunder without the consent of such
indemnifying party.
Section 6.5 Contribution. In order to provide for just and
equitable contribution in circumstances under which the indemnity contemplated
by Section 6.4 is for any reason not available, the parties entitled to
indemnification by the terms hereof shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity incurred by the Company, any seller of Registrable Securities and one
or more of the underwriters, except to the extent that contribution is not
permitted under Section 11(f) of the Securities Act. In determining the amount
of contribution to which the respective parties shall be entitled, there shall
be considered the relative benefits received by each party from the offering of
the Registrable Securities (taking into account the portion of the proceeds of
the offering realized by each), the parties' relative knowledge and access to
information concerning the matter with respect to which the claim was asserted,
the opportunity to correct and prevent any statement or omission and any other
equitable considerations appropriate under the circumstances. The Company and
each seller of Registrable Securities agree with each other that no seller of
Registrable Securities shall be required to contribute any amount in excess of
the amount such seller would have been required to pay to an indemnified party
if the indemnity under subsection 6.4(b) was available. The Company and each
such seller agree with each other and the underwriters of the Registrable
Securities, if requested by such underwriters, that it would not be equitable if
the amount of such contribution were determined by pro-rata or per capita
allocation (even if the underwriters were treated as one entity for such
purpose) or for the underwriters' portion of such contribution to exceed the
percentage that the underwriting discount bears to the offering price of the
Registrable Securities. For purposes of this Section 6.5, each Person, if any,
who controls an underwriter within the meaning of Section 15 of the Securities
Act, shall have the same rights to contribution as such underwriter, and each
director and each officer of the Company who signed the registration statement,
and each Person, if any, who controls the Company or a seller of Registrable
Securities within the meaning of Section 15 of the Securities Act shall have
the same rights
28
<PAGE>
to contribution as the Company or such seller of Registrable Securities, as the
case may be.
Section 6.6 Rule 144. If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, the Company covenants that it will file the reports required to
be filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available other information), and it will
take such further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell shares of Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (i) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (ii) any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any holder of Registrable Securities, the Company will deliver to such holder
a written statement as to whether it has complied with such requirements.
ARTICLE 7
FUTURE INVESTORS
If subsequent to the date hereof, the Company grants to
holders or prospective holders of its securities registration rights which are
more favorable than the terms or provisions of Article 6 of this Agreement are
to the Stockholders, such Article 6 shall be deemed to be automatically amended
(without the necessity of any action on the part of the Company or the
Stockholders) to grant to the Stockholders such more favorable registration
rights, in addition to those set forth herein. If subsequent to the date hereof,
the Company grants to holders or prospective holders of its securities
antidilution rights which are more favorable than the terms or provisions of the
Certificate of Incorporation are to the holders of Preferred Stock, this
Agreement shall be deemed to be automatically amended (without the necessity of
any action on the part of the Company or any holder of Preferred Stock) to grant
to the holders of Preferred Stock such more favorable antidilution rights, in
addition to those set forth in the Certificate of Incorporation, it being
understood and agreed that antidilution rights which provide that the conversion
price of a class or series of Equity Securities may not be adjusted such that it
is less than the applicable conversion price of another class or series of
Equity Securities shall not be deemed to be
29
<PAGE>
more favorable than the antidilution rights of such other class or series of
Equity Securities. In connection therewith, the Company shall take all action
available to it to cause the Certificate of Incorporation to be amended to
provide for such more favorable antidilution rights, and each Stockholder agrees
to vote (or cause to be voted) all shares of Company Stock then owned by such
Stockholder to approve such amendment. Such amended antidilution provisions
shall be applicable to any issuance or deemed issuance of Common Stock (to the
extent provided in such more favorable antidilution provisions) which is made
(i) after the issuance of securities in connection with which such more
favorable antidilution rights are granted to the holders of Preferred Stock
pursuant to this Article 7 and (ii) at a price below the Conversion Price in
effect under the Certificate of Incorporation (or such other applicable price
which, under the terms of such more favorable antidilution rights, gives rise to
an antidilution adjustment) at the time of such issuance or deemed issuance. The
provisions of this Article 7 may be waived in any specific instance by the vote
or written consent of Stockholders holding shares of Series A Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
and/or Common Stock into which such shares of Preferred Stock have been
converted, representing at least 662/3% of the voting power of such shares of
Preferred Stock (for this purpose shares of Preferred Stock shall be deemed to
have a number of votes equal to the number of shares of Common Stock into which
such shares of Preferred Stock are then convertible) and Common Stock, voting or
acting by written consent as a single class, and each Stockholder owning any
such shares of Preferred Stock or such shares of Common Stock agrees that such
Stockholder will consider in good faith any such waiver requested by the Company
as being necessary or desirable to effect a financing on terms which are
otherwise favorable to the Company.
ARTICLE 8
TERMINATION
Section 8.1 (a) Subject to subsection 8.1(c) hereof, this
Agreement shall terminate on the earlier of: (i) the date of an Initial Public
Offering or (ii) December 23, 2003.
(b) Notwithstanding the foregoing, this Agreement
shall in any event terminate with respect to any Stockholder when such
Stockholder no longer owns any shares of Common Stock, Preferred Stock, or other
common or preferred stock of the Company.
(c) The provisions set forth in Article VI, this
Section 8.1(c) and Article 9 hereof shall survive the termination of this
Agreement.
30
<PAGE>
ARTICLE 9
MISCELLANEOUS
Section 9.1 Successors and Assigns. Except as otherwise
provided herein, all of the terms and provisions of this Agreement shall be
binding upon the respective successors and assigns of the parties hereto
(including any nominee of a Stockholder which holds Company Stock in its name
which is beneficially owned by such Stockholder), and shall inure to the benefit
of and shall be enforceable by the respective successors and assigns of the
parties hereto. Any breach of any of the terms or provisions of this Agreement
by a nominee of any Stockholder shall be deemed a breach of this Agreement by
such Stockholder. No Stockholder may assign any of its rights hereunder to any
Person other than a transferee of Company Stock that has complied in all
respects with the requirements of Articles 2 and 3 hereof; provided, however,
that the rights provided for in Article 4 hereof to designate a Designee shall
not be assignable. If any transferee of any Stockholder shall acquire any
securities of the Company, in any manner, whether by operation of law or
otherwise, such securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such securities such Person shall be
entitled to receive the benefits of and be conclusively deemed to have agreed to
be bound by and to comply with all of the terms and provisions of this Agreement
to the extent applicable to such Person's transferor; provided, however, that
the rights provided for in Article 4 hereof to designate a Designee shall not
inure to the benefit of or apply to any such transferee. Notwithstanding the
foregoing, each transferee of any securities of the Company shall execute and
deliver to the Company a Stock Transfer Agreement in the form attached hereto
as Exhibit A.
Section 9.2 Amendment and Modification; Waiver of Compliance.
This Agreement may be amended only by a written instrument duly executed by the
Company and Stockholders who own a majority of the then outstanding shares of
Common Stock, and shares of Series A Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock and Series E Preferred Stock and/or Common Stock into
which such shares of Preferred Stock have been converted, representing at least
66 2/3% of the voting power of such shares of Preferred Stock (for this purpose
shares of Preferred Stock shall be deemed to have a number of votes equal to the
number of shares of Common Stock into which such shares of Preferred Stock are
then convertible) and Common Stock, provided that, notwithstanding the
foregoing, without the prior consent or approval of the holders of a majority of
the Series E Preferred Stock, this Agreement may not be amended if such proposed
amendment affects the Series E Preferred Stock but does not so affect the Series
C Preferred Stock and the Series D Preferred Stock.
31
<PAGE>
(b) Except as otherwise provided in this Agreement,
any failure of any of the parties to comply with any obligation, agreement or
condition herein may be waived by the party entitled to the benefits thereof
only by a written instrument signed by the party granting such waiver, but such
waiver or failure to insist upon strict compliance with such obligation,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
Section 9.3 Notices. Any notice, request, claim, demand,
document and other communication hereunder to any party shall be effective upon
receipt (or refusal of receipt) and shall be in writing and delivered personally
or sent by telex, telecopy, or certified or registered mail, postage prepaid, or
other similar means of communication, as follows:
If to the Company or any Founder:
PRAECIS PHARMACEUTICALS INCORPORATED
One Hampshire Street
Cambridge, MA 02142
Attention: Malcolm L. Gefter, Ph.D.
Telecopy: (617) 494-8414
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street, 31st Floor
Boston, MA 02108
Attention: Kent A. Coit, Esq.
Telecopy: (617) 573-4822
If to any of the Investors: at the addresses specified in
Schedules 1 or 2 attached hereto or a Stock Transfer
Agreement.
Section 9.4 Additional Parties. Any Person who acquires any
Company Stock from the Company after the date hereof may become a party to this
Agreement if agreed to by the Board and if such person shall agree in writing,
in form and substance reasonably acceptable to the Company, to be bound by and
to comply with all of the provisions of this Agreement.
Section 9.5 Entire Agreement; Governing Law. This Agreement
and the other writings referred to herein or delivered pursuant hereto, and
with respect to the Founders, the respective Stock Subscription and
Restriction Agreements dated July 27, 1993, as amended, between each of the
Founders and the Company, contain
32
<PAGE>
the entire agreement among the parties hereto with respect to the subject
transactions contemplated hereby and supersede all prior oral and written
agreements and memoranda and undertakings among the parties hereto with regard
to its subject matter; provided, however, that any representations set forth in
Section 3.6 of the Original Stockholders Agreement shall survive. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware without regard to the conflicts of laws provisions thereof.
Section 9.6 Injunctive Relief. The parties hereto
acknowledge and agree that a violation of any of the terms of this Agreement
will cause the parties irreparable injury for which adequate remedy at law is
not available. Therefore, the parties agree that each party shall be entitled to
an injunction, restraining order or other equitable relief from any court of
competent jurisdiction, restraining any party from committing any violations of
the provisions of this Agreement. Without limiting the generality of the
foregoing, the Company shall have the right to any such equitable relief to
prevent any unauthorized transfers of securities of the Company hereunder.
Section 9.7 Expenses. Except as expressly provided herein,
each party shall pay its own expenses incident to the performance or enforcement
of this Agreement, including all fees and expenses of its counsel for activities
of such counsel undertaken pursuant to this Agreement.
Section 9.8 Inspection. For so long as this Agreement shall
be in effect, this Agreement shall be made available for inspection by any
Stockholder at the principal executive office of the Company.
Section 9.9 Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 9.10 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
33
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by
the requisite parties on the date first above written.
PRAECIS PHARMACEUTICALS
INCORPORATED
By:/s/ Kevin F. McLaughlin
------------------------------------
Name:
Title: V.P. and CFO
/s/ Malcolm L. Gefter
------------------------------------
Malcolm L. Gefter
/s/ Ethan R. Signer
------------------------------------
Ethan R. Signer
/s/ A. Donny Strosberg
------------------------------------
A. Donny Strosberg
MASSACHUSETTS INSTITUTE OF
TECHNOLOGY
By /s/ Allan S. Bufferd
------------------------------------
Name: Allan S. Bufferd
Title: Deputy Treasurer
/s/ David L. Anderson
------------------------------------
David L. Anderson
/s/ G. Leonard Baker, Jr.
------------------------------------
G. Leonard Baker, Jr.
CANAAN VENTURES II LIMITED
PARTNERSHIP
By: Canaan Venture Partners II L.P.
By /s/ Harry T. Rein
------------------------------------
Name: Harry T. Rein
Title: Managing General Partner
34
<PAGE>
CANAAN VENTURES II OFFSHORE
C.V.
By: Canaan Venture Partners II L.P.
By /s/ Harry T. Rein
------------------------------------
Name: Harry T. Rein
Title: Managing General Partner
CHASE VENTURE CAPITAL
ASSOCIATES, L.P.
By: CHASE CAPITAL PARTNERS
Its General Partner
By /s/ Damion Wicker
------------------------------------
Name: Damion Wicker
Title: General Partner
/s/ Tench Coxe
------------------------------------
Tench Coxe
/s/ Sherryl W. Hossack
------------------------------------
James C. Gaither
By: Sherryl W. Hossack
Under Power of Attorney
GENSTAR INVESTMENT LLC
By /s/ Richard D. Paterson
------------------------------------
Name: Richard D. Paterson
Title: Member
GREYLOCK LIMITED PARTNERSHIP
By /s/ Henry F. McCance
------------------------------------
Name: Henry F. McCance
Title: General Partner
35
<PAGE>
HIGHLAND CAPITAL PARTNERS II
LIMITED PARTNERSHIP
By: Highland Management Partners II
Limited Partnership
Its General Partner
By /s/ Wycliffe K. Grousbeck
------------------------------------
General Partner
J.H. WHITNEY & CO.
By /s/ William Laverack, Jr.
------------------------------------
Name: William Laverack, Jr.
Title: General Partner
ROBERT W. AND LAURIE KITTS
By /s/ Robert W. Kitts
------------------------------------
Robert W. Kitts
By /s/ Laurie Kitts
------------------------------------
Laurie Kitts
/s/ Sherryl W. Hossack
------------------------------------
Ronald L. Perkins
By: Sherryl W. Hossack
Under Power of Attorney
SAUNDERS HOLDINGS, L.P.
By /s/ G. Leonard Baker, Jr.
------------------------------------
Name: G. Leonard Baker, Jr.
Title: Managing Director of the General
Partner
36
<PAGE>
SUTTER HILL VENTURES, A CALIFORNIA LIMITED
PARTNERSHIP
By /s/ G. Leonard Baker, Jr.
------------------------------------
Name: G. Leonard Baker, Jr.
Title: Managing Director of the General
Partner
TOW PARTNERS, A CALIFORNIA LIMITED PARTNERSHIP
By /s/ Paul M. Wythes
------------------------------------
Name: Paul M. Wythes
Title: General Partner
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO
David Anderson
By /s/ Annik Prasad
------------------------------------
Name: Annik Prasad
Title: Trust Officer
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO
G. Leonard Baker, Jr.
By /s/ Annik Prasad
------------------------------------
Name: Annik Prasad
Title: Trust Officer
WHITNEY 1990 EQUITY FUND, L.P.
By /s/ William Laverack, Jr.
------------------------------------
Name: William Laverack, Jr.
Title: General Partner
37
<PAGE>
PAUL M. WYTHES AND MARSHA R.
WYTHES, TRUSTEES OF THE WYTHES
LIVING TRUST 7-21-87
By /s/ Paul M. Wythes
------------------------------------
Name: Paul M. Wythes
Title: Trustee
/s/ William H. Younger, Jr.
------------------------------------
William H. Younger, Jr.
WILLIAM H. YOUNGER, JR.,
TRUSTEE OF THE YOUNGER LIVING
TRUST 1-20-95
By /s/ William H. Younger, Jr.
------------------------------------
Name: William H. Younger, Jr.
Title: Trustee
/s/ Steven P. Bird
------------------------------------
Steven P. Bird
COMDISCO, INC.
By
------------------------------------
Name:
Title:
/s/ Kevin J. McQuillan
------------------------------------
Kevin J. McQuillan
HLM PARTNERS V, L.P.
By /s/ A. R. Haberkorn III
------------------------------------
Name: A. R. Haberkorn III
Title: General Partner HLM Associates V,
L.P. the General Partner of HLM
Partners V, L.P.
38
<PAGE>
PHARMA/wHEALTH FUND
By /s/ Samuel D. Isaly
------------------------------------
Name: Samuel D. Isaly
Title: Portfolio Manager
VULCAN VENTURES, INC.
By /s/ William D. Savoy
------------------------------------
Name: William D. Savoy
Title: Vice President
/s/ Albert L. Zesiger
------------------------------------
Albert L. Zesiger
ARTHUR D. LITTLE EMPLOYEE
PENSION PLAN
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
CITY OF STAMFORD FIREMEN'S
PENSION FUND
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
DEAN WITTER FOUNDATION
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
DEMVEST EQUITIES, L.P.
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
39
<PAGE>
FERRIS F. HAMILTON FAMILY TRUST
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
HBL CHARITABLE UNITRUST
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
/s/ Albert L. Zesiger
------------------------------------
William B. Lazar
By: Albert L. Zesiger
Agent & Attorney-in-fact
/s/ Albert L. Zesiger
------------------------------------
Jeanne Morency
By: Albert L. Zesiger
Agent & Attorney-in-fact
WOLFSON INVESTMENT PARTNERS LP
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
/s/ Albert L. Zesiger
------------------------------------
Leonard Kingsley
By: Albert L. Zesiger
Agent & Attorney-in-fact
/s/ Albert L. Zesiger
------------------------------------
Helen Hunt
By: Albert L. Zesiger
Agent & Attorney-in-fact
40
<PAGE>
MARY ANN HAMILTON TRUST
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
MORGAN TRUST CO. OF THE
BAHAMAS LTD.
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
NORWALK EMPLOYEE PENSION FUND
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
ROANOKE COLLEGE
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
STATE OF OREGON PERS/ZCG
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
TAB PRODUCTS COMPANY
PENSION PLAN
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
THE BREARLEY SCHOOL
ENDOWMENT FUND
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
41
<PAGE>
THE CHAPIN SCHOOL LTD.
ENDOWMENT FUND
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
THE JENIFER ALTMAN FOUNDATION
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
THE RAISER MARITAL TRUST
By /s/ Mark Collins, Jr.
------------------------------------
Name: Mark Collins, Jr.
Title: Principal, Alex Brown Capital
VAN LOBEN SELS FOUNDATION
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
WARREN INVESTMENT GROUP LTD.
LLC
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
WARREN OTOLOGIC PROFIT
SHARING TRUST
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
42
<PAGE>
WELLS FAMILY LLC
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
/s/ James Finnerty
------------------------------------
James Finnerty
QUANTUM INDUSTRIAL PARTNERS
LDC
By /s/ Michael C. Neus
------------------------------------
Name: Michael C. Neus
Title: Attorney-In-Fact
TRUSTEES OF AMHERST COLLEGE
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
CITY OF MILFORD PENSION &
RETIREMENT FUND
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
PUBLIC EMPLOYEE RETIREMENT
SYSTEM OF IDAHO
By /s/ Albert L. Zesiger
------------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
43
<PAGE>
SCHEDULE 1
NAMES AND ADDRESSES OF EXISTING INVESTORS
J.H. Whitney & Co.
177 Broad Street
Stamford, CT 06901
Attn: William Laverack
Whitney 1990 Equity Fund, L.P.
177 Broad Street
Stamford, CT 06901
Attn: William Laverack
Greylock Limited Partnership
One Federal Street, 26th Floor
Boston, MA 02110
Attn: Henry F. McCance
Chase Venture Capital Associates, L.P.
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, NY 10017
Attn: Damion E. Wicker
Highland Capital Partners II Limited Partnership
Two International Place, 22nd Floor
Boston, MA 02110
Attn: Wycliffe Grousbeck
Canaan Ventures II Offshore C.V.
105 Rowayton Avenue
Rowayton, CT 06853
Attn: Harry T. Rein
<PAGE>
Canaan Ventures II Limited Partnership
105 Rowayton Avenue
Rowayton, CT 06853
Attn: Harry T. Rein
Sutter Hill Ventures
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Attn: G. Leonard Baker
TOW Partners
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Saunders Holdings, L.P.
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
William H. Younger, Jr.
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Tench Coxe
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Ronald L. Perkins
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
S1-2
<PAGE>
Wells Fargo Bank, Trustee SHV M/P/T FBO
G. Leonard Baker, Jr.
Attn: Annik Prasad
420 Montgomery Street
San Francisco, CA 94104
Wells Fargo Bank, Trustee SHV M/P/T FBO
David L. Anderson
Attn: Annik Prasad
420 Montgomery Street
San Francisco, CA 94104
James C. Gaither
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
William H. Younger, Jr., Trustee of
The Younger Living Trust 1-20-95
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
G. Leonard Baker, Jr.
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
David L. Anderson
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
Paul M. Wythes and Marsha R. Wythes,
Trustees of The Wythes Living
Trust 7-21-87
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
Genstar Investment LLC
Metro Tower, Suite 1170
950 Tower Lane
Foster City, CA 94404-2121
Attn: R.D. Paterson
S1-3
<PAGE>
Eric Gleacher
c/o Gleacher NatWest, Inc.
660 Madison Avenue
New York, NY 10021
Charles G. Phillips
c/o Gleacher NatWest, Inc.
660 Madison Avenue
New York, NY 10021
James Goodwin
c/o Gleacher NatWest, Inc.
660 Madison Avenue
New York, NY 10021
H. Conrad Meyer
c/o Gleacher NatWest, Inc.
660 Madison Avenue
New York, NY 10021
Emil W. Henry
c/o Gleacher NatWest, Inc.
660 Madison Avenue
New York, NY 10021
Richard A. Derbes
c/o Morgan Stanley & Co.
1585 Broadway
New York, NY 10036-8293
Robert W. Kitts
c/o Morgan Stanley & Co.
1585 Broadway
New York, NY 10036-8293
Comdisco, Inc.
6111 North River Road
Rosemont, IL 60018
Attn: Jill C. Hanses
S1-4
<PAGE>
Massachusetts Institute of Technology
Office of the Treasurer
238 Main Street
Suite 200
Cambridge, MA 02142
Attn: Philip Rotner
Venture Capital Officer
PHARMA/wHEALTH Fund
c/o G/A Capital Management
41 Madison Avenue
New York, NY 10010-2202
Attn: Samuel D. Isaly
Vulcan Ventures, Inc.
110-110th Avenue Northeast
Suite 550
Bellevue, WA 98004
Attn: William D. Savoy
Kevin J. McQuillan
345 Cervantes Road
Portola Valley, CA 94028
Steven P. Bird
8 Faxon Road
Atherton, CA 94027
HLM Partners V, L.P.
222 Berkeley Street
Boston, MA 02116
Attn: Buck Haberkorn
Robert W. and Laurie Kitts
c/o Morgan Stanley & Co.
1585 Broadway
New York, NY 10036-8293
Albert L. Zesiger
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
S1-5
<PAGE>
Arthur D. Little Employee Pension Fund
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
City of Stamford Firemen's Pension Fund
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Dean Witter Foundation
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Demvest Equities, L.P.
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Ferris F. Hamilton Family Trust
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
HBL Charitable Unitrust
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Helen Hunt
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
S1-6
<PAGE>
Leonard Kingsley
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Mary Ann Hamilton Trust
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Morgan Trust Co. of The Bahamas Ltd.
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Norwalk Employee Pension Fund
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Roanoke College
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
State of Oregon PERS/ZCG
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Tab Products Company Pension Plan
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
S1-7
<PAGE>
The Brearley School Endowment Fund
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
The Chapin School Ltd. Endowment Fund
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
The Jennifer Altman Foundation
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
The Raiser Marital Trust
Alex Brown Capital Advisory & Trust Co.
19 South Street
Baltimore, MD 21202
Attn: Venedia Andrews
Van Loben Sels Foundation
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Warren Investment Group Ltd. LLC
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Warren Otologic Profit Sharing Trust
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
S1-8
<PAGE>
Wells Family LLC
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
James Finnerty
128 Cliff Road
Wellesley, MA 02181
Wolfson Investment Partners LP
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
William B. Lazar
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Jeanne Morency
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Quantum Industrial Partners LDC
c/o Michael C. Neus
Attorney-in-fact
888 Seventh Avenue
New York, NY 10106
S1-9
<PAGE>
SCHEDULE 2
NAMES AND ADDRESSES OF NEW INVESTORS
J.H. Whitney & Co.
177 Broad Street
Stamford, CT 06901
Attn: William Laverack
Whitney 1990 Equity Fund, L.P.
177 Broad Street
Stamford, CT 06901
Attn: William Laverack
Greylock Limited Partnership
One Federal Street, 26th Floor
Boston, MA 02110
Attn: Henry F. McCance
Chase Venture Capital Associates, L.P.
c/o Chase Capital Partners
380 Madison Avenue, 12th Floor
New York, NY 10017
Attn: Damion E. Wicker
Highland Capital Partners II Limited Partnership
Two International Place, 22nd Floor
Boston, MA 02110
Attn: Wycliffe Grousbeck
Canaan Ventures II Offshore C.V.
105 Rowayton Avenue
Rowayton, CT 06853
Attn: Harry T. Rein
Canaan Ventures II Limited Partnership
105 Rowayton Avenue
Rowayton, CT 06853
Attn: Harry T. Rein
S1-1
<PAGE>
Sutter Hill Ventures, A California Limited Partnership
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Attn: G. Leonard Baker
Paul M. Wythes and Marsha R. Wythes,
Trustees of The Wythes Living Trust 7-21-87
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
TOW Partners, A California Limited Partnership
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
William H. Younger, Jr.,
Trustee of the Younger Living Trust 1-20-95
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Tench Coxe
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
James C. Gaither
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Ronald L. Perkins
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Wells Fargo Bank, Trustee
SHV M/P/T FBO David L. Anderson
420 Montogmery Street, 2nd Floor
San Francisco, CA 94104
Attn: Annik Prasad
S1-2
<PAGE>
Wells Fargo Bank, Trustee
SHV M/P/T FBO G. Leonard Baker, Jr.
420 Montgomery Street, 2nd Floor
San Francisco, CA 94104
Attn: Annik Prasad
Genstar Investment LLC
Metro Tower, Suite 1170
950 Tower Lane
Foster City, CA 94404-2121
Attn: R.D. Paterson
Vulcan Ventures, Inc.
110-110th Avenue Northeast
Suite 550
Bellevue, WA 98004
Attn: William D. Savoy
HLM Partners V, L.P.
222 Berkeley Street
Boston, MA 02116
Attn: Buck Haberkorn
Trustees of Amherst College
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
City of Milford Pension & Retirement Fund
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
Public Employee Retirement System of Idaho
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
S1-3
<PAGE>
State of Oregon PERS/ZCG
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Attn: Albert L. Zesiger
S1-4
<PAGE>
EXHIBIT A
STOCK TRANSFER AGREEMENT
The undersigned, being the transferee of _____ shares of __________
stock1 of PRAECIS PHARMACEUTICALS INCORPORATED, a Delaware corporation (the
"Company"), as a condition to the receipt of such shares, acknowledges that
the voting and transfer of such shares are restricted by an Amended and
Restated Stockholders Agreement dated as of April 30, 1998 (the
"Stockholders Agreement") among the Company and certain of it stockholders,
and the undersigned agrees to be bound by the terms of (and shall be a party
to) the Stockholders Agreement, as such agreement has been or may be amended,
and to be a "Stockholder" for purposes of the Stockholders Agreement.
Agreed to this _____ day of __________, ____.
-----------------------------------
Name:
2
-------------------------------------------
Confirmed on behalf of the parties to the Stockholders Agreement as of the date
hereof.
PRAECIS PHARMACEUTICALS INCORPORATED
By ---------------------------------
Name:
Title:
- --------
1 Specify title of equity securities.
2 Include address for notices.
<PAGE>
AMENDMENT NO. 1 TO AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
AMENDMENT NO. 1 dated as of May 14, 1998 to Amended and
Restated Stockholders Agreement dated as of April 30, 1998 by and among PRAECIS
PHARMACEUTICALS INCORPORATED, a Delaware corporation (the "Company"), and the
stockholders of the Company referred to therein (the "Stockholders Agreement").
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to such terms in the Stockholders Agreement.
The Company and the Stockholders of the Company who are
signatories hereto desire to amend the Stockholders Agreement as set forth
herein.
Pursuant to Section 9.2 of the Stockholders Agreement, the
Stockholders Agreement may be amended only by a written instrument duly
executed by the Company and Stockholders who own a majority of the then
outstanding shares of Common Stock, and shares of Series A Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock
and/or Common Stock into which such shares of Preferred Stock have been
converted, representing at least 66 2/3% of the voting power of such shares of
Preferred Stock (for this purpose shares of Preferred Stock shall be deemed to
have a number of votes equal to the number of shares of Common Stock into which
such shares of Preferred Stock are then convertible) and Common Stock.
The signatories hereto represent holders of greater than a
majority of the outstanding shares of Common Stock held by Stockholders and
greater than 66 2/3% of the shares of Common Stock issued or issuable upon
conversion of the Series A Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock.
In consideration of the foregoing, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. The definition of "Related Party" set forth in Article 1 of
the Stockholders Agreement is hereby amended by (x) deleting the word
"affiliates" as it appears in the third and fifth lines of clause (iv) of such
definition and replacing it with the word "Affiliates" and (y) deleting the
period at the end of clause (iv), adding ";" to the end of such clause and
adding the following as the final clauses of such definition:
"(v) In the case of a limited liability company, (A) such limited
liability company and any of its members, (B) any former
members of such
<PAGE>
limited liability company, (C) the estates or other legal
representatives of any such members or former members, (D) any
corporation, partnership, limited liability company or other
business organization to which such limited liability company
shall sell all or substantially all of its assets or with
which it shall be merged and (E) any Affiliate of such limited
liability company;
(vi) In the case of a Stockholder which is, or an Affiliate of
which is, engaged in the investment advisory or investment
management business as of the date hereof (a
"Manager-Stockholder"), in addition to the above, any Person
or entity for which such Manager-Stock holder or any such
Affiliate acts as investment advisor or investment manager;
and
(vii) In the case of a Stockholder for which a Manager-Stockholder
or any Affiliate thereof acts as investment advisor or
investment manager, in addition to the above, any other Person
or entity for which such Manager-Stockholder or any such
Affiliate acts as investment advisor or investment manager."
2. Section 3.6 of the Stockholders Agreement is hereby amended
by (x) inserting "(i)" immediately before the word "unless" in the fourth line
of such section; (y) replacing the word "Purchaser" as it appears in two places
in the ninth line of such section with the word "Investor"; and (z) deleting the
period at the end of such section and adding the following as the final clause
of Section 3.6:
"or (ii) the Company determines that such Transfer would
result in the Company being required to register any of its
securities under the Exchange Act."
3. Counterparts. This Amendment No. 1 may be signed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
2
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment
No. 1 to the Stockholders Agreement as of the date first written above.
PRAECIS PHARMACEUTICALS
INCORPORATED
By:/s/ Malcolm L. Gefter
--------------------------
Name:
Title:
/s/ Malcolm L. Gefter
--------------------------
Malcolm L. Gefter
/s/ Ethan R. Signer
--------------------------
Ethan R. Signer
/s/ A. Donna Strosberg
--------------------------
A. Donny Strosberg
MASSACHUSETTS INSTITUTE OF
TECHNOLOGY
By /s/ Allan S. Bufferd
--------------------------
Name: Allan S. Bufferd
Title: Deputy Treasurer
/s/ David L. Anderson
--------------------------
David L. Anderson
/s/ G. Leonard Baker, Jr.
--------------------------
G. Leonard Baker, Jr.
3
<PAGE>
CANAAN VENTURES II LIMITED
PARTNERSHIP
By: Canaan Venture Partners II L.P.
By /s/ Harry T. Rein
--------------------------
Name: Harry T. Rein
Title: Managing General Partner
CANAAN VENTURES II OFFSHORE
C.V.
By: Canaan Venture Partners II L.P.
By /s/ Harry T. Rein
--------------------------
Name: Harry T. Rein
Title: Managing General Partner
CHASE VENTURE CAPITAL
ASSOCIATES, L.P.
By: CHASE CAPITAL PARTNERS
Its General Partner
By /s/ Damion E. Wicker
--------------------------
Name:
Title:
/s/ Tench Coxe
--------------------------
Tench Coxe
/s/ Sherryl W. Hossack
--------------------------
James C. Gaither
By: Sherryl W. Hossack
Under Power of Atty
GENSTAR INVESTMENT LLC
By /s/ Richard D. Paterson
--------------------------
Name: Richard D. Paterson
Title: Member
4
<PAGE>
GREYLOCK LIMITED PARTNERSHIP
By /s/ Henry F. McCance
--------------------------
Name: Henry F. McCance
Title: General Partner
HIGHLAND CAPITAL PARTNERS II
LIMITED PARTNERSHIP
By: Highland Management Partners II
Limited Partnership
Its General Partner
By /s/ Wycliffe K. Grousbeck
--------------------------
General Partner
J.H. WHITNEY & CO.
By /s/ William Laverack, Jr.
--------------------------
Name:
Title:
ROBERT W. AND LAURIE KITTS
By /s/ Robert W. Kitts
--------------------------
Robert W. Kitts
By /s/ Laurie Kitts
--------------------------
Laurie Kitts
/s/ Sherryl W. Hossack
--------------------------
Ronald L. Perkins
By: Sherryl W. Hossack
Under Power of Atty
SAUNDERS HOLDINGS, L.P.
By /s/ G. Leonard Baker, Jr.
--------------------------
Name: G. Leonard Baker, Jr.
Title: General Partner
5
<PAGE>
SUTTER HILL VENTURES, A CALIFORNIA
LIMITED PARTNERSHIP
By /s/ G. Leonard Baker, Jr.
--------------------------
Name: G. Leonard Baker, Jr.
Title: Managing Director of the
General Partner
TOW PARTNERS, A CALIFORNIA LIMITED
PARTNERSHIP
By /s/ Paul M. Wythes
--------------------------
Name: Paul M. Wythes
Title: General Partner
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO David Anderson
By /s/ Annik Prasad
--------------------------
Name: Annik Prasad
Title: Trust Officer
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO G. Leonard Baker, Jr.
By /s/ Annik Prasad
--------------------------
Name: Annik Prasad
Title: Trust Officer
WHITNEY 1990 EQUITY FUND, L.P.
By /s/ William Laverack, Jr.
--------------------------
Name:
Title:
PAUL M. WYTHES AND MARSHA R.
WYTHES, TRUSTEES OF THE WYTHES
LIVING TRUST 7-21-87
By /s/ Paul M. Wythes
--------------------------
Name: Paul M. Wythes
Title: Trustee
6
<PAGE>
/s/ William H. Younger, Jr.
--------------------------
William H. Younger, Jr.
WILLIAM H. YOUNGER, JR.,
TRUSTEE OF THE YOUNGER LIVING
TRUST 1-20-95
By /s/ William H. Younger, Jr.
--------------------------
Name: William H. Younger, Jr.
Title: Trustee
/s/ Steven P. Bird
--------------------------
Steven P. Bird
COMDISCO, INC.
By
--------------------------
Name:
Title:
/s/ Kevin J. McQuillan
--------------------------
Kevin J. McQuillan
HLM PARTNERS V, L.P.
By /s/ A.R. Haberkorn, III
--------------------------
Name: A.R. Haberkorn, III
Title: General Partner, HLM
Associates V, L.P., the
General Partner of HLM
Partners V, L.P.
PHARMA/wHEALTH FUND
By /s/ Samuel D. Isaly
--------------------------
Name: Samuel D. Isaly
Title: Manager of Fund
7
<PAGE>
VULCAN VENTURES, INC.
By /s/ William D. Savoy
-----------------------
Name: William D. Savoy
Title: Vice President
/s/ Albert L. Zesiger
--------------------------
Albert L. Zesiger
ARTHUR D. LITTLE EMPLOYEE
PENSION PLAN
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
CITY OF STAMFORD FIREMEN'S
PENSION FUND
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
DEAN WITTER FOUNDATION
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
DEMVEST EQUITIES, L.P.
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
FERRIS F. HAMILTON FAMILY TRUST
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
8
<PAGE>
HBL CHARITABLE UNITRUST
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
/s/ Albert L. Zesiger
--------------------------
William B. Lazar
By: Albert L. Zesiger
Agent & Attorney-in-fact
/s/ Albert L. Zesiger
--------------------------
Jeanne Morency
By: Albert L. Zesiger
Agent & Attorney-in-fact
WOLFSON INVESTMENT PARTNERS LP
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
/s/ Albert L. Zesiger
--------------------------
Leonard Kingsley
By: Albert L. Zesiger
Agent & Attorney-in-fact
/s/ Albert L. Zesiger
--------------------------
Helen Hunt
By: Albert L. Zesiger
Agent & Attorney-in-fact
MARY ANN HAMILTON TRUST
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
9
<PAGE>
MORGAN TRUST CO. OF THE
BAHAMAS LTD.
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
NORWALK EMPLOYEE PENSION FUND
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
ROANOKE COLLEGE
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
STATE OF OREGON PERS/ZCG
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
TAB PRODUCTS COMPANY
PENSION PLAN
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
THE BREARLEY SCHOOL
ENDOWMENT FUND
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
10
<PAGE>
THE CHAPIN SCHOOL LTD.
ENDOWMENT FUND
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
THE JENIFER ALTMAN FOUNDATION
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
THE RAISER MARITAL TRUST
By /s/ Mark Collins, Jr.
-----------------------
Name: Mark Collins, Jr.
Title: Principal, Alex Brown Capital
VAN LOBEN SELS FOUNDATION
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
WARREN INVESTMENT GROUP LTD.
LLC
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
WARREN OTOLOGIC PROFIT
SHARING TRUST
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
11
<PAGE>
WELLS FAMILY LLC
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
/s/ James Finnerty
--------------------------
James Finnerty
QUANTUM INDUSTRIAL PARTNERS
LDC
By /s/ Michael C. Neus
-----------------------
Name: Michael C. Neus
Title: Attorney-In-Fact
TRUSTEES OF AMHERST COLLEGE
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
CITY OF MILFORD PENSION &
RETIREMENT FUND
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
PUBLIC EMPLOYEE RETIREMENT
SYSTEM OF IDAHO
By /s/ Albert L. Zesiger
-----------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
12
<PAGE>
AMENDMENT NO. 2 TO AMENDED AND
RESTATED STOCKHOLDERS AGREEMENT
AMENDMENT NO. 2 dated as of July 21, 1998 to Amended and
Restated Stockholders Agreement dated as of April 30, 1998 by and among
PRAECIS PHARMACEUTICALS INCORPORATED, a Delaware corporation (the "Company"),
and the stockholders of the Company referred to therein, as amended by
Amendment No. 1 dated as of May 14, 1998 (the "Stockholders Agreement").
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to such terms in the Stockholders Agreement.
The Company and the Stockholders of the Company who are
signatories hereto desire to amend the Stockholders Agreement as set forth
herein.
Pursuant to Article 6 of the Stockholders Agreement,
certain Stockholders have demand registration rights and all Stockholders
have piggyback registration rights.
The Company desires to effect an Initial Public Offering,
and, in order to facilitate such Initial Public Offering, the Company desires
that the piggyback registration rights of the Stockholders pursuant to
Section 6.2 of the Stockholders Agreement not apply to the Initial Public
Offering and the demand registration rights of the Stockholders pursuant to
Section 6.1 of the Stock holders Agreement be deferred until 180 days after
con summation of the Initial Public Offering.
Pursuant to Section 9.2 of the Stockholders Agreement, the
Stockholders Agreement may be amended by a written instrument duly executed
by (i) the Company; (ii) the Stockholders who own a majority of the then
outstanding shares of Common Stock, and shares of Series A Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred
Stock and/or Common Stock into which such shares of Preferred Stock have been
converted, representing at least 66 2/3% of the voting power of such shares
of Preferred Stock (for this purpose shares of Preferred Stock shall be
deemed to have a number of votes equal to the number of shares of Common
Stock into which such shares of Preferred Stock are then convertible) and
Common Stock; and (iii) since such proposed amendment in part affects the
Series E Preferred Stock (and not the Series C Preferred Stock and Series D
Preferred Stock), the holders of a majority of the Series E Preferred Stock.
<PAGE>
In consideration of the foregoing, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Deferral of Registration Rights. The following is
hereby added as the final Section of Article 6 of the Stockholder Agreement:
"Section 6.7 Deferral of Registration Rights. The holders of
Registrable Securities shall have no right (i) pursuant to Section 6.2,
to have their Registrable Securities in cluded as part of an Initial
Public Offering and (ii) pursuant to Section 6.1, to request that the
Company effect a registration under the Securities Act of all or part
of such holder's Registrable Securities until 180 days after the
effectiveness of the registration statement for the Initial Public
Offering; provided, however, that if the Initial Public Offering is
not consummated on or prior to December 31, 1998, this Section 6.7
shall be void and of no further force or effect."
2. Counterparts. This Amendment No. 2 may be signed
in one or more counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this
Amendment No. 2 to the Amended and Restated Stockholders Agreement as of the
date first written above.
PRAECIS PHARMACEUTICALS
INCORPORATED
By: /s/ Malcolm L. Gefter
-------------------------------
Name: Malcolm L. Gefter
Title: Chairman of the Board, CEO and President
/s/ Malcolm L. Gefter
--------------------------------
Malcolm L. Gefter
2
<PAGE>
/s/ Ethan R. Signer
------------------------------
Ethan R. Signer
/s/ A. Donny Strosberg
------------------------------
A. Donny Strosberg
MASSACHUSETTS INSTITUTE OF
TECHNOLOGY
By:/s/ Allan S. Bufferd
------------------------------
Name: Allan S. Bufferd
Title: Director of Investments
/s/ David Anderson
------------------------------
David L. Anderson
/s/ G. Leonard Baker
------------------------------
G. Leonard Baker
CANAAN VENTURES II LIMITED
PARTNERSHIP
By: Canaan Venture Partners II
L.P.
By:/s/ Harry T. Rein
------------------------------
Name: Harry T. Rein
Title: General Partner
CANAAN VENTURES II OFFSHORE
C.V.
By: Canaan Venture Partners II
L.P.
By:/s/ Harry T. Rein
------------------------------
Name: Harry T. Rein
Title: General Partner
3
<PAGE>
CHASE VENTURE CAPITAL
ASSOCIATES, L.P.
By: CHASE CAPITAL PARTNERS
Its General Partner
By:/s/ Damion E. Wicker, M.D.
------------------------------
Name: Damion E. Wicker, M.D.
Title: General Partner
/s/ Tench Coxe
--------------------------------
Tench Coxe
/s/ Sherryl W Hossack
--------------------------------
James C. Gaither
By: Sherryl W. Hossack
Under Power of Attorney
GENSTAR INVESTMENT LLC
By:/s/ Angus A. MacNaughton
------------------------------
Name: Angus A. MacNaughton
Title: Member
GREYLOCK LIMITED PARTNERSHIP
By:/s/ Henry McCance
------------------------------
Name: Henry McCance
Title: General Partner
HIGHLAND CAPITAL PARTNERS II
LIMITED PARTNERSHIP
By: Highland Management Partners II
Limited Partnership
Its General Partner
By/s/ Wycliffe K. Grousbeck
------------------------------
General Partner
4
<PAGE>
J.H. WHITNEY & CO.
By:/s/ Daniel J. O'Brien
------------------------------
Name: Daniel J. O'Brien
Title: General Partner
ROBERT W. AND LAURIE KITTS
By/s/ Robert W. Kitts
------------------------------
Robert W. Kitts
By/s/ Laurie Kitts
------------------------------
Laurie Kitts
/s/ Sherryl W. Hossack
--------------------------------
Ronald L. Perkins
By: Sherryl W. Hossack
Under Power of Atty
SAUNDERS HOLDINGS, L.P.
By:/s/ G. Leonard Baker, Jr.
------------------------------
Name: G. Leonard Baker, Jr.
Title: General Partner
SUTTER HILL VENTURES
By /s/ G. Leonard Baker, Jr.
------------------------------
Name: G. Leonard Baker, Jr.
Title: Managing Director of
the General Partner
TOW PARTNERS
By /s/ Paul M. Wythes
------------------------------
Name: Paul M. Wythes
Title: General Partner
5
<PAGE>
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO
David Anderson
By/s/ Vicki M. Bandel
------------------------------
Name: Vicki M. Bandel
Title: A.V.P. & T.O.
By/s/ S. Matson
------------------------------
Name: S. Matson
Title: A.V.P. & T.O.
WELLS FARGO BANK, TRUSTEE
SHV M/P/T FBO
G. Leonard Baker, Jr.
By/s/ Vicki M. Bandel
------------------------------
Name: Vicki M. Bandel
Title: A.V.P. & T.O.
By/s/ S. Matson
------------------------------
Name: S. Matson
Title: A.V.P. & T.O.
WHITNEY 1990 EQUITY FUND, L.P.
By:/s/ Daniel J. O'Brien
------------------------------
Name: Daniel J. O'Brien
Title: General Partner
PAUL M. WYTHES AND MARSHA R.
WYTHES, TRUSTEES OF THE WYTHES
LIVING TRUST 7-21-87
By/s/ Paul M. Wythes
------------------------------
Name: Paul M. Wythes
Title: Trustee
/s/ William H. Younger
--------------------------------
William H. Younger, Jr.
6
<PAGE>
WILLIAM H. YOUNGER, JR.,
TRUSTEE OF THE YOUNGER LIVING
TRUST 1-20-95
By/s/ William H. Younger
------------------------------
Name: William H. Younger, Jr.
Title: Trustee
/s/ Steven Bird
--------------------------------
Steven P. Bird
COMDISCO, INC.
By:
------------------------------
Name:
Title:
/s/ Kevin J. McQuillan
--------------------------------
Kevin J. McQuillan
HLM PARTNERS V, L.P.
By:/s/ A.R. Haberkorn III
------------------------------
Name: A.R. Haberkorn III
Title: General Partner
PHARMA/wHEALTH FUND
By:/s/ Samuel D. Isaly
------------------------------
Name: Samuel D. Isaly
Title: Portfolio Manager
VULCAN VENTURES, INC.
By:/s/ William D. Savoy
------------------------------
Name: William D. Savoy
Title: Vice President
7
<PAGE>
/s/ Albert L. Zesiger
--------------------------------
Albert L. Zesiger
By: Albert L. Zesiger
Agent & Attorney-in-fact
ARTHUR D. LITTLE EMPLOYEE
PENSION PLAN
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
CITY OF STAMFORD FIREMEN'S
PENSION FUND
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
DEAN WITTER FOUNDATION
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
/s/ Albert L. Zesiger
------------------------------
Susan U. Halpern
By: Albert L. Zesiger
Agent & Attorney-in-fact
FERRIS F. HAMILTON FAMILY TRUST
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
8
<PAGE>
HBL CHARITABLE UNITRUST
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
/s/ Albert L. Zesiger
--------------------------------
William B. Lazar
By: Albert L. Zesiger
Agent & Attorney-in-fact
/s/ Albert L. Zesiger
------------------------------
Jeanne Morency
By: Albert L. Zesiger
Agent & Attorney-in-fact
/s/ Albert L. Zesiger
------------------------------
Helen Hunt
By: Albert L. Zesiger
Agent & Attorney-in-fact
/s/ Albert L. Zesiger
------------------------------
Leonard Kingsley
By: Albert L. Zesiger
Agent & Attorney-in-fact
WOLFSON INVESTMENT PARTNERS LP
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
MARY ANN HAMILTON TRUST
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
9
<PAGE>
MORGAN TRUST CO. OF THE
BAHAMAS LTD.
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
NORWALK EMPLOYEE PENSION FUND
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
ROANOKE COLLEGE
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
STATE OF OREGON PERS/ZCG
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
TAB PRODUCTS COMPANY
PENSION PLAN
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
10
<PAGE>
THE BREARLEY SCHOOL
ENDOWMENT FUND
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
THE JENNIFER ALTMAN FOUNDATION
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
THE RAISER MARITAL TRUST
By:/s/ Mark Collins, Jr.
------------------------------
Name: Mark Collins, Jr.
Title: Principal, Alex Brown Capital
VAN LOBEN SELS FOUNDATION
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
WARREN INVESTMENT GROUP LTD. LLC
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
11
<PAGE>
WARREN OTOLOGIC PROFIT
SHARING TRUST
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
WELLS FAMILY LLC
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
TRUSTEES OF AMHERST COLLEGE
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
CITY OF MILFORD PENSION &
RETIREMENT FUND
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
PUBLIC EMPLOYEE RETIREMENT
SYSTEM OF IDAHO
By:/s/ Albert L. Zesiger
------------------------------
Name: Albert L. Zesiger
Title: Agent & Attorney-in-fact
/s/ James Finnerty
------------------------------
James Finnerty
12
<PAGE>
QUANTUM INDUSTRIAL PARTNERS LDC
By:/s/ Michael C. Neus
------------------------------
Name: Michael C. Neus
Title: Attorney-in-fact
13
<PAGE>
Exhibit 10.5
STOCK AND WARRANT PURCHASE AGREEMENT
between
SYLAMERICA, INC.
and
PRAECIS PHARMACEUTICALS, INC.
Dated as of May 13, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I PURCHASE AND SALE OF SHARES AND WARRANT....................................................1
1.1 Purchase and Sale; Purchase Price...................................................1
1.2 Closing and Closing Date............................................................1
1.3 Deliveries at the Closing...........................................................1
ARTICLE II REPRESENTATIONS AND WARRANTIES OF
PURCHASER.................................................................3
2.1 Due Organization; Authority; Valid
Agreement.........................................................................3
2.2 No Violation........................................................................4
2.3 Investment Intention................................................................5
2.4 Disclosure of Information...........................................................5
2.5 Investment Experience; Accredited
Investor..........................................................................5
2.6 Restricted Securities...............................................................6
2.7 Further Limitations on Disposition..................................................7
2.8 Legends; Stop Transfer Instructions.................................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
PRAECIS...................................................................11
3.1 Due Organization; Authority; Valid
Agreement........................................................................12
3.2 No Violation.......................................................................13
3.3 Validity of Shares and Warrant Shares..............................................14
3.4 Financial Statements...............................................................15
3.5 Capitalization.....................................................................18
3.6 Litigation.........................................................................19
3.7 Intellectual Property..............................................................19
3.8 Registration Rights................................................................20
3.9 Corporate Documents................................................................20
3.10 Title to Property and Assets.......................................................20
3.11 Tax Returns and Payments...........................................................20
3.12 Changes............................................................................22
3.13 Contracts..........................................................................23
3.14 Compliance with Laws...............................................................23
3.15 Exempt Transaction.................................................................24
3.16 Investment Company Act of 1940.....................................................24
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE IV RESTRICTIONS ON TRANSFER OF THE
SECURITIES................................................................24
4.1 Restrictions on Transfer of Warrant................................................24
4.2 Restrictions on Transfer of Common
Stock............................................................................25
ARTICLE V STANDSTILL................................................................................28
ARTICLE VI REGISTRATION RIGHTS......................................................................32
6.1 Piggyback Registration.............................................................32
6.2 Registration Procedures............................................................36
6.3 Indemnification....................................................................41
6.4 Contribution.......................................................................47
6.5 Rule 144...........................................................................49
6.6 Definitions........................................................................50
ARTICLE VII INDEMNIFICATION; CERTAIN COVENANTS......................................................52
7.1 Indemnification....................................................................52
7.2 Information to be Furnished........................................................55
7.3 Closing Deliveries.................................................................55
ARTICLE VIII ENFORCEMENT............................................................................56
8.1 Injunctive Relief..................................................................56
8.2 Consent to Jurisdiction and Venue..................................................56
8.3 Service of Process.................................................................57
ARTICLE VIX MISCELLANEOUS...........................................................................58
9.1 Survival...........................................................................58
9.2 Entire Agreement; No Assignment;
Severability.....................................................................59
9.3 Notices............................................................................61
9.4 Best Efforts.......................................................................62
9.5 Fees and Expenses..................................................................63
9.6 Certain Definitions................................................................63
9.7 Counterparts.......................................................................64
9.8 Governing Law......................................................................64
</TABLE>
ii
<PAGE>
STOCK AND WARRANT PURCHASE AGREEMENT
STOCK AND WARRANT PURCHASE AGREEMENT dated as of May 13, 1997
(this "Agreement"), between Sylamerica, Inc., a Delaware corporation
("Purchaser") and a wholly owned subsidiary of Synthelabo, a societe anonyme
organized and existing under the laws of France ("Synthelabo"), and PRAECIS
PHARMACEUTICALS, INC., a Delaware corporation ("PRAECIS").
Concurrently with the execution and delivery of this
Agreement, PRAECIS and Synthelabo are entering into a definitive License
Agreement.
In consideration of the representations, covenants and
agreements herein contained, Purchaser and PRAECIS hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES AND WARRANT
1.1 Purchase and Sale; Purchase Price. Upon the terms and
subject to the conditions set forth in this Agreement, Purchaser agrees to
purchase from PRAECIS, and PRAECIS agrees to sell to Purchaser, 215,703 shares
of Common Stock (the "Shares") and a five-year warrant to purchase 53,926 shares
of Common Stock at an exercise
<PAGE>
price of $96.6 per share (the "Warrant"), for an aggregate purchase price of
U.S. $10,000,000 (the "Purchase Price").
1.2 Closing and Closing Date. The closing of the purchase and
sale of the Shares and the Warrant hereunder (the "Closing") is occurring on the
date hereof (sometimes referred to as the "Closing Date") at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP, One Beacon Street, Boston,
Massachusetts.
1.3 Deliveries at the Closing. At the Closing, PRAECIS is
delivering to Purchaser (i) a certificate or certificates, in definitive form,
representing the Shares, registered in Purchaser's name, (ii) a certificate
evidencing the Warrant in the form attached hereto as Exhibit A, duly executed
by PRAECIS and registered in Purchaser's name, and (iii) all other documents
required by the terms hereof to be delivered by PRAECIS at or prior to the
Closing against (x) payment by Purchaser to PRAECIS of the Purchase Price in
U.S. dollars in immediately available funds and (y) delivery by Purchaser to
PRAECIS of all other documents required by the terms hereof to be delivered by
Purchaser at or prior to the Closing.
2
<PAGE>
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents, warrants to, and
agrees with, PRAECIS as follows:
2.1 Due Organization; Authority; Valid Agreement. Purchaser is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and is qualified to do business as a foreign
corporation in each jurisdiction in which such qualification is required, except
where the failure to so qualify would not have a material adverse effect on
Purchaser's ability to perform its obligations hereunder. Purchaser has the
requisite corporate power and authority to enter into and perform this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance by Purchaser of this Agreement and the consummation by Purchaser
of the transactions contemplated hereby have been duly authorized by all
requisite corporate action on the part of Purchaser. This Agreement has been
duly executed and delivered by Purchaser and is a valid and binding agreement of
Purchaser, enforceable against Purchaser in accordance with its terms, subject
to (i) any applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or
3
<PAGE>
other similar laws now or hereafter in effect affecting creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).
2.2 No Violation. The execution, delivery and performance by
Purchaser of this Agreement and the purchase of the Shares and the Warrant by
Purchaser pursuant to this Agreement does not and will not (i) violate or
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute (or with notice or lapse of time, or both, constitute) a default
under (a) Purchaser's Certificate of Incorporation or By-laws as in effect on
the date hereof or (b) any mortgage, agreement, instrument, order, judgment,
injunction or decree to which Purchaser or its properties or assets is bound or
subject or (c) any statute, law, rule or regulation to which Purchaser or any of
its Affiliates (as defined herein) or their respective properties or assets is
bound or subject or (ii) require any consent, approval, authorization or permit
of, or filing with, any governmental or regulatory authority, to be obtained or
made by Purchaser or any of its Affiliates, except, in the case of clause
(i)(b), for any violation, conflict, breach or default which would not have a
material adverse effect on
4
<PAGE>
the ability of Purchaser to perform its obligations hereunder.
2.3 Investment Intention. Purchaser is acquiring the Shares
and the Warrant, and will acquire the shares of Common Stock issuable upon
exercise of the Warrant (the "Warrant Shares" and, together with the Shares and
the Warrant, the "Securities"), for its own account for the purpose of
investment and not with a view to the resale or distribution of any part thereof
and Purchaser has no present intention of selling, granting any participation
in, or otherwise distributing the same.
2.4 Disclosure of Information. Purchaser acknowledges that it
has reviewed such information about PRAECIS as it considers necessary or
appropriate for deciding whether to purchase the Securities, and has had an
opportunity to ask questions and receive answers from PRAECIS regarding its
investment in the Securities; provided, however, that such review of such
information shall not be deemed to impair or in any way affect Purchaser's
ability to rely upon PRAECIS' representations, warranties, covenants and other
agreements contained herein.
2.5 Investment Experience; Accredited Investor. Purchaser
acknowledges that it can bear the eco-
5
<PAGE>
nomic risk and complete loss of its investment in the Securities and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Securities. Purchaser
has not been organized solely for the purpose of acquiring the Securities.
Purchaser is an "accredited investor" as defined in Rule 501(a) of Regulation D,
as amended, under the Securities Act (as defined herein).
2.6 Restricted Securities. The Securities are characterized as
"restricted securities" under the federal securities laws of the United States
of America inasmuch as they are being or will be acquired from PRAECIS in a
transaction not involving a public offering and that under such laws and
applicable regulations thereunder such securities may be resold without
registration under the United States Securities Act of 1933, as amended (the
"Securities Act"), only in certain limited circumstances. Purchaser is familiar
with Rule 144 promulgated by the U.S. Securities and Exchange Commission (the
"SEC") under the Securities Act ("Rule 144"), as presently in effect, and
understands the resale limitations imposed on the Securities thereby and by
applicable provisions of the Securities Act.
6
<PAGE>
2.7 Further Limitations on Disposition. Without in any way
limiting the representations set forth above and subject to the limitations
contained in Article IV hereof, Purchaser further agrees not to make any
disposition of all or any portion of the Securities unless and until:
(a) there is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement and any applicable United States
federal or state securities law or regulation; or
(b) (i) Purchaser shall have notified PRAECIS of the proposed
disposition and shall have furnished PRAECIS with a detailed statement of the
circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by PRAECIS, Purchaser shall have furnished PRAECIS with an opinion of
counsel reasonably satisfactory to PRAECIS and in form and substance reasonably
satisfactory to PRAECIS that such disposition will not require registration of
such shares under the Securities Act; provided, however, that such prior notice
shall not be required in connection with any permitted transfers
7
<PAGE>
specified in Section 4.1 or in clauses (i) through (vii)
of Section 4.2.
2.8 Legends; Stop Transfer Instructions.
(a) Legend and Instructions Applicable to the
Shares. Purchaser hereby acknowledges and agrees that each of the certificates
representing the Shares and the Warrant Shares shall be subject to stop transfer
instructions against the transfer of legended certificates representing the
Shares or the Warrant Shares and shall bear a legend substantially as follows:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be transferred or otherwise disposed of unless they
have been registered under such Act or pursuant to an
exemption from registration under such Act. The sale,
transfer, pledge or other disposition of the shares
represented by this certificate is also subject to certain
limitations set forth in a Stock and Warrant Purchase
Agreement dated as of May 13, 1997 (the "Purchase Agreement")
between PRAECIS PHARMACEUTICALS, INC. and Sylamerica, Inc. A
copy of the Purchase Agreement is on file with the Secretary
of PRAECIS PHARMACEUTICALS, INC."
PRAECIS agrees that, at the request of Purchaser, it will
remove from the certificates representing the Shares (or any relevant portion
thereof) or the Warrant Shares (or any relevant portion thereof) (a) the legend
8
<PAGE>
contemplated by this Section 2.8(a) regarding restrictions under the Securities
Act in the event that outside counsel for Purchaser delivers to PRAECIS an
opinion to the effect that the sale or transfer of such Shares or Warrant Shares
is exempt from the registration requirements of the Securities Act or that such
sale or transfer is no longer restricted by the Securities Act, and (b) the
legend contemplated by this Section 2.8(a) regarding the limitations on transfer
hereunder at the time after which such limitations are no longer applicable or
have been waived in writing by PRAECIS.
(b) Legend and Instructions Applicable to Additional Shares.
Purchaser also acknowledges and agrees that any shares of Common Stock (in
addition to the Shares and the Warrant Shares) beneficially owned by Purchaser
or its Affiliates at any time prior to (but not after) the sale, transfer or
other disposition of all (but not less than all) of the Shares and the Warrant
Shares to any third party or parties ("Additional Shares") shall be subject to
similar stop transfer instructions as provided in Section 2.8(a) and shall bear
the following legend:
"The transfer of the shares repre-
sented by this certificate is subject
to certain limitations on transfer
9
<PAGE>
set forth in a Stock and Warrant
Purchase Agreement dated as of May
13, 1997 between PRAECIS PHARMACEUTI-
CALS, INC. and Sylamerica, Inc. A
copy of such agreement is on file
with the Secretary of PRAECIS
PHARMACEUTICALS, INC."
Purchaser agrees that if it or any of its Affiliates acquires any Additional
Shares it will promptly surrender to PRAECIS the certificates representing such
Additional Shares. Upon receipt thereof, PRAECIS will cause the aforesaid legend
to be placed on such certificates and such certificates will be promptly
returned to Purchaser. PRAECIS agrees that, at the request of Purchaser, it will
remove such legend from the certificates representing such Additional Shares at
the time after which the limitations on transfer referred to in such legend are
no longer applicable or have been waived in writing by PRAECIS.
(c) In addition, PRAECIS agrees that it will instruct its
transfer agent to register the transfer of any Shares, Warrant Shares or
Additional Shares sold by Purchaser or an Affiliate thereof in compliance with
the terms of this Agreement and presented for registration of transfer, provided
that the certificates representing such Shares, Warrant Shares or Additional
Shares are duly endorsed or accompanied by duly executed stock powers and
10
<PAGE>
otherwise in proper form for transfer on the stock trans-
fer books of PRAECIS.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PRAECIS
PRAECIS hereby represents and warrants to
Purchaser as follows:
3.1 Due Organization; Authority; Valid Agreement. PRAECIS is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and is qualified to do business as a foreign
corporation in each jurisdiction in which such qualification is required, except
where the failure to so qualify would not have a Material Adverse Effect (as
hereinafter defined). PRAECIS has the requisite corporate power and authority to
own or lease the properties which it owns or leases, to carry on its business as
now conducted, to enter into and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
PRAECIS of this Agreement and the Warrant, and the consummation by PRAECIS of
the transactions contemplated hereby and thereby, including the issuance and
sale of the Shares and the Warrant pursuant hereto and of the Warrant Shares
pursuant to the
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Warrant, have been duly authorized by all requisite corporate action on the part
of PRAECIS. This Agreement and the Warrant have been duly executed and delivered
by PRAECIS and each is a valid and binding agreement of PRAECIS, enforceable
against PRAECIS in accordance with its terms, subject to (i) any applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws now or hereafter in effect affecting creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law). PRAECIS has no
subsidiaries and does not own or control, directly or indirectly, any capital
stock or other equity interest in any other corporation, association, trust,
partnership, limited liability company, joint venture or other business entity.
3.2 No Violation. The execution, delivery and performance by
PRAECIS of this Agreement and the Warrant and the issuance and sale of the
Shares and the Warrant pursuant hereto and of the Warrant Shares pursuant to the
Warrant does not and will not (i) violate or conflict with or result in a breach
of the terms, conditions or provisions of, or constitute (or with notice or
lapse of time, or both, constitute) a default under, (a) PRAECIS'
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Amended and Restated Certificate of Incorporation, as amended (the "Charter"),
or Amended and Restated By-Laws (the "By-Laws"), each as currently in effect, or
(b) any mortgage, agreement, instrument, order, judgment, decree, injunction or
decree to which PRAECIS or its properties or assets is bound or subject or (c)
subject to the accuracy of Purchaser's representations contained in Sections
2.3, 2.4, 2.5, 2.6 and 2.7 hereof, any statute, law, rule or regulation to which
PRAECIS or its properties or assets is bound or subject or (ii) subject to the
accuracy of Purchaser's representations contained in Sections 2.3, 2.4, 2.5, 2.6
and 2.7 hereof, require any consent, approval, authorization or permit of, or
filing with, any governmental or regulatory authority, except, in the case of
clause (i)(b), for any violation, conflict, breach or default, which would not
have a material adverse effect on the business, operations or financial
condition of PRAECIS (a "Material Adverse Effect") or any adverse effect on the
legality or validity of the Securities or the rights of Purchaser as a holder of
shares of Common Stock.
3.3 Validity of Shares and Warrant Shares.
The Shares and the Warrant Shares, respectively, have
been duly authorized and reserved for issuance and, upon
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their issuance in accordance with the terms hereof or of the Warrant,
respectively, will be validly issued, fully paid and nonassessable, and, upon
such issuance, Purchaser will acquire good and valid title to such Shares and
Warrant Shares, respectively, free and clear of any liens, security interests,
options, charges, beneficial interests, claims or encumbrances of any type,
other than those created or caused by Purchaser, and such Shares and Warrant
Shares, respectively, will be free of restrictions on transfer other than
restrictions on transfer pursuant to this Agreement or the Warrant, restrictions
on transfer under applicable state and federal securities laws and restrictions
on transfer created or caused by Purchaser pursuant to agreements with third
parties.
3.4 Financial Statements. PRAECIS has delivered to Purchaser
its audited financial statements at December 31, 1996 and 1995 and for the
period from July 16, 1993 through December 31, 1996 and for the years ended
December 31, 1996, 1995 and 1994 (together with the related notes, the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated, except as may be otherwise stated
therein, and fairly present
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the financial position and the results of operations of PRAECIS at the
respective dates and for the respective periods to which they apply. Except as
set forth in the Financial Statements, PRAECIS has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to December 31, 1996 and (ii) obligations under contracts
and commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in the Financial
Statements, which, in the case of (i) and (ii) individually or in the aggregate,
have not had a Material Adverse Effect.
3.5 Capitalization.
(a) On the date hereof, the authorized capital stock of
PRAECIS consists of (i) 4,500,000 shares of Common Stock, of which (A) 455,988
shares have been duly and validly issued, are fully paid and nonassessable and
are presently outstanding, (B) 1,056,091 are reserved for issuance upon
conversion of PRAECIS' Series A Convertible Preferred Stock, par value $.01 per
share (the "Series A Preferred Stock"), including 14,925 shares of Common Stock
issuable upon conversion of the Series A Preferred Stock issuable upon exercise
of the Comdisco Warrants (as defined below), (C) 63,700 shares are reserved for
issu-
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ance upon conversion of PRAECIS' Series B Convertible Preferred Stock, par value
$.01 per share (the "Series B Preferred Stock"), (D) 1,052,632 shares are
reserved for issuance upon conversion of PRAECIS' Series C Convertible Preferred
Stock, par value $.01 per share (the "Series C Preferred Stock"), and (E)
962,195 shares are reserved for issuance upon exercise of options that have been
or may be granted under PRAECIS' 1995 Stock Plan, as amended; and (ii) 3,750,000
shares of preferred stock, par value $.01 per share, of PRAECIS ("Preferred
Stock"), of which (A) 1,061,166 shares have been designated as Series A
Preferred Stock, 1,041,166 of which have been duly and validly issued, are fully
paid and nonassessable and are presently outstanding and 14,925 of which are
reserved for issuance upon exercise of the warrants granted to Comdisco, Inc.
pursuant to the Warrant Agreement dated March 29, 1995 between PRAECIS and
Comdisco (the "Comdisco Warrants"), (B) 63,700 shares have been designated as
Series B Preferred Stock, all of which have been duly and validly issued, are
fully paid and nonassessable and are presently outstanding and (C) 1,052,632
shares have been designated as Series C Preferred Stock, all of which have been
duly and validly issued, are fully paid and nonassessable and are presently
outstanding. As of
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the date hereof, the conversion price for the Series A Preferred Stock and the
Series B Preferred Stock is $10.085 per share of Common Stock and the conversion
price for Series C Preferred Stock is $19.00 per share of Common Stock. Except
as set forth in this Section 3.5(a), as of the date hereof, PRAECIS has not
reserved any other shares of any class of its capital stock for future issuance.
(b) Except as referred to in Section 3.5(a) or as set forth on
Schedule 3.5(b) attached hereto, there are no existing subscriptions, options,
preemptive rights, first offer rights, conversion or exchange rights, warrants,
calls, repurchase or redemption agreements, or other agreements, claims or
commitments of any nature whatsoever obligating PRAECIS to issue, transfer,
deliver, sell, repurchase or redeem shares of capital stock (or securities
convertible into or exchangeable for shares of such capital stock) or obligating
PRAECIS to grant, extend or enter into any such agreement or commitment. Except
for the Amended Stockholders Agreement dated as of April 4, 1996 by and among
PRAECIS and the stockholders of PRAECIS listed on Schedules 1 and 2 thereto, as
amended by Amendment No. 1 dated as of February 13, 1997 (as so amended, the
"Stockholders Agree-
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ment"), there are no voting trusts or other agreements or understandings to
which PRAECIS is a party with respect to the voting of the capital stock of
PRAECIS, and PRAECIS is not aware of any other voting trusts, agreements or
understandings with respect to the voting of its capital stock. The issuance
of the Shares or Warrant Shares (assuming the Warrant Shares were issued on
the date hereof) to Purchaser pursuant to the provisions of this Agreement
and the Warrant, respectively, will not be subject to any first refusal or
preemptive rights or any anti-dilution protections given by PRAECIS to any
person or entity (including, without limitation, any stockholder, lender,
warrant-holder, lessor and/or licensor). Without limiting the foregoing, the
transactions contemplated under this Agreement and the Warrant are exempt
from the provisions of Article V of the Stockholders Agreement by virtue of
Section 5.3(viii) of the Stockholders Agreement.
3.6 Litigation. There is no pending suit, action or litigation,
administrative, arbitration or other proceeding to which PRAECIS is a party
and of which it has received notice, and, to the best knowledge of PRAECIS,
no such suit, action, litigation or proceeding is threatened. There is no
judgment, injunction, decree
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or order of any court or other governmental or public authority or agency
outstanding against PRAECIS of which PRAECIS has received written notice.
3.7 Intellectual Property. PRAECIS owns or has the right to use all
trade names, trademarks, trade dress, patents, trade secrets and proprietary
processes (collectively, "Proprietary Rights") necessary for its business as
presently conducted or as proposed to be conducted pursuant to business plans
previously disclosed in writing to Purchaser without, to PRAECIS' knowledge,
any material conflict with or infringement of the rights of others. PRAECIS
has not received any communication alleging that it has violated, or by
conducting its business as proposed would violate, any of the Proprietary
Rights of any other person or entity. PRAECIS is not aware of any
infringement by any third party on, or any competing claim of the right to
use or own, any of its Proprietary Rights that would, or would be reasonably
likely to, have a Material Adverse Effect.
3.8 Registration Rights. Except as provided herein and in the
Stockholders Agreement, a copy of which has previously been delivered to
Purchaser, PRAECIS has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
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3.9 Corporate Documents. The Charter and the By-Laws as in effect
on the Closing Date are attached hereto as Exhibits B and C, respectively.
3.10 Title to Property and Assets. PRAECIS does not own any real
property. With respect to property leased by PRAECIS, PRAECIS has a valid
leasehold interest in such property pursuant to leases which are in full
force and effect, and PRAECIS is in compliance in all material respects with
the material provisions of such leases. PRAECIS owns or has the right to use
under valid leasehold interests all assets and properties necessary for the
conduct of its business as presently conducted, free and clear of all
mortgages, judgments, claims, liens, security interests, pledges, escrows,
charges or other encumbrances, except for any of the foregoing which were
granted in connection with leasing arrangements or which would not have a
Material Adverse Effect.
3.11 Tax Returns and Payments. PRAECIS has timely filed all tax
returns and reports as required by law, except where the failure to file any
such tax return or report would not have a Material Adverse Effect. These
returns and reports are true and correct in all material respects. PRAECIS
has paid all taxes and other assessments due prior to the time penalties
would accrue
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thereon, except where the failure to pay such taxes or other assessments
would not have a Material Adverse Effect. PRAECIS has not been notified by
any federal or state taxing authority of any audit of the tax returns of
PRAECIS for any tax year, nor has PRAECIS received written notice that any
tax liens have been filed or that any addition to, or deficiency regarding,
taxes has been proposed, asserted or assessed against PRAECIS. PRAECIS has
not granted any extension of the statute of limitations applicable to any tax
return or other tax claim with respect to any taxable year. As used in this
Agreement, the terms "tax" and "taxes" shall, unless otherwise specified,
mean all income taxes (including any tax on or based upon net income, or
gross income, or income as specially defined, or earnings, or profits) and
all gross receipts, sales, use, ad valorem, transfer, franchise, license,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property or windfall profits taxes, alternative or add-on minimum
taxes, customs duties or other taxes, fees, assessments or charges of any
kind whatsoever, together with any interest and any penalties, additions to
tax or additional amounts imposed by any taxing authority (domestic or
foreign).
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3.12 Changes. Since December 31, 1996, there has not been:
(a) any change in the assets, liabilities, financial condition or
operations of PRAECIS except changes in the ordinary course of business which
have not, either individually or in the aggregate, had a Material Adverse
Effect;
(b) any damage, destruction or loss, whether or not covered by
insurance, causing (or which reasonably could be expected to cause) a
Material Adverse Effect;
(c) any satisfaction or discharge of any lien, claim or encumbrance
or payment of any obligation by PRAECIS, except in the ordinary course of
business and which has not had a Material Adverse Effect;
(d) any repurchase of PRAECIS' capital stock (other than the
repurchase of 2,333 shares of Common Stock), or any agreement entered into by
PRAECIS with respect to the repurchase of any of its capital stock (other
than option or severance agreements with current or former employees which
provide for stock repurchases from such employees in certain circumstances);
or
(e) any payment of dividends.
3.13 Contracts. Except as listed on Schedule 3.13 attached
hereto, as of the date hereof, PRAECIS is
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<PAGE>
not a party to or bound by any contract or agreement that is material to the
business of PRAECIS. All contracts and agreements listed on Schedule 3.13 are
valid and subsisting and PRAECIS is not in default thereunder nor, to the
best knowledge of PRAECIS, is any other party to any such contract or
agreement in default thereunder, nor to the best knowledge of PRAECIS, does
any condition exist which, with notice or lapse of time or both, would
constitute a default thereunder.
3.14 Compliance with Laws. PRAECIS currently holds and is in
material compliance with the terms of all licenses, permits and
authorizations necessary for the lawful conduct of the business of PRAECIS as
currently conducted, and has complied with, and is not in violation of, the
applicable statutes, ordinances, rules, regulations, orders or decrees of all
federal, state, local and foreign governmental bodies, agencies and
authorities having or asserting jurisdiction over it or over any part of its
operations or assets, except for any non-compliance, violations or defaults
which individually or in the aggregate would not have a Material Adverse
Effect.
3.15 Exempt Transaction. Based in part on the representations and
warranties of Purchaser contained in Sections 2.3, 2.4, 2.5, 2.6 and 2.7 of
this Agreement,
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<PAGE>
the offer and sale of the Shares and the Warrant pursuant to the terms hereof
are exempt from the registration requirements of the Securities Act.
3.16 Investment Company Act of 1940. PRAECIS is not an "investment
company" nor an entity "controlled" by an investment company, as such terms
are defined in the Investment Company Act of 1940, as amended.
ARTICLE IV
RESTRICTIONS ON TRANSFER OF THE SECURITIES
4.1 Restrictions on Transfer of Warrant. Without PRAECIS' prior
written consent, neither Purchaser nor any of its Affiliates will, directly
or indirectly, sell, transfer, pledge or otherwise dispose of the Warrant, or
any interest therein, except to an Affiliate of Purchaser (which, for
purposes of this Section 4.1 only, shall include any corporation or other
business organization to which Purchaser shall sell all or substantially all
of its assets or with which it shall be merged or to any third party which
acquires all (but not less than all) of the Shares from Purchaser in a
transaction permitted under the terms hereof) so long as such Affiliate has
agreed in writing with PRAECIS to be bound by this
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<PAGE>
Agreement and the terms of the Warrant applicable to the Purchaser.
4.2 Restrictions on Transfer of Common Stock. Without PRAECIS'
prior written consent, neither Purchaser nor any of its Affiliates will,
directly or indirectly, sell, transfer, pledge or otherwise dispose of any
Shares, or any interest therein, except (i) a transfer pursuant to an
effective registration statement under the Securities Act; (ii) a transfer of
Shares complying with Rule 144 as in effect on the date of such transfer and
as applied to Purchaser and its Affiliates (but only a sale pursuant to a
"brokers' transaction" as defined in clauses (i) and (ii) of paragraph (g) of
Rule 144 as in effect on the date hereof); (iii) to PRAECIS, pursuant to a
self-tender offer or otherwise; (iv) to an Affiliate of Purchaser (which, for
purposes of this Section 4.2(iv) only, shall include any corporation or other
business organization to which Purchaser shall sell all or substantially all
of its assets or with which it shall be merged), provided that such Affiliate
agrees in writing with PRAECIS that it will be bound by the provisions of
this Agreement applicable to the Purchaser; (v) to a third party pursuant to
a tender offer recommended by PRAECIS' Board of Directors; (vi) pursuant to
or in
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connection with a merger or consolidation in which PRAECIS will be the
acquired corporation, a sale or disposition of all or substantially all of
PRAECIS' assets or a plan of liquidation or dissolution of PRAECIS, which, in
any such case is approved by the stockholders of PRAECIS; (vii) pursuant to a
bona fide pledge of the Shares to secure indebtedness for borrowed money (and
not to circumvent the provisions of this Article IV) in which the pledgee
agrees in writing that, upon any transfer of the Shares to such pledgee, such
Shares shall remain subject to the restrictions set forth in this Agreement;
or (viii) in other bona fide sales for cash made to third parties pursuant to
an exemption from the registration requirements of the Securities Act if,
prior to any such sale, PRAECIS shall have failed (A) to unconditionally
agree in writing, within 20 days after PRAECIS' receipt of written notice
from Purchaser of the proposed sale, to purchase for cash the Shares to be
included in such sale at the same cash price offered by the third-party
purchaser, and (B) to conclude such purchase within 45 days after PRAECIS'
receipt of such written notice from Purchaser, provided however, that the
provisions of this clause (viii) shall be applicable only with respect to
sales and transfers made from and after
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<PAGE>
the first anniversary of the date hereof and only if each of the conditions
set forth in clauses 1 and 2 below are satisfied: (1) Purchaser has no actual
knowledge (without any independent duty of inquiry) that such third party
purchaser beneficially owns or, after giving effect to such proposed sale
would beneficially own, more than 5% of the then outstanding shares of Common
Stock and (2) such third party purchaser agrees in writing with PRAECIS that
it will be bound by the provisions of this Agreement applicable to the
Purchaser or any Affiliate thereof. Subject to the last sentence of this
Section 4.2, for purposes of this Article IV, the term "Shares" shall include
all shares of Common Stock beneficially owned by Purchaser or any of its
Affiliates, including without limitation any Warrant Shares and any
Additional Shares. Notwithstanding anything to the contrary in the foregoing,
with respect to any person or entity bound by this Agreement, the transfer
restrictions set forth in this Article IV shall cease to apply with respect
to such person or entity at the time such person or entity does not
beneficially own any (i) Shares (excluding for this purpose, any Additional
Shares which may still be owned by such person or entity) or (ii) Warrant
Shares.
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ARTICLE V
STANDSTILL
From the date hereof until the fifth anniversary after the date the
Common Stock is first Publicly Traded (as defined in the Charter as in effect
on the date hereof), without PRAECIS' prior written consent, neither
Purchaser nor any of its Affiliates will, directly or indirectly:
(a) acquire, offer or propose to acquire, or agree to acquire,
by purchase or otherwise, any Voting Securities, or direct or indirect rights
or options to acquire (through purchase, exchange, conversion or otherwise),
any Voting Securities (as defined herein) if, after giving effect to any such
acquisition, Purchaser, alone or together with its Affiliates, would
beneficially own Voting Securities representing more than 8.2% of the voting
power of all then outstanding Voting Securities, provided, however, that
notwithstanding anything to the contrary contained in this Agreement, the
foregoing 8.2% limitation shall not be deemed to be violated if the
percentage of the voting power of all outstanding Voting Securities
represented by Voting Securities beneficially owned by Purchaser and its
Affiliates is increased as a result of a decrease in the number of
outstanding Voting
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Securities caused by a repurchase of securities by PRAECIS or any other
action taken by PRAECIS;
(b) make, or in any way participate in, any "solicitation" of
"proxies" to vote (as such terms are used in the proxy rules of the SEC under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")), seek
to advise, encourage or influence any person or entity with respect to the
voting of any Voting Securities, initiate, propose or otherwise solicit
stockholders of PRAECIS for the approval of one or more stockholder proposals
or induce or attempt to induce any other person to initiate any stockholder
proposal; provided, however, that Purchaser shall not, in any event, be
deemed to "solicit" or to be a participant in a "solicitation" for purposes
of this subparagraph (b) by reason of the exercise by Purchaser or its
Affiliates of voting rights with respect to any Voting Securities
beneficially owned by Purchaser or its Affiliates;
(c) make any proposal, whether written or oral, to the Board
of Directors of PRAECIS, any director or officer of PRAECIS, or make any
public announcement concerning such a proposal, with respect to a tender
offer for any Voting Securities, a merger or other business combination, sale
or transfer of assets, liquidation
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or other extraordinary corporate transaction involving PRAECIS;
(d) 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;
(e) deposit any Voting Securities beneficially owned by
Purchaser or its Affiliates into a voting trust or subject any such Voting
Securities to any arrangement or agreement with respect to the voting of any
such Voting Securities or any agreement having similar effect, other than a
trust or similar arrangement to which only Purchaser and its Affiliates are
parties;
(f) execute any written stockholder con-sent with respect to
any Voting Securities;
(g) otherwise act, alone or in concert with others, to seek
to affect or influence the control in any material respect of the management,
policies or Board of Directors of PRAECIS, or make any public statement with
respect thereto;
(h) knowingly and intentionally sell or otherwise transfer
any Shares to any "person" (as defined in Section 13 (d)(3) of the Securities
Exchange Act of 1934) or group (within the meaning of Rule 13d-5(b)(1) under
the Securities Exchange Act of 1934) as to which
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Purchaser has received notice from PRAECIS of such person's or group's
intention to seek to take, assist or participate in any of the actions
described in clauses (b) through (g) above;
(i) in any way participate in, encourage, assist or otherwise
induce any person (as that term is used in Section 13(d)(3) of the Exchange
Act) to take, any action prohibited by or inconsistent with the foregoing; or
(j) take any other action inconsistent with the foregoing,
provided that seeking any waiver from PRAECIS or any amendment of any
covenant or agreement of or restriction on Purchaser or its Affiliates
contained in this Agreement in a manner which is not calculated or reasonably
likely to be disseminated to the public shall not be deemed "action
inconsistent with the foregoing".
For the purposes of this Agreement, "Voting Securities" shall mean
all outstanding securities of PRAECIS entitled to vote generally for the
election of directors, including, without limitation, the Common Stock and
"beneficial ownership" of any securities shall be determined pursuant to Rule
13d-3 of the Exchange Act.
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ARTICLE VI
REGISTRATION RIGHTS
6.1 Piggyback Registration. (a) If at any time after the
consummation by PRAECIS of an initial public offering of Common Stock PRAECIS
proposes to register (including without limitation any registration effected
by PRAECIS pursuant to Section 6.2 of the Stockholders Agreement) any of its
authorized but unissued Common Stock under the Securities Act on Forms S-1,
S-2, S-3, SB-1, SB-2 or any other registration form at the time in effect on
which Registrable Securities (as defined herein) could be registered for sale
by Purchaser (other than a registration in connection with an acquisition of
or merger with another entity or the sale of shares to employees, consultants
or directors of PRAECIS pursuant to employee stock option, stock purchase or
other employee benefit plans, provided that the only securities covered by
such registration are the securities to be issued as part of such acquisition
or merger or the securities to be sold to such employees, consultants or
directors), PRAECIS shall on each such occasion give written notice to
Purchaser of its intention so to do, describing such Common Stock to be
registered and specifying the form and manner and the other relevant
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facts involved in such proposed registration (including, without limitation,
(x) whether or not such proposed registered offering will be an underwritten
offering (an "Underwritten Offering") and, if so, the identity of the
investment banker or bankers that shall manage the offering (the "Managing
Underwriter") and whether such offering will be pursuant to a "best efforts"
or "firm commitment" underwriting and (y) the price (net of any underwriting
commissions, discounts and the like) at which the Registrable Securities, if
any, are reasonably expected to be sold) if such disclosure is acceptable to
the Managing Underwriter. Upon the written request of Purchaser delivered to
PRAECIS within 30 calendar days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed of
by Purchaser and the intended method of disposition thereof), PRAECIS will
use its reasonable best efforts to effect the registration under the
Securities Act of all of the Registrable Securities that PRAECIS has been so
requested to register; provided, however, that:
(i) If, at any time after giving such written notice
of its intention to register any securities and prior to the effective
date of the registration statement filed
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<PAGE>
in connection with such registration, PRAECIS shall determine for any
reason not to register such securities, PRAECIS may, at its election,
give written notice of such determination to Purchaser and thereupon
shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its
obligation to pay the Registration Expenses (as defined herein) in
connection therewith); and
(ii) If such registration involves an Underwritten
Offering, Purchaser must sell its Registrable Securities to the
underwriters selected by PRAECIS on the same terms and conditions as
apply to PRAECIS.
(b) The Registration Expenses incurred in connection with each
registration of Registrable Securities requested pursuant to this Section 6.1
shall be paid by PRAECIS.
(c) If a registration pursuant to this Section 6.1 involves an
Underwritten Offering and the Managing Underwriter advises PRAECIS that, in
its opinion, the number of shares proposed to be included in such
registration should be limited due to market conditions,
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<PAGE>
then PRAECIS will include in such registration to the extent of the number
which PRAECIS is so advised can be sold in such offering (i) first, the
securities PRAECIS proposes to sell (if any) and (ii) second, the number of
Registrable Securities and shares of Common Stock held by stockholders of
PRAECIS other than Purchaser requested to be included in such registration;
provided, however, that if a greater number of Registrable Securities and
other shares proposed to be offered by other stockholders of PRAECIS are
offered for inclusion in the proposed underwriting than in the opinion of the
Managing Underwriter proposing to underwrite securities to be sold by PRAECIS
(if any) can be accommodated without adversely affecting the proposed
underwriting, PRAECIS may elect to reduce prorata (based upon the amount of
shares owned by stockholders who have requested to have shares which have
registration rights to be included in the proposed underwriting) the amount
of all securities (including shares of Registrable Securities) proposed to be
offered in the underwriting for the accounts of all persons other than
PRAECIS to a number deemed satisfactory by the Managing Underwriter.
(d) In connection with any Underwritten Offering with respect
to which Purchaser shall have
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<PAGE>
requested registration pursuant to subsection 6.1(a), PRAECIS shall have the
right to select the Managing Underwriter with respect to the offering.
6.2 Registration Procedures. (a) If and whenever PRAECIS is
required to use its reasonable best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Section 6.1,
PRAECIS will, as expeditiously as possible:
(i) After a registration statement with respect to
Registrable Securities is filed with the SEC, prepare and file with the
SEC such amendments (including post-effective amendments) and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period not in excess of 90 days and to comply
with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of
disposition by Purchaser set forth in such registration statement,
provided, however, that PRAECIS may discontinue any regis-
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tration of its securities that is being effected pursuant to Section
6.1 at any time prior to the effective date of the registration state-
ment relating thereto;
(ii) Furnish to Purchaser and to each underwriter, if
any, of such Registrable Securities, such number of copies of a
prospectus and preliminary prospectus for delivery in conformity with
the requirements of the Securities Act, and such other documents, as
such person may reasonably request, in order to facilitate the public
sale or other disposition of the Registrable Securities;
(iii) Use its best efforts to cause such Registrable
Securities covered by such registration statement to be registered with
or approved by such other governmental agencies or authorities as may
be reasonably necessary to enable Purchaser to consummate the
disposition of such Registrable Securities;
(iv) Immediately notify Purchaser, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act within the appropriate period
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mentioned in Section 6.2(a)(i), if PRAECIS becomes aware that the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits 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, and at the request of Purchaser, deliver a
reasonable number of copies of an amended or supplemental prospectus as
may be necessary so that, as thereafter delivered to the purchasers of
such Registrable 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;
(v) Otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC and make generally
available to Purchaser, in each case as soon as practicable, but not
later than 45 calendar
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days after the close of the period covered thereby (90 calendar days in
case the period covered corresponds to a fiscal year of PRAECIS), an
earnings statement of PRAECIS which will satisfy the provisions of
subsection 11(a) of the Securities Act;
(vi) In the event the offering is an Underwritten
Offering, use its best efforts to obtain a "cold comfort" letter from
the independent public accountants for PRAECIS in customary form and
covering such matters as are customarily covered by such letters; and
(vii) Execute and deliver all instruments and
documents (including in an Underwritten Offering an underwriting
agreement in customary form) and take such other actions and obtain
such certificates and opinions as are customary in underwritten public
offerings.
(b) Purchaser will, upon receipt of any notice from PRAECIS
of the happening of any event of the kind described in subsection 6.2(a)(iv),
forthwith discontinue disposition of the Registrable Securities pursuant to
the registration statement covering such Registrable Securities until
Purchaser's receipt of the copies of
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the supplemented or amended prospectus contemplated by Section 6.2(a)(iv).
(c) If a registration undertaken by PRAECIS involves an
Underwritten Offering, Purchaser, whether or not Purchaser's Registrable
Securities are included in such registration, will, if requested by the
Managing Underwriter, enter into an agreement not to effect any public sale
or distribution, including any sale pursuant to Rule 144 under the Securities
Act, of any Registrable Securities, or of any security convertible into or
exchangeable or exercisable for any Registrable Securities (other than as
part of such Underwritten Offering), without the consent of the Managing
Underwriter, during a period commencing on the effective date of such
registration and ending a number of calendar days thereafter not exceeding
180 as the Board of Directors of PRAECIS and the Managing Underwriter shall
reasonably determine is required to effect a successful offering.
(d) If a registration pursuant to Section 6.1 involves an
Underwritten Offering, PRAECIS agrees, if so required by the Managing
Underwriter, not to effect any public sale or distribution of any of its
equity securities or securities convertible into or exchangeable or
exercisable for any of such equity securities during a
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period commencing on the effective date of such registration and ending not
more than 180 calendar days thereafter, except for such Underwritten Offering
or in connection with a stock option plan, stock purchase plan, savings or
similar plan, or an acquisition, merger or exchange offer.
6.3 Indemnification. (a) In the event of any registration of any
securities of PRAECIS under the Securities Act, PRAECIS will, and hereby
does, indemnify and hold harmless Purchaser, if Purchaser has any Registrable
Securities covered by such registration statement, its directors and
officers, each other person who participates as an underwriter in the
offering or sale of such securities and each other person, if any, who
controls Purchaser or any such underwriter within the meaning of the
Securities Act against any losses, claims, damages or liabilities, joint or
several, to which Purchaser or any such director or officer or underwriter or
controlling person may become subject under the Securities Act, state
securities or blue sky laws, or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any
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material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, any
amendment or supplement thereto, or any document filed in connection
therewith or in connection with any qualification pursuant to Section
6.2(a)(iii), or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein (in the case of a prospectus, in light of the circumstances under
which they were made) not misleading, and PRAECIS will reimburse Purchaser
and each such director, officer, underwriter and controlling person for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided that PRAECIS shall not be liable with respect to
Purchaser in any such case to the extent that any such loss, claim, damage,
liability (or action or preceding in respect thereof) or expense arises out
of or is based upon an untrue statement or omission made in such registration
statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement, or any document incident thereto or inci-
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dent to registration or qualification of any Registrable Securities pursuant
to Section 6.2(a)(iii), in reliance upon and in conformity with written
information furnished to PRAECIS by Purchaser specifically for use in the
preparation thereof; and provided, further, that PRAECIS shall not be liable
to any person who participates as an underwriter, in the offering or sale of
Registrable Securities or to any other person, if any, who controls such
underwriter within the meaning of the Securities Act, in any such case to the
extent that any such loss, claim, damage, liability (or action or proceeding
in respect thereof) or expense arises out of such person's failure to send or
give a copy of the final prospectus, as the same may be then supplemented or
amended, to the person asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by
or on behalf of Purchaser or any such director, officer, underwriter or
controlling person and shall survive the transfer of such securities by
Purchaser.
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(b) PRAECIS may require, as a condition to including any
Registrable Securities in any registration statement filed pursuant to
Section 6.2, that PRAECIS shall have received an undertaking satisfactory to
it from Purchaser, to indemnify and hold harmless (in the same manner and to
the same extent as set forth in subsection (a) of this Section 6.3) PRAECIS,
each director of PRAECIS, each officer of PRAECIS and each other person, if
any, who controls PRAECIS within the meaning of the Securities Act, with
respect to any statement in or omission from such registration statement, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any qualification
pursuant to Section 6.2(a)(iii), if such statement or omission was made in
reliance upon and in conformity with written information furnished to PRAECIS
by Purchaser specifically for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement. Such indemnity shall remain in full force and
effect, regardless of any investigation made by or on behalf of PRAECIS or
any such director, officer or controlling person and shall survive the
transfer of such securities by Purchaser. In no event shall the liability
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of Purchaser hereunder be greater in amount than the dollar amount of the
proceeds received by Purchaser upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Promptly after receipt by an indemnified party of notice
of the commencement of any action or proceeding involving a claim referred to
in the preceding subsections of this Section 6.3, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subsections of this Section 6.3, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties exists in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly
notified, to the extent that the indemnifying party may wish, with
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counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred
by the latter in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
its own counsel in any such action, but the fees and expenses of such counsel
shall be at the expense of such indemnified party, when and as incurred,
unless (i) the employment of counsel by such indemnified party has been
authorized by the indemnifying parties, (ii) the indemnified party shall have
reasonably concluded that there is a conflict of interest between the
indemnifying parties and the indemnified party in the conduct of the defense
of such action (in which case the indemnifying parties shall not have the
right to direct the defense of such action on behalf of the indemnified
party) or (iii) the indemnifying parties shall not in fact have employed
counsel to assume the defense of such action. No indemnifying party shall,
without the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement of any such action
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which 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 to such claim or litigation. No indemnified party shall
consent to entry of any judgment or enter into any settlement of any such
action the defense of which has been assumed by an indemnifying party or for
which an indemnifying party may have liability hereunder without the consent
of such indemnifying party.
6.4 Contribution. In order to provide for just and equitable
contribution in circumstances under which the indemnity contemplated by
Section 6.3 is for any reason not available, the parties entitled to
indemnification by the terms hereof shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity incurred by PRAECIS, Purchaser and one or more of the underwriters,
except to the extent that contribution is not permitted under Section 11(f)
of the Securities Act. In determining the amount of contribution to which the
respective parties shall be entitled, there shall be considered the relative
benefits received by each party from the offering of the securities,
including the Registrable Securities, (taking into account the portion of
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the proceeds of the offering realized by each), the parties' relative
knowledge and access to information concerning the matter with respect to
which the claim was asserted, the opportunity to correct and prevent any
statement or omission and any other equitable considerations appropriate
under the circumstances. PRAECIS and Purchaser agree with each other that
Purchaser shall not be required to contribute any amount in excess of the
amount Purchaser would have been required to pay to an indemnified party if
the indemnity under subsection 6.3(b) was available. PRAECIS and Purchaser
agree with each other and the underwriters of the Registrable Securities, if
required by such underwriters, that it would not be equitable if the amount
of such contribution were determined by pro-rata or per capita allocation
(even if the underwriters were treated as one entity for such purpose) or for
the underwriters' portion of such contribution to exceed the percentage that
the underwriting discount bears to the offering price of the Registrable
Securities. For purposes of this Section 6.4, each person, if any, who
controls an underwriter within the meaning of Section 15 of the Securities
Act, shall have the same rights to contribution as such underwriter, and each
director and each officer of PRAECIS who signed the
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registration statement, and each person, if any, who controls PRAECIS or
Purchaser within the meaning of Section 15 of the Securities Act shall have
the same rights to contribution as PRAECIS or Purchaser, as the case may be.
6.5 Rule 144. If PRAECIS shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act,
PRAECIS covenants that it will file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder (or, if PRAECIS is not required to file such
reports, it will, upon the request of Purchaser, make publicly available
other information), and it will take such further action as Purchaser may
reasonably request, all to the extent required from time to time to enable
Purchaser to sell shares of Registrable Securities, subject to the applicable
restrictions on transfers contained herein, without registration under the
Securities Act within the limitation of the exemptions provided by (i) Rule
144, as such rule may be amended from time to time, or (ii) any similar rule
or regulation hereafter adopted by the SEC. Upon the request of Purchaser,
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PRAECIS will deliver to Purchaser a written statement as to whether it has
complied with such requirements.
6.6 Definitions. (a) "Registrable Securities" shall mean (i) the
Shares, (ii) the Warrant Shares, and (iii) any equity securities issued in
exchange or substitution for, or in payment of dividends on, any such shares
referred to in clauses (i) and (ii) of this definition. Any particular
Registrable Securities shall cease to be Registrable Securities when either
(i) 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 under such registration statement, (ii) such
securities shall have been transferred pursuant to Rule 144, (iii) such
securities shall have been otherwise transferred or disposed of, and new
certificates therefor not bearing a legend restricting further transfer
thereof under the Securities Act shall have been delivered by PRAECIS and
subsequent transfer or disposition thereof shall not require their
registration or qualification under the Securities Act or any similar state
law then in force, or (iv) such securities shall have ceased to be
outstanding.
(b) "Registration Expenses" shall mean any and all
out-of-pocket expenses incident to PRAECIS'
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performance of or compliance with this Article VI, including, without
limitation, all SEC, stock exchange or National Association of Securities
Dealers, Inc. ("NASD") registration and filing fees, all fees and expenses of
complying with securities and blue sky laws (including the reasonable fees
and disbursements of underwriters' counsel in connection with blue sky
qualification and NASD filings), all fees and expenses of the transfer agent
and registrar for the Common Stock, all printing expenses, the fees and
disbursements of counsel for PRAECIS and of its independent public
accountants, including the expenses of any special audits and/or "cold
comfort" letters required by or incident to such performance and compliance,
and the reasonable fees and disbursements of one counsel (other than house
counsel) retained by Purchaser, but excluding (a) any allocation of the
personnel or other general overhead expenses of PRAECIS or other expenses for
the preparation of financial statements or other data normally prepared by
PRAECIS in the ordinary course of its business, which shall be borne by
PRAECIS in all cases, and (b) underwriting discounts and commissions and
applicable transfer and documentary stamp taxes, if any, which shall be borne
by Purchaser in all cases.
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ARTICLE VII
INDEMNIFICATION; CERTAIN COVENANTS
7.1 Indemnification. (a) PRAECIS agrees to
indemnify, defend and hold Purchaser harmless from and against any demand,
liability, loss, deficiency, damage, cost or expense (including reasonable legal
and accounting fees and expenses but excluding consequential damages) to
Purchaser arising out of any breach of any representation or warranty of PRAECIS
or any nonfulfillment of any covenant or agreement of PRAECIS contained herein.
Purchaser shall not be entitled to indemnification with respect to any claim
under the foregoing provisions of this Section 7.1(a) as to which notice shall
not have been given by Purchaser to PRAECIS (i) with respect to indemnification
for claims arising out of any such nonfulfillment of any such covenant or
agreement, within two years of the date of occurrence of such nonfulfillment or
(ii) with respect to indemnification for claims arising out of breach of the
representations and warranties of PRAECIS contained in Article III, on or before
the applicable date specified in Section 9.1(b) below.
(b) Purchaser agrees to indemnify, defend and hold PRAECIS
harmless from and against any demand, lia-
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bility, loss, deficiency, damage, cost or expense (including reasonable legal
and accounting fees and expenses but excluding consequential damages) to
PRAECIS arising out of any breach of any representation or warranty of
Purchaser or any nonfulfillment of any covenant or agreement of Purchaser
contained herein. PRAECIS shall not be entitled to indemnification with
respect to any claim under the foregoing provisions of this Section 7.1(b) as
to which notice shall not have been given by PRAECIS to Purchaser (i) with
respect to indemnification for claims arising out of any such nonfulfillment
of any such covenant or agreement, within two years of the date of occurrence
of such nonfulfillment or (ii) with respect to indemnification for claims
arising out of breach of the representations and warranties of Purchaser
contained in Article II, on or before the applicable date specified in
Section 9.1(a) below.
(c) Promptly after receipt by an indemnified party under
this Agreement of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party hereunder, notify the indemnifying party in writing of
such claim or the commencement of such action. Following such notice, the
indemnifying
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party shall be entitled to participate therein and, to the extent it wishes,
to assume the defense thereof with counsel reasonably satisfactory to the
indemnified party. After notice from the indemnifying party to the
indemnified party of its election to assume the defense of any such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section 7.1 for any legal fees subsequently incurred by the
indemnified party in connection with the defense thereof; provided, however,
that the indemnified party shall have the right to employ separate counsel in
connection with any such claim or action if it shall have received an opinion
of counsel reasonably acceptable to the indemnifying party that, in the
opinion of such counsel, separate representation of the indemnified party is
appropriate in light of conflicting interests or other factors, and, in such
event, the reasonable fees and expenses of one such separate counsel shall be
paid by the indemnifying party.
7.2 Information to be Furnished. Until such time as PRAECIS
has a class of securities which is Publicly Traded (as defined in the Charter
as in effect on the Closing Date), so long as Purchaser and its Affiliates
beneficially own at least one half of the total number of shares and Common
Stock beneficially owned by
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them immediately after giving effect to the Closing (including for this
purpose the Warrant Shares), PRAECIS shall furnish to Purchaser copies of all
information which is provided to the holders of any series of its preferred
stock, including, without limitation, copies of its annual audited and
monthly unaudited financial statements and all annual budgets.
7.3 Closing Deliveries. Simultaneously with the execution
and delivery of this Agreement, the following deliveries shall be made:
(a) Each party shall deliver to the other party a
certificate of a duly authorized officer of such party certifying as to the
resolutions of the Board of Directors of such party authorizing such party's
execution, delivery and performance of this Agreement and the consummation by
such party of the transactions contemplated hereby.
(b) PRAECIS shall cause to be delivered to Purchaser an
opinion from Skadden, Arps, Slate, Meagher & Flom LLP, counsel to PRAECIS, in
form and substance satisfactory to Purchaser.
(c) Purchaser shall cause to be delivered to PRAECIS an
opinion from Coudert Brothers, counsel to Purchaser, in form and substance
satisfactory to PRAECIS.
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ARTICLE VIII
ENFORCEMENT
8.1 Injunctive Relief. Purchaser and PRAECIS acknowledge
that neither party would have an adequate remedy at law for money damages in
the event that any of the covenants or agreements of the other party in this
Agreement were not performed in accordance with its terms. Therefore, the
parties agree that each party shall be entitled to specific enforcement of
such covenants or agreements and to injunctive and other equitable relief in
addition to any other remedy to which such party may be entitled, at law or
in equity.
8.2 Consent to Jurisdiction and Venue. Purchaser and
PRAECIS consent to personal jurisdiction in any action arising under this
Agreement brought in any court, federal or state, within the State of New
York of the United States of America having subject matter juris- diction.
The parties further agree that such courts will be proper fora in which to
adjudicate any case or controversy arising hereunder, and that neither of
them will object to such venue or the jurisdiction of such courts. The
parties further agree that only the state and federal courts within the State
of New York shall have jurisdiction over any such case or controversy
arising hereunder.
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The parties acknowledge that the agreement of each party to submit to such
venue and jurisdiction is a material inducement to the other party to enter
into this Agreement.
8.3 Service of Process. The parties agree that service of
any summons or other legal process in any action arising under this Agreement
may be made, and shall not be objected to if made, in the manner provided in
Section 8.3 hereof.
ARTICLE IX
MISCELLANEOUS
9.1 Survival.
(a) Except as set forth below, all representations and
warranties of Purchaser set forth herein shall survive consummation of the
purchase and sale of the Shares and the Warrant in accordance with the terms
hereof until eighteen months after the Closing Date. If the Warrant is
exercised by Purchaser, as a condition to each such exercise, Purchaser shall
deliver to PRAECIS a certificate of a duly authorized officer of Purchaser
certifying as to the truth and accuracy of Purchaser's representations and
warranties contained in Sections 2.3, 2.4, 2.5, 2.6 and 2.7 hereunder and, in
such event, such
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representations and warranties of Purchaser shall survive for a period of
eighteen months after the date of issuance of such Warrant Shares. For
purposes of the preceding two sentences, the applicable survival period shall
continue during the pendency of any suit, claim or other proceeding brought
in respect of such representations and warranties prior to the relevant
expiration date.
(b) All representations and warranties of PRAECIS set
forth herein shall survive consummation of the purchase and sale of the
Shares and the Warrant in accordance with the terms hereof until the date
which is eighteen months after the Closing Date (provided that such survival
period shall continue during the pendency of any suit, claim or other
proceeding brought in respect of such representations and warranties prior to
the termination of such eighteen-month period).
9.2 Entire Agreement; No Assignment; Severability. This
Agreement, and the other agreements referred to herein, contain the entire
understanding of the parties with respect to the subject matter hereof and
thereof and may not be amended except by a writing signed by the parties.
Neither this Agreement, nor any rights hereunder, shall be assignable by
either of the parties,
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except that Purchaser may assign this Agreement and its rights hereunder to
an Affiliate of Purchaser in connection with a transfer of Shares, the
Warrant or Warrant Shares to such Affiliate in compliance with the applicable
terms of this Agreement and the Warrant. Additionally, in transactions
permitted hereunder, the rights granted to Purchaser under Article VI may be
transferred or succeeded to by a person or entity that acquires substantially
all of the assets of Purchaser or with which Purchaser is merged so long as
such transferee provides PRAECIS with a written undertaking to be bound by
all of the provisions of this Agreement applicable to the Purchaser. After
two years from the date hereof, in transactions permitted hereunder, the
rights granted to Purchaser under Article VI may also be transferred by
Purchaser to any other person or entity that acquires at least 50% of the
Registrable Securities so long as such transferee provides PRAECIS with a
written undertaking to be bound by all of the provisions of this Agreement
applicable to Purchaser. A transferee to whom rights under Article VI are
transferred pursuant to the preceding two sentences may not thereafter
transfer such rights to any other person or entity. This Agreement shall be
binding upon the respective successors of the parties.
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In the event that any provision of this Agreement shall be declared
unenforceable by a court of competent jurisdiction, such provision, to the
extent declared unenforceable, shall be stricken and the remainder of this
Agreement shall remain binding on the parties hereto. However, in the event
any such provision shall be declared unenforceable due to its scope, breadth
or duration, then it shall be modified to the scope, breadth or duration
permitted by law and shall continue to be fully enforceable as so modified.
9.3 Notices. Any notices and other communications given
pursuant to this Agreement shall be in writing and shall be effective upon
delivery by hand or upon receipt if sent by mail (registered or certified mail,
postage prepaid, return receipt requested) or upon receipt of confirmation of
delivery if sent by telex or telecopy. Notices are to be addressed as follows:
If to PRAECIS:
PRAECIS PHARMACEUTICALS, INC.
One Hampshire Street
Cambridge, Massachusetts 02139
Attention: Chief Financial Officer
Telephone: (617) 494-8400
Telecopy: (617) 494-8414
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street
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Boston, Massachusetts 02108
Attention: Kent A. Coit, Esq.
Telephone: (617) 573-4800
Telecopy: (617) 573-4822
If to Purchaser:
Sylamerica, Inc.
660 White Plains Road
Suite 400
Tarrytown, New York 10591
Attention: President
Telephone: (914) 332-0165
Facsimile: (914) 332-0245
with a copy to:
Synthelabo
22 Avenue Galilee
92350 Le-Plessis-Robinson
France
Attention: Director de Projet-
Accords et Licenses
Telephone: (011) 331-45-37-90-16
Telecopy: (011) 331-45-37-59-49
and to:
Coudert Brothers
1114 Avenue of the Americas
New York, New York 10036-7703
Attention: James Colihan, Esq.
Telephone: (212) 626-4680
Facsimile: (212) 626-4120
or to such other addresses as either PRAECIS or Purchaser shall designate to
the other by notice in writing in accordance with the provisions of this
Section 9.3, provided that notice of a change of address shall be effective
only upon receipt.
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9.4 Best Efforts. Subject to the terms and conditions of
this Agreement, each of the parties hereby agrees to use all reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws, rules
and regulations to consummate and make effective the transactions
contemplated by this Agreement, including using its best efforts to make all
required filings and to obtain all necessary waivers, consents and approvals.
In case at any time after the execution of this Agreement, further action is
necessary or desirable to carry out the purposes of this Agreement, the
proper officers and directors of each of the parties shall take all such
necessary actions.
9.5 Fees and Expenses. Each of the parties hereto shall pay
its own fees and expenses (including the fees of any attorneys, accountants,
investment bankers or others engaged by such party) incurred in connection
with this Agreement and the transactions contemplated hereby, whether or not
such transactions are consummated.
9.6 Certain Definitions. As used in this Agreement, (i) the
term "business day" means any day except a Saturday, Sunday or a day on which
banking institutions in the State of New York are obligated by
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law, regulation or governmental order to close, (ii) the term "Affiliate"
with respect to a Person means any other Person directly or indirectly,
through one or more intermediaries, controlling, controlled by or under
common control with such Person (for purposes of this definition "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise) and (iii) the term
"Person" means any individual, corporation, trust, association, partnership,
limited liability company, other business entity or any government, political
subdivision thereof or governmental agency.
9.7 Counterparts. This Agreement may be executed in
counterparts, which together shall be considered one and the same agreement
and each of which shall be deemed an original.
9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
giving effect to the conflicts of law principles thereof.
63
<PAGE>
9.9 Headings. The Article and Section headings contained in
this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
64
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this
Agreement on the date first written above.
PRAECIS PHARMACEUTICALS, INC.
By /s/ Malcolm L. Gefter
--------------------------------
Name: Malcolm L. Gefter
Title: Chairman of the Board,
Chief Executive
Officer and Treasurer
SYLAMERICA, INC.
By /s/ George Liney
--------------------------------
Name: George Liney
Title: V.P. Finance and
Administration
65
<PAGE>
Schedule 3.5(b)
Amended Stockholders Agreement dated as of April 4, 1996 by and among the
Company and certain stockholders of the Company, as amended as of February 13,
1997
Master Lease Agreement dated March 29, 1995 by and between the Company and
Comdisco, Inc.
Option Agreements entered into pursuant to the Company's 1995 Stock Plan, as
amended
Letter Agreement dated February 2, 1994 by and between the Company and David
Sharrock
66
<PAGE>
Schedule 3.13
Collaboration and License Agreement dated as of August 1, 1996 by and between
the Company and Boehringer Ingelheim International GmbH
License Agreement effective as of October 17, 1996 by and between the Company
and Indiana University Foundation
License Agreement effective as of March 1996 by and among the Company, Dyax
Corp. and Protein Engineering Corporation
Lease dated as of April 28, 1994 by and between the Company and The Charles
Stark Draper Laboratory, Inc.
1995 Stock Plan, as amended
Amended Stockholders Agreement dated as of April 4, 1996 by and among the
Company and certain stockholders of the Company, as amended as of February 13,
1997
Master Lease Agreement dated March 29, 1995 by and between the Company and
Comdisco, Inc.
67
<PAGE>
Exhibit A
This Warrant and any securities acquired upon the exercise of this Warrant
have not been registered under the Securities Act of 1933, as amended, and
may not be transferred or otherwise disposed of unless they have been
registered under such Act or pursuant to an exemption from registration
under such Act. The sale, transfer, pledge or other disposition of this
Warrant and such securities is also subject to certain limitations set
forth in a Stock and Warrant Purchase Agreement dated as of May 13, 1997
(the "Purchase Agreement") between PRAECIS PHARMACEUTICALS, INC. and
Sylamerica, Inc. A copy of the Purchase Agreement is on file with the
Secretary of PRAECIS PHARMACEUTICALS, INC. This Warrant and such
securities may be sold, transferred, pledged or otherwise disposed of only
upon the fulfillment of the conditions specified in the Purchase Agreement
and this Warrant.
PRAECIS PHARMACEUTICALS, INC.
Warrant for the Purchase of Shares of Common Stock
53,926 Shares
THIS CERTIFIES that, for value received, Sylamerica, Inc., a Delaware
corporation (including any successor, the "Holder"), is entitled to subscribe
for and purchase from PRAECIS PHARMACEUTICALS, INC., a Delaware corporation
(including any successor, the "Company"), at any time or from time to time
subsequent to May 13, 1997 and prior to 5:00 p.m. on May 13, 2002, Boston,
Massachusetts time (the "Exercise Period"), 53,926 fully paid, validly issued
and nonassessable shares (the "Shares") of the Company's Common Stock, $.01 par
value per share (the "Common Stock"), at a purchase price of $96.6 per Share,
subject to adjustment as provided herein (the "Exercise Price"), upon the terms
and subject to the conditions set forth herein. This Warrant is the warrant
originally issued to the Holder pursuant to the Stock and Warrant Purchase
Agreement dated as of May 13, 1997 between the Company and the Holder (the
"Purchase Agreement"). As used herein the term "this Warrant" shall mean and
<PAGE>
include any Warrant or Warrants hereafter issued in consequence of the transfer
of this Warrant or the exercise of this Warrant in part. This Warrant is not
transferable in whole or in part, except to an Affiliate (as defined in Section
4.1 of the Purchase Agreement) of the Holder which has agreed in writing with
the Company to be bound by the Purchase Agreement and the terms hereof.
1. This Warrant may be exercised in whole or in part at any time during
the Exercise Period by the surrender of this Warrant (with the Election to
Exercise attached hereto as Exhibit I duly executed) to the Company at its
office at One Hampshire Street, Cambridge, MA 02139, Attention: Chief Financial
Officer, or such other place as may be designated in writing by the Company,
together with a certified or bank cashier's check payable to the order of the
Company in an amount equal to the Exercise Price multiplied by the number of
Shares covered by such exercise.
2. Upon exercise of this Warrant in whole or in part, the Holder shall be
deemed to be the holder of record of the Shares issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or certificates representing such Shares shall not then have been
physically delivered to the Holder. As soon as practicable after each such
exercise of this Warrant, but not later than five days from the date of such
exercise, the Company shall issue and deliver to the Holder a certificate or
certificates for the Shares issuable upon such exercise, registered in the name
of the Holder. The Company shall not be required to issue stock certificates
representing fractions of Shares, but shall, in respect of any final fraction of
a Share, make a payment in cash in an amount equal to the same fraction
(calculated to the nearest 1/100th of a Share) of the closing sale price per
share of the Common Stock on the principal public trading market on which the
Common Stock is then traded, or, if the Common Stock is not then traded on any
public trading market, in an amount determined in good faith by the Company's
Board of Directors. In case an exercise of this Warrant is in part only,
concurrently with delivering to the Holder the certificate or certificates for
the Shares issuable upon such exercise as provided above, the Company shall
deliver to the Holder a new Warrant of like tenor, calling in the aggregate on
the face thereof for the number of
2
<PAGE>
remaining Shares as to which the Holder is entitled to receive upon any
further exercise of this Warrant.
3. The Company shall at all times reserve for issuance and keep available
out of its authorized and unissued shares of Common Stock, solely for the
purpose of providing for the exercise of this Warrant, such number of Shares as
shall from time to time be sufficient therefor.
4. (a) The Exercise Price shall be subject to adjustment from time to
time in case the Company shall (i) declare a dividend or make a distribution on
the outstanding shares of Common Stock, in shares of Common Stock, (ii)
subdivide or reclassify the outstanding shares of Common Stock into a greater
number of shares of Common Stock, or (iii) combine or reclassify the outstanding
shares of Common Stock into a smaller number of shares of Common Stock. In each
such case, the Exercise Price in effect at the time of the record or effective
date, as the case may be, of such dividend, declaration, distribution,
subdivision, combination or reclassification shall be adjusted so that it shall
equal the price determined by multiplying the Exercise Price by a fraction, the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after giving effect to such action, and the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
action.
(b) Whenever the Exercise Price upon exercise of this Warrant is
adjusted pursuant to Paragraph 4(a), the number of Shares issuable upon exercise
of this Warrant shall simultaneously be adjusted by multiplying the number of
Shares initially issuable upon exercise of this Warrant by the initial Exercise
Price in effect on the date hereof and dividing the product so obtained by the
Exercise Price, as adjusted.
(c) Whenever there shall be an adjustment as provided in this
Paragraph 4 or in Paragraph 5 below, the Company shall promptly cause written
notice thereof to be sent by registered mail, postage prepaid to the Holder, at
its principal office, which notice shall be accompanied by a certificate setting
forth the Exercise Price after such adjustment and a brief statement of the
facts requiring such adjustment and the computation thereof.
3
<PAGE>
(d) All calculations pursuant to this Paragraph 4 shall be made to
the nearest cent or one-hundredth of a Share, as the case may be.
5. (a) In case of any reclassification or change of the shares of Common
Stock issuable upon exercise of this Warrant (other than a change in par value
or from par value to no par value, or as a result of a subdivision or
combination, but including any change in such shares into two or more classes or
series of shares) or in case of any consolidation or merger of the Company into
another corporation or of another corporation into the Company in which the
Company is the surviving corporation and in which there is a reclassification or
change (including change by way of a conversion into the right to receive cash
or other property) of the shares of Common Stock (other than a change in par
value, or from par value to no par value, or as a result of a subdivision or
combination, but including any change in such shares into two or more classes or
series of shares), appropriate provision shall be made so that the Holder shall
have the right thereafter to receive upon exercise of this Warrant solely the
kind and amount of shares of stock and other securities, property, cash or any
combination thereof receivable upon such reclassification, change, consolidation
or merger by a holder of the number of shares of Common Stock for which this
Warrant could have been exercised immediately prior to such reclassification,
change, consolidation or merger. Thereafter, appropriate provision (as
determined reasonably and in good faith by the Company's Board of Directors)
shall be made for adjustments which shall be as nearly equivalent as practicable
to the adjustments provided for in Paragraph 4.
(b) The above provisions of this Paragraph 5 shall apply to
successive reclassifications and changes of shares of Common Stock and to
successive consolidations or mergers.
6. The Company will not, by amendment of its articles of incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this Warrant.
Without limiting the generality of the foregoing, the Company (a)
4
<PAGE>
will not increase the par value of any shares of stock receivable upon the
exercise of this Warrant above the amount payable therefor upon such
exercise, and (b) will take all such action as may be necessary or
appropriate in order that the Company may validly and legally issue fully
paid and nonassessable shares of stock upon the exercise of this Warrant from
time to time outstanding.
7. The Shares or other securities issued upon exercise of this Warrant
shall be subject to a stop-transfer order and the certificate or certificates
evidencing any such Shares or securities shall bear the following legend:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be transferred or otherwise disposed of unless they
have been registered under such Act or pursuant to an
exemption from registration under such Act. The sale,
transfer, pledge or other disposition of the shares
represented by this certificate is also subject to certain
limitations set forth in a Stock and Warrant Purchase
Agreement dated as of May 13, 1997 (the "Purchase
Agreement") between PRAECIS PHARMACEUTICALS, INC. and
Sylamerica, Inc. A copy of the Purchase Agreement is on
file with the Secretary of PRAECIS PHARMACEUTICALS, INC."
8. Upon receipt of evidence or sworn statement satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and upon
surrender and cancellation of this Warrant if mutilated, and upon reimbursement
of the Company's reasonable incidental expenses, the Company shall execute and
deliver to the Holder thereof a new Warrant of like date, tenor and denomination
9. This Warrant shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to the conflicts of laws
principles thereof.
5
<PAGE>
Dated: May 13, 1997
PRAECIS PHARMACEUTICALS, INC.
By
----------------------------------------------
Name:
Title:
Attest:
- --------------------------
Name:
Title:
6
<PAGE>
Exhibit I
To: PRAECIS PHARMACEUTICALS, INC.
ELECTION TO EXERCISE
The undersigned hereby exercises its right to subscribe for and
purchase from PRAECIS PHARMACEUTICALS, INC., _________ fully paid, validly
issued and nonassessable shares of Common Stock covered by the within Warrant
and tenders payment herewith in the amount of $________ in accordance with the
terms thereof, and requests that certificates for such shares be issued in the
name of, and delivered to:
Sylamerica, Inc.
660 White Plains Road
Suite 400
Tarrytown, New York
TIN:
Date: SYLAMERICA, INC.
-------------------------
By
----------------------------
Name:
Title:
7
<PAGE>
EXHIBIT 10.6
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT
ASTERISKS (*) DENOTE SUCH OMISSIONS
AGREEMENT
BETWEEN
PRAECIS PHARMACEUTICALS INCORPORATED
AND
ROCHE PRODUCTS INC.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
Article 1 - Definitions.......................................................2
Article 2 - Grant of Rights...................................................9
Article 3 - Development......................................................13
Article 4 - Manufacturing....................................................25
Article 5 - Commercialization................................................26
Article 6 - Consideration....................................................28
Article 7 - Information......................................................42
Article 8 - Patents..........................................................48
Article 9 - Term and Termination.............................................58
Article 10 - Warranties and Indemnities......................................61
Article 11 - Dispute Resolution..............................................65
Article 12 - Miscellaneous...................................................66
Exhibit 1....................................................................74
Exhibit 2....................................................................76
Exhibit 3....................................................................77
Exhibit 4....................................................................82
Exhibit 5....................................................................89
</TABLE>
<PAGE>
AGREEMENT
This Agreement ("Agreement") is made and is effective as of the 21st day
of August, 1997 ("Effective Date"), by and between PRAECIS PHARMACEUTICALS
INCORPORATED, a Delaware Corporation having a principal place of business at 1
Hampshire Street, Cambridge, Massachusetts 02139 ("PRAECIS") and ROCHE PRODUCTS
INC., a corporation of Panama having a principal place of business at Manati,
Puerto Rico ("ROCHE").
WHEREAS, the parties entered into an option agreement dated as of August
21, 1997 ("Option Agreement") under which ROCHE obtained an option to enter into
a collaboration with PRAECIS for the development and commercialization of
pharmaceutical products which contain any LHRH receptor antagonist(s) owned by
or licensed (with the right to grant sublicenses) to PRAECIS, including, but not
limited to the decapeptide known as abarelix.
WHEREAS, ROCHE is hereby exercising its rights under the Option Agreement.
WHEREAS, the parties have prepared this binding Agreement which shall
replace and supersede the Option Agreement and the Summary of Terms attached
thereto.
NOW THEREFORE, for and in consideration of the mutual covenants set forth
below, PRAECIS and ROCHE agree as follows:
<PAGE>
ARTICLE 1 - DEFINITIONS
1.1 "Affiliate" shall mean:
a) an organization fifty percent (50%) or more of the voting stock of
which is owned and/or controlled directly or indirectly by a party to this
Agreement;
b) an organization which directly or indirectly owns and/or controls fifty
percent (50%) or more of the voting stock of a party to this Agreement; or
c) an organization which is directly or indirectly under common control
with a party to this Agreement through common share holdings.
The term Affiliate shall not include Genentech, Inc., 1 DNA Way, South San
Francisco, California, U.S.A., unless ROCHE, in its sole discretion,
notifies PRAECIS that Genentech shall be so considered an Affiliate and
Genentech agrees in writing to be bound by the terms and obligations of
this Agreement.
1.2 "Term of the Agreement" shall mean the time period set forth in Section 9.1
of this Agreement.
1.3 "Territory" shall mean all the countries and territories of the world
excluding the countries set forth on Exhibit 1 to this Agreement.
2
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
1.4 "Compound" shall mean all LHRH receptor antagonist(s) owned by or licensed
(with the right to grant sublicenses) to PRAECIS including, but not limited to,
the decapeptide known as abarelix represented by the following sequence:
***.
Compounds shall include the salts and prodrugs of Compound.
1.5 "Product" shall mean any pharmaceutical product which contains Compound.
1.6 "Agreed Upon Indication" shall mean prostate cancer or any other indication
for which the Joint Steering Committee has agreed to develop Product in the
Territory pursuant to Section 3.2.
1.7 "FDA" shall mean the United States Food and Drug Administration and
equivalent governmental agencies in the Territory.
1.8 "Technical Information" shall mean any and all technical data, information,
materials including samples of Product, chemical manufacturing data,
toxicological data and pharmacological data, clinical data, medical uses,
formulations, specifications, quality control testing data, and all submissions
and correspondence to and from the FDA with regard to Product made by or on
behalf of PRAECIS or its Affiliates, which is reasonably useful to enable ROCHE
to make, have made, use, offer for sale, sell or import Product in the
Territory.
3
<PAGE>
1.9 "PRAECIS Invention" means any invention relating to the making, having made,
using, offering for sale, selling or importing of Product, whether or not
patentable, which is conceived and reduced to practice during the Term of the
Agreement solely by a person or persons contractually required to transfer (such
as by assignment) or license patent rights relating to such inventions to
PRAECIS or its Affiliates.
1.10 "Joint Invention" means any invention relating to the making, having made,
using, offering for sale, selling or importing of Product (whether or not
patentable) which is jointly conceived and reduced to practice during the Term
of the Agreement by (i) at least one person contractually required to transfer
(such as by assignment or license) patent rights relating to such inventions to
PRAECIS or its Affiliates and (ii) at least one person contractually required to
transfer such as by assignment or license patent rights related to such
inventions to ROCHE or its Affiliates.
1.11 "ROCHE Invention" means any invention relating to the making, having made,
using, offering for sale, selling or importing of Product (whether or not
patentable) which is conceived and reduced to practice during the Term of the
Agreement solely by a person or persons contractually required to transfer (such
as by assignment or license) patent rights relating to such inventions to ROCHE
or its Affiliates.
1.12 "PRAECIS Proprietary Rights" shall mean (i) the patent applications and
patents in all countries of the Territory (including patent applications and
patents claiming PRAECIS Inventions and Joint Inventions) and (ii) know-how
(including Technical Information), owned by or licensed (with the right to grant
sublicenses) to PRAECIS on the Effective Date or at any time during the Term of
this Agreement, relating to the making, having made, using, offering for sale,
selling and importing of Product in the
4
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
Territory. Such PRAECIS Proprietary Rights include all those patents and patent
applications as set forth in Exhibit 2. PRAECIS, from time to time, but not less
than once a year during the Term of the Agreement shall, if there are any
changes, update Exhibit 2 and provide the updated Exhibit 2 to ROCHE.
1.13 "Semi-Finished Dosage Form" shall mean Product in finished dosage
pharmaceutical form, including vial (sterilized or unsterilized), for
distribution or sale to the ultimate user or dispenser but before labeling and
packaging.
1.14 "Development Costs" shall have the meaning set forth in Exhibit 3.
1.15 "Initial Cost of Goods" (for commercial quantities) shall mean the cost of
Compound, Semi-Finished Dosage Form or other form of Product as initially
supplied to the parties for commercial quantities, whether such Compound,
Semi-Finished Dosage Form or other form of Product is supplied by a third party
vendor or PRAECIS, determined on the basis of the following formula:
*** of Compound multiplied by the number of grams of Compound (or
fraction thereof) included in a dosage unit plus a *** overage factor.
Based upon current assumptions, the Initial Cost of Goods for Semi-finished
Dosage Form assuming a vial content of ***, would be equal to a cost per vial of
$***, plus a ***% premium to reflect transportation, insurance, warehousing,
obsolescence, handling and other costs, plus $*** per vial for the Sustained
Release Formulation, Fill and Finish, QA/QC and vial cost, etc., for a total
cost per vial of approximately $***.
5
<PAGE>
1.16 "NDA" shall mean a New Drug Application or Product License Application
filed with the FDA, or its foreign equivalent, for approval to market and sell a
drug or biological.
1.17 "Phase III" shall mean the third phase of human clinical trials of Product
required by the FDA to gain evidence of efficacy in the target population and
obtain expanded evidence of safety for Product, as described in 21 CFR Part 312
as it may be amended.
1.18 "Initiation of First Phase III" shall mean the date that the first patient
is entered and randomized (if appropriate) into Phase III in the United States.
1.19 "Launch of Product" shall mean the first shipment of Product by ROCHE or
any of ROCHE's Affiliates or sublicensees to a wholesaler or distributor in
commercial quantities for sale in a country in the Territory.
1.20 "Adjusted Gross Sales" shall mean the gross sales amount invoiced by ROCHE,
its Affiliates, or sublicensees for the Product to non-Affiliated third party
purchasers in the Territory less, to the extent such amounts are included in the
amount of gross sales invoiced, deductions of returns (including withdrawals and
recalls), rebates (price reductions, including Medicaid or performance based and
similar types of rebates e.g., chargebacks or retroactive price reductions),
volume (quantity) discounts, discounts granted at the time of invoicing, sales
taxes and other taxes directly linked to the gross sales amount as computed on a
product-by-product basis in ROCHE's sales statistics for the countries
concerned.
6
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
1.21 "Net Sales" shall mean the amount calculated by subtracting from Adjusted
Gross Sales a lump sum deduction of *** (***%) percent of Adjusted Gross Sales
for those sales related deductions which are not accounted for on a
product-by-product basis.
1.22 "Valid Claim" means a claim in any (i) unexpired and issued patent that is
a PRAECIS Proprietary Right and that has not been dedicated to the public,
disclaimed, revoked or held invalid by a final unappealable decision or
unappealed decision of a court of competent jurisdiction, or (ii) pending patent
application that is a PRAECIS Proprietary Right which patent application has not
been on file with the applicable patent office for more than seven (7) years
from the earliest date from which the patent application 1) was filed or 2)
claims priority.
1.23 "Non-Disclosure Agreement" shall mean a non-disclosure agreement dated
December 16, 1996 under which the parties have shared information with regard to
the research, development and commercialization of LHRH antagonists.
1.24 "Information" shall mean any and all materials, trade secrets or other
information related to the making, having made, using, offering for sale,
selling or importing Product (including, without limitation, Technical
Information and business information or objectives) which is disclosed in
writing by one party ("Disclosing Party") to the other party ("Receiving Party")
under (i) the Non-Disclosure Agreement, (ii) the Option Agreement, or (iii) this
Agreement. Notwithstanding the foregoing, materials, trade secrets or other
information which is orally, electronically or visually disclosed to the
7
<PAGE>
Receiving Party by the Disclosing Party, shall constitute "Information" if the
Disclosing Party, within thirty (30) days after such disclosure, delivers to the
Receiving Party a written document or documents which describes in detail or
summarizes the materials, trade secrets or other information and references the
place and date of such oral, electronic, or visual disclosure and the names of
the persons to whom such disclosure was made.
1.25 "Synthelabo Agreement" shall mean an agreement dated May 13, 1997 (as
amended) between PRAECIS and Synthelabo, a societe anonyme organized in France
("Synthelabo"), with respect to the development and commercialization of
Products outside the Territory. PRAECIS shall promptly provide to ROCHE any and
all documents which amend, expressly or by implication, the Synthelabo
agreement, which documents PRAECIS may redact with respect to financial
information. ROCHE shall maintain any and all such documents as Information in
accordance with the requirements of this Agreement.
1.26 "COGS Amount" shall mean the Initial Cost of Goods for the applicable form
of Product, as adjusted pursuant to the provisions of the Heads of Supply
Agreement and, upon execution in accordance with the terms thereof, the Supply
Agreement (as defined in the Heads of Supply Agreement).
1.27 "Revenue Share" shall mean the amount provided for and determined as set
forth in Section 6.2 of this Agreement, which amount reflects both a mark-up on
Initial Cost of Goods and a payment.
8
<PAGE>
1.28 "Product Revenue" shall mean the sum of the COGS Amount and the Revenue
Share with respect to Product.
2. GRANT OF RIGHTS
2.1 Territory Rights. PRAECIS grants ROCHE the sole and exclusive right and
license, with the right to sublicense (except as set forth in Sections 2.2 and
2.3), to make and have made (subject to the provisions of Article 4), use, offer
for sale, import and sell Product under the PRAECIS Proprietary Rights in the
Territory.
2.2 Sublicenses. Except as otherwise provided in Section 2.3 below, ROCHE shall
have the right to sublicense the rights granted under Section 2.1 above to any
given third party.
If ROCHE grants a sublicense, all of the terms and conditions of this
Agreement shall apply to the sublicensee to the same extent as they apply to
ROCHE for all purposes. ROCHE assumes full responsibility for the performance of
all obligations so imposed on such sublicensee and will itself pay and account
to PRAECIS for all payments due under this Agreement by reason of the operations
of any such sublicensee.
2.3 PRAECIS Right to Sublicense in the United States. In the event ROCHE desires
to sublicense the rights to Products granted pursuant to Section 2.1 above to
any third party in the United States, ROCHE shall first present an offer to
PRAECIS. PRAECIS and ROCHE shall negotiate such offer in good faith for up to
ninety (90) days from the date the offer is received by PRAECIS. If, at the end
of such ninety (90)
9
<PAGE>
day period, the parties have been unable to reach agreement on the essential
terms of such sublicense, ROCHE shall be free to offer sublicensing rights to
Products in the United States to any third party. However, prior to entering
into any such agreement with a third party, ROCHE shall (i) summarize in writing
such terms ("Third Party Terms") to PRAECIS for PRAECIS to consider whether the
Third Party Terms would be more favorable to PRAECIS than the offer last made to
PRAECIS by ROCHE ("PRAECIS Offer") and (ii) request written consent from PRAECIS
to such grant to the third party ("Sublicensee Notice").
If PRAECIS, in good faith, determines that (i) the Third Party Terms are
more favorable than the PRAECIS Offer (a "PRAECIS Third Party Terms
Determination") and/or (ii) such grant to the third party would have a material
adverse impact on the potential of Product in the Territory from a business or
scientific viewpoint ("PRAECIS Material Adverse Impact Determination"), then
PRAECIS shall so notify ROCHE in writing of such Determination(s) and provide
ROCHE with reasons for such Determination(s) within thirty (30) days after
receiving ROCHE's Sublicensee Notice. In the event ROCHE disagrees with either
or both of PRAECIS' Determination(s), ROCHE shall so notify PRAECIS in writing
within thirty (30) days after receiving PRAECIS' notice. PRAECIS shall then have
thirty (30) days from ROCHE's notice to submit all matters in dispute to
arbitration generally in accordance with the procedures set forth in Article 11
of this Agreement. Should PRAECIS not submit one or both of the two matters to
arbitration within such thirty (30) days, then such corresponding
Determination(s) and PRAECIS' notice shall be considered untimely and withdrawn.
In the event (1) PRAECIS makes a PRAECIS Third Party Terms Determination
and ROCHE agrees with such Determination or (2) such Determination is timely
10
<PAGE>
submitted to arbitration as described above and the arbitrator agrees with such
Determination, ROCHE shall grant a sublicense to PRAECIS under the Third Party
Terms. In the event PRAECIS makes a PRAECIS Third Party Terms Determination
which is timely submitted to arbitration as described above and the arbitrator
does not agree with such Determination, ROCHE shall be free to grant such
sublicense to the third party under the Third Party Terms, except as provided in
this Section 2.3 with respect to a PRAECIS Material Adverse Impact
Determination.
In the event (1) PRAECIS makes a PRAECIS Material Adverse Impact
Determination and ROCHE agrees with such determination or (2) such Determination
is timely submitted to arbitration as described above and the arbitrator agrees
with such Determination, then ROCHE shall not be permitted to grant such
sublicense to such third party. In the event PRAECIS makes a PRAECIS Material
Adverse Impact Determination which is timely submitted to arbitration as
described above and the arbitrator does not agree with such Determination, ROCHE
shall be free to grant such sublicense to the third party under the Third Party
Terms, except as provided above with respect to a PRAECIS Third Party Terms
Determination.
2.4 Non-Territory Rights. The parties acknowledge that PRAECIS and Synthelabo
have entered into the Synthelabo Agreement. In the event rights under patents
applications, patents and know-how owned by or licensed (with the right to grant
sublicenses) to PRAECIS now or at any time during the Term of the Agreement,
relating to the making, having made, using, offering for sale, selling or
importing of Products in a country outside the Territory become available for
licensing due to any i) expiration, (ii) modification, (iii) termination by
PRAECIS or Synthelabo, or (iv) exercise of rights by PRAECIS or Synthelabo,
under the Synthelabo Agreement, PRAECIS,
11
<PAGE>
should it choose not to retain such rights for itself, shall first present an
offer to ROCHE in writing to obtain such available rights. PRAECIS and ROCHE
shall negotiate such offer in good faith for up to ninety (90) days from the
date the offer is received by ROCHE. If, at the end of such ninety (90) day
period, the parties have been unable to reach agreement on the essential terms
of an agreement granting such available rights in the country to ROCHE, PRAECIS
shall be free to offer the available rights in the country to any third party;
provided, however, that prior to entering into any such agreement with a third
party, PRAECIS shall summarize in writing such terms to ROCHE ("PRAECIS Third
Party Terms") for ROCHE to consider whether the PRAECIS Third Party Terms would
be more favorable to ROCHE than the offer last made to ROCHE by PRAECIS ("ROCHE
Offer").
If ROCHE, in good faith, determines that the PRAECIS Third Party Terms are
more favorable than the ROCHE Offer, then ROCHE shall so notify PRAECIS in
writing of such determination and shall provide reasons for such determination.
ROCHE shall provide such notice and reasons to PRAECIS within thirty (30) days
after ROCHE's receipt of the PRAECIS Third Party Terms. In the event PRAECIS
disagrees with ROCHE's determination, PRAECIS shall so notify ROCHE in writing
within thirty (30) days after receiving ROCHE's notice. ROCHE shall then have
thirty (30) days from PRAECIS' notice to submit the matter to arbitration
generally in accordance with the procedures set forth in Article 11 of this
Agreement. Should ROCHE not timely submit the matter to arbitration within such
thirty (30) days, then ROCHE's determination and notice shall be considered
untimely and withdrawn.
In the event (1) PRAECIS agrees with ROCHE's determination or (2) the
matter is timely submitted to arbitration as described above and the arbitrator
agrees with
12
<PAGE>
ROCHE's determination, PRAECIS shall grant to ROCHE a license or sublicense to
the available rights in the country under the PRAECIS Third Party Terms. In the
event the matter is timely submitted to arbitration as described above and the
arbitrator does not agree with ROCHE's determination, PRAECIS shall be free to
grant such available rights to the third party under the PRAECIS Third Party
Terms.
3. DEVELOPMENT
3.1 Cooperation. ROCHE and PRAECIS will collaborate in developing procedures for
each party to provide input into the development of Product, including, without
limitation, regulatory submissions for Agreed Upon Indications.
3.2 Joint Steering Committee.
a) The parties shall form a Joint Steering Committee ("JSC"), consisting
of an equal number of representatives from each of ROCHE and PRAECIS, which
equal number shall not exceed two (2). The JSC shall establish, in writing, the
Agreed Upon Indications. The JSC shall be chaired, on a rotating annual calendar
year basis, by a senior representative from ROCHE or PRAECIS, with the initial
chairperson to be designated by ROCHE. The JSC shall have the following
responsibilities: (a) establish the Agreed Upon Indications, as provided above,
but with no recourse to Arbitration under Article 11; (b) establish policies
for the development of Product for all Agreed Upon Indications in the Territory;
(c) establish policies for manufacture and formulation activities with respect
to Product, including, without limitation, alternative sustained release
formulations to maximize sales of the Product in the Territory; (d) approve and
monitor annual development programs and modifications thereto; (e) establish
13
<PAGE>
subcommittees and project teams on an as-needed basis; and (f) undertake such
other activities as may be agreed upon by the parties.
b) To implement its policies, the JSC shall establish a Development
Project Team ("DPT") containing representatives from ROCHE and PRAECIS. The DPT
will (a) prepare and submit to the JSC for approval annual development plans and
budgets for Product ("Development Program"), and, (b) under the oversight of the
JSC, implement and monitor the Development Program, including submitting
proposed modifications thereof to the JSC for its approval. The DPT shall be
chaired by a Roche representative who shall lead the day-to-day operations of
the DPT in implementing and monitoring the Development Program.
c) The DPT will annually establish the Development Program, consisting of
a development plan and a development budget, for Product in all Agreed Upon
Indications. The development plan shall identify the activities to be conducted
by the DPT, for at least eight (8) calendar quarters in advance and shall be
updated on a quarterly basis. A rolling development budget in US dollars will be
derived from such development plan and shall identify manpower used, expressed
as Full Time Equivalents ("FTE"), and costs to be incurred by each party,
either internally or externally, for at least the next eight (8) calendar
quarters. The rolling development budget shall identify activities for each main
development function, as detailed in Exhibit 3, in sufficient activity detail to
allow monitoring of expenses versus budget. The parties shall update the
development budget on a quarterly basis and may revise it if changes in the
Development Program warrant.
14
<PAGE>
3.3 JSC Decisions.
a) Consensus. Decisions of the JSC regarding development of Product shall
be made by consensus. If the JSC is unable to reach consensus on any development
decision, the issue shall be submitted for consideration to the Head of
Development for the Pharmaceutical Division of F.Hoffmann-La Roche Ltd, a Swiss
Corporation having a principal place of business at Basel, Switzerland
("ROCHE-Basel") and to the Chief Executive Officer of PRAECIS.
b) Agreed Upon Indication. In the event that the issue can not be resolved
by the individuals named in subparagraph (a) and the issue is a development
commitment which relates to an Agreed Upon Indication, then the party proposing
the commitment ("Proposing Party") may proceed with such development commitment.
In such event the issue must promptly be brought to an independent neutral
expert selected by the parties or, if within thirty (30) days the parties are
unable to agree upon an independent neutral expert, one selected by the American
Arbitration Association ("AAA"), to determine whether such development
commitment is reasonably necessary, consistent with prudent business practices,
to obtain approval of Product for an Agreed Upon Indication. Such determination
shall include consideration of whether development or commercialization,
directly or indirectly, would have a material adverse impact on the potential of
Product in the Territory from a business or scientific viewpoint. If the neutral
expert determines that the commitment is reasonably necessary, then costs
associated with such commitment shall be considered as Development Costs. If the
neutral expert determines that the commitment is not reasonably necessary, then
the costs incurred in connection with such commitment shall not be considered
part of Development Costs and shall be paid solely by the Proposing Party.
15
<PAGE>
c) Other Indications.
i) In the event that the issue can not be resolved by the
individuals named in subparagraph (a) and the issue is a development commitment
relating to an indication other than an Agreed Upon Indication, then the
Proposing Party may proceed with such development commitment as set forth below,
at its sole cost. In such event, the other party shall lose its rights with
respect to such indication (other than under the Heads of Supply Agreement set
forth as Exhibit 4 to this Agreement), including (1) in the case of PRAECIS, any
copromotion rights and rights to financial consideration including Revenue Share
under Section 6.2 and ex-US royalties under Section 6.3(a) with respect to such
indication, and, (2) in the case of ROCHE, its license and related rights under
Article 2 with respect to such indication, except as described below.
ii) Should PRAECIS be the Proposing Party, ROCHE shall have the
option to reassume rights lost in subsection (c)(i) above with respect to such
indication ("ROCHE Opt-in Right") by so notifying PRAECIS in writing before the
filing of the NDA for such indication. In the event ROCHE exercises the Roche
Opt-in Right with respect to an indication, ROCHE shall, within sixty (60) days
after receiving an invoice with detailed cost information, reimburse PRAECIS for
the amount of PRAECIS' documented costs in developing such indication (to the
extent such costs would otherwise have been reimbursable as a Development Cost)
and after ROCHE's exercise of the ROCHE Opt-in Right, share in the Development
Costs for the indication in accordance with Section 3.4. Should PRAECIS be the
Proposing Party and ROCHE does not exercise the ROCHE Opt-in Right, then upon
notice to ROCHE, PRAECIS may develop and commercialize the indication either
alone or in collabora-
16
<PAGE>
tion with or through one or more third parties and PRAECIS shall continue to
supply Compound or Product in accordance with Article 4 for all other
indications.
Notwithstanding the above, PRAECIS shall not develop or commercialize such
indication if the JSC decides that such development or commercialization,
directly or indirectly, would have a material adverse impact on the potential of
the Product in the Territory from a business or scientific viewpoint ("Impact").
Should the JSC not be able to reach a decision with respect to Impact, then the
issue shall be submitted for consideration to the Head of Development for the
Pharmaceutical Division of ROCHE-Basel and to the Chief Executive Officer of
PRAECIS. In the event that such issue cannot be resolved by these individuals
after a good faith discussion to resolve the issue, then either party may submit
the matter to arbitration generally in accordance with the procedures set forth
in Article 11 (other than Section 11.1(a) and 11.1(c) below) of this Agreement.
iii) Should ROCHE be the Proposing Party, PRAECIS shall have the option to
reassume rights lost in subsection (c)(i) above including the right to obtain
Revenue Share under Section 6.2 and ex-US royalties under Section 6.3(a) with
respect to such indication ("PRAECIS Opt-in Right") by so notifying ROCHE in
writing before the filing of the NDA for such indication. In the event PRAECIS
exercises the PRAECIS Opt-in Right with respect to an indication, PRAECIS shall,
within sixty (60) days after receiving an invoice with detailed cost
information, reimburse ROCHE for the amount of ROCHE's documented costs in
developing such indication (to the extent such costs would otherwise have been
reimbursable as a Development Cost) and after PRAECIS exercises the PRAECIS
Opt-in Right share in the Development Costs for the indication in accordance
with Section 3.4. Should ROCHE be the Proposing Party and
17
<PAGE>
PRAECIS does not exercise the PRAECIS Opt-in Right, then upon notice to PRAECIS,
ROCHE may develop and commercialize the indication either alone or in
collaboration with or through one or more third parties and PRAECIS shall
continue to supply Compound or Product in accordance with Article 4 for all
other indications.
Notwithstanding the above, ROCHE shall not develop or commercialize such
indication if the JSC decides that such development or commercialization,
directly or indirectly, would have a material adverse impact on the potential of
the Product in the Territory from a business or scientific viewpoint ("Impact").
Should the JSC not be able to reach a decision with respect to Impact, then the
issue shall be submitted for consideration to the Head of Development for
ROCHE-Basel and to the Chief Executive Officer of PRAECIS. In the event that
such issue cannot be resolved by these individuals after a good faith discussion
to resolve the issue, then either party may submit the matter to arbitration
generally in accordance with the procedures set forth in Article 11 (other than
Section 11.1(a) and 11.1(c) below) of this Agreement.
iv) When needed under Section 3.3(c)(iii), the parties shall agree
upon mechanisms and equally share costs to account for sales which are
attributable to such indications that are not Agreed Upon Indications.
3.4 Development Costs. Except as set forth in Section 3.8, the parties shall
share equally Development Costs, after subtracting amounts paid by Synthelabo.
Notwithstanding the above, ROCHE shall not be responsible for Development
Costs incurred or commitments made before the Effective Date even if such costs
or commitments are actually paid for or conducted after such date.
18
<PAGE>
The parties shall conduct the Development Program in accordance with
annual budgets included therein. On or after the date ROCHE exercises its option
under the Option Agreement, i) on a monthly basis thereafter, within fifteen
(15) days after the end of each calendar month during the Term of the Agreement,
a given party shall provide a report to the other party and the JSC identifying
the estimated expenses incurred by such party during the prior calendar month,
and ii) within thirty (30) days after the end of each calendar quarter during
the Term of the Agreement, a given party shall provide a final report to the
other party and the JSC of actual Development Costs incurred by such party
during the prior calendar quarter. Each monthly and quarterly report will be
accompanied by and include reasonable documentation, in accordance with Exhibit
3, which itemizes and explains the costs incurred as to allow comparison to the
annual budget. Based on the quarterly reports, the JSC shall, within thirty (30)
days after the receipt of quarterly reports from each party, determine the net
amount owed by one party to the other party, and the party owing such net amount
will make such payment within five (5) business days after such determination.
Except as set forth in the Development Program, one party shall not bind another
party to any financial obligation whatsoever without the other party's prior
written approval.
Reports provided to ROCHE shall be sent to:
Roche Products Inc.
State Road #670 km 2.7
Manati, Puerto Rico 00647-0452
Attn: President
or to any other address that ROCHE may advise in writing.
19
<PAGE>
Reports provided to PRAECIS shall be sent to:
PRAECIS PHARMACEUTICALS INCORPORATED
1 Hampshire Street
Cambridge, Massachusetts 02139
Attn: Chief Financial Officer
or to any other address that PRAECIS may advise in writing.
All Development Costs payable to a party under this Agreement shall be
payable in U.S. Dollars by wire transfer to a bank account designated by the
party. Development Costs incurred by a party in a country having a currency
other than US Dollars shall be converted into US Dollars. ROCHE shall convert
Development Costs incurred by PRAECIS in a country having a currency other than
US Dollars for a given calendar month using the average of the daily official
rates of exchange for each day in the calendar month, using the rates of
exchange as computed in ROCHE's central foreign currency exchange data base
derived from the Reuters System. PRAECIS shall convert Development Costs
incurred by ROCHE in a country having a currency other than US Dollars for a
given calendar month using the average of the daily official rates of exchange
for each day in the calendar month, using the rates of exchange from the Reuters
System.
3.5 Audit. Each party shall keep accurate and correct records appropriate to
determine the amounts due under Article 3 of this Agreement. Such records shall
be retained for at least four (4) years following the end of the calendar year
to which such records pertain.
A party or its authorized independent public accountant ("auditing party")
shall have the right to engage a partner (or person comparable in position and
technical
20
<PAGE>
expertise to a partner), located in the country where the audit would occur,
from the other party's independent public accountant, to perform, on behalf of
the auditing party, an audit of such books and records of the other party
("audited party") that are deemed reasonably necessary by such partner to verify
the audited party's report(s) for the period(s) requested. The partner can not
be responsible for supervising or conducting audits of the audited party's books
and records. The audit shall be conducted in accordance with generally accepted
auditing standards in the United States of America.
The audit rights under this Section of this Agreement may be exercised by
a party (1) no more often than once per year (2) not more frequently than once
with respect to records covering any specific period of time, and (3) only
within four (4) years after the payment period to which such records relate. The
audit shall be performed upon no less than thirty (30) days prior written notice
to the audited party, during the audited party's normal business hours. The
terms of this Section 3.5 shall survive the Term of the Agreement for a period
of four (4) years.
The auditing party will bear the full cost any such audit unless such
audit discloses an underpayment to the auditing party of more than five percent
(5%) from the amounts paid. The audited party shall promptly (1) pay any
underpayment due the auditing party and, (2) if the underpayment due to the
auditing party is more than five percent (5%) of the amount paid, the audited
party shall bear the full reasonable cost of such audit. Any overpayment by the
audited party shall be deducted from the next payment due the auditing party
under Section 3 of this Agreement or, if no such further payments are due
promptly reimbursed to the auditing party.
21
<PAGE>
3.6 Diligence. Each party shall use reasonable diligence consistent with prudent
business practices to develop Product and obtain and maintain necessary
governmental approval to market Product in the Territory in accordance with the
Development Program which includes all normal and customary activities necessary
for timely development of Product for the Agreed Upon Indications. Reasonable
diligence for a party shall mean the same standard of effort as would be used by
the party in the development, testing, and manufacturing of its products of its
own innovation of similar scientific and business potential in the Territory.
3.7 NDA. In the United States, the NDA for Product shall be owned by PRAECIS and
filed by ROCHE or its Affiliates on behalf of PRAECIS. Outside the United States
and within the Territory, the NDA for Product shall be owned by ROCHE or its
Affiliates and filed by ROCHE or its Affiliates. Each party, upon request,
shall supply the other party with a copy of all communications related to
Product to or from any governmental agency of all countries in the Territory.
ROCHE shall have primary responsibility for compiling and submitting the
NDA documentation for all countries in the Territory, except for a given country
of the Territory if, for the given country, the JSC concludes that the
submission of the NDA in the given country would be materially delayed by ROCHE
compiling and submitting such documentation.
Consistent with the role of an NDA owner, PRAECIS shall promptly act upon
any promotional material related to Product provided by ROCHE for submission to
the FDA.
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
3.8 Data. All data generated on account of the Development Program shall be
owned jointly by ROCHE and PRAECIS and shall not be provided to any third party
without the consent of both parties, except to Synthelabo to the extent required
by (i) applicable regulatory authorities or (ii) the Synthelabo Agreement as of
the Effective Date. PRAECIS will use best efforts to ensure that Synthelabo
timely provides to ROCHE, free of charge, all data relating to the safety of
Compound and Product and all other data relating to clinical studies.
3.9 Additional Trial. PRAECIS and ROCHE, subject to approval by the JSC pursuant
to Section 3.3, may conduct an additional clinical study on ***. Should the JSC
decide to have such study conducted, for the first *** dollars ($***) of
Development Costs associated with the ***, ROCHE shall be responsible for
sharing *** and PRAECIS shall be responsible for sharing the remaining
Development Costs associated with ***. For any Development Costs associated
with the *** in excess of *** dollars ($***), the parties shall share equally
such additional Development Costs, after subtracting amounts paid by Synthelabo
to PRAECIS with respect to those additional Development Costs. PRAECIS shall use
best efforts to secure the agreement of Synthelabo to pay a sum which *** of the
Development Costs of the ***. Any payments by Synthelabo with respect to the
first *** dollars ($***) of Development Costs associated with the *** will not
be deducted in determining ROCHE's funding obligation for the ***.
23
<PAGE>
3.10 Withholding Tax. With respect to Development Costs, each party will remit
payments to the other party due under this Article 3 without deduction of any
withholding taxes which may otherwise be due.
3.11 Trademarks. It is the objective of the parties to have a single worldwide
trademark for a given Product. ROCHE shall own the trademark for a given Product
only in the Territory. ROCHE shall bear the cost of obtaining and maintaining
the trademark for the Product in the Territory. Notwithstanding the above and
subject to Section 3.3, for a given Product, in the event PRAECIS or any of its
Affiliates or sublicensees (including Synthelabo), if any, has or acquires the
right to market and sell Product incorporating PRAECIS Proprietary Rights in the
Territory, then PRAECIS or such Affiliate or sublicensee shall have the right to
use the trademark for the Product on a royalty-free basis in connection with
marketing and selling such Product in the Territory.
Outside the Territory, upon written request from PRAECIS to ROCHE, PRAECIS
or any of its Affiliates or sublicensees (including Synthelabo) shall have the
right to use the same trademark for the same Product as it is used in the
Territory on a royalty-free basis unless ROCHE determines and demonstrates
within thirty (30) days after the date PRAECIS requested such use that such use
would have a material adverse impact on the potential of Product in the
Territory from a business viewpoint. In the event PRAECIS does not agree that
ROCHE has demonstrated that such use would have a material adverse impact on the
potential of Product in the Territory from a business viewpoint, PRAECIS shall
so notify ROCHE in writing within thirty (30) days after the date PRAECIS
requested such use. ROCHE shall then have thirty (30) days from PRAECIS's notice
to submit the matter to arbitration generally in accordance with
24
<PAGE>
the procedures set forth in Article 11 of this Agreement. Should ROCHE not
submit the matter to arbitration within such thirty (30) days, then ROCHE's
determination and notice shall be considered untimely and withdrawn. In the
event (1) PRAECIS agrees with ROCHE or (2) the matter is timely submitted to
arbitration as described above and the arbitrator agrees with ROCHE, PRAECIS and
its Affiliates and sublicensees (including Synthelabo) shall not have the right
to use the trademark outside the Territory. In the event the matter is timely
submitted to arbitration as described above and the arbitrator does not agree
with ROCHE's determination, PRAECIS and its Affiliates and sublicensees
(including Synthelabo) shall be free to use such trademark outside the Territory
for the same Product as used in the Territory on a royalty-free basis.
4. MANUFACTURING
4.1 Supply Agreement.
a) Heads. The parties shall enter into a Supply Agreement for PRAECIS to
exclusively make or have made and ROCHE to exclusively purchase its requirement
of Compound and/or Product in the Territory. A Heads of Supply Agreement is set
forth in Exhibit 4 to this Agreement and is binding on the parties. The Heads of
Supply Agreement shall be the basis for preparing a full Supply Agreement. It is
anticipated that the parties will negotiate in good faith additional specific
terms reflecting the understandings set forth in the Heads of Supply Agreement
and finalize the Supply Agreement within three (3) months after Initiation of
First Phase III.
25
<PAGE>
b) Dispute. In the event that the parties are unable to resolve any issues
and thus are unable to finalize the Supply Agreement by three (3) months after
Initiation of First Phase III, the parties shall first refer such issues to the
President of Roche Laboratories Inc., a Delaware corporation which is an
Affiliate of ROCHE ("Roche Labs"), or its equivalent, and to the Chief Executive
Officer of PRAECIS for resolution. In the event that such issues cannot be
resolved by these individuals, then either party may initiate arbitration
generally in accordance with the procedures set forth in Article 11 (other than
Sections 11(a) and 11(c) below) of this Agreement. However, the decision of the
arbitrator pursuant to this Section 4.1 shall be based on the following factors
in descending order of importance: (a) consistency with the provisions of this
Agreement and Heads of Supply Agreement; (b) consistency with the intent of the
parties as reflected in this Agreement and Heads of Supply Agreement; and (c)
customary and reasonable provisions included in comparable supply agreements.
5. COMMERCIALIZATION
5.1 Diligence. ROCHE shall use reasonable diligence consistent with ROCHE's
typical prudent business practices to market and sell Product in the Territory.
Reasonable diligence for ROCHE under this Section 5.1 shall mean the same
standard of effort as would be used by ROCHE in the marketing and sale of
products of its own innovation of similar business potential in the Territory.
5.2 Cooperation. ROCHE and PRAECIS will collaborate in developing procedures for
PRAECIS to provide input into the promotion of Product. ROCHE shall retain
responsibility for leading the implementation of the promotion of Product and
making
26
<PAGE>
decisions regarding marketing of Product. ROCHE shall present the ROCHE
marketing plan for Product to PRAECIS on at least an annual basis, and PRAECIS
shall have a reasonable opportunity to provide comments thereon to ROCHE.
5.3 US Copromotion Option.
a) Option. PRAECIS shall have an option to promote and detail in the
United States Product jointly with Hoffmann-La Roche Inc., a New Jersey
corporation, having a principal place of business at Nutley, New Jersey
("ROCHE-Nutley") or, at ROCHE-Nutley's discretion, an Affiliate of ROCHE-Nutley,
such option to be exercised in accordance with Section 1 of the Heads of
Agreement for Copromotion as set forth in Exhibit 5 to this Agreement
("Copromotion Option"). The Heads of Agreement for Copromotion is binding on the
parties, and shall be the basis for preparing a full Copromotion Agreement
("Copromotion Agreement"). It is anticipated that the parties will negotiate in
good faith additional specific terms reflecting the understandings set forth in
the Heads of Agreement for Copromotion and finalize the Copromotion Agreement
within three (3) months after PRAECIS exercises its Copromotion Option.
b) Dispute. In the event that the parties are unable to resolve any issues
and thus are unable to finalize the Copromotion Agreement by three (3) months
after the Copromotion Option is exercised, the parties shall first refer such
issues to the President of Roche Labs, or its equivalent, and to the Chief
Executive Officer of PRAECIS for resolution. In the event that such issues
cannot be resolved by these individuals, then either party may initiate
arbitration generally in accordance with the procedures set forth in Article 11
(other than Sections 11(a) and 11(c) below) of this Agreement. However, the
decision of the arbitrator pursuant to this Section 5.3 shall be based on the
following factors in descending order of importance: (a) consistency
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
with the provisions of this Agreement and Heads of Copromotion Agreement; (b)
consistency with the intent of the parties as reflected in this Agreement and
Heads of Copromotion Agreement; and (c) customary and reasonable provisions
included in comparable agreements.
6. CONSIDERATION
6.1 Development Payments.
a) Events. ROCHE shall make the following non-refundable payment(s) to
PRAECIS within thirty (30) days after (i) the first achievement of the
respective event(s) set forth below with respect to an Agreed Upon Indication
for Product and (ii) receipt of an invoice from PRAECIS:
<TABLE>
<CAPTION>
TABLE # I
---------
------------------------------------------------------------
Event For an Agreed Upon United States Dollars
Indication (In Millions)
------------------------------------------------------------
<S> <C>
*** ***
------------------------------------------------------------
</TABLE>
Under Table I, ***.
28
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
Each of the above payments shall be payable no more than once and shall
encompass all products comprising Product and all indications taken together.
In the event the United States FDA waives Initiation of First Phase III for
Product, the payment that would otherwise have become due under this Section 6.1
for Initiation of First Phase III will be due and payable upon Filing NDA in the
United States.
b) Allocation. Based upon PRAECIS' allocation of PRAECIS Proprietary
Rights between (1) patents owned by PRAECIS and (2) those owned by third parties
(such as patents related to Product owned by the Indiana University Foundation
("IU")) and licensed to PRAECIS, the payments of Table 1 are allocated as
follows: ***% of each such payment shall be deemed to be attributable to the
PRAECIS Proprietary Rights owned by PRAECIS, and ***% of each such payment shall
be deemed to be attributable to that portion of the PRAECIS Proprietary Rights
owned by third parties and licensed to PRAECIS.
c) Withholding Tax. When due and payable, ROCHE will remit each of the
above payments under Section 6.1(a) to PRAECIS without deduction of any
withholding taxes which may otherwise be due.
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<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
6.2 Payments - United States.
a) Revenue Share. For the United States, during the Term of the Agreement
and following Launch of Product, for sales in the United States, within fifteen
(15) days after the end of each fiscal month, ROCHE shall provide PRAECIS with a
monthly report of estimated Net Sales of Product in the United States by ROCHE,
its Affiliates and sublicensees during the preceding month, which report shall
include information concerning total units of Product sold by ROCHE, its
Affiliates and sublicensees in the United States to non-Affiliated third party
purchasers during such month. Based upon this report and the form of Product
supplied by PRAECIS to ROCHE (e.g., Compound, Semi-Finished Dosage Form or
otherwise), PRAECIS shall submit an invoice to ROCHE stating the estimated
amounts due from ROCHE to PRAECIS on account of Product Revenue, itemizing
separately the COGS Amount and the Revenue Share.
Subject, inter alia, to Sections 3.3(c) and 8.1, the Revenue Share shall
equal a percentage of Net Sales of Product sold by ROCHE in the United States in
a calendar year as follows:
<TABLE>
<CAPTION>
TABLE # II
----------
------------------------------------------------------------
Incremental Net Sales $ US (in Percentage (%) Millions)
------------------------------------------------------------
<S> <C>
*** 25
------------------------------------------------------------
*** ***
------------------------------------------------------------
*** ***
------------------------------------------------------------
*** ***
------------------------------------------------------------
</TABLE>
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<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
By way of illustration, assume in the calendar year 2001 that Net Sales of
Product in the United States total $***. The Revenue Share payable by ROCHE to
PRAECIS would be $***, calculated as follows:
<TABLE>
<CAPTION>
TABLE # III
-----------
------------------------------------------------------------
Sales (million) x % Revenue Share (million)
------------------------------------------------------------
------------------------------------------------------------
<S> <C> <C>
*** x 25 ***
------------------------------------------------------------
------------------------------------------------------------
*** *** ***
------------------------------------------------------------
------------------------------------------------------------
*** *** ***
------------------------------------------------------------
------------------------------------------------------------
------- ---------
------------------------------------------------------------
------------------------------------------------------------
*** ***
------------------------------------------------------------
------------------------------------------------------------
</TABLE>
The Revenue Share shall be an amount serving as consideration for PRAECIS
granting ROCHE the right and license to offer for sale, import and sell Product
under the PRAECIS Proprietary Rights in the United States.
b) Royalty. As additional consideration for PRAECIS granting ROCHE the
right and license to offer for sale, import and sell Product under the PRAECIS
Proprietary Rights in the United States, ROCHE shall pay to PRAECIS a one-time,
non-refundable royalty payment equal to $*** U.S. within thirty (30) days after
the first Launch of Product in the United States for an Agreed Upon Indication.
For purposes of this Section 6.2(b), such Launch of Product shall include
PRAECIS' supplying ROCHE with sufficient quantity of Product to (i) meet ROCHE's
forecast of ROCHE's requirements for Product, as provided by ROCHE to PRAECIS in
accordance with the
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<PAGE>
Heads of Supply Agreement set forth in Exhibit 4, for at least six (6)
consecutive month sales in the United States from Launch of Product and (ii)
allow ROCHE reasonable time to manufacture finished goods and distribute such
finished goods in adequate quantities for Launch of Product throughout the
United States.
c) Payment of COGS Amount. Based upon the invoice submitted under Section
6.2(a), in good faith, by PRAECIS to ROCHE, ROCHE shall pay the COGS Amount
within thirty (30) days after receipt by ROCHE of the invoice.
d) Payment of Revenue Share. During the Term of the Agreement and
following Launch of Product, within sixty (60) days after the end of each fiscal
quarter, ROCHE shall provide PRAECIS with a report of actual Net Sales of
Product sold by ROCHE in the United States for that fiscal quarter and shall
compute the actual amount of Revenue Share owed by ROCHE to PRAECIS, subject,
inter alia, to Sections 3.3(c) and 8.1. Payment of such Revenue Share shall
accompany this report.
In the event that there is a difference between the estimated units of
Product sold and the actual units of Product sold for the given fiscal quarter,
the parties shall make an adjustment to COGS Amount for the given period to
reflect the difference. If for a given fiscal quarter the amount of estimated
units of Products sold exceeded the amount of units of Product actually sold
("Overestimate"), ROCHE will deduct an amount reflecting the Overestimate from
the Revenue Share otherwise due PRAECIS under this Agreement on account of sales
of Product in the United States during the fiscal quarter.
<PAGE>
Notwithstanding the foregoing, if ROCHE, in its sole determination,
concludes that a unit of Product, supplied by PRAECIS to ROCHE and intended
for sale in the United States, reaches obsolescence, then ROCHE shall, within
sixty (60) days after the end of the fiscal quarter in which such unit
reaches obsolescence, pay to PRAECIS the COGS Amount for such unit as an
inventory adjustment fee. In no event shall such obsolescence exceed the
expiration date of such unit of Product. Such payment shall reflect the form
of Product received from PRAECIS by ROCHE.
e) Duration. The duration of payment by ROCHE to PRAECIS of the Revenue
Share under Section 6.2 shall continue for the longer of (i) ten (10) years
from Launch of Product in the United States or (ii) the date of the last to
expire Valid Claim that would be infringed by ROCHE's making, having made,
using, importing, offering for sale or selling of Product in the United
States.
f) Third Party Entry in the United States. If, in the United States, in
any calendar quarter a third party other than an Affiliate or sublicensee of
ROCHE achieves market penetration which, with respect to a Product (including
all formulations containing the same Compound (including acids, salts or
esters thereof) as found in the given Product), cumulatively amounts to more
than a fifteen percent (15%) market share in the United States of units of
such Product as determined on a unit basis in such calendar quarter, the
Revenue Share otherwise due from ROCHE to PRAECIS under this Section 6.2
shall be reduced by an amount (not to exceed fifty percent (50%)) to be
agreed upon by the parties, such amount to reflect the (i) relative gross
margin and (ii) market share of ROCHE before and after such market
penetration. Such amount shall be determined by the mutual agreement of the
parties after good faith negotiations. Should the parties be unable to reach
mutual agreement
33
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
thereon, the matter shall be submitted to arbitration generally in accordance
with the procedures set forth in Article 11 of this Agreement.
g) Additional Consideration. ROCHE shall also pay PRAECIS a total sum
of one dollar ($1.00) as consideration for PRAECIS granting ROCHE the right
and license to make, have made and use Product under the PRAECIS Proprietary
Rights in the United States.
6.3 Payments - Outside the United States.
a) Ex-US Royalties. For sales in all countries in the Territory outside
the United States, during the Term of the Agreement for a given country,
ROCHE shall pay PRAECIS (a) an amount equal to the COGS Amount for the
applicable form of Product as reflected by the units supplied by PRAECIS to
ROCHE ("ex-US COGS ") and (b) a royalty of *** percent (***) of Net Sales -
of Product in each such country ("ex-US Royalties").
In accordance with the Heads of Supply Agreement as set forth in
Exhibit 4, ROCHE shall pay the ex-US COGS within thirty (30) days after
receipt by ROCHE of an invoice from PRAECIS for the Compound and/or Product
that has been delivered to ROCHE under a firm purchase order.
Within ninety (90) days after the end of each calendar quarter, ROCHE
shall provide PRAECIS with a report of Net Sales of Product sold by ROCHE in
countries of the Territory outside the United States for that calendar
quarter and compute the
34
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
amount of royalties owed by ROCHE to PRAECIS under this Section 6.3. Payment
of such royalties shall accompany this report.
b) Duration. The duration of payment of royalties under this Section
6.3 in a country shall continue for the longer of (i) ten (10) years from
Launch of Product in that country or (ii) the date of the last to expire
Valid Claim which except for this Agreement would be infringed by ROCHE's
making, having made, using, importing, offering for sale or selling of
Product in that country. The royalties set forth in this Section 6.3 shall be
reduced to *** percent (***) of Net Sales at any time and in any country in
which ROCHE's making, having made, using, importing, offering for sale or
selling of Product in such country would not infringe a Valid Claim in that
country.
c) Third Party Entry Outside the United States. If, in a country in the
Territory outside the United States, in any calendar quarter a third party
other than an Affiliate or sublicensee of ROCHE achieves market penetration
which, with respect to a Product (including all formulations containing the
same Compound (including acids, salts or esters thereof) as found in the
given Product), cumulatively amounts to more than a *** percent (***)
market share in such country of units of such product as determined on a unit
basis in such calendar quarter, the ex-US royalties otherwise due from ROCHE
to PRAECIS under this Section 6.3 shall be reduced by an amount (not to
exceed *** percent (***) to be agreed upon by the parties, such amount to
reflect the (i) relative gross margin and (ii) market share of ROCHE before
and after such market penetration. Such amount shall be determined by the
mutual agreement of the parties after good faith negotiations. Should the
parties be unable to reach mutual agreement thereon, the matter shall be
submitted to arbitration generally in accordance with the procedures set
forth in Article 11 of this Agreement.
35
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
6.4 Withholding Tax. All payments under Sections 6.2 and 6.3 shall be made in
full without deduction of taxes, charges and any other duties ("Taxes") that
may be imposed, provided, however, that ROCHE shall to the extent required
under the tax law of a given country, withhold such Taxes from any such sum
and forthwith upon paying such sum to the given countries' tax authorities
promptly furnish PRAECIS with the receipt thereof in respect of the same. The
parties agree to cooperate in all respects necessary to (a) take advantage of
reduced withholding tax rates available under any applicable tax treaties,
and (b) assist PRAECIS in obtaining any refunds for PRAECIS of amounts
withheld and paid to tax authorities.
Notwithstanding the above, ROCHE will be liable for, and will not
deduct any Tax imposed on payment of Revenue Share by the Commonwealth of
Puerto Rico.
6.5 ROCHE Third Party Payments. Except as provided in Section 6.6, if ROCHE,
in good faith, pays consideration under patent rights or know-how owned or
controlled by a party other than PRAECIS, which in ROCHE's opinion, is
reasonably required to allow ROCHE to make, have made, use, import, offer for
sale or sell Product (other than active ingredients which are not Compound)
in a given country, then the payments otherwise made by ROCHE to PRAECIS
under this Agreement (other than Development Costs under Section 3.4,
payments under Section 6.1, and payments relating to the COGS Amount and
ex-U.S. COGS under Sections 6.2 and 6.3 respectively) shall be reduced by
such consideration. However, in no event shall any such payment be reduced by
more than *** in any quarter as a result of such consideration,
36
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
with any amounts not utilized as a result of such limitation ("Unutilized
Amounts") being carried forward to future reporting periods. Within thirty
(30) days after the end of the Term of the Agreement for a given country,
PRAECIS shall reimburse ROCHE for an amount equal to the cumulative
Unutilized Amounts for such country.
6.6 PRAECIS Third Party Payments.
a) Third Parties. PRAECIS shall be solely responsible for all royalties
and other payments that may be due or payable by it to a third party.
b) Indiana University. Notwithstanding Section 6.6(a), the parties
acknowledge that PRAECIS and IU have entered into an agreement dated October
17, 1996 ("Indiana Agreement") and an Amendment which is being finalized by
PRAECIS (which Amendment, upon finalization, will immediately be sent to
ROCHE). ROCHE shall pay IU directly a portion of the royalty that is due IU
under the Indiana Agreement up to a maximum of *** (***%) of Net Sales of
Product in the Territory. Prior to Launch of Product, PRAECIS shall notify
ROCHE in writing of the address to where ROCHE shall pay such royalty due IU.
In addition, PRAECIS shall promptly notify ROCHE of any changes or
modifications to the IU Agreement.
PRAECIS warrants and represents that PRAECIS has obtained IU's approval
for ROCHE's use of the Net Sales definition as defined in Section 1.21 of
this Agreement rather than the net sales definition set forth in the Indiana
Agreement.
37
<PAGE>
6.7 Royalties Due Once. Sales of Product between and among ROCHE, its
Affiliates and its sublicensees which are subsequently resold or to be resold
by ROCHE, its Affiliates or its sublicensees to a third party shall not be
subject to a royalty, but royalties shall be payable upon any such resale
other than by a licensee of PRAECIS outside the Territory with regard to
Product or any one in privity with any such licensee. The obligation to pay
royalties to PRAECIS under this Agreement is imposed only once with respect
to the same unit of Product.
6.8 Combination Products. For any product containing both a pharmaceutically
active agent which causes it to be considered a Product and one or more other
pharmaceutically active agents which are not Products ("Combination
Product"), the parties shall in good faith negotiate and agree to an
appropriate adjustment to the Net Sales to reflect the relative contribution
of each Product and each other pharmaceutically active agent which is not a
Product to the Combination Product. If, after good faith negotiations (not to
exceed ninety (90) days, which can be extended by mutual agreement), the
parties can not agree to an appropriate adjustment, Net Sales shall be equal
to Net Sales of the Combination Product multiplied by a fraction, the
numerator of which is the reasonable fair market value of the Compounds
contained in the Combination Product and the denominator of which is the
reasonable fair market value of all pharmaceutically active agents contained
in the Combination Product.
6.9 Currency. All amounts payable to PRAECIS under this Agreement shall be
payable in U.S. Dollars by wire transfer to a bank account designated by
PRAECIS. When calculating the Adjusted Gross Sales, the amount of such sales
in foreign currencies shall be converted into Swiss Francs as computed by
ROCHE-Basel for the countries concerned, using the average monthly rate of
exchange at the time for such
38
<PAGE>
currencies calculated on the basis of the average daily rate of exchange as
retrieved from the Reuters System during such month. When calculating the
royalties on Net Sales, such conversion shall be at the average rate of Swiss
Franc to the United States currency calculated on the basis of the average
daily rate of exchange as retrieved from the Reuter's System for the
applicable reporting period.
6.10 Blocked Country. If at any time a Product is sold in a country in which
conditions or legal restrictions exist which prohibit remittance of United
States dollars or Swiss Francs ("Blocked Country") the following provisions
shall apply to the payment of the corresponding royalty, depending on where
the Product is made:
a) If such Product is made in the same or another Blocked Country,
ROCHE shall make such royalty payment by depositing the amount thereof in the
currency of the country of sale or manufacture, at PRAECIS's election, to
PRAECIS's account in a bank designated by PRAECIS in such country.
b) If such Product is made in a country which is not a Blocked Country,
then a "number" shall be obtained by multiplying the applicable royalty rate
by the price at which the Product is sold to the entity selling in the
Blocked Country. ROCHE or its Affiliate (i) shall pay that "number" to
PRAECIS as converted to US Dollars in accordance with Section 6.9, and (ii)
shall deposit the excess of the applicable royalty over the "number", in the
currency of the country of sale of the Product, to PRAECIS's account in a
bank designated by PRAECIS in such Blocked Country.
6.11 Audit. ROCHE shall keep, and shall require its Affiliates and
sublicensees to keep, accurate and correct records of Products sold under
this Agreement appropriate
39
<PAGE>
to determine the amounts due hereunder to PRAECIS. Such records shall be
retained for at least four (4) years following the end of the calendar year
to which such records pertain.
PRAECIS or its authorized independent public accountant shall have the
right to engage a partner (or person comparable in position and technical
expertise to a partner), located in the country where the audit would occur,
from ROCHE's independent public accountant to perform, on behalf of PRAECIS
or its independent public accountant, an audit of such books and records of
ROCHE that are deemed reasonably necessary by such partner to verify ROCHE's
report(s) on Net Sales of Products for the period(s) requested. The partner
can not be responsible for supervising or conducting audits of ROCHE's books
and records. The audit shall be conducted in accordance with generally
accepted auditing standards in the United States of America.
The audit rights under this Agreement may be exercised by PRAECIS (1)
no more often than once per year, (2) not more frequently than once with
respect to records covering any specific period of time, and (3) within four
(4) years after the payment period to which such records relate. The audit
shall be performed upon no less than thirty (30) days prior written notice to
ROCHE, during ROCHE's normal business hours. The terms of this Section 6.11
shall survive the Term of the Agreement for a period of four (4) years.
PRAECIS will bear the full cost any such audit unless such audit
discloses an underpayment to PRAECIS of more than five percent (5%) from the
amounts paid. ROCHE shall promptly (1) pay any underpayment due to PRAECIS
and, (2) if the
40
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
underpayment is more than five percent (5%) of the amount paid, ROCHE shall
bear the full reasonable cost of such audit. Any overpayment by ROCHE shall
be deducted from the next payment due PRAECIS under Section 6 of this
Agreement or, if no such further payments are due, promptly reimbursed to
ROCHE by PRAECIS.
6.12 Mechanism for Adjustment. Should any amount such as reductions, credits
or deductions otherwise allowable to ROCHE for a country under this Agreement
not be utilized by ROCHE upon the termination of this Agreement (other than a
termination as a result of a material breach by ROCHE pursuant to Section
9.3), then PRAECIS shall promptly reimburse ROCHE for the allowable amount.
6.13 Low Sales Adjustment.
a) If, in the third (3rd) or any subsequent full calendar year up to
and including the eighth (8th) full calendar year after Launch of Product in
the United States, Net Sales in the United States do not exceed *** dollars
($***) in a given full calendar year, the following provisions shall apply.
At ROCHE's written request to PRAECIS (which request may be given more than
once), the parties promptly and in good faith shall (i) meet and consider
whether modifications to the consideration under the Agreement are required
in light of a goal for a fifty-fifty (50/50) sharing between the parties of
the net present value as of the Effective Date of the pretax net income for
Product during the Term of the Agreement ("NPV"), and (ii) if the parties
agree that a modification is required, negotiate modifications in light of
the above goal, taking into
41
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
account, without limitation, prudent business practices and all amounts paid
or to be paid by a party to the other under this Agreement including all
Development Costs.
b) The parties agree that any modifications under Section 6.13 shall be
prospective only. Additionally, the parties agree that any modifications
under Section 6.13 shall not be effective for a given calendar year in which
Net Sales in the United States equal or exceed *** dollars ($***).
c) The parties recognize that they have not disclosed to each other the
financial models that reflect expectations for such fifty-fifty (50/50)
sharing of NPV. The parties also further recognize that in implementing this
Section 6.13 additional financial information (for example, relative to
marketing, promotion, sales and expenses of Product) would need to be
disclosed and discussed. Neither party, by agreeing to the provisions of this
Section 6.13, concedes that any modification to the consideration would or
would not need to be made if Net Sales in the United States are less than ***
dollars ($***).
d) Should the parties be unable to agree upon (i) whether a
modification is required, or (ii) if required, how to modify the
consideration, then the arbitration procedures of Article 11 shall be
available.
42
<PAGE>
7. INFORMATION
7.1 Exchange.
a) Mechanism. During the Term of the Agreement, the parties will, free
of charge, exchange and, to this end, the parties shall establish a mechanism
by which the parties will share, Information necessary for the parties to
meet their obligations under this Agreement.
In particular, a party shall, to the extent it is legally permitted to
do so, exchange all information coming into its possession or control, or its
representatives or Affiliates possession or control, relating to formulation,
manufacture, improvement, use and sale of Product in the Territory, including
any such information consisting of technical, pharmacological, preclinical,
clinical, biochemical, toxicological and pharmacokinetic experimental data
and results related to Product. Each party shall also permit a reasonable
number of representatives of the other party or its Affiliates, at reasonable
time and upon reasonable notice, to observe, review, make copies of, and/or
discuss with the party or its Affiliate's scientists and/or clinicians
supervising or conducting research related to Product, the results of studies
and/or submissions to governmental agencies concerning Products, at mutually
agreeable times and locations. Each party shall also permit a reasonable
number of representatives of the other party or its Affiliates, at reasonable
time and upon reasonable notice, to observe, review, make copies of, and/or
discuss with its or its Affiliate's scientists supervising or conducting
manufacture of Product or third party scientists supervising or conducting
manufacture on behalf of it, at mutually agreeable times and locations.
43
<PAGE>
b) Adverse Events. During the Term of the Agreement, each party shall
notify the other of all information coming into its possession concerning
side effects, injury, toxicity, pregnancy or sensitivity reaction associated
with commercial or clinical uses, studies, investigations or tests with
Product, throughout the world, whether or not determined to be attributable
to Product ("Adverse Reaction Reports"). In the case of Adverse Reaction
reports within the scope of 21 CFR 314.80(c)(iii), PRAECIS shall transmit
such Adverse Reaction Reports relating to Product to ROCHE and ROCHE-Nutley
so that they are received by both ROCHE and ROCHE-Nutley within two (2)
calendar days after receipt by PRAECIS, or such other reporting period as may
be required by law, and ROCHE shall notify PRAECIS of any Adverse Reaction
Report relating to Product within two (2) calendar days after receipt thereof
by ROCHE.
7.2 Information. During the Term of the Agreement and for ten (10) years
after termination, a Receiving Party shall a) treat Information provided by a
Disclosing Party as it would treat its own information of a similar nature
and take all reasonable precautions not to disclose such Information to third
parties except Affiliates or actual or potential sublicensees who agree to be
bound by the same terms and conditions as found in this Article 7, without
the other party's prior written authorization and b) not use such Information
for other than the purposes of fulfilling its obligations under this
Agreement.
The provisions of this Section 7.2 shall not apply to such Information
which:
a) was known or used by the Receiving Party or its Affiliates prior to
its date of disclosure to the Receiving Party or its Affiliates by the
Disclosing Party or its
44
<PAGE>
Affiliates, as evidenced by the prior written records of the Receiving Party
or its Affiliates; or
b) either before or after the date of the disclosure to the Receiving
Party or its Affiliates, is lawfully disclosed to the Receiving Party or its
Affiliates by a third party rightfully in possession of such information; or
c) either before or after the date of the disclosure to the Receiving
Party or its Affiliates, becomes published or generally known to the public
through no fault or omission on the part of the receiving Party or its
Affiliates, but such inapplicability applies only after such information is
published or becomes generally known; or
d) is independently developed by the Receiving Party or its Affiliates
without reference to or reliance upon any such information of the Disclosing
Party or its Affiliates; or
e) is required to be disclosed by the Receiving Party or its Affiliates
to comply with applicable laws, to defend or prosecute litigation or to
comply with governmental regulations, provided that, the Receiving Party or
its Affiliates provides prior written notice of such disclosure to the
Disclosing Party or its Affiliates and, to the extent practicable, takes
reasonable and lawful actions to avoid and/or minimize the degree of such
disclosure.
f) is permitted to be disclosed as provided in Section 12.2, provided
that such disclosure is made in compliance with such Section, and only to the
extent permitted under such Section.
45
<PAGE>
7.3 Non-Disclosure Agreements.
a) Employees. Each party covenants and agrees that either (i) it or its
Affiliates has in place agreements requiring its employees, including the
employees of its Affiliates, to (A) maintain all Information provided by the
Disclosing Party in accordance with the requirements of this Agreement and
(B) to assign to such party all rights to inventions and other intellectual
property which its employees create during the course of their employment, or
(ii) such party or its Affiliates shall require its employees, and shall
require employees of its Affiliates, involved in the development,
manufacturing or marketing of Products to execute an agreement with terms as
set forth above.
b) Third Parties. Unless otherwise agreed to in writing, each party
shall, to the extent practicable, require all third parties other than
Affiliates, including consultants, subcontractors, sublicensees or agents,
involved in carrying out its obligations under this Agreement, to (i) execute
an agreement for the protection of Information provided by the Disclosing
Party to any such third party which shall require such third party to
maintain all Information in accordance with the requirements of this
Agreement, and (ii) assign inventions related to Products to the party to
this Agreement to the extent such inventions are useful in carrying out the
terms and objectives of this Agreement.
7.4 Publications. During the Term of the Agreement, the following
restrictions shall apply with respect to disclosure by any party (either the
Disclosing Party or the
46
<PAGE>
Receiving Party) of Information in any publication or presentation
(collectively "Publications"):
a) A party ("Publishing Party") shall provide the other party with a
copy of any proposed Publication at least forty-five (45) days prior to
submission for publication so as to provide such other party with an
opportunity to recommend any changes it reasonably believes are necessary to
continue to maintain the Information disclosed by the other party to the
Publishing Party in accordance with the requirements of this Agreement. The
incorporation of such recommended changes shall not be unreasonably refused;
and
b) If such other party notifies ("Notice") the Publishing Party in
writing, within forty-five (45) days of receipt of the copy of the proposed
Publication, that such Publication in its reasonable judgment (i) contains an
invention, solely or jointly conceived and/or reduced to practice by the
other party, for which the other party reasonably desires to obtain patent
protection or (ii) could be expected to have a material adverse effect on the
commercial value of any Information disclosed by the other party to the
Publishing Party, the Publishing Party shall prevent such publication or
delay such publication for a mutually agreeable period of time. In the case
of inventions, a delay shall be for a period reasonably sufficient to permit
the timely preparation and filing of a patent application(s) or
applications(s)(s) on the Invention, and in no event less than one hundred
and eighty (180) days from the date of Notice. In the event the parties do
not agree as to whether such Publication (i) contains an invention, solely or
jointly conceived and/or reduced to practice by the other party, or (ii)
could be expected to have a material adverse effect on the commercial value
of any Information disclosed by the other party to the Publishing Party,
either party may
47
<PAGE>
submit the matter to arbitration generally in accordance with the procedures
set forth in Article 11 of this Agreement.
7.5 Exceptions. The restrictions set forth in this Article 7 shall not
prevent either party from (i) preparing, filing, prosecuting or maintaining a
patent application or its resulting patents related to the making, having
made, using, offering for sale, selling or importing of Product, (ii)
disclosing Information provided by the Disclosing Party to persons working on
behalf of the Receiving Party or to governmental agencies, to the extent the
Receiving Party reasonably believes is required or desirable to secure any
government approval for the development, manufacture, marketing or sale of
Product in the Territory, or (iii) upon imminent approval or actual approval
for registration by a governmental agency in a country in the Territory of a
drug application on Product, disclosing Information to the extent reasonably
necessary to promote the use and sale of Product in the country.
7.6 Information Provided to Government Agency. Consistent with Section 3.3 of
this Agreement, it is contemplated and permitted that a party may (a) develop
Products for indications other than Agreed Upon Indication in the Territory,
and/or (b) may undertake a development commitment with respect to an Agreed
Upon Indication.
During the Term of the Agreement, a party shall provide the other party
with a copy of any proposed submission of Information by such party to
governmental agencies with respect to the development, manufacture, marketing
or sale of Product in the Territory, at least twenty (20) days prior to
submission to the government agency. The other party shall have an
opportunity, within such twenty (20) day period, to make recommendations that
the other party, in good faith, believes will prevent such
48
<PAGE>
submission from having a material adverse impact on the potential of the
Product in the Territory from a business and scientific viewpoint. The party
proposing such disclosure shall consider, in good faith, the recommendations
of the other party.
8. PATENTS
8.1 Ownership of Technology.
a) PRAECIS. Subject to Section 8.1(b), ownership of PRAECIS Proprietary
Rights and other intellectual property owned or controlled by PRAECIS shall
remain vested at all times in PRAECIS. ROCHE hereby acknowledges that this
Agreement does not grant ROCHE any ownership rights in any intellectual
property claiming or relating to PRAECIS Proprietary Rights or any other
intellectual property owned or controlled by PRAECIS.
b) Joint. Ownership of Joint Inventions and intellectual property
related to the making, having made, using, offering for sale, selling or
importing of Joint Inventions shall be vested jointly in PRAECIS and ROCHE,
subject to the licenses set forth in Section 2.1 of this Agreement. Unless
otherwise set forth in this Agreement, neither party shall be obligated to
account to the other for making, having made, using, offering for sale,
selling or importing Product under a patent application or patent claiming a
Joint Invention. Should the only remaining Valid Claim relating to a Product
in a country of the Territory be claims of a Joint Invention, the Revenue
Share or ex-
49
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
US royalties, as the case may be, that would otherwise be due from ROCHE to
PRAECIS under Article 6 for the Product shall be reduced by ***.
c) ROCHE. Ownership of ROCHE Inventions and intellectual property shall
remain vested at all times in ROCHE. PRAECIS hereby acknowledges that this
Agreement does not grant PRAECIS any ownership rights in any intellectual
property claiming or relating to ROCHE Inventions.
8.2 Patents.
a) PRAECIS Proprietary Rights other than Joint Inventions. Subject to
Section 8.2(b) and the further provisions of this Section 8.2(a), PRAECIS
agrees to (i) prepare, file, prosecute and maintain all patents and patent
applications included within the PRAECIS Proprietary Rights in such countries
in the Territory as may be determined by the parties, (ii) consult with ROCHE
as to the preparing, filing, prosecuting and maintaining of such patent
applications and patents, and (iii) furnish to ROCHE copies of all documents
relevant to any such preparation, filing, prosecution or maintenance. PRAECIS
shall furnish such documents and consult with ROCHE in sufficient time before
any action by PRAECIS is due to allow ROCHE to provide comments thereon,
which comments PRAECIS shall consider. PRAECIS shall bear all costs and
expenses for preparing, filing, prosecuting and maintaining such patents and
patent applications in the Territory. At PRAECIS's reasonable request, ROCHE
shall cooperate, in all reasonable ways and at PRAECIS' cost, in connection
with the
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preparing, filing, prosecuting and maintaining of all patent applications and
patents included within the PRAECIS Proprietary Rights in the Territory.
Should PRAECIS decide that it does not desire to file, maintain or prosecute
a patent or patent application within the PRAECIS Proprietary Rights in one
or more countries in the Territory, it shall promptly advise ROCHE thereof
and, at the request of ROCHE, PRAECIS shall assign to ROCHE its rights in and
to such patent or patent application in such country or countries, and ROCHE
will thereafter file, prosecute and/or maintain the same at ROCHE's own cost,
to the extent that ROCHE desires to do so.
b) Joint Invention. As soon as a party concludes that it wishes to file
a patent application claiming a Joint Invention, it shall immediately inform
the other party and consult about filing procedures and allocation of costs
concerning such patent application. The party also will provide the other
party with the determination of inventors and a copy of a draft
specification, if any, and the scope of claims as early as possible. Should a
party be faced with possible loss of rights, such communication may take
place promptly after filing a convention application. Subject to the further
provisions of this Section 8.2(b), the party performing a priority filing
agrees to (i) prepare, file, prosecute and maintain such priority patent
application, corresponding foreign patents, and resulting patents, in the
Territory (ii) consult with the other party as to the preparing, filing,
prosecuting and maintaining of such patent applications and resulting
patents, and (iii) furnish to the other party copies of all documents
relevant to any such preparation, filing, prosecution or maintenance. Unless
agreed otherwise, the filing party shall furnish such documents and consult
with the other party in sufficient time before any action by the filing party
is due to allow the other party to provide comments thereon, which comments
the filing party shall consider. The party performing the priority filing
shall bear all costs and expenses for preparing, filing,
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prosecuting and maintaining such patent applications and resulting patents in
the Territory. On request of the party performing the filing, the other party
will cooperate, in all reasonable ways at the filing party's cost, in
connection with the preparing, filing, prosecuting and maintaining of such
patent applications and resulting patents in the Territory. Should the filing
party decide that it does not desire to file, maintain or prosecute a patent
or patent application claiming a Joint Invention in one or more countries in
the Territory, it shall promptly advise the other party thereof and, at the
request of the other party, the filing party shall assign to the other party
its rights in and to such patent or patent application in such country or
countries, and the other party will thereafter file, prosecute and/or
maintain the same at the other party's own cost, to the extent that the other
party desires to do so.
c) ROCHE Inventions. Subject to the further provisions of this Section
8.2(c), ROCHE agrees to (i) prepare, file, prosecute and maintain all patents
and patent applications claiming a ROCHE Invention in the Territory (ii)
consult with PRAECIS as to the preparing, filing, prosecuting and maintaining
of such patent applications and patents, and (iii) furnish to PRAECIS copies
of all documents relevant to any such preparation, filing, prosecution or
maintenance. ROCHE shall furnish such documents and consult with PRAECIS in
sufficient time before any action by ROCHE is due to allow PRAECIS to provide
comments thereon, which comments ROCHE shall consider. ROCHE shall bear all
costs and expenses for preparing, filing, prosecuting and maintaining such
patents and patent applications in the Territory. At ROCHE's reasonable
request, PRAECIS shall cooperate, in all reasonable ways and at ROCHE' cost,
in connection with the preparing, filing, prosecuting and maintaining of all
patent applications and patents claiming a ROCHE Invention in the Territory.
Should ROCHE decide that it does not desire to file, maintain or prosecute a
patent or patent applica-
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tion claiming a ROCHE Invention in one or more countries in the Territory, it
shall promptly advise PRAECIS thereof and, at the request of PRAECIS, ROCHE
shall assign to PRAECIS its rights in and to such patent or patent
application in such country or countries and PRAECIS will thereafter file,
prosecute and/or maintain the same at PRAECIS' own cost, to the extent that
PRAECIS desires to do so.
8.3 Infringement by Third Parties.
a) ROCHE Brings Suit. Each party shall promptly provide written notice
to the other party during the Term of the Agreement of any (i) known
infringement or suspected infringement in the Territory of any PRAECIS
Proprietary Rights, or patent claiming a ROCHE Invention, or (ii) known or
suspected unauthorized use or misappropriation of any Technical Information
by a third party, and shall provide the other party with all evidence in its
possession supporting such infringement or unauthorized use or
misappropriation.
Subject to Section 8.3(c), within a period of ninety (90) days after
ROCHE provides or receives such written notice ("Decision Period"), ROCHE, in
its sole discretion, shall decide whether or not to initiate an infringement
or other appropriate suit under the above rights, patents or Technical
Information and shall advise PRAECIS of its decision in writing, unless the
parties agree to an extension. Should ROCHE not advise PRAECIS within the
Decision Period, then ROCHE shall be deemed as having decided not to initiate
an infringement or other appropriate suit.
After ROCHE advises PRAECIS of its decision to initiate suit, ROCHE may
immediately initiate such suit, subject to Section 8.3(c). ROCHE shall keep
PRAECIS
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promptly and fully informed of the status of any such suit and shall provide
PRAECIS with copies of all substantive documents filed in, and all
substantive written communications relating to such suit. ROCHE shall have
the sole and exclusive right to select counsel for any such suit.
ROCHE shall, except as provided below, pay all expenses of the suit,
including, without limitation, ROCHE's attorneys' fees and court costs.
PRAECIS may elect in writing, within ninety (90) days after its receipt of
notice from ROCHE of the initiation of the suit, to contribute to such
expenses. Should PRAECIS not so elect within said ninety (90) day period,
PRAECIS shall have no right to contribute and any contributions shall be
considered untimely. If ROCHE initiates suit and PRAECIS timely contributes
to the expenses thereof, any damages, settlement fees or other consideration
for past infringement received as a result of such suit shall be shared by
ROCHE and PRAECIS based on their respective sharing of the expenses of such
suit. Any recovery of damages owed to IU under the Indiana Agreement shall be
the sole responsibility of PRAECIS.
If ROCHE believes it reasonably necessary and PRAECIS consents (such
consent not to be unreasonably withheld), PRAECIS shall join as a party to
the suit but shall be under no obligation to participate except to the extent
that such participation is required as the result of its being a named party
to the suit. At ROCHE's written request, PRAECIS shall offer reasonable
assistance to ROCHE in connection therewith at no charge to ROCHE except for
reimbursement of reasonable out-of-pocket expenses incurred by PRAECIS in
rendering such assistance. PRAECIS shall have the right to participate and be
represented in any such suit by its own counsel at its own expense.
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b) PRAECIS Brings Suit. In the event that ROCHE does not in writing
advise PRAECIS under subsection (a) within the Decision Period that ROCHE
will initiate suit, or if ROCHE fails to initiate suit or otherwise prosecute
such suit with reasonable diligence, PRAECIS shall thereafter have the right
to initiate, or assume control of the prosecution, of such suit and shall
provide written notice to ROCHE of any such action. PRAECIS shall keep ROCHE
promptly and fully informed of the status of any such suit and shall provide
ROCHE with copies of all substantive documents filed in, and all substantive
written communications relating to, such suit. In exercising its rights
pursuant to this subsection 8.3(b), PRAECIS shall have the sole right to
select counsel, but ROCHE may be represented in any such suit by its own
counsel at its own expense.
As used in this Section 8.3(b), "reasonable diligence" shall mean the
same standard of effort as would be used by ROCHE in the prosecution of a
patent infringement litigation of its patent which protects a product of its
own innovation having similar commercial potential in the country of suit.
Should the parties be unable to reach agreement as to whether ROCHE has
exercised reasonable diligence as used in this Section 8.3(b) with respect to
a given suit, the matter may be submitted to arbitration generally in
accordance with the procedures set forth in Article 11 of this Agreement, and
ROCHE shall retain control of such suit during such arbitration.
PRAECIS shall pay all expenses of the suit incurred from the time of
such initiation or assumption of control by PRAECIS, including without
limitation PRAECIS's attorneys' fees and court costs. ROCHE may elect in
writing within ninety (90) days after its receipt of notice from PRAECIS of
the initiation of the suit by PRAECIS, to contribute to such expenses. Should
ROCHE not so elect within said ninety (90) day
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period, ROCHE shall have no right to contribute and any contributions shall
be considered untimely. If PRAECIS initiates suit or assumes control after
arbitration and ROCHE timely contributes to the expenses thereof, any
damages, settlement fees or other consideration for past infringement
received as a result of such suit shall be shared by PRAECIS and ROCHE based
on their respective sharing of the costs of such suit. Any recovery of
damages owed to IU under the Indiana Agreement shall be the sole
responsibility of PRAECIS.
If PRAECIS believes it reasonably necessary and ROCHE consents (such
consent not to be unreasonably withheld), ROCHE shall join as a party to the
suit but shall be under no obligation to participate except to the extent
that such participation is required as a result of its being named party to
the suit. At PRAECIS's written request, ROCHE shall offer reasonable
assistance to PRAECIS in connection therewith at no charge to PRAECIS except
for reimbursement of reasonable out-of-pocket expenses incurred by ROCHE in
rendering such assistance. ROCHE shall have the right to be represented in
any such suit by its own counsel at its own expense.
c) IU Patent. 1) For any patent that is a PRAECIS Proprietary Right by
virtue of the Indiana Agreement ("IU Patent"), PRAECIS warrants and
represents that PRAECIS has obtained IU's approval of the terms and
obligations of Section 8.3(a) and 8.3(b) of this Agreement rather than the
terms and conditions of Sections 10.04 - 10.07 of the Indiana Agreement with
respect to third party infringement of any such IU Patent.
2) Notwithstanding anything to the contrary, for any IU Patent, should
ROCHE or its Affiliates or sublicensees receive a certification pursuant to
the Drug
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Price Competition and Patent Restoration Act of 1984 (Public Law 98-417) as
amended, or its equivalent in a country other than the United States of
America with respect to such patent, then (i) ROCHE or its Affiliate or
sublicensee shall immediately provide PRAECIS with a copy of such
certification and identify the date on which ROCHE, its Affiliate or
sublicensee received such certification ("Certification Date"), and (ii)
PRAECIS shall have thirty (30) days from the Certification Date to provide
ROCHE with written notice whether PRAECIS or IU will bring suit within a
forty five (45) day period (or any other mandatory time period) from the
Certification Date.
Should PRAECIS or its Affiliates or IU receive a certification pursuant
to the Drug Price Competition and Patent Restoration Act of 1984 (Public Law
98-417) as amended, or its equivalent in a country other than the United
States of America with respect to such patent, then (i) PRAECIS or its
Affiliate shall immediately provide, or cause IU to immediately provide,
ROCHE with a copy of such certification and identify the date on which
PRAECIS, its Affiliate or IU received such certification ("Certification
Date"), and (ii) PRAECIS shall have thirty (30) days from the Certification
Date to provide ROCHE with written notice whether PRAECIS or IU will bring
suit within a forty five (45) day period (or any other mandatory time period)
from the Certification Date.
Should any such thirty (30) day period pass without PRAECIS authorizing
ROCHE to bring suit or without PRAECIS or IU initiating suit, then ROCHE
shall be free to immediately bring suit for patent infringement in its name.
If PRAECIS or IU initiates a suit within the forty-five (45) day
period, PRAECIS will promptly notify ROCHE. At PRAECIS's or IU's request,
ROCHE, its Affiliate or sublicensee shall immediately become a party to the
suit, and PRAECIS may use the
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name of ROCHE, its Affiliate or sublicensee as a party plaintiff. If ROCHE
initiates suit pursuant to this Section 8.3(d), it will promptly notify
PRAECIS. At ROCHE's request, (1) PRAECIS or its Affiliate shall immediately
become party to the suit and/or cause IU to become party to the suit, and (2)
ROCHE may use the name of PRAECIS or its Affiliate as a party plaintiff
and/or PRAECIS shall cause IU to allow ROCHE to use the name of IU as a party
plaintiff.
8.4 Infringement of Third Party Rights. In the event that a third party at
any time provides written notice to, or commences an action, suit or
proceeding against, a party or such party's Affiliates, sublicensees or
distributors, claiming infringement of the third party's patent rights or
copyrights or unauthorized use or misappropriation of its technology, based
upon an assertion or claim arising out of the making, having made, using,
offering for sale, selling or importing of a Product, such party shall
promptly notify the other party of the claim or the commencement of such
action, suit or proceeding, enclosing a copy of the claim and/or all papers
served.
The parties shall discuss in good faith an appropriate response to such
claim or commencement of such action, suit or proceeding, and each party
shall provide reasonable assistance to the other party in connection
therewith. Such party and the other party must mutually agree upon a
settlement or compromise of any such claim, action, suit or proceeding before
execution of such settlement or compromise, to the extent such settlement or
compromise would restrict the scope or enforceability of any right, including
without limitation any patent rights or other proprietary rights, of the
other party. In the event that any such claim, action, suit or proceeding
results in an obligation to make payments to a third party, Section 6.5 also
shall apply.
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9. TERM AND TERMINATION
9.1 Term. The Term of the Agreement shall commence on the Effective Date and,
unless sooner terminated as provided in this Article, expire on a
country-by-country basis on the expiration of ROCHE's payment obligations set
forth in Sections 6.2 and 6.3. After expiration, ROCHE shall have a fully paid
up license under PRAECIS Proprietary Rights, on a country-by-country basis.
9.2 Termination. ROCHE shall have the right to terminate this Agreement on a
country-by-country basis by providing PRAECIS with the following prior written
notice:
a) If ROCHE has sold Product in commercial quantity in the given country,
one (1) year's notice, effective as of the date notice is provided; or
b) If ROCHE has not sold Product in commercial quantity in the given
country, one hundred eighty days' (180) notice, effective as of the date notice
is provided.
9.3 Material Breach. In the event of a material breach of this Agreement by
either party, the non-breaching party shall have the right to terminate this
Agreement by providing written notice of such breach to the breaching party,
specifying the nature of such breach ("Breach Notice"). The non-breaching party
shall thereupon have the right to terminate this Agreement immediately upon
written notice if the breaching party fails to cure such breach within sixty
(60) days after receipt of the Breach Notice.
9.4 Effect of Termination.
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a) By ROCHE without cause. Termination of this Agreement by ROCHE under
Section 9.2 shall not relieve either party of the performance of any obligations
incurred or payments due prior to the effective date of termination.
b) By either party for cause. Termination of this Agreement by either
party under Section 9.3 shall (i) not relieve either party of the performance of
any obligations incurred or payments due prior to the date of breach, and (ii)
be without prejudice to any remedy that any party may have in addition to those
rights as provided under this Agreement.
c) By ROCHE for Cause. In the event of termination of the Agreement by
ROCHE under Section 9.3, the rights and licenses granted by PRAECIS to ROCHE
under this Agreement shall, at ROCHE's option, remain in effect. If ROCHE
chooses for such rights and licenses to remain in effect, ROCHE's payment
obligations under Article 6 shall continue; provided, however, that the amounts
of such payments shall be decreased to reflect the following factors: the nature
of PRAECIS' breach, the damage to ROCHE caused thereby, and the relative
contributions of the parties to the development of Product. Such amounts shall
be determined by the mutual agreement of the parties after good faith
negotiations; provided, however, that if the parties are unable to reach mutual
agreement thereon, the matter shall be submitted to arbitration generally in
accordance with the procedures set forth in Article 11 of this Agreement, and
the arbitrator shall base his/her decision on the above factors.
d) By PRAECIS For Cause. In the event of termination of this Agreement by
PRAECIS under Section 9.3, (i) all licenses granted by PRAECIS to ROCHE shall
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terminate, (ii) at the request of PRAECIS, ROCHE shall assign to PRAECIS all
regulatory filings, regulatory approvals and clinical data owned and controlled
by ROCHE relating to PRODUCTS, or, if such assignment is not legally
permissible, grant PRAECIS the right to access, use and cross reference such
filings, approval and data, and (iii) ROCHE shall assign to PRAECIS all rights
in the trademarks referred to in Section 3.11.
In the event that PRAECIS requests the assignment of any regulatory
filings, regulatory approvals or clinical data pursuant to subsection 9.4(d),
then PRAECIS shall pay ROCHE a royalty upon sales of Product reasonably related
to such assigned filings, approvals or data. The amount of such royalty shall be
determined by mutual agreement of the parties after good faith negotiation;
provided, however, that if the parties are unable to reach mutual agreement
thereon, the matter shall be submitted to arbitration generally in accordance
with the procedures set forth in Article 11 of this Agreement, and the
arbitrator shall base his/her decision on the following factors: (i) the value
of the assigned filings, approvals and/or data as related to the
commercialization of Product; (ii) the relative contributions of the parties to
the development of Product; and (iii) the nature of ROCHE's breach and the
damages caused to PRAECIS thereby.
9.5 Survival. Notwithstanding any termination of this Agreement, the obligations
of the parties with respect to audit under Sections 3.5 and 6.11 and Information
under Article 7, as well as any other provisions which by their nature are
intended to survive any such termination, shall survive and continue to be
enforceable.
10. WARRANTIES AND INDEMNITIES
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10.1 PRAECIS Warranties. PRAECIS warrants and represents that, as of the date
PRAECIS signs this Agreement and to the best of its knowledge, under PRAECIS
Proprietary Rights, it has the entire right, title and interest to make, have
made, use, offer for sale, sell and import Compound and/or Product in the
Territory; that it has no knowledge of the existence of any patent or patent
application owned by or licensed to anyone other than PRAECIS which could be
asserted to claim the Compound and/or Product and/or could be asserted to
prevent PRAECIS or ROCHE from importing, making, having made, using, offering to
sell, or selling the Compound and/or Product in the Territory.
PRAECIS warrants and represents that it has identified on Exhibit 2 all of
the patents or patent applications that, as of the date PRAECIS signs this
Agreement, it owns or licenses in the Territory which, in its reasonable
opinion, would preclude ROCHE from making, having made, using, offering for
sale, selling or importing Product in the Territory for any use.
10.2 Warranties of Both Parties. Each party warrants that, as of the date
PRAECIS signs this Agreement, it has the full right and authority to enter into
this Agreement, and that it is not aware of any impediment that would inhibit
its ability to perform its obligations hereunder. Each party warrants and
represents to the other that, as of the date it signs this Agreement to the best
of its knowledge, it or its Affiliates has disclosed all information in
possession or control of it or its Affiliates which, in the opinion of it or its
Affiliates, would be material to the other party entering into this Agreement,
and such information does not contain any untrue statement of material fact or
omit to state a material fact.
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10.3 Grant. PRAECIS represents and warrants to ROCHE that, as of the date
PRAECIS signs this Agreement it has the right to grant ROCHE the rights and
licenses described in this Agreement.
10.4 Indiana Agreement. PRAECIS represents and warrants that it has provided to
ROCHE in writing the entire understanding between PRAECIS and IU relating to
Product as of the date PRAECIS signs this Agreement. PRAECIS agrees that (1) no
amendment or modification to the Indiana Agreement will be made unless made in
writing between PRAECIS and IU and, (2) if such amendment or modification
adversely affects ROCHE's rights under this Agreement, either expressly or by
implication, such amendment or modification must be agreed and accepted in
writing by ROCHE before made.
10.5 DISCLAIMER. THE FOREGOING REPRESENTATIONS AND WARRANTIES ARE IN LIEU OF ALL
OTHER REPRESENTATIONS AND WARRANTIES NOT EXPRESSLY SET FORTH HEREIN. PRAECIS AND
ROCHE DISCLAIM ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, WITH RESPECT TO
EACH OF THEIR RESEARCH, DEVELOPMENT AND COMMERCIALIZATION EFFORTS HEREUNDER,
INCLUDING, WITHOUT LIMITATION, WHETHER THE PRODUCTS CAN BE SUCCESSFULLY
DEVELOPED OR MARKETED, THE ACCURACY, PERFORMANCE, UTILITY, RELIABILITY,
TECHNOLOGICAL OR COMMERCIAL VALUE, COMPREHENSIVENESS, MERCHANTABILITY OR FITNESS
FOR ANY PARTICULAR PURPOSE WHATSOEVER OF THE PRODUCTS. IN NO EVENT SHALL EITHER
PRAECIS OR ROCHE BE LIABLE FOR SPECIAL, INDIRECT,
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INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT BASED ON
CONTRACT, TORT OR ANY OTHER LEGAL THEORY.
10.6 Indemnification by ROCHE. ROCHE agrees to defend, indemnify and hold
PRAECIS and its directors, officers, employees and agents (the "PRAECIS
Indemnified Parties") harmless from and against any losses, costs, and damages,
including reasonable costs and expenses arising out of the development,
manufacture, use, sale or other disposition of any Product by ROCHE, its
Affiliates, its sublicensees, its distributors, or representatives, except to
the extent that such losses, costs and damages are due to the negligence or
wrongful acts or failures to act of PRAECIS. In the event of any such claim
against the PRAECIS Indemnified Parties by a third party, PRAECIS shall promptly
notify ROCHE in writing of the claim and ROCHE shall undertake and shall solely
manage and control, at its sole expense, the defense of the claim and its
settlement. The PRAECIS Indemnified Parties shall cooperate with ROCHE and may,
at their option and expense, be represented in any such action or proceeding.
ROCHE shall not be liable for any litigation costs or expenses incurred by the
PRAECIS Indemnified Parties without ROCHE's written authorization. ROCHE shall
not settle any such claim against PRAECIS unless such settlement fully and
unconditionally releases PRAECIS from all liability relating thereto, unless
PRAECIS otherwise agrees in writing.
10.7 INDEMNIFICATION BY PRAECIS. PRAECIS agrees to defend, indemnify and hold
ROCHE and its directors, officers, employees and agents (the "ROCHE Indemnified
Parties") harmless from and against any losses, costs, and damages, including
reasonable costs and expenses arising out of the development, manufacture, use,
sale or other disposition of any Product by PRAECIS, its Affiliates, licensees
(other than
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ROCHE), distributors, or representatives, except to the extent that such losses,
costs and damages are due to the negligence or wrongful acts or failures to act
of ROCHE. In the event of any such claim against the Roche Indemnified Parties
by a third party, ROCHE shall promptly notify PRAECIS in writing of the claim
and PRAECIS shall undertake and shall solely manage and control, at its sole
expense, the defense of the claim and its settlement. The Roche Indemnified
Parties shall cooperate with PRAECIS and may, at their option and expense, be
represented in any such action or proceeding. PRAECIS shall not be liable for
any litigation costs or expenses incurred by the Roche Indemnified Parties
without PRAECIS's written authorization. PRAECIS shall not settle any such claim
against ROCHE unless such settlement fully and unconditionally releases ROCHE
from all liability relating thereto, unless ROCHE otherwise agrees in writing.
ARTICLE 11. DISPUTE RESOLUTION
11.1 Procedure.
a) Internal Escalation. Unless otherwise explicitly set forth in this
Agreement, in the event that the parties are unable to resolve any dispute,
controversy or claim arising out of, or in relation to this Agreement, or the
breach, termination or invalidity thereof (collectively "Issue"), the parties
shall first refer such Issue to the Head of Pharmaceuticals of ROCHE-Basel and
to the Chief Executive Officer of PRAECIS. In the event that such Issue cannot
be resolved by these individuals after a good faith discussion to resolve the
issue, then either party may initiate arbitration in accordance with this
subsection under the guidelines of AAA in New York City, New
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York, under the commercial rules then in effect for AAA, except as provided for
herein.
b) Procedure. A party shall notify the other in writing should it intend
to initiate arbitration. The parties shall select, by mutual agreement, one
arbitrator within a time period of thirty (30) days after receipt of such
notice. Should no arbitrator be chosen within the above period, the AAA shall
appoint the arbitrator within thirty (30) days after the end of such period.
Within thirty (30) days after selection of such arbitrator, each party shall
submit to the arbitrator a proposed resolution of the Issue and the reasons for
proposing the resolution. Should either party desire, a joint meeting before the
arbitrator shall be held within thirty (30) days after the end of the above
resolution submission period.
Within thirty (30) days after the later of (i) the end of the resolution
submission period or (ii) holding of the joint meeting, the arbitrator shall
decide the matter by selecting only one of such resolutions, and shall have no
authority to modify its proposed terms.
c) Factors. Unless otherwise agreed to by the parties, the arbitrator
shall make such decision based on the following factors in descending order of
importance: (a) consistency with the provisions of this Agreement; (b)
consistency with the intent of the parties as reflected in this Agreement; and
(c) customary and reasonable provisions included in comparable agreements. The
decision of the arbitrator will be binding upon the parties without the right of
appeal, and judgment upon the decision rendered by the arbitrator may be entered
in any court having jurisdiction thereof.
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11.2 Cost. The parties shall share equally the reasonable documented cost of
such arbitration proceeding, but not the individual cost of the parties in
participating in such proceeding.
12. MISCELLANEOUS
12.1 Indiana Agreement. PRAECIS shall promptly inform ROCHE if (a) (i) IU
notifies PRAECIS that a breach of the Indiana Agreement has occurred, and
PRAECIS will further notify ROCHE as to when such breach has been or is intended
to be cured; and (ii) PRAECIS notifies IU that a breach of the Indiana Agreement
has occurred, and PRAECIS will notify ROCHE as to when such breach has been or
is intended to be cured or (b) the rights to PRAECIS under the Indiana Agreement
are converted, or IU intends to convert such rights, from exclusive to
non-exclusive.
12.2 Disclosure of Agreement and Press Releases and Information. Neither party
will disclose the terms or conditions of this Agreement to any third party or
issue any press release relating to the terms and conditions of this Agreement
for any purpose without the prior written consent of the other party, except as
required by law (including without limitation any regulatory agency or
commission of competent jurisdiction). Each party, however, shall have the right
to disclose, without the prior written consent of the other party, the terms and
conditions of this Agreement or Information to its actual or potential lending
institutions, financial advisors, and shareholders (collectively, "investors"),
provided such investors agree in writing to maintain the terms and conditions of
this Agreement and Information in confidence.
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If it is impracticable for a party to obtain written agreement from
investors to maintain the terms and conditions of this Agreement and Information
in confidence, such party may disclose the terms and conditions of this
Agreement and Information to such investors to the extent there is a reasonable
need for them to know, provided such party obtains the prior written consent of
the other party, which consent the other party shall not unreasonably withhold.
Once a party has consented to the disclosure of specific terms and conditions of
this Agreement or specific Information, it shall be deemed to have consented to
the same type of disclosure of the same specific terms and conditions or the
same specific Information to other investors of the like kind without the need
to obtain separate consents in each instance (For example, a previously approved
disclosure of specific Information to a financial advisor would permit
disclosure of the same Information only to other financial advisors, but would
not permit disclosure of the same Information to a lending institution(s)).
12.3 Force Majeure. If either party shall be delayed, interrupted or prevented
with respect to the performance of any obligation hereunder by reason of an act
of God, fire, flood, war (declared or undeclared), public disaster, strike or
labor dispute, governmental enactment, rule or regulation, or any similar cause
beyond such party's control, such party shall not be liable to the other
therefor; and the time for performance of such obligation shall be extended for
a period equal to the duration of the contingency which occasioned the delay,
interruption or prevention.
Within fifteen (15) days after the beginning of the force majeure, the
party invoking its force majeure rights must notify the other party of this fact
in accordance with Section 12.7. The other party must also be notified of the
termination of the force majeure within fifteen (15) days after such
termination. If the force majeure renders
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either of the required notifications impossible, notification must be given as
soon as possible.
If the delay resulting from the force majeure exceeds six (6) months, the
injured party may elect to treat such delay as a material breach and may
terminate this Agreement pursuant to the provisions of Section 9.3, or may elect
to extend the Term of this Agreement for an amount of time equal to the delay.
If no notice of such election is given prior to termination of the force
majeure, this Agreement will continue in effect without modification.
12.4 Bankruptcy. In the event that PRAECIS shall become insolvent, shall make an
assignment to the benefit of creditors, or shall have a petition in bankruptcy
filed for or against it (which, in the case of an involuntary petition, is not
dismissed or stayed within sixty (60) days after such petition is filed), all
rights and licenses granted under or pursuant to this Agreement by PRAECIS to
ROCHE are, and shall otherwise be deemed to be, for purposes of Section 365(n)
of Title 11, US Code (the "Bankruptcy Code"), licenses of rights to
"intellectual property" as defined under Section 101(60) of the Bankruptcy Code.
The parties agree that ROCHE, as a licensee or sublicensee of such rights under
this Agreement, shall retain and may fully exercise all of its rights and
elections under the Bankruptcy Code, subject to the continued performance of its
obligations under this Agreement.
12.5 Law. This Agreement will be interpreted in accordance with the laws of the
state of New York.
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12.6 Waiver. The waiver by a party of a breach or a default of any provision of
this Agreement by the other party shall not be construed as a waiver of any
succeeding breach of the same or any other provision, nor shall any delay or
omission on the part of a party to exercise or avail itself of any right, power
or privilege that it has or may have hereunder operate as a waiver of any right,
power or privilege by such party.
12.7 Notices. Any notice or communication (including invoices) required to be
given hereunder shall be in writing and shall be considered properly given when
(a) personally delivered or sent by telefax (other than for invoices) or
overnight mail with a confirmation copy, (b) three (3) business days after being
sent by certified or registered mail to the respective address of a party, or
(c) the next business day after being sent by overnight mail or over night
courier as follows:
<TABLE>
<CAPTION>
<S> <C>
If to ROCHE: Roche Products Inc.
State Road #670 km 2.7
Manati, Puerto Rico 00647-0452
Attn.: President
</TABLE>
or any other address that ROCHE may advise in writing;
<TABLE>
<CAPTION>
<S> <C>
If to PRAECIS: Praecis Pharmaceuticals Incorporated
1 Hampshire Street
Cambridge, Massachusetts 02139
Attn.: Vice President of Corporate Development
</TABLE>
or any other address that PRAECIS may advise in writing.
12.8 No Agency. Nothing herein shall be deemed to constitute either party as the
agent or representative of the other party. Each party shall be an independent
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<PAGE>
contractor, not an employee or partner of the other party. Each party shall be
responsible for the conduct of activities at its own facilities and for any
liabilities resulting therefrom. Neither party shall be responsible for the acts
or omissions of the other party, and neither party will have authority to speak
for, represent or obligate the other party in any way without prior written
authority from the other party.
12.9 Entire Agreement. This Agreement (including its Exhibits) constitutes the
entire agreement between the parties with respect to the subject matter and
supersedes all previous agreements, whether oral or written, including the
Non-Disclosure Agreement. This Agreement can only be changed or modified by
written agreement of the parties.
12.10 Captions. The captions herein are for convenience only and shall not be
interpreted as having any substantive meaning.
12.11 Severability. In the event that any provision of this Agreement is held by
a court of competent jurisdiction to be unenforceable because it is invalid or
in conflict with any law of any relevant jurisdiction, the validity of the
remaining provisions shall not be affected, and the parties shall negotiate a
substitute provision that, to the extent possible, accomplishes the original
business purpose.
12.12 Assignment. This Agreement shall be binding upon and shall inure to the
benefit of successors of the parties hereto and to the assigns of all good will
and entire business and assets of a party hereto, but shall otherwise not be
assignable without prior written consent of the other party. Notwithstanding the
above, without notice to PRAECIS, ROCHE may at any time and for any reason
assign all or certain rights and
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obligations to its Affiliates who agree to be bound by the terms and obligations
of this Agreement. Such assignment shall be considered as effective on the date
specified by ROCHE in its notice, even if retroactive. Such assignment shall not
relieve or alter in any manner the obligations of ROCHE-Basel under Section
12.13.
12.13 Guarantee. ROCHE-Basel guarantees the full and timely performance by ROCHE
or any of its Affiliates of all their respective obligations under this
Agreement. In particular, in the event ROCHE or its Affiliates fails to make a
payment due PRAECIS or perform an obligation required under this Agreement, such
payment due PRAECIS or obligation required under this Agreement shall be made by
or be the responsibility of ROCHE-Basel.
12.14 Interpretation. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The words
"include," "includes" and "including" shall be deemed to be followed by the
phrase "without limitation." All defined terms in this Agreement shall have the
meaning assigned thereto by this Agreement, whether such terms are used in the
singular or plural. All references herein to Articles, Sections, and Exhibits
shall be deemed references to Articles and Sections of, and Exhibits to, this
Agreement unless the context shall otherwise require. All Exhibits to this
Agreement are attached hereto and made a part hereof. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with United States generally accepted accounting
principles, as in effect from time to time.
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12.15 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of such together
shall constitute one and the same instrument.
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IN WITNESS WHEREOF, PRAECIS PHARMACEUTICALS INCORPORATED and ROCHE
PRODUCTS INC. have caused this Agreement to be duly executed by their authorized
representatives on the dates written below.
<TABLE>
<CAPTION>
<S> <C>
PRAECIS PHARMACEUTICALS ROCHE PRODUCTS INC.
INCORPORATED
By: /s/ Malcolm L. Gefter By: /s/ Ernesto Muniz
------------------------------- -------------------------------
Title: Chairman & CEO Title: President & General Manager
---------------------------- ----------------------------
Date: 6/4/98 Date: 5/29/98
----------------------------- -----------------------------
Approved and accepted by:
F.HOFFMANN-LA ROCHE LTD
By: /s/ W. Henrich By: /s/ B. Lehuu
------------------------------- -------------------------------
Name: W. Henrich Name: B. Lehuu
----------------------------- -----------------------------
Title: Director Title: Licensing Manager
---------------------------- ----------------------------
Date: 6/4/98 Date: 6/4/98
----------------------------- -----------------------------
</TABLE>
Exhibit 1 - Countries Excluded from Territory
Exhibit 2 - Patent included within PRAECIS Proprietary Rights
Exhibit 3 - Development Costs
Exhibit 4 - Heads of Supply Agreement
Exhibit 5 - Heads of Copromotion Agreement
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<PAGE>
EXHIBIT 1
Countries Excluded From Territory*
- ----------------------------------
*All countries not listed are included in the Territory
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Austria Belgium Denmark Greece
- --------------------------------------------------------------------------------
Finland France Germany Luxembourg
- --------------------------------------------------------------------------------
Ireland Italy Liechtenstein Spain
- --------------------------------------------------------------------------------
Monaco Netherlands Norway Portugal
- --------------------------------------------------------------------------------
San Marino Sweden Switzerland United Kingdom
- --------------------------------------------------------------------------------
Vatican Iceland Andora
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Belize Costa Rica Guatemala Honduras
- --------------------------------------------------------------------------------
Mexico Nicaragua Panama San Salvador
- --------------------------------------------------------------------------------
Argentina Bolivia Brazil Chile
- --------------------------------------------------------------------------------
Columbia Ecuador French Guyana Guyana
- --------------------------------------------------------------------------------
Paraguay Peru Uruguay Venezuela
- --------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Albania Armenia Azerbaijan Belarusse
- --------------------------------------------------------------------------------
Bosnia- Bulgaria Croatia Czech Republic
Herzegovina
- --------------------------------------------------------------------------------
Estonia Georgia Hungary Kazakhstan
- --------------------------------------------------------------------------------
Kyrgyzstan Latvia Lithuania Macedonia
- --------------------------------------------------------------------------------
Moldavia Poland Romania Russia
- --------------------------------------------------------------------------------
Slovakia Slovenia Tadzhikistan Turkmenistan
- --------------------------------------------------------------------------------
Ukrania Uzbekistan Yugoslavia
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Algeria Benin Burkina Faso Cameroon
- --------------------------------------------------------------------------------
Central African Chad Congo Djibouti
Republic
- --------------------------------------------------------------------------------
Gabon Guinea Guinea Bissau Ivory Coast
- --------------------------------------------------------------------------------
Madagascar Mali Mauritania Morocco
- --------------------------------------------------------------------------------
Niger Rwanda Senegal Seychelles
- --------------------------------------------------------------------------------
Tunisia Zaire South Africa
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Iran Iraq Israel Jordan
- --------------------------------------------------------------------------------
Kuwait Lebanon Oman Saudi Arabia
- --------------------------------------------------------------------------------
South Yemen Syria Turkey Yemen
- --------------------------------------------------------------------------------
Cyprus United Arab Bahrain
Emirates
- --------------------------------------------------------------------------------
Malta Qatar
- --------------------------------------------------------------------------------
</TABLE>
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<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
EXHIBIT 2
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
FILING DATE ISSUE
COUNTRY SERIAL NO. TITLE (PRIORITY) PATENT NO. DATE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
USA 08/480,494 LHRH ANTAGONIST
PEPTIDES ***
- ---------------------------------------------------------------------------------------------------
USA 08/973,378 LHRH ANTAGONIST
PEPTIDES ***
- ---------------------------------------------------------------------------------------------------
Australia 61680/96 LHRH ANTAGONIST
PEPTIDES ***
- ---------------------------------------------------------------------------------------------------
Canada 2,220,459 LHRH ANTAGONIST
PEPTIDES ***
- ---------------------------------------------------------------------------------------------------
Japan 09-502050 LHRH ANTAGONIST
PEPTIDES ***
- ---------------------------------------------------------------------------------------------------
USA 08/762,747 PHARMACEUTICAL
FORMULATIONS
FOR SUSTAINED ***
DRUG DELIVERY
- ---------------------------------------------------------------------------------------------------
USA 08/988,851 PHARMACEUTICAL
FORMULATIONS
FOR SUSTAINED ***
DRUG DELIVERY
- ---------------------------------------------------------------------------------------------------
PCT PCT/US97/22 PHARMACEUTICAL
881 FORMULATIONS
FOR SUSTAINED ***
DRUG DELIVERY
- ---------------------------------------------------------------------------------------------------
USA 08/573,109 METHODS FOR
TREATING PROSTATE ***
CANCER WITH LHRH
ANTAGONISTS
- ---------------------------------------------------------------------------------------------------
USA 08/755,593 METHODS FOR
TREATING PROSTATE ***
CANCER WITH LHRH
ANTAGONISTS
- ---------------------------------------------------------------------------------------------------
PCT PCT/US96/18 METHODS FOR
911 TREATING PROSTATE ***
CANCER
- ---------------------------------------------------------------------------------------------------
</TABLE>
77
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
WITH LHRH ANTAGONISTS
- ---------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
EXHIBIT 3
DEVELOPMENT COSTS
Development Costs shall mean the costs attributable to the development of the
Product and actually incurred or committed by a party after the Effective Date
of this Agreement through the termination of development efforts or the date of
marketing approval for the final Agreed Upon Indication for which marketing
approval is sought in the Territory.
Such Development Costs shall:
1) include those costs incurred in the Territory as well as those costs incurred
in geographical areas other than the Territory, provided that the activities
related with such costs are planned in the Development Program for the purpose
of generating data or information required to obtain the authorization and/or
ability to market and sell the Product in commercial quantities in the Territory
to third parties,
2) include those reasonable and prudent costs, both direct and indirect (i.e.:
fully burdened costs), which are ordinary and customary for a like product at a
like stage of development, and which are required to obtain the above mentioned
authorization and/or ability in the Territory,
3) include but not be limited to those costs of studies on the toxicological,
pharmacokinetic, metabolical or clinical aspects of the Product conducted
internally or by individual investigators or consultants,
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<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
4) include expenses for data management, statistical designs and studies,
document preparation, and other administration expenses associated with the
clinical testing program. They shall also include expenses for post-registration
clinical studies which are conducted as part of the Development Program in the
Territory,
5) include CMC development costs i.e.: manufacturing process development,
scale-up and qualification lot costs, the cost for manufacturing Compound and
Product used to register the drug ("Registration Batches"). If Compound or
Product manufactured for Registration Batches is sold by ROCHE, then ROCHE
shall not be responsible for additional payments to PRAECIS for supplying such
Compound or Product. Moreover, Development Costs shall include the costs paid by
PRAECIS to *** prior to the date all parties sign this Agreement and the costs
paid thereafter to *** or any third party by the parties as related to improving
the process for manufacturing abarelix,
6) include those costs for preparing, submitting, reviewing or developing data
or information for the purpose of submission to the FDA and necessary to obtain
approval to market and sell the Product in commercial quantities in the
Territory. Such costs shall include those which are related to establishing or
expanding the labeling for an Agreed Upon Indication,
7) not include process improvement, modification costs and associated scale-up
costs incurred after initial approval of Product by the FDA and, the associated
costs for preparing, submitting, reviewing or developing data or information and
necessary to
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<PAGE>
maintain approval by the FDA to manufacture the Product in commercial quantities
in the Territory, all of which costs are the sole responsibility of PRAECIS,
8) except as provided in Paragraph 5, not include the cost of identifying and
enabling a secondary supplier and, patent costs (including costs incurred to a
third party for rights to make, have made, import, use or sell or offer for sale
Product in Territory), all of which costs are the sole responsibility of
PRAECIS,
9) except as provided in Paragraph 6, not include costs associated with Phase
III b and Phase IV clinical studies which are not part of the Development
Program, all such costs being considered as marketing costs.
In determining Development Costs, each Party will use its applicable project
cost system with the purpose of tracking costs as much as possible on a product
indication-by-product indication basis. If expenses are common to several
product indications comprised in the Development Program, they will be charged
either to the product indication that is expected to be filed in first instance,
or as determined by the JSC.
Such Development Costs consist of payments to third parties and in-house
personnel costs.
The third party payments associated with the Development Program reflect all
significant payments made to third parties as part of the development activities
under the Development Program. Such expenses would include, but not be limited
to, payments to investigators, laboratories, consultants, patients and clinical
research organizations for services, cost of materials and drugs purchased,
expenses related to
81
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
information technology equipment and services, and other outside services. In
order to simplify the cost determination, minor out-of-pocket expenses will be
calculated as part of a standardized human resource cost per FTE ("Standard FTE
Rate"); such costs would include travel, office supplies, and minor expenses.
Commencing July 1, 1998, the cost of personnel associated with the Development
Program shall be calculated using a Standard FTE Rate for each FTE charged to
development activities under the Development Program. Aggregate FTE costs shall
be calculated by applying an agreed Standard FTE Rate to the number of FTEs
assigned to and charging development activities under the Development Program
(as determined by time sheets of the individuals charging such activities). The
Standard FTE Rate shall include the direct and indirect cost (i.e., fully
burdened costs) associated with an average, full-time development staff. Such
costs would include, but not be limited to, the following: salaries, fringe
benefits, travel, supplies, minor outside services and overhead (general and
administrative costs, including, but not limited to, salaries and fringe
benefits of development management personnel and central service charges
including depreciation). Both parties shall utilize the same Standard FTE Rate
on a July 1 to June 30 fiscal year basis. The initial Standard FTE Rate for the
fiscal year beginning 1998 shall be $***. This Standard FTE Rate shall be
increased by a fixed amount in each subsequent fiscal year to reflect the impact
of inflation after agreement between both parties.
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<PAGE>
The Development Costs shall be reported as follows:
A) External costs: Value
Preclinical development ......................
Clinical development ......................
Chem/Manuf/Control (CMC) ......................
Project management ......................
Regulatory and documentation ......................
----------------------
----------------------
External costs (1)
External expenses shall be charged on the basis of the actual costs invoiced by
the external third parties with supporting comments on the activities behind
such expenses. No overhead charges will be added.
B) Internal costs :
Units Manuf. Cost Value
Clinical material : ............... .......... ................ (2)
Other Internal :
FTE's Value
Preclinical development ............. ......................
Clinical development .............. ......................
Chem/Manuf/Control (CMC) (*) .............. ......................
Project management .............. ......................
Regulatory and documentation .............. ......................
--------------------
--------------------
Other internal costs (3)
Other Internal Costs shall be planned and charged on the basis of a Standard FTE
Rate which shall be agreed between the parties.
(*) Other Internal CMC costs does not include clinical material manufacturing
costs
Total DEVELOPMENT COSTS = (1) + (2) + (3)
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<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
EXHIBIT 4
HEADS OF SUPPLY AGREEMENT
This Heads of Supply Agreement sets forth the basic understanding between
the parties with respect to the supply of Compound and/or Product. This Heads of
Supply Agreement shall be binding on the parties. The full terms of the supply
agreement between the parties will be set forth in a full agreement which shall
be consistent with the terms as described below ("Supply Agreement").
1 Orders. The parties shall discuss and agree upon the stage of processing
in which the Compound and/or Product should be provided to ROCHE for
further manufacture to best advance the goals established by the JSC, and
the price for Compound and/or Product shall be adjusted accordingly.
Illustratively, (i) PRAECIS may supply ROCHE with sterilized vials
containing abarelix in depot formulation, i.e. Semi-finished Dosage Form,
and ROCHE will in turn label and package the sterile vials, or (ii)
PRAECIS may supply ROCHE with abarelix in depot formulation which ROCHE
will put into vials and have sterilized and labeled ("fill and finish").
On behalf of and exclusively in the Territory for ROCHE, PRAECIS shall
supply, and ROCHE shall purchase as provided for below, ROCHE's
requirements for Compound and/or Product. Such Compound and/or Product for
commercial sale shall have at least *** (***%) of its shelf life remaining
at the time of supply.
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<PAGE>
ROCHE will provide PRAECIS with non-binding forecasts of ROCHE's
requirements for Compound and/or Product in six (6) month increments for
the upcoming eighteen (18) month period, to be updated quarterly on a
rolling basis. ROCHE shall provide PRAECIS with firm purchase orders for
Compound and/or Product in a commercially reasonable period of time (the
exact period of time to be negotiated by the parties in the Supply
Agreement) before the order must be delivered by PRAECIS to ROCHE.
2 Price. During the Term of the Agreement, for Compound and/or Product
supplied by PRAECIS to ROCHE for sale in the United States, ROCHE shall
pay to PRAECIS the amount specified under and in accordance with Section
6.2 of the Agreement. During the Term of the Agreement, for Compound
and/or Product supplied by PRAECIS to ROCHE for sale in the Territory
outside the United States, ROCHE shall pay to PRAECIS the ex-COGS amount
specified under and in accordance with Section 6.3 of the Agreement.
In the event that the Compound and/or Product becomes unfit for use due to
reasons within PRAECIS' control, for example because it fails to meet
specifications or GMP standards, then ROCHE shall have the right to
return the Compound and/or Product to PRAECIS and shall have no liability
whatsoever for the Compound and/or Product.
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<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
3 Process Savings and Improvement. a) ROCHE and PRAECIS shall share on a ***
basis all savings from Initial Cost of Goods resulting from decreased
manufacturing costs (including but not limited to scale-up, technical
process improvements (such as changes in synthesis, improved efficiency),
and those improvements arising from investments through Development Costs)
in supplying Compound for as long as such savings from Initial Cost of
Goods are realized. Accordingly, *** of such savings will be deducted from
the Initial Cost of Goods.
b) However, if technical process improvements made solely by a party or
its Affiliates (without the other party's technical or financial
contribution such as through paying its share of Development Costs) result
in savings from Initial Cost of Goods on account of decreased
manufacturing costs in supplying Compound, the parties shall share any
substantial (*** or greater) savings resulting from such technical process
improvements. The other party's share of such savings in excess of the ***
shall equal *** of the excess savings for as long as such savings are
realized. Accordingly, the first *** of savings will not be deducted from
the Initial Cost of Goods; *** of savings in excess of *** will be
deducted from the Initial Cost of Goods. Technical process improvements
made by UCB Pharma and PLAS shall be excluded from such technical process
savings, and shall be shared on a *** basis in accordance with paragraph
3(a) of this Heads of Supply Agreement less any process improvement
payments made by Synthelabo.
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<PAGE>
4 Approvals and Supply. Subject to Section 7, PRAECIS, at its cost, shall
make or have made Compound and/or Product in accordance with written
manufacturing procedures and product specifications that have been
accepted in writing by ROCHE and which meet the requirements of all laws
and governmental regulations including but not limited to current Good
Manufacturing Procedures and foreign equivalents and validation
requirements. PRAECIS shall, at its own expense (other than with respect
to expenses which constitute Development Costs), obtain and maintain all
necessary permits required to meet its manufacturing obligations. PRAECIS
shall also use best efforts to ensure that sufficient stock of Compound
and Product is available in its inventory to promptly fill orders to the
trade in the Territory. PRAECIS and ROCHE shall also use best efforts to
establish manufacturing capacity to supply ROCHE's forecasts.
5 Rights of Inspection and Reports. PRAECIS shall timely provide ROCHE with
all documentation requested by ROCHE reasonably related to manufacture of
Compound and/or Product, and obtaining and maintaining regulatory approval
of Product. ROCHE's authorized representatives shall be entitled, on
reasonable prior notice, to visit and inspect the areas where Compound
and/or Product is produced or stored, whether at PRAECIS or at one of
PRAECIS' manufacturing contractors, during normal business hours at
reasonable times to be agreed by the parties. ROCHE's authorized
representatives shall be entitled on reasonable prior notice to review the
manufacturing process and technical records insofar as they relate to the
manufacture of Compound and/or Product. The above visits, inspections and
reviews are without limitation to other rights ROCHE would have to
determine the adequacy of the facilities and records and whether the
services are being conducted in compliance with this Agreement
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<PAGE>
and relevant laws and regulations. Although ROCHE shall possess this right
to visit, inspect and review, it shall have no obligation to make such
visitations, inspections and reviews.
6 Audit. PRAECIS shall keep full, true, and accurate records documenting the
actual cost of manufacturing Compound and/or Product. ROCHE shall have the
right to audit such records to ascertain the baseline cost of
manufacturing Compound and/or Product. Thereafter, ROCHE shall have the
right to audit PRAECIS' records on an annual basis to ascertain the cost
of manufacturing Compound and/or Product.
7 Source of Supply. The parties shall work together to secure primary and
secondary sources of supply for Compound and/or Product. The parties
envision that UCB Pharma will be the primary manufacturer of Compound for
development, Launch of the Product, and for up to seven (7) years after
Launch of the Product. ROCHE shall have the right to be the secondary
manufacturer for Compound while UCB Pharma is the primary manufacturer.
Thereafter, ROCHE shall have the right to be the primary manufacturer for
Compound. The parties also envision, that Salsbury Chemicals, Inc. of
Charles City, Iowa ("Salsbury") will be the primary manufacturer of depot
formulation used in manufacturing the final Product for development,
Launch of the Product, and for up to five (5) years after Launch of the
Product. PRAECIS shall be the secondary manufacturer of depot formulation
used in manufacturing the final Product while Salsbury is the primary
manufacturer. Thereafter, the parties envision that PRAECIS first and
ROCHE second will become the primary manufacturer of the depot formulation
used in manufacturing the final Product.
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<PAGE>
Notwithstanding the above, if PRAECIS or ROCHE are to supply Product in
depot formulation and/or Compound, then they shall do so at a price no
higher than that which could be obtained from a third party supplier for
similar quantities and delivery schedules. With regard to the fill and
finish of the Product, ROCHE shall have the right to be the primary party
for conducting such activities but shall do so at a price that is no
higher than that which could be obtained from a third party supplier for
similar quantities and delivery schedules.
If ROCHE becomes a manufacturer of Compound, the parties will consider
terms under which ROCHE may, at its option, supply Compound to PRAECIS for
use outside the Territory.
8 Supply Failure. In the event that PRAECIS manufactures and is unwilling or
unable to supply sufficient amount of Product to be used to satisfy ROCHE
purchase orders and/or forecasts (within ordinary and customary time
limits and cure periods to be negotiated in the Supply Agreement), and/or
meet established procedures and specifications, (i) ROCHE shall be free
to make, or have a third party make such Product to fill orders in the
Territory during the period of PRAECIS' unwillingness or inability, or for
the period during which ROCHE becomes obligated to obtain Product from a
third party; and (ii) PRAECIS agrees, free of charge, to disclose
sufficient information to ROCHE to make or have made Products, to permit
ROCHE to cross reference the regulatory filings, and to provide copies of
all proprietary information (including regulatory filings and materials
which in ROCHE's reasonable opinion is needed to manufacture Product). All
costs associated with PRAECIS' unwillingness or inability to
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<PAGE>
manufacture, including qualification of such additional manufacturing with
FDA, shall be deducted by ROCHE from any amounts owed to PRAECIS.
9 Term and Extension. The Supply Agreement shall be in effect for a period
of time which begins on the date on which the Supply Agreement is entered
into and continues for the Term of the Agreement on a country-by-country
basis. Thereafter, the Supply Agreement shall continue to remain in full
force on a country-by-country basis for two (2) additional terms of five
(5) years each; provided however, that it can be terminated by either
party upon three (3) year's prior written notice to the other party but in
no event shall such written notice be provided before three (3) years
prior to the end of the Term of the Agreement (original term or as
extended).
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EXHIBIT 5
HEADS OF AGREEMENT FOR COPROMOTION
This Heads of Agreement for Copromotion sets forth the basic understanding
between the parties with respect to the collaboration relating to the
copromotion of a given Product. This Heads of Agreement for Copromotion shall be
binding on the parties. The full terms of the copromotion agreement between the
parties will be set forth in a full agreement which shall be consistent with the
terms as described below.
1. Exercise of Copromotion Option. The Copromotion Option with respect to a
given Product shall be exercisable by PRAECIS by giving ROCHE at least
nine (9) months advanced written notice (Notice). Such Notice must be
given after the beginning of the third full calendar year and before the
end of the first quarter of the fourth full calendar year after Launch of
the Product in the United States ("Notice Period"). Should Notice not be
given during the Notice Period, then the PRAECIS' Copromotion Option as
related to the Product (including subsequently approved indications and
formulations containing the same Compound (including acids, salts or
esters thereof) as found in the given Product) shall be null and void.
Copromotion for the given Product shall start at the beginning of the next
full calendar year after the year in which Notice is given provided ROCHE
receives Notice at least six (6) months before copromotion commences.
Additionally, PRAECIS shall not be entitled to exercise such Copromotion
Option if Adjusted Gross Sales in the United States
91
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
in the full calendar year immediately prior to Notice and copromotion do
not exceed *** dollars ($***).
For example, if (a) Launch of the Product in the United States occurs in
June, 1999, and (b) Adjusted Gross Sales in the United States in calendar
year 1999 are *** dollars ($***), and (c) Adjusted Gross Sales in the
United States in calendar year 2000 are *** dollars ($***), (d) Adjusted
Gross Sales in the United States in calendar year 2001 are *** dollars
($***), and (e) Adjusted Gross Sales in the United States in calendar year
2002 are *** dollars ($***), PRAECIS may give Notice to ROCHE between
January 1, 2002 and March 31, 2003. If ROCHE receives Notice on June 30,
2002, copromotion would start January 1, 2003.
As another example, if (a) Launch of the Product in the United States
occurs in June, 1999, and (b) Adjusted Gross Sales in the United States in
calendar year 1999 are *** dollars ($***), and (c) Adjusted Gross Sales in
the United States in calendar year 2000 are *** dollars ($***), (d)
Adjusted Gross Sales in the United States in calendar year 2001 are ***
dollars ($***), and (e) Adjusted Gross Sales in the United States in
calendar year 2002 are *** dollars ($***), PRAECIS may give Notice to
ROCHE between January 1, 2003 and March 31, 2003 and Copromotion would
start on January 1, 2004.
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
2. Details. The rights of PRAECIS to copromote in the United States shall
also be subject to PRAECIS providing at least a level of *** (***%)
percent and no more than (***%) *** percent of the total promotional
effort in a given calendar year as established by number and type of
details in accordance with the Copromotion Plan as described in paragraph
6 below. Once PRAECIS establishes its level of participation, such level
shall not be modified without the prior approval of ROCHE and PRAECIS. In
the event PRAECIS does not fulfill its detailing obligations as
established under the Copromotion Plan, PRAECIS' right to copromote shall
terminate.
3. Reimbursement. In addition to the compensation under paragraph 6 of this
Agreement, ROCHE shall reimburse PRAECIS for PRAECIS' copromotional
activities at a cost based on fixed rate(s) per actual type and position
of detail performed by PRAECIS. The rate shall take into consideration the
position of the presentation of the Product and shall be in accordance
with usual and customary industry standards for details of a like nature.
Such fixed rate(s) shall be established annually.
4. Copromotion Term. The Copromotion Term starts on the date of Notice and
ends on the expiration of ROCHE's payment obligations in the United States
as set forth in Article 6.2 of this Agreement.
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5. Grant. Subject to Paragraph 16, during the Copromotion Term, ROCHE grants
PRAECIS the right to promote and detail Product in the United States
jointly with ROCHE or its Affiliates for all indications. ROCHE and
PRAECIS will jointly promote and detail the Product in accordance with all
federal and state laws and regulations.
6. Copromotion Plans. Taking into consideration input from PRAECIS, ROCHE
shall establish copromotional programs and budgets (Copromotion Plan).
ROCHE shall retain responsibility for leading the implementation of the
Copromotion Plan and making decisions regarding marketing of Product.
7. Joint Promotional Team. A Joint Promotional Team ("JPT") comprised of
representatives from ROCHE and PRAECIS will be formed to oversee
copromotional activities of the Product in accordance with the Copromotion
Plan and shall meet at least annually. Consistent with prudent business
practices, the JPT will discuss copromotional activities with the Product
and establish mechanisms for achieving an effective copromotional
collaboration between ROCHE and PRAECIS in aspects which include
professional educational activities. PRAECIS shall have the right to
comment upon and make recommendations to ROCHE regarding copromotional
activities, which recommendations ROCHE shall evaluate and consider,
taking into account each party's expertise and experience with ethical
pharmaceutical products in the United States. The JPT shall be chaired by
a senior representative from ROCHE.
8. JPT Decisions. Any decisions regarding the implementation of the
Copromotion Plan shall be made by ROCHE taking into consideration comments
of
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PRAECIS. The final decision in such copromotional matter resides with
ROCHE.
9. Product Responsibility.
a. To the extent permitted by law, ROCHE is responsible, at its cost, for
taking all actions with respect to the Product as would normally be
conducted to market a major ethical pharmaceutical product in the United
States. These actions include:
preparing training materials and advertisement;
taking final responsibility with respect to detailing and
promotional strategies;
receiving orders, booking sales, invoicing, distributing Product,
handling returns, recalls, inventory and receivables of Product; and
communicating with governmental agencies regarding post approval
activity and issues.
b. PRAECIS is responsible for:
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assuming all costs directly associated with its sales force,
including travel and other expenses subject to reimbursement under
paragraph 3 of this Heads;
ensuring that it follows the detailing and promotional strategies
which are established in the Copromotion Plan; and
promptly advising ROCHE of any issues relating to safety, customer
orders or regulatory questions of which it becomes aware.
c. ROCHE will be responsible for handling all inquiries for medical
information regarding the Product. ROCHE and PRAECIS will collaborate in
developing procedures for providing information on such inquiries to
ROCHE for response.
d. ROCHE will be responsible for processing all adverse reaction and
product complaint reports regarding the Product. ROCHE and PRAECIS will
collaborate in developing procedures for providing to ROCHE any
information coming into PRAECIS' possession concerning adverse events or
product complaints with the Product.
10. Other Selling Activity.
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a. ROCHE has responsibility for managing all corporate accounts activity
including conducting Account Management activities such as Managed Care,
Contracting, and Disease Management.
b. ROCHE has responsibility for managing relationships with the trade.
ROCHE and PRAECIS agree to collaborate in developing procedures for
providing information on orders or other trade inquires to ROCHE for
action.
11. Product Sale. ROCHE is solely responsible for establishing and modifying
the terms and conditions with respect to the sale of the Product,
including without limitation price.
12. Training Materials and Personnel. ROCHE provides PRAECIS with a master
copy of training materials regarding the detailing and promotion of
Product, free of charge. PRAECIS supplies all necessary copies of such
training materials to its sales force at its own cost. ROCHE may elect, at
its option, to make available, free of charge, sales and training
personnel to assist PRAECIS' management team in training PRAECIS' sales
force to detail and promote the Product. The details provided by ROCHE and
PRAECIS shall be carried out by a fully trained professional sales force
who are (i) employed by ROCHE and PRAECIS, respectively, and (ii) trained
according to a level specified by the JPT. Each party has final
responsibility to train its sales force with respect to the Product.
13. Sales and Promotional Materials. ROCHE develops sales and promotional
materials for distribution to the medical community. ROCHE supplies the
sales
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and promotional materials with respect to the Product to PRAECIS, free of
charge, in a manner that is equitable.
14. Sampling Program. ROCHE will establish a sampling program for Product and
strategy of such program, including the allotment of samples to PRAECIS.
ROCHE will supply the samples of the Product, free of charge, to PRAECIS.
15. Product Presentation. Before PRAECIS' exercise of the Copromotion Option,
ROCHE will acknowledge on promotional material and at promotional events
that the Product is licensed from PRAECIS and is being jointly developed.
During the Copromotion Term, the Product will be presented to the medical
community as being jointly promoted by ROCHE and PRAECIS. ROCHE will use
reasonable efforts consistent with prudent business practice to include
PRAECIS' name and logo on appropriate promotional materials. All such
activities shall be consistent with all laws and governmental regulations.
16. Reporting and Performance Measurement. Appropriate reporting and
performance measurement provisions will be agreed upon by the parties and
included in the Copromotion Agreement.
17. Third Party Copromotion. ROCHE retains the right to copromote the Product
with a third party except to the extent that PRAECIS exercises its right
to copromote hereunder. Before entering into a third party copromotion
arrangement, ROCHE shall advise PRAECIS as to such potential copromotion
with a third party and provide PRAECIS with an opportunity to discuss with
ROCHE
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such potential copromotion. ROCHE shall retain the right to solely
determine if it shall enter into such third party copromotion.
18. Diligence. Each party shall use reasonable diligence consistent with
prudent business practices to copromote the Product in the United States
in accordance with the Copromotion Plan.
19. Indemnification. A party indemnifies the other for all claims related to
the Product to the extent the party is negligent or fails to promote the
Product in accordance with federal and state laws.
20. Non-Assignability. (a) The Copromotion Option and the right to copromote
granted herein to PRAECIS shall not be transferred or assigned, even to a
successor of PRAECIS or an assignee of all the good will and entire
business and assets of PRAECIS, except with the prior written consent of
ROCHE, which consent ROCHE may not unreasonably withhold; provided that
the foregoing shall not prohibit, or require the consent of ROCHE for any
such transfer or assignment if such transfer or assignment is pursuant to
a transaction which is not and does not result in a Change of Control (as
defined below) of PRAECIS. Moreover, any Change in Control (as defined
below) of PRAECIS after the Effective Date of this Agreement shall render
the Copromotion Option and the right to copromote thereunder null and
void, except with the prior written consent of ROCHE, which consent ROCHE
may not unreasonably withhold. At least thirty (30) days prior to any
intended transfer or assignment of the Copromotion Option, PRAECIS shall
provide ROCHE with written notice of such
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intended transfer or assignment, and how such transfer or assignment is
permitted hereunder.
(b) As used herein, "Change of Control" of PRAECIS shall occur or be
deemed to occur only if any of the following events occur:
(i) 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") (other than (A) PRAECIS, (B) any trustee or other fiduciary
holding securities under an employee benefit plan of PRAECIS, (C)
any corporation owned directly or indirectly by the stockholders of
PRAECIS in substantially the same proportion as their ownership of
stock of PRAECIS, or (D) any stockholder of PRAECIS as of the
Effective Date is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of PRAECIS representing more than 30% of the combined
voting power of the Company's then outstanding securities;
(ii) individuals who, as of the Effective Date, constitute the
PRAECIS Board of Directors (the "Incumbent Board") cease for any
reason to constitute at least a majority of such Board of Directors,
provided that any person becoming a director of PRAECIS subsequent
to the date hereof whose election, or nomination for election by
PRAECIS stockholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of
office is in connection with an
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actual or threatened election contest relating to the election of
the directors of PRAECIS, as such terms are used in Rule 14a--11 of
Regulation 14A under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of
the Incumbent Board; or
(iii) consummation by PRAECIS of a merger or consolidation other
than
(1) a merger or consolidation which would result in the voting
securities of PRAECIS outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity
or the ultimate parent entity thereof) more than 60% of the
combined voting power of the voting securities of such
surviving entity outstanding immediately after such merger or
consolidation; or
(2) a merger or consolidation effected to implement a
recapitalization of PRAECIS (or similar transaction) in which
no "person" (as defined in subparagraph (i) above) acquires
more than 30% of the combined voting power of the Company's
then outstanding securities; or
(iv) consummation by PRAECIS of a sale of all or substantially all
of its assets, other than to a wholly-owned subsidiary or an entity
which
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owns all the outstanding capital stock of PRAECIS solely as part of
a reorganization or recapitalization transaction; or
(v) the stockholders of PRAECIS approve a plan of complete
liquidation of PRAECIS in the event of bankruptcy or receivership.
(c) For the purposes of the foregoing definition of "Change of Control,"
the term "PRAECIS" shall mean either PRAECIS PHARMACEUTICALS INCORPORATED
or a corporation referred to in clause (c) of paragraph (i) of such
definition.
(d) Notwithstanding anything to the contrary in this Heads of Agreement
for Copromotion, should a pharmaceutical entity (or a parent or subsidiary
thereof) acquire PRAECIS or more than fifty percent (50%) of the voting
securities of PRAECIS, the Copromotion Option and the right to copromote
shall not be transferred and shall become null and void, except with the
prior written consent of ROCHE.
21. Full Agreement. Consistent with the Heads of Agreement for Copromotion,
the Copromotion Agreement will contain ordinary and customary terms for an
agreement in which a pharmaceutical product of like nature is jointly
copromoted and detailed in the United States, such as insurance,
additional warranties and the like.
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EXHIBIT 10.7
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
LICENSE AGREEMENT
BY AND BETWEEN
SYNTHELABO
AND
PRAECIS PHARMACEUTICALS, INC.
May 13, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
ARTICLE 1 DEFINITIONS................................................2
ARTICLE 2 GRANT OF EXCLUSIVE LICENSE TO SYNTHELABO..................14
2.1 Exclusive License and Sublicense For
Licensed Products.........................................14
2.2 PRAECIS Covenant to Honor Synthelabo's
Exclusive Rights..........................................15
2.3 Acknowledgement of PRAECIS' Retained
Rights....................................................16
2.4 Sublicenses...............................................18
2.5 Agreement Regarding Sales in Section B
Territory Countries.......................................19
2.6 Use of Improvements by IUF and IU.........................21
ARTICLE 3 MANUFACTURING.............................................21
3.1 PRAECIS' Supply Commitment................................21
3.2 Preliminary Three-Year Forecasts..........................21
3.3 Long-Term Forecasts.......................................22
3.4 Long-Term Forecasts Nonbinding............................22
3.5 Short-Term Forecasts......................................23
3.6 Purchase Orders...........................................24
3.7 PRAECIS' Supply Obligations and Rights....................25
3.8 [Intentionally Omitted]
3.9 Manufacturing Rights of Synthelabo Upon
PRAECIS Material Breach...................................26
3.10 Payment for Licensed Products Manufacture
By Synthelabo; Synthelabo Duty to Mitigate................27
3.11 Suspension of Manufacture By Synthelabo;
Termination of Manufacturing License......................29
3.12 Agreement Regarding Third Party
Manufacturers.............................................30
3.13 Direct Billing............................................32
3.14 Force Majeure.............................................33
3.15 Form and Terms of License Product
Shipments.................................................33
3.16 Supply of Licensed Product For Certain
Supplemental Development Plan Clinical
Studies...................................................35
ARTICLE 4 DEVELOPMENT AND APPROVAL OF LICENSED
PRODUCTS..................................................35
4.1 Diligence.................................................35
4.2 Development Program and Plans.............................36
</TABLE>
i
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<TABLE>
<S> <C> <C>
4.3 Additional Applications...................................38
4.4 Regulatory Meetings.......................................39
4.5 Development Costs.........................................39
4.6 Registration and Reimbursement Approvals..................41
4.7 Development Costs Records.................................42
4.8 Technical Information.....................................43
4.9 Clinical Trials...........................................44
4.10 Material Adverse Development; Material
Adverse Patent Development; Competition...................45
4.11 Synthelabo Formulation....................................47
4.12 Reporting on Adverse Reaction.............................47
ARTICLE 5 MARKETING AND SALES OBLIGATIONS OF
SYNTHELABO................................................47
5.1 Diligence Generally.......................................47
5.2 Advertising...............................................47
ARTICLE 6 GOVERNANCE................................................48
6.1 Joint Steering Committee..................................48
6.2 Operations of the Parties Under the
Collaboration.............................................48
6.3 Timing of Regular Meetings; Agendas.......................49
6.4 Special Meetings..........................................49
6.5 Decisions and Disputes....................................49
6.6 Development Subcommittee..................................51
6.7 Cooperation...............................................51
6.8 Visitation................................................52
6.9 Committee and Certain Other Costs.........................52
ARTICLE 7 CONFIDENTIALITY...........................................53
7.1 General...................................................53
7.2 Certain Exceptions........................................54
7.3 Publications..............................................55
ARTICLE 8 TRADEMARKS................................................56
8.1 Exclusive License for Rel-Ease(TM) Trademark..............56
8.2 PRAECIS Approval Right....................................57
8.3 Trademark Designations....................................58
8.4 Labelling, etc............................................58
8.5 Indemnification By PRAECIS................................59
8.6 Licensed Products Names and Trademarks....................59
</TABLE>
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<TABLE>
<S> <C> <C>
8.7 PRAECIS Registration of Licensed Product
Territory Trademark Outside the Territory.................61
ARTICLE 9 PAYMENTS..................................................62
9.1 Signing and Milestone Payments............................62
9.2 Benchmark Transfer Price..................................64
9.3 Determination of Selling Price of
Licensed Products.........................................65
9.4 Transfer Price............................................66
9.5 Payment of Benchmark Transfer Price.......................66
9.6 Adjustments; Reports......................................67
9.7 Miscellaneous Sales Costs.................................68
9.8 Royalties.................................................68
9.9 Samples...................................................69
9.10 Currency..................................................70
9.11 PRAECIS Audit Rights......................................70
ARTICLE 10 REMEDIES FOR NON-PAYMENT..................................72
10.1 Interest..................................................72
10.2 Other.....................................................72
10.3 Collateral................................................73
10.4 Insurance on Unsold Goods.................................74
ARTICLE 11 COOPERATION AND ASSISTANCE................................74
11.1 General...................................................74
11.2 Specific Cooperation of Synthelabo........................75
11.3 Specific Cooperation of PRAECIS...........................75
11.4 Patent Prosecution and Maintenance........................76
ARTICLE 12 REPRESENTATIONS AND WARRANTIES............................77
12.1 Conformity to Specifications..............................77
12.2 Representations as to Intellectual
Property..................................................79
12.3 Authority; Binding Agreement; Other
Matters...................................................80
12.4 IUF License Agreement.....................................81
12.5 Warranty Disclaimer.......................................81
ARTICLE 13 INDEMNIFICATION...........................................82
13.1 Synthelabo Indemnification of PRAECIS.....................82
13.2 PRAECIS' Indemnification of Synthelabo....................83
13.3 Mutual Indemnification for Breach.........................83
13.4 Procedure For Third Party Claims..........................84
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE 14 INSURANCE.................................................85
ARTICLE 15 NON-COMPETITION...........................................85
15.1 Mutual Non-Competition Covenant...........................85
15.2 Competitive Acquisition...................................86
ARTICLE 16 IMPROVEMENTS..............................................86
ARTICLE 17 TERM & TERMINATION........................................90
17.1 Term; Expiration..........................................90
17.2 Bankruptcy, Etc...........................................91
17.3 Breach....................................................92
17.4 Effect of Termination.....................................93
17.5 Surviving Provisions......................................94
17.6 Continuation of Sublicense Rights.........................94
17.7 Termination for Material Adverse Events...................95
17.8 Right to Sell Inventory...................................95
ARTICLE 18 ARBITRATION...............................................96
18.1 Procedure; Decision Final and Binding.....................96
18.2 Assumption Regarding Intellectual
Property Rights...........................................97
18.3 Exception to Exclusive Dispute Resolution
Procedure.................................................97
ARTICLE 19 INFRINGEMENT AND MAINTENANCE..............................98
19.1 Infringement by Third Parties.............................98
19.2 Infringement Suit By Third Parties........................99
19.3 Cooperation...............................................99
19.4 Differing Interests......................................100
ARTICLE 20 ASSIGNMENT...............................................100
ARTICLE 21 COMMUNICATIONS...........................................101
ARTICLE 22 MISCELLANEOUS PROVISIONS.................................102
22.1 Relationship of the Parties..............................102
22.2 Advertising; Trademarks, Etc.............................103
22.3 Public Disclosures.......................................103
22.4 Governing Law............................................104
22.5 Entire Agreement.........................................104
22.6 Severability.............................................104
22.7 No Waiver................................................105
22.8 Captions and References..................................105
22.9 Counterparts.............................................105
</TABLE>
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APPENDICES
Appendix I PRAECIS Proposed Core Development Studies
Appendix II Patent Applications
Appendix III IUF License Agreement
Appendix IV PPI-149 Definition
Appendix V Territory
Appendix VI Additional Supply Provisions
Appendix VII Example Form of Quality Charter
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LICENSE AGREEMENT
This Agreement is made as of the 13th day of May, 1997 (the "Effective
Date"), by and between Synthelabo, a societe anonyme organized in France, having
principal offices at 22 Avenue Galilee 92350 Le-Plessis-Robinson, France
("Synthelabo"), and PRAECIS PHARMACEUTICALS, INC., a Delaware corporation having
principal offices at One Hampshire Street, Cambridge, MA 02139 ("PRAECIS").
R E C I T A L S:
PRAECIS(TM) is the owner of patent applications and know-how related
to its depot formulation Rel-EaseTM system (the "Rel-Ease System") and certain
uses of LHRH Antagonist Compounds, and is the exclusive licensee of PPI-149 and
the other PPI Licensed Rights.
Synthelabo wishes to enter into a license agreement with PRAECIS for the
development and commercialization of therapeutic LHRH antagonist products which
contain PPI-149 or potentially other LHRH Antagonist Compounds and which are
formulated by or on behalf of PRAECIS.
PRAECIS is willing to enter into a license agreement with Synthelabo for
the development and commercialization of therapeutic LHRH antagonist products
which contain PPI-149 or potentially other LHRH Antagonist Compounds and which
are formulated by or on behalf of PRAECIS.
<PAGE>
NOW, THEREFORE, in consideration of the foregoing, and the
representations, warranties, covenants and agreements contained herein, the
parties hereby agree as follows:
ARTICLE 1 - DEFINITIONS
For the purposes of this Agreement, the following words and phrases shall
have the following meanings:
1.1 "Advertise" shall mean to create, distribute and display
information and artistic material for the purpose of promoting sales of the
Licensed Products to Third Parties, including but not limited to articles, print
ads, brochures, symposia, commercial exhibits, video and audio recordings, and
television, radio, and internet advertisements or commercials (hereinafter
"Forms").
1.2 "Adjustment Amount" is defined in Section 9.6.
1.3 An "Affiliate" of a party shall mean a company or other entity
which controls, is controlled by, or is under common control with such party. A
corporation or other entity shall be regarded as in control of another
corporation or entity if it owns or directly or indirectly controls more than
fifty percent (50%) of the voting stock or other ownership interest of the other
corporation or entity, or if it possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of the corporation
or other entity or the power to elect or appoint fifty percent (50%) or more of
the members of the governing body of the corporation or other entity; provided
that for all purposes of this Agreement, the following
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entities shall be deemed to be Affiliates of Synthelabo: Synthemedic (Morocco),
Synthelabo - Byk Pharma GmbH (Austria), Astra Synthelabo AB (Sweden) and Leiras
Synthelabo Oy (Finland).
1.4 [INTENTIONALLY OMITTED]
1.5 "Applications" shall mean all existing and future therapeutic
uses for Licensed Products, including without limitation the treatment of
prostate cancer, breast cancer, endometriosis, uterine fibroids, benign
prostatic hypertrophy (BPH), infertility, and precocious puberty.
1.6 "Benchmark Transfer Price" is defined in Section 9.2.
1.7 "Binding Estimate" is defined in Section 3.5(b).
1.8 "Clinical Trials" shall mean research in which Licensed Products
are used to treat human patients for the purpose of evaluating the safety,
efficacy and performance of the Licensed Products in such use, and for the
purpose of preparing reports as may be required in order to obtain Registration
Approval or Reimbursement Approval or for the purpose of preparing marketing
studies.
1.9 "Confidential Information" shall mean private information
transmitted by one party to the other pursuant to this Agreement or the
collaboration contemplated hereby, including but not limited to plans, results,
data, ideas, concepts, Improvements, conclusions, suggestions, know-how,
show-how, inventions, discoveries, products, processes, trade secrets, and all
information relating to the Licensed Products (including
3
<PAGE>
without limitation, the information set forth in Appendix IV); any financial or
business information relating to the Licensed Products, this Agreement or the
collaboration contemplated hereby; strategies with respect to Clinical Trials;
and any other information marked "Confidential" prior to transmittal. With
regard to oral communications, information conveyed thereby shall be considered
"Confidential Information" if made in the context of discussions specifically
relating to the Licensed Products, this Agreement or the collaboration
contemplated hereby, or if reduced to a writing marked "CONFIDENTIAL" and
transmitted to the other party within forty-five (45) days after said oral
communication. Confidential Information shall not include information which the
recipient can show: (i) is generally known or readily available to the public at
the time of disclosure other than as a result of a breach of any obligation of
confidentiality (including hereunder); (ii) was already known to the recipient
without a breach of any obligation of confidentiality (including hereunder);
(iii) became available to the public independent of the recipient; (iv) was
disclosed to the recipient by a Third Party having legal rights to same, which
disclosure did not violate a confidentiality obligation of such Third Party; or
(v) is subsequently and independently developed by an employee of the recipient
who did not have knowledge of the information disclosed by the disclosing party.
1.10 "Core Development Plan" shall mean the development plan to be
prepared and revised as necessary by
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Synthelabo and PRAECIS, in accordance with Section 4.2, which will include on an
annual basis a detailed set of milestones, timeframes and operating plans with
respect to the Core Development Studies.
1.11 "Core Development Studies" shall mean preclinical studies and
Clinical Trials to be undertaken by PRAECIS in the United States and/or other
countries in order to seek and obtain FDA Registration Approval for (i) the
Application of prostate cancer and (ii) the Applications of endometriosis or
uterine fibroids as the Joint Steering Committee shall determine, and (iii) any
other Application approved for development by the Joint Steering Committee and
the Development Subcommittee as provided in Section 4.3. The Core Development
Studies proposed by PRAECIS as of the Effective Date are summarized in Appendix
I.
1.12 "Cost of Goods" or its abbreviation "COGS" shall mean the unit
cost of manufacture of a given Licensed Product, as determined in accordance
with generally accepted accounting principles in the place of manufacture of
such Licensed Product, which cost in any event includes, without limitation,
costs of direct labor, contracts with Third Parties, manufacturing overhead
(including fixed costs), materials and supplies, all freight, duties, taxes
assessed on sales and transportation costs, but excludes any amount payable as
royalties in respect of the PPI Licensed Rights.
1.13 "Development Costs" shall mean all external costs (e.g., costs
of contracts with clinical research organizations)
5
<PAGE>
and direct internal costs (including direct labor, materials, supplies, and
specially procured essential equipment, but excluding rent, utilities,
administrative, secretarial, clerical, accounting and management allocations),
plus a fixed amount for overhead equal to ten percent (10%) of the direct
internal costs, which in each case are incurred after the Effective Date and
during the term hereof by PRAECIS or Synthelabo, as applicable, in connection
with a Development Phase (but excluding such costs incurred before or after the
Effective Date in connection with the prostate cancer Clinical Trials (IND
#51,170, Protocol #149-96-01) which are underway as of the Effective Date).
1.14 "Development Phase" in any country with respect to any
Application for any Licensed Product shall mean the period commencing on the
Effective Date and continuing until Registration Approval and Reimbursement
Approval of such Licensed Product for such Application in such country has been
obtained.
1.15 "Development Program" shall mean the collaboration by PRAECIS
and Synthelabo hereunder during the Development Phase.
1.16 "Diligence" or "diligent efforts" shall mean commercially
reasonable efforts consistent with efforts made by businesses of similar size
and resources for similar products in a similar context.
1.17 "Dispute Notice" is defined in Section 6.4.
1.18 "Disputed Matter" is defined in Section 6.4.
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1.19 "Effective Date" is defined in the first paragraph of this
Agreement.
1.20 "FDA" shall mean the United States Food and Drug Administration
or any successor agency.
1.21 "Field" shall mean the field as defined by the Applications
taken collectively.
1.22 "First Commercial Sale" of a Licensed Product shall mean the
first commercial sale by Synthelabo or its Affiliates for use or consumption by
the general public of such Licensed Product based on Registration Approval of
such Licensed Product in any Territory Country.
1.23 "Improvements" shall mean changes in composition, design or
manufacture of the Licensed Products which result in enhancements or alterations
of any component of the Licensed Products with respect to, without limitation,
efficacy, safety, drug delivery profiles, stability, shelf-life, dosage, cost,
ease of use, or styling, except that for purposes of Section 2.6 only,
"Improvements" shall have the meaning set forth in the IUF License Agreement.
1.24 "Incoterms" shall mean that body of trade rules as published in
1990 by the International Chamber of Commerce, Paris, France.
1.25 "Intellectual Property Rights" shall mean all rights, including
unpatented inventions and know-how, of PRAECIS in and to or with respect to the
Licensed Products, including the rights in the Territory in and to the patent
applications listed
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in Appendix II (which is incorporated herein by reference), and all patents
issuing therefrom and all continuations, continuations-in-part, reissues,
divisionals, extensions, supplementary certificates of protection and
equivalents of any of the foregoing throughout the Territory; and further
including all other rights, including unpatented inventions and know-how, in and
to or with respect to the Licensed Products as may subsist or may be secured by
PRAECIS under and in accordance with the patent, copyright, and trade secret
statutes, rules, regulations, orders and decrees of any governments of the
Territory, or which otherwise exist or can be obtained under constitutions,
treaties, common law, or civil law of any and all Territory Countries, together
with all rights of PRAECIS under contracts, licenses and other agreements
relating to the Licensed Products or any Intellectual Property Rights; but
excluding trademark rights and the PPI Licensed Rights which are provided for
separately hereunder.
1.26 "Inventions" and "Invention Rights" shall have the respective
meanings set forth in the IUF License Agreement.
1.27 "IU" shall mean Indiana University.
1.28 "IUF" shall mean Indiana University Foundation.
1.29 "IUF License Agreement" shall mean the License Agreement dated
as of October 17, 1996 between IUF and PRAECIS as in effect from time to time, a
copy of which Agreement as currently in effect is attached hereto as Appendix
III.
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1.30 "Joint Steering Committee" is defined in Section 6.1
1.31 "LHRH Antagonist Compounds" shall mean compounds which exhibit
Lutenizing Hormone Releasing Hormone (LHRH) antagonist activity.
1.32 "Licensed Products" shall mean therapeutic products which
contain PPI-149, or any other LHRH Antagonist Compound as to which PRAECIS has
all the rights necessary to make the grants to Synthelabo hereunder, in either
case in a depot or other formulation owned by or licensed to PRAECIS. Unless
otherwise specified herein, references to Licensed Products include
Improvements.
1.33 "Licensed Product Territory Trademark" is defined in Section
8.5.
1.34 "Long-Term Forecast" is defined in Section 3.3.
1.35 "Material Adverse Development" means, with respect to a
Licensed Product for a particular Application, an event or development (other
than a Material Adverse Patent Development) which occurs after the date of this
Agreement (other than an event or development which constitutes or arises from a
breach hereof by Synthelabo) which results in a material adverse change in the
commercial prospects of such Licensed Product for such Application.
1.36 "Material Adverse Patent Development" means the occurrence of
any of the events described in clauses (A), (B) or (C): (A) the reasonable
determination of Synthelabo, at any stage
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in the patent procedure after receipt of the European search report and the
first official letter from the European Patent Office referred to in Section
11.4, that it is not reasonably likely that a European patent will be granted on
PPI-149 or the formulation, respectively, substantially as described in the
respective European equivalents of patent applications PCT/US96/09852 or US
08/762,747, respectively (the "Material Patent Applications"); (B) the lack of
any valid or enforceable patent issued substantially as described in the
Material Patent Applications as the individual or combined result of (i) no such
patents having issued and the unrevivable abandonment of any of the Material
Patent Applications, (ii) all such patents having been finally and unappealably
declared invalid or unenforceable, or (iii) all such patents having prematurely
expired for failure to pay maintenance fees or annuities; or (C) a timely filed
action by a Third Party to annul, cancel or revoke a patent issued substantially
as described in the Material Patent Applications, other than any such action
which has no reasonable likelihood of success on the merits.
1.37 "Net Sales" shall mean the sales price per unit of a Licensed
Product invoiced by Synthelabo or an Affiliate thereof to a Third Party with
respect to the sale of Licensed Products to a Third Party, less, to the extent
such amounts are included in the invoiced sales price, the direct cost of trade
discounts, credits for returns and rebates, discounts for prompt payments to the
extent such discounts are customary in the
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applicable Territory Country, insurance and transportation charges (unless
reimbursed by a Third Party), and duties and taxes assessed on sales; provided
that neither Synthelabo nor its Affiliates shall (i) sell Licensed Products in
combination with other products unless the price of the Licensed Products is
separately identified in the invoice with such other products, nor (ii) discount
Licensed Products by a greater percentage than other products with which such
Licensed Products are sold. Units of Licensed Products which are provided to
Synthelabo or its Affiliates at Cost of Goods in accordance with Section 9.9 for
use as salesman's exhibits or as Promotional free samples, shall not be
considered sales for purposes of this definition, but units of Licensed Products
which are provided to Synthelabo or its Affiliates in connection with any Phase
IV Clinical Trials shall be considered sales for purposes of this definition.
For purposes of this definition as used throughout this Agreement, any
co-marketing partner of Synthelabo or its Affiliates shall be deemed an
"Affiliate" and not a Third Party.
1.38 "Notice" is defined in Article 21.
1.39 "Notice Address" means the addresses listed as such in
Article 21.
1.40 "Patent Rights" shall have the meaning set forth in the IUF
License Agreement.
1.41 "Plateau Amount" is defined in Section 3.9.
1.42 "PPI-149" shall have the meaning set forth in Appendix IV.
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1.43 "PPI Licensed Rights" shall mean all rights licensed to PRAECIS
pursuant to Section 3.01(a) of the IUF License Agreement, together with, if
applicable, any rights to LHRH Antagonist Compounds licensed to PRAECIS in
accordance with Section 3.01(b) of the IUF License Agreement.
1.44 "Promote" shall mean to encourage Third Parties to consider
purchasing the Licensed Products, through in-person calls by qualified and
trained salespeople, and through such other promotional means as are reasonable
and customary in the pharmaceutical industry in each Territory Country for
products which are similar to Licensed Products.
1.45 "Quarterly Shortfall" is defined in Section 3.7(b).
1.46 "Registration Application" shall mean a registration dossier
filed with the appropriate regulatory authorities of a country or with an agency
representing a group of countries to obtain Registration Approval and
Reimbursement Approval for a Licensed Product in such country or group of
countries.
1.47 "Registration Approval" shall mean governmental approval for
marketing and sale of a Licensed Product in a country prior to the commencement
of sales of Licensed Product in such country.
1.48 "Reimbursement Approval" shall mean approval by the
governmental health care cost reimbursement agency or agencies in a country,
including any required pricing approval,
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required in order for patients in such country to receive reimbursement for
purchases of a Licensed Product.
1.49 "Requesting Party" is defined in Section 4.7.
1.50 "Revenue" or its abbreviation "REV" shall mean the arithmetic
average of Net Sales for a given Licensed Product during a given calendar
quarter.
1.51 "Reviewed Party" is defined in Section 4.7.
1.52 "Short-Term Forecast" is defined in Section 3.5(a).
1.53 "Startup Date" is defined in Section 3.3.
1.54 "Supplemental Development Plan" shall mean the supplemental
development plan to be prepared and revised, as necessary, by Synthelabo in
accordance with Section 4.2, which will include on an annual basis a detailed
set of milestones, timeframes and operating plans with respect to the
Supplemental Development Studies.
1.55 "Supplemental Development Studies" shall mean preclinical
studies and Clinical Trials to be undertaken by Synthelabo in order to fulfill
the requirements for Registration Approval and Reimbursement Approval in any
Territory Country which have not fully been satisfied by the Core Development
Studies.
1.56 "Synthelabo Formulation" shall mean any formulation for PPI-149
or for any other LHRH Antagonist Compound licensed to Synthelabo hereunder,
which formulation is
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discovered, conceived or developed solely by or on behalf of Synthelabo, its
employees or agents.
1.57 "Territory" shall mean the geographic areas which, as of the
Effective Date, are denominated as set forth in Appendix V, including their
respective territories and possessions, irrespective of any changes in
government or name after the Effective Date.
1.58 "Territory Countries" shall mean the countries which make up
the Territory as defined hereinabove and in Appendix V, both individually and
collectively.
1.59 "Third Party" shall mean any person or entity other than
PRAECIS, Synthelabo and their respective Affiliates.
1.60 "Transfer Price" is defined in Section 9.4.
ARTICLE 2 - GRANT OF EXCLUSIVE LICENSE TO SYNTHELABO
2.1 Exclusive License and Sublicense For Licensed Products. Subject
to the other terms and conditions herein, PRAECIS hereby grants Synthelabo and
its Affiliates (i) an exclusive license under the Intellectual Property Rights
and an exclusive sublicense under the PPI Licensed Rights to develop Licensed
Products, to use Licensed Products, to import Licensed Products from PRAECIS, to
offer to sell Licensed Products to Third Parties, to Advertise and Promote
Licensed Products, and to distribute and sell Licensed Products to Third
Parties, with each such licensed and sublicensed right being limited to the
Field and to the Territory and (ii) an exclusive sublicense under the PPI
Licensed Rights and with respect to any LHRH Antagonist
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Compound not included in the PPI Licensed Rights as to which PRAECIS has all the
rights necessary to make the grant set forth in this clause (ii), to develop
Synthelabo Formulations. The right to manufacture Licensed Products or have
Licensed Products manufactured and the right to import Licensed Products from
other than PRAECIS are included in this grant in accordance with and only to the
extent permitted by Article 3. Notwithstanding the foregoing or any other
provision of this Agreement, (i) in no event shall the scope of the grant of a
sublicense with respect to the PPI Licensed Rights as set forth herein be deemed
to exceed the scope of the grant of rights to PRAECIS pursuant to the IUF
License Agreement and (ii) the grant of a sublicense with respect to the PPI
Licensed Rights as set forth herein shall be subject to any reservations or
restrictions with respect to PPI Licensed Rights contained in the IUF License
Agreement.
2.2 PRAECIS Covenant to Honor Synthelabo's Exclusive Rights. PRAECIS
and its Affiliates shall honor the exclusive license rights of Synthelabo
hereunder and shall neither take, nor permit to be taken, any action which is
inconsistent with such exclusive rights, including, by way of example and not
limitation, by (i) offering to sell or selling Licensed Products inside the
Territory, (ii) knowingly offering to sell or knowingly selling Licensed
Products to Third Parties who intend to transport or use same inside the
Territory, (iii) knowingly offering to sell or knowingly selling any Licensed
Products to Third Parties who intend to sell same in the Territory or (iv)
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<PAGE>
maintaining any branch or distribution depot for the purpose of selling Licensed
Products in the Territory; however, subject to the foregoing restrictions on
PRAECIS, nothing herein shall obligate PRAECIS to impose any restriction upon
the use or resale of any Licensed Product by a purchaser (except for a licensee
of PRAECIS outside the Territory) thereof from PRAECIS, and the use or resale of
any Licensed Product in the Territory by such a purchaser (except for a licensee
of PRAECIS outside the Territory) shall not constitute a breach of any provision
of this Agreement by PRAECIS. Neither PRAECIS nor Synthelabo shall be under any
obligation to procure the termination of such use or resale, but either may, at
their discretion, seek to do so.
2.3 Acknowledgement of PRAECIS' Retained Rights. Synthelabo and its
Affiliates hereby agree and acknowledge that PRAECIS and its Affiliates may
develop Licensed Products and Improvements, distribute, offer for sale,
Advertise, Promote, and sell the Licensed Products, and otherwise develop and
exploit the market for Licensed Products outside of the Territory, either on
their own behalf or through marketing partnerships, strategic alliances, or
other relationships with Third Parties, as PRAECIS may determine in its sole
discretion, and without any obligation to Synthelabo therefor. In addition,
Synthelabo and its Affiliates hereby agree that PRAECIS and its Affiliates,
either on their own behalf or through marketing partnerships, strategic
alliances, or other relationships with Third Parties, shall have the right
within the Territory to (i) develop the Licensed
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Products and Improvements, conduct Clinical Trials and engage in academic
research and publication (so long as in accordance with the confidentiality and
publication provisions herein) and (ii) with the prior approval of Synthelabo
which will not be unreasonably withheld or delayed, hold, sponsor and
participate in conferences and symposia related to the Licensed Products or LHRH
Antagonist Compounds generally. Synthelabo and its Affiliates shall honor the
exclusive rights of PRAECIS outside of the Territory and shall neither take, nor
permit to be taken, any action which is inconsistent with such exclusive rights,
including, by way of example and not limitation, by (i) offering to sell or
selling Licensed Products outside the Territory, (ii) knowingly offering to sell
or knowingly selling Licensed Products to Third Parties who intend to transport
or use same outside the Territory, (iii) knowingly offering to sell or knowingly
selling any Licensed Products to Third Parties who intend to sell same outside
of the Territory or (iv) maintaining any branch or distribution depot for the
purpose of selling Licensed Products outside the Territory; however, subject to
the foregoing restrictions on Synthelabo, nothing herein shall obligate
Synthelabo to impose any restriction upon the use or resale of any Licensed
Product by a purchaser thereof (except for a licensee of Synthelabo inside the
Territory) from Synthelabo or its Affiliates, and the use or resale of any
Licensed Product outside of the Territory by such a purchaser (except for a
licensee of Synthelabo inside the Territory) shall not constitute
17
<PAGE>
a breach of any provision of this Agreement by Synthelabo. Neither PRAECIS nor
Synthelabo shall be under any obligation to procure the termination of such use
or resale, but either may, at their discretion, seek to do so.
2.4 Sublicenses. Pursuant to sublicense or similar agreements,
Synthelabo and its Affiliates may, with the written consent of PRAECIS which
shall not be unreasonably withheld or delayed, extend the grant of Section 2.1,
along with its other rights hereunder, to one or more Third Parties; provided
such agreement is consistent with the terms hereof and the IUF License Agreement
and contains all of the terms required by the IUF License Agreement to be
included in any sublicense granted by PRAECIS. By granting any such sublicense,
Synthelabo shall be deemed to have consented to the amendment of this Agreement
to render the license and sublicense provided for herein co-exclusive as between
Synthelabo and its Affiliates on the one hand, and their respective
sublicensee(s) on the other, but not as between any such parties, on the one
hand, and any other Third Party on the other. Synthelabo will deliver to PRAECIS
a true and correct copy of each agreement entered into by Synthelabo and a Third
Party pursuant to this Section 2.4 and shall promptly advise PRAECIS in writing
of any modification (and shall supply a copy of the same) or termination of each
such agreement. If IUF should object that the IUF License Agreement does not
entitle PRAECIS to grant any such sublicense, Synthelabo may request PRAECIS to
grant such sublicense directly to such Third Party.
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Any such agreement shall automatically terminate upon termination (but not
expiration) of this Agreement, unless such termination is pursuant to Section
17.2 due to an event described therein with respect to PRAECIS or such
termination is by Synthelabo for breach pursuant to Section 17.3 and the special
provisions of Section 17.4 are applicable.
2.5 Agreement Regarding Sales in Section B Territory Countries. It
is the intention of the parties that Synthelabo, either alone or acting through
its Affiliates or its or their permitted assigns or permitted sublicensees, will
itself take full responsibility for the marketing and distribution activities
contemplated herein. As such, Synthelabo hereby agrees that it and its
Affiliates shall not, in those Territory Countries listed in Section A of
Appendix V ("Section A Territory Countries"), knowingly sell or otherwise
transfer Licensed Products to a Third Party which has substantially assumed or
will substantially assume the marketing responsibilities of Synthelabo hereunder
with respect to Licensed Products purchased by such Third Party, provided that
the foregoing shall not prohibit Synthelabo and its Affiliates from entering
into co-marketing arrangements with Third Parties on customary terms, it being
understood and agreed that any such arrangement shall not affect Synthelabo's
responsibility for the performance of its obligations hereunder and Synthelabo's
indemnification obligations hereunder shall apply to the acts or omissions of
any such co-marketing partner as if such acts or omissions were those of
Synthelabo. However,
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the parties agree that in certain of the Territory Countries listed in Section B
of Appendix V (the "Section B Territory Countries"), direct marketing by
Synthelabo or its Affiliates or by a co-marketing partner thereof may not be
possible, practicable or feasible. Therefore, in the Section B Territory
Countries, Synthelabo may have its marketing activities in such countries
performed by other Third Parties to the extent such performance of such
activities is customarily performed by such Third Parties in such countries, and
Synthelabo may sell Licensed Products through any distribution channels in each
such country as are considered normal and customary for such country; provided
that Synthelabo shall remain responsible for the performance of its obligations
hereunder and Synthelabo's indemnification obligations hereunder shall apply to
the acts or omissions of any such Third Party as if such acts or omissions were
those of Synthelabo. If more than 20% of cumulative Net Sales in the Territory
during any calendar year is from sales of Licensed Products in the Section B
Territory Countries, then PRAECIS and Synthelabo shall promptly negotiate in
good faith a special Transfer Price for Licensed Products sold in the Section B
Territory Countries, with a view to preserving for both PRAECIS and Synthelabo
the economic benefits intended to be provided hereunder. If agreement with
respect to such a special Transfer Price cannot be reached within 30 days after
the commencement of such negotiations, the parties hereby agree that the dispute
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resolution procedures set forth in Sections 6.5 and 18.1 may be invoked by
either party and the resolution achieved through such procedures shall be
binding on the parties.
2.6 Use of Improvements by IUF and IU. Synthelabo hereby grants to
PRAECIS, for further grant to IUF and IU, a royalty-free, nonexclusive license,
to use for research and educational purposes only, and without the right to
sublicense, any and all Improvements made by or on behalf of Synthelabo or any
Affiliate thereof.
ARTICLE 3 - MANUFACTURING
3.1 PRAECIS' Supply Commitment. PRAECIS shall provide Synthelabo
with all of its requirements for the Licensed Products, upon the terms and
subject to the conditions and limitations specified herein. PRAECIS shall be
entitled to subcontract the manufacture of all or part of such requirements to
one or more Third Party manufacturers, but any such subcontract shall not
diminish or alter PRAECIS' obligations hereunder. All manufacture of Licensed
Products shall be in accordance with current Good Manufacturing Practices (cGMP)
applicable to the pharmaceutical industry.
3.2 Preliminary Three-Year Forecasts. As promptly as practicable
after the Effective Date, but in any event at least eighteen (18) months prior
to the date which Synthelabo reasonably expects will be the date of First
Commercial Sale of a Licensed Product in the Territory, Synthelabo shall prepare
and deliver to PRAECIS a preliminary, good-faith, non-binding
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forecast of its total estimated requirements for Licensed Products during the
first three years following the projected date of First Commercial Sale of
Licensed Products in the Territory. Such non-binding three-year forecast shall
be updated by Synthelabo from time to time during the Development Phase to
reflect changes in Synthelabo's projected requirements for the first three years
following the anticipated date of such First Commercial Sale, provided that such
updates shall be prepared by Synthelabo no less frequently than annually during
the Development Phase.
3.3 Long-Term Forecasts. Not less than six months prior to the
actual date of First Commercial Sale of Licensed Products in the Territory (the
"Startup Date"), Synthelabo shall provide PRAECIS with a non-binding forecast (a
"Long-Term Forecast") of its total good-faith estimate of its requirements for
Licensed Products during the first three annual periods following the Startup
Date, with such projected requirements to be broken down on a quarter-by-quarter
basis for each such annual period. Not later than the first December 1 following
the Startup Date and, thereafter, on each anniversary of such date, Synthelabo
shall provide PRAECIS with a revised Long-Term Forecast covering the three
calendar years following the year in which such revised Long-Term Forecast is
provided, with such projected requirements to be broken down on a
quarter-by-quarter basis for each such calendar year.
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3.4 Long-Term Forecasts Nonbinding. It is acknowledged and agreed
that the Long-Term Forecasts are intended solely to assist the parties in their
long-range planning and shall not be binding on the parties in any respect, and
neither party shall have any liability to the other with respect to any
Long-Term Forecast.
3.5 Short-Term Forecasts.
(a) Periods Covered By and Delivery Dates for Short-Term Forecasts.
Synthelabo shall also provide PRAECIS with short-term forecasts of its
good-faith estimate of its requirements for Licensed Products on a rolling five
calendar quarter basis (i.e., covering five successive calendar quarters from
January-March, April-June, July-September and October-December, as applicable)
(each a "Short-Term Forecast"). The initial Short-Term Forecast shall be
delivered to PRAECIS simultaneously with the initial Long-Term Forecast to be
delivered six months prior to the Startup Date pursuant to the first sentence of
Section 3.3 above, and shall cover the calendar quarter in which the Startup
Date occurs and the next four succeeding calendar quarters. Each subsequent
Short-Term Forecast shall be delivered to PRAECIS not later than the first day
of each succeeding calendar quarter.
(b) Binding Estimates. Each Short-Term Forecast shall be provided at
least six months in advance of the commencement of the five-quarter period
covered by such Short-Term Forecast. The forecast for the first calendar quarter
covered by each Short-
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Term Forecast shall be treated as a binding forecast with respect to such
quarter (each a "Binding Estimate"), subject to the remaining provisions of this
Article 3. Each Short-Term Forecast shall revise and update the projections set
forth in the applicable Long-Term Forecast.
(c) Synthelabo's Purchase Commitment Based on Binding Estimates.
Subject to the provisions of Section 3.7 below, Synthelabo's delivery to PRAECIS
of each Short-Term Forecast shall constitute Synthelabo's binding commitment to
purchase during the first calendar quarter covered thereby at least 80% of the
Binding Estimate contained in such Short-Term Forecast.
3.6 Purchase Orders. Synthelabo shall submit written purchase orders
for Licensed Products to PRAECIS at least ninety days prior to the requested
delivery date. Subject only to the volume limitations set forth in Section 3.7,
each purchase order shall be accepted and confirmed by PRAECIS within ten days
of its receipt. The parties agree that no term or provision contained in any
Synthelabo purchase order, or in any PRAECIS sales confirmation form, shall
modify or supersede any of the terms or provisions of this Agreement, and that
this Agreement shall dominate any such purchase order or sales confirmation form
in all respects, unless otherwise agreed in a separate written instrument
executed by duly authorized representatives of both Synthelabo and PRAECIS.
Toward this end, the parties agree that all purchase orders and confirmations
shall state on their face:
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"ALL TERMS AND CONDITIONS OF THE AGREEMENT OF MAY 13, 1997 SHALL APPLY TO THIS
TRANSACTION."
3.7 PRAECIS' Supply Obligations and Rights.
(a) Maximum and Minimum Quantities. Notwithstanding anything to the
contrary herein, unless otherwise agreed in writing by PRAECIS, in no event
shall PRAECIS be obligated to deliver quantities of Licensed Products during any
calendar quarter which exceed in the aggregate 120% of the Binding Estimate
previously provided by Synthelabo with respect to such calendar quarter. Subject
to the immediately preceding sentence, PRAECIS shall be obligated to supply
Licensed Products in an amount not less than 90% of the amount of Licensed
Products set forth in purchase orders submitted by Synthelabo pursuant to and in
accordance with the terms of Section 3.6.
(b) Quarterly Shortfalls. If the aggregate quantity of Licensed
Products actually ordered by Synthelabo for delivery during any calendar quarter
is less than 80% of the Binding Estimate for such calendar quarter (a "Quarterly
Shortfall"), then at the election of Synthelabo set forth in a notice which
Synthelabo shall give to PRAECIS within 15 days after the end of such calendar
quarter (i) PRAECIS shall have the right, exercisable within 45 days after the
end of such calendar quarter, to deliver to Synthelabo a quantity of Licensed
Products equal to such Quarterly Shortfall, and Synthelabo shall make timely
payment for such additional goods in accordance with Article 9, in the same
manner as if Synthelabo had ordered such goods or
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(ii) Synthelabo shall pay for such goods without requiring delivery thereof. The
purchase price payable by Synthelabo for the goods comprising any Quarterly
Shortfall shall be the average Transfer Price paid by Synthelabo to PRAECIS for
all deliveries made during the calendar quarter in which such Quarterly
Shortfall occurs, or if no such deliveries were made during such calendar
quarter, shall be equal to the average Transfer Price for the most recent
calendar quarter in which orders were placed and deliveries were made hereunder.
3.8 [INTENTIONALLY OMITTED]
3.9 Manufacturing Rights of Synthelabo Upon PRAECIS Material Breach.
If PRAECIS shall fail to materially comply with its supply obligations
hereunder, then PRAECIS shall provide Synthelabo with manufacturing protocols
and other manufacturing know-how and information, all of which shall be
Confidential Information hereunder, in order that Synthelabo may prepare to make
or have made such Licensed Products. If any other such material non-compliance
occurs within eight calendar quarters of the first such material noncompliance,
then PRAECIS shall grant to Synthelabo a sole, non-exclusive license under the
Intellectual Property Rights and PPI Licensed Rights to make and have made such
Licensed Products in such quantities as Synthelabo may thereafter require which
exceed the quantity which PRAECIS is able to supply in accordance with the terms
hereof (hereinafter, the "Plateau Amount"). In the event that Synthelabo has
such Licensed Products made by a Third Party, the agreement with such
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Third Party shall contain the same confidentiality provisions as this Agreement,
and a copy of such agreement shall promptly be provided to PRAECIS. No such
agreement shall have a term of more than one year, unless PRAECIS otherwise
agrees. Synthelabo shall continue to obtain from PRAECIS the Plateau Amount. If
Synthelabo makes or has made Licensed Products pursuant to this Section 3.9,
then Synthelabo shall, or shall have the Third Party manufacturer, apply for and
obtain a supplementary manufacturing approval with the appropriate regulatory
agencies, such that the PRAECIS manufacturing regulatory approval status remains
active with the appropriate regulatory agency, and the cost and expenses thereof
shall be included in Synthelabo's "Cost of Goods" for purposes of Section 3.10.
3.10 Payment for Licensed Products Manufacture By Synthelabo;
Synthelabo Duty to Mitigate. Synthelabo shall pay to PRAECIS the Transfer Price
for all Licensed Products made or had made by Synthelabo within forty-five (45)
days following the sale of same to Third Parties, less Synthelabo's Cost of
Goods; and Synthelabo shall timely pay to PRAECIS the Adjustment Amounts due and
payable for same, in accordance with Article 9. Subject to Section 3.14, if
Synthelabo's Cost of Goods for Licensed Products made or had made by Synthelabo
in accordance with Section 3.9 shall be greater than the Transfer Price, then
PRAECIS shall credit the difference to the account of Synthelabo, which credit
shall be reduced by any Adjustment Amounts due and payable for same, of which
PRAECIS shall be timely notified. Any remaining
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credits to Synthelabo will be applied to future payments due hereunder until
such credits are used in full. For purposes of this Section 3.10, Synthelabo's
"Cost of Goods" shall include the items set forth in Section 1.12 as well as
Synthelabo's reasonable costs of cover and other reasonable expenses incident to
any material breach by PRAECIS of its supply obligations hereunder, including,
without limitation, the cost of making Licensed Products itself or having such
products made by a Third Party and the costs and expenses referred to in the
last sentence of Section 3.9. At any time during which Synthelabo is making or
having made Licensed Products pursuant to Section 3.9, (i) Synthelabo shall be
required to minimize its Cost of Goods to the extent commercially reasonable,
and (ii) if PRAECIS can arrange to have a reputable Third Party manufacturer
provide Licensed Products to Synthelabo that are of the same quality and in the
same quantity as are being made or had made by Synthelabo, but at a cost that is
less than Synthelabo's (or its Affiliate's) Cost of Goods by ten percent (10%)
or more, and if such Third Party manufacturer is willing to enter into a supply
contract for same with a term of at least one (1) year, on supply terms at least
as favorable as those of this Agreement, then PRAECIS may contract for such
manufacture with such Third Party manufacturer and Synthelabo shall, as soon
thereafter as is commercially practicable (without requiring it to breach its
supply agreement with any Third Party unless PRAECIS obtains a release of
Synthelabo from such agreement), discontinue making or having
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made such Licensed Products, and shall instead order and obtain same from
PRAECIS and PRAECIS shall have such Licensed Products made by such Third Party
manufacturer for delivery to Synthelabo upon instruction by PRAECIS. In such
instance, all other terms and conditions hereof shall apply, as if PRAECIS were
manufacturing such Licensed Products itself; and PRAECIS shall continue to be
responsible for performance of its supply obligations hereunder notwithstanding
the manufacture of Licensed Products by such Third Party manufacturer.
Consistent with the foregoing and with Synthelabo's obligation to minimize its
Cost of Goods to the extent commercially reasonable, Synthelabo will not itself
construct a manufacturing facility to manufacture Licensed Products unless it
demonstrates with commercially reasonable evidence that (i) PRAECIS will
permanently be unable to comply in all material respects with its supply
obligations hereunder or (ii) no commercially feasible alternative source of
supply is available or will be available in the reasonably foreseeable future.
The provisions of Section 3.9 and this Section 3.10 set forth the sole remedy of
Synthelabo for any breach by PRAECIS of its supply obligations hereunder unless
Synthelabo has validly terminated this Agreement in accordance with Section
17.3, in which event, as contemplated by the first sentence of Section 17.4,
Synthelabo shall have available all remedies with respect to any liability or
obligation that matured prior to the effective date of termination.
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3.11 Suspension of Manufacture By Synthelabo; Termination of
Manufacturing License. Should PRAECIS provide Synthelabo with commercially
reasonable evidence that it is ready, willing and able, directly or through
subcontractors, to resume material compliance with its supply obligations
hereunder, Synthelabo shall suspend its manufacture of Licensed Products or
having the Licensed Products manufactured, provided that in no event shall
Synthelabo be required to (i) suspend such manufacture until it has continued
for at least nine (9) months from its inception or (ii) prematurely terminate
any Third Party manufacturing agreement the terms of which are in compliance
with Section 3.9. If PRAECIS shall thereafter materially comply with its supply
obligations hereunder for four (4) consecutive calendar quarters, then the
Synthelabo license to make or have Licensed Products made which was granted in
accordance with Section 3.9 shall thereupon terminate, subject to being
re-granted if the conditions precedent stated in Section 3.9 are again met.
3.12 Agreement Regarding Third Party Manufacturers. Without
limitation of Sections 3.10 and 3.11, PRAECIS acknowledges its obligation to
undertake commercially reasonable measures to keep the average Cost of Goods at
an amount such that, on average, the share of Net Sales retained by Synthelabo
(prior to making the royalty payments pursuant to Section 9.8)
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
pursuant to Article 9 is at least *** percent (***%). If (i) PRAECIS is making
or having made Licensed Products hereunder, (ii) the Transfer Price for a given
Licensed Product exceeds *** percent (***%) of REV for any two consecutive
calendar quarters and (iii) Synthelabo presents PRAECIS with commercially
reasonable evidence that a one (1) year supply agreement can be concluded with a
reputable Third Party manufacturer whereby such Third Party manufacturer will
agree to make such Licensed Product in the same quality, quantity and on
delivery terms at least as favorable as those of PRAECIS, but at a Cost of Goods
that is at least *** percent (***%) less than PRAECIS's average Cost of Goods
for such two quarters, then PRAECIS shall either (A) match that Cost of Goods
for all quantities of such Licensed Product ordered by Synthelabo for one (1)
year, irrespective of whether it must suffer a loss in order to do so, or (B)
enter into such one (1) year supply contract with such Third Party manufacturer
and provide the Licensed Products manufactured by such Third Party manufacturer
to Synthelabo in accordance with the remaining provisions of this Agreement. Any
such Third Party manufacturer shall be subject to approval by PRAECIS, which
shall not be unreasonably withheld; and PRAECIS shall provide a manufacturing
license under the Intellectual Property Rights and the PPI Licensed Rights as
may be required for such Third Party
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
manufacturer to make such Licensed Product. In the event that a Third Party
manufacturer shall assume manufacturing responsibilities in accordance with this
Section, PRAECIS shall, as soon as reasonably commercially practicable,
discontinue making or having made Licensed Products hereunder. Synthelabo shall
pay PRAECIS for all Licensed Products obtained from such Third Party
manufacturer in accordance with Article 9. Should PRAECIS, prior to renewal or
extension of any one-year contract between PRAECIS and such Third Party
manufacturer, notify Synthelabo (and provide it with commercially reasonable
evidence) that it is ready, willing and able to make or have made such Licensed
Products and deliver such Licensed Products to Synthelabo at a Transfer Price
which is less than ***% of then-current Net Sales, then PRAECIS may allow the
above-described Third Party manufacturer contract to expire, terminate the
license of Intellectual Property Rights and PPI Licensed Rights granted in
accordance with this Section 3.12, and resume manufacturing of Licensed Products
itself in accordance with the terms hereof or make supply arrangements with
another Third Party manufacturer of its own choosing, but without prejudice to
Synthelabo's right to invoke the provisions of this Section 3.12 at a later date
if the conditions described in the second sentence of this Section again become
applicable.
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3.13 Direct Billing. Synthelabo shall obtain PRAECIS's agreement
before issuing orders for direct billing, showing payment due to Synthelabo, and
shipping of Licensed Products from PRAECIS to a Third Party. If PRAECIS agrees
and accepts such orders, Synthelabo shall include such sales in all reports
required hereunder and shall make payment to PRAECIS therefor as if such
products had been shipped to Synthelabo and then shipped by Synthelabo to such
Third Party as provided herein, less any remittances therefor received by
PRAECIS from such Third Party.
3.14 Force Majeure. Each party shall take all actions that are
commercially reasonable in order to assure that it can perform its obligations
hereunder. Notwithstanding the foregoing, however, a party shall not be liable
for loss or damage resulting from any cause beyond its reasonable control,
including, but not limited to, acts of God, acts or omissions of the other
party, acts of civil or military authorities, fires, strikes, facilities
shutdowns or alterations, embargoes, war, riot, epidemic, delays in
transportation, or inability to obtain necessary labor, manufacturing facilities
or materials from usual sources, and any delays resulting from any such cause
shall extend the time for performance correspondingly. Should any such force
majeure result in a shortfall or delay and the consequent grant to Synthelabo of
a manufacturing license pursuant to Section 3.9 hereinabove, then Sections 3.10
and 3.11 shall also apply, except that PRAECIS shall not be required to make any
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credits to the account of Synthelabo and any excess of Synthelabo's Cost of
Goods over the Transfer Price shall be borne by Synthelabo. In no event shall
either party be liable for consequential or special damages arising out of force
majeure.
3.15 Form and Terms of License Product Shipments. Licensed Products
manufactured and delivered hereunder shall meet the specifications set forth in
the Registration Approval for such Licensed Product and shall be adequately
labelled to fulfill all customs, legal, regulatory and patent requirements
required for delivery as provided hereunder. If Licensed Products are delivered
in bulk, they will subsequently be packaged and labelled by Synthelabo in
compliance with all local market and regulatory requirements for the respective
Territory Countries, and shall clearly identify PRAECIS as the
manufacturer/developer of the formulation and Rel-Ease(TM) (if the Rel-Ease(R)
system is utilized), together with appropriate trademarks. Licensed Products
shall be delivered to Synthelabo CIP (as such term is defined by the Incoterms)
Paris, France. Each shipment shall be accompanied by a certificate of analysis,
and a batch report containing information reasonably required by Synthelabo,
with respect to the batch or batches of Licensed Product contained therein.
Synthelabo shall inspect all shipments for obvious defects within thirty (30)
days of receipt thereof. Claims for shortages, breakage, damage or non-obvious
defects must be made by Synthelabo to PRAECIS within thirty (30) days of when
such shortage, breakage, damage or non-obvious defect is or reasonably
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should have been discovered. Without limitation of any other provision of this
Agreement and subject thereto, (i) the parties agree to the additional supply
provisions set forth in Appendix VI and (ii) PRAECIS and Synthelabo agree that
prior to commencement of the manufacture of Licensed Products for commercial
sale they will execute and deliver a Quality Charter that shall reflect the
general spirit of the example form of Quality Charter set forth as Appendix VII
hereto and which shall be adapted in a manner intended to be consistent with
this Agreement and which is reasonable under the circumstances in light of the
specific facts pertaining to the particular Licensed Product, the particular
situation of the parties and other relevant considerations, it being understood
and agreed (with respect to both clauses (i) and (ii)) that in the event of any
conflict or inconsistency between such additional supply provisions or such
executed Quality Charter and any other provision(s) of this Agreement, such
other provision(s) of this Agreement shall control.
3.16 Supply of Licensed Product For Certain Supplemental Development
Plan Clinical Studies. PRAECIS shall supply Synthelabo with all Licensed
Products required for Synthelabo to conduct the Supplemental Development Studies
pursuant to the Supplemental Development Plan. Such supply of Licensed Products
shall be (i) at a price equal to PRAECIS' COGS if Synthelabo is not entitled,
pursuant to Section 4.5, to receive reimbursement from PRAECIS for a portion of
its Development Costs incurred in connection with such Supplemental
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Development Studies and (ii) otherwise charged to Synthelabo as a Development
Cost pursuant to Sections 1.13 and 4.5.
ARTICLE 4 - DEVELOPMENT AND APPROVAL OF LICENSED PRODUCTS
4.1 Diligence. During the Development Phase, Synthelabo and PRAECIS
shall diligently seek to develop the Licensed Products for (i) the Application
of prostate cancer and (ii) the Applications of endometriosis or uterine
fibroids as the Joint Steering Committee shall determine and (iii) any other
Application approved for development by the Joint Steering Committee and the
Development Subcommittee as provided in Section 4.3 in accordance with the Core
Development Plan, and the Supplemental Development Plan, in each case subject to
the further provisions of this Article 4. The Development Program shall be
directly supervised by the Development Subcommittee to be established pursuant
to Article 6 hereof, working with designated individuals at PRAECIS and
Synthelabo and subject to the oversight and direction of the Joint Steering
Committee. The Development Subcommittee will have oversight responsibilities
with respect to pre-clinical testing and Clinical Trials for Licensed Products
and will coordinate the preparation of regulatory filings for Licensed Products
in accordance with the Core Development Plan and the Supplemental Development
Plan, provided that Synthelabo shall have responsibility for filing and
obtaining Registration Approval and Reimbursement Approval for the Licensed
Products for each Application to be developed by the parties as contemplated by
the first sentence of this Section 4.1
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in all of the Territory Countries in which such Licensed Product will be
commercialized pursuant to the terms hereof. PRAECIS shall cooperate with
Synthelabo in connection with such filing(s) and any amendments or supplements
thereto.
4.2 Development Program and Plans. The Development Program shall be
conducted in accordance with the Core Development Plan and Supplemental
Development Plan, as defined in this Section 4.2, which shall describe the work
to be supervised by the Development Subcommittee with respect to the development
of the Licensed Products, each of which shall include annual budgets. These
plans shall include detailed milestones, timeframes, operating plans and
objectives, including with respect to pre-clinical studies, toxicology and
Clinical Trials and obtaining Registration Approvals and Reimbursement
Approvals, and shall be updated annually. Without limitation of the foregoing,
these plans shall also set forth in detail the studies to be performed by each
party for purposes of obtaining Registration Approvals and Reimbursement
Approvals. The initial Core Development Plan shall be prepared by PRAECIS and
Synthelabo as promptly as practicable after
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the Effective Date (and shall provide that initially the parties will seek to
develop and commercialize as soon as practicable Licensed Products (i) for the
Application of prostate cancer, and (ii) the Applications of endometriosis or
uterine fibroids as the Joint Steering Committee shall determine) and the
initial Supplemental Development Plan shall be prepared by Synthelabo as
promptly as practicable after the Effective Date, and each shall be subject to
approval by the Development Subcommittee and the Joint Steering Committee.
Thereafter, these plans will be updated by these same parties, respectively, and
submitted to the Development Subcommittee and the Joint Steering Committee no
later than thirty (30) days prior to the beginning of each calendar year. The
Joint Steering Committee shall, with guidance from the Development Subcommittee,
approve such plans within thirty (30) days of the commencement of each calendar
year, or alternatively, shall return same to their source for revision and
resubmission.
4.3 Additional Applications. If the development and marketing of a
given Licensed Product for a given Application other than (i) prostate cancer or
(ii) endometriosis or uterine fibroids is proposed by PRAECIS to the Development
Subcommittee (on the cost-sharing basis set forth in Section 4.5) but not
approved, then PRAECIS may, but shall not be required to, carry out Development
Phase activities with respect to such Licensed Product for such Application, at
its own expense. If the Joint Steering Committee determines that Phase II or
Phase III Clinical Trials funded by PRAECIS demonstrate safety and efficacy of
such Licensed Product for such Application and that such Application is
commercially viable, and Synthelabo determines that the commercialization of
such Application should be pursued in the Territory, then Synthelabo shall
promptly reimburse PRAECIS for
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
*** (***%) of all Development Costs theretofore incurred by PRAECIS with respect
to such Licensed Product for such Application and shall share on an equal basis
all future Development Costs required for FDA Registration Approval of such
Licensed Product for such Application, Section 4.5 notwithstanding. Within sixty
(60) days after such determination, the Development Subcommittee shall add the
continued development and marketing of such Licensed Product for such
Application to the Core Development Plan and/or the Supplemental Development
Plan by amendment, which amendment shall be approved by the Joint Steering
Committee within thirty (30) days thereafter; and Synthelabo and PRAECIS, as
applicable, shall promptly and diligently pursue such continued development and
marketing, in accordance with Article 4 and Article 5 hereof.
4.4 Regulatory Meetings. PRAECIS or Synthelabo, as the case may be,
will provide the other party with reasonable prior notice of all meetings
between its representatives and regulatory authorities regarding any
Registration Approval of the Licensed Products in any jurisdiction. The
recipient of such notice shall have the right to have a representative present
at all important meetings. Each of PRAECIS and Synthelabo will furnish, at the
other's request, a representative to attend
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regulatory meetings of the other regarding Registration Approval of the Licensed
Products.
4.5 Development Costs. Except as provided in Section 4.3, PRAECIS
shall pay seventy-five percent (75%), and Synthelabo shall pay twenty-five
percent (25%), of all Development Costs incurred in carrying out the Core
Development Plan. The foregoing cost sharing provisions shall also apply if
PRAECIS enters into an agreement with a Third Party under which such Third Party
shall undertake PRAECIS' development activities pursuant to the Core Development
Plan, unless PRAECIS and Synthelabo shall agree otherwise. Synthelabo shall pay
all Development Costs which are incurred in carrying out the Supplemental
Development Plan, provided that PRAECIS shall reimburse Synthelabo for
seventy-five percent (75%) of such Development
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Costs to the extent the results of the Development Phase activities in respect
of which such Development Costs were incurred are used to seek or obtain
Registration Approvals or Reimbursement Approvals in the United States. If (i)
PRAECIS or its licensee or sublicensee wishes to use both outside of the
Territory and outside of the United States the results of the Supplemental
Development Studies obtained by Synthelabo in carrying out the Supplemental
Development Plan and (ii) PRAECIS is not required hereunder to reimburse
Synthelabo 75% of the Development Costs incurred in connection with such
Supplemental Development Studies, then PRAECIS and Synthelabo shall meet to
negotiate in good faith an equitable sharing of such Development Costs. Anything
herein to the contrary notwithstanding, (i) each of Synthelabo and PRAECIS shall
have full and complete access to and use of the safety data of the other
regarding each Licensed Product, and each may use the safety data of the other
for Advertising and Promotion, in each case without any cost or reimbursement
therefor and (ii) regulatory submission, registration fees and maintenance fees
in the Territory shall be paid by Synthelabo, and registration fees and
maintenance fees outside the Territory shall be paid by PRAECIS. If a party is
claiming reimbursement pursuant to this Section 4.5, then within forty-five (45)
days after the end of a calendar quarter during which the Development Costs for
which reimbursement is being claimed were incurred, a party will submit to the
other a statement (each a "Development Cost Statement") itemizing in reasonable
detail such Development Costs and setting forth the total amount, if any, of
such Development Costs to be reimbursed by the other party pursuant to this
Section 4.5. Such reimbursement amounts shall be paid within twenty (20) days
after receipt of a Development Cost Statement, except to the extent such
Development Cost Statement is being disputed in good faith. Except as otherwise
provided herein, each party shall assume full responsibility for its own
Development Costs.
4.6 Registration and Reimbursement Approvals. All Registration
Approvals and Reimbursement Approvals within the Territory shall be applied for,
obtained and maintained in the name of Synthelabo; provided that Synthelabo
hereby agrees
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to promptly take any and all action necessary to transfer or assign such
Registration Approvals and Reimbursement Approvals to PRAECIS or its designee
upon the termination of this Agreement pursuant to Section 17.2 upon the
occurrence of an event described therein with respect to Synthelabo or pursuant
to Section 17.3 as a result of Synthelabo's breach. Without limitation of the
immediately preceding sentence, upon termination of this Agreement in its
entirety by Synthelabo pursuant to Section 17.7, Synthelabo shall provide
PRAECIS with such documentation, authorization, or permission as may be
available to Synthelabo to enable PRAECIS to obtain access to, and to officially
make reference to, the Synthelabo Registration Approval and Reimbursement
Approval files, data, correspondence and records throughout the entire period of
their existence. All Registration Approvals and Reimbursement Approvals outside
the Territory shall be applied for and obtained by PRAECIS in its own name
and/or in the name of its one or more marketing partners, and PRAECIS shall
provide Synthelabo with such documentation, authorization, or permission as may
be available to PRAECIS to enable Synthelabo to obtain access to, and to
officially make reference to, such Registration Approval and Reimbursement
Approval files, data, correspondence and records throughout the entire period of
their existence.
4.7 Development Costs Records. Each party shall keep complete and
accurate records of its Development Costs, which records each party shall retain
for five (5) years after the end
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of the calendar year in which such expenses were incurred. The records shall
conform to generally accepted accounting principles consistently applied in the
country where such Development Costs were incurred. Each party shall have the
right at its own expense during each year of a Development Phase and during the
subsequent five (5) year period to appoint an independent public accountant
reasonably acceptable to the other party to inspect said records or to have its
own representatives inspect such records. Upon reasonable notice from the other
party (the "Requesting Party"), a party (the "Reviewed Party") shall make its
records available during regular business hours for inspection by the requesting
party's representatives and the independent public accountant at the place or
places where the Reviewed Party customarily keeps such records, to the extent
reasonably necessary to verify the accuracy of the expenditures. The right of
inspection shall not be exercised by a party more than once in any calendar
year. A Requesting Party shall hold in strict confidence all information
concerning such expenditures and all confidential information learned in the
course of any audit or inspection, except to the extent necessary for the
Requesting Party to enforce any rights it may have pursuant to this Agreement or
if disclosure is required by law. Absent fraud or manifest material error, the
failure of either party to request verification of any expenditures during the
period the other party is required to retain the records for any calendar
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year shall be considered acceptance of the accuracy of the reports concerning
such expenditures.
4.8 Technical Information. To the best knowledge and belief of
PRAECIS, as of the Effective Date PRAECIS has provided Synthelabo with all
material information concerning the Licensed Products that PRAECIS believes in
its reasonable business judgment would be relevant to Synthelabo's decision to
enter into this Agreement. PRAECIS will provide Synthelabo with access to all
confidential technical information in PRAECIS' possession from the Effective
Date and during the term of this Agreement relating to the Licensed Products,
including all documentation in the possession of PRAECIS based on work performed
by PRAECIS with the Licensed Products. Upon request, PRAECIS shall provide
copies of such materials to Synthelabo. In addition, as further provided in
Section 11.4, PRAECIS shall keep Synthelabo informed regarding progress in
prosecution of the patent applications licensed hereunder, shall timely provide
Synthelabo with copies of all applications, office actions, amendments, and
other documents pertaining thereto, and shall provide Synthelabo with reasonable
opportunities to discuss same with PRAECIS's patent counsel. Furthermore,
PRAECIS and Synthelabo shall extend to one another the same information and
access with regard to patent applications covering Improvements.
4.9 Clinical Trials. Synthelabo shall from time to time notify
PRAECIS of any Clinical Trial or technical activity which it intends to
undertake with respect to any Licensed
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Product; and PRAECIS shall communicate any reasonable technical or scientific
concerns in relation thereto within fifteen (15) days of notification in which
event the parties shall promptly discuss the same. In the event that PRAECIS has
any such technical or scientific concerns which cannot be satisfied, then
PRAECIS may notify Synthelabo to that effect and Synthelabo shall not undertake
the Clinical Trial or other technical activity contemplated, provided that no
such determination shall (i) be made unreasonably by PRAECIS or (ii) prevent
Synthelabo from applying for, obtaining or maintaining a Registration Approval
or Reimbursement Approval in the Territory. Synthelabo and PRAECIS will provide
one another with a copy of each master dossier and all correspondence and
submissions regarding each Registration Approval or Reimbursement Approval which
they (or their respective sublicensees or co-marketing partners) seek, on or
prior to the date of submitting the same; and shall also promptly provide one
another with the results of all toxicology and pharmacology studies and Clinical
Trials conducted by or under their supervision with respect to the Licensed
Products. Synthelabo will specify the data and processes required from PRAECIS
in order to obtain Registration Approval and Reimbursement Approval in the
Territory Countries at least eighteen (18) months in advance of such data and
processes being needed. All relevant documents in support of each such
Registration Approval and Reimbursement Approval will be archived
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
by each party in compliance with applicable regulatory and legal requirements.
4.10 Material Adverse Development; Material Adverse Patent
Development; Competition. If (i) the results of Clinical Trials of a Licensed
Product with respect to an Application in a Territory Country constitute a
Material Adverse Development, or (ii) a Material Adverse Patent Development
shall occur, or (iii) a competitor makes a product containing the same LHRH
Antagonist Compound as a Licensed Product in a functionally equivalent delivery
system and has Registration Approval to sell such product for the same
Application, and the number of units of such product sold by such competitor in
a Territory Country over any calendar year equals more than *** percent (***%)
of the number of units of Licensed Product, if any, sold in such Territory
Country for such Application by Synthelabo or its Affiliates over such calendar
year, then, in the case of clauses (i) and (iii) Synthelabo shall be entitled to
terminate this Agreement with respect to such Licensed Product for such
Application in such Territory Country only, and, in the case of clause (ii),
Synthelabo shall be entitled to terminate this Agreement in its entirety only,
subject, however, in the case of each of clauses (i), (ii) or (iii), to
compliance with Section 17.7. If the parties reasonably and in good faith
disagree as to whether an
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event described in clause (i), (ii) or (iii) above has occurred, such matter may
be resolved by the dispute resolution procedures described in Section 6.5 and
Article 18.
4.11 Synthelabo Formulation. In the event that (i) four years have
elapsed from the Effective Date, (ii) safety and efficacy in humans of a depot
or other formulation owned by or licensed to PRAECIS for PPI-149 or any other
LHRH Antagonist Compound licensed by PRAECIS to Synthelabo hereunder for at
least one of the Applications then included in the Core Development Plan has not
been demonstrated in Phase II Clinical Trials and (iii) Synthelabo has, pursuant
to license rights granted hereunder, developed a Synthelabo Formulation for at
least one of the Applications then included in the Core Development Plan, which
formulation has demonstrated safety and efficacy in humans in Phase II clinical
trials, then, without prejudice to Synthelabo's rights under Section 17.7,
Synthelabo shall have the right to propose that such Synthelabo Formulation be
used in connection with PPI-149 or any other LHRH Antagonist Compound licensed
hereunder for such Application. In such event, the parties shall negotiate in
good faith appropriate adjustments to the terms and conditions of this Agreement
to permit the incorporation of such Synthelabo Formulation as aforesaid. Such
good faith negotiations shall give due regard to the costs incurred by the
parties in the development of their respective formulations and the relative
benefits, if any, derived therefrom.
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4.12 Reporting on Adverse Reaction. Each party shall promptly inform
the other about any suspected serious and/or unexpected adverse drug reaction
associated with the use of a Licensed Product. The parties shall, quarterly,
exchange reports of suspected, deemed "non-serious" adverse drug reactions
associated with the use of the Licensed Products.
ARTICLE 5 - MARKETING AND SALES OBLIGATIONS OF SYNTHELABO
5.1 Diligence Generally. Throughout the term of this Agreement,
promptly after Registration Approval of a Licensed Product for a particular
Application has been obtained in or with respect to a Territory Country,
Synthelabo shall use diligent efforts to Advertise, Promote and sell such
Licensed Product for such Application throughout such Territory Country,
provided such commercialization is reasonably economically viable.
5.2 Advertising. Subject to Section 5.1, Synthelabo shall at its own
expense develop, procure, and supervise distribution of appropriate and
effective Advertising for each of the Licensed Products throughout the Territory
where permitted by applicable law, and assess and revise same as needed; and
shall actively Promote and, where permitted, actively Advertise same in a manner
that is commercially reasonable and is reasonably designed to be effective in
each Territory Country.
ARTICLE 6 - GOVERNANCE
6.1 Joint Steering Committee. Within thirty (30) days after the
Effective Date, Synthelabo and PRAECIS shall notify one another of the names,
addresses, and telephone numbers of three
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(3) senior representatives that they have appointed to a committee which shall
be charged with coordinating and overseeing the collaboration in the manner and
to the extent provided hereunder (the "Joint Steering Committee") including,
without limitation, approval of the Core Development Plan and Supplemental
Development Plan, and the attempted resolution of any disputes which arise in
connection with the collaboration hereunder. The Joint Steering Committee shall
be chaired by one of the three appointees of PRAECIS, which Chairperson shall
initially be designated in the above-required notice from PRAECIS to Synthelabo.
Synthelabo and PRAECIS shall be permitted at their own discretion at any time to
remove and/or replace those members of the Joint Steering Committee which they
have appointed.
6.2 Operations of the Parties Under the Collaboration. It is
intended that the strategy for the clinical development, Regulatory Approval and
Reimbursement Approval of Licensed Products in the Territory shall be jointly
conceived, and that the parties shall communicate regularly. Decisions of the
Joint Steering Committee shall be binding on the parties; provided however, that
the operations of the parties in connection with the collaboration hereunder
shall be conducted by the operating management and employees of PRAECIS and
Synthelabo, respectively, as their obligations and responsibilities under this
Agreement require.
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6.3 Timing of Regular Meetings; Agendas. The Joint Steering
Committee shall hold quarterly or more frequent regular meetings on mutually
agreeable dates, with the location of the meetings to alternate between PRAECIS
and Synthelabo facilities. For any such meeting, the Chairman of the Joint
Steering Committee shall prepare an agenda which shall be provided to the other
members at least five business days prior to the meeting.
6.4 Special Meetings. Any member of the Joint Steering Committee may
call a special meeting of the Joint Steering Committee upon notice duly given in
person or by telephone to each other member (which notice shall include an
agenda for the meeting) at least forty-eight (48) hours in advance of the
meeting (unless such member waives receipt of notice either before or after the
meeting or by attending the meeting without protestation); provided that such
special meeting (and any other meeting) may take place by means of a telephone
or video conference.
6.5 Decisions and Disputes. The objective of the Joint Steering
Committee and of any Subcommittee (as defined in Section 6.6) shall be to seek
to reach agreement on all matters by consensus. Each of PRAECIS and Synthelabo
shall have one (1) vote on the Joint Steering Committee and on any Subcommittee.
Concurring votes of both parties shall be required for any decision by the Joint
Steering Committee or any Subcommittee. A quorum of the Joint Steering Committee
or any Subcommittee, respectively, shall consist of the representatives from
each
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party with authority to cast the vote of the party on issues before the
Joint Steering Committee or any Subcommittee, respectively, and each party shall
use reasonable efforts to assure that its representatives so authorized are
present at all meetings. If the Joint Steering Committee is unable to reach a
decision on any matter, including any matter referred to the Joint Steering
Committee by any Subcommittee pursuant to Section 6.6 (a "Disputed Matter"),
PRAECIS and Synthelabo shall engage in good faith discussions in an effort to
resolve the Disputed Matter in a mutually satisfactory manner. If the Disputed
Matter is not resolved within thirty (30) days of the date such matter was
initially considered by the Joint Steering Committee, the Chairperson of the
Joint Steering Committee shall notify the respective Chief Executive Officers of
PRAECIS and Synthelabo, in writing, of the nature and basis of the Disputed
Matter (the "Dispute Notice") within five (5) days after the end of such thirty
(30) day period. The Chief Executive Officers of PRAECIS and Synthelabo shall
use their best efforts to resolve the Disputed Matter. If the Disputed Matter is
not resolved by the Chief Executive Officers within thirty (30) days after the
date of the Dispute Notice, either Party may request, in writing, that the
matter be resolved by binding arbitration in accordance with the provisions of
Article 18 of this Agreement.
6.6 Development Subcommittee. The Joint Steering Committee shall be
authorized to establish subcommittees consisting of an equal number of
representatives from each of
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PRAECIS and Synthelabo (each, a "Subcommittee"). At the first meeting of the
Joint Steering Committee, it shall establish a Development Subcommittee
comprised of at least three (3) Synthelabo representatives and three (3) PRAECIS
representatives, which shall be charged with overseeing and coordinating the
preparation and implementation of the Core Development Plan and Supplemental
Development Plan by PRAECIS and Synthelabo, respectively, and strategies
generally with respect to the clinical development of, and obtaining
Registration Approvals and Reimbursement Approvals for, Licensed Products (the
"Development Subcommittee"). If any Subcommittee (including without limitation
the Development Subcommittee) is unable to reach a decision on any matter, such
matter shall be referred to the Joint Steering Committee for resolution as
contemplated by Section 6.5.
6.7 Cooperation. Each party agrees to make its employees and
non-employee consultants reasonably available at their respective places of
employment to consult with the other party on issues arising during the
Development Phase and thereafter and in connection with any request from any
regulatory agency, including regulatory, scientific, technical and clinical
testing issues, or otherwise, throughout the term of this Agreement.
6.8 Visitation. Representatives of PRAECIS and Synthelabo may, with
the other party's prior approval, which approval shall not be unreasonably
withheld, visit the sites of
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any Clinical Trials or other experiments being conducted by such other party in
connection with the Development Phase and, subject to any necessary approvals of
the relevant Third Party, which either PRAECIS or Synthelabo shall obtain for
the other, manufacturing sites used for making or having made any Licensed
Products. Each party hereto shall have the right to audit the quality control
records of the other or any Third Party manufacturers regarding Licensed
Products, and shall sign customary "quality charters" as required by the other
party. If requested by the other party, PRAECIS and Synthelabo shall cause
appropriate individuals to be available for meetings at the location of the
facilities where such individuals are employed at times reasonably convenient to
the party responding to such request.
6.9 Committee and Certain Other Costs. Each of Synthelabo and
PRAECIS shall bear their own costs and expenses arising from the appointment,
operation, and maintenance of the Joint Steering Committee, the Development
Subcommittee and any other subcommittee established by the Joint Steering
Committee or arising from any other visitation, consultation or inspection
provided for in this Article 6.
ARTICLE 7 - CONFIDENTIALITY
7.1 General. Synthelabo and PRAECIS hereby agree to, and to use
their best efforts to cause their respective officers, directors, employees and
agents to, maintain one another's Confidential Information in strict secrecy,
through at a minimum
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the use of the same security measures as each uses to protect its own
confidential records and information of the same nature, but in no case less
than a reasonable degree of care for such information. Synthelabo and PRAECIS
each hereby agree that they shall cause each of their respective officers,
directors, employees, Affiliates and agents who receive Confidential Information
to maintain such Confidential Information in secrecy. Synthelabo and PRAECIS
further agree that each of their respective directors, employees, officers, and
agents who receive Confidential Information have been and will be so bound in
writing upon their employment. Synthelabo and PRAECIS also agree that
Confidential Information will be provided only to directors, officers, employees
and agents who will utilize such information in their work as permitted under
this Agreement, and that all directors, officers, employees and agents receiving
such Confidential Information will be informed of the obligations of
confidentiality hereunder. Synthelabo and PRAECIS agree that they will not, and
will use their best efforts to cause their respective Affiliates, directors,
officers, employees and agents not to, communicate Confidential Information of
the other party to directors, officers, employees or agents of any Third Party
unless (i) such Third Party has a need to know in order for the disclosing party
or for such Third Party to meet its obligations hereunder or those undertaken by
either party in conformity with this Agreement (e.g., clinical research
organizations, Affiliates and sublicensees); (ii) such persons are bound by
confidentiality
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obligations no less stringent than those of this Article 7, and (iii) such
persons are first made aware of the confidential nature of the information being
provided.
7.2 Certain Exceptions. Notwithstanding Section 7.1, Synthelabo and
PRAECIS acknowledge that there may be key trade secrets, Licensed Product
formulas, patient identification information, and other extremely confidential
information which is entitled to special treatment; and neither party shall be
required to disclose such Confidential Information to the other unless the other
party agrees to undertake special security precautions and agrees not to further
distribute same without specific written permission from the disclosing party,
which shall not be unreasonably withheld. Notwithstanding anything contained
herein to the contrary, the disclosure restrictions set forth in this Article 7
shall not preclude disclosure of Confidential Information by either party hereto
(or any of their respective Affiliates, officers, directors, employees or
agents) (i) with the prior written consent of the other party hereto, (ii) to
the extent necessary to comply with law or the valid order of a court or other
governmental or regulatory body of competent jurisdiction, in which event the
party making such disclosure shall so notify the other party hereto as promptly
as practicable (and, if possible, prior to making such disclosure) and shall
seek confidential treatment of such Confidential Information, (iii) to any
not-for-profit, governmental or quasi-governmental organization which may
require such disclosure, in
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which event the party making such disclosure shall take all available measures
to have such organization maintain such Confidential Information in confidence,
provided the party making such disclosure shall notify the other party hereto as
promptly as practicable (and, if possible, prior to making such disclosure), in
order to allow the other party to consider and to undertake the filing of patent
applications or other protective measures, (iv) to the extent required to file
this Agreement or file and prosecute a patent with respect thereto and (v) to
the extent required to commercialize a Licensed Product. This Article shall
remain in effect during the term of the Agreement and shall survive for a period
of ten (10) years following termination or expiration of this Agreement,
notwithstanding any provision to the contrary in this Agreement.
7.3 Publications. The following restrictions shall apply with
respect to the disclosure in scientific journals, publications or scientific
presentations by any party relating to any scientific work performed as part of
the collaboration hereunder:
(a) a party (the "Publishing Party") shall provide the other party
with an advance copy of any proposed publication containing Confidential
Information prior to submission for publication, and such other party shall have
a reasonable opportunity to recommend any changes it reasonably believes are
necessary to preserve the Confidential Information belonging in
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whole or in part to PRAECIS or Synthelabo, and the incorporation of such
recommended changes shall not be unreasonably refused;
(b) if such other party informs the Publishing Party, within thirty
(30) days of receipt of an advance copy of a proposed publication, that such
publication in its reasonable judgment could be expected to have a material
adverse effect on the commercial value of any Confidential Information belonging
in whole or in part to PRAECIS or Synthelabo, the Publishing Party shall delay
or prevent such publication as proposed. In the case of inventions, the delay
shall be sufficiently long to permit the timely preparation and filing of a
patent application(s) or application(s) with respect to such invention(s); and
(c) the parties shall use their best efforts to gain the right to
review proposed publications relating to the collaboration hereunder by
consultants or contractors of a party, and shall use their best efforts to
protect any Confidential Information of either party that may be contained in
any such publication.
ARTICLE 8 - TRADEMARKS
8.1 Exclusive License for Rel-Ease(TM) Trademark. Subject to the
review and approval of each of Synthelabo's uses of same, as set forth in
Section 8.2, PRAECIS hereby grants to Synthelabo an exclusive royalty-free
license to use the Rel-Ease(TM) trademark in the Field throughout the Territory,
such license to cover the existing and all future forms of such trademark and
all associated logos, but shall be limited to use
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only on Licensed Products that conform to the specifications for such Licensed
Products on which Registration Approval of such Licensed Products was based.
Such license shall be perpetual fully paid up and royalty free, except that it
may be revoked by PRAECIS for breach of Sections 8.2 or 8.3 or upon the
termination of this Agreement in any Territory Country pursuant to Section 17.3
by reason of breach by Synthelabo, and shall survive any other termination or
expiration of this Agreement. PRAECIS agrees that it will promptly file for
registration of the Rel-Ease(TM) trademark in each Territory Country designated
by Synthelabo where such registration is possible and affords potential
protection for such trademark in such Territory Country, and will take all such
actions as are necessary or appropriate and commercially reasonable to secure
such registration and, thereafter, to maintain such registration for the benefit
of Synthelabo. PRAECIS shall further take all such actions as are necessary or
appropriate and commercially reasonable to protect the Rel-Ease(TM) trademark
against impairment or infringement in such Territory Countries.
8.2 PRAECIS Approval Right. Prior to the first use of the
Rel-Ease(TM) trademark on any materials in any form, Synthelabo shall first
provide PRAECIS with at least one sample of same in each such form; or if not
yet made, shall provide an artist's rendering of same. If PRAECIS does not
reasonably object to same within ten (10) business days of receipt, PRAECIS
shall be deemed to have approved such use. Synthelabo may thereafter use the
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Rel-Ease(TM) trademark in the manner and form so approved, provided that such
use is on materials which have substantially the same content and are of
substantially the same quality as the samples that were the basis for approval.
8.3 Trademark Designations. Synthelabo hereby agrees that each use
of the Rel-Ease(TM) trademark shall be accompanied by the designation "(R)" or
"(TM)", as is appropriate depending upon whether such mark has been registered
in the Territory Country of use; or by such other designation as may be
appropriate under the trademark laws of the Territory Country of use.
8.4 Labelling, etc. Synthelabo shall be responsible for labelling
Licensed Products and repackaging Licensed Products in such form as is suitable
and in compliance with all applicable laws for resale in each Territory Country.
To the extent permitted by law, Licensed Products shall be represented in all
labelling and other documentation as jointly developed by PRAECIS and
Synthelabo, and all packaging shall, among other things, clearly bear the
following language: "Licensed from PRAECIS PHARMACEUTICALS INCORPORATED", or its
translation in the language of the country of commercialization, and shall
clearly bear the Rel-Ease(TM) trademark (if the Rel-Ease(TM) system is
utilized).
8.5 Indemnification By PRAECIS. PRAECIS hereby agrees to indemnify
and hold Synthelabo harmless against any liability, damages, loss or expense
(including reasonable attorneys fees and expenses of litigation) arising out of
the proper use by Synthelabo in accordance with the provisions of this Article 8
of
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the Rel-Ease(TM) trademark and the name PRAECIS PHARMACEUTICALS INCORPORATED.
8.6 Licensed Products Names and Trademarks. Prior to First
Commercial Sale of a Licensed Product in each Territory Country, the parties
shall consult and agree on an appropriate name and trademark for such Licensed
Product to be used in such Territory Country (any such name and trademark so
agreed upon being referred to as a "Licensed Product Territory Trademark").
PRAECIS shall not unreasonably withhold its agreement to the Licensed Product
Territory Trademark selected by Synthelabo. The parties agree that, subject to
the further provisions of this Article 8, Synthelabo shall be the owner in the
Territory of each Licensed Product Territory Trademark, together with all
associated logos and related goodwill, and may sublicense same to its Affiliates
and Third Parties to whom it sublicenses its other rights hereunder. Synthelabo
(i) acknowledges and agrees that (A) PRAECIS shall be the owner of each Licensed
Product Territory Trademark outside the Territory and (B) neither Synthelabo nor
any Affiliate thereof will, directly or indirectly, so long as this Agreement is
in force and thereafter if this Agreement is terminated pursuant to Section 17.2
by reason of the occurrence of one or more of the events described therein with
respect to Synthelabo or pursuant to Section 17.3 due to breach by Synthelabo,
(1) challenge or in any way oppose such ownership rights of PRAECIS or (2) file
for the registration outside the Territory of any Licensed Product Territory
Trademark,
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(ii) agrees that it will promptly file for the registration in each Territory
Country of each Licensed Product Territory Trademark to be used by Synthelabo in
such Territory Country, provided such registration is possible and affords
potential protection for such Licensed Product Territory Trademark in such
Territory Country, and will take all such other actions as are necessary or
appropriate and commercially reasonable to protect such Licensed Product
Territory Trademark against impairment or infringement anywhere in the Territory
where such Licensed Product Territory Trademark is so used and (iii)
acknowledges and agrees that (A) automatically upon termination of this
Agreement pursuant to Section 17.2 by reason of the occurrence of one or more of
the events described therein with respect to Synthelabo or pursuant to Section
17.3 due to breach by Synthelabo, and without any further action by PRAECIS or
Synthelabo, ownership in the Territory of each Licensed Product Territory
Trademark, together with its good will, shall be deemed assigned to, and vested
solely in, PRAECIS, and Synthelabo shall have no further right or interest
therein, (B) following any such termination for breach, Synthelabo shall
promptly, at PRAECIS' request, and without further consideration, execute and
deliver and file or cause to be filed in all jurisdictions in the Territory
where such a filing is necessary or appropriate to protect the rights of PRAECIS
as assignee appropriate instruments of assignment reflecting and confirming the
foregoing assignment(s) and (C) PRAECIS shall be, and hereby is, constituted
Synthelabo's
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true and lawful attorney-in-fact with full power and authority to execute and
deliver in the name and on behalf of Synthelabo the instrument(s) referred to in
clause (iii)(B) above, which shall be binding upon Synthelabo with the same
effect as if executed and delivered by it. If clause (iii) immediately above
applies, the value of the Licensed Product Territory Trademark and associated
goodwill assigned to PRAECIS shall be available as an offset against any damages
for the breach by Synthelabo referred to in such clause (iii). Without
limitation of and subject to the foregoing terms and conditions of this Section
8.6 and Synthelabo's compliance therewith, during the term of this Agreement and
thereafter (i) Synthelabo shall retain all ownership rights in the Territory in
and to each Licensed Product Territory Trademark (and no compensation or
indemnity shall be payable in respect of such ownership rights) and (ii) neither
PRAECIS nor any of its Affiliates shall, directly or indirectly, challenge or in
any way oppose the ownership rights of Synthelabo in any Licensed Product
Territory Trademark in any of the Territory Countries.
8.7 PRAECIS Registration of Licensed Product Territory Trademark
Outside the Territory. If PRAECIS intends to use a Licensed Product Territory
Trademark in one or more countries outside the Territory, it will promptly file
for the registration in each such country of each Licensed Product Territory
Trademark to be so used in such country, provided such registration is possible
and affords potential protection for such Licensed Product Territory Trademark
in such country, and will take all
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
such other actions as are necessary or appropriate and commercially reasonable
to protect such Licensed Product Territory Trademark against impairment or
infringement in each such country where such Licensed Product Territory
Trademark is so used.
ARTICLE 9 - PAYMENTS
9.1 Signing and Milestone Payments. Synthelabo shall make the
following payments to PRAECIS (without withholding deductions of any kind other
than required withholding taxes as to which Synthelabo shall secure and send to
PRAECIS proof of any such taxes withheld and paid by Synthelabo), all of which
shall be non-refundable:
(i) Upon signature of this Agreement, (A) *** dollars ($***)
in partial consideration of the sublicense granted hereunder with respect
to the PPI Licensed Rights, (B) *** dollars ($***) in partial
consideration of the license granted hereunder with respect to the
Intellectual Property Rights, and (C) *** dollars ($***) in consideration
of the license granted hereunder with respect to the Rel-Ease(TM)
trademark; and
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
(ii) Within thirty (30) days after the date of each occurrence
shown below, the occurrence of which shall be demonstrated by providing
reasonable documentary evidence of same, the amounts shown opposite such
occurrence below, *** of each of such amounts being in consideration of
the sublicense granted hereunder with respect to the PPI Licensed Rights
and *** of each of such amounts being in consideration of the license
granted hereunder with respect to the Intellectual Property Rights. Should
one or more occurrence set forth below occur substantially (but not
exactly) as described, and Synthelabo proceeds in commercialization
despite such inexact occurrence without a written waiver by PRAECIS, such
occurrence shall be deemed to have occurred for the purposes of this
Section 9.1:
Occurrence Payment
- ---------- -------
*** $***
*** $***
*** $***
*** $***
*** $***
*** $***
*** $***
*** $***
TOTAL $***
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
Notwithstanding the foregoing, Synthelabo shall be required to make
any of the payments otherwise payable with respect to any of the second through
the eighth occurrences set forth above only if (i) forty-five (45) days have
elapsed after Synthelabo's receipt of the European search report and the first
official letter from the European Patent Office referred to in Section 11.4 and
(ii) on or before the end of such forty-five (45) day period Synthelabo has not
validly elected to terminate this Agreement pursuant to Section 17.7 due to a
Material Adverse Patent Development by delivering to PRAECIS on or before the
end of such forty-five (45) day period a Section 17.7 Notice setting forth a
Section 17.7 Termination Date which is not later than thirty (30) days after the
end of such forty-five (45) day period.
Only one payment in the amount set forth opposite each occurrence
set forth above shall be payable in respect of such occurrence, and the maximum
aggregate amount payable by Synthelabo in respect of all such occurrences
(excluding amounts paid pursuant to subparagraph (i) above) shall be *** dollars
($***) regardless of the number of Licensed Products or Applications developed
hereunder.
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
9.2 Benchmark Transfer Price. As of the Effective Date, Synthelabo
and PRAECIS hereby agree to a Benchmark Transfer Price for the first Licensed
Product of *** United States dollars ($U.S.***) per unit (the "Benchmark
Transfer Price"), which Benchmark Transfer Price shall not change for the first
two (2) quarters after the date of First Commercial Sale of such Licensed
Product. At the end of the second calendar quarter of sales of such Licensed
Product, the first Adjustment Amount is to be paid or credited in accordance
with Section 9.6 with respect to the preceding quarter; and the report showing
the Adjustment Amount due or creditable shall state the Transfer Price for each
Licensed Product during such first calendar quarter of sales, as determined in
accordance with Section 9.4. Thereafter, the Benchmark Transfer Price for a
given calendar quarter of sales of such Licensed Product shall be equal to the
actual Transfer Price for Licensed Products which were shipped by PRAECIS to
Synthelabo two calendar quarters earlier. At least thirty (30) days prior to the
First Commercial Sale in the Territory of any other Licensed Product, Synthelabo
and PRAECIS shall meet to determine an initial Benchmark Transfer Price for such
Licensed Product; and such Benchmark Transfer Price shall apply for the first
two quarters of sales, and shall thereafter be adjusted in accordance with this
paragraph.
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
9.3 Determination of Selling Price of Licensed Products. Synthelabo
shall determine the price at which it shall sell the Licensed Products it
obtains from PRAECIS. The Benchmark Transfer Prices of this Agreement are solely
for the purposes of determining the initial amount that Synthelabo shall pay to
PRAECIS for Licensed Products, and shall not be considered by Synthelabo,
PRAECIS or any Third Party to dictate prices at which Synthelabo should offer to
sell or sell Licensed Products to Third Parties.
9.4 Transfer Price. The Transfer Price is hereby defined as:
***Approximately 22 lines omitted***
.33 multiplied by REV for cumulative Net Sales for all Licensed Products
in a given calendar year that exceed $***;
Notwithstanding the foregoing, (i) in no instance shall the Transfer Price be
less than COGS + .06 times REV, except to the extent otherwise expressly
provided in Section 3.10 and (ii) the Transfer Price with respect to Licensed
Products sold in Latin America shall in all cases be .33 for such Net Sales.
9.5 Payment of Benchmark Transfer Price. When received by PRAECIS,
and as a condition to approval by PRAECIS, each Synthelabo purchase order shall
show on its face a stated
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transfer amount equal to the Benchmark Transfer Price times the number of units
ordered; and such stated amount shall be followed by the phrase, "plus or minus
Adjustment Amounts", which refers to the adjustment payments or credits to be
made pursuant to Section 9.6. Within forty five (45) days of the issuance by
PRAECIS to Synthelabo of an invoice for Licensed Products pursuant to a
Synthelabo purchase order (the date of such invoice to be no earlier than the
date of delivery), Synthelabo shall pay PRAECIS the amount stated on the
invoice. Any other provision of this Agreement notwithstanding, under no
circumstances shall PRAECIS be required to ship Licensed Products to Synthelabo
pursuant to a given Synthelabo purchase order if a payment due and payable under
this Section 9.5 with regard to a prior Synthelabo purchase order has not been
paid to PRAECIS, unless and to the extent that such payment is being disputed in
good faith by Synthelabo.
9.6 Adjustments; Reports. Within seventy (70) days after the end of
each calendar quarter of Licensed Product sales, Synthelabo shall submit to
PRAECIS a sales, adjustment and royalty report, which shall specify (i) the
Transfer Price for Licensed Products ordered by Synthelabo during such calendar
quarter, as determined pursuant to Section 9.4; (ii) the number of units of
Licensed Products delivered by PRAECIS during such quarter; (iii) the cumulative
Transfer Price owed to PRAECIS for such Licensed Products, calculated as the
Transfer Price for such quarter times the number of units delivered during such
quarter;
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(iv) the Benchmark Transfer Price applicable to such quarter; (v) the cumulative
payments already made to PRAECIS for such quarter, calculated as the Benchmark
Transfer Price for such quarter times the number of units delivered during such
quarter; (vi) the "Adjustment Amount", which is defined as the cumulative
Transfer Price owed to PRAECIS (as described in (iii) above) less the cumulative
payments already made to PRAECIS (as described in (v) above), (vii) the total
Net Sales, and Net Sales on a country-by-country basis, during such calendar
quarter and (viii) the total amount of royalties, and the amount of royalties on
a country-by-country basis, payable to PRAECIS pursuant to Section 9.8. If the
Adjustment Amount is a positive number, Synthelabo shall make payment to PRAECIS
of same along with such report. If the Adjustment Amount is negative, then
Synthelabo shall so report; and PRAECIS shall credit such amount to the account
of Synthelabo, which credit shall be applied against future amounts due from
Synthelabo to PRAECIS.
9.7 Miscellaneous Sales Costs. PRAECIS shall be responsible for
shipping and handling costs arising from the return and replacement of defective
goods. Synthelabo shall itself directly pay all license fees, sales, use,
service use, occupation, service occupation, personal property, and excise taxes
and any other fees, assessments or taxes which may be assessed or levied by any
foreign, national, state or local government and any departments or subdivisions
thereof, against any of the Licensed Products ordered by Synthelabo and under
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
Synthelabo's direct or indirect control. Each party shall be directly
responsible for the payment of all other taxes properly levied or assessed
against it with respect to its obligations hereunder.
9.8 Royalties.
(a) Royalty Rate; Payments to IUF. Synthelabo shall pay to
PRAECIS a running royalty equal to either (i) ***, or (ii) ***. PRAECIS
shall remit to IUF all royalty payments made by Synthelabo hereunder at
the times required under the IUF License Agreement.
(b) Accrual of Royalties. Royalties pursuant to this Section
9.8 shall accrue when Licensed Products are sold or otherwise transferred
by Synthelabo or an Affiliate thereof to a Third Party, and Licensed
Products shall be considered sold when each invoice of Synthelabo or an
Affiliate thereof is issued to the Third Party. Synthelabo shall make
payments to PRAECIS in accordance with the requirements of subsection
9.8(d) below.
(c) Royalty Reduction. In the event that IUF and PRAECIS agree
to a lower royalty rate pursuant to Section 14.01 of the IUF License
Agreement, or otherwise, the royalty rate payable by Synthelabo to PRAECIS
hereunder shall be adjusted downward to match such lower royalty rate.
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(d) Semi-Annual Royalty Payments. Payments of royalties from
Synthelabo to PRAECIS pursuant to this Section 9.8 shall be made by
Synthelabo to PRAECIS on a semi-annual basis, not later than sixty (60)
days after the last day of June and the last day of December for as long
as such obligations continue under this Agreement.
(e) Single Royalty Liability. Synthelabo and its Affiliates
shall be liable for only one royalty hereunder with respect to the sale of
Licensed Products.
(f) Deduction for Taxes. Any tax required to be withheld by
Synthelabo or its Affiliates on any royalty payments payable to PRAECIS
hereunder shall be deducted from the total amount of the payment otherwise
due. Synthelabo shall secure and send to PRAECIS proof of any such taxes
withheld and paid by Synthelabo or its Affiliates.
9.9 Samples. PRAECIS hereby agrees that it shall upon written
request provide Synthelabo with "free samples" of Licensed Product in a quantity
no greater than one tenth of one percent (0.1%) of the amount of Licensed
Product that Synthelabo has ordered during the calendar quarter immediately
prior to such request. Synthelabo shall pay PRAECIS only the Cost of Goods for
such samples. PRAECIS shall mark such samples "not for sale;" and Synthelabo
agrees that such samples will be used only as salesman's exhibits and as
promotional free samples, and will not in any instance be sold.
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9.10 Currency. All payments hereunder shall be made by wire transfer
of U.S. Dollars in immediately available funds to PRAECIS as follows:
c/o Chase Manhattan Bank, NY
ABA #021-0000-21
A/C Goldman, Sachs & Co.
A/C #930-1-011483
FFC A/C Name: PRAECIS PHARMACEUTICALS INCORPORATED
Account #: 010-08933-2
In the event that any currency conversions are required in the calculating of or
making of payments hereunder, such conversions shall be made using the
conversion rates set forth in The Wall Street Journal on the day that such
payments become due and payable to PRAECIS.
9.11 PRAECIS Audit Rights. Synthelabo hereby agrees that Synthelabo
shall, and shall cause its Affiliates to, keep and maintain full and accurate
books of account and records showing for each calendar quarter, without
limitation, the number of units of each Licensed Product sold for each
Application in each Territory Country, and showing cumulative Net Sales for each
Licensed Product sold for each Application in each Territory Country, as well as
copies of invoices and other normal and customary sales records. All such books
and records shall be maintained for at least four (4) years after the latest
calendar quarter to which they pertain. Synthelabo further agrees that PRAECIS
shall have the right to engage (at its own cost and expense, except as otherwise
provided below in this Section 9.11) an independent accounting firm to examine
Synthelabo's books and records pertaining to the sale of Licensed Products, and
that
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Synthelabo shall cause its Affiliates' to allow such firm to examine its
Affiliates' books and records pertaining to the sale of Licensed Products, in
order to confirm the accuracy and timeliness of reports and payments hereunder.
Such examination shall be made at the location of Synthelabo or the relevant
Affiliate, during normal business hours, and with reasonable advance notice.
Prior to any such examination, Synthelabo may require the accounting firm to
maintain all information of Synthelabo and its Affiliate confidential, through
the execution of a confidentiality agreement having reasonable terms and
conditions; however, such firm shall be permitted to disclose to PRAECIS
sufficient information to allow PRAECIS to confirm the accuracy and timeliness
of reports and payments hereunder, and to fully understand any discrepancy or
underpayment. Such examination shall not be performed more than once per year
for each of Synthelabo and each Affiliate, and the right to examine records for
a given calendar quarter shall expire four (4) years following that quarter. If
such an examination discloses an underpayment, Synthelabo shall immediately
remit such amount to PRAECIS unless and to the extent that the amount in
question is being disputed in good faith by Synthelabo; and any such unpaid
amount shall be subject to interest as provided in Section 10.1. If such
examination reveals an underpayment of seven and one-half percent (7.5%) or more
for the period examined, Synthelabo shall also reimburse PRAECIS for the
reasonable cost of the examination, in-
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cluding without limitation all reasonable travel costs, meals, and other
reasonable costs incidental thereto.
ARTICLE 10 - REMEDIES FOR NON-PAYMENT
10.1 Interest. Amounts due and payable hereunder but not paid by the
date due hereunder will be subject to an interest charge from the date such
payment was due until payment equal to the highest U.S. Prime Interest Rate per
annum published in The Wall Street Journal on the first business day after the
payment first became due, plus 3.0 percentage points.
10.2 Other. Failure on the part of Synthelabo to timely pay for
Licensed Products when such payment is due as provided herein shall give PRAECIS
the right (without prejudice to any other remedies):
10.2.1 to enforce its security interest granted pursuant
to Section 10.3; or
10.2.2 to give written notice to Synthelabo that Synthelabo
shall not sell or part with possession of the Licensed Products until the
transfer payments set forth in Article 9 shall have been paid in full, with
which Synthelabo shall comply.
10.3 Collateral. As collateral security for the due and punctual
payment by Synthelabo of all amounts payable by it either under this Agreement
or on account of any sale of one or more Licensed Products from PRAECIS to
Synthelabo, Synthelabo hereby grants to PRAECIS a purchase money security
interest in all Licensed Products hereafter acquired by Synthelabo from PRAECIS,
together with the proceeds (including, without limita-
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tion, proceeds under insurance policies) therefrom, and in all right, title and
interest of Synthelabo in and to all instruments and other documents, whenever
arising, covering or relating to such Licensed Products and proceeds and all
rights, remedies and claims of Synthelabo under or with respect to such
documents, whether now existing or hereafter arising, in each case until the
purchase price for such Licensed Products has been paid in full in accordance
with the terms hereof; provided, however, that PRAECIS hereby releases such
security interest effective upon such payment in full, and provided further,
that the security arrangements hereunder shall in no way impair Synthelabo's
right to sell any Licensed Products to any Third Party. PRAECIS shall have all
the rights, powers, privileges and remedies with respect to such collateral as
shall be permitted for a secured party under the Uniform Commercial Code of the
State of New York as is in effect at such time. Synthelabo agrees that it will
join with PRAECIS in executing, filing and refiling such documents as PRAECIS
may reasonably deem necessary or appropriate to perfect, preserve and deliver
such additional documents as PRAECIS may reasonably deem necessary or
appropriate to carry into effect the purpose of this Section 10.3 or to better
assure and confirm to PRAECIS its rights, powers and remedies under this Section
10.3. Synthelabo hereby authorizes PRAECIS, in its discretion, to file financing
statements and similar documents relative to all or any part of the
above-described collateral without the signature of Synthelabo wherever
permitted by law.
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10.4 Insurance on Unsold Goods. Synthelabo at its own cost and
expense shall keep all of the Licensed Products in which PRAECIS has an
interest, and which are under Synthelabo's direct or indirect control, insured
under a standard policy with coverage and in an amount which shall be sufficient
to prevent PRAECIS from sustaining any financial loss caused by the loss, damage
or destruction of such Licensed Products unless and until such Licensed Products
undergo manufacturing transformation by Synthelabo or a Third Party
manufacturer.
ARTICLE 11 - COOPERATION AND ASSISTANCE
11.1 General. Subject to the other provisions of this Agreement,
Synthelabo and PRAECIS shall each take such steps as are reasonably necessary to
assist one another in securing their trademark rights, intellectual property
rights and any other rights in connection with the Licensed Products, and to
assist one another in taking any steps necessary to defend such rights. Except
as otherwise provided in Article 19, any reasonable expenses incurred in this
regard by an assisting party shall be refunded by the party receiving such
assistance, provided that such party has agreed to such expenses in advance.
11.2 Specific Cooperation of Synthelabo. Synthelabo shall cooperate
with PRAECIS in the following ways with respect to Licensed Products:
11.2.1 Synthelabo shall inform PRAECIS of any suggested
Improvements;
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11.2.2 Synthelabo shall give representatives from PRAECIS
reasonable opportunity to participate in sales meetings and exhibitions in order
to enable PRAECIS to understand marketing problems and opportunities within the
Territory, and to give adequate assistance when and where required; and
11.2.3 Synthelabo shall submit to PRAECIS from time to time
and at the end of each December reports detailing all relevant information as to
the prevailing market situation, the attitude of customers, and the activities
of competitors, in each Territory Country.
11.3 Specific Cooperation of PRAECIS. PRAECIS shall cooperate with
Synthelabo in the following ways with respect to Licensed Products:
11.3.1 PRAECIS shall inform Synthelabo of any suggested
Improvements;
11.3.2 PRAECIS shall give representatives from Synthelabo
reasonable opportunity to participate in sales meetings and exhibitions in order
to enable Synthelabo to understand marketing problems and opportunities outside
of the Territory, and to give adequate assistance when and where required; and
11.3.3 PRAECIS shall submit to Synthelabo from time to time
and at the end of each December reports detailing all relevant information as to
the prevailing market situation, the attitude of customers, and the activities
of competitors, in each country outside of the Territory.
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11.4 Patent Prosecution and Maintenance. The parties agree that they
will coordinate with each other in all reasonable respects the worldwide
prosecution of all patents and patent applications relating to this Agreement,
subject to the provisions of this Section 11.4. PRAECIS shall, at its expense,
diligently pursue the filing, prosecution and maintenance of all patents and
patent applications included in the Intellectual Property Rights and the PPI
Licensed Rights (except for Improvements owned exclusively by Synthelabo) in all
Territory Countries where protection of intellectual property rights in general
is available, Synthelabo reasonably requires such protection and such protection
is available, and PRAECIS shall bear all costs associated therewith. PRAECIS
shall furnish Synthelabo with copies of any patent application concerning the
Intellectual Property Rights sufficiently in advance of the anticipated filing
date therefor (but in no event less than 20 business days before filing) so as
to give Synthelabo a reasonable opportunity to review and comment thereon.
PRAECIS shall also furnish copies to Synthelabo of all communications to and
from United States and foreign patent offices regarding patents or patent
applications relating to this Agreement within a reasonable time prior to filing
such communication or promptly following the receipt thereof. PRAECIS shall
reasonably consider any comments Synthelabo may have related to such patent
applications or communications. Each of Synthelabo and PRAECIS shall have the
right, at its expense, to file, prosecute and
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maintain patents in all countries on Improvements owned solely by it. Each party
shall have the reasonable right to review and comment on such filings by the
other party and all patent office communications related thereto to the same
extent as Synthelabo is permitted by this Section 11.4 with respect to filings
made by PRAECIS. PRAECIS shall designate Synthelabo its European patent agent,
and shall deliver any power of attorney required to give effect to such
designation, in order that Synthelabo may, and Synthelabo agrees to, implement
and diligently carry out an accelerated procedure to obtain a European search
report and the first official letter from the European Patent Office with
respect to the patentability of PPI-149 and the formulation, respectively,
described in the European patent applications to be filed based on the
respective Material Patent Applications (as defined in Section 1.36).
ARTICLE 12 - REPRESENTATIONS AND WARRANTIES
12.1 Conformity to Specifications. PRAECIS warrants that each
Licensed Product delivered to Synthelabo for sale to Third Parties shall conform
to the specifications for such Licensed Product as shall be developed by PRAECIS
and provided to Synthelabo from time to time, which shall be consistent with
those upon which Registration Approval of such Licensed Product was based, and
shall have a minimum remaining shelf life at delivery of at least 83% of the
total shelf life of such Licensed Product. PRAECIS further warrants that (i)
neither it nor any Third Party manufacturer engaged by it shall make any change
to
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its Licensed Product manufacturing process or place of manufacture which would
adversely affect Registration Approvals in the Territory, unless consent to such
change is first obtained from Synthelabo and (ii) PRAECIS will make any change
to the manufacturing process or place of manufacture required by regulatory
authorities to maintain Registration Approval in a Territory Country. Synthelabo
warrants that any Licensed Products manufactured by, or pursuant to agreements
with, it or any of its Affiliates, pursuant to Article 3, for sale to Third
Parties shall conform to the specifications for such Licensed Product as shall
be developed by PRAECIS and provided to Synthelabo from time to time, which
shall be consistent with those upon which Registration Approval of such Licensed
Product was based. Synthelabo further warrants that neither it nor any of its
Affiliates nor any Third Party manufacturer which it engages, shall make any
change to any Licensed Product manufacturing process which it employs which
would adversely affect Registration Approvals in the Territory, unless consent
to such change is first obtained from PRAECIS.
12.2 Representations as to Intellectual Property. PRAECIS represents
and warrants that PRAECIS owns or possesses adequate licenses or other rights to
use all patents, patent rights, inventions and know-how included in the
Intellectual Property Rights and the PPI Licensed Rights being licensed to
Synthelabo hereunder and to grant the licenses granted herein. To the best
knowledge of PRAECIS, the manufacture, use or sale of
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the Licensed Products pursuant to this Agreement will not infringe or conflict
with any Third Party right or patent and PRAECIS is not aware of any pending
patent application that if issued would be infringed by the manufacture, use or
sale of the Licensed Products pursuant to this Agreement. Appendix II hereto
correctly identifies all patent applications included within the Intellectual
Property Rights and the PPI Licensed Rights as of the date hereof. With respect
to all such patent applications, except as disclosed in writing by PRAECIS to
Synthelabo prior to the Effective Date, PRAECIS has no knowledge of any prior
patent or publication, public use, offer for sale or actual sale that would
invalidate the claims of such patent applications, and PRAECIS has no knowledge
of any actions heretofore taken by a patent office that would render such patent
unenforceable. As of the Effective Date, neither Synthelabo nor PRAECIS has
knowledge that any infringement referred to above in this Section 12.2 has
occurred, and neither party has been notified or is aware of any actual or
potential claims of infringement.
12.3 Authority; Binding Agreement; Other Matters. Each of
Synthelabo and PRAECIS hereby represent and warrant to one another that:
12.3.1 They are duly incorporated and are validly existing
corporations in good standing under the laws of their respective jurisdictions
of incorporation.
12.3.2 Each has the corporate power and authority to execute,
deliver and perform this Agreement.
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12.3.3 This Agreement constitutes a valid and binding
obligation of such party, enforceable against such party in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or by the principles governing the availability of equitable
remedies.
12.3.4 Neither it nor any of its Affiliates is a party to,
subject to, or bound by any agreement, understanding or judgment, award, order,
writ, injunction or decree of any court, governmental body or arbitrator which
would (i) prevent it from carrying out of this Agreement or (ii) conflict with
or be breached by the execution, delivery or performance by it of this
Agreement. There is no action, suit, dispute or governmental, administrative,
arbitration or regulatory proceeding pending or, to the best of such party's
knowledge, threatened against or relating to such party which, in each case,
could prevent such party from carrying out its obligations under this Agreement.
12.4 IUF License Agreement. PRAECIS represents and warrants that, as
of the date of this Agreement, (i) the IUF License Agreement is in full force
and effect, (ii) PRAECIS is in compliance in all material respects with its
obligations thereunder and has heretofore delivered to Synthelabo a true and
complete copy thereof, (iii) there have been no amendments or modifications
thereof and (iv) IUF has not breached the IUF License Agreement. So as not to
adversely affect Synthelabo's
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rights under this Agreement, PRAECIS will not, during the term of this
Agreement, take any actions to terminate or restrict its rights under the IUF
License Agreement as the same relate to the Licensed Products, and will
discharge all of its obligations and responsibilities thereunder, including,
without limitation, making any required payments. If PRAECIS receives any notice
of default under the IUF License Agreement, PRAECIS will promptly notify
Synthelabo thereof.
12.5 Warranty Disclaimer. PRAECIS MAKES NO WARRANTIES, EXPRESSED OR
IMPLIED, AS TO THE MERCHANTABILITY OR FITNESS FOR ANY PURPOSE OF ANY LICENSED
PRODUCTS. PRAECIS SHALL NOT BE LIABLE FOR ANY DIRECT, CONSEQUENTIAL OR OTHER
DAMAGES SUFFERED BY SYNTHELABO OR ANY THIRD PARTY RESULTING FROM THE USE OF THE
LICENSED PRODUCTS, EXCEPT TO THE EXTENT OF (I) ANY BREACH OF A REPRESENTATION OR
WARRANTY OF PRAECIS SET FORTH HEREIN, OR (II) ANY EXPRESS INDEMNIFICATION BY
PRAECIS HEREUNDER.
ARTICLE 13 - INDEMNIFICATION
13.1 Synthelabo Indemnification of PRAECIS. Synthelabo hereby agrees
to indemnify and hold harmless PRAECIS, its directors, officers, employees,
agents, subsidiaries and Affiliates against any and all liability, damages, loss
or expenses (including those arising out of personal injury claims), including
reasonable attorney fees and expenses of litigation, arising out of the actions
of Synthelabo, its directors, officers, employees, agents, subsidiaries or
Affiliates, or any Third Party acting on behalf of or under authorization by
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Synthelabo, in connection with Synthelabo's development, Improvement, testing,
importation, Advertising, Promotion, marketing, distribution, manufacture
(whether complete manufacture or "fill and finish"), use, transport, offering
for sale, sale, labeling, handling, storage or support of the Licensed Products,
or otherwise arising out of or resulting from such actions by Synthelabo or its
customers, or arising out of Synthelabo's failure to procure insurance as
required hereunder. These provisions shall survive for six (6) years beyond the
termination or expiration of this Agreement. Without limiting the foregoing, in
the event that any of the duties and obligations of Synthelabo hereunder are
performed by any Affiliate or permitted third party sublicensee of Synthelabo,
PRAECIS shall be indemnified by Synthelabo for the acts or omissions of such
other party to the same extent as PRAECIS is indemnified for the acts and
omissions of Synthelabo under this Section 13.1.
13.2 PRAECIS' Indemnification of Synthelabo. PRAECIS hereby agrees
to indemnify and hold harmless Synthelabo, its directors, officers, employees,
agents, subsidiaries and Affiliates against any and all liability, damages, loss
or expenses (including those arising out of personal injury claims), including
reasonable attorney fees and expenses of litigation, arising out of the actions
of PRAECIS, its directors, officers, employees, agents, subsidiaries or
Affiliates, or any Third Party acting on behalf of or under authorization by
PRAECIS, in connection with PRAECIS's design, development, Improvement,
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testing, manufacture, labeling, handling or support of Licensed Products, or
otherwise arising out of or resulting from such actions by PRAECIS or its
customers, or arising out of PRAECIS' failure to procure insurance as required
hereunder. These provisions shall survive for six (6) years beyond the
termination or expiration of this Agreement. Without limiting the foregoing, in
the event that any of the duties and obligations of PRAECIS hereunder are
performed by any Affiliate or permitted third party licensee of PRAECIS,
Synthelabo shall be indemnified by PRAECIS for the acts or omissions of such
other party to the same extent as Synthelabo is indemnified for the acts and
omissions of PRAECIS under this Section 13.2.
13.3 Mutual Indemnification for Breach. PRAECIS hereby agrees to
indemnify and hold Synthelabo harmless against any liability, damages, loss or
expense (including reasonable attorneys fees and expenses of litigation) arising
out of the breach of any representation, warranty, covenant or agreement of
PRAECIS contained herein. Synthelabo hereby agrees to indemnify and hold PRAECIS
harmless against any liability, damages, loss or expense (including reasonable
attorneys fees and expenses of litigation) arising out of the breach of any
representation, warranty, covenant or agreement of Synthelabo contained herein.
13.4 Procedure For Third Party Claims. Any person that intends to
claim indemnification under this Article 13 (an "Indemnitee") arising out of a
Third Party claim shall promptly notify the indemnifying party (the
"Indemnitor") of such claim in respect of which the Indemnitee intends to claim
such indemnifi-
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cation, and the Indemnitor shall, to the extent applicable, assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an Indemnitee shall have the right to retain its own counsel, with the
reasonable fees and expenses thereof to be paid by the Indemnitor, if
representation of such Indemnitee by the counsel retained by the Indemnitor
would be inappropriate due to actual or potential differing interests between
such Indemnitee and any other party represented by such counsel in such
proceedings. The parties' indemnity obligations under this Article 13 shall not
apply to amounts paid in settlement of any loss, claim, liability or action if
such settlement is effected without the consent of the Indemnitor, which consent
shall not be withheld unreasonably. Any Indemnitee's failure to deliver notice
to the Indemnitor within a reasonable time after the commencement of any such
action, if materially prejudicial to the Indemnitor's ability to defend such
action, shall relieve the Indemnitor of any liability to the Indemnitee under
this Article 13, but not any liability that it may have to the Indemnitee
otherwise than under this Article 13. The Indemnitee and its employees and
agents shall cooperate fully with the Indemnitor and its legal representatives
in the investigation and defense of any action, claim or liability covered by
this indemnification.
ARTICLE 14 - INSURANCE
The parties shall maintain insurance coverage with respect to their
activities and potential liabilities in
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connection with the collaboration hereunder as is commercially reasonable in the
circumstances.
ARTICLE 15 - NON-COMPETITION
15.1 Mutual Non-Competition Covenant. Except as provided in Section
15.2, neither PRAECIS nor Synthelabo shall, during the term of this Agreement or
any extension thereof and for one (1) year thereafter, without the consent of
the other party, be concerned or interested, directly or indirectly (including
through a licensing arrangement), in the advertising, promotion, manufacture,
use, importation, offering for sale, sale or marketing in any Territory Country
of any products containing an LHRH Antagonist, other than, in the case of
Synthelabo, Licensed Products. For the avoidance of doubt, activities undertaken
by Synthelabo to discover, conceive or invent Improvements or Synthelabo
Formulations shall not be prohibited by this Section 15.1. The above restriction
on competition shall not apply after termination of this Agreement (i) to a
party if this Agreement has terminated pursuant to Section 17.2 by reason of the
occurrence of one or more of the events described therein with respect to the
other party or if this Agreement has been validly terminated by such party for
breach by the other party pursuant to Section 17.3 or (ii) to Synthelabo or
PRAECIS if this Agreement has been terminated in its entirety pursuant to
Section 17.7 (including without limitation as contemplated by Section 9.1).
15.2 Competitive Acquisition. Synthelabo shall promptly notify
PRAECIS if Synthelabo shall acquire, or
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Synthelabo or substantially all its business or assets shall be acquired by,
directly or indirectly, an entity which, directly or indirectly, is developing,
or which Advertises, Promotes, manufactures, imports, offers for sale, sells or
markets, any product which contains an LHRH Antagonist and which is competitive
with any Licensed Product in the Territory. The occurrence of any of the events
described in the preceding sentence shall not relieve either party of its
obligations hereunder or otherwise modify or vary the rights and obligations of
the parties hereunder, including without limitation Synthelabo's general
obligation as provided herein to diligently develop, market and sell Licensed
Products in the Territory.
ARTICLE 16 - IMPROVEMENTS
It is contemplated that PRAECIS and Synthelabo, separately or
jointly, may discover, conceive or develop Improvements as defined herein, and
that Synthelabo may discover, conceive or develop Synthelabo Formulations. All
intellectual property rights in and to Improvements discovered, conceived or
developed by PRAECIS, its employees or agents shall be owned by PRAECIS, and
shall be included in the Intellectual Property Rights licensed hereunder. All
intellectual property rights in and to Improvements discovered, conceived or
developed by Synthelabo, its employees or agents shall be owned by Synthelabo,
and an exclusive fully paid-up, royalty-free license, with the right to grant
sublicenses in connection with licenses granted by PRAECIS related to Licensed
Products, under such rights for use only with Licensed Products outside the
Territory is hereby
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granted to PRAECIS, it being understood and agreed that, subject to Section
15.1, Synthelabo may use or license such Improvement (i) in the Territory in
connection with Licensed Products to the extent provided in this Agreement and
(ii) in or outside the Territory for uses other than in connection with Licensed
Products. Such license to PRAECIS shall be perpetual, except that such license
shall automatically terminate if this Agreement is terminated by Synthelabo
pursuant to Section 17.2 by reason of the occurrence of one or more of the
events described therein with respect to PRAECIS or is validly terminated by
Synthelabo pursuant to and in accordance with Section 17.3 by reason of any
material breach of this Agreement by PRAECIS. All intellectual property rights
in and to Synthelabo Formulations shall be owned by Synthelabo. All intellectual
property rights in and to Improvements jointly discovered, conceived or
developed by PRAECIS and Synthelabo employees or agents shall be jointly owned
by PRAECIS and Synthelabo, as dictated by U.S. law regarding ownership of
jointly discovered, conceived or developed intellectual property rights; and the
rights of each of PRAECIS and Synthelabo in and to same shall be licensed to the
other as provided for Improvements made by each alone, as set forth hereinabove.
Each party shall promptly disclose to the other any Improvements developed by
its employees or agents acting on its behalf and Synthelabo shall promptly
disclose to PRAECIS any Synthelabo Formulations. The parties shall discuss in
good faith the manner in which such Improvements or such Synthelabo
Formulations, as applicable, may be incorporated into the
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Licensed Products which have been commercialized (or are in the course of
development for commercialization) hereunder. If and to the extent that any
Synthelabo Formulation is incorporated into any Licensed Product as aforesaid,
the term "Licensed Product" hereunder shall be amended in the manner mutually
agreed upon by the parties as provided below. The Joint Steering Committee shall
determine in good faith whether any Improvement or Synthelabo Formulation should
be incorporated into any Licensed Product intended for sale in the Territory.
Notwithstanding the foregoing, if incorporation of such Improvement or
Synthelabo Formulation would have a material impact on the economic terms and
conditions of this Agreement applicable to either party, then the parties shall
negotiate in good faith appropriate adjustments to the economic terms and
conditions of this Agreement with a view to preserving the relative economic
benefits of the parties under this Agreement (except as otherwise mutually
agreed) to permit the incorporation of such Improvement. If mutual agreement of
the parties is reached as to the incorporation of any Synthelabo Formulation as
aforesaid, then Synthelabo shall be deemed to have granted to PRAECIS a
fully-paid up, royalty-free exclusive license, with the right to grant
sublicenses in connection with licenses granted by PRAECIS related to the
Licensed Products or other products containing PPI-149 or another LHRH
Antagonist Compound licensed to Synthelabo hereunder and formulated in such
Synthelabo Formulation, of its rights in such Synthelabo Formulation solely for
use outside the Territory with Licensed Products or other
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products containing PPI-149 or another LHRH Antagonist Compound licensed to
Synthelabo hereunder and formulated in such Synthelabo Formulation. Such license
shall be perpetual, except that such license shall automatically terminate if
this Agreement is terminated by Synthelabo pursuant to Section 17.2 by reason of
the occurrence of one or more of the events described therein with respect to
PRAECIS or is validly terminated by Synthelabo pursuant to and in accordance
with Section 17.3 by reason of any material breach of this Agreement by PRAECIS.
It is understood and agreed that, subject to Section 15.1, Synthelabo may use or
license a Synthelabo Formulation (i) in the Territory to the extent provided in
this Agreement and (ii) in or outside the Territory for uses other than in
connection with (A) Licensed Products or (B) other products containing PPI-149
or other LHRH Antagonist Compounds licensed to Synthelabo hereunder and
formulated in such Synthelabo Formulation. Each of PRAECIS and Synthelabo hereby
represent and warrant that their relevant employees are bound by a written
agreement which requires them to assign to their employer all intellectual
property rights arising within the scope of their employment.
ARTICLE 17 - TERM & TERMINATION
17.1 Term; Expiration. Unless terminated earlier, as provided
herein, the term of this Agreement shall expire, and the licenses granted by
PRAECIS to Synthelabo hereunder shall become fully paid-up, perpetual and
royalty-free and shall continue without any further obligation, with respect to
a Territory Country, upon the expiration in such Territory Country of the
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last to expire of the patents and any extensions thereof or supplementary
certificates of protection included in the Intellectual Property Rights or the
PPI Licensed Rights, respectively, which are licensed or sublicensed
respectively, hereunder and which cover a Licensed Product in such Territory
Country. In the event that no Intellectual Property Rights, Patent Rights or
Invention Rights licensed or sublicensed hereunder cover a Licensed Product in a
Territory Country, the term of this Agreement in such Territory Country for such
Licensed Product shall expire ten (10) years after the date of Registration
Approval of such Licensed Product in such Territory Country, whereupon the
licenses granted herein shall become fully paid-up, perpetual, royalty-free and
shall continue without any further obligation in such Territory Country. Upon
the expiration of this Agreement in a Territory Country pursuant to this Section
17.1, PRAECIS shall cease to have any further obligations to Synthelabo
hereunder with respect to such Territory Country, including to manufacture and
supply Licensed Products with respect to such Territory Country, and Synthelabo
shall cease to have any further obligations to PRAECIS hereunder with respect to
such Territory Country, except that such expiration shall not release either
party from any liability or obligation that matured prior to such expiration,
including for this purpose the obligation of Synthelabo to timely make all
payments required by Article 9 for Licensed Products ordered by Synthelabo or
its Affiliates pursuant hereto prior to such expiration.
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17.2 Bankruptcy, Etc.
(a) Automatic Termination. If either party (i) shall make a
general assignment for the benefit of creditors, (ii) shall file a
voluntary petition of bankruptcy, (iii) shall be adjudged a bankrupt or
insolvent, or have had entered against it an order for relief in any
bankruptcy or insolvency proceeding, (iv) shall file a petition or answer
seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law or
regulation, (v) shall file an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against it
in any proceeding specified in (vii) below, (vi) shall seek, consent to or
acquiesce in the appointment of a trustee, receiver or liquidator of said
party or of all or any substantial part of the assets of said party or
(vii) shall fail to obtain dismissal within 60 days of the commencement of
any proceeding against said party seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief
under any statute, law or regulation, or the entry of any order appointing
a trustee, liquidator or receiver of said party or of said party's assets
or any substantial portion thereof, this Agreement shall automatically
terminate, inasmuch as permitted under applicable and prevailing law.
(b) Bypass of Payments. If PRAECIS enters into an arrangement
of creditors and/or bankruptcy, one week
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prior to such arrangement of creditors and/or bankruptcy Synthelabo shall
have the right to be notified by PRAECIS of such arrangement and/or
bankruptcy, and any and all license fees owed directly to PRAECIS by
Synthelabo pursuant to this Agreement shall thereafter be paid by
Synthelabo directly to IUF at the same royalty rate as set forth in this
Agreement.
17.3 Breach. Subject to the further provisions of this Section 17.3,
upon any material breach or default of this Agreement by either party, the
non-breaching party shall have the right to serve notice upon the breaching
party of its intention to terminate this Agreement upon the expiration of ninety
(90) days after the date said notice is given, unless the breaching party shall
cure any such breach or default within said ninety (90) day period. Upon the
expiration of said ninety (90) day period, if the breaching party shall not have
so cured, and if the non-breaching party gives a notice of final termination,
final termination of this Agreement shall be effective on the date such notice
is given. Notwithstanding the foregoing, in the case of a breach of a payment
obligation hereunder, the ninety day (90) period referred to above shall instead
be thirty (30) days.
17.4 Effect of Termination. Upon expiration or termination of this
Agreement as provided herein, this Agreement shall, except as otherwise provided
herein, be void and of no further force or effect and neither party shall have
any further liability hereunder, and except that no such expiration or
termination shall release either party from any liability or
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obligation that arose or is based upon events which occurred prior to the
effective date of such expiration or termination. The following special
provisions shall be applicable if this Agreement (i) terminates pursuant to
Section 17.2 by reason of the occurrence of one or more of the events described
therein with respect to PRAECIS or (ii) is validly terminated by Synthelabo
pursuant to and in accordance with Section 17.3 by reason of any material breach
of this Agreement by PRAECIS other than breach by PRAECIS of its supply
obligations hereunder:
(a) all of the license and sublicense rights granted to
Synthelabo and its Affiliates hereunder shall remain in full force and
effect on a fully paid-up, perpetual and royalty-free basis; and
(b) Synthelabo shall have a fully paid-up, perpetual,
royalty-free license of all manufacturing protocols, know-how and related
information and data necessary to enable Synthelabo to develop, have
developed, make and have made Licensed Products in the Territory from and
after the effective date of such termination.
17.5 Surviving Provisions. The parties agree that, subject to the
first sentence of Section 17.4, upon termination of this Agreement, the
following shall survive (subject to the limitations set forth in this Section
17.5): Section 4.6 (only upon termination as provided in such Section) and
Section 4.7, the confidentiality obligations of Article 7 hereof (to the extent
provided therein), the obligations of Synthelabo set forth in Section 8.6 (only
in the case of termination pursuant to
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Section 17.2 due to the occurrence of one or more of the events described
therein with respect to Synthelabo or termination by PRAECIS pursuant to Section
17.3 for breach by Synthelabo), the non-competition obligations set forth in
Section 15.1 (to the extent provided therein), Section 17.4 (with respect to the
special provisions set forth therein, only upon termination as provided in such
Section), this Section 17.5 and Section 17.8 (only upon termination as provided
in such Section).
17.6 Continuation of Sublicense Rights. The sublicense granted
hereunder with respect to the PPI Licensed Rights shall survive the termination
of the IUF License Agreement. Upon termination of the IUF License Agreement for
any reason during the term of this Agreement, PRAECIS shall assign to IUF all of
PRAECIS' rights in the PPI Licensed Rights in accordance with Section 12.05 of
the IUF License Agreement, and upon IUF's complete assumption of all of PRAECIS'
future obligations hereunder with respect to such sublicense, PRAECIS shall have
no further obligation whatsoever with respect thereto, except for any liability
or obligation of PRAECIS that matured prior to the effective date of such
assumption.
17.7 Termination for Material Adverse Events. Synthelabo may
terminate this Agreement to the extent provided in Section 4.10. However, such
termination right shall be exercisable only if, with respect to any event
referred to in Section 4.10 giving rise to such termination right, within nine
months after first becoming aware of the occurrence of such event (such date on
which Synthelabo first becomes aware of the
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occurrence of such event being referred to as a "Termination Right Trigger
Date"), Synthelabo notifies PRAECIS in writing of such event (a "Section 17.7
Notice"), which notice shall set forth a date (the "Section 17.7 Termination
Date") not less than sixty (60) days (except as provided in Section 9.1) and not
more than twelve months after the Termination Right Trigger Date on which this
Agreement shall terminate to the extent provided in Section 4.10, it being
understood and agreed that until the Section 17.7 Termination Date, the
obligations of the parties hereunder shall remain in effect, including without
limitation Synthelabo's general obligation as provided herein to diligently
develop, market and sell Licensed Products in the Territory.
17.8 Right to Sell Inventory. Upon termination of this Agreement
pursuant to Section 17.2 due to the occurrence of one or more of the events set
forth therein with respect to Synthelabo or pursuant to Section 17.3 due to a
breach by Synthelabo, Synthelabo may, for a period of six (6) months after the
termination date, sell all Licensed Products on hand as of the termination date,
provided that all payments therefor are timely paid in compliance with Article 9
hereof.
ARTICLE 18 - ARBITRATION
18.1 Procedure; Decision Final and Binding. Except as to issues
relating to the validity, construction or effect of any patent right licensed
hereunder, any and all claims, disputes or controversies arising under, out of,
or in connection with this Agreement, which have not been resolved by good faith
negotiations between the parties may be referred by either party
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to arbitration and finally settled in accordance with the UNCITRAL Arbitration
Rules (as supplemented or modified by this Section 18.1) in effect on the date
hereof (hereinafter, the "Rules"), by three arbitrators appointed in accordance
with said Rules. The appointing authority shall be the Court of Arbitration of
the International Chamber of Commerce ("ICC") located in Paris, France. The
place of arbitration shall be London, England. All arbitrators shall be fully
conversant with the English language and the opinion shall be rendered in
English. The English language shall be used in all documents, briefs, evidence
and any other writings submitted. All proceedings shall be in the English
language. Except as provided in Section 18.3 the procedures set forth in this
Section 18.1 shall be the sole and exclusive means of settling or resolving any
dispute hereunder. Accordingly, each party covenants and agrees with the other
party that except as expressly provided in Section 18.3, it will not seek to
have any such dispute adjudicated (except to enforce the provisions of this
Section 18.1 as provided below and except for the limited right to seek
injunctive relief where appropriate) in any court or other official forum of any
government, or otherwise seek to invalidate or circumvent the procedures set
forth in this Section 18.1 as the sole and exclusive means of settling or
resolving any such dispute.
The decision of the arbitrators contemplated by this Section 18.1
shall be final and binding on the parties and may be
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presented by either party for enforcement in any court of competent
jurisdiction; provided, however, that if such enforcement is sought in the
United States, it may only be sought in the state courts of the Commonwealth of
Massachusetts, or a United States federal court in the Commonwealth of
Massachusetts. The parties understand and agree that the provisions of this
Article 18 may be specifically enforced by injunction or otherwise in any court
of competent jurisdiction.
18.2 Assumption Regarding Intellectual Property Rights. In any
arbitration proceedings hereunder, the arbitrators shall assume the validity and
enforceability of any patent rights licensed hereunder.
18.3 Exception to Exclusive Dispute Resolution Procedure. Claims,
disputes or controversies concerning the validity, construction or effect of any
patent rights licensed hereunder shall be resolved in a court having subject
matter jurisdiction thereof.
ARTICLE 19 - INFRINGEMENT AND MAINTENANCE
19.1 Infringement by Third Parties. Synthelabo and PRAECIS shall
promptly inform one another in writing of any alleged infringement, unauthorized
use or misappropriation, of which either shall have notice of any trademarks or
Intellectual Property Rights or the PPI Licensed Rights licensed hereunder and
provide each other with any reasonably available evidence of infringement. Upon
such notice, the PRAECIS and Synthelabo
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
representatives to the Joint Steering Committee shall promptly confer with their
respective patent counsel regarding such apparent infringement; and the Joint
Steering Committee shall promptly thereafter meet in person or by telephone to
discuss possible courses of action. Unless the Joint Steering Committee
recommends otherwise, PRAECIS shall, with respect to any such alleged
infringement, take action to compel such alleged infringers to cease and desist;
and that failing, shall bring legal action against such alleged infringers. All
costs of such legal action, including reasonable attorneys' fees and
disbursements, shall be borne by PRAECIS, and all judgments, settlements,
damages, license fee payments and future royalties shall first be applied to pay
or reimburse PRAECIS for all costs of such action, including reasonable
attorneys' fees and disbursements, and shall thereafter be split ***% for
Synthelabo and ***% for PRAECIS.
19.2 Infringement Suit By Third Parties. In the event that
Synthelabo (i) is sued in an action which alleges infringement, unauthorized use
or misappropriation by Synthelabo in any Territory Country of any Intellectual
Property Rights or PPI Licensed Rights or which is based on the development,
importation, use, sale or distribution by Synthelabo in the Territory of any
Licensed Product as provided hereunder, or (ii) is sued in a declaratory
judgment or similar action alleging
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invalidity or unenforceability in any Territory Country of any Intellectual
Property Rights or PPI Licensed Rights, Synthelabo shall promptly notify
PRAECIS; and the PRAECIS and Synthelabo representatives to the Joint Steering
Committee shall promptly confer with their respective patent counsel regarding
such alleged infringement. The Joint Steering Committee shall promptly
thereafter meet in person or by telephone to discuss possible courses of action.
Unless the Joint Steering Committee recommends otherwise, PRAECIS shall take
action to defend against such suit, and Synthelabo shall cooperate fully with
PRAECIS in such action. All costs of such legal action, including reasonable
attorneys' fees, and the cost of all judgments, damages, settlements, license
fee payments and future royalties shall be borne by PRAECIS.
19.3 Cooperation. In any legal action contemplated under Article 8
or this Article 19, the parties shall provide reasonable cooperation and support
to each other, subject to applicable legal privileges, which each party shall
have the right to assert and maintain, and confidentiality requirements imposed
by a court or other competent tribunal. PRAECIS shall keep Synthelabo reasonably
informed of the status of any such legal action. Without limiting the foregoing,
the parties shall, to the extent possible, make their directors, officers,
employees and agents available to testify when reasonably requested and make
available relevant records, papers, information, samples, specimens, and the
like. The costs to Synthelabo of such cooperation shall be borne by PRAECIS.
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19.4 Differing Interests. Synthelabo recognizes that PRAECIS may
have interests in the trademarks, the Intellectual Property Rights and the PPI
Licensed Rights licensed hereunder which are outside of the scope of the rights
licensed to Synthelabo. Synthelabo therefore hereby agrees that in any legal
action under Article 8 or this Article 19, without limitation of PRAECIS'
obligations under such Articles, PRAECIS shall have the right to seek to protect
the entirety of those separate interests in any litigation regarding such
trademarks, the Intellectual Property Rights or the PPI Licensed Rights.
ARTICLE 20 - ASSIGNMENT
Subject to Section 2.4, Synthelabo may not assign or otherwise
transfer this Agreement or any rights acquired by it hereunder without the prior
written consent of PRAECIS, except for any such assignment to an entity which
acquires or acquires control of its entire business or that part of its business
to which this Agreement relates, whether pursuant to a merger, consolidation,
stock purchase, recapitalization, asset sale or otherwise. Notwithstanding the
foregoing, Synthelabo may have certain of its duties and obligations hereunder
performed by its Affiliates without an assignment or sublicense thereof. In such
cases, Synthelabo shall continue to be obligated to PRAECIS to perform
Synthelabo's obligations hereunder and Synthelabo's indemnification obligations
shall apply to the acts or omissions of any such Affiliate as if such acts or
omissions were those of Synthelabo. PRAECIS may assign this Agreement or its
rights hereunder to an entity which acquires, by license or otherwise,
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rights to Licensed Products outside the Territory (provided that in such event
PRAECIS shall continue to be obligated to Synthelabo to perform PRAECIS'
obligations hereunder), or which acquires or acquires control of its entire
business or that part of its business to which this Agreement relates, whether
pursuant to a merger, consolidation, stock purchase, recapitalization, asset
sale or otherwise (provided that in any such event, PRAECIS or the successor
entity in such transaction shall continue to be liable to perform PRAECIS'
obligations hereunder). This Agreement shall inure to the benefit of and be
binding upon the parties and their respective heirs, executors, administrators,
successors and permitted assigns.
ARTICLE 21 - COMMUNICATIONS
Any notice, request, report, recommendation, consent or other
communication (collectively, a "Notice") under this Agreement shall be effective
if it is in writing and (i) personally delivered, (ii) sent by certified or
registered mail, postage prepaid, return receipt requested, (iii) sent by an
internationally recognized overnight delivery service, with delivery confirmed,
or (iv) telexed or telecopied, with receipt confirmed, addressed as set forth in
this Article 21 or to such address as shall be furnished by either party hereto
to the other party hereto in accordance with the method of Notice set forth
herein. A Notice shall be deemed to have been given as of (i) the date when
personally delivered, (ii) seven (7) days after being deposited with the U.S or
French Postal Service, certified or registered mail, properly addressed, return
receipt requested,
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postage prepaid, (iii) three days after being sent by said overnight delivery
service properly addressed, or (iv) confirmation of receipt of the telex or
telecopy, as the case may be, unless the sending party has actual knowledge that
a Notice was not received by the intended recipient. All Notices shall
specifically state: (i) the Sections (or Sections) of this Agreement with
respect to which such Notice is given, and (ii) the relevant time period, if
any, in which the party receiving the Notice must respond.
Notice Addresses:
Synthelabo: Synthelabo
22 Avenue Galilee
92350 Le-Plessis-Robinson-France
Attention: General Counsel
Facsimile No. 011-33-1-45-37-58-04
PRAECIS: PRAECIS Pharmaceuticals, Inc.
One Hampshire Street
Cambridge, MA 02139
Attention: Director of Business Development
Facsimile No.: 617-494-8414
ARTICLE 22 - MISCELLANEOUS PROVISIONS
22.1 Relationship of the Parties. Each party shall conduct its
business hereunder as a principal for its own account and at its own expense and
risk, except as otherwise provided herein. This Agreement does not in any way
create the relationship of principal and agent, or any similar relationship,
between PRAECIS and Synthelabo. Each party covenants and warrants that it will
not act or represent itself directly or by implication as agent for the other
party, and will not attempt to create any obligation, or make any
representation, on behalf of or in the name of the other party.
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22.2 Advertising; Trademarks, Etc. Neither party shall use the other
party's name in its advertising or elsewhere, or any trademark or trade name (or
any mark or name closely resembling the same) now or hereafter owned or licensed
by the other party or any of its Subsidiaries or Affiliates other than to the
extent specifically provided herein, without the prior written approval of the
other party, except as required by law.
22.3 Public Disclosures. The parties agree that public disclosures
regarding this Agreement, Regulatory Approvals, Reimbursement Approvals and
Licensed Products may be made at the time and in such manner as both parties
shall both approve; provided that such approval will not be unreasonably
withheld and shall not be required for any such disclosure which a party's
counsel advises is required by law or for public disclosure by such party in any
disclosure document in connection with any financing, strategic transaction,
acquisition or disposition involving PRAECIS or Synthelabo. The restriction on
disclosure contained herein shall not apply to any information disseminated to
the public which is information essentially identical to that contained in a
previous disclosure authorized hereunder.
22.4 Governing Law. This Agreement shall be construed, governed,
interpreted and applied in accordance with the laws of the State of New York,
U.S.A. without regard to the conflict of law principles thereof, and the United
Nations Convention on Contracts for the International Sale of Goods is expressly
disclaimed.
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22.5 Entire Agreement. The parties hereto acknowledge that this
Agreement and the other agreements between the parties hereto referred to herein
set forth the entire agreement and understanding of the parties hereto as to the
subject matter hereof and thereof. This Agreement shall not be subject to any
change or modification except by the execution of a written instrument
subscribed to by the parties hereto; provided that all obligations of the
parties under this Agreement and the Sublicense Option Agreement shall be
considered cumulative rather than contradictory, and the more stringent or
burdensome obligations of a party under one agreement shall control over any
less stringent or less burdensome obligation under the other.
22.6 Severability. The provisions of this Agreement are severable,
and in the event that any provision of this Agreement shall be determined to be
invalid or unenforceable under any controlling body of law, such invalidity or
unenforceability shall not in any way affect the validity or enforceability of
the remaining provisions hereof.
22.7 No Waiver. The failure of either party to assert a right
hereunder or to insist upon compliance with any term or condition of this
Agreement shall not constitute a waiver of that right or excuse a similar
subsequent failure to perform any such term or condition by the other party.
22.8 Captions and References. Unless otherwise indicated, references
to Sections and Articles are references to Sections and Articles of this
Agreement. Headings, titles and
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captions of this Agreement are for convenience only and shall not be used for
the construction or interpretation of this Agreement.
22.9 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but which together shall constitute
one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement through their duly authorized representatives, with the intention to
become bound thereby.
SYNTHELABO
By: /s/ Herve Guerin
-------------------------
Name: Herve Guerin
Title: President
PRAECIS PHARMACEUTICALS, INC.
By: /s/ Malcolm L. Gefter
-------------------------
Name: Malcolm L. Gefter
Title: Chairman & CEO
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<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
APPENDIX I
PRAECIS PROPOSED CORE DEVELOPMENT STUDIES
*** Appendix I, which including the Confidential
Information contains 22 pages,
has been omitted in its entirety. ***
109
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
APPENDIX II
PATENT APPLICATIONS
LHRH Related Patents
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Type Serial Number Title and Inventors Ststus
US, CIP, (PPI Number)
PCT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
US 08/480,94 LHRH Antagonist Peptides by ***
(PPI-007) Roger W. Roeske
- -----------------------------------------------------------------------------------------------------------------
PCT PCT/US96/09852 LHRH Antagonist Peptides by ***
(PPI-007CPPC) Roger W. Roeske
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
US 08/573,109 Methods for Treating Prostate Cancer with LHRH ***
Antagonists by Marc B. Garnick, Christopher J.
Molineaux and Malcolm L. Gefter
- -----------------------------------------------------------------------------------------------------------------
US, CIP of 08/755,593 Methods for Treating Prostate Cancer with LHRH ***
08/573,109 (PPI-013CP) Antagonists by Marc B. Garnick, Christopher J.
Molineaux and Malcolm L. Gefter
- -----------------------------------------------------------------------------------------------------------------
PCT PCT/US96/18911 Methods for Treating Prostate Cancer with LHRH ***
(PPI-013CPPC) Antagonists by Marc B. Garnick, Christopher J.
Molineaux and Malcolm L. Gefter
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
<TABLE>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
US 08/762,747 Pharmaceutical Formulations for Sustained Drug ***
Delivery by Malcolm L. Gefter, Nicholas Barker,
Gary Musso and Christopher J. Molineaux
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
APPENDIX III
IUF LICENSE AGREEMENT
See Exhibit 10.9 to
the Registration Statement
112
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
APPENDIX IV
PPI-149 DEFINITION
PPI-149 shall mean a peptide compound having the following structure:
***
113
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APPENDIX V
TERRITORY
SECTION A
Europe, consisting of:
<TABLE>
<S> <C> <C> <C>
Austria Belgium Denmark Greece
Finland *France *Germany Luxembourg
Ireland *Italy Liechtenstein *Spain
Monaco Netherlands Norway Portugal
San Marino Sweden Switzerland *United Kingdom
Vatican Iceland
Andora
</TABLE>
*Major European Territory Countries
SECTION B
Latin America, consisting of:
<TABLE>
<S> <C> <C> <C>
Belize Costa Rica Guatemala Honduras
Mexico Nicaragua Panama San Salvador
Argentina Bolivia Brazil Chile
Columbia Ecuador French Guyana Guyana
Paraguay Peru Uruguay Venezuela
</TABLE>
Eastern Europe, consisting of:
<TABLE>
<S> <C> <C> <C>
Albania Armenia Azerbaijan Belarusse
Bosnia-Herzegovina Bulgaria Croatia Czech Republic
Estonia Georgia Hungary Kazakhstan
Kyrgyz Latvia Lithuania Macedonia
Moldova Poland Roumania Russia
Slovakia Slovenia Tadzhikistan Turkmenistan
Ukrainia Uzbekistan Yugoslavia
</TABLE>
The following countries of Africa, consisting of:
<TABLE>
<S> <C> <C> <C>
Algeria Benin Burkina-Fasso Cameroun
Central African Chad Congo Djibouti
Republic
Gabon Guinea Guinea Bissau Ivory Coast
Madagascar Mali Mauritania Morocco
Niger Rwanda Senegal Seychelles
Tunisia Zaire South Africa
</TABLE>
Middle East, consisting of:
<TABLE>
<S> <C> <C> <C>
Iran Iraq Israel Jordan
Kuwait Lebanon Oman Saudi Arabia
South Yemen Syria Turkey Yemen
Cyprus United Arab Bahrain
Malta Emirates Qatar
</TABLE>
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APPENDIX VI
ADDITIONAL SUPPLY PROVISIONS
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<PAGE>
APPENDIX VI
Additional Supply Terms
MANUFACTURING AND PRODUCT QUALITY
1. Licensed Products shall be delivered as finished products according to the
specifications in the Registration Approval and any further specifications
agreed to by the parties. Finished products shall be deemed to mean powder
and diluent in separate closed sterile and unlabeled vials packed in an
appropriately labeled bulk shipment container as per section 3.15 PRAECIS
shall not be responsible for final commercial packaging and labeling.
PRAECIS shall ensure that unlabeled vials shall at all times, until final
packaging by Synthelabo, be traceable.
2. Synthelabo and PRAECIS shall collaborate in the definition of
specifications in the registration processes within the Territory.
3. Synthelabo agrees, where in the best interest of the Parties to diligently
seek to obtain approval by the appropriate regulatory authorities in the
respective Territory Countries, of the specifications of the Licensed
Product proposed by PRAECIS.
4. The following is a general description of the manufacturing operations for
Licensed Products:
o purchasing, reception, storage of raw materials and bulk packing
material of Licensed Products,
o manufacturing and bulk packaging of Licensed Products,
o control of raw material, bulk packaging material, in process control
and control of Licensed Products as defined in the Quality Charter,
o Packing and storage of bulk Licensed Product,
o Releasing of bulk Licensed Products
o file maintenance and storage of batch records and samples for
analysis.
<PAGE>
5. The place of manufacture of the Licensed Products shall be communicated to
Synthelabo at least 6 months in advance of anticipated commencement of
manufacture of Licensed Product for commercial sale.
6. The raw materials and bulk packaging materials shall be stored by PRAECIS
or its subcontractor under its sole responsibility.
7. PRAECIS is solely responsible for the safe storage of the bulk Licensed
Products until delivery.
8. PRAECIS covenants to store in appropriate conditions the raw materials,
packaging materials and finished Licensed Products, according to cGMP.
9. PRAECIS undertakes to manufacture and package the Licensed Products
according to good manufacturing practices reasonably acceptable in Europe
as well as in accordance with the process set out in the Quality Charter.
In the absence of specific guidelines in the Quality Charter PRAECIS shall
follow the current European Guide and in particular chapter 7 of such
Guide.
10. PRAECIS undertakes to control raw materials, packaging materials and
Licensed Products according to the techniques and instructions for
analysis set out in the Quality Charter.
11. Any dispute as to whether or not the procedure is being correctly followed
shall be resolved in accordance with the provisions of the Quality
Charter.
12. PRAECIS must ensure that its representative signing the Quality Charter
has the appropriate experience and holds the appropriate position in
PRAECIS's manufacturing unit.
13. Synthelabo or its representative has the right to verify at any time that
the manufacture of the Licensed Products is being carried out in the
proper manner. To this end PRAECIS agrees, upon reasonable advance notice
by Synthelabo, to allow Synthelabo or such designee to have access to the
manufacturing and control areas, to take samples and in general to inspect
the manufacturing operations during reasonable business hours provided any
such inspection does not interrupt or impair in any significant manner the
manufacturing operations. Access to certain areas, information and samples
may be restricted to the extent PRAECIS reasonably determines that such
verification,
<PAGE>
access, sampling or inspection would constitute a transfer of technology
prior to the events which would mandate such transfer as contemplated in
3.9.
14. Critical and major deficiencies raised during such audit or inspection
shall be promptly notified to PRAECIS.
15. PRAECIS will send to Synthelabo a timetable of the corrective actions
within a prompt and reasonable period following the receipt of the written
audit report.
16. The timetable for correction of deficiencies will be commensurate with
their criticality.
17. PRAECIS may only ship the Licensed Products to Synthelabo after such
products have been released by PRAECIS according to the procedure defined
in the Quality Charter.
18. PRAECIS shall provide Synthelabo with the necessary documents and samples
specified in the Quality Charter, and shall do so in accordance with the
conditions (time limit, nature of documents etc.) set out in such Quality
Charter.
19. PRAECIS undertakes to prepare records of all stages of manufacture and
quality control on the basis of the Quality Charter and to keep them for
at least 5 years unless otherwise stipulated.
20. Synthelabo reserves the right to reject any batch which does not conform
to the specifications in the Quality Charter. In this event, PRAECIS may
then recover at PRAECIS's expense the rejected products according to the
rework process as described in the Quality Charter.
21. In the event the parties agree in writing that a batch does not conform to
the specifications, PRAECIS shall at its own expense, within forty-five
(45) days of Synthelabo's rejection thereof, replace the defective batch.
22. In the event of a dispute as to the acceptance of a batch, the parties
agree to discuss the problem with a view to finding an amicable solution
to the extent that the dispute cannot be resolved amicably, the issue
shall be referred to an independent expert nominated by PRAECIS and to
whom Synthelabo does not reasonably object.
<PAGE>
23. If the parties are not able to agree on an expert within two (2) months of
a party's objection thereto, an expert will be appointed by the President
of the Court of Arbitration of the ICC upon request by either one of the
parties.
24. The expert so appointed will determine whether the batch in question
conforms with the general standards and with the procedure for analytical
control set out in the Quality Charter, and whether the manufacturing
conditions have been properly followed, having particular regard to the
file provided by PRAECIS for each Licensed Product.
25. The parties agree to accept the findings and conclusion reached by the
expert. If the expert considers the Licensed Products to be clearly
defective, all his fees, expenses and the cost of destruction of Licensed
Products will be paid for by PRAECIS, which party shall also be bound to
reimburse whatever sums Synthelabo has already paid for the defective
batch.
26. If the expert considers the Licensed Products to be not defective, all
fees and expenses of the expert will be paid for by Synthelabo.
27. The Parties agree to develop and register rework processes and procedures.
In the event a defective batch can not be reworked and necessitates
destruction, all destruction shall be performed by PRAECIS. Following
destruction, PRAECIS will send to Synthelabo a certificate of destruction
indicating the following:
o name of the Licensed Products
o batch number
o quantity
o name of the company who has destroyed the Licensed Products
28. Each party agrees to make the relevant Authorities such declarations as
are necessary to comply with pharmaceutical law applicable to such party.
29. Any term of this Agreement that does not comply with the law regulating
the pharmaceutical profession must be modified accordingly within the
shortest possible time.
Capitalized terms used but not defined in this Appendix VI shall have the
respective meaning ascribed thereto in the License Agreement
<PAGE>
dated as of May 13, 1997 (the "License Agreement") between PRAECIS and
Synthelabo to which this Appendix VI is attached
<PAGE>
[LOGO Synthelabo]
Mr. Marc SILVER
Vice President
Business Development
PRAECIS PHARMACEUTICALS, Inc.
One Hampshire Street
Cambridge
MA 02139
Etats-Unis
Le Plessis-Robinson, 31 July, 1997
Ref.: BJJ/fm - 231
Sent via telefax: 00.1.617.494.8414
Dear Marc,
I refer to the discussions and deliberations we have had over the past few weeks
relating to the contribution that SYNTHELABO is to make to the costs of the core
development studies for PPI-149 for the treatment of prostate cancer (which
includes all pre-clinical costs for all indications).
At the Steering Committee of 24 July, it was agreed that, notwithstanding any
other term of our license agreement, SYNTHELABO's total contribution to these
core development costs shall be limited to 30 million French francs paid as
follows: 5 million every six months commencing 1 September 1997 (to be paid
within 30 days of this date and within 30 days of every subsequent six months
period). This will be the maximum paid for this programme and includes the cost
of all pre-clinical (for all indications) and clinical studies for the treatment
of prostate cancer whether performed by PRAECIS, SYNTHELABO or contact research
organisations, total formulated drug costs, any CMC studies and internal costs
incurred by PRAECIS.
As I discussed with Malcolm Gefter, the above core development costs are the
costs of all the studies necessary to obtain a full NDA including the mandatory
phase IV studies if the first approval is conditional.
If you agree with the above, would you please arrange for PRAECIS to sign both
copies of this letter returning one copy for our files.
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Best regards, Agreed and accepted by
PRAECIS PHARMACEUTICALS, INC.
Name: Marc A. Silver
/s/ Bernard Jordan Signature: /s/ Marc A. Silver
B.J. JORDAN Date: September 5, 1997
Director of Licensing Department
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
EXHIBIT 10.8
EXECUTION COPY
COLLABORATION AND LICENSE AGREEMENT
by and between
PHARMACEUTICAL PEPTIDES, INC.
and
BOEHRINGER INGELHEIM INTERNATIONAL GmbH
dated as of August 1, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS..............................................1
1.1 AAI................................................1
1.2 Abandonment Date...................................1
1.3 Affiliate..........................................1
1.4 Applicable Base Royalty Rate.......................2
1.5 BI Compound........................................2
1.6 BI Patent Rights...................................2
1.7 BI Product.........................................2
1.8 Develop or Development.............................2
1.9 Designated BI Compound.............................2
1.10 Effective Date....................................2
1.11 Exchange Information..............................3
1.12 Exclusivity Period................................3
1.13 First Commercial Sale.............................3
1.14 FTE...............................................3
1.15 Indemnitee........................................3
1.16 Indemnitor........................................3
1.17 Information.......................................3
1.18 Licensed Diagnostic Compound......................3
1.19 Marketing Authorization...........................3
1.20 Net Sales.........................................3
1.21 Patent Expiration Date............................4
1.22 Phase 0...........................................4
1.23 Phase I...........................................5
1.24 Phase II..........................................5
1.25 Phase III.........................................5
1.26 PPI Change of Control Transaction.................5
1.27 PPI Compound......................................5
1.28 PPI Information...................................5
1.29 PPI Patent Rights.................................6
1.30 PPI Product.......................................6
1.31 Publishing Party..................................6
1.32 Recognized Agent..................................6
1.33 Reviewing Party...................................7
1.34 Sale Date.........................................7
1.35 SAR Information...................................7
1.36 Screening Data....................................7
1.37 Screening Program.................................7
1.38 Screening Term....................................7
1.39 Screening Term Year...............................7
1.40 SEC...............................................7
1.41 Section 10.4.1(a) Notice..........................7
1.42 Territory.........................................7
1.43 Third Party.......................................7
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<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
1.44 Third Party AD Product............................7
1.45 Work Plan.........................................8
1.46 ***% Royalty Rate.................................8
1.47 ***% Royalty Rate.................................8
ARTICLE 2. SCREENING PROGRAM........................................8
2.1 Screening Services.................................8
2.2 Payments...........................................8
2.3 Expense Reimbursement..............................9
2.4 Screening Term.....................................9
2.5 Exclusivity.......................................10
ARTICLE 3. LICENSE GRANTS; DEVELOPMENT, MANUFACTURING
AND MARKETING OF BI PRODUCTS........................11
3.1 Grant of License Rights by PPI to BI..............11
3.2 Sublicense Rights.................................12
3.3 Diligence; Limit on Sales to
Recognized Agents..............................12
3.4 Failure to Market Due to Currency
Difficulties...................................12
3.5 Future License Rights.............................13
3.5.1 PPI's Future License Right..............13
3.5.2 BI's Right of First
Refusal...............................14
ARTICLE 4. EXCHANGE OF INFORMATION.................................15
4.1 Information to be Provided........................15
4.2 Information Not Required to be
Provided; Restriction on Certain
Research Activities............................16
ARTICLE 5. INTELLECTUAL PROPERTY RIGHTS............................16
ARTICLE 6. ROYALTIES...............................................17
6.1 Royalties on Net Sales............................17
6.1.1 Royalty Rate............................17
6.1.2 Third Party Patents;
Combination BI Products; Bundled Products...........19
6.1.3 Sublicense Royalties....................19
6.2 Royalty Reports; Exchange Rates...................20
6.3 Audits............................................20
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6.4 Royalty Payment Terms.............................21
6.5 Withholding Taxes.................................21
6.6 Application for Tax Exemption.....................22
6.7 Interest on Late Payments.........................22
6.8 Duration of Royalties; Step Down..................22
ARTICLE 7. CONFIDENTIALITY.........................................23
7.1 Nondisclosure Obligations.........................23
7.1.1 General.................................23
7.1.2 Limitations.............................23
7.2 Terms of this Agreement...........................24
7.3 Publications......................................25
7.3.1 Procedure...............................25
7.3.2 Delay...................................25
7.3.3 Resolution..............................25
7.4 Injunctive Relief.................................26
ARTICLE 8. REPRESENTATIONS AND WARRANTIES..........................26
ARTICLE 9. INDEMNITY...............................................26
9.1 BI Indemnity Obligations..........................26
9.2 PPI Indemnity Obligations.........................27
9.3 Procedure.........................................27
9.4 Insurance.........................................28
ARTICLE 10. TERMINATION............................................28
10.1 Termination......................................28
10.1.1 Material Breach........................28
10.1.2 Failure of BI to Pay...................28
10.1.3 Failure of BI to Use
Diligent Efforts.....................29
10.1.4 Bankruptcy...............................29
10.1.5 Change of Control........................29
10.2 Effect of Termination Generally..................29
10.2.1 Existing Obligations.....................29
10.2.2 Survival.................................29
10.3 Effect of Termination by PPI.....................30
10.3.1 Termination by PPI Prior
to Commencement of Phase III..........30
10.3.2 Termination By PPI After
Commencement of Phase III.............30
10.4 Effect of Termination by BI......................30
10.4.1 Termination for PPI Breach...............30
10.4.2 Termination for Change of
Control...............................32
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ARTICLE 11. MISCELLANEOUS..........................................32
11.1 Force Majeure....................................32
11.2 Assignment.......................................33
11.3 Severability.....................................33
11.4 Notices..........................................34
11.5 Applicable Law...................................35
11.6 Dispute Resolution; Choice of
Forum......................................35
11.7 Arbitration......................................35
11.8 Entire Agreement.................................35
11.9 Headings.........................................36
11.10 Independent Contractors.........................36
11.11 Agreement Not to Solicit
Employees..................................36
11.12 Exports.........................................36
11.13 Waiver..........................................37
11.14 Counterparts....................................37
Appendix A - PPI Patent Rights
Appendix B - Recognized Agents of BI
Appendix C - Work Plan
iv
<PAGE>
COLLABORATION AND LICENSE AGREEMENT
This COLLABORATION AND LICENSE AGREEMENT (the "Agreement") is made
as of August 1, 1996, by and between Pharmaceutical Peptides, Inc., a Delaware
corporation having its principal place of business at One Hampshire Street,
Cambridge, Massachusetts 02139-1572 ("PPI"), and Boehringer Ingelheim
International GmbH, a limited liability company organized under the laws of the
Federal Republic of Germany having its principal place of business at D-55216
Ingelheim Rhein Germany ("BI").
WHEREAS, PPI is the owner of certain proprietary screening
technology which enables PPI to identify compounds as lead candidates for
discovery program for compounds and drug development; and
WHEREAS, PPI has a discovery program for compounds which exhibit
A(beta) peptide amyloid aggregation inhibition activity with a view to
developing and commercializing such compounds as pharmaceutical products; and
WHEREAS, BI possesses certain compounds which it desires to have
screened by PPI in order to identify if any such compounds or their derivatives
exhibit A(beta) peptide amyloid aggregation inhibition activity with a view to
developing and commercializing such compounds as pharmaceutical products;
NOW, THEREFORE, in consideration of the foregoing, and the
representations, warranties and agreements contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1. DEFINITIONS
1.1 "AAI" shall mean amyloid aggregation inhibition.
1.2 "Abandonment Date" shall have the meaning set forth in
Section 3.5.
1.3 "Affiliate" shall mean any corporation or other entity which
controls, is controlled by, or is under
<PAGE>
common control with a party to this Agreement. A corporation or other entity
shall be regarded as in control of another corporation or entity if it owns or
directly or indirectly controls more than fifty percent (50%) of the voting
stock or other ownership interest of the other corporation or entity, or if it
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of the corporation or other entity or the power to
elect or appoint fifty percent (50%) or more of the members of the governing
body of the corporation or other entity.
1.4 "Applicable Base Royalty Rate" shall have the meaning set forth
in Section 6.1.
1.5 "BI Compound" shall mean and include any of (i) any compound
which is screened by PPI pursuant to Article 2 hereof and exhibits AAI activity
in any of such screens or (ii) any compound which is developed by BI utilizing,
or is based upon, any PPI Information.
1.6 "BI Patent Rights" shall mean all patents, patent applications,
patent extensions, certificates of invention or applications for certificates of
invention, together with any divisions, continuations or continuations-in-part
thereof, which are owned or controlled by, or licensed (or sublicensed) to, BI
with respect to any Designated BI Compound. BI agrees to provide a list to PPI
of BI Patent Rights at least annually.
1.7 "BI Product" shall mean any pharmaceutical preparation or
product containing a BI Compound, whether as the sole active ingredient or mixed
with any other active ingredient.
1.8 "Develop" or "Development" shall mean all work involved in
Phases O, I, II and III, as applicable, with respect to a BI Compound or a BI
Product.
1.9 "Designated BI Compound" shall mean any BI Compound referred to
in clause (i) of the definition of BI Compound (Section 1.5) which exhibits AAI
activity in each of the Nucleation Assay and the Neurotoxicity Assay referred to
in Section I of the Work Plan.
1.10 "Effective Date" shall mean the date first written above.
2
<PAGE>
1.11 "Exchange Information" shall have the meaning set forth in
Section 4.1.
1.12 "Exclusivity Period" shall have the meaning set forth in
Section 2.5.
1.13 "First Commercial Sale" shall mean the first sale for use or
consumption by the general public of a BI Product, PPI Product or a product
containing a Licensed Diagnostic Compound, as applicable, in any country based
upon the required marketing and pricing approval granted by the governing health
authority of such country.
1.14 "FTE" shall mean a full time professional employee dedicated to
the Screening Program.
1.15 "Indemnitee" shall have the meaning set forth in Section 9.3.
1.16 "Indemnitor" shall have the meaning set forth in Section 9.3.
1.17 "Information" shall have the meaning set forth in Section 7.1.
1.18 "Licensed Diagnostic Compound" shall have the meaning set forth
in Section 3.5.1.
1.19 "Marketing Authorization" shall mean all allowances and
approvals (including pricing and reimbursement approvals) granted by the
appropriate federal, state and local regulatory agencies, departments, bureaus
or other governmental entities within a country necessary to market and sell a
BI Product.
1.20 "Net Sales" shall mean the invoiced sales price per unit for
each of the BI Products or PPI Products, as applicable, billed to independent
customers or Recognized Agents by a party or its Affiliates, or permitted
sublicensees of either party, less, to the extent such amounts are included in
the invoiced sales price, actual (a) credited allowances to such independent
customers for such BI Products or PPI Products which were spoiled, damaged,
out-dated or returned; (b) freight and insurance costs incurred in transporting
BI Products or PPI Products to such customers; (c) quantity and other trade
discounts
3
<PAGE>
actually allowed and taken; (d) sales, use, value added and other taxes or
governmental charges incurred in connection with the sale, exportation or
importation of the BI Products or PPI Products in finished packaged form; and
(e) charge back payments and/or rebates provided to managed health care
organizations or federal, state and local governments, their agencies,
purchasers and reimburses, including reimbursements to social security
organizations. The transfer of the BI Products or PPI Products by a party or one
of its Affiliates to (i) another Affiliate of such party or (ii) a permitted
sublicensee of such party shall not be considered a sale; in such cases, Net
Sales shall be determined based on the invoiced sales price by the Affiliate or
permitted sublicensee to its customer, less the deductions allowed under this
Section. Every other commercial use or disposition of BI Products or PPI
Products by a party, its Affiliates or permitted sublicensees, other than
reasonable quantities of promotional samples or bona fide sale to a bona fide
customer, shall be considered a sale of the BI Products or PPI Products at the
weighted average Net Sales price then being invoiced by the seller in arm's
length transactions.
A party or its Affiliates shall be deemed to have sold a "Bundled
Product" if the BI Products or PPI Products are sold by a party or its
Affiliates pursuant to an agreement with an independent customer or a Recognized
Agent specifying, for a combination of products or services, (i) a single price,
(ii) other terms of purchase not separately identifying either a price per
product or the effective deductions referred to above per product or (iii) a
price for units of the BI Products or PPI Products which is discounted below a
party's or its Affiliates' standard invoice price per unit of the BI Products or
PPI Products by at least five percentage points more than the amount that any
other product of service in the Bundled Product is discounted below such other
product's or service's standard invoice price.
1.21 "Patent Expiration Date" shall have the meaning set forth in
Section 6.8
1.22 "Phase 0" shall mean that portion of Development which starts
after a candidate has been selected and approved by BI or a Third Party licensee
thereof for start of development as a product as evidenced by the approval in
writing of such start of development by
4
<PAGE>
BI's International Steering Committee or equivalent body. Phase 0 generally
includes toxicological and pharmacological studies as well as drug substance and
drug product formulation and manufacturing development necessary to obtain the
permission of regulatory authorities to begin and continue human clinical
testing.
1.23 "Phase I" shall mean that portion of Development which starts
with the first introduction into humans of a product with the purpose of
determining safety, metabolism, absorption, elimination and other
pharmacological action in humans as well as additional development work on
animal toxicity, metabolism, drug substance and drug product formulation and
manufacturing development to ensure continuation of human clinical testing.
1.24 "Phase II" shall mean that portion of Development which
includes initial trials on a limited number of patients for the purposes of
determining dose and evaluating safety and preliminary efficacy data in the
proposed therapeutic indication as well as additional development work on animal
toxicity, metabolism, drug substance and drug product formulation and
manufacturing development to ensure continuation of human clinical testing.
1.25 "Phase III" shall mean that portion of Development which
includes continued trials in sufficient numbers of patients to establish safety
and efficacy to support Marketing Authorization in the proposed indication. In
addition, all other development work on animal toxicity, metabolism, drug
substance and drug product formulation and manufacturing development will be
finalized.
1.26 "PPI Change of Control Transaction" shall mean any transaction
described in Section 10.1.5.
1.27 "PPI Compound" shall mean any compound owned by or licensed
(with the right to sublicense) to PPI which exhibits AAI activity.
1.28 "PPI Information" shall mean information, knowledge and
know-how (i) possessed by PPI before the Effective Date relating to the
Screening Program or (ii) generated solely by PPI personnel during the Screening
Program, including but not limited to screening methods and results during the
Screening Term in the course of performing the Screening Program, as well as SAR
Information with
5
<PAGE>
respect to PPI Compounds, which in each case is disclosed to BI hereunder.
1.29 "PPI Patent Rights" shall mean (i) the specific composition of
matter claims and the specific methods claims listed on Appendix A hereto (under
the heading "Claims Included") contained in the patent application and the
continuation in part thereof listed on Appendix A, as such claims are pending in
said applications as of the Effective Date, (ii) the claims referred to in
clause (i) to the extent granted in any resultant U.S. letters patent, (iii) the
claims referred to in clauses (i) and (ii) to the extent contained in any
corresponding Patent Co-operation Treaty applications, European Patent
Convention applications or applications under similar administrative
international conventions, or in any corresponding national patents and patent
applications, (iv) equivalents of the claims referred to in clauses (i), (ii)
and (iii) and (v) any divisional, continuation, substitution, reissue,
extension, supplementary protection certificate or other application solely to
the extent based on the claims referred to in clauses (i) through (iv). PPI
Patent Rights shall exclude all other claims set forth on Appendix A hereto
under the heading "Claims Excluded."
1.30 "PPI Product" shall mean any pharmaceutical preparation
containing a PPI Compound, whether as the sole active ingredient or mixed with
any other active ingredient and which is intended for prophylactic or
therapeutic purposes.
1.31 "Publishing Party" shall have the meaning set forth in Section
7.3.
1.32 "Recognized Agent" shall mean an entity, other than an
Affiliate of PPI or BI, as applicable, through which PPI or BI, as applicable,
distributes and sells its products in a particular country or region. From and
after the First Commercial Sale of a BI Product, PPI Product or a product
containing a Licensed Diagnostic Compound, the selling party will provide the
other party with a complete list of its Recognized Agents and will update such
list at least once annually.
1.33 "Reviewing Party" shall have the meaning set forth in Section
7.3.
6
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1.34 "Sale Date" shall have the meaning set forth in Section 6.8.
1.35 "SAR Information" shall mean and include structure activity
relationships information, and information with respect to chemical structure,
in each case with respect to PPI Compounds, whether in existence on the
Effective Date or generated thereafter.
1.36 "Screening Data" shall have the meaning set forth in Section
7.3.
1.37 "Screening Program" shall mean the collaboration by PPI and BI
during the Screening Term provided for in Article 2.
1.38 "Screening Term" shall mean the two-year period commencing on
the Effective Date, as extended pursuant to Section 2.4 hereof, unless this
Agreement is earlier terminated in accordance with Article 10 below, in which
event the Screening Term shall terminate on the effective date of such
termination.
1.39 "Screening Term Year" shall have the meaning set forth in
Section 2.3.
1.40 "SEC" shall mean the United States Securities and Exchange
Commission.
1.41 "Section 10.4.1(a) Notice" shall have the meaning set forth in
Section 10.4.
1.42 "Territory" shall mean all countries and territories in the
world.
1.43 "Third Party" shall mean any entity other than PPI and BI,
their respective Affiliates and Recognized Agents.
1.44 "Third Party AD Product" shall mean a pharmaceutical product
(other than a BI Product or a PPI Product) for the prevention or treatment of
Alzheimer's Disease which achieves its prophylactic or therapeutic effect
through A(beta) peptide AAI activity.
1.45 "Work Plan" shall mean the description of, and certain terms
and conditions applicable to, the
7
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
screening services to be carried out by PPI pursuant to this Agreement,
including the scope and timing of such work, the in vitro and in vivo assays to
be utilized by PPI in performing such work, the anticipated annual capital
budget (and particular items of equipment to be purchased by PPI) in connection
with performing such work, as set forth in Appendix B, as it may be amended by
mutual agreement of the parties from time to time.
1.46 "***% Royalty Rate" shall have the meaning set forth in Section
6.1.
1.47 "***% Royalty Rate" shall have the meaning set forth in Section
6.1.
ARTICLE 2. SCREENING PROGRAM
2.1 Screening Services. Subject to and in accordance with the terms
and provisions of the Work Plan, during the Screening Term, PPI shall screen
compounds provided by BI.
2.2 Payments. Subject to the last two sentences of Section 11.1, BI
shall pay PPI *** Approximately 15 lines omitted ***. In the event the
conditions for payment in the preceding sentence are not met on the first
anniversary of the Effective Date for reasons associated with the nature of the
compounds provided by BI (PPI agreeing to use best efforts, but without
incurring significant additional expense or materially adversely delaying the
Work Plan, to minimize or eliminate any such reasons) or because of delays to
the Work Plan caused by BI, BI agrees to make such payment on such first
anniversary, provided PPI is then in compliance in all material respects with
the terms and provisions of this Agreement (other than any non-compliance for
reasons associated with the nature of the compounds provided by BI or because of
delays to the Work Plan caused by BI).
8
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
2.3 Expense Reimbursement.
(a) BI shall reimburse PPI for the following expenses in
respect of each consecutive twelve-month period during the Screening Term (a
"Screening Term Year"): (i) $250,000 per FTE; provided, that BI shall not be
required to reimburse PPI for more than four FTEs, and (ii) actual amounts
expended for capital budget items as set forth in the Work Plan; provided,
however, that BI shall not be required to reimburse PPI pursuant to this Section
2.3 for expenses in excess of an aggregate of $2.5 million in respect of the
first two Screening Term Years and an aggregate of $1.25 million in respect of
any Screening Term Year.
(b) BI shall reimburse PPI at the end of each quarter for
expenses incurred by PPI during such quarter pursuant to paragraph (a) above,
such reimbursement payments to be received by PPI within fifteen days of BI's
receipt of a reasonably itemized invoice for such expenses prepared by PPI. For
purposes of this clause (b), expenses incurred by PPI for any FTE hired prior to
the Effective Date shall be deemed to be reimbursable expenses under paragraph
(a) above and shall be included in the first quarterly invoice prepared by PPI.
2.4 Screening Term.
(a) BI shall have the option, exercisable on any number of
occasions by delivering written notice to PPI not later than six months prior to
the expiration of the Screening Term then in effect, to extend such Screening
Term for an additional one (1) year period commencing on the later of the
expiration of the Screening Term then in effect or the expiration of any
extension thereof pursuant to subsection 2.4(b), provided that on or prior to
the commencement of such additional one (1) year period (i) BI pays (and
delivery of such notice shall constitute BI's agreement to pay) PPI $*** in cash
and (ii) the parties have agreed in writing to an amended Work Plan.
9
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
(b) Notwithstanding subsection 2.4(a), if (i) BI is in
compliance with the terms and provisions of this Agreement (including without
limitation the Work Plan), and (ii) at the expiration of the Screening Term then
in effect, PPI has not completed the screening contemplated by the Work Plan
then in effect, then (A) PPI shall, if BI so requests by written notice to PPI
within fifteen (15) days after expiration of the Screening Term then in effect,
complete any such screening and the Screening Term shall be automatically
extended until the completion of such screening and (B) BI shall not be required
to pay PPI the $*** in cash referred to in subsection 2.4(a) in respect of the
extension of the Screening Term pursuant to this subsection 2.4(b) or to
reimburse PPI in accordance with Section 2.3 for expenses incurred by PPI during
such extension.
2.5 Exclusivity.
(a) So long as (i) the Screening Term is in effect and BI has
supplied PPI with compounds in accordance with the Work Plan or (ii) BI is
pursuing Development or marketing of any BI Compound or BI Product with diligent
efforts at least consistent with those of BI with respect to other BI products
with similar commercial potential (the "Exclusivity Period"), PPI shall not
screen any Third Party compounds for A(beta) peptide AAI activity; provided,
however, that this restriction on screening during the Exclusivity Period only
applies to screening of compounds as potential prophylactics or therapeutics.
Without limitation of the foregoing restriction, PPI covenants and agrees with
BI that during the Exclusivity Period, if PPI enters into any agreement with a
Third Party to screen compounds of such Third Party for AAI activity, such
agreement shall provide that such Third Party shall not (i) utilize any
information provided by PPI to such Third Party in connection with the
development of, or (ii) develop, any such Third Party compound for use as a
prophylactic or therapeutic product for Alzheimer's Disease. PPI shall use its
reasonable efforts to enforce any such provision in any such agreement with such
a Third Party. For purposes of this Section 2.5(a), "Third Party" includes any
Recognized Agent of PPI.
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(b) During the Exclusivity Period, BI shall not provide any
compounds to any Third Party for screening for A(beta) peptide AAI activity.
Without limitation of the foregoing restriction, BI covenants and agrees with
PPI that during the Exclusivity Period, if BI provides any compounds to any
Third Party for screening for AAI activity, BI will not, and will obtain an
agreement from such Third Party that such Third Party will not, (i) utilize any
information provided to or by such Third Party pursuant to such arrangement in
connection with the development of, or (ii) develop, any such compounds for use
as a prophylactic, therapeutic or diagnostic product for Alzheimer's Disease. BI
shall use its reasonable efforts to enforce any such provision in any such
agreement with such a Third Party. For purposes of this Section 2.5(b), "Third
Party" includes any Recognized Agent of BI.
ARTICLE 3. LICENSE GRANTS; DEVELOPMENT,
MANUFACTURING AND MARKETING OF BI PRODUCTS
3.1 Grant of License Rights by PPI to BI. Subject to the terms and
conditions of this Agreement, PPI hereby grants to BI an exclusive (except as to
PPI, its Affiliates and their respective sublicensees) right and license in the
Territory during the Exclusivity Period, under the PPI Information and the PPI
Patent Rights, to develop BI Compounds, and to develop, manufacture or have
manufactured, use and sell or have sold BI Compounds as incorporated into a BI
Product, in each case solely for use (i) as a prophylactic or therapeutic or
(ii) as a diagnostic solely to the extent that any such BI Compound is required
as a diagnostic in order to commercialize a BI Compound, and sell the
corresponding BI Product, as a prophylactic or therapeutic. It is understood
that BI will have no right to, and BI agrees that it will not, develop,
manufacture or have manufactured, use, sell or have sold any BI Compound or BI
Product for use as a diagnostic, except as and to the extent that such BI
Compound or BI Product is required as a diagnostic in order for BI to
commercialize a BI Compound, and for BI to sell the corresponding BI Product, as
a prophylactic or therapeutic.
3.2 Sublicense Rights. BI shall have the right to grant sublicenses
with respect to the license granted in Section 3.1 to Affiliates of BI, BI's
Recognized Agents and third parties.
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
3.3 Diligence; Limit on Sales to Recognized Agents. BI shall (i) use
diligent efforts at least consistent with BI's normal business practices with
respect to other BI products with similar commercial potential, to (A) Develop
BI Compounds (and shall immediately advise PPI in writing if a BI Compound has
been selected and approved for start of development as described in the
definition of Phase 0 (Section 1.22)), manufacture, market and distribute the
corresponding BI Products throughout the Territory and obtain all requisite
regulatory licenses, permits or approvals relating thereto and (B) obtain and
enforce patent and other relevant intellectual property protection in the
Territory for BI Compounds and BI Products with respect to which BI is required
to use diligent efforts pursuant to clause (A) immediately above, and (ii)
provide PPI on a semi-annual basis with status reports in reasonable detail with
respect to such activities. BI covenants and agrees with PPI that in no event
will the amount of Net Sales in any year of any BI Product in the Territory to
BI's Recognized Agents exceed 10% of the total amount of Net Sales of such BI
Product in the Territory during such year.
3.4 Failure to Market Due to Currency Difficulties. It shall not be
considered a breach of BI's obligations under Section 3.3 if BI reduces or halts
shipments of BI Products to a country which by law, regulation or fiscal policy,
has restricted or forbidden the transfer of funds of a convertible currency to
Germany, provided that BI notifies PPI of any such circumstance and resumes the
obligations to market the BI Products in such country promptly after such
circumstance no longer exists. BI shall, however, remain obligated to pay
royalties to PPI on its Net Sales, if any, in such country as provided in
Article 6.
3.5 Future License Rights.
3.5.1 PPI's Future License Right. In the event (i) BI has not,
within *** after the end of the Screening Term, either (A) commenced Development
of at least
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one BI Compound or (B) granted a license to at least one BI Compound to a Third
Party which is financially and otherwise reasonably capable of pursuing the
development and commercialization of such BI Compound and which imposes on such
Third Party diligence obligations no less stringent than those imposed upon BI
pursuant to this Agreement, or (ii) if after commencing such Development or
granting such a license to such a Third Party, BI or such Third Party ceases to
pursue such Development or such license is terminated, PPI shall have the right
to obtain an exclusive royalty-bearing license in the Territory, with the right
to grant sublicenses, under any and all applicable BI Patent Rights and BI
know-how, on royalty and other customary terms to be negotiated in good faith by
the parties hereto, to use, develop, manufacture and have manufactured, any one
BI Compound, and to use, manufacture, have manufactured, distribute for sale,
sell and have sold, any corresponding BI Product. PPI shall have the same
license right, to the same extent set forth in the immediately preceding
sentence, with respect to any BI Compound, and corresponding BI Product, which
PPI determines it will seek to develop and commercialize as a diagnostic, other
than any such BI Compound which is required by BI as a diagnostic in order to
commercialize any BI Compound, and sell the corresponding BI Product, as a
prophylactic or therapeutic, and of which BI or a Third Party licensee thereof
has commenced and not ceased Development (any such BI Compound as to which PPI
makes such a determination being referred to as a "Licensed Diagnostic
Compound"). BI or any Third Party referred to above shall be deemed to have
ceased Development of a BI Compound if, (i) in the case of BI, it fails to meet
the diligence requirements set forth in Section 3.3 above with respect to
Development of such BI Compound or, in the case of such Third Party it fails to
meet the analogous diligence requirements in the applicable license to such
Third Party or (ii) BI or any Third Party referred to above abandons Development
of such BI Compound or the license held by such Third Party terminates prior to
the Development and commercialization of such BI Compound (the date of any such
cessation or abandonment being referred to herein as an "Abandonment Date"). In
order that PPI may realize the benefits of this Section 3.5.1, (i) BI shall
promptly provide PPI with such information as PPI may reasonably require and
request with respect to each Designated BI Compound if BI has not taken either
of the actions referred to in clause (i) of the first sentence of this Section
3.5.1 within the time period specified in such clause and (ii) BI shall promptly
notify PPI in writing
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<PAGE>
after becoming aware of the occurrence of an Abandonment Date. Upon the
occurrence of an Abandonment Date, or, with respect to any Licensed Diagnostic
Compound, upon notice from PPI that it will seek to develop such Licensed
Diagnostic Compound, BI shall promptly provide PPI with such information as PPI
may reasonably require and request with respect to the BI Compound which is the
subject of such Abandonment Date and/or with respect to such Licensed Diagnostic
Compound, subject to PPI's execution of an appropriate confidentiality agreement
reasonably acceptable to BI, and within fifteen (15) days of the written request
of PPI, the parties shall commence good faith negotiations with respect to the
royalty and other terms of the license of such BI Compound(s) and/or Licensed
Diagnostic Compound(s) to PPI in accordance with this Section 3.5.1. If within
sixty (60) days of the commencement of such negotiations the parties have not
entered into a definitive license agreement with respect to such BI Compound(s)
and/or Licensed Diagnostic Compound(s), the terms of such license agreement
shall be determined by binding arbitration in accordance with Section 11.7
hereof, and the parties shall be obligated to promptly execute and deliver a
definitive license agreement containing such terms.
3.5.2 BI's Right of First Refusal. BI shall, subject to and in
accordance with the provisions set forth below, have a right of first
negotiation to obtain an exclusive royalty-bearing license in the Territory with
respect to any PPI Compound, solely for use as a prophylactic or therapeutic for
Alzheimer's Disease, which PPI has determined to seek to license to a Third
Party. PPI shall promptly notify BI of such determination (a "PPI License
Notice"), and BI shall have twenty (20) days after receipt of a PPI License
Notice to notify PPI (an "Initial BI License Response Notice") that it may seek
to enter into such negotiations and, as part of such Initial BI License Response
Notice, to request such information with respect to such PPI Compound as it
reasonably requires to determine whether to enter into such negotiations. If BI
has timely delivered an Initial BI License Response Notice, PPI shall promptly
provide such information with respect to such PPI Compound as BI has requested
in the Initial BI License Response Notice and is available to PPI, subject to
BI's execution of an appropriate confidentiality agreement reasonably acceptable
to PPI. BI shall have thirty (30) days after PPI's substantial compliance with
the information request included as part of the Initial BI License
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<PAGE>
Response Notice to notify PPI in writing that it has determined to enter into
such negotiations (a "BI Negotiation Notice"). If BI has not timely delivered a
BI Negotiation Notice, PPI shall be free to enter into an agreement with a Third
Party to license such PPI Compound on such terms and conditions as PPI shall
determine. If BI timely delivers a BI Negotiation Notice, then for a period of
sixty (60) days after PPI's receipt of such BI Negotiation Notice, PPI will
negotiate exclusively with BI with respect to the terms of such a license. If at
the end of such sixty (60) day period the parties have not entered into a
definitive license agreement with respect to such PPI Compound, then PPI shall
be free to enter into an agreement with a Third Party to license such PPI
Compound, provided that the terms of such license agreement shall not, taken as
a whole, be materially more favorable to such Third Party than the terms, if
any, last offered in writing by BI to PPI during the aforesaid sixty (60) day
period, unless PPI has first offered BI in writing the opportunity to enter into
the license agreement containing such more favorable terms and BI has not
executed and delivered such license agreement within twenty (20) days after
receipt of such written offer from PPI.
ARTICLE 4. EXCHANGE OF INFORMATION
4.1 Information to be Provided. During the Screening Term, each
party shall promptly provide the other party with information and results
generated from the Screening Program (the "Exchange Information"), and, without
limiting the generality of the foregoing, PPI shall promptly provide BI with SAR
Information to the extent reasonably necessary to facilitate BI's selection of a
BI Compound for Development; provided, however, that PPI shall not be required
to provide BI with any clinical data relating to any PPI Compound. However, PPI
agrees to provide BI with copies of its clinical plans and protocols relating to
clinical trials with respect to each PPI Compound, and PPI agrees, and BI shall
have the right for a sixty (60) day period after receipt of such clinical plans
or protocols, to negotiate in good faith the financial and other terms and
conditions upon which BI would gain access to such clinical data.
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<PAGE>
4.2 Information Not Required to be Provided; Restriction on
Certain Research Activities. Notwithstanding Section 4.1 or any other
provision of this Agreement, (i) so long as the withholding of Exchange
Information does not materially adversely affect the Screening Program,
neither party shall be required to provide the other party with general,
enabling technology or with other general technical information or know-how
which is applicable outside the scope of the Screening Program and (ii)
neither party will analyze the chemical and/or physical properties of any
compound provided by such party to the other party hereunder or otherwise
undertake any analysis of such compound to derive or elucidate such
structural information; provided, that upon BI's selection of a BI Compound
for Development, or PPI's exercise of its license rights with respect to a BI
Compound (including a Licensed Diagnostic Compound) pursuant to Section
3.5.1, BI shall promptly disclose to PPI structural information with respect
to such BI Compound(s).
ARTICLE 5. INTELLECTUAL PROPERTY RIGHTS
Except to the extent expressly set forth in this Agreement, (a) all
right, title and interest in PPI Patent Rights, other patent or intellectual
property rights of any kind relating to any PPI Compounds, all PPI Information
and any PPI Compounds shall be and remain vested solely and exclusively in PPI,
(b) all right, title and interest in all BI Patent Rights, BI Information and BI
Compounds shall be and remain vested solely and exclusively in BI and (c) under
no circumstances shall a party hereto, as a result of this Agreement, obtain any
ownership interest in or other right to any technology, know-how, patents,
pending patent applications, products or biological materials of the other
party, including items owned, controlled or developed by the other party, or
transferred by the other party to said party, at any time pursuant to this
Agreement.
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
ARTICLE 6. ROYALTIES
6.1 Royalties on Net Sales.
6.1.1 Royalty Rate.
(a) In consideration of the rights granted to BI under Section
3.1, with respect to any BI Product, BI shall pay PPI (i) a royalty in the
amount equal to ***% of annual Net Sales of such BI Product (the "***% Royalty
Rate") up to $***, and (ii) a royalty in the amount equal to ***% of that
portion of annual Net Sales of such BI Product (the "***% Royalty Rate") greater
than $***. Each of the ***% Royalty Rate and the ***% Royalty Rate are referred
to herein as the "Applicable Base Royalty Rate." The Applicable Base Royalty
Rate is subject to increase as provided in Section 6.1.1(b), and to reduction as
provided in Section 6.1.1(c) and Section 6.8.
(b) If, within three years after PPI's First Commercial Sale
of a PPI Product in a country, BI introduces a BI Product to the market in such
country, the Applicable Base Royalty Rate with respect to Net Sales of such BI
Product in such country for the first and second consecutive twelve-month
periods, respectively, commencing on the First Commercial Sale of such BI
Product in such country, shall be the Applicable Base Royalty Rate with respect
to such Net Sales, plus ***% and ***%, respectively; provided, however, that the
maximum amount of additional royalties (over and above the amount of royalties
payable pursuant to paragraph (a) above) which BI shall be obligated to pay PPI
pursuant to this paragraph (b) shall not exceed 50% of the Net Sales of such PPI
Product in such country during the consecutive twelve calendar months
immediately preceding the First Commercial Sale of such BI Product in such
country.
(c) If (i) in any calendar year commencing after the end of
the first full calendar year follow
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
ing the First Commercial Sale of a BI Product in a country, Net Sales of such BI
Product in the Territory are less than $*** and (ii) in such country the number
of units of a Third Party AD Product sold in such country during such year
exceeds ***%, ***%, ***%, ***% or ***%, respectively, of the number of units of
such BI Product sold in such country during such year, the Applicable Base
Royalty Rate with respect to Net Sales of such BI Product in such country during
such year shall be reduced by ***%, ***%, ***%, ***% or ***%, respectively,
provided that in no event shall such Applicable Base Royalty Rate be reduced by
more than ***% (including pursuant to the operation of Section 6.1.1(c), alone
or together with Section 6.8.) The percentage reduction(s) (if any) of the
Applicable Base Royalty Rate in any country in respect of any year pursuant to
this Section 6.1.1(c) shall be set forth in the quarterly royalty report of BI
for the last quarter of such year contemplated by Section 6.2. If any such
reduction is applicable, then the amount of any royalties previously paid by BI
during such year in excess of the amount which would have been payable based on
the Applicable Base Royalty Rate, as so reduced, shall be an offset against the
amount of royalties payable by BI in respect of the last quarter of such year
(calculated without giving effect to any such reduction) and, as necessary,
against the amount of royalties otherwise payable thereafter; provided that BI
shall not be entitled to offset more than ***% of the amount of royalties which
would otherwise be payable to PPI in any fiscal quarter.
(d) With respect to any BI Compound or BI Product, promptly
after completion of Phase II and provided a PPI Change of Control Transaction
has not occurred, BI shall provide PPI with all information relating to the
Development thereof, all data, clinical results and protocols for the
commencement of Phase III with respect thereto, and, whether or not a PPI Change
of Control Transaction has occurred, a detailed budget which sets forth a fair
and reasonable estimate of the costs associated with such Phase III. Within
ninety (90) days
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<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
of receipt of such information, PPI may elect by written notice to BI to
reimburse BI on a quarterly basis for ***%, ***% or ***% of the actual Phase III
Development costs paid by BI, and, from and after delivery of such notice by PI,
the royalty rate payable by BI with respect to Net Sales of a BI Product shall
be the rate which would otherwise be applicable pursuant to Sections 6.1(a), (b)
and (c), plus ***%, ***% or ***%, respectively (such applicable additional
percentage being referred to as the "PPI Investment Percentage Royalty Rate
Increase"), and PPI shall be obligated to make such reimbursement payments
within fifteen (15) days after receiving an invoice therefor containing a
reasonable itemization of such costs. It is understood and agreed that BI shall
have sole responsibility with respect to any decision regarding the Phase III
referred to in this Section 6.1.1(d).
6.1.2 Third Party Patents; Combination BI
Products; Bundled Products.
(a) If BI, its Affiliates or sublicensees can demonstrate
that, in order to operate under or exploit any license granted under Section 3.1
in any country they must make payments (including without limitation royalties,
option fees or license fees) to one or more Third Parties to obtain a license or
similar right in the absence of which the BI Product could not be legally
manufactured or sold in such country, BI and PPI shall enter into good faith
negotiations with a view to agreeing on a reasonable amount that BI may deduct
from the royalties payable to PPI hereunder in respect of Net Sales of such BI
Product in such country in any given quarter.
(b) If a BI Product contains an active ingredient in addition
to a BI Compound, then BI and PPI shall enter into good faith negotiations with
a view to agreeing on an appropriate reduction in the Applicable Base Royalty
Rate with respect to Net Sales of such BI Product.
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(c) If a Bundled Product (as defined in Section 1.20) is sold,
the parties will promptly negotiate mutually agreeable royalty terms with
respect to sales of such Bundled Product. If within sixty (60) days of the
commencement of such negotiations, such royalty terms have not been agreed to in
writing by the parties, such royalty terms shall be determined by binding
arbitration in accordance with Section 11.7 hereof.
6.1.3 Sublicense Royalties. If BI grants a sublicense
hereunder to any Third Party to make, have made, use, distribute for sale or
sell the BI Products in any country, BI shall pay to PPI royalties on Net Sales
of the BI Products sold by such Third Party in such country at the royalty rate
set forth in Section 6.1.1 that would be applicable had such sales been made by
BI.
6.2 Royalty Reports; Exchange Rates. Following the First Commercial
Sale of any BI Product in any country, BI shall within thirty (30) days after
each calendar quarter furnish to PPI a written quarterly report showing: (i) the
gross sales of the BI Product sold by BI, its Affiliates and sublicensees,
including sales by BI to Recognized Agents during the reporting period and the
calculation of Net Sales from such gross sales; (ii) withholding taxes, if any,
required by law to be deducted in respect of such sales; and (iii) the exchange
rates used in determining the amount of United States dollars. All sales in
currencies other than United States dollars shall first be converted into German
marks and then into United States dollars using in both cases the average
monthly exchange rates as published regularly by Deutsche Bank in Frankfurt am
Main, Germany, and as customarily used by BI in its accounting system. If no
royalty is due for any royalty period hereunder, BI shall so report. BI shall
keep complete and accurate records in sufficient detail to properly reflect all
gross sales and Net Sales and to enable the royalties payable hereunder to be
determined.
6.3 Audits. Upon the written request of PPI, BI shall permit an
independent public accountant selected by PPI and acceptable to BI, which
acceptance shall not be unreasonably withheld, to have access during normal
business hours to such records of BI as may be reasonably necessary to verify
the accuracy of the royalty reports described herein, in respect of any fiscal
year ending
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<PAGE>
not more than thirty-six (36) months prior to the date of such request. All such
verifications shall be conducted at PPI's expense and not more than once in each
calendar year. In the event such PPI representative concludes that additional
royalties were owed to PPI during such period, the additional royalty shall be
paid by BI within thirty (30) days of the date PPI delivers to BI such
representative's written report so concluding. The fees charged by such
representative shall be paid by PPI unless the audit discloses that the
royalties payable by BI for the audited period are incorrect by more than five
percent (5%), in which case BI shall pay the reasonable fees and expenses
charged by such representative. BI shall include in each Third Party sublicense
granted by it pursuant to this Agreement a provision requiring the sublicensee
to make reports to BI, to keep and maintain records of sales made pursuant to
such sublicense and to grant access to such records by PPI's representatives to
the same extent required of BI under this Agreement. PPI agrees that all
information subject to review under this Section 6.3 or under any sublicense
agreement is confidential and that PPI shall cause its representatives to retain
all such information in confidence.
6.4 Royalty Payment Terms. Royalties shown to have accrued by each
royalty report provided for under this Agreement shall be due thirty (30) days
after the end of each calendar quarter. Payment of royalties in whole or in part
may be made in advance of such due date. Royalties determined to be owing with
respect to any prior quarter shall be added, together with interest thereon
accruing under this Agreement from the date of the report for the quarter for
which such amounts are owing, to the next quarterly payment hereunder.
6.5 Withholding Taxes. BI shall deduct any withholding taxes from
the payments agreed upon under this Agreement and pay them to the proper tax
authorities required by the laws of the Federal Republic of Germany applicable
at the date of payment. BI shall not deduct any other withholding or any other
governmental charges from the payments agreed upon under this Agreement,
including but not limited to any such taxes or charges incurred as a result of
an assignment or sublicense by BI to any Affiliate or any Third Party, except as
noted above. BI shall maintain official receipts of payment of any withholding
taxes and forward these receipts to PPI.
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The parties will exercise their best efforts to ensure that any withholding
taxes imposed are reduced as far as possible under the provisions of the current
or any future double taxation agreement between the United States and the
Federal Republic of Germany. According to existing German Law, this reduction
requires that the German Bundesamt fur Finanzen issue a Certificate of Tax
Exemption. In order to achieve such reduction, PPI shall provide BI with an
application for a certificate of tax exemption for royalties under the US-German
Double Taxation Treaty performed on the official German form (Application for
Tax Exemption) and signed by PPI. The Certification of Filing a Tax Return (IRS
Form 6166) must be enclosed with the Application For Tax Exemption. BI shall
provide PPI with the official German form. Once every three years after PPI
first provides BI with an Application For Tax Exemption, it will provide BI with
a new such Application unsolicited which complies with the above mentioned
prerequisites.
6.6 Application for Tax Exemption. The payments are not due until
PPI provides BI with the Application for Tax Exemption fulfilling the
prerequisites set out in Section 6.5 of this Agreement. Payments arising after
expiration of any Certification of Tax Exemption are not due until the next
Application for Tax Exemption is filed with BI. Notwithstanding the preceding
provisions of this Section 6.6, in the event of any extended delay in approval
or effectiveness of the Application for Tax Exemption, PPI may require payment
of any amounts due pursuant to this Agreement after deduction of any applicable
withholding taxes. PPI shall be notified by BI of any changes regarding the
filing of Applications for Tax Exemption.
6.7 Interest on Late Payments. Any payments by BI to PPI that are
not paid on or before the date such payments are due under this Agreement shall
bear interest, to the extent permitted by applicable law, at two (2) percentage
points above the Prime Rate of interest declared from time to time by The First
National Bank of Boston in Boston, Massachusetts, calculated on the number of
days payment is delinquent.
6.8 Duration of Royalties; Step Down. If (a) the
expiration date of the last to expire of the PPI Patent Rights in
any country (with respect to such coun-
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<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
try, the "Patent Expiration Date") occurs prior to the date which is ten (10)
years after the First Commercial Sale of a BI Product in such country (with
respect to such country, the end of such tenth year being referred to herein as
the "Sale Date"), (i) the Applicable Base Royalty Rate with respect to Net Sales
of such BI Product in such country shall (A) decrease by ***% on such Patent
Expiration Date (unless, with respect to the year in which the Patent Expiration
Date occurs in such country and any subsequent year, the Applicable Base Royalty
Rate with respect to Net Sales of such BI Product in such country for such year
has already been reduced pursuant to Section 6.1.1(c)) and (B) decrease by an
additional ***% (or such lesser percentage such that, together with any
reduction of the Applicable Base Royalty Rate pursuant to Section 6.1.1(c), the
Applicable Base Royalty Rate with respect to Net Sales of such BI Product in
such country in the year in which the Sale Date occurs and any subsequent year
is decreased by ***%) on such Sale Date and (ii) any PPI Investment Percentage
Royalty Rate Increase in effect with respect to Net Sales of such BI Product in
such country shall decrease by ***% on such Sale Date, and (b) if the Sale Date
occurs prior to the Patent Expiration Date, (i) the Applicable Base Royalty Rate
with respect to Net Sales of such BI Product in such country shall decrease by
***% (or such lesser percentage such that, together with any reduction of the
Applicable Base Royalty Rate pursuant to Section 6.1.1(c), the Applicable Base
Royalty Rate with respect to Net Sales of such BI Product in such country in the
year in which the Sale Date occurs and any subsequent year is decreased by ***%)
on such Sale Date and (ii) any PPI Investment Percentage Royalty Rate Increase
in effect with respect to Net Sales of such BI Product in such country shall
decrease by ***% on such Sale Date; provided, that in no event shall the
Applicable Base Royalty Rate be decreased by more than ***% (including pursuant
to the operation of Section 6.1.1(c), alone or together with this Section 6.8),
and provided further that no royalties with respect to Net Sales of a BI Product
in a country shall be payable in accordance with this Article 6 after the date
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<PAGE>
which is fifteen (15) years after the First Commercial Sale of a BI Product in
such country.
ARTICLE 7. CONFIDENTIALITY
7.1 Nondisclosure Obligations.
7.1.1 General. Except as otherwise provided in this Article 7,
both parties shall maintain in strict confidence and use only for purposes
specifically authorized under this Agreement (i) information and data received
from the other party resulting from or related to the Screening Program
(including without limitation SAR Information and PPI Information) or the
Development of any BI Product and (ii) all information and data not described in
clause (i) but supplied by the other party under this Agreement and marked
"Confidential." For purposes of this Article 7, information and data described
in clause (i) or (ii) shall be referred to as "Information."
7.1.2 Limitations. To the extent it is reasonably necessary or
appropriate to fulfill its obligations or exercise its rights under this
Agreement, a party may disclose Information it is otherwise obligated under this
Section not to disclose to its Affiliates, sublicensees, consultants, outside
contractors and clinical investigators, on a need-to-know basis on condition
that such entities or persons agree to keep the Information confidential to the
same extent as such party is required to keep the Information confidential; and
a party or its sublicensees may disclose such Information to government or other
regulatory authorities to the extent that such disclosure is reasonably
necessary to obtain patents or authorizations to conduct clinical trials of, and
to commercially market, the BI Products. The obligation not to disclose
Information shall not apply to any part of such Information that: (i) is or
becomes part of the public domain other than by unauthorized acts of the party
obligated not to disclose such Information or its Affiliates or sublicensees;
(ii) can be shown by written documents to have been disclosed to the receiving
party or its Affiliates or sublicensees by a Third Party, provided such
Information was not obtained by such Third Party directly or indirectly from the
other party under this Agreement pursuant to a confidentiality agreement; (iii)
prior to disclosure under this Agree-
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<PAGE>
ment, was already in the possession of the receiving party or its Affiliates or
sublicensees, provided such Information was not obtained directly or indirectly
from the other party under this Agreement pursuant to a confidentiality
agreement; (iv) can be shown by written documents to have been independently
developed by the receiving party or its Affiliates without breach of any of the
provisions of this Agreement; or (v) is disclosed by the receiving party
pursuant to interrogatories, requests for information or documents, subpoena,
civil investigative demand issued by a court or governmental agency or as
otherwise required by law; provided, that the receiving party notifies the other
party immediately upon receipt thereof (and provided that the disclosing party
furnishes only that portion of the Information which it is advised by counsel is
legally required).
7.2 Terms of this Agreement. PPI and BI each agree not to disclose
any terms or conditions of this Agreement to any Third Party without the prior
written consent of the other party, except as required by applicable law,
including without limitation the rules and regulations of the SEC governing
disclosure to shareholders or potential investors. If PPI determines that it is
required to file with the SEC or other governmental agency this Agreement for
any reason, PPI shall request confidential treatment of such portions of this
Agreement as it and BI shall together determine. Notwithstanding the foregoing,
prior to execution of this Agreement, PPI and BI shall agree upon the substance
of information that can be used as a routine reference in the usual course of
business to describe the terms of this Agreement, and PPI and BI may disclose
such information, as modified by mutual agreement from time to time, without the
other party's consent.
7.3 Publications.
7.3.1 Procedure. Each party recognizes the mutual interest in
avoiding premature publication of information and data with respect to the
results of the Screening Program ("Screening Data"). In the event that, either
party, its employees or consultants or any other Third Party under contract to
such party wishes to make a publication (including any oral disclosure made
without obligation of confidentiality) disclosing any Screening Data (the
"Publishing Party"), such party shall transmit
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<PAGE>
to the other party (the "Reviewing Party") a copy of the proposed written
publication at least forty-five (45) days prior to submission for publication,
or an abstract of such oral disclosure at least thirty (30) days prior to
submission of the abstract or the oral disclosure, whichever is earlier. The
Reviewing Party shall have the right (a) to propose modifications to the
publication for patent reasons, (b) to request a delay in publication or
presentation in order to protect patentable information, or (c) to request that
the information be maintained as a trade secret and, in such case, the
Publishing Party shall not make such publication.
7.3.2 Delay. If the Reviewing Party requests a delay as
described in subsection 7.3.1.(b), the Publishing Party shall delay submission
or presentation of the publication for a period of ninety (90) days to enable
patent applications protecting each party's rights in such information to be
filed.
7.3.3 Resolution. Upon the receipt of written approval of the
Reviewing Party, the Publishing Party may proceed with the written publication
or the oral presentation.
7.4 Injunctive Relief. The parties hereto understand and agree that
remedies at law may be inadequate to protect against any breach of any of the
provisions of this Article 7 by either party or their employees, agents,
officers or directors or any other person acting in concert with it or on its
behalf. Accordingly, each party shall be entitled to the granting of injunctive
relief by a court of competent jurisdiction against any action that constitutes
any such breach of this Article 7.
ARTICLE 8. REPRESENTATIONS AND WARRANTIES
Each party represents and warrants to the other that it has the
legal right and power to enter into this Agreement, to extend the rights and
licenses granted to the other in this Agreement, and that the performance of
such obligations will not conflict with its charter documents or any agreements,
contracts or other arrangements to which it is a party. BI further represents
and warrants to, and covenants with, PPI that (a) BI is a
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<PAGE>
limited liability company duly organized, validly existing and in good standing
under applicable German law and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement and (b) upon the execution
and delivery of this Agreement, this Agreement shall constitute a valid and
binding obligation of BI enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
ARTICLE 9. INDEMNITY
9.1 BI Indemnity Obligations. BI agrees to defend, indemnify and
hold PPI, its Affiliates and their respective employees and agents harmless from
all claims, losses, damages or expenses arising as a result of: (a) actual or
asserted violations of any applicable law or regulation by BI, its Affiliates or
sublicensees in connection with the manufacture, distribution or sale or use of
any BI Compounds or BI Products; (b) claims for bodily injury, death or property
damage attributable to the manufacture, distribution, sale or use of BI
Compounds or BI Products by BI, its Affiliates or sublicensees; or (c) a BI
Product recall ordered by a governmental agency or required by a confirmed BI
Product failure as reasonably determined by the parties hereto.
9.2 PPI Indemnity Obligations. PPI, its Affiliates and their
respective employees and agents shall not be entitled to the indemnities set
forth in Section 9.1 to the extent the loss, damage or expense for which
indemnification is sought was caused by the negligence, willful misconduct or
material breach of this Agreement by PPI or its Affiliates or sublicensees.
Further, should BI be found responsible for claims, losses or expenses caused by
any such negligence, willful misconduct or breach by PPI or its Affiliates and
not attributable to other causes for which BI is responsible, BI shall be
entitled to an indemnity from PPI to the same extent as PPI would be so entitled
from BI under Section 9.1 above.
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<PAGE>
9.3 Procedure. A party or any of its Affiliates or their respective
employees or agents (the "Indemnitee") that intends to claim indemnification
under this Article 9 shall promptly notify the other party (the "Indemnitor") of
any loss, claim, damage, liability or action in respect of which the Indemnitee
intends to claim such indemnification, and the Indemnitor shall assume the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an Indemnitee shall have the right to retain its own counsel, with
the fees and expenses to be paid by the Indemnitor, if representation of such
Indemnitee by the counsel retained by the Indemnitor would be inappropriate due
to actual or potential differing interests between such Indemnitee and any other
party represented by such counsel in such proceedings. The indemnity agreement
in this Article 9 shall not apply to amounts paid in settlement of any loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Indemnitor, which consent shall not be unreasonably withheld. The
failure to deliver notice to the Indemnitor within a reasonable time after the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such Indemnitor of any liability to the Indemnitee under
this Article 9, but the omission so to deliver notice to the Indemnitor will not
relieve it of any liability that it may have to any Indemnitee otherwise than
under this Article 9. The Indemnitee under this Article 9, its employees and
agents, shall cooperate fully with the Indemnitor and its legal representatives
in the investigation of any action, claim or liability covered by this
indemnification. In the event that each party claims indemnity from the other
and one party is finally held liable to indemnify the other, the Indemnitor
shall additionally be liable to pay the reasonable legal costs and attorneys'
fees incurred by the Indemnitee in establishing its claim for indemnity.
9.4 Insurance. BI shall maintain appropriate product liability
insurance with respect to the Development, manufacture and sales of BI Products
by BI in such amount as BI customarily maintains with respect to sales of
similar products. BI shall maintain such insurance for so long as it continues
to manufacture or sell BI Products, and thereafter for so long as BI maintains
insurance for itself covering such manufacture or sales.
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ARTICLE 10. TERMINATION
10.1 Termination. This Agreement may be terminated in the
following circumstances:
10.1.1 Material Breach. By a party upon written notice to
the other party by reason of a material breach by such other party not
described in Section 10.1.2 or 10.1.3 that the breaching party fails to
remedy within ninety (90) days after written notice thereof by the
non-breaching party;
10.1.2 Failure of BI to Pay. By PPI, if BI fails to make
(i) any payment to PPI required under Section 2.2 or 2.3 within fifteen (15)
days after such payment becomes payable or (ii) any royalty payment under
Section 6.1 within thirty (30) days after such payment becomes payable, and,
in either such case, such failure is not remedied within thirty (30) days
after notice thereof from PPI;
10.1.3 Failure of BI to Use Diligent Efforts. By PPI, if BI
fails to use diligent efforts as required by Section 3.3, and BI fails to
remedy or take reasonable action to initiate a remedy of such default within
ninety (90) days after the notice thereof by PPI;
10.1.4 Bankruptcy. By either party upon bankruptcy,
insolvency, dissolution or winding up of the other; and
10.1.5 Change of Control. By BI if, prior to the end of the
Screening Term, a transaction with a Third Party is consummated involving (a)
the acquisition, merger or consolidation of PPI and (i) PPI is not the
acquiring, surviving or continuing corporation or (ii) PPI is the surviving
or continuing corporation, but, in connection with such transaction, the then
outstanding shares of the capital stock of PPI were changed into or exchanged
for stock or other securities of such Third Party or cash or other property
or the then outstanding shares of the capital stock of PPI represented less
than fifty percent (50%) of the outstanding shares and share equivalents of
the surviving or continuing corporation immediately after consummation of
such transaction or (b) the sale or other disposition of more than fifty
percent (50%) of the voting capital stock of PPI or
29
<PAGE>
all or substantially all of the assets of PPI to a Third Party, and such
Third Party is a major pharmaceutical company that is in competition with BI.
10.2 Effect of Termination Generally.
10.2.1 Existing Obligations. Termination pursuant to
Section 10.1 of this Agreement for any reason shall not relieve the parties
of any obligation accruing prior to such termination.
10.2.2 Survival. Except as otherwise expressly provided
below in this Article 10, the provisions of Sections 2.2 and 2.3 (with
respect only to payments and expense reimbursement payments accrued at the
time of termination but not yet paid), Article 3, Articles 5 through 9, this
Section 10.2, Section 10.3 (if this Agreement is terminated by PPI pursuant
to Section 10.1), Section 10.4.1 (if this Agreement is terminated by BI
pursuant to Section 10.1.1), Section 10.4.2 (if this Agreement is terminated
pursuant to Section 10.1.5) and Article 11 (as applicable to such surviving
provisions) shall survive termination of this Agreement pursuant to Section
10.1.
10.3 Effect of Termination by PPI.
10.3.1 Termination By PPI Prior to Commencement of Phase
III. In the event that this Agreement is terminated by PPI pursuant to
Section 10.1 prior to the time that a BI Compound or BI Product enters Phase
III (such time being referred to as the "Phase III Initiation Date"), then
(i) all licenses and rights granted to BI hereunder shall terminate, except
to the extent PPI otherwise determines and advises BI in writing, and BI will
immediately cease Development of any BI Compound, (ii) BI shall, (a) to the
extent legally permissible, take all action reasonably necessary to assign
all of its right, title and interest in and transfer possession and control
to PPI of the regulatory filings prepared by BI, and regulatory approvals
received by BI, to the extent that such filings and approvals relate to a BI
Compound and/or any BI Product and (b) grant PPI, and take any other action
necessary to provide PPI with, a worldwide, perpetual, exclusive, fully-paid
and royalty free right and license, with the right to grant sublicenses,
under any and all applicable BI Patent Rights and BI know-how
30
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
to develop such BI Compound, and to develop, manufacture or have
manufactured, use and sell or have sold such BI Compound as incorporated into
a BI Product and (iii) PPI shall retain any and all remedies which may be
available to it at law or in equity.
10.3.2 Termination By PPI After Commencement of Phase III.
In the event that PPI is entitled to terminate this Agreement pursuant to
Section 10.1 after the Phase III Initiation Date, then from and after the
time such right of termination first arises, (i) the Applicable Base Royalty
Rate applicable to Net Sales of any BI Product in any country shall be ***
times such Applicable Base Royalty Rate as would have otherwise applied and
(ii) PPI shall retain any and all remedies which may be available to it at
law or in equity.
10.4 Effect of Termination by BI.
10.4.1 Termination for PPI Breach. (a) In the event that BI
is entitled to terminate this Agreement pursuant to Section 10.1.1, BI may
elect, by notice to PPI (a "Section 10.4.1(a) Notice") not later than thirty
(30) days after such right first arises, to either (i) terminate this
Agreement, in which case all licenses and rights granted to BI shall
terminate, except to the extent the parties otherwise agree in writing, and
BI will immediately cease Development of any BI Compound and will cease to
manufacture and sell any BI Products except as provided in this Section
10.4.1(a) and except as the parties otherwise agree in writing, and BI shall
retain any and all remedies which may be available to it at law or in equity
or (ii) pursue the remedy set forth in Section 10.4.1(b) below (it being
understood and agreed that if BI fails to deliver to PPI a Section 10.4.1(a)
Notice within the required thirty (30) day period, BI shall be deemed to have
elected such remedy set forth in Section 10.4.1(b) below). If BI elects to
terminate this Agreement pursuant to clause (i) above, then (x) BI may
dispose of its inventory of BI Products on hand as of the effective date of
termination, and may fill any orders for twelve (12) months after the
effective date of termination and (y) within thirty (30) days after
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disposition of such inventory and fulfillment of such orders (and in any
event within seven (7) months after termination) BI will forward to PPI a
final report and, subject to Section 10.5, if applicable, pay all royalties
due for Net Sales in such period.
(b) If BI elects, pursuant to Section 10.4.1, to pursue the
remedy set forth in this paragraph (b), then (i) BI shall have the right and
option, if it has obtained a final judgment or award of monetary damages
and/or costs against PPI based on such breach, (A) to offset the amount of
such damages and/or costs against any amounts would otherwise be payable to
PPI under Article 2 or Article 6 and (B) if the breach which gave rise to
BI's right to terminate this Agreement was PPI's material breach of BI's
right to exclusivity pursuant to Section 2.5 or Section 3.1, (1) BI may cease
paying royalties to PPI hereunder (and in such event BI shall be deemed to
have a paid-up and royalty free license equivalent to that set forth in
Section 3.1 hereof), (2) PPI's rights pursuant to Section 3.5.1 shall
automatically terminate, if such breach occurs prior to the Phase III
Initiation Date or equivalent development stage of a Licensed Diagnostic
Compound and (3) the parties acknowledge and agree that if such breach occurs
after the Phase III Initiation Date or equivalent development stage of a
Licensed Diagnostic Compound, the royalties which would otherwise be payable
by PPI to BI pursuant to the license agreement referred to in Section 3.5.1
(or which would be considered customary for purposes of the license
negotiation referred to in such Section) shall be multiplied by 3, and (ii)
BI shall retain any and all remedies (other than termination of this
Agreement) which may be available to it at law or in equity.
10.4.2 Termination for Change of Control. In the event that
BI is entitled to terminate this Agreement pursuant to Section 10.1.5, BI may
terminate this Agreement, in which case all licenses and rights granted to BI
shall terminate, except to the extent PPI otherwise determines and advises BI
in writing, and BI will immediately cease Development of any BI Compound.
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ARTICLE 11. MISCELLANEOUS
11.1 Force Majeure. Neither party shall be held liable or
responsible to the other party nor be deemed to have defaulted under or
breached this Agreement for failure or delay in fulfilling or performing any
term of this Agreement when such failure or delay is caused by or results
from causes beyond the reasonable control of the affected party, including
but not limited to fire, floods, embargoes, war, acts of war (whether war is
declared or not), insurrections, riots, civil commotions, strikes, lockouts
or other labor disturbances, acts of God or acts, omissions or delays in
acting by any governmental authority or the other party; provided, however,
that the party so affected shall use reasonable commercial effects to avoid
or remove such causes of non performance, and shall continue performance
hereunder with reasonable dispatch whenever such causes are removed. Either
party shall provide the other party with prompt written notice of any delay
or failure to perform that occurs by reason of force majeure. The parties
shall mutually seek a resolution of the delay or the failure to perform as
noted above. It is understood and agreed that if this Section 11.1 is
applicable to a party's failure or delay in performing its obligations under
the Work Plan, the other party will not be obligated thereunder until the
first party has so performed, and if such failure or delay is by PPI, BI will
not be obligated to pay PPI the payment required by Section 2.2(b) until such
failure or delay is cured. It is further agreed that if such failure or delay
by either party continues for more than twelve consecutive months, the other
party shall have the right to terminate this Agreement with the effect
provided in Section 10.3.1. (if such failure or delay is by BI) or Section
10.4.1 (if such failure or delay is by PPI).
11.2 Assignment. This Agreement may not be assigned or otherwise
transferred by either party without the consent of the other party; provided,
however, that either PPI or BI may, without such consent, assign its rights
and obligations under this Agreement (i) in connection with a corporate
reorganization, to any Affiliate, all or substantially all of the equity
interest of which is owned and controlled by such party or its direct or
indirect parent corporation, or (ii) in connection with a merger,
consolidation or sale of substantially all of such
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<PAGE>
party's assets to an unrelated third party; provided, however, that such
party's rights and obligations under this Agreement shall be assumed (by
operation of law or otherwise) by its successor in interest in any such
transaction and shall not be transferred separate from all or substantially
all of its other business assets, including those business assets that are
the subject of this Agreement. Any purported assignment in violation of the
preceding sentence shall be void. Any permitted assignee shall assume all
obligations of its assignor under this Agreement.
11.3 Severability. Each party hereby agrees that it does not
intend to violate any public policy, statutory or common laws, rules,
regulations, treaty or decision of any government agency or executive body
thereof of any country or community or association of countries. Should one
or more provisions of this Agreement be or become invalid, the parties hereto
shall substitute, by mutual consent, valid provisions for such invalid
provisions which valid provisions in their economic effect are sufficiently
similar to the invalid provisions that it can be reasonably assumed that the
parties would have entered into this Agreement with such valid provisions. In
case such valid provisions cannot be agreed upon, the invalidity of one or
several provisions of this Agreement shall not affect the validity of this
Agreement as a whole, unless the invalid provisions are of such essential
importance to this Agreement that it is to be reasonably assumed that the
parties would not have entered into this Agreement without the invalid
provisions.
11.4 Notices. Any consent, notice or report required or permitted
to be given or made under this Agreement by one of the parties hereto to the
other shall be in writing, delivered personally or by facsimile (and promptly
confirmed by telephone, personal delivery or courier) or courier, postage
prepaid (where applicable), addressed to such other party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addressor and shall be effective upon receipt by
the addressee.
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If to PPI: Pharmaceutical Peptides, Inc.
One Hampshire Street
Cambridge, Massachusetts 02139
Attention: President
Telephone: (617) 494-8400
Telecopy: (617) 494-8414
with copy to: Skadden, Arps, Slate, Meagher & Flom
One Beacon Street, 31st Floor
Boston, Massachusetts 02108
Attention: Kent A. Coit, Esq.
Telephone: (617) 573-4835
Telecopy: (617) 573-4822
If to BI: Boehringer Ingelheim International GmbH
Postbox 200
D-55216 Ingelheim, Rhein
Germany
Attention: Corporate Licensing
Telephone: 011 49 61 32 77 34 08
Telecopy: 011 49 61 32 77 35 83
with a copy to: Boehringer Ingelheim International GmbH
Postbox 200
D-55216 Ingelheim, Rhein
Germany
Attention: Head of Legal Department
Telephone: 011 49 61 32 77 21 06
Telecopy: 011 49 61 32 77 35 83
11.5 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
giving effect to the conflicts of law provisions thereof.
11.6 Dispute Resolution; Choice of Forum. Any disputes arising
between the parties relating to, arising out of or in any way connected with
this Agreement or any term or condition hereof, or the performance by either
party of its obligations hereunder, whether before or after the termination
pursuant to Section 10.1 of this Agreement, shall be promptly presented to
the Chief Executive Officer of PPI and the Member of the Corporate Board of
BI responsible for Pharmaceuticals for resolution and if they or their
designees cannot promptly resolve such disputes, then either party shall have
the right to bring an action to resolve such dispute before a court of
competent juris-
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<PAGE>
diction. The parties hereby submit to the exclusive jurisdiction of the
federal or state courts located within the State or City of New York for the
conduct of any suit, action or proceeding arising out of or relating to this
Agreement.
11.7 Arbitration. If the parties are unable to enter into the
definitive license agreement referenced in Section 3.5.1 within the time
period specified in such Section, or are unable to reach agreement on royalty
terms for a Bundled Product as provided in Section 6.1.2(c) within the time
period specified in such Section, the terms of such license agreement or such
royalty terms, as applicable, shall be settled by arbitration. Such
arbitration shall be conducted in the City of New York, in accordance with
the Commercial Arbitration rules then pertaining to the American Arbitration
Association with a panel of three (3) arbitrators. The arbitrators shall be
selected from the National Panel of Arbitrators of the American Arbitration
Association. The laws of the State of New York shall apply to the arbitration
proceedings. The decision of the arbitrators with respect to the terms of
such license agreement, or such royalty terms, as applicable, shall be final
and binding on the parties and their legal successors.
11.8 Entire Agreement. This Agreement, together with the
appendices hereto contains the entire understanding of the parties with
respect to the subject matter hereof and supersedes the Confidentiality
Agreement dated August 8, 1995 between PPI and BI. All express or implied
agreements and understandings, either oral or written, heretofore made are
expressly merged in and made a part of this Agreement. This Agreement may be
amended, or any term hereof modified, only by a written instrument duly
executed by both parties hereto.
11.9 Headings. The captions to the several Articles and Sections
hereof are not a part of this Agreement, but are merely guides or labels to
assist in locating and reading the several Articles and Sections hereof.
11.10 Independent Contractors. It is expressly agreed that PPI
and BI shall be independent contractors and that the relationship between the
two parties shall not constitute a partnership, joint venture or agency.
Neither
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<PAGE>
PPI nor BI shall have the authority to make any statements, representations
or commitments of any kind, or to take any action, which shall be binding on
the other, without the prior consent of the other party to do so.
11.11 Agreement Not to Solicit Employees. During the term of this
Agreement and for a period of two (2) years following the termination of this
Agreement, PPI and BI agree not to seek to persuade or induce any employee of
the other company who is or was involved in the collaboration provided for
herein to discontinue his or her employment with that company in order to
become employed by or associated with any business, enterprise or effort that
is associated with its own business.
11.12 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 which are beyond
the reasonable control of either party. PPI and BI agree not to export or
re-export, 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 which may be
applicable, including, but not limited to, the Export Administration Act of
1979, as amended, its rules and regulations, including, but not limited to,
Part 779 of the United States Export Control Regulations, published by the
United States Department of Commerce, and other applicable export control
laws. PPI and BI agree to obtain similar covenants from their licenses,
sublicenses and contractors with respect to the subject matter of this
Section 11.12.
11.13 Waiver. The waiver by either party hereto of any right
hereunder or the failure to perform or of a breach by the other party shall
not be deemed a waiver of any other right hereunder or of any other breach or
failure by said other party whether of a similar nature or otherwise.
11.14 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed an original and together shall
constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first set forth above.
PHARMACEUTICAL PEPTIDES, INC.
By /s/ Joseph M. Limber
---------------------------------------
Name: Joseph M. Limber
Title: President/COO
BOEHRINGER INGELHEIM
INTERNATIONAL GmbH
By /s/ Hohbach Muller
---------------------------------------
Name: Hohbach Muller
Title: Authorized Signatories
38
<PAGE>
APPENDIX A
<TABLE>
<CAPTION>
- ---------------------------- ------------------------- ------------------------
Patent Application Claims Included Claims Excluded
- ---------------------------- ------------------------- ------------------------
<S> <C> <C>
U.S. Patent Application Compositions of Matter: Compositions of Matter:
Serial No. 08/404,831 ---------------------- ----------------------
13-17 and 30-32 1-12 and 20-29
Methods: Methods:
------- -------
18-19, 37-44, 50-52 and 33-36, 45-49 and 53-58
59-62
- ---------------------------- ------------------------- ------------------------
U.S. Continuation-in-Part Compositions of Matter: Compositions of Matter:
Patent Application ---------------------- ----------------------
Serial No. 08/475,579 14-18 and 32-34 1-13 and 21-31
Methods: Methods:
------- -------
19-20 and 40-47 35-39
- ---------------------------- ------------------------- ------------------------
</TABLE>
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
APPENDIX B
WORK PLAN UNDER THE
COLLABORATION AND LICENSE AGREEMENT
DATED AS OF AUGUST 1, 1996
BY AND BETWEEN
PHARMACEUTICAL PEPTIDES, INC.
AND
BOEHRINGER INGELHEIM INTERNATIONAL GmbH
This is the Work Plan referred to in, and which forms a part of, the
Collaboration and License Agreement dated as of August 1, 1996 by and between
Pharmaceutical Peptides, Inc. and Boehringer Ingelheim International GmbH
(the "Collaboration Agreement"). Capitalized terms used but not defined
herein have the respective meanings ascribed thereto in the Collaboration
Agreement.
I. Screening Program
During the Screening Term, PPI will employ exclusively assays A-D as
described below to screen for A(beta) peptide polymerization inhibition
activity for 50,000 compounds selected and supplied by BI. *** Depending on
activity levels seen in Assay A, PPI may require additional material for
Assays B-D and subsequent in vivo assays. PPI will deliver to BI SAR data on
existing PPI Compounds within 6 weeks of the Effective Date. BI will deliver
to PPI at least 13,000, 25,000, 37,500, and 50,000 compounds within 2.0, 5.0,
12.0, and 16.0 months respectively, of the Effective Date and PPI
anticipates, barring any unforeseen technical issues, screening 25,000
compounds in its Nucleation Assay within 12 months and 50,000 compounds in
its Nucleation Assay within 24 months of the Effective Date. Compounds
jointly designated will be further screened in secondary assays described
below.
<TABLE>
<CAPTION>
Assay Functional Measurement Manpower
----- ---------------------- --------
<S> <C> <C>
A. Nucleation Assay *** *** FTE
B. Extension Assay *** *** FTE
C. Neurotoxicity Assay *** *** FTE
</TABLE>
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
<TABLE>
<S> <C> <C>
D. Specificity Assay *** *** FTE
</TABLE>
PPI will make available *** FTE's to the Screening Program immediately
following the Effective Date. These FTE's will either be new hires or
redeployments of existing personnel. PPI anticipates that it will be
evaluating BI compounds in assays A-D within 6 weeks of first receiving
compounds from BI. All Applicable data will be supplied to BI in PC
compatible form (e.g. ASCI II or Excel files). All BI compounds will be
handled or disposed of in accordance with BI's written instructions.
A. Nucleation Assay: A rapid high-throughput primary screen
The nucleation assay *** Approximately 13 lines omitted ***
B. Extension Assay: ***
The extension assay *** Approximately 6 lines omitted ***
C. Neurotoxicity Assay: in vitro Cellular Efficacy
*** Approximately 10 lines omitted ***
D. ***: Amyloid Specificity Assays
*** Approximately 9 lines omitted ***
II. Development of Animal Model for A(beta) Peptide Polymerization Inhibitors
<TABLE>
<CAPTION>
Assay Functional Measurement Manpower
----- ---------------------- --------
<S> <C> <C>
Animal Model *** ***
</TABLE>
41
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
PPI will dedicate *** to the development of an animal model immediately
following the Effective Date. *** will either be *** new hire or a
redeployment of *** The *** for assay 5 will be active in the identification,
in-house development, and validation of an efficacy model for testing A(beta)
peptide polymerization inhibitors.
*** Approximately 9 lines omitted ***
III. Capital Budget Items
Capital Budget items include dedicated equipment and assay specific supplies
purchased during the Screening Program. These will include but not be limited
to:
Dedicated Equipment
- 2 rotary shakers
- Plate-reader flourimeter
- Spectrophotometer (96-well Plate Reader)
- Spectrophotometer (Cuvette)
- Computers (data management, direct connection to flourimeter)
- Cryostat
- Stereotaxtic Apparatus
Assay Specific Supplies
- Pipet tips
- Multi-pipettors
- Low-Bind 96 well plates
- Standard 96 well plates
- Reservoirs
- Computer Software
- Disposable Cuvettes
- Tissue Culture Media and Supplies
- Histochemical Supplies
- Animal Purchase Costs/Supplies/Housing
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
- Osmotic Pumps
*** Approximately 4 lines omitted ***
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
EXHIBIT 10.9
LICENSE AGREEMENT
This License Agreement ("Agreement") is entered into effective as of
the 17th day of October, 1996, between Indiana University Foundation, a
not-for-profit Indiana corporation with offices at Showalter House, P.O. Box
500, Bloomington, IN 47402 (hereinafter referred to as "LICENSOR") and Praecis
Pharmaceuticals, Inc., a Delaware corporation with offices at One Hampshire
Street, Cambridge, MA 02139 (hereinafter referred to as "LICENSEE").
WITNESSETH:
WHEREAS, LICENSOR, by agreement with The Trustees of Indiana
University, is the owner of proprietary rights in intellectual property
resulting from research at Indiana University (hereinafter referred to as "IU");
WHEREAS, Roger Roeske (hereinafter referred to as "INVENTOR") while
an employee of IU created the "Inventions" as described and attached hereto as
Exhibit A.
WHEREAS, LICENSOR is the owner of said patent applications and
know-how related to LHRH antagonist compounds as claimed in United States Patent
Application number 08/480,494 filed *** and foreign, PCT application number
PCT/US96/09852 filed *** included in Exhibit A.
WHEREAS, the parties recognize that the research of the INVENTOR
demonstrated preliminary evidence of usefulness of the Inventions on a
commercial basis, and further recognize that technical knowledge, production
scale-up, market development, and state and federal regulatory approval of the
Inventions shall be required for commercialization;
WHEREAS, LICENSEE desires to acquire a license to the INVENTIONS and
related technologies and know-how in order to engage in further product
development and sales activities related to LICENSEE's activity in the
biomedical products field, including but not limited to, oncology and
reproductive endocrinology treatments, including but not limited to cancer
(prostate and
<PAGE>
2
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
breast), reproductive endocrinology (endometriosis, uterine fibroid, female and
male fertility), polycystic ovarian disease, precocious puberty; and
WHEREAS, LICENSEE has exercised the option granted to LICENSEE under
the Option Agreement Dated June 13, 1995.
Now, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and other good valuable consideration, the receipt
of which is hereby acknowledged, the parties agree as follows.
ARTICLE I
Definitions
1.1 "Invention Rights" shall mean the patented process, patent
applications, disclosures of inventions, technology and know-how involving the
use of certain LHRH antagonist compounds. The technologies are disclosed in
Exhibit A and summarized as follows:
(a) United States Patent Application number 08/480,494 filed
*** and foreign, PCT application number PCT/US96/09852 filed ***.
(b) the existing technical know-how related to the patent
applications and the underlying research.
1.2 "Patent Rights" shall mean:
(a) Subject matter within the scope of any valid claim of
LICENSOR to any patent or patent application relating to the Inventions;
including, without limitation, any continuations, continuations-in-part,
provisionals, divisions, derivations, foreign counterparts, patents of addition,
reissues, renewals, or extensions thereof.
(b) Subject matter within the scope of any valid claim of a
LICENSOR owned or controlled patent or patent applications of the Inventor which
dominates the subject matter of the Inventions: including, without limitation,
any continuations, continuations-in-part,
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3
provisionals, divisions, derivations, foreign counterparts, patents of addition,
reissues, renewals, or extensions thereof.
1.3 "Licensed Products" shall mean the therapeutic and/or
prophylactic product or part thereof which is manufactured or sold in whole or
in part directly or indirectly by LICENSEE that are covered by any one valid
claim in Patent Rights or include any Invention Rights.
1.4 "Technical Information" shall mean all present and future
technical information and know-how which relates to the Inventions and shall
include, without limitation, all information relating to the Inventions, the
Patent Rights and the Licensed Products and useful for the development and
commercialization of the Inventions.
1.5 "Licensee" shall mean Praecis Pharmaceuticals,
Inc. or any Affiliate or assignee thereof.
1.6 "Improvements" shall mean all improvements including but not
limited to revisions, modifications and enhancements developed by LICENSEE
and/or Sublicensee independently of LICENSOR with respect to any technology,
patent applications, and/or patents related to Invention Rights, Patent Rights,
Technical Information or Licensed Products.
1.7 "Licensed Patents" shall mean Patent Rights.
1.8 "Licensor" shall mean Indiana University Foundation.
1.9 "Affiliate" shall mean any corporation, subsidiary, firm,
partnership or other entity, whether de jure or de facto, which directly or
indirectly owns, is owned by or is under common ownership with a party to this
Agreement to the extent of at least fifty percent (50%) of the equity having the
power to vote on or direct the affairs of the entity and any person, firm,
partnership, corporation, or other entity actually controlled by, controlling,
or under common control of a party to this Agreement.
1.10 "License Fee" shall mean all amounts collected from a
Sublicensee of LICENSEE, in lieu of royalty and in pursuant to any sublicense
granted by
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4
LICENSEE to such sublicensee with respect to any Patent Rights and/or
Inventions.
1.11 "Net Sales" shall mean the gross receipts from sales of
Licensed Products less all (i) transportation charges, including insurance; (ii)
sales and excise taxes and duties paid or allowed by any selling party, together
with any other governmental charges or taxes imposed upon the production,
importation, use, or sale of any Licensed Products; (iii) normal and customary
trade, quantity, and cash discounts allowed; and (iv) allowances or credits to
customers or on account of rejection or return of any Licensed Products subject
to royalty under this Agreement or on account of retroactive price reductions
affecting such Licensed Products.
1.12 "Sublicense" shall mean the conveyance of rights to any Third
Party to use the Inventions or any part thereof, for its purpose of developing
its own product, in return for any option fee, License Fees or other "front-end
payment" and/or royalties based upon said Third Party's Net Sales.
1.13 "Sublicensee" shall mean any Third Party to whom or which
LICENSEE has granted a Sublicense.
1.14 "Third Party" shall mean any person or entity other than
LICENSOR, IU, LICENSEE and its Affiliates.
1.15 "License Year" shall mean the twelve-month period beginning on
the first day of the month after execution of this Agreement, and each
anniversary of such date thereafter.
1.16 "Development Costs" shall mean, with respect to any Licensed
Products sold by a Sublicensee which is covered in whole or in part by a
Sublicense, any internal or out-of-pocket charges, costs or expenses incurred by
LICENSEE in connection with research and development activities related to such
Licensed Products.
ARTICLE II
Assignment of Patent Rights
2.1 Ownership of Intellectual Property. LICENSOR, by virtue of its
contractual relationships with IU and the Patent Policy of IU, is the sole and
exclusive owner of all Inventions and Invention Rights covered by this
agreement.
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5
ARTICLE III
Grant of License
3.1 License. LICENSOR hereby grants a license to LICENSEE:
(a) an exclusive, worldwide license under the Invention Rights
and/or Patent Rights, together with an express right to grant sublicenses to
Affiliates or Third Party, to make, have made, further develop, research,
improve, use, process, offer for sale, import, sell, and distribute products
embodying Invention Rights and/or Patent Rights;
(b) a first right to acquire an exclusive license, on
substantially the same terms as this Agreement with respect to any LHRH related
compounds developed by Inventor. This grant of rights is subject to the rights
of the United States Government, if any, that arise out of United States
Government sponsorship of research that led to Invention. LICENSEE agrees during
the period of exclusivity of this license in the United States that any Licensed
Products produced for sale in the United States will be manufactured
substantially in the United States. If manufacturing of any product,
substantially in the United States, is not commercially feasible, LICENSOR will
use best efforts to cooperate with LICENSEE in obtaining a waiver of the United
States manufacturing requirement from the United States Government.
3.2 Reservation. LICENSOR hereby reserves an irrevocable,
nontransferable, royalty-free license to make, further develop, improve and use
but not to have made or commercialize the subject matter of Patent Rights and
Improvements thereon and Technical Information for research and educational
purposes to be conducted at facilities owned and/or operated by IU.
Notwithstanding the reservation contained in this paragraph 3.2, LICENSOR hereby
acknowledges that its right to use the Patent Rights, Improvements and Technical
Information for research and educational purposes is limited by the
confidentiality provisions contained in Article VII below. LICENSOR agrees to
submit to LICENSEE copies of publications related to allow LICENSEE to make
appropriate patent filings with respect to such Invention Rights prior to any
such publication or other distribution of Invention Rights, thirty (30) days
prior to submission for publication or other distribution.
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6
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
ARTICLE IV
Payments and Royalties
4.1 Initial Fee. In exchange for the exclusive license granted under
this agreement LICENSEE agrees to pay to LICENSOR an initial fee of *** U.S.
dollars ($***) upon execution of this Agreement. This commitment is designed to
partially reimburse the Licensor and IU for the costs of the research leading to
the Invention Rights licensed hereunder. *** (***) of this Initial Fee, all
payments under the Option Agreement and all patent-related fees and expenses may
be credited toward future fees, (including License Fees) the Milestone Payments
referred to in paragraph 4.2, and/or royalties payable to IUF; however, such
credit for fees and/or royalty, in any period, for any country, shall not exceed
*** of the fees or royalty due IUF for such period in respect of such country,
provided that any unused credit may be carried forward to subsequent periods.
4.2 Milestone Payments. LICENSEE shall pay three (3) Milestone
Payments, reduced by credits allowed under paragraph 4.1 as follows:
(a) *** U.S. dollars ($***) upon ***;
(b) *** U.S. dollars ($***) upon ***;
and
(c) *** U.S. dollars ($***) upon ***.
4.3 Royalty. LICENSEE shall pay a *** percent (***%) royalty to
LICENSOR on all Net Sales of Licensed Products covered by paragraph 1.3,
commencing with first commercial sale where Licensed Products are not sold in
combination with depot formulation and *** percent (***%) royalties where
Licensed Products are sold in combination with depot formulation.
4.4 Accrual of Royalties. Royalties shall accrue when Licensed
Products are sold or otherwise transferred by LICENSEE to a Third Party, and
Licensed
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7
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
Products shall be considered sold when LICENSEE invoice is issued. LICENSEE
shall make payments to LICENSOR in accordance with the requirements of Article
VIII.
4.5 Sublicense License Fees and Royalties. LICENSEE shall pay to
LICENSOR the following:
(a) *** percent (***%) royalties on Net Sales of Licensed
Products by Sublicensee commencing with first commercial sale where Licensed
Products are not sold in combination with depot formulation and *** percent
(***%) royalties where Licensed Products are sold in combination with depot
formulation. Sublicensee shall not pay royalties on the Net Sale of any Licensed
Products by a Sublicensee that is paying LICENSEE License Fees, in lieu of
royalty payments; and
(b) *** percent (***%) of License Fees received by LICENSEE
after deduction of documented and reasonable Development Costs with respect to
Licensed Products covered by such Sublicense, provided that no amount shall be
payable under this clause 4.5(b) until the earlier of the following:
(c) LICENSEE's cessation of development activities with
respect to the specific Licensed Products indication pursuant to the terms of
the Sublicense under which a License Fee was paid; or
(d) the first commercial sale of the specific Licensed
Products indication covered by such Sublicense.
ARTICLE V
Additional Covenants of LICENSEE
5.1 Market Development. LICENSEE agrees to diligently pursue the
development, scale-up, manufacturing and marketing of the Licensed Products in
the United States and such countries as it shall determine is economically and
practically desirable in a manner that is consistent with manufacture, scale-up,
development and marketing efforts for similar products by businesses comparable
to LICENSEE in size and resources.
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8
5.2 Performance Standards. LICENSEE agrees to comply
with the following Licensed Products performance standards and time
periods:
(a) LICENSEE shall use commercially reasonable efforts to
submit and prosecute Licensed Products approval requests with the government
agencies having jurisdiction over Licensed Products. LICENSOR and IU hereby
agrees to provide LICENSEE with all existing data, reports and interpretation of
data as LICENSEE may request in order to aid it in securing government approval.
(b) LICENSEE agrees to prepare and submit to LICENSOR
semi-annual progress reports, the first of which shall be submitted within
thirty (30) days following the end of the first full one-hundred-eighty (180)
day period of this Agreement.
(c) upon obtaining required regulatory approvals, to use
commercially reasonable efforts to exercise reasonable business practices to
make Licensed Products available on world-wide basis.
(d) Licensee's development program will serve to identify
appropriate milestones against which to gauge due diligence (Exhibit C);
provides that the failure of LICENSEE to meet such milestones within the time
periods contemplated by Exhibit C shall not constitute a material breach of this
License Agreement (and accordingly, LICENSOR shall not be entitled to terminate
this License Agreement due to such failure), unless LICENSEE shall have failed
to use commercially reasonable efforts (consistent with development, scale-up,
manufacture and marketing efforts for similar products by businesses comparable
to LICENSEE in size and resources) to meet such milestone within such time
periods. If LICENSOR believes that a report provided to LICENSOR pursuant to
paragraph 5.2(b) does not reflect such commercially reasonable efforts and gives
notice to such effect to LICENSEE of such a report, LICENSEE shall, within sixty
(60) days of receipt of such notice, address in writing the concerns raised by
LICENSOR in its notification. If LICENSOR remains dissatisfied, the matter shall
be resolved by mediation.
5.3 Use of Improvements by LICENSOR. LICENSEE agrees to grant to
LICENSOR and IU on a royalty-free, nonexclusive license, to use for research and
educational
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9
purposes only, and without the right to Sublicense, to any and all
Improvements.
ARTICLE VI
Covenants of LICENSOR
6.1 Technical Information. Promptly upon execution of this
Agreement, LICENSOR shall deliver to LICENSEE all (a) Technical Information and
all marketing information pertaining to the Inventions, the Patent Rights and
the Licensed Products in its possession or with respect to which it has control.
LICENSOR shall promptly report to LICENSEE any information or facts of serious
or unexpected reactions related to any application of the Inventions.
6.2 Prototype Tests and Governmental Approvals. At LICENSEE's
request, and subject to LICENSOR's concurrence with said request, which will not
be unreasonably withheld LICENSOR through IU shall assist LICENSEE in the design
and/or conduct of prototype evaluation and such other testing and review
procedures as may be necessary in order to obtain requisite federal, state and
foreign governmental regulatory agency approval with respect to the use,
manufacture or sale of any Licensed Products. LICENSEE shall provide adequate
financial support for tests conducted by LICENSOR through IU, such support shall
be the subject of a budget approved by both parties.
6.3 Invention Agreements. LICENSOR represents and warrants to
LICENSEE that the Inventor and all personnel that have worked on the development
of the Inventions have assigned all rights with respect thereto to LICENSOR
pursuant to duly executed Invention Agreements. LICENSOR agrees to cause any
personnel that may hereafter be assigned to perform research with respect to the
Inventions, the Patent Rights or the Licensed Products pursuant to this
Agreement or any research agreements to assign rights to it pursuant to the IU
Patent Policy and all such rights shall be deemed to be automatically included
within the scope of the license granted hereby, without further action or
consideration.
6.4 Research Materials. LICENSOR agrees to provide, as available
and mutually agreed upon, during the term of this Agreement, LICENSEE with
research quantities of materials relating to Inventions. The material will be
provided by IU to LICENSEE with a fee to reimburse IU for its distribution
costs. The terms of this
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10
material transfer from IU to LICENSEE will be mutually agreed upon under a
separate Uniform Biological Material Transfer Agreement (UBMTA) in substantially
the form of Exhibit D.
6.5 Referrals. LICENSOR shall use its best efforts to refer to both
LICENSEE and the second Licensee any and all prospects having an interest in the
Invention Rights.
ARTICLE VII
Confidentiality
7.1 Confidentiality. LICENSOR and LICENSEE agree to maintain as
confidential any information which may be disclosed by the other and is
designated in writing as confidential. Such information shall not be considered
confidential if the recipient can show that such information is: 1) generally
known or readily available to the public; 2) was already known to LICENSOR or
LICENSEE from other sources at the time of the receipt thereof without a breach
of any obligation of confidentiality; 3) becomes available to the public
independent of LICENSOR or LICENSEE; 4) is disclosed to LICENSOR or LICENSEE by
a Third Party having legal rights to information and not bound by this Agreement
or 5) is subsequently and independently developed by an employee of LICENSOR or
LICENSEE who had no knowledge of the information disclosed by LICENSOR or
LICENSEE. Notwithstanding any of the foregoing, any confidential information
disclosed by either party to the other shall be maintained in confidence five
(5) years from the date of such disclosure unless mutually agreed otherwise.
ARTICLE VIII
Payments and Reports
8.1 Semi-Annual Payments. Payments of royalties from LICENSEE to
LICENSOR hereunder shall be made by LICENSEE to LICENSOR on a semi-annual basis,
not later than ninety (90) days after the last day of each semi-annual period
for as long as such obligations continue under this Agreement. Payments shall be
accompanied by reports which shall set forth units sold and a calculation of the
amounts owed to LICENSOR on a country-by-country basis for the applicable
semi-annual period. Late payment shall bear interest at the maximum rate
allowable by Indiana Usury Law; however, said rate shall not exceed the prime
rate plus two percent (2%).
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11
8.2 Exchange Rate. All Payments hereunder shall be made in U.S.
dollars in the United States. In the event LICENSEE receives payment for
Licensed Products in currency other than U.S. dollars, payments payable to
LICENSOR shall be computed using the official rate of exchange as reported in
The Wall Street Journal prevailing on the date the payment to LICENSEE is
actually collected from the Third Party.
8.3 Single Royalty Liability. LICENSEE and its Affiliates shall
be liable for one royalty with respect to any given Licensed Products or product
embodying any part of the Invention Rights.
8.4 Deduction for Taxes. Any tax paid or required to be withheld
by LICENSEE on any Net Sales for which Payments are payable to LICENSOR under
this Agreement shall be deducted from the total amount of Payments otherwise
due. LICENSEE shall secure and send to LICENSOR proof of any such taxes withheld
and paid by LICENSEE or its sublicensees.
ARTICLE IX
Record Keeping and Auditing
9.1 Records. LICENSEE shall maintain full, true and accurate records
containing all information which may be necessary for a determination of the
various amounts to be paid to LICENSOR under the terms of this Agreement. Said
records shall be maintained for no less than four (4) years from the date of
creation and shall be open and available upon reasonable notice during regular
business hours for review by LICENSOR or any independent certified public
accountant, retained and paid for by LICENSOR for the purpose of verifying
LICENSEE's compliance with its payment obligations hereunder. This includes the
right to inspect LICENSEE documentation of reasonable Development Costs deducted
under paragraph 4.5. In the event LICENSEE has failed to pay royalty due
LICENSOR, and such deficit exceeds five percent (5%) or five hundred dollars
($500.00), whichever is greater, for any one (1) year time period, LICENSEE
agrees to pay all reasonable and documented audit expenses.
ARTICLE X
Patent Protection
10.1 Prosecution of Patent Applications. Upon full execution of this
Agreement, LICENSEE agrees to
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12
continue to prosecute, at its own expense, the applications for United States
Letters Patent identified in Exhibit A. With respect to any given patent
application filed in the United States and arising out of research evaluations
conducted pursuant to this Agreement, LICENSEE shall further file and diligently
prosecute corresponding foreign applications and maintain any patent issuing
therefrom, in such additional countries throughout the world as set forth in
Exhibit B, always attempting to obtain the best available claim coverage, at
LICENSEE's own expense.
10.2 LICENSOR decides not to file. In the event LICENSEE decides not
to file and/or diligently prosecute the application for Letters Patent
identified in Exhibit A, LICENSEE shall notify LICENSOR at least thirty (30)
days prior to taking, or not taking, action and LICENSOR may, at its election
and expense, but without obligation on its part, undertake such actions, and in
that event, LICENSEE shall give up all rights to such patent or patent
application and shall do all other acts reasonably required by LICENSOR to
exercise LICENSOR's rights under this paragraph 10.2.
10.3 Disclosure of Patent Prosecution Information. LICENSOR and
LICENSEE shall disclose to each other the complete texts of all patent
applications filed by LICENSOR and LICENSEE included in the Patent Rights.
Prior to taking any action with respect to the United States or any foreign
Patent Office or with respect to any other governmental or regulatory body
having jurisdiction over the subject matter of this Agreement, LICENSEE shall
present to LICENSOR and shall afford LICENSOR the opportunity to make such
comments as it may deem desirable to the texts of all patent applications
intended to be filed by LICENSEE which relate to the Inventions or the Patent
Rights. LICENSEE shall also afford LICENSOR the prior right to review and
comment on all information received or prepared by LICENSEE concerning the
institution or possible institution or any interference, opposition,
re-examination, reissue, revocation, nullification or any official proceeding
involving Patent Rights anywhere in the world. LICENSEE shall keep LICENSOR
fully informed of the course of all patent prosecution or other proceedings and
shall permit LICENSOR the full right to participate in such proceedings at its
own expense.
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13
10.4 Patent Infringement Notification. LICENSOR and LICENSEE shall
promptly inform each other in writing of any alleged infringement of which it
shall have notice committed by a Third Party regarding any patents within the
Patent Rights and each shall provide the other with any available evidence of
such infringement. Within thirty (30) days after receipt of the notice of
alleged infringement, LICENSOR and LICENSEE shall meet and mutually agree on a
procedure for resolving the alleged infringement.
10.5 LICENSOR's Option Regarding Infringement. If within four (4)
months after the notice of alleged infringement specified in paragraph 10.4
above, LICENSEE shall have been unsuccessful in resolving the alleged
infringement in a manner mutually acceptable to LICENSOR and LICENSEE, then
LICENSOR shall have the right, but shall not be obligated, to prosecute at its
own expense any infringement of the Patent Rights, and LICENSOR may, for such
purposes, use the name of LICENSEE as party plaintiff; provided, however, that
such right to bring an infringement action in LICENSEE's name shall remain in
effect only so long as the license granted herein remains exclusive. Without
LICENSEE's prior written consent, LICENSOR will not consent to any settlement,
consent judgment or other voluntary disposition of such suit if the same
involves any liability of, or admission of culpability of LICENSEE.
10.6 LICENSEE's Option Regarding Infringement. In the event that
LICENSEE shall undertake the enforcement and/or defense of the Patent Rights by
litigation, LICENSOR shall allow LICENSEE to withhold up to fifty percent (50%)
of the royalties from royalty payments due to LICENSOR from Net Sales in the
country in which the litigation occurs, and may apply the same toward
reimbursement of its expenses, including reasonable attorneys' fees, in
connection therewith.
Any recovery of damages by LICENSEE for any such suit shall be applied first in
satisfaction of any unreimbursed expenses and legal fees of LICENSEE and
LICENSOR relating to the suit, and next toward reimbursement of LICENSOR for any
royalties past due or withheld and applied pursuant to this Article X. The
balance remaining from any such recovery shall be retained by LICENSEE.
10.7 Cooperation During Infringement Proceedings. In any
infringement suit either party may insti-
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14
tute to enforce the Patent Rights pursuant to this Agreement, the other party
hereto shall, at the request and expense of the party initiating such suit,
cooperate in all respects and, to the extent possible, have its employees
testify when requested and make available relevant records, papers, information,
samples, specimens, and the like.
ARTICLE XI
Sublicenses
11.1 Authority to Sublicense. The terms and conditions under which
LICENSEE may grant sublicenses under the Patent Rights shall rest solely in
LICENSEE's discretion as long as the relevant requirements set forth in this
Agreement are met.
11.2 Required Provisions. LICENSEE shall include as a provision in
the Sublicense Agreement that if LICENSEE enters into an arrangement of
creditors and/or bankruptcy that one (1) week prior to such arrangement of
creditors and/or bankruptcy that any and all Sublicensees have the right to be
notified by LICENSEE of such arrangement and/or bankruptcy and such Sublicenses
shall further state that any and all license fees owed directly to LICENSEE
shall thereafter be paid directly to LICENSOR at the same royalty rate set forth
in any and all existing Sublicensee Agreements.
11.3 Accounting. LICENSEE shall provide LICENSOR an accounting of
all License Fees and royalties received from Sublicensees. Such accounting shall
accompany the Semi-Annual Report as provided in paragraph 8.1.
11.4 Sublicense Agreements. LICENSEE agrees to deliver to LICENSOR a
true and correct copy of each and every sublicense entered into by LICENSEE
within thirty (30) days after execution thereof and shall promptly advise
LICENSOR in writing of any modification (and supply a copy of same) or
termination of each sublicense. Upon termination of this Agreement, LICENSEE's
rights in all sublicenses shall be determined according to paragraph 12.5.
ARTICLE XII
Term and Termination
12.1 Term. This Agreement and LICENSEE's obligations shall be in
effect until the date of the last to expire of Licensed Patents and shall remain
in effect
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15
unless terminated earlier in accordance with the provisions of this Article XII.
In the event that this Agreement terminates at the date of the last to expire
Licensed Patents, then LICENSEE shall not be precluded from continuing to make,
have made, further develop, improve, use and sell Licensed Products, and use of
the Technical Information. Such request for continuation shall be presented to
LICENSOR by LICENSEE in writing and continuation shall be by mutual consent.
LICENSOR agrees that consent shall not be unreasonably withheld.
12.2 Voluntary Termination. LICENSEE shall have the right to
terminate this Agreement upon giving LICENSOR ninety (90) days prior to written
notice to that effect.
12.3 Termination for Breach. In the event that LICENSEE shall at
any time fail to make required payments or otherwise materially breach the terms
of this Agreement, LICENSOR shall notify LICENSEE of such breach and shall
indicate that it intends to terminate this Agreement unless such breach is
corrected or terminated. LICENSEE shall have ninety (90) days following its
receipt of such notice to correct such breach. In the event of unforeseen delay,
justification for delay shall be presented to LICENSOR by LICENSEE and
termination shall be delayed to some agreed time if it is determined that
diligence by LICENSEE existed.
12.4 Payment of Accrued Royalties. The termination of this
Agreement for any reason shall be without prejudice to LICENSOR's right to
receive all amounts payable and unpaid at the date of the termination of this
Agreement.
12.5 Survival of Sublicenses. Any sublicense granted by LICENSEE
pursuant to this Agreement prior to any termination of this Agreement shall
survive the termination of this Agreement. Upon termination of this Agreement
for any reason during the term of any Sublicenses, LICENSEE shall assign to
LICENSOR all of LICENSEE's rights in such Sublicenses and LICENSOR shall assume
all obligations of LICENSEE under any such Sublicense.
12.6 Sales of Licensed Products Inventory. Upon termination of this
Agreement, other than pursuant to paragraph 12.1, LICENSEE shall notify LICENSOR
of the amount of Licensed Products LICENSEE and its various distributors then
have on hand, the sale of which would,
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16
but for such termination, be subject to royalty, and thereafter LICENSEE and its
various distributors shall be permitted to sell such quantities of Licensed
Products, and LICENSEE shall pay LICENSOR the applicable royalty in the manner
required hereby.
12.7 Assignment of Patent Rights Upon Termination. In the event
this Agreement is terminated for any reason other than the expiration of
Licensed Patents, LICENSEE hereby agrees to reassign to LICENSOR any ownership
rights in patents acquired by it by virtue of this Agreement.
12.8 Survival of Covenants. Expiration or termination of this
Agreement for any reason shall terminate all outstanding obligations and
liabilities between the parties arising from this Agreement except those
described in paragraph 5.3 and Article VII.
12.9 Partial Termination. Termination of this Agreement with
respect to any particular country or territory shall not affect this Agreement
with respect to any other country or territory.
12.10 Additional Termination Rights. This Agreement may be
terminated by LICENSOR at its option and without prejudice to any other remedy
to which it may be entitled at law or in equity, or elsewhere under this
Agreement, by giving written notice of termination to LICENSEE in the event that
LICENSEE (a) shall become "Insolvent" (as such term is defined in the Bankruptcy
Code of the United States of America, as amended from time-to-time), (b) shall
fail to pay its debts generally as they become due, (c) shall voluntarily seek,
consent, or acquiesce in the benefits of any bankruptcy or similar debtor-relief
laws, or (d) shall become a party to or is made the subject of any proceeding
provided for by any debtor-relief law that could suspend or otherwise alter
LICENSOR's rights under this Agreement.
ARTICLE XIII
Representations and Indemnity
13.1 LICENSOR Representations. LICENSOR hereby represents to
LICENSEE as follows:
(a) LICENSOR has sole and exclusive ownership rights in and to
the Invention Rights, the Patent Rights, and the Technical Information granted
to LICENSEE;
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17
(b) LICENSOR has the full right, power, and authority to
assign, free and clear of any liens, claims or encumbrances of any kind,
ownership and grant the license set forth in Articles II and III;
(c) There are no outstanding agreements, assignments, or
encumbrances inconsistent with the provisions of this Agreement.
(d) LICENSOR has no knowledge of any infringement or of any
pending or threatened claim relating in any manner to the Inventions, the Patent
Rights or the Licensed Products;
(e) LICENSOR has no knowledge of or reason to believe that any
of the Patent Rights are invalid or unenforceable or that their exercise would
infringe the patent rights of any Third Party.
(f) LICENSOR MAKES NO OTHER REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, NOR DOES LICENSOR ASSUME ANY OBLIGATIONS WITH RESPECT TO THE
INFRINGEMENT OF PATENTS OF OTHERS ARISING AS A RESULT OF LICENSEE'S ACTIVITIES
UNDER THIS AGREEMENT.
13.2 LICENSEE's Representations and Indemnity. LICENSEE agrees to
indemnify and hold LICENSOR, IU, and their Trustees, Directors, officers and
employees harmless from and against any and all claims, demands, losses or
causes of action related in any way to marketing, commercialization or other
rights granted under this Agreement, except to the extent that such claims,
demands, losses or causes of action result (a) from negligent or intentional
actions or misrepresentations on the part of LICENSOR and/or IU, or (b) from
patent infringement claims involving the Invention Rights, the Patent Rights or
the Licensed Products.
13.3 Cooperation in Defending Claims. In the event of the
institution of any suit by a Third Party against LICENSOR and/or IU or LICENSEE
or its sublicensees for patent infringement involving the manufacture, use,
sale, distribution or marketing of Licensed Products, the party sued shall
promptly notify the other party in writing. LICENSOR and LICENSEE shall assist
one another and cooperate in any such litigation at the other's request without
expense to the requesting party; provided, however, that LICENSOR and LICENSEE
shall each recover its costs of litigation from any recovery, award or
settlement as provided in paragraph 10.7.
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ARTICLE XIV
Third Party and Compulsory Licenses
14.1 Third Party Licenses. Without limitation of paragraph 4.3 (and
the royalty reduction provided therein), in the event that LICENSEE deems it
necessary to pay royalties to any Third Party on account of making, having made,
using or selling Licensed Products by virtue of Third Party having rights under
a patent, or to know-how where no patents are applicable, which dominate the
rights granted to LICENSEE hereunder, LICENSEE shall give written notice thereof
to LICENSOR and LICENSOR and LICENSEE shall renegotiate in good faith a lowering
of the royalty rates required to be paid under this Agreement.
14.2 Compulsory License. In the event that a governmental agency in
any country or territory, except as referred to in Article III hereunder, grants
or compels LICENSOR to grant a license to it or to any Third Party for any
Licensed Products, LICENSEE shall have the benefit in such county or territory
of the terms granted to such Third Party to the extent that such terms are more
favorable than those of this Agreement.
ARTICLE XV
Export Controls
15.1 Export Controls. It is understood that LICENSOR and IU are
subject to United States laws and regulations controlling the export of
technical data, computer software, laboratory prototypes and other commodities
(including the Arms Export Control Act, as amended, and the Export
Administration Act of 1979), and that its obligations hereunder are contingent
on compliance with applicable United States export laws and regulations. The
transfer of certain technical data and commodities may require a license from
the cognizant agency of the United States Government and/or written assurances
by LICENSEE and LICENSEE shall not export data commodities to certain foreign
countries without prior approval of such agency. LICENSOR neither represents
that a license pursuant to such law and regulations shall not be required nor
that, if required, it shall be issued.
<PAGE>
19
ARTICLE XVI
Use of Name
16.1 Use of Name. No advertising or publicity concerning the subject
matter of this Agreement and having or containing any reference to LICENSOR, IU
or any inventor or other employee of either shall be made use of by either party
hereto unless and until the same shall have been first submitted to and shall
have received the approval of the authorized representative of the parties
hereto, appointed pursuant to Paragraph 17.1 hereof, which approval shall not be
unreasonably withheld, provided that LICENSEE shall be entitled to refer to
LICENSOR, IU and this Agreement in disclosure or similar documents used in
connection with financing transactions and that LICENSOR and/or IU shall review
and approve all such language, such approval not to be unreasonably withheld.
ARTICLE XVII
Miscellaneous
17.1 Notices or Other Communications. Any payment, notice or other
communication required or permitted to be made or to be given to either party
under this Agreement shall be sufficiently made or given three business days
after the date of mailing if sent to such party by certified first class U.S.
mail, postage prepaid, the date of transmission (or the next business day
thereafter if such date is not a business day) by telecopier (to the respective
numbers set forth below) with answer back to confirm or upon receipt if
personally delivered (including by reputable overnight carrier) at the address
as shall be designated by written notice given to the other party.
If to LICENSOR:
Attn: Vice President, Office of Technology Transfer
Advanced Research & Technology Institute
Indiana University
501 North Morton, Suite 111
Bloomington, IN 47404
telecopier number: (812) 855-3757
<PAGE>
20
If to LICENSEE:
Attn: Director of Business Development
Praecis Pharmaceuticals, Inc.
One Hampshire Street
Cambridge, MA 02139
telecopier number: (617) 494-8414
In the event of a change of address, the party changing must notify the other
party.
17.2 Assignability. Licensee may assign or otherwise transfer this
Agreement and the License granted hereby and the rights acquired by it to and
only to the assignee or transferee of Licensee's entire business or of that part
of Licensee's business to which the License granted hereby relates, provided,
however, that such assignee or transferee agrees in writing to be bound by the
terms and conditions of this Agreement. Licensee will give IU Foundation thirty
days prior notice of such assignment and transfer and if IU Foundation raises no
reasonable objection in writing to such assignment or transfer within fifteen
days after IU Foundation receives such notice, then IU Foundation will be deemed
to have approved such assignment or transfer so long as the assignee or
transferee agrees in writing to be bound by the terms and conditions of this
Agreement. If Licensee sells or otherwise transfers its entire business or that
part of its business to which the license granted hereby relates and the
assignee or transferee does not agree in writing to be bound by the terms and
conditions of this Agreement within fifteen days of such sale or transfer, IU
Foundation will have the sole right to terminate this License by providing
written notice of termination to such transferee or assignee.
17.3 Governing Law. This Agreement and its effects are subject to
and shall be construed and enforced within the internal laws of the State of
Indiana and the United States of America.
17.4 Entire Agreement and Amendments. This Agreement embodies the
entire understanding of the parties and supersedes and replaces any and all
pre-existing agreements or understandings between LICENSEE and LICENSOR and/or
IU relating to the subject matter hereof. No amendment or modification of this
Agreement shall be valid or binding upon LICENSEE or LICENSOR unless made in
writing and signed on behalf of each of the parties by their respective duly
authorized representative.
<PAGE>
21
17.5 Specific Performance. Each of the parties hereto acknowledges
and agrees that its respective rights and opportunities arising out of the
obligations under this Agreement are of a unique nature. To the extent permitted
by the laws and constitution of the State of Indiana, in order to preclude any
dispute regarding the determinability of damages resulting from a failure or
breach in performance by any party hereto, each of the parties hereby agrees
that they shall be entitled to sue in equity for specific performance or to
obtain any injunction against continued or future violations of this Agreement,
and each of the parties to this Agreement expressly waives the defense that a
remedy in damages would be adequate.
17.6 Waiver. A waiver by any party hereto as to any particular
breach of this Agreement shall not constitute or be considered a waiver of any
similar breach thereafter.
17.7 Headings. The headings of the paragraphs are inserted for
convenience of reference and not for interpretation of this Agreement.
17.8 Multiple Counterparts. This Agreement is executed in duplicate
and each executed duplicate is deemed an original.
17.9 Pre-existing Agreements. LICENSOR and LICENSEE represent that
there are no other outstanding agreements relating to the Inventions set forth
in paragraph 1.1.
IN WITNESS WHEREOF, each party hereto has executed this Agreement as of the day
and year first above written.
INDIANA UNIVERSITY FOUNDATION PRAECIS PHARMACEUTICALS, INC.
<TABLE>
<CAPTION>
<S> <C>
By /s/ Walter L. Koon, Jr. By /s/ Marc A. Silver
------------------------- -----------------------
Walter L. Koon, Jr.
Senior Vice President, Title Vice President
Investments --------------------
Date January 30, 1997 Date February , 1997
---------------------- --------------------
</TABLE>
<PAGE>
22
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
EXHIBIT A
Patent(s) and Patent Application(s)
United States patent Application number 08/480,494 filed *** PCT
application number PCT/US96/09852 filed ***
<PAGE>
23
EXHIBIT B
List of Countries in Which to File for Patents
Europe
Canada
Japan
Australia
<PAGE>
24
EXHIBIT C
Pharmaceutical Peptides, Inc. Development Plan
[NOT INCLUDED AS AN EXHIBIT TO ORIGINAL AGREEMENT]
<PAGE>
25
EXHIBIT D
Uniform Biological Material Transfer Agreement
Non-Profit to Profit
<TABLE>
<CAPTION>
<S> <C> <C>
I. Definitions:
1 PROVIDER: Organization providing the ORIGINAL MATERIAL. (Name and
address).
2 PROVIDER SCIENTIST: (Name and address).
3 RECIPIENT: Organization receiving the ORIGINAL MATERIAL (Name and
address).
4 RECIPIENT SCIENTIST (Name and address):
5 ORIGINAL MATERIAL (Description of the material being transferred):
6 MATERIAL: ORIGINAL MATERIAL, PROGENY, and UNMODIFIED DERIVATIVES.
The MATERIAL shall not include: (a) MODIFICATIONS, or (b) other
substances created by the RECIPIENT through the use of the MATERIAL
which are not MODIFICATIONS, PROGENY, or UNMODIFIED DERIVATIVES.
7 PROGENY: Unmodified descendant from the MATERIAL, such as virus from
virus, cell from cell, or organism from organism.
8 UNMODIFIED DERIVATIVES: Substances created by the RECIPIENT which
constitute an unmodified functional subunit or product expressed by
the ORIGINAL MATERIAL. Some examples include: subclones of
unmodified cell lines, purified or fractionated subsets of the
ORIGINAL MATERIAL, proteins expressed by DNA/RNA supplied by the
PROVIDER, or monoclonal antibodies secreted by a hybridoma cell
line.
9 MODIFICATIONS: Substances created by the RECIPIENT which
contain/incorporate the MATERIAL.
10 COMMERCIAL PURPOSES: The sale, lease, license, or other transfer of
the MATERIAL or MODIFICATIONS to a for-profit organization.
COMMERCIAL PURPOSES shall also include uses of the MATERIAL or
MODIFICATIONS by any organization, including RECIPIENT, to perform
contract research, to screen compound libraries, to produce or
manufacture products for general sale, or to conduct research
activities that result in any sale, lease, license, or transfer of
the MATERIAL or MODIFICATIONS to a for-profit organization. However,
industrially sponsored academic research shall not be considered a
use of the MATERIAL or MODIFICATIONS for COMMERCIAL PUR-
</TABLE>
<PAGE>
26
<TABLE>
<CAPTION>
<S> <C> <C> <C>
POSES per se, unless any of the above conditions of this definition
are met.
11 NONPROFIT ORGANIZATION(S): A university or other institution of
higher education or an organization of the type described in section
501(c)(3) of the Internal Revenue Code of 1954 (26 U.S.C. 501(c))
and exempt from taxation under section 501(a) of the Internal
Revenue Code (26 U.S.C. 501(a)) or any nonprofit scientific or
educational organization qualified under a state nonprofit
organization statute. As used herein, the term also includes
government agencies.
II. Terms and Conditions of this Agreement.
1 The PROVIDER retains ownership of the MATERIAL, including any
MATERIAL contained or incorporated in MODIFICATIONS.
2 The RECIPIENT retains ownership of: (a) MODIFICATIONS (except that,
the PROVIDER retains ownership rights to the MATERIAL included
therein), and (b) those substances created through the use of the
MATERIAL or MODIFICATIONS, but which are not PROGENY, UNMODIFIED
DERIVATIVES or MODIFICATIONS (i.e., do not contain the ORIGINAL
MATERIAL, PROGENY, UNMODIFIED DERIVATIVES). If either 2(a) or 2(b)
results from the collaborative efforts of the PROVIDER and the
RECIPIENT, joint ownership may be negotiated.
3 The RECIPIENT and the RECIPIENT SCIENTIST agree that the MATERIAL:
(a) is to be used solely for research purposes;
(b) will not be used in human subjects, in clinical trials, or for
diagnostic purposes involving human subjects without the
written consent of the PROVIDER;
(c) is to be used only at the RECIPIENT organization and only in
the RECIPIENT SCIENTIST's laboratory under the direction of
the RECIPIENT SCIENTIST or others working under his/her direct
supervision; and
4 The RECIPIENT and the RECIPIENT SCIENTIST agree to refer to the
PROVIDER any request for the MATERIAL from anyone other than those
persons working under the RECIPIENT SCIENTIST's direct supervision.
5 (a) The RECIPIENT and/or the RECIPIENT SCIENTIST shall have the
right, without restriction, to distribute substances created
by the RECIPIENT through the use of the ORIGINAL MATERIAL only
if those substances
</TABLE>
<PAGE>
27
<TABLE>
<CAPTION>
<S> <C> <C> <C>
are not PROGENY, UNMODIFIED DERIVATIVES, or MODIFICATIONS.
(b) Without written consent from the PROVIDER, the RECIPIENT
and/or the RECIPIENT SCIENTIST may NOT provide MODIFICATIONS
for COMMERCIAL PURPOSES. It is recognized by the RECIPIENT
that such COMMERCIAL PURPOSES may require a commercial license
from the PROVIDER and the PROVIDER has no obligation to grant
a commercial license to its ownership interest in the MATERIAL
incorporated in the MODIFICATIONS. Nothing in this paragraph,
however, shall prevent the RECIPIENT from granting commercial
licenses under the RECIPIENT's intellectual property rights
claiming such MODIFICATIONS, or methods of their manufacture
or their use.
6 The RECIPIENT acknowledges that the MATERIAL is or may be the
subject of a patent application. Except as provided in this
Agreement, no express or implied licenses or other rights are
provided to the RECIPIENT under any patents, patent applications,
trade secrets or other proprietary rights of the PROVIDER, including
any altered forms of the MATERIAL made by the PROVIDER. In
particular, no express or implied licenses or other rights are
provided to use the MATERIAL, MODIFICATIONS, or any related patents
of the PROVIDER for COMMERCIAL PURPOSES.
7 If the RECIPIENT desires to use or license the MATERIAL or
MODIFICATIONS for COMMERCIAL PURPOSES, the RECIPIENT agrees, in
advance of such use, to negotiate in good faith with the PROVIDER to
establish the terms of a commercial license. It is understood by the
RECIPIENT that the PROVIDER shall have no obligation to grant such a
license to the RECIPIENT, and may grant exclusive or non-exclusive
commercial licenses to others, or sell or assign all or part of the
rights in the MATERIAL to any third party(ies), subject to any
pre-existing rights held by others and obligations to the Federal
Government.
8 The RECIPIENT is free to file patent application(s) claiming
inventions made by the RECIPIENT through the use of the MATERIAL but
agrees to notify the PROVIDER upon filing a patent application
claiming MODIFICATIONS or method(s) of manufacture or use(s) of the
MATERIAL.
9 Any MATERIAL delivered pursuant to this Agreement is understood to
be experimental in nature and may have hazardous properties. The
PROVIDER MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY
KIND, EITHER EXPRESSED OR IMPLIED. THERE ARE NO EXPRESS OR IMPLIED
WARRANTIES OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE,
OR THAT
</TABLE>
<PAGE>
28
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
THE USE OF THE MATERIAL WILL NOT INFRINGE ANY PATENT, COPYRIGHT,
TRADEMARK, OR OTHER PROPRIETARY RIGHTS.
10 Except to the extent prohibited by law, the RECIPIENT assumes all
liability for damages which may arise from its use, storage or
disposal of the MATERIAL. The PROVIDER will not be liable to the
RECIPIENT for any loss, claim or demand made by the RECIPIENT, or
made against the RECIPIENT by any other party, due to or arising
from the use of the MATERIAL by the RECIPIENT, except to the extent
permitted by law when caused by the gross negligence or willful
misconduct of the PROVIDER.
11 This Agreement shall not be interpreted to prevent or delay
publication of research findings resulting from the use of the
MATERIAL or the MODIFICATIONS. The RECIPIENT SCIENTIST agrees to
provide appropriate acknowledgement of the source of the MATERIAL in
all publications.
12 The RECIPIENT agrees to use the MATERIAL in compliance with all
applicable statutes and regulations, including Public Health Service
and National Institutes of Health regulations and guidelines such
as, for example, those relating to research involving the use of
animals or recombinant DNA.
13 This Agreement will terminate on the earliest of the following
dates:
(a) When the MATERIAL becomes generally available from third
parties, for example, through reagent catalogs or public
depositories, or
(b) on completion of the RECIPIENT's current research with the
MATERIAL, or (c) on thirty (30) days written notice by either
party to the other:
(i) If termination should occur under 13(a), the RECIPIENT
shall be bound to the PROVIDER by the least restrictive
terms applicable to the MATERIAL obtained from the
then-available sources; and
(ii) If termination should occur under 13(b) above, the
RECIPIENT will discontinue its use of the MATERIAL and
will, upon direction of the PROVIDER, return or destroy
any remaining MATERIAL. The RECIPIENT, at its
discretion, will also either destroy the MODIFICATIONS
or remain bound by the terms of this agreement as they
apply to MODIFICATIONS; and
</TABLE>
<PAGE>
29
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(iii) In the event the PROVIDER terminates this Agreement
under 13(c) other than for breach of this Agreement or
for cause such as an imminent health risk or patent
infringement, the PROVIDER will defer the effective date
of termination for a period of up to one year, upon
request from the RECIPIENT, to permit completion of
research in progress. Upon the effective date of
termination, or if requested, the deferred effective
date of termination, RECIPIENT will discontinue its use
of the MATERIAL and will, upon direction of the
PROVIDER, return or destroy any remaining MATERIAL. The
RECIPIENT, at its discretion, will also either destroy
the MODIFICATIONS or remain bound by the terms of this
agreement as they apply to MODIFICATIONS.
14 Paragraphs 6, 9, and 10 shall survive termination.
15 The MATERIAL is provided at a cost of dollars ($ .00) to
reimburse the PROVIDER for its preparation and distribution costs.
16 The PROVIDER and RECIPIENT acknowledge that MATERIAL is being
provided to recipient in connection with an option agreement between
Indiana University Foundation (IUF) and RECIPIENT effective date
June , 1995 (hereinafter referred to as "Option Agreement") or a
license agreement between IUF and RECIPIENT entered into pursuant to
the Option Agreement (hereinafter referred to as "License
Agreement"). It is understood and agreed that the provisions of this
agreement shall be subject to the Option Agreement or the License
Agreement, as applicable, and in the event of any conflict or
inconsistency between the terms of this Agreement and the
</TABLE>
<PAGE>
30
<TABLE>
<CAPTION>
<S> <C> <C>
AGREED:
PROVIDER: Organization providing the ORIGINAL MATERIAL:
Organization:
-----------------------------------------------------------------
Address:
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Authorized Official:
Name:
------------------------------------------------------------------------
Title:
------------------------------------------------------------------------
Signature: Date:
-------------------------------------------- -----------------
Provider's Scientist:
Name:
------------------------------------------------------------------------
Title:
------------------------------------------------------------------------
Signature: Date:
-------------------------------------------- -----------------
RECIPIENT: Organization receiving the ORIGINAL MATERIAL:
Organization:
-----------------------------------------------------------------
Address:
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Authorized Official:
Name:
------------------------------------------------------------------------
Title:
------------------------------------------------------------------------
Signature: Date:
-------------------------------------------- -----------------
Provider's Scientist:
Name:
------------------------------------------------------------------------
Title:
------------------------------------------------------------------------
Signature: Date:
-------------------------------------------- -----------------
</TABLE>
<PAGE>
31
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
Amendment
This Amendment ("Amendment"), effective as of the date last written below,
amends the license agreement between Indiana University Foundation, now assigned
to Indiana University's Advanced Research and Technology Institute, Inc.
(hereinafter referred to as "LICENSOR"), and Praecis Pharmaceuticals, Inc.
(hereinafter referred to as "LICENSEE") dated October 17, 1996 ("Agreement").
Provisions Replaced. The following provisions replace the corresponding
provisions of the Agreement in their entirety.
"1.11 'Net Sales' shall mean the amount calculated by subtracting
from Adjusted Gross Sales a lump sum deduction of *** (***%) percent
of Adjusted Gross Sales for those sales related deductions which are
not accounted for on a product-by-product basis."
"Adjusted Gross Sales" shall mean the gross sales amount invoiced by
LICENSEE, its Affiliates, or sublicensees for the Licensed Products
to Third Party purchasers less, to the extent such amounts are
included in the amount of gross sales invoiced, deductions of
returns (including withdrawals and recalls), rebates (price
reductions, including Medicaid or performance based and similar
types of rebates e.g. chargebacks or retroactive price deductions),
volume (quantity) discounts, discounts granted at the time of
invoicing, sales taxes and other taxes directly linked to the gross
sales amount as computed on a product-by-product basis in
LICENSEE's, its Affiliate's or sublicensee's sales statistics for
the countries concerned.
"ARTICLE IV
Payments and Royalties
4.01 Initial Fee. In exchange for the exclusive license granted under this
agreement LICENSEE agrees to pay to LICENSOR an initial fee of *** U.S. dollars
($***) upon execution of this Agreement.
<PAGE>
32
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
4.02. Milestone Payment. LICENSEE shall pay Milestone Payments as follows:
(a) ***;
(b) ***;
(c) ***;
(d) ***;
(e) ***;
(f) ***; and
(g) ***.
4.03 Royalty. LICENSEE shall pay to LICENSOR the following royalties:
(a) for the first *** dollars ($***) in Net Sales per year:
(i) *** (***%) of Net Sales where Net Sales are not sold in
combination with depot formulation; and
(ii) *** (***%) of Net Sales where Net Sales are sold in
combination with depot formulation; and
(b) for Net Sales above *** dollars ($***) per year:
(i) *** (***%) of Net Sales where Net Sales where Net Sales
are not sold in combination with depot formulation; and
(ii) *** (***%) of Net Sales where Net Sales are sold in
combination with depot formulation.
4.04 Accrual of Royalties
Royalties shall accrue when Licensed Products are sold or otherwise
transferred by LICENSEE to a Third Party, and Licensed Products shall be
considered when LICENSEE invoice is issued. LICENSEE shall make payments
to LICENSOR in accordance with the requirements of Article VIII.
10.5
In any event, for so long as the license granted hereunder remains exclusive.
LICENSEE or its Affiliates or its sublicensee shall have ninety (90) days after
the notice of the alleged infringement specified in paragraph 10.04 above to
initiate prosecution at its own expense of the alleged infringement of the
Patent Rights. In such case, LICENSEE shall, before initiation of such
prosecution by LICENSEE or its Affiliates or its sublicensee, provide prior
written notice to LICENSOR. At LICENSEE's request, LICENSOR shall immediately
(1) become party to the suit and LICENSEE or its Affiliate or its
<PAGE>
33
sublicensee may use the name of LICENSOR as a party plaintiff, or (2) at
LICENSOR's option, assign the Patent Right to LICENSEE.
If, after ninety (90) days after the notice of alleged infringement specified in
paragraph 10.04 above, LICENSEE or its Affiliate or its sublicensee shall not
have initiated prosecution at its own expense of the alleged infringement of the
Patent Rights, then LICENSOR shall have the right, but shall not be obligated,
to prosecute at its own expense the alleged infringement of the Patent Rights.
In such case, LICENSOR shall, before the filing of such suit by LICENSOR,
provide prior written notice to LICENSEE. At LICENSOR's request, (1) LICENSEE
shall immediately become a party to the suit and/or cause its Affiliate or
sublicensee to become a party to the suit, and (2) LICENSOR may use the name of
LICENSEE as a party plaintiff and/or LICENSEE shall cause its Affiliate or its
sublicensee to allow LICENSOR to use the name of its Affiliate or sublicensee as
a party plaintiff.
Without LICENSEE's prior written consent, LICENSOR will not consent to any
settlement, consent judgement or other voluntary disposition of such suit if the
same involves any liability of, or admission of culpability of LICENSEE or its
Affiliate or its sublicensee.
Without LICENSOR'S prior written consent, LICENSEE will not consent to any
settlement, consent judgment or other voluntary disposition of such suit if the
same involves any liability of, or admission of culpability of LICENSOR or its
Affiliate or its sublicensee.
Provision Added. The following provision added to the Agreement.
"10.8 Notwithstanding anything to the contrary, should a party or its
Affiliate or sublicensee receive a certification pursuant to the Drug
Price Competition and Patent Restoration Act of 1984 (Public Law 98-417)
as amended, or its equivalent in a country other than the United States of
America, with respect to a Patent Right, then (1) such party shall
immediately provide the other party with a copy of such certification and
the date on which such party, its Affiliate or sublicensee received such
certification ("Certification Date"), and (2) LICENSEE, or its Affiliate
or its sublicensee, will have the first right to immediately bring a suit
for infringement of the Patent Right, at its expense. In such case,
LICENSEE shall, before the filing of such suit by LICENSEE or its
Affiliate or its sublicensee, provide prior written notice to LICENSOR. At
LICENSEE's request, LICENSOR shall immediately (1) become party to the
suit and LICENSEE, or its Affiliate or sublicensee may use the name of
LICENSOR as a party plaintiff, or, (2) at LICENSOR's option, assign the
Patent Right to LICENSEE.
Should a period of thirty (30) days after the Certification Date pass without
LICENSEE or its Affiliate or sublicensee initiating suite, then LICENSOR shall
be free to immediately bring suit for patent infringement in its name, at its
expense. In such case, LICENSOR
<PAGE>
34
shall, before the filing of such suit by LICENSOR, provide prior written notice
to LICENSEE. At LICENSOR's request, (1) LICENSEE shall immediately become a
party to the suit and/or cause its Affiliate or sublicensee to become a party to
the suit, and (2) LICENSOR may use the name of LICENSEE as a party plaintiff
and/or LICENSEE shall cause its sublicensee to allow LICENSOR to use the name of
its Affiliate or sublicensee as a party plaintiff."
All other terms and conditions shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals and duly executed this Amendment as of the day and year set forth below.
<TABLE>
<CAPTION>
<S> <C>
Advanced Research and Technology Praecis Pharmaceuticals,
Institute, Inc. Inc.
BY: /s/ Douglas Wilson By: /s/ Marc A. Silver
----------------------- -----------------------
NAME: Douglas Wilson NAME: Marc A. Silver
TITLE: President TITLE: Vice President
DATE: DATE: June 3, 1998
</TABLE>
<PAGE>
EXHIBIT 10.10
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT
ASTERISKS (*) DENOTE SUCH OMISSIONS
DEVELOPMENT AND SUPPLY AGREEMENT (PRAECIS-149)
BETWEEN UCB-BIOPRODUCTS S.A., with registered office at Avenue Louise
326, B-1050 Brussels, Belguim, (Facsimile No. 32.2/386.29.90)
("UCB")
on the one hand,
AND PRAECIS PHARMACEUTICALS INCORPORATED with its principal office at
One Hampshire Street, 5th Floor, Cambridge, Massachusetts, 02139,
USA (Facsimile No. 617/494.8414) ("PRAECIS")
on the other hand,
WHEREAS, PRAECIS holds exclusive worldwide rights, as licensee, to a compound
identified as "PPI-149", USAN name "Abarelix" (the "Product"), and is interested
in development and marketing on a worldwide basis pharmaceutical compositions
containing the Product for the treatment of prostate cancer and other diseases
as used by the end user (the "Finished Product"); and
WHEREAS, UCB has suitable premises, equipment and expertise in the development
and production of pharmaceutical grade bulk peptides; and
WHEREAS, PRAECIS wishes UCB, as a preferred supplier, to produce and supply it
with quantities of the Product for development and commercial purposes, upon the
terms and subject to the conditions set forth in this Agreement; and
WHEREAS, UCB is willing to manufacture and supply Product upon the terms and
subject to the conditions set forth in this Agreement;
<PAGE>
NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING, AND THE REPRESENTATIONS,
WARRANTIES, COVENANTS AND AGREEMENTS CONTAINED HEREIN, THE PARTIES AGREE AS
FOLLOWS:
SECTION 1 - DEFINITIONS
When used herein, the following terms, used with initial capital letters, shall
have the following respective meanings and the singular shall include the plural
and vice-versa:
1.1 "Affiliates" shall mean with respect to either party, any person,
corporation, company, partnership, joint venture or other entity
controlling, controlled by or under common control with such party. For
such purpose the term "control" means the holding of 50% or more of the
common voting stock or ordinary shares in, or the right to appoint 50% or
more of the directors of, or the right to share in 50% or more of the
profits of, the said corporation, company, partnership, joint venture, or
entity.
1.2 "Confidential Information" shall mean any UCB or PRAECIS trade secret or
other information of a confidential and/or proprietary nature which is
disclosed by one party ("Disclosing Party") to the other party ("Receiving
Party"), excluding such trade secret or other information which (i) is
published or otherwise becomes a matter of public knowledge by any means
other than through the breach of this Agreement by the Receiving Party,
(ii) was known by the Receiving Party at the time of such disclosure, as
evidenced by the Receiving Party's written records predating such
disclosure and maintained in the ordinary course of business, or (iii) was
disclosed to the Receiving Party by any Third Party (as defined below) who
has the right to disclose the same. For the purposes of this Section 1.2,
information shall not be deemed to be public knowledge or known to PRAECIS
solely because: (i) the general principal is public knowledge or known to
PRAECIS, if the particular practice is not itself public knowledge or so
known, or (ii) it constitutes a combination of information which is public
knowledge or known to PRAECIS unless the combination itself and the
principle and mode of operation of such combination is also public
knowledge or known to PRAECIS.
1.3 "Development Period" shall mean the period of time from the Effective Date
until Launch Date (as defined below).
2
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1.4 "Development Plan" shall have the meaning set forth in Section 2.1 of this
Agreement.
1.5 "Effective Date" shall mean the date on which this Agreement is signed by
the latter of the parties to sign this Agreement.
1.6 "Finished Product" shall have the meaning set forth in the preamble to
this Agreement.
1.7 "Forecast" shall have the meaning set forth in Section 4.2.
1.8 "Initial Product Orders" shall have the meaning set forth in Section 4.3.
1.9 "Launch Date" shall mean the first date that the Finished Product is sold
commercially by PRAECIS, its Affiliates, Partners, licensee(s),
sublicensee(s) or distributors to a wholesaler or end user.
1.10 "LHRH Antagonist" shall mean any compound which exhibits Lutenizing
Hormone Releasing Hormone (LHRH) antagonist activity.
1.11 "Manufacturing Standards" shall have the meaning set forth in Section 3.2
of this Agreement.
1.12 "Net Sales" shall mean with respect to all Finished Product sold by
PRAECIS, any PARTNER, and their respective Affiliates, licensee(s),
sublicensee(s) or distributors, the total gross invoices for such Finished
Product less (i) quantity and/or cash discounts actually allowed and
taken, (ii) customs duties and sales and income taxes, if any, related to
the sale of the Finished Product, and (iii) amounts allowed by reason of
rejections and return of goods.
1.13 "Partner" shall mean ROCHE PRODUCTS INC. and SYNTHELABO, and their
respective Affiliates, as long as their respective Agreements dated May
13, 1997 and August 21, 1997 (or in the case of the August 21st Agreement,
the definitive agreement to be entered into upon the exercise of the
option provided for in such August 21st Agreement), respectively, with
PRAECIS remain in force.
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1.14 "Product" shall have the meaning set forth in the preambles to this
Agreement.
1.15 "Specifications" shall have the meaning set forth in Section 2.1.
1.16 "Supplied Entities" shall have the meaning set forth in Section 3.1.
1.17 "Third Party" shall mean any natural person, corporation, firm, trust,
joint venture, company, partnership or other business organization which
is not a party hereto or an Affiliate of any party hereto.
1.18 "UCB Manufacturing Capacity" shall mean the aggregate amount of Product
which UCB and its Affiliates can manufacture over the applicable time
period.
1.19 "UCB Technical Information" shall mean any and all know-how, trade
secrets, formulations, process, vendor or supplies information, raw
material, peptide or intermediate specifications, methods and the like,
whether or not patented or patentable, including without limitation,
pre-clinical, pharmacological, toxicological, chemical, physical and
analytical, safety, quality control or other proprietary data and
information relating to the development, testing, use, manufacture or
marketing of peptides (including the Product) which UCB or any of its
Affiliates has now (which is fully set forth in Annex F, with respect to
UCB strategy of synthesis and purification) or may conceive, develop,
acquire or have the ability to license or sublicensee (under licenses from
others or otherwise) during the term of or in the performance of this
Agreement, provided that any of the foregoing (including that set forth in
Annex F) which would otherwise constitute UCB Technical Information (i)
shall not be deemed to be UCB Technical Information unless it constitutes
Confidential Information and (ii) shall not be deemed to be UCB Technical
Information, but information owned jointly, to the extent it was jointly
conceived, discovered or developed by PRAECIS or its Affiliates and UCB or
its Affiliates.
SECTION 2 - DEVELOPMENT OF THE PROCESS, SPECIFICATIONS
2.1 Development Plan. UCB, in liaison with PRAECIS, shall develop a method of
assembly, synthesis and purification of the Product, using specifications
of the Product established by PRAECIS which, upon PRAECIS' approval, will
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be the contractual specifications hereunder and will be attached hereto as
Annex A to this Agreement (the "Specifications"), prepare the drug master
file ("DMF"), develop the analytical procedures and supply stability
batches and validation batches, all in accordance with the plan to be
agreed upon by the parties, as amended from time to time in accordance
with the terms hereof (the "Development Plan"), and the other terms and
conditions of this Agreement. An outline of the Development Plan is
attached hereto as Annex B. Alternatively, at the request of PRAECIS, in
lieu of submission of a DMF, the information and data which would be
contained therein will be included in the Chemistry Manufacturing and
Controls section of the applicable regulatory submission. The Development
Plan may be amended or updated from time to time by written agreement of
the parties, as development proceeds and results are obtained. In the
Development Period, it is understood that Specifications are tentative;
therefore PRAECIS may propose changes to the Specifications, including as
required by a regulatory agency, it being understood that if any such
changes would cause an increase in UCB manufacturing costs, acceptance of
the new Specifications by UCB shall be conditional on a mutually agreeable
revision of the prices at which Product is delivered hereunder based on
such increased costs, and if applicable, taking into account any material
change in percentage margin. UCB may also request changes to the
Specifications, which may be implemented upon approval by PRAECIS.
PRAECIS, any Partners, and their respective Affiliates, shall have the
right to review any manufacturing and regulatory documents, under secrecy
obligation.
2.2 Reports. UCB shall issue PRAECIS written development reports on a mutually
agreed upon schedule during the Development Period. Such development
reports shall describe the work performed during the period concerned in
connection with the Development Plan. The parties shall each designate
responsible members of their respective organizations to meet at least
quarterly to discuss the progress of the foregoing work.
SECTION 3 - SUPPLY OF THE PRODUCT
3.1 Product Requirements. Subject to the terms and conditions of this
Agreement (i) UCB shall manufacture and supply to PRAECIS, and PRAECIS
shall purchase from UCB, the full amount of Product ordered by PRAECIS
pursuant to the Initial Product Orders, provided that if PRAECIS, the
Partners and the respective Affiliates, licensee(s) and sublicensee(s) of
PRAECIS, the
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
Partners and such Affiliates (collectively, the "Supplied Entities"), have
requirements for Product during the Development Period in addition to the
quantities supplied and purchased pursuant to the Initial Product Orders,
then (A) UCB shall manufacture and supply to PRAECIS all of such
requirements up to ***% of the then current UCB Manufacturing Capacity and
(B) PRAECIS shall purchase from UCB at least ***% of such requirements for
Product and (ii) after the Development Period until the expiration or
termination of this Agreement, with respect to the Supplied Entities'
total requirements for Product in addition to the quantities supplied and
purchased pursuant to clause (i) above, UCB shall manufacture and supply
to PRAECIS, and PRAECIS shall purchase from UCB, the lesser of (A) such
applicable percentage of such requirements for Product of the Supplied
Entities as set forth in Annex G (which percentage for any twelve-month
period after the Launch Date may be increased up to *** by notice to such
effect from PRAECIS to UCB given at least twelve (12) months prior to the
time such increased percentage takes effect), or (B) up to *** (***%) of
the then current UCB Manufacturing Capacity; provided however that such
obligation to supply by UCB and to purchase by PRAECIS shall be without
prejudice to PRAECIS' right to make quantities of Product itself or to
purchase quantities of Product from either the Partners or any Affiliate
thereof or an alternative Third Party manufacturer/supplier (i) to the
extent UCB fails or is unwilling (A) to meet PRAECIS' specific or excess
requirements for Product, as provided under Sections 3.2 and 4.2
respectively, or (B) to fulfill its obligations to supply, as provided
under Section 4.6, (ii) to the extent such quantities of Product exceed
the quantities of Product required by this Section 3.1 to be purchased
from UCB, or (iii) in the event that at any time after the Development
Period a Third Party manufacturer/supplier is able to provide a ***% or
greater discount from the per unit amount then being charged by UCB
hereunder for similarly qualified materials and the Third Party
manufacturer/supplier is willing to enter into a supply contract of at
least two years at such a ***% or greater discount.
3.2 Compliance with Specifications and Manufacturing Standards. UCB shall
manufacture Product for approval and ongoing product supply hereunder in
accordance with the Specifications, under current Good Manufacturing
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Practices ("cGMP") as applicable in the European Union, USA and Japan
(collectively, the "Manufacturing Standards").
In the event any regulatory authority in any country requires cGMP
deviating from the Manufacturing Standards or the Specifications, PRAECIS
and UCB shall discuss and reach agreement with respect to such modified
cGMP or such modified Specification. If such conformance of the Product to
such modified cGMP or such modified Specification would cause UCB
substantial costs, UCB will so notify PRAECIS and the parties will
negotiate in good faith the possible adaptation/expansion of the UCB
Manufacturing Capacity and the costs thereof. If UCB determines in good
faith that it is commercially impracticable to adapt/expand the UCB
Manufacturing Capacity as required to meet such modified cGMP or such
modified Specifications, PRAECIS shall be free to have the excess demand
satisfied by itself or by a Third Party supplier/manufacturer and PRAECIS
shall be permitted to grant sublicenses under the UCB Technical
Information for this sole purpose, to the extent provided in Section 7.
UCB and PRAECIS will establish an effective cGMP change control system,
and UCB will not make any material change in the manufacturing process
without PRAECIS' prior written consent.
UCB shall also be responsible for adherence to appropriate health
standards for its employees and furthermore will operate under guidelines
provided by PPI's MSDS, which shall be updated from time to time (such
guidelines in effect on the date hereof are given in Annex H).
3.3 Certificate of Analysis. UCB shall include, with each shipment of Product
hereunder, a certificate of analysis certifying that such shipment meets
the Specifications and was manufactured in compliance with the
Manufacturing Standards. PRAECIS, the Partners, and the respective
Affiliates of PRAECIS and the Partners, shall have the opportunity to
review at UCB's premises all batch records, in process batch data, and
other appropriate documents associated with manufacture.
3.4 Audit. In order to ascertain compliance by PRAECIS with the purchase
obligation set forth in Section 3.1, PRAECIS shall, within sixty (60) days
after the end of each calendar year during the period of time in which UCB
supplies PRAECIS with Product under this Agreement, provide written
reports to UCB specifying the amount of Product manufactured by PRAECIS
and purchased by PRAECIS from suppliers other than UCB during the prior
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calendar year. If UCB does not object to such written reports within sixty
(60) days, then UCB shall waive the right to audit PRAECIS' books and
records relating to the information contained in such reports. However, if
in a subsequent year it is determined in accordance with the provisions of
this Section 3.4 that PRAECIS breached its purchase obligation set forth
in Section 3.1, then UCB shall have the right to audit PRAECIS' books and
records relating to the information contained in such reports for the
previous three (3) years. If UCB timely notifies PRAECIS of its intention
to audit PRAECIS's books and records, UCB may designate an auditor
reasonably acceptable to PRAECIS. PRAECIS shall make available to such
auditor such books and records as may be required to audit such
information and such books and records shall be deemed Confidential
Information for purposes of Section 8. Such audit shall be completed
within ninety (90) days after the date on which UCB notified PRAECIS that
it desired to audit such information. UCB shall promptly deliver a copy of
the report of such audit to PRAECIS. If PRAECIS disagrees with the
conclusions of such report, it shall notify UCB and the parties shall
attempt to resolve the disagreement. If the parties fail to agree on the
conclusions in the report, such disagreement shall be resolved in
accordance with Section 15. Each such audit shall be at UCB's expense;
provided, that if it is finally determined that in any calendar year
PRAECIS violated its purchase obligation set forth in Section 3.1, then
PRAECIS shall pay the costs of such audit and PRAECIS shall compensate for
or purchase an additional quantity of Product from UCB in an amount which,
if it had been purchased in the prior calendar year, would have resulted
in PRAECIS' compliance with such obligation.
3.5 Inspection. In order to ascertain compliance by UCB with the quality
requirements provided in Section 3.2, PRAECIS, the Partners, and the
respective Affiliates of PRAECIS and the Partners, shall have the right,
during regular business hours and on reasonable prior notice to UCB, to
inspect and take samples from such facilities at which UCB manufactures,
tests, sources and/or stores raw materials or Product. UCB shall use its
best efforts to enable PRAECIS and its Affiliates to inspect and sample
raw materials from all UCB suppliers. Such inspections and sampling shall,
to the extent reasonably practicable, be conducted in a manner which does
not interrupt or impair in any significant manner the manufacturing
operations of such facilities.
3.6 Inventory Management. The parties will meet periodically to discuss
inventory management and address efficiencies with respect thereto.
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
3.7 Non-Competition. Neither UCB nor any of its Affiliates shall, during the
term of this Agreement and, unless this Agreement is terminated by UCB
pursuant to and in accordance with Section 10.2, for a period of
twenty-four (24) months thereafter (except that such period shall be ten
(10) years with respect to any generic version of the Product), directly
or indirectly engage in development activities with respect to, or
produce, any LHRH Antagonist other than, during the term of this
Agreement, Product; provided that this Section 3.7 shall not apply after
the applicable date set forth on Annex D if PRAECIS has not, by, or within
30 days after, such date, submitted the Initial Product Order(s) in
substantially at least the amount set forth on Annex D with respect to
such date; and provided further that in any event this Section 3.7 shall
again apply in accordance with its terms from and after the Launch Date as
long as PRAECIS or the Supplied Entities orders at least 35 kg of Product
per year; it being understood and agreed that this Section 3.7 shall apply
in accordance with its terms after termination of this Agreement (without
any minimum purchase requirement) if this Section 3.7 was applicable at
the time of such termination.
SECTION 4 - FORECASTS AND ORDERS FOR THE PRODUCT
4.1 Five-year plan. During the term of this Agreement, PRAECIS shall provide
UCB with a non-binding 5-year plan of Product needs, which plan shall,
during the term of this Agreement, be updated annually before year-end,
for planning purposes. The first plan covering the years 1998 up to 2002
is attached hereto as Annex C.
4.2 Forecasts. Beginning as of the date the first *** of Product have been
ordered, and each calendar quarter thereafter so long this Agreement shall
remain in effect, PRAECIS shall provide UCB at least *** in advance of the
relevant *** period with a forecast (each, a "Forecast") specifying
PRAECIS' requirements for Product in respect of each of the *** during the
*** period covered by such Forecast (each such *** period being referred
to as a "Forecast Period"). The delivery by PRAECIS of each Forecast as
required by this Section 4.2 shall constitute PRAECIS' irrevocable
agreement to order and purchase from UCB during such Forecast Period in
accordance
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
with this Agreement (i) at least *** (***%) of the quantity of Product
specified in such Forecast in respect of the *** of such Forecast Period
and (ii) at least *** of the quantity of Product specified in such
Forecast in respect of the *** of such Forecast Period, provided that such
quantities do not exceed the UCB Manufacturing Capacity for such ***. UCB
shall supply the Product so ordered, provided, however, that UCB shall not
be obligated (but shall use its diligent efforts) to supply Product
ordered during a *** to the extent the quantities of Product so ordered
exceed *** (***%) of the quantities of Product in respect of such ***
specified in the Forecast delivered *** prior to such ***, nor to supply
quantities of Product in excess of the then current UCB Manufacturing
Capacity.
It is expressly understood and agreed that if the quantities of Product
specified in a Forecast exceed the UCB Manufacturing Capacity, the
delivery of such Forecast shall not constitute PRAECIS' irrevocable
agreement to order and purchase that quantity of Product which exceeds the
UCB Manufacturing Capacity. If UCB notifies PRAECIS that the quantities of
Product specified in a Forecast exceed the UCB Manufacturing Capacity, the
parties will negotiate in good faith the possible expansion of the UCB
Manufacturing Capacity and the estimated costs thereof. If UCB or PRAECIS
determines that it is commercially impracticable to expand the UCB
Manufacturing Capacity to supply the quantities of Product specified in a
Forecast which exceed the then current UCB Manufacturing Capacity, PRAECIS
shall be free to have such excess quantities of Product manufactured
and/or supplied by itself or by a Third Party supplier/manufacturer and
PRAECIS shall be permitted to sublicense under the UCB Technical
information to the extent set forth in Section 7.
4.3 Timing of Product Orders and Product Delivery. Subject to Section 4.2, UCB
will deliver Product ordered by PRAECIS hereunder pursuant to a firm
purchase order on or before the delivery date set forth in such purchase
order, provided that, except as set forth in the next succeeding sentence,
such purchase order is submitted at least *** (***) days prior to such
requested delivery date for orders placed on or prior to the date which is
two (2) years after the Launch Date, and at least *** (***) days prior to
such requested
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
delivery date for orders placed thereafter. UCB agrees that with respect
to each order for Product listed on Annex D hereto (collectively, the
"Initial Product Orders"), if PRAECIS places (and makes the prepayment
with respect to) such Initial Product Order by the date specified in Annex
D, UCB will deliver to PRAECIS the quantity of Product reflected in each
such Initial Product Order on or before the applicable Delivery Date
therefor set forth on such Annex D.
At UCB's request, PRAECIS shall use commercially reasonable efforts to
reschedule its purchase orders in order to spread the supply more evenly
over the quarter concerned to reflect UCB's production rate, provided that
for this purpose reasonable efforts shall not require PRAECIS to incur
additional costs or to risk breach of any agreement between PRAECIS or any
of its Affiliates and any Third Party.
4.4 UCB Manufacturing Capacity
(a) UCB covenants and agrees with PRAECIS that (i) if PRAECIS places (and
makes the prepayment with respect to) the first Initial Purchase Order
(for *** of Product) on or before the date specified in Annex D, then on
or before the last delivery date with respect to such Initial Purchase
Order as set forth on Annex D, the UCB Manufacturing Capacity will be at
least *** of Product per six-month period, (ii) if PRAECIS places (and
makes the prepayment with respect to) the third Initial Purchase Order
(for *** of Product) on or before the date specified in Annex D, then on
or before the last delivery date with respect to such Initial Purchase
Order as set forth on Annex D, the UCB Manufacturing Capacity will be at
least *** of Product per six-month period.
(b) After the first *** of Product have been ordered, UCB will maintain
for *** a minimum annual UCB Manufacturing Capacity equal to the greater
of (i) ***/year and (ii) the amount of Product supplied by UCB in the
immediately preceding year. After such ***, UCB will maintain a minimum
annual UCB Manufacturing Capacity equal to the amount of Product supplied
by UCB in the immediately preceding year; provided that in any *** period
after the first *** have been ordered, if PRAECIS orders an amount of
Product
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
equal to at least the UCB Manufacturing Capacity as of the commencement of
such *** period, the minimum annual UCB Manufacturing Capacity for the
following *** will be at least such UCB Manufacturing Capacity as of the
commencement of such *** period.
4.5 Product Delivery. Product ordered hereunder shall be delivered by UCB FOB,
Belgium, express courier selected by PRAECIS (ICC Incoterms 1990).
4.6 Inability or failure to supply. In the event UCB is unable to supply
Product in accordance with the terms hereof, UCB shall promptly notify
PRAECIS in writing of such inability, which notice shall include a
reasonably detailed explanation of the reasons for such inability (a "UCB
Product Supply Deficiency Notice"). Upon PRAECIS' receipt of a Product
Supply Deficiency Notice, or upon any material failure by UCB to meet its
supply obligations hereunder and UCB's receipt from PRAECIS of a notice
reasonably describing such material failure by UCB (a "PRAECIS Default
Notice"), if UCB's inability or material failure to supply Product in
accordance with the terms hereof is reasonably likely to continue for at
least ninety (90) days (or such shorter period not shorter than thirty
(30) days if such inability or failure would materially jeopardize
PRAECIS' commercial relationships with respect to Product or Finished
Product, or would present PRAECIS with a significant risk of contractual
damages to Third Parties), PRAECIS shall have the right to sublicense one
or more other suppliers under the UCB Technical Information to the extent
provided in Section 7, and in such event UCB shall promptly provide to
such other supplier(s) such technical information (including without
limitation UCB Technical Information) as may be necessary for such
supplier(s) to qualify with relevant regulatory authorities. Except in the
case of force majeure, in which case the provisions of Section 14 shall
apply, UCB shall be liable to PRAECIS for all costs and expenses incurred
by PRAECIS in connection with qualifying one or more alternative suppliers
of Product with the relevant regulatory authorities (such costs and
expenses will not be considered as consequential losses as defined in
Section 9.6), including any advance payments (other than those described
on Annex D except to the extent set forth below) made in respect of the
quantities of Product not so supplied; provided however that (i) PRAECIS
shall act in a
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commercially reasonable manner with respect to obtaining an alternative
supply of Product as contemplated above, and (ii) UCB shall not be
required to reimburse PRAECIS for any advance payment described in Annex D
unless (A) UCB shall have failed to apply such advance payments (or part
thereof) to the purchase or construction of such plant and equipment as is
reasonably intended to enable it to meet its supply obligations hereunder
or shall have so applied such advance payments but shall have failed to
utilize such plant and equipment for such purpose or (B) UCB's inability
or failure to supply constitutes an intentional breach of this Agreement
or arises from UCB's gross negligence or willful misconduct. If within
ninety (90) days (extended to one hundred and eighty (180) days during the
Development Period) after PRAECIS' receipt of a UCB Product Supply
Deficiency Notice or PRAECIS' delivery to UCB of a PRAECIS Default Notice,
as applicable, UCB provides PRAECIS with evidence reasonably satisfactory
to PRAECIS that UCB is able to and will meet its supply obligations
hereunder ("Cure Evidence"), then, unless this Agreement has been
terminated in accordance with Section 10, within sixty (60) days of
receiving such Cure Evidence PRAECIS shall resume purchasing Product from
UCB in accordance with the terms of this Agreement (subject to again
ceasing such purchasing as contemplated by this Section 4.6), provided
that PRAECIS shall be allowed to fulfill any outstanding obligations to
other suppliers that were incurred by PRAECIS due to UCB's failure or
inability to supply Product to PRAECIS.
SECTION 5 - QUALITY AND DEFICIENCY CLAIMS
5.1 Limited warranty - Inspection and claim. UCB's only warranty, with respect
to the Product, is that the Product will conform to the Specifications and
will be manufactured in accordance with the Manufacturing Standards.
Without express or implied, is expressly excluded. PRAECIS shall be
responsible for performing all necessary inspections to detect obvious
damage (shortages, breakage, damage, etc.) and non-conformity of Product
to Specifications, within sixty (60) days of receipt of Product. PRAECIS
shall notify UCB in writing of any defective shipment and shall set forth
the lot, date of delivery and date of the failure. At PRAECIS' option, UCB
shall promptly replace, or reimburse or give credit with respect to any
payment for, any defective shipment. Unless such notification is timely
provided, subject to and without limitation of Section 5.2(b), the Product
shall be deemed to be delivered and accepted by PRAECIS. PRAECIS shall
hold any allegedly defective ship-
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
ment of Product for inspection by UCB or, at UCB's request and expense,
shall return such shipment or part thereof to UCB.
5.2 Remedy. (a) In the event that it is determined in accordance with this
Section 5.2 that all or any portion of a shipment of Product does not meet
the Specifications or was not manufactured in accordance with the
Manufacturing Standards, UCB, at PRAECIS' option but after consultation of
UCB, shall either replace or rework such rejected shipment or portion
thereof or reimburse or give credit for such payment to PRAECIS, and,
without limitation of Section 4.6, UCB shall have no other liability to
PRAECIS therefor except as provided in Section 4.5. In the event that the
parties disagree over whether a shipment of Product fails to comply with
the Specifications or was not manufactured in accordance with the
Manufacturing Standards, the parties shall make every attempt to resolve
the disagreement first between themselves and, failing that, by referring
the matter to a mutually-agreeable Third Party specializing in the
analysis of such products. If these methods fail to resolve the
disagreement, the matter shall be resolved pursuant to Section 15. UCB and
PRAECIS shall develop a qualified rework procedure. At PRAECIS' request,
unsatisfactory material shall be reworked at UCB's expense.
(b) Hidden defects not revealed by the inspections specified under Section
5.1 shall be brought to UCB's attention promptly upon discovery. In such
event, the parties shall in good faith discuss and agree upon procedures
and business terms for addressing such defects to the reasonable
satisfaction of PRAECIS and UCB.
SECTION 6 - PRICE AND PAYMENT TERMS
6.1 Prices. Product supplied pursuant to the Initial Purchase Orders will be
supplied at the prices, which shall not exceed *** peptide weight with
respect to each Initial Purchase Order (subject to PRAECIS having placed
such Initial Purchase Order for an amount of Product and substantially by
the dates set out in Annex D). All other Product quantities will be
supplied at the
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WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
prices (expressed *** peptide weight) and/or according to the price
formula/system out in Annex E hereto.
All prices referred to in Annexes D and E are exclusive of any taxes and
duties, such as sales, export, import, value added tax, excise duty, which
shall be added to such prices as appropriate.
6.2 Payment terms. Payment of the price for Product shall be in USD net thirty
(30) days from invoice and shipment. Any amount not received at its due
date shall automatically and without further notice bear an interest on
overdue payment at the rate of three percent (3%) above LIBOR (3 months)
as in effect on the date such payment was due.
6.3 Exchange rate fluctuations. The prices set out in Section 6.1 shall be
adjusted each calendar quarter to reflect exchange rate fluctuations, as
follows.
In the event at the date for such an adjustment the average of the
exchange rate of US Dollars into Belgian francs (BEF), as reported in the
Wall Street Journal (Eastern Edition), for the 10 business day period
immediately preceding that date varies by more than ten (10) percent
compared to 37.79 USD (which is the rate of exchange as applicable at the
day of signature of this Agreement) or the date of the last price
adjustment, then the purchase prices set out in Section 6.1, as theretofor
adjusted, shall be adjusted to reflect 50% of such change.
SECTION 7 - INTELLECTUAL PROPERTY RIGHTS
7.1 No Intellectual Property Rights in the Product. UCB expressly acknowledges
that it has no ownership or intellectual property rights of any kind in or
to the Product, by virtue of this Agreement or otherwise, and will not
acquire any such rights as a result of its or PRAECIS' performance of
their respective obligations hereunder.
7.2 UCB License Grant During Term of Agreement. (a) During the term of this
Agreement and subject to its terms, UCB hereby grants to PRAECIS and its
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Affiliates an exclusive worldwide royalty-free right and license, with the
right to grant sublicenses, under the UCB Technical Information (i) to use
or incorporate quantities of Product supplied by UCB in connection with
the manufacture, use or sale of the Finished Product and (ii) to make or
have made quantities of Product for incorporation in the Finished Product
in an amount up to 100% of the worldwide requirements of the Supplied
Entities in the case of UCB's unwillingness or inability (A) to meet
PRAECIS' specific or excess requirements for Product as provided under
Section 3.2 and 4.2 or (B) to fulfill its obligations to supply, as
provided under Section 4.6, and to use or incorporate Product so made in
connection with the manufacture, use or sale of Finished Product.
(b) During the term of this Agreement and subject to its terms, UCB hereby
grants to PRAECIS and its Affiliates an exclusive worldwide right and
license, with the right to grant sublicenses, under the UCB Technical
Information, (i) to make or have made quantities of Product which exceed
the requirements reserved to UCB as provided in Section 3.1 and Annex G
and (ii) to use or incorporate quantities of Product made and supplied by
PRAECIS, its Affiliates or any Third Party, as contemplated by clause (i)
of this subparagraph (b) in connection with the manufacture, use or sale
of Finished Product.
7.3 UCB License Grant Upon Termination of Agreement. Upon termination of this
Agreement (other than a termination by UCB pursuant to and in accordance
with Section 10.2 or a termination by UCB or PRAECIS pursuant to Section
10.3, in which event no license, and thus no ability to grant sublicenses,
shall be granted by UCB to PRAECIS upon such termination), UCB shall, and
hereby does, grant to PRAECIS and its Affiliates an exclusive perpetual
worldwide right and license, with the right to grant sublicenses, under
the UCB Technical Information, to make or have made quantities of Product
for incorporation in the Finished Product, and to use or incorporate
Product so made in connection with the manufacture, use or sale of
Finished Product.
16
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
7.4 Royalties in Respect of Licenses and Sublicenses. The license granted to
PRAECIS and its Affiliates, and any sublicenses, hereunder shall be ***,
except that (i) during the term of this Agreement, (A) any sublicense
granted to make or have made quantities of Product which exceed the
requirements reserved to UCB as provided in Section 3.1 and Annex G, or
(B) any sublicense granted pursuant to Section 3.2 or Section 4.2, shall
be royalty-bearing at the rate and for the period set forth in this
Section 7.4, (ii) if this Agreement is terminated by PRAECIS pursuant to
and in accordance with Section 10.1, such license and any such sublicenses
shall be royalty-bearing at the rate and for the period set forth in this
Section 7.4, (iii) if this Agreement is terminated by UCB pursuant to and
in accordance with Section 10.1, any such sublicense (other than to a
Partner) shall be royalty-bearing at the rate and for the period set forth
in this Section 7.4. If under this Section 7.4 the license or any
sublicense granted pursuant to this Section 7 for the term of this
Agreement and upon the termination hereof is royalty-bearing, such royalty
shall apply until the termination of this Agreement and for a period of
five years thereafter. If under this Section 7.4 the license or any
sublicense granted pursuant to this Section 7 upon the termination hereof
if royalty-bearing, such royalty shall apply for a period of five years
after such termination. In each case such royalty shall be payable by
PRAECIS to UCB. With respect to a royalty-bearing sublicense referred to
in clause (i) (B) or clause (iii) of this Section 7.4, such royalty shall
be at a rate of ***% percent, and with respect to any other royalty
bearing license or sublicense referred to in this Section 7.4 such royalty
shall be at a rate of ***%, on the Net Sales of Finished Product
containing Product manufactured or supplied by any Third Party and which
incorporates or uses any part of the UCB Technical Information, provided
that in any event the applicable royalty shall be payable only once with
respect to the sale of any Finished Product.
7.5 Royalties. Royalties shall be payable in USD on a calendar quarterly basis
within thirty (30) days of the end of each calendar quarter. The exchange
rate of the due date shall apply. Each payment shall be accompanied by a
report stating the Net Sales and the amount of royalties payable to UCB,
as well as computation hereof.
17
<PAGE>
The audit provisions contained in Section 3.4 shall apply mutatis mutandis
to the royalty payments provided by this Section and payment of any
shortfall in royalty shall be made forthwith after its determination
increased by an interest of 3 percentage points over LIBOR (3 months )
interest rate.
7.6 Grant-back license. PRAECIS hereby grants to UCB and UCB's Affiliates (i)
during the term of this Agreement, a non-exclusive royalty-free license to
use any technical information and data relating to the development,
testing, use or manufacture of the Product (other than relating to
formulations) which PRAECIS or its Affiliates have not or may conceive,
develop, acquire or have the ability to license or sublicense during the
term of this Agreement solely to make Product for PRAECIS, as provided
under this Agreement and (ii) during the term of this Agreement and
thereafter (except in the case of termination of this Agreement by PRAECIS
pursuant to and in accordance with Section 10.2, in which event the
license granted under this Section 7.6 shall automatically terminate), a
perpetual, irrevocable non-exclusive, fully paid-up license, with the
right to grant sublicenses to use said information and data solely to make
and have made peptides other than Product and other than any other LHRH
Antagonists.
7.7 Disclosure of technical and regulatory information. In accordance with
Sections 3.1, 3.2, 4.2, 4.6 and 6.1, as it may become necessary for
PRAECIS or a Third Party to undertake the manufacture of the Product, UCB
shall promptly supply to PRAECIS or such Third Party such technical
information (including without limitation UCB Technical Information) in
its possession as may be necessary for PRAECIS or such Third Party to
manufacture the Product in accordance with the Specifications and
Manufacturing Standards, including without limitation the Product's
current Drug Master, the SOPs and master batch records.
7.8 UCB Representations and Indemnity as to UCB Technical Information. UCB
represents and warrants to PRAECIS that (i) UCB is the sole and exclusive
owner of the UCB Technical Information, and has the full right, power and
authority to grant the licenses to PRAECIS pursuant to this Section 7, and
(ii) such grant, and UCB's performance of its obligations hereunder
(including its use of UCB Technical Information in connection with such
performance), do not and will not violate or infringe upon the
intellectual property or other rights of any Third Party. UCB shall
indemnify and hold PRAECIS harmless with respect to all liabilities,
claims, demands, actions, suits, losses, costs,
18
<PAGE>
damages and expenses (including attorneys fees) arising out of or in
connection with any claim that the use by any Supplied Entities of the UCB
Technical Information pursuant to and in accordance with any license or
sublicense granted under this Section 7 violates or infringes upon the
rights of any Third Party.
SECTION 8 - CONFIDENTIAL INFORMATION
8.1 Mutual confidentiality undertaking. From time to time during the term of
this Agreement, the parties will disclose or make available to each other
Confidential Information in connection with the activities contemplated
hereunder.
Each party hereby agrees that it will use Confidential Information
belonging to the other solely for the purpose(s) for which it was
disclosed hereunder; and that it will not disclose Confidential
Information belonging to the other to any Third Party (other than its
employees and/or consultants reasonably requiring such Confidential
Information for purposes of this Agreement who are bound by obligations of
non disclosure and limited use at least as stringent as those contained
herein) without the express prior written consent of the other party,
except to regulatory authorities to the extent required by law or by
applicable regulations.
Any Confidential Information reasonably classifiable as a trade secret
shall, as between the parties and their employees, remain a trade secret
and be fully protected as such in spite of any failure by the disclosing
party to constantly admonish the receiving party of the trade secret
nature of the information disclosed or because of any failure of the
disclosing party to pursue an active course of conduct designed to inform
the receiving party or its employees that the secrets and information are
to remain confidential.
8.2 Publicity. The parties further agree that except as otherwise expressly
required by law, they will not publicly announce or otherwise disclose any
of the terms and conditions of this Agreement without the express prior
written consent of the other; provided that the foregoing shall not
prohibit or restrict in any manner, and no consent shall be required, for
any such public announcement or disclosure by a party in connection with
any financing, strategic transaction, acquisition or disposition involving
such party. Neither party will use the names of the other or any of its
employees in any advertising, promotional or sales materials relating to
Product or otherwise, except as
19
<PAGE>
required by law or regulatory authorities, without the express prior
written consent of the other.
SECTION 9 - INDEMNIFICATION
9.1 UCB Indemnity. UCB shall at all times during the term of this Agreement
and thereafter defend, indemnify and hold PRAECIS and its Affiliates and
their respective officers, directors, agents, employees and permitted
assigns, harmless from and against any and all third party claims, suits
(whether or not groundless), damages, liabilities, costs and expenses
(whether based on tort, breach of contract, patent infringement, product
liability or otherwise), including, but not limited to court costs and
reasonable attorneys fees, arising out of or based on a material breach by
UCB of any representation, warranty or obligation under this Agreement,
subject to any limitations set forth in this Agreement.
9.2 PRAECIS Indemnity. PRAECIS shall at all times during the term of this
Agreement and thereafter defend, indemnify and hold UCB and its Affiliates
and their respective officers, directors, agents, employees and permitted
assigns, harmless from and against any and all third party claims, suits
(whether or not groundless), damages, liabilities, costs and expenses
(whether based on tort, breach of contract, patent infringement, product
liability or otherwise), including, but not limited to court costs and
reasonable attorneys fees, (i) arising out of or based on a material
breach by PRAECIS of any representation, warranty or obligation under this
Agreement, subject to any limitations set forth in this Agreement or (ii)
arising out of any sale or use of pharmaceutical compositions containing
the Product, except, in the case of clause (ii), to the extent determined
by a court as being attributable to UCB's gross negligence or reckless or
willful misconduct.
9.3 Third Party Claims. Either party (the "Notifying Party") shall promptly
notify the other party (the "Indemnifying Party") of the existence of any
Third Party claim, demand or other action giving rise to a claim for
indemnification under this Agreement (a "Third Party Claim") and shall
give the Indemnifying Party a reasonable opportunity to defend the same at
its own expense and with its own counsel, provided that the Notifying
Party shall at all times have the right to participate in such defense at
its own expense. If, within a reasonable time after receipt of notice of a
Third Party Claim the Indemnifying Party shall fail to so defend, the
Notifying Party shall have the
20
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
right, but not the obligation, to defend and, with the Indemnifying
Party's written consent (not to be unreasonably withheld) to compromise or
settle (exercising reasonable business judgment) the Third Party Claim for
the account and at the risk and expense of the Indemnifying Party. Each
party shall make available to the other, at the other's expense, such
information and assistance as the other shall reasonably request in
connection with the defense of a Third Party Claim.
9.5 Assistance with Claims. Subject to Sections 9.1 through 9.4 above, each
party shall, at the request and expense of the other, furnish such
reasonable assistance as may be required to enable the other party to
defend itself against Third Party Claims threatened or filed in connection
with any activities conducted hereunder.
9.6 Consequential losses. Notwithstanding any other provision hereof to the
contrary, neither party shall be liable to the other party for any
special, incidental, indirect or consequential damages, such as loss of
reputation or loss of revenue, profit, downtime costs, and claims of
customers or others for such damages.
SECTION 10 - TERM AND TERMINATION
10.1 Term. This Agreement shall be in full force and effect as from its
signature and shall remain in force for an initial period expiring ***
from the Launch Date, except that it will be automatically renewed for
consecutive *** periods, unless terminated by either party by written
notice given at the latest twenty-four (24) months before the expiration
of the initial period or any renewal period.
10.2 Earlier termination. This Agreement may be terminated by either party by
written notice of termination to the other party (i) if the other party
commits a material and substantial breach or default in the performance of
any of the provisions of this Agreement and such breach or default is not
cured within ninety (90) days after the giving of notice (a "Section 10.2
Default Notice") by the other party specifying such breach or default;
provided that, subject to
21
<PAGE>
the next succeeding proviso, PRAECIS may not give a Section 10.2 Default
Notice in respect of such a breach or default by UCB consisting of a
failure to supply Product in accordance with the terms hereof until the
expiration, without UCB having delivered the Cure Evidence, of the ninety
(90) day period (extended to one hundred and eighty (180) days during the
Development Period) referred to in the last sentence of Section 4.6;
provided further that PRAECIS may give a Section 10.2 Default Notice prior
to the expiration of such ninety (90) day period, whether or not UCB has
delivered the Cure Evidence prior to such expiration, in respect of such a
breach or default by UCB consisting of a failure to supply Product in
accordance with the terms hereof if such a breach or default has occurred
more than once within any twenty-four month period after the Development
Period, (ii) forthwith if the other party institutes or is the subject of
bankruptcy, liquidation or any other similar proceedings or (iii)
forthwith if a situation of Force Majeure as provided by Section 14
continues for more than one hundred and twenty (120) days.
10.3 Additional Termination Rights. PRAECIS and UCB shall have the right upon
written notice thereof to the other to terminate this Agreement if PRAECIS
either (i) determines that the pharmaceutical formulation of the Product
is unsafe or not efficacious, or (ii) determines not to commercialize or
continue to commercialize the Product. PRAECIS shall promptly notify UCB
if PRAECIS makes the determination referred to in clause (i) or (ii) of
this Section 10.3.
SECTION 11 - EFFECT OF TERMINATION
11.1 Effects of Termination. In the event of the termination of this Agreement
for any reason, other than termination by PRAECIS pursuant to Section
10.2, PRAECIS shall purchase from UCB (i) all inventories of Product
meeting Specifications and Manufacturing Standards, manufactured by UCB
based on the forecasted quantities of Product for the first two quarters
contained in the most recent Forecast preceding such termination and/or
Purchase Orders delivered by PRAECIS to UCB prior to such termination, at
the then current price, (ii) all inventories of quality control released
process intermediates manufactured by UCB based on the forecasted
quantities of Product for the first two quarters contained in the most
recent Forecast preceding such termination at a price equal to their
proportionate part of the price of Product and (iii) all raw materials
previously purchased by UCB to meet the fore-
22
<PAGE>
casted quantities of Product for the first two quarters contained in the
most recent Forecast preceding such termination, delivered by PRAECIS to
UCB, at UCB's purchase cost.
11.2 Survival. Upon termination of this Agreement, all rights, licenses and
obligations of the parties hereunder shall immediately cease, except (i)
for Section 3.7 and Sections 7 through 12 which shall survive, (ii) for
Sections 6 and 13 through 19 (to the extent applicable to such surviving
sections referred to in clause (i)), and (iii) that termination of this
Agreement shall not release a party from any liability for breach of this
Agreement or from any liability or obligation that arose prior to such
termination.
11.3 Return of Confidential Information upon termination. Upon termination of
this Agreement, each party shall promptly return to the other, at the
other's request, any and all Confidential Information of the other then in
its possession or under its control, except if such information is covered
under surviving license rights.
SECTION 12 - REPORTS AND RECORDS
12.1 Notice of certain events. Each party shall promptly notify the other upon
becoming aware of any of the following events: any confirmed or
unconfirmed information concerning adverse, serious or unexpected
occurrences associated with the safety, handling or use of Product;
unauthorized disclosure of any Confidential Information of the other; any
alleged infringement of Third Party proprietary rights in connection with
actions taken hereunder; liability claims relating to Product; and any
other event that might reasonably be expected to have a material adverse
effect upon the development, production, sale or distribution of Product.
12.2 Quality Control records. UCB shall maintain records relating to Product in
accordance with the Manufacturing Standards and shall retain such records
for not less than ten (10) years after shipment to PRAECIS of the Product
to which such records relate, and thereafter such records will be
transferred to PRAECIS if requested. PRAECIS shall be entitled to inspect
such records at its own expense and at such times and intervals as PRAECIS
shall reasonably request upon prior written notice to UCB.
23
<PAGE>
SECTION 13 - ASSIGNMENT AND DELEGATION
Neither this Agreement nor any rights hereunder may be assigned or licensed by
either party, without the prior written consent of the other party, except for
(i) assignments or sublicenses to Affiliates which shall occur freely by simple
notice to the other party (provided that no such assignment or sublicense shall
relieve a party from liability for its obligations hereunder), (ii) as provided
in Section 7 and (iii) any such assignment to an entity which acquires control
of the entire business of such party or that part of its business to which this
Agreement relates, whether pursuant to a merger, consolidation, stock purchase
recapitalization, asset sale or otherwise, unless, with respect to this clause
(iii), (A) in the case of such an acquisition of the business (or such part
thereof) of UCB, the acquiring entity is, at the time of such acquisition,
engaged, directly or indirectly, in the business of commercializing and/or
manufacturing products containing any LHRH antagonist or LHRH agonist and is a
direct or substantial competitor of PRAECIS with respect to such business or (B)
in the case of such an acquisition of the business (or such part thereof) of
PRAECIS, the acquiring entity is, at the time of such acquisition, engaged,
directly or indirectly, in the business of the contract manufacture of peptides
and is a direct and substantial competitor of UCB with respect to such business.
SECTION 14 - FORCE MAJEURE
Neither party hereto shall be liable for damages, nor shall this Agreement be
terminable or cancelable (except as provided in Section 10.2) by reason of any
delay or default in such party's performance hereunder if such default or delay
is caused by events beyond such party's reasonable control ("force majeure")
including, but not limited to, acts of God, regulation or law or other action of
any government or agency thereof, war or insurrection, civil commotion
destruction of production facilities or materials by earthquake, fire, flood or
storm, labor disturbances, epidemics, or failure of suppliers (except to the
extent reasonably foreseeable or attributable to such party, public utilities or
common carriers).
Each party shall endeavor to resume its performance hereunder as soon as
reasonably possible if such performance is delayed or interrupted by reason of
force majeure.
SECTION 15 - APPLICABLE LAW - ARBITRATION
This Agreement shall be governed by and interpreted in accordance with the laws
of the state of New York without reference to its conflicts of law principles.
Any
24
<PAGE>
dispute arising under this Agreement which cannot be settled amicably shall be
submitted to binding arbitration in accordance with the International Chamber of
Commerce Rules, by an arbitration panel composed of three members selected in
accordance with such rules, and the decision or award of such panel will be
binding upon the parties without the right of appeal, and may be enforced in any
court of competent jurisdiction. The place of arbitration shall be Atlanta,
Georgia and the language of arbitration shall be English.
Within thirty (30) days after selection of the arbitrators, each party shall
submit to the arbitrators a proposed resolution of the dispute and the reasons
for proposing the resolution. Should either party desire, a joint meeting before
the arbitrators shall be held within thirty (30) days after the end of the above
resolution submission period. Within thirty (30) days after the later of (i) the
end of the above resolution submission period or (ii) the holding of the joint
meeting, the arbitrators shall decide the matter by selecting only one of such
resolutions, and shall have no authority to modify its proposed terms.
SECTION 16 - SEVERABILITY
Should any part of this Agreement be held unenforceable or in conflict with the
applicable laws or regulations of any jurisdiction, the invalid or unenforceable
part or provisions shall be replaced with a provision which accomplishes, to the
extent possible, the original business purpose of such part or provision in a
valid and enforceable manner, and the remainder of this Agreement shall remain
binding upon the parties hereto.
SECTION 17 - NOTICES
Any notice required or permitted to be given under the terms of this Agreement
shall be in writing and shall be sufficiently given if mailed by first class
postage prepaid or given by telefax or delivery to the party for whom is
intended at the address indicated in the preamble or to such other address as
either party hereto may from time to time advise the other party by notice in
writing to the addresses (or facsimile number) first above given. Any notice
given as aforesaid shall be deemed to have been given on the day on which it was
delivered or sent by telefax (with "answer-back" confirmation), if delivered or
sent by telefax, or on the seventh business day excluding Saturday, Sunday and
statutory holidays, following the date on which it was mailed, if mailed,
provided that if there is a postal interruption due to strike, slow down or
other causes, notice shall be given by delivery or telefax only. Any party
hereto may
25
<PAGE>
change its address for service from time to time by notice given in accordance
with the foregoing.
SECTION 18 - ENTIRE AGREEMENT
This Agreement (including the Annexes hereto) constitutes the entire
understanding between the parties with respect to the subject matter hereof and
supersedes all prior agreements, negotiations, understandings, representations,
statements and writings relating to it ir any part thereof.
No modification, alteration, waiver or change in any terms of this Agreement
shall be valid or binding upon the parties hereto unless made in writing.
SECTION 19 - ANTITRUST COMPLIANCE
In the event that a governmental authority of competent jurisdiction advises
either of the parties in writing that one or more of the provisions of this
Agreement violate any applicable competition or antitrust law of the USA or the
EU, UCB and PRAECIS agree to amend this agreement to the minimum extent
necessary to render it compatible with such provisions.
SECTION 20 - REPRESENTATIONS AND WARRANTIES
Each party represents and warrants to the other that (i) the execution, delivery
and performance by such party of this Agreement has been duly authorized by all
requisite corporate action on the part of such party, and (ii) this Agreement
has been duly executed and delivered by such party and constitutes the valid and
binding agreement of such party, enforceable against such party in accordance
with is terms.
26
<PAGE>
Done as of this March 12, 1998 (date), in Brussels (place), in two original
copies, each party having received its copy.
UCB-BIOPRODUCTS S.A. PRAECIS PHARMACEUTICALS
INCORPORATED
/s/ E. Croufer /s/ Marc A. Silver
- ------------------------- -------------------------------
By: E. Croufer By: Marc A. Silver
Title: Director Title: Vice President,
Corporate Development
/s/ Ph. Proost
- ------------------------- -------------------------------
By: /s/ Ph. Proost By:
Title: Director Title:
27
<PAGE>
LIST OF ANNEXES
to the Development and Supply Agreement between UCB-BIOPRODUCTS S.A. and
PRAECIS PHARMACEUTICALS, INC, signed on March 12, 1998.
ANNEX A Specifications
ANNEX B Development Plan
ANNEX C 5-year plan (1997-2001)
ANNEX D First orders (stability and validations lots)
ANNEX E Prices (formula or mode)
ANNEX F UCB strategy of synthesis
ANNEX G Product requirements allocated to UCB
ANNEX H Guidelines provided by PRAECIS' MSDS
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<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
PRAECIS ANNEX A
PHARMACEUTICALS
INCORPORATED
PPI-149 Drug Substance Tentative Specifications
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C>
Parameter *** Tentative Specification
- --------------------------------------------------------------------------------
Appearance *** White to off-white powder
- --------------------------------------------------------------------------------
Identification
- - HPLC *** ***
- - Mass Spectrometry *** ***
- - Amino acid analysis *** ***
- --------------------------------------------------------------------------------
*** *** ***
- --------------------------------------------------------------------------------
*** *** ***
- --------------------------------------------------------------------------------
Water content *** ***
- --------------------------------------------------------------------------------
Specific rotation *** ***
- --------------------------------------------------------------------------------
*** *** ***
- --------------------------------------------------------------------------------
Residual solvents: *** ***
***
- --------------------------------------------------------------------------------
HPLC purity *** ***
- - Total impurities
- - Individual impurity
- --------------------------------------------------------------------------------
Microbial limits *** ***
- --------------------------------------------------------------------------------
Bacterial endotoxins *** ***
(LAL)
- --------------------------------------------------------------------------------
Peptide content *** ***
- --------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
Note: The tightening of current tentative specifications is envisioned,
according to batch analysis data, as part of the NDA process.
1 Hampshire Street Cambridge Massachusetts 02139-1572
Tel 617/494-8400 Fax 617/494-8414
30
<PAGE>
ANNEX B
OUTLINE OF UCB DEVELOPMENT/WORK PLAN
PPI-149 DRUG SUBSTANCE
In synergy with PRAECIS:
1. Develop and Supply both clinical and commercial quantities of PPI-149 Drug
Substance prepared according to cGMP and other international quality
standards.
2. Prepare/assist in preparation of CMC drug substance filings (US NDA Dec.,
98) European Filings estimated 2Q99.
3. Develop, maintain and provide documentation to support approval and
ongoing commercial supply of drug substance.
- Batch Production records
- Certificates of Analysis
- Development reports
- Facilities and instrumentation IQ/QQ/ and PQ
- Facilities Drug Master Files, to be included in CMC/DMF
- SOP's
- Change control
- Validation documentation - strategy, plan, protocol, report
- CMC section for NDA filing
- Stability programs and reports (development and commercial)
4. Prepare and qualify reference standards
5. Determine and qualify impurity profile including preparation of impurity
standards as required.
6. Supply representative pre-launch material.
7. Source, secure, and qualify appropriate production facilities for
commercial volumes and expedite scale up in a timely manner.
8. Qualify raw material suppliers, dual supply to minimize risk, as
appropriate.
9. Outsource qualified intermediates as appropriate
10. Develop suitable recycle strategy for the filing
11. Develop/assist in developing a supplemental commercial strategy which
favorably impacts cycle time and cost of goods.
12. Maintain regulatory filing with appropriate updates (CBE's, AR's)
13. Provide comprehensive regulatory support for international approvals and
commercializations.
14. Expediently work to correct/improve any findings documented or questions
generated by regulatory agencies or other quality assessments.
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<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
Annex C - 5 Yr. Plan (1998-2002)
<TABLE>
<CAPTION>
Year Quantity (***)
---- --------------
<S> <C>
1998 ***
1999 ***
2000 ***
2001 ***
2002 ***
</TABLE>
32
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
ANNEX D
to the Development & Supply Agreement between UCB-Bioproducts S.A. and PRAECIS
PHARMACEUTICALS Inc.
Annex D is a part of the above mentioned Agreement.
ORDERS & DELIVERIES SCHEDULE
DURING THE DEVELOPMENT PERIOD
Reference to Article 4.4 & Article 6.1
- - *** orders for a total amount of *** will be issued at the following
dates:
1. P.O. of *** will be issued *** and not later than ***
2. P.O. of *** will be issued not later than ***
3. P.O. of *** will be issued not later than ***
These orders are ***
- - Advanced payments: each P.O. will be accompanied by an advanced payment at
the corresponding date of the P.O. according to the following schedule:
1. ***: *** USD
2. ***: *** USD
3. ***: *** USD
- - Delivery schedule: delivery schedule for the *** is as follows:
1. ***: deliveries not later than ***;
2. ***: deliveries not later than ***;
3. ***: deliveries not later than ***.
- - Modifications in the dates of issuing P.O. may significantly affect the
delivery schedule which would be revisited by UCB-Bioproducts should such
modifications occur.
- - The prices for the *** is ***
33
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
ANNEX E
to the Development & Supply Agreement between UCB-Bioproducts S.A. and PRAECIS
PHARMACEUTICALS Inc.
Annex E is part of the above mentioned Agreement.
ORDERS & DELIVERIES SCHEDULE AFTER DELIVERY OF THE FIRST 112 Kg
Reference to Article 6.1
Pricing structure: the price structure is defined taking into account ***.
- - For minimum orders of ***: ***
- - For orders between***: ***
- - For orders above ***: ***
34
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
ANNEX F
UCB-BIOPRODUCTS S.A.
- --------------------------------------------------------------------------------
-----------------------------------
Praecis Pharmaceuticals Inc.
UCB Strategy of Syntheses
-----------------------------------
1. INTRODUCTION AND OVERVIEW
The manufacturing strategy developed by UCB-Bioproducts for PPI-149 is outlined
on the following chart:
***Chart Omitted***
*** Approximately 10 lines omitted ***
2. SEQUENCE ASSEMBLY
*** Approximately 18 lines omitted ***
3. DEPROTECTION
*** Approximately 7 lines omitted ***
4. PURIFICATION
*** Approximately 15 lines omitted ***
- --------------------------------------------------------------------------------
UCB-Bioproducts S.A. Page 1 of 4 Confidential
35
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
ANNEX F
5. ISOLATION
*** Approximately 7 lines omitted ***
6. PROCESS CONTROLS
*** Approximately 8 lines omitted ***
7. FLOW CHART
An actual flow chart for a preferred manufacturing strategy is given hereafter,
to illustrate the current process.
(a) General Flow Chart
(b) Assembly Flow Chart
(c) Deprotection Flow Chart
(d) Purification Flow Chart
- --------------------------------------------------------------------------------
UCB-Bioproducts S.A. Page 2 of 4 Confidential
36
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UCB-BIOPRODUCTS S.A.
- --------------------------------------------------------------------------------
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
Flow Chart Omitted
37
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
ANNEX G
to the supply agreement between PRAECIS and UCB
PERCENTAGE OF PRODUCT REQUIREMENTS (article 3.1.)
Launch year ***
first ***
second ***
third ***
fourth ***
fifth and following ***
38
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
ANNEX H
Material Safety Data Sheet
PPI-149-Depot (abarelix Depot) PRAECIS Pharmaceuticals, Incorporated
One Hampshire St., 5th Floor
Cambridge, MA 02139
617-894-8400
Section I: Identification
Trade Name: abarelix or abarelix depot
Synonyms: PPI-149, R3827,
CAS#: None
M.W. ***
MF: ***
Section II: Hazardous Ingredients
None
Section III: Physical Data
Appearance: White to Off white powder
Odor: Odorless
Solubility: ***
Section IV: Fire and Explosion Information
Not considered to be a fire or explosion hazard.
Use any means suitable for extinguishing surrounding fire.
In the event of a fire, wear protective clothing and NIOSH-approved
self-contained breathing apparatus.
Section V: Health Hazards
*** Approximately 12 lines omitted ***
Toxicity -
***
39
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
First Aid -
If swallowed, wash out mouth with water provided person is conscious
Call a Physician
In case of skin contact, flush with copious amounts of water for at least
15 minutes, remove contaminated clothing and call a Physician.
If inhaled, remove to fresh air. If breathing becomes difficult, call a
physician.
In case of contact with eyes, flush with copious amounts of water for at
least 15 minutes. Call a physician.
Section VI: Reactivity Data
Stability:
Stable under ordinary storage conditions.
Preferably store cool and dry.
Hazardous combustion or decomposition products:
toxic fumes of carbon monoxide, carbon dioxide, nitrogen oxides
Hazardous polymerization
will not occur.
Section VII: Spill or Leak Procedures
Steps to be taken if material is released or spilled -
Wear Respirator, chemical safety goggles, rubber boots and rubber gloves.
Sweep up, place in a bag and hold for disposal.
ventilate area and wash spill after pickup is complete.
Waste Disposal Method -
Dissolve or mix in a combustible solvent and burn in a chemical
incinerator equipped with an afterburner and scrubber.
Observe all Federal, State, and Local Laws.
Section VIII: Precautions to be Taken in Handling and Storage
NIOSH/MSHA approved respirator
Mechanical exhaust
Chemical resistant gloves
Chemical safety Goggles
Caution: The Chemical, Physical and Toxicological properties of this molecule
have not been thoroughly investigated.
Exercise Due Care.
Target Organs: ***
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<PAGE>
The above information is believed to be correct but does not purport to be all
inclusive and are offered as a guide for your consideration, investigation, and
verification. PRAECIS makes no guarantee of the accuracy or the completeness of
the data and shall not be held liable for any damage resulting from handling or
from direct contact with the above product.
Section IX: Special Precautions
None
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<PAGE>
EXHIBIT 10.11
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT
ASTERISKS (*) DENOTE SUCH OMISSIONS.
SUPPLY AGREEMENT
This Supply Agreement (this "Agreement") is entered into this 11th day of
February, 1998 by and between Cook Imaging Corporation ("Cook"), an Indiana
corporation having a principal place of business at 927 South Curry Pike,
Bloomington, Indiana 47403, and PRAECIS PHARMACEUTICALS INCORPORATED, a Delaware
corporation having a principal place of business at One Hampshire Street,
Cambridge, Massachusetts ("PRAECIS").
RECITALS
1. PRAECIS is engaged in the development, sale and distribution of
pharmaceuticals products;
2. Cook is engaged in the filling and labeling of certain pharmaceutical
products;
3. PRAECIS and Cook desire to have Cook fill, bulk package, and ship to PRAECIS
or its designee pharmaceutical products for development, distribution and sale
by PRAECIS.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties agree as follows:
DEFINITIONS
As used in this Agreement, the following words and phrases shall have the
following meanings:
1.1 "Affiliate" of a party hereto shall mean any entity which controls, is
controlled by, or is under common control with such party. For purposes of this
definition, a party shall be deemed to control another entity if it owns or
controls, directly or indirectly, at least fifty percent (50%) of the voting
equity of another entity (or other comparable ownership interest for an entity
other than a corporation). For
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
purposes of this agreement, "Affiliate" shall also include development and or
marketing partners.
1.2 "Drug Product Intermediate" shall mean the PPI-149-*** in powder form.
1.3 "Effective Date" shall mean the date on which both parties have executed
this Agreement.
1.4 "Confidential Information" shall mean all information and data provided by
the parties to each other hereunder except any portion thereof which:
(i) is known to the recipient as evidenced by its written records before receipt
thereof under this Agreement;
(ii) is disclosed to the recipient after acceptance of this Agreement by a third
person who has the right to make such disclosure;
(iii) is or becomes part of the public domain through no fault of the recipient;
(iv) which the recipient can reasonably establish is independently developed by
recipient without access to the information disclosed hereunder; or
(v) is required to be disclosed by governmental or judicial order, rule, law or
regulation; provided in such case the recipient shall provide the disclosing
party a notice of such required disclosure and an opportunity to contest such
disclosure.
1.5 "Contract Requirements" shall mean PRAECIS' requirements for the
development, and launch of Product in the United States and all other parts of
the world during the term.
1.6 "Environmental Laws" shall mean all applicable federal, state and local
laws, ordinances and regulations relating to environmental protection or control
and handling of hazardous materials, including, but not limited to, the Federal
Water Pollution Control Act, the Resource Conservation & Recovery Act, the Safe
Drinking Water Act, the Toxic Substance Control Act, the Clean Air Act, the
Comprehen-
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sive Environmental Response Compensation and Liability Act, the Occupational
Safety and Health Act, all as amended, and other comparable local, state and
federal laws.
1.7 "Manufacture" shall mean the filling, bulk packaging, bulk labeling, and
associated QC release of Product by Cook.
1.8 "Presentation" shall mean the treated Type I glass tubing vial with rubber
stopper and aluminum seal in which the Product is packaged.
1.9 "Product shall mean "PPI-149-Depot" in final packaged and labeled form.
1.10 "Product Specifications" shall mean the specifications for Product that are
set forth in the Provisional Product Specification Sheet. (Schedule 2)
1.11 "Project Plan" shall mean the manual containing the parameters for the
Manufacture of Product as set forth in Schedule I attached hereto and by
reference made a part hereof.
1.12 "Provisional Product Specification Sheet" shall mean a listing of the
Product Specifications and the testing to be performed on the Drug Product
Intermediate, the in-process Product, the Product, and the stability program.
The stability program shall be mutually agreed upon using protocols consistent
with ICH guidelines by the Parties as soon as practical.
1.13 "PRAECIS Trademarks and Tradenames" shall mean the proprietary name for
Product owned or licensed by PRAECIS.
QUANTITY AND MANUFACTURE OF PRODUCT
2.1 Pursuant to the terms and conditions of this Agreement, PRAECIS shall
purchase from Cook the Contract Requirements of Product, and Cook shall
Manufacture and deliver to PRAECIS the Contract Requirements of Product in
accordance with the Project Plan.
2.2. Both Parties shall collaborate to develop and file rework procedures. If
during the Manufacture of any lot of Product, any rework or remanufacture is
required in order to meet the Product Specifications, Cook shall conduct such
rework or remanufacture at Cooks expense. Product Specifications may be modified
from
3
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CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
time to time by prior written agreement signed by an authorized representative
of each party without the necessity of amending this Agreement.
FORECASTS AND ORDER
3.1 Upon the Effective Date of this Agreement and on or before the first day of
each calendar quarter thereafter, PRAECIS will provide to Cook PRAECIS' good
faith estimate of PRAECIS' Contract Requirements for that quarter and the
succeeding three quarters. PRAECIS shall not submit unit forecasts for any
quarter in an amount greater than *** units. Cook specifically agrees that such
forecasts submitted by PRAECIS will be for general planning purposes only, and
shall not be binding on PRAECIS nor affect PRAECIS' right to submit orders under
Section 3.2 of this Agreement. During each calendar quarter, Cook shall supply
PRAECIS with quantity of Product ordered by PRAECIS unless the quantity for any
quarter exceeds *** percent (***%) of PRAECIS' estimated quantity for such
calendar quarter in accordance with this Section 3.1, in which case Cook shall
supply PRAECIS with at least ***% of PRAECIS' estimated quantity.
3.2 PRAECIS shall submit its purchase orders from time to time to Cook covering
PRAECIS' purchases of Product pursuant to this Agreement. Each purchase order
shall designate the quantity of Product covered by the order, shipping
instructions, and appropriate delivery addresses and shall specify the delivery
date, of no earlier than thirty (30) days from the date PRAECIS submits the
purchase order. Except as provided herein, such purchase order shall be binding
to PRAECIS and to Cook. Cook shall provide a confirmation of receipt of the
purchase order. If Cook is unable to meet the specified delivery date, ("Failure
to Supply"), Cook shall promptly notify PRAECIS and provide to PRAECIS an
alternative delivery date within 30 days of the originally specified delivery
date, in which case the Cook shall not be deemed to be in breach of its supply
obligations. To the extent of any conflict between purchase orders submitted by
PRAECIS and this Agreement, this Agreement shall control.
3.3 Immediately upon Cook's confirmation of a PRAECIS purchase order, PRAECIS
shall ship to Cook, F.O.B. Cook in Bloomington, Indiana, without cost to Cook, a
quantity of Drug Product Intermediate necessary for Manufacture of the
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Product ordered pursuant to such purchase order. Cook shall have no
responsibility for delays in delivery of Product caused by delays in receipt of
Drug Product Intermediate from PRAECIS.
PRICE
4.1 The price and payment schedule to be paid by PRAECIS for Product ("Purchase
Price") shall be set forth in Annex A - Pricing Schedule.
4.2 If Cook is unable to fulfill the orders placed by PRAECIS, the price to be
paid by PRAECIS shall be calculated on quantities ordered by PRAECIS and for
which COOK is responsible to supply per 3.1.
SHIPMENT AND INVOICING
5.1 Product shall be delivered to PRAECIS, or its designate, F.O.B. Cook's
facility in Bloomington, Indiana freight collect, by a common carrier designated
by PRAECIS. Title and risk of loss, delay or damage in transmit shall pass to
PRAECIS upon delivery by Cook of Product to common carrier at Cook's facility.
5.2 Cook shall invoice PRAECIS for Products as of the date shipped by Cook. Each
such invoice shall be payable by PRAECIS net thirty (30) days from date of
receipt by PRAECIS of the invoice. Payments not received within thirty (30) days
from the date of receipt by PRAECIS of the invoice shall bear interest at 1 1/2%
per month. PRAECIS shall be responsible for all taxes, fees, and other expenses
incurred in connection with the distribution and sale of Product. Any claims
arising from alleged Product shortages, or failures in shipment or delivery
shall be waived and released by Buyer unless made in writing to Cook within
twenty (20) business days from the date of delivery.
6.1. PRAECIS shall have a period of sixty (60) days from the date of receipt of
Product at PRAECIS or other facility designated in the purchase order to inspect
any shipment of Product to determine whether that shipment conforms to the
Product Specifications except as specifically provided for in 6.2. If PRAECIS
believes that any shipment of Product does not conform to the Product
Specifications, PRAECIS shall, within five (5) days of when such non-conformity
of the Product to the Specifications is or reasonably should have been
discovered, but in no case more than sixty (60) days from the receipt of
product, except as specifically provided in 6.2, so notify Cook by telephone
including a detailed explanation of the non-confor-
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<PAGE>
mity and shall confirm such notice with a written confirmation by overnight
delivery. If Cook agrees that the Product does not conform to the Product
Specifications, it shall notify PRAECIS by telephone and shall confirm such
notice with a written confirmation. If Cook agrees that the Product does not
conform to the Product Specifications, PRAECIS shall return the non-conforming
Product to Cook, at Cook's expense, for disposal or rework at PRAECIS'
discretion, by Cook at Cook's expense. If Cook does not agree with PRAECIS'
determination that the Product does not conform to the Product Specifications,
Cook shall notify PRAECIS by telephone and shall confirm such notice with a
written confirmation. In the event of a dispute as to whether or not Product is
non-conforming, PRAECIS and Cook shall use good faith efforts to resolve the
issues as to whether the Product conforms to Product Specifications. In case
Cook and PRAECIS cannot resolve the issue as to the conformity or non-conformity
of Product, the subject will be submitted to a mutually acceptable lab for
determination. The determination of such mutually acceptable lab shall be
binding on the parties. The non-prevailing party shall bear the cost of testing
at the mutually acceptable lab. In the event PRAECIS fails to notify Cook of
non-conforming Product with the sixty (60) day period, PRAECIS shall be deemed
to have accepted such Product. Cook, at its expense, shall use its commercial
good faith to replace any confirmed, non-conforming Product, including
nonrecoverable Drug Product Intermediate, within the shortest reasonable time.
6.2. Product will be tested routinely by Cook for stability in accordance with
mutually agreed upon protocols consistent with ICH guidelines. In the event a
lot of Product is shown to be significantly less stable than NDA registration
stability lots, and upon investigation the decreased stability is attributable
solely to Manufacture, Cook will recover and resupply at its expense.
TERM AND TERMINATION
7.1 This Agreement shall be effective on the Effective Date and shall continue
until NDA Approval of the Product (the "Term" unless earlier terminated in
accordance with the terms of this Agreement.
7.2 Either party may terminate this Agreement upon the breach of any material
provision of this Agreement by the other party, including Failure to Supply, if
such breach is not cured within thirty (30) days after written notice thereof to
the breaching party.
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7.3 In the event of the termination or cancellation of this Agreement, with the
exception of termination by PRAECIS for breach by Cook, PRAECIS shall reimburse
Cook for all raw materials and components ordered prior to termination and not
cancellable at no cost to Cook. PRAECIS shall pay prices described in Annex A
for (a) all work-in-process commenced by Cook and (b) all finished goods of
Cook. Cook shall ship such materials to PRAECIS at PRAECIS' cost and per
PRAECIS' instructions. PRAECIS shall make payment for all expenses described in
this Section 7.3 net thirty (30) days from the invoice date.
7.4 Termination, expiration, cancellation or abandonment of this Agreement
through any means or for any reason shall not relieve the parties of any
obligation accruing prior thereto and shall be without prejudice to the rights
and remedies of either party with respect to any antecedent breach of any of the
provisions of this Agreement and the provisions of Section 11, 13, 15 and 16
hereof shall survive.
7.5 The Parties agree to discuss in good faith an extension of this Agreement
upon expiration, it being understood that the terms of an extended agreement
would be substantially equivalent to the terms of this Agreement.
MANUFACTURE OF PRODUCT
8.1 Product shall be Manufactured in accordance with current Good Manufacturing
Practices promulgated by the United States Food and Drug Administration (the
"FDA") and the applicable New Drug Application (NDA) filed with the FDA. If
applicable, Product shall be manufactured in accordance with foreign (i.e.,
outside of the United States) current Good manufacturing Practices and
applicable laws and regulations, pursuant to submissions filed. PRAECIS shall be
responsible for keeping Cook apprised of any foreign submissions and providing
Cook copies of said submissions.
8.2 PRAECIS, and its Affiliates, shall have the right to inspect Cook's
facilities solely as they relate to the Manufacture of the Product, to determine
compliance with (i) current Good Manufacturing Practices and (ii) applicable
federal, state and local laws, regulations and rules. Such inspections shall not
occur more than twice per year with a greater frequency only upon approval by
COOK. Such inspections shall be scheduled at mutually agreeable times upon
reasonable advance written notice to Cook, shall be at PRAECIS' or its
Affiliates' expense, and shall be conducted in a manner that in no way
interrupts or impairs, in any significant manner, the manufacturing operations,
at such facilities in which Cook manufactures, tests, sources
7
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materials and/or stores Product. These facilities are specified in Schedule I.
The location of manufacturing operations shall not be changed without
appropriate change of control procedures. Cook shall use good faith efforts to
enable PRAECIS to inspect and sample materials from all Cook suppliers as they
relate to the Manufacture of Product. All information disclosed or reviewed in
such inspections shall be deemed to be Confidential Information.
8.3 Cook agrees to collaborate with PRAECIS and its Affiliates before, during
and after any regulatory inspection which is relevant to the Manufacture of the
Product. Any observations from any inspection of Cook will be discussed and an
action plan for prompt resolution of any identified issue will be agreed to by
both Parties and implemented by Cook.
8.4. Cook shall test, or cause to be tested, in accordance with the
Specifications, each batch of Product Manufactured pursuant to this Agreement
before delivery to PRAECIS. A certificate of analysis for each released batch of
Product delivered to PRAECIS shall set forth the items tested by Cook,
specifications, and test results. Cook shall send, or cause to be sent, such
certificates to PRAECIS prior to or at the same time of shipment of Product to
PRAECIS. Cook shall also send as soon as possible, but in no case later than one
week later, additional documentation, consisting of batch records and a
statement of GMP compliance, and such other documents to be agreed upon by Cook
and PRAECIS.
8.5. At PRAECIS' option, Cook shall perform all stability testing required to be
performed on production batches of Product as per 1.12.
8.6. PRAECIS shall provide Cook a Material Safety Data Sheet for Product. Cook
shall immediately notify PRAECIS of any unusual health or environmental
occurrence relating to the Product, including, but not limited to any claim or
complaint by any Cook employee or third party that the operations of Cook
pursuant to this Agreement have resulted in any adverse health or safety effect
on an employee or third party. Cook agrees to advise PRAECIS immediately of any
safety or toxicity problems of which it becomes aware regarding the Product.
PURCHASE OF MATERIALS
9.1. Cook shall purchase at Cook's expense all packaging materials listed in
Schedule I, primary container components and secondary packaging materials
required to supply Product. Cook will be responsible for any and all
subcontractor
8
<PAGE>
expenses, including but not limited to sterilization testing, incurred to
Manufacture Product.
TRADEMARKS AND TRADENAMES
10.1. PRAECIS hereby licenses Cook to use the PRAECIS Trademarks and Tradenames
for the sole purpose of allowing Cook to fulfill its responsibilities under this
Agreement.
10.2. PRAECIS shall be solely responsible for selecting, registering and
enforcing the PRAECIS Trademarks and Tradenames used to identify the Product and
shall have sole and exclusive rights in such PRAECIS Trademarks and Tradenames.
WARRANTY AND LIMITATION OF DAMAGES
11.1. Cook warrants that Product shall conform with the Product Specifications
at the time of Manufacture, and shall be Manufactured in accordance with GMP.
The Parties agree that a system of mutual change control shall be established.
Cook will inform PRAECIS of any implemented change.
11.2. EXCEPT FOR THOSE WARRANTIES SET FORTH IN THIS SECTION 11, SECTION 12 AND
SECTION 13, COOK MAKES NO OTHER WARRANTIES, WRITTEN, ORAL, EXPRESS OR IMPLIED,
WITH RESPECT TO PRODUCT. ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING,
WITHOUT LIMITATION, THE IMPLIED WARRANTIES OR MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE AND NONINFRINGEMENT HEREBY ARE DISCLAIMED BY COOK. NO
WARRANTIES OF COOK MAY BE CHANGED BY ANY REPRESENTATIVES OF COOK. PRAECIS
ACCEPTS PRODUCT SUBJECT TO THE TERMS HEREOF.
11.3. PRAECIS' sole and exclusive remedy for breach of this Agreement, with the
exception of willful misconduct and willful disregard, is limited to, at PRAECIS
discretion, replacement by Cook at the non-conforming Product, including
nonrecoverable Drug Product Intermediate, or reimbursement by Cook of the
Purchase Price for the non-conforming Product, including nonrecoverable Drug
Product Intermediate, except to the extent provided above in this Section 11.3,
Cook shall not be liable for loss of use or profits or other collateral,
special, consequential or other damages, losses, or expenses, including but not
limited to the cost of cover or a recall, except as specified in 14.1, in
connection with or by reason of the
9
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Manufacture and delivery of Product under this Agreement whether such claims are
founded in tort or contract. The foregoing constitutes the sole and exclusive
remedy of PRAECIS and the exclusive liability of Cook. All claims by PRAECIS for
breach or default under this Agreement shall be brought within one (1) year
after the cause of action accrued or shall be deemed waived.
REPRESENTATION AND WARRANTY REGARDING COMPLIANCE WITH LAWS
12.1. Cook represents and warrants that it has obtained (or will obtain prior to
Manufacturing Product), and will remain in compliance with during the term of
this Agreement, all permits, licenses and other authorizations (the "Permits")
which are required under federal, state and local laws, rules and regulations
applicable to the Manufacture only of Product; provided, however, Cook shall
have no obligation to obtain Permits relating to the sale, marketing,
distribution or use of Drug Product Intermediate or Product or with respect to
the labeling of Product. Cook makes no representation or warranty with respect
to the sale, marketing, distribution or use of Drug Product Intermediate or
Product or as to printed materials supplied by PRAECIS or its designate.
12.2. In the event of any violation or alleged violation by Cook of any of the
foregoing laws, rules or regulations which renders Cook unable to perform the
obligations imposed on Cook pursuant to this Agreement, PRAECIS shall have the
right to terminate this Agreement, in whole or in part, upon fifteen (15) days
prior written notice to Cook and the failure of Cook to cure within the fifteen
(15) day period.
12.3. Cook represents and warrants that its execution, delivery and performance
of this Agreement will not constitute or result in a breach of or default under
any agreement or instrument binding on Cook, and Cook will not enter into any
agreement which would prohibit or impair the performance by Cook of its
obligations hereunder.
INDEMNIFICATION
13.1. PRAECIS shall indemnify and hold harmless Cook and its employees,
subcontractors and agents from and against any and all liabilities, claims,
demands, actions, suits, losses, damages, costs and expenses (including
reasonable attorney's fees) arising out of or in connection with PRAECIS'
storage, promotion, labeling,
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marketing, distribution, use or sale of Drug Product Intermediate or Product or
which otherwise results from PRAECIS' negligence or willful misconduct or its
breach of this Agreement, except to the extent caused solely by the negligence
or willful misconduct of Cook or its employees, subcontractors or agents or
solely by the breach by Cook of its warranties hereunder. Cook shall use its all
reasonable efforts to establish supply contracts, that will contain change
control provisions consistent with those established between PRAECIS and Cook,
with any subcontractors involved in the Manufacture of Product.
13.2. Cook shall indemnify and hold harmless PRAECIS and its employees and
agents from and against any and all liabilities, claims, demands, actions,
suits, losses, damages, costs and expenses (including reasonable attorney's
fees) resulting from Cook's negligence or willful misconduct or from Cook's
breach of its warranties hereunder.
13.3. Each of the parties shall promptly notify the other of any such claim or
potential claim covered by any of the above subsections of this Section 13 and
shall include sufficient information to enable the other party to assess the
facts. Each of the parties shall cooperate fully with the other party in the
defense of all such claims. No settlement or compromise shall be binding on a
party hereto without its prior written consent.
RECALL OF PRODUCT
14.1. In the event PRAECIS shall be required to recall any Product because such
Product may violate local, state or federal laws or regulations, the laws or
regulations of any applicable foreign government or agency or the Product
Specifications, PRAECIS shall be responsible for coordinating such recall. Cook
shall cooperate with PRAECIS in connection with any recall, at PRAECIS' expense.
If a recall is due solely to Cook's breach of its warranties under this
Agreement, Cook shall reimburse PRAECIS for the Purchase Price, including
nonrecoverable Drug Product Intermediate, paid by PRAECIS for such recalled
Product and any reasonable, out of pocket expenses associated with such recall.
Except as specifically set forth above, PRAECIS shall be responsible for all of
the costs and expenses of such recall.
INTELLECTUAL PROPERTY
15.1. PRAECIS will indemnify and hold Cook harmless from all liabilities,
claims, demands, actions, suits, losses, costs, damages and expenses (including
reasonable
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attorney's fees) arising out of or in connection with any claim that the sale,
manufacture, marketing or distribution of Drug Product Intermediate or Product
by Cook or PRAECIS violates the proprietary rights of any third party.
15.2. Cook will cooperate with PRAECIS in defending or otherwise resolving any
changes of such infringement. PRAECIS will have full control of the defense of
any litigation brought against Cook for actual or alleged infringement; however,
Cook, at its expense, shall be entitled to be represented by its own counsel in
any such litigation. Except as provided in the preceding sentence, PRAECIS shall
bear all other costs and expenses of litigation, including its own attorneys'
fees, in connection with such alleged infringement, and PRAECIS will reimburse
Cook for any disbursement made by Cook in satisfaction of any final judgment
issued in any such litigation. In the event that the sale of Product is enjoined
due to an alleged infringement by either party, PRAECIS shall refund to Cook the
costs incurred by Cook relating to any Product or other materials used in
connection with the Manufacture remaining in Cook's possession.
CONFIDENTIAL INFORMATION AND NONDISCLOSURE
16.1 It is contemplated that in the course of the performance of this Agreement
each party may, from time to time, disclose Confidential Information to the
other. Each party agrees to take all reasonable steps to prevent disclosure of
Confidential Information to third parties. No provision of this Agreement shall
be construed so as to preclude disclosure of Confidential Information as may be
reasonably necessary to secure from any governmental agency necessary approvals
or licenses or to obtain patents with respect to the Product. Such obligations
of the parties relating to Confidential Information shall expire ten (10) years
after expiration or termination of this Agreement.
16.2. This Agreement, by reference, incorporates the Confidentiality Agreement
signed by PRAECIS and Cook on January 5, 1996, and is made a part hereof as
through fully set forth herein.
16.3. Neither party shall disclose any information about this Agreement,
including its existence, without the prior written consent of the other party.
16.4. Cook shall not during the term of the Agreement Manufacture or develop
compounds for themselves or for a party other than PRAECIS that exhibit
Lutenizing Hormone Releasing Hormone (LHRH) antagonist activity, other than
under this
12
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Agreement. Upon Termination of the Agreement, Cook shall not Manufacture or
develop a generic version of the Product.
16.5. Notwithstanding anything to the contrary in this Agreement either party
shall be permitted to disclose the terms of this Agreement to applicable
governmental tax authorities if requested by such authorities.
FORCE MAJEURE
17.1. Any delay in the performance of any of the duties or obligations of either
party hereto (except the payment of money) caused by an event outside the
affected party's reasonable control which affects the Product shall not be
considered a breach of this Agreement, and unless provided to the contrary
herein, the time required for performance shall be extended for a period equal
to the period of such delay. Such events shall include without limitation, acts
of God; acts of public enemies; insurrections; riots, injunctions; embargoes;
labor disputes, including strikes, lockouts, job actions, or boycotts; fires;
explosions; floods; shortages of energy or materials; acts or orders of any
government or agency thereof or other unforeseeable causes beyond the reasonable
control and without the fault or negligence of the party so affected. The party
so affected shall give prompt notice to the other party of such cause and a good
faith estimate of the continuing effect of the force majeure condition and the
duration of the affected party's nonperformance, and shall take whatever
reasonable steps are appropriate to relieve the effect of such causes as rapidly
as possible. If the period of nonperformance of Cook because of Cook force
majeure conditions exceeds sixty (60) days, PRAECIS may terminate this Agreement
by written notice to Cook. If the period of nonperformance of PRAECIS because of
PRAECIS force majeure conditions exceeds sixty (60) days, Cook may terminate
this Agreement by written notice to PRAECIS.
COMPLIANCE WITH LAWS
18.1 Each party shall comply with all applicable federal, state and local
governmental laws, regulations and rules relating to its performance under this
Agreement.
NOTICES
19.1 All notices hereunder shall be delivered personally or by registered or
certified mail, postage prepaid, or by facsimile (confirmed by overnight
delivery), or by overnight delivery, to the following addresses of the
respective parties:
13
<PAGE>
If to Cook: Cook Imaging Corporation
927 South Curry Pike
Bloomington, Indiana 47403
Attn: Joanne W. Daly, Project Coordinator
Telefax No. 812-332-3079
Telephone No. 812-333-0887
If to PRAECIS: PRAECIS Pharmaceuticals Inc.
One Hampshire Street
Cambridge, Massachusetts 02139-1572
Attn: VP Corporate Development
Telefax No. 617-494-8414
Telephone No. 617-494-8400
Notices shall be effective upon receipt if personally delivered, on the third
business day following the date of mailing if sent by registered or certified
mail, and on the second business day following the date of transmission or
delivery to the overnight delivery if sent by facsimile or overnight delivery. A
party may change its address listed above by notice to the other party.
APPLICABLE LAW
20.1. This Agreement is being delivered and executed in the State of Indiana.
"Venue shall be proper only in a court of competent jurisdiction located in the
State of Indiana. In any action brought regarding the validity, construction and
enforcement of this Agreement, it shall be governed in all respects by the laws
of the State of Indiana, without regard to the principals of conflicts of laws.
The parties shall be subject to personal jurisdiction in and consent to service
of process issued by such court.
ASSIGNMENT
21.1. Neither party shall assign this Agreement or any part hereof or any
interest herein to any third party, (or use any subcontractor) without the
written approval of the other party. However, PRAECIS may, without such consent,
assign or sell this Agreement to an Affiliate of PRAECIS. Cook may, without such
consent, assign this Agreement to an Affiliate of Cook. Any permitted assignee
shall assume all obligations of its assignor under this Agreement. No assignment
shall relieve any
14
<PAGE>
party of responsibility for the performance of any accrued obligation which such
party then has hereunder.
21.2. PRAECIS shall have the right, transferable to its marketing and
development partner, Hoffman La-Roche, to buy the remainder of the term of the
contract ("Buy-out") subject to payment of a fee to COOK, to be negotiated and
agreed upon by PRAECIS and COOK in good faith. Such a fee will consider the
remaining term of the contract, the PRAECIS' forecasted unit volume requirements
for the remainder of the term of the contract, the profit margin forecasted to
be received by Cook from Manufacture of the Product and the reasonable
probability that Cook shall recover a portion of the profits during the
remainder of the term through alternate commercial use of the facility. The
Buy-out will occur upon six months prior written notice to COOK.
ALLIANCES
22.1. Nothwithstanding anything to the contrary herein, Cook agrees that PRAECIS
shall have the right to enter into alliances with third parties who may engage
in joint (with PRAECIS) or unilateral marketing and promoting of the Product or
any combination of products that includes the Product.
TAXES
23.1. PRAECIS shall pay all national, state, municipal or other sales, use
excise, import, property, value added, or other similar taxes, assessments or
tariffs assessed upon or levied against the sale of Product to PRAECIS pursuant
to this Agreement (or at PRAECIS' sole expense, defend against the imposition of
such taxes). Cook shall notify PRAECIS of any such taxes that any governmental
authority is seeking to collect from Cook, and PRAECIS may assume the defense
thereof in Cook's name, if necessary, and Cook agrees to fully cooperate in such
defense to the extent of the capacity of Cook, at PRAECIS' expense. Cook shall
pay all national, state, municipal or other taxes on the income resulting from
the sale by Cook of the Product to PRAECIS under this Agreement, including but
not limited to gross income, adjusted gross income, supplemental net income,
gross receipts, excess profits taxes, or other similar taxes.
SUCCESSORS AND ASSIGNS
15
<PAGE>
24.1. This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto, their affiliates, successors and permitted assigns.
ENTIRE AGREEMENT
25.1.1 This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof and supersedes all written or oral prior
agreements or understandings with respect thereto.
SEVERABILITY
26.1. If any term or provision of this Agreement shall for any reason be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
shall not affect any other term or provision hereof, and this Agreement shall be
interpreted and construed as if such term or provision, to the extent the same
shall have been held to be invalid, illegal or unenforceable, had never been
contained herein.
WAIVER-MODIFICATION OF AGREEMENT
27.1 No waiver or modification of any of the terms of this Agreement shall be
valid unless in writing and signed by authorized representatives of both parties
hereto. Failure by either party to enforce any rights under this Agreement shall
not be construed as a waiver of such rights nor shall a waiver by either party
in one or more instances be construed as constituting a continuing waiver or as
a waiver in other instances.
INDEPENDENT CONTRACTOR and USE OF MACHINE
28.1 Cook shall act as an independent contractor for PRAECIS in providing the
services required hereunder and shall not be considered an agent for joint
venture with PRAECIS. Unless otherwise provided herein to the contrary, Cook
shall furnish all expertise, labor, supervision, machining and equipment
necessary for performance hereunder and shall obtain and maintain all building
and other permits and licenses required by public authorities.
29.1 PRAECIS will purchase at its own expense a Perry Acco filling machine to
install at Cook for Manufacture of NDA validation and subsequent commercial
lots. Prior to NDA validation, the machine shall be fully dedicated to
Manufacture of Product. This machine will be returned to PRAECIS, at PRAECIS'
request upon
16
<PAGE>
Termination of this Agreement. Cook will provide to PRAECIS a certificate of
insurance on the aforementioned PRAECIS purchased equipment.
17
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their
duly authorized representatives as of the later date written below.
COOK IMAGING CORPORATION PRAECIS PHARMACEUTICALS INC.
By: /s/ Jerry C. Arthur By: /s/ Marc A. Silver
-------------------------- ------------------------------------------
Title: President Title: Vice President - Corporate Development
---------------------- --------------------------------------
Date: March 16, 1998 Date: February 10, 1998
---------------------- --------------------------------------
18
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
Annex A Project Price/Unit
Based on *** units being generated *** (includes filling, labeling, packaging,
and analytical support; all as described above)
*** Pricing Information Omitted ***
- --------------------------------------------------------------------------------
For purposes of example:
*** Pricing Example Omitted ***
Price/unit in a given calendar year will be based on the total unit quantity
actually purchased for that calendar year. Over the calendar year, units will be
purchased at the unit price indicated in the schedule above. A reconciliation
will take place within thirty (30) days after the end of the calendar year.
For example:
Where,
Calendar Year Unit Purchases = ***
*** Pricing Example Omitted ***
In the case the an amount is due PRAECIS, PRAECIS shall receive a credit
immediately applicable to new orders for the then current year. In the event
that an amount is due Cook. PRAECIS shall submit payment in full within 60 days
of year end.
19
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
[COOK LETTERHEAD]
SCHEDULE I FOR PPI
(Project code 110-02)
Primary Contact - - Nick Barker & Mark Staples, Ph.D. ph: 617-494-8400
Praecis Pharmaceuticals Inc. fax: 617-621-8675
1 Hampshire Street
Cambridge, MA 02139-1572
Product Description -- PPI-149 Depot powder filled in a vial; used to treat
prostate cancer.
Safety - - Respirators must be worn by all personnel entering
the weighing and filling area.
Storage - - Store the bulk drug substance and finished product at
controlled room temperature. NOTE: The finished
product will be stored for 60 days free of charge
from date of COOK release, after which PPI will
accrue a storage fee of $125/month/pallet (or any
quantity thereunder).
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Raw Material & Components
- -------------------------------------------------------------------------------
Item Test Storage Supplied by COOK P/N
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PPI-149-*** C RT CLIENT 1153-928
- -------------------------------------------------------------------------------
SGD molded 3 mL x 20 mm Type I vial COOK 2249-928
- -------------------------------------------------------------------------------
West 20 mm 4432/50 stopper COOK 2134-321
- -------------------------------------------------------------------------------
West 20 mm aluminum tear-off seal COOK 2197-321
- -------------------------------------------------------------------------------
NOTE: COOK will store any remaining bulk drug substance for 30 days after the
fill date (unless other runs are scheduled) at which time all the inventory will
be sent back to CLIENT, F.O.B. Bloomington
- -------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
Filling -
*** Approximately 5 lines omitted ***
Chemistry/Microbiology ***
NOTE: ***
*** Approximately 23 lines omitted ***
Inspection - - ***
Labeling - - *** Approximately 4 lines omitted ***
Packaging - - *** Approximately 4 lines omitted ***
Shipping- - Shipments are F.O.B. Bloomington.
Disposal - - ***
Contacts at CPS -
Scientific Affairs Manager Tami Stackhouse
Materials Manager Robert Stoner
Quality Assurance Manager Jennifer Walls
Documentation provided by CPS -
1. Master batch record for review and approval by CPS and PPI.
2. Product specific validation summaries.
3. Executed batch records (includes C of A)
2
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
- -------------------------------------------------------------------------------
Project Price
- -------------------------------------------------------------------------------
Based on *** units being generated *** (includes filling, labeling, packaging,
and analytical support; all as described above)
- -------------------------------------------------------------------------------
*** Pricing Information Omitted ***
- -------------------------------------------------------------------------------
3
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
SCHEDULE 2: Provisional Product Specification Sheet
Praecis Pharmaceuticals Inc./
Cook Imaging Corporation
PPI-149-Depot Drug Product Tentative Specifications
---------------------------------------------------
The following tentative specifications have been established for PPI-149-Depot.
It is understood that these specifications will be reviewed on an ongoing basis
and amended as appropriate. Regulatory agency feedback may also necessitate
specification review.
Before Reconstitution
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Test Tentative Specification
- -------------------------------------------------------------------------------
<S> <C>
Appearance before reconstitution White to off-white powder in a
sealed vial
- -------------------------------------------------------------------------------
Identification ***
- -------------------------------------------------------------------------------
***content ***
- -------------------------------------------------------------------------------
Uniformity of vial content ***
- -------------------------------------------------------------------------------
Peptide assay (based on uniformity of ***
content)
- -------------------------------------------------------------------------------
Impurities ***
- -------------------------------------------------------------------------------
Moisture content ***
- -------------------------------------------------------------------------------
Particle size ***
- -------------------------------------------------------------------------------
Sterility USP D71E ***
- -------------------------------------------------------------------------------
Bacterial Endotoxin Test USP D85E ***
- -------------------------------------------------------------------------------
Dissolution* ***
- -------------------------------------------------------------------------------
</TABLE>
- ------------
* PRAECIS is currently investigating a discriminating dissolution test
method and accordingly will implement a drug product dissolution
specification in the future.
1
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
After Reconstitution ***:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Test Tentative Specifications
- -------------------------------------------------------------------------------
<S> <C>
Appearance after reconstitution White to off-white suspension
- -------------------------------------------------------------------------------
pH after reconstitution ***
- -------------------------------------------------------------------------------
Dose delivery after reconstitution ***
- -------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
EXHIBIT 10.12
CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT
ASTERISKS (*) DENOTE SUCH OMISSIONS.
SUPPLY AGREEMENT
THIS AGREEMENT (the "Agreement") dated as of this twenty-third (23) day of
July, 1998, by and between PRAECIS PHARMACEUTICALS INCORPORATED, a Delaware
corporation, of 1 Hampshire Street, Cambridge, MA 02139-1572 ("PRAECIS") and
Salsbury Chemicals, Inc., an Iowa corporation of 1205 Eleventh Street, Charles
City, Iowa 50616-3466 ("SALSBURY").
WITNESSETH:
WHEREAS, PRAECIS is in the business of developing and commercializing
pharmaceutical chemicals and has submitted information regarding PPI-149 peptide
(the "Peptide") in a PPI-149-*** formulation ("***") *** to the Federal Food and
Drug Administration ("FDA") for testing and approval; and
WHEREAS, PRAECIS and SALSBURY have entered into a letter agreement dated
November 28, 1997 (the "Letter Agreement") which provides, among other things,
for SALSBURY to manufacture and supply PRAECIS, and for PRAECIS to purchase from
SALSBURY, certain qualification batches of *** using the Peptide supplied by
PRAECIS as a raw ingredient, and for the parties to negotiate and execute a
mutually agreeable Supply Agreement with respect to ***; and
WHEREAS, SALSBURY owns and operates a pilot plant pharmaceutical
manufacturing facility (the "Facility") in Charles City, Iowa, meeting cGMP
requirements. SALSBURY will be required to design, engineer, install and qualify
additional equipment and facility which will enable SALSBURY to produce
commercial quantities of ***; and
WHEREAS, the parties have reached agreement as set forth herein with
respect to the terms of the Supply Agreement contemplated by the Letter
Agreement.
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
NOW THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereby agree as follows:
1. MANUFACTURE
A. Subject to the terms and conditions set forth herein, during the Term (as
hereinafter defined), SALSBURY shall manufacture for and supply to PRAECIS, and
PRAECIS shall purchase from SALSBURY, PRAECIS's requirements of ***.
B. Not withstanding Section 1A. above, PRAECIS retains the right, at its sole
option, to qualify one or more alternative suppliers at any time during the
Term. Upon completion of such qualification, PRAECIS may order up to *** (***%)
of its annual requirements for *** from such alternative suppliers; provided
that, without limitation of its other remedies, PRAECIS may order a greater
percent (up to 100%) of such requirements from such alternative suppliers if
SALSBURY is unable to meet is supply obligations hereunder.
2. TERM
Subject to earlier termination as provided in Section 20 below or extension as
provided in this Section 2, this Agreement shall commence on the date hereof and
shall continue for a period of *** (the "Original Term"); provided that
commencing with the *** anniversary of the date hereof and on each subsequent
anniversary, the term of this Agreement shall automatically be extended for an
additional *** from the then current expiration date, unless either party
provides written notice to the other party electing not to extend the term of
this Agreement, such notice to be provided at least twelve (12) months prior to
the applicable anniversary date (the term of this Agreement, as so extended or
earlier terminated, being referred so as the "Term").
3. CONFIDENTIALITY
The parties hereto have entered into a Non-Disclosure Agreement dated as of
September 2, 1997 (the "Non-Disclosure Agreement") relating to the Technical
Information (as hereinafter defined) and such agreement is attached hereto as
Exhibit A and is incorporated herein and made part hereof. The parties agree
that all Technical or
2
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
Confidential Information disclosed by either party to the other shall be
covered under the terms of the Non-Disclosure Agreement and, notwithstanding any
provision of the Non-Disclosure Agreement, shall be held confidential as
provided in the Non-Disclosure Agreement from time of disclosure until ten (10)
years after the end of the Term.
4. PRODUCTION UNIT AND EQUIPMENT
A. The parties recognize that additional equipment must be installed at the
Facility to permit SALSBURY to produce *** in the required commercial
quantities. SALSBURY shall be responsible for the design, engineering,
installation and qualification of the additional equipment and facility for the
*** Production Facility (the "Production Facility"), and PRAECIS shall be
responsible for the capital and other costs incurred by SALSBURY associated with
constructing and completing the Production Facility (the "Costs"). The costs
shall be recovered by SALSBURY in monthly payments by PRAECIS (on an invoice
pass through basis) over the length of the engineering, construction and
commission phase of the project. SALSBURY shall provide the project management
team and the Costs shall be capped at *** ($***). The Production Facility shall
be dedicated to PRAECIS over the Original Term of this Agreement. SALSBURY shall
make best efforts to commission the Production Facility in ***. Although the
Costs shall be paid for by PRAECIS, SALSBURY shall own the Production Facility
and all installed equipment and PRAECIS shall have no claim thereon whatsoever.
B. Upon signing of this Agreement, PRAECIS shall execute a binding Purchase
Order for *** of *** at a price of ***, F.O.B. Charles City, Iowa, for delivery
as soon as practical after completion and commissioning of the Production
Facility. SALSBURY's obligation to complete the Production Facility shall be
subject to PRAECIS's execution, not later than October 1, 1998, of a binding
Purchase Order for at least an additional *** of *** at a price of ***, for
delivery in calendar year 1999.
C. In the event that PRAECIS does not proceed with the commercialization of ***,
either because of its inability to obtain the requisite regulatory approvals or
for any other reason including its inability to provide SALSBURY with Peptide
and other raw materials necessary to fill such order, PRAECIS may instead pay to
SALSBURY
3
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
the amount which it would have been required to pay (at time it would have been
required to make such payment) under Section 4(B) above had PRAECIS actually
received both shipments of ***.
D. All *** will be billed at the time the product successfully passes Quality
Control and Quality Assurance. Payment is required 30 days from invoice date.
Ownership and risk of loss passes to PRAECIS at the time of invoicing.
5. FORECASTING
A. Thirty (30) days prior to the start of each calendar quarter during the Term,
PRAECIS will provide SALSBURY with a written non-binding four quarter rolling
forecast estimating PRAECIS's *** requirements for the next four quarters or for
each remaining quarter if the remainder of the Term is less than four quarters
and, without limitation of SALSBURY's supply obligations under Section 1 hereof,
SALSBURY may use such orders as the basis to schedule production.
B. At least thirty (30) days prior to the start of each month during the Term
PRAECIS shall give SALSBURY firm purchase orders for its *** requirements during
the next month. SALSBURY shall deliver *** to PRAECIS not later than
thirty-seven (37) days from the date of SALSBURY's receipt of a firm Purchase
Order, the Peptide and other raw materials.
C. If PRAECIS's actual requirements in any calendar quarter exceed the most
recent forecast for that quarter by more than ***, without limitation of
SALSBURY's supply obligations under Section 1 with respect to an amount of ***
equal to *** of such forecasted amount (the "*** Amount"), SALSBURY shall only
be required to use best efforts to meet PRAECIS' requirements in excess of the
*** Amount.
6. PRICE
A. Following FDA (or equivalent foreign regulatory) approval of the Peptide in a
*** formulation, the base price per kilogram for quantities up to *** per
calendar year shall be ***, and *** for any quantities in excess of *** in any
calendar year. All prices are F.O.B. Charles City, Iowa. *** will be billed at
the time the ***
4
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
successfully passes Quality Control and Quality Assurance. Payment is required
thirty (30) days from invoice date. Ownership and risk of loss passes to PRAECIS
at the time of invoicing.
B. Following FDA (or equivalent foreign regulatory) approval of the Peptide in a
*** formulation, the base price will be adjusted annually by SALSBURY by an
amount not to exceed the change in the published Produce Price Index for
Chemicals and Allied Products (PPI), as published by the Bureau of Labor
Statistics of the U.S. Department of Labor. The parties agree that the PPI
factor adjustment will begin at the average for June 1998 at 144.9.
C. SALSBURY shall use best efforts to maximize the concentration of active
Peptide in *** and to maximize the conversion of Peptide to ***, consistent with
the In-Process Limits (as defined herein).
D. The parties shall seek to establish a mutually agreed program to reduce
manufacturing costs and improvement yields in the *** process (the "Program").
Any cost savings or yield improvements resulting from the Program shall be ***
by the parties and will be reflected in annual price adjustments. For yield
improvements, if Yield is defined as the mole of *** produce per mole of peptide
reacted, and if Yield becomes higher, the sales price of *** is adjusted upward
as follows:
Adjusted Price = ***
Yield #1 is the Average Yield of the 3-kilogram validation lots
Yield #2 is a future Yield
E. Each party shall bear its own costs in the Program, provided that PRAECIS
shall bear the costs of any raw material losses in the Program with the
exception of raw material losses due to negligence or willful misconduct by
SALSBURY which shall be borne entirely by SALSBURY. In the event new capital is
required to implement a cost savings program both parties will share the cost
equally.
7. RAW MATERIALS, SHIPPING AND WAREHOUSING
5
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
A. PRAECIS will provide, at PRAECIS's sole risk and expense, all Peptide and
other raw materials (except WFI water which will be supplied by SALSBURY),
freight prepaid, to the Production Facility, in such amounts and at such times
as shall be jointly determined by SALSBURY and PRAECIS to be required for
manufacture of *** ordered by PRAECIS; provided that with respect to any
purchase order, PRAECIS shall not be required to supply SALSBURY with Peptide
and other raw materials required to fill such order more than fifteen (15) days
prior to submission to SALSBURY of such purchase order. Risk of loss of Peptide
and the other raw materials delivered by PRAECIS shall pass to SALSBURY when
safely delivered at the Production Facility.
B. PRAECIS will provide a Certificate of Analysis ("CA") for each lot of Peptide
delivered to SALSBURY for use in producing *** SALSBURY will perform a cGMP
identity test upon receipt of Peptide. Any cost of loss resulting from
SALSBURY's use of off-spec material in reliance on PRAECIS's CA shall be
PRAECIS's sole responsibility unless such off-spec condition shall be the fault
of SALSBURY who shall then bear such risk. SALSBURY shall be responsible for any
rework or loss rising from actions or omissions of SALSBURY, including any costs
to rework or replace PRAECIS-supplied materials.
C. Upon completion of manufacture, SALSBURY will arrange for shipment of *** to
PRAECIS designated locations, F.O.B. the Facility. *** will be billed at the
time the product successfully passes Quality Control and Quality Assurance as
evidenced by receipt of a CA. Payment is required 30 days from invoice date.
Ownership and risk of loss passes to PRAECIS at the time of invoicing.
8. ANALYTICAL SERVICES
A. PRAECIS desires to have SALSBURY provided a CA for each lot of ***
manufactured at SALSBURY's facility according to the in-process limits attached
hereto as Exhibit B (the "In-Process Limits"). A CA will accompany each lot of
*** shipped.
B. SALSBURY and PRAECIS agree to jointly establish a release procedure for ***
manufactured by SALSBURY. SALSBURY shall obtain prior written approval
6
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
from PRAECIS for any exemption in the In-Process Limits. If, at any time, ***
produced for PRAECIS fails to meet the In-Process Limits, PRAECIS and SALSBURY
agree to work together in good faith to attempt to resolve any such problem
through rework of the ***, as appropriate, and SALSBURY will perform a failure
investigation and report results to PRAECIS.
C. Any changes to the In-Process Limits must be approved and signed by
authorized representatives of both parties as may be designated from time to
time.
D. SALSBURY will maintain retention samples no greater than 0.5 gram of each lot
of *** produced for a period of (1) year from the date of shipment. Such samples
will be returned to PRAECIS or it's designate upon request by PRAECIS.
E. Analytical methods will be validated and reports will be provided to PRAECIS.
As necessary, cross-validation will be performed with other parties.
9. INVOICING AND INVENTORIES
SALSBURY shall invoice PRAECIS immediately following completion of ***
manufacture, packaging and Quality Control and Quality Assurance approval.
Payment shall be due from PRAECIS within thirty (30) days of date of SALSBURY's
invoice. Ownership and risk of loss passes to PRAECIS as the time of invoicing.
Bill of Lading for each shipment will accompany the shipment. Within ten (10)
days following the end of each month during the Term, SALSBURY shall submit the
following to PRAECIS.
A. Inventory of *** at the end of each calendar month and a listing of each
shipment of *** made during such calendar month showing truck or car numbers,
date, weight and number of containers; and
B. Inventory of Peptide supplied by PRAECIS at the end of each calendar month;
and
C. Total amount of Peptide used in the processing of *** during such calendar
month.
7
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
10. CHANGE IN MATERIAL, PROCESS OR PROCEDURE.
SALSBURY shall obtain prior written approval of PRAECIS for any change in
materials or methods of manufacture or analysis employed in producing ***
hereunder, and SALSBURY shall promptly notify PRAECIS of and implement any
changes advised by any appropriate regulatory agency or other authority.
11. FACILITY INSPECTION
A. Upon reasonable prior notice, PRAECIS and its Licensees who agree to be bound
by the terms of Non-Disclosure Agreement shall have the right to inspect and
audit the Production Facility, provided that if PRAECIS requests an inspection
at a time when such inspection would not present a significant risk of
disclosure of confidential information of SALSBURY or a customer of SALSBURY
other than PRAECIS. SALSBURY will, if practical, arrange for the inspection to
take place within five (5) working days from the date of said request.
B. PRAECIS employees and Licensees who are present at the Production Facility
shall comply with all SALSBURY's rules, regulations and instructions from
SALSBURY's employees, and PRAECIS assumes all liability, costs and loss of
whatever kind directly resulting from the presence of PRAECIS's employees at the
Production Facility, provided that SALSBURY shall be responsible for its
negligence, recklessness or willful misconduct.
12. PACKAGING
The *** supplied by SALSBURY hereunder shall be packaged in containers specified
by PRAECIS (but supplied by SALSBURY) and shall bear labels supplied by SALSBURY
using label copy supplied by PRAECIS. PRAECIS shall be solely responsible for
complying with any applicable laws, regulations, rules or ordinances (federal,
state or local) relating to the container and the contents of the labels. In
addition to the container specifications and labels, PRAECIS shall also provide
SALSBURY with all the packaging component specifications necessary to package
the ***.
8
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
13. WASTE DISPOSAL
SALSBURY is responsible for all costs and liabilities associated with the
transport and approved disposal of waste streams generated by the manufacture of
*** at the Facility. Upon request, SALSBURY will provide to PRAECIS copies of
all manifests for shipping *** waste streams from the Production Facility. At
PRAECIS option and PRAECIS' expense, all waste will be shipped to PRAECIS or
it's designate.
14. SAFETY INFORMATION
PRAECIS will supply Material Safety Data Sheets ("MSDS") for Peptide and ***.
SALSBURY will obtain from their raw material suppliers all other raw material
MSDS's utilized in the manufacture of the *** before said manufacture will
begin.
15. REGULATORY APPROVALS
SALSBURY is responsible for securing and complying with the necessary worldwide
regulatory approvals for the manufacture and supply of *** and any substitute
*** at the Facility, in the case where modifications to the manufacture and
supply of *** are not required by regulatory agencies and PRAECIS requests
modifications to the manufacture and supply of ***, PRAECIS shall reimburse
SALSBURY promptly for all increased approval and compliance costs. If PRAECIS
offers and SALSBURY accepts substitute or additional ***'s, PRAECIS shall be
responsible for all costs of regulatory compliance, and shall reimburse SALSBURY
promptly for all such approval and compliance costs. PRAECIS shall be solely
responsible for obtaining all regulatory approvals required for the sale of ***
to PRAECIS's customers.
16. TECHNICAL INFORMATION
A. PRAECIS has developed and is the owner of certain technical information
required to produce ***(the "Technical Information"), and except to the extent
provided in this Section 16A, SALSBURY shall have no rights of any kind with
respect to any Technical Information. PRAECIS hereby licenses the Technical
9
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
Information to SALSBURY on non-exclusive, royalty-free basis for the sole
purpose of producing *** for PRAECIS during the Term.
B. Any and all improvements, discoveries and/or inventions, whether or not
patentable, which may be made or conceived by SALSBURY during the Term which is
based on or incorporates or uses any Technical Information, or otherwise arises
out of SALSBURY's performance of its obligations hereunder shall be the sole and
exclusive property of PRAECIS. Process or equipment information or
recommendations provided by PRAECIS and/or inventions relating to such process
and/or equipment information or recommendations, which arise in whole or in part
out of such information shall also be the sole and exclusive property of
PRAECIS. SALSBURY shall provide full disclosure to PRAECIS of all such
improvements, discoveries, and/or inventions described above, and shall execute
or cause to be executed any and all applications, assignments, or other
instruments which PRAECIS shall deem necessary or useful in order to apply for,
obtain and protect Patents of the United States and all foreign countries with
respect to any and all such discoveries, improvements and/or inventions and
shall, and hereby does, assign and convey to PRAECIS the sole and exclusive
right, title, and interest in and to any and all such discoveries, improvements
and/or inventions and to all patent applications and patents thereon. PRAECIS
will bear the cost of preparation of all such patent applications and patents.
PRAECIS shall grant SALSBURY a royalty-free, perpetual, worldwide license under
any patent so obtained and agrees that SALSBURY can utilize any operational
knowledge in other areas of its business; provided that such license shall not
extend to, and SALSBURY shall not utilize any operational knowledge to provide,
products, services or processes which are competitive with the business of
PRAECIS.
17. WARRANTIES
A. SALSBURY warrants and represents:
(i) that all *** manufactured by SALSBURY hereunder will meet the
In-Process Limits and will be made in accordance with worldwide cGMP;
10
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
(ii) that the Production Facility (and the operations thereof) is, and
shall remain during the term hereof, in substantial compliance with all
applicable laws, statutes, rules, regulations or ordinances (federal, state or
local) including but not limited to those enforced by the U.S. Environmental
Protection Agency and the Occupational Safety and Health Administration.
B. PRAECIS warrants and represents:
(i) that all Peptide and other raw materials delivered to SALSBURY for use
in the manufacture of *** hereunder shall meet the In-Process Limits shall be
suitable for use in the ***;
(ii) that it has the right to use the Technical Information and to grant
to SALSBURY the license granted pursuant to Section 18A. hereof;
18. INDEMNIFICATION
A. SALSBURY shall protect, defend, indemnify and hold harmless PRAECIS and its
affiliates, and their respective directors, officers, employees and agents, from
and against any and all actions, liability, loss, damage, cost or expense
(including reasonable attorney's fees) arising out of, incident to, or in any
way connected with, any breach by SALSBURY of this Agreement, including without
limitation any representations or warranties of SALSBURY set forth herein.
PRAECIS shall give SALSBURY prompt notice of any claim on which PRAECIS seeks
indemnification from SALSBURY under this Section.
B. (i) PRAECIS shall protect, defend, indemnify and hold harmless SALSBURY and
its affiliates, and their respective directors, officers, employees and agents,
from and against any and all actions, liability, loss, damage, cost or expense
(including reasonable attorney's fees) arising out of, incident to, or in any
way connected with, any breach by PRAECIS of this Agreement, including without
limitation any representations or warranties of PRAECIS set forth herein.
SALSBURY shall give PRAECIS prompt notice of any claim on which SALSBURY seeks
indemnification from PRAECIS under this Section.
11
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
(ii) it is understood that SALSBURY has no control over the ultimate use
of the *** once the *** leaves the Facility, and SALSBURY shall have no
liability in connection with any use made of the ***, except to the extent
attributable to SALSBURY's gross negligence, willful misconduct or breach of
this Agreement, including without limitation any breach of any representations
or warranties of SALSBURY set forth herein. PRAECIS shall protect, defend,
indemnify and hold harmless SALSBURY and its affiliates, and their respective
directors, officers, employees and agents, from and against any and all actions,
liability, loss, damage, cost or expense (including reasonable attorney's fees):
(a) arising out of or in connection with the sale or use of the ***; or
(b) arising out of any claim that the ***, the Technology or the
manufacturing process furnished by PRAECIS infringes any patent or
other intellectual property right of any third party or that the
labels of the *** infringe any patent, copyright or trademark of any
third party; or
(c) otherwise arising out of the labeling or packaging of the ***.
Prompt notice of any such claim asserted against SALSBURY shall be
given by SALSBURY to PRAECIS.
(d) notwithstanding the foregoing provisions of this paragraph (ii),
PRAECIS shall have no indemnify obligation under this paragraph (ii)
to the extent any action, liability, loss, damage, cost or expense
(including reasonable attorney's fees) referred to in this paragraph
(ii) is attributable to SALSBURY's gross negligence, willful
misconduct or breach of this Agreement, including without limitation
any breach of any representations or warranties of SALSBURY set
forth herein.
19. INSURANCE
SALSBURY shall furnish to PRAECIS, at PRAECIS request, but not later than the
date of the commencement of manufacture of *** hereunder by SALSBURY, adequate
evidence of the fact (including amounts of coverage) of insurance coverage, more
particularly, worker's compensation, employer's liability and comprehensive
12
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
general liability insurance, provided that self-insurance shall be permitted.
SALSBURY shall carry (and provide evidence to PRAECIS of) appropriate insurance
to cover loss or damage to in-process *** and in-process Peptide.
20. TERMINATION FOR CAUSE
Either party may terminate this Agreement (and upon any such termination the
Term shall automatically end), by giving the other party ninety (90) days
written notice thereof, in any of the following events:
A. the cessation of business activities by the other party, except as the
result of the merger or consolidation referred to in Section 26 hereof;
B. (i) the admission by the other party of its inability to pay its debts as
they mature;
(ii) the filing of a petition for bankruptcy or similar proceedings by the
other party, but excluding a proceeding for reorganization pursuant to Chapter
11 of the Federal Bankruptcy Code by the other party providing that the party
continues in the operation of its business and further provided that the party
shall otherwise continue to perform its obligations under this Agreement; or
(iii) a general assignment for the benefit of creditors or similar acts by
the other party.
C. In the event this Agreement is terminated during the Production Facility
construction phase, PRAECIS shall pay SALSBURY the Costs incurred or irrevocably
committed to through the date of termination.
D. In the event that Salsbury does not perform under the terms of the Agreement,
Salsbury will nevertheless use its best efforts to continue to supply Product
until PRAECIS has an alternate validated replacement reproduction facility on
line. Salsbury will assist PRAECIS with the Technology transfer. In no case will
Salsbury's best efforts obligation extend beyond the Original Term
13
<PAGE>
E. Any act of material dishonesty or violation of laws or regulations by the
other party in relation to this Agreement which could affect that party's
ability to perform hereunder.
F. The parties agree that assignment or transfer of this Agreement as provided
in Section 24 might be an alternative to termination under this provision.
G. The material breach by the other party of this Agreement, including without
limitation any such other party's representations or warranties set forth
herein, which, if curable, continues uncured for a period of ninety (90) days
after notice thereof is given to such other party.
21. FORCE MAJEURE
A. Neither party shall be liable for failure or delay of performance, except
with respect to PRAECIS's obligations of payment under Section 6(A). hereunder,
by reason of any Acts of God, riots, insurrections, strikes, lockouts,
governmental action or regulation or any other cause beyond the reasonable
control of such party. In the event of any such occurrence, deliveries of any
order placed and accepted under this Agreement or the appropriate portion of
such delivery shall be suspended for the duration of the period during which
such cause continues, provided that no such act or occurrence shall relieve
PRAECIS from its obligations of payment hereunder.
B. In the event of partial failure or delay of performance hereunder by reason
of cause described in Section 21(A). above, unaffected portions of the Facility
may be allocated to perform hereunder on an equivalent basis, but only if such
allocation is determined by PRAECIS, prior to manufacture, to be in accordance
with cGMP.
22. ARBITRATION
A. Any dispute, controversy or claim arising out of or relating to this
Agreement, or the breach hereof shall be settled by arbitration in New Jersey in
accordance with the Rules of the American Arbitration Association and judgment
upon the award rendered by the Arbitrator(s) may be entered in any court having
jurisdiction thereof. Written notice of demand for arbitration shall be filed
with the other party to the Agreement and with the American Arbitration
Association within a reasonable time after the dispute, controversy or claim has
arisen.
14
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
B. In any such arbitration proceeding in which damages may be awarded to PRAECIS
based on SALSBURY's inability or failure to meet its supply obligations under
this Agreement, such damages may include reasonably foreseeable losses arising
from such inability or failure, including loss of sales and costs and expenses
to obtain an alternate supply (including qualification of an alternate
supplier), provided that damages consisting of loss of sales may not be awarded
based on SALSBURY's inability or failure to supply to the extent the cause of
such inability or failure is one or more force majeure events described in
Section 21A. above.
23. APPLICABLE LAW; ENTIRE AGREEMENT
This Agreement (including the Exhibits hereto), which shall be interpreted and
enforced in accordance with the laws of the State of Iowa, constitutes the
entire agreement between the parties, and it is expressly agreed that any and
all prior understandings or agreements relating to the subject matter of this
Agreement, whether oral or written, are automatically canceled by the execution
of this Agreement, except that the respective obligations of the parties set
forth in the Letter Agreement with respect to the manufacture, delivery and
payment for qualification lots of *** shall remain in full force and effect. The
terms and conditions set forth herein may only be modified in a subsequent
writing signed by both parties.
24. ASSIGNMENT
This Agreement may not be assigned or transferred by either party without the
prior written consent of the other party, which consent shall not be
unreasonably withheld, except (i) that either party may assign its rights
hereunder to a subsidiary or controlled affiliated company, provided that no
such assignment shall release the assigning party from its obligation hereunder
and (ii) for any such assignment by PRAECIS to an entity which this Agreement
relates, whether pursuant to a merger, consolidation, stock purchase,
recapitalization, asset sale or otherwise.
25. INDEPENDENT CONTRACTOR
SALSBURY's status hereunder is that of an independent contractor. SALSBURY is
not, and shall not, represent itself to be PRAECIS's agent or representative.
15
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
SALSBURY shall not contact or communicate with PRAECIS's customers for the ***
in any manner or for any reason unless PRAECIS shall have consented thereto in
advance.
26. NOTICES
A. All notices given pursuant to this Agreement shall be in writing and shall be
(i) hand delivered, or (ii) sent by (a) recognized overnight courier service,
(b) certified or registered mail, return receipt requested, or (c) facsimile,
addressed as follows:
To PRAECIS:
PRAECIS PHARMACEUTICALS Inc.
1 Hampshire Street
Cambridge, MA 02139-1572
Attention: Vice President, Corporate Development
Facsimile No.: 617-494-8414
To SALSBURY:
Salsbury Chemicals, Inc.
1205 Eleventh Street
Charles City, Iowa 50616
Attention: Vice President, Sales and Marketing
Facsimile No.: 515-257-1020
with a copy to:
Cambrex Corporation
One Meadowlands Plaza
East Rutherford, NJ 07073
Attention: Corporate Secretary
Facsimile No.: 201-804-9851
B. Notice shall be effective seven business days after the time of posting if
sent by mail (or on the date of delivery if hand delivered including by
overnight courier) and on the date sent (if sent by facsimile with receipt
confirmed), unless the notice
16
<PAGE>
relates to changing a party's address for purposes of giving notice, in which
event the notice shall be effective as of the time received.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
Witnesseth: PRAECIS PHARMACEUTICALS INC.
By:/s/ Kevin McLaughlin By:/s/ Marc A. Silver
---------------------- --------------------
Name:Kevin McLaughlin Name:Marc A. Silver
---------------------- --------------------
Title:Vice President
--------------------
Date: 7/23/98
---------------
Witnesseth: SALSBURY CHEMICALS, INC.
By:/s/ Nicholas P. Johnson By:/s/ Dennis P. Bauer
----------------------- --------------------
Name:Nicholas P. Johnson Name:Dennis P. Bauer
- -------------------------- --------------------
Title:Vice President, Sales & Marketing
---------------------------------
Date:June 23, 1998
---------------
17
<PAGE>
EXHIBIT A
CONFIDENTIAL DISCLOSURE AGREEMENT
AGREEMENT dated of September 2, 1997, by and between PRAECIS Pharmaceuticals,
Inc. ("PRAECIS"), a Delaware corporation, having its principal place of business
at One Hampshire Street, Cambridge, Massachusetts 02139, and Salsbury Chemicals,
Inc., an Iowa corporation having its principal place of business at 1205 11th
Street, Charles City, Iowa, 50616-3466 ("CONFIDANT").
1. Background
PRAECIS and CONFIDANT intend to engage in discussions in order to evaluate
a potential business relationship between the two parties. In the course
of such discussions and negotiations, it is anticipated that the CONFIDANT
may acquire PRAECIS's proprietary or confidential information
("CONFIDENTIAL INFORMATION") relating to PRAECIS's research and
development programs including its LHRH and drug formulation programs,
specifically; compound structures, compositions, formulation strategies,
compound characteristics, methods of preparation, methods of testing, uses
of, mechanisms of action, biologic activity, marketing research, clinical
development and registration strategies, research and management
personnel, technical and economic information, business concepts, proposed
corporate partnership arrangements, and other information relating to
PRAECIS business affairs and know how, for the purpose of enabling
CONFIDANT to evaluate the feasibility of such business relationship.
PRAECIS and CONFIDANT have entered into this Agreement in order to protect
their rights with respect to any such information in accordance with the
terms of this Agreement.
2. Disclosure of CONFIDENTIAL INFORMATION.
CONFIDANT shall hold in confidence and shall not disclose to any third
party any CONFIDENTIAL INFORMATION disclosed to it by PRAECIS, except as
expressly permitted under this Agreement. In order for such information to
be subject to the obligations set forth herein, it must be disclosed in
written or other tangible form, and clearly marked "confidential". If
disclosed orally, such information must be reduced to written or tangible
form within 30 days of initial disclosure, so marked and delivered to
CONFIDANT. CONFIDANT shall use such CONFIDENTIAL INFORMATION only for the
purpose for which it was disclosed and shall not exploit such CONFIDENTIAL
INFORMATION for its own benefit or the benefit of another without
18
<PAGE>
the prior written consent of PRAECIS. CONFIDANT shall disclose
CONFIDENTIAL INFORMATION of PRAECIS only to its employees and consultants
who have need to know such CONFIDENTIAL INFORMATION in the course of the
performance of their duties and who are legally bound to protect the
confidentiality of such CONFIDENTIAL INFORMATION.
3. Protection of CONFIDENTIAL INFORMATION.
CONFIDANT shall protect PRAECIS's CONFIDENTIAL INFORMATION by using the
same degree of care, but not less than a reasonable degree of care, to
prevent the unauthorized use, dissemination, publication of, or access to,
PRAECIS's CONFIDENTIAL INFORMATION as it uses to protect its own
CONFIDENTIAL INFORMATION.
4. Property Rights in CONFIDENTIAL INFORMATION.
CONFIDENTIAL INFORMATION shall remain the property of PRAECIS
notwithstanding disclosure hereunder. Disclosure of CONFIDENTIAL
INFORMATION hereunder shall not be deemed to constitute a grant, by
implication or otherwise, of a right or license to the CONFIDENTIAL
INFORMATION or in any patents or patent applications of the PRAECIS.
5. Limitation on Obligations.
The obligations of each party specified in Section 3 above shall not apply
to any CONFIDENTIAL INFORMATION which:
(a) Is otherwise in the pubic domain at the time of disclosure, or becomes
publicly known, in each case, through no breach of this Agreement by
CONFIDANT (provided, however, that information shall not be disqualified
as CONFIDENTIAL INFORMATION (i) merely because it is embraced by more
general or generic information which is in the public domain or available
from a third party, or (ii) if it can only be reconstructed from
information taken from multiple sources, none of which individually shows
or fairly suggests the whole combination (with matching degree of
specificity), its principle of operation and/or the relevant use or method
of use, as applicable;
(b) Becomes known to CONFIDANT through disclosure by sources other than
PRAECIS having the rights to disclose such CONFIDENTIAL INFORMATION:
19
<PAGE>
(c) Is generally disclosed to third parties by PRAECIS without similar
restriction on such third parties;
(d) Is approved for release by written authorization of an officer of PRAECIS;
or
(e) Is independently developed by employees or agents of CONFIDANT who have
not utilized CONFIDENTIAL INFORMATION of PRAECIS's in such independent
development.
6. Return of Documents.
CONFIDANT shall, upon the written request of PRAECIS, or upon termination
of this Agreement, return to PRAECIS all CONFIDENTIAL INFORMATION received
by CONFIDANT from PRAECIS pursuant to this Agreement (and all copies and
reproductions thereof), except that one (1) copy thereof may be retained
by CONFIDANT solely for the purpose of determining the extent of its
obligations hereunder. CONFIDANT will retain copies of reports, data, and
documentation, such as to remain in compliance with relevant regulatory
agencies.
7. Term
Exchange of information hereunder shall occur within one year from the
effective date of this agreement. This agreement shall remain in effect
for ten years from the date of the signing or until the signing of a
superseding agreement.
8. General.
(a) This Agreement and a party's rights, duties and obligations under this
Agreement are not transferable or assignable by that party without express
prior written consent of the other. Any attempt to transfer or assign this
Agreement or any of the rights, duties or obligations under this Agreement
without such consent is void
(b) This Agreement can only be modified by written agreement duly signed by
the persons authorized to sign agreements on behalf of the parties hereto,
and variance from the terms or conditions of this Agreement will be of no
effect.
20
<PAGE>
(c) If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or be impaired thereby.
(d) This Agreement shall be governed and constructed in accordance with the
laws of the State of Massachusetts.
(e) This Agreement is the complete and exclusive statement of the agreement
between the parties as to the subject matter hereof and supersedes all
communications between the parties related to the subject matter of this
Agreement.
(f) A waiver of a breach or default under this Agreement shall not be a waiver
of any other or subsequent breach or default. The failure or delay in
enforcing compliance with any term or condition of this Agreement shall
not constitute a waiver of such term or condition unless such term or
condition is expressly waived in writing.
(g) In the event of a breach or threatened breach by CONFIDANT of any of the
provisions of this Agreement, PRAECIS, in addition to any other remedies
available to it under law, shall be entitled to an injunction restraining
CONFIDANT from the performance of acts which constitute breach of this
Agreement.
(h) This Agreement shall be binding upon the parties hereto and inure to the
benefit of the parties hereto, their respective successors and permitted
assigns.
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective
the day and year first above written.
PRAECIS Pharmaceuticals, Inc. CONFIDANT - SALSBURY CHEMICALS, INC.
- ----------------------------- ---------
By:/s/ N. Barker By:/s/ Rudi E. Moerck
--------------------- -------------------
Name:N. Barker Name:Rudi E. Moerck
------------------- -----------------
Title:V. P., Development Title:President
------------------ ----------------
Date:September 9, 1997
-----------------
22
<PAGE>
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASTERISKS (*) DENOTE SUCH OMISSIONS.
EXHIBIT B
SALSBURY CHEMICALS, INC. CPD 174
QUALITY ASSURANCE SPECIFICATIONS
<TABLE>
<CAPTION>
<S> <C> <C>
CATEGORY: PRODUCT QC FLAG: QC
CODE NO: 2000300
NAME: PPI 149-***
SYNONYMS: ABARELIZ DEPOT
FORMULA: ***
MOLECULAR WEIGHT: ***
CAS NO: [183552-38-7]
DATE ISSUED: APRIL 24, 1998
REPLACES 04/09/1998
***: ***
</TABLE>
DRUG PRODUCT INTERMEDIATE IN-PROCESS LIMITS
<TABLE>
<CAPTION>
<S> <C> <C>
TEST ITEM LIMITS TEST METHOD
- --------- ------ -----------
1. Description White to off-white ***
powder
2. *** Content *** ***
(spectrophotometric)
3. Moisture *** ***
4. HPLC ID (retention time) *** ***
5. Assay *** ***
6. Impurities (HPLC) *** ***
7. Particle Size *** ***
***
8. *** *** ***
9. *** *** ***
10. Microbial Limits (***) *** ***
11. Endotoxin (LAL) (per mg) *** ***
</TABLE>
23
<PAGE>
EXHIBIT B (cont.)
QUALITY ASSURANCE SPECIFICATION CODE NO. 2000300
PPI-149 Revision No. 9804
APPROVALS:
ORIGINATOR /s/ Michael Tzarny Date: 4/22/98
---------------------- -------
QUALITY CONTROL /s/ Michael Tzarny Date: 4/22/98
---------------------- -------
Supervisor
QUALITY ASSURANCE /s/ L.J. Frahm Date: 4/22/98
---------------------- -------
Manager
CHEMICAL DEVELOPMENT /s/ Eric Michalson Date: 4/22/98
---------------------- -------
Manager
SALES & MARKETING /s/ Shel Gelman Date: 4/22/98
---------------------- -------
Director
OPERATIONS /s/ Donald Bertling Date: 4/22/98
---------------------- -------
Manager
CHANGES: 1. Correct Replace date and Revision Number.
24
<PAGE>
Exhibit 10.13
HILL BUILDING
Lease to Pharmaceutical Peptides, Inc.
Table of Contents
1. Recitals and Definitions.............................................. 1
1.1 Recitals........................................................ 1
1.2 Definitions..................................................... 1
2. Premises and Term..................................................... 2
2.1 Premises........................................................ 2
2.2 Appurtenant Rights.............................................. 3
2.3 Landlord's Reservations......................................... 3
2.4 Parking......................................................... 4
3. Rent and Other Payments............................................... 4
3.1 Annual Fixed Rent............................................... 4
3.2 Real Estate Taxes............................................... 5
3.3 Operating Expenses.............................................. 8
3.4 Inspection and Audit............................................ 12
3.5 Electricity..................................................... 12
3.6 Other Utility Charges........................................... 13
3.7 Above-Standard Services......................................... 13
3.8 No Offsets...................................................... 14
3.9 Security Services............................................... 14
3.10 Net Lease....................................................... 14
4. Alterations........................................................... 14
4.1 Consent Required for Tenant's Alterations....................... 14
4.2 Ownership of Alterations........................................ 15
4.3 Construction Requirements for Alterations....................... 15
4.4 Payment for Tenant Alterations.................................. 16
4.5 Tenant's Initial Improvements................................... 17
4.6 Security for Performance of Tenant's
Initial Improvements............................................ 19
4.7 Use of Roof..................................................... 24
5. Responsibility for Condition of Building and
Premises.............................................................. 26
5.1 Maintenance of Building and Common Ar
eas by Landlord................................................. 26
5.2 Maintenance of Premises by Tenant............................... 27
5.3 Delays in Landlord's Services................................... 27
6. Tenant Covenants...................................................... 28
6.1 Permitted Uses.................................................. 28
<PAGE>
6.2 Laws and Regulations............................................ 29
6.3 Rules and Regulations........................................... 29
6.4 Safety Compliance............................................... 30
6.5 Landlord's Entry................................................ 30
6.6 Floor Load...................................................... 30
6.7 Personal Property Tax........................................... 30
6.8 Assignment, Subleases or other Transfers........................ 30
7. Indemnity and Insurance............................................... 33
7.1 Indemnity....................................................... 33
7.2 Liability Insurance............................................. 34
7.3 Personal Property at Risk....................................... 35
7.4 Waiver of Subrogation........................................... 35
7.5 Landlord's Insurance............................................ 36
8. Casualty and Eminent Domain........................................... 36
8.1 Restoration Following Casualties................................ 36
8.2 Landlord's Termination Election................................. 37
8.3 Tenant's Termination Election................................... 37
8.4 Casualty at Expiration of Lease................................. 38
8.5 Eminent Domain.................................................. 38
8.6 Rent After Casualty or Taking................................... 39
8.7 Temporary Taking................................................ 39
8.8 Taking Award.................................................... 39
9. Default............................................................... 39
9.1 Tenant's Default................................................ 39
9.2 Damages......................................................... 41
9.3 Cumulative Rights............................................... 42
9.4 Landlord's Self-help............................................ 42
9.5 Enforcement Expenses............................................ 43
9.6 Late Charges and Interest on
Overdue Payments................................................ 43
9.7 Landlord's Right to Notice and Cure............................. 43
10. Mortgagees' Rights.................................................... 44
10.1 Subordination................................................... 44
10.2 Prepayment of Rent not to Bind Mortgagee........................ 44
10.3 Tenant's Duty to Notify Mortgagee:
Mortgagee's Ability to Cure..................................... 44
10.4 Estoppel Certificates........................................... 45
11. Miscellaneous......................................................... 46
11.1 Recording of Lease.............................................. 46
11.2 Notices......................................................... 46
11.3 Successors and Limitation on Liability
of the Landlord................................................. 47
ii
<PAGE>
11.4 Waivers by the Landlord......................................... 47
11.5 Acceptance of Partial Payments of Rent.......................... 48
11.6 Interpretation and Partial Invalidity........................... 48
11.7 Quiet Enjoyment................................................. 48
11.8 Brokerage....................................................... 49
11.9 Surrender of Premises and Holding Over ......................... 49
11.10 Landlord's Lien................................................. 50
11.11 Right of First Offer............................................ 51
EXHIBIT A: BASIC LEASE TERMS
EXHIBIT A-1: FLOOR PLAN OF THE PREMISES
EXHIBIT B: STANDARD SERVICES
EXHIBIT C: RULES AND REGULATIONS
EXHIBIT D: TENANT'S INITIAL IMPROVEMENTS
EXHIBIT D-1: TENANT'S PERSONAL PROPERTY
EXHIBIT D-2: SECURED PROPERTY
EXHIBIT E: CUSTODIAL SERVICES
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LEASE
1. Recitals and Definitions
1.1 Recitals. This Lease (this "Lease") is entered into as of April ___,
1994, by and between The Charles Stark Draper Laboratory, Inc. (the "Landlord"),
and Pharmaceutical Peptides, Inc. (the "Tenant").
In consideration of the mutual covenants herein set forth, the Landlord
and the Tenant do hereby agree to the terms and conditions set forth in this
Lease.
1.2 Definitions. The following Terms, have the meanings indicated or
referred to below.
"Additional Rent" means all charges payable by the Tenant pursuant to this
Lease other than Annual Fixed Rent, including without implied limitation; the
Tenant's Tax Expense Allocable to the Premises as provided in Section 3.2; the
Tenant's Operating Expenses Allocable to the Premises in accordance with Section
3.3; amounts payable for special services pursuant to Section 3.5; the
Landlord's share of any sublease or assignment proceeds pursuant to Section 6.8.
"Annual Fixed Rent" - See Exhibit A, and Sections 2.5 and 3.1.
"Building" means The Hill Building located at 1 Hampshire Street,
Cambridge, Massachusetts in which the Premises are located.
"Commencement Date" - See Exhibit A.
"Common Building Areas" means those portions of the Building which are not
part of the Premises and to which the Tenant has appurtenant rights pursuant to
Section 2.2.
"External Causes" means collectively, (i) Acts of God, war, civil
commotion, fire, flood or other casualty, strikes or other extraordinary labor
difficulties, shortages of labor or materials or equipment in the ordinary
course of trade, government order or regulations or other cause not reasonably
within the Landlord's control and not due to the fault or neglect of the
Landlord, and (ii)
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any act, failure to act or neglect of the Tenant or the Tenant's servants,
agents, employees, licensees or any person claiming by, through or under the
Tenant, which in either case causes delays encountered by the Landlord in the
performance of any act required to be performed by the Landlord under this Lease
which are reasonably attributable thereto.
"Land" means the parcel of land owned by Landlord upon which the Building
is located.
"Landlord's Original Address" - See Exhibit A.
"Lease Year" means each period of one year during the Term commencing on
the Rent Commencement Date or on any anniversary thereof.
"Permitted Uses" - See Exhibit A.
"Premises" means that portion of the Building which the Tenant is leasing
at any given time pursuant to the provisions of this Lease. See Exhibit A and
Section 2.1.
"Property" means the Land and the Building.
"Tenant's Initial Improvements Monthly Amortization Amount" means the
quotient of (i) the unamortized cost of Tenant's Initial Improvements amortized
on a straight line basis over the Term at a rate of seven percent (7%) per
annum, divided by (ii) the number of months remaining in the unexpired Term
(including any partial month).
"Tenant's Original Address" - See Exhibit A.
"Term" - See Exhibit A.
2. Premises and Term
2.1 Premises. The Landlord hereby leases to the Tenant, and the Tenant
hereby leases from the Landlord, for the Term, the Premises. The Premises shall
exclude the entry and main lobby of the Building, first floor elevator lobby,
the common stairways and stairwells, elevators and elevator wells, sprinklers,
mechanical rooms, loading and receiving areas, electric and telephone closets,
janitor closets, and pipes, ducts, conduits, wires and appurtenant fixtures and
equipment
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serving exclusively or in common other parts of the Building. If the Premises at
any time includes less than the entire rentable floor area of any floor of the
Building, the Premises shall also exclude the common corridors, vestibules,
elevator lobby and toilets located on such floor. The Tenant acknowledges that,
except as expressly set forth in this Lease, there have been no representations
or warranties made by or on behalf of the Landlord with respect to the Premises,
the Building or the Property or with respect to the suitability of any of them
for the conduct of the Tenant's activities. The Tenant acknowledges that the
Landlord is not obligated to provide any modifications to the Premises and that
the Tenant is taking the Premises in its "as is" condition. The taking of
possession of the Premises by the Tenant shall conclusively establish that the
Premises and the Building were at such time in satisfactory condition, order and
repair.
2.2 Appurtenant Rights. The Tenant shall have, as appurtenant to the
Premises, the nonexclusive right to use in common with others, subject to
reasonable rules of general applicability to occupants of the Building from time
to time made by the Landlord of which the Tenant is given notice: (i) the front
and rear entries and main lobby of the Building, two designated elevators, the
common stairways, mechanical rooms, electric and telephone closets and the
pipes, sprinklers, ducts, conduits, wires and appurtenant fixtures and equipment
serving the Premises in common with others, (ii) common walkways and driveways
necessary or reasonably convenient for access to the Building, (iii) access to
loading area and freight elevator with prior notice to the Landlord and subject
to rules and regulations then in effect, and (iv) if the Premises at any time
include less than the entire rentable floor area of any floor, the common
toilets, corridors, and elevator lobby of such floor. Subject to the provisions
of Section 5.3, Tenant shall have elevator access to the Premises at all times
during the Term, provided that Landlord may limit the number of elevators to be
in operation at times other than during customary business hours for the
Building.
2.3 Landlord's Reservations. The Landlord reserves the right from time to
time, without unreasonable interference with the Tenant's use: (i) to install,
use, maintain, repair, replace and relocate for service to the
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Premises and other parts of the Building, or either, pipes, ducts, conduits,
wires, chases, shafts, flues and appurtenant fixtures and equipment, wherever
located in the Premises or the Building, and (ii) to alter or relocate any
common facility, provided that substitutions are substantially equivalent or
better. In the event that Landlord's exercise of its rights under this Section
2.3 results in a material reduction in the usable area of the Premises, the
Annual Fixed Rent and the Rentable Floor Area of the Premises shall be adjusted
in proportion to the area of the Premises that Tenant can no longer use for the
conduct of its business; provided, however, that (i) Landlord's exercise of its
rights under this Section 2.3 shall not result in a reduction in the usable area
of the Premises in excess of one hundred (100) square feet, and (ii) the
location of any such reduction shall be subject to Tenant's reasonable approval.
2.4 Parking. The Landlord shall provide and the Tenant shall pay for
parking privileges for use by the Tenant's employees and business invitees and
visitors in accordance with Exhibit A. The Landlord shall have the right to
designate from time to time, and to change from time to time, the location on
the Land that shall be used for the parking of the Tenant's automobiles. The
Tenant's parking privileges will be on a nonexclusive basis. The Tenant agrees
that it and all persons claiming by, through and under it, shall at all times
abide by the reasonable rules and regulations promulgated by the Landlord with
respect to the use of the parking area provided by the Landlord pursuant to this
Lease, provided that the same rules apply to all tenants of the Building.
The Tenant shall pay to the Landlord for the Tenant's parking privileges
the monthly rent as provided in Exhibit A.
3. Rent and Other Payments
3.1 Annual Fixed Rent. Subject to the last paragraph of this Section 3.1,
from and after the Rent Commencement Date, the Tenant shall pay, without notice
or demand, monthly installments of one-twelfth (1/12th) of the Annual Fixed Rent
in effect and applicable to the Premises in advance for each full calendar month
of the Term and of the corresponding fraction of said one-twelfth (1/12th) for
any fraction of a calendar month at
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the beginning or end of the Term. The Annual Fixed Rent applicable to the
Premises during the Term shall be as set forth in Exhibit A.
Notwithstanding anything to the contrary set forth in Exhibit A, the
Annual Fixed Rent set forth therein is based upon the understanding that Tenant
shall not use or occupy that portion of the Premises containing approximately
9,797 square feet of Rentable Floor Area (the "Second Year Space") identified by
cross-hatching on Exhibit A-1 prior to the beginning of the second (2nd) Lease
Year. If Tenant uses or occupies the Second Year Space prior to the commencement
of the second (2nd) Lease Year, the Annual Fixed Rent in effect and applicable
to the Premises for the portion of the first (1st) Lease Year occurring from and
after the date of such use or occupancy shall be increased to the amount
applicable with respect to the second (2nd) Lease Year. Tenant shall immediately
deliver to Landlord written notice informing Landlord of Tenant's use or
occupancy of the Second Year Space. Tenant's performance of Tenant's Initial
Improvements (as hereinafter defined) in the Second Year Space, without
additional use or occupancy by Tenant, shall not be deemed "use" or "occupancy"
for purposes of determining Annual Fixed Rent pursuant to this Section 3.1.
The Annual Fixed Rent payable hereunder shall be abated for the period
beginning on the Rent Commencement Date and ending on the date that is six (6)
months following the Rent Commencement Date (the "Rent Abatement Period").
3.2 Real Estate Taxes. From and after the Rent Commencement Date, during
the Term, the Tenant shall pay to the Landlord, as Additional Rent, the Tenant's
Tax Expenses Allocable to the Premises (as such term is hereinafter defined), in
accordance with this Section 3.2. The terms used in this Section 3.2 are defined
as follows:
(a) "Tax Year" means the 12-month period beginning July 1 each year
or, if the appropriate governmental tax fiscal period shall begin on any date
other than July 1, such other date.
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(b) "The Tenant's Tax Expense Allocable to the Premises" means that
portion of the Landlord's Tax Expenses for a Tax year which bears the same
proportion thereto as the Rentable Floor Area of the Premises (from time to
time) bears to the Total Rentable Floor Area of the Building. In the event that
the Premises are improved to a standard which is higher than other portions of
the Property, the Tenant's Tax Expense allocable to the Premises shall include
such portion of the Real Estate Taxes on the Property with respect to any Tax
Year as is appropriate so that the Tenant bears the portion of the Real Estate
Taxes which are properly allocable to the Premises, as reasonably determined by
Landlord based on information with respect to the assessment process made
available by the assessing authorities; provided, however, that Landlord shall
make a similar allocation of Real Estate Taxes with regard to other tenants
whose premises are improved to a standard which is higher than other portions of
the Property so that Tenant is not allocated any portion of such Real Estate
Taxes.
(c) "The Landlord's Tax Expenses" with respect to any Tax Year means
the aggregate Real Estate Taxes on the Property with respect to that Tax Year,
reduced by any abatement receipts with respect to that Tax Year.
(d) "Real Estate Taxes" means all taxes and special assessments of
every kind and nature assessed by any governmental authority on the applicable
property and reasonable expenses of any proceedings for abatement of such taxes
including appeals thereof. The amount of special taxes or special assessments to
be included shall be limited to the amount of the installment (plus any interest
thereon) of such special tax or special assessment (which shall be payable over
the longest period permitted by law) required to be paid during the Tax Year in
respect of which such taxes are being determined. There shall be excluded from
such taxes all income, estate, succession, inheritance, excess profit, franchise
and transfer taxes; provided, however, that if at any time during the Term the
present system of ad valorem taxation of real property shall be changed so that
in lieu of the whole or any part of the ad valorem tax on real property, there
shall be assessed on the Landlord a capital levy or other tax on the gross rents
received with respect to the Property, or a Federal, State, Coun-
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ty, Municipal, or other local income, franchise, excise or similar tax,
assessment, levy or charge (distinct from any now in effect) based, in whole or
in part, upon any such gross rents, then any and all of such taxes, assessments,
levies or charges, to the extent so based, shall be deemed to be included within
the term "Real Estate Taxes."
Payments by the Tenant on account of the Tenant's Tax Expenses Allocable
to the Premises shall be made monthly at the time and in the fashion herein
provided for the payment of Annual Fixed Rent and shall be in an amount equal to
one-twelfth (1/12) of the Tenant's Tax Expenses Allocable to the Premises for
the current Tax Year as reasonably estimated by the Landlord.
Not later than ninety (90) days after the Landlord's Tax Expenses are
determinable for the first Tax Year of the Term or fraction thereof and for each
succeeding Tax Year or fraction thereof during the Term, the Landlord shall
render the Tenant a statement in reasonable detail showing for the preceding
year or fraction thereof, as the case may be, real estate taxes on the Property,
and any abatements or refunds of such taxes, together with copies of the
applicable tax bills. Expenses incurred in obtaining any tax abatement or refund
may be charged against such tax abatement or refund before the adjustments are
made for the Tax Year. If at the time such statement is rendered it is
determined with respect to any Tax Year, that the Tenant has paid (i) less than
the Tenant's Tax Expenses Allocable to the Premises or (ii) more than the
Tenant's Tax Expenses Allocable to the Premises, then, in the case of (i) the
Tenant shall pay to the Landlord, as Additional Rent, within thirty (30) days of
such statement the amount of such underpayment and, in the case of (ii) the
Landlord shall credit the amount of such overpayment against the monthly
installments of the Tenant's Tax Expenses Allocable to the Premises and the
Annual Fixed Rent next thereafter coming due (or refund such overpayment if the
Term has expired and the Tenant has no further obligation to the Landlord).
To the extent that real estate taxes shall be payable to the taxing
authority in installments with respect to periods less than a Tax Year, the
statement to be furnished by the Landlord shall be rendered and payments
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made on account of such installments. Notwithstanding the foregoing provisions,
no decrease in Landlord's Tax Expenses with respect to any Tax Year shall result
in a reduction of the amount otherwise payable by Tenant if and to the extent
said decrease is attributable to vacancies in the Building, rather than to a
reduction in the assessed value of the Property as a whole or a reduction in the
tax rate. Landlord shall, upon Tenant's request therefor, provide Tenant with
copies of all applicable tax bills, statements, records and the like, as well as
copies of Landlord's calculations and all other relevant information.
3.3 Operating Expenses. From and after the Rent Commencement Date, during
the Term the Tenant shall pay to the Landlord, as Additional Rent, the Tenant's
Operating Expenses Allocable to the Premises, as hereinafter defined, in
accordance with this Section 3.3. The terms used in this Section 3.3 are defined
as follows:
(a) "The Tenant's Operating Expenses Allocable to the Premises"
means that portion of the Operating Expenses for the Property which bears the
same proportion thereto as the Rentable Floor Area of the Premises (from time to
time) bears to the Total Rentable Floor Area of the Building.
(b) "Operating Expenses for the Property" means Landlord's cost of
operating, cleaning, maintaining and repairing the Property, the parking areas
for tenants in the Building and the roads, driveways and walkways for providing
access to the Building and such parking areas and shall include without
limitation, the cost of services on Exhibit B except as expressly excluded
hereunder, the cost of custodial services on Exhibit E, premiums for property,
liability and such other insurance as Landlord may carry with respect to the
Property; the amount of any commercially reasonable deductible from any
insurance claim of the Landlord; compensation and all fringe benefits, worker's
compensation insurance premiums and payroll taxes paid to, for or with respect
to all persons directly engaged in the operating, maintaining or cleaning of the
Property and such parking facilities at or below the level of building manager;
cost of steam, water, sewer, gas, oil, electricity, telephone and other utility
charges (excluding such utility charges either separately metered or separately
chargeable to tenants
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for additional or special services); cost of providing HVAC; cost of building
and cleaning supplies; rental costs for equipment used in the operating,
cleaning, maintaining or repairing of the Property, or the applicable fair
market rental charges in the case of equipment owned by the Landlord, provided
that (i) if such equipment is also used at locations other than the Property, an
appropriate allocation of fair market rental charges is made, and (ii) Landlord
shall not recover from tenants of the Property an amount in excess of Landlord's
cost to purchase such equipment, which cost shall be amortized in accordance
with generally accepted accounting principles, together with interest on the
unamortized balance at the base lending rate announced by a major commercial
bank designated by the Landlord; cost of cleaning; cost of maintenance, repairs
and replacements; cost of snow removal; cost of landscape maintenance; security
services; payments under service contracts with independent contracts; the cost
of any capital improvement made for the purpose of reducing operating expenses
or to comply with applicable law, which cost shall be amortized in accordance
with generally accepted accounting principles, together with interest on the
unamortized balance at the base lending rate announced by a major commercial
bank designated by the Landlord, provided that the cost of any such improvements
made for the purpose of reducing operating expenses includable as Operating
Expenses for the Property in any given year shall be limited to the extent of
Landlord's reasonable estimate of the savings realized in such year; and all
other reasonable and necessary expenses paid in connection with the operation,
cleaning, maintenance and repair of the Property. Any of the Operating Expenses
for the Property that vary with occupancy and that are attributable to any part
of the Term will be adjusted by Landlord to the amount that Landlord reasonably
believes they would have been if the Building had been fully occupied. Operating
Expenses for the Property shall not include the following: the Landlord's Tax
Expense; cost of repairs or replacements (i) resulting from eminent domain
takings, (ii) to the extent reimbursed by insurance, or (iii) required, above
and beyond ordinary periodic maintenance, to maintain in serviceable condition
the major structural elements of the Building, including the roof, exterior
walls and floor slabs; replacement or contingency reserves; the cost of capital
improvements (other than as specifically provided for above); payment of any
debt obligations
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(other than as specifically provided for above); legal and other professional
fees for matters not relating to the normal administration and operation of the
Property; promotional, advertising, public relations or brokerage fees and
commissions paid in connection with services rendered for securing or renewing
leases; security services; transfer, gains, franchise, inheritance, estate and
income taxes imposed upon Landlord; the cost of installations and decorations
incurred in connection with preparing space for tenants, and any other
contribution by Landlord to the cost of tenant improvements; salaries, fringe
benefits, and other compensation of Landlord's personnel above the grade of
building manager; costs for which Landlord receives compensation through the
proceeds of insurance; ground rent, if any, or any other payments under any
superior lease; costs of furnishing services to any individual tenant of the
Building to the extent the same exceeds the services provided to Tenant
hereunder without additional charge to Tenant; costs incurred with respect to a
sale of all or any portion of the Property; advertising and promotional
expenses; financing and refinancing costs (other than as a component of the
amortization of certain capital expenses as specifically provided for above);
amounts otherwise includable in Operating Expenses for the Property but
reimbursed to Landlord directly by Tenant or other tenants; costs and expenses
paid to a corporation, entity or person related to Landlord to the extent that
such costs and expenses exceed the commercially competitive costs and expenses
for similar materials and services that would be charged in the absence of such
relationship; lease takeover costs incurred by Landlord in connection with
leases in the Building; to the extent that any costs includable in Operating
Expenses for the Property are incurred with respect to the Property and other
locations (including, without limitation, salaries, fringe benefits and other
compensation of Landlord's personnel who provide services to both the Property
and other locations), the reasonable percentage thereof which is properly
allocable to such other locations, the cost of any judgment, settlement or
arbitration award resulting from any liability of Landlord (other than a
liability or amounts otherwise includable in Operating Expenses for the Property
hereunder); costs relating to withdrawal, liability or unfunded pension
liability under the Multi-Employer Pension Plan
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Act or similar law; the cost of installing, operating and maintaining any
specialty facility (such as an observatory, broadcasting facility, luncheon
club, athletic or recreational club, cafeteria or dining facility); any interest
or penalty charges incurred by Landlord due to the violation of any law, except
to the extent caused by the default of Tenant hereunder; any compensation paid
to clerks, attendants or other persons in commercial concession operated by
Landlord; costs for acquiring or renting works of fine, investment grade
sculpture, paintings or other objects of art, provided that non-investment grade
objects of art purchase primarily to decorate the Property and costs of
maintaining any art shall be included in Operating Expenses for the Property.
Nothing contained in this Section 3.3 shall permit Landlord to include duplicate
charges in Operation Expenses. Payments by the Tenants on account of the
Tenant's Operating Expenses Charge shall be made monthly at the time and in the
fashion herein provided for the payment of Annual Fixed Rent. The amount so to
be paid to the Landlord shall be an amount from time to time reasonably
estimated by the Landlord to be sufficient to aggregate a sum equal to the
Tenant's Operating Expenses Charge for each calendar year; provided that
Landlord shall deliver to Tenant notice of such estimated amount accompanied by
a statement showing Landlord's estimated expenses.
Not later than ninety (90) days after the end of each calendar year or
fraction thereof during the Term or fraction thereof at the end of the Term, the
Landlord shall render the Tenant a statement in reasonable detail and according
to usual accounting practices certified by a representative of the Landlord,
showing for the preceding calendar year or fraction thereof, as the case may be,
the Operating Expenses for the Property and the Tenant's Operating Expenses
Allocable to the Premises. Said statement to be rendered to the Tenant also
shall show for the preceding calendar year or fraction thereof, as the case may
be, the amounts of Operating Expenses already paid by the Tenant. If at the time
such statement is rendered it is determined with resect to any calendar year,
that the Tenant has paid (i) less than the Tenant's Operating Expenses Allocable
to the Premises or (ii) more than the Tenant's Operating Expenses Allocable to
the Premises, then, in the case of (i) the Tenant shall pay to the Landlord, as
Additional Rent, within thirty (30)
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days of such statement the amounts of such underpayment and, in the case of (ii)
the Landlord shall credit the amount of such overpayment against the monthly
installments of the Tenant's Operating Expenses Allocable to the Premises and
the Annual Fixed Rent next thereafter coming due (or refund such overpayment if
the Term has expired and the Tenant has no further obligation to the Landlord).
3.4 Inspection and Audit. Upon not less than fifteen (15) days prior
notice to Landlord, but not more frequently than once each calendar year, Tenant
shall have the right to inspect and/or audit Landlord's books and records with
respect to any of the charges of Additional Rent, including the Real Estate
Taxes and the Operating Expenses for the Property, with respect to the
immediately preceding calendar year. In the event the inspection or audit
reveals no overstatement in the charges paid by Tenant, Tenant shall reimburse
Landlord for any out-of-pocket costs which Landlord incurs in connection with
obtaining the services of professionals to respond to Tenant's requests for
information and/or explanation in connection with such inspection or audit,
within thirty (30) days after notice form Landlord. The inspection or audit
shall be performed at Landlord's office. In the event Tenant, after completion
of such audit or inspection, shall dispute the correctness of Landlord's Annual
Statement of Operating Expenses for the Property in accordance with the terms of
this Lease, Tenant shall notify Landlord of such dispute on or before the date
which is twelve (12) months following the last day of the calendar year with
respect to which such expenses relate, specifying the particular respects in
which such statement is allegedly incorrect. In the event the inspection or
audit reveals that Tenant has paid more than Tenant's Tax Expense Allocable to
the Premises or Tenant's Operating Expenses allocable to the Premises, Landlord
shall credit the amount of such over-payment against the monthly installments of
Rent next thereafter coming due (or refund such overpayment if the Term has
expired and Tenant has no further obligation to Landlord).
3.5 Electricity. Electrical energy to the extent required for lighting and
electrical facilities, equipment, machinery, fixtures and appliances
substantially equivalent to the lighting and electrical facilities,
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equipment, machinery, fixtures and appliances of Landlord in the space in the
Building occupied by Landlord, and the space occupied by Landlord in neighboring
buildings, shall be provided to the Premises and Tenant shall pay, as Additional
Rent, the share of electrical energy charges paid by Landlord to the electric
utility which is allocable to the Premises. The electric energy required to
operate the air-handling units serving Tenants laboratories, to be constructed
as part of Tenant's Initial Work (including the exhaust system and system for
re-heat of make-up air), and any other mechanical equipment which may be
installed in the Premises by Tenant from time to time which consumes
significantly more electric energy than the mechanical equipment currently
contained therein, shall be separately check-metered and the cost of such
electric energy shall be payable by Tenant to Landlord as Additional Rent. In
the event that, after the date hereof, Landlord undertakes alterations or
additions to any space occupied by Landlord which includes the installation of
mechanical equipment which consumes significantly more electric energy than the
mechanical equipment currently contained therein, Landlord shall reasonably
allocate the increased electrical energy costs associated with such equipment
and exclude such cost from the aggregate energy expense proportionately
allocated to Tenant; provided, however, that the provisions of this sentence
shall not apply to any equipment installed as a replacement for existing
equipment.
3.6 Other Utility Charges. During the Term, the Tenant shall pay directly
to the provider of the service, all separately metered charges for steam, heat,
gas, electricity, fuel and other services and utilities furnished to the
Premises.
3.7 Above-Standard Services. If the Tenant requests and the Landlord
elects to provide any services to the Tenant in addition to those described in
Exhibit B, the Tenant shall pay to the Landlord, as Additional Rent, the amount
billed by Landlord for such services at Landlord's standard rates as from time
to time in effect. If Tenant has requested that such services be provided on a
regular basis, Tenant shall, if requested by Landlord, pay for such services at
the time and in the fashion in which Annual Fixed Rent under this Lease is
payable. Otherwise, Tenant shall pay for such additional services within thirty
(30) days after receipt of an invoice from
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Landlord. Landlord shall have the right, at its election, to survey Tenant's
electricity usage in the Premises and/or install a check meter therein, in
either case at Tenant's expense, for purposes of monitoring above-standard
electricity usage. Tenant shall pay for such work within thirty (30) days after
receipt of an invoice from Landlord.
3.8 No Offsets. Annual Fixed Rent and Additional Rent shall be paid by the
Tenant without offset, abatement or deduction.
3.9 Security Services. During the Term and any extension thereof, the
Tenant shall pay Six Thousand Six Hundred Dollars ($6,600.00) per year for the
Security Services described on Exhibit B.
3.10 Net Lease. It is understood and agreed that this Lease is a Net Lease
and that the Annual Fixed Rent is absolutely net to Landlord, accepting only
Landlord's obligation to pay any debt service or ground rent on the Property, to
provide Landlord's services, and to pay the real estate taxes and operating
expenses which Tenant is not required to pay under this Lease.
4. Alterations.
4.1 Consent Required for Tenant's Alterations. The Tenant shall not make
alterations or additions to the Premises except in accordance with the building
standards from time to time in effect, with construction rules and regulations
from time to time promulgated by Landlord and applicable to Tenants in the
Building, and with plans and specifications therefor first approved by the
Landlord, which approval shall not be withheld unreasonably; provided, however,
that such alterations do not change the character of the Premises as laboratory
space, subject to the provisions of Section 11.10 with respect to Secured
Property (as hereinafter defined). The Landlord shall not be deemed unreasonable
for withholding approval of any alterations or additions which (i) might
adversely affect any structural element of the Building, (ii) involves or might
affect the roof of the Building (subject, however, to Section 4.7), any area or
element outside of the Premises, or any facility serving any area of the
Building outside of the Premises or any publicly accessible major interior
features of the Building, or (iii)
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will require unusual expense to readapt the Premises to normal use unless the
Tenant first gives assurance acceptable to the Landlord that such readaptation
will be made prior to such termination without expense to the Landlord, in each
case as reasonably determined by the Landlord. Notwithstanding the foregoing,
Tenant may, without the prior written consent of Landlord, install or replace
wall coverings or floor coverings and otherwise decorate the Premises.
4.2 Ownership of Alternations. All alterations and additions ("Leasehold
Improvements") shall be part of the Building and owned by the Landlord, and
unless at the time of granting its consent therefor the Landlord shall specify
that the same must be removed, such Leasehold Improvements may not be removed
from the Premises without Landlord's written consent, which may be withheld in
Landlord's sole discretion. Nothing in the preceding sentence is intended to
derogate from Tenant's right to make alterations to the Premises as contemplated
under Section 4.1. The movable equipment and furnishings not attached to the
Premises, which are specified on Exhibit D-1, shall remain the property of the
Tenant and shall be removed by the Tenant upon termination or expiration of this
Lease. Tenant shall, in connection with removing any Leasehold Improvements or
personal property from the Premises which Tenant is permitted or required to
remove, repair any damage or injury caused by such removal.
4.3 Construction Requirements for Alterations. All construction work by
the Tenant shall be done in a good and workmanlike manner employing only good
materials and in compliance with all applicable laws and all lawful ordinances,
regulations and orders of Governmental authority and insurers of the Building.
The Landlord or Landlord's authorized agent may (but without any implied
obligation to do so) inspect the work of the Tenant at reasonable times and
shall give notice of observed defects. All of the Tenant's alterations and
additions and installation of furnishings shall be coordinated with any work
being performed by the Landlord and in such manner as to maintain harmonious
labor relations and not to damage the Building or interfere with Building
construction or operation and, except for installation of furnishings, shall be
performed by contractors or workmen first approved by the Landlord, which
approval the Landlord agrees not to unreasonably withhold or delay. The
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Tenant, before starting any work, shall receive and comply with Landlord's
construction rules and regulations and shall cause Tenant's contractors to
comply therewith, shall secure all licenses and permits necessary therefor and
shall deliver to the Landlord a statement of the names of all its contractors
and subcontractors and the estimated cost of all labor and material to be
furnished by them and, in the event the cost of such alterations (excluding
decorations) shall exceed two hundred fifty thousand dollars ($250,000.00),
security satisfactory to the Landlord protecting the Landlord against liens
arising out of the furnishing of such labor and material; and cause each
contractor to carry worker's compensation insurance in statutory amounts
covering all the contractors' and subcontractors' employees and comprehensive
general public liability insurance with such limits as the Landlord may require
reasonably, but in no event less than $1,000,000 (individual)/$3,000,000
(occurrence) or in such other amounts as Landlord may reasonably require
covering personal injury and death and property damage (all such insurance to be
written in companies approved reasonably by the Landlord and insuring the
Landlord, such individuals and entities affiliated with the Landlord as the
Landlord may designate, and the Tenant as well as the contractors and to contain
a requirement for at least thirty (30) days' notice to the Landlord prior to
cancellation, nonrenewal or material change), and to deliver to the Landlord
certificates of all such insurance.
4.4 Payment for Tenant Alterations. The Tenant agrees to pay promptly when
due the entire cost of any work done on the Premises by the Tenant, its agents,
employees or independent contractors, and not to cause or permit any liens for
labor or materials performed or furnished in connection therewith to attach to
the Premises or the Property and promptly to discharge any such liens which may
so attach. If any such lien shall be filed against the Premises or the Property
and the Tenant shall fail to cause such lien to be discharged within thirty (30)
days after Tenant has notice of the filing thereof, the Landlord may cause such
lien to be discharged by payment, bond or otherwise, without investigation as to
the validity thereof or as to any offsets or defenses which the Tenant may have
with respect to the amount claimed; provided, however, that in the event
Landlord is in the process of selling, or obtaining a
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loan secured in whole or in part by, the Property, Tenant shall be obligated to
cause such lien to be discharged within twenty (20) days after Tenant has notice
thereof. The Tenant shall reimburse the Landlord, as additional rent, for any
cost so incurred and shall indemnify and hold harmless the Landlord from and
against any and all claims, costs, damages, liabilities and expenses (including
attorneys' fees) which may be incurred or suffered by the Landlord by reason of
any such lien or its discharge.
4.5 Tenant's Initial Improvements. (a) Tenant shall, at Tenant's sole cost
and expense, make certain alterations and additions to the Premises, as more
particularly described in the scope of work attached as Exhibit D ("Tenant's
Initial Improvements"). Notwithstanding anything to the contrary contained
herein, Tenant's Initial Improvement shall include the construction of two (2)
mechanical and electrical rooms with all mechanical and electrical components
(including, without limitation, fans and air handling units) required for
Tenant's contemplated use of the Premises (including the Second Year Space);
provided, however, that the VAV boxes and other distribution and control
components necessary to distribute service to the Second Year Space need not be
included in Tenant's Initial Improvements. Tenant's Initial Improvements shall
be performed, in all respects, in accordance with Article 4 hereof. Tenant
agrees that Tenant's Initial Improvements will be performed in a manner so as to
minimize the disturbance to the occupants of other parts of the Building;
provided, however, that Tenant shall not be required to perform such work on an
overtime basis unless such work is to be performed in space occupied by another
tenant of the Building or Landlord, in which event such work shall be performed
on an overtime basis unless such other tenant or Landlord agrees with Tenant in
writing that Tenant may perform the required work during ordinary business
hours. Tenant shall use commercially reasonable efforts to complete Tenant's
Initial Improvements on or before September 15, 1994.
It is understood that of the services to be furnished by Landlord
referred to in Section 5.1 and Exhibit B hereof, Landlord shall not furnish any
cleaning services until Tenant commences occupancy of the Premises (exclusive of
the Second Year Space) for the conduct of its business. Tenant shall be
responsible for removal of
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Tenant's refuse and rubbish during the period that Tenant's Initial Improvements
are in progress in the Premises.
(b) Tenant, at Tenant's expense, shall cause an architect approved
in writing by Landlord, which approval Landlord shall not unreasonably withhold
(the "Architect"), to prepare a set of plans, specifications and working
drawings (the "Plans and Specifications") for Tenant's Initial Improvements. As
used herein, the term "Plans and Specifications" shall include the MEP Plans and
Specifications (as hereinafter defined). Tenant shall also obtain Landlord's
prior written approval of any engineer who prepares engineering plans and
specifications comprising a portion of the Plans and Specifications, which
approval shall not be unreasonably withheld.
Landlord and Tenant hereby acknowledge that Tenant shall perform Tenant's
Initial Improvements on a so-called "fast-track" basis, whereby certain items of
construction shall be commenced before all Plans and Specifications have been
finalized. Notwithstanding the foregoing, the Plans and Specifications for the
mechanical, electrical and plumbing components of Tenant's Initial Improvements
(the "MEP Plans and Specifications") shall be submitted by Tenant to Landlord on
or prior to the date occurring forty-five (45) days form the date hereof for
Landlord's review. The MEP Plans and Specifications must be approved by Landlord
in writing prior to Tenant's commencement of Tenant's Initial Improvements
except for any demolition of the existing Leasehold Improvements. After the MEP
Plans and Specifications have been approved by Landlord, Tenant will, during the
course of construction, furnish Landlord with all other Plans and Specifications
as the same are prepared.
Tenant shall reimburse Landlord, within ten (10) days of demand, for any
out-of-pocket costs and expenses incurred by Landlord in connection with
Landlord's review of the Plans and Specifications. Tenants shall make such
changes to the Plans and Specifications as Landlord reasonably requires and
Tenant shall not commence the performance of any portion of Tenant's Initial
Improvements prior to obtaining Landlord's prior written approval of the Plans
and Specifications relating thereto, which shall not be unreasonably withheld.
Landlord's failure to either approve, reject or request additional
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information regarding the Plans and Specification submitted by Tenant within
fifteen (15) days from Landlord's receipt thereof shall be deemed to be
Landlord's approval of said Plans and Specification. Any rejection by Landlord
shall be in writing, shall specify the reasons for such rejection and shall
outline the required modifications thereto which would render said Plans and
Specifications acceptable. After Landlord has approved Plans and Specifications,
Tenant shall promptly and diligently perform the Tenant's Initial Improvements
in accordance with such approved Plans and Specifications, and pursue said work
to completion. Tenant shall thereafter resubmit any modifications of or
additions to the approved Plans and Specifications for Landlord's approval,
which approval shall not be unreasonably withheld.
(c) Landlord shall not be deemed unreasonable for withholding
approval of any portion of the Plans and Specifications for Tenant's Initial
Improvements which (i) might materially adversely affect any structural element
of the Building, or (ii) involves or might affect the roof of the Building
(subject, however, to Section 4.7), any area or element outside of the Premises,
or any facility serving any area of the Building outside of the Premises or any
publicly accessible major interior features of the Building. Notwithstanding the
foregoing, Landlord acknowledges that nothing described in the scope of the work
set forth in Exhibit D presents grounds for Landlord's withholding approval on
the basis of any of clauses (i) or (ii) above, provided the same conforms to a
typical first-class laboratory build-out, consistent with similar facilities in
the metropolitan Boston area.
4.6 Security for Performance of Tenant's Initial Improvements.
(a) Prior to commencing the performance of Tenant's Initial
Improvements, or any demolition of the existing Leasehold Improvements, Tenant
shall deposit with Landlord as security for Tenant's timely performance and
completion of Tenant's Initial Improvements, a sum of money equal to the product
of (i) Eighty Dollars ($80.00), multiplied by (ii) the number of rentable square
feet of the Premises (in no event less than 15,000 rentable square feet) which
shall be improved by Tenant in connection with Tenant's Initial Improvements
(the
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"Construction Security Deposit"). The Construction Security Deposit shall be
held by Landlord and disbursed or used in accordance with this Section 4.6. In
the event that either any Budget (as defined below) estimates the cost to
complete Tenant's Initial Improvements to be greater than the amount of the
Construction Security Deposit then held by Landlord, Tenant shall deposit with
Landlord additional sums such that the undisbursed amount of the Construction
Security Deposit will be sufficient, when disbursed to Tenant, to pay all
estimated unpaid costs required to complete Tenant's Initial Improvements,
including the payment of all so-called "soft" costs.
(b) Landlord shall invest the Construction Security Deposit in the
"Bank Account." In this Lease, the term "Bank Account" means a "money-market"
rate account with Bay Bank. Landlord shall have no responsibility for the rate
or amount of any interest earned on the Construction Security Deposit or for the
preservation of the principal of the Construction Security Deposit. All interest
earned on the Construction Security Deposit shall be deemed to be part of the
Construction Security Deposit and shall be held and/or disbursed in the same
manner as the Construction Security Deposit.
(c) Once Tenant has deposited the Construction Security Deposit with
Landlord, Tenant shall be permitted to commence with the demolition work
required to prepare the Premises for Tenant's Initial Improvements. Tenant shall
not, however, commence any construction of Tenant's Initial Improvements, and
Landlord shall not be required to disburse any portion of the Construction
Security Deposit, unless and until Landlord has first received the following
items:
(i) A detailed preliminary budget prepared by Architect representing
Architect's good faith estimate, based on Architect's best professional
judgement, specifying the anticipated costs of construction, fixturing and
equipping Tenant's Initial Improvements, as known to Architect at the time
(a "Budget"), accompanied by a written certification from an officer of
Tenant that, in connection with Architect's preparation of such Budget,
Tenant has provided Architect with all the relevant details of Tenant's
Initial Improvements known to Tenant as of the date of such Budget;
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(ii) A detailed preliminary construction schedule (the "Schedule")
for Tenant's Initial Improvements prepared by Architect, representing
Architect's good faith estimate, based on Architect's best professional
judgement, showing the estimated periods of commencement and completion of
construction of Tenant's Initial Improvements and projected Requisitions
(as hereinafter defined), as known to Architect at the time, accompanied
by a written certification from an officer of Tenant that, in connection
with Architect's preparation of such Schedule, Tenant has provided
Architect with all the relevant details of Tenant's Initial Improvements
known to Tenant as of the date of such schedule;
(iii) A fully-executed contract between Tenant and the Architect, to
perform architectural services in connection with Tenant's Initial
Improvements, which contract contains Architect's agreement to perform
such services for Landlord subsequent to an Event of Default and
termination of the Lease upon the same terms and conditions of Architect's
agreement with Tenant;
(iv) A fully-executed contract between Tenant and Tenant's general
contractor who shall be performing Tenant's Initial Improvements on
Tenant's behalf (the "General Contractor"), to perform contracting
services in connection with Tenant's Initial Improvements, which contract
contains the General Contractor's agreement to perform such services for
Landlord subsequent to an Event of Default and termination of the Lease
upon the same terms and conditions of the General Contractor's agreement
with Tenant;
(v) The approved MEP Plans and Specifications; and
(vi) The building permit and all other permits and approvals
necessary for construction of Tenant's Initial Improvements.
(d) As long as Landlord has not terminated the Lease after an Event
of Default, Landlord shall make disbursements the Construction Security Deposit
to the
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Architect, the General Contractor, any engineer, contractor, subcontractor, or
supplier who has performed work or supplied materials in connection with
Tenant's Initial Improvements upon written Requisition to Landlord by Tenant
directing such disbursement, in installments as Tenant's Initial Improvements
progress. The amount of each installment shall be an amount equal to the actual
cost of Tenant's Initial Improvements completed and in place, less (A) retainage
in the amount of 10% of the value of labor and materials covered by the
Requisition, and (B) the aggregate amount of all sums previously disbursed to
Tenant pursuant to this Section 4.6. Disbursements hereunder shall be made
solely for the payment of expenses properly incurred in the construction of
Tenant's Initial Improvements.
(e) All requisitions for payment of installments of the Construction
Security Deposit ("Requisitions") shall be submitted by Tenant to Landlord at
least fifteen (15) days before the date upon which the installment is desired
from Landlord accompanied by the following:
(i) A request by Tenant to Landlord directing Landlord to pay the
specified architect, engineer, contractor, subcontractor, or supplier the
amount(s) provided therein;
(ii) Copies of invoices and other documents, including a cost
breakdown, to support the amount requested in the Requisition;
(iii) Partial or final lien waivers from any architect, engineer,
contractor, subcontractor, or supplier, or receipts from the same, and any
applicable bills of sale, for work or supplies that were the subject of
any previous Requisition; and
(iv) A revised Budget, dated as of the date of such Requisition,
prepared by Architect, representing Architect's good faith estimate, based
on Architect's best professional judgment, specifying the anticipated
remaining costs of constructing, fixing and equipping Tenant's Initial
Improvements, as known to Architect at the time, accompanied by a written
certification from an officer of Tenant that, in connection with
Architect's preparation of
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such revised Budget, Tenant has provided Architect with all of the
relevant details of Tenant's Initial Improvements known to Tenant as of
the date of such revised Budget.
Any request for any disbursement hereunder shall automatically constitute a
representation by Tenant that all conditions contained herein are then
satisfied, that, to the best of Tenant's knowledge, all Tenant's Initial
Improvements represented by the Requisition have been satisfactory completed in
accordance with Plans and Specifications approved by Landlord, that all checks
for amounts previously delivered by Landlord to Tenant have been paid to the
applicable architect, engineer, contractor, subcontractor, or supplier, and that
the undisbursed amount of the Construction Security Deposit will be sufficient,
when disbursed to Tenant, to pay all unpaid costs required to complete Tenant's
Initial Improvements, including the payment of all non-construction costs, based
upon the most recent revised Budget.
(f) Landlord shall not be required to disburse, and shall be
entitled to withhold, the final installment of the Construction Security
Deposit, representing the ten percent (10%) retainage provided for in subsection
(d), unless and until: (i) Tenant's Initial Improvements are completed to the
satisfaction of Landlord and Landlord receives a certificate from the Architect
that Tenant's Initial Improvements are completed; (ii) the final certificate of
occupancy has been issued by the appropriate governmental authority; (iii)
either (A) Landlord has received final lien waivers from all engineers,
architects, contractors, suppliers and subcontractors who performed services or
supplied materials in connection with Tenant's Initial Improvements, or (B) the
applicable statutory mechanic's or supplier's lien period has expired; and (iv)
Tenant has delivered to Landlord final as-built Plans and Specifications for
Tenant's Initial Improvements.
(g) In the event Landlord has terminated the Lease after an Event of
Default, Landlord shall have the right, without notice to Tenant, to make any
disbursement in whole or in part by payment directly to any engineer, architect,
contractor, subcontractor, or supplier for the account of the Tenant or for its
own account. The execution of this Lease by Tenant shall and hereby does con-
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stitute an irrevocable direction and authorization to so disburse the
Construction Security Deposit. No further direction or authorization from Tenant
shall be necessary to warrant such direct payments and all such disbursement
shall satisfy pro tanto the obligations of the Landlord as fully as if made
directly to a third party pursuant to Tenant's direction contained in a
Requisition or otherwise, regardless of the disposition thereof made by such
architect, engineer, contractor, supplier or subcontractor.
4.7 Use of Roof. Landlord agrees that Tenant may, in connection with
Tenant's Initial Improvements, at Tenant's sole cost and expense, install on the
roof of the Building, and thereafter maintain, repair and operate one (1)
emergency generator, one (1) gas heater, one (1) chiller and exhaust vents, fans
and fan hoods (together with support structures, duct work, electrical lines and
related equipment, the "Roof Equipment"), provided and on condition that: (i)
the size and dimensions of the Roof Equipment as well as the location on the
roof for such installation shall be subject to Landlord's consent which may be
withheld in Landlord's sole discretion, exercised in good faith (provided
further that Landlord shall exercise reasonable judgment as long as the Roof
Equipment occupies no more than four hundred (400) square feet of roof space
designated by Landlord); (ii) no such equipment shall extend higher than the
parapet of the roof of the Building; (iii) the installation and position of such
Roof Equipment shall comply with all laws and legal requirements; (iv) the
installation of the Roof Equipment shall comply with all laws and legal
requirements; and (v) the Roof Equipment shall be maintained and kept in repair
by Tenant, at Tenant's sole cost and expense. Tenant covenants and agrees that
the Roof Equipment to be installed by Tenant shall not interfere with or
adversely affect any equipment, installations, lines or machinery of the
Building or any other tenant of the Building, or access thereto for maintenance,
repair or removal. Tenant shall not be obligated to pay any additional rental on
account of Tenant's use of the roof of the Building pursuant to this Section
4.7.
For the purpose of installing, servicing or repairing the Roof Equipment,
Tenant shall have access to the roof of the Building upon making prior
reasonable request of Landlord. All access by Tenant to the roof of the
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Building shall be subject to the supervision and control of Landlord and to
Landlord's reasonable safeguards relating, without limitation, to the security
and protection of the Building, the Building equipment and installations and
equipment of other tenants of the Building as may be located on the roof of the
Building, and any roof warranty that may be in effect. Landlord shall have the
right to assign an outside consultant to be present during the duration of
Tenant's access to the rooftop and Tenant shall pay the Landlord's out-of-pocket
costs therefor as Additional Rent; provided, however, that in the event Tenant
engages United Engineers for structural engineering services, Tenant shall not
be required to pay any additional charges for Landlord to hire an outside
structural engineer to review and/or supervise such structural engineering work.
Tenant, at Tenant's sole cost and expense, agrees to promptly and
faithfully obey, observe and comply with all laws, ordinances, regulations,
requirements and rules of all duly constituted public authorities in any manner
affecting or relating to Tenant's use of the roof of the Building as to the
installation, repair, maintenance and operation of any Roof Equipment erected or
installed by Tenant pursuant to the provisions of this Section 4.7. Tenant, at
Tenant's sole cost and expense, shall secure and thereafter maintain all permits
and licenses required for the installation and operation of the Roof Equipment
erected or installed by Tenant pursuant to the provisions of this Section 4.7.
Upon the expiration of the Term or upon the earlier termination of this
Lease in any manner, if Landlord so directs by written notice to Tenant, Tenant
shall promptly remove the Roof Equipment as designated in such notice, at
Tenant's sole cost and expense. Tenant, at Tenant's sole cost and expense, shall
promptly repair any and all damage to the roof of the Building and to any other
part of the Building caused by or resulting from the installation, maintenance
and repair, operation or removal of the Roof Equipment erected or installed by
Tenant pursuant to the provisions of this Section 4.7 and restore said affected
areas to their condition as existed prior to the installation of such equipment.
Tenant covenants and agrees that all installations made by Tenant on the
roof of the Building or any other
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part of the Building pursuant to the provisions of this Section 4.7 shall be at
the sole risk of Tenant, and neither Landlord nor Landlord's agent or employees
shall be liable for any damage or injury thereto caused in any manner, unless
the same shall result from the gross negligence or willful misconduct of
Landlord, its agents and employees.
Tenant will, and does hereby, indemnify and save harmless Landlord from
and against any and all claims, costs, demands, expenses, fees or suits arising
out accidents, damage, injury or loss to any and all persons and property, or
either, whomsoever or whatsoever resulting from or arising in connection with
the erection, installation, maintenance and operation and repair of the Roof
Equipment, except to the extent caused by the negligence of Landlord, or its
agents or employees. If any installations are negligently performed or if
Tenant's negligent acts or omissions should revoke, negate or in any manner
impair or limit any roof warranty or guaranty obtained by Landlord, then Tenant
shall reimburse Landlord for any loss or damage sustained or costs or expenses
incurred by Landlord as a result thereof.
Tenant shall not be permitted to assign or transfer all or any portion of
the rights granted to Tenant pursuant to this Section 4.7 unless Tenant assigns
this Lease to the party to whom such rights are assigned or transferred.
5. Responsibility for Condition of Building and Premises.
5.1 Maintenance of Building and Common Areas by Landlord. Except as
otherwise provided in Article 8, the Landlord shall make such repairs to the
structural elements of the Building, including the roof, exterior walls and
floor slabs as may be necessary to keep and maintain the same in serviceable
condition and maintain and make such repairs to the Common Building Areas as may
be necessary to keep them in good order, condition and repair, including without
limitation, the glass in the exterior walls of the Building, and all mechanical
systems and equipment serving the Building and not exclusively serving the
Premises. The Landlord shall further perform the services on Exhibit B hereto.
The Landlord shall in no event be responsible to the Tenant for any
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condition in the Premises or the Building caused by an act or neglect of the
Tenant, or any invitee or contractor of the Tenant. Landlord's costs in
performing such services shall be reimbursed by the Tenant to the extent
provided in Section 3.3.
5.2 Maintenance of Premises by Tenant. The Tenant shall keep neat and
clean and maintain in good order, condition and repair the Premises and every
part thereof and all Building and mechanical equipment exclusively serving the
Premises, reasonable wear and tear excepted and further excepting those repairs
for which the Landlord is responsible pursuant to Section 5.1 and damage by fire
or other casualty and as a consequence of the exercise of the power of eminent
domain and shall surrender the Premises and all alterations and additions
thereto, at the end of the Term, in such condition, first removing all goods and
effects of the Tenant and, to the extent specified by the Landlord by notice to
the Tenant, all alterations and additions made by the Tenant and repairing any
damage caused by such removal and restoring the Premises and leaving them clean
and neat. The Tenant shall not permit or commit any waste, and the Tenant shall
be responsible for the cost of repairs which may be made necessary by reason of
damages to common areas in the Building by the Tenant, or any of the contractors
or invitees of the Tenant.
5.3 Delays in Landlord's Services. The Landlord shall not be liable to the
Tenant for any compensation or reduction of rent by reason of inconvenience or
annoyance or for loss of business arising from the necessity of the Landlord or
its agents entering the Premises for any purposes authorized in this Lease, or
for repairing the Premises or any portion of the Building. In case the Landlord
is prevented or delayed from making any repairs, alterations or improvements, or
furnishing any services or performing any other covenant or duty to be performed
on the Landlord's part, by reason of any External Cause, the Landlord shall not
be liable to the Tenant therefor, nor, except as expressly otherwise provided in
this Lease, shall the Tenant be entitled to any abatement or reduction of rent
by reason thereof, nor shall the same give rise to a claim in the Tenant's favor
that such failure constitutes actual or constructive, total or partial, eviction
from the Premises.
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The Landlord reserves the right to stop any service or utility system when
necessary by reason of accident or emergency, until necessary repairs have been
completed; provided, however, that in each instance of stoppage, the Landlord
shall exercise reasonable diligence to eliminate the cause thereof. Except in
case of emergency repairs, the Landlord will give the Tenant reasonable advance
written notice of any contemplated stoppage and will use reasonable efforts to
avoid unnecessary inconvenience to the Tenant by reason thereof. In no event
shall the Landlord have any liability to the Tenant for the unavailability of
heat, light or any utility or service to be provided by the Landlord to the
extent that such unavailability is caused by External Causes.
6. Tenant Covenants
The Tenant covenants during the Term and for such further time as the
Tenant occupies any part of the Premises:
6.1 Permitted Uses. The Tenant shall occupy the Premises only for the
Permitted Uses, and shall not injure or deface the Premises or the Property, nor
permit in the Premises any auction sale. The Tenant shall give written notice to
the Landlord of any materials on OSHA's right to know list or which are subject
to regulation by any other federal, state, municipal or other governmental
authority and which the Tenant intends to have present at the Premises. The
Tenant shall comply with all requirements of public authorities and of the Board
of Fire Underwriters in connection with methods of storage, use and disposal of
all such materials. The Tenant shall not permit in the Premises any nuisance, or
the emission from the Premises of any objectionable noise, odor or vibration,
nor use or devote the Premises or any part thereof for any purpose which is
contrary to law or ordinance or liable to invalidate or increase premiums
(unless Tenant pays the entire amount of such increase) for any insurance on the
Building or its contents or liable to render necessary any alteration or
addition to the Building, nor commit or permit any waste in or with respect to
the Premises. The Tenant shall not generate, store or dispose of any oil, toxic
substances, hazardous wastes, or hazardous materials (each a, "Hazardous
Material"), or permit the same in or on the Premises or any parking areas
provided for under this Lease, except in compliance
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with all applicable laws relating to such Hazardous Materials. The Tenant shall
not dump, flush or in any way introduce any Hazardous Materials into septic,
sewage or other waste disposal systems serving the Building generally or any
parking areas provided for under this Lease. The Tenant will indemnify the
Landlord and its successors and assigns against all claims, loss, cost, and
expenses including attorneys' fees, incurred as a result of any contamination of
the Property with Hazardous Materials by the Tenant or Tenant's contractors,
licensees, invitees, agents, servants or employees.
6.2 Laws and Regulations. The Tenant, at Tenant's sole cost and expense,
shall comply with all federal, state and local laws, rules, regulations,
ordinances, executive orders, Federal guidelines, and similar requirements in
effect from time to time (collectively "Laws") relating to the use, condition or
occupancy of the Premises (including, without limitation, City of Cambridge
ordinances with respect to animal experiments and hazardous waste and relating
to the Building if necessitated by Tenant's improvements or manner of use
therein. Except to the extent that compliance is Tenant's responsibility
hereunder, Landlord shall be responsible for maintaining the Building in
compliance with Laws to the extent that failure to so maintain the Building
would (i) imminently endanger persons or property, (ii) prevent access to the
Premises, or (iii) prevent Tenant from performing Tenant's Initial Improvements;
provided; however, that Tenant shall be solely responsible for maintaining the
Building in compliance with laws to the extent necessitated by Tenant's Initial
Improvements.
6.3 Rules and Regulations. The Tenant shall not obstruct in any manner any
portion of the Property not hereby leased; shall not permit the placing of any
signs, curtains, blinds, shades, awnings, aerials or flagpoles, or the like,
visible from outside the Premises; and shall comply with all reasonable rules
and regulations of uniform application to all occupants of the Building now or
hereafter made by the Landlord, of which the Tenant has been given notice, for
the care and use of the Property. The Landlord shall not be liable to the Tenant
for the failure of other occupants of the Building to conform to any such rules
and regulations. The initial rules and regulations are set forth in Exhibit C.
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6.4 Safety Compliance. The Tenant shall keep the Premises equipped with
all safety appliances required by law or ordinance or any other regulations of
any public authority because of any non-office use made by the Tenant and to
procure all licenses and permits so required by Laws because of such use and, if
requested by the Landlord, do any work so required because of such use, it being
understood that the foregoing provisions shall not be construed to broaden in
any way the Tenant's Permitted Uses.
6.5 Landlord's Entry. The Tenant shall permit the Landlord and its agents,
after reasonable notice except in the case of emergencies, to enter the Premises
at all reasonable hours for the purpose of inspecting or of making repairs to
the same, monitoring Tenant's compliance with the requirements and restrictions
set forth in this Lease, and for the purpose of showing the Premises to
prospective purchasers and mortgagees at all reasonable times and to prospective
tenants provided that in connection with such entry, Tenant may provide
procedures reasonably designed so as not to jeopardize Tenant's trade secrets,
proprietary technology or critical business operations.
6.6 Floor Load. The Tenant shall not place a load upon any floor in the
Premises exceeding the floor load per square foot of area which such floor was
designed to carry and which is allowed by law; and not move any safe, vault or
other heavy equipment in, about or out of the Premises except in such manner and
at such time as the Landlord shall in each instance authorize. The Tenant's
machines and mechanical equipment shall be placed and maintained by the Tenant
at the Tenant's expense in settings sufficient to absorb or prevent vibration or
noise that may be transmitted to the Building structure or to any other space in
the Building.
6.7 Personal Property Tax. The Tenant shall pay promptly when due all
taxes which may be imposed upon personal property (including, without
limitation, trade fixtures and equipment) in the Premises to whomever assessed.
6.8 Assignment, Subleases or other Transfers. The Tenant shall not assign,
mortgage, pledge, hypothecate or otherwise transfer this Lease or any of
Tenant's
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interest therein, or sublet (which term, without limitation, shall include
granting of concessions, licenses and the like) the whole or any part of the
Premises without, in each instance, having first received the consent of the
Landlord. However, Landlord shall not unreasonably withhold consent to a
proposed assignment of this Lease or sublease of the Premises. Any assignment or
sublease made without such consent shall be void. The Landlord shall not be
deemed to be unreasonable in withholding its consent to any proposed assignment
or subletting by the Tenant based on any of the following factors:
(a) The business of the proposed occupant is not consistent with the
image and character which the Landlord desires to promote for the building.
(b) The proposed assignment or subletting could adversely affect the
ability of the Landlord and its affiliates to lease space in the Building
including leasing other space to any proposed assignee or subtenant.
Whether or not the Landlord consents to any assignment or subletting, the
Tenant named herein shall remain fully and primarily liable for the obligations
of the tenant hereunder, including, without limitation, the obligation to pay
Annual Fixed Rent and Additional Rent provided under this Lease.
The Tenant shall give the Landlord notice of any proposed sublease or
assignment, specifying the provisions of the proposed subletting or assignment,
including (i) the name and address of the proposed subtenant or assignee, (ii) a
copy of the proposed subtenant's or assignee's most recent annual financial
statement, (iii) all of the terms and provisions upon which the proposed
subletting or assignment is to be made and such other information concerning the
proposed subtenant or assignee as the Tenant has obtained in connection with the
proposed subletting or assignment. The Tenant shall reimburse the Landlord
promptly for reasonable legal and other expense incurred by the Landlord in
connection with any request by the Tenant for consent to any assignment or
subletting. If this Lease is assigned, or if the Premises or any part thereof is
sublet or occupied by anyone other than the Tenant, the Landlord may, at any
time and from time to time, collect rent and other charg-
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es from the assignee, sublessee or occupant and apply the net amount collected
to the rent and other charges herein reserved, but no such assignment,
subletting, occupancy or collection shall be deemed a waiver of the prohibitions
contained in this Section 6.8 or the acceptance of the assignee, sublessee or
occupant as a tenant, or a release of the Tenant from the further performance by
the Tenant of covenants on the part of the Tenant herein contained. The Tenant
shall pay to the Landlord any amounts the Tenant receives from any subtenant or
assignee as rent, additional rent or other forms of compensation or
reimbursement other than those which are less than or equal to the then due and
payable proportionate monthly share of Annual Fixed Rent, Additional Rent and
all other monies due to Landlord pursuant to this Lease (allocable in the case
of a sublease to that portion of the Premises being subleased). The consent by
the Landlord to an assignment or subletting shall not be construed to relieve
the Tenant from obtaining the express consent in writing of the Landlord to any
further assignment or subletting.
Without affecting any of its other obligations under this Lease, Tenant
will pay Landlord, as Additional Rent, all sums or other economic consideration
(deducting therefrom all brokerage commissions and legal fees, and deducting on
a monthly basis therefrom the Tenant's Initial Improvements Monthly Amortization
Amount) that (i) in the case of an assignment, are received by Tenant for such
assignment, and (ii) in the case of a subletting, are received by Tenant for
such subletting, whether or not denominated rentals under the sublease, to the
extent the same exceeds the sums which Tenant is obligated to pay Landlord under
this Lease (prorated, if a sublease of less than the entire Rentable Floor Area
of the Premises, on the basis of the portion of the Premises subject to such
sublease). The provisions of this paragraph shall not apply to a transfer to a
Permitted Transferee (as hereinafter defined).
Landlord may elect, within thirty (30) days of receipt of written notice
from Tenant of any proposed assignment or sublease, prior to approving or
disapproving any proposed assignment or sublease, to repossess the space
proposed to be assigned or sublet. Landlord may thereafter lease the repossessed
space in such a manner as the landlord may in its sole discretion determine. In
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the event Landlord elects to repossess the space as provided above, then all of
the Tenant's rights and obligations hereunder with respect to the repossessed
space shall cease and shall be of no further force and effect. The provisions of
this paragraph shall not apply to a transfer to a Permitted Transferee.
The foregoing to the contrary notwithstanding, Tenant shall have the right
to assign this Lease or sublet the entire Premises (but not a portion thereof),
and Landlord shall give its consent to such an assignment or sublease, if the
proposed assignee or subtenant is (each of the following, a "Permitted
Transferee") (i) an entity owning one hundred percent (100%) of Tenant; (ii) an
entity into (or with which) Tenant is merged or consolidated; (iii) an entity
into which substantially all of Tenant's assets are transferred; (iv) an entity
under common control with Tenant; or (v) an entity all of whose ownership
interests shall, at the time, be owned directly by Pharmaceutical Peptides,
Inc., provided that:
(a) such merger, consolidation or transfer of assets is for a good
business purpose and not a device for the transfer of Tenant's interest in this
Lease; and
(b) the affiliate, subsidiary, parent, assignee or successor entity
has a net worth at least equal to the net worth of Tenant immediately prior to
such merger, consolidation or transfer, as evidenced by financial statements
prepared and certified by independent reputable certified public accountants.
In any case where Landlord is required not to unreasonably withhold its
consent, provided Landlord has withheld its consent in good faith, Tenant's sole
remedy shall be injunctive relief.
7. Indemnity and Insurance
7.1 Indemnity. To the maximum extent this agreement may be made effective
according to law, the Tenant agrees to indemnify, defend and save harmless the
Landlord from and against all claims, loss, or damage of whatever nature arising
from any breach by Tenant of any obligation of Tenant under this Lease or from
any act, omission or negligence of the Tenant, or the Tenant's contractors,
licensees, invitees, agents, servants or
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employees, or arising from any accident, injury or damage whatsoever caused to
any person or property, occurring after the date that possession of the Premises
is first delivered to the Tenant and until the end of the Term and thereafter,
so long as the Tenant is in occupancy of any part of the Premises, in or about
the Premises or arising from any accident, injury or damage occurring outside
the Premises but within the Building, on the Land, within any adjacent area
maintained by Landlord or any individual or entity affiliated with Landlord,
where such accident, injury or damage results from an act or omission on the
part of the Tenant or the Tenant's agents or employees, licensees, invitees,
servants or contractors, provided that the foregoing indemnity shall not include
any cost or damage arising from any act, omission or negligence of the Landlord,
or the Landlord's contractors, licensees, invitees, agents, servants or
employees. This indemnity and hold harmless agreement shall include indemnity
against attorneys' fees and all other costs, expenses and liabilities incurred
or in connection with any such claim or proceeding brought thereon, and the
defense thereof.
Throughout the Term, Landlord shall defend and save Tenant harmless and
indemnify Tenant from and against all bodily or personal injury, loss, claims or
damage to any personal property which results from the negligence or wilful
misconduct of Landlord, its employees, agents, or contractors.
7.2 Liability Insurance. The Tenant agrees to maintain in full force from
the date upon which the Tenant first enters the Premises for any reason,
throughout the Term, and thereafter, so long as the Tenant is in occupancy of
any part of the Premises, a policy of comprehensive general liability insurance
under which the Landlord (and any individuals or entities affiliated with the
Landlord, and any holder of a mortgage on the Property of whom the Tenant is
notified by the Landlord) and the Tenant are named as insureds, and under which
the insurer provides a contractual liability endorsement insuring against all
cost, expense and liability arising out of or based upon any and all claims,
accidents, injuries and damages described in Section 7.1, in the broadest form
of such coverage from time to time available. Each such policy shall be
noncancellable and nonamendable (to the extent that any proposed amendment
reduces the limits or the scope of the insurance required
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in this Lease) with respect to the Landlord and such ground lessors and
mortgagees without thirty (30) days' prior notice to the Landlord and such
mortgagees and, at the election of Landlord, either a certificate of insurance
or a duplicate original policy, together with evidence of payment of premiums
therefor reasonably satisfactory to Landlord, shall be delivered to the Landlord
on or before the Commencement Date (and at least thirty (30) days prior to the
expiration of any such policy of required insurance). The minimum limits of
liability of such insurance as of the Commencement Date shall be Three Million
Dollars ($3,000,000.00) for combined bodily injury (or death) and damage to
property (per occurrence), and from time to time during the Term such limits of
liability shall be increased to reflect such higher limits as are customarily
required pursuant to new leases of space in the Boston-Cambridge area with
respect to similar properties.
7.3 Personal Property at Risk. The Tenant agrees that all of the
furnishings, fixtures, equipment, effects and property of every kind, nature and
description of the Tenant and of all persons claiming by, through or under the
Tenant which, during the continuance of this Lease or any occupancy of the
Premises by the Tenant or anyone claiming under the Tenant, may be on the
Premises or elsewhere in the Building or on the Lot shall be at the sole risk
and hazard of the Tenant, and if the whole or any part thereof shall be
destroyed or damaged by fire, water or otherwise, or by the leakage or bursting
of water pipes, steam pipes, or other pipes, by theft or from any other cause,
no part of said loss or damage is to be charged to or be borne by the Landlord,
except that the Landlord shall in no event be exonerated from any liability to
the Tenant or to any person, for any injury, loss, damage or liability caused by
any negligence or willful misconduct of Landlord or Landlord's agents,
employees, or contractors.
7.4 Waiver of Subrogation. Any insurance carried by either party with
respect to the Building, Land, Premises, parking facilities or any property
therein or occurrences thereon shall, without further request by either party,
if it can be so written without additional premium, or with an additional
premium which the other party elects to pay, include a clause or endorsement
denying to the insurer rights of subrogation against the
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other party to the extent rights have been waived by the insured prior to
occurrence of injury or loss. Each party, notwithstanding any provisions of this
Lease to the contrary, hereby waives any rights of recovery against the other
for injury or loss, including, without limitation, injury or loss caused by
negligence of such other party, due to hazards covered by insurance containing
such clause or endorsement to the extent of the indemnification received
thereunder.
7.5 Landlord's Insurance. During the Term, Landlord shall carry and
maintain the following coverages of insurance (collectively, "Landlord's
Insurance"): (i) Fire and extended coverage insurance covering the Building and
Tenant's Leasehold Improvements to the extent of the full replacement value
thereof; and (ii) commercial general liability insurance in amounts Landlord
reasonably deems prudent. Notwithstanding anything to the contrary contained
herein, Tenant shall pay to Landlord the amount of Landlord's property and
casualty insurance premiums which are allocable to Tenant's leasehold
improvements, which amount shall not be included in Operating Expenses.
8. Casualty and Eminent Domain
8.1 Restoration Following Casualties. If, during the Term, the Building or
Premises shall be damaged by fire or casualty, subject to the exceptions and
limitations provided below, the Landlord shall proceed promptly to exercise
reasonable efforts to restore the Building and Premises (including Tenant's
Leasehold Improvements, but excluding all moveable equipment and furnishings not
attached to the Premises and Tenant's other personal property) to substantially
the condition thereof at the time of such damage, but the Landlord shall not be
responsible for delay in such restoration which may result from any cause beyond
the reasonable control of the Landlord. The Landlord shall have no obligation to
expend in the reconstruction of the Building and Premises more than the actual
amount of insurance proceeds made available by its insurer. Any restoration of
the Building or the Premises shall be altered to the extent necessary to comply
with then current laws and applicable codes.
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8.2 Landlord's Termination Election. If in the opinion of the Landlord the
Building has been so damaged that it is appropriate for the Landlord to raze or
substantially alter the Building, then the Landlord may terminate this Lease by
giving notice to the Tenant within sixty (60) days after the date of the
casualty or such later date as is required to allow the Landlord a reasonable
time to make either such determination; provided, however, that Landlord may not
terminate this Lease pursuant to this paragraph unless Landlord similarly
terminates the leases of other tenants covering at least fifty percent (50%) of
the Building (excluding from such calculation space in the Building occupied by
Landlord). Any such termination shall be effective on the date designated in
such notice from the Landlord, but in any event, not later than sixty (60) days
after such notice, and if no date is specified, effective upon the delivery of
such notice.
8.3 Tenant's Termination Election. Unless Landlord has earlier advised
Tenant of Landlord's election to terminate this Lease pursuant to Section 8.2,
or has earlier commenced to restore the Premises and maintain this Lease in
effect pursuant to Section 8.1, the Tenant shall have the right after the
expiration of sixty (60) days after any casualty which materially impairs a
material portion of the Premises to give a written notice to the Landlord
requiring the Landlord within ten (10) days thereafter to either (a) exercise or
waive any right of the Landlord to terminate this Lease pursuant to Section 8.2
as a result of such casualty, or (b) give written notice that Landlord intends
to restore the Premises pursuant to Section 8.1 and if the Landlord fails to
give timely response to the Tenant's notice, the Tenant shall be entitled to
give notice to the Landlord terminating this Lease. Where the Landlord is
obligated to exercise reasonable efforts to restore the Premises, unless such
restoration is completed within two hundred seventy (270) days from the date of
the casualty or taking, such period to be subject, however, to extension where
the delay in completion of such work is due to External Causes, the Tenant shall
have the right to terminate this Lease at any time after the expiration of such
two hundred seventy (270) days (as extended) period until the restoration is
substantially completed, such termination to take effect as of the date of the
Tenant's notice.
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8.4 Casualty at Expiration of Lease. If the Premises shall be damaged by
fire or casualty in such a manner that the Premises cannot, in the ordinary
course, reasonably be expected to be repaired within one hundred and twenty
(120) days from the commencement of repair work and such damage occurs within
the last eighteen (18) months of the Term (as the same may have been extended
prior to such fire or casualty), either party shall have the right, by giving
notice to the other not later than sixty (60) days after such damage, to
terminate this Lease, whereupon this Lease shall terminate as of the date of
such notice.
8.5 Eminent Domain. Except as hereinafter provided, if the Premises, or
such portion thereof as to render the balance (if reconstructed to the maximum
extent practicable in the circumstances) unsuitable for the Tenant's purposes,
shall be taken by condemnation or right of eminent domain, the Landlord or the
Tenant shall have the right to terminate this Lease by notice to the other of
its desire to do so, provided that such notice is given not later than thirty
(30) days after the effective date of such taking. If so much of the Building
shall be so taken that the Landlord determines that it would be appropriate to
raze or substantially alter the Building, the Landlord shall have the right to
terminate this Lease by giving notice to the Tenant of the Landlord's desire to
do so not later than thirty (30) days after the effective date of such taking;
provided, however, that Landlord may not terminate this Lease pursuant to this
paragraph unless Landlord similarly terminates the leases of other tenants
covering at least fifty percent (50%) of the Building (excluding from such
calculation space in the Building occupied by Landlord).
Should any part of the Premises be so taken or condemned during the Term,
and should this Lease be not terminated in accordance with the foregoing
provisions, the Landlord agrees to use reasonable efforts to put what may remain
of the Premises into proper condition for use and occupation as nearly like the
condition of the Premises prior to such taking as shall be practicable, subject,
however, to applicable laws and codes then in existence and to the availability
of sufficient proceeds from the eminent domain taking.
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8.6 Rent After Casualty or Taking. If the Premises shall be damaged by
fire or other casualty, except as provided below, the Annual Fixed Rent and
Additional Rent shall be justly and equitably abated and reduced according to
the nature and extent of the loss of use thereof suffered by the Tenant. If the
fire or other casualty was caused by Tenant, such abatement shall be made only
to the extent that Landlord is fully compensated therefore by any lost rent
insurance. In the event of a taking which permanently reduces the area of the
Premises, a just proportion of the Annual Fixed Rent shall be abated for the
remainder of the Term.
8.7 Temporary Taking. In the event of any taking of the Premises or any
part thereof for a temporary use not in excess of six (6) months, (i) this Lease
shall be and remain unaffected thereby and Annual Fixed Rent and Additional Rent
shall not abate, and (ii) the Tenant shall be entitled to receive for itself
such portion or portions of any award made for such use with respect to the
period of the taking which is within the Term.
8.8 Taking Award. Except as otherwise provided in Section 8.7, the
Landlord shall have and hereby reserves and excepts, and the Tenant hereby
grants and assigns to the Landlord, all rights to recover for damages to the
Building and the Land, and the leasehold interest hereby created, and to
compensation accrued or hereafter to accrue by reason of such taking, damage or
destruction, as aforesaid, and by way of confirming the foregoing, the Tenant
hereby grants and assigns to the Landlord, all rights to such damages or
compensation. Nothing contained herein shall be construed to prevent the Tenant
from prosecuting in any condemnation proceedings a claim for relocation
expenses, provided that such action shall not affect the amount of compensation
otherwise recoverable by the Landlord from the taking authority pursuant to the
preceding sentence.
9. Default
9.1 Tenant's Default. Each of the following shall constitute an Event of
Default:
(a) Failure onto the part of Tenant to pay the Annual Fixed Rent on
or before the date on which the same shall become due and payable, if such
condition
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continues for five (5) days after notice from Landlord that the same is due
(except that the giving of such written notice of default, and the cure period
which follows, shall no longer be required as a condition to the occurrence of
an Event of Default on the third or any further occasion of monetary default
occurring within a twelve (12) consecutive month period).
(b) Failure on the part of the Tenant to pay the Additional Rent or
other charges for which provision is made herein on or before the date on which
the same become due and payable, if such condition continues for ten (10) days
after notice from the Landlord that the same are delinquent (except that the
giving of such written notice of default, and the cure period which follows,
shall no longer be required as a condition to the occurrence of an Event of
Default on the third or any further occasion of monetary default occurring
within a twelve (12) consecutive month period).
(c) Failure on the part of the Tenant to perform or observe any
other term or condition contained in this Lease if the Tenant shall not cure
such failure within thirty (30) days after notice from the Landlord to the
Tenant thereof, provided that in the case of breaches of obligations under this
Lease which are susceptible to cure but cannot be cured within thirty (30) days
through the exercise of due diligence, so long as the Tenant commences such cure
within thirty (30) days, such breach remains susceptible to cure, and the Tenant
diligently pursues such cure, such breach shall not be deemed to create an Event
of Default.
(d) The taking of the estate hereby created on execution or by other
process of law; or a judicial declaration that the Tenant is bankrupt or
insolvent according to law; or any assignment of the property of the Tenant for
the benefit of creditors; or the appointment of a receiver, guardian,
conservator, trustee in bankruptcy or other similar officer to take charge of
all or any substantial part of the Tenant's property by a court of competent
jurisdiction; or the filing of an involuntary petition against the Tenant under
any provisions of the bankruptcy act now or hereafter enacted if the same is not
dismissed within one hundred twenty (120) days; the filing by the Tenant of any
voluntary petition
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for relief under provisions of any bankruptcy law now or hereafter enacted.
If an Event of Default shall occur, then, in any such case, whether or not
the Term shall have begun, the Landlord lawfully may, immediately or at any time
thereafter, give notice to the Tenant specifying the Event of Default and this
Lease shall come to an end on the date specified therein as fully and completely
as if such date were the date herein originally fixed for the expiration of the
Lease Term, and the Tenant will then quit and surrender the Premises to the
Landlord, but the Tenant shall remain liable as hereinafter provided.
9.2 Damages. In the event that this Lease is terminated, the Tenant
covenants to pay to the Landlord all the sums ("Periodic Payments") and perform
all the obligations which the Tenant covenants in this Lease to pay and to
perform in the same manner and to the same extent and at the same time as if
this Lease had not been terminated (in calculating the amounts to be paid by the
Tenant under the foregoing covenant, the Tenant shall be credited with the net
proceeds of any rent obtained by reletting the Premises, after deducting all the
Landlord's expenses in connection with such reletting, including, without
limitation, all repossession costs, brokerage commissions, fees for legal
services and expenses of preparing the Premises for such reletting). Suit or
suits for the recovery of such damages, or any installments thereof, may be
brought by Landlord from time to time at its election, and nothing contained
herein shall be deemed to require Landlord to postpone suit until the date when
the Term would have expired if the Lease had not been so terminated or had
Landlord not re-entered the Premises.
Landlord may, at its election made at any time after this Lease is
terminated, require Tenant to pay an amount (the "Lump Sum Payment") equal to
the excess, if any, of the discounted present value of the total rent reserved
for the remainder of the Term over the then discounted present fair rental value
of the Premises for the remainder of the Term (in calculating the rent reserved,
there shall be included, in addition to the Annual Fixed Rent and all Additional
Rent, the value of all other considerations agreed to be paid or performed by
the Tenant over the remainder of the Term). Upon payment of the Lump Sum
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Payment, Tenant shall not thereafter be responsible for Periodic Payments.
Landlord may (i) relet the Premises, or any part or parts thereof, for a
term or terms which may, at the Landlord's option, exceed or be equal to or less
than the period which would otherwise have constituted the balance of the Term,
and may grant such concessions and free rent as the Landlord in its reasonable
commercial judgment considers advisable or necessary to relet the same and (ii)
make such alterations, repairs and improvements in the Premises as the Landlord
in its reasonable commercial judgment considers advisable or necessary to relet
the same. No action of the Landlord in accordance with the foregoing or failure
to relet or to collect rent under reletting shall operate to release or reduce
Tenant's liability. The Landlord shall be entitled to seek to rent other
properties of the Landlord prior to reletting the Premises.
9.3 Cumulative Rights. The specific remedies to which the Landlord may
resort under the terms of this Lease are cumulative and are not intended to be
exclusive of any other remedies or means of redress to which it may be lawfully
entitled in case of any breach or threatened breach by the Tenant of any
provisions of this Lease. In addition to the other remedies provided in this
Lease, the Landlord shall be entitled to the restraint by injunction of the
violation or attempted or threatened violation of any of the covenants,
conditions or provisions of this Lease or to a decree compelling specific
performance of any such covenants, conditions or provisions. Nothing contained
in this Lease shall limit or prejudice the right of the Landlord to prove for
and obtain in proceedings for bankruptcy, insolvency or like proceedings by
reason of the termination of this Lease, an amount equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in which, the damages are to be proved, whether or not the amount be
greater, equal to, or less than the amount of the loss or damages referred to
above.
9.4 Landlord's Self-help. After an Event of Default, the Landlord shall
have the right, but not the obligation, upon reasonable, but in no event less
than thirty (30) days' notice to the Tenant (except in case of emergency in
which case no notice need be given), to
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perform such obligation. The Landlord may exercise its rights under this Section
without waiving any other of its rights or releasing the Tenant from any of its
obligations under this Lease.
9.5 Enforcement Expenses. The Tenant shall promptly reimburse the Landlord
for all costs and expenses, including without limitation legal fees, incurred by
the Landlord in exercising and enforcing its rights under this Lease following
an Event of Default on the part of the Tenant, together with interest at the
Default Interest Rate (as hereinafter defined) from the date paid by the
Landlord.
9.6 Late Charges and Interest on Overdue Payments. In the event that any
payment of Annual Fixed Rent or Additional Rent shall remain unpaid for a period
of two (2) business days following notice by the Landlord to the Tenant that
such payment is overdue, there shall become due to the Landlord from the Tenant,
as Additional Rent and as compensation for the Landlord's extra administrative
costs in investigating the circumstances of late rent, a late charge of two
percent (2%) of the amount overdue. In addition, any Annual Fixed Rent and
Additional Rent not paid when due shall bear interest from the date due to the
Landlord until paid at the variable rate (the "Default Interest Rate") equal to
the higher of (i) the rate at which interest accrues on amounts not paid when
due under the terms of the Landlord's financing for the Building, as from time
to time in effect, and (ii) two percent (2%) per annum in excess of the rate
from time to time announced by The First National Bank of Boston as its base
rate, or if such rate can no longer be determined, two percent (2%) per annum in
excess of the rate from time to time announced by a major commercial bank
selected by the Landlord as its base or prime rate; provided, however that if
the payment of any interest due hereunder would subject Landlord to any penalty
under applicable law, then the payments due hereunder shall be automatically
reduced to what they would be at the highest rate authorized under applicable
law.
9.7 Landlord's Right to Notice and Cure. The Landlord shall in no event be
in default in the performance of any of the Landlord's obligations hereunder
unless and until the Landlord shall have failed to per-
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form such obligations within thirty (30) days, or such additional time as is
reasonably required to correct any such default not susceptible to being cured
within such thirty (30) day period (provided that Landlord diligently pursues
such cure), after notice by the Tenant to the Landlord expressly specifying
wherein the Landlord has failed to perform any such obligation.
10. Mortgagees' Rights
10.1 Subordination. This Lease shall, at the election of the holder of any
mortgage on the Property, be subject and subordinate to any and all mortgages on
the Property, so that the lien of any such mortgage shall be superior to all
rights hereby or hereafter vested in the Tenant. Tenant's agreement to
subordinate this Lease to any and all mortgages on the Property is conditioned
upon the execution and delivery of a non-disturbance agreement by such mortgagee
in such mortgagee's then-customary form. Landlord represents and warrants that,
on the date hereof, the Property is not encumbered by a mortgage.
10.2 Prepayment of Rent not to Bind Mortgagee. No Annual Fixed Rent,
Additional Rent, or any other charge payable to the Landlord shall be paid more
than thirty (30) days prior to the due date thereof under the terms of this
Lease and payments made in violation of this provision shall (except to the
extent that such payments are actually received by a mortgagee or ground lessor)
be a nullity as against such mortgagee or ground lessor and the Tenant shall be
liable for the amount of such payments to such mortgagee or ground lessor.
10.3 Tenant's Duty to Notify Mortgagee: Mortgagee's Ability to Cure. No
act or failure to act on the part of the Landlord which would entitle the Tenant
under the terms of this Lease, or by law, to be relieved of the Tenant's
obligations to pay Annual Fixed Rent or Additional Rent hereunder or to
terminate this Lease, shall result in a release or termination of such
obligations of the Tenant or a termination of this Lease unless (i) the Tenant
shall have first given written notice of the Landlord's act or failure to act to
the Landlord's mortgagees or ground lessors of record, if any, of whose identity
and address the Tenant shall have been given notice, specifying the act or
failure to act on the part
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of the Landlord which would give basis to the Tenant's rights; and (ii) such
mortgagees or ground lessors, after receipt of such notice, have failed or
refused to correct or cure the condition complained of within the grace period
provided to Landlord hereunder.
10.4 Estoppel Certificates. The Tenant shall from time to time, upon not
less than fifteen (15) days' prior written request by the Landlord, execute,
acknowledge and deliver to the Landlord a statement in writing certifying to the
Landlord or an independent third party, with a true and correct copy of this
Lease attached thereto, (i) that this Lease is unmodified and in full force and
effect (or, if there have been any modifications, that the same is in full force
and effect as modified and stating the modifications); (ii) that the Tenant has
no knowledge of any defenses, offsets or counterclaims against its obligations
to pay the Annual Fixed Rent and Additional Rent and to perform its other
covenants under this Lease (or if there are any defenses, offsets, or
counterclaims, setting them forth in reasonable detail); (iii) that there are no
known uncured defaults of the Landlord or the Tenant under this Lease (or if
there are known defaults, setting them forth in reasonable detail); (iv) the
dates to which the Annual Fixed Rent, Additional Rent and other charges have
been paid; (v) that the Tenant has accepted, is satisfied with, and is in full
possession of the Premises, including all improvements, additions, and
alterations thereto required to be made by Landlord under the Lease; (vi) that
the Landlord has satisfactorily complied with all of the requirements and
conditions precedent to the commencement of the Term of the Lease as specified
in the Lease; (vii) the Term, the Commencement Date, and any other relevant
dates, and that the Tenant has been in occupancy since the Commencement Date and
paying rent since the specified dates; (viii) that no monetary or other
considerations, including, but not limited to, rental concessions for Landlord,
special tenant improvements or Landlord's assumption of prior lease obligations
of Tenant have been granted to Tenant by Landlord for entering into the Lease,
except as specified; (ix) that Tenant has no notice of a prior assignment,
hypothecation, or pledge of rents or of the Lease; (x) that the Lease represents
the entire agreement between Landlord and Tenant (unless there are amendments,
in which case all amendments shall be specified); and (xi) such other matters
with respect to the Tenant and
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this Lease as the Landlord may reasonably request. On the Commencement Date,
Tenant shall, at the request of Landlord, promptly execute, acknowledge and
deliver to Landlord a statement in writing that the Commencement Date has
occurred, that the Annual Fixed Rent has begun to accrue (if true) and that
Tenant has taken occupancy of the Premises. Any statement delivered pursuant to
this Section may be relied upon by any prospective purchaser or mortgagee of the
Property and shall be binding on the Tenant.
Landlord shall from time to time, upon not less than fifteen (15) days'
prior request by Tenant, execute, acknowledge and deliver to Tenant a statement
in writing certifying to Tenant or an independent third party, that (i) this
Lease has not been modified and is in full force and effect or, if there has
been a modification of this Lease, that this Lease is in full force and effect
as modified, stating such modifications, (b) the dates to which the Annual Fixed
Rent and Additional Rent have been paid, (c) whether or not, to the knowledge of
the Landlord, Tenant is in default, and, if Tenant is in default, stating the
nature of such default, (d) whether or not there are then existing any set-offs
or defenses against the enforcement of any of the obligations hereunder upon the
part of Landlord or Tenant, as the case may be, to be performed or complied with
(and, if so, specifying the same).
11. Miscellaneous
11.1 Recording of Lease. The Tenant agrees not to record this Lease, and
any attempted or actual recording thereof by Tenant shall be an Event of Default
hereunder. At Tenant's request, the parties shall execute and deliver a notice
of lease in form and substance reasonably satisfactory to both parties for the
purpose of recording, but said notice of lease shall not in any circumstance be
deemed to modify or to change any of the provisions of this Lease.
11.2 Notices. Whenever any notice, approval, consent, request, election,
offer or acceptance is given or made pursuant to this Lease, it shall be in
writing. Communications and payments shall be addressed, if to the Landlord, at
the Landlord's Original Address as set forth in Exhibit A or at such other
address as may have been
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specified by prior notice to the Tenant, with a copy sent to Joseph W. Haley,
P.C., Goodwin, Procter & Hoar, One Exchange Place, Boston, MA 02108, and if to
the Tenant prior to the Commencement Date, at the Tenant's Original Address, and
after the Commencement Date, at the Premises, or at such other place as may have
been specified by prior notice to the Landlord, with a copy of default notices
sent to Kent A. Coit, Esq., Skadden, Arps, Slate, Meagher & Flom, One Beacon
Street, Boston, MA 02108, and a copy of all notices to Ethan Signer, Ph.D at the
Premises. Any communication so addressed shall be deemed duly given on the
earlier of (i) the date received or (ii) on the third business day following the
day of mailing if mailed by registered or certified mail, return receipt
requested. If the Landlord by notice to the Tenant at any time designates some
other person to receive payments or notices, all payments or notices thereafter
by the Tenant shall be paid or given to the agent designated until notice to the
contrary is received by the Tenant from the Landlord.
11.3 Successors and Limitation on Liability of the Landlord. The
obligations of this Lease shall run with the land, and this Lease shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the original landlord named herein and each
successor landlord shall be liable only for obligations accruing during the
period of its ownership. The obligations of the Landlord shall be binding only
upon the assets of the Landlord consisting of the ownership of the Property but
not upon other assets of the Landlord and neither the Tenant, nor anyone
claiming by, under or through the Tenant, shall be entitled to obtain any
judgment creating personal liability on the part of the Landlord or enforcing
any obligations of the Landlord against any assets of the Landlord other than
the ownership of the Property. In no event shall any partner, officer, director,
trustee, stockholder, employee or beneficiary of Landlord be held to have any
personal liability for satisfaction of any claims or judgments that Tenant may
have against Landlord.
11.4 Waivers by the Landlord. The failure of the Landlord or the Tenant to
seek redress for violation of, or to insist upon strict performance of, any
covenant or condition of this Lease, shall not be deemed a waiver of such
violation nor prevent a subsequent act, which would
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have originally constituted a violation, from having all the force and effect of
an original violation. Neither the receipt by the Landlord, nor the payment by
Tenant, of Annual Fixed Rent or Additional Rent with knowledge of the breach of
any covenant of this Lease shall be deemed a waiver of such breach. No provision
of this Lease shall be deemed to have been waived by the Landlord, unless such
waiver be in writing signed by the Landlord. No consent or waiver, express or
implied, by Landlord or Tenant to or of any breach of any agreement or duty
shall be construed as a waiver or consent to or of any other breach of the same
or any other agreement or duty.
11.5 Acceptance of Partial Payments of Rent. No acceptance by the Landlord
of a lesser sum than the Annual Fixed Rent and Additional Rent then due shall be
deemed to be other than a partial installment of such rent due, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as rent be deemed an accord and satisfaction, and the Landlord may
accept such check or payment as without prejudice to the Landlord's right to
recover the balance of such installment or pursue any other remedy in this Lease
provided. The delivery of keys to any employee of the Landlord or to the
Landlord's agent or any employee thereof shall not operate as a termination of
this Lease or a surrender of the Premises.
11.6 Interpretation and Partial Invalidity. If any term of this Lease, or
the application thereof to any person or circumstances, shall to any extent be
invalid or unenforceable, the remainder of this Lease, or the application of
such term to persons or circumstances other than those as to which it is invalid
or unenforceable, shall not be affected thereby, and each term of this Lease
shall be valid and enforceable to the fullest extent permitted by law. The
titles of the Articles are for convenience only and not to be considered in
construing this Lease. This Lease contains all of the agreements of the parties
with respect to the subject matter thereof and supersedes all prior dealings
between them with respect to such subject matter.
11.7 Quiet Enjoyment. So long as the Tenant pays Annual Fixed Rent and
Additional Rent, performs all other Tenant covenants of this Lease and observes
all conditions hereof, the Tenant shall peaceably and quietly
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have, hold and enjoy the Premises free of any claims by, through or under the
Landlord.
11.8 Brokerage. Landlord and Tenant each represent and warrant to the
other that it has had no dealings with any broker or agent other than Lynch
Murphy Walsh & Partners ("Broker") in connection with this Lease and shall
indemnify and hold harmless the other from claims for any brokerage commission
other than that due Broker arising out of such party's action.
11.9 Surrender of Premises and Holding Over. The Tenant shall surrender
possession of the Premises on the last day of the Term and the Tenant waives the
right to any notice of termination or notice to quit. The Tenant covenants that
upon the expiration or sooner termination of this Lease, it shall, without
notice, deliver up and surrender possession of the Premises in the same
condition in which the Tenant has agreed to keep the same during the continuance
of this Lease and in accordance with the terms hereof, normal wear and tear
excepted, first removing therefrom all goods and effect of the Tenant and any
leasehold improvements Landlord specified for removal pursuant to Section 4.2,
and repairing all damage caused by such removal. Upon the expiration of this
Lease or if the Premises should be abandoned by the Tenant, or this Lease should
terminate for any cause, and at the time of such expiration, vacation,
abandonment or termination, the Tenant or Tenant's agents, subtenants or any
other person should leave any property of any kind or character on or in the
Premises, the fact of such leaving of property on or in the Premises shall be
conclusive evidence of intent by the Tenant, and individuals and entities
deriving their rights through the Tenant, to abandon such property so left in or
upon the Premises, and such leaving shall constitute abandonment of the
property. Landlord shall have the right and authority without notice to the
Tenant or anyone else, to remove and destroy, or to sell or authorize dispose of
such property, or any part thereof, without being in any way liable to the
Tenant therefor and the proceeds thereof shall belong to the Landlord as
compensation for the removal and disposition of such property.
If the Tenant fails to surrender possession of the Premises upon the
expiration or sooner termination of this Lease, the Tenant shall pay to
Landlord, as rent for
49
<PAGE>
any period after the expiration or sooner termination of this Lease an amount
equal to one hundred fifty percent (150%) the Annual Fixed Rent and the
Additional Rent required to be paid under this Lease as applied to any period in
which the Tenant shall remain in possession. Acceptance by the Landlord of such
payments shall not constitute a consent to a holdover hereunder or result in a
renewal or extension of the Tenant's rights of occupancy. Such payments shall be
in addition to and shall not affect or limit the Landlord's right of re-entry,
Landlord's right to collect such damages as may be available at law, or any
other rights of the Landlord under this Lease or as provided by law.
11.10 Landlord's Lien. To secure the payment of all Annual Fixed Rent and
Additional Rent, and the performance of all other obligations hereunder, Tenant
hereby grants to Landlord a first lien and security interest on the personal
property listed on Exhibit D-2 (the "Secured Property"), and also upon all
proceeds of any insurance that may accrue to Tenant by reason of the destruction
or damage of the Secured Property. Tenant will not remove the Secured Property
from the Premises without the prior written consent of Landlord, which consent
shall not be unreasonably withheld; provided, however, that Tenant replaces such
item(s) of Secured Property with replacement item(s) of equal or greater value
and that any such removal does not change the character of the Premises as
laboratory space nor have a detrimental effect on the value thereof. Tenant
waives the benefit of all exemption laws in favor of this lien and security
interest. Upon the occurrence of an Event of Default hereunder, this lien may be
foreclosed with or without court proceedings by private or public sale, so long
as Landlord gives Tenant at least ten (10) days notice of the time and place of
such sale. Landlord will have the right to become the purchaser if it is the
highest bidder at the sale. Contemporaneously with its execution of this Lease,
and if requested by Landlord after such extension, Tenant will execute and
deliver to Landlord Uniform Commercial Code financing statements in form and
substance sufficient (upon proper filing) to perfect the security interest
granted in this Section 11.10. If requested Landlord, Tenant will also execute
and deliver to Landlord, within five (5) days of Landlord request, any Uniform
Commercial Code continuation statements in form and substance sufficient to
reflect any
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proper amendment of, modification in, or extension of the security interest
granted in this Section 11.10. The parties hereto agree that this Lease
constitutes a security agreement and that the recordation of a notice of this
Lease shall constitute a fixture filing pursuant to and under the Massachusetts
Uniform Commercial Code. The provisions of this Section 11.10 shall survive the
expiration or earlier termination of this Lease.
11.11 Right of First Offer. Unless an Event of Default has occurred and is
continuing, before entering into a lease with a third party unaffiliated with
Landlord for any other space in the Building ("Additional Space"), Landlord will
notify Tenant of the availability of Additional Space and the principal terms
and conditions, including the rent and other economic terms (the "Rental Terms,"
and, together with such other principal terms and conditions, the "offered
Terms") on which Landlord would be willing to lease the Additional Space to
Tenant ("Landlord's Offer"). Tenant may, by notice to Landlord given without
thirty (30) days of being given Landlord's Offer, either:
(i) give Landlord notice that Tenant has elected to lease the
Additional Space on the Offered Terms ("Tenant's Acceptance"), or
(ii) give Landlord notice rejecting Landlord's Offer, but containing
a counteroffer ("Tenant's Counteroffer") which sets forth the Rental Terms
on which Tenant would be willing to lease the Additional Space, but
otherwise on the Offered Terms (the "Counteroffer Terms"), or
(iii) give Landlord notice rejecting Landlord's Offer ("Tenant's
Rejection"), but not containing a Tenant's Counteroffer which fulfills the
conditions of clause (ii) above; Tenant's failure to timely give either
Tenant's Acceptance or Tenant's Counteroffer shall constitute Tenant's
Rejection.
If Tenant timely gives Tenant's Acceptance with respect to Landlord's
Offer, then Tenant shall execute a lease for the Additional Space, on
substantially the same terms and conditions of this Lease, except as modified to
incorporate the Offered Terms and such other matters as
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are reasonably required by Landlord, within five (5) days of being delivered an
execution counterpart thereof by Landlord. Tenant's failure to timely do so
shall constitute a revocation of Tenant's Acceptance and all of the terms
relating to Tenant's Rejection shall apply instead. If Tenant timely executes
such a lease, Landlord will execute the same.
If Tenant timely makes a Tenant's Counteroffer to Landlord's Offer, then:
(a) At any time during the period commencing on the date that
Landlord receives Tenant's Counteroffer and ending on the date that is one
hundred fifty (150) days thereafter, Landlord may, by notice to Tenant (the "Put
Notice") require Tenant to lease the Additional Space on the Counteroffer Terms.
If Landlord timely gives Tenant a Put Notice, then Tenant shall execute a lease
for the Additional Space, on substantially the same terms and conditions of this
Lease, except as modified to incorporate the Counteroffer Terms and such other
matters as are reasonably required by Landlord, within five (5) days of being
delivered an execution counterpart thereof by Landlord. Tenant's failure to
timely do so shall constitute a revocation of Tenant's Counteroffer and all of
the terms relating to Tenant's Rejection shall apply instead. If Tenant timely
executes such a lease, Landlord will execute the same.
(b) In addition to Landlord's right to give Tenant a Put Notice,
Landlord shall have a period (the "Market Period") of one (1) year from the date
that is the earlier to occur of (x) the date that is thirty (30) days following
Landlord's delivery to Tenant of Landlord's Offer or (y) the date that Landlord
receives Tenant's Counteroffer, to lease the Additional Space on any terms and
conditions; provided, however, that before Landlord can lease the Additional
Space on Rental Terms more favorable than those contained in Tenant's
Counter-offer, Landlord shall offer to lease the Additional Space to Tenant at
such more favorable Rental Terms. Landlord's offer to Tenant as aforesaid shall
constitute a Landlord's Offer for all purposes of this Section 11.11, except
that Tenant must respond within ten (10) days, rather than within the thirty
(30) day period set forth in the first paragraph of this Section 11.11.
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(c) If Landlord has not leased the Additional Space on or prior to
the expiration of the Market Period, then in the event Landlord desires to lease
the Additional Space to a third party unaffiliated with Landlord, Landlord must
again comply with the conditions of this Section 11.11.
If Tenant either gives notice of, or is deemed to have given, Tenant's
Rejection, Tenant shall have no further rights to lease the Additional Space in
question.
This right of first offer to lease the Additional Space is personal to
Pharmaceutical Peptides, Inc. and is not transferable upon any assignment of
this Lease except to a Permitted Transferee.
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IN WITNESS WHEREOF, the parties hereto have entered into this Lease
on the date and year first above written.
The Charles Stark Draper
Laboratory, Inc.
By: /s/ David C. Driscoll
---------------------------------
Name: David C. Driscoll
------------------------------
Title: Treasurer
------------------------------
Pharmaceutical Peptides, Inc.
By: /s/ Ethan R. Signer
---------------------------------
Name: Ethan R. Signer
------------------------------
Title: Chief Executive Officer
------------------------------
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EXHIBIT A
Basic Lease Terms
Annual Fixed Lease Year 1: $195,000.00 ($13.00 per square
Rent for the foot of Rentable Floor Area
Initial Term: with respect to 15,000 square
feet of Rentable Floor Area,
and $0.00 per square foot of
Rentable Floor Area with
respect to 9,797 square feet of
Rentable Floor Area), subject
to the rent abatement provided
pursuant to Section 3.1.
Lease Year 2: $258,680.50 ($13.00 per square
foot of Rentable Floor Area
with respect to 15,000 rentable
square feet of Rentable Floor
Area, and $6.50 per square foot
of Rentable Floor Area with
respect to 9,797 square feet of
Rentable Floor Area).
Lease Years 3-5: $322,361.00 ($13.00 per square
foot of Rentable Floor Area
with respect to 24,797 square
feet of Rentable Floor Area).
Lease Years 6-10: $347,158.00 ($14.00 per square
foot of Rentable Floor Area
with respect to 24,797 square
feet of Rentable Floor Area).
Term: Beginning on the Commencement Date and ending on the date
this is ten (10) years following the Rent Commencement
Date.
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Landlord's The Charles Stark Draper Laboratory, Inc.
Original Address: 555 Technology Square
Cambridge, Massachusetts 02139
Attention: David C. Driscoll, Treasurer
Premises: The entire fifth (5th) floor of the Hill Building, One
Hampshire Street, Cambridge, MA containing 24,797 square
feet of Rentable Floor Area, a floor plan of which is
attached as Exhibit A-1.
Parking Privileges: During the Term, Landlord shall provide up to a maximum
of twenty-five (25) parking permits, and Tenant shall
pay One Hundred Dollars ($100.00) per month per parking
permit. If Tenant initially desires fewer than twenty
five (25) parking spaces, Tenant may elect to take fewer
parking spaces. Tenant shall then be permitted to request
additional parking spaces, up to the maximum of
twenty-five (25) in the aggregate; provided, however,
that Tenant shall not be permitted to give up any parking
spaces previously requested.
Permitted Uses: Laboratories and offices and accessory uses supporting
the foregoing.
Commencement April ____, 1994
Date:
Rent Commencement The date that is the earlier to occur of:
Date: (i) the date when Tenant, any employee of Tenant, or any
person holding by, through or under Tenant first occupies
the Premises for the conduct of business; or (ii)
September 15, 1994.
Tenant's Original Pharmaceutical Peptides, Inc.
Address: c/o Lynch Murphy Walsh & Partners
One Financial Center, 13th Floor
Boston, Massachusetts 02111
Attention: Malcolm Gefter, Ph.D.
Total Rentable 171,599 square feet
Floor Area of
Building
56
<PAGE>
EXHIBIT A-1
FLOOR PLAN OF THE PREMISES
<PAGE>
EXHIBIT B
STANDARD SERVICES
The following services are provided by the Landlord:
A. Regular maintenance of interior, exterior and park ing lot landscaping.
B. Regular maintenance, sweeping and snow removal of building exterior areas
such as roadways, driveways, sidewalks, parking areas and courtyard
paving.
C. Exterior and interior cleaning of all exterior windows twice per year.
D. Daily, weekday maintenance of hallways, passenger elevators, common area
bathrooms and main lobby.
E. Periodic cleaning of stairwells and freight elevators.
F. Daily, weekday rubbish removal of all tenant trash from Premises.
G. Maintenance and repair of base building surveillance and alarm equipment,
mechanical, electrical, plumbing and life safety systems.
H. Building surveillance and alarm system operation and live monitoring
service to building standard specifications.
I. Heating and air conditioning to maintain the Premises at comfortable
temperatures shall be provided between the hours of 8:00 AM to 6:00 PM
Monday through Friday. In other hours, air conditioning will be made
available for $20 per hour. Heating will be provided at comfortable
temperatures in other reasonable hours without additional charge.
J. Normal elevator service from the freight and passenger elevators during
the same hours and on a reduced basis as demand may require at other
hours.
<PAGE>
K. Utilities for all interior common areas and exterior building and parking
lighting.
L. Custodial Services pursuant to Exhibit E.
M. Hot water for lavatory purposes and cold water for drinking, lavatory and
toilet purposes.
<PAGE>
EXHIBIT C
RULES AND REGULATIONS
DEFINITIONS
Wherever in these Rules and Regulations the word "Tenant" is used, it shall be
taken to apply to and include the Tenant and his agents, employees, invitees,
licensees, contractors, any subtenants and is to be deemed of such number and
gender as the circumstances require. The word "Premises" is to be taken to
include the space covered by the Lease. The word "Landlord" shall be taken to
include the employees and agents of Landlord. Other capitalized terms used but
not defined herein shall have the meanings set forth in the Lease.
GENERAL USE OF BUILDING
A. Space for admitting natural light into any public area or tenant
space of the Building shall not be covered or obstructed by Tenant
except in a manner approved by Landlord.
B. Toilets, showers and other like apparatus shall be used only for the
purpose for which they were constructed. Any and all damage from
misuse shall be borne by Tenant.
C. No sign, advertisement, notice or the like, shall be used in the
Building by Tenant other than within the Premises and not visible
from outside the Premises. If Tenant violates the foregoing,
Landlord may remove the violation without liability and may charge
all costs and expenses incurred in so doing to Tenant.
D. Tenant shall not throw or permit to be thrown anything out of
windows. In addition, Tenant shall not do or permit anything which
will obstruct, injure, annoy or interfere with other tenants or
those having business with them, or affect any insurance rate on the
Building or violate any provision of any insurance policy on the
Building.
<PAGE>
E. No additional locks or similar devices shall be attached to any door
or window and no keys other than those provided by the Landlord
shall be made for any door unless permitted by Landlord. Upon
termination of this lease or of the Tenant's possession, the Lessee
shall surrender all keys to the Premises and shall explain to the
Landlord all combination locks on safes, cabinets and vaults.
F. Tenant shall not install any shades, blinds, or awnings or any
interior window treatment without consent of Landlord. All equipment
of any electrical or mechanical nature shall be placed in settings
which absorb and prevent any vibration or noise.
G. Landlord shall designate the time when and the method whereby
freight, laboratory equipment, furniture, safes and other like
articles may be brought into, moved or removed from the Building or
Premises, and to designate the location for temporary disposition of
such items.
H. Canvassing, soliciting and peddling in the Building is prohibited
and Tenant shall cooperate to prevent the same from occurring.
I. Tenant shall not place a load on any floor of said Premises
exceeding one hundred (100) pounds per square foot. Landlord
reserves the right to prescribe the weight and position of all
safes and heavy equipment.
J. Tenant shall not install or use any air conditioning or heating
device or system other than those approved by Landlord.
K. Landlord shall have the right to make such other and further
reasonable rules and regulations as in the judgment of Landlord,
may from time to time be needful for the safety, appearance, care
and cleanliness of the Building and for the preservation of good or-
der therein. Landlord shall not be responsi-
<PAGE>
ble to Tenant for any violation of rules and regulations by other
tenants.
L. The loading areas, parking areas, sidewalks, entrances, lobbies,
halls, walkways, elevators, stairways and other common areas
provided by Landlord shall not be obstructed by Tenant, or used by
Tenant for any other purpose than for ingress and egress.
M. In order to insure use and care of the Premises Tenant shall not
enter any janitors' closets, mechanical or electrical areas,
telephone closets, loading areas, roof or Building storage areas
without the written consent of Landlord.
<PAGE>
EXHIBIT D
TENANT'S INITIAL IMPROVEMENTS
Approximately fifteen thousand (15,000) square feet of first-class
bio-technology laboratory space, consistent with similar facilities located in
the Metropolitan Boston area.
<PAGE>
EXHIBIT D-1
LIST OF TENANT'S PERSONAL PROPERTY
See three (3) sheets entitled "Pharmaceutical Peptides, Inc.
Equipment Lease" attached hereto.
<PAGE>
EXHIBIT D-2
SECURED PROPERTY
All items incorporated within and made a part of Tenant's Initial
Improvements, excluding therefrom those items listed on Exhibit D-1.
<PAGE>
EXHIBIT E
CUSTODIAL SERVICES
CUSTODIAL WORKERS: WILL POSSESS A THOROUGH KNOWLEDGE OF THE OPERATION OF ALL
MECHANICAL CLEANING EQUIPMENT, ALL CLEANING METHODS, AND
ALL CLEANING MATERIALS. ALL CUSTODIAL WORKERS WILL BE
SUPERVISED ON A NIGHTLY BASIS.
MATERIALS
1. ALL MECHANICAL CLEANING EQUIPMENT WILL BE FURNISHED BY DRAPER
LABORATORY.
2. ALL CLEANING CHEMICALS, MATERIALS, AND CLEANING EQUIPMENT WILL BE
FURNISHED BY DRAPER LABORATORY.
3. SANITARY NAPKIN VENDING MACHINES WILL BE RESTOCKED BY DRAPER
LABORATORY. THE COST OF THESE SANITARY PRODUCTS WILL BE BORNE BY THE
INDIVIDUAL USERS.
4. FLOOR FINISHES USED HAVE PASSED A SAFETY NON SLIP TEST.
5. ALL BATHROOM DESCALERS WILL BE LESS THAN 12 PERCENT HYDROCHLORIC
ACID.
6. MATERIAL SAFETY DATA SHEETS WILL BE KEPT BY DRAPER LABORATORY ON ALL
CLEANING CHEMICALS SUPPLIED.
CLEANING OF RESTROOMS
TASK FREQUENCY
A. REPLENISH SUPPLIES DAILY
B. CLEAN AND DISINFECT DAILY
ALL RESTROOM FIXTURES
C. CLEAN MIRRORS DAILY
D. CLEAN AND DISINFECT DAILY
PARTITIONS
E. CLEAN AND DISINFECT DAILY
HARD SURFACE FLOORS
F. EMPTY TRASH RECEPTACLES DAILY
G. REPLACE LINERS DAILY
TRASH/SANITARY
H. VACUUM LIGHT FIXTURES AS NEEDED
AND DIFFUSERS
I. SPOT CLEAN WALLS DAILY
J. WASH WALLS AS NEEDED
K. DESCALING OF FIXTURES WEEKLY/OR AS NEEDED
<PAGE>
Exhibit 10.16
EMPLOYMENT AGREEMENT BETWEEN PHARMACEUTICAL PEPTIDES,
INC. ("THE COMPANY") AND MARC B. GARNICK ("THE EMPLOYEE")
Commencement April 1, 1994 (commencing transition), September 1, 1994
Date (full-time). At the Company's discretion and in
consultation with the Employee that date may be extended
but not beyond the date the Employee presents himself
for full time employment. The Company will reimburse the
Employee for expenses associated with this transition,
including expenses after this date in connection with
terminating current employment, up to $10,000, and
reimburse beyond that by mutual agreement.
Term of Employ- Three years, with automatic annual renewal unless either
ment party terminates.
Time Commitment Except during the transition period, full-time, except
for (a) one day per week to devote to the practice of
medicine, including as an expert or consultant, at the
Dana-Farber Cancer Institute or other health care facil-
ity, (b) approved outside Directorships and service on
scientific boards, and (c) normal professional
activities. During the transition period, Employee may
provide services to Genetics Institute, Inc.
Principal Loca- Cambridge, Massachusetts or within a reasonable distance
tion from Brookline.
<PAGE>
Title, Posi- Executive Vice President and Medical Advisor to the
tions, Reporting Board of Directors. As Medical Advisor to the Board of
Relationship Directors, Employee shall be provided notice of and the
materials for Board meetings and may attend such
meetings except as specifically requested not to by the
Board. The Company will not appoint a physician to the
Board of Directors primarily for medical advice without
offering such a position to the Employee. A Board of
Directors position offered to an Executive Vice
President will first be offered to the Employee. The
Employee will report only to the Chief Executive Officer
and the Board of Directors. The Employee will be a
member of the Management Committee, consisting of
Chairman, CEO and other Executive Vice Presidents, which
Committee will be responsible for the general management
of the company.
2
<PAGE>
Responsibilities Senior management responsibility and authority for
clinical and preclini-cal management, including:
responsibility for preclinical biology and
research (including, but not limited to, in vivo
evaluation of target molecules and pharmacological and
toxicological assessment)
shared responsibility for selection of drug
targets
responsibility for all medical and regulatory
activities of the Company and service as Chief Medical
and Regulatory Officer
creation of a Medical Advisory Board
shared responsibility for clinical scale
manufacturing and quality control and quality assurance
activities
shared responsibility for development of the
overall corporate business plan and corporate strategic
development
shared responsibility for patent affairs
Base Annual Sal- $150,000 as Executive Vice President plus $35,000 as
ary Medical Advisor to the Board of Directors.
Bonuses Bonuses at the discretion of the Board of Directors upon
review of performance.
3
<PAGE>
Options Incentive stock options issued pursuant to rule 701
under the Securities Act of 1933 to purchase 62,456
shares of common stock, exercisable at fair market
value, as of no later than June 1, 1994, (subject to ad-
justment for stock splits, reverse stock splits and
similar transactions) subject to a four year vesting
schedule, vesting monthly. Term of options: 10 years.
Exercise period after employment termination: 1 year
death or disability, 90 days all other terminations.
Payment upon exercise: cash or if employment terminat-
ed without cause or as a result of constructive
termination, with two year note with interest at lowest
federal rate under Internal Revenue Code. In the event
of termination for cause, the Company shall have the
right to repurchase all vested shares at fair market
value by giving notice no later than 120 days after the
termination date. In the event of termination
without cause, the Company shall have the right of first
offer to repurchase all vested shares at fair market
value, or, if not offered to the Company for purchase,
to repurchase upon Initial Public Offering at the
closing price on the first trading day. The right of
first offer shall terminate on consummation of an
initial public offering.
4
<PAGE>
Termina- Termination by the Company at any time during or after
tion/Severance initial term without cause, by Constructive Termination
or following a Change of Control/Sale of Business, or as
a result of Disability or Death: Lump sum payment of a
multiple of then current annual base salary plus most
recent annual bonus, as follows:
First two years: 1.5 plus benefits, 2 years'
acceleration of options
After two years: 1 plus benefits, 1 year's
acceleration of options
Expiration of the term as a result of Company
notice: at least $185,000 plus benefits payable in 12
monthly installments
In the case of disability or death, net of any amounts
paid pursuant to disability coverage or life insurance
coverage provided through the Company's plan.
Benefits: In any circumstance that severance is due
(except following death), individual and family benefits
to continue for 18 months if termination during first
two years, otherwise one year following termination.
5
<PAGE>
Benefits Plans:
Participation in all benefit plans, including (to be
instituted within a reasonable time after employment):
Comprehensive medical and dental coverage (and
payment of 80% of COBRA premium, while available, until
coverage equivalent to current coverage provided)
A disability plan providing benefit equal to 65%
of compensation
term life insurance for 3 times base salary (after
the Company has a number of employees making such a plan
feasible)
401(k) plan (after the Company has a number of
employees making such a plan feasible)
Other Benefits:
three weeks vacation
reimbursements of reasonable business expenses
incurred
Legal Fees The Company agrees to pay the Employee's reasonable
attorney's fees in connection with employment agreement.
Non-competition The Employee will execute a non-com-petition agreement
in the form attached as Exhibit A.
Other Standard indemnification as an officer of the Company
to full extent permitted by statute
Provision that any successor must assume agreement
6
<PAGE>
Definitions Cause:
(1) Willful and continued failure to substantially
perform designated duties
(2) Willful malfeasance which is materially injurious to
the Company
(3) Conviction of a felony by a court of competent
jurisdiction
An act (or failure to act) will be considered "willful"
if done (or omitted to be done) not in good faith and
without reasonable belief that the action (or omission)
was in the Company's best interest
In the event of a termination for Cause, Employee will
be provided an opportunity to be heard before the Board
of Directors and in the case of (1) and (2) above, 30
day notice of the specific actions or inactions and an
opportunity to correct.
Constructive Termination:
(1) Failure to elect to or continue in position
(2) Material change in functions, duties, authority or
responsibilities to make position of less dignity,
importance, scope or authority, including a change in
the reporting structure
(3) Material change in business of the Company as
generally described in current Business Plan
(4) Failure of the Company to abide by material terms of
this agreement
7
<PAGE>
Change of Control/Sale of Business:
(1) Any person or group becomes the beneficial owner of
50% or more of the Company's outstanding shares of
beneficial interest while private, 30% if it becomes a
public company
(2) Election of new Directors such that a majority of
Directors were not nominated as candidates by a majority
of the Directors in office immediately preceding the
election
(3) Sale of the Company by merger, consolidation, asset
sale or otherwise
(4) Initial public offering by the Company
THE FOREGOING CONSTITUTES THE TERMS AND CONDITIONS UPON WHICH THE COMPANY AND
THE EMPLOYEE HAVE AGREED WITH RESPECT TO THE EMPLOYEE'S EMPLOYMENT. THIS
AGREEMENT, TOGETHER WITH EXHIBIT A, CONSTITUTES THE ENTIRE AGREEMENT OF THE
PARTIES AND MAY BE AMENDED ONLY BY A WRITING SIGNED BY BOTH PARTIES. THE
SIGNATURES BELOW INDICATE AGREEMENT OF BOTH PARTIES WITH THE FOREGOING.
April 4, 1994
/s/ Ethan R. Signer /s/ Marc B. Garnick
- --------------------------- ----------------------------
Ethan R. Signer Marc B. Garnick
Chief Executive Officer
Pharmaceutical Peptides,
Inc.
8
<PAGE>
Exhibit A
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
In consideration of my employment with Pharmaceutical Peptides, Inc.
(the "Company"), I hereby agree with the Company as follows:
1. Prior Employment. I hereby represent and warrant to the Company
that (i) I have disclosed to the Company each and every employment agreement,
nondisclo-sure agreement, inventions agreement, noncompete agreement or other
similar agreement with any of my current or previous employers which has not by
its terms expired and (ii) my employment by the Company and my compliance with
the terms of this agreement will not result in a violation by me of any material
term of any agreement or obligation of mine with or to the Dana Farber Cancer
Institute or other not-for-profit institution.
2. Confidential Information. I understand that the Company's
confidential information includes and will include matters not generally known
outside the Company, such as developments, inventions, technologies, methods,
discoveries, improvements, modifications, designs, drawings, processes and trade
secrets relating to the Company's business, to proposed products and services
and to data relating to the technologies, business operations, methodologies and
techniques of the Company, including information concerning sales, costs,
profits, organizations, customer lists, personnel and pricing methods (all
information not generally known outside the Company being referred to herein as
"Confidential Information"). I further understand that while I am employed by
the Company, I may obtain or hear of Confidential Information of the Company and
of other parties which has been provided to the Company in confidence. I agree
not to disclose, use or copy any Confidential Information of the Company
(whether or not produced by me) or of other parties which has been provided to
the Company in confidence, except as the Company may specifically authorize or
direct or as required by law.
3. Discoveries. I agree to make full and prompt disclosure to the
Company of any and all inventions, technologies, improvements, modifications,
processes, discoveries, methods, and developments (all of
<PAGE>
which are collectively termed "Discoveries"), whether patentable or not,
performed, made, conceived or reduced to practice by me or under my direction or
jointly with others during my employment by the Company, whether or not made,
conceived or reduced to practice during normal working hours or on the premises
of the Company. I hereby assign and transfer to the Company all of my right,
title and interest in and to all Discoveries and any patents or patent
applications covering such Discoveries. I further agree, both during and after
my employment with the Company, to execute and deliver such assignments, patents
and applications, and other documents as the Company may direct, and agree to
cooperate fully with the Company to enable the Company to secure and patent and
otherwise perfect and protect such Discoveries in any and all countries. This
paragraph will not apply to Discoveries, and for all purposes of this Agreement
the term "Discoveries" shall not include any of the foregoing which would
otherwise be included within the meaning of such term, but (a) which do not
relate to the actual, planned or anticipated business or research and
development of the Company or affiliated corporations and which are performed,
made, conceived or reduced to practice by me during other than while working as
an employee of the Company, not on the Company's premises and without the use of
any of the Company's tools, devices, equipment, resources or Confidential
Information or (b) are inventions, ideas, discoveries, innovations, or
improvements (whether or not patentable) or material made subject to copyright
which is or becomes the property of Genetics Institute, Inc. ("GI") pursuant to
my Employment Agreement with GI dated January 9, 1992.
4. Intellectual Property Rights. I acknowledge and agree that any
and all right, title and interest which I may have in and to any Discoveries and
any other intellectual property rights within the scope of my employment belongs
to the Company exclusively throughout the world. I hereby waive and release all
my rights, if any, to the foregoing and hereby assign and transfer to the
Company without further compensation any interest I may have in the entire
worldwide right, title and interest in and to the foregoing. I further agree to
execute any papers and to assist the Company in any manner deemed necessary by
the Company to permit the Company to apply for, obtain and defend patents and
other intellectual property rights related to the foregoing.
2
<PAGE>
5. Obligations to other Parties. I hereby represent to the Company
that, as of the date hereof, I have no present obligation to assign to any
former employer or any other person, corporation or firm, any items covered by
paragraph 3. I will not disclose and have not disclosed to the Company, and I
will not induce or cause and have not induced or caused the Company to use, any
confidential information of other persons, corporations or firms, including
former employers. In addition, I will not bring or provide and have not brought
or provided to the Company, any documents or other tangible items containing
confidential information of other persons, corporations or firms, including any
former employers.
6. Competitive Activities Prohibited. During the term of my
employment by the Company, I will not become employed full-time or part-time by
or act on behalf of any other person, corporation or firm which is engaged in
any business or activity competitive with that of the Company, unless such
employment has been approved by the Company in a writing signed by an officer of
the Company. I also agree that I will not, for a period of one year after the
termination of my employment with the Company, solicit or seek to obtain orders
for any products directly competitive with those manufactured or sold by the
Company from any person or organization that is a customer of the Company or
recruit or otherwise seek to cause employees of the Company to terminate their
employment or violate any agreement with the Company.
7. Affiliates or Subsidiaries. If my employment is transferred to a
subsidiary or affiliated company of the Company, this Agreement will continue to
apply as though I were still employed by the Company unless I sign an agreement
provided to me by such other company covering essentially the same matters as
this Agreement.
8. Termination of Employment. Upon any termination of my employment
by the Company, I agree to leave with or return to the Company all records,
drawings, notebooks and other documents pertaining to the Company's Confidential
Information, whether prepared by me or others, and any equipment, tools or
devices owned by the Company then in my possession or under my control however
such items were obtained.
3
<PAGE>
9. Vesting of Rights. The rights, title and other interests granted
by me to the Company under this Agreement shall automatically vest in the
Company as each item to which a right, title or other interest applies comes
into existence.
10. Survival. My obligations under this Agreement shall survive any
termination of my employment with the Company. This Agreement shall be binding
upon my heirs, executors and administrators and shall inure to the benefit of
the Company and its successors and assigns.
11. Entire Agreement; Modifications. This Agreement constitutes the
entire agreement covering the subject matter set forth herein and may be
modified only by agreement in writing signed by me and an officer of the
Company.
12. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts.
Date: April 4, 1994 /s/ Marc B. Garnick
----------------------------
Signature of Employee
Marc B. Garnick
----------------------------
Printed Name of Employee
Witness:
__________________________________
ACCEPTED AND AGREED TO:
PHARMACEUTICAL PEPTIDES, INC.
By: /s/ Ethan R. Signer
-------------------------------
Title: President
4
<PAGE>
Amendment No. 1 to Employment Agreement
AGREEMENT dated as of April 1, 1997 by and between Marc B. Garnick
("Employee") and Praecis Pharmaceuticals, Inc. (the "Company").
WHEREAS, Employee and the Company entered into an Employment
Agreement dated April 4, 1994 (the "Employment Agreement");
WHEREAS, as of March 28, 1997, Employee and the Company agreed to
an extension of the renewal date under the Employment Agreement (the
"Extension Letter");
WHEREAS, Employee and the Company desire to amend the Employment
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein
set forth and other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. The paragraph entitled "Base Annual Salary" is hereby
amended by deleting it in its entirety and inserting in its place the
following:
"$195,000 as Executive Vice President and
Medical Advisor to the Board of Directors."
2. The paragraph entitled "Bonuses" is hereby amended by
deleting it in its entirety and inserting in its place the following:
"(i) $25,000 upon completion of the Phase II clinical
trials of PPI-149 now underway, IND #51,710, Protocol
#149-96-01, (a) payable at such time as Synthelabo _____
("Synthelabo") is obligated to make a payment to the Company
pursuant to a determination of completion of such trials in
accordance with the _____ Agreement between the Company and
Synthelabo (the "Synthelabo Agreement"), (b) in the event no
licensing agreement is in effect with Synthelabo with
respect to prostate cancer trials of PPI-149, then payable
at such other time as any other llcensee is obligated to pay
to the Company a sum of funds as a result of
<PAGE>
completion of a Phase II study of PPI-149, or (c) in the
event no licensing agreement is in effect with respect to
prostate cancer trials of PPI-149 and provided the
completion of such Phase II clinical trials is successful in
accordance with the protocol therefor, then payable upon
consummation of an underwritten initial public offering of
the Company's common stock (the "IPO");
(ii) $50,000 earned upon the first to occur of (a)
completion of Phase II clinical trials of PPI-149 in a
depot formulation for chronic therapy of prostate
cancer, payable at such time as Synthelabo is obligated
to make a payment to the Company pursuant to the
Synthelabo Agreement upon a determination in accordance
therewith that there has been a demonstration in such
trials of the safety and efficacy of a Praecis depot
formulation of PPI-149 for chronic therapy of prostate
cancer or (b) the commencement a Phase III clinical
trial employing a depot formulation of PPI-149 for
treatment of prostate cancer;
(iii) $75,000 payable upon the filing of a New
Drug Application with the United States Food and
Drug Administration for a depot formulation of
PPI-149 for treatment of prostate cancer; and
(iv) $100,000 payable upon the issue of the
Registration Approval and Reimbursement Approval,
if required, for a depot formulation of PPI-149
for treatment of prostate cancer in any Major
European Territory Country (each of the preceding
capitalized terms in this clause (iv), as defined
in the attached Schedule A) (a) by Synthelabo, or
(b) by any other licensee of the Company."
3. To amend the paragraph "Options" by adding at the end
thereof the following:
2
<PAGE>
"The Company shall grant to Employee as of May 1,
1997 an option pursuant to Rule 701 under the
Securities Act of 1933 to purchase 80,000 shares
of common stock of the Company on the following
terms: (i) the number of shares shall be subject
to proportionate adjustment for any stock split or
stock dividend after the date hereof, (ii) a ten
year term, (iii) exercise period following
termination: 1 year death or disability, 90 days
all other terminations; (iv) payment upon
exercise: cash or if employment terminated without
cause or as a result of constructive termination,
with two year note with interest at lowest federal
rate under Internal Revenue Code, (v) the option
shall be an incentive stock option to the full
extent permissible under the Internal Revenue
Code, (vi) the option shall vest and become
exercisable in equal monthly installments over ten
years at the rate of 666.67 shares per month,
commencing May 1, 1998, and (vii) in the event the
Fair Market Value of a share of common stock of
the Company is at least $309.30 (subject to
proportionate adjustment in the event of a stock
split, stock dividend, stock combination or
reverse stock split), then such option shall
become fully vested and exercisable. As used
herein, Fair Market Value shall mean the closing
sales price on the largest national exchange on
which shares of the Company's common stock are
listed or on the Nasdaq National Market System or,
if not so listed, as determined by the Board of
Directors in good faith considering recent
transactions in the Company's common stock. In
addition, Employee shall be entitled to such other
grants of stock options as the Compensation
3
<PAGE>
Committee of the Board of Directors shall determine from
time to time in accordance with the usual practice of the
Company with respect to review of compensation of its senior
executives and in recognition of Employee's performance."
4. The Company shall pay the Employee's reasonable legal fees
and expenses in connection with this amendment.
5. Except as expressly provided in this Amendment No. 1, the
Employment Agreement is affirmed and shall remain in full force and
effect.
6. This Amendment No. 1 (together with the Employment
Agreement, the Proprietary Information and Inventions Agreement
between Employee and the Company dated April 4, 1997, stock option
agreements for options previously granted to Employee pursuant to the
terms in the Employment Agreement and otherwise) constitutes the
entire agreement between the parties with respect to the subject
matter hereof and supersedes the Extension Letter and any other
agreements pertaining to the subject matter hereof. This agreement
may only be amended in a writing signed by both parties.
IN WITNESS WHEREOF, the parties have executed this agreement.
PRAECIS PHARMACEUTICALS, INC.
/s/ Marc B. Garnick By: /s/ Malcolm L. Gefter
- ------------------------ -------------------------
Marc B. Garnick Malcolm L. Gefter
Chief Executive Officer
4
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Financial Data" and to the use of our report dated February 4, 1998,
except for the first paragraph of Note 6 as to which the date is August 7, 1998,
in the Registration Statement (Form S-1) and related Prospectus of PRAECIS
PHARMACEUTICALS INCORPORATED for the registration of 4,025,000 shares of its
common stock.
Ernst & Young LLP
/s/ Ernst & Young LLP
Boston, Massachusetts
August 10, 1998
<PAGE>
EXHIBIT 23.3
[LETTERHEAD OF LAHIVE & COCKFIELD, LLP]
August 11, 1998
The Board of Directors
PRAECIS PHARMACEUTICALS INCORPORATED
One Hampshire Street
Cambridge, MA 02139-1532
Re: Registration Statement on Form S-1
Dear Sirs:
We hereby consent to the reference to our firm under the caption "Experts"
in the prospectus which is a part of PRAECIS PHARMACEUTICALS INCORPORATED's
Registration Statement on Form S-1.
Very truly yours,
/s/ LAHIVE & COCKFIELD, LLP
LAHIVE & COCKFIELD, LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PRAECIS
PHARMACEUTICALS INCORPORATED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS AND NOTES THERETO.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 JUN-30-1998
<CASH> 40,190,073 82,150,131
<SECURITIES> 0 0
<RECEIVABLES> 2,546,739 3,907,289
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 42,934,626 86,627,186
<PP&E> 5,207,700 5,798,663
<DEPRECIATION> 1,853,245 2,545,353
<TOTAL-ASSETS> 46,289,082 89,880,496
<CURRENT-LIABILITIES> 8,133,651 9,051,266
<BONDS> 0 0
0 0
25,168 34,173
<COMMON> 25,323 29,244
<OTHER-SE> 37,856,192 80,660,940
<TOTAL-LIABILITY-AND-EQUITY> 46,289,082 89,880,496
<SALES> 0 0
<TOTAL-REVENUES> 20,732,837 21,048,280
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 18,792,838 17,269,045
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 101,848 25,250
<INCOME-PRETAX> 3,304,301 5,205,541
<INCOME-TAX> 100,000 150,000
<INCOME-CONTINUING> 3,204,301 5,055,541
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,204,301 5,055,541
<EPS-PRIMARY> 1.44 1.80
<EPS-DILUTED> 0.23 0.31
</TABLE>
