<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 8, 2000.
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 (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
PRAECIS PHARMACEUTICALS INCORPORATED
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)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
STUART M. CABLE, P.C.
KENT A. COIT, ESQ. KATHRYN I. MURTAGH, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP GOODWIN, PROCTER & HOAR LLP
ONE BEACON STREET EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02108 BOSTON, MASSACHUSETTS 02109
(617) 573-4800 (617) 570-1000
</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, as amended, 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE (1) (2) REGISTRATION FEE (2)
<S> <C> <C>
Common Stock, par value $.01 per share...................... $156,400,000 $41,290
</TABLE>
(1) Includes shares of common stock which the underwriters have the option to
purchase from PRAECIS to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 8, 2000
PROSPECTUS
SHARES
[LOGO]
PRAECIS PHARMACEUTICALS INCORPORATED
COMMON STOCK
$ PER SHARE
---------
We are selling shares of our common stock. We have granted the
underwriters a 30-day option to purchase up to an additional shares of
common stock to cover over-allotments.
This is the initial public offering of our common stock. We currently expect
that the initial public offering price to be between $ and $ per
share. We have applied to have our common stock included for quotation of our
common stock on the Nasdaq National Market under the symbol "PRCS."
--------------
INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 7.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
--------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
----------- -----------
<S> <C> <C>
Public Offering Price $ $
Underwriting Discount $ $
Proceeds to PRAECIS (before expenses) $ $
</TABLE>
The underwriters expect to deliver the shares to purchasers on or about
, 2000.
--------------
SALOMON SMITH BARNEY
CIBC WORLD MARKETS
CREDIT SUISSE FIRST BOSTON
, 2000
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS
PROSPECTUS.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary.......................................... 3
Risk Factors................................................ 7
Information Regarding Forward-Looking Statements............ 17
Use of Proceeds............................................. 18
Dividend Policy............................................. 18
Capitalization.............................................. 19
Dilution.................................................... 20
Selected Financial Data..................................... 21
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 22
Business.................................................... 27
Management.................................................. 45
Relationships and Related Party Transactions................ 55
Principal Stockholders...................................... 56
Description of Capital Stock................................ 60
Shares Eligible For Future Sale............................. 65
Underwriting................................................ 67
Legal Matters............................................... 69
Experts..................................................... 69
Where You Can Find More Information......................... 70
Index to Financial Statements............................... F-1
</TABLE>
Until , 2000, all dealers that buy, sell or trade our common stock,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
PRAECIS-TM-, MASTRscreen-TM-, Rel-Ease-TM-, LEAP-TM-, Latranal-TM- and
Apan-TM- are trademarks of our company. This prospectus also contains
trademarks, trade names and service marks of other companies, including
Casodex-TM-, Lupron Depot-TM- and Zoladex-TM-, which are the property of their
respective owners.
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
YOU SHOULD READ THIS ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE "RISK FACTORS"
SECTION. IN ADDITION, WE INCORPORATE BY REFERENCE IMPORTANT BUSINESS AND
FINANCIAL INFORMATION IN THIS PROSPECTUS.
OUR COMPANY
We are a fully integrated drug discovery and development company with a lead
product, abarelix-depot-M, for the treatment of hormonally responsive prostate
cancer. To date, abarelix-depot-M has been tested in approximately 1,000
patients with prostate cancer at more than 100 clinical centers. We expect to
file a new drug application, or NDA, for abarelix-depot-M with the FDA by the
end of 2000 and to globally commercialize abarelix-depot-M with our
collaborators, Amgen Inc. and Sanofi-Synthelabo S.A. We believe that
abarelix-depot-M works in a unique manner that will allow this drug to
successfully compete in the approximately $2.0 billion worldwide market for
drugs used to treat prostate cancer.
In addition to developing abarelix-depot-M, we are developing
abarelix-depot-F for the treatment of diseases in women that can be addressed by
lowering estrogen levels. We have demonstrated the potential utility of
abarelix-depot-F in a phase I/II study for the treatment of endometriosis.
Endometriosis is a painful, long-lasting condition affecting an estimated five
million women in the United States. We believe that this patient population is
largely untreated. To date, abarelix-depot-F has been tested at more than 20
clinical centers in more than 100 patients with endometriosis and is now in
phase II/III clinical testing. Due to its unique formulation and the manner in
which it works, we believe that abarelix-depot-F will expand the existing market
for drugs to treat endometriosis and fulfill a significant unmet need.
We developed abarelix using our proprietary technology, that we refer to as
Ligand Evolution to Active Pharmaceuticals, or LEAP. This technology enables us
to rapidly analyze large numbers of molecules and identify those that have
desired properties to be further developed into drugs. Using this technology, we
can examine in excess of 1,000 times more molecules for drug development than
can be examined using conventional technologies, in a fraction of the time.
We used our LEAP technology to develop Apan, our drug for the treatment of
the more than four million Americans suffering from Alzheimer's Disease. We
expect to file an investigational new drug application with the FDA and begin
clinical trials with Apan within the next 12 months. Apan addresses what is
thought to be the underlying cause of Alzheimer's Disease, rather than the
symptoms.
To date, LEAP technology has been valuable in the development of our
pipeline of drugs. We believe LEAP's power and utility provide us with an
opportunity to realize the potential for new drug targets coming out of the
Human Genome Project, an effort to determine the entire sequence of the DNA of
the genes of human beings.
The potential commercialization of abarelix depot-M and abarelix depot-F as
once-a-month injectable drugs is made possible through the formulation of these
drugs in our proprietary drug delivery system known as Rel-Ease. We have
demonstrated that Rel-Ease is also useful for formulating other drugs in
long-acting, or depot forms, and we believe that it may have significant
commercial potential. We have an issued patent that covers the general
application of this technology for a broad range of drugs.
OUR BUSINESS STRATEGY
Our objective is to combine our skills, expertise and proprietary technology
platform to rapidly develop and commercialize drugs that address significant
clinical needs. We are pursuing the following strategy to achieve this
objective:
- extend the commercial potential of abarelix by expanding into additional
disease areas that can be treated by lowering male or female hormones;
3
<PAGE>
- leverage our LEAP technology, together with opportunities presented by the
Human Genome Project, to discover new drugs;
- retain significant downstream economic potential of developed products in
collaborations and partnerships; and
- develop drugs licensed from third parties to supplement product
development.
OUR CORPORATE COLLABORATORS
To date, we have entered into a number of corporate collaborations and
licensing arrangements for the discovery, development and commercialization of
drug candidates. These collaborations and licensing agreements are summarized
below:
- AMGEN. We entered into an agreement with Amgen for the research,
development and commercialization of abarelix products in the United
States, Canada, Japan and selected other countries. Amgen has agreed to
pay us up to $25 million in signing and performance-based payments. Amgen
will pay all costs and expenses associated with the research, development
and commercialization of abarelix in the United States incurred during
1999 and a portion of 2000, and spent in accordance with the agreement.
Following these expenditures, we generally will share with Amgen all
additional research and development and sales and marketing costs and
expenses, and profits, associated with the research, development and
commercialization of abarelix products in the United States. In 1999, we
recognized $56.8 million of revenues under the agreement. In addition,
Amgen will provide us with a substantial line of credit, subject to
various limitations and conditions.
- SANOFI-SYNTHELABO. We entered into a license agreement with Synthelabo,
now Sanofi-Synthelabo, for the development and commercialization of
abarelix products in specific territories including Europe, Latin America,
the Middle East and various countries in Africa. Sanofi-Synthelabo has
agreed to pay us up to $64.6 million in signing and performance-based
payments, $5.0 million of the costs and expenses for the development in
the United States of abarelix products for prostate cancer, and 25% of all
United States costs and expenses for the development of abarelix products
for endometriosis and for any future additional diseases. We will receive
a share of the profits from the sale of abarelix products.
- HUMAN GENOME SCIENCES. We entered into an agreement with Human Genome
Sciences, Inc. for the discovery, development and commercialization of
compounds targeted to proprietary proteins encoded in the genome and
identified by them. Under the agreement, we will employ our proprietary
LEAP technology to generate drugs for these targets. We and Human Genome
Sciences will develop these drugs jointly and share equally in expenses
and revenues.
- PHARMACEUTICAL APPLICATIONS ASSOCIATES. We license the active ingredients
in Latranal, our drug for treating pain associated with muscle and tendon
injury, from Pharmaceutical Applications Associates LLC, which discovered
that a topical formulation of two generically available compounds was
effective for pain relief. We will conduct pre-clinical and clinical
studies to support the approval of Latranal and provide for its
manufacturing and commercialization. Pharmaceutical Applications
Associates is entitled to receive royalties on product sales.
-------------------
We were incorporated in Delaware in July 1993 under the name Pharmaceutical
Peptides, Inc. In June 1997, we changed our name to PRAECIS PHARMACEUTICALS
INCORPORATED. Our principal executive offices and primary research facilities
are located at One Hampshire Street, Cambridge, Massachusetts 02139, and our
telephone number is (617) 494-8400. Our Web site address is www.praecis.com. We
do not incorporate by reference into this prospectus the information on our Web
site, and you should not consider it as part of this prospectus.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered......................... shares
Common stock outstanding after this shares
offering...................................
Use of proceeds.............................. For the production of abarelix drug product,
our new facility and related improvements,
clinical trials, preclinical testing and
other research and development activities,
sales and marketing expenses, the acquisition
of complementary businesses, products or
technologies, working capital and general
corporate purposes.
Proposed Nasdaq National Market symbol....... "PRCS"
</TABLE>
Unless otherwise indicated, all information contained in this prospectus:
- assumes no exercise of the underwriters' option to purchase up to
additional shares of common stock to cover over-allotments;
- reflects a 2-for-1 split of our common stock to take effect prior to the
completion of this offering;
- reflects the automatic conversion of all of our convertible preferred
stock into common stock prior to the completion of this offering; and
- gives effect to the adjustment of certain warrants, so that upon the
closing of this offering the warrants will be exercisable for 111,495
shares of common stock rather than for convertible preferred stock.
The number of shares of common stock to be outstanding immediately after the
offering:
- is based upon 31,966,545 shares outstanding as of December 31, 1999;
- does not take into account 8,211,644 shares of common stock issuable upon
the exercise of options outstanding as of December 31, 1999, at a weighted
average price of $3.35 per share; and
- does not take into account 515,940 shares of common stock issuable upon
the exercise of warrants outstanding as of December 31, 1999, at a
weighted average exercise price of $10.39 per share.
5
<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Corporate collaborations...................... $ -- $ -- $15,118 $37,624 $61,514
Contract services............................. -- 876 2,615 1,943 --
------- ------- ------- ------- -------
Total revenues............................ -- 876 17,733 39,567 61,514
Costs and expenses:
Research and development...................... 3,687 7,947 15,013 33,704 48,764
General and administrative.................... 1,609 2,120 3,780 3,605 6,173
------- ------- ------- ------- -------
Operating income (loss)......................... (5,296) (9,191) (1,060) 2,258 6,577
Net income (loss)............................... $(5,099) $(8,564) $ 204 $ 5,674 $ 9,250
======= ======= ======= ======= =======
Net income (loss) per share:
Basic......................................... $ (1.59) $ (2.62) $ 0.05 $ 0.99 $ 1.51
======= ======= ======= ======= =======
Diluted....................................... $ (1.59) $ (2.62) $ 0.01 $ 0.16 $ 0.24
======= ======= ======= ======= =======
Weighted average number of common shares:
Basic......................................... 3,199 3,263 4,446 5,738 6,106
Diluted....................................... 3,199 3,263 28,270 35,139 37,849
</TABLE>
<TABLE>
<S> <C>
Pro forma net income per share:
Basic..................................................................................... $ 0.29
=======
Diluted................................................................................... $ 0.24
=======
Pro forma weighted average number of common shares:
Basic..................................................................................... 31,714
Diluted................................................................................... 37,849
</TABLE>
Pro forma basic and diluted net income per share have been calculated
assuming the conversion of all previously outstanding shares of convertible
preferred stock into common stock as if the stock had been converted immediately
upon its issuance.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------
PRO FORMA
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 94,525
Working capital............................................. 86,220
Total assets................................................ 140,331
Total stockholders' equity.................................. 87,716
</TABLE>
The pro forma as adjusted balance sheet reflects this offering and issuance
of the related shares of common stock and the automatic conversion into common
stock of all outstanding shares of convertible preferred stock.
6
<PAGE>
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES SIGNIFICANT RISKS. YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISKS BEFORE YOU DECIDE TO BUY OUR COMMON
STOCK.
WE EXPECT FUTURE OPERATING LOSSES BECAUSE WE HAVE NOT YET MARKETED OR SOLD ANY
OF OUR PRODUCTS
As of December 31, 1999, we had an accumulated deficit of approximately
$1.1 million. We expect to have net losses in fiscal 2000 and over the next
several years. All of our potential products are in the research or development
stage. We have not yet marketed or sold any of our products, and we may not
succeed in developing and marketing any product in the future. To date, we have
derived all of our revenues from signing, performance-based, cost sharing and
contract services payments under our collaboration and license agreements and
will continue to do so for at least the next several years. In addition, we
expect to continue to spend significant amounts to continue clinical studies,
obtain regulatory approval for our product candidates and expand our facilities.
We also intend to expend substantial amounts to fund additional research and
development for other products, enhance our core technologies, and for general
and administrative purposes. As a result, we expect that our operating expenses
will increase significantly in the near term, resulting in significant operating
losses for fiscal 2000 and the next several years. We cannot assure you that we
will be profitable in the future or, if we are profitable, that it will be
sustainable.
IF OUR CLINICAL TRIALS ARE NOT SUCCESSFUL, WE WILL NOT OBTAIN THE REGULATORY
APPROVAL REQUIRED TO MARKET AND SELL OUR PRODUCTS
To gain regulatory approval from the FDA and foreign regulatory authorities
for the commercial sale of any product, we must demonstrate the safety and
efficacy of the product in clinical trials. If the product is intended to treat
a long-lasting disease, such as cancer or Alzheimer's Disease, we must gather
data over an extended period of time. There are many risks associated with our
clinical trials. For example, promising results in early trials may not be
repeated in later trials. Additionally, data obtained from preclinical and
clinical activities are susceptible to varying interpretations that could impede
regulatory approval. Further, some patients in our prostate cancer and
Alzheimer's Disease programs have a high risk of death, age-related disease or
other adverse medical events not related to our products. These events may
effect the statistical analysis of the safety and efficacy of our products.
In addition, our ongoing or future clinical trials may be delayed or
terminated. Many factors can delay or terminate a clinical trial. A clinical
trial may experience slow patient enrollment or lack of sufficient drug
supplies. Adverse medical events or side effects in treated patients may occur,
and there may be a real or perceived lack of effectiveness of the drug being
tested. Future governmental action or changes in FDA policy may also result in
delays or rejection. Accordingly, we may not be able to obtain product
registration or marketing approval for abarelix-depot-M, abarelix-depot-F, or
for any of our other products, based on the results of our clinical trials.
If we are delayed in obtaining or are unable to obtain regulatory approval
to market our products, we may exhaust our available resources, including the
proceeds from this offering, significantly sooner than we had planned. If this
happened, we would need to raise additional funds to complete commercialization
of our lead products and continue our research and development programs. We
cannot assure you that we would be able to obtain these additional funds on
favorable terms, if at all.
IF WE ARE UNABLE TO OBTAIN AND MAINTAIN REGULATORY APPROVAL FOR OUR PRODUCTS, WE
WOULD BE UNABLE TO MARKET, OR CONTINUE TO MARKET, OUR PRODUCTS AND WOULD INCUR
INCREASING OPERATING LOSSES
The development and sale of our products is subject to extensive regulation
by governmental authorities. Obtaining and maintaining regulatory approval
typically is costly and takes many years. Regulatory authorities have
substantial discretion to terminate clinical trials, delay or withhold
7
<PAGE>
registration and marketing approval, and mandate product recalls. Failure to
comply with applicable regulatory requirements may result in criminal
prosecution, civil penalties, recall or seizure of products, total or partial
suspension of production or injunction, as well as other regulatory action
against our potential products or us. Outside the United States, our ability to
market a product is contingent upon receiving a marketing authorization from the
appropriate regulatory authorities. This foreign regulatory approval process
includes all of, and in some cases, additional, risks associated with the FDA
approval described above.
If we obtain regulatory approval for a product, the approval will be limited
to those diseases for which our clinical trials demonstrate the product is safe
and effective. To date, none of our products have received regulatory approval
for commercial sale. If we or our collaborators are unable to obtain and
maintain regulatory approval for our products, we would likely incur increasing
operating losses that could require us to cease operations. A more detailed
discussion regarding government regulation of our products is included in this
prospectus under the heading "Business--Government Regulation."
EVEN IF OUR PRODUCTS ARE APPROVED FOR MARKETING AND SALE, THEY MAY FAIL TO
ACHIEVE MARKET ACCEPTANCE AND, ACCORDINGLY, MAY NEVER BE COMMERCIALLY SUCCESSFUL
Many factors may affect the market acceptance and commercial success of any
of our potential products, including:
- the timing of market entry relative to competitive products;
- the effectiveness of our products, including any potential side effects,
relative to alternative treatment methods;
- the rate of adoption of our products by health care practitioners and
acceptance by the target population;
- the product labeling or product insert applicable to our products;
- the competitive features of our products as compared to other products,
including the frequency of administration of abarelix as compared to other
products, and physician and patient acceptance of these features;
- cost-effectiveness of our products and the availability of insurance or
other third-party reimbursement, in particular Medicare, for patients
using our products;
- the extent and success of our marketing efforts and those of our
collaborators; and
- unfavorable publicity concerning our products or any similar products.
If our products are not commercially successful, we may never become profitable.
IF OUR STRATEGIC PARTNERS REDUCE, DELAY OR TERMINATE THEIR FINANCIAL SUPPORT, WE
MAY BE UNABLE TO SUCCESSFULLY DEVELOP, MARKET, DISTRIBUTE OR SELL OUR PRODUCTS
We depend upon our corporate collaborators, in particular Amgen and
Sanofi-Synthelabo, to provide substantial financial support for developing our
products. We also will rely on them in some instances to help us obtain
regulatory approval for our products and to manufacture, market, distribute or
sell our products. Despite our dependence, we have limited control over the
amount and timing of resources that our corporate collaborators devote to our
programs or potential products. Also, our corporate collaborators may terminate
our collaboration agreements in various circumstances. For example, in
December 1998, our agreement with Roche Products Inc. was terminated by mutual
8
<PAGE>
agreement. Our agreements with Amgen and Sanofi-Synthelabo may be terminated by
mutual agreement, and, in addition:
- Amgen and Sanofi-Synthelabo each may terminate its agreement with us if
the results of any clinical trial of abarelix materially harms the
product's commercial prospects;
- Amgen may terminate its agreement with us at any time upon 90 days prior
written notice; and
- Sanofi-Synthelabo may terminate its agreement with us if specified adverse
events occur relating to our European patent applications or the related
patents which may be issued covering abarelix or our Rel-Ease technology.
We cannot assure you that any of our present or future collaborators will
meet their obligations to us under the collaboration agreements. If a
collaborator terminates its agreement with us or fails to perform its
obligations, the development or commercialization of the potential product or
research program may be delayed. This could require us to devote unforseen
additional resources to development and commercialization or to terminate one or
more of our drug development programs. The increased operating costs and lost
revenue associated with the termination of a collaboration agreement could
require us to seek funds in addition to the net proceeds of this offering to
meet our capital requirements. We cannot assure you that we would be able to
raise the necessary funds or negotiate additional corporate collaborations on
acceptable terms, if at all, and we may have to curtail or cease operations. For
instance, if, following the termination of our agreement with Roche, we had been
unable to enter into an alternative collaboration for the development and
commercialization of our abarelix products in a timely manner, we likely would
have needed to delay or cut back our abarelix or other drug development
programs, and to raise additional funds through one or more equity financings
prior to the time we had planned to do so and possibly on less than favorable
terms.
CONFLICTS WITH OUR CORPORATE COLLABORATORS OR COMPETITION FROM THEM COULD HARM
US
An important part of our strategy involves conducting proprietary research
programs. We may pursue opportunities that conflict with our collaborators'
businesses. Disagreements with our collaborators could develop over rights to
intellectual property, including the ownership of technology co-developed with
our collaborators. Our current or future collaborators could develop products in
the future that compete with our products. This could diminish our
collaborators' commitment to us, and reduce the resources they devote to
developing and commercializing our products. Conflicts or disputes with our
collaborators, and competition from them, could harm our relationships with our
other collaborators, restrict our ability to enter future collaboration
agreements and delay research, development or the commercialization of our
products.
ALTERNATIVE TREATMENTS ARE AVAILABLE WHICH MAY IMPAIR OUR ABILITY TO CAPTURE
MARKET SHARE FOR OUR PRODUCTS
Alternative products exist or are under development to treat the diseases
for which we are developing drugs. For example, the FDA has approved several
drugs for the treatment of hormonally responsive prostate cancer. If
abarelix-depot-M, our product for the treatment of prostate cancer, is approved
for commercialization, it may not compete favorably with existing treatments
that already have an established market share.
MANY OF OUR COMPETITORS HAVE SUBSTANTIALLY GREATER RESOURCES THAN WE DO AND MAY
BE ABLE TO DEVELOP AND COMMERCIALIZE PRODUCTS THAT MAKE OUR PRODUCTS AND
TECHNOLOGIES OBSOLETE AND NON-COMPETITIVE
The biotechnology industry is characterized by rapid technological change
and intense competition. We compete with biotechnology and pharmaceutical
companies for funding, access to new technology, research personnel and in
product research and development. Many of these companies have greater
9
<PAGE>
financial resources and more experience than we do in developing drugs,
obtaining regulatory approvals, manufacturing and marketing. We also face
competition from academic and research institutions and government agencies
pursuing competitive alternatives to our products and technologies. We expect
that all of our products under development will face intense competition from
existing or future drugs.
Our competitors may:
- successfully identify drug candidates or develop products earlier than we
do;
- obtain approvals from the FDA or foreign regulatory bodies more rapidly
than we do;
- develop products that are more effective, have fewer side effects, or cost
less than our products; or
- successfully market products that compete with our products.
IF WE ARE UNABLE TO OBTAIN AND ENFORCE VALID PATENTS, WE COULD LOSE OUR
COMPETITIVE ADVANTAGE
Our success will depend in part on our ability to obtain patents and
maintain adequate protection of our technologies and products. If we do not
adequately protect our intellectual property, competitors may be able to use our
technologies and erode our competitive advantage. Some foreign countries lack
rules and methods for defending intellectual property rights and do not protect
proprietary rights to the same extent as the United States. Many companies have
had difficulty protecting their proprietary rights in these foreign countries.
Patent positions are sometimes uncertain and usually involve complex legal
and factual questions. We can protect our proprietary rights from unauthorized
use by third parties only to the extent that our proprietary technologies are
covered by valid and enforceable patents or are effectively maintained as trade
secrets. To date, we hold seven issued patents. We have applied, and will
continue to apply, for patents covering both our technologies and products as we
deem appropriate. Our patent applications may be challenged or may not result in
issued patents. Moreover, any issued patents on our own inventions, or those
licensed from third parties, may not provide us with adequate protection, or may
be challenged, circumvented or narrowed by others. Third party patents may
impair or block our ability to conduct our business. Additionally, third parties
may independently develop products similar to our products, duplicate our
unpatented products, or design around any patented products we develop.
IF WE ARE UNABLE TO PROTECT OUR TRADE SECRETS AND PROPRIETARY INFORMATION, WE
COULD LOSE OUR COMPETITIVE ADVANTAGE IN THE MARKET
In addition to patents, we rely on a combination of trade secrets,
confidentiality, nondisclosure and other contractual provisions, and security
measures to protect our confidential and proprietary information. These measures
may not adequately protect our trade secrets or other proprietary information.
If they do not adequately protect our rights, third parties could use our
technology, and we could lose any competitive advantage we may have. In
addition, others may independently develop similar proprietary information or
techniques or otherwise gain access to our trade secrets, which could impair any
competitive advantage we may have.
IF OUR POTENTIAL PRODUCTS CONFLICT WITH PATENTS THAT COMPETITORS, UNIVERSITIES
OR OTHERS HAVE OBTAINED, THEN WE MAY BE UNABLE TO COMMERCIALIZE THOSE PRODUCTS
Our potential products may give rise to claims that they infringe other
patents. We could be forced to pay damages or to stop our manufacturing and
marketing of the affected products as a result of a legal action against us for
any infringement. In addition, we could be forced to obtain a license to
continue to manufacture or market the affected products, and we may not be able
to do so. We believe
10
<PAGE>
that there will continue to be significant litigation in our industry regarding
patent and other intellectual property rights. If we become involved in
litigation, it could consume a substantial portion of our resources. Even if
legal actions were meritless, defending a lawsuit could take significant time,
be expensive and divert management attention from other business concerns.
IF SOME OF OUR LICENSES ARE TERMINATED, WE COULD EXPERIENCE DELAYS OR BE UNABLE
TO COMPLETE THE DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCTS
Some of the technology that we use is licensed to us by third parties. If
these licenses were terminated, we could be forced to delay or discontinue some
of our development and commercialization programs. For example, if our abarelix
license were terminated, we could be forced to discontinue development and
commercialization of our abarelix products. We cannot assure you that we would
be able to license substitute technology in the future. Our inability to do so
would impair our ability to conduct our business.
BECAUSE WE DEPEND ON THIRD PARTIES TO CONDUCT LABORATORY TESTING AND HUMAN
CLINICAL STUDIES AND ASSIST US WITH REGULATORY COMPLIANCE, WE MAY ENCOUNTER
DELAYS IN PRODUCT DEVELOPMENT AND COMMERCIALIZATION
We currently have contracts with a limited number of research organizations
to design and conduct our laboratory testing and human clinical studies. If we
cannot contract for testing activities on acceptable terms, or at all, we may
not complete our product development efforts in a timely manner. To the extent
we rely on third parties for laboratory testing and human clinical studies, we
may lose some control over these activities. For example, third parties may not
complete testing activities on schedule or when we request. In addition, these
third parties may not conduct our clinical trials in accordance with regulatory
requirements. The failure of these third parties to carry out their contractual
duties could delay or prevent the development and commercialization of our
products.
IF WE FAIL TO DEVELOP OR MAINTAIN OUR RELATIONSHIPS WITH THIRD PARTY
MANUFACTURERS, OR IF THESE MANUFACTURERS FAIL TO PERFORM ADEQUATELY, WE MAY BE
UNABLE TO COMMERCIALIZE OUR PRODUCTS
Our capacity to conduct clinical trials and commercialize our products will
depend in part on our ability to manufacture our products on a large scale, at a
competitive cost and in accordance with regulatory requirements. We must
establish and maintain a commercial scale formulation and manufacturing process
for all of our potential products to complete clinical trials. We, our
collaborators or third party manufacturers may encounter difficulties with these
processes at any time that could result in delays in clinical trials, regulatory
submissions or in the commercialization of potential products.
We have no experience in large-scale product manufacturing, nor do we have
the resources or facilities to manufacture products on a commercial scale. We
have arrangements with third party manufacturers to produce abarelix and other
compounds for preclinical, clinical and commercial purposes. We will continue to
rely upon contract manufacturers to produce our products for a significant
period of time. If our supply agreements are not satisfactory, we may not be
able to develop or commercialize potential products as planned. The manufacture
of our potential products will be subject to current good manufacturing
practices regulations. Third party manufacturers are subject to regulatory
review and may fail to comply with these good manufacturing practices
regulations. If we need to replace our current third party manufacturers, or
contract with additional manufacturers, we must conduct new product testing and
facility compliance inspections. This testing and inspection is costly and
time-consuming. Any of these factors could prevent, or cause delays in,
obtaining regulatory approvals for, and manufacturing, marketing or selling of,
our products and could also result in significantly higher operating expenses.
11
<PAGE>
If we fail to meet our manufacturing and supply obligations under our
agreements with either Amgen or Sanofi-Synthelabo, they may assume manufacturing
responsibility under their agreements. In addition, if this occurs, we must pay
Sanofi-Synthelabo its incremental costs of assuming manufacturing
responsibility.
DUE TO OUR INEXPERIENCE AND OUR LIMITED SALES AND MARKETING STAFF, WE WILL
DEPEND ON THIRD PARTIES TO SELL AND MARKET OUR PRODUCTS
We have no experience in marketing or selling pharmaceutical products and
have a limited marketing and sales staff. To achieve commercial success for any
approved product, we must either develop a marketing and sales force or enter
into arrangements with third parties to market and sell our products. We have
granted Amgen and Sanofi-Synthelabo exclusive commercialization rights for
abarelix products in defined territories. Our marketing and distribution
arrangements with Amgen and Sanofi-Synthelabo may not be successful or result in
any revenues to us. We cannot assure you that we will be able to enter into
marketing and sales agreements on acceptable terms, if at all, for any other
products.
OUR REVENUES WILL DIMINISH IF WE FAIL TO OBTAIN ACCEPTABLE PRICES OR ADEQUATE
REIMBURSEMENT FOR OUR PRODUCTS FROM THIRD PARTY PAYORS
The continuing efforts of government and third party payors to contain or
reduce the costs of health care will limit our commercial opportunity. For
example, in some foreign markets, pricing and profitability of prescription
pharmaceuticals are subject to government control. In the United States, we
expect that there will continue to be federal and state proposals for similar
controls. In addition, increasing emphasis on managed care in the United States
will continue to put pressure on the pricing of pharmaceutical products. Cost
control initiatives could decrease the price that any of our collaborators or we
receive for any products in the future. Further, cost control initiatives could
impair our collaborators' ability to commercialize our products, and our ability
to earn revenues from this commercialization.
Our ability to commercialize pharmaceutical products, alone or with
collaborators, may depend in part on the availability of reimbursement for our
products from:
- government and health administration authorities;
- private health insurers; and
- other third party payors, including Medicare.
We cannot predict the availability of reimbursement for newly approved
health care products. Third party payors, including Medicare, are challenging
the prices charged for medical products and services. Government and other third
party payors increasingly are limiting both coverage and the level of
reimbursement for new drugs and refusing, in some cases, to provide coverage for
a patient's use of an approved drug for purposes not approved by the FDA. Third
party insurance coverage may not be available to patients for any of our
products. If government and other third party payors do not provide adequate
coverage and reimbursement for our products, physicians may not prescribe them.
If we are unable to offer physicians comparable or superior financial motivation
to use our products, we may not be able to generate significant revenues.
OUR PURCHASE OF A NEW FACILITY WILL REQUIRE SUBSTANTIAL FUNDS FOR WHICH WE MAY
BE UNABLE TO SECURE ADEQUATE DEBT FINANCING, WHICH COULD ALTER OUR PLANNED USE
OF PROCEEDS IN AN ADVERSE MANNER
We have exceeded the capacity of our current facilities, and recently agreed
to purchase a new facility in the western suburbs of Boston. We will spend
substantial funds to purchase this facility and make necessary improvements. We
may be unable to borrow sufficient funds to do so on a timely basis, or at all.
If we cannot borrow money, we will be required to use more proceeds from this
offering than we currently expect. In addition, we intend to lease part of our
new facility and sub-lease our current
12
<PAGE>
facility. We may not be able to find a suitable tenant or sub-tenant to occupy
these spaces in a timely manner, if at all.
IF WE LOSE OUR KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN ADDITIONAL
SKILLED PERSONNEL, WE MAY BE UNABLE TO PURSUE OUR PRODUCT DEVELOPMENT AND
COMMERCIALIZATION EFFORTS
We depend substantially on the principal members of our management and
scientific staff, including Malcolm L. Gefter, Ph.D., our Chief Executive
Officer, President and Chairman of the Board. We do not have employment
agreements with any of our officers or key personnel and none of our employees
have signed non-competition agreements. Any officer or employee can terminate
his or her relationship with us at any time and work for one of our competitors.
The loss of these key individuals would impair the achievement of our objectives
and could result in competitive harm.
Recruiting and retaining qualified scientific personnel to perform future
research and development work will be critical to our success. Competition for
skilled personnel is intense and the turnover rate can be high. Numerous
companies and academic and other research institutions compete with us for
experienced scientists. This competition may limit our ability to recruit and
retain qualified personnel on acceptable terms. Failure to attract and retain
personnel would prevent us from successfully developing our products or core
technologies and launching our products commercially. Our planned activities may
require the addition of new personnel, including management, and the development
of additional expertise by existing management personnel. The inability to
acquire these services or to develop this expertise could impair the growth of
our business.
WE MAY HAVE SUBSTANTIAL EXPOSURE TO PRODUCT LIABILITY CLAIMS AND MAY NOT HAVE
ADEQUATE INSURANCE TO COVER THOSE CLAIMS
We may be held liable if any product we develop, or any product made by
others using our technologies, causes injury. We have only limited product
liability insurance coverage for our clinical trials. We intend to obtain
product liability insurance to cover our products approved for marketing and
sale. This insurance may be prohibitively expensive or may not fully cover our
potential liabilities. Our inability to obtain adequate insurance coverage and
at an acceptable cost could prevent or inhibit the commercialization of our
products. If we are sued for any injury caused by products made by us or using
our technologies, our liability could exceed our total assets.
WE USE HAZARDOUS CHEMICALS AND RADIOACTIVE AND BIOLOGICAL MATERIALS IN OUR
BUSINESS AND POTENTIAL CLAIMS RELATING TO IMPROPER HANDLING, STORAGE OR DISPOSAL
OF THESE MATERIALS COULD BE TIME CONSUMING AND COSTLY
Our research and development processes involve the controlled use of
hazardous materials, including chemicals and radioactive and biological
materials. There are health risks associated with accidental exposure to
abarelix, including temporary impotence or infertility, and harmful effects on
pregnant women. Our operations also produce hazardous waste products. We cannot
eliminate the risk of accidental contamination or discharge from hazardous
materials and any resultant injury. Federal, state and local laws and
regulations govern the use, manufacture, storage, handling and disposal of
hazardous materials. Compliance with environmental laws and regulations may be
expensive. Current or future environmental regulations may impair our research,
development or production efforts. We might have to pay civil damages in the
event of an improper or unauthorized release of, or exposure of individuals to,
hazardous materials.
Some of our collaborators also work with hazardous materials in connection
with our collaborations. We have agreed to indemnify our collaborators in some
circumstances against damages and other liabilities arising out of development
activities or products produced in connection with these collaborations.
13
<PAGE>
FLUCTUATIONS IN CURRENCY EXCHANGE RATES COULD INCREASE THE PAYMENTS WE MUST MAKE
UNDER SOME OF OUR SUPPLY AGREEMENTS
We currently conduct all our business transactions in United States dollars.
However, under two of our supply agreements relating to our abarelix products,
the amount we are required to pay our supplier may be adjusted from time to time
if the applicable currency exchange rate varies by more than 10% from the agreed
exchange rate. Accordingly, significant exchange rate fluctuations could
materially increase the required payments under these agreements.
IF WE ENGAGE IN AN ACQUISITION, WE WILL INCUR A VARIETY OF COSTS AND MAY NEVER
REALIZE THE ANTICIPATED BENEFITS OF THE ACQUISITION
If appropriate opportunities become available, we may attempt to acquire
businesses, products or technologies that we believe are a strategic fit with
our business. We currently have no commitments or agreements for any
acquisitions. If we do undertake any transaction of this sort, the process of
integrating an acquired business, product or technology may result in unforeseen
operating difficulties and expenditures and may absorb significant management
attention that would otherwise be available for ongoing development of our
business. Moreover, we may fail to realize the anticipated benefits of any
acquisition. Future acquisitions could dilute your ownership interest in us and
could cause us to incur debt, expose us to future liabilities and result in
amortization expenses related to goodwill and other intangible assets.
OUR OR THIRD PARTIES' COMPUTER SYSTEMS MAY FAIL DURING THE YEAR 2000, WHICH
COULD DELAY DEVELOPMENT AND COMMERCIALIZATION OF OUR PRODUCTS
The year 2000 issue arises from computer programs written using two, rather
than four, digits to define the applicable year. Any computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. If our computer
systems, or the computer systems of the third parties we rely upon, experience
problems because of the year 2000 issue, it could delay development and
commercialization of our products or reduce our ability to cost-effectively
manage our business during the time required to fix these problems. We have
assessed our computer systems and do not expect any residual year 2000-related
problems. However, our systems could experience residual year 2000-related
problems in the future which could harm our operations. We have not assessed the
year 2000 readiness of our suppliers, corporate collaborators or other third
parties with which we conduct transactions. These third parties may encounter
year 2000-related problems in the future which could harm our operations.
THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK, AND YOU MAY NOT BE
ABLE TO RESELL SHARES OF OUR COMMON STOCK FOR A PROFIT
Prior to this offering, there has been no public market for our common
stock. We will determine the initial public offering price with the
underwriters. This price may not be the price at which the common stock will
trade after this offering. The market price of our common stock may decline
below the initial public offering price and an active trading market may not
develop after this offering. We cannot assure you of the extent to which an
active trading market will develop or how liquid that market may become.
THE MARKET PRICE OF OUR COMMON STOCK MAY EXPERIENCE EXTREME PRICE AND VOLUME
FLUCTUATIONS
The market price of the common stock may fluctuate substantially due to a
variety of factors, including:
- announcements of technological innovations or new products by us or our
competitors;
- announcement of FDA approval or disapproval of our products;
14
<PAGE>
- the success rate of our discovery efforts and clinical trials leading to
performance-based payments and revenues under our collaborations;
- developments or disputes concerning patents or proprietary rights,
including announcements of infringement, interference or other litigation
against us or our licensors;
- the willingness of collaborators to commercialize our products and the
timing of commercialization;
- announcements concerning our competitors, or the biotechnology or
pharmaceutical industry in general;
- public concerns as to the safety of our products or our competitors'
products;
- changes in government regulation of the pharmaceutical or medical
industry;
- changes in the reimbursement policies of third party insurance companies
or government agencies;
- actual or anticipated fluctuations in our operating results;
- changes in financial estimates or recommendations by securities analysts;
- changes in accounting principles; and
- the loss of any of our key scientific or management personnel.
In addition, the stock market has experienced extreme price and volume
fluctuations. The market prices of the securities of biotechnology companies,
particularly companies like ours without consistent product revenues and
earnings, have been highly volatile, and may continue to be highly volatile in
the future. This volatility has often been unrelated to the operating
performance of particular companies. In the past, securities class action
litigation has often been brought against companies that experience volatility
in the market price of their securities. Whether or not meritorious, litigation
brought against us could result in substantial costs and a diversion of
management's attention and resources.
WE EXPECT THAT OUR QUARTERLY RESULTS OF OPERATIONS WILL FLUCTUATE, AND THIS
FLUCTUATION COULD CAUSE OUR STOCK PRICE TO DECLINE
Our quarterly operating results have fluctuated in the past and are likely
to do so in the future. These fluctuations could cause our stock price to
decline. Some of the factors that could cause our operating results to fluctuate
include:
- the failure of any of our corporate collaborators to meet their payment
obligations, or termination of any of our agreements with them;
- the timing of development and commercialization of our abarelix products
leading to performance-based payments and revenues under our agreements
with our corporate collaborators; and
- the timing of our commercialization of other products resulting in
revenues.
Due to the possibility of fluctuations in our revenues and expenses, we
believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance.
IF OUR EXISTING STOCKHOLDERS SELL A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON
STOCK IN THE PUBLIC MARKET, OUR STOCK PRICE MAY DECLINE
After this offering, we will have outstanding shares of common stock. Of
these shares, the shares being offered in this offering will be freely
tradeable. Our directors, executive officers, substantially all of our
stockholders and all our warrant holders have agreed that they will not sell or
otherwise dispose of any shares of common stock without the prior written
consent of Salomon Smith
15
<PAGE>
Barney Inc. for a period of 180 days after the completion of this offering.
Salomon Smith Barney Inc. may waive these lock-up agreements.
After the 180-day lock-up period expires, we expect to file a registration
statement covering shares of common stock issued or issuable under our stock
option plan, its predecessor plan and our employee stock purchase plan. In
addition, holders of 30,652,908 shares of our common stock have registration
rights. In the future, we may issue additional shares to our employees, in
connection with corporate alliances, and to raise capital. Due to these factors,
sales of a substantial number of shares of our common stock in the public market
could occur at any time.
OUR OFFICERS AND DIRECTORS WILL CONTROL % OF OUR COMMON STOCK AND WILL BE ABLE
TO SIGNIFICANTLY INFLUENCE CORPORATE ACTIONS
After this offering, our executive officers, directors and stockholders
affiliated with them will control approximately % of our common stock, based
on their beneficial ownership as of December 31, 1999 and including options held
by them that are exercisable within 60 days of December 31, 1999. As a result,
these stockholders, acting together, will be able to significantly influence all
matters requiring approval by our stockholders, including the election of
directors and the approval of mergers or other business combination
transactions. The interests of this group of stockholders may not always
coincide with our interests or the interests of other stockholders.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND UNDER DELAWARE LAW MAY
MAKE AN ACQUISITION OF US MORE DIFFICULT, EVEN IF AN ACQUISITION WOULD BE
BENEFICIAL TO OUR STOCKHOLDERS
Provisions in our certificate of incorporation and bylaws may delay or
prevent an acquisition of us or a change in our management. In addition, because
we are incorporated in Delaware, we are governed by the provisions of
Section 203 of the Delaware General Corporate Law. These provisions may prohibit
large stockholders, in particular those owning 15% or more of our outstanding
voting stock, from merging or combining with us. These provisions in our
charter, bylaws and under Delaware law could reduce the price that investors
might be willing to pay for shares of our common stock in the future and result
in the market price being lower that it would be without these provisions.
WE MAY SPEND A SUBSTANTIAL PORTION OF THE NET PROCEEDS OF THIS OFFERING IN WAYS
WHICH DO NOT YIELD A FAVORABLE RETURN
We have broad discretion to allocate the net proceeds from this offering. As
a result, investors in this offering will be relying upon our judgment with only
limited information about our specific intentions regarding the use of proceeds.
We cannot assure you that the proceeds will be invested to yield a favorable
return.
INVESTORS IN THIS OFFERING WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION OF
THEIR INVESTMENT
We expect the initial public offering price of our common stock to be
substantially higher than the book value per share of the outstanding common
stock. Investors purchasing shares of common stock in this offering will incur
immediate substantial dilution in the amount of $ per share based upon an
assumed initial public offering price of $ per share. To the extent
outstanding stock options or warrants are exercised, there will be further
dilution to new investors.
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<PAGE>
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. The forward-looking
statements are contained principally in the sections entitled "Prospectus
Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business." These statements involve known and
unknown risks, uncertainties and other factors which may cause our actual
results, performance or achievements to be materially different from any future
results, performances or achievements expressed or implied by the
forward-looking statements. Forward-looking statements include, but are not
limited to, statements about:
- the progress of our product development programs;
- the status of our clinical development of drug candidates, clinical trials
and the regulatory approval process;
- our estimates for future revenues and profitability;
- our estimates regarding our capital requirements and our needs for
additional financing;
- developments relating to our selection and licensing of targets;
- our ability to attract development partners with acceptable development,
regulatory and commercialization expertise;
- the benefits to be derived from corporate collaborations, including
collaborations relating to the development and commercialization of
abarelix products;
- the benefits to be derived from license agreements and other collaborative
efforts for the development and commercialization of products; and
- sources of revenues and/or anticipated revenues, including contributions
from corporate collaborations, license agreements and other collaborative
efforts for the development and commercialization of products, and the
continued viability and duration of those agreements and efforts.
In some cases, you can identify forward-looking statements by terms such as
"may," "will," "should," "could," "would," "expects," "plans," "anticipates,"
"believes," "estimates," "projects," "predicts," "potential" and similar
expressions intended to identify forward-looking statements. These statements
reflect our current views with respect to future events and are based on
assumptions and subject to risks and uncertainties. Given these uncertainties,
you should not place undue reliance on these forward-looking statements. We
discuss many of these risks in this prospectus in greater detail under the
heading "Risk Factors." Also, these forward-looking statements represent our
estimates and assumptions only as of the date of this prospectus.
You should read this prospectus and the documents that we incorporate by
reference in this prospectus completely and with the understanding that our
actual future results may be materially different from what we expect. We
qualify all of our forward-looking statements by these cautionary statements.
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<PAGE>
USE OF PROCEEDS
We expect that the net proceeds we will receive from the sale of the
shares of common stock offered by us will be approximately
$ , based on an assumed initial public offering price of $ per
share, and after deducting underwriting discounts and commissions and estimated
offering expenses payable by us. If the underwriters exercise their
over-allotment option in full, our net proceeds will be approximately
$ . We currently intend to use the net proceeds of this offering as
follows:
- approximately $30.0 million to fund the production of abarelix drug
product;
- approximately $30.0 million towards the purchase of our new facility and
related improvements;
- an undetermined amount for clinical trial expenses related to abarelix and
other preclinical testing and expansion of research and development
activities;
- an undetermined amount for sales and marketing expenses associated with
the commercial launch of abarelix; and
- for working capital and general corporate purposes.
In addition, we also may use a portion of the net proceeds of this offering
for the acquisition of complementary businesses, products or technologies. While
we evaluate these types of opportunities from time to time, there are currently
no agreements or negotiations with respect to any specific transaction.
We have not yet determined all of our expected expenditures, and we cannot
estimate the amounts to be used for each purpose set forth above. Accordingly,
our management will have significant flexibility in applying a significant
portion of the net proceeds of this offering. Pending use of the net proceeds as
described above, we intend to invest the net proceeds of this offering in
short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock, and
we do not currently intend to pay any cash dividends on the common stock in the
foreseeable future. We expect to retain future earnings, if any, to fund the
development and growth of our business. Future dividends, if any, will be
determined by our board of directors.
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CAPITALIZATION
The following table describes our capitalization as of December 31, 1999:
- on an actual basis; and
- on a pro forma as adjusted basis to give effect to this offering and
issuance of the related shares of common stock and the automatic
conversion of all of our outstanding shares of convertible preferred stock
into common stock.
You should read this table together with the section of this prospectus with
the heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and our financial statements and the related notes
appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
---------------------------
PRO FORMA
ACTUAL AS ADJUSTED
---------- --------------
(IN THOUSANDS, EXCEPT SHARE
AND PER SHARE DATA)
<S> <C> <C>
Cash and cash equivalents................................... $94,525 $
======= ========
Stockholders' equity:
Preferred stock--unallocated, $0.01 par value: 312,700
shares authorized, actual; 10,000,000 shares authorized,
pro forma as adjusted; none issued and outstanding,
actual and pro forma as adjusted........................ --
Series A, B, C, D and E convertible preferred stock, $0.01
par value: 3,437,300 shares authorized, actual; none
authorized, pro forma as adjusted; 3,417,300 shares
issued and outstanding, actual; none issued and
outstanding, pro forma as adjusted...................... 35
Common stock, $0.01 par value: 60,000,000 shares
authorized, actual; 200,000,000 shares authorized, pro
forma as adjusted; 6,358,684 shares issued and
outstanding, actual; shares issued and
outstanding, pro forma as adjusted...................... 64
Additional paid-in capital................................ 88,710
Accumulated deficit....................................... (1,093)
-------
Total stockholders' equity.............................. 87,716
------- --------
Total capitalization.................................. $87,716 $
======= ========
</TABLE>
The actual and pro forma as adjusted information set forth in the table
excludes:
- 8,211,644 shares of common stock issuable upon the exercise of stock
options outstanding as of December 31, 1999, at a weighted average
exercise price of $3.35 per share;
- 515,940 shares reserved for issuance upon the exercise of warrants
outstanding as of December 31, 1999, at a weighted average exercise price
of $10.39 per share;
- an additional 1,558,816 shares of common stock reserved for issuance under
our Amended and Restated 1995 Stock Plan; and
- an additional 160,000 shares of common stock reserved for issuance under
our Employee Stock Purchase Plan.
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DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
approximately $ , or $ per share of common stock. Pro forma net tangible book
value per share represents the amount of our pro forma total tangible assets
less total liabilities, divided by the pro forma number of shares of common
stock outstanding assuming the conversion of all shares of convertible preferred
stock outstanding as of December 31, 1999 into 25,607,861 shares of common
stock. Pro forma net tangible book value dilution per share represents the
difference between the amount per share paid by purchasers of shares of common
stock in this offering and the pro forma net tangible book value per share of
common stock immediately after completion of this offering on a pro forma as
adjusted basis. After giving effect to the sale of the shares of common
stock by us at an assumed initial public offering price of $ per share, and
after deducting the underwriting discounts and commissions and estimated
offering expenses payable by us, our pro forma net tangible book value as of
December 31, 1999 would have been $ , or $ per share of common stock. This
represents an immediate increase in net tangible book value of $ per share of
common stock to existing common stockholders and an immediate dilution in pro
forma net tangible book value of $ per share to new investors purchasing shares
of common stock in this offering. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share before this
offering................................................ $
Increase in pro forma net tangible book value per share
attributable to this offering...........................
-------------------------
Pro forma net tangible book value per share after this
offering..................................................
-------------------------
Dilution per share to new investors......................... $
=========================
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1999, the number of shares of common stock purchased from us, the total
consideration paid and the average price per share paid by existing and new
investors purchasing shares of common stock in this offering, before deducting
underwriting discounts and commissions and offering expenses payable by us.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.............. % $ % $
New investors......................
-------- ----- -------- -----
Total.......................... 100.0% 100.0%
======== ===== ======== =====
</TABLE>
The tables and calculations above assume no exercise of options outstanding
under our 1995 Stock Plan and no exercise of outstanding warrants. As of
December 31, 1999, there were 8,211,644 shares of common stock reserved for
issuance upon the exercise of outstanding options at a weighted average exercise
price of $3.35 per share and 515,940 shares of common stock reserved for
issuance upon the exercise of outstanding warrants at a weighted average
exercise price of $10.39 per share. To the extent that any of these options or
warrants are exercised, there will be further dilution to new investors.
20
<PAGE>
SELECTED FINANCIAL DATA
You should read the following selected financial data in conjunction with
our financial statements and the related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" appearing elsewhere
in this prospectus. Our statement of operations for each of the three years in
the period ended December 31, 1999, and our balance sheet data at December 31,
1998 and 1999, are derived from our financial statements that have been audited
by Ernst & Young LLP, independent auditors, and which we include elsewhere in
this prospectus. Our statement of operations data for the years ended
December 31, 1995 and 1996 and the balance sheet data at December 31, 1995, 1996
and 1997 are derived from our audited financial statements which we do not
include in this prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Corporate collaborations.............................. $ -- $ -- $15,118 $37,624 $61,514
Contract services..................................... -- 876 2,615 1,943 --
------- ------- ------- ------- -------
Total revenues...................................... -- 876 17,733 39,567 61,514
Costs and expenses:
Research and development.............................. 3,687 7,947 15,013 33,704 48,764
General and administrative............................ 1,609 2,120 3,780 3,605 6,173
------- ------- ------- ------- -------
Total costs and expenses............................ 5,296 10,067 18,793 37,309 54,937
------- ------- ------- ------- -------
Operating income (loss)................................. (5,296) (9,191) (1,060) 2,258 6,577
Interest income (net)................................... 197 627 1,364 3,516 4,473
------- ------- ------- ------- -------
Income (loss) before income taxes....................... (5,099) (8,564) 304 5,774 11,050
Provision for income taxes.............................. -- -- 100 100 1,800
------- ------- ------- ------- -------
Net income (loss)....................................... $(5,099) $(8,564) $ 204 $ 5,674 $ 9,250
======= ======= ======= ======= =======
Net income (loss) per share:
Basic................................................. $ (1.59) $ (2.62) $ 0.05 $ 0.99 $ 1.51
======= ======= ======= ======= =======
Diluted............................................... $ (1.59) $ (2.62) $ 0.01 $ 0.16 $ 0.24
======= ======= ======= ======= =======
Weighted average number of common shares:
Basic................................................. 3,199 3,263 4,446 5,738 6,106
Diluted............................................... 3,199 3,263 28,270 35,139 37,849
Pro forma net income per share:
</TABLE>
<TABLE>
<S> <C>
Basic................................................................................................. $ 0.29
=======
Diluted............................................................................................... $ 0.24
=======
Pro forma weighted average number of common shares:
Basic................................................................................................. 31,714
Diluted............................................................................................... 37,849
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments.................................... $2,595 $15,220 $40,190 $85,298 $ 94,525
Working capital.................................. 1,727 13,092 31,802 76,626 86,220
Total assets..................................... 5,250 18,213 47,361 90,625 140,331
Capital lease obligations, net of current
portion........................................ 864 717 249 59 --
Total stockholders' equity....................... 3,486 14,761 34,907 78,373 87,716
</TABLE>
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS IN CONJUNCTION WITH
"SELECTED FINANCIAL DATA" AND OUR FINANCIAL STATEMENTS AND THE RELATED NOTES
INCLUDED ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We were incorporated in July 1993 as Pharmaceutical Peptides, Inc. and began
operations in January 1994. In June 1997, we changed our name to PRAECIS
PHARMACEUTICALS INCORPORATED. Since our inception, we have developed drugs for
the treatment of a variety of human diseases. Our lead program is the
development of abarelix, a drug to treat diseases that respond to the lowering
of hormone levels. We have entered into collaborations with Amgen and Sanofi-
Synthelabo to further develop and commercialize our abarelix products.
Since our inception, we have had no revenues from product sales. We have
received revenues in the form of signing, performance-based, cost sharing and
contract services payments from corporate collaborations. These revenues enabled
us to achieve profitability and positive cash flow before any financing activity
for fiscal 1997, 1998 and 1999. Through December 31, 1999, we recognized
approximately $119.7 million in revenues under these collaboration agreements.
Under these agreements, we could receive additional non-refundable
performance-based payments and reimbursement for ongoing development costs, as
well as a percentage of future product profits. For the next several years, we
expect that our sources of revenue, if any, will consist primarily of interest
income and payments from our corporate collaborators.
Our accumulated deficit as of December 31, 1999 was approximately
$1.1 million. Substantially all of our expenditures to date have been for drug
development activities and for general and administrative expenses.
Due to the high costs associated with preparing to launch our first product,
as well as other research and development and general and administrative
expenses, we expect to have net operating losses for fiscal 2000 and the
following several years. We do not expect to generate operating income until
several years after marketing approval of abarelix-depot-M by the FDA. We will
require regulatory approval to market all of our future products.
In August 1996, we entered into a collaboration and license agreement with
Boehringer Ingelheim International GmbH, which provided approximately
$5.4 million in payments from Boehringer to us over approximately two years.
These payments consisted of an initial signing payment and additional payments
for the screening of Boehringer compounds and reimbursement of personnel and
related materials expenses. We also are entitled to receive royalties on the net
sales of any product containing a Boehringer compound which was screened by us
that Boehringer develops and commercializes.
In May 1997, we entered into an agreement with Sanofi-Synthelabo for the
development and commercialization of abarelix products in Europe, Latin America,
the Middle East and various countries in Africa. Under our agreement with
Sanofi-Synthelabo, we could receive up to approximately $69.6 million in
non-refundable fees and performance-based payments. For supply of product to
Sanofi-Synthelabo, we receive a transfer price which represents our cost of
goods sold plus a profit margin that varies based on sales price and volume.
Additionally, we are entitled to receive reimbursement for ongoing development
costs. To date, we have received a total of approximately $30.3 million in
non-refundable fees, performance-based payments and reimbursement for ongoing
development costs under the Sanofi-Synthelabo agreement.
In 1997 and 1998, we entered into agreements with Roche Products for the
research, development and commercialization of abarelix products in all
countries outside of the Sanofi-Synthelabo territory. In December 1998, the
Roche agreement was terminated by mutual agreement. During the term of the
22
<PAGE>
agreement, Roche paid to us approximately $28.2 million in performance-based and
cost-sharing payments. Roche retains no rights to the abarelix program and has
no equity interest in us.
Effective March 1999, we entered into an agreement with Amgen for the
development and commercialization of abarelix products in the countries not
covered by the Sanofi-Synthelabo agreement. Under the agreement, we could
receive up to $25.0 million in signing and performance-based fees, of which we
have received $10.0 million to date. Amgen will pay all costs and expenses
associated with the research, development and commercialization of abarelix
products in the United States incurred during 1999 and a portion of 2000, and
spent in accordance with the agreement. Following these expenditures, in general
we will share with Amgen all subsequent United States research and development
costs for abarelix products through the launch period and we will reimburse
Amgen for a share of costs associated with establishing a sales and marketing
infrastructure in the United States. In general, we will receive a transfer
price and royalty based on a sharing of the resulting profits on sales of
abarelix products in the United States. All program expenses in Amgen's licensed
territory outside the United States will be borne by Amgen, and we will receive
a royalty on net sales of abarelix products in those territories.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
Revenues for the year ended December 31, 1999 were $61.5 million as compared
to $39.6 million for the corresponding period in 1998. The increase in revenues
was due to significantly increased cost-sharing payments under our collaboration
agreements, principally our agreement with Amgen.
Research and development expenses for the year ended December 31, 1999 were
$48.8 million as compared to $33.7 million for the corresponding period in 1998.
The increase in research and development expenses was attributable primarily to
increased expenses related to two pivotal phase III clinical trials for the
application of abarelix to prostate cancer and phase I and II/III clinical
trials for the application of abarelix to endometriosis. Additional spending
increases were related to our Apan program, our Latranal program and core
research and development activities.
General and administrative expenses for the year ended December 31, 1999
were $6.2 million as compared to $3.6 million for the corresponding period in
1998. The increase in expenses reflects our participation in professional
forums, costs associated with marketing consultants and the purchase of market
data.
Net interest income for the year ended December 31, 1999 was $4.5 million as
compared to $3.5 million for the corresponding period in 1998. This increase was
attributable to an increase in the amount of cash available for investment
following our sale of $37.7 million of equity securities in April 1998.
The provision for income taxes for year ended December 31, 1999 was
$1.8 million as compared to $0.1 million for the corresponding period in 1998.
The provision increased because prior to 1999, we utilized net operating loss
carryforwards to offset substantially all of our taxable income.
YEARS ENDED DECEMBER 31, 1998 AND 1997
Revenues for the year ended December 31, 1998 were $39.6 million as compared
to $17.7 million for the corresponding period in 1997. Revenues for the year
ended December 31, 1998 included approximately $37.6 million earned under our
collaboration agreements and $2.0 million earned under the Boehringer agreement.
Revenues for the year ended December 31, 1997 included approximately
$15.1 million earned under our collaboration agreements and $2.6 million earned
under the Boehringer agreement.
23
<PAGE>
Research and development expenses for the year ended December 31, 1998 were
$33.7 million as compared to $15.0 million for the corresponding period in 1997.
The increase in expenses was attributable to the expansion of clinical trials
relating to abarelix, the hiring of additional research and development
personnel, including the commencement of the Provid Research division's
operations in New Jersey, and increased expenditures relating to the Alzheimer's
Disease program and core research and technologies.
General and administrative expenses for the year ended December 31, 1998
were $3.6 million as compared to $3.8 million for the corresponding period in
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 year ended December 31, 1998 was $3.5 million as
compared to $1.4 million for the corresponding period in 1997. The increase in
interest income was attributable to an increase in the amount of cash available
for investment resulting from the net proceeds of our sale of Series E
convertible preferred stock, as well as payments received pursuant to
collaboration agreements.
The provision for income taxes for the year ended December 31, 1998 was
$0.1 million which was consistent with the corresponding period in 1997. The
provision for income taxes during both years reflects our use of net operating
loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations since inception principally through private
placements of equity securities. We have received net proceeds of approximately
$9.5 million from the sale of our common stock, $0.5 million from the sale of
warrants to purchase common stock and $78.5 million from the sale of convertible
preferred stock. Additionally, we have received a total of approximately
$138.4 million for one-time signing payments and performance-based payments,
cost reimbursements and contract service payments under our collaboration
agreements. We also have received $10.9 million from interest on invested cash
balances and paid $0.4 million in interest expense associated with equipment
leasing. As of December 31, 1999, we had cash and cash equivalents of
$94.5 million and working capital of $86.2 million. We anticipate that these
existing capital resources, together with the net proceeds of this offering,
interest income and payments under our collaboration agreements, will enable us
to maintain currently planned operations for at least the next several years.
For the year ended December 31, 1999, net cash of $12.9 million was provided
by operating activities principally due to net income and an increase in current
liabilities, partially offset by an increase in accounts receivable and unbilled
revenues. The Company's investing activities for the year ended December 31,
1999 were limited to the purchase of property and equipment in the amount of
$3.6 million. The Company's financing activities for the year ended
December 31, 1999 were minimal since the Company completed its last equity
financing in 1998.
Subject to various limitations and conditions, Amgen will also provide us
with a substantial line of credit through 2002. Borrowings will bear interest at
market rates and will be secured by various receivables relating to abarelix
products. In addition, all borrowings under the line of credit must be repaid by
2008.
We expect our funding requirements to increase over the next several years
as we continue with current clinical trials for abarelix, initiate clinical
trials for additional products, prepare for a potential commercial launch of
abarelix products and continue to expand our research and development efforts.
Our expenditure requirements will depend on numerous factors, including:
- the progress of our research and development activities;
- the scope and results of preclinical testing and clinical trials;
24
<PAGE>
- the cost, timing and outcomes of regulatory reviews;
- the rate of technological advances;
- determinations as to the commercial potential of our products under
development;
- the status of competitive products;
- our ability to defend and enforce our intellectual property rights;
- the establishment, continuation or termination of third party
manufacturing or sales and marketing arrangements;
- the development of sales and marketing resources;
- the establishment of additional strategic or licensing arrangements with
other companies or acquisitions; and
- the availability of other financing.
At December 31, 1999, the Company had provided a valuation allowance of
$3.6 million for its deferred tax assets. The valuation allowance represents the
excess of the deferred tax asset over the benefit from future losses that could
be carried back if, and when, they occur. The valuation allowance decreased by
$2.7 million in 1999 due to utilization of previously unbenefitted tax credit
carryforwards.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk. Some of the securities that we invest in
may have market risk. This means that a change in prevailing interest rates may
cause the principal amount of the investment to fluctuate. For example, if we
hold a security that was issued with an interest rate fixed at the
then-prevailing rate and the prevailing interest rate later rises, the principal
amount of our investment will probably decline. To minimize this risk in the
future, we intend to maintain our portfolio of cash equivalents and short-term
investments in a variety of securities, including commercial paper, money market
funds and government and non-government debt securities. The average duration of
all of our investments in 1999 was less than one year. Due to the short-term
nature of these investments, we believe we have no material exposure to interest
rate risk arising from our investments. Therefore, no quantitative tabular
disclosure is required.
YEAR 2000 ISSUES
The year 2000 issue arises from computer programs written using two digits
rather than four to define the applicable year. Any computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
system failures or miscalculations following December 31, 1999, causing
disruptions of operations for companies using these computer programs or
hardware. Many companies' computer systems may still need to be upgraded or
replaced in order to avoid year 2000-related issues.
We, our corporate collaborators, suppliers and other third parties we rely
upon use a wide variety of information technologies, computer systems and
scientific equipment containing computer chips dedicated to a specific task. As
of January 31, 2000, neither we, nor to our knowledge, any of the third parties
we depend upon, have experienced any material problems associated with the year
2000 issue. If we or these third parties experience problems in the future as a
result of any year 2000-related issues, we could experience an interruption of
our research programs. We currently are unable to estimate the duration and
extent of any potential interruption, or estimate the effect that any
interruption may have on our future revenue. However, we believe that the impact
of any residual year 2000-related issues on our research operations will be
limited to the ongoing execution of new experiments, and we do not
25
<PAGE>
expect that any historical data would be affected. Costs to ensure that our
systems and networks are year 2000 compliant have not been and are not expected
to be material.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and Hedging Activities," which will be effective for 2001. This
statement establishes accounting and reporting standards requiring that every
derivative instrument, including various derivative instruments embedded in
other contracts, be recorded on the balance sheet as either an asset or
liability measured at its fair value. The statement also requires that changes
in the derivative's fair value be recognized in earnings unless specific hedge
accounting criteria are met. We do not anticipate that Statement of Financial
Accounting Standards No. 133 will have a significant impact on our operating
results or financial condition when adopted, since we currently do not engage in
hedging activities.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, which clarified the Securities and Exchange
Commission's views concerning revenue recognition policies and is effective no
later than the quarter ended March 31, 2000. We believe that our revenue
recognition policies comply with the Staff Accounting Bulletin.
26
<PAGE>
BUSINESS
OVERVIEW
We are a fully integrated drug discovery and development company. Our
product pipeline includes abarelix-depot-M, which we have tested in two pivotal
phase III clinical trials for the treatment of hormonally responsive prostate
cancer, and abarelix-depot-F, currently in phase II/III clinical trials for the
treatment of endometriosis. We are also developing Latranal, a locally-acting,
topically-applied pain reliever in preclinical development for the treatment of
acute and chronic muscle and tendon related pain, and Apan, our drug for the
treatment of Alzheimer's Disease. Other product candidates are in the research
phase.
We believe that we have established, and that our product pipeline
demonstrates the utility of, a new proprietary technology for the rapid and
cost-effective discovery and development of drugs. Our technology combines a
biological selection with a chemical modification process that enables us to
rapidly analyze large numbers of molecules and identify those that have desired
properties to be further developed into drugs. Using this technology, we can
examine in excess of 1,000 times more molecules for drug development than can be
examined using conventional technologies, in a fraction of the time. We believe
that we are the leader in this technological field that we refer to as Ligand
Evolution to Active Pharmaceuticals, or LEAP.
In addition to demonstrating that LEAP is a useful technical approach for
discovering and developing new drugs, we also have demonstrated that it is
cost-effective and practical. Using our private equity capital, we were able to
develop abarelix-depot-M and abarelix-depot-F sufficiently so that their
clinical and commercial utility could be satisfactorily demonstrated to
potential sales and marketing partners. We have generated adequate revenues
through our corporate collaborations to allow us to operate at a profit for the
last three fiscal years and have an accumulated deficit of only $1.1 million as
of December 31, 1999. Our initial products will be marketed through arrangements
with Amgen and Sanofi-Synthelabo.
We have successfully employed LEAP to develop abarelix-depot-M, a drug for
the treatment of prostate cancer. It is estimated that 180,400 men in the United
States develop prostate cancer each year. We expect to file an NDA for
abarelix-depot-M with the FDA by the end of 2000. We believe that
abarelix-depot-M works in a unique manner which will allow this drug to
successfully compete in the approximately $2.0 billion worldwide market for
drugs used to treat prostate cancer.
We have also developed a unique form of abarelix, called abarelix-depot-F,
for the treatment of diseases in women that can be addressed by lowering
estrogen levels. We have demonstrated the potential utility of abarelix-depot-F
in a phase I/II study for the treatment of endometriosis. Endometriosis is a
painful, long-lasting condition affecting an estimated five million women in the
United States. We believe that this patient population is poorly served
medically. Due to its unique formulation and the way in which it functions in
the body, we believe that abarelix-depot-F will expand the existing market for
drugs to treat endometriosis and fulfill a significant unmet need.
Our LEAP technology was also instrumental in the development of Apan, a drug
candidate for the treatment of Alzheimer's Disease. It is estimated that more
than four million Americans suffer from Alzheimer's Disease. We expect to begin
clinical trials with Apan within the next 12 months. Apan addresses what is
thought to be the underlying cause of Alzheimer's Disease, rather than the
symptoms.
We intend to commercialize both abarelix-depot-M and abarelix-depot-F as
once-a-month injectable drugs. This is made possible through the formulation of
these drugs in our proprietary drug delivery system, known as Rel-Ease. We have
demonstrated that Rel-Ease also is useful for formulating other drugs in
long-acting, or depot forms, and believe that it may have significant commercial
potential. We have a patent that covers the application of this technology for a
broad range of drugs.
27
<PAGE>
Since our proprietary LEAP technology readily produces drug-like molecules,
we can use it to test and validate potential drug targets much more efficiently
than conventional drug discovery and development methods can. LEAP's utility in
drug discovery can be compared to an Internet search engine. Search engines are
essential in the location and selection of useful information from a vast amount
of data, most of which is useless in isolation. We believe that LEAP selects
useful drug targets imbedded within the sequence of the human genome by showing
which ones, when targeted by a drug, have a clinical use. LEAP selects protein
sequences that can be modified into drugs directly and identifies drug targets
against which LEAP technology can be deployed to produce drugs that treat human
diseases.
We have entered into an alliance with one of the world leaders in genomics,
Human Genome Sciences, to have access to the output that genomics research has
created. Through this alliance, we will seek to develop drugs employing LEAP
technology for the treatment of various medical conditions using proprietary
genomic targets supplied by Human Genome Sciences.
We have assembled an experienced and multi-disciplined team of senior
executives and trained scientists and technicians. Our staff, totaling about 100
persons, has the necessary expertise to discover and develop commercially viable
drugs from inception through preclinical and clinical testing and to obtain
regulatory approval. Our areas of expertise include chemistry and medicinal
chemistry, molecular biology, biochemistry, cell biology, proteomics,
pharmacology, toxicology, formulation, manufacturing, quality assurance and
control, medical and regulatory. This collective expertise allows us to license
drug opportunities from third parties to supplement our internal product
development. For example, we have obtained rights to Latranal, that we expect to
test this year in patients with acute and chronic muscle and tendon related
pain. We believe that if successful, this drug will address a market of several
million patients and fulfill an unmet medical need.
In the future, we may enter into alliances for global commercialization
following clinical validation of our products, as we have done with Amgen and
Sanofi-Synthelabo, while retaining significant profit sharing potential.
Alternatively, we may choose to sell our products directly and retain 100% of
the profit potential.
OUR BUSINESS STRATEGY
Our objective is to combine our skills, expertise and proprietary technology
platform to rapidly develop and commercialize drugs that address significant
clinical needs. We are pursuing the following strategy to achieve this
objective:
- EXTEND THE COMMERCIAL POTENTIAL OF ABARELIX BY EXPANDING INTO ADDITIONAL
DISEASE AREAS. We believe that abarelix may provide a therapeutic benefit
for the treatment of other diseases which respond to the reduction of
testosterone or estrogen hormone levels, such as benign prostatic
hypertrophy, breast cancer, uterine fibroids, polycystic ovarian disease,
precocious puberty and infertility. We intend to explore new product
opportunities and extensions with our corporate collaborators.
- LEVERAGE OUR LEAP TECHNOLOGY, TOGETHER WITH OPPORTUNITIES PRESENTED BY THE
HUMAN GENOME PROJECT, TO DISCOVER NEW DRUG CANDIDATES. Our proprietary
LEAP technology is a powerful tool for the rapid discovery of lead drug
compounds. The Human Genome Project provides us with a database of
newly-identified genes from which we can define new drug targets through
the application of LEAP. We believe that this database will enable us to
accelerate the identification of new drug targets and drug candidates. To
this end, we have established a collaboration with Human Genome Sciences
and have identified promising genomic targets to pursue.
- RETAIN SIGNIFICANT DOWNSTREAM ECONOMIC POTENTIAL OF DEVELOPED PRODUCTS IN
COLLABORATIONS AND PARTNERSHIPS. We believe that we can retain significant
product value by developing products to a
28
<PAGE>
late stage before seeking commercialization partners, or by entering into
partnerships where the cost of development is shared equally. Our
developmental capabilities and financial resources enable us to assume
significant product responsibility, both financial and operational,
allowing us to retain significant profit potential from the sale of our
products.
- DEVELOP LICENSED DRUGS FROM THIRD PARTIES TO SUPPLEMENT PRODUCT
DEVELOPMENT. We have gained significant experience in applying our LEAP
technology for the discovery and development of both abarelix and Apan.
This experience has allowed us to establish the necessary infrastructure
to expand our product base, capture and develop new third party licensing
opportunities, and rapidly and cost-effectively develop internally
discovered compounds.
OUR PRODUCT PIPELINE
We focus our drug development efforts on conditions or diseases where there
are significant unmet needs creating a potential for large product revenues. We
have four programs that have moved beyond the research phase into late
preclinical or clinical testing. The following table outlines our development
programs and the clinical indications they address:
<TABLE>
<S> <C> <C> <C>
<S> <C> <C> <C>
COMPOUND DISEASE STATUS PARTNERS
- ------------------------------- ----------------------------- -------------------- -----------------------
Abarelix-Depot-M Hormonally Responsive Phase III Amgen;
Prostate Cancer Sanofi-Synthelabo
Abarelix-Depot-F Endometriosis Phase II/III Amgen;
Sanofi-Synthelabo
Latranal Acute and Chronic Muscle Preclinical --
and Tendon Related Pain
Apan Alzheimer's Disease Preclinical --
</TABLE>
ABARELIX PROGRAM
Abarelix has potential use in diseases that respond to the reduction of
testosterone, a male hormone, and estrogen, a female hormone. Examples of these
diseases include prostate cancer, endometriosis, uterine fibroids, breast
cancer, benign prostatic hypertrophy, polycystic ovarian disease, infertility
and precocious puberty. Treatments that reduce testosterone or estrogen through
the use of drugs, known as hormonal therapy, result in a therapeutic benefit to
the patient.
Currently available hormonal therapies overstimulate the GnRH receptor,
located on the pituitary gland, a small gland in the center of the brain.
Overstimulation of the pituitary GnRH receptor leads to increased production of
a second hormone, luteinizing hormone, or LH. The increased levels of LH then
cause a surge of testosterone from the testes in males and a surge of estrogen
from the ovaries in females. The temporary surge in hormone levels may result in
a worsening, or flare, of the disease that the therapies are intended to treat.
Only after several weeks following administration of these hormonal therapies
does the desired reduction of hormonal levels occur. Accordingly, current
hormonal therapies, such as Lupron Depot, marketed by TAP Pharmaceuticals Inc.,
and Zoladex, marketed by AstraZeneca Pharmaceuticals, have precautionary
labeling about the hormone-induced flare. This precautionary labeling is
mandated by the FDA and is included prominently in drug labels and packaging to
protect patients, and avoid the use of the drugs in high-risk patient
populations.
In contrast, abarelix has a blocking, or antagonist, effect on the GnRH
receptor. Abarelix immediately shuts off the production of LH and consequently,
immediately reduces the levels of testosterone or estrogen. With abarelix,
unlike commercially available hormonal therapies, there is no
29
<PAGE>
increase in hormonal levels before achieving the desired hormone level
reduction. Results of our prostate cancer and endometriosis clinical trials
demonstrate that abarelix rapidly inhibits hormone production without the
initial surge in hormone levels.
Our most advanced programs involve the development of abarelix-depot-M and
abarelix-depot-F for the treatment of diseases worsened by testosterone in men
or estrogen in women. We believe abarelix-depot-M and abarelix-depot-F represent
the first sustained release formulations of an important class of compounds
known as GnRH antagonists.
ABARELIX-DEPOT-M
BACKGROUND. Prostate cancer is one of the most commonly diagnosed cancers
in men. According to the American Cancer Society, approximately 180,400 new
diagnoses of, and 31,900 deaths from, prostate cancer will occur in the United
States in 2000. Approximately 40% of these newly diagnosed patients have
prostate cancer that has spread beyond the prostate gland, referred to as
non-localized prostate cancer. These patients are generally treated with
long-term hormonal therapy. In the remaining 60% of patients, where the prostate
cancer is localized, hormonal therapy also is increasingly being used in
addition to other therapies, such as radiation therapy, including radioactive
seed implantation to the prostate gland. Hormonally responsive prostate cancer,
accounting for approximately 85% of all initially diagnosed prostate cancer, is
a condition where the cancerous cells require, and are stimulated to grow by,
androgens, including testosterone and its derivatives. The goal of therapy is to
reduce testosterone to low levels, leading to inhibition of prostate cancer cell
growth. The market for hormonal treatment of prostate cancer was approximately
$2.0 billion worldwide in 1998, the majority of which was related to treatment
for non-localized prostate cancer.
Our primary focus to date has been the development of abarelix-depot-M as a
treatment for hormonally responsive prostate cancer. Abarelix-depot-M is a
sustained release formulation of abarelix that enables once-per-month
administration. Our pivotal phase III studies demonstrate that abarelix-depot-M
reduces the time required to achieve therapeutically low testosterone levels
without the testosterone surge and the resulting associated symptoms.
Abarelix-depot-M, if approved for marketing, will be the first commercially
available GnRH antagonist in a sustained delivery formulation for the acute and
chronic management of patients with prostate cancer.
The surge of testosterone associated with available hormonal therapies may
last as long as three weeks before the intended medical effect of reduced
testosterone levels take place. In an attempt to mitigate the flare, many
practicing physicians prescribe a supplemental drug, known as anti-androgens.
Anti-androgens, such as Casodex, are oral drugs given one-to-three times a day.
Anti-androgens function by interfering with the effect of testosterone at the
cellular level but do not reduce circulating testosterone levels. This
additional therapy may be only partially effective in reducing some of the
undesirable effects of the flare. In addition, anti-androgen therapy has side
effects, including liver damage, breast enlargement, lung dysfunction and
gastrointestinal distress. Finally, anti-androgens are expensive and generally
are not covered by Medicare. This means that many patients may not receive the
potential benefit of anti-androgens.
In our pivotal phase III studies of over 500 patients, none of the patients
treated with abarelix-depot-M experienced a testosterone surge. In contrast, 85%
of patients treated with Lupron Depot alone or in combination with Casodex
experienced a sustained testosterone surge. A major reason for using
anti-androgens in clinical practice is to avoid the surge and subsequent flare.
We believe that the results of our clinical studies may lessen the perceived
need to use anti-androgens because the use of abarelix-depot-M alone avoids the
surge.
Some patients with advanced stage hormonally responsive prostate cancer are
at higher risk of serious harm resulting from testosterone surge. Based upon our
studies, these patients constitute approximately 15% of all non-localized
prostate cancer patients. In these patients, the testosterone
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surge may lead to urinary blockage, worsening pain, paralysis and nerve damage
due to spinal cord compression, kidney failure and even death. FDA mandated drug
product labels specifically warn against the use of available hormonal therapy
in patients with confirmed spinal metastases. In these cases, immediate surgical
removal of the testes may be required to both rapidly reduce testosterone levels
and avoid the testosterone surge. Based upon our analysis of our clinical
studies, we believe that abarelix-depot-M may have the potential to provide a
non-surgical alternative for these patients. A significant portion of patients
who are not confirmed to have spinal tumors are still at risk for clinical
flare. Approximately 50-60% of all non-localized prostate cancer patients fall
into this group. We believe that both physicians and patients will prefer a
treatment option that eliminates the potential risks of a clinical flare
response.
ABARELIX-DEPOT-M CLINICAL STUDIES. We intend to submit comprehensive safety
and efficacy data to the FDA in 2000 to support market approval of
abarelix-depot-M. Our submission will include data from two recently completed
pivotal phase III studies for the treatment of hormonally responsive prostate
cancer, a phase III patient exposure study, an ongoing phase III study in
advanced metastatic prostate cancer patients, as well as previously completed
phase I and phase I/II studies with abarelix-depot-M.
In November 1999, we completed two pivotal phase III clinical trials of
abarelix-depot-M for the treatment of hormonally responsive prostate cancer. The
first phase III clinical trial was a 271 patient study comparing
abarelix-depot-M to Lupron Depot. This study compared the safety of both drugs
and the ability of both drugs to reduce testosterone. The second phase III
clinical trial was a 255 patient study comparing the safety and efficacy of
abarelix-depot-M to the combination therapy of Lupron Depot plus Casodex.
In addition to well-defined safety parameters, these studies had three
performance goals:
- the demonstration of the benefit of abarelix-depot-M compared to Lupron
Depot and Lupron Depot plus Casodex in avoiding or eliminating the
testosterone surge;
- the demonstration of the benefit of abarelix-depot-M compared to Lupron
Depot and Lupron Depot plus Casodex in rapidly achieving therapeutically
low testosterone levels, as measured by testosterone levels on the eighth
day following treatment; and
- the demonstration of the similarities of abarelix-depot-M to Lupron Depot
and Lupron Depot plus Casodex in achieving and maintaining therapeutically
low testosterone levels through 85 days of treatment.
In further support of the safety of abarelix-depot-M, we and our partner,
Amgen, are conducting a separate phase III 500 patient exposure study comparing
abarelix-depot-M to Lupron Depot. The primary objective of this study is to gain
more patient exposure to confirm the safety and efficacy performance over a six
month course of therapy. The results of this study will supplement existing
patient drug exposure data and will be included in our NDA.
Abarelix-depot-M has been well tolerated in patients to date and we believe
that the collective data from all of our clinical studies will support these
goals. In addition, we believe that these findings will result in product
labeling that is consistent with the absence of an initial testosterone surge.
In addition, abarelix-depot-M is being tested in an ongoing phase III
clinical trial, evaluating its use in patients with advanced prostate cancer
where the use of current hormonal therapies could result in a life-threatening
disease flare. The goal of this study is to demonstrate that abarelix-depot-M
provides a medical alternative to immediate surgical removal of the testes for
this high risk population. Prostate specific antigen, or PSA, levels for these
patients were monitored. PSA is a widely used screen for identification of
patients with prostate cancer. Although the FDA does not accept PSA levels for
its approval purposes, physicians monitor a patient's progress based on PSA
levels over time. We observed
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an immediate decrease in median PSA levels in patients with advanced prostate
cancer when treated with abarelix-depot-M. The graph below depicts the decrease
in median PSA levels observed from 42 patients in this study:
[Bar graph depicting reduction in PSA levels in response to abarelix-depot-M
therapy over a twelve week period.]
Our partner Sanofi-Synthelabo is conducting a 150 person study in Europe
comparing safety and efficacy of abarelix-depot-M to Zoladex plus Casodex.
Initial analysis of the results of this study are consistent with the safety and
efficacy results observed in our two pivotal phase III studies.
In further support of our abarelix-depot-M NDA filing, we will submit data
from earlier clinical trials. In June 1999, we completed a three-month, 236
patient phase I/II clinical study of abarelix-depot-M for the treatment of
hormonally responsive prostate cancer. The study also included patients who
received Lupron Depot or Zoladex with or without anti-androgens. This study
evaluated safety and efficacy parameters similar to those measured in our
pivotal phase III studies. We believe that these results are consistent with and
further support the conclusions and interpretations of our pivotal phase III
studies.
In addition, in December 1998, we concluded a 36 patient phase I/II clinical
trial of abarelix in patients with locally confined prostate cancer prior to
radiation therapy or surgical removal of the prostate. This study used abarelix
in an injectable liquid formulation delivered continuously rather than a depot
formulation. This clinical trial evaluated safety parameters, the rate of
prostate gland volume reduction and reduction of testosterone levels. We
believe, based upon analysis of the data from this study, that abarelix
substantially reduces the volume of the prostate gland within one to three
months of commencing treatment and reduces testosterone levels within several
days. These safety results are also consistent with our pivotal phase III
studies.
The cumulative worldwide experience of our clinical studies of approximately
1,000 patients demonstrates that abarelix-depot-M is well tolerated and supports
our intent to file an NDA for abarelix-depot-M prior to the end of 2000.
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ABARELIX-DEPOT-F
BACKGROUND. We also are developing abarelix-depot-F for the treatment of
endometriosis. We believe that abarelix-depot-F, if approved for marketing, will
be the first commercially available GnRH antagonist in a sustained delivery
formulation for the rapid and sustained reduction of pain associated with
endometriosis through estrogen suppression. We are currently evaluating
abarelix-depot-F in a phase II/III study for the treatment of pain and painful
symptoms associated with endometriosis.
Endometriosis is a condition where endometrial tissue grows beyond the
uterine lining, most often to the surfaces of organs in the pelvic cavity.
Endometrial tissues, regardless of location in the body, respond to the normal
menstrual cycling of women. When the location of the endometrial tissue prevents
the appropriate sloughing of tissue that normally occurs during menstruation,
inflammation, gastrointestinal symptoms and internal scarring occurs. This
causes, among other things, pain, fatigue, heavy menstrual bleeding, painful
sexual intercourse and infertility. On rare occasions, these displaced
endometrial tissues may even cause bleeding in distant organs, such as the
lungs. Each year, approximately 300,000 women are diagnosed with endometriosis
in the United States. The total number of women in the United States with
endometriosis is estimated to be five million. In addition, as a result of
increased awareness of female health, we believe that the number of patients
diagnosed with and treated for endometriosis will increase.
Existing treatments for endometriosis include pain management, birth control
pills and hormonal therapy, including Lupron Depot and Zoladex. The use of
current hormonal therapies to suppress estrogen production causes an initial
estrogen surge in women. FDA mandated drug product labels for both Lupron Depot
and Zoladex specifically warn that an initial estrogen surge may worsen the
signs and symptoms of endometriosis which include pain, cramping and excessive
bleeding. In addition, the label provides that the stimulation of the hormones
which cause the estrogen rise may lead to the creation of ovarian cysts. Our
initial studies show that abarelix-depot-F causes a more rapid reduction of
estrogen levels and associated relief of pain, as compared to Lupron Depot.
ABARELIX-DEPOT-F CLINICAL STUDIES. To date, we have completed a phase I/II
study of 40 women with confirmed endometriosis using abarelix-depot-F and are
conducting a phase II/III study of abarelix-depot-F. In these studies, we
administered abarelix-depot-F in a once-per-month injection. In the phase I/II
study, we compared various doses of abarelix-depot-F to the standard dose of
Lupron Depot. Patients receiving Lupron Depot therapy experienced estrogen
surges that required several weeks to reach therapeutically low levels.
Furthermore, patients receiving Lupron Depot therapy had more frequent episodes
of endometriosis-associated pain during the first month of treatment compared to
patients receiving abarelix-depot-F. Treatment with abarelix-depot-F was well
tolerated in this study.
The graphs below illustrate the results of patients treated with either
abarelix-depot-F at a dose of 120 milligrams or Lupron Depot through four weeks
of treatment. In contrast to the Lupron Depot patients, who experienced an
estrogen surge following injection and a resulting increase in pain during the
third and fourth weeks of treatment, patients treated with abarelix-depot-F
experienced a rapid reduction of estrogen levels without the initial surge, and
a rapid elimination of pain during the third and fourth weeks of treatment.
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ESTROGEN LEVELS AND PELVIC PAIN IN ENDOMETRIOSIS PATIENTS
TREATED WITH ABARELIX-DEPOT-F OR LUPRON DEPOT
[Four Graphs depicting estrogen levels and pelvic pain in endometriosis
patients treated with abarelix-depot-F compared to patients treated with Lupron
- -REGISTERED TRADEMARK- Depot over time.]
Our phase II/III study, begun in June 1999, compares the safety and efficacy
of abarelix-depot-F to Lupron Depot with respect to the ability to provide pain
relief and rapid estrogen suppression. This study includes a 24-week treatment
period and a 12-month follow-up period. We expect to conduct an interim analysis
within the next 12 months after treating approximately 100 patients for 12
weeks.
ADDITIONAL INDICATIONS FOR ABARELIX
We believe that abarelix may be used to treat other diseases involving
testosterone and estrogen, including, benign prostatic hypertrophy, breast
cancer, uterine fibroids and other diseases where hormone reduction is a goal of
therapy. We have not begun clinical trials of abarelix for these diseases.
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It currently is estimated that at least ten million men over the age of 50
in the United States are afflicted with benign prostatic hypertrophy, symptoms
of which include impaired urinary flow and, in the most severe cases, urinary
retention. These symptoms are in part related to the fact that the prostate
gland continues to enlarge with age. We believe that approximately 25% of
patients with this disease could benefit from a reduction in the size of the
prostate gland. Based on data from our phase I/II clinical trial of
abarelix-depot-M, in which urinary problems in prostate cancer patients were
assessed, we believe that abarelix may be useful in treating urinary symptoms
associated with diseases of the prostate gland.
The American Cancer Society estimates that there will be approximately
184,200 newly diagnosed cases of, and 41,200 deaths from, female breast cancer
in the United States in 2000. Approximately one-third of all newly diagnosed
patients are pre-menopausal, and in many of these cases, estrogen stimulates the
breast cancer. Current hormonal therapies, such as Zoladex, have been studied in
patients and appear to be beneficial due to their ability to suppress estrogen.
Zoladex has received FDA marketing approval for this use. We believe abarelix
has the potential to treat female breast cancer and reduce estrogen levels
rapidly and without an estrogen surge.
Other conditions in which hormone reduction is an accepted goal of therapy
include uterine fibroids, polycystic ovarian disease, infertility and precocious
puberty. Approximately ten million women in the United States suffer from
uterine fibroids, which are benign enlargements of the uterus. In addition, an
estimated three million women in the United States suffer from polycystic
ovarian disease, a disease characterized by excessive hormonal production caused
by ovarian cysts.
LATRANAL
We currently are developing Latranal, a drug preparation that can be applied
to the skin over an area of local muscle or tendon pain and provides pain
relief. Pain, whether associated with injury, illnesses or the general aging
process, remains one of the most serious and poorly treated afflictions.
Worldwide, approximately $9.5 billion are spent annually on all medications for
pain management. The cost of pain related issues to society is significant. For
example, in the United States, back pain is the single largest reason for lost
days of work. The needs of pain sufferers, especially those suffering from
chronic pain conditions, are generally poorly met. We estimate that there are
several million individuals suffering from chronic pain in the United States who
are experiencing minimal to no relief from currently available treatment
options, including prescription pain medications.
Latranal is our proprietary topical formulation of two generically available
compounds. Both of these compounds have been in use as oral formulations for
extended periods of time and have demonstrated acceptable safety profiles. One
of these compounds affects nerve action and the other has muscle relaxant
properties. Pharmaceutical Applications Associates discovered that the
combination of these two compounds, when applied to the skin, may result in pain
relief. To date, the clinical observations by Pharmaceutical Applications
Associates of over 100 patients suggest that relief of acute and chronic muscle
and tendon related pain can occur with the use of this drug combination.
Through a license from Pharmaceutical Applications Associates, we have
obtained rights to the patents filed on this drug formulation and its use as a
treatment for pain.
An investigator-sponsored investigational new drug application was filed
with the FDA in July of 1999 for Latranal by an academic investigator. Following
the request by the FDA for standard preclinical toxicology studies, the
ownership of the application was transferred to us. We are conducting the
preclinical toxicology studies that were requested by the FDA. Following the
satisfactory completion of these studies, we intend to initiate a phase I
clinical trial for Latranal during 2000.
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APAN
We are developing Apan for the treatment of Alzheimer's Disease. Alzheimer's
Disease affects an estimated four million people in the United States according
to a 1998 report issued by the National Institute of Aging. According to the
Alzheimer's Association, the prevalence of Alzheimer's Disease is expected to
increase as the population ages. Current therapies provide temporary relief for
some of the symptoms of Alzheimer's Disease, but do not affect the progression
of the disease itself.
The hallmark of Alzheimer's Disease is the accumulation of plaque-like
deposits in brain tissue. A major component of this plaque is a small peptide
called beta-amyloid. Over the past several years, a large body of clinical,
biochemical and genetic evidence has emerged indicating that the aggregation of
beta-amyloid peptide is the underlying cause of Alzheimer's Disease. This body
of evidence has led to the widely held theory that when single beta-amyloid
molecules aggregate they become toxic to nerve cells, and that this toxicity
leads to the development and progression of Alzheimer's Disease. Apan was
selected employing our LEAP technology to interfere with this aggregation
process.
We have shown that Apan specifically inhibits the aggregation of
beta-amyloid and its associated nerve cell toxicity in preclinical experiments.
In addition, we have shown in rats and mice that Apan reaches the brain in
quantities that we believe are sufficient to block the aggregation of
beta-amyloid molecules and alter the course of the disease.
Apan is currently undergoing good laboratory practice toxicology studies to
support our investigational new drug application. We anticipate filing an
application for Apan in 2000 and initiating a phase I clinical trial within the
next 12 months.
OUR TECHNOLOGY
We developed our technology to overcome the limitations of existing drug
discovery methods. We envisioned a technology that combines the biological
selection of natural peptide molecules, also known as ligands, which can come
either from natural genes or large pools of synthetic genes known as gene
libraries, with a chemical modification process that endows peptides with the
pharmacological properties that allow them to be used as drugs.
LEAP
Our proprietary method for discovering drugs is based on a unique system
that combines the power and diversity of biological selection with the favorable
drug-like properties added using medicinal chemistry. We call this process
Ligand Evolution to Active Pharmaceuticals, or LEAP. We believe LEAP is superior
to traditional methods of drug discovery that are limited by the number of
compounds that can be made and tested mechanically. In a typical LEAP selection
process, we can examine more than a trillion molecules in a few months. By
contrast, conventional screening and medicinal chemistry permit the examination
of fewer than one million molecules with equivalent resources and require more
time.
As in the case of abarelix, LEAP allows us to take a peptide encoded in the
human genome and convert that peptide into a drug. GnRH is a natural peptide
that binds to its receptor target and triggers a biological response. We used
LEAP to convert GnRH into abarelix, a drug that binds to the same receptor
target but blocks the biological response.
If a ligand from the human genome is not available, we can select one
encoded in a synthetic gene library using a process we call biological
evolution. This process involves the natural selection of the best ligand from a
pool containing billions of natural peptides in a biological system. This
process can be carried out in repeated cycles, selecting ligands based on their
functions. We then modify the selected ligand using a unique process that we
call chemical evolution. Chemical evolution is powerful because we can make
pools of thousands of diverse molecules based on the structure of the selected
ligand and composed of synthetic building blocks. We then select the best
molecules from these pools
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and identify them through our unique application of the technology called mass
spectrometry. These molecules can behave like drugs because they bind to their
target like natural peptides and have the characteristics of an effective drug.
DRUG DELIVERY TECHNOLOGY
The clinical utility of our drug candidates can be enhanced further when
formulated with our proprietary sustained release technology, Rel-Ease. For
example, Rel-Ease technology enables us to make abarelix in such a way that it
only needs to be administered once-per-month, since the drug will be released
continuously in the body over the next 30 days. In many cases, infrequent
injections of a drug in a sustained release formulation are more desirable than
oral administration due to patient compliance, convenience or reimbursement
issues. We have formulated a broad spectrum of molecules with Rel-Ease
technology and believe that this technology will enable sustained release
formulations of drugs discovered and developed in our other disease programs.
PROVID RESEARCH
While we have already demonstrated the clinical utility of LEAP in our
abarelix program, we also have other powerful technologies that can enhance the
value of modified peptides. We established the Provid Research division to
further extend our drug development technologies. Provid's approach to drug
discovery leverages the potential of medicinal chemistry and structure-based
design to improve the features of peptides and optimize molecular interactions.
This process facilitates the modification of peptides into small molecules with
enhanced drug-like properties.
MASTRSCREEN
MASTRscreen is our proprietary, rapid and efficient screening procedure that
identifies and evaluates ligands for the most successful class of drug targets,
known as G-protein coupled receptors. The GnRH receptor is a member of this
class of receptors. MASTRscreen was developed in connection with our abarelix
program and was instrumental in the selection of abarelix from pools of modified
peptides. MASTRscreen is useful because of its sensitivity to low concentrations
of screened material, easily measurable endpoints, and adaptability to various
screening systems.
ALZHEIMER'S DISEASE DRUG TESTS
Our proprietary beta-amyloid aggregation inhibition testing procedures
measure the aggregation of beta-amyloid and the ability of candidate molecules
to prevent the aggregation process. These testing procedures were used in the
identification of Apan. In addition, these testing procedures formed the basis
of our collaboration with Boehringer, which is aimed at developing orally
administered drugs to treat Alzheimer's Disease.
RESEARCH AND DEVELOPMENT
As of December 31, 1999, we had a total of 76 employees dedicated to
research and development for abarelix and our other products. In 1998, we
established the Provid Research division to further extend our drug development
technologies. Our Provid Research division currently has 14 employees. We have
expended substantial funds over the past three years to develop abarelix and our
other potential drug candidates and expect to continue to do so in the future.
We spent approximately $15.0 million in 1997, $33.7 million in 1998 and
$48.8 million in 1999 on research and development activities.
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CORPORATE COLLABORATIONS
AMGEN INC.
Effective March 1999, we entered into an agreement with Amgen for the
research, development and commercialization of abarelix products in the United
States, Canada, Japan and other countries not covered by the Sanofi-Synthelabo
collaboration. The following summarizes the significant terms of the Amgen
agreement.
- We could receive from Amgen up to $25 million in signing and
performance-based payments, of which we have received $10 million to date.
- Amgen will pay all costs and expenses associated with the research,
development and commercialization of abarelix products in the United
States incurred during 1999 and a portion of 2000, and spent in accordance
with the agreement. Following these expenditures, in general we will share
with Amgen all subsequent United States research and development costs for
abarelix products through the launch period and we will reimburse Amgen
for a share of costs associated with establishing a sales and marketing
infrastructure in the United States. In general, we will receive a
transfer price and royalty based on a sharing of the resulting profits on
sales of abarelix products in the United States.
- All program expenses in Amgen's licensed territory outside the United
States will be borne by Amgen, and we will receive a royalty on net sales
of abarelix products in those territories.
- Amgen will provide us with a substantial line of credit through 2002,
subject to limitations and conditions specified in the agreement. The loan
will be interest-bearing, secured by receivables relating to the abarelix
products and must be repaid by 2008.
In 1999, we recognized $56.8 million of revenues under the Amgen agreement.
We have granted Amgen exclusive manufacturing and commercialization rights
for abarelix products for all indications in the licensed territories.
Initially, we are responsible for supplying Amgen with its requirements for
abarelix products in the licensed territory. We are transferring manufacturing
responsibility to Amgen and expect the transfer to be complete later this year.
In addition, we are transferring the final decision making authority for the
abarelix endometriosis indication to Amgen later this year.
The agreement, and Amgen's payment obligations under the agreement,
terminate when the last patent right included in the abarelix technology
expires. Following the expiration of the agreement, Amgen will have a fully
paid, compensation free, perpetual, exclusive license under the abarelix
technology to manufacture and commercialize the abarelix products resulting from
the collaboration in the licensed territories. The agreement may be terminated
by us or Amgen for material breach by the other. Amgen may also terminate the
agreement on 90 days notice or if the results of any clinical trial of abarelix
materially harms its commercial prospects. If the agreement is terminated by
Amgen for material breach by us, then Amgen retains all licenses granted under
the agreement, subject to continued payment to us of all costs and royalty
payments due under the agreement.
SANOFI-SYNTHELABO
In May 1997, we entered into a license agreement with Sanofi-Synthelabo, one
of the largest pharmaceutical companies in Europe with a significant urological
franchise, for the development and commercialization of abarelix products in
specific territories including Europe, Latin America, the Middle East and
various countries in Africa.
Sanofi-Synthelabo agreed to pay us up to $64.6 million in signing and
performance-based payments, approximately $5.0 million of the costs and expenses
for the development in the United States of abarelix products for prostate
cancer, and 25% of all United States costs and expenses for the
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development of abarelix products for endometriosis and for any future additional
indications. Sanofi-Synthelabo will pay all costs and expenses associated with
obtaining regulatory approvals in their territory. To date, we have received a
total of $30.3 million under the agreement. In addition, in connection with the
agreement, Sanofi-Synthelabo purchased $10.0 million of common stock and
warrants to purchase common stock.
Under the agreement, Sanofi-Synthelabo has co-development rights with us,
and exclusive marketing and distribution rights, for abarelix products for all
indications in the licensed territories. We retain manufacturing rights and are
required to supply Sanofi-Synthelabo with abarelix products in the licensed
territories. Sanofi-Synthelabo pays us a transfer price for abarelix products
equal to our cost of goods sold plus a profit margin that varies based on sales
price and sales volumes.
The agreement expires, and the licenses granted by us to Sanofi-Synthelabo
become fully paid, perpetual and royalty free, on a country by country basis,
when the last patent licensed in that country expires. If no licensed patents
cover an abarelix product in the country, the license becomes fully paid up,
perpetual and royalty free, ten years after the date of regulatory approval for
the marketing and sale of the abarelix product in the country.
The agreement may be terminated by us or Sanofi-Synthelabo for material
breach by the other. Upon termination of the agreement by Sanofi-Synthelabo for
material breach or default by us, other than a breach of our supply obligations,
the license granted to Sanofi-Synthelabo would become fully paid, perpetual and
royalty free and Sanofi-Synthelabo would have a fully paid, perpetual and
royalty free license of all manufacturing protocols, know-how and related
information and data necessary to enable it to develop and make licensed
products in the licensed territory from and after the effective date of the
termination. Sanofi-Synthelabo also may terminate the agreement as to an
abarelix product for the treatment of a particular disease in any country within
the licensed territories if the results of clinical trials of the product for
that disease in that country materially impair the product's commercial
prospects for that disease application. In addition, Sanofi-Synthelabo may
terminate if annual sales in that country of a competitor's product containing
the same GnRH antagonist as the abarelix product in a delivery system exceeds
more than a specified percentage of annual sales of the abarelix product in that
country. Sanofi-Synthelabo also may terminate the agreement within nine months
after first becoming aware of any of various specified adverse circumstances or
events relating to the patentability of abarelix products or the Rel-Ease
formulation. The right to terminate in this situation includes a reasonable
determination by Sanofi-Synthelabo that it is not reasonably likely that a
European patent will issue covering abarelix or Rel-Ease.
HUMAN GENOME SCIENCES
In January 2000, we entered into an agreement with Human Genome Sciences for
the discovery, development and commercialization of compounds targeted to two
proprietary genomic targets identified by Human Genome Sciences. Under the
agreement, we will employ LEAP to generate drugs targeted to these molecules. We
will jointly develop clinical drug candidates with Human Genome Sciences on an
equal cost and profit sharing basis, unless a pre-existing option that Human
Genome Sciences granted to SmithKline Beecham applies to the drug candidate and
is exercised. In that case, we will have no obligation to participate in any
development costs, and we will be entitled to royalties and performance-based
payments instead of a profit share.
BOEHRINGER INGELHEIM INTERNATIONAL GMBH
In August 1996, we entered into a collaboration and license agreement with
Boehringer. Under the agreement, we used various proprietary procedures to
screen compounds supplied by Boehringer for beta-amyloid aggregation inhibition
activity, and received screening services payments totaling $5.4 million. The
screening portion of the collaboration ended in August 1998. Boehringer is
responsible for all development, marketing and other costs for, and we are
entitled to receive royalties
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on net sales of, any product containing any Boehringer compound which was
screened by us that Boehringer develops and commercializes.
ROCHE PRODUCTS INC.
In August 1997 and June 1998, we granted Roche exclusive co-development
rights with us, and exclusive marketing rights, for abarelix products outside of
the Sanofi-Synthelabo territory. In December 1998, we and Roche mutually
terminated the agreement. Prior to termination, we received $16.0 million in
signing and performance-based payments and approximately $12.2 million in cost
sharing payments from Roche. Roche retains no rights of any kind to abarelix or
any abarelix product.
TECHNOLOGY LICENSES
PHARMACEUTICAL APPLICATIONS ASSOCIATES
In April 1999, we entered into a license agreement with Pharmaceutical
Applications Associates. Under the agreement we have exclusive worldwide rights
to develop and commercialize Latranal for the treatment of acute and chronic
muscle and tendon related pain. Under the agreement, we will pay for all costs
associated with the development and commercialization of Latranal, and will pay
a $50,000 fee if we proceed with a second clinical efficacy study. We pay a
royalty on net sales of Latranal products to Pharmaceutical Applications
Associates. The license agreement remains in effect until the later of ten years
or the date the last licensed patent expires. We have the right to terminate the
agreement at any time.
INDIANA UNIVERSITY FOUNDATION
In October 1996, we entered into a license agreement with Indiana University
Foundation. The license was amended in June 1998 and has been assigned to
Indiana University's Advanced Research and Technology Institutes, Inc. Under the
agreement, we have an exclusive worldwide license under patent applications,
future patents, and technology of Indiana University Foundation, relating to
GnRH antagonist compounds, including abarelix and methods of use for abarelix.
We have paid non-refundable fees of $305,000 and a performance-based payment of
$250,000 under this agreement. We have agreed to make performance-based payments
of up to an additional $4 million, and to pay royalties on our net sales of
products covered by the license grant. The license agreement remains in effect
until the last licensed patent expires. Expiration of the license will not
preclude us from continuing to develop and market the licensed products and use
the licensed technology. We must request a continuation of the license and
Advanced Research and Technology may not unreasonably withhold its consent. We
can terminate the agreement at any time upon 90 days notice. Advanced Research
and Technology may terminate upon 90 days notice if we materially breach the
agreement or fail to make required payments.
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
In December 1993, in connection with our initial financing, we entered into
a license agreement with the Massachusetts Institute of Technology. Under this
agreement, MIT granted us an exclusive worldwide license under specified
technology and related patent rights regarding biological screening techniques
and related methodologies developed at MIT by Malcolm L. Gefter, Ph.D. and
another founder. In the agreement, MIT acknowledged that it has no rights with
respect to any intellectual property generated by us, including any and all
enhancements, modifications or additions regarding the licensed technology or
any product or process covered by the licensed future patents.
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<PAGE>
MANUFACTURING
We generally manufacture the drug supply required to support our preclinical
studies in-house. All clinical supplies are provided by external contractors and
are manufactured in accordance with FDA and European regulations. We currently
have long-term contracts with third-party manufacturers for the commercial
manufacture of abarelix products. We have a supply agreement with each of UCB
Bioproducts S.A., Salsbury Chemicals, Inc. and Oread Pharmaceuticals
Manufacturing, Inc.
Under the UCB Bioproducts agreement, UCB has agreed to supply us with
commercial volumes of abarelix compound and we have committed to purchase
$56.0 million of pharmaceutical grade peptide between February 1999 and
February 2001. As of December 31, 1999, we had purchased approximately
$25.5 million of peptide. In addition, under the Salsbury agreement, Salsbury
has agreed to supply us with the commercial depot formulations. We contributed
approximately $6.0 million toward Salsbury's construction and outfitting of a
dedicated manufacturing facility, to which we will retain manufacturing process
rights. Under the Oread agreement, Oread has agreed to supply us with
abarelix-depot products in vials. In order to effect a favorable pricing
environment, we have secured a second source of supply of abarelix compound. We
intend to secure a second source for abarelix-depot products and abarelix-depot
products in vials.
If we fail to meet our manufacturing and supply obligations, Amgen or
Sanofi-Synthelabo may assume manufacturing responsibility under their agreement.
If this occurs, we must pay Sanofi-Synthelabo its incremental costs of assuming
manufacturing responsibility. We are transferring manufacturing responsibility
to Amgen and expect the transfer to be complete later this year.
PATENTS AND PROPRIETARY RIGHTS
Proprietary protection for our products, technology and processes is
essential to our business. We seek proprietary protection predominantly in the
form of patents on our products and the processes by which they are discovered.
With respect to a particular product, we seek patent protection on the compound
itself, its commercial formulation, its range of applications and its
production. Where possible, we also seek patent coverage that could prevent the
marketing of, or restrict the commercial threat of, competitive products.
As of January 20, 2000, we had filed or held exclusive licenses to 34 United
States patent applications, as well as 80 related foreign patent applications,
including both Patent Cooperation Treaty filings and national filings. In
addition, we have seven United States patents and an exclusive license to one
United States patent. These patents have expiration dates from 2012 through
2017. We also have non-exclusive licenses to four United States patents and four
issued foreign patents, and related United States and foreign applications,
directed to technologies embodied in LEAP.
In particular, we have United States patents that cover both the abarelix
compound and the sustained release formulation enabling its once-per-month
administration. We also have a patent covering the use of abarelix and any other
GnRH antagonist in a variety of therapeutic settings, including in combination
with surgery or radiation therapy. We intend to file additional United States
and foreign patent applications, where appropriate, relating to new product
discoveries or improvements.
We also rely on trade secrets, know-how and continuing technological
advances to protect various aspects of our core technology. We require our
employees, consultants and scientific collaborators to execute confidentiality
and invention assignment agreements with us to maintain the confidentiality of
our trade secrets and proprietary information.
COMPETITION
The biotechnology industry is characterized by rapid technological change
and intense competition. Many companies, both public and private, including
large pharmaceutical companies, chemical
41
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companies and biotechnology companies, develop products or technologies
competitive with our products or technologies. 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 strategic corporate alliances.
Competitors exist to each of our potential products in research or
development. If approved for marketing and sale, our products will compete with
numerous established or newly introduced products on the market, including:
- Lupron Depot, Zoladex and other pharmaceuticals approved and marketed for
the treatment of hormonally responsive prostate cancer or endometriosis in
the United States and Europe; and
- Cetrotide, manufactured by ASTA Medica, and Antagon, manufactured by
Organon, which are GnRH antagonists that have been approved for use in
infertility and are only available as daily injectable formulations.
For each of our products, we will face increasing competition from generic
formulations of existing drugs whose active components are no longer covered by
patents. Specifically, we are aware of various formulations of leuprorelin, the
active ingredient of Lupron Depot, including Viadur, manufactured by Crescendo,
for which an NDA has been submitted.
We believe that our product candidates will compete favorably in the market
with these and other products on the basis of a combination of superior
efficacy, decreased side effects and overall cost-benefit considerations.
GOVERNMENT REGULATION
The manufacture and marketing of pharmaceutical products and our ongoing
research and development activities in the United States require the approval of
numerous governmental 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, an applicant
typically conducts preclinical studies in animals to assess a drug's efficacy
and to identify potential safety problems. An applicant must conduct specified
preclinical laboratory and animal studies in compliance with the FDA's good
laboratory practice regulations. An applicant must conduct the results of these
studies to the FDA as part of an investigational new drug application, which
must receive clearance from the FDA before proposed clinical testing can begin.
We can make no assurance that our submission of an investigational new drug
application will result in FDA authorization to conduct a 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. 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. Occasionally, phase II trials 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 NDA
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,
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<PAGE>
further clinical trials would be necessary to gain approval for the use of the
product for any additional diseases.
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 good manufacturing practices. In complying with good
manufacturing practices, 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.
The FDA must grant approval of our products, which would involve a review of
the manufacturing processes and facilities used to produce these products before
we can market these products 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 the product does not supply applicable regulatory criteria. The FDA may
also require additional testing for safety and efficacy of the drug. If
regulatory approval of a drug product is granted, the approval will be limited
to specific indications.
If we receive marketing approval, we must comply with FDA requirements for
manufacturing, labeling, advertising, record keeping and reporting of adverse
experiences and other information. In addition, we must comply with federal and
state anti-kickback and other health care fraud and abuse laws that pertain to
the marketing of drugs. For all drugs, 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 to regulations enforced by the FDA, we also are 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 our
research and development activities. Although we believe that our safety
procedures for handling and disposing of these materials comply with the
standards prescribed by state and federal regulations, we cannot assure you that
accidental contamination or injury from these materials will not occur.
Compliance with laws and regulations relating to the protection of the
environment has not had a material effect on our capital expenditures or our
competitive position. However, the extent of government regulation, and the
cost, and effect thereof on our competitive position, which might result from
any legislative or administrative action cannot be accurately predicted.
Additionally, comparable regulatory authorities in foreign countries may
require approval of a product prior to the commencement of marketing of the
product in those 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. We expect to rely on corporate partners and licensees,
along with our expertise, to obtain governmental approval in foreign countries
of drug formulations utilizing our drug candidates. Under the Sanofi-Synthelabo
agreement, Sanofi-Synthelabo is responsible for filing and obtaining necessary
governmental marketing reimbursement and pricing approvals for any abarelix
product in each country in the Sanofi-Synthelabo territory where the abarelix
product will be commercialized pursuant to that agreement.
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<PAGE>
PRODUCT LIABILITY INSURANCE
We maintain product liability insurance for clinical trials in the amount of
$15.0 million per occurrence and $15.0 million in the aggregate. We intend to
expand our 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
we may be unable to maintain insurance coverage at a reasonable cost or in
sufficient amounts to protect us against losses due to liability. In addition,
we may be unable to obtain commercially reasonable product liability insurance
for any products approved for marketing. A successful product liability claim or
series of claims brought against us could result in substantial setbacks for our
business.
EMPLOYEES
As of December 31, 1999, we had 94 full-time employees, 80 of whom were
employed at our headquarters in Cambridge, Massachusetts and 14 of whom were
employed with our Provid Research division at our facility in Piscataway, New
Jersey. We also employ consultants and independent contractors on a regular
basis to assist in the development of our products. None of our employees are
party to a collective bargaining agreement. We believe our relationship with our
employees is good.
FACILITIES
Our headquarters and primary research facilities are located in Cambridge,
Massachusetts, where we lease and occupy a total of approximately 25,000 square
feet. The lease for these facilities expires in September 2004. In August 1998,
we executed a lease for a total of approximately 15,000 square feet of space in
Piscataway, New Jersey for the operations of our Provid Research division. The
lease for this facility expires in 2008.
In January 2000, we signed an agreement to purchase a building of
approximately 175,000 square feet located in the western suburbs of Boston,
Massachusetts. We expect to complete the acquisition of this facility in
June 2000 and, following additional laboratory and office improvements, to
occupy the new facility by the end of 2000. We intend to occupy approximately
100,000 square feet at this facility and expect to lease a portion of the
remaining space for at least the next five years, although no tenant has yet
been identified. We expect to vacate and sublease our current Cambridge,
Massachusetts premises upon our move to the new facility. Upon completion of our
new facility, we believe that our facilities will be adequate for at least the
next seven years and that we will be able to obtain additional space as needed
on commercially reasonable terms.
LEGAL PROCEEDINGS
We are not currently a party to any material legal proceedings.
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MANAGEMENT
OFFICERS AND DIRECTORS
The following table shows information about our executive officers,
directors and other officers as of December 31, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- -------------------------------- -------- --------------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Malcolm L. Gefter, Ph.D......... 57 Chairman of the Board, Chief Executive Officer and
President
Kevin F. McLaughlin............. 43 Chief Financial Officer, Senior Vice President,
Treasurer and Secretary
Marc B. Garnick, M.D............ 53 Executive Vice President and Chief Medical Officer
G. Leonard Baker, Jr............ 57 Director
William Laverack, Jr............ 42 Director
Henry F. McCance................ 56 Director
David B. Sharrock............... 63 Director
Damion E. Wicker, M.D........... 39 Director
Albert L. Zesiger............... 70 Director
OTHER OFFICERS
Nicholas P. Barker, Ph.D........ 44 Vice President of Development
Lena M. Bergfors................ 53 Vice President, Human Resources
Dean A. Falb, Ph.D.............. 39 Senior Vice President, Research
William L. Kubasek, Ph.D........ 40 Senior Director of Project Management
Paul M. Martha, M.D............. 46 Vice President, Endocrinology
Gary L. Olson, Ph.D............. 54 Senior Vice President, Chemistry Research and
Development and President of Provid Research division
Marc A. Silver.................. 42 Vice President, Corporate Development
Janice M. Swirski............... 38 Vice President, Operations
</TABLE>
Messrs. Baker, Laverack and Wicker are members of our audit committee.
Messrs. McCance, Sharrock and Zesiger are members of the compensation committee.
MALCOLM L. GEFTER, PH.D. is our founder and has served as a director since
July 1993, as Chairman of the Board since February 1994, as our Chief Executive
Officer since July 1996 and as our President since July 1998. From July 1993 to
July 1998, Dr. Gefter was our Treasurer. Dr. Gefter has been a Professor of
Biology at MIT and is now professor emeritus. He has authored more than 200
original scientific papers. Dr. Gefter was a founder of ImmuLogic Pharmaceutical
Corporation and from 1987 to March 1997, served as Chairman of the Board of
Directors at ImmuLogic. 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.
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KEVIN F. MCLAUGHLIN has been our Chief Financial Officer since joining us in
September 1996. Since January 1997, he has also been our Secretary and since
July 1998, he has been a Senior Vice President and our Treasurer. From
September 1996 to July 1998, Mr. McLaughlin was one of our Vice Presidents. 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.
MARC B. GARNICK, M.D. joined us in April 1994 as Executive Vice President
and Chief Medical Officer. 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 Depot 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 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.
Dr. Garnick also is a director of Genome Therapeutics Corporation.
G. LEONARD BAKER, JR. has served as a member of our board of directors since
March 1994. Since 1974, Mr. Baker has been a Managing Director or General
Partner of Sutter Hill Ventures, a venture capital firm. Mr. Baker also is a
director of ThermaWave Inc. and a number of private companies.
WILLIAM LAVERACK, JR. has served as a member of our board of directors since
December 1993. Since 1993, Mr. Laverack has been a General Partner of J.H.
Whitney & Co., a private investment firm. From 1991 to 1993, Mr. Laverack was
employed at Gleacher & Co., Inc. and from 1985 to 1991, Mr. Laverack was
employed at Morgan Stanley & Co. Incorporated, each of which are investment
banking firms. Mr. Laverack also is a director of Steel Dynamics, Inc. and a
number of private companies.
HENRY F. MCCANCE has served as a member of our board of directors since
December 1993. Mr. McCance has been employed at Greylock Management Corporation,
a private venture capital group, 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 also is a director of Peritus Software Services, Inc.
DAVID B. SHARROCK has served as a member of our board of directors 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 Broadwing Inc., Interneuron
Pharmaceuticals, Inc., Intercardia, Inc. and Progenitor, Inc.
DAMION E. WICKER, M.D. has served as a member of our board of directors
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 to December 1996.
Previously, Dr. Wicker was President of Adams Scientific from July 1991 to
December 1992, and, prior to that, held positions with MBW Venture Partners and
Alexon, Inc. Dr. Wicker also was 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.
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<PAGE>
ALBERT L. ZESIGER has served as a member of our board of directors since
July 1996. Mr. Zesinger is a founding Principal of Zesiger Capital Group LLC, a
global investment advisory firm started in 1995. Mr. Zesiger previously was with
BEA Associates, an investment advisory firm where he started in 1968 and most
recently was Managing Director from December 1990 to September 1995. He
currently is a director of Durect Corporation, Eos Biotechnology, Inc., Hayes
Medical Inc. and Virologic Inc. and is the Co-chair of Asphalt Green, Inc., a
non-profit corporation in New York City.
NICHOLAS P. BARKER, PH.D. joined us 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
Development. He also has held senior level positions with Fisons Pharmaceuticals
and Smith, Kline & French (U.K.). 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.). Dr. Barker is a licensed U.K.
pharmacist with membership in the Royal Pharmaceutical Society of Great Britain.
LENA M. BERGFORS joined us in June 1999 as Vice President of Human
Resources. From December 1980 to May 1999, Ms. Bergfors was employed by Serono
Laboratories, Inc., the United States affiliate of the Ares-Serono Group. While
at Serono, Ms. Bergfors held a variety of positions in human resources, most
recently as Director of Human Resources.
DEAN A. FALB, PH.D. joined us in January 1998 as Senior Vice President,
Research. Dr. Falb was a founding employee of Millennium Pharmaceuticals, Inc.,
a biotechnology company formed in 1993, and was responsible for establishing its
genomics 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, Dr. Falb 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.
WILLIAM L. KUBASEK, PH.D. joined us in March 1994 as a founding scientist
and has served as our Senior Director of Project Management since July 1999.
From July 1989 to February 1994, Dr. Kubasek was a research fellow at the
Massachusetts General Hospital and the Harvard Medical School. Dr. Kubasek
received his B.S. in Biochemistry from the University of California, Davis and
his Ph.D. in Molecular Biology from the University of Oregon.
PAUL M. MARTHA, M.D. joined us in February 1998 as Vice President,
Endocrinology. From September 1993 to January 1998, Dr. Martha was employed at
Genentech, Inc. in a variety of positions, most recently as Director of
Endocrinology. Previously, Dr. Martha was Assistant Professor of Pediatrics and
Director and Principal Investigator, Laboratory for Neuroendocrine Research at
BayState Medical Center/Tufts University School of Medicine and Tufts New
England Medical Center. Dr. Martha received his B.S. in biology from Trinity
College and his M.D. from the University of Connecticut School of Medicine.
GARY L. OLSON, PH.D. joined us in March 1998 as Senior Vice President,
Chemistry Research and Development and President of our 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 and holds 24 United States
patents. 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.
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<PAGE>
MARC A. SILVER joined us in October 1994. Since September 1996, he has
served as Vice President of Corporate Development and from October 1994 to
September 1996, as Vice President. From 1992 to 1994, Mr. Silver was Vice
President at Harvard Management Corp., an investment management company. Prior
to that time, 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.
JANICE M. SWIRSKI joined us in May 1998 as Vice President, Operations. From
May 1985 to April 1998, Ms. Swirski 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 Depot 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.
Pursuant to the terms of the amended and restated stockholders agreement
dated as of April 30, 1998, as amended, by and among us and some of our
stockholders, Messrs. Gefter, Laverack, McCance, Baker and Wicker were
designated as directors and were elected to our board of directors. The
stockholders agreement provides that we will use our best efforts to cause these
individuals or any other persons designated in accordance with the stockholders
agreement to be nominated for election and elected as our directors and that the
stockholders who are parties to the stockholders agreement will vote their
shares in favor of these designees. Upon completion of this offering, these
obligations will terminate.
All of our directors hold office until the first annual meeting of
stockholders following this offering and until their successors are duly elected
and qualified or their earlier resignation, retirement, disqualification or
removal from office. After election at the annual meeting following this
offering, the directors 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.
Our officers serve at the discretion of the board of directors. There are no
family relationships among our directors and officers.
BOARD OF DIRECTORS COMMITTEES AND OTHER INFORMATION
Our board of directors has an audit committee and a compensation committee.
The audit committee, currently comprised of Messrs. Baker, Laverack and Wicker,
determines our accounting policies and practices and financial reporting and
internal control structures, recommends to the board of directors the
appointment of independent auditors to audit our financial statements each year
and confers with the auditors and our officers for purposes of reviewing our
internal controls, accounting practices, financial structure and financial
reporting.
The compensation committee, currently comprised of Messrs. McCance, Sharrock
and Zesiger, determines salaries, incentives and other forms of compensation for
our executive officers and administers our incentive compensation plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationship exists between our board of directors or
compensation committee and the board of directors or compensation committee of
any other entity, nor has any interlocking relationship existed in the past.
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<PAGE>
DIRECTOR COMPENSATION
Except as otherwise provided below, we have not paid any cash compensation
to members of our board of directors for their services as directors. David
Sharrock has received $10,000 each year in connection with his services as a
member of our board of directors. In addition, in January 1997, we granted to
Mr. Sharrock options to purchase 22,500 shares of common stock at an exercise
price of $1.60 per share as additional compensation for his services as a
director. Mr. Sharrock also received $20,000 during 1997 in connection with a
consulting service provided to us during 1997.
We reimburse the directors for reasonable expenses in connection with
attendance at board and committee meetings. Directors also are eligible to
receive stock options under our Second Amended and Restated 1995 Stock Plan. In
November 1999, we granted each non-employee director options under the 1995
Stock Plan to purchase 30,000 shares of common stock at an exercise price of
$7.00 per share for services they performed as directors. Each option grant will
vest and become exercisable in equal monthly installments over a three-year
period so long as the individual continues to be a member of our board of
directors.
Upon the closing of this offering, non-employee directors will each receive,
to the extent the internal policies of their respective organizations permit, an
annual director's fee of $12,000, plus $1,000 for each board meeting.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation earned, including salary,
bonuses, stock options and other compensation during the fiscal year ended
December 31, 1999 by Malcolm L. Gefter, Ph.D., our Chief Executive Officer, and
our other two executive officers, each of whose total annual compensation
exceeded $100,000 in 1999. We may refer to these officers as our named executive
officers in other parts of this prospectus.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
------------------- UNDERLYING
NAME AND POSITION(S) SALARY BONUS OPTIONS
- ------------------------------------------------------------ -------- -------- ------------
<S> <C> <C> <C>
Malcolm L. Gefter, Ph.D..................................... $297,675 $104,177 153,080(1)
Chairman of the Board,
Chief Executive Officer
and President
Kevin F. McLaughlin......................................... 187,425 32,785 146,970(2)
Chief Financial Officer,
Senior Vice President,
Treasurer and Secretary
Marc B. Garnick, M.D........................................ 250,000 26,190 60,780(3)
Executive Vice President
and Chief Medical Officer
</TABLE>
- ------------------------
(1) Includes options to purchase 3,080 shares of common stock granted on
January 13, 2000 in connection with a bonus earned in 1999 and excludes
options to purchase 10,400 shares of common stock granted on January 6, 1999
in connection with a bonus earned in 1998, in each case awarded under our
Executive Management Bonus Plan.
(2) Includes options to purchase 970 shares of common stock granted on
January 13, 2000 in connection with a bonus earned in 1999 and excludes
options to purchase 2,900 shares of common stock granted January 6, 1999 in
connection with a bonus earned in 1998, in each case awarded under our
Executive Management Bonus Plan.
(3) Includes options to purchase 780 shares of common stock granted on
January 13, 2000 in connection with a bonus earned in 1999 under our
Executive Management Bonus Plan.
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STOCK OPTION GRANTS
The following table shows information regarding options we granted to the
named executive officers under our 1995 Stock Plan during the year ended
December 31, 1999. We have never granted any stock appreciation rights. The
maximum term of each option granted is ten years from the date of grant, subject
to earlier termination in the event of resignation or termination of employment.
The percentage of the total options granted to employees in 1999 shown in the
table below is based on options to purchase an aggregate of 2,220,742 shares of
common stock granted to our employees, directors and consultants during the year
ended December 31, 1999. The exercise price of each option is equal to the fair
market value of the common stock on the date of grant as determined by the board
of directors.
The potential realizable values are net of the exercise prices and before
taxes associated with the exercise, and are based on an assumed initial public
offering price of $ per share and the assumption that our common stock
appreciates at the annual rate shown from the date of the grant until the
expiration of the ten-year option term. These numbers are calculated based on
the rules of the Securities and Exchange Commission and do not represent our
estimate or projection of future common stock prices. The amounts reflected in
the table may not necessarily be achieved. The actual amount the executive
officer may realize will depend upon the extent to which the stock price exceeds
the exercise price of the options on the date the option is exercised.
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------- POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE APPRECIATION
SECURITIES OPTIONS FOR OPTION TERM
UNDERLYING GRANTED TO EXERCISE --------------------------
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION
NAME GRANTED(1) FISCAL YEAR SHARE DATE 5% 10%
- -------------------------------- ---------- ------------ --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Malcolm L. Gefter, Ph.D......... 150,000(2) 6.9% $ 6.38 07/08/09
3,080(3) 14.50 01/13/10
Kevin F. McLaughlin............. 80,000(2) 6.6 6.38 07/08/09
66,000(4) 6.38 07/08/09
970(3) 14.50 01/13/10
Marc B. Garnick, M.D............ 60,000(2) 2.7 6.38 07/08/09
780(3) 14.50 01/13/10
</TABLE>
- ------------------------
(1) Excludes options granted in January 1999 in connection with bonus awards
earned in 1998 under our Executive Management Bonus Plan.
(2) These options will vest and become exercisable as to 16 2/3% of the shares
on July 1, 2001. Thereafter, options with respect to an additional 33 1/3%
of the shares will vest in equal monthly installments through July 1, 2004.
Options with respect to the remaining 50% of the shares vest in equal
monthly installments after July 1, 2004 through July 1, 2007.
(3) Represents options granted in January 2000 in connection with bonus awards
earned in 1999 under our Executive Management Bonus Plan. These options were
fully vested and immediately exercisable on the date of grant.
(4) These options vest and become exercisable in equal monthly installments over
a 33 month period beginning on October 31, 2001.
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<PAGE>
The following table provides information concerning the number and value of
unexercised options held by the named executive officers at December 31, 1999.
None of the named executive officers exercised any options in 1999.
The value of unexercised in-the-money options held at December 31, 1999
represents the total gain which would be realized if all of the in-the-money
options held at December 31, 1999 were exercised, and is determined by
multiplying the number of shares of common stock underlying the options by the
difference between an assumed initial public offering price of $ per share and
the per share option exercise price. An option is in-the-money if the fair
market value of the underlying shares exceeds the exercise price of the option.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
OPTION VALUES AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1999 DECEMBER 31, 1999
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Malcolm L. Gefter, Ph.D........................ 571,540 843,862
Kevin L. McLaughlin............................ 182,840 281,060
Marc B. Garnick, M.D........................... 183,420 692,598
</TABLE>
EMPLOYMENT AGREEMENTS
None of our named executive officers has an employment agreement, although
all of our executive officers have entered into agreements that contain
non-disclosure and non-solicitation restrictions and covenants.
INCENTIVE PLANS
SECOND AMENDED AND RESTATED 1995 STOCK PLAN
Our board of directors approved and adopted our Second Amended and Restated
1995 Stock Plan in February 2000 and we will submit the 1995 Stock Plan, as
amended and restated, to our stockholders for approval in February 2000. The
1995 Stock Plan will be effective upon the closing of this offering. We have
reserved a total of 11,375,000 shares of common stock for issuance under the
1995 Stock Plan. Under the terms of the 1995 Stock Plan, our board of directors
may grant incentive stock options, non-qualified stock options, awards of common
stock and opportunities to make direct purchases of common stock, to our
employees, directors and consultants, provided that the board may only grant
incentive stock options to persons who are employees at the time of the grant.
The 1995 Stock Plan is administered by the board of directors and the
compensation committee. The plan must be administered by a committee consisting
of at least two non-employee directors following the closing of this offering.
The exercise price per share of common stock for:
- non-qualified options must be no less than par value per share of common
stock on the date of grant,
- incentive stock options must be no less than the fair market value per
share of common stock on the date of the grant,
- incentive stock options granted to an employee owning more than 10% of the
total combined voting power of all classes of our capital stock, or of any
related company, must not be less than 110% of the fair market value per
share of the common stock on the date of the grant.
52
<PAGE>
Initially, each incentive stock option granted is 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 Internal Revenue Code of 1986, as
amended. In addition, the exercise period for an incentive stock option may not
exceed five years from the date of grant if the option is granted to an
individual who, at the time of the grant, owns more than 10% of the total
combined voting power of all classes of our stock. The board of directors or the
compensation committee generally has the right to accelerate the exercisability
of any options granted under the 1995 Stock Plan which would otherwise be
unexercisable. Upon consolidations or mergers, the board of directors of any
entity assuming our obligations may make equitable adjustments to the options,
accelerate the exercisability of options or terminate them in exchange for a
cash payment.
The 1995 Stock Plan expires on January 5, 2005, except as to options or
awards outstanding on that date. Subject to the terms of the 1995 Stock Plan,
the board of directors may terminate or amend the Plan at any time.
As of December 31, 1999, options for the purchase of an aggregate of
8,211,644 shares of common stock at a weighted average exercise price of $3.35
were outstanding under the 1995 Stock Plan.
EXECUTIVE MANAGEMENT BONUS PLAN
In November 1997, the board of directors adopted the Executive Management
Bonus Plan, which became effective in 1998 and will continue from year to year
unless terminated by the board of directors. We established the Bonus Plan as a
means to attract and retain senior level executives. Pursuant to the Bonus Plan,
individuals holding executive management positions, including our president and
chief executive officer, chief financial officer and our executive vice
presidents, are entitled to annual bonus payments linking performance oriented
objectives, which are defined and approved annually by the board, to a variable
compensation award based upon a percentage of the annual base salary of each
eligible participant. 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, we will pay bonus awards granted to
participants as follows:
- a minimum of 30% of the total value of the award shall be in the form of
stock options, with a value equal to the option exercise price multiplied
by the number of shares of common stock subject to the option; and
- the remaining 70% of the total value shall be in the form of cash or stock
options, to the extent elected by the participant.
Each year, prior to the time we grant the bonus awards, each participant
must make an election as to the form of payment of his or her bonus award. The
board of directors will grant stock options in accordance with the Bonus Plan
under our 1995 Stock Plan. The options awarded will be incentive stock options
to the extent possible and will fully vest immediately upon grant. The board of
directors has the sole discretion to grant awards under the Bonus Plan and may
terminate or amend the Bonus Plan at any time, in any manner, without the
consent of any participant.
EMPLOYEE STOCK PURCHASE PLAN
In February 2000, the board of directors approved and adopted the Employee
Stock Purchase Plan, subject to the completion of this offering and approval by
our stockholders. The Employee Stock Purchase Plan will be effective July 3,
2000 and provides that 40,000 shares of common stock will be available for
purchase during a six month period commencing on the effective date. An
additional 40,000 shares of common stock, as well as any shares not purchased
during the prior six month period, will be made available in each subsequent six
month period until the Employee Stock Purchase Plan terminates. All of our
employees or employees of our affiliates who have completed six months of
53
<PAGE>
service and whose customary employment is at least 20 hours per week and for
more than five months in any calendar year are eligible to participate in the
Employee Stock Purchase Plan. Employees who would own 5% or more of the total
combined voting power or value of our stock immediately after having subscribed
for shares under the Employee Stock Purchase Plan may not participate in the
Plan.
Each eligible employee may purchase shares of common stock through regular
payroll deductions in an amount not less than 1% nor more than 10% of the
employee's compensation for each payroll period. At the end of each six month
period, we will issue shares of common stock on behalf of participating
employees, using the employees' payroll deductions, at a purchase price equal to
85% of the lesser of the last reported sale price of the common stock on the
first or last business day of the six month period. Under the Employee Stock
Purchase Plan, no employee may purchase shares of common stock during any
calendar year with a fair market value in excess of $25,000.
The board of directors may amend or terminate the Employee Stock Purchase
Plan, provided that:
- no amendment or termination may affect shares purchased under the Stock
Purchase Plan or the right of a participant to acquire shares during the
current six month period semiannual cycle without the consent of that
participant; and
- to the extent required by Rule 16b-3 of the Securities Exchange Act of
1934, as amended, or any other law, regulation or stock exchange rule, the
stockholders shall have the right to approve amendments prior to their
effectiveness.
In addition, the Employee Stock Purchase Plan provides that our stockholders
must approve any amendment which increases the aggregate number of shares of
common stock which may be issued under the Plan or which expands the class of
persons entitled to participate under the Plan as of the effective date of the
Employee Stock Purchase Plan within twelve months after the adoption of the
amendment.
401(k) PLAN
Effective January 1, 1997, we amended and restated our July 1, 1994
Pharmaceutical Peptides, Inc. 401(k) Plan in its entirety by adopting a 401(k)
Trust Plan and Trust Agreement. This currently existing plan is known as the
PRAECIS Pharmaceutical, Inc. 401(k) Plan. The amended plan does not reduce the
benefits or lessen the rights of any employee with respect to those benefits
accrued prior to January 1, 1997. Employees who are at least 21 years of age and
have satisfied various service eligibility requirements, except for nonresident
aliens with no United States source of income, are eligible to make tax-deferred
contributions. Participants in the 401(k) plan may contribute up to 15% of their
total annual compensation, not to exceed the specified statutory limit, which
was $10,000 in 1999. Under our prior 401(k) plan, our participants received full
and immediate vesting of their contributions. Under our current 401(k) plan,
participants are vested in their non-matching and matching contributions, if
any, on a graded vesting schedule based on years of credited service.
The 401(k) plan permits, but does not require, us to make contributions to
the 401(k) plan on behalf of our employees. To date, we have not made any
matching contributions. All contributions to the 401(k) plan by or on behalf of
employees are subject to aggregate annual limits prescribed by the Internal
Revenue Service.
54
<PAGE>
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
We believe that we have executed all of the transactions set forth below on
terms no less favorable to us than terms we could have obtained from
unaffiliated third parties. It is our intention to ensure that all future
transactions, including loans, between us and our officers, directors, principal
stockholders and their affiliates, are approved by a majority of the board of
directors, including a majority of the independent and disinterested members of
the board of directors, and are on terms no less favorable to us than those that
we could obtain from unaffiliated third parties.
PRIVATE PLACEMENTS OF SECURITIES
Since January 1997, we have issued and sold common stock, warrants and
convertible preferred stock to the following persons and/or entities that are
our principal stockholders or directors.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK ISSUABLE UPON
-------------------------------------------
EXERCISE OF CONVERSION OF CONVERSION OF
WARRANT TO SERIES D SERIES E
SHARES OF PURCHASE CONVERTIBLE CONVERTIBLE
COMMON COMMON PREFERRED PREFERRED
INVESTOR STOCK STOCK STOCK STOCK
- ----------------------------------------------- --------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Sanofi-Synthelabo Inc. (formerly Sylamerica,
Inc.)........................................ 1,617,772 404,445 -- --
Quantum Industrial Partners LDC................ -- -- 2,695,414 --
Chase Venture Capital Associates, L.P.......... -- -- -- 5,357,145
Entities affiliated with Sutter Hill
Ventures..................................... -- -- -- 84,409
J.H. Whitney & Co. and an affiliated entity.... -- -- -- 535,717
Greylock Limited Partnership................... -- -- -- 89,287
Entities affiliated with Zesiger Capital Group
LLC.......................................... -- -- -- 267,855
</TABLE>
Shares held by all affiliated persons and entities have been aggregated. For
additional details on the shares held by each of these purchasers, please refer
to the information in this prospectus under the heading "Principal Stockholders
and Management." The aggregate purchase price for the common stock and the
warrant was $10.0 million in May 1997. The aggregate purchase price for the
Series D convertible preferred stock was $10.0 million, or $3.71 per share, in
June 1997. The per share purchase price for the Series E convertible preferred
stock was $5.60 per share in April 1998.
Damion E. Wicker, M.D., one of our directors, is General Partner of Chase
Capital Partners, a private equity and mezzanine capital group affiliated with
Chase Venture Capital Associates, L.P., G. Leonard Baker, Jr., one of our
directors, is a Managing Director of Sutter Hill Ventures, William Laverack,
Jr., one of our directors, is a General Partner of J.H. Whitney & Co., Henry F.
McCance, one of our directors, is a Managing Partner of Greylock Limited
Partnership and Albert L. Zesiger, one of our directors, is a Principal of
Zesiger Capital Group LLC.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
Our certificate of incorporation and by-laws provide that we will indemnify
each of our directors and officers to the fullest extent permitted by the
Delaware General Corporation Law.
55
<PAGE>
PRINCIPAL STOCKHOLDERS
The following tables set forth information regarding the beneficial
ownership of our common stock on December 31, 1999, and as adjusted to reflect
the sale of the shares of common stock in this offering, by:
- each named executive officer;
- each of our directors;
- each person known to us to be the beneficial owner of more than 5% of our
common stock; and
- all of our executive officers and directors as a group.
Unless otherwise noted below, the address of each beneficial owner listed on
the tables is c/o PRAECIS PHARMACEUTICALS INCORPORATED, One Hampshire Street,
Cambridge, Massachusetts 02139.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Except as indicated by the footnotes below,
we believe, based on the information furnished to us, that the persons and
entities named in the tables below have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them,
subject to applicable community property laws. Percentage of beneficial
ownership is based on 31,966,545 shares of common stock outstanding on
December 31, 1999 and shares of common stock outstanding upon completion of
this offering.
In computing the number of shares of common stock beneficially owned by a
person and the percentage ownership of that person, shares of common stock
subject to options held by that person that are currently exercisable or
exercisable within 60 days of December 31, 1999 are deemed outstanding. These
shares, however, are not deemed outstanding for the purpose of computing the
percentage ownership of any other person. Asterisks represent beneficial
ownership of less than one percent.
56
<PAGE>
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF COMMON STOCK
SHARES OF NUMBER OF BENEFICIALLY OWNED
COMMON STOCK SHARES -------------------
BENEFICIALLY SUBJECT TO BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OPTIONS(1) OFFERING OFFERING
- ---------------------------------------------------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C>
Malcolm L. Gefter, Ph.D............................. 877,500 612,158 4.66%
Kevin F. McLaughlin................................. 50,000 203,830 *
Marc B. Garnick, M.D. (2)........................... 458,654 213,608 2.10
G. Leonard Baker, Jr. (3)........................... 1,965,017 2,499 6.15
c/o Sutter Hill Ventures
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
William Laverack, Jr. (4)........................... 3,406,194 2,499 10.66
c/o J. H. Whitney & Co.
177 Broad Street
Stamford, CT 06901
Henry F. McCance (5)................................ 1,793,296 2,499 5.62
c/o Greylock Limited Partnership
One Federal Street, 26(th) Floor
Boston, MA 02110
David B. Sharrock................................... 31,875 13,749 *
1011 Barcamil Way
Naples, FL 34110
Damion E. Wicker, M.D. (6).......................... 7,339,004 2,499 22.97
c/o Chase Capital Partners
380 Madison Avenue,
12(th) Floor
New York, NY 10017
Albert L. Zesiger (7)............................... 1,529,506 2,499 4.79
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
All current directors and executive officers
as a group (9 persons)............................ 17,451,046 1,055,840 56.04
</TABLE>
- ------------------------
57
<PAGE>
(1) Represents the number of shares issuable upon the exercise of options
exercisable within 60 days of December 31, 1999.
(2) Includes 36,000 shares of common stock held by the Garnick Family 1999
Grantor Retained Annuity Trust, of which Mr. Garnick is the trustee.
(3) Consists of 1,288,372 shares of common stock held by Sutter Hill Ventures,
over which Mr. Baker, a member of our board of directors 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; 463,842 shares of common stock held by three other
managing directors, one retired managing director and their related family
entities; and shares of common stock held by Mr. Baker and his 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.
(4) Consists of 859,804 shares of common stock held by J. H. Whitney & Co. and
2,546,390 shares of common stock held by Whitney 1990 Equity Fund, an
affiliated entity of J. H. Whitney & Co. Mr. Laverack is a member of our
board of directors and a general partner of each entity and has voting and
investment power with respect to these shares. Mr. Laverack disclaims
beneficial ownership of these shares, except to the extent of his
proportionate pecuniary interest therein.
(5) Consists of 1,793,296 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 these
shares, except as to his proportionate partnership interest therein.
(6) Consists of 7,339,004 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 these shares.
(7) Consists of 1,529,506 shares of common stock held in accounts managed for
various 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 these
shares but disclaims beneficial ownership with respect thereto.
58
<PAGE>
5% STOCKHOLDERS
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF COMMON STOCK
SHARES OF BENEFICIALLY OWNED
COMMON STOCK -------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OFFERING OFFERING
- ------------------------------------------------------------ ------------ -------- --------
<S> <C> <C> <C>
Chase Venture Capital Associates, L.P....................... 7,339,004 22.96%
c/o Chase Capital Partners
380 Madison Avenue, 12(th) Floor
New York, NY 10017
J. H. Whitney & Co. (1)..................................... 3,406,194 10.66
177 Broad Street
Stamford, CT 06901
Quantum Industrial Partners LDC............................. 2,695,414 8.43
888 Seventh Avenue
New York, NY 10106
Sanofi-Synthelabo Inc. (2).................................. 2,022,217 6.33
90 Park Avenue
New York, NY 10019
Sutter Hill Ventures (3).................................... 1,965,017 6.15
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
Greylock Limited Partnership................................ 1,793,296 5.61
One Federal Street, 26(th) Floor
Boston, MA 02110
Vulcan Ventures, Inc........................................ 1,641,026 5.13
110-110th Avenue Northeast
Suite 550
Bellevue, WA 98004
</TABLE>
- ------------------------
(1) Consists of 859,804 shares of common stock held by J. H. Whitney & Co. and
2,546,390 shares of common stock held by Whitney 1990 Equity Fund, L.P., an
affiliated entity of J. H. Whitney & Co.
(2) Includes 404,445 shares of common stock subject to currently exercisable
warrants.
(3) Consists of 1,288,372 shares of common stock held by Sutter Hill Ventures,
over which Mr. Baker, Jr., a member of our board of directors 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; 463,842 shares of common stock held by the three
other managing directors, one retired managing director and their related
family entities; and shares of common stock held by Mr. Baker and his
related family entities.
59
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock and provisions of our amended
and restated certificate of incorporation and our amended and restated by-laws
is a summary. Statements contained elsewhere in this prospectus relating to
these provisions are not necessarily complete, and we refer you to the amended
and restated certificate of incorporation and the amended and restated by-laws
that will be in effect upon the completion of this offering. Copies of these
documents have been filed with the Securities and Exchange Commission as
exhibits to our registration statement, of which this prospectus constitutes a
part. The amended and restated certificate of incorporation and the amended and
restated by-laws described below will become effective at the time of completion
of this offering.
Our authorized capital stock will consist of 200,000,000 shares of common
stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par
value $0.01 per share, upon the closing of this offering.
COMMON STOCK
As of December 31, 1999, there were 31,966,545 shares of common stock
outstanding and held of record by 118 stockholders. Upon completion of this
offering, there will be shares of common stock outstanding. In addition, as of
December 31, 1999, there were outstanding stock options for the purchase of a
total of 8,211,644 shares of common stock and outstanding warrants to purchase
of 515,940 shares of common stock. Shares of common stock have the following
rights, preferences and privileges:
VOTING RIGHTS. Each outstanding share of common stock is entitled to one
vote on all matters submitted to a vote of our stockholders, including the
election of directors. There are no cumulative voting rights, and therefore, the
holders of a plurality of the shares of common stock voting for the election of
directors may elect all of our directors standing for election.
DIVIDENDS. Holders of common stock are entitled to receive dividends if and
when dividends are declared by our board of directors out of assets legally
available for the payment of dividends, subject to preferential rights of
outstanding shares of preferred stock, if any.
LIQUIDATION. In the event of a liquidation, dissolution or winding up of
the affairs of PRAECIS, whether voluntary or involuntary, after payment of our
debts and other liabilities of and making provision for the holders of
outstanding shares of preferred stock, if any, the remainder of our assets will
be distributed ratably among the holders of shares of common stock.
RIGHTS AND PREFERENCES. The common stock has no preemptive, redemption,
conversion or subscription rights. The rights, powers, preferences and
privileges of holders of common stock are subject to, and may be impaired by,
the rights of the holders of shares of any series of preferred stock that we may
designate and issue in the future.
FULLY PAID AND NONASSESSABLE. 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 nonassessable.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of preferred stock
will be converted into common stock. Pursuant to the terms of our amended and
restated certificate of incorporation, the board of directors will be
authorized, subject to any limitations prescribed by Delaware law, without
further stockholder approval, to issue from time to time up to an aggregate of
10,000,000 shares of preferred stock, in one or more classes or series, and to
fix the voting powers, if any, and the distinctive designations, preferences and
relative, participating, optional or other special rights and the
qualifications, limitations or restrictions of these rights, of the shares of
each class or series. The board
60
<PAGE>
of directors is authorized to issue preferred stock with voting, conversion and
other rights and preferences that could impair the voting power or other rights
of the holders of common stock.
We have no current plans to issue any preferred stock. However, the issuance
of preferred stock or of rights to purchase preferred stock could make it more
difficult or less desirable for third party to acquire a majority of our
outstanding common stock.
WARRANTS
In connection with a Master Lease Agreement dated March 29, 1995, as
amended, between us and Comdisco, Inc., we issued to Comdisco warrants to
purchase shares of our Series A convertible preferred stock. All of these
warrants are subject to adjustment in accordance with their terms and expire on
March 29, 2005. Upon the closing of this offering, these warrants will convert
to warrants to purchase common stock at an exercise price of $1.35 per share.
The warrants issued to Comdisco were exercisable for a total of 111,495 shares
of common stock. In August 1998, Comdisco transferred to a third party warrants
to purchase 12,722 shares of common stock. Comdisco currently holds warrants to
purchase 98,773 shares of common stock. All of these warrants are currently
exercisable.
Pursuant to a Stock and Warrant Purchase Agreement dated as of May 13, 1997,
we issued to Sanofi-Synthelabo Inc., formerly Sylamerica, Inc., warrants which
are currently exercisable for 404,445 shares of common stock at an exercise
price of $12.88 per share. These warrants are subject to adjustment in
accordance with their terms and expire on May 13, 2002.
REGISTRATION RIGHTS
Pursuant to the amended and restated stockholders agreement dated as of
April 30, 1998, as amended, between us and some of our stockholders, and the
stock and warrant purchase agreement, the holders of 30,652,908 shares of common
stock have rights to have their shares of common stock registered under the
Securities Act of 1933, as amended. Under the terms of the stockholders
agreement and the stock and warrant purchase agreement, if we propose to
register any of our securities under the Securities Act, subject to various
conditions, the parties to the stockholders agreement and the stock and warrant
purchase agreement are entitled to notice of the registration and to include
their shares of common stock in the registration statement. We have the right,
however, to cut back or completely exclude shares proposed to be registered in
an underwritten public offering to the extent the managing underwriter advises
us to do so due to market conditions.
In addition, the holders of at least 66 2/3% of the outstanding securities
issued upon conversion of the Series A convertible preferred stock, Series C
convertible preferred stock, Series D convertible preferred stock and Series E
convertible preferred stock are entitled to demand, at any time, and up to three
times, that we file a registration statement under the Securities Act covering
some or all of their shares. Under these demand registration rights, we must use
our reasonable best efforts to cause the shares requested, and all other shares
held by holders of securities entitled to registration rights under the
stockholders agreement requested, to be included in the registration statement,
subject to customary conditions and limitations.
In addition, at any time after the first anniversary of the closing of this
offering, holders of at least a majority of the outstanding securities issued
upon conversion of the Series E convertible preferred stock are entitled to
demand, on one occasion, that we file a registration statement to register their
shares. We must use our reasonable best efforts to cause those shares requested
and all other shares held by the stockholders entitled to demand registration
rights requested to be included in the registration statement to be registered,
subject to customary conditions and limitations.
Once we become eligible to file a registration statement on Form S-3, the
holders of 10% of the outstanding securities entitled to registration rights
under the stockholders agreement may require us to
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<PAGE>
register, on up to three occasions, all or a portion of their securities on a
registration statement on Form S-3 and may participate in that registration by
us, subject to conditions and limitations described in the stockholders
agreement. These holders may not request a Form S-3 registration on more than
one occasion in any twelve month period. In addition, the Series E convertible
preferred stockholders may require us, on one occasion, to register all or a
portion of their securities on a registration statement on Form S-3 and may
participate in a similar registration by us, subject to conditions and
limitations described in the stockholders agreement.
The exercise of any of the registration rights described above may hinder
our efforts to arrange future financing and may lower the market price of the
common stock.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CHARTER AND BY-LAWS AND OF DELAWARE
LAW
Our amended and restated certificate of incorporation and by-laws, effective
upon completion of this offering, contain provisions that could discourage,
delay or prevent a tender offer or takeover attempt at a price which many
stockholders may find attractive. The existence of these provisions could limit
the price that investors might otherwise pay in the future for shares of common
stock.
CERTIFICATE OF INCORPORATION AND BY-LAWS
BLANK CHECK PREFERRED STOCK. As noted above, our board of directors,
without stockholder approval, will have the authority under our certificate of
incorporation to issue preferred stock with rights superior to the rights of the
holders of common stock. As a result, preferred stock could be issued quickly
and easily, could impair the rights of holders of common stock and could be
issued with terms calculated to delay or prevent a change of control or make
removal of management more difficult.
ELECTION OF DIRECTORS. Newly created directorships resulting from an
increase in the authorized number of directors may be filled only by a majority
of the directors then in office, provided that a quorum is present, and any
other vacancy occurring on the board of directors may be filled only by a
majority of the directors then in office, even though less than a quorum may
then be in office. These provisions may discourage a third party from voting to
remove incumbent directors and simultaneously gaining control of the board of
directors by filling the vacancies created by that removal with its own
nominees.
STOCKHOLDER ACTION. Our certificate of incorporation provides that the
stockholders may only act at meetings of stockholders and not by written consent
in lieu of a stockholders' meeting.
STOCKHOLDER MEETINGS. Our certificate of incorporation and by-laws provide
that stockholders may not call a special meeting of the stockholders. Rather,
only the chairman of the board, the president, any vice president, the
secretary, or any assistant secretary, acting pursuant to a resolution of a
majority of the board of directors, will be able to call special meetings of
stockholders. Our by-laws also provide that only business specified in the
notice of meeting be conducted at a special meeting of our stockholders. These
provisions may discourage another person or entity from making a tender offer,
even if it acquired a majority of our outstanding voting stock, because the
person or entity could only take action at a duly called stockholders' meeting
relating to the business specified in the notice of meeting and not by written
consent.
REQUIREMENTS FOR ADVANCE NOTIFICATION OF STOCKHOLDER NOMINATIONS AND
PROPOSALS. Our by-laws provide that a stockholder seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for election
as directors at an annual meeting of stockholders, must provide timely notice of
this intention in writing. To be timely, a stockholder's notice must be
delivered to or mailed and received at our principal executive offices not less
than 90 days nor more than 120 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders. However, if the date
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<PAGE>
of the annual meeting of stockholders has been changed to a date than is not
within 30 days before or after the anniversary of our previous annual meeting of
stockholders, then the stockholder's notice must be received no later than the
close of business on the later of the 90(th) day preceding the date of the
annual meeting and the 10(th) day following the date on which notice of the date
of the meeting was mailed or a public announcement was made, whichever first
occurs. The by-laws also include a similar requirement for making nominations at
special meetings and specify requirements as to the form and content of the
stockholder's notice. These provisions could delay stockholder actions that are
favored by the holders of a majority of our outstanding stock until the next
stockholders' meeting.
SUPER-MAJORITY VOTING. Delaware law generally provides that the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's certificate of incorporation, unless a corporation's
certificate of incorporation requires a greater percentage. We have provisions
in our certificate of incorporation which require a vote of at least 85% of the
stockholders entitled to vote in the election of directors to amend, alter,
change or repeal the anti-takeover provisions of our certificate of
incorporation.
DELAWARE ANTI-TAKEOVER STATUTE
We are a Delaware corporation subject to Section 203 of the Delaware General
Corporation Law. Under Section 203, some business combinations between a
Delaware corporation whose stock generally is publicly traded or held of record
by more than 2,000 stockholders and an interested stockholder are prohibited for
a three-year period following the date that the stockholder became an interested
stockholder, unless:
- the corporation has elected in its certificate of incorporation not to be
governed by Section 203;
- the transaction which resulted in the stockholder becoming an interested
stockholder was approved by the board of directors of the corporation
before the stockholder became an interested stockholder;
- 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
commencement of the transaction, excluding voting stock owned by directors
who are also officers or held in employee benefit plans in which the
employees do not have a confidential right to tender stock held by the
plan in a tender or exchange offer; or
- the business combination is approved by the board of directors of the
corporation and authorized at a meeting by two-thirds of the voting stock
which the interested stockholder did not own.
We have not made an election in our amended and restated certificate of
incorporation to opt-out of Section 203.
In addition to the above exceptions to Section 203, the three-year
prohibition does not apply to some business combinations proposed by an
interested stockholder following the announcement or notification of an
extraordinary transaction involving the corporation and a person who had not
been an interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors. For the purposes of Section 203, a business combination generally
includes mergers or consolidations, transactions involving the assets or stock
of the corporation or its majority-owned subsidiaries and transactions which
increase an interested stockholder's percentage ownership of stock. Also, an
interested stockholder generally includes a stockholder who becomes beneficial
owner of 15% or more of a Delaware corporation's voting stock, together with the
affiliates or associates of that stockholder.
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<PAGE>
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our certificate of incorporation limits the liability of our directors to
the maximum extent permitted by Delaware law. Delaware law provides that
directors will not be personally liable for monetary damages for breach of their
fiduciary duties as directors, except liability for:
- any breach of their duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
This provision has no effect on any non-monetary remedies that may be
available to us or our stockholders, nor does it relieve us or our officers or
directors from compliance with federal or state securities laws.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us pursuant to
the foregoing provisions or otherwise, we have been informed that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
Our by-laws also permit us to purchase and maintain insurance on behalf of
any officer or director for any liability arising out of his or her actions in
that capacity, regardless of whether our by-laws would otherwise permit
indemnification for that liability. We are in the process of obtaining liability
insurance for our officers and directors.
At the present time, there is no pending litigation or proceeding involving
any director, officer, employee or agent of PRAECIS in which indemnification
will be required or permitted. We are not aware of any threatened litigation or
proceeding which may result in a claim for indemnification.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American Stock
Transfer and Trust Company.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
SALE OF RESTRICTED SHARES
Upon completion of this offering, based upon the number of shares
outstanding as of December 31, 1999, we will have an aggregate of
outstanding shares of common stock, or
shares if the underwriters' over-allotment option, excluding 8,211,644 shares
underlying outstanding options and 515,940 underlying outstanding warrants. Of
these shares, all of the shares sold in this offering shares, or shares
if the underwriters over-allotment option is exercised in full will be freely
tradable without restriction or further registration under the Securities Act,
except that any shares purchased by our affiliates, as that term is defined in
Rule 144 under the Securities Act, may generally only be sold in compliance with
the limitations of Rule 144 described below. As defined in Rule 144, an
affiliate of an issuer is a person that directly, or indirectly through one or
more intermediaries, controls, is controlled by or is under common control with
the issuer. The remaining outstanding shares of common stock will be deemed
"restricted securities" as that term is defined under Rule 144. Restricted
securities may be sold in the public market only if they qualify for an
exemption from registration under Rule 144, including Rule 144(k), or Rule 701
under the Securities Act.
LOCK-UP AGREEMENTS
We, our directors, executive officers, warrant holders and substantially all
of our other stockholders, holding shares in the aggregate upon completion
of this offering, have agreed not to offer, sell, contract to sell or, with
limited exception, otherwise dispose of any shares of common stock or any
security convertible into or exchangeable for common stock for a period of
180 days from the date of this prospectus without the prior written consent of
Salomon Smith Barney. People who have agreed to these restrictions may dispose
of shares as a gift or distribution, provided that the recipients of those
shares agree to the same restrictions. Immediately following this offering, our
existing stockholders will own restricted shares, representing approximately
% of the then outstanding shares of common stock, or % if the
underwriters' over-allotment option is exercised in full. Our executive officers
and directors will own shares. Upon expiration of the lock-up period,
180 days after the date of this prospectus, shares will be available for
resale to the public in accordance with Rule 144.
RULE 144
In general, under Rule 144 as currently in effect, commencing 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year, including persons who are affiliates, is
entitled to sell within any three-month period a number of shares that does not
exceed the greater of:
- 1% of the number of shares of common stock then outstanding, which is
expected to be approximately shares upon completion of this offering;
or
- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to a sale, subject to restrictions
specified in Rule 144.
Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about us.
Commencing 90 days after the date of this prospectus, shares of common stock
not subject to a lock-up agreement will be available for resale to the public in
accordance with Rule 144.
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<PAGE>
RULE 144(k)
Under Rule 144(k), a person who has not been one of our affiliates at any
time during the three months preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, is entitled to sell those
shares without regard to the volume, manner-of-sale or other limitations
contained in Rule 144. Upon completion of this offering, shares of common
stock may be sold under Rule 144(k).
RULE 701
In general, under Rule 701 of the Securities Act as currently in effect, any
of our employees, consultants or advisors who purchases shares from us in
connection with a compensatory stock plan or other written agreement is eligible
to resell the shares 90 days after the effective date of this offering in
reliance on Rule 144, but without compliance with various restrictions,
including the holding period, contained in Rule 144.
STOCK OPTIONS
As of December 31, 1999, options to purchase a total of 8,211,644 shares of
common stock were outstanding, of which 2,776,546 were then exercisable. Upon
completion of this offering, we intend to file a registration statement to
register for resale an aggregate of shares of common stock reserved for
issuance under our Second Amended and Restated 1995 Stock Plan and our Employee
Stock Purchase Plan. That registration statement will become effective
immediately upon filing. Accordingly, shares covered by that registration
statement will become eligible for sale in the public markets, subject to
vesting restrictions, Rule 144 volume limitations applicable to our affiliates
or the lock-up agreements with Salomon Smith Barney. Holders of options to
purchase shares of common stock have entered into lock-up agreements.
We have agreed not to issue, sell or otherwise dispose of any shares of
common stock during the 180-day period following the date of the prospectus,
except we may issue and grant options to purchase shares of common stock under
the 1995 Stock Plan. In addition, we may issue shares of common stock in
connection with an acquisition of another company if the terms of the issuance
provide that the common stock so issued may not be resold prior to the
expiration of the 180-day lock-up period.
REGISTRATION RIGHTS
Upon completion of this offering, under specified circumstances and subject
to customary conditions, the holders of an aggregate of 30,652,908 shares of our
common stock, will be entitled to rights with respect to the registration under
the Securities Act of some or all of their shares, subject to the 180-day
lock-up period described above. These holders of registration rights are subject
to lock-up periods of not more than 180 days following the date of this
prospectus or any subsequent prospectus. Please refer to the information in this
prospectus under the heading "Description of Capital Stock--Registration Rights"
for a more detailed discussion of these registration rights.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions of an underwriting agreement, each
underwriter named below has severally agreed to purchase, and we have agreed to
sell to each underwriter, the number of shares set forth opposite the name of
that underwriter.
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ------------------------------------------------------------ ---------
<S> <C>
Salomon Smith Barney Inc....................................
CIBC World Markets Corp.....................................
Credit Suisse First Boston Corporation......................
-------
Total.....................................................
=======
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
approval of legal matters by their counsel and to other conditions. The
underwriters must purchase all the shares, other than those covered by the
over-allotment option described below, if they purchase any of the shares.
The underwriters, for whom Salomon Smith Barney Inc., CIBC World Markets
Corp. and Credit Suisse First Boston Corporation are acting as representatives,
propose to offer some of the shares directly to the public at the public
offering price set forth on the cover page of this prospectus and some of the
shares to dealers at the public offering price less a concession not in excess
of $ per share. The underwriters may allow, and the dealers may reallow, a
concession not in excess of $ per share on sales to other dealers. If all of
the shares are not sold at the initial offering price, the representatives may
change the public offering price and the other selling terms. The
representatives have advised us that the underwriters do not intend to confirm
any sales to any accounts over which they exercise discretionary authority.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to additional shares of common
stock at the public offering price less the underwriting discount. The
underwriters may exercise that option solely to cover over-allotments, if any,
in connection with this offering. To the extent the option is exercised, each
underwriter must, subject to specified conditions, purchase a number of
additional shares approximately proportionate to that underwriter's initial
purchase commitment.
At our request, the underwriters have reserved for sale at the initial
public offering price up to of the shares, or %, of our common stock to be
sold in this offering for sale to our directors, officers and employees and
friends and family of our directors, officers and employees. The number of
shares available for sale to the general public will be reduced to the extent
that any reserved shares are purchased. Any reserved shares not purchased will
be offered by the underwriters on the same basis as the other shares offered.
We, our officers and directors, warrant holders and substantially all of our
stockholders have agreed that, with limited exceptions, for a period of
180 days from the date of this prospectus, we or they will not, without the
prior written consent of Salomon Smith Barney Inc., dispose of or hedge any
shares of our common stock or any securities convertible into or exchangeable
for common stock. Salomon Smith Barney Inc. in its sole discretion may release
any of the securities subject to these lock-up agreements at any time without
notice.
Prior to this offering, there has been no public market for the common
stock. Consequently, the initial public offering price for the shares was
determined by negotiations among us and the representatives. Among the factors
considered in determining the initial public offering price were our record of
operations, our current financial condition, our future prospects, our markets,
the economic conditions in and future prospects for the biotechnology and
pharmaceutical industries, our
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management and currently prevailing general conditions in the equity securities
markets, including current market valuations of publicly traded companies
considered comparable to us. However, the prices at which the shares will sell
in the public market after this offering may be lower than the price at which
they are sold by the underwriters and an active trading market in the common
stock may not develop or continue after this offering.
We have applied to have the common stock included for quotation on the
Nasdaq National Market under the symbol "PRCS."
The following table shows the underwriting discounts and commissions to be
paid to the underwriters by us in connection with this offering. These amounts
are shown assuming both no exercise and full exercise of the underwriters'
option to purchase additional shares of common stock.
<TABLE>
<CAPTION>
PAID BY PRAECIS
---------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share............................................ $ $
Total................................................ $ $
</TABLE>
In connection with the offering, Salomon Smith Barney Inc., on behalf of the
underwriters, may purchase and sell shares of common stock in the open market.
These transactions may include over-allotment, syndicate covering transactions
and stabilizing transactions. Over-allotment involves syndicate sales of common
stock in excess of the number of shares to be purchased by the underwriters in
the offering, which creates a syndicate short position. Syndicate covering
transactions involve purchases of the common stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Stabilizing transactions consist of bids or purchases of common stock made to
prevent or retard a decline in the market price of the common stock while the
offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to other underwriters a portion of the
underwriting discount received by it because the other underwriters have
repurchased shares sold by or for the account of the underwriter in stabilizing
or short covering transactions.
Any of these activities may cause the price of the common stock to be higher
than the price that otherwise would exist in the open market in the absence of
these transactions. These activities may be effected on the Nasdaq National
Market or in the over-the-counter market, or otherwise and, if commenced, may be
discontinued at any time.
In addition, in connection with this offering, some of the underwriters may
engage in passive market making transactions in the common stock on the Nasdaq
National Market, prior to the pricing and completion of the offering. Passive
market making consists of displaying bids on the Nasdaq National Market no
higher than the bid prices of independent market makers and making purchases at
prices no higher than those independent bids and effected in response to order
flow. Net purchases by a passive market maker on each day are limited to a
specified percentage of the passive market maker's average daily trading volume
in the common stock during a specified period and must be discontinued when that
limit is reached. Passive market making may cause the price of the common stock
to be higher than the price that otherwise would exist in the open market in the
absence of these transactions. If passive market making is commenced, it may be
discontinued at any time.
We estimate that the total expenses of this offering will be approximately
$ .
We have agreed to indemnify the underwriters against some liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make in respect of any of those
liabilities.
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LEGAL MATTERS
Various legal matters with respect to the validity of the common stock
offered by this prospectus will be passed upon for us by Skadden, Arps, Slate,
Meagher & Flom LLP, Boston, Massachusetts. Various legal matters in connection
with this offering will be passed upon for the underwriters by Goodwin,
Procter & Hoar LLP, Boston, Massachusetts.
EXPERTS
Our financial statements at December 31, 1998 and 1999 and for each of the
three years in the period ended December 31, 1999, appearing in this prospectus
and elsewhere in the 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 this report given upon the
authority of such firm as experts in accounting and auditing.
The statements in this prospectus relating to patents appearing in the
section entitled "Risk Factors" under the captions "If we are unable to obtain
and enforce valid patents, we could lose our competitive advantage" and "If our
potential products conflict with patents that competitors, universities or
others have obtained, then we may not be able to commercialize those products,"
and in the section entitled "Business" under the sub-heading "Patents and
Proprietary Rights" and other references in this prospectus patents have been
examined by and passed upon for us by Lahive & Cockfield, LLP, and are included
in reliance upon such examination and upon the authority of such counsel as
experts on patents.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission under the Securities Act with respect to the shares of
common stock offered in this offering. This prospectus, which constitutes part
of the registration statement, does not contain all of the information set forth
in the registration statement, or the exhibits and schedules which are part of
the registration statement, parts of which are omitted as permitted by the rules
and regulations of the Securities and Exchange Commission. For further
information about us and the shares of our common stock to be sold in this
offering, please refer to the registration statement and the exhibits and
schedules which are part of the registration statement. Statements contained in
this prospectus as to the contents of any contract or any other document are not
necessarily complete. Each statement in this prospectus regarding the contents
of the referenced contract or other document is qualified in all respects by our
reference to the filed copy.
For further information about us and our common stock, we refer you to our
registration statement and its attached exhibits, copies of which may be
inspected without charge at the Securities and Exchange Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the Commission located at Seven World Trade Center, Suite
1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. You can request copies of these documents,
upon payment of a duplicating fee, by writing to the Securities and Exchange
Commission. Please call the Securities and Exchange Commission at 1-800-SEC-0330
for further information about the public reference rooms. The Commission
maintains a World Wide Web site on the Internet at HTTP://WWW.SEC.GOV that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Exchange Act and, in accordance
therewith, will file periodic reports, proxy and information statements and
other information with the Commission. Our periodic reports, proxy and
information statements and other information will be available for inspection
and copying at the regional offices, public references facilities and Web site
of the commission referred to above.
We intend to furnish our stockholders with annual reports containing audited
financial statements and an opinion thereon expressed by independent certified
public accountants. We also intend to furnish other reports as we may determine
or as required by law.
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PRAECIS PHARMACEUTICALS INCORPORATED
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Auditors.............................. F-2
Balance Sheets at December 31, 1998 and 1999................ F-3
Statements of Operations for the years ended December 31,
1997, 1998 and 1999....................................... F-4
Statements of Stockholders' Equity for the years ended
December 31, 1997, 1998 and 1999.......................... F-5
Statements of Cash Flows for the years ended December 31,
1997, 1998 and 1999....................................... 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, 1998 and 1999, and the related statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1999. 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 auditing standards generally
accepted in the United States. 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, 1998 and 1999, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1999, in conformity with accounting principles generally accepted in the United
States.
Ernst & Young LLP
Boston, Massachusetts
February 2, 2000
The foregoing report is in the form that will be signed upon stockholder
approval of the two-for-one split of the Company's common stock described in
Note 6 to the financial statements.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 2, 2000
F-2
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 85,298 $ 94,525
Accounts receivable....................................... 680 8,121
Unbilled revenue.......................................... -- 4,259
Materials inventory....................................... -- 21,100
Prepaid expenses and other assets......................... 526 708
Deferred income taxes..................................... 280 5,575
-------- --------
Total current assets.................................... 86,784 134,288
Property and equipment, net................................. 3,841 6,043
-------- --------
Total assets............................................ $ 90,625 $140,331
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,206 $ 9,878
Accrued expenses.......................................... 7,231 6,859
Deferred revenue.......................................... 1,302 5,501
Advance payments.......................................... -- 21,100
Income taxes payable...................................... 230 4,672
Current portion of capital lease obligations.............. 189 58
-------- --------
Total current liabilities............................... 10,158 48,068
Deferred revenue............................................ 2,035 4,547
Capital lease obligations, net of current portion........... 59 --
Commitments and contingencies
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
Series B Convertible Preferred Stock, $0.01 par value;
63,700 shares authorized, issued and outstanding ($642
aggregate liquidation preference)....................... 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
Series D Convertible Preferred Stock, $0.01 par value;
359,324 shares authorized, issued and outstanding
($10,000 aggregate liquidation preference).............. 4 4
Series E Convertible Preferred Stock, $0.01 par value;
900,478 shares authorized, issued and outstanding....... 9 9
Common Stock, $0.01 par value; 60,000,000 shares
authorized; 5,920,174 shares in 1998 and 6,358,684
shares in 1999 issued and outstanding................... 59 64
Additional paid-in capital................................ 88,622 88,710
Accumulated deficit....................................... (10,343) (1,093)
-------- --------
Total stockholders' equity.............................. 78,373 87,716
-------- --------
Total liabilities and stockholders' equity.............. $ 90,625 $140,331
======== ========
</TABLE>
SEE ACCOMPANYING NOTES.
F-3
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Corporate collaborations.................................. $15,118 $37,624 $61,514
Contract services......................................... 2,615 1,943 --
------- ------- -------
Total revenues.......................................... 17,733 39,567 61,514
Costs and expenses:
Research and development.................................. 15,013 33,704 48,764
General and administrative................................ 3,780 3,605 6,173
------- ------- -------
Total costs and expenses................................ 18,793 37,309 54,937
------- ------- -------
Operating income (loss)..................................... (1,060) 2,258 6,577
Interest income............................................. 1,466 3,562 4,484
Interest expense............................................ (102) (46) (11)
------- ------- -------
Income before income taxes.................................. 304 5,774 11,050
Provision for income taxes.................................. 100 100 1,800
------- ------- -------
Net income.................................................. $ 204 $ 5,674 $ 9,250
======= ======= =======
Net income per share:
Basic..................................................... $ 0.05 $ 0.99 $ 1.51
======= ======= =======
Diluted................................................... $ 0.01 $ 0.16 $ 0.24
======= ======= =======
Weighted average number of common shares:
Basic..................................................... 4,446 5,738 6,106
Diluted................................................... 28,270 35,139 37,849
</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
-------------------- ------------------- -------------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- -------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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...............
Common Stock issued upon
exercise of stock options.....
Net income......................
--------- --- ------ -- --------- --- ------- --
Balance at December 31, 1998.... 1,041,166 10 63,700 1 1,052,632 11 359,324 4
Common Stock issued upon
exercise of stock options.....
Net income......................
--------- --- ------ -- --------- --- ------- --
Balance at December 31, 1999.... 1,041,166 $10 63,700 $1 1,052,632 $11 359,324 $4
========= === ====== == ========= === ======= ==
<CAPTION>
PREFERRED STOCK
-------------------
SERIES E COMMON STOCK TREASURY STOCK ADDITIONAL
------------------- -------------------- ------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
-------- -------- --------- -------- -------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996.... 3,341,402 $34 $30,926 $(16,221)
Issuance of Common Stock........ 1,617,772 16 9,448
Issuance of warrants to purchase
Common Stock.................. 500
Common Stock issued upon
exercise of stock options..... 123,082 1 18
Repurchase of Treasury Stock.... 17,498 $(2)
Retirement of Treasury Stock.... (17,498) (17,498) 2 (2)
Issuance of Series D Convertible
Preferred Stock............... 9,957
Net income...................... 204
------- -- --------- --- ------- --- ------- --------
Balance at December 31, 1997.... 5,064,758 51 50,847 (16,017)
Issuance of Series E Convertible
Preferred Stock............... 900,478 $9 37,622
Common Stock issued upon
exercise of stock options..... 855,416 8 153
Net income...................... 5,674
------- -- --------- --- ------- --- ------- --------
Balance at December 31, 1998.... 900,478 9 5,920,174 59 88,622 (10,343)
Common Stock issued upon
exercise of stock options..... 438,510 5 88
Net income...................... 9,250
------- -- --------- --- ------- --- ------- --------
Balance at December 31, 1999.... 900,478 $9 6,358,684 $64 $88,710 $ (1,093)
======= == ========= === ======= === ======= ========
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balance at December 31, 1996.... $14,761
Issuance of Common Stock........ 9,464
Issuance of warrants to purchase
Common Stock.................. 500
Common Stock issued upon
exercise of stock options..... 19
Repurchase of Treasury Stock.... (2)
Retirement of Treasury Stock....
Issuance of Series D Convertible
Preferred Stock............... 9,961
Net income...................... 204
-------
Balance at December 31, 1997.... 34,907
Issuance of Series E Convertible
Preferred Stock............... 37,631
Common Stock issued upon
exercise of stock options..... 161
Net income...................... 5,674
-------
Balance at December 31, 1998.... 78,373
Common Stock issued upon
exercise of stock options..... 93
Net income...................... 9,250
-------
Balance at December 31, 1999.... $87,716
=======
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.................................................. $ 204 $ 5,674 $ 9,250
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization............................. 754 1,005 1,354
Deferred income taxes..................................... -- (280) (5,295)
Changes in operating assets and liabilities:
Accounts receivable..................................... (2,213) 1,867 (7,441)
Unbilled revenues....................................... (1,071) 1,071 (4,259)
Materials inventory..................................... -- -- (21,100)
Prepaid expenses and other assets....................... 115 (328) (182)
Accounts payable........................................ 1,252 (213) 8,672
Accrued expenses........................................ 3,280 2,468 (372)
Deferred revenue........................................ 4,931 (2,265) 6,711
Advance payments........................................ -- -- 21,100
Income taxes payable.................................... -- 230 4,442
-------- -------- --------
Net cash provided by operating activities................... 7,252 9,229 12,880
INVESTING ACTIVITIES:
Purchase of property and equipment.......................... (1,819) (1,492) (3,556)
Sale of short-term investments.............................. 4,960 -- --
-------- -------- --------
Net cash provided by (used in) investing activities......... 3,141 (1,492) (3,556)
FINANCING ACTIVITIES:
Proceeds from sale of Convertible Preferred Stock........... 9,961 37,631 --
Principal repayments of capital lease obligations........... (405) (421) (190)
Proceeds from the issuance of Common Stock, options and
warrants.................................................. 9,983 161 93
Repurchase of treasury stock................................ (2) -- --
-------- -------- --------
Net cash provided by (used in) financing activities......... 19,537 37,371 (97)
-------- -------- --------
Increase in cash and cash equivalents....................... 29,930 45,108 9,227
Cash and cash equivalents at beginning of year.............. 10,260 40,190 85,298
-------- -------- --------
Cash and cash equivalents at end of year.................... $ 40,190 $ 85,298 $ 94,525
======== ======== ========
</TABLE>
SEE ACCOMPANYING NOTES.
F-6
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS
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 fully integrated drug discovery and development
company engaged in the development of drugs for the treatment of human diseases.
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.
2. SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS
Cash equivalents consist principally of money market funds with original
maturities of three months or less at the date of purchase.
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.
UNBILLED REVENUE
Unbilled revenue represents reimbursable costs incurred by the Company but
not yet billed under corporate collaboration agreements.
INVENTORY
Materials inventory is carried at the lower of actual cost or market (net
realizable value).
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.
F-7
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
The Company recognizes revenue as follows:
CORPORATE COLLABORATIONS. Revenues are earned based upon research expenses
incurred and milestones achieved. Non-refundable payments upon initiation of
contracts are deferred and amortized over the period which the Company has
obligations to perform. Amounts received in advance of reimbursable expenses 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 reimbursable
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 SFAS No. 123 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 June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which is
effective for fiscal year 2001. This Statement requires all derivatives to be
carried on the balance sheet as assets or liabilities at fair value. The
accounting for changes in fair value would depend on the hedging relationship
and would be reported in the income statement or as a component of comprehensive
income. The Company believes that the adoption of this new accounting standard
will not have a material impact on the Company's financial statements.
F-8
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin 101, which clarified the Staff's views concerning revenue
recognition policies and is effective no later than the quarter ended March 31,
2000. The Company believes its revenue recognition policies are in compliance
with the Staff Accounting Bulletin.
NET INCOME PER SHARE
Basic net income per share represents net income 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>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Weighted average number of common shares outstanding
used in basic net income per share................ 4,446 5,738 6,106
Effect of dilutive securities:
Convertible Preferred Stock....................... 17,680 23,387 25,608
Stock options..................................... 6,007 5,868 5,989
Warrants.......................................... 137 146 146
------ ------ ------
Weighted average number of common shares used in
diluted net income per share...................... 28,270 35,139 37,849
====== ====== ======
</TABLE>
PRO FORMA NET INCOME PER SHARE (UNAUDITED)
Pro forma net income 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 25,607,861 shares of common stock (as of their
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
per share calculations for 1999 are as follows (in thousands, except per share
data):
<TABLE>
<S> <C>
Basic pro forma net income per share........................ $ 0.29
======
Weighted average number of common shares.................... 31,714
Diluted pro forma net income per share...................... $ 0.24
======
Weighted average number of common shares.................... 37,849
</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,
-------------------
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Laboratory and office equipment........................... $ 4,127 $ 6,271
Leasehold improvements.................................... 2,113 3,711
Construction in progress.................................. 460 274
------- -------
6,700 10,256
Less accumulated depreciation and amortization............ 2,859 4,213
------- -------
$ 3,841 $ 6,043
======= =======
</TABLE>
4. LEASES
The Company has capitalized leased equipment totaling approximately
$1.6 million at December 31, 1998 and $0.3 million at December 31, 1999, and
related accumulated amortization of approximately $1.4 million and $0.3 million
at December 31, 1998 and 1999, respectively.
The Company leases its laboratory and office space under operating lease
agreements with fixed terms of ten years plus renewal options. In addition to
the minimum lease commitments, the leases require payment of the Company's pro
rata share of property taxes and building operating expenses. The leases also
contain certain rent inducements, which are being amortized over the term of the
agreements using the straight-line method.
At December 31, 1999, future minimum commitments under leases with
noncancelable terms of more than one year are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEARS ENDED DECEMBER 31, LEASES LEASES
- ------------------------ -------- ---------
(IN THOUSANDS)
<S> <C> <C>
2000....................................................... $59 $ 590
2001....................................................... -- 590
2002....................................................... -- 590
2003....................................................... -- 590
2004....................................................... -- 626
Thereafter................................................. -- 1,117
--- ------
Total...................................................... 59 $4,103
======
Less amount representing interest.......................... (1)
---
Present value of current minimum lease payments............ $58
===
</TABLE>
F-10
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. LEASES (CONTINUED)
Total rent expense amounted to approximately $0.3 million in 1997,
$0.5 million in 1998 and $0.6 million in 1999. Interest paid under all financing
and leasing arrangements during each of the years presented approximated
interest expense.
5. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Clinical trial costs........................................ $5,072 $4,116
Professional fees........................................... 645 533
Other....................................................... 1,514 2,210
------ ------
$7,231 $6,859
====== ======
</TABLE>
6. STOCKHOLDERS' EQUITY
STOCK SPLIT
On February 2, 2000, the Company's Board of Directors approved, subject to
stockholder approval, a two-for-one stock split of the common stock, which was
effected in the form of a 100% stock dividend. 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 into common stock 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, be automatically converted into a total of 25,607,861 shares
of common stock upon the closing of an initial public offering with an initial
public offering price per share of common stock being at least $7.56.
Each holder of Series A, C, D and E Convertible Preferred Stock 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. Holders of Series B Convertible Preferred Stock have no voting
rights, except as otherwise provided by law. In the event of a liquidation, the
holders of Convertible preferred stock 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
F-11
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
terms thereof will convert into warrants to purchase 111,495 shares of common
stock at $1.35 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.
In May 1997, Sanofi-Synthelabo Inc. (a wholly owned subsidiary of
Sanofi-Synthelabo, S.A.) formerly Sylamerica Inc. (a wholly owned subsidiary of
Synthelabo S.A.) purchased 1,617,772 shares of common stock and a warrant to
purchase 404,445 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
$12.88 per share. The Company 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, 1999, the Plan provided for the issuance of up to
11,375,000 shares of common stock. Incentive options granted to employees
generally vest at 20% on the first anniversary of the date of grant, with the
remaining shares vesting equally over four years following such anniversary
date. However, options to purchase 600,002 shares of common stock for $3.71 per
share vest ratably over ten years or immediately upon the attainment of a
targeted price per share of common stock of $41.24 per share, whichever occurs
first. Nonqualified options generally vest over the period of service with the
Company.
Information regarding options under the Plan is summarized below:
<TABLE>
<CAPTION>
WEIGHTED-
NUMBER AVERAGE
OF EXERCISE
SHARES PRICE
-------- -------------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Outstanding at December 31, 1996................... 5,170 $0.25
Granted............................................ 1,762 2.77
Canceled........................................... (170) 0.49
Exercised.......................................... (124) 0.15
----- -----
Outstanding at December 31, 1997................... 6,638 0.92
Granted............................................ 1,814 4.68
Canceled........................................... (858) 0.83
Exercised.......................................... (856) 0.19
----- -----
Outstanding at December 31, 1998................... 6,738 2.03
Granted............................................ 2,230 6.47
Canceled........................................... (318) 1.50
Exercised.......................................... (438) 0.21
----- -----
Outstanding at December 31, 1999................... 8,212 $3.35
===== =====
Options exercisable at December 31:
1997........................................... 2,038 $0.24
===== =====
1998........................................... 1,998 $0.66
===== =====
1999........................................... 2,777 $1.61
===== =====
</TABLE>
F-12
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY (CONTINUED)
The weighted average per share fair value of options granted was $1.73 in
1997, $2.90 in 1998 and $4.07 in 1999. At December 31, 1999, there were
1,558,816 options available for grant and 35,894,790 shares of common stock
reserved for the exercise of stock options and warrants and the conversion of
preferred shares.
The following table presents weighted average price and life information
about significant option groups outstanding at December 31, 1999 (option amounts
in thousands):
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
REMAINING AVERAGE AVERAGE
OPTIONS CONTRACTUAL EXERCISE OPTIONS EXERCISE
EXERCISE PRICE OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
- -------------- ----------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.14-$1.60.............................. 3,316 5.88 $0.45 1,967 $0.40
$3.71-$7.00.............................. 4,896 8.60 $5.33 810 $4.53
</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 plan had been determined based on the fair value at the grant date for
grants for each year:
<TABLE>
<CAPTION>
1997 1998 1999
------------------- ------------------- -------------------
AS PRO AS PRO AS PRO
REPORTED FORMA REPORTED FORMA REPORTED FORMA
-------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net income (loss)....................... $ 204 $ (797) $5,674 $2,914 $9,250 $ 5,405
====== ======= ====== ====== ====== =======
Diluted net income (loss) per common
share................................. $ 0.01 $ (0.18) $ 0.16 $ 0.08 $ 0.24 $ 0.14
====== ======= ====== ====== ====== =======
</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 common stock of 70%, and a weighted-average
expected life of the options of five years. The Company has never declared or
paid any cash 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 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 two, three,
and four years, respectively, of option grants under the Company's plan.
F-13
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES
The Company's provision for income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal......................................... $ 85 $ 280 $ 5,295
State........................................... 15 100 1,800
------- ------- -------
100 380 7,095
Deferred:
Federal......................................... -- (280) (5,295)
State........................................... -- -- --
------- ------- -------
(280) (5,295)
------- ------- -------
$ 100 $ 100 $ 1,800
======= ======= =======
</TABLE>
A reconciliation of the Company's income tax provision to the statutory
federal provision is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Statutory federal income tax provision.......... $ 261 $ 2,327 $ 3,868
State income taxes.............................. 19 362 620
Decrease in valuation allowance................. -- -- (2,688)
Utilization of net operating losses............. (180) (2,589) --
------- ------- -------
Income tax provision............................ $ 100 $ 100 $ 1,800
======= ======= =======
</TABLE>
In 1997 and 1998, respectively, the Company utilized approximately
$4.6 million and $10.3 million of net operating loss carryforwards to offset
taxable income.
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Deferred tax assets:
Deferred revenue........................................ $ 1,221 $ 3,743
Property and equipment.................................. 2,395 4,104
Accrued expenses........................................ 438 1,169
Research and development tax credit carryforwards....... 2,238 --
Other................................................... 286 169
------- -------
Total deferred tax assets................................. 6,578 9,185
Valuation allowance....................................... (6,298) (3,610)
------- -------
$ 280 $ 5,575
======= =======
</TABLE>
At December 31, 1998 and 1999, the Company has provided a valuation
allowance for the excess of the deferred tax asset over the benefit from future
losses that could be carried back if, and when,
F-14
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. INCOME TAXES (CONTINUED)
they occur. The valuation allowance decreased by $2.7 million in 1999 due
primarily to utilization of previously unbenefitted tax credit carryforwards.
Income tax payments amounted to approximately $0.2 million in 1998 and
$2.6 million in 1999.
8. CORPORATE COLLABORATIONS
SANOFI-SYNTHELABO AGREEMENT
In May 1997, the Company entered into a license agreement with Synthelabo
S.A., who subsequently merged with Sanofi S.A. forming Sanofi-Synthelabo S.A.,
for the development and commercialization of the Company's abarelix products.
Synthelabo received marketing rights in Europe, Latin America, the Middle East
and various countries in Africa in exchange for (a) a one-time, nonrefundable
$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; and (e) specified percentages of product
sales, if any. The Company retained worldwide manufacturing rights. The Company
recognized revenues of $13.8 million in 1998 and $4.7 million in 1999 under the
Sanofi-Synthelabo agreement.
ROCHE AGREEMENT
In August 1997, the Company entered into an agreement with Roche
Products Inc. (Roche) in return for a nonrefundable $2.0 million option 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 $4.4 million in revenues under the agreement.
In June 1998, Roche exercised their 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, nonrefundable
payment to the Company upon initiation; (b) funding of a portion of additional
research and development expenses; (c) payments upon achievement of specific
milestones; and (d) specified percentages of product sales, if any, representing
product cost payment. The Company retained worldwide manufacturing rights. In
November 1998, Roche and the Company entered into a termination agreement as
allowed for under the definitive agreement. Pursuant to the termination
agreement, Roche surrendered any rights with respect to the Company's abarelix
products, and neither party has any further obligations to the other on account
of, or arising from, the Roche definitive agreement. In 1998, the Company
recognized $23.8 million of revenues under the definitive agreement and
termination agreements with Roche.
AMGEN AGREEMENT
Effective March 1999, the Company entered into a binding agreement in
principle with Amgen Inc. (Amgen) for the development and commercialization of
the Company's abarelix products. Under terms of the agreement, Amgen has agreed
to assist in the development of abarelix for all indications and has received
the right to commercialize abarelix in the United States, Canada, Japan and all
other countries not covered by the Sanofi-Synthelabo Agreement.
F-15
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. CORPORATE COLLABORATIONS (CONTINUED)
Under terms of the agreement, Amgen will pay the Company up to $25 million
in signing and milestone payments. In addition, Amgen will pay all costs
associated with the development and commercialization of abarelix products,
including the cost of materials, in the United States incurred by Amgen and the
Company in 1999 and a substantial portion of such costs incurred in 2000. The
materials are consigned to Amgen until such time as they are used in the
manufacture of the final product and/or title passes to Amgen. At that time,
advance payments previously received are recognized as revenue.
Following these expenditures in 1999 and a portion of 2000, in general we
will share with Amgen all subsequent United States research and development
costs for abarelix products through the launch period and we will reimburse
Amgen for a share of costs associated with establishing a sales and marketing
infrastructure in the United States. In general, we will receive a transfer
price and royalty based on a sharing of the resulting profits on sales of
abarelix products in the United States. All program expenses in Amgen's licensed
territory outside the United States will be borne by Amgen, and we will receive
a royalty on net sales of abarelix products in those territories.
Subject to various limitations and conditions, Amgen will also provide the
Company with a substantial line of credit through 2002. Borrowings under the
line will bear interest at market rates, will be secured by Company receivables
relating to abarelix products and must be repaid by 2008.
The agreement can be terminated by either party for material breach, or by
Amgen by giving 90-days notice.
In 1999, the Company recognized $56.8 million of revenues under the Amgen
agreement, which includes $53.8 million of reimbursed costs and that portion of
the signing payment recognized in 1999.
9. CONTRACT SERVICES
In August 1996, the Company entered into a service agreement with Boehringer
Ingelheim International GmBH for the screening of certain Boehringer 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. Boehringer is responsible for all development, marketing and other
costs with respect to any Boehringer compound screened by the Company and
developed and commercialized by Boehringer or its licensee. The Company is
entitled to receive royalties on net sales of any product containing a
Boehringer compound and commercialized by Boehringer or its licensee. In
August 1998, the Company completed its responsibility for screening Boehringer
compounds.
10. COMMITMENTS
INDIANA UNIVERSITY FOUNDATION (IUF) 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 an additional
$4.3 million upon achievement of specific milestones, and (c) a royalty
percentage of net sales of licensed products, if any. The Company made fee
payments of $50,000 in 1997 and $495,000 in 1998 under the IUF agreement; no
such payments were made in 1999.
F-16
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. COMMITMENTS (CONTINUED)
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. At December 31, 1999, the
Company has committed to purchase $56.0 million of pharmaceutical-grade peptide
under the UCB Agreement through January 2001. As of December 31, 1999, the
Company has purchased approximately $25.5 million of peptide related to its
commitment to UCB.
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 has contributed approximately
$6.0 million toward the construction and outfitting of a dedicated manufacturing
facility by Salsbury as to which the Company will retain manufacturing process
rights but has no ownership rights. The Company has expensed those amounts as
manufacturing start up costs. The Company has committed to purchase
$1.4 million of clinical depot formulation through December 2000.
BUILDING
On January 14, 2000, the Company signed a purchase and sale agreement to
purchase, for $41.5 million, land and a building to be used as its principal
headquarters and research facility. In connection with the agreement, the
Company has made deposits of $1.2 million and expects the transaction to close
in the second quarter of 2000.
11. SUBSEQUENT EVENTS
On February 2, 2000, the Board of Directors approved an Amended and Restated
Certificate of Incorporation, which, subject to stockholder approval, will
become effective upon consummation of the initial public offering, and increased
the Company's shares of common stock by 140,000,000 shares (for a total of
200,000,000 authorized shares of common stock) and provides for a total of
10,000,000 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.
On February 2, 2000, the Board of Directors adopted, subject to consummation
of the initial public offering, an Employee Stock Purchase Plan and authorized
the reservation of 160,000 shares of common stock for issuance thereunder. Under
the Employee Stock Purchase Plan, commencing July 3, 2000, 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 Employee Stock
Purchase Plan. Participation is limited to the lesser of 10% of the employee's
compensation or $25,000 in any calendar year.
In February 2000, the Company entered into an agreement with Human Genome
Sciences Inc. (HGS) for the discovery, development and commercialization of
compounds targeted to two proprietary molecules identified by HGS. Under the
terms of the agreement, the Company will apply its technology to these molecules
and any clinical drug candidates will be jointly developed by the parties on an
equal cost and profit sharing basis.
F-17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
PRAECIS PHARMACEUTICALS INCORPORATED
COMMON STOCK
[LOGO]
------
PROSPECTUS
, 2000
---------
SALOMON SMITH BARNEY
CIBC WORLD MARKETS
CREDIT SUISSE FIRST BOSTON
- --------------------------------------------------
- --------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses, other than underwriting discounts and commissions, expected to
be incurred by us in connection with the issuance and distribution of the
securities being registered under this registration statement are estimated to
be as follows:
<TABLE>
<S> <C>
SEC registration fee........................................ $ 41,290
NASD filing fees............................................ 16,140
The Nasdaq National Market listing fee...................... 95,000
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky fees and expenses (including legal fees)........... *
Transfer agent fees......................................... *
Miscellaneous............................................... *
--------
Total................................................. $ *
========
</TABLE>
- ------------------------
* To be provided by Amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporate Law permits indemnification of
officers, directors and other corporate agents under certain circumstances and
subject to certain limitations. Our amended and restated certificate of
incorporation and our amended and restated by-laws, effective upon the closing
of this offering, provide that we shall indemnify our directors and officers to
the fullest extent authorized or permitted by law.
Our amended and restated certificate of incorporation further provides that
our directors will not be personally liable to us or any stockholder for
monetary damages for breach of fiduciary duty, except to the extent such
exemption is not permitted by law. Section 102 of the Delaware General Corporate
Law provides that officers and directors will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except
liability for:
- any breach of their duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
This provision has no effect on any non-monetary remedies that may be
available to us or our stockholders, nor does it relieve us or our officers or
directors from compliance with federal or state securities laws.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling us pursuant to
the foregoing provisions or otherwise, we have been informed that in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
Our by-laws also permit us to purchase and maintain insurance on behalf of
any officer or director for any liability arising out of his or her actions in
such capacity, regardless of whether our by-laws
II-1
<PAGE>
would otherwise permit indemnification for that liability. We are in the process
of obtaining directors' and officers' liability insurance which would indemnify
our directors and officers against damages arising out of claims which might be
made against them based on their negligent acts or omissions while acting in
their capacity as officers and directors.
The underwriting agreement provides that the underwriters are obligated,
under certain circumstances, to indemnify our directors, officers and
controlling persons against some liabilities, including liabilities under the
Securities Act. Reference is made to the form of underwriting agreement filed as
Exhibit 1.1 hereto.
Under agreements with J.H. Whitney & Co. and affiliated entities, William
Laverack, Jr., a director, is indemnified for certain liabilities which may be
incurred in his capacity as a director.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In the three years preceding the filing of this registration statement, we
have issued the securities set forth below that were not registered under the
Securities Act. The share amounts and option and warrant exercise prices set
forth below have been adjusted to give effect to the 2-for-1 stock split of the
common stock to be effected prior to the closing of this offering, and the
corresponding adjustments to the conversion price of the preferred stock.
(a) ISSUANCE OF CAPITAL STOCK.
In May 1997, we issued to one accredited investor 1,617,772 shares of common
stock and a warrant to purchase 404,445 shares of common stock, at an exercise
price of $12.88 per share, for an aggregate purchase price of $10,000,000.
In June 1997, we issued to one accredited investor 359,324 shares of our
Series D convertible preferred stock, par value $.01 per share, for an aggregate
purchase price of $10,000,000. Upon the closing of this offering, the shares of
Series D convertible preferred stock will automatically convert into
2,695,414 shares of common stock.
In April 1998, we issued to 23 accredited investors 900,478 shares of our
Series E convertible preferred stock, par value $.01 per share, for an aggregate
purchase price of $37,820,076. Upon the closing at this offering, the shares of
Series E convertible preferred stock will automatically convert into
6,753,582 shares of common stock.
No underwriters were involved in the foregoing sales of securities. The
sales of capital stock were made in reliance upon an exemption from registration
under the Securities Act provided by Section 4(2) of the Securities Act, and its
related rules and regulations, regarding sales by an issuer not involving a
public offering. All of the foregoing securities are deemed restricted
securities for purposes of the Securities Act.
(b) GRANTS AND EXERCISES OF STOCK OPTIONS.
As of December 31, 1999, we had granted options to employees, directors and
consultants under our Amended and Restated 1995 Stock Plan, as amended, to
purchase a total of 8,211,644 shares of common stock at a weighted average
exercise price of $3.35 per share. Of these options, options to purchase
1,604,540 shares of common stock have been exercised for an aggregate
consideration of $297,016 as of December 31, 1999.
The issuance of options and the issuance of common stock upon the exercise
of these options was exempt from registration under the Securities Act either
pursuant to Rule 701 under the Securities Act, as a transaction pursuant to a
compensatory benefit plan, or pursuant to Section 4(2) of the Securities Act, as
a transaction by an issuer not involving a public offering. All of the foregoing
securities are deemed restricted securities for purposes of the Securities Act.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<S> <C>
*1.1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation, as
amended
3.2 Form of Amendment to Amended and Restated Certificate of
Incorporation, as amended (to be filed prior to the
effectiveness of the registration statement)
3.3 Form of Amended and Restated Certificate of Incorporation
(to be filed upon the closing of this offering)
3.4 Amended and Restated By-Laws
3.5 Form of Amended and Restated By-Laws (to become effective
upon the closing of this offering)
4.1 Specimen certificate representing shares of common stock
4.2 Warrant to purchase Series A Convertible Preferred Stock
dated as of August 12, 1998 held by Comdisco, Inc.
4.3 Warrant to purchase Series A Convertible Preferred Stock
dated as of August 12, 1998 held by Gregory Stento
4.4 Warrant to purchase Common Stock dated May 13, 1997
*5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
10.1 Form of Second Amended and Restated 1995 Stock Plan
10.2 Executive Management Bonus Plan
10.3 Form of Employee Stock Purchase Plan
*10.4 Amended and Restated Stockholders Agreement dated as of
April 30, 1998 by and among PRAECIS and certain stockholders
referred to therein, as amended by Amendment No. 1 dated as
of May 14, 1998, Amendment No. 2 dated as of July 21, 1998
and Amendment No. 3 dated January 31, 2000
10.5 Stock and Warrant Purchase Agreement dated as of May 13,
1997 by and between Sylamerica, Inc. and PRAECIS
+10.6 License Agreement dated as of May 13, 1997 by and between
PRAECIS and Synthelabo, as amended by a letter dated July
31, 1997
+10.7 Amended and Restated Binding Agreement in Principle
effective as of March 8, 1999 by and between PRAECIS and
Amgen Inc.
+10.8 Collaboration Agreement dated as of January 31, 2000 by and
between Human Genome Sciences, Inc. and PRAECIS
+10.9 Collaboration and License Agreement dated as of August 1,
1996 by and between PRAECIS and Boehringer Ingelheim
International GmbH
+10.10 License Agreement effective as of October 17, 1996 by and
between PRAECIS and Indiana University Foundation, as
amended as of June 3, 1998
+10.11 License Agreement dated as of April 15, 1999 between
Pharmaceutical Applications Associates LLC, C. Donald
Williams, M.D.C.G.P., Robert Murdock, R.Ph. and PRAECIS
+10.12 Development and Supply Agreement effective as of March 12,
1998 between UCB-Bioproducts S.A. and PRAECIS
+10.13 Supply Agreement dated as of July 23, 1998 by and between
PRAECIS and Salsbury Chemicals, Inc.
+10.14 Supply Agreement dated as of February 2, 2000 between Oread
Pharmaceutical Manufacturing Inc. and PRAECIS
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<S> <C>
10.15 License Agreement dated December 23, 1993 between
Massachusetts Institute of Technology and PRAECIS
10.16 Lease dated as of April 28, 1994 by and between PRAECIS and
The Charles Stark Draper Laboratory, Inc.
10.17 Lease dated as of August 19, 1998 by and between PRAECIS and
BDG Piscataway, LLC
*10.18 Contract of Sale dated as of January 14, 2000 by and between
Best Property Fund, L.P. and PRAECIS
*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 other schedules for which provision is made in the applicable accounting
regulations 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 to provide to the underwriter
at the closing specified in the underwriting agreement, certificates in the
denominations and registered in the names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 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.
The registrant hereby undertakes:
(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 is 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 is deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
will be deemed to be the initial BONA FIDE offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned, there unto duly
authorized, in Cambridge, Massachusetts on February 8, 2000.
<TABLE>
<S> <C> <C>
PRAECIS PHARMACEUTICALS INCORPORATED
By /s/ MALCOLM L. GEFTER, PH.D.
-----------------------------------------
Malcolm L. Gefter, Ph.D.
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE
OFFICER AND PRESIDENT
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the persons whose signatures appear
below, constitute and appoint Malcolm L. Gefter, Chairman of the Board, Chief
Executive Officer and President, and Kevin F. McLaughlin, Chief Financial
Officer, Senior Vice President, Treasurer and Secretary, and each of them
individually, as their true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for them in their names, places and
steads, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended, and to file the same, with all exhibits thereto, and the other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as they might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, or their or his or
her 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 February 8, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ MALCOLM L. GEFTER, PH.D.
------------------------------------------- Chairman of the Board, Chief Executive Officer
Malcolm L. Gefter, Ph.D. and President (PRINCIPAL EXECUTIVE OFFICER)
/s/ KEVIN F. MCLAUGHLIN Chief Financial Officer, Senior Vice
------------------------------------------- President, Secretary and Treasurer
Kevin F. McLaughlin (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
/s/ G. LEONARD BAKER, JR.
------------------------------------------- Director
G. Leonard Baker, Jr.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ WILLIAM LAVERACK, JR.
------------------------------------------- Director
William Laverack, Jr.
/s/ HENRY F. MCCANCE
------------------------------------------- Director
Henry F. McCance
/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-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<S> <C>
*1.1 Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation, as
amended
3.2 Form of Amendment to Amended and Restated Certificate of
Incorporation, as amended (to be filed prior to the
effectiveness of the registration statement)
3.3 Form of Amended and Restated Certificate of Incorporation
(to be filed upon the closing of this offering)
3.4 Amended and Restated By-Laws
3.5 Form of Amended and Restated By-Laws (to become effective
upon the closing of this offering)
4.1 Specimen certificate representing shares of common stock
4.2 Warrant to purchase Series A Convertible Preferred Stock
dated as of August 12, 1998 held by Comdisco, Inc.
4.3 Warrant to purchase Series A Convertible Preferred Stock
dated as of August 12, 1998 held by Gregory Stento
4.4 Warrant to purchase Common Stock dated May 13, 1997
*5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
10.1 Form of Second Amended and Restated 1995 Stock Plan
10.2 Executive Management Bonus Plan
10.3 Form of Employee Stock Purchase Plan
*10.4 Amended and Restated Stockholders Agreement dated as of
April 30, 1998 by and among PRAECIS and certain stockholders
referred to therein, as amended by Amendment No. 1 dated as
of May 14, 1998, Amendment No. 2 dated as of July 21, 1998
and Amendment No. 3 dated January 31, 2000
10.5 Stock and Warrant Purchase Agreement dated as of May 13,
1997 by and between Sylamerica, Inc. and PRAECIS
+10.6 License Agreement dated as of May 13, 1997 by and between
PRAECIS and Synthelabo, as amended by a letter dated July
31, 1997
+10.7 Amended and Restated Binding Agreement in Principle
effective as of March 8, 1999 by and between PRAECIS and
Amgen Inc.
+10.8 Collaboration Agreement dated as of January 31, 2000 by and
between Human Genome Sciences, Inc. and PRAECIS
+10.9 Collaboration and License Agreement dated as of August 1,
1996 by and between PRAECIS and Boehringer Ingelheim
International GmbH
+10.10 License Agreement effective as of October 17, 1996 by and
between PRAECIS and Indiana University Foundation, as
amended as of June 3, 1998
+10.11 License Agreement dated as of April 15, 1999 between
Pharmaceutical Applications Associates LLC, C. Donald
Williams, M.D.C.G.P., Robert Murdock, R.Ph. and PRAECIS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -------
<S> <C>
+10.12 Development and Supply Agreement effective as of March 12,
1998 between UCB-Bioproducts S.A. and PRAECIS
+10.13 Supply Agreement dated as of July 23, 1998 by and between
PRAECIS and Salsbury Chemicals, Inc.
+10.14 Supply Agreement dated as of February 2, 2000 between Oread
Pharmaceutical Manufacturing Inc. and PRAECIS
10.15 License Agreement dated December 23, 1993 between
Massachusetts Institute of Technology and PRAECIS
10.16 Lease dated as of April 28, 1994 by and between PRAECIS and
The Charles Stark Draper Laboratory, Inc.
10.17 Lease dated as of August 19, 1998 by and between PRAECIS and
BDG Piscataway, LLC
*10.18 Contract of Sale dated as of January 14, 2000 by and between
Best Property Fund, L.P. and PRAECIS
*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.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PRAECIS PHARMACEUTICALS INCORPORATED
PRAECIS PHARMACEUTICALS INCORPORATED, a Delaware corporation (the
"Corporation"), does hereby certify that the Corporation was organized in the
State of Delaware on July 16, 1993 under the name Pharmaceutical Peptides, Inc.,
and that this Amended and Restated Certificate of Incorporation hereby amends,
restates and integrates the provisions of the Amended and Restated Certificate
of Incorporation, as amended, of the Corporation as currently in effect (the
"Certificate of Incorporation"), and has been duly adopted in accordance with
the provisions of Sections 242 and 245 of the General Corporation Law of the
State of Delaware (the "DGCL") by written consent of the holders of not less
than a majority of the outstanding stock of the Corporation entitled to vote
thereon and not less than a majority of each class of the outstanding stock of
the Corporation entitled to vote thereon as a class, and written notice of the
corporate action has been given to the stockholders of the Corporation who have
not consented in writing, all in accordance with the provisions of Section 228
of the DGCL. The text of the Certificate of Incorporation is hereby amended and
restated to read in its entirety as follows:
FIRST: The name of the Corporation is PRAECIS PHARMACEUTICALS
INCORPORATED (hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at that address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law
<PAGE>
of the State of Delaware as set forth in Title 8 of the Delaware Code (the
"DGCL").
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is (i) 60,000,000 shares of common stock, each
having a par value of one penny ($.01) ("Common Stock"), and (ii) 3,750,000
shares of preferred stock, each having a par value of one penny ($.01), of which
1,061,166 shares are designated "Series A Convertible Preferred Stock"
(hereinafter "Series A Preferred Stock"), 63,700 shares are designated "Series B
Convertible Preferred Stock" (hereinafter "Series B Preferred Stock"), 1,052,632
shares are designated "Series C Convertible Preferred Stock" (hereinafter
"Series C Preferred Stock"), 359,324 shares are designated "Series D Convertible
Preferred Stock" (hereinafter "Series D Preferred Stock") and 900,478 shares are
designated "Series E Convertible Preferred Stock" (hereinafter "Series E
Preferred Stock" and, together with the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, the
"Preferred Stock"). Effective October 10, 1997, pursuant to an Amendment to the
Amended and Restated Certificate of Incorporation of the Corporation then in
effect, each outstanding share of Common Stock was split 3-for-1 (the "Stock
Split"), and without further action on the part of the Corporation or any
stockholder, became and was deemed to represent 3 shares of Common Stock. Each
certificate representing outstanding shares of Common Stock which was issued by
the Corporation prior to October 10, 1997, is deemed to represent the number of
shares of Common Stock after giving effect to the Stock Split. Upon any
surrender for transfer or exchange of any such certificate or certificates
issued prior to October 10, 1997 representing shares of outstanding Common
Stock, the Corporation will issue and deliver a certificate or certificates for
a number of shares of Common Stock which gives effect to the Stock Split. In
addition, the Conversion Prices set forth in Section 4(e) of ARTICLE FIFTH
hereof with respect to the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock give effect to the Stock
Split.
The Board of Directors of the Corporation (the "Board of Directors")
is expressly authorized to provide for the issuance of all or any shares of the
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 desig-
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nations, preferences and relative, participating, optional or other special
rights and such qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions adopted by the Board of
Directors providing for the issuance of such class or series and as may be
permitted by the DGCL, including, without limitation, the authority to provide
that any such class or series may be (i) subject to redemption at such time or
times and at such price or prices; (ii) entitled to receive dividends (which may
be cumulative or non-cumulative) at such rates, on such conditions, and at such
times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or any other series; (iii) entitled to
such rights upon the dissolution of, or upon any distribution of the assets of,
the Corporation; or (iv) convertible into, or exchangeable for, shares of any
other class or classes of stock, or of any other series of the same or any other
class or classes of stock, of the Corporation at such price or prices or at such
rates of exchange and with such adjustments; all as may be stated in such
resolution or resolutions.
FIFTH: The powers, preferences and relative participating, optional
and other special rights of, and the qualifications, limitations and
restrictions upon, the Preferred Stock are as follows:
(1) Dividends.
The holders of Preferred Stock shall be entitled to participate with
the holders of Common Stock in any dividends paid or set aside for payment so
that the holders of Preferred Stock shall receive with respect to each share of
Preferred Stock an amount equal to (x) the dividend payable with respect to each
share of Common Stock multiplied by (y) the number of shares (and fraction of a
share, if any) of Common Stock into which such share of Preferred Stock is
convertible as of the record date for such dividend (assuming such shares of
Preferred Stock were converted into Common Stock on such record date).
(2) Voting Rights.
Except as otherwise provided by law, the holders of Series A
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock shall have full voting rights and powers, and they shall be
entitled to vote on all matters as to which
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<PAGE>
holders of Common Stock shall be entitled to vote, voting together with the
holders of Common Stock as one class. Each holder of shares of Series A
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock shall be entitled to the number of votes equal to the number of
shares of Common Stock into which such shares of Series A Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock,
respectively, could be converted on the record date for the vote which is being
taken. Fractional votes shall not, however, be permitted and any fractional
voting rights resulting from the above formula (after aggregating all shares of
Common Stock into which shares of Series A Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock or Series E Preferred Stock held by each holder
could be converted) shall be rounded to the nearest whole number (with one-half
being rounded upward).
Except as otherwise provided by law, the holders of Series B
Preferred Stock shall have no voting rights.
(3) Rights on Liquidation.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation (any such event being hereinafter
referred to as a "Liquidation"), before any distribution of assets of the
Corporation shall be made to or set apart for the holders of Common Stock, the
holders of Series A Preferred Stock and Series B Preferred Stock, the holders of
Series C Preferred Stock, the holders of Series D Preferred Stock and the
holders of Series E Preferred Stock, respectively, shall be entitled to receive
payment out of such assets of the Corporation of $10.085, $19.00, $27.83 and
$42.00 per share, respectively, plus any declared and unpaid dividends on such
share of Preferred Stock (the "Preferred Liquidation Preference"). If the assets
of the Corporation available for distribution to the holders of Preferred Stock
shall not be sufficient to make in full the payments herein required, such
assets shall be distributed ratably among the holders of Preferred Stock in
proportion to the aggregate preferential amount each such holder would otherwise
be entitled to receive.
(b) If the assets of the Corporation available for
distribution to stockholders exceed the aggregate amount of the Preferred
Liquidation Preference payable with respect to all shares of Preferred Stock,
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<PAGE>
then, after the payment required by paragraph (a) above shall have been made or
irrevocably set aside, the holders of Common Stock shall be entitled to receive
with respect to each share of Common Stock payment out of such assets in an
amount equal to the Conversion Price (as hereinafter defined) for the Series A
Preferred Stock and Series B Preferred Stock then in effect on the date of
Liquidation, plus any declared but unpaid dividends on such share of Common
Stock. If the assets of the Corporation available for distribution to the
holders of Common Stock shall not be sufficient to make in full the payment
herein required, such assets shall be distributed among the holders of Common
Stock so that an equal amount shall be paid with respect to each outstanding
share of Common Stock.
(c) If the assets of the Corporation available for
distribution to stockholders exceed the aggregate amount payable pursuant to
paragraphs (a) and (b), above, the remainder of such assets shall be distributed
to the holders of Preferred Stock and Common Stock on a pro-rata basis, with the
amount distributable to the holders of Preferred Stock to be computed on the
basis of the number of shares of Common Stock which would be held by them if
immediately prior to the Liquidation all of the outstanding shares of Preferred
Stock had been converted into shares of Common Stock.
(d) Subject to the provisions of Section 6 of this ARTICLE
FIFTH, a merger or consolidation involving the Corporation and a sale, lease or
transfer of all or part of the assets of the Corporation shall be deemed a
Liquidation, unless in connection with such transaction the Preferred Stock
remains unchanged or the holders of Preferred Stock receive a preferred stock
having terms and conditions which are no less favorable for each such series
than the terms and conditions of such series immediately prior to such merger,
consolidation, sale or transfer of the assets of the Corporation; provided,
however, that any such event shall not be deemed a Liquidation if so determined
by action of 66-2/3% of the shares of then outstanding Series A Preferred Stock,
and a majority of the shares of outstanding Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock, voting together as a single
series.
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<PAGE>
(4) Conversion.
(a) Number of Shares on Conversion.
(i) The shares of Series A Preferred Stock and Series B
Preferred Stock shall be convertible into such number of fully paid
nonassessable shares of Common Stock as is determined by dividing (A) an
amount equal to $10.085 multiplied by the number of shares of Series A
Preferred Stock or Series B Preferred Stock to be converted by (B) the
Conversion Price then in effect for the Series A Preferred Stock or Series
B Preferred Stock, as the case may be.
(ii) The shares of Series C Preferred Stock shall be
convertible into such number of fully paid nonassessable shares of Common
Stock as is determined by dividing (A) an amount equal to $19.00
multiplied by the number of shares of Series C Preferred Stock to be
converted by (B) the Conversion Price then in effect for the Series C
Preferred Stock.
(iii) The shares of Series D Preferred Stock shall be
convertible into such number of fully paid nonassessable shares of Common
Stock as is determined by dividing (A) an amount equal to $27.83
multiplied by the number of shares of Series D Preferred Stock to be
converted by (B) the Conversion Price then in effect for the Series D
Preferred Stock.
(iv) The shares of Series E Preferred Stock shall be
convertible into such number of fully paid nonassessable shares of Common
Stock as is determined by dividing (A) an amount equal to $42.00
multiplied by the number of shares of Series E Preferred Stock to be
converted by (B) the Conversion Price then in effect for the Series E
Preferred Stock.
No fractional shares or scrip representing fractional shares shall
be issued upon the conversion of any Preferred Stock. With respect to any
fraction of a share of Common Stock called for upon any conversion, the
Corporation shall pay to the holder an amount in cash equal to such fraction
multiplied by the current market
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<PAGE>
value of a share, determined in good faith by the Board of Directors.
(b) Right to Convert. The holder of any share or shares of
Series A Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or
Series E Preferred Stock shall have the right at any time and from time to time,
at such holder's option, to convert all or a portion of the shares of Series A
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock held by such holder into Common Stock. Subject to the provisions
of Section 4(f) of this Article FIFTH, commencing on the first to occur of (i)
an Acquisition (as defined below) and (ii) such time as the Common Stock (or any
other security into which the Series B Preferred Stock may then be convertible)
becomes Publicly Traded (as defined below), the holder of any share or shares of
Series B Preferred Stock shall have the right at any time and from time to time,
at such holder's option, to convert all or a portion of the shares of Series B
Preferred Stock held by such holder into Common Stock (or such other security
into which the Series B Preferred Stock may then be convertible). Prior to the
occurrence of either such event, holders of shares of Series B Preferred Stock
may not convert such shares into Common Stock, except as required by Section
4(f) of this Article FIFTH. The term "Acquisition" shall mean a merger or
consolidation of the Corporation in which (A) the Corporation is not the
surviving corporation and (B) the stock of the Corporation is converted into or
exchanged for stock of the surviving corporation which represents less than 50%
of total voting power of the surviving corporation after giving effect to such
merger or consolidation. A security shall be "Publicly Traded" if (A) it is
listed on a national securities exchange or traded in the over-the-counter
market and (B) the issuer of such security files periodic reports with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended. Notwithstanding the foregoing provisions of this Section 4(b),
the holder of any share of Series B Preferred Stock shall be entitled to convert
all or a portion of the shares of Series B Preferred Stock into Common Stock
pursuant to this Section 4(b) only if and to the same extent that the shares of
Series A Preferred Stock are then convertible.
(c) Mechanics of Conversion of Preferred Stock. The right of
the holders of Preferred Stock to convert such holder's shares pursuant to
Section 4(b) of this Article FIFTH shall be exercised by the holder of
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<PAGE>
such shares by giving prior written notice to the Corporation (the "Conversion
Notice") that such holder elects to convert a stated number of shares of
Preferred Stock (the "Conversion Shares") into shares of Common Stock on the
date specified in the Conversion Notice (which date shall not be earlier than
the date on which the Conversion Notice is given), and by surrender of the
certificate or certificates representing such Conversion Shares. The Conversion
Notice shall also contain a statement of the name or names (with addresses) in
which the certificate for Common Stock shall be issued. Promptly after the
receipt of the Conversion Notice (or such later date specified in the Conversion
Notice) and surrender of the Conversion Shares, the Corporation shall issue and
deliver, or cause to be delivered, to the holder of the Conversion Shares or his
nominee or nominees, a certificate or certificates for the number of shares of
Common Stock issuable upon conversion of such Conversion Shares. Such conversion
shall be deemed to have been effected as of the close of business on the date
specified in the Conversion Notice, and the person or persons entitled to
receive the shares of Common Stock issuable upon conversion shall be treated for
all purposes as the holder or holders of record of such shares of Common Stock
as of the close of business on such date.
(d) Common Stock Reserved. The Corporation shall at all times
reserve and keep available out of its authorized but unissued Common Stock,
solely for issuance upon the conversion of shares of Preferred Stock as herein
provided, such number of shares of Common Stock as shall from time to time be
issuable upon the conversion of all of the shares of Preferred Stock at the time
outstanding or reserved for issuance.
(e) Conversion Price. As of the Effective Date (as defined
herein), the conversion price (i) for the Series A Preferred Stock and Series B
Preferred Stock is $3.36 per share of Common Stock, (ii) for the Series C
Preferred Stock is $6.33 per share of Common Stock, (iii) for the Series D
Preferred Stock is $9.28 per share of Common Stock and (iv) for the Series E
Preferred Stock shall be $14.00 per share of Common Stock, such price to be
subject to adjustment in accordance with the provisions of this Section 4(e).
The conversion price in effect from time to time with respect to each series of
Preferred Stock, as adjusted pursuant to this Section 4(e), is referred to
herein as the "Conversion Price" for such series of Preferred Stock. All of the
remaining provisions of this Section 4(e) (except
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<PAGE>
Sections 4(e)(i)-(vi) which shall only apply to the Conversion Prices in effect
from time to time with respect to Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock, respectively) shall apply separately to the
Conversion Price in effect from time to time with respect to each series of
Preferred Stock.
(i) For purposes of this Section 4(e), the following
definitions shall apply:
(A) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities (as defined in Section 5 of this Article FIFTH), excluding
options described in Section 4(e)(i)(C)(4) below.
(B) "Original Issue Date" shall mean the date and time
on which a share of Series C Preferred Stock was first issued.
(C) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to Section 4(e)(iii) below,
deemed to be issued) by the Corporation after the Original Issue Date,
other than shares of Common Stock issued or issuable:
(1) upon conversion of any Convertible Securities
outstanding immediately prior to the Original Issue Date, or upon exercise
of any Options outstanding immediately prior to the Original Issue Date;
(2) as a dividend or distribution on Series C
Preferred Stock, Series D Preferred Stock or Series E Preferred Stock;
(3) by reason of a dividend, stock split, split-up
or other distribution on shares of Common Stock that is covered by Section
4(e)(vii) below; or
(4) to employees, consultants, directors or
persons performing similar functions, if such issuances are approved by
the Board of Directors or such issuances are
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<PAGE>
pursuant to a plan or plans approved by the Board of Directors.
(ii) No adjustment in the number of shares of Common
Stock into which the Series C Preferred Stock, Series D Preferred Stock or
Series E Preferred Stock, respectively, is convertible shall be made, by
adjustment in the applicable Conversion Price thereof: (a) unless the
consideration per share (determined pursuant to Section 4(e)(v) of this
Article FIFTH) for an Additional Share of Common Stock issued or deemed to
be issued by the Corporation is less than the applicable Conversion Price
for the Series C Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock, respectively, in effect on the date of, and immediately
prior to, the issue of such Additional Shares, or (b) if prior to such
issuance, the Corporation receives written notice from the holders of at
least a majority of the then outstanding shares of Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock, agreeing
that no such adjustment shall be made as the result of the issuance of
Additional Shares of Common Stock, provided that no such written notice
shall be effective if such agreement affects the Series E Preferred Stock
but does not so affect the Series D Preferred Stock and the Series C
Preferred Stock.
(iii) If the Corporation at any time or from time to
time after the Original Issue Date shall issue any Options or Convertible
Securities or shall fix a record date for the determination of holders of
any class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares of Common Stock
(as set forth in the instrument relating thereto without regard to any
provision contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common
Stock issued as of the time of such issuance of such Options or
Convertible Securities or, in case such a re-
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<PAGE>
cord date shall have been fixed, as of the close of business on such
record date, provided that for purposes of determining whether any
adjustment of the Conversion Price for the Series C Preferred Stock,
Series D Preferred Stock or Series E Preferred Stock, respectively, is
required, Additional Shares of Common Stock shall not be deemed to have
been issued unless the consideration per share (determined pursuant to
Section 4(e)(v) of this Article FIFTH) of such Additional Shares of Common
Stock would be less than the applicable Conversion Price in effect for the
Series C Preferred Stock, Series D Preferred Stock or Series E Preferred
Stock, respectively, on the date of and immediately prior to such issue,
or such record date, as the case may be, and provided further that in any
such case in which Additional Shares of Common Stock are deemed to be
issued:
(A) No further adjustment in the Conversion Price for
the Series C Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock, as applicable, shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible Securities;
(B) If such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in
the consideration payable to the Corporation, upon the exercise,
conversion or exchange thereof, the Conversion Price for the Series C
Preferred Stock, Series D Preferred Stock or Series E Preferred Stock, as
applicable, computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), as adjusted as a result
of any such increase in consideration payable to the Corporation, shall,
upon any such increase becoming effective, be recomputed to reflect such
increase insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities;
(C) Upon the expiration or termination of any
unexercised Option or con-
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<PAGE>
version right with respect to any Convertible Security, the Conversion
Price for the Series C Preferred Stock, Series D Preferred Stock or Series
E Preferred Stock, as applicable, shall be readjusted to such Conversion
Price for the Series C Preferred Stock, Series D Preferred Stock or Series
E Preferred Stock, as applicable, as would have obtained had the
adjustment made upon the issuance of such Options or Convertible
Securities (or upon the occurrence of a record date with respect thereto)
been made upon the basis of the issuance of only the number of shares of
Common Stock actually issued upon the exercise of such Options or
conversion of such Convertible Securities, as the case may be;
(D) In the event of any change in the number of shares
of Common Stock issuable upon the exercise, conversion or exchange of any
Option or Convertible Security, including, but not limited to, a change
resulting from the anti-dilution provisions thereof, the Conversion Price
for the Series C Preferred Stock, Series D Preferred Stock or Series E
Preferred Stock, as applicable, then in effect shall forthwith be
readjusted to such Conversion Price for the Series C Preferred Stock,
Series D Preferred Stock or Series E Preferred Stock, as applicable, as
would have obtained had the adjustment which was made upon the issuance of
such Option or Convertible Security not exercised or converted prior to
such change been made after giving effect to such change; and
(E) No readjustment pursuant to clauses (B), (C) or (D)
above shall have the effect of increasing the Conversion Price for the
Series C Preferred Stock, the Series D Preferred Stock or the Series E
Preferred Stock, as applicable, to an amount which exceeds the Conversion
Price for the Series C Preferred Stock, the Series D Preferred Stock or
the Series E Preferred Stock, as applicable, on the original adjustment
date (immediately prior to such original adjustment).
In the event the Corporation, after the Original Issue Date, amends
the terms of any Options or Con-
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<PAGE>
vertible Securities (whether such Options or Convertible Securities were
outstanding on the Original Issue Date or were issued after the Original Issue
Date), then such Options or Convertible Securities, as so amended, shall be
deemed to have been issued after the Original Issue Date and the provisions of
this Section 4(e)(iii) shall apply.
(iv) In the event the Corporation shall at any time
after the Original Issue Date issue Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant
to Section 4(e)(iii), but excluding shares issued as a stock split or
combination or upon a dividend or distribution as provided in Section
4(e)(vii)), without consideration or for a consideration per share less
than the applicable Conversion Price for the Series C Preferred Stock, the
Series D Preferred Stock or the Series E Preferred Stock, respectively, in
effect on the date of and immediately prior to such issue (or deemed
issuance), then and in such event, such Conversion Price for the Series C
Preferred Stock, the Series D Preferred Stock or the Series E Preferred
Stock, respectively, shall be reduced, concurrently with such issue, to a
price determined by multiplying such Conversion Price for the Series C
Preferred Stock, the Series D Preferred Stock or the Series E Preferred
Stock, respectively, by a fraction, (A) the numerator of which shall be
(1) the number of shares of Common Stock outstanding immediately prior to
such issue plus (2) the number of shares of Common Stock which the
aggregate consideration received or to be received by the Corporation for
the total number of Additional Shares of Common Stock so issued would
purchase at such Conversion Price for the Series C Preferred Stock, Series
D Preferred Stock or Series E Preferred Stock, respectively; and (B) the
denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued; provided that, (i) for the
purpose of this Section 4(e)(iv), all shares of Common Stock issuable upon
exercise or conversion of Options or Convertible Securities outstanding
immediately prior to such
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<PAGE>
issue shall be deemed to be outstanding, and (ii) the number of shares of
Common Stock deemed issuable upon exercise or conversion of such
outstanding Options and Convertible Securities shall not give effect to
any adjustments to the conversion price or conversion rate of such Option
or Convertible Securities resulting from the issuance of Additional Shares
of Common Stock that is the subject of this calculation; and provided
further that, notwithstanding any other term or provision of this Amended
and Restated Certificate of Incorporation (the "Certificate of
Incorporation"), in no event shall (i) the Conversion Price for the Series
C Preferred Stock be less than the then applicable Conversion Price for
the Series A Preferred Stock and (ii) the Conversion Price for the Series
D Preferred Stock or the Series E Preferred Stock be less than the then
applicable Conversion Price for the Series C Preferred Stock.
(v) For purposes of this Section 4(e), the consideration
received by the Corporation for the issue of any Additional Shares of
Common Stock shall be computed as follows:
(A) Cash and Property: Such consideration shall:
(1) Insofar as it consists of cash, be computed at
the aggregate of cash received by the Corporation;
(2) insofar as it consists of property other than
cash, be computed at the fair market value thereof at the time of such
issue, as determined in good faith by the Board of Directors; and
(3) in the event Additional Shares of Common Stock
are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (i) and (ii)
above, as determined in good faith by the Board of Directors.
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<PAGE>
(B) Options and Convertible Securities. The
consideration per share received by the Corporation for Additional Shares
of Common Stock deemed to have been issued pursuant to Section 4(e)(iii),
relating to Options and Convertible Securities, shall be determined by
dividing
(x) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such
Options or Convertible Securities, plus the minimum aggregate amount
of additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration) payable to the
Corporation upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options
for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such
Convertible Securities, by
(y) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without regard to
any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or the conversion
or exchange of such Convertible Securities.
(vi) In the event the Corporation shall issue or shall
be deemed to have issued on more than one date Additional Shares of Common
Stock as part of the same transaction or series of related transactions,
and such issuance dates occur within a period of no more than 90 days,
then the applicable Conversion Price for the Series C Preferred Stock,
Series D Preferred Stock or Series E Preferred Stock shall be adjusted
only once on account of such issuances, with such adjustment to occur upon
the final such issuance and to give effect to all such issuances as if
they occurred on the date of the final such issuance.
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<PAGE>
(vii) In the event the Corporation shall issue any
shares of Common Stock (A) by means of dividend or other distribution upon
the outstanding Common Stock or (B) in subdivision of its outstanding
Common Stock, by reclassification or otherwise, the Conversion Price then
in effect for each series of Preferred Stock shall be reduced
proportionately, and, in like manner, in the event of any combination of
shares of Common Stock, by reclassification or otherwise, the Conversion
Price then in effect for each series of Preferred Stock shall be
proportionately increased.
(viii) If any capital reorganization or reclassification
of the Common Stock of the Corporation, or consolidation or merger of the
Corporation with or into another corporation, shall be effected (except
for a transaction which is deemed to be a Liquidation under Section 3(d)
of this Article FIFTH), then, as a condition of such reorganization,
reclassification, consolidation or merger, lawful or adequate provision
shall be made whereby the holders of Preferred Stock shall thereafter have
the right to receive, in lieu of the shares of Common Stock of the
Corporation immediately theretofore receivable upon the exercise of their
conversion rights, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number of
outstanding shares of such Common Stock equal to the number of shares of
such Common Stock immediately theretofore receivable upon the exercise of
such conversion rights had such reorganization, reclassification,
consolidation or merger not taken place, and, in any such case,
appropriate provision shall be made with respect to the rights and
interests of the holders of Preferred Stock to the end that such
conversion rights (including, without limitation, provisions for
adjustment of the Conversion Price for each series of Preferred Stock)
shall thereafter be applicable, as nearly as may be practicable in
relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise thereof. The Corporation shall not effect
any such consolidation or merger to which this paragraph (viii) is
applicable, unless prior to
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<PAGE>
or simultaneously with the consummation thereof the successor corporation
(if other than the Corporation) resulting from such consolidation or
merger shall assume by written instrument, executed and mailed or
delivered to the holders of the Preferred Stock, the obligation to deliver
to such holders such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holders may be entitled to
receive upon conversion of the Preferred Stock.
(ix) Each adjustment in the Conversion Price shall be
calculated to two decimal places.
(x) If any event occurs as to which in the opinion of
the Board of Directors the other provisions of this Section 4(e) are not
strictly applicable or if strictly applicable would not fairly protect the
conversion rights of the Preferred Stock in accordance with the intent and
principles of such provisions, then the Board of Directors shall make an
adjustment in the application of such provisions, in accordance with such
intent and principles, so as to protect such conversion rights as
aforesaid, but in no event shall such adjustment have the effect of
increasing the Conversion Price for each series of Preferred Stock as
otherwise determined pursuant to this Section 4(e) except in the event of
a combination of shares of the type contemplated in paragraph (e)(vii)
hereof, and then in no event to an amount greater than the Conversion
Price for each series of Preferred Stock as adjusted pursuant to paragraph
(e)(vii) hereof.
(f) Automatic Conversion. Notwithstanding any other provisions
of this Section 4, if the Corporation shall consummate a public offering of
shares of Common Stock registered under the Securities Act of 1933, as amended
which yields aggregate gross proceeds to the Corporation of not less than
$20,000,000 (a "Public Offering"), 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 Corporation, by action of its Board of Directors, shall have the
right to require that each share of Pre-
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<PAGE>
ferred Stock be converted into Common Stock. Following any such action by the
Board of Directors, each outstanding share of Preferred Stock shall, by virtue
of, and simultaneously with, the consummation of such transaction and without
any action on the part of the holder thereof, be deemed automatically converted
into the number of fully paid and nonassessable shares of Common Stock into
which such share of Preferred Stock is convertible at such time pursuant to
Section 4(a) of this Article FIFTH. The Minimum Per Share Offering Price (such
amount to be adjusted proportionately upon the occurrence of any event specified
in Section 4(e)(vii) of this Article FIFTH) (i) for the period commencing upon
the date of filing of this Amended and Restated Certificate of Incorporation
(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 Corporation shall file with the Securities and Exchange
Commission a registration statement with respect to a Public Offering 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 the automatic conversion of the
Preferred Stock described above unless such Public Offering is not consummated
within 150 calendar days after the Initial Filing Date.
(g) Stock Transfer Taxes. The issue of stock certificates upon
conversion of the Preferred Stock shall be made without charge to the converting
holder for any tax in respect of such issue. The Corporation shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of shares in any name other than that of the
registered holder of the Preferred Stock converted, and the Corporation shall
not be required to issue or deliver any stock certificate unless and until the
person or persons requesting the issue thereof shall have paid to the
Corporation the amount of such tax or shall have established to the satisfaction
of the Corporation that such tax has been paid.
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<PAGE>
(h) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price for each series of Preferred
Stock, the Corporation, at its expense, shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and prepare and furnish to
each holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and readjustments,
(ii) the Conversion Price at the time in effect for such holders' Preferred
Stock, and (iii) the number of shares of Common Stock and the amount, if any, of
other property which at the time would be received upon the conversion of
Preferred Stock owned by such holder.
(i) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of Common Stock for the purpose of
determining the holders thereof who are entitled to receive any non-cash
dividend or other non-cash distribution, any shares of Common Stock or other
securities, or any right to subscribe for, purchase or otherwise acquire, or any
option for the purchase of, any shares of stock of any class or any other
securities or property, or to receive any other right, the Corporation shall
mail to each holder of Preferred Stock at least thirty (30) days prior to the
record date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or rights,
and the amount and character of such dividend, distribution or right.
(j) Notices. Any notice required by the provisions of this
Section 4 to be given to a holder of shares of Preferred Stock shall be deemed
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of the Corporation.
(5) Purchase Rights. If at any time the Corporation issues any
options, Convertible Securities (as defined below) or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of Common
Stock (the "Purchase Rights"), then each holder of Preferred Stock will be
entitled to acquire, upon the terms applicable to such Purchase Rights,
19
<PAGE>
the aggregate Purchase Rights which such holder could have acquired if such
holder had held the number of shares of Common Stock acquirable upon conversion
of such holder's Preferred Stock immediately before the date on which a record
is taken for the issuance of such Purchase Rights, or, if no such record is
taken, the date as of which the record holders of Common Stock are to be
determined for such issuance of such Purchase Rights. For the purposes of this
Section 5, the term "Convertible Securities" shall mean any right to subscribe
for or to purchase, or any option for the purchase of, Common Stock or any stock
or other securities convertible into or exchangeable for Common Stock.
(6) Protective Provisions. The Corporation shall not, without the
prior consent or approval of the holders of a majority of the then outstanding
shares of Series C Preferred Stock, Series D Preferred Stock and Series E
Preferred Stock, voting together as a single series, (a) alter or change the
rights of the Series C Preferred Stock, the Series D Preferred Stock or the
Series E Preferred Stock so as to affect them adversely within the meaning of
the DGCL, (b) create any new class or series of equity securities (whether or
not convertible) or any other security convertible into equity securities which
has a preference over the Series C Preferred Stock, the Series D Preferred Stock
or the Series E Preferred Stock, either as to dividends or upon Liquidation, or
(c) declare or pay any dividend other than a dividend on the Common Stock
payable solely in shares of 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, the Corporation may not (i) alter or change the
provisions of Section 4(f) of this ARTICLE FIFTH so as to adversely affect the
rights of the Series E Preferred Stock or (ii) take any of the actions referred
to in this Section (6) of this ARTICLE FIFTH if such action affects the Series E
Preferred Stock but does not so affect the Series C Preferred Stock and the
Series D Preferred Stock. In addition, as long as shares of Series E Preferred
Stock are outstanding, the Corporation will not, without the consent of the
holders of a majority of the shares of Series E Preferred Stock, consummate a
Sale of the Corporation (as defined herein) prior to the Public Offering whereby
the Corporation is acquired (i) solely for cash, unless the holders of Series E
Preferred Stock receive in such Sale of the Corporation at least $63.00 per
share of Series E Preferred Stock, (ii) for consideration consisting of
securities or a combination of cash and securities having an aggregate value
(the value of any securities constituting all or part of any consideration
referred to in this Section 6 of this ARTICLE FIFTH to be determined in good
faith by the Board of Directors) which is equal to or less than 20% of the total
market capitalization of the issuer of such securities as determined immediately
after the consummation of the Sale of the Corporation, unless the holders of the
Series E Preferred Stock receive in such Sale of the Corporation consideration
having a value of at least $63.00 per share of Series E Preferred Stock or (iii)
for consideration consisting of securities or a combination of cash and
securities
20
<PAGE>
having an aggregate value which is greater than 20% of the total market
capitalization of the issuer of the securities as determined immediately after
the consummation of the Sale of the Corporation, unless the holders of Series E
Preferred Stock receive in such Sale of the Corporation consideration having a
value equal to or greater than the minimum per share sale price (in each case,
the "Minimum Per Share Sale Price") for each applicable time period set forth
below. The Minimum Per Share Sale Price (i) for the period commencing on the
Effective Date and ending at the close of business on the first anniversary of
the Effective Date shall be $50.40 per share of Series E Preferred 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 $56.70 per share of Series E Preferred Stock, and
(iii) at any time after the close of business on the second anniversary of the
Effective Date shall be $63.00 per share of Series E Preferred Stock.
Notwithstanding the foregoing, in the event that the Corporation shall enter
into a definitive agreement with respect to a Sale of the Corporation on or
before the close of business on the second anniversary of the Effective Date,
the Minimum Per Share Sale Price applicable at the time of execution of such
definitive agreement (the "Execution Date") shall be the Minimum Per Share Sale
Price for the purposes of this Section 6 of this ARTICLE FIFTH, unless such Sale
of the Corporation is not consummated within 180 calendar days of the Execution
Date. For the purposes hereof, "Sale of the Corporation" shall mean (i) the sale
or transfer by the Corporation (or any subsidiary of the Corporation) of all or
substantially all of the Corporation's assets in one transaction or a series of
related transactions, or (ii) any merger, consolidation or other transaction (a
"Transaction"), including without limitation any Transaction in which the
consideration is comprised of cash, in which the holders of the Corporation's
outstanding capital stock immedi-
21
<PAGE>
ately prior to such Transaction possessing the voting power (under ordinary
circumstances) to elect the Corporation's Board of Directors do not, immediately
after such Transaction, own capital stock of the entity surviving such
transaction or a parent entity thereof possessing the voting power (under
ordinary circumstances) to elect a majority of the members of such surviving or
parent entity's Board of Directors.
SIXTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
(2) The directors shall have concurrent power with the stockholders
to make, alter, amend, change, add to or repeal the By-Laws of the Corporation.
(3) The number of directors of the Corporation shall be as from time
to time fixed by, or in the manner provided in, the By-Laws of the Corporation.
Election of directors need not be by written ballot unless the By-Laws so
provide.
(4) 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 for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the DGCL or (iv) for any transaction from
which the director derived an improper personal benefit. Any repeal or
modification of this Article SIXTH by the stockholders of the Corporation 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.
(5) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject, nevertheless,
22
<PAGE>
to the provisions of the DGCL, this Certificate of Incorporation, and any
By-Laws adopted by the stockholders; provided, however, that no By-Laws
hereafter adopted by the stockholders shall invalidate any prior act of the
directors which would have been valid if such By-Laws had not been adopted.
SEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the DGCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
EIGHTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, PRAECIS PHARMACEUTICALS INCORPORATED has caused
this Amended and Restated Certificate of Incorporation to be executed in its
corporate name this 30th day of April, 1998.
PRAECIS PHARMACEUTICALS INCORPORATED
By /s/ Malcom L. Gefter
---------------------------------------------
Name: Malcolm L. Gefter
Title: Chairman of the Board,
Chief Executive Officer and
Treasurer
23
<PAGE>
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PRAECIS PHARMACEUTICALS INCORPORATED
- --------------------------------------------------------------------------------
Pursuant to Sections 228 and 242 of
the General Corporation Law of the
State of Delaware
- --------------------------------------------------------------------------------
PRAECIS PHARMACEUTICALS INCORPORATED, a corporation organized and
existing under and by virtue of the provisions of the General Corporation Law of
the State of Delaware (the "Corporation"), does hereby certify as follows:
FIRST: That the following is hereby added immediately after the last
sentence of the first paragraph of Article FOURTH of the Corporation's Amended
and Restated Certificate of Incorporation:
"Upon the filing of this Amendment to the Certificate of
Incorporation, each outstanding share of Common Stock shall be split 1.25-for-1,
and without further action on the part of the Corporation or any stockholder,
shall become and be deemed to represent 1.25 shares of Common Stock. Each
certificate representing outstanding shares of Common Stock shall hereafter be
deemed to represent the number of shares of Common Stock adjusted to reflect the
1.25 for 1 stock split, except that no such certificate shall represent
fractional shares. With respect to any fraction of a share that would have been
represented by such certificate, the Corporation shall pay to the holder an
amount in cash equal to such fraction multiplied by the current market value of
a share, determined in good faith by the Board of Directors. Subject to the
foregoing, upon any surrender for transfer or exchange of any certificate or
certificates representing shares of outstanding Common Stock, the Corporation
will issue and deliver a certificate or certificates for a number of shares of
Common Stock which gives effect to the 1.25-for-1 stock split."
24
<PAGE>
SECOND: That the foregoing amendment was duly adopted in accordance
with the provisions of Sections 228 and 242 of the General Corporation Law of
the State of Delaware.
25
<PAGE>
IN WITNESS WHEREOF, PRAECIS PHARMACEUTICALS INCORPORATED has caused
this Certificate to be executed in its corporate name this 30th day of
September, 1998.
PRAECIS PHARMACEUTICALS
INCORPORATED
By: /s/ Malcolm L. Gefter
-------------------------------------
Malcolm L. Gefter
Chairman of the Board,
Chief Executive Officer
and President
26
<PAGE>
EXHIBIT 3.2
FORM OF
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PRAECIS PHARMACEUTICALS INCORPORATED
- --------------------------------------------------------------------------------
Pursuant to Sections 228 and 242 of
the General Corporation Law of the
State of Delaware
- --------------------------------------------------------------------------------
PRAECIS PHARMACEUTICALS INCORPORATED, a corporation organized and
existing under and by virtue of the provisions of the General Corporation Law of
the State of Delaware (the "Corporation"), does hereby certify as follows:
FIRST: That the following is hereby added immediately after the last
sentence of the second paragraph of Article FOURTH of the Corporation's Amended
and Restated Certificate of Incorporation, as amended:
"Upon the filing of this Amendment to the Certificate of
Incorporation, each outstanding share of Common Stock shall be further split
2-for-1, and without further action on the part of the Corporation or any
stockholder, shall become and be deemed to represent 2 shares of Common Stock.
Each certificate representing outstanding shares of Common Stock shall hereafter
be deemed to represent the number of shares of Common Stock adjusted to reflect
the 2-for-1 stock split, except that no such certificate shall represent
fractional shares. With respect to any fraction of a share that would have been
represented by such certificate, the Corporation shall pay to the holder an
amount in cash equal to such fraction multiplied by the current market value of
a share, determined in good faith by the Board of Directors. Subject to the
foregoing, upon any surrender for transfer or exchange of any certificate or
certificates representing shares of outstanding Common Stock, the Corporation
will issue and deliver a certificate or certificates for a number of shares of
Common Stock which gives effect to the 2-for-1 stock split."
<PAGE>
SECOND: That the foregoing amendment was duly adopted in accordance
with the provisions of Sections 228 and 242 of the General Corporation Law of
the State of Delaware.
2
<PAGE>
IN WITNESS WHEREOF, PRAECIS PHARMACEUTICALS INCORPORATED has caused
this Certificate to be executed in its corporate name this day of February,
2000.
PRAECIS PHARMACEUTICALS
INCORPORATED
By _________________________________________
Malcolm L. Gefter
Chairman of the Board, Chief Executive
Officer and President
3
<PAGE>
EXHIBIT 3.3
FORM OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PRAECIS PHARMACEUTICALS INCORPORATED
PRAECIS PHARMACEUTICALS INCORPORATED, a Delaware corporation (the
"Corporation"), does hereby certify that the Corporation was organized in the
State of Delaware on July 16, 1993 under the name Pharmaceutical Peptides, Inc.
and that this Amended and Restated Certificate of Incorporation hereby amends,
restates and integrates the provisions of the Amended and Restated Certificate
of Incorporation of the Corporation, as amended, as currently in effect (the
"Certificate of Incorporation"), and has been duly adopted in accordance with
the provisions of Sections 228, 242 and 245 of the General Corporation Law of
the State of Delaware by written consent of the holders of not less than a
majority of the outstanding stock of the Corporation entitled to vote thereon
and not less than a majority of each class of the outstanding stock of the
Corporation entitled to vote thereon. The text of the Certificate of
Incorporation is hereby amended and restated to read in its entirety as follows:
FIRST: The name of the Corporation is PRAECIS PHARMACEUTICALS
INCORPORATED (hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of the Corporation's registered agent at that address is
The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware
Code (the "DGCL").
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is (i) 200,000,000 shares of common stock, each
having a par value of one penny ($.01) ("Common Stock"), and (ii) 10,000,000
shares of preferred stock, each having a par value of one penny ($.01)
("Preferred Stock").
<PAGE>
A. COMMON STOCK
(1) Relative Rights of Preferred Stock and Common Stock. All
preferences, voting powers, relative, participating, optional or other special
rights and privileges and qualifications, limitations or restrictions of the
Common Stock are expressly made subject to those that may be fixed with respect
to any shares of Preferred Stock.
(2) Voting Rights. Except as otherwise required by law or this
Amended and Restated Certificate of Incorporation, each holder of shares of
Common Stock shall be entitled to one vote for each share of Common Stock
standing in his name on the books of the Corporation on the record date for the
determination of stockholders entitled to notice of, or to vote at, any meeting
of stockholders of the Corporation. There shall be no cumulative voting.
(3) Dividends. Subject to the preferential rights of holders of
Preferred Stock, if any, the holders of shares of Common Stock shall be entitled
to receive, when and if declared by the Board of Directors of the Corporation
(the "Board of Directors"), out of the assets of the Corporation which are by
law available therefor, dividends payable either in cash, or in property or
shares of capital stock, notes or other evidence of indebtedness, of the
Corporation or any other person or entity.
(4) Dissolution, Liquidation or Winding Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, after distribution in full of the preferential amounts, if any, to
be distributed to the holders of shares of Preferred Stock, unless otherwise
required by law, holders of shares of Common Stock shall be entitled to receive
all the remaining assets of the Corporation of whatever kind available for
distribution to stockholders ratably in proportion to the number of shares of
Common Stock held by them respectively.
B. PREFERRED STOCK
(1) General. The Board of Directors is expressly authorized to
provide for the issuance of all or any shares of the 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, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of such class or series and as may be permitted by
the DGCL, including, without limitation, the authority to provide that any such
class or series may be (a) subject to redemption at such time or times and at
such price or prices; (b) entitled to receive dividends (which may be cumulative
or non-cumulative) at such rates, on such conditions, and at such times,
2
<PAGE>
and payable in preference to, or in such relation to, the dividends payable on
any other class or classes or any other series; (c) entitled to such rights upon
the dissolution, liquidation or winding-up of, or upon any distribution of the
assets of, the Corporation; or (d) convertible into, or exchangeable for, shares
of any other class or classes of stock, or of any other series of the same or
any other class or classes of stock, at such price or prices or at such rates of
exchange and with such adjustments; all as may be stated in such resolution or
resolutions.
FIFTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(1) The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
(2) The number of directors that shall constitute the whole Board of
Directors shall from time to time be fixed exclusively by the Board of Directors
by a resolution adopted by a majority of the whole Board of Directors serving at
the time of adoption of such resolution. In no event shall the number of
directors that constitute the whole Board of Directors be less than three. No
decrease in the number of directors shall have the effect of shortening the term
of any incumbent director. Election of directors need not be by written ballot
unless the By-Laws so provide.
(3) In addition to the powers and authority hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, subject, nevertheless, to the provisions of the DGCL,
this Amended and Restated Certificate of Incorporation and the By-Laws.
(4) Any vacancy on the Board of Directors that results from an
increase in the number of directors may be filled only by a majority of the
directors then in office, provided that a quorum is present, and any other
vacancy occurring in the Board of Directors may be filled only by a majority of
the directors then in office, even if less than a quorum, or by a sole remaining
director. Any director elected to fill a vacancy not resulting from an increase
in the number of directors shall have the same remaining term as that of his
predecessor and shall hold office until his successor shall be duly elected and
shall duly qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office.
(5) Notwithstanding the foregoing, whenever the holders of any one
or more classes or series of Preferred Stock issued by the Corporation shall
have the right, voting separately by class or series, to elect directors at an
annual or special
3
<PAGE>
meeting of stockholders, the election, term of office, filling of vacancies,
removal and other features of such directorships shall be governed by the terms
of the instrument creating such class or series of Preferred Stock.
(6) The presence of a majority of the total number of directors
shall constitute a quorum for the transaction of business and, except as
otherwise provided herein, the vote of a majority of such quorum shall be
required in order for the Board of Directors to act.
SIXTH: Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of stockholders of the Corporation, and the ability of the
stockholders to consent in writing to the taking of any action is hereby
specifically denied.
SEVENTH: Unless otherwise required by law, special meetings of
stockholders, for any purpose or purposes, may be called only by (i) the
Chairman of the Board of Directors, if there be one, (ii) the President, (iii)
any Vice President, if there be one, (iv) the Secretary or (v) any Assistant
Secretary, if there be one, and shall be called by any such officer pursuant to
a resolution adopted by a majority of the Board of Directors. Stockholders shall
not be entitled to call a special meeting of stockholders, nor to require the
Board of Directors to call such a special meeting.
EIGHTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors is expressly
authorized and empowered to adopt, amend or repeal any provision of the By-Laws
of the Corporation. The By-Laws of the Corporation may be adopted, amended or
repealed by the stockholders by the affirmative vote of holders of shares
representing at least two-thirds (66 2/3%) of the voting power of all shares
entitled to vote at an election of directors.
NINTH: 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;
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.
4
<PAGE>
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 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.
TENTH: 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 automatically, without any required action by the
Corporation or any other person, 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.
ELEVENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the DGCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation.
TWELFTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation; provided, however, that, notwithstanding any other provision of
this Amended and Restated Certificate of Incorporation (and in addition to any
other vote that may be the DGCL), the affirmative vote of holders of at least
eighty-five percent (85%) of the voting power of the shares entitled to vote for
the election of directors, shall be re-
5
<PAGE>
quired to amend, alter, change or repeal any provision of, or to adopt any
provision as part of this Amended and Restated Certificate of Incorporation
inconsistent with the purpose and intent of, Articles SIXTH, SEVENTH, EIGHTH,
NINTH or TENTH of this Amended and Restated Certificate of Incorporation or this
Article TWELFTH.
6
<PAGE>
IN WITNESS WHEREOF, PRAECIS PHARMACEUTICALS INCORPORATED has caused
this Amended and Restated Certificate of Incorporation to be executed in its
corporate name this day of , 2000.
PRAECIS PHARMACEUTICALS
INCORPORATED
By ______________________________________
Malcolm L. Gefter
Chairman of the Board, Chief Executive
Officer and President
7
<PAGE>
EXHIBIT 3.4
AMENDED AND RESTATED
BY-LAWS
OF
PHARMACEUTICAL PEPTIDES, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
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Section 2. Annual Meetings. The Annual Meetings of Stockholders shall be
held on such date and at such time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect by a plurality vote a Board of Directors,
and transact such other business as may properly be brought before the meeting.
Written notice of the Annual Meeting stating the place, date and hour of the
meeting shall be given to each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law or by the
Certificate of Incorporation, Special Meetings of Stockholders, for any purpose
or purposes, may be called by either (i) the Chairman, if there be one, or (ii)
the President, (iii) any Vice President, if there be one, (iv) the Secretary or
(v) any Assistant Secretary, if there be one, and shall be called by any such
officer at the request in writing of a majority of the Board of Directors or at
the request in writing of stockholders owning a majority of the capital stock of
the Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose
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or purposes of the proposed meeting. Written notice of a Special Meeting stating
the place, date and hour of the meeting and the purpose or purposes for which
the meeting is called shall be given not less than ten nor more than sixty days
before the date of the meeting to each stockholder entitled to vote at such
meeting.
Section 4. Quorum. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned
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meeting, a notice of the adjourned meeting shall be given to each stockholder
entitled to vote at the meeting.
Section 5. Voting. Unless otherwise required by law, the Certificate of
Incorporation or these ByLaws, any question brought before any meeting of
stockholders shall be decided by the vote of the holders of a majority of the
stock represented and entitled to vote thereat. Each stockholder represented at
a meeting of stockholders shall be entitled to cast one vote for each share of
the capital stock entitled to vote thereat held by such stockholder. Such votes
may be cast in person or by proxy but no proxy shall be voted on or after three
years from its date, unless such proxy provides for a longer period. The Board
of Directors, in its discretion, or the officer of the Corporation presiding at
a meeting of stockholders, in his discretion, may require that any votes cast at
such meeting shall be cast by written ballot.
Section 6. Consent of Stockholders in Lieu of Meeting. Unless otherwise
provided in the Certificate of Incorporation, any action required or permitted
to be taken at any Annual or Special Meeting of Stockholders of the Corporation,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing,
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setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
Section 7. List of Stockholders Entitled to Vote. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list
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shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder of the Corporation
who is present.
Section 8. Stock Ledger. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of Directors shall
consist of not less than one nor more than fifteen members, the exact number of
which shall initially be fixed by the Incorporator and thereafter from time to
time by the Board of Directors. Except as provided in Section 2 of this Article,
directors shall be elected by a plurality of the votes cast at Annual Meetings
of Stockholders, and each director so elected shall hold office until the next
Annual Meeting and until his successor is duly elected and qualified, or until
his earlier resignation or removal. Any director may resign
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at any time upon notice to the Corporation. Directors need not be stockholders.
Section 2. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until the
next annual election and until their successors are duly elected and qualified,
or until their earlier resignation or removal.
Section 3. Duties and Powers. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these By-Laws
directed or required to be exercised or done by the stockholders.
Section 4. Meetings. The Board of Directors of the Corporation may hold
meetinqs, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called
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by the Chairman, if there be one, the President, or any directors. Notice
thereof stating the place, date and hour of the meeting shall be given to each
director either by mail not less than forty-eight (48) hours before the date of
the meeting, by telephone or telegram on twenty-four (24) hours' notice, or on
such shorter notice as the person or persons calling such meeting may deem
necessary or appropriate in the circumstances.
Section 5. Quorum. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these By-Laws, at all meetings of the
Board of Directors, a majority of the entire Board of Directors shall constitute
a quorum for the transaction of business and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board of Directors. If a quorum shall not be present at any meeting of the
Board of Directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
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Section 6. Actions of Board. Unless otherwise provided by the Certificate
of Incorporation or these ByLaws, any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 7. Meetings by Means of Conference Telephone. Unless otherwise
provided by the Certificate of Incorporation or these By-Laws, members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 7 shall constitute
presence in person at such meeting.
Section 8. Committees. The Board of Directors may, by resolution passed by
a majority of the entire Board of Directors, designate one or more committees,
each committee to consist of one or more of the directors
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of the Corporation. The Board of Directors may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of any such committee. In the absence or
disqualification of a member of a committee, and in the absence of a designation
by the Board of Directors of an alternate member to replace the absent or
disqualified member, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member. Any committee, to the
extent allowed by law and provided in the resolution establishing such
committee, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation.
Each committee shall keep regular minutes and report to the Board of Directors
when required.
Section 9. Compensation. The directors may be paid their expenses, if any,
of attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall
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preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
Section 10. Interested Directors. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or
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interest and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee thereof
or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen by the
Board of Directors and shall be a President, a Secretary and a Treasurer. The
Board of Directors, in its discretion, may also choose a Chairman of the Board
of Directors (who must be a director), a Chief Executive Officer (who need not
be the Chairman of the Board of Directors or the President) and one or more Vice
Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any
number of offices may be held by the same person, unless otherwise
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prohibited by law, the Certificate of Incorporation or these By-Laws. The
officers of the Corporation need not be stockholders of the Corporation nor,
except in the case of the Chairman of the Board of Directors, need such officers
be directors of the Corporation.
Section 2. Election. The Board of Directors at its first meeting held
after each Annual Meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed by
the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be execut-
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ed in the name of and on behalf of the Corporation by the President or any Vice
President and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to vote
in person or by proxy at any meeting of security holders of any corporation in
which the Corporation may own securities and at any such meeting shall possess
and may exercise any and all rights and power incident to the ownership of such
securities and which, as the owner thereof, the Corporation might have exercised
and possessed if present. The Board of Directors may, by resolution, from time
to time confer like powers upon any other person or persons.
Section 4. Chairman of the Board of Directors; Chief Executive Officer.
The Chairman of the Board of Directors, if there be one, shall preside at all
meetings of the stockholders and of the Board of Directors. Except where by law
the signature of the President is required, each of the Chairman of the Board of
Directors (if there be one) and the Chief Executive Officer (if there be one)
shall possess the same power as the President to sign all contracts,
certificates and other instruments of the Corporation which may be authorized by
the Board of Directors. During the absence or disability
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of the President, the Chairman of the Board of Directors or the Chief Executive
Officer, as the Board of Directors shall determine, shall exercise all the
powers and discharge all the duties of the President. The Chairman of the Board
of Directors and the Chief Executive Officer shall also perform such other
duties and may exercise such other powers as from time to time may be assigned
to him by these By-Laws or by the Board of Directors.
Section 5. President. The President shall, subject to the control of the
Board of Directors and, if there be one, the Chairman of the Board of Directors,
have general supervision of the business of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried into effect. He
shall execute all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except that
the other officers of the Corporation may sign and execute documents when so
authorized by these By-Laws, the Board of Directors or the President. In the
absence or disability of the Chairman of the Board of Directors, or if there be
none, the President shall preside at all meetings of the stockholders and the
Board of Directors.
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The President shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these By-Laws or by the
Board of Directors.
Section 6. Vice Presidents. At the request of the President or in his
absence or in the event of his inability or refusal to act (and if there be no
Chairman of the Board of Directors), the Vice President or the Vice Presidents
if there is more than one (in the order designated by the Board of Directors)
shall perform the duties of the President, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the President. Each
Vice President shall perform such other duties and have such other powers as the
Board of Directors from time to time may prescribe. If there be no Chairman of
the Board of Directors and no Vice President, the Board of Directors shall
designate the officer of the Corporation who, in the absence of the President or
in the event of the inability or refusal of the President to act, shall perform
the duties of the President, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the President.
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Section 7. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of stockholders and record all the proceedings
thereat in a book or books to be kept for that purpose; the Secretary shall also
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or President, under whose
supervision he shall be. If the Secretary shall be unable or shall refuse to
cause to be given notice of all meetings of the stockholders and special
meetings of the Board of Directors, and if there be no Assistant Secretary, then
either the Board of Directors or the President may choose another officer to
cause such notice to be given. The Secretary shall have custody of the seal of
the Corporation and the Secretary or any Assistant Secretary, if there be one,
shall have authority to affix the same to any instrument requiring it and when
so affixed, it may be attested by the signature of the Secretary or by the
signature of any such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to
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attest the affixing by his signature. The Secretary shall see that all books,
reports, statements, certificates and other documents and records required by
law to be kept or filed are properly kept or filed, as the case may be.
Section 8. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation,
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in case of his death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control belonging to the Corporation.
Section 9. Assistant Secretaries. Except as may be otherwise provided in
these By-Laws, Assistant Secretaries, if there be any, shall perform such duties
and have such powers as from time to time may be assigned to them by the Board
of Directors, the President, any Vice President, if there be one, or the
Secretary, and in the absence of the Secretary or in the event of his disability
or refusal to act, shall perform the duties of the Secretary, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in the
event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the
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Treasurer. If required by the Board of Directors, an Assistant Treasurer shall
give the Corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful performance of
the duties of his office and for the restoration to the Corporation, in case of
his death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 11. Other Officers. Such other officers as the Board of Directors
may choose shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other officer of the Corporation the power to choose such other
officers and to prescribe their respective duties and powers.
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ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed, in the name of the Corporation
(i) by the Chairman of the Board of Directors, the President or a Vice President
and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned by
him in the Corporation.
Section 2. Signatures. Any or all of the signatures on a certificate may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the
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person claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate, or his legal
representative, to advertise the same in such manner as the Board of Directors
shall require and/or to give the Corporation a bond in such sum as it may direct
as indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these By-Laws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the certificate
or by his attorney lawfully constituted in writing and upon the surrender of the
certificate therefor, which shall be cancelled before a new certificate shall be
issued.
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Section 5. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty days nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 6. Beneficial Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound
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to recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his address
as it appears on the records of the Corporation, with postage thereon prepaid,
and such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Written notice may also be given personally
or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to
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said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, and may be
paid in cash, in property, or in shares of the capital stock. Before payment of
any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Board of Directors from time to
time, in its absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
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Section 3. Fiscal Year. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings other Than
Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall 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 or officer of the Corporation,
or is or was a director or officer of the Corporation serving at the request of
the Corporation as a director or officer,
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employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan 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. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which 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 reasonable cause to believe that his conduct
was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in
the Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threat-
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ened, pending or completed action or suit by or in the right of the Corporation
to procure a judgment in its favor by reason of the fact that he is or was a
director or officer of the Corporation, or is or was a director or officer of
the Corporation serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit 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; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
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Section 3. Authorization of Indemnification. Any indemnification under
this Article VIII (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because he has met the applicable standard of conduct set forth in Section 1 or
Section 2 of this Article VIII, as the case may be. Such determination shall be
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (ii) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders. To the extent, however, that a director
or officer of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding described above, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith, without the necessity of authorization in the specific
case.
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Section 4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article VIII, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their duties, or on the
advice of legal counsel for the Corporation or another enterprise or on
information or records given or reports made to the Corporation or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Corporation or another
enterprise. The term "another enterprise" as used in this Section 4 shall mean
any other corporation or any partnership, joint venture, trust, employee benefit
plan or other enterprise of which such person is or was serving at the request
of the Corporation as a director, officer, employee or agent. The provisions of
this Section 4 shall not be deemed to be exclusive or to limit in any way the
circum-
30
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stances in which a person may be deemed to have met the applicable standard of
conduct set forth in Sections 1 or 2 of this Article VIII, as the case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to any court of competent jurisdiction in the State of
Delaware for indemnification to the extent otherwise permissible under Sections
1 and 2 of this Article VIII. The basis of such indemnification by a court shall
be a determination by such court that indemnification of the director or officer
is proper in the circumstances because he has met the applicable standards of
conduct set forth in Sections 1 or 2 of this Article VIII, as the case may be.
Neither a contrary determination in the specific case under Section 3 of this
Article VIII nor the absence of any determination thereunder shall be a defense
to such application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If
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successful, in whole or in part, the director or officer seeking indemnification
shall also be entitled to be paid the expense of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by a director or
officer in defending or investigating a threatened or pending action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by or granted pursuant
to this Article VIII shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any By-Law, agreement, contract, vote of stockholders or disinterested directors
or pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such
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office, it being the policy of the Corporation that indemnification of the
persons specified in Sections 1 and 2 of this Article VIII shall be made to the
fullest extent permitted by law. The provisions of this Article VIII shall not
be deemed to preclude the indemnification of any person who is not specified in
Sections 1 or 2 of this Article VIII but whom the Corporation has the power or
obligation to indemnify under the provisions of the General Corporation Law of
the State of Delaware, or otherwise.
Section 8. Insurance. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director or officer of the Corporation,
or is or was a director or officer of the Corporation serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power or the obligation to indemnify him against such
liability under the provisions of this Article VIII.
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Section 9. Certain Definitions. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued. For purposes of
this Article VIII, references to "fines" shall include any excise taxes assessed
on a person with respect to an employee benefit plan; and references to "serving
at the request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such
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director or officer with respect to an employee benefit plan, its participants
or beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
VIII.
Section 10. Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article VIII shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
Section 11. Limitation on Indemnification. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5 hereof),
the Corporation shall not be obligated to indemnify any director or officer in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized or
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consented to by the Board of Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. 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 VIII to
directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, or new By-Laws may be adopted by the stockholders or by the Board of
Directors, provided, however, that notice of such alteration, amendment, repeal
or adoption of new By-Laws be contained in the notice of such meeting of
stockholders or Board of Directors as the case may be. All such amendments must
be approved by either the holders of a majority of the outstanding capital stock
entitled to vote thereon or by a majority of the entire Board of Directors then
in office.
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Section 2. Entire Board of Directors. As used in this Article IX and in
these By-Laws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.
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EXHIBIT 3.5
FORM OF
AMENDED AND RESTATED
BY-LAWS
OF
PRAECIS PHARMACEUTICALS INCORPORATED
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors.
<PAGE>
Section 2. Annual Meetings. The Annual Meetings of Stockholders for
the election of directors shall be held on such date and at such time as shall
be designated from time to time by the Board of Directors.
Section 3. Nature of Business at Annual Meetings. No business may be
transacted at an Annual Meeting of Stockholders, other than business that is
either (a) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors (or any duly authorized
committee thereof), (b) otherwise properly brought before the Annual Meeting by
or at the direction of the Board of Directors (or any duly authorized committee
thereof) or (c) otherwise properly brought before the Annual Meeting by any
stockholder of the Corporation (i) who is a stockholder of record on the date of
the giving of the notice provided for in this Section 3 and on the record date
for the determination of stockholders entitled to vote at such Annual Meeting
and (ii) who complies with the notice procedures set forth in this Section 3.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than ninety (90) days nor more than one hundred twenty
(120) days prior to the
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anniversary date of the immediately preceding Annual Meeting of Stockholders;
provided, however, that in the event that the Annual Meeting is called for a
date that is not within thirty (30) days before or after such anniversary date,
notice by the stockholder in order to be timely must be so received not later
than the close of business on the later of (i) the ninetieth (90th) day
preceding the date of the Annual Meeting and (ii) the tenth (10th) day following
the day on which such notice of the date of the Annual Meeting was mailed or
such public disclosure of the date of the Annual Meeting was made, whichever
first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the Annual Meeting (i) a brief description of the business desired to be
brought before the Annual Meeting and the reasons for conducting such business
at the Annual Meeting, (ii) the name and record address of such stockholder,
(iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by such stockholder, (iv)
a description of all arrangements or understandings between such stockholder and
any other person or persons (including their names) in connection with the
proposal of such business by such stockholder and any material interest of such
stockholder in such business and (v) a representation that such stockholder
intends to appear in person or by proxy at the Annual Meeting to bring such
business before the meeting.
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No business shall be conducted at the Annual Meeting of Stockholders
except business brought before the Annual Meeting in accordance with the
procedures set forth in this Section 3; provided, however, that, once business
has been properly brought before the Annual Meeting in accordance with such
procedures, nothing in this Section 3 shall be deemed to preclude discussion by
any stockholder of any such business. If the Chairman of an Annual Meeting
determines that business was not properly brought before the Annual Meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the Annual Meeting and
such business shall not be transacted.
Section 4. Special Meetings. Unless otherwise required by law or by
the certificate of incorporation of the Corporation, as amended and restated
from time to time (the "Certificate of Incorporation"), Special Meetings of
Stockholders, for any purpose or purposes, may be called only by (i) the
Chairman of the Board (if there be one), (ii) the President, (iii) any Vice
President (if there be one), (iv) the Secretary or (v) any Assistant Secretary
(if there be one), and shall be called by any such officer pursuant to a
resolution of a majority of the Board of Directors, which resolution shall state
the purpose or purposes of the proposed meeting. At a Special Meeting of
Stockholders, only such business shall be conducted as shall be specified in the
notice of meeting (or any supplement thereto).
4
<PAGE>
Section 5. Nomination of Directors at Annual and Special Meetings.
Only persons who are nominated in accordance with the following procedures shall
be eligible for election as directors of the Corporation, except as may be
otherwise provided in the Certificate of Incorporation with respect to the right
of holders of preferred stock of the Corporation to nominate and elect a
specified number of directors in certain circumstances. Nominations of persons
for election to the Board of Directors may be made at any Annual Meeting of
Stockholders, or at any Special Meeting of Stockholders called for the purpose
of electing directors, (a) by or at the direction of the Board of Directors (or
any duly authorized committee thereof) or (b) by any stockholder of the
Corporation (i) who is a stockholder of record on the date of the giving of the
notice provided for in this Section 5 and on the record date for the
determination of stockholders entitled to vote at such meeting and (ii) who
complies with the notice procedures set forth in this Section 5.
In addition to any other applicable requirements, for a nomination
to be made by a stockholder, such stockholder must have given timely notice
thereof in proper written form to the Secretary of the Corporation. To be
timely, a stockholder's notice to the Secretary must be delivered to or mailed
and received at the principal executive offices of the Corporation (a) in the
case of an Annual Meeting, not less than ninety (90) days nor more than one
hundred twenty (120) days prior to the anniversary date of the immediately
preceding Annual Meeting of Stockholders; provided, however, that in the event
that the Annual Meeting is called for a date that
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is not within thirty (30) days before or after such anniversary date, notice by
the stockholder in order to be timely must be so received not later than the
close of business on the later of (i) the ninetieth (90th) day preceding the
date of the Annual Meeting and (ii) the tenth (10th) day following the day on
which such notice of the date of the Annual Meeting was mailed or such public
disclosure of the date of the Annual Meeting was made, whichever first occurs;
and (b) in the case of a Special Meeting of Stockholders called for the purpose
of electing directors, not later than the close of business on the tenth (10th)
day following the day on which notice of the date of the Special Meeting was
mailed or public disclosure of the date of the Special Meeting was made,
whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth (a) as to each person whom the stockholder proposes to
nominate for election as a director, (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by the person and (iv)
any other information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder; and (b) as to the
stockholder giving the notice, (i) the name and record address of such
stockhold-
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er, (ii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by such stockholder, (iii)
a description of all arrangements or understandings between such stockholder and
each proposed nominee and any other person or persons (including their names)
pursuant to which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the meeting to nominate the persons named in such stockholder's notice and (v)
any other information relating to such stockholder that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act and the rules and regulations promulgated
thereunder. Such notice must be accompanied by a written consent of each
proposed nominee to being named as a nominee and to serve as a director if
elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 5. If the Chairman of the meeting determines that a nomination was not
made in accordance with the foregoing procedures, the Chairman shall declare to
the meeting that the nomination was defective and such defective nomination
shall be disregarded.
Section 6. Notice. Whenever stockholders are required or permitted
to take any action at a meeting, a written notice of the meeting shall be given
which
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shall state the place, date and hour of the meeting, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called. Unless
otherwise required by law, the written notice of any meeting shall be given not
less than ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting.
Section 7. Adjournments. Any meeting of the stockholders may be
adjourned from time to time to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting, the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 8. Quorum. Unless otherwise required by law or the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall not
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to
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time, in the manner provided in Section 7, until a quorum shall be present or
represented. A quorum, once established, shall not be broken by the withdrawal
of enough votes to leave less than a quorum.
Section 9. Voting. Unless otherwise required by law, the Certificate
of Incorporation or these By-laws, any question brought before any meeting of
stockholders, other than the election of directors, shall be decided by the vote
of the holders of a majority of the total number of votes of the capital stock
represented and entitled to vote thereat, voting as a single class. Unless
otherwise provided in the Certificate of Incorporation, and subject to Section 5
of Article V hereof, each stockholder represented at a meeting of stockholders
shall be entitled to cast one vote for each share of the capital stock entitled
to vote thereat held by such stockholder. Such votes may be cast in person or by
proxy but no proxy shall be voted on or after three years from its date, unless
such proxy provides for a longer period. The Board of Directors, in its
discretion, or the officer of the Corporation presiding at a meeting of
stockholders, in such officer's discretion, may require that any votes cast at
such meeting shall be cast by written ballot.
Section 10. No Action by Consent of Stockholders in Lieu of Meeting.
Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly constituted Annual or Special Meeting of
Stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
9
<PAGE>
Section 11. List of Stockholders Entitled to Vote. The officer of
the Corporation who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting either at a place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder of the Corporation who is present.
Section 12. Stock Ledger. The stock ledger of the Corporation shall
be the only evidence as to who are the stockholders entitled to examine the
stock ledger, the list required by Section 11 of this Article II or the books of
the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 13. Conduct of Meetings. The Board of Directors of the
Corporation may adopt by resolution such rules and regulations for the conduct
of the meeting of the stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of the stockholders shall have the right
and authority to
10
<PAGE>
prescribe such rules, regulations and procedures and to do all such acts as, in
the judgment of such chairman, are appropriate for the proper conduct of the
meeting. Such rules, regulations or procedures, whether adopted by the Board of
Directors or prescribed by the chairman of the meeting, may include, without
limitation, the following: (i) the establishment of an agenda or order of
business for the meeting; (ii) the determination of when the polls shall open
and close for any given matter to be voted on at the meeting; (iii) rules and
procedures for maintaining order at the meeting and the safety of those present;
(iv) limitations on attendance at or participation in the meeting to
stockholders of record of the Corporation, their duly authorized and constituted
proxies or such other persons as the chairman of the meeting shall determine;
(v) restrictions on entry to the meeting after the time fixed for the
commencement thereof; and (vi) limitations on the time allotted to questions or
comments by participants.
ARTICLE III
DIRECTORS
Section 1. Election of Directors. Except as otherwise required by
law or the Certificate of Incorporation, directors shall be elected by a
plurality of the votes cast at the Annual Meetings of Stockholders and each
director so elected shall hold office until the next Annual Meeting of
Stockholders and until such director's successor is duly elected and qualified,
or until such director's earlier death, resigna-
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tion or removal. Any director may resign at any time upon written notice to the
Corporation. Directors need not be stockholders.
Section 2. Duties and Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of Directors
which may exercise all such powers of the Corporation and do all such lawful
acts and things as are not by statute or by the Certificate of Incorporation or
by these By-Laws required to be exercised or done by the stockholders.
Section 3. Meetings. The Board of Directors may hold meetings, both
regular and special, either within or without the State of Delaware. Regular
meetings of the Board of Directors may be held without notice at such time and
at such place as may from time to time be determined by the Board of Directors.
Special meetings of the Board of Directors may be called by the Chairman (if
there be one), the Chief Executive Officer (if there be one), the President, or
by any other officer of the Corporation upon the request of a majority of the
directors then in office. Notice thereof stating the place, date and hour of the
meeting shall be given to each director either by mail not less than forty-eight
(48) hours before the date of the meeting, by telephone or telegram on
twenty-four (24) hours' notice, or on such shorter notice as the person or
persons calling such meeting may deem necessary or appropriate in the
circumstances.
Section 4. Quorum. Except as otherwise required by law or the
Certificate of Incorporation, at all meetings of the Board of Directors, a
majority of
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the entire Board of Directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors. If a quorum
shall not be present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting of the time and place of the adjourned meeting,
until a quorum shall be present.
Section 5. Actions by Written Consent. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all the members of the
Board of Directors or committee, as the case may be, consent thereto in writing,
and the writing or writings are filed with the minutes of proceedings of the
Board of Directors or committee.
Section 6. Meetings by Means of Conference Telephone. Members of the
Board of Directors of the Corporation, or any committee thereof, may participate
in a meeting of the Board of Directors or such committee by means of a
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section 6 shall constitute presence in person at such
meeting.
Section 7. Committees. The Board of Directors may designate one or
more committees, each committee to consist of one or more of the directors of
the Corporation. The Board of Directors may designate one or more directors as
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alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member. Any committee, to the
extent permitted by law and provided in the resolution establishing such
committee, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which
may require it. Each committee shall keep regular minutes and report to the
Board of Directors when required.
Section 8. Compensation. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
such other compensation as may be determined by the Board of Directors from time
to time.
Section 9. Interested Directors. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers or have a
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financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the Board of Directors or committee thereof which authorizes the contract or
transaction, or solely because the director or officer's vote is counted for
such purpose if (i) the material facts as to the director or officer's
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
the director or officer's relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified by the
Board of Directors, a committee thereof or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be chosen
by the Board of Directors and shall be a President, a Secretary and a Treasurer.
The
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Board of Directors, in its discretion, also may choose a Chief Executive
Officer, Chairman of the Board of Directors (who must be a director) and one or
more Vice Presidents, Assistant Secretaries, Assistant Treasurers and other
officers. Any number of offices may be held by the same person, unless otherwise
prohibited by law or the Certificate of Incorporation. The officers of the
Corporation need not be stockholders of the Corporation nor, except in the case
of the Chairman of the Board of Directors, need such officers be directors of
the Corporation.
Section 2. Election. The Board of Directors, at its first meeting
held after each Annual Meeting of Stockholders, shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier death,
resignation or removal. Any officer elected by the Board of Directors may be
removed at any time by the affirmative vote of the Board of Directors. Any
vacancy occurring in any office of the Corporation may be filled only by, or at
the direction of, the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the Chief Executive Officer (if there be
one), the President or any Vice President or any other officer authorized to do
so by the Board
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of Directors and any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may deem advisable to vote
in person or by proxy at any meeting of security holders of any corporation in
which the Corporation may own securities and at any such meeting shall possess
and may exercise any and all rights and power incident to the ownership of such
securities and which, as the owner thereof, the Corporation might have exercised
and possessed if present. The Board of Directors may, by resolution, from time
to time confer like powers upon any other person or persons.
Section 4. Chairman of the Board of Directors; Chief Executive
Officer. The Chairman of the Board of Directors (if there be one) shall preside
at all meetings of the stockholders and of the Board of Directors. Except where
by law the signature of the President is required, each of the Chairman of the
Board of Directors (if there be one) and the Chief Executive Officer (if there
be one) shall possess the same power as the President to sign all contracts,
certificates and other instruments of the Corporation which may be authorized by
the Board of Directors. During the absence or disability of the President, the
Chairman of the Board of Directors (if there be one) or the Chief Executive
Officer (if there be one), as the Board of Directors shall determine, shall
exercise all the powers and discharge all the duties of the President. The
Chairman of the Board of Directors (if there be one) and the Chief Executive
Officer (if there be one) shall also perform such other duties and
17
<PAGE>
may exercise such other powers as may from time to time be assigned by these
By-Laws or by the Board of Directors.
Section 5. President. The President shall, subject to the control of
the Board of Directors and, if there be one, the Chief Executive Officer, have
general supervision of the business of the Corporation and shall see that all
orders and resolutions of the Board of Directors are carried into effect. The
President shall execute all bonds, mortgages, contracts and other instruments of
the Corporation requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except that the other officers of the Corporation may sign and execute documents
when so authorized by these By-Laws, the Board of Directors or the President. In
the absence or disability of the Chairman of the Board of Directors, or if there
be none, the President shall preside at all meetings of the stockholders and the
Board of Directors. The President shall also perform such other duties and may
exercise such other powers as may from time to time be assigned to such officer
by these By-Laws or by the Board of Directors or the Chief Executive Officer.
Section 6. Vice Presidents. At the request of the President or in
the President's absence or in the event of the President's inability or refusal
to act (and if there be no Chief Executive Officer or Chairman of the Board of
Directors able and willing to act), the Vice President, or the Vice Presidents
if there is more than one (in the order designated by the Board of Directors),
shall perform the duties of the
18
<PAGE>
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President. Each Vice President shall perform such
other duties and have such other powers as the Board of Directors or the Chief
Executive Officer or President from time to time may prescribe. If there be no
Chairman of the Board of Directors, Chief Executive Officer or Vice President,
the Board of Directors shall designate the officer of the Corporation who, in
the absence of the President or in the event of the inability or refusal of the
President to act, shall perform the duties of the President, and when so acting,
shall have all the powers of and be subject to all the restrictions upon the
President.
Section 7. Secretary. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for committees of the Board of
Directors when required. The Secretary shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors, the Chairman of the Board of Directors (if there be one), the
Chief Executive Officer (if there be one) or the President, under whose
supervision the Secretary shall be. If the Secretary shall be unable or shall
refuse to cause to be given notice of all meetings of the stockholders and
special meetings of the Board of Directors, and if there be no Assistant
Secretary, then either the Board of Directors, the Chief Executive Officer (if
there be one) or the President
19
<PAGE>
may choose another officer to cause such notice to be given. The Secretary shall
have custody of the seal of the Corporation, and the Secretary or any Assistant
Secretary (if there be one) shall have authority to affix the same to any
instrument requiring it and when so affixed, it may be attested by the signature
of the Secretary or by the signature of any such Assistant Secretary. The Board
of Directors may give general authority to any other officer to affix the seal
of the Corporation and to attest to the affixing by such officer's signature.
The Secretary shall see that all books, reports, statements, certificates and
other documents and records required by law to be kept or filed are properly
kept or filed, as the case may be.
Section 8. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Chief Executive
Officer (if there be one), the President or the Board of Directors. The
Treasurer shall disburse the funds of the Corporation as may be ordered by the
Chief Executive Officer (if there be one), the President or the Board of
Directors, taking proper vouchers for such disbursements, and shall render to
the Chief Executive Officer (if there be one), the President and the Board of
Directors, at its regular meetings, or when the Board of Directors so requires,
an account of all transactions as Treasurer and of the financial condition of
the Corporation. If required by the Board of Directors, the Treasurer
20
<PAGE>
shall give the Corporation a bond in such sum and with such surety or sureties
as shall be satisfactory to the Board of Directors for the faithful performance
of the duties of the office of the Treasurer and for the restoration to the
Corporation, in case of the Treasurer's death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in the Treasurer's possession or under the Treasurer's control
belonging to the Corporation.
Section 9. Assistant Secretaries. Assistant Secretaries, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the Chief Executive Officer (if
there be one), the President, any Vice President (if there be one) or the
Secretary, and in the absence of the Secretary or in the event of the
Secretary's disability or refusal to act, shall perform the duties of the
Secretary, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Secretary.
Section 10. Assistant Treasurers. Assistant Treasurers, if there be
any, shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the Chief Executive Officer (if
there be one), the President, any Vice President (if there be one) or the
Treasurer, and in the absence of the Treasurer or in the event of the
Treasurer's disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of Directors,
an Assistant Treasurer shall give the Corporation a bond in such
21
<PAGE>
sum and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of the office of Assistant
Treasurer and for the restoration to the Corporation, in case of the Assistant
Treasurer's death, resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in the Assistant
Treasurer's possession or under the Assistant Treasurer's control belonging to
the Corporation.
Section 11. Other Officers. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number of
shares owned by such stockholder in the Corporation.
Section 2. Signatures. Any or all of the signatures on a certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or
22
<PAGE>
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if such
person were such officer, transfer agent or registrar at the date of issue.
Section 3. Lost Certificates. The Board of Directors may direct a
new certificate to be issued in place of any certificate theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or the owner's legal representative, to advertise the same in such
manner as the Board of Directors shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed or the issuance of such new certificate.
Section 4. Transfers. Stock of the Corporation shall be transferable
in the manner prescribed by law and in these By-Laws. Transfers of stock shall
be made on the books of the Corporation only by the person named in the
certificate or by such person's attorney lawfully constituted in writing and
upon the surrender of the certificate therefor, which shall be cancelled before
a new certificate shall be
23
<PAGE>
issued. No transfer of stock shall be valid as against the Corporation for any
purpose until it shall have been entered in the stock records of the Corporation
by an entry showing from and to whom transferred.
Section 5. Record Date.
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall not be more
than sixty nor less than ten days before the date of such meeting. If no record
date is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the
24
<PAGE>
Board of Directors may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted, and which
record date shall be not more than sixty days prior to such action. If no record
date is fixed, the record date for determining stockholders for any such purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
Section 6. Record Owners. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise required by
law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail or by a
nationally recognized overnight delivery service, addressed to such director,
member of a committee or stockholder, at such person's address as it appears on
the records of the
25
<PAGE>
Corporation, with postage thereon prepaid if by mail, and such notice shall be
deemed to be given at the time when the same shall be deposited in the United
States mail or if applicable, entrusted to such nationally recognized overnight
delivery service. Written notice may also be given personally or by telegram,
telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by
law, the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed, by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent thereto. Attendance of
a person at a meeting, present in person or represented by proxy, shall
constitute a waiver of notice of such meeting, except where the person attends
the meeting for the express purpose of objecting at the beginning of the meeting
to the transaction of any business because the meeting is not lawfully called or
convened.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, subject to the requirements of the General Corporation Law of the
State of Delaware and the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special meeting
of the Board of Directors (or any action by written consent in lieu thereof in
accordance with Section 5 of Article III hereof), and may be paid in cash, or in
property or shares of capital
26
<PAGE>
stock, notes or other evidence of indebtedness, of the Corporation or any other
person or entity. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, deems proper
as a reserve or reserves to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware." The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
27
<PAGE>
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings other
than Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall 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 such person is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director or officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person 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 such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the
28
<PAGE>
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that such person's conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or
in the Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director or officer of the Corporation, or is
or was a director or officer of the Corporation serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Corporation;
except that no indemnification shall be made pursuant to this Section 2 in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
29
<PAGE>
Section 3. Authorization of Indemnification. Any indemnification
under this Article VIII (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director or officer is proper in the circumstances
because such person has met the applicable standard of conduct set forth in
Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (i) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (ii) by a committee of such directors designated by a
majority vote of such directors, even though less than a quorum, or (iii) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion or (iv) by the stockholders. Such
determination shall be made, with respect to former directors and officers, by
any person or persons having the authority to act on the matter on behalf of the
Corporation. To the extent, however, that a present or former director or
officer of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding described above, or in defense of any
claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith, without the necessity of authorization in the
specific case.
30
<PAGE>
Section 4. Good Faith Defined. For purposes of any determination
under Section 3 of this Article VIII, a person shall be deemed to have acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Corporation, or, with respect to any
criminal action or proceeding, to have had no reasonable cause to believe such
person's conduct was unlawful, if such person's action is based on the records
or books of account of the Corporation or another enterprise, or on information
supplied to such person by the officers of the Corporation or another enterprise
in the course of their duties, or on the advice of legal counsel for the
Corporation or another enterprise or on information or records given or reports
made to the Corporation or another enterprise by an independent certified public
accountant or by an appraiser or other expert selected with reasonable care by
the Corporation or another enterprise. The term "another enterprise" as used in
this Section 4 shall mean any other corporation or any partnership, joint
venture, trust, employee benefit plan or other enterprise of which such person
is or was serving at the request of the Corporation as a director, officer,
employee or agent. The provisions of this Section 4 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth in Section 1 or
2 of this Article VIII, as the case may be.
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<PAGE>
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to the Court of Chancery in the State of Delaware for
indemnification to the extent otherwise permissible under Sections 1 and 2 of
this Article VIII. The basis of such indemnification by a court shall be a
determination by such court that indemnification of the director or officer is
proper in the circumstances because such person has met the applicable standards
of conduct set forth in Section 1 or 2 of this Article VIII, as the case may be.
Neither a contrary determination in the specific case under Section 3 of this
Article VIII nor the absence of any determination thereunder shall be a defense
to such application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 5 shall be given to the
Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director or officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by a
director or officer in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be
32
<PAGE>
determined that such person is not entitled to be indemnified by the Corporation
as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by or granted
pursuant to this Article VIII shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under the Certificate of Incorporation, any By-Law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office, it being the policy of the Corporation that indemnification of the
persons specified in Sections 1 and 2 of this Article VIII shall be made to the
fullest extent permitted by law. The provisions of this Article VIII shall not
be deemed to preclude the indemnification of any person who is not specified in
Section 1 or 2 of this Article VIII but whom the Corporation has the power or
obligation to indemnify under the provisions of the General Corporation Law of
the State of Delaware, or otherwise.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against any liability asserted against such person and
incurred by such person in any such capaci-
33
<PAGE>
ty, or arising out of such person's status as such, whether or not the
Corporation would have the power or the obligation to indemnify such person
against such liability under the provisions of this Article VIII.
Section 9. Certain Definitions. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer of
such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued. For
purposes of this Article VIII, references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director or officer with
respect to an employee benefit plan, its participants or beneficiaries; and a
person who acted in good faith and in a manner such person reasonably believed
to
34
<PAGE>
be in the interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this Article VIII.
Section 10. Survival of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this Article VIII shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.
Section 11. Limitation on Indemnification. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5 of this
Article VIII), the Corporation shall not be obligated to indemnify or to advance
expenses to any director or officer 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 of the Corporation.
Section 12. Indemnification of Employees and Agents. 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 VIII to directors and officers of the Corporation.
35
<PAGE>
ARTICLE IX
AMENDMENTS
Section 1. Amendments. Subject to the voting requirements set forth
in the Certificate of Incorporation, these By-Laws may be altered, amended or
repealed, in whole or in part, or new By-Laws may be adopted by the stockholders
or by the Board of Directors.
Section 2. Entire Board of Directors. As used in this Article IX and
in these By-Laws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.
* * *
36
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PP
EXHIBIT 4.1
[LOGO]
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEE REVERSE FOR CERTAIN DEFINITIONS
COMMON STOCK
PAR VALUE $.01 PER SHARE
CUSIP 739421 10 5
This Certifies That
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF
PRAECIS PHARMACEUTICALS INCORPORATED
(HEREINAFTER CALLED THE "CORPORATION") TRANSFERABLE ON THE BOOKS OF THE
CORPORATION BY SAID OWNER IN PERSON OR BY DULY AUTHORIZED ATTORNEY, UPON
SURRENDER OF THIS CERTIFICATE PROPERLY ENDORSED. THE CORPORATION WILL FURNISH
WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS, A STATEMENT OF THE POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL, OR OTHER
SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS. THIS CERTIFICATE
AND THE SHARES REPRESENTED HEREBY ARE ISSUED AND SHALL BE HELD SUBJECT TO ALL
THE PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND ALL AMENDMENTS THERETO,
COPIES OF WHICH ARE ON FILE AT THE OFFICE OF THE TRANSFER AGENT, AND THE HOLDER
HEREOF, BY ACCEPTANCE OF THIS CERTIFICATE, CONSENTS TO AND AGREES TO BE BOUND BY
ALL OF SAID PROVISIONS. THIS CERTIFICATE IS NOT VALID UNLESS COUNTERSIGNED AND
REGISTERED BY THE TRANSFER AGENT AND REGISTRAR.
WITNESS, THE FACSIMILE SEAL OF THE CORPORATION AND BY FACSIMILE THE
SIGNATURES OF ITS DULY AUTHORIZED OFFICERS.
Dated:
/s/ Kevin F. McLaughlin /s/ Malcolm L. Gefter
SECRETARY PRESIDENT
Countersigned and Registered:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, NEW YORK)
Transfer Agent
and Registrar
By:
Authorized Signature
<PAGE>
PRAECIS PHARMACEUTICALS INCORPORATED
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT- Custodian
----------------- -------------------
(Cust) (Minor)
under Uniform Gifts to Minors Act
Act
-------------------
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received ___________________________________________ hereby sell,
assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the capital stock represented by the within certificate, and do hereby
irrevocably constitute and appoint
________________________________________________________________________________
______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ________________________________________________________________________
_________________________________________________________________
NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the certificate in every particular, without alteration
or enlargement or any change whatever.
Signature(s) Guaranteed:
-----------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCK-BROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR
DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO
THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
<PAGE>
EXHIBIT 4.2
THIS WARRANT AND SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE 1933 ACT).
WARRANT AGREEMENT
To Purchase Shares of the Series A Convertible Preferred Stock of
PRAECIS PHARMACEUTICALS INCORPORATED (formerly
Pharmaceutical Peptides, Inc.)
Dated as of March 29, 1995 (the "Effective Date")
Re-Issued as of August 12, 1998
WHEREAS, PRAECIS PHARMACEUTICALS INCORPORATED (formerly known as
Pharmaceutical Peptides, Inc.) a Delaware corporation (the "Company"), has
entered into a Master Lease Agreement dated as of February 28, 1995, Equipment
Schedules No. VL-1 and VL-2, and related Schedules (collectively the "Leases")
with Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, in consideration for such leases, the Company entered into a
Warrant Agreement dated as of March 29, 1995 (the "Original Warrant Agreement"),
whereby the Company granted the Warrantholder the right to purchase 14,925
shares of its Series A Convertible Preferred Stock; and
WHEREAS, pursuant to and in accordance with the Original Warrant
Agreement, the Warrantholder has transferred to Gregory Stento, effective as of
August 12, 1998, the Warrantholder's rights under the Original Warrant Agreement
with respect to the purchase of 1,703 shares of the Company's Series A
Convertible Preferred Stock (the "Warrant Transfer"); and
WHEREAS, the Company and the Warrantholder acknowledge the Warrant
Transfer and, accordingly, the Company is reissuing, as of August 12, 1998, the
Warrant provided for in the Original Warrant Agreement, and the Company and the
Warrantholder are entering into this Warrant Agreement, to reflect the Warrant
Transfer and the Warrantholder's right to purchase 13,222 shares of Series A
Convertible Preferred Stock as set forth herein;
NOW THEREFORE, in consideration of the foregoing, and the mutual covenants
and agreements contained herein, the Company and Warrantholder agree as follows:
<PAGE>
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 13,222 fully paid and
non-assessable shares of the Company's Series A Convertible Preferred Stock, par
value $.01 per share ("Preferred Stock") at a purchase price of $10.085 per
share (the "Exercise Price"). The number and purchase price of such shares are
subject to adjustment as provided in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period commencing
on the Effective Date and ending on the later of (i) the date ten (10) years
after the Effective Date, or (ii) the date two (2) years from the effective date
of the Company's initial public offering.
In the event the Company converts all of its shares of Preferred Stock
into Common Stock (the "Preferred Conversion" pursuant to Section (4)(f) of
Article Fifth of the Company's Amended and Restated Certificate of Incorporation
filed with the Secretary of State of the State of Delaware on April 30, 1998
(hereinafter the "Certificate"), then notwithstanding any other provision hereof
this Warrant to purchase shares of Preferred Stock shall automatically convert
to a Warrant to purchase a number of shares of Common Stock of the Company, par
value $.01 per share ("Common Stock") equal to the number of shares of Common
Stock into which the number of shares of Preferred Stock for which this Warrant
was exercisable as of immediately prior to the Preferred Conversion was
convertible as of such time, and from and after such conversion of this Warrant
the Exercise Price per share of Common Stock shall equal the Conversion Price
(as defined in the Certificate) for the Preferred Stock, and the number and
purchase price of such shares of Common Stock shall be subject to adjustment in
accordance with Section 8 herein. In the event of such conversion, all
references to "Preferred" Stock herein shall be deemed to be references to
"Common" Stock.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
Acknowledgment of Exercise in the form attached hereto as Exhibit II indicating
the number of shares which remain subject to future purchases, if any.
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In the event of an initial public offering, and if specifically requested by the
Underwriter(s), Warrantholder will agree to lockup provisions equivalent to but
not to exceed those required of the other preferred shareholders.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock as to which the
Warrants are being exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Common Stock.
B = the Exercise Price.
As used herein, current fair market value of Common Stock shall mean with
respect to each share of Common Stock:
(i) if the exercise is in connection with an initial public offering, and
if the Company's Registration Statement relating to such public offering
has been declared effective by the Securities and Exchange Commission (the
"SEC"), then the initial "Price to Public" specified in the final
prospectus with respect to the offering;
(ii) if this Warrant is exercised after, and not in connection with the
Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value shall
be deemed to be the average of the closing prices over a twenty-one
(21) day period ending three days before the day the current fair
market value of the securities is being determined; or
(b) if actively traded over-the-counter, the fair market value shall
be deemed to be the average of the closing bid and asked prices
quoted on the NASDAQ system (or similar system) over the twenty-one
(21) day period ending three days before the day the current fair
market value of the securities is being determined;
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<PAGE>
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market,
the current fair market value of Common Stock shall be the highest price
per share which the Company could obtain from a willing buyer (not a
current employee or director) for shares of Common Stock sold by the
Company, from authorized but unissued shares, as determined in good faith
by its Board of Directors, unless the Company shall become subject to a
merger, acquisition or other consolidation pursuant to which the Company
is not the surviving party, in which case the fair market value of Common
Stock shall be deemed to be the value received by the holders of the
Company's Preferred Stock on a common equivalent basis pursuant to such
merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
1933 Act, as then in effect, or any similar Federal statute then enforced, or
any state securities law, required by reason of any transfer involved in such
conversion), or listing on any domestic securities exchange, before such shares
may be issued upon conversion, the Company will, at its expense and as
expeditiously as possible, use its reasonable best efforts to cause such shares
to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
5. NO FRACTIONAL SHARE OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
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<PAGE>
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization reclassifying or otherwise altering shares of Preferred Stock
(other than a combination, reclassification, exchange or subdivision of shares
otherwise provided for herein), or a merger or consolidation of the Company with
or into another corporation when the Company is not the surviving corporation,
or the sale of all or substantially all of the Company's properties and assets
to any other person (hereinafter referred to as a "Merger Event"), then, as a
part of such Merger Event, lawful provision shall be made so that the
Warrantholder shall thereafter be entitled to receive, upon exercise of the
Warrant, the number of shares of preferred stock or other securities of the
successor corporation resulting from such Merger Event, equivalent in value to
that which would have been issuable if Warrantholder had exercised this Warrant
immediately prior to the Merger Event. In any such case, appropriate adjustment
(as determined in good faith by the Company's Board of Directors) shall be made
in the application of the provisions of this Warrant Agreement with respect to
the rights and interest of the Warrantholder after the Merger Event to the end
that the provisions of this Warrant Agreement (including adjustments of the
Exercise Price and number of shares of Preferred Stock purchasable) shall be
applicable to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall issue any shares of
Preferred Stock by means of a dividend or other distribution on the Preferred
Stock (except any distribution specifically provided for in the foregoing
subsections (a) or (b)), then the Exercise Price shall be adjusted, from and
after the record date of such dividend or distribution, to that price determined
by
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<PAGE>
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction (i) the numerator of which shall be the total number of shares of
Preferred Stock outstanding immediately prior to such dividend or distribution,
and (ii) the denominator of which shall be the total number shares of Preferred
Stock outstanding immediately after such dividend or distribution. The
Warrantholder shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Right to Purchase Additional Stock. If, the Warrantholder's total cost
of equipment leased pursuant to Equipment Schedule VL-1 and Equipment Schedule
VL-2/Part I under the Leases exceeds $1,500,000.00, Warrantholder shall have the
right to purchase from the Company, upon the terms and subject to the conditions
herein at the Exercise Price (adjusted as set forth herein), an additional
number of shares, which number shall be determined by (i) multiplying the amount
by which the Warrantholder's total equipment cost exceeds $1,500,000.00 by 9%,
and (ii) dividing the product thereof by the Exercise Price per share referenced
above.
If, the Warrantholder's total cost of equipment leased pursuant to
Equipment Schedule VL-2/Part II under the Leases exceeds $1,000,000.00,
Warrantholder shall have the right to purchase from the Company, at the Exercise
Price (adjusted as set forth herein), an additional number of shares, which
number shall be determined by (i) multiplying the amount by which the
Warrantholder's total equipment cost exceeds $1,000,000.00 by 3%, and (ii)
dividing the product thereof by the Exercise Price per share referenced above.
(f) Antidilution Rights. A true and correct copy of the Certificate, as
amended through the Re-Issue Date, is attached hereto as Annex A. The Company
shall promptly provide the Warrantholder with any restatement, amendment,
modification or waiver of the Certificate.
(g) Notice of Adjustments. If: (i) the Company shall declare any dividend
or distribution upon its Preferred Stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; or (iv) there shall be any voluntary or involuntary dissolution,
liquidation or winding up of the Company; then, in connection with each such
event, the Company shall send to the Warrantholder: (A) at least twenty (20)
days' prior written notice of the date on which the books of the Company shall
close or a record shall be taken for such dividend, distribution, subscription
rights (specifying the date on which the holders of Preferred Stock shall be
entitled thereto) or for determining rights to vote in respect of such Merger
Event, dissolution, liquidation or winding up; and (B) in the case of any such
Merger Event, dissolution, liquidation or winding up, at least twenty (20) days'
prior written notice of the date when the same shall take place (and specifying
the date on which the holders of Preferred Stock shall be entitled to exchange
their Preferred Stock for securities or other property deliverable upon such
Merger Event, dissolution, liquidation or winding up). In the case
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<PAGE>
of a public offering, the Company shall give Warrantholder at least twenty (20)
days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring an adjustment (if any adjustment is required), (ii) the amount
of the adjustment (if any adjustment is required), (iii) the method by which
such adjustment was calculated (if any adjustment is required), (iv) the
Exercise Price after giving effect to such adjustment (if any adjustment is
required), and (v) the number of shares subject to purchase hereunder after
giving effect to such adjustment (if any adjustment is required), and shall be
given by first class mail, postage prepaid, addressed to the Warrantholder, at
the address as shown on the books of the Company.
(h) Timely Notice. Failure to timely provide such notice required by
subsection (g) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been (or, in the case of Preferred
Stock issuable pursuant to Section 8(e), will be) duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter, as heretofore amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant shall be made without
charge to the Warrantholder for any issuance tax in respect thereof, or other
cost incurred by the Company in connection with such exercise and the related
issuance of shares of Preferred Stock. The Company shall not be required to pay
any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
7
<PAGE>
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act if such Regulation is being relied upon, which filing will
be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition as of the
Effective Date:
(i) The authorized capital of the Company consists of (A) 3,000,000 shares
of Common Stock, of which 417,044 shares are issued and outstanding, and the
Company has commitments to issue an additional 3,472 shares and (B) 2,000,000
shares of Preferred Stock, of which 1,104,866 shares are issued and outstanding
and are currently convertible into 1,104,866 shares of Common Stock at $10.085
per share.
(ii) The Company has reserved (A) 450,000 shares of Common Stock for
issuance under its 1995 Stock Plan, under which 389,206 options are outstanding
at an average price of $1.00 per share. There are no other options, warrants,
conversion privileges or other rights presently outstanding to purchase or
otherwise acquire any authorized but unissued shares of the Company's capital
stock or other securities of the Company.
(iii) Except as set forth in Section 5 of the Company's Amended
Certificate of Designation, no shareholder of the Company has preemptive rights
to purchase new issuances of the Company's capital stock pursuant to the
Company's Certificate of Incorporation.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Commitments to Register Securities. As of the Effective Date, except
as set forth in the Stockholders Agreement dated as of December 23, 1993, and
supplemented by Supplement Number 1, dated as of March 1, 1994, the Company is
not, pursuant to the terms of any other agreement currently in existence, under
any obligation to register under the 1933 Act any of its presently outstanding
securities or any of its securities which may hereafter be issued.
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<PAGE>
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof and assuming no circumstances at the time
of the exercise of this Warrant which would render unavailable the exemption
referred to in clause (i) of this subparagraph (g), the issuance of the
Preferred Stock upon exercise of this Warrant will constitute a transaction
exempt from (i) the registration requirements of Section 5 of the 1933 Act, in
reliance upon Section 4(2) thereof, and (ii) the qualification requirements of
the Illinois Securities Law, in reliance upon Section 4. c. thereof, and of the
Massachusetts Uniform Securities Act, in reliance upon Section 402(b)(8).
(h) Compliance with Rule 144. If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, as amended (the "1934 Act") or a registration
statement pursuant to the requirements of the 1933 Act, at the written request
of the Warrantholder, who proposes to sell Preferred Stock issuable upon the
exercise of the Warrant in compliance with Rule 144 promulgated by the SEC, the
Company shall furnish to the Warrantholder, within ten days after receipt of
such request, a written statement confirming the Company's compliance with the
filing requirements of the SEC as set forth in such Rule, as such Rule may be
amended from time to time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDERS.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock represented
by this Warrant Agreement and the Preferred Stock issuable upon exercise of the
Warrantholder's rights contained herein will be acquired for investment and not
with a view to the sale or distribution of any part thereof, and the
Warrantholder has no present intention of selling or engaging in any public
distribution of the same except pursuant to a registration or exemption from the
registration requirements of Section 5 of the 1933 Act.
(b) Private Issue. The Warrantholder understands (i) that the issuance of
this Warrant and the Preferred Stock issuable upon exercise of this Warrant is
not registered under the 1933 Act or qualified under applicable state securities
laws on the ground that the issuances are or will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10. In addition, the Warrantholder consents to the
placement of a legend on any certificate or other document evidencing this
Warrant, the Preferred Stock issuable upon exercise of this Warrant or any
Common Stock issuable upon conversion of the Preferred Stock, such legend
stating that such securities have not been registered under the 1933 Act or
under any state securities or "blue sky" laws and setting forth or referring to
the restrictions on transferability and sale thereof, including the restrictions
set forth herein, until such time as such restrictions are not longer
applicable.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise
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<PAGE>
of such rights unless and until (i) it shall have notified the Company of the
proposed disposition, and (ii) if requested by the Company, it shall have
furnished the Company with an opinion of counsel (which counsel may either be
inside or outside counsel to the Warrantholder) satisfactory to the Company and
its counsel to the effect that (A) appropriate action necessary for compliance
with the 1933 Act has been taken, or (B) an exemption from the registration
requirements of the 1933 Act is available. Notwithstanding the foregoing, the
restrictions imposed upon the transferability of any of its rights to acquire
Preferred Stock or Preferred Stock issuable on the exercise of such rights do
not apply to transfers from the beneficial owner of any of the aforementioned
securities to its nominee or from such nominee to its beneficial owner, and
shall terminate as to any particular share of Preferred Stock when (1) such
security shall have been effectively registered under the 1933 Act and sold by
the holder thereof in accordance with such registration or (2) such security
shall have been sold without registration in compliance with Rule 144 under the
1933 Act, or (3) a letter shall have been issued to the Warrantholder at its
request by the staff of the SEC or a ruling shall have been issued to the
Warrantholder at its request by the SEC stating that no action shall be
recommended by such staff or taken by the SEC, as the case may be, if such
security is transferred without registration under the 1933 Act in accordance
with the conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the SEC pursuant to Section 12 of the 1933 Act,
or file reports pursuant to Section 15(d), of the 1934 Act, or if a registration
statement covering the securities under the 1933 Act is not in effect when it
desires to sell (i) the rights to purchase Preferred Stock pursuant to this
Warrant Agreement, or (ii) the Preferred Stock issuable upon exercise of the
right to purchase, it may be required to hold such securities for an indefinite
period. The Warrantholder also understands that any sale of its rights as the
Warrantholder to purchase Preferred Stock or Preferred Stock which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
11. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed a total of three (3) transfers. The transfer shall be recorded
on the
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books of the Company upon receipt by the Company of a notice of transfer in the
form attached hereto as Exhibit III (the "Transfer Notice"), at its principal
offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer.
12. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement (except for
references to instruments dated after the Effective Date) shall be construed and
shall be given effect in all respects as if it had been executed and delivered
by the Company as of the Effective Date. This Warrant Agreement shall be binding
upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in counterparts,
each of which shall be deemed an original, but both of which together shall
constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, attention: James Labe, Venture
Leasing Director, cc: Legal Department, (and/or, if by facsimile, (847)
518-5465) and (ii) to the Company at 1 Hampshire Street, Cambridge,
Massachusetts 02139-1572, attention: President (and/or if by facsimile, (617)
494-8414) or at such other address as any such party may subsequently designate
by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where a party will not have an adequate remedy at law and where damages
will not be readily ascertainable. The Company expressly agrees that it shall
not oppose, on the grounds that on adequate remedy at law exists, an application
by the Warrantholder or any other person entitled to the benefit of this
Agreement requiring specific performance of any or all provisions hereof or
enjoining the Company from continuing to commit any such breach of this
Agreement.
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(g) No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms.
(h) Survival. The representations, warranties, covenants and conditions of
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by
a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the Company's authorization of the execution, delivery, and
performance by the Company of the Warrant Agreement. The Company shall also
supply such other documents as may be reasonably necessary to confirm the
Company's compliance with its obligation hereunder (subject to reasonable
confidentiality restrictions) as the Warrantholder may from time to time
reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
Company: PRAECIS PHARMACEUTICALS
INCORPORATED
By: /s/Malcolm L. Gefter
-------------------------------
Title: Chairman of the Board
-----------------------------
Warrantholder: COMDISCO, INC.
By: /s/John J. Vosicky
-------------------------------
Title: Executive Vice President and
----------------------------
Chief Financial Officer
---------------------------
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<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To: ___________________
(1) The undersigned Warrantholder hereby elects to purchase ____________
shares of the [Series A Convertible Preferred Stock] [Common Stock, if the
Warrant has been converted pursuant to Section 2 of the Warrant Agreement
referred to below] of PRAECIS PHARMACEUTICALS INCORPORATED (the
"Company"), pursuant to the terms of the Warrant Agreement originally
dated as of the 29th day of March, 1995, reissued as of August 12, 1998
(the "Warrant Agreement"), between the Company and the Warrantholder, and
tenders herewith payment of the purchase price for such shares in full,
together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the [Series A Convertible Preferred
Stock] [Common Stock] of the Company, the undersigned hereby confirms and
acknowledges the invest ment representations and warranties made in
Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
[Series A Convertible Preferred Stock] [Common Stock] in the name of the
undersigned or in such other name as is specified below.
- -----------------------------
(Name)
- -----------------------------
(Address)
Warrantholder: COMDISCO, INC.
By:__________________________
Title:_______________________
Date:________________________
13
<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned _______________________, hereby acknowledges receipt of
the "Notice of Exercise" from Comdisco, Inc., to purchase _____________ shares
of the [Series A Convertible Preferred Stock] [Common Stock] of PRAECIS
PHARMACEUTICALS INCORPORATED, pursuant to the terms of the Warrant Agreement,
and further acknowledges that ___________ shares remain subject to purchase
under the terms of the Warrant Agreement.
Company: PRAECIS PHARMACEUTICALS
INCORPORATED
By:_____________________________
Title:__________________________
Date:___________________________
14
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
- --------------------------------------------------------------------------------
(Please Print)
whose address is _______________________________________________________________
________________________________________________________________________________
Dated_______________________________________
Holder's Signature__________________________
Holder's Address____________________________
________________________________________________________________________________
Signature Guaranteed:___________________________________________________________
NOTE: The signature to this Transfer Notice must correspond with
the name as it appears on the face of the Warrant
Agreement, without alteration or enlargement or any change
whatever. Officers of corporations and those acting in a
fiduciary or other representative capacity should file
proper evidence of authority to assign the foregoing
Warrant Agreement.
15
<PAGE>
EXHIBIT 4.3
THIS WARRANT AND SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT"). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE 1933 ACT).
WARRANT AGREEMENT
To Purchase Shares of the Series A Convertible Preferred Stock of
PRAECIS PHARMACEUTICALS INCORPORATED (formerly
Pharmaceutical Peptides, Inc.)
Dated as of March 29, 1995 (the "Effective Date")
Re-Issued as of August 12, 1998 (the "Re-Issue Date")
WHEREAS, PRAECIS PHARMACEUTICALS INCORPORATED (formerly known as
Pharmaceutical Peptides, Inc.), a Delaware corporation (the "Company'), entered
into a Warrant Agreement dated as of March 29, 1995 (the "Original Warrant
Agreement") with Comdisco, Inc. (the "Original Warrantholder"), whereby the
Company granted the Original Warrantholder the right to purchase 14,925 shares
of the Company's Series A Convertible Preferred Stock; and
WHEREAS, pursuant to and in accordance with the Original Warrant
Agreement, the Original Warrantholder has transferred to Gregory Stento (the
"Warrantholder"), effective as of August 12, 1998, the Original Warrantholder's
rights under the Original Warrant Agreement with respect to the purchase of
1,703 shares of the Company's Series A Convertible Preferred Stock (the "Warrant
Transfer"); and
WHEREAS, the Company and the Warrantholder acknowledge the Warrant
Transfer and, accordingly, are entering into this Warrant Agreement to reflect
the Warrant Transfer and the Warrantholder's right to purchase 1,703 shares of
Series A Convertible Preferred Stock as set forth herein;
NOW, THEREFORE, in consideration of the foregoing, and the mutual
covenants and agreements contained herein, the Company and Warrantholder agree
as follows:
<PAGE>
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 1,703 fully paid and non-assessable
shares of the Company's Series A Convertible Preferred Stock, par value $.01 per
share ("Preferred Stock") at a purchase price of $10.085 per share (the
"Exercise Price"). The number and purchase price of such shares are subject to
adjustment as provided in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period commencing
on the Effective Date and ending on the later of (i) the date ten (10) years
after the Effective Date, or (ii) the date two (2) years from the effective date
of the Company's initial public offering.
In the event the Company converts all of its shares of Preferred Stock
into Common Stock (the "Preferred Conversion" pursuant to Section (4)(f) of
Article Fifth of the Company's Amended and Restated Certificate of Incorporation
filed with the Secretary of State of the State of Delaware on April 30, 1998
(hereinafter the "Certificate"), then notwithstanding any other provision hereof
this Warrant to purchase shares of Preferred Stock shall automatically convert
to a Warrant to purchase a number of shares of Common Stock of the Company, par
value $.01 per share ("Common Stock") equal to the number of shares of Common
Stock into which the number of shares of Preferred Stock for which this Warrant
was exercisable as of immediately prior to the Preferred Conversion was
convertible as of such time, and from and after such conversion of this Warrant
the Exercise Price per share of Common Stock shall equal the Conversion Price
(as defined in the Certificate) for the Preferred Stock, and the number and
purchase price of such shares of Common Stock shall be subject to adjustment in
accordance with Section 8 herein. In the event of such conversion, all
references to "Preferred" Stock herein shall be deemed to be references to
"Common" Stock.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
Acknowledgment of Exercise in the form attached
2
<PAGE>
hereto as Exhibit II indicating the number of shares which remain subject to
future purchases, if any. In the event of an initial public offering, and if
specifically requested by the Underwriter(s), Warrantholder will agree to lockup
provisions equivalent to but not to exceed those required of the other preferred
shareholders.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock as to which the
Warrants are being exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Common Stock.
B = the Exercise Price.
As used herein, current fair market value of Common Stock shall mean with
respect to each share of Common Stock:
(i) if the exercise is in connection with an initial public offering, and
if the Company's Registration Statement relating to such public offering
has been declared effective by the Securities and Exchange Commission (the
"SEC"), then the initial "Price to Public" specified in the final
prospectus with respect to the offering;
(ii) if this Warrant is exercised after, and not in connection with the
Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value shall
be deemed to be the average of the closing prices over a twenty-one
(21) day period ending three days before the day the current fair
market value of the securities is being determined; or
(b) if actively traded over-the-counter, the fair market value shall
be deemed to be the average of the closing bid and asked prices
quoted on the NASDAQ system (or similar system) over the twenty-one
(21) day period ending three days before the day the current fair
market value of the securities is being determined;
3
<PAGE>
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market,
the current fair market value of Common Stock shall be the highest price
per share which the Company could obtain from a willing buyer (not a
current employee or director) for shares of Common Stock sold by the
Company, from authorized but unissued shares, as determined in good faith
by its Board of Directors, unless the Company shall become subject to a
merger, acquisition or other consolidation pursuant to which the Company
is not the surviving party, in which case the fair market value of Common
Stock shall be deemed to be the value received by the holders of the
Company's Preferred Stock on a common equivalent basis pursuant to such
merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
1933 Act, as then in effect, or any similar Federal statute then enforced, or
any state securities law, required by reason of any transfer involved in such
conversion), or listing on any domestic securities exchange, before such shares
may be issued upon conversion, the Company will, at its expense and as
expeditiously as possible, use its reasonable best efforts to cause such shares
to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
5. NO FRACTIONAL SHARE OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
4
<PAGE>
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization reclassifying or otherwise altering shares of Preferred Stock
(other than a combination, reclassification, exchange or subdivision of shares
otherwise provided for herein), or a merger or consolidation of the Company with
or into another corporation when the Company is not the surviving corporation,
or the sale of all or substantially all of the Company's properties and assets
to any other person (hereinafter referred to as a "Merger Event"), then, as a
part of such Merger Event, lawful provision shall be made so that the
Warrantholder shall thereafter be entitled to receive, upon exercise of the
Warrant, the number of shares of preferred stock or other securities of the
successor corporation resulting from such Merger Event, equivalent in value to
that which would have been issuable if Warrantholder had exercised this Warrant
immediately prior to the Merger Event. In any such case, appropriate adjustment
(as determined in good faith by the Company's Board of Directors) shall be made
in the application of the provisions of this Warrant Agreement with respect to
the rights and interest of the Warrantholder after the Merger Event to the end
that the provisions of this Warrant Agreement (including adjustments of the
Exercise Price and number of shares of Preferred Stock purchasable) shall be
applicable to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall issue any shares of
Preferred Stock by means of a dividend or other distribution on the Preferred
Stock (except any distribution specifically provided for in the foregoing
subsections (a) or (b)), then the Exercise Price shall be adjusted, from and
after the record date of such dividend or distribution, to that price determined
by
5
<PAGE>
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction (i) the numerator of which shall be the total number of shares of
Preferred Stock outstanding immediately prior to such dividend or distribution,
and (ii) the denominator of which shall be the total number shares of Preferred
Stock outstanding immediately after such dividend or distribution. The
Warrantholder shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Antidilution Rights. A true and correct copy of the Certificate, as
amended through the Re-Issue Date, is attached hereto as Annex A. The Company
shall promptly provide the Warrantholder with any restatement, amendment,
modification or waiver of the Certificate.
(f) Notice of Adjustments. If: (i) the Company shall declare any dividend
or distribution upon its Preferred Stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; or (iv) there shall be any voluntary or involuntary dissolution,
liquidation or winding up of the Company; then, in connection with each such
event, the Company shall send to the Warrantholder: (A) at least twenty (20)
days' prior written notice of the date on which the books of the Company shall
close or a record shall be taken for such dividend, distribution, subscription
rights (specifying the date on which the holders of Preferred Stock shall be
entitled thereto) or for determining rights to vote in respect of such Merger
Event, dissolution, liquidation or winding up; and (B) in the case of any such
Merger Event, dissolution, liquidation or winding up, at least twenty (20) days'
prior written notice of the date when the same shall take place (and specifying
the date on which the holders of Preferred Stock shall be entitled to exchange
their Preferred Stock for securities or other property deliverable upon such
Merger Event, dissolution, liquidation or winding up). In the case of a public
offering, the Company shall give Warrantholder at least twenty (20) days written
notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring an adjustment (if any adjustment is required), (ii) the amount
of the adjustment (if any adjustment is required), (iii) the method by which
such adjustment was calculated (if any adjustment is required), (iv) the
Exercise Price after giving effect to such adjustment (if any adjustment is
required), and (v) the number of shares subject to purchase hereunder after
giving effect to such adjustment (if any adjustment is required), and shall be
given by first class mail, postage prepaid, addressed to the Warrantholder, at
the address as shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required by
subsection (f) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice
6
<PAGE>
period shall begin on the date Warrantholder actually receives a written notice
containing all the information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been (or, in the case of Preferred
Stock issuable pursuant to Section 8(e), will be) duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter, as heretofore amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant shall be made without
charge to the Warrantholder for any issuance tax in respect thereof, or other
cost incurred by the Company in connection with such exercise and the related
issuance of shares of Preferred Stock. The Company shall not be required to pay
any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms.
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act if such Regulation is being relied upon, which filing will
be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition as of the
Effective Date:
7
<PAGE>
(i) The authorized capital of the Company consists of (A) 3,000,000 shares
of Common Stock, of which 417,044 shares are issued and outstanding, and the
Company has commitments to issue an additional 3,472 shares and (B) 2,000,000
shares of Preferred Stock, of which 1,104,866 shares are issued and outstanding
and are currently convertible into 1,104,866 shares of Common Stock at $10.085
per share.
(ii) The Company has reserved (A) 450,000 shares of Common Stock for
issuance under its 1995 Stock Plan, under which 389,206 options are outstanding
at an average price of $1.00 per share. There are no other options, warrants,
conversion privileges or other rights presently outstanding to purchase or
otherwise acquire any authorized but unissued shares of the Company's capital
stock or other securities of the Company.
(iii) Except as set forth in Section 5 of the Company's Amended
Certificate of Designation, no shareholder of the Company has preemptive rights
to purchase new issuances of the Company's capital stock pursuant to the
Company's Certificate of Incorporation.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Commitments to Register Securities. As of the Effective Date, except
as set forth in the Stockholders Agreement dated as of December 23, 1993, and
supplemented by Supplement Number 1, dated as of March 1, 1994, the Company is
not, pursuant to the terms of any other agreement currently in existence, under
any obligation to register under the 1933 Act any of its presently outstanding
securities or any of its securities which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof and assuming no circumstances at the time
of the exercise of this Warrant which would render unavailable the exemption
referred to in clause (i) of this subparagraph (g), the issuance of the
Preferred Stock upon exercise of this Warrant will constitute a transaction
exempt from (i) the registration requirements of Section 5 of the 1933 Act, in
reliance upon Section 4(2) thereof, and (ii) the qualification requirements of
the Illinois Securities Law, in reliance upon Section 4. c. thereof, and of the
Massachusetts Uniform Securities Act, in reliance upon Section 402(b)(8).
(h) Compliance with Rule 144. If the Company shall have filed a
registration statement pursuant to the requirements of Section 12 of the
Securities Exchange Act of 1934, as amended (the "1934 Act") or a registration
statement pursuant to the requirements of the 1933 Act, at the written request
of the Warrantholder, who proposes to sell Preferred Stock issuable upon the
exercise of the Warrant in compliance with Rule 144 promulgated by the SEC, the
Company shall furnish to the Warrantholder, within ten days after receipt of
such request, a written statement confirming the
8
<PAGE>
Company's compliance with the filing requirements of the SEC as set forth in
such Rule, as such Rule may be amended from time to time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDERS.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock represented
by this Warrant Agreement and the Preferred Stock issuable upon exercise of the
Warrantholder's rights contained herein will be acquired for investment and not
with a view to the sale or distribution of any part thereof, and the
Warrantholder has no present intention of selling or engaging in any public
distribution of the same except pursuant to a registration or exemption from the
registration requirements of Section 5 of the 1933 Act.
(b) Private Issue. The Warrantholder understands (i) that the issuance of
this Warrant and the Preferred Stock issuable upon exercise of this Warrant is
not registered under the 1933 Act or qualified under applicable state securities
laws on the ground that the issuances are or will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10. In addition, the Warrantholder consents to the
placement of a legend on any certificate or other document evidencing this
Warrant, the Preferred Stock issuable upon exercise of this Warrant or any
Common Stock issuable upon conversion of the Preferred Stock, such legend
stating that such securities have not been registered under the 1933 Act or
under any state securities or "blue sky" laws and setting forth or referring to
the restrictions on transferability and sale thereof, including the restrictions
set forth herein, until such time as such restrictions are not longer
applicable.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the SEC or a ruling
shall have been issued to the Warrantholder at its request by the SEC stating
that no action shall be
9
<PAGE>
recommended by such staff or taken by the SEC, as the case may be, if such
security is transferred without registration under the 1933 Act in accordance
with the conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the SEC pursuant to Section 12 of the 1933 Act,
or file reports pursuant to Section 15(d), of the 1934 Act, or if a registration
statement covering the securities under the 1933 Act is not in effect when it
desires to sell (i) the rights to purchase Preferred Stock pursuant to this
Warrant Agreement, or (ii) the Preferred Stock issuable upon exercise of the
right to purchase, it may be required to hold such securities for an indefinite
period. The Warrantholder also understands that any sale of its rights as the
Warrantholder to purchase Preferred Stock or Preferred Stock which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
11. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed a total of three (3) transfers. The transfer shall be recorded
on the books of the Company upon receipt by the Company of a notice of transfer
in the form attached hereto as Exhibit III (the "Transfer Notice"), at its
principal offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer.
12. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement (except for
references to instruments dated after the Effective Date) shall be construed and
shall be given effect in all respects as if it had been executed and delivered
by the Company as of the Effective Date. This Warrant Agreement shall be binding
upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
10
<PAGE>
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in counterparts,
each of which shall be deemed an original, but both of which together shall
constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at 49
Tanglewood Road, Wellesley, Massachusetts 02481, attention: Gregory Stento, and
(ii) to the Company at 1 Hampshire Street, Cambridge, Massachusetts 02139-1572,
attention: President (and/or if by facsimile, (617) 494-8414 or at such other
address as any such party may subsequently designate by written notice to the
other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where a party will not have an adequate remedy at law and where damages
will not be readily ascertainable. The Company expressly agrees that it shall
not oppose, on the grounds that on adequate remedy at law exists, an application
by the Warrantholder or any other person entitled to the benefit of this
Agreement requiring specific performance of any or all provisions hereof or
enjoining the Company from continuing to commit any such breach of this
Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms.
(h) Survival. The representations, warranties, covenants and conditions of
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by
a written instrument signed by the Company and by the Warrantholder.
11
<PAGE>
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the Company's authorization of the execution, delivery, and
performance by the Company of the Warrant Agreement. The Company shall also
supply such other documents as may be reasonably necessary to confirm the
Company's compliance with its obligation hereunder (subject to reasonable
confidentiality restrictions) as the Warrantholder may from time to time
reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
Company: PRAECIS PHARMACEUTICALS
INCORPORATED
By: /s/Malcolm L. Gefter
----------------------------------
Title: Chairman of the Board
-------------------------------
Warrantholder: Gregory Stento
By: /s/Gregory Stento
----------------------------------
Title:
--------------------------------
12
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To:____________________________
(1) The undersigned Warrantholder hereby elects to purchase ____________
shares of the [Series A Convertible Preferred Stock] [Common Stock, if the
Warrant has been converted pursuant to Section 2 of the Warrant Agreement
referred to below] of PRAECIS PHARMACEUTICALS INCORPORATED (the
"Company"), pursuant to the terms of the Warrant Agreement entered into as
of August 12, 1998 between the Com pany and the undersigned, as transferee
of the rights of Comdisco, Inc. ("Comdisco"), with respect to the purchase
of up to 1,703 of the Company's Series A Convertible Preferred Stock,
originally granted to Comdisco pursuant to the terms of the Warrant
Agreement originally dated as of the 29th day of March, 1995, reissued as
of August 12, 1998 (the "Warrant Agreement"), between the Company and
Gregory Stento, and tenders herewith payment of the purchase price for
such shares in full, together with all applica ble transfer taxes, if any.
(2) In exercising its rights to purchase the [Seris A Convertible Preferred
Stock] [Common Stock] of the Company, the undersigned hereby confirms and
acknowledges the invest ment representations and warranties made in
Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
[Series A Convertible Preferred Stock] [Common Stock] in the name of the
undersigned or in such other name as is specified below.
- -----------------------------
(Name)
- -----------------------------
(Address)
Warrantholder: GREGORY STENTO
By:__________________________
Title:_______________________
Date:________________________
13
<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned _____________________, hereby acknowledges receipt of the
"Notice of Exercise" from Gregory Stento, to purchase _________________ shares
of the [Series A Convertible Preferred Stock] [Common Stock] of PRAECIS
PHARMACEUTICALS INCORPORATED pursuant to the terms of the Warrant Agreement,
and further acknowledges that_________ shares remain subject to purchase under
the terms of the Warrant Agreement.
Company: PRAECIS PHARMACEUTICALS
INCORPORATED
By:___________________________________
Title:________________________________
Date:_________________________________
14
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
- --------------------------------------------------------------------------------
(Please Print)
whose address is _______________________________________________________________
________________________________________________________________________________
Dated_______________________________________
Holder's Signature__________________________
Holder's Address____________________________
________________________________________________________________________________
Signature Guaranteed:___________________________________________________________
NOTE: The signature to this Transfer Notice must correspond with
the name as it appears on the face of the Warrant
Agreement, without alteration or enlargement or any change
whatever. Officers of corporations and those acting in a
fiduciary or other representative capacity should file
proper evidence of authority to assign the foregoing
Warrant Agreement.
15
<PAGE>
EXHIBIT 4.4
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
<PAGE>
Company and the Holder (the "Purchase Agreement"). As used herein the term "this
Warrant" shall mean and 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, not withstanding 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 deliv-
2
<PAGE>
er to the Holder a new Warrant of like tenor, calling in the aggregate on
the face thereof for the number of 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 out
standing 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
3
<PAGE>
after such adjustment and a brief statement of the facts requiring such
adjustment and the computation thereof.
(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 ac-
4
<PAGE>
tion, 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) 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
5
<PAGE>
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.
Dated: May 13, 1997
PRAECIS PHARMACEUTICALS, INC.
By /s/ Malcolm L. Gefter
---------------------------------
Name: Malcolm L. Gefter
Title: Chairman of the Board,
Chief Executive
Officer and Treasurer
Attest:
/s/ Kevin F. McLaughlin
- --------------------------------
Name: Kevin F. McLaughlin
Title: Secretary
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 10.1
PRAECIS PHARMACEUTICALS INCORPORATED
FORM OF SECOND AMENDED AND RESTATED 1995 STOCK PLAN
1. PURPOSE. This Second 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
<PAGE>
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. If no Committee
has been appointed to administer the Plan, the
functions of the Committee specified in the Plan
shall be carried out by the Board, except that at any
time after a registration of any of the Company's
stock under the 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, the Committee 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
2
<PAGE>
other terms and conditions of Options
and Awards not inconsistent with the
Plan; and
(vii) interpret the Plan and prescribe and
rescind rules and regulations relating
to it.
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 deter
mine. 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.
3
<PAGE>
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 11,375,000, subject to adjustment as
provided in paragraph 13. Any such shares may be issued
pursuant to ISOs, Non-Qualified Options or Awards, so long
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 the close of business on 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
4
<PAGE>
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
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.
5
<PAGE>
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 provided in paragraphs 9 and 10, the term of each ISO
shall be the term set forth in the original instrument 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).
6
<PAGE>
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 other wise 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 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
7
<PAGE>
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 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,
in the sole discretion of the Committee at the time of the proposed
assignment or transfer, 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), or as the Committee, in
its sole discretion, shall otherwise permit. The Option shall be
exercisable during the lifetime of the optionee only by such optionee
or his guardian or legal representative, or by an assignee or
transferee if the Option has been assigned or transferred in compliance
with the immediately preceding sentence. 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
8
<PAGE>
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 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
9
<PAGE>
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 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 Com-
10
<PAGE>
pany, 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.
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
11
<PAGE>
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
(a) in United States dollars in cash or by check, (b) at the discretion
of the Committee, by delivery of shares of Common Stock (the value of
which for this purpose shall be determined by the Committee), (c) at
the discretion of the Committee, by delivery of the grantee's personal
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) subject to clauses (b) and (c), by
any combination of (a), (b) or (c) above. 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, as
determined by the Committee), 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 Company's 1995 Stock Plan
was originally adopted on January 5, 1995. The Plan as
currently in effect was adopted by the Board on February 2, 2000,
approved by the stockholders of the Company on February , 2000,
and shall be effective automatically upon consummation of the
Company's initial public offering. The Plan shall expire at the end
of the day on January 5, 2005 (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
12
<PAGE>
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.
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)
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<PAGE>
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
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,
14
<PAGE>
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.
(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
15
<PAGE>
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, 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 stock holder 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 other
wise 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.
16
<PAGE>
(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
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>
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
FORM OF
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 July 3, 2000.
"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 on an applicable Semiannual Grant Date an owner of 5%
or more of the outstanding capital stock of the Company or an Affiliated
Company, as determined under Section 424(d) 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
July 3, 2000, January 1, 2001, July 2, 2001 and December 31, 2001 and ending at
5 p.m. (Boston time) on each of December 31, 2000, July 1, 2001, December 30,
2001 and June 30, 2002, 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.
"Initial Notice Period" means the period beginning on the Effective Date and
ending on the 15th day thereafter.
2
<PAGE>
"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 July 3, 2000, January 1, 2001, July 2,
2001 and December 31, 2001.
"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, 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.
3
<PAGE>
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 Forty
Thousand (40,000) as of July 3, 2000, with an additional Forty Thousand
(40,000) shares available as of each of January 1, 2001, July 2, 2001 and
December 31, 2001, 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.
(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).
4
<PAGE>
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 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.
5
<PAGE>
(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 and amounts withheld from
compensation during the Exercise Period will be refunded.
(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. 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.
6
<PAGE>
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 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
With holding 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
execu-
7
<PAGE>
tion, 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 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 corpora-
8
<PAGE>
tion, 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.
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 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
9
<PAGE>
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 December 31, 2001.
The Plan shall expire on June 30, 2002, 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
compensation due 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 Express and including the
10
<PAGE>
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.
11
<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
11
<PAGE>
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'
12
<PAGE>
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
13
<PAGE>
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
14
<PAGE>
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-
15
<PAGE>
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
16
<PAGE>
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-
17
<PAGE>
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
18
<PAGE>
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.
19
<PAGE>
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
20
<PAGE>
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).
21
<PAGE>
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
22
<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,
23
<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
24
<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
25
<PAGE>
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
26
<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.
27
<PAGE>
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
28
<PAGE>
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
29
<PAGE>
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
30
<PAGE>
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.
31
<PAGE>
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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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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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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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
41
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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.
59
<PAGE>
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
60
<PAGE>
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.
61
<PAGE>
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
62
<PAGE>
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 TREATMENT HAS BEEN REQUESTED FOR CERTAIN
PORTIONS OF THIS DOCUMENT. SUCH PORTIONS HAVE BEEN
REDACTED AND MARKED WITH ASTERISKS (**). THE NON-
REDACTED VERSION OF THIS DOCUMENT HAS BEEN SENT TO
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
AN APPLICATION FOR CONFIDENTIAL TREATMENT.
LICENSE AGREEMENT
BY AND BETWEEN
SYNTHELABO
AND
PRAECIS PHARMACEUTICALS, INC.
May 13, 1997
<PAGE>
TABLE OF CONTENTS
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
i
<PAGE>
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
ii
<PAGE>
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
iii
<PAGE>
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
iv
<PAGE>
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
v
<PAGE>
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-Ease(TM) 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
2
<PAGE>
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
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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)
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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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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
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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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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 manufacturer to make such Licensed Product.
In the event that a Third Party manufacturer shall assume manufacturing
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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.
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
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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
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.
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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(TM)
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 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 commence-
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ment 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 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
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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 in all of the Territory Countries in
which such Licensed Product will be commercialized pursuant to the terms hereof.
PRAECIS
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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 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.
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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 *** (***%) 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
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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 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
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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 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
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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 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
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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 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
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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 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
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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 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
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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 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
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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 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,
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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.
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
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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 (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
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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.
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
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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 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
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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 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
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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 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
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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 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,
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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 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
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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 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
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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 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
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(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 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
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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
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
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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 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
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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, (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
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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 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
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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 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:
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(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
(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
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occurrence shall be deemed to have occurred for the purposes of this
Section 9.1:
Occurrence Payment
- ---------- -------
*** $***
*** $***
*** $***
*** $***
*** $***
*** $***
*** $***
*** $***
TOTAL $63,000,000.00
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.
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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 sixty-three
million dollars ($63,000,000) regardless of the number of Licensed Products or
Applications developed hereunder.
9.2 Benchmark Transfer Price. As of the Effective Date, Synthelabo
and PRAECIS hereby agree to a Benchmark Transfer Price for the first Licensed
Product of *** United States dollars ($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
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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.
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,
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each Synthelabo purchase order shall show on its face a stated 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
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quarter times the number of units delivered during such quarter; (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
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government and any departments or subdivisions thereof, against any of the
Licensed Products ordered by Synthelabo and under 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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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) issued 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 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
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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.
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
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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, 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
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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, 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
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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.
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
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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.
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
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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 captions of this Agreement are for convenience
only and shall not be used for the construction or interpretation of this
Agreement.
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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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APPENDIX I
PRAECIS PROPOSED CORE DEVELOPMENT STUDIES
*** Appendix I, which including the Confidential
Information contains 22 pages,
has been omitted in its entirety. ***
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APPENDIX II
PATENT APPLICATIONS
LHRH Related Patents
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Type Serial Number Title and Inventors Status
US, CIP, (PPI Number)
PCT
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
US 08/480,94 LHRH Antagonist Peptides by Filed 6/7/95;
(PPI-007) Roger W. Roeske Pending
- -----------------------------------------------------------------------------------------------------------------
PCT PCT/US96/09852 LHRH Antagonist Peptides by Filed 6/7/96;
(PPI-007CPPC) Roger W. Roeske Pending
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
US 08/573,109 Methods for Treating Prostate Cancer Filed **;
with LHRH Antagonists by Marc B. Pending
Garnick, Christopher J. Molineaux and
Malcolm L. Gefter
- -----------------------------------------------------------------------------------------------------------------
US, CIP of 08/755,593 Methods for Treating Prostate Cancer Filed **;
08/573,109 (PPI-013CP) with LHRH Antagonists by Marc B. Pending
Garnick, Christopher J. Molineaux and
Malcolm L. Gefter
- -----------------------------------------------------------------------------------------------------------------
PCT PCT/US96/18911 Methods for Treating Prostate Cancer Filed 11/25/96;
(PPI-013CPPC) with LHRH Antagonists by Marc B. Pending
Garnick, Christopher J. Molineaux and
Malcolm L. Gefter
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
US 08/762,747 Pharmaceutical Formulations for Sus- Filed **;
tained Drug Delivery by Malcom, L. Pending
Gefter, Nicholas Barker, Gary Musso and
Christopher J. Molineaux
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
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APPENDIX III
IUF LICENSE AGREEMENT
See Exhibit 10.10 to
the Registration Statement
111
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APPENDIX IV
PPI-149 DEFINITION
PPI-149 shall mean a peptide compound having the following structure:
***
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APPENDIX V
TERRITORY
SECTION A
Europe, consisting of:
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
*Major European Territory Countries
SECTION B
Latin America, consisting of:
Belize Costa Rica Guatemala Honduras
Mexico Nicaragua Panama San Salvador
Argentina Bolivia Brazil Chile
Columbia Ecuador French Guyana Guyana
Paraguay Peru Uruguay Venezuela
Eastern Europe, consisting of:
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
The following countries of Africa, consisting of:
Algeria Benin Burkina-Fasso Cameroun
Central African Republic Chad Congo Djibouti
Gabon Guinea Guinea Bissau Ivory Coast
Madagascar Mali Mauritania Morocco
Niger Rwanda Senegal Seychelles
Tunisia Zaire South Africa
Middle East, consisting of:
Iran Iraq Israel Jordan
Kuwait Lebanon Oman Saudi Arabia
South Yemen Syria Turkey Yemen
Cyprus United Arab Bahrain
Malta Emirates Qatar
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APPENDIX VI
ADDITIONAL SUPPLY PROVISIONS
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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
<PAGE>
o file maintenance and storage of batch records and samples for
analysis.
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
<PAGE>
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, 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
<PAGE>
cannot be resolved amicably, the issue shall be referred to an independent
expert nominated by PRAECIS and to whom Synthelabo does not reasonably
object.
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.
<PAGE>
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 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.
<PAGE>
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>
EXHIBIT 10.7
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN
PORTIONS OF THIS DOCUMENT. SUCH PORTIONS HAVE BEEN
REDACTED AND MARKED WITH
ASTERISKS (***). THE NON-REDACTED
VERSION OF THIS DOCUMENT HAS BEEN SENT TO THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN
APPLICATION FOR CONFIDENTIAL TREATMENT
AMENDED AND RESTATED BINDING AGREEMENT IN PRINCIPLE
AMENDED AND RESTATED BINDING AGREEMENT IN PRINCIPLE, effective
as of March 8, 1999 (the "Signing Date"), by and between PRAECIS PHARMACEUTICALS
INCORPORATED, a Delaware corporation with its principal place of business at 1
Hampshire Street, Cambridge, Massachusetts 02139-1572 ("Praecis"), and Amgen
Inc., a Delaware corporation with its principal place of business at One Amgen
Center Drive, Thousand Oaks, California 91320-1789 ("Amgen").
WHEREAS, the parties desire to enter into a collaboration
respecting the research, development and commercialization of certain LHRH
antagonist compounds;
WHEREAS, the parties desire to enter into a legal and binding
agreement with respect to the terms and conditions under which Praecis and Amgen
are prepared to conduct such collaboration;
NOW, THEREFORE, in consideration of the representations,
warranties and covenants contained herein, and for other good and valuable
consideration, and intending to enter into a legal and binding agreement, the
parties hereby agree to the terms and conditions of this Binding Agreement in
Principle and the accompanying exhibits and schedules, all of which are
incorporated herein by reference.
IN WITNESS WHEREOF, duly authorized representatives of the
parties hereto have duly executed this Binding Agreement in Principle as of the
Signing Date.
PRAECIS PHARMACEUTICALS INCORPORATED
By /S/ MALCOLM L. GEFTER
--------------------------------------------------
Name: Malcolm L. Gefter, Ph.D.
Title: Chief Executive Officer and President
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AMGEN INC.
By /S/ GORDON M. BINDER
--------------------------------------------------
Name: Gordon M. Binder
Title: Chief Executive Officer
2
<PAGE>
1. PARTIES. Amgen Inc. ("Amgen") and PRAECIS PHARMACEUTICALS INCORPORATED
("Praecis").
2. COLLABORATION TECHNOLOGY. As used in this Binding Agreement in Principle,
"Collaboration Technology" means any and all proprietary data, information,
materials, know-how or intellectual property (including Patent Rights) to which
Praecis or its Affiliates now or hereafter has any right, title or interest
which Praecis is entitled to license or sublicense, relating to LHRH Antagonist
Compounds (in the case of any depot or other formulation, for use with LHRH
Antagonist Compounds only), including but not limited to the Praecis Patent
Rights set forth on Exhibit A attached hereto and incorporated herein. "LHRH
Antagonist Compounds" means compounds (including salts and prodrugs) which
exhibit Lutenizing Hormone Releasing Hormone (LHRH) antagonist activity,
including but not limited to the decapeptide known as Abarelix or PPI-149 and
further described in Exhibit B (hereinafter referred to as "Abarelix"), all
compounds included in the IUF License Agreement (including those identified in
Section 3.01(b) thereof) and any other technology owned or controlled by Praecis
which Praecis is entitled to license or sublicense and which is necessary or
useful to make, have made, use, sell, or offer to sell any compounds that
exhibit LHRH antagonist activity. For purposes hereof, "Collaboration
Technology" shall include all prodrugs and salts used in connection with
compounds that exhibit LHRH antagonist activity, regardless of whether or not
such prodrugs or salts exhibit such activity.
3. LICENSED PRODUCTS. As used in this Binding Agreement in Principle, "Licensed
Products" means all products described in, claimed in, incorporating or
containing Collaboration Technology. Licensed Products shall also include
Praecis Improvements.
4. FIELD OF USE. As used in this Binding Agreement in Principle, "Field of Use"
means all human therapeutic, prophylactic and diagnostic uses of Licensed
Products. The Field of Use shall not include Licensed Products for ***, provided
that Praecis shall not, without Amgen's prior written consent (not to be
unreasonably withheld), directly or indirectly transfer (other than by operation
of law), assign or sublicense any rights to make, have made, use, sell, offer to
sell, export and import Licensed Products for *** and may use such rights only
to commercialize Licensed Products that, in Amgen's reasonable determination,
would not adversely effect the commercialization of Licensed Products sold for
human therapeutic, prophylactic or diagnostic use.
5. LICENSE GRANT. Praecis grants to Amgen and its Affiliates an exclusive
license, with a right to sublicense, under the Collaboration Technology, to
make, have made, use, sell, offer to sell, export and import Licensed Products
in the Field of Use in the Licensed Territory. This license grant shall include,
but not be limited to, the grant of an exclusive sublicense in the Field of Use
in the Licensed Territory under any and all rights granted to Praecis under the
IUF License Agreement. ***Praecis will be considered by Amgen as a possible
sublicensee. Any sublicense by Amgen shall be consistent with the terms hereof
and the IUF License Agreement and shall contain all of the terms required by the
IUF License Agreement to be included in any sublicense.
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<PAGE>
If IUF should object that the IUF License Agreement does not entitle Amgen or
its Affiliates to grant any such sublicense to a third party, upon request by
Amgen, Praecis will grant such sublicense directly to such third party.
6. LICENSED TERRITORY. As used in this Binding Agreement in Principle, "Licensed
Territory" means each and every country of the world (except those set forth on
Exhibit C), including their respective territories and possessions, regardless
of any changes relating to such countries, territories and possessions after the
Signing Date. Amgen recognizes that it shall not be entitled to rights to any of
the countries, including their territories and possessions, listed on Exhibit C
regardless of any changes relating to such countries, territories or possessions
after the Signing Date.
7. MILESTONE PAYMENT. A single non-refundable milestone payment in the amount of
*** will be payable by Amgen to Praecis one time
***.
8. INITIAL PAYMENT. Amgen shall pay to Praecis a non-refundable payment of ***
in respect of R&D expenses incurred by Praecis prior to January 1, 1999. This
payment shall be exclusive of, and in addition to, the payments set forth in
Section 14e).
9. TRANSFER PRICE AND ROYALTY IN THE UNITED STATES.
a) AMGEN FUNDING. Amgen will be responsible for funding in the amount
of ***, to be paid in the form of : (1) the Initial Payment of *** as set forth
in Section 8, (2) one Milestone Payment of *** as set forth in Section 7, and
(3) *** to be spent in accordance with: (a) the Long Range Plan attached hereto
as Exhibit D (except to the extent modified by the Annual Budgets), (b) the
Development Plan attached hereto as Exhibit E (to the extent expenses in the
Development Plan are included in the R&D component of the Annual Budgets) and
(c) the sales and marketing plan, the costs of which are reflected in the Long
Range Plan (except to the extent modified by the Annual Budgets). ***
b) LONG RANGE PLAN. The Long Range Plan shall serve as guidance for
preparing annual budgets for the Licensed Products ("Annual Budgets"). The Long
Range Plan may be amended at any time with the mutual agreement of the parties.
*** The parties will agree on a new long range plan one year prior to expiration
of the Long Range Plan, provided that such new long range plan shall include the
following assumptions: annual Sales and Marketing expenses shall be *** , annual
G&A expenses shall be ***.
c) ANNUAL BUDGET. An Annual Budget will be established and determined
by mutual agreement prior to each year based upon the Long Range Plan. If the
parties are unable to agree on the Annual Budget, then the Annual Budget for
that year shall be determined as follows: Amgen shall reasonably and in good
faith determine the sales forecast; expenses shall be as set forth for that year
in the Long Range Plan, provided that with respect to each expense item, the
party with final decision making authority with respect to an expense item shall
have the authority ***. Except as
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<PAGE>
otherwise provided herein, expenses may be incurred outside the Annual Budget by
either party but such expenses shall be borne solely by the party incurring such
expenses without compensation from the other party. Once the Annual Budget has
been determined, each expense category in the Annual Budget may be ***. In
addition, once the Annual Budget has been determined, each expense category in
the Annual Budget may be ***. Notwithstanding any of the foregoing, annual G&A
expenses shall ***, annual Distribution costs shall ***. Within 20 days
following the end of each quarter the parties agree to report and perform a
reconciliation of Actual Expenses incurred during the prior quarter to the
Annual Budget.
D) TRANSFER PRICE AND ROYALTY. ***
e) LINE OF CREDIT. In the years 2000-2002, Amgen shall extend to
Praecis a line of credit not to exceed ***. The line of credit will
bear interest at *** and the principal and interest of which shall be
repaid according to the schedule set forth in Exhibit F. Amounts
outstanding under the line of credit may be prepaid at any time without
premium or penalty.
The line of credit shall be made available by Amgen only upon the satisfaction
of all of the following conditions (which conditions shall also apply with
respect to each drawdown):
***
The parties agree to discuss in good faith adjustments to the years of
availability and limitations on annual drawdowns based on changes in facts and
circumstances.
10. ROYALTY IN OTHER COUNTRIES IN THE LICENSED TERRITORY. In countries in the
Licensed Territory other than the United States, royalties will be payable
quarterly as follows:
a) ***
- - *** of Net Sales of a Licensed Product
b) ***
- - *** of Net Sales of a Licensed Product
c) ***
- - *** of Net Sales of a Licensed Product
All the above royalties may be reduced on a country by country basis as follows,
provided that in no event will royalties in any country be reduced by more than
***%:
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<PAGE>
***
11. AUDIT RIGHTS. Each party agrees that the other party shall have reasonable
audit rights during reasonable times to confirm Net Sales in countries in the
Licensed Territory outside the United States, and in the United States to
confirm Net Sales, external expenses, and FTEs for internal expenses with
respect to Section 9. Such audit shall be performed not more than once per year.
Such audit shall be performed by the inquiring party's auditors and at the cost
of the inquiring party. If such audit discloses an underpayment, the party being
audited shall promptly pay the inquiring party unless the party being audited
disputes such amount in good faith. If such audit reveals an underpayment for
the year of *** or more, then the party being audited shall reimburse the
inquiring party for the reasonable costs of the audit.
12. IUF LICENSE AGREEMENT AND ROYALTY. Praecis shall be solely responsible for
the payment of all royalties or other payments due under the IUF License
Agreement. If:
(1) Praecis shall fail to make any such payments to IUF within 60
days after due; or
(2) the IUF License Agreement shall be terminated and the
sublicense thereunder to Amgen (as contained in this Binding
Agreement in Principle) shall survive; or
(3) Praecis enters into an arrangement of creditors and/or
bankruptcy (in which case Praecis shall be obligated to give
Amgen one week prior written notice thereof),
then Amgen may (in the event of (1)) and shall (in the event of (2) and (3)),
make all payments due to IUF under the IUF License Agreement with respect to
sales of Licensed Product by Amgen in the Licensed Territory and Amgen shall
deduct the full amount of any such payments actually made by Amgen from any
amounts payable to Praecis hereunder.
The sublicense under the IUF License Agreement contained in this Binding
Agree-ment in Principle shall survive termination of the IUF License Agreement.
Praecis will not during the Term take any actions to terminate or restrict its
rights under the IUF License Agreement and will discharge all of its obligations
thereunder. Praecis will promptly notify Amgen in writing if (1) IUF notifies
Praecis that a breach of the IUF Agreement has occurred, and, to the extent
known by Praecis, Praecis shall further notify Amgen as to when such breach has
been or is intended to be cured; (2) Praecis notifies IUF that a breach of the
IUF Agreement has occurred, and Praecis will notify Amgen as to when such breach
has been or is intended to be cured; or (3) the rights to Praecis under the IUF
Agreement are converted, or IUF intends to convert such rights, from exclusive
to non-exclusive.
***
Not later than 90 days following the Signing Date, Praecis agrees to use all
reasonable
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<PAGE>
efforts to obtain agreement with IUF that: (a) sections 5.01 (Market
Development) and 5.02 (Performance Standards) of the IUF License Agreement are
satisfied by Commercially Reasonable Efforts hereunder; (b) Amgen shall have the
first right, followed by Praecis, and then by IUF to carry out the patent
prosecution activities set forth in sections 10.01 and 10.02 of the IUF License
Agreement, with respect to Collaboration Patents, (c) section 12.05 of the IUF
License Agreement shall be amended so that in the event the license from IUF to
Praecis terminates, the sublicense to Amgen granted hereunder shall survive and
Amgen shall assume all rights and obligations of Praecis with respect to the IUF
License Agreement and (d) the sublicense to the IUF License granted to Amgen
hereunder is a valid sublicense under the IUF License Agreement.
13. TERM OF AMGEN PAYMENT OBLIGATIONS. Amgen's payment obligations hereunder
will be payable ***. Thereafter, Amgen shall have a paid up, consideration free,
perpetual license to make, have made, use, sell, offer to sell, export and
import Licensed Products ***.
14. RESEARCH, DEVELOPMENT AND REGULATORY.
a) DEVELOPMENT PLAN FOR U.S. The parties have agreed to the Development
Plan attached hereto as Exhibit E, which shall determine development activities
to be undertaken in the United States *** It is anticipated that the Development
Plan will need to be modified based upon the results of clinical trials and
other unanticipated events and any such modifications may affect, among other
things, ***. Either party may perform clinical studies outside the Development
Plan at its own expense, provided that if any such study is to be undertaken by
the party that does not have final decision making authority as provided in
subsection c) below, then such study shall take place only after obtaining the
prior consent of the party with final decision making authority. Notwithstanding
anything to the contrary contained in this Binding Agreement in Principle,
Praecis shall obtain Amgen's prior approval of any studies Praecis approves for
the Licensed Territory at the Praecis/Synthelabo Joint Steering Committee.
b) COMMITTEE. A product development and commercialization committee
shall be established to discuss and coordinate the information and data
necessary to obtain and maintain approval of the Licensed Products in the Field
of Use in the Licensed Territory, formulate the strategies and plans to most
effectively and efficiently obtain such approvals and to prepare plans to
commercialize the Licensed Products (including sales and marketing) in the Field
of Use in the United States. The committee shall be comprised of an equal number
of representatives from each company, consisting of a project team leader from
each company and other representatives appointed by each company. The committee
shall meet quarterly (either in person, by telephone or videoconference) to
review the progress and status of development and commercialization of Licensed
Products in the Field of Use in the Licensed Territory. In the event that the
committee is unable to reach a consensus decision on any issue, then the
committee representatives of either party may bring
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<PAGE>
such matter to the attention of senior management of the respective parties,
following which either party's senior management may contact the other party's
senior management. The party with the final decision making authority with
respect to the subject matter of such issue shall be entitled to make the final
determination. The Annual Budget will be prepared by the committee and submitted
to senior management of both companies for decision pursuant to Section 9.
c) GOVERNANCE: RESEARCH, DEVELOPMENT AND REGULATORY.
- UNITED STATES
(i) PROSTATE CANCER. Praecis will have final decision making
authority ***over all research, development and regulatory matters for all
Licensed Products for the prostate cancer indication prior to the earlier of: a)
***. Following the earlier of the occurrence of either a), b) or c) in the
preceding sentence, Amgen will have final decision making authority *** for all
research, development and regulatory matters for all Licensed Products in the
prostate cancer indication.
(ii) ENDOMETRIOSIS. Praecis will have final decision making
authority *** over all research, development and regulatory matters for all
Licensed Products for the endometriosis indication prior to the earlier of:***.
Following the occurrence of the earlier of: a), b), c) or d) in the preceding
sentence, Amgen will have final decision making authority (within the R&D
Budget) over all research, development and regulatory matters for all Licensed
Products in the endometriosis indication. Amgen shall submit a transition plan
to Praecis for possible transition earlier than contemplated in a), b), c) or
d), which shall be considered by Praecis in good faith.
(iii) ALL OTHER INDICATIONS. Amgen will have final decision
making authority *** over all research, development and regulatory matters for
all Licensed Products for all other indications.
- OTHER COUNTRIES IN THE LICENSED TERRITORY.
(i) Amgen will have final decision making authority over all
research, development and regulatory matters for Licensed Products in the Field
of Use in the Licensed Territory for all indications; provided that with respect
to any clinical trial that will be submitted as part of a United States IND for
prostate or endometriosis, then Praecis shall have the final decision making
authority during the time period during which it has final decision making
authority under subsections c)i) or c)ii) above.
d) OWNERSHIP OF REGULATORY FILINGS AND LICENSES. Initially Praecis
shall file and be the owner and party of record sponsoring all regulatory
filings (INDs, PLAs,
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<PAGE>
BLAs, ELAs and NDAs or other equivalent filings) and product licenses with
respect to Licensed Products for all indications in the Field of Use in the
United States. Such ownership and control shall be immediately transferred and
assigned to Amgen upon the earlier of ***. Amgen will file INDs for all
indications other than prostate and endometriosis and Praecis shall permit Amgen
to cross reference Praecis' INDs as necessary consistent with final decision
making authority in subsection c) above. Each party shall inform, cooperate with
and assist the other with respect to all material communications to or from
regulatory authorities and both parties shall have the right to attend all FDA
meetings and participate in all telephone calls with the FDA. Amgen and Praecis
will have equal and complete access to the ongoing clinical trial databases for
prostate cancer and endometriosis. For each clinical trial the parties will
establish a corresponding master database for the data. When Amgen obtains final
decision making authority, master databases shall be transferred by Praecis to
Amgen. Outside the United States, Amgen shall have ownership and control of all
regulatory filings and licenses in the Licensed Territory.
e) RESEARCH, DEVELOPMENT AND OTHER OPERATING COSTS. Amgen will conduct
and pay for all research and development activities ***. As part of the ***
total combined expenses to be paid by Amgen as described in Section 9, Amgen
will pay to Praecis up to a total of approximately ***, which shall include
research and development to be performed or contracted for by Praecis in
accordance with the Development Plan, payable to Praecis as follows:
***
These payments are intended to cover estimated research and development expenses
to be expended pursuant to the Development Plan within the *** and other
operating expenses within the ***. These payments shall be reconciled on a
quarterly basis not later than 30 days after the end of each quarter against
actual external and internal expenses. Amounts paid but not expended in such
quarter or expended but not previously paid by Amgen in accordance with this
Section 14(e), as reflected in such reconciliation, shall reduce or increase the
next payment due.
f) SYNTHELABO. Praecis will use reasonable efforts to have both it and
Amgen meet with Synthelabo to coordinate worldwide clinical trial activities and
the provision of safety data.
g) DILIGENCE. The parties will use Commercially Reasonable Efforts to
develop Licensed Products in the Licensed Territory.
15. MANUFACTURING.
a) SUPPLY OF COMMERCIAL PRODUCT BY PRAECIS. Praecis shall use
Commercially Reasonable Efforts to supply Amgen with all of its requirements for
the Licensed Products for all countries in the Licensed Territory and all
indications. Praecis will provide such supply within, and *** as provided in
Section 9. Praecis shall supply the
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Licensed Products in "nude" form (formulated and filled but unlabeled and
unpackaged) and Amgen shall label and package and release all lots. Amgen's
costs for these activities shall include ***. To the extent permitted by
regulatory authorities, Praecis may subcontract the manufacture of all or any
part of the manufacturing process to any third party approved by Amgen (such
consent not to be unreasonably withheld and not to be required for any Praecis
contracts in effect as of the Signing Date). Praecis shall not extend existing
supply contracts or enter into new supply contracts without Amgen's prior
consent (not to be unreasonably withheld). If Amgen grants its consent, Praecis
may, to the extent permitted by law, regulation and regulatory authorities,
enter into new contractual arrangements with any such third party, provided that
(1) each such third party and Praecis shall be bound by the obligations of
Praecis to Amgen hereunder relating to manufacturing, (2) each such third party
passes Amgen's quality audits and (3) each such third party agrees to adhere to
the Amgen quality policy relating to third party contract manufacturers. During
the 120-day period following the Signing Date, Praecis shall use commercially
reasonable efforts (which shall not include payment by Praecis of any
significant additional consideration) to cause its existing third party contract
manufacturers to amend existing contracts with Praecis to provide for the
foregoing. The Licensed Products shall be manufactured in accordance with ***
specifications and in accordance with current Good Manufacturing Practices in a
manufacturing facility registered with and approved for such purpose with the
FDA. Amgen shall have the right to inspect and audit any parties involved in the
manufacturing process and have its representatives be present at manufacturing
facilities. Amgen shall have the right to ensure that raw material suppliers
maintain compliance with current Good Manufacturing Practices, including having
one or more Amgen employee in each supplier facility during all hours of
operation. Praecis shall provide a certificate of analysis for all nude Licensed
Products supplied to Amgen. Shelf life of Licensed Product supplied shall be
mutually agreed. Amgen will accept risk of loss for Licensed Products following
receipt of delivery from Praecis. Praecis shall supply Licensed Products for
clinical trials in the Licensed Territory at its cost, as provided in the Annual
Budget.
b) GOVERNANCE. Amgen shall have final decision making authority to
fulfill its regulatory responsibilities over all steps of the manufacturing
process (including bulk, finish and fill, labeling and packaging, lot release
and management of subcontractors). Notwithstanding the foregoing, if a Licensed
Product incorporates Praecis' proprietary depot formulation as currently
anticipated, Praecis shall have final decision making authority *** over matters
relating solely to such depot formulation, to the extent permitted by regulatory
authorities and subject to Amgen having sufficient knowledge of the formulation
process to satisfy itself that such formulation process is in compliance with
current Good Manufacturing Practices and that there is an ability to perform
suitable lot release assays. In order to help preserve the proprietary nature of
such formulation, to the extent permitted by regulatory authorities, Praecis
will file a drug master file with the FDA (or other regulatory authorities) to
make the information regarding such formulation available directly to the FDA
(or other regulatory authorities) and Praecis will deal directly with the FDA
(or other regulatory
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authorities) on all matters relating solely to such depot formulation.
c) SUPPLY PROBLEM. If Praecis (or any subcontractor) shall fail to
materially comply with its supply obligations hereunder, then Praecis shall
provide to Amgen manufacturing protocols and other manufacturing know-how and
information (all of which shall be considered Confidential Information) in order
that Amgen may supply the Licensed Products itself or though third parties and
the ***.
d) AMGEN OPTIONS. Amgen shall have options to supply bulk Licensed
Product and/or perform finish and fill services on substantially equivalent
terms as Praecis or any third party contract manufacturer, considering economic
(maximizing profits), timing and quality considerations. These options may be
exercised by Amgen at any time by providing Praecis with not less than 90 days
prior written notice. The exercise of these options by Amgen shall not cause
Praecis to breach its then existing supply contracts and if such exercise would
cause a breach, Amgen and Praecis shall work together in good faith to, if
possible, enable Amgen to perform the function for which it has exercised its
option.
e) NEW FORMULATIONS. Either party may develop a new formulation for a
Licensed Product *** and if either party develops such new formulation, then it
may offer it to the other party for inclusion in Licensed Products. If so
offered and the offer is accepted, the payment obligations hereunder will be
adjusted accordingly to reflect the terms agreed by the parties with respect to
such new formulation.
f) SUPPLY TRANSITION. Upon Amgen's written notice to Praecis, not later
than June 30, 2000 (or such later date specified by Amgen, but in any event no
later than January 1, 2002, whether or not such notice has been given) all
supply rights and responsibilities (including all of Praecis' rights and
obligations under then existing supply agreements to the extent assignable under
such agreements) shall transition to Amgen except with respect to the depot
formulation; provided that Amgen shall provide such written notice no less than
45 days prior to the specified date of transition. Therefore, following such
transition, to the extent that any of the provisions in this Section 15 are no
longer applicable to Praecis because of such transition, such provisions shall
no longer have any force and effect (it being understood that in any event the
provision in the second sentence of the last paragraph of Section 10 shall
continue in effect).
16. COMMERCIALIZATION. Amgen will make all decisions regarding the
commercialization and sales and marketing of Licensed Products for all countries
in the Licensed Territory and indications, including but not limited to
determination of prices, sales and distribution, packaging, labeling, language
to be included in the package insert with the FDA, detailing and selection and
registration of generic names (i.e. provided by USAN) and trademarks.
Notwithstanding the foregoing, Praecis has submitted to USAN an application to
use abarelix as the generic name and Amgen will diligently pursue the complete
registration of abarelix as the generic name for Abarelix. Amgen will use
Commercially Reasonable Efforts to market and sell Licensed Products in the
Licensed Territory. To the extent permitted by law,
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regulation or regulatory authorities, Praecis' logo shall be included on
promotional materials and displayed with reasonable prominence. In order to
satisfy Praecis' desire for access to patients and physicians, Praecis may, to
the extent permitted by applicable laws and regulations and under the guidance
and management of Amgen, co-sponsor with Amgen conferences or seminars in the
United States chosen by Amgen to target urologists.
***.
17. INTELLECTUAL PROPERTY.
a) EX PARTE PATENT PROSECUTION. At Amgen's direction, outside counsel
which is mutually acceptable to Amgen and Praecis will conduct ex parte patent
prosecution of Patent Rights having at least one Praecis or IUF inventor (as
determined under U.S. Patent law) included within Collaboration Technology
("Collaboration Patents") in the Licensed Territory, with consideration given to
Praecis' input. In the event Amgen elects not to pursue any Collaboration
Patents having at least one Amgen inventor (as determined under U.S. Patent
Law), Amgen shall give Praecis the opportunity to do so at Praecis' cost (which
shall not be included as an expense of Praecis in determining profits/losses),
in which event, Praecis will own any patents issuing thereon.
b) INTER PARTES PATENT PROSECUTION. Amgen shall have the right but not
the obligation to conduct inter partes proceedings relating to all Patent Rights
included within Collaboration Technology (including interferences and
oppositions), in the Licensed Territory, with consideration given to Praecis'
input.
c) ENFORCEMENT OF PATENT RIGHTS. Amgen shall have the right but not the
obligation to enforce all Patent Rights included within the Collaboration
Technology against any third party suspected of infringing a claim of a Patent
Right included in Collaboration Technology, in the Licensed Territory, with
consideration given to Praecis' input.
d) INFRINGEMENT DEFENSE. Amgen shall have the right, but not the
obligation, to defend and control any suit alleging infringement of any patent
or other intellectual property right of a third party arising out of the
manufacture, use, sale, offer to sell, export or import of a Licensed Product by
Amgen or its sublicensees, in the Licensed Territory, with consideration given
to Praecis' input.
e) EXPENSES. Unless otherwise provided above, the expenses incurred by
a party in pursuing any of the above activities relating to Patent Rights or any
trademark filings, prosecution, enforcement or infringement defense ***.
f) COOPERATION BETWEEN THE PARTIES. Amgen and Praecis agree to
cooperate with each other and to use all reasonable efforts to ensure the
cooperation of any of their respective personnel and licensee(s) or licensor(s)
as might reasonably be requested in any of the above matters.
12
<PAGE>
18. TERM; TERMINATION.
a) TERM. This Binding Agreement in Principle shall become effective as
of the Signing Date. Unless terminated earlier pursuant to the terms of this
Section 18, this Binding Agreement in Principle will continue in full force and
effect until the last to expire of the Patent Rights included in Collaboration
Technology. Following such expiration, Amgen shall have a fully paid up,
compensation free, perpetual, exclusive license, with a right to sublicense,
under the Collaboration Technology, to make, have made, use, sell, offer to
sell, export and import Licensed Products in the Field of Use in the Licensed
Territory.
b) TERMINATION BY AMGEN.
(i) TERMINATION FOR MATERIAL ADVERSE CLINICAL DEVELOPMENT. If
the results of any clinical trials of the Licensed Products constitute a
material adverse change in the commercial prospects of the Licensed Products,
then Amgen may terminate this Binding Agreement in Principle anytime within 30
days following its receipt of such clinical trial data.
(ii) TERMINATION FOR CONVENIENCE. Amgen may terminate this
Binding Agreement in Principle by giving Praecis 90 days prior written notice,
and in such event this Binding Agreement in Principle shall be terminated at the
end of such 90 day period, provided that in the event of such termination, the
parties shall wind up clinical trials, sales and marketing activities and other
affairs hereunder in a timely, reasonable and businesslike manner, not to exceed
a period of *** months after the end of such ninety-day period. During such ***
month period, each party shall be responsible for winding up its own such
trials, activities and other affairs at its own expense and Amgen shall provide
for an orderly and businesslike transfer of the business to Praecis, including
assigning (to the extent permitted by law) all regulatory filings, regulatory
approvals and clinical data relating to Licensed Products.
(iii) ***
13
<PAGE>
(iv) TERMINATION PURSUANT TO SECTION 20(C). Amgen may
terminate this Binding Agreement in Principle upon the terms and subject to the
conditions set forth in Section 20(c) hereof.
c) TERMINATION FOR DEFAULT.
(i) AMGEN DEFAULT. Upon any Default by Amgen hereunder, if
Praecis notifies Amgen of such Default and Amgen shall not have cured such
Default within 60 days, Praecis may terminate this Binding Agreement in
Principle.
(ii) PRAECIS DEFAULT. Upon any Default by Praecis hereunder,
if Amgen notifies Praecis of such Default and Praecis shall not have cured the
Default within 60 days, Amgen may: (1) terminate this Binding Agreement in
Principle in whole or on a country by country basis, (2) terminate Praecis'
manufacturing rights and *** (in which case Amgen shall assume all of Praecis'
rights and obligations under then existing supply agreements to the extent such
rights and obligations are assignable) and/or terminate any or all of Praecis'
rights hereunder (other than rights to receive payments) and/or (3) deduct from
the profits/losses and royalties payable to Praecis any costs, liabilities,
damages***, or (4) terminate this Binding Agreement in Principle and retain all
licenses to Collaboration Technology granted hereunder, subject to continued
payment to Praecis of all payments payable hereunder.
d) BANKRUPTCY OR ACQUISITION. In the event Praecis shall declare or be
declared bankrupt, or upon the acquisition (directly or indirectly, by any third
party of 50% or more of the shares of capital stock) of Praecis by a third
party, Amgen may: (1) terminate this Agreement in whole or in part on a country
by country basis; or (2) terminate Praecis' manufacturing rights and ***(in
which case Amgen shall assume all of Praecis' rights and obligations under then
existing supply agreements to the extent such rights and obligations are
assignable) *** (other than rights to receive payments due hereunder), subject
to continued payment to Praecis of all payments payable by Amgen hereunder.
Notwithstanding the foregoing, in the case of an acquisition of Praecis by a
third party, Amgen shall not have the right set forth in (1) above. Any
termination under this subsection d) shall be made in an orderly and
businesslike manner.
e) INJUNCTION. This Binding Agreement in Principle will terminate
automatically in the event a final nonappealable order of any court or other
governmental body of competent jurisdiction shall have been issued prohibiting,
restraining or enjoining the transactions contemplated by this Binding Agreement
in Principle and all appeals or rights of appeal shall have been exhausted.
f) EFFECT OF TERMINATION. Upon termination of this Binding Agreement in
Principle in accordance with this Section 18, (i) except as otherwise provided
in Section 18(c)(ii) or Section 18(d), all licenses granted to Amgen hereunder
shall revert to Praecis and in such event Amgen shall assign (to the extent
permitted by law) to Praecis all regulatory filings, regulatory approvals,
clinical data and trademarks
14
<PAGE>
(including without limitation, trademarks owned by Amgen) relating to Licensed
Products, (ii) each party shall be responsible for obligations of such party
which accrued prior to such termination and (iii) each party shall be liable for
any breach by such party of this Binding Agreement in Principle prior to such
termination, except that if such termination is pursuant to Section 18 b) iv),
neither Praecis nor Amgen shall have liability for any breach by it of any
representation or warranty contained herein.
g) NO CONSEQUENTIAL DAMAGES. Neither party will be liable for
consequential damages incurred by the other party arising out of any breach of
this Binding Agreement in Principle.
19. INDEMNIFICATION. Amgen will indemnify Praecis and hold Praecis harmless from
all liability, loss, damage and cost arising out of (i) any claims of any nature
(other than claims by third parties relating to patent infringement) arising out
of the research, development, manufacturing, marketing and/or sale of Licensed
Products by, on behalf of or under authority of, Amgen and/or (ii) any
representation or warranty by Amgen set forth herein being untrue in any
material respect when made or failure by Amgen to perform any of its obligations
hereunder. Praecis will indemnify Amgen and hold Amgen harmless from all
liability, loss, damage and cost arising out of (i) any claims of any nature
(other than claims by third parties relating to patent infringement) arising out
of the research, development, manufacturing or promotion of Licensed Products
by, on behalf of or under authority of (other than Amgen, its Affiliates, or
sublicensees), Praecis and/or (ii) any representation or warranty of Praecis set
forth herein (subject to the first sentence of Section 20(c)) having been untrue
in any material respect when made or failure by Praecis to perform any of its
obligations hereunder. Each party will notify the other in the event it becomes
aware of a claim for which indemnification may be sought hereunder. For purposes
hereof, manufacturing and other activities or obligations to be performed or
provided by Praecis shall not be considered to be performed or provided on
behalf of, or under authority of, Amgen, its Affiliates or sublicensees.
20. REPRESENTATIONS AND WARRANTIES.
a) MUTUAL. Each of Praecis and Amgen represents and warrants to the
other that as of the Signing Date: i) it is duly incorporated, validly existing
and in good standing in its respective state of incorporation, ii) it has the
corporate power and authority to execute, deliver and perform this Binding
Agreement in Principle and its obligations hereunder, iii) this Binding
Agreement in Principle is a valid and binding obligation of such party,
enforceable against such party in accordance with its terms, except as such
enforceability may be limited by laws affecting creditors rights generally or by
the principles governing the availability of equitable remedies, iv) Praecis'
other material contractual obligations do not (1) materially impair the
performance by Praecis of any of its material obligations under this Binding
Agreement in Principal or (2) conflict with the rights granted to Amgen
hereunder, the effect of which would impair any such rights in any material
respect (provided that
15
<PAGE>
Praecis does not make the representation contained in this clause (iv) with
respect to Sections 10.01 and 10.02 of the IUF License Agreement), v) there is
not a legal or regulatory constraint on its ability to carry out in all material
respects its obligations hereunder.
b) PRAECIS. Praecis represents and warrants to Amgen that as of the
Signing Date:
(i) INTELLECTUAL PROPERTY. Praecis owns or possesses adequate
licenses or other rights to use all the Praecis Patent Rights set forth in
Exhibit A. To the best knowledge of Praecis, the manufacture, use or sale of
Abarelix pursuant hereto 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 Abarelix (alone
or in connection with the depot formulation described in the patent applications
referred to in Exhibit A) pursuant hereto. The Praecis Patent Rights set forth
in Exhibit A include all patent rights owned or controlled by Praecis which
claim or describe LHRH Antagonist Compounds and related methods. With respect to
the patent applications in Exhibit A, 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 taken by a patent office that would render such patent
unenforceable.
(ii) IUF LICENSE AGREEMENT. The IUF License Agreement is in
full force and effect. Praecis is in compliance in all material respects with
all of its obligations thereunder and has delivered to Amgen a true and complete
copy thereof together with all amendments. Neither Praecis nor, to the best
knowledge of Praecis, IUF is in breach of the IUF License Agreement.
(iii) ABARELIX. The data shown by Praecis to Amgen with
respect to the current Phase 2 study for Abarelix in prostate cancer is the
actual data from such study and is complete through the Signing Date. No patient
in any clinical trial of Abarelix has been shown to exhibit antibodies against
Abarelix.
(iv) MANUFACTURING. Praecis has entered into valid long term
contracts for the supply of Abarelix (including the depot formulation) with
three subcontractors identified to Amgen. Praecis, through these subcontractors,
has the ability to supply large scale commercial quantities of Abarelix
(including the depot formulation) consistent with the Long Range Plan and in
quality substantially similar to that used in the Phase 2 trials for Abarelix
for which Praecis has provided Amgen with clinical data.
(v) RESEARCH AND DEVELOPMENT. With respect to the NDA expected
to be filed for Abarelix following the completion of the upcoming Phase 3
studies in prostate cancer: (1) ***, (2) *** and (3) ***. Praecis has utilized a
sensitive, validated method to detect antibody formation in its clinical trials.
With respect to the ***, the minutes of such meeting prepared by Praecis and
provided to Amgen are
16
<PAGE>
accurate and complete.
c) AMGEN TERMINATION RIGHT. The representations and warranties in
Section 20 b) iv) and v) shall survive until *** (and thereafter shall cease to
be of any further force or effect). In order to give Amgen an opportunity to
complete its due diligence in order to verify the accuracy of such
representations and warranties, Praecis shall provide Amgen with access to
clinical investigators and make available to Amgen all information reasonably
requested, including all contract manufacturing sites and records, copies of
contracts with all contract manufacturers, copies of all correspondence to or
from the FDA and copies of all notes from meetings with the FDA, toxicology and
other pre-clinical studies, clinical studies and QA/QC records requested by
Amgen. If based on such review Amgen reasonably determines in good faith that
any such representation or warranty in Section 20 b) iv) or v) shall be
inaccurate in any material respect as of the Signing Date, then on or prior to
***, Amgen may terminate this Binding Agreement in Principle.
21. STANDSTILL. For a period of *** years from the date that more than *** of
Praecis' outstanding common stock is publicly traded on a national securities
exchange or the NASDAQ National Market, neither Amgen nor any of its
"affiliates" or representatives will directly or indirectly, (a) effect or seek,
offer or publicly propose to effect, or cause or participate in any way or
assist any person to effect or seek, offer or publicly propose to effect or
participate in, (i) any acquisition of any securities or material assets of
Praecis or any of its subsidiaries, (ii) any tender or exchange offer, merger or
other business combination involving Praecis or any of its subsidiaries; (iii)
any recapitalization, restructuring, liquidation, dissolution or other business
combination with respect to Praecis or its subsidiaries, (iv) any "solicitation"
of "proxies" or consents to vote any voting securities of the Company, (b) form,
join or in any way participate in a "group", or otherwise act, alone or in
concert with others, to seek to control or influence the management, Board of
Directors or policies of Praecis, (d) take any action which might force Praecis
to make a public announcement regarding any of the matters set forth in (a)
above; or (e) enter into any discussions or arrangements with any third party
with respect to any of the foregoing. (Certain terms used but not defined above
shall have the meaning given such terms in the Securities Exchange Act of 1934,
as amended, or the proxy rules of the Securities and Exchange Commission). The
foregoing restrictions shall apply only if and when more than *** of Praecis'
outstanding common stock is publicly traded on a national securities exchange or
the NASDAQ National Market. In addition, nothing shall prevent Amgen from: (1)
purchasing, selling or holding less than 5% of Praecis common stock, or (2)
making offers or proposals at the request of the Board of Directors. The above
restrictions shall terminate immediately upon any of the following events: (i)
upon the announcement or disclosure or commencement by any third party (other
than one or more underwriters in a bonafide public offering) of any proposal or
offer to acquire, directly or indirectly, more than *** of Praecis' outstanding
common stock, (ii) upon any acquisition or proposed acquisition by any third
party (other than one or more underwriters in a bonafide public offering) of
more than *** of Praecis' outstanding common stock, or (iii) upon the proposal,
announcement, disclosure or initiation of
17
<PAGE>
any transaction of the type described in subsection (a)(ii) or (iii) of the
restrictions.
22. RIGHTS OF FIRST OFFER AND LAST REFUSAL. Amgen shall have a right of first
offer and last refusal during the Term to (1) any other Praecis products
intended to be sold to urologists or gynecologists and (2) all products in all
territories covered by the Synthelabo Agreement in the event that the Synthelabo
Agreement shall be terminated for any reason. Therefore, before offering to
dispose of any interest in (1) or (2) to any party, Praecis will first seek an
offer from Amgen. Following Amgen's submission of an offer, Praecis cannot
accept an offer from any third party on terms which, taken as a whole, are less
favorable to Praecis than the Amgen offer. Should Amgen's offer in clause (1)
above be accepted by Praecis, then Praecis shall have the right to co-promote
such product with Amgen, with the size of the Praecis sales force relative to
the Amgen sales force to be determined proportional to the relative value of the
new product compared to the value of Abarelix. Co-promotion by Praecis will be
in accordance with Amgen's sales and marketing plan, under Amgen's training and
management and using Amgen's field sales materials.
23. CONFIDENTIALITY. Except to the extent expressly authorized by this Agreement
or otherwise agreed in writing, the parties agree that, for the term of this
Agreement and for five (5) years thereafter, Praecis and/or Amgen, as the case
may be (the "Receiving Party"), shall keep confidential and shall not publish or
otherwise disclose or use for any purpose other than as provided for in this
Agreement any proprietary data, information and/or materials furnished to it by
the other party (the "Disclosing Party") (together with all other data and
information deemed Confidential Information of either party herein,
"Confidential Information"), except, to the extent that it can be established:
(a) by the Receiving Party that Confidential Information was already known to
the Receiving Party, other than under an obligation of confidentiality, at the
time of disclosure by the Disclosing Party and such Receiving Party has
documentary evidence to that effect; (b) by the Receiving Party that
Confidential Information was generally available to the public or otherwise part
of the public domain at the time of its disclosure to the Receiving Party; (c)
by a party that Confidential Information became generally available to the
public or otherwise part of the public domain after its disclosure or
development, as the case may be, and other than through any act or omission of a
party in breach of this confidentiality obligation; or (d) by a party that
Confidential Information was disclosed to that party, other than under an
obligation of confidentiality, by a third party who had no obligation to the
Disclosing Party not to disclose such information to others.
Each party may disclose Confidential Information belonging to the other party to
the extent such disclosure is reasonably necessary in filing or prosecuting
patent applications, prosecuting or defending litigation or complying with
applicable governmental regulations. Amgen shall further have the right to
disclose Confidential Information owned by Praecis or jointly by Amgen and
Praecis in developing Licensed Products in connection with conducting
pre-clinical and clinical trials and commercializing and promoting Licensed
Products. Praecis, with Amgen's prior approval, shall have the right to disclose
Confidential Information owned by Amgen or
18
<PAGE>
jointly by Amgen and Praecis in connection with Praecis' clinical development
activities within the Development Plan.
Data and information arising out of Praecis' activities under the Development
Plan will be Praecis Confidential Information and data and information arising
out of Amgen's activities under the Development Plan will be Amgen Confidential
Information.
24. PUBLICATION. Neither party will publish the structure of any Licensed
Product prior to publication of the structure in a patent application and
thereafter shall refrain from publishing without the approval of the other party
if such publication will materially aid competitors. Each party will submit to
the other for review and comment all proposed academic, scientific and medical
publications relating to Licensed Products and/or Collaboration Technology no
less than ***days prior to submission for publication. Following Amgen's
assumption of final decision making authority as set forth in Section 14c),
Praecis shall not submit any such publication without Amgen's prior written
approval.
25. PUBLIC ANNOUNCEMENTS. The parties agree on the importance of coordinating
their public announcements respecting this Binding Agreement in Principle and
the subject matter thereof (other than academic, scientific or medical
publications which are subject to the publication provision set forth above).
Except as required by law, neither party will make any public announcement
regarding this Binding Agreement in Principle, Collaboration Technology or
Licensed Products (other than academic, scientific or medical publications which
are subject to the publication provisions set forth above) without giving the
other opportunity to review and comment.
In no event will either party use the name of the other in any press release or
public announcement without the prior approval of the named party.
26. [Intentionally omitted]
27. [Intentionally omitted]
28. DOCUMENTATION. The parties acknowledge and agree that this Binding
Agree-ment in Principle contains all of the essential terms of the transactions
contemplated hereby and is intended to be, and is, a legally binding agreement.
Amgen and Praecis will use good faith efforts to negotiate and execute
definitive agreements relating to the transactions set forth herein which will
include the terms set forth herein and such other terms as the parties may
mutually agree which, upon such execution, will supersede in its entirety this
Binding Agreement in Principle.
29. GOVERNING LAW. This Binding Agreement in Principle shall be governed by the
laws of the State of California, without reference to the conflicts of law
principles thereof.
30. MISCELLANEOUS. Neither this Binding Agreement in Principle nor the
activities
19
<PAGE>
contemplated hereunder shall be deemed to create a partnership or joint venture
for accounting or any other purposes and the parties shall be independent with
no right to bind or otherwise act as the agent for the other party.
31. TRADEMARKS. Praecis hereby grants to Amgen exclusive royalty-free licenses
to use the Rel-Ease trademark and other trademarks owned by Praecis relating to
the Licensed Products in the Field throughout the Licensed Territory, such
license to cover the existing and all future forms of such trademark and
associated logos, subject to the same terms and conditions set forth in Article
8 of the Synthelabo Agreement.
32. BUSINESS TRANSITION. It is anticipated that prior to January 1, 2002,
certain expertise possessed by Praecis personnel shall be utilized and be
reflected in FTE charges for the various expense items in the Annual Budget.
During this time period Amgen is expected to perform an increasing portion of
all activities as reflected in the Long Range Plan, but that some Praecis
employees will continue to participate in activities through 2001. After January
1, 2002, Amgen shall be solely responsible for substantially all activities
relating to the Licensed Products, excluding manufacturing and supply of the
depot formulation which shall remain the responsibility of Praecis. From and
after Amgen's assumption of manufacturing and supply responsibility pursuant to
Section 15f), Amgen shall have responsibility for supplying Praecis with
Licensed Product for the purpose of Praecis supplying Synthelabo with Licensed
Product under the Synthelabo Agreement (excluding the depot formulation which
shall remain the responsibility of Praecis). Amgen's supply of Praecis for
purposes of the preceding sentence shall be made: (1) at a price determined ***;
and (2) ***. After January 1, 2002, Praecis will make its personnel available to
Amgen at the then current FTE rate to participate in activities related to this
Binding Agreement in Principle, but only following reasonable advance notice by
Amgen and with due consideration for such employees' other responsibilities.
33. ENTIRE AGREEMENT OF THE PARTIES. This Binding Agreement in Principle
constitutes and contains the complete, final and exclusive understanding and
agreement of the parties and cancels and supersedes any and all prior
negotiations, correspondence, understandings and agreements, whether oral or
written, among the parties respecting the subject matter hereof.
34. OFFSET. A party (the "first party") shall be entitled to offset against any
payments due and payable to the other party hereunder all such amounts due and
payable hereunder but not yet paid by such other party to the first party.
20
<PAGE>
DEFINITIONS
AFFILIATE shall mean any person or entity that, directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with the person or entity specified. For the purposes of this
definition, control shall mean the direct or indirect ownership of at least 50%
of the shares of capital stock or other equity interest entitled to vote for the
election of directors or equivalent governing body.
ACTUAL EXPENSES shall mean all ***.
ACTUAL PROFITS shall be deemed to have occurred when Net Sales of Licensed
Products in a given calendar year exceed Actual Expenses in that calendar year.
COMMERCIALLY REASONABLE EFFORTS shall mean efforts and resources commonly used
in the research-based pharmaceutical industry for a product at a similar stage
in its product life of similar market potential taking into account efficacy and
side effects, the competitiveness of alternative products in the marketplace,
the patent and other proprietary position of the product, the likelihood of
regulatory approval given the regulatory structure involved, the profitability
of the product including the royalties payable to licensors of patent rights,
alternative products and other relevant factors. Commercially Reasonable Efforts
shall be determined on a market-by-market basis for a particular product, and it
is anticipated that the level of effort will change over time, reflecting
changes in the status of the product and the market involved.
COST OF SALES includes COGS ***.
CUMULATIVE ADJUSTED PROFIT shall be equal to ***
DEFAULT shall mean with respect to a party that (i) any representation or
warranty of such party shall have been untrue in any material respect when made
or (ii) such party shall have failed to perform any material obligation set
forth herein.
G & A shall mean general and administrative.
IMPROVEMENTS shall have the meaning set forth in the IUF License Agreement.
IUF LICENSE AGREEMENT shall mean the License Agreement dated as of October 17,
1996 between Indiana University Foundation ("IUF") and Praecis, as amended.
NET SALES shall mean ***.
PATENTED PRODUCT shall mean a Licensed Product the sale of which without a
license would infringe one or more claims of a valid, issued, and enforceable
(i.e., the patent is not expired and all maintenance fees due having been paid;
and there has been no determination which remains in effect of unenforceability
of the patent by a court of
21
<PAGE>
competent jurisdiction) patent included in the Collaboration Technology in the
country of sale. ***
PATENT RIGHT shall mean patent applications, patents issuing thereon and any
extensions or restorations by existing or future extension or restoration
mechanisms, including without limitation Supplementary Protection Certificates
or the equivalent thereof, renewals, continuations, continuations-in-part,
divisions, patents-of-addition, and/or reissues of any patent.
PIVOTAL TRIAL shall mean a clinical trial which, if the defined end-points are
met, is intended by Amgen and Praecis as of the start of such trial to be the
clinical trial which will constitute sufficient basis for receipt of marketing
approval in the United States.
PRAECIS IMPROVEMENTS shall mean all changes in composition, design or
manufacture of the Licensed Products by Praecis 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.
R & D shall mean research and development.
SYNTHELABO AGREEMENT shall mean the License Agreement dated May 13, 1997 by and
between Praecis and Synthelabo, as amended by letter dated July 31, 1997 from
Synthelabo to Praecis.
UNPATENTED PRODUCT shall mean a Licensed Product the sale of which without a
license would not infringe one or more claims of a valid, issued and enforceable
(i.e., the patent is not expired and all maintenance fees due having been paid;
and there has been no determination which remains in effect of unenforceability
of the patent by a court of competent jurisdiction) patent included in the
Collaboration Technology in the country of sale. An Unpatented Product shall
become, and be, a Patented Product when, and for so long as, it meets the above
definition of Patented Product.
22
<PAGE>
EXHIBIT A
PRAECIS PATENT RIGHTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
SERIAL NO. FILING DATE TITLE PATENT NO./ISSUE
DATE
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
US 08/480,494 6-7-95 LHRH Antagonist Peptides 5,843,901
12-1-98
- -------------------------------------------------------------------------------------------------------------------------
*** *** ***
- -------------------------------------------------------------------------------------------------------------------------
*** *** ***
- -------------------------------------------------------------------------------------------------------------------------
*** *** ***
- -------------------------------------------------------------------------------------------------------------------------
*** *** ***
- -------------------------------------------------------------------------------------------------------------------------
*** *** ***
- -------------------------------------------------------------------------------------------------------------------------
US 08/573,109 12-15-95 Methods For Treating Prostate Cancer With LHRH-R 5,780,435
Antagonists 7-14-98
- -------------------------------------------------------------------------------------------------------------------------
US 08/755,593 11-25-96 Methods For Treating Prostate Cancer With LHRH 5,843,902
Antagonists 12-1-98
- -------------------------------------------------------------------------------------------------------------------------
*** *** ***
- -------------------------------------------------------------------------------------------------------------------------
*** *** ***
- -------------------------------------------------------------------------------------------------------------------------
PCT/US96/18911 *** Methods For Treating Prostate Cancer With LHRH
Antagonists
- -------------------------------------------------------------------------------------------------------------------------
*** *** ***
- -------------------------------------------------------------------------------------------------------------------------
*** *** ***
- -------------------------------------------------------------------------------------------------------------------------
*** *** ***
- -------------------------------------------------------------------------------------------------------------------------
US 08/762,747 *** ***
- -------------------------------------------------------------------------------------------------------------------------
*** *** ***
- -------------------------------------------------------------------------------------------------------------------------
*** *** ***
- -------------------------------------------------------------------------------------------------------------------------
*** *** ***
- -------------------------------------------------------------------------------------------------------------------------
*** *** ***
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
ANSWER 1 OF 1 REGISTRY COPYRIGHT 1999 ACS
<S> <C>
RN 183552-38-7 ZREGISTRY
CN D-Alaninamide, N-acetyl-3-(2-napthalenyl) -D-alanyl-4-cholor-D-
Phehylalanyl-3-(3-pyridinyl) -D-alanyl-L-seryl-N-methly-L-tyrosyl-D-
Asparaginyl-L-leucyl-N6- (1-methylethyl) -L-lysyl-L-prolyl- (9CI) (CA
INDEX NAME)
OTHER NAMES:
CN Abarelix
CN PPI 149
CN R 3827
FS PROTEIN SEQUENCE; STEREOSEARCH
MF C72 H95 C1 N14 O14
CI COM
SR CAS Registry Services
LC STN Files: ADISINSIGHT, CA, CAPLUS, DDFU, DRUGU, DRUGUPDATES,
TOXLIT, USPATFULL
</TABLE>
Absolute stereochemistry.
PAGE 1-A
[CHEMICAL DIAGRAM]
PAGE 1-B
[CHEMICAL DIAGRAM]
2 REFERENCES IN FILE CA (1967 TO DATE)
2 REFERENCES IN FILE CAPLUS (1967 TO DATE)
24
<PAGE>
EXHIBIT C
COUNTRIES EXCLUDED FROM TERRITORY*
- ------------------------------------
*All countries not listed are included in the Territory
<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 Andorra
- -------------------------------------------------------------------------------------------------------
Belize Costa Rica Guatemala Honduras
- -------------------------------------------------------------------------------------------------------
Mexico Nicaragua Panama San Salvador
- -------------------------------------------------------------------------------------------------------
Argentina Bolivia Brazil Chile
- -------------------------------------------------------------------------------------------------------
Columbia Ecuador French Guyana Guyana
- -------------------------------------------------------------------------------------------------------
Paraguay Peru Uruguay Venezuela
- -------------------------------------------------------------------------------------------------------
Albania Armenia Azerbaijan Belarusse
- -------------------------------------------------------------------------------------------------------
Bosnia/Herzegovina Bulgaria Croatia Czech Republic
- -------------------------------------------------------------------------------------------------------
Estonia Georgia Hungary Kazakhstan
- -------------------------------------------------------------------------------------------------------
Kyrgyzstan Latvia Lithuania Macedonia
- -------------------------------------------------------------------------------------------------------
Moldavia Poland Romania Russia
- -------------------------------------------------------------------------------------------------------
Slovakia Slovenia Tadzhikistan Turkmenistan
- -------------------------------------------------------------------------------------------------------
Ukrania Uzbekistan Yugoslavia
</TABLE>
25
<PAGE>
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
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 Emirates Bahrain
- ---------------------------------------------------------------------------------------------------
Malta Qatar
- ---------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
PRAECIS PHARMACEUTICALS
LONG RANGE PLAN - ** 1999-2008
MARCH 1999
EXHIBIT D ($MM)
**
<PAGE>
EXHIBIT E
[AMGEN INC. LETTERHEAD]
VIA FAX: 617-731-1908
February 26, 1999
Dr. Marc B. Garnick, MD
Executive Vice President and Chief Medical Officer
Praecis Pharmaceuticals Incorporated
1 Hampshire Street
Cambridge, MA 02139
Dear Marc:
RE: Collaboration of Amgen and Praecis on Abarelix Development
Thank you for your hospitality and patience in hosting the Amgen team on
February 24 at the Praecis office in Boston.
I have attached draft minute to document the results of our conversations.
Please let me know if you have any corrections. As we discussed, a proposed
agenda for our planned meeting in Boston on Monday is attached.
Best regards
William Sheridan
cc: C. Bubser, M. Foote, D. Alu, D. Menchaca, H. Movahhed, J. O'Connor, D.
Perry, G. Schwab, T. Ulich
29
<PAGE>
DRAFT
Minutes of Discussion between Amgen and Praecis staff held in Boston February
24th, 1999, 1:00pm - 4:30pm
Attendees:
a) Section 1 A only.
Praecis: M. Campion, E. Cole, T. English, M. Garnick, M. Gray, C. Kelley, B.
Kuca, K. Martha, C. Molineaux
Amgen: C. Bubser, M. Foote, H. Movahhed, G. Schwab, B. Sheridan
PPD by phone: R. Crawley, J. Conway, T. Hopkins, C. Philput, K. Ferriter
b) All other sections - Continued discussions between M. Garnick and W.
Sheridan, 4:30-9:45pm.
I. PRIORITIES FOR ONGOING CLINICAL PROGRAM AND PRECLINICAL SUPPORT
***
(BALANCE OF OUTLINE IS CONFIDENTIAL.)
30
<PAGE>
Appendix 1
Prostate Cancer NDA - Clinical Components
***
***
31
<PAGE>
Appendix 3
Proposed Agenda for Abarelix R&D Offsite Meeting
Boston
Monday, March 1, 1999
Amgen Attendees:
Chris Bubser - Marketing Planning and Development, David Lau - Pharmacokinetic
and Drug Metabolism, Dora Menchaca - Clinical Research, Hassan Movahhed -
Clinical Affairs, Doug Perry - Marketing Planning and Development, Bill Sheridan
- - Product Development, Gisela Schwab - Clinical Research
Praecis Attendees:
Marc Garnick, C. Molineaux, M. Campion, Marc Silver, B. Cooper, Janice Swirski,
Kip Martha, Michelle Gray
<TABLE>
<S> <C> <C>
1. Welcome and Introductions M. Garnick
2. Questions and Clarifications to Minutes of February 24 Meeting All
3. NDA filing
- - Amgen International Clinical Safety Department contact for Praecis (H. Movahhed)
- - ***
- - ***
4. Package Insert and Preferred Product Profile C. Bubser
5. Main Item: Abarelix Product Development Plan
a) new prostate cancer studies
b) endometriosis NDA plan
c) BPH
d) PIN
e) ***
f) ***
g) summary of timelines
h) summary of costs
i) requirements international filings in Canada and Australia (brief)
j) development of Abarelix in Japan (very brief)
6. Investigator Meetings, Scientific Meetings, Advisory Panel Workshops, Regulatory Meetings
-plans and schedules
</TABLE>
32
<PAGE>
EXHIBIT F
REPAYMENT SCHEDULE
INTEREST
***
PRINCIPAL
***All payments will be applied first to accrued but unpaid interest and then to
principal. All principal balances will be repaid by December 31, 2008.
<PAGE>
EXHIBIT 10.8
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN
PORTIONS OF THIS DOCUMENT. SUCH PORTIONS HAVE BEEN
REDACTED AND MARKED WITH ASTERISKS (**). THE NON-
REDACTED VERSION OF THIS DOCUMENT HAS BEEN SENT TO
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
AN APPLICATION FOR CONFIDENTIAL TREATMENT.
COLLABORATION AGREEMENT
BETWEEN
HUMAN GENOME SCIENCES, INC.
AND
PRAECIS PHARMACEUTICALS INCORPORATED
JANUARY 31, 2000
<PAGE>
TABLE OF CONTENTS
DEFINITIONS................................................................. 3
GRANTS AND COVENANTS........................................................ 12
DRUG DISCOVERY EFFORTS...................................................... 14
MILESTONES, ROYALTIES AND CERTAIN OTHER PAYMENTS............................ 29
CONFIDENTIALITY............................................................. 33
OWNERSHIP; PATENT PROSECUTION AND LITIGATION................................ 36
STATEMENTS AND REMITTANCES.................................................. 43
TERM AND TERMINATION........................................................ 46
WARRANTIES AND REPRESENTATIONS.............................................. 50
INDEMNIFICATION; INSURANCE.................................................. 53
FORCE MAJEURE............................................................... 58
DISPUTE RESOLUTION.......................................................... 58
SEPARABILITY................................................................ 61
ENTIRE AGREEMENT............................................................ 61
NOTICES..................................................................... 62
ASSIGNMENT.................................................................. 63
COUNTERPARTS................................................................ 64
WAIVER...................................................................... 64
INDEPENDENT RELATIONSHIP.................................................... 65
2
<PAGE>
COLLABORATION AGREEMENT
This Agreement ("Agreement"), dated as of the 31st of January 2000 (the
"Effective Date"), is entered into by Human Genome Sciences, Inc. ("HGS"), a
Delaware corporation, having a place of business at 9410 Key West Avenue,
Rockville, Maryland 20850, and Praecis Pharmaceuticals Incorporated, a Delaware
corporation, having a place of business at One Hampshire Street, Cambridge,
Massachusetts 02139 ("PPI").
1. DEFINITIONS
1.1 "ANNUAL BUDGET" has the meaning set forth in Paragraph 3.8.
1.2 "AFFILIATES" shall mean any individual or entity directly or indirectly
controlling, controlled by or under common control with, the specified
individual or entity. For purposes of this Agreement, the direct or indirect
ownership of over fifty percent (50%) of the outstanding voting securities of an
entity, or the right to receive over fifty (50%) of the profits or earnings of
an entity shall be deemed to constitute control. Such other relationship as in
fact gives such individual or entity the power or ability to control the
management, business and affairs of an entity shall also be deemed to constitute
control.
1.3 "**" shall mean the ** (**) ** described in the international patent
application **.
3
<PAGE>
1.4 "**" shall mean the ** (**) ** described in international patent application
**.
1.5 "COST OF GOODS" shall mean the sum of the actual direct and indirect costs
for active and other ingredients, supplies, material, and labor and an allocated
portion of overheads, incurred in manufacturing a PRODUCT, as determined in
accordance with Generally Accepted Accounting Principles in the United States.
1.6 "COST SHARING DEVELOPMENT PERIOD" shall have the meaning set forth in
Paragraph 3.8.
1.7 "COST SHARING DEVELOPMENT PERIOD REIMBURSEMENT STATEMENT" has the meaning
set forth in Paragraph 3.8.
1.8 "DEVELOPMENT PLAN" has the meaning set forth in Paragraph 3.8.
1.9 "FIELD" shall mean the treatment and/or prevention of a disease or disorder
in humans through the use of a SMALL MOLECULE DRUG directed against a RESEARCH
TARGET.
1.10 "HGS PATENT(S)" shall mean all patents and patent applications to the
extent that they claim HGS TECHNOLOGY or RESEARCH TECHNOLOGY, which are or
become owned by HGS or to which HGS otherwise has, now or in the future, the
right to grant licenses. Included within the definition of HGS PATENTS are all
continuations, continuations-in-part, divisions, patents of addition, reissues,
4
<PAGE>
renewals, registrations, confirmations, re-examinations or extensions, and any
provisional applications thereof and all related SPCs.
1.11 "HGS/PPI PRODUCT" shall mean a SB NON-PARTICIPATING PRODUCT as to which
(i) PPI has exercised the PPI CONTINUED PARTICIPATION OPTION and not made on
OPT-OUT ELECTION and (ii) HGS has not made an OPT-OUT ELECTION.
1.12 "HGS/PPI PRODUCT REIMBURSEMENT STATEMENT" has the meaning set forth in
Paragraph 3.13.
1.13 "HGS PRODUCT" shall mean a SB NON-PARTICIPATING PRODUCT as to which (i) PPI
has not exercised the PPI CONTINUED PARTICIPATION OPTION or has made an OPT-OUT
ELECTION and (ii) HGS has not made an OPT-OUT ELECTION.
1.14 "HGS TECHNOLOGY" shall mean, collectively, any and all data, substances,
processes, materials, formulae, know-how and inventions with respect to RESEARCH
TARGETS which may be useful within the FIELD and which are developed by or on
behalf of HGS during or prior to the RESEARCH TERM and which are owned by HGS or
with respect to which HGS has the right to grant a license.
1.15 "INEFFECTIVE RESEARCH TARGET" has the meaning set forth in Paragraph 3.6.
5
<PAGE>
1.16 "INITIAL SCREENING DATE" has the meaning set forth in Paragraph 3.4.
1.17 "LONG RANGE PLAN" has the meaning set forth in Paragraph 3.13.
1.18 "LRP ANNUAL BUDGET" has the meaning set forth in Paragraph 3.13.
1.19 "NET SALES" shall mean proceeds actually received from sales of a PRODUCT
(calculated on a PRODUCT by PRODUCT basis) by PPI, HGS, or SB as the case may
be, or, except as provided below in this definition, by their respective
AFFILIATES, licensees (or sublicensees) of such entities or such AFFILIATES,
distributors trading on their respective accounts, joint ventures or other
associated companies, less deductions for (i) transportation, shipping and
postage charges, including transportation insurance and customs duties to the
extent separately invoiced; (ii) sales and excise taxes and duties paid or
allowed by a selling party and any other governmental charges imposed upon the
production, importation, use or sale of such PRODUCT (including value added
taxes or other governmental charges otherwise measured by the billing amount
when included in billing); (iii) normal and customary trade, quantity and cash
discounts allowed and charge back payments and rebates granted to managed health
care organizations or to federal, state and local governments, their agencies
and purchasers and reimbursees, including but not limited to Medicaid rebates or
to trade customers, including but not limited to wholesalers, chain and pharmacy
buying groups; (iv) rebates (or equivalents thereof)
6
<PAGE>
granted to or charged by national, state or local government authorities in
countries other than the United States; and (v) allowances or credits to
customers on account of rejection or return of such PRODUCT or on account of
retroactive price reductions affecting such PRODUCT. Sales between or among PPI,
its AFFILIATES, licensees (or sublicensees) of PPI or such AFFILIATES,
distributors trading on such entities' respective accounts, joint ventures or
other associated companies, sales between or among HGS, its AFFILIATES,
licensees (or sublicensees) of HGS or such AFFILIATES, distributors trading on
such entities' respective account, joint ventures or other associated companies,
and sales between or among SB, its AFFILIATES, licensees (or sublicensees) of SB
or such AFFILIATES, distributors trading on such entities' respective accounts,
joint ventures or other associated companies, as applicable, shall be included
within NET SALES only if such purchaser is an end-user of the PRODUCT.
Otherwise, NET SALES shall only include the subsequent, final sales to THIRD
PARTIES.
1.20 "OPERATING PROFIT" shall mean NET SALES less (i) COST OF GOODS, (ii)
royalties paid to THIRD PARTIES, (iii) costs and expenses of Phase IV studies,
i.e., post-marketing clinical studies and (iv) marketing, promotion,
distribution and selling expenses of HGS or PPI or their AFFILIATES as the case
may be, all as determined in accordance with Generally Accepted Accounting
Principles in the United States.
7
<PAGE>
1.21 "OPT-OUT ELECTION" has the meaning set forth in Paragraph 3.12.
1.22 "OPT-OUT PARTY" has the meaning set forth in Paragraph 3.12.
1.23 "PHASE IIa", as used herein, shall have the same meaning as such term is
used in the SB/HGS License Agreement.
1.24 "PI DEVELOPMENT COST AMOUNT" has the meaning set forth in Paragraph 4.5.
1.25 "PPI PATENT(S)" shall mean all patents and patent applications to the
extent that they claim PPI TECHNOLOGY, which are or become owned by PPI or to
which PPI otherwise has, now or in the future, the right to grant licenses.
Included within the definition of PPI PATENTS are all continuations,
continuations-in-part, divisions, patents of addition, reissues, renewals,
registrations, confirmations, re-examinations or extensions, and any provisional
applications thereof and all related SPCs.
1.26 "PPI PRODUCT" shall mean a SB NON-PARTICIPATING PRODUCT as to which (i) PPI
has exercised the PPI CONTINUED PARTICIPATION OPTION and not made an OPT-OUT
ELECTION and (ii) HGS has made an OPT-OUT ELECTION.
1.27 "PPI TECHNOLOGY" shall mean, collectively, any and all data, substances,
processes, methods, materials, formulae, know-how and inventions with respect to
biology-based and chemistry-based combinatorial systems for screening of
8
<PAGE>
compounds that bind to molecular targets, including all improvements and
modifications thereof, which may be useful within the FIELD and which are
developed by or on behalf of PPI during or prior to the RESEARCH TERM and which
are owned by PPI or with respect to which PPI has the right to grant a license
to HGS.
1.28 "PRODUCT" shall mean a PRODUCT LEAD that has been advanced into pre-IND
testing pursuant to Paragraph 3.5. Included within the definition of PRODUCT is
any preparation, formulation or product containing a PRODUCT LEAD, whether as
the sole active ingredient or mixed with any other active ingredient, and
whether or not such PRODUCT LEAD is altered or modified after its advancement
into pre-IND testing.
1.29 "PRODUCT LEAD" shall mean a SMALL MOLECULE DRUG directed to a RESEARCH
TARGET that may be useful in the FIELD (i) which SMALL MOLECULE DRUG is
identified as a result of the screening of such SMALL MOLECULE DRUG against a
RESEARCH TARGET pursuant to or in connection with this Agreement, or (ii) the
identification of which SMALL MOLECULE DRUG involved or utilized, in any manner,
PPI TECHNOLOGY or RESEARCH TECHNOLOGY.
1.30 "PRODUCT LEAD ADVANCEMENT CRITERIA" has the meaning set forth in Paragraph
3.1.
9
<PAGE>
1.31 "PRODUCT LEAD ADVANCEMENT DATE" has the meaning set forth in Paragraph 3.5.
1.32 "RESEARCH PATENTS" shall mean all HGS PATENTS to the extent they claim
RESEARCH TECHNOLOGY.
1.33 "RESEARCH PLAN" shall mean a plan for screening of RESEARCH TARGETS to
discover PRODUCT LEADS and PRODUCTS. An example of such a plan is shown in
Appendix A.
1.34 "RESEARCH TARGET" shall mean ** and **, as applicable, and/or a target
substituted for a RESEARCH TARGET pursuant to Paragraph 3.6.
1.35 "RESEARCH TECHNOLOGY" shall mean, collectively, any and all information,
data, substances, processes, methods, materials, formulae, know-how and
inventions solely with respect, and solely to the extent applicable, to RESEARCH
TARGETS, PRODUCT LEADS or PRODUCTS, including SAR INFORMATION and all
improvements and modifications with respect to the foregoing, in each case
solely to the extent developed or discovered during the RESEARCH TERM pursuant
to the collaboration provided for in this Agreement.
1.36 "RESEARCH TERM" shall mean the period beginning on the Effective Date and
ending on November 1, 2004, as such period may be extended by mutual agreement
of the parties, unless this Agreement is earlier terminated (or earlier
terminated with respect to a RESEARCH TARGET or a PRODUCT) in accordance
10
<PAGE>
with ARTICLE 8 hereof, in which event the RESEARCH TERM (or the RESEARCH TERM
with respect to such RESEARCH TARGET or PRODUCT) shall terminate on the
effective date of such termination.
1.37 "SAR INFORMATION" shall mean structure activity relationships information,
and information with respect to chemical structure, in each case with respect to
SMALL MOLECULE DRUGS screened against a RESEARCH TARGET pursuant to or in
connection with this Agreement
1.38 "SB" shall mean SmithKline Beecham Corporation and/or SmithKline Beecham
p.l.c., as defined in the SB/HGS LICENSE AGREEMENT.
1.39 "SB ADVERSE EVENT" has the meaning set forth in Paragraph 10.2.
1.40 "SB/HGS LICENSE AGREEMENT" shall mean the SB/HGS License Agreement dated
June 28, 1996 between SmithKline Beecham Corporation, SmithKline Beecham p.l.c.,
and Human Genome Sciences, Inc., and all predecessor and successor agreements,
in each case as amended or supplemented after the date hereof.
1.41 "SB OPTION" has the meaning set forth in Paragraph 3.11.
1.42 "SB NON-PARTICIPATING PRODUCT" has the meaning set forth in Paragraph 3.11.
1.43 "SB PARTICIPATING PRODUCT" has the meaning set forth in Paragraph 3.11.
11
<PAGE>
1.44 "SMALL MOLECULE DRUGS" shall mean compounds of molecular weight less than
** kilodaltons, including synthetic peptides and non-peptides, but excluding
natural ligands, soluble receptors, antibodies and antisense.
1.45 "SPC" shall mean a right based upon an underlying patent such as a
Supplementary Protection Certificate.
1.46 "THIRD PARTY" shall mean any party other than HGS or PPI or an AFFILIATE of
PPI or HGS.
2. GRANTS AND COVENANTS
2.1 Subject to the terms and conditions of this Agreement, PPI grants to HGS a
non-exclusive, non-transferable (except as expressly provided herein), worldwide
license under PPI TECHNOLOGY and PPI PATENTS, and HGS grants to PPI a
non-exclusive, non-transferable, worldwide license under HGS TECHNOLOGY,
RESEARCH TECHNOLOGY and HGS PATENTS, to perform research and development on
behalf of HGS in the FIELD during the RESEARCH TERM solely with respect to
RESEARCH TARGETS.
2.2 Subject to the terms and conditions of this Agreement, PPI grants to HGS an
exclusive, non-transferable (except as expressly provided herein), worldwide
license under PPI TECHNOLOGY and PPI PATENTS, solely to the extent such PPI
TECHNOLOGY and/or PPI PATENTS are required to practice any RESEARCH
12
<PAGE>
TECHNOLOGY in performing research and development solely with respect to PRODUCT
LEADS and PRODUCTS.
2.3 Subject to the terms and conditions of this Agreement, HGS grants to PPI an
exclusive, non-transferable (except as expressly provided herein), worldwide
license under HGS TECHNOLOGY, RESEARCH TECHNOLOGY, and HGS PATENTS to perform
research and development on behalf of HGS in the FIELD solely with respect to
PRODUCT LEADS and PRODUCTS.
2.4 Subject to the terms and conditions of this Agreement, PPI grants to HGS an
exclusive, non-transferable (except as expressly provided herein), worldwide
license under PPI TECHNOLOGY and PPI PATENTS, solely to the extent such PPI
TECHNOLOGY and/or PPI PATENTS are required to make, have made, use, import,
export, offer to sell and sell PRODUCTS in the FIELD.
2.5 Subject to the terms and conditions of this Agreement, HGS grants to PPI an
exclusive, non-transferable (except as expressly provided herein), worldwide
license under HGS TECHNOLOGY, RESEARCH TECHNOLOGY, and HGS PATENTS, solely to
the extent such HGS TECHNOLOGY, RESEARCH TECHNOLOGY and/or HGS PATENTS are
required to perform research and development with respect to, or to make, have
made, use, import, export, offer to sell and sell, HGS/PPI PRODUCTS or PPI
PRODUCTS, in the FIELD.
13
<PAGE>
Miscellaneous
2.6 During and after the RESEARCH TERM, PPI agrees to use HGS TECHNOLOGY,
RESEARCH TECHNOLOGY and HGS PATENTS only as licensed and permitted hereunder.
During and after the RESEARCH TERM, HGS agrees to use PPI TECHNOLOGY and PPI
PATENTS only as licensed and permitted hereunder.
2.7 Except as provided in Article 16, (i) the rights and licenses granted to HGS
by PPI are sublicensable and/or transferable by HGS to a THIRD PARTY only for
the purpose of developing and/or commercializing a specific HGS PRODUCT or a
specific SB PARTICIPATING PRODUCT and (ii) the rights and licenses granted to
PPI by HGS are sublicensable and/or transferable by PPI to a THIRD PARTY only
for the purpose of developing and/or commercializing a specific PPI PRODUCT.
3. DRUG DISCOVERY EFFORTS
3.1 PPI and HGS shall form a Joint Research Committee ("JRC") to coordinate the
collaboration provided for herein with respect to RESEARCH TARGETS and make
determinations to the extent specified herein, including establishing criteria
which should be met for a PRODUCT LEAD to be advanced into pre-IND testing (such
criteria, as modified by action of JRC from time to time, together with the
other factors to be considered by the JRC in determining whether a PRODUCT LEAD
should advance into pre-IND testing as set forth in Paragraph 3.5, being
referred to as the "PRODUCT LEAD ADVANCEMENT CRITERIA"). PPI shall
14
<PAGE>
have final decision-making authority as to the precise methods and procedures to
be used in screening SMALL MOLECULE DRUGS against the RESEARCH TARGETS.
(1) The JRC shall consist of three (3) representatives of each party,
but each party shall have only one vote. JRC actions shall be taken
only by unanimous vote.
(2) Each party shall notify the other party in writing of its initial
representatives to the JRC within ten (10) days after the Effective
Date, and may substitute one or more representatives from time to
time effective upon written notice to the other party.
(3) The JRC shall meet not less than twice each calendar year during the
RESEARCH TERM so long as discovery or development of a PRODUCT is
being diligently pursued by the parties hereunder, at such times and
places as mutually agreed by the parties, alternating between
Cambridge, Massachusetts and Rockville, Maryland or such other
places as the parties mutually agree. If the parties mutually agree,
any meeting of the JRC may be held by telephone or video conference.
At each such meeting, the JRC representatives shall discuss the
status of all screening activities directed to RESEARCH TARGETS.
15
<PAGE>
(4) Within thirty (30) days following each JRC meeting, the party
hosting the meeting (or entitled to host the meeting, if held by
telephonic or video conference or at a location other than
Cambridge, Massachusetts or Rockville, Maryland) shall prepare and
provide to the other party mutually acceptable, reasonably detailed
written minutes describing all matters reviewed or considered by the
JRC and all determinations and actions of the JRC and the reasons
therefor.
3.2 At the first meeting of the JRC, which shall occur as soon as reasonably
practicable after the Effective Date, PPI will present for review by the JRC a
preliminary outline of a research plan for identifying PRODUCT LEADS.
3.3 For each RESEARCH TARGET, HGS shall provide to PPI sufficient biological
material (including without limitations clones and other available biological
material) to facilitate the initial screening by PPI of SMALL MOLECULE DRUGS
directed to such RESEARCH TARGET.
3.4 For each RESEARCH TARGET, as soon as reasonably practicable following the
first meeting of the JRC and PPI's receipt of the biological materials referred
to in Section 3.3 (and in any event no later than twelve (12) months after such
first meeting and PPI's receipt of such biological materials), subject to PPI
receiving the notification from HGS referred to below that a RESEARCH PLAN has
been submitted, PPI shall undertake screening of such RESEARCH TARGET in an
effort
16
<PAGE>
to identify PRODUCT LEADS that meet the criteria for such RESEARCH TARGET. PPI
will notify HGS of the date on which PPI commences such initial screening of a
RESEARCH TARGET (with respect to each RESEARCH TARGET, the "INITIAL SCREENING
DATE"). Based solely on information provided by HGS to PPI, PPI acknowledges
that pursuant to the SB/HGS LICENSE AGREEMENTS, HGS may not initiate screening
to evaluate multiple chemical entities for activity with respect to a RESEARCH
TARGET without first submitting to SB a RESEARCH PLAN, and must submit annual
updates to each such plan. PPI agrees not to undertake any screening of a
RESEARCH TARGET, until notified by HGS that a RESEARCH PLAN has been submitted.
PPI further agrees to assist, as reasonably requested by HGS, in the preparation
of the RESEARCH PLAN and in any and all annual updates. HGS covenants and agrees
that it will submit the aforesaid RESEARCH PLAN to SB within thirty (30) days of
the EFFECTIVE DATE and will promptly notify PPI of such submission.
3.5 As soon as reasonably practicable after identifying a PRODUCT LEAD which PPI
believes meets the PRODUCT LEAD ADVANCEMENT CRITERIA, PPI shall present such
PRODUCT LEAD to the JRC, along with all material data related to such PRODUCT
LEAD. The JRC shall review such PRODUCT LEAD and such data to determine whether
such PRODUCT LEAD meets the PRODUCT LEAD ADVANCEMENT CRITERIA and whether such
PRODUCT LEAD should
17
<PAGE>
advance into pre-IND testing. In making this decision, the JRC shall consider
not only such PRODUCT LEAD's characteristics, but also the prevailing market
conditions, the status of competitive products and the status of the parties'
and competitors' applicable intellectual property rights. If the JRC, in its
sole discretion (provided that each party will cause its representatives on the
JRC to act reasonably and in good faith) and by unanimous vote, determines that
such PRODUCT LEAD should advance into pre-IND testing (the date of such
determination with respect to a particular PRODUCT LEAD being referred to as the
"PRODUCT LEAD ADVANCEMENT DATE"), then such PRODUCT LEAD shall thereupon be
deemed a PRODUCT for the purposes of this Agreement.
3.6 If, after performing reasonable screening efforts with respect to a RESEARCH
TARGET, PPI determines that it is not reasonably likely that one or more PRODUCT
LEADS will be identified which meet the PRODUCT LEAD ADVANCEMENT CRITERIA, (i)
PPI may advise the JRC of such determination and the bases therefor (a RESEARCH
TARGET as to which PPI has made such a determination and so advised the JRC
being referred to as an "INEFFECTIVE RESEARCH TARGET"), (ii) the JRC will
thereupon consider in good faith whether an alternative target should be
substituted by HGS for such INEFFECTIVE RESEARCH TARGET, and (iii) if the JRC
determines that such a substitution should occur, then from and after the date
of such determination, for all purposes of this
18
<PAGE>
Agreement such alternative target shall be deemed a RESEARCH TARGET and such
INEFFECTIVE RESEARCH TARGET shall cease to be a RESEARCH TARGET; provided that
the JRC shall not be required to consider such a substitution with respect to
more than one RESEARCH TARGET.
3.7 As soon as reasonably practicable after the PRODUCT LEAD ADVANCEMENT DATE,
HGS and PPI shall form a Joint Development Committee ("JDC").
(a) The JDC shall consist of three (3) representatives of each party,
but each party shall have only one vote. All decisions of the JDC
shall be by unanimous vote.
(b) Each party shall notify the other party in writing of its initial
representatives to the JDC within thirty (30) days after the PRODUCT
LEAD ADVANCEMENT DATE. Each party may substitute one or more
representatives from time to time effective upon written notice to
the other party.
(c) The JDC shall meet not less than twice each calendar year so long as
development and commercialization of a PRODUCT is being diligently
pursued by the parties hereunder, at such times and places as
mutually agreed by the parties, alternating between Cambridge,
Massachusetts and Rockville, Maryland or such other places as the
parties mutually agree. If the parties mutually agree, any meeting
of
19
<PAGE>
the JRC may be held by telephone or video conference. At each such
meeting, the JDC representatives shall discuss and make decisions
with respect to the development of PRODUCTS.
3.8 The JDC shall direct and coordinate all activities related to pre-IND
testing, IND filing and the planning and implementation of clinical trials with
respect to a PRODUCT from and after the PRODUCT LEAD ADVANCEMENT DATE with
respect to such PRODUCT through and including the conclusion of Phase IIa (the
"COST SHARING DEVELOPMENT PERIOD"). As soon as reasonably practicable after a
PRODUCT LEAD ADVANCEMENT DATE, the JDC will prepare and approve a DEVELOPMENT
PLAN for the PRODUCT which was the subject of such PRODUCT LEAD ADVANCEMENT
DATE, which shall describe in detail the development work with respect to such
PRODUCT, which party shall perform which tasks, the budget for such work for the
ensuing year and including, in the case of the first such annual budget, the
remaining months of the then current year (the "ANNUAL BUDGET"), as well as
milestones, time frames and operating plans (as amended from time to time by the
JDC, the "DEVELOPMENT PLAN"). The DEVELOPMENT PLAN shall be reviewed annually by
the JDC and the ANNUAL BUDGET for the ensuing year shall be approved by the JDC
no later than December 15th of the then current year. The DEVELOPMENT PLAN shall
allocate responsibilities to the respective parties consistent with their
respective capabilities and, to
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the extent possible, so as to maximize the expeditious and cost-effective
development of the PRODUCT. PPI and HGS shall each be responsible for one-half
of all direct costs (including direct labor costs to be charged at mutually
agreed upon rates) and out-of-pocket expenses (i) reasonably incurred in
connection with the development of a PRODUCT during the COST SHARING DEVELOPMENT
PERIOD and prior to approval by the JDC of the first ANNUAL BUDGET and (ii)
incurred during the COST SHARING DEVELOPMENT PERIOD and after approval by the
JDC of the first ANNUAL BUDGET, provided, in the case of clause (ii), such cost
or expense item is provided for in the ANNUAL BUDGET then in effect and the
amount thereof is not inconsistent in any material respect with the amount(s)
for such item(s) contemplated by such ANNUAL BUDGET. Any payments to a THIRD
PARTY for services (e.g., toxicology studies, clinical trial expenses) performed
in connection with pre-clinical or clinical studies to the extent not provided
for in the ANNUAL BUDGET, must be approved by the JDC prior to the incurrence of
any such expense. If a party is claiming reimbursement pursuant to this
Paragraph 3.8, then within forty-five (45) days after the end of a calendar
quarter during which the costs or expenses for which reimbursement is being
claimed were incurred, a party will submit to the other a statement (each a
"COST SHARING DEVELOPMENT PERIOD REIMBURSEMENT STATEMENT") itemizing in
reasonable detail such cost and expenses and setting forth the total amount, if
any, of such costs and
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expenses to be reimbursed by the other party pursuant to this Paragraph 3.8.
Such reimbursement amounts shall be paid within thirty (30) days after receipt
of a COST-SHARING DEVELOPMENT PERIOD REIMBURSEMENT STATEMENT, except to the
extent such COST SHARING DEVELOPMENT PERIOD REIMBURSEMENT STATEMENT is being
disputed in good faith. Except as otherwise provided herein, each party shall
assume full responsibility for its own costs and expenses with respect to a
PRODUCT incurred during the COST SHARING DEVELOPMENT PERIOD.
3.9 With respect to any PRODUCT, during the COST SHARING DEVELOPMENT PERIOD the
parties shall each use reasonable efforts consistent with prudent business
practices and this Agreement to expeditiously develop such PRODUCT through the
conclusion of PHASE IIa.
3.10 HGS shall have responsibility for filing all INDs with respect to a PRODUCT
(and any subsequent INDs with respect to such PRODUCT, including for different
indications) and coordinating with the U.S. Food and Drug Administration, and
all foreign counterparts, with respect thereto.
3.11 Based solely on information provided by HGS to PPI, PPI acknowledges that,
with respect to the RESEARCH TARGETS, SB may have an option for
co-development/co-marketing rights with HGS for any PRODUCT (with respect to any
PRODUCT, if applicable, the "SB OPTION"). For any such Product for which SB
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has and exercises the SB Option and its rights to co-development/co-marketing (a
"SB PARTICIPATING PRODUCT"), (i) PPI shall have no right to continue to
participate in the development or to participate in the commercialization of
such SB PARTICIPATING PRODUCT, but shall have only the right to receive the
royalties and milestones set forth in Paragraph 4.1, (ii) the license granted by
HGS to PPI pursuant to Section 2.3, to the extent such license is with respect
to such SB PARTICIPATING PRODUCT or the related PRODUCT LEAD, shall
automatically terminate and be without further force or effect, and (iii) to the
extent legally permissible, PPI will take all action reasonably necessary to
assign to HGS all of its right, title and interest in, and transfer possession
and control to HGS of, any regulatory or patent filings prepared, submitted or
filed by PPI, to the extent that such filings related to such SB PARTICIPATING
PRODUCT or the related PRODUCT LEAD. HGS shall keep PPI fully apprised of any
communications to or from SB relating to the SB OPTION, including without
limitation notifying PPI promptly upon sending or receiving (and providing PPI
with a summary of the nature and substance of) any notice or other writing with
respect to a PRODUCT pursuant to SECTION 10.3(c) of the SB/HGS LICENSE
AGREEMENT, and upon expiration of the sixty (60) day period referred to in such
SECTION 10.3(c) without SB having exercised the SB OPTION.
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3.12 For any Product for which SB does not have or does not exercise or waives
or relinquishes, the SB Option or its co-development/co-marketing rights (a "SB
NON-PARTICIPATING PRODUCT"), PPI shall have the option (the "PPI CONTINUED
PARTICIPATION OPTION") to continue to fund fifty percent (50%) of all remaining
direct development, and to fund fifty percent (50%) of all direct marketing,
sales and other, costs and expenses associated with commercialization of such SB
NON-PARTICIPATING PRODUCT, as provided in Paragraph 3.13, in return for fifty
percent (50%) of the OPERATING PROFIT with respect to such SB NON-PARTICIPATING
PRODUCT, so long as PPI has not exercised an OPT-OUT ELECTION (as defined below)
with respect to such SB NON-PARTICIPATING PRODUCT. If PPI does not exercise the
CONTINUED PARTICIPATION OPTION with respect to a SB NON-PARTICIPATING PRODUCT,
then (i) PPI shall have no right to continue to participate in the development,
or to participate in the commercialization, of such SB NON-PARTICIPATING
PRODUCT, but shall have only the right to receive the royalties, and the
milestone payments (solely with respect to milestones achieved after such
failure to exercise the CONTINUED PARTICIPATION OPTION) set forth in Paragraph
4.2 with respect to such SB NON-PARTICIPATING PRODUCT, (ii) the license granted
by HGS to PPI pursuant to Section 2.3, to the extent such license is with
respect to such SB NONPARTICIPATING PRODUCT or the related PRODUCT LEAD, shall
automatically terminate and be without
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further force or effect, and (iii) to the extent legally permissible, PPI will
take all action reasonably necessary to assign to HGS all of its right, title
and interest in, and transfer possession and control to HGS of, any regulatory
or patent filings prepared, submitted or filed by PPI, to the extent that such
filings relate to such SB NON-PARTICIPATING PRODUCT or the related PRODUCT LEAD.
At any time after the COST SHARING DEVELOPMENT PERIOD, either HGS or PPI may opt
out of further co-development/co-marketing with respect to a SB
NON-PARTICIPATING PRODUCT (an "OPT-OUT ELECTION"), in which event (i) if such
OPT-OUT ELECTION is by HGS, the licenses granted by PPI to HGS pursuant to
Paragraphs 2.2 and 2.4, to the extent such licenses are with respect to such SB
NON-PARTICIPATING PRODUCT or the related PRODUCT LEAD, shall automatically
terminate and be without further force or effect, (ii) if such OPT-OUT ELECTION
is by PPI, the licenses granted by HGS to PPI pursuant to Sections 2.3 and 2.5,
to the extent such licenses are with respect to such SB NON-PARTICIPATING
PRODUCT or the related PRODUCT LEAD, shall automatically terminate and be
without further force or effect, (iii) the party making such OPT-OUT ELECTION
(the "OPT-OUT PARTY") shall be responsible for the payment of such OPT-OUT
PARTY'S share of costs and expenses which were accrued or as to which
commitments were made prior to the time of the OPT-OUT PARTY'S OPT-OUT ELECTION,
(iv) to the extent legally permissible, the OPT-OUT PARTY will take all action
reasonably necessary
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to assign to the other party all of its right, title and interest in, and
transfer possession and control to the other party of, any regulatory or patent
filings prepared, submitted or filed by the OPT-OUT PARTY, and any regulatory
approvals received by the OPT-OUT PARTY, to the extent that such filings or
approvals related to such SB NON-PARTICIPATING PRODUCT or the related PRODUCT
LEAD and (v) the party which has not made an OPT-OUT ELECTION the remaining
party shall pay to the OPT-OUT-PARTY the royalties, and the milestones (solely
with respect to milestones achieved after such OPT-OUT ELECTION) as provided in
Paragraph 4.2.
3.13 The JDC, or any additional committee(s) or persons selected by the JDC
(which for purposes of this Section 3.13 shall collectively be referred to as
the "JDC"), shall direct and coordinate all activities with respect to the
further development and commercialization of a HGS/PPI PRODUCT, including,
without limitation, the filing and the planning and implementation of clinical
trials, obtaining all required regulatory approvals, development and
implementation of plans for the manufacture, marketing and distribution of such
HGS/PPI PRODUCT, and determining whether and on what terms any or all aspects of
such further development and commercialization should be licensed, sublicensed
or assigned to THIRD PARTIES. In this connection, the JDC will prepare and
approve a LONG RANGE PLAN for such development and commercialization, which
shall describe in detail the development and commercialization work with respect
to such HGS/PPI PROD-
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UCT, which party shall perform which tasks, the budget for such work for the
ensuing year and including, in the case of the first such annual budget, the
remaining months of the then current year (the "LRP ANNUAL BUDGET"), as well as
milestones, time frames, and operating plans (as amended from time to time by
the JDC, the "LONG RANGE PLAN"). The LONG RANGE PLAN shall be reviewed annually
by the JDC and the LRP ANNUAL BUDGET for the ensuing year shall be approved by
the JDC no later than December 15th of the then current year. The LONG RANGE
PLAN shall allocate responsibilities to the respective parties consistent with
their respective capabilities, and to the extent possible, so as to maximize the
expeditious and cost-effective development of the HGS/PPI PRODUCT. Unless
otherwise agreed by the parties in writing, PPI and HGS shall each be
responsible for one-half of all direct costs (including direct labor costs to be
charged at mutually agreed upon rates) and out-of-pocket expenses (i) reasonably
incurred in connection with the development and commercialization of a HGS/PPI
PRODUCT after the COST SHARING DEVELOPMENT PERIOD and prior to approval by the
JDC of the first LRP ANNUAL BUDGET and (ii) incurred after the COST SHARING
DEVELOPMENT PERIOD and after approval by the JDC of the first LRP ANNUAL BUDGET,
provided, in the case of clause (ii), such cost or expense item is provided for
in the LRP ANNUAL BUDGET then in effect and the amount thereof is not
inconsistent in any material respect with the amount(s) for such item(s)
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contemplated by such LRP ANNUAL BUDGET. Any payments to a THIRD PARTY for
services (e.g., clinical trial expenses, manufacturing), to the extent not
provided for in the LRP ANNUAL BUDGET, must be approved by the JDC prior to the
incurrence of such expense. If a party is claiming reimbursement pursuant to
this Paragraph 3.13, then within forty-five (45) days after the end of a
calendar quarter during which the costs or expenses for which reimbursement is
being claimed were incurred, a party will submit to the other a statement (each
a "HGS/PPI PRODUCT REIMBURSEMENT STATEMENT") itemizing in reasonable detail such
costs and expenses and setting forth the total amount, if any, of such costs and
expenses to be reimbursed by the other party pursuant to this Paragraph 3.13.
Such reimbursement amounts shall be paid within thirty (30) days after receipt
of a HGS/PPI PRODUCT REIMBURSEMENT STATEMENT, except to the extent such HGS/PPI
PRODUCT REIMBURSEMENT STATEMENT is being disputed in good faith. Except as
otherwise provided herein, each party shall assume full responsibility for its
own costs and expenses with respect to a HGS/PPI PRODUCT incurred after the COST
SHARING DEVELOPMENT PERIOD.
3.14 If at any time, the JDC decides to discontinue pre-IND testing and/or
clinical trials of a PRODUCT, then such drug shall cease to be a PRODUCT and all
licenses and rights under this Agreement with respect to such PRODUCT shall
terminate.
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3.15 Each party shall keep complete and accurate records of its activities
conducted under this Agreement regarding screening of, and other research and
development activities with respect to, RESEARCH TARGETS, PRODUCT LEADS and
PRODUCTS and the results thereof. Within thirty (30) days after the end of each
calendar quarter during the Research Term, each party shall prepare and provide
the other party with a reasonably detailed written report of such activities and
results, through such date.
3.16 With respect to any SB NON-PARTICIPATING PRODUCT which is a HGS/PPI
PRODUCT, the parties will use reasonable efforts consistent with prudent
business practices to expeditiously develop and commercialize such PRODUCT. With
respect to any SB PARTICIPATING PRODUCT or any SB NON-PARTICIPATING PRODUCT
which is a HGS PRODUCT, HGS will use reasonable efforts consistent with prudent
business practices to expeditiously develop and commercialize such PRODUCT. With
respect to any SB NONPARTICIPATING PRODUCT which is a PPI PRODUCT, PPI, will use
reasonable efforts consistent with prudent business practices to expeditiously
develop and commercialize such PRODUCT.
4. MILESTONES, ROYALTIES AND CERTAIN OTHER PAYMENTS
4.1 Subject to Paragraph 4.3, with respect to each SB Participating PRODUCT, HGS
shall pay to PPI the following royalties and milestones (which milestone
payments shall be due and payable within thirty (30) days after the milestone
event is
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achieved by or on behalf of HGS, SB, their respective AFFILIATES, or any direct
or indirect licensee, sublicensee, assignee or transferee of such entities.
(1) ** U.S. Dollars ($**) upon first submission of an application for
regulatory approval in a major country (i.e., United States, Canada,
Japan, United Kingdom, France, Germany, Italy or Spain) for such SB
PARTICIPATING PRODUCT;
(2) ** U.S. Dollars ($**) upon the first regulatory approval in a major
country (i.e., United States, Canada, Japan, United Kingdom, France,
Germany, Italy or Spain) of such SB PARTICIPATING PRODUCT for
commercial sale; and
(3) a royalty of ** percent (**%) of NET SALES of such SB PARTICIPATING
PRODUCT.
4.2 Subject to Paragraph 4.3, with respect to each PPI PRODUCT, PPI shall pay to
HGS, and with respect to each HGS PRODUCT, HGS shall pay to PPI, the following
royalties and milestones (payment of which milestone payments shall be in
accordance with and subject to Paragraph 3.12 and shall be due and payable
within thirty (30) days after the milestone event is achieved by or on behalf of
the party required to make such payment or its AFFILIATES or any direct or
indirect licensee, sublicensee, assignee or transferee of such entities):
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(1) ** U.S. Dollars ($**) upon first submission of an application for
regulatory approval in a major country (i.e., United States, Canada,
Japan, United Kingdom, France, Germany, Italy or Spain) for such SB
NON-PARTICIPATING PRODUCT;
(2) ** U.S. Dollars ($**) upon the first regulatory approval in a major
country (i.e., United States, Canada, Japan, United Kingdom, France,
Germany, Italy or Spain) of such SB NON-PARTICIPATING PRODUCT for
commercial sale;
(3) a royalty of ** percent (**%) of NET SALES during each calendar year
in which NET SALES are ** dollars ($**) or less;
(4) a royalty of ** percent (**%) of NET SALES during each calendar year
in which NET SALES exceed ** dollars ($**), but are ** ($**) or
less;
(5) a royalty of ** percent (**%) of NET SALES during each calendar year
in which NET SALES exceed ** dollars ($**).
4.3 The milestone payments provided for in Paragraphs 4.1 and 4.2 shall only be
made once for each PRODUCT and shall not be made in the case of improvements or
modifications such as, but not limited to, changed forms, formats, line
extensions, formulations, indications, processes or protocols of a PRODUCT for
which such payments were previously made. Royalty obligations under Paragraphs
4.1 and 4.2
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with respect to a PRODUCT, shall terminate on a country-by-country basis and on
a PRODUCT by PRODUCT basis on the later of (i) ten (10) years after first
country-wide launch of such PRODUCT in such country or (ii) if such royalty is
payable by HGS, expiration of the last to expire RESEARCH PATENT or PPI PATENT
which covers the making, having made, importing, exporting, offering to sell or
using or selling of such PRODUCT in such country or (iii) if such royalty is
payable by PPI, expiration of the last to expire RESEARCH PATENT or HGS PATENT
which covers the making, having made, importing, exporting, offering to sell or
using or selling of such PRODUCT in such country.
4.4 For each SB NON-PARTICIPATING PRODUCT, as to which PPI either does not
exercise the PPI CONTINUED PARTICIPATION OPTION or makes an OPT-OUT ELECTION and
HGS makes an OPT-OUT ELECTION, the licenses granted by the parties hereunder
shall automatically terminate and the parties shall cooperate in the
outlicensing of such SB NON-PARTICIPATING PRODUCT and shall share equally in all
outlicensing fees and royalties.
4.5 With respect to any PRODUCT, if SB exercises the SB OPTION and the aggregate
costs and expenses in respect of such PRODUCT paid or payable by PPI during the
COST SHARING DEVELOPMENT PERIOD (the "PPI DEVELOPMENT COST AMOUNT") exceed **
dollars ($**), then upon first submission of an application for regulatory
approval in a major country (i.e., United States, Canada,
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Japan, United Kingdom, France, Germany, Italy or Spain) for such PRODUCT HGS
will promptly pay to PPI an amount equal to the positive difference between the
PPI DEVELOPMENT COST AMOUNT and ** dollars ($**), provided that in no event
shall HGS be required to pay to PPI an amount in excess of ** dollars ($**)
pursuant to this Section 4.5.
Miscellaneous
4.6 The manner in which statements and remittances of royalty and other payments
shall be rendered and made shall be as provided in Article 7 hereof.
4.7 All payments to be made hereunder shall be by wire transfer of immediately
available funds to an account designated by PPI or HGS, whichever is to be the
recipient of such funds.
5. CONFIDENTIALITY
5.1 Subject to Paragraph 5.2, the parties agree not to disclose and/or provide
to a THIRD PARTY any information and/or materials received from the other party
pursuant to this Agreement and agree to use the information and materials
received from the other party pursuant to this Agreement only as licensed or
otherwise provided hereunder.
5.2 Unless otherwise restricted by this Agreement, the confidentiality
obligations of Paragraph 5.1 shall not apply to information and/or materials
which:
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(1) was known to the receiving party or generally known to the public
prior to its disclosure hereunder; or
(2) subsequently becomes known to the public by some means other than a
breach of this Agreement;
(3) is disclosed to the receiving party by a THIRD PARTY having a lawful
right to make such disclosure and who is not under an obligation of
confidentiality to the other party;
(4) is required by law or bona fide legal process regulation, rule, act
or order of any governmental agency or authority to be disclosed,
provided that the party making disclosure takes all reasonable steps
to restrict and maintain confidentiality of such disclosure and
provides reasonable advance notice, to the extent such advance
notice is possible, to the other party;
(5) is approved for release by the parties; or
(6) is independently developed by the employees or agents of a party or
its AFFILIATES, without any knowledge of the information and/or
materials provided by the other party, provided that such
independent development can be properly demonstrated by the first
party.
5.3 All confidential information disclosed by one party to the other party shall
remain the intellectual property of the disclosing party. In the event that a
court or
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other legal or administrative tribunal, directly or through an appointed master,
trustee or receiver, assumes partial or complete control over the assets of a
party to this Agreement based on the insolvency or bankruptcy of such party, the
bankrupt or insolvent party shall promptly notify the court or other tribunal
(i) that confidential information received from the other party under this
Agreement remains the property of the other party and (ii) of the
confidentiality obligations under this Agreement. In addition, the bankrupt or
insolvent party shall, to the extent permitted by law, take all steps necessary
or desirable to maintain the confidentiality of the other party's confidential
information and to ensure that the court, other tribunal or appointee maintains
such information in confidence in accordance with the terms of this Agreement.
5.4 No public announcement concerning (i) the existence of or terms of this
Agreement, (ii) research and/or discoveries made by one party, (iii) milestones
achieved by one party, and (iv) exercise by one party of rights and options
granted under this Agreement, shall be made by the other party to this Agreement
without prior written notice, to the extent practicable under the circumstances,
and, except as a party determines in good faith may be legally required, or as a
party determines in good faith may be required for recording purposes, without
first obtaining the written approval of the other party and agreement upon the
nature and text of such announcement, such agreement and/or approval not to be
unreasonably withheld. To the
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extent practicable under the circumstances, the party desiring to make any such
public announcement shall inform the other party of the proposed announcement or
disclosure at least three (3) business days prior to public release, and, to the
extent practicable under the circumstances, shall provide the other party with a
written copy thereof. This Paragraph shall not apply to any information (i) in a
public announcement that is information essentially identical to that contained
in a previous public announcement agreed to pursuant to this paragraph or (ii)
any disclosure which a party determines is reasonably necessary in connection
with any financing, strategic transaction, acquisition or disposition involving
such party.
5.5 Without the written consent of both parties, neither party shall submit for
written or oral publication any manuscript, abstract or the like which includes
RESEARCH TECHNOLOGY prior to the earlier of (i) eighteen months after PPI or HGS
files a patent which claims such PRODUCT or (ii) the date on which such PRODUCT
is disclosed in a printed publication other than through breach of this
Paragraph.
6. OWNERSHIP; PATENT PROSECUTION AND LITIGATION
6.1 Subject to the grants of license herein, all right, title and interest in
and to any and all data, substances, processes, methods, materials, formulae,
know-how and inventions with respect to biology-based and chemistry-based
combinatorial systems for screening of compounds that bind to molecular targets,
including all improve-
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ments and modifications thereof, which may be useful within the FIELD and which
are developed by or on behalf of PPI during, prior to or after the RESEARCH
TERM, and all patent rights and other intellectual property rights therein,
shall belong solely to PPI, except to the extent any of the foregoing which is
developed by or on behalf of PPI during the RESEARCH TERM constitutes RESEARCH
TECHNOLOGY. PPI shall have the sole right and responsibility for the filing,
prosecution and maintenance of patents and patent applications with respect to
PPI TECHNOLOGY (including any extensions or SPCs relating thereto).
6.2 Subject to the grants of license herein, all right, title and interest to
the HGS TECHNOLOGY and RESEARCH TECHNOLOGY and all patent rights and other
intellectual property rights therein shall belong solely to HGS. Except as set
forth in Section 6.3, as between the parties, HGS shall have the sole right and
responsibility for the filing, prosecution and maintenance of patents and patent
applications directed thereto (including any extensions or SPCs relating
thereto).
6.3 As between the parties, with respect to RESEARCH TECHNOLOGY, HGS shall, in
its sole discretion, determine whether, when, and in which jurisdictions to file
any patent applications related thereto. HGS shall control the filing,
prosecution and maintenance of any such patent applications and any patents
issuing therefrom, including the filing of any extensions or SPCs relating
thereto. The foregoing rights shall not apply with respect to any patent or
patent application to the extent the
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claims thereof are directed exclusively to a PPI PRODUCT, as to which PPI shall
have the sole right, in its discretion to file, prosecute and maintain any
patent applications and patents issuing therefrom, including the filing of any
extensions or SPCs relating thereto. Except as otherwise specified herein, the
parties shall share equally the costs of all such filing, prosecution and
maintenance. If HGS determines not to file a patent application covering the
RESEARCH TECHNOLOGY after request by PPI, or not to prosecute any such patent
application or to maintain any such patents, HGS shall timely provide PPI with
written notice of such determination, in which event PPI shall have the right to
file or prosecute such application or maintain such patents entirely at its own
expense, unless HGS reasonably determines (and includes in such written notice
the basis for such determination) that such filing or prosecution would be
detrimental to the commercial prospects of a possible PRODUCT LEAD or PRODUCT.
6.4 In addition, the party entitled to file, prosecute and maintain a patent or
patent application (the "Prosecuting Party") claiming RESEARCH TECHNOLOGY shall
keep the other party (the "NON-PROSECUTING PARTY") reasonably informed with
regard to filing, prosecution and maintenance activity for such patent or patent
application. The NON-PROSECUTING PARTY shall have the right to consult in
advance with the PROSECUTING PARTY with respect to strategies for the filing,
prosecution and maintenance of such patents and patent applications. Without
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limitation of the foregoing, the NON-PROSECUTING PARTY shall have the right to
request that the PROSECUTING PARTY cause additional claims to be added, at the
NON-PROSECUTING PARTY's expense, to a patent application claiming RESEARCH
TECHNOLOGY, which request shall not be unreasonably refused by the PROSECUTING
PARTY.
6.5 Both parties will provide the other reasonable assistance to enable the
other to prepare, file, prosecute and maintain patents pursuant to this Article
6.
6.6 In the event of the institution of any suit or any threatened suit by a
THIRD PARTY,
(1) against HGS or PPI for infringement of any third-party intellectual
property right in connection with the manufacture, use, import,
export, offer for sale, sale, distribution or marketing of a PPI
PRODUCT, the party against whom such suit is brought or threatened
shall promptly notify the other in writing. As between HGS and PPI,
PPI shall be solely responsible for, and shall indemnify HGS
against, any and all cost and expense incurred in connection with
such action or threatened action and any liability including,
without limitation, any third-party royalties required to be paid in
respect thereof (collectively, "IP LOSSES") which results therefrom;
provided, however, that PPI shall be entitled to offset such IP
Losses against any royalties
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owed by PPI to HGS hereunder to the extent such IP Losses result
from a claim that the use by PPI or its licensees of any HGS
TECHNOLOGY in accordance with this Agreement infringes any
intellectual property right of any THIRD PARTY; provided further,
however, that PPI may not offset in such manner in any calendar
quarter more than ** (**) of the royalties which are owed to HGS in
respect of such calendar quarter.
(2) against HGS or PPI, for infringement of any third-party intellectual
property right in connection with the manufacture, use, import,
export, offer for sale, sale, distribution or marketing of a HGS
PRODUCT or SB PARTICIPATING PRODUCT, the party against whom such
suit is brought or threatened shall promptly notify the other in
writing. As between HGS and PPI, HGS shall be solely responsible for
any IP LOSSES which result therefrom; provided, however, that HGS
shall be entitled to offset such IP LOSSES against any royalties
owed by HGS to PPI hereunder to the extent such IP LOSSES result
from a claim that the use by HGS or its licensees of any PPI
TECHNOLOGY in accordance with this Agreement infringes any
intellectual property right of any THIRD PARTY; provided further,
however, that HGS may not offset in such manner in any calendar
quarter more
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than ** (**) of the royalties which are owed to PPI in respect of
such calendar quarter.
(3) against HGS or PPI, for patent infringement involving the
manufacture, use, import, export, offer for sale, sale, distribution
or marketing of a HGS/PPI PRODUCT, the party against whom such suit
is brought or threatened shall promptly notify the other in writing.
HGS and PPI shall be jointly responsible for and shall jointly
control the defense of any such action, and shall bear equally any
IP LOSSES which result therefrom.
(4) The party defending an action under subsection (a) or (b) of this
paragraph shall have sole control over its conduct, including
settlement thereof, provided such settlement shall not be made
without the prior written consent of the other party if it would
adversely affect the patent or other rights of such party.
6.7 In the event that HGS or PPI becomes aware of actual or threatened
infringement of a PPI PATENT, HGS PATENT or RESEARCH PATENT covering a PRODUCT,
that party shall promptly notify the other party in writing. The owner of the
PPI PATENT, HGS PATENT or RESEARCH PATENT shall have the first right but not the
obligation to bring, at its own expense, an infringement action against any
THIRD PARTY and to use the other party's name in connection therewith as
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necessary to create or maintain standing. If the owner of the patent does not
commence a particular infringement action within ninety (90) days, the other
party, after notifying the owner in writing, shall be entitled to bring such
infringement action, in its own name and/or in the name of the patent owner, at
its own expense, to the extent that such party is licensed thereunder. The
foregoing notwithstanding, in the event that an alleged infringer certifies
pursuant to 21 U.S.C. ss. 355(b)(2)(A)(iv) against an issued PPI PATENT, HGS
PATENT or RESEARCH PATENT covering a PRODUCT, the party receiving notice of such
certification shall immediately notify the other party of such certification,
and if fourteen (14) days prior to expiration of the forty five (45) day period
set forth in 21 U.S.C. ss. 355(c)(3)(C), the owner of the patent fails to
commence an infringement action, the party receiving notice, in its sole
discretion, at its own expense and to the extent that it is licensed under the
patent, shall be entitled to bring such infringement action in its own name
and/or in the name of the patent owner. The party conducting an action under
this paragraph shall have full control over its conduct, including settlement
thereof, provided such settlement shall not be made without the prior written
consent of the other licensing party or licensed party if it would adversely
affect the patent or other rights of such party. The parties shall reasonably
assist one another and cooperate in any such litigation at the other's request,
each party paying its own costs and expenses.
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6.8 Any recovery made by a party as the result of an action for patent
infringement it has conducted under Paragraph 6.6 shall be distributed as
follows:
(1) The party conducting the action shall recover its actual
out-of-pocket expenses, and then shall reimburse the other party for
any unreimbursed actual and out-of-pocket expenses incurred by the
other party in connection therewith.
(2) To the extent that the recovery exceeds the total of item (a), the
excess shall be kept by the party conducting the action, provided,
however, that to the extent that (i) the recovery is based on an
award of lost sales/profits, and (ii) the party conducting the
action would have incurred a royalty obligation to the other party
based upon such sales, the party to whom such royalties would have
been due shall receive a proportion of the excess recovery
corresponding to the royalty percentage it would have otherwise been
due.
6.9 The parties shall periodically keep one another reasonably informed of the
status of their respective activities regarding any such litigation or
settlement thereof.
7. STATEMENTS AND REMITTANCES
7.1 PPI and HGS, as the case may be, shall keep and require its licensees to
keep complete and accurate records of all sales and calculations for NET SALES
of products for which royalties are due hereunder. Each party shall have the
right,
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through a certified public accountant or like person reasonably acceptable to
the other party, to examine pertinent financial records during regular business
hours upon reasonable advance written notice during the life of this Agreement
and for twelve (12) months after its termination for the purpose of verifying
and reporting to HGS or PPI as to the computation of the royalty payments made
hereunder; provided, however, that such examination shall not take place more
often than once a year; provided further that such accountant shall report only
as to the accuracy of the royalty statements and payments, including the
magnitude and source of any discrepancy. PPI, HGS, and their licensees shall be
required to maintain such records for three (3) years. The accountant shall
execute customary confidentiality agreements prior to any examination,
reasonably satisfactory in form and substance to both parties, to maintain in
confidence all information obtained during the course of any such examination,
except for disclosure to the parties, as necessary for the above purpose. The
fees charged by such accountant shall be paid by the party requesting the
examination unless such examination discloses that the royalties reported for
the examined period are incorrect by more than five percent (5%), in which case
the reporting party shall pay the reasonable fees and expenses charged by such
accountant.
7.2 Within sixty (60) days after the close of each calendar quarter, PPI and
HGS, as the case may be, shall deliver to the other party a report containing a
true account-
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ing of all sales of products subject to royalty hereunder during such calendar
quarter and shall at the same time pay all royalties due in respect of such
sales by wire transfer, in immediately available funds, to a bank account
designated by the other party.
7.3 All royalties and other payments due under this Agreement shall be payable
in U.S. dollars. 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, at an interest rate 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.
7.4 Royalties payable on sales in countries other than the United States shall
be calculated by multiplying the appropriate royalty rate by the NET SALES in
the currency in which they are made and converting the resulting amount into
United States dollars, at the rates of exchange as reported in The New York
Times, or, if not in the Times, then in The Wall Street Journal, on the last
business day in New York, New York of each royalty period. Such payments shall
be without deduction of exchange, collection, or other charges. If, due to
restrictions or prohibitions imposed by a national or international authority,
payments cannot be made as aforesaid, the parties shall consult with a view to
finding a prompt and acceptable solution lawfully direct at no additional
out-of-pocket expense to the party owed the royalty. Notwith-
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standing the foregoing, if royalties cannot be remitted for any reason within
six (6) months after the end of the calendar quarter during which they are
earned, then the party owing the royalty shall be obligated to deposit the
royalties in a bank account in Switzerland in the name of the other party. Each
party shall deduct any taxes which the party is obligated to pay and/or withhold
in a country based on royalties due to the other based on NET SALES in such
country from royalty payments due for such country under this Agreement and pay
them to the proper authorities as required by applicable laws. Each party shall
maintain official receipts of payment of any such taxes and forward these
receipts to the other along with the royalty report covering the calendar
quarter in which such receipts were issued.
8. TERM AND TERMINATION
8.1 This Agreement shall come into effect as of the date first written above,
and shall remain in full force and effect unless earlier terminated as provided
in this Article 8. This Agreement shall terminate automatically upon the
expiration of the RESEARCH TERM if prior to such expiration no PRODUCT LEAD
shall have been identified.
8.2 (i) A party shall have the right to terminate this Agreement with respect to
any PRODUCT or in its entirety (a) upon the material breach by the other party
of the other party's obligations to pay any amounts owing hereunder with respect
to such PRODUCT or otherwise, if such breach is not cured within thirty (30)
days
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after receipt of written notice from such party thereof or (b) upon the material
breach by the other party of the other party's obligations (other than
obligations to pay any amounts owing hereunder with respect to such PRODUCT, but
including, without limitation, failure to use diligent efforts with respect to
such PRODUCT as required by Paragraphs 3.9 and 3.16), if such breach is not
cured within sixty (60) days after receipt of written notice from such party
thereof.
(ii) PPI shall have the right to terminate this Agreement with respect to
any PRODUCT or in its entirety if an SB ADVERSE EVENT shall have occurred.
(iii) Notwithstanding the foregoing, a party may not terminate this
Agreement pursuant to this Section 8.2 during the pendency of an arbitration
proceeding under this Agreement in which the other party reasonably contests
that it has breached this Agreement such that the first party is entitled to
terminate pursuant to this Section 8.2.
8.3 Either party may terminate this Agreement in its entirety or with respect to
one or more PRODUCTS if, at any time, the other party shall file in any court or
agency pursuant to any statute or regulation of any state or country, a petition
in bankruptcy or insolvency or for reorganization or for an arrangement or for
the appointment of a receiver or trustee of the party or of its assets, or if
the other party proposes a written agreement of composition or extension of its
debts, or if the other party shall be served with an involuntary petition
against it, filed in any insolvency
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proceeding, and such petition shall not be dismissed within sixty (60) days
after the filing thereof, or if the other party shall propose or be a party to
any dissolution or liquidation, or if the other party shall make an assignment
for the benefit of creditors.
8.4 PPI may, upon thirty (30) days prior written notice to HGS, at any time
after the first anniversary of the INITIAL SCREENING DATE with respect to a
RESEARCH TARGET, terminate this Agreement with respect to such RESEARCH TARGET
prior to the occurrence of a PRODUCT LEAD ADVANCEMENT DATE with respect to a
PRODUCT LEAD directed at such RESEARCH TARGET. HGS may, upon thirty (30) days
prior written notice to PPI, at any time commencing eighteen (18) months after
the INITIAL SCREENING DATE with respect to a RESEARCH TARGET, terminate this
Agreement with respect to such RESEARCH TARGET prior to the occurrence of a
PRODUCT LEAD ADVANCEMENT DATE with respect to a PRODUCT LEAD directed at such
RESEARCH TARGET.
8.5 Neither party shall have the right to terminate this Agreement except under
Paragraphs 8.2, 8.3, or 8.4, provided however that nothing in this Agreement
(including this Article 8) shall limit any remedies for breach which may be
available pursuant to a judgment of a court, in law or equity, including
termination of this Agreement or of any or all rights hereunder, except that any
action seeking remedies for breach of this Agreement (other than an action for
specific performance or other injunctive relief) shall be conducted in
accordance with Article 12.
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8.6 Upon termination of this Agreement with respect to a PRODUCT, or in its
entirety, pursuant to and in accordance with this Article 8, then all rights,
licenses and obligations with respect to such PRODUCT, or this Agreement in its
entirety, shall be void and of no further force or effect, except as otherwise
provided in this Article 8; provided that (i) in any event, notwithstanding any
termination of this Agreement with respect to a PRODUCT or in its entirety, or
any other provision of this Agreement, the rights and obligations of the parties
under Articles 5, 6, 7, 8, 9, 10 and 12 through 20, and any obligations of a
party which accrued prior to such termination, shall survive any such
termination, as well as any rights or obligations which shall continue to apply
pursuant to the other provisions of this Article 8 or which are clearly meant to
survive termination of this Agreement, (ii) in the case of termination by PPI
pursuant to and in accordance with this Article 8 with respect to an HGS
PRODUCT, an HGS/PPI PRODUCT, or this Agreement in its entirety, HGS shall have
no further right to continue, and shall immediately cease, all research,
development, manufacturing, marketing and sales activities with respect to such
HGS PRODUCT, HGS/PPI PRODUCT, or all HGS PRODUCTS and HGS/PPI PRODUCTS in the
case of such a termination by PPI of this Agreement in its entirety and (iii) in
the case of termination by HGS pursuant to and in accordance with this Article 8
with respect to a PPI PRODUCT, HGS/PPI PRODUCT, or this Agreement in its
entirety, PPI shall have no further right to continue, and shall
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immediately cease, all research, development, manufacturing, marketing and sales
activities with respect to such PPI PRODUCT, HGS/PPI PRODUCT, or all PPI
PRODUCTS and HGS/PPI PRODUCTS in the case of such a termination by HGS of this
Agreement in its entirety.
9. WARRANTIES AND REPRESENTATIONS
9.1 Each of HGS and PPI hereby represents, warrants and covenants to the other,
as of the date of this Agreement, as follows:
(1) it is a corporation duly organized and validity existing under the
laws of the state of its incorporation;
(2) the execution, delivery and performance of this Agreement by such
party has been duly authorized by all requisite corporate action;
(3) it has the power and authority to execute and deliver this Agreement
and to perform its obligations hereunder, including, without
limitation, the right, power and authority to grant the licenses
under Article 2;
(4) the execution, delivery and performance by such party of this
Agreement and its compliance with the terms and provisions hereof do
not and will not conflict with or result in a breach of any of the
terms and provisions of or constitute a default under (i) any loan
agreement, guaranty, financing agreement, agreement affecting a
Product or other
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agreement or instrument binding or affecting it or its property;
(ii) any provision of its charter documents or bylaws; (iii) any
order, writ, injunction or decree of any court or governmental
authority entered against it or by which any of its property is
bound or (iv) any other agreement to which it is a party or by which
it is bound.
(5) this Agreement constitutes such party's legal, valid and binding
obligation enforceable against it in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to
or affecting creditors' rights and to the availability of particular
remedies under general equity principles.
9.2 No party to this Agreement has in effect, and, after the date of this
Agreement, no party shall enter into any written agreement that would be
inconsistent with any provision hereof.
9.3 HGS further represents and warrants to PPI that, to the best of its
knowledge, neither the grant of any license to PPI under this Agreement nor the
exercise of any right or performance of any obligation under this Agreement by
HGS or PPI will conflict with or result in a breach of any other agreement to
which HGS is a party.
9.4 HGS agrees that HGS will fully perform all of its obligations under the
SB/HGS LICENSE AGREEMENT or any similar agreement to the extent that such
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obligations relate to RESEARCH TARGETS or otherwise relate to the subject matter
of this Agreement.
9.5 HGS agrees that it will not consent to any modification or waiver of any
existing agreement to which it is a party, or enter into any new agreement with
a THIRD PARTY, which relates to the subject matter of this Agreement and which
would adversely affect PPI's rights and/or interests under this Agreement. PPI
acknowledges that the granting of rights to a THIRD PARTY with respect to HGS
TECHNOLOGY for the screening of RESEARCH TARGETS shall not be a breach of this
Agreement.
9.6 EXCEPT AS EXPRESSLY SET FORTH HEREIN, NEITHER PARTY MAKES ANY WARRANTY THAT
PPI PATENTS, HGS PATENTS OR RESEARCH PATENTS ARE VALID OR ENFORCEABLE OR THAT
THEIR PRACTICE OR THE PRACTICE OF HGS TECHNOLOGY, PPI TECHNOLOGY, OR RESEARCH
TECHNOLOGY DOES NOT INFRINGE ANY PATENT RIGHTS OR OTHER INTELLECTUAL PROPERTY
RIGHTS OF THIRD PARTIES. EXCEPT AS EXPRESSLY SET FORTH HEREIN, A HOLDING OF
INVALIDITY OR UNENFORCEABILITY OF ANY SUCH PATENT, FROM WHICH NO FURTHER APPEAL
IS OR CAN BE TAKEN, SHALL NOT AFFECT ANY OBLIGATION HEREUNDER, BUT SHALL ONLY
ELIMINATE
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ROYALTIES OTHERWISE DUE UNDER SUCH PATENT FROM THE DATE SUCH HOLDING BECOMES
FINAL.
9.7 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, HGS AND PPI MAKE NO
REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
9.8 Each party represents and warrants to the other that its use of any
materials provided to it by the other party under this Agreement shall comply
with all applicable laws and regulations.
10. INDEMNIFICATION; INSURANCE
10.1 PPI shall defend, indemnify and hold harmless HGS, licensors of HGS and
each of their respective directors, officers, shareholders, agents and
employees, from and against any and all liability, loss, damages, costs and
expenses, including reasonable attorneys' fees and expenses, (i) arising from or
in connection with a breach by PPI of any of the representations and warranties
contained in Section 9 hereof or (ii) resulting from claims, demands, costs or
judgments which may be threatened, made or instituted against any of them
arising out of the development manufacture, possession, distribution, use,
testing, sale or other disposition of a PRODUCT by, on behalf of or through PPI
or any THIRD PARTY granted rights by
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PPI in accordance with this Agreement (other than in connection with a suit or
threatened suit covered by Section 6.6 hereof). PPI's obligation to defend,
indemnify and hold harmless shall include claims, demands, costs or judgments,
whether for money damages or equitable relief by reason of alleged personal
injury (including death) to any person or alleged property damage; provided,
however, the indemnity shall not extend to any claim against an indemnified
party to the extent such claim results from the gross negligence, willful
misconduct or material breach of this Agreement of or by such indemnified party.
PPI shall have the exclusive right to control the defense of any action which is
to be indemnified in whole by PPI hereunder, including the right to select
counsel reasonably acceptable to HGS to defend HGS, and to settle any such
action; provided that, without the written consent of HGS (which shall not be
unreasonably withheld or delayed), PPI shall not agree to settle any claim
against HGS to the extent the settlement of such claim has a material adverse
effect on HGS. The provisions of this paragraph shall survive and remain in full
force and effect after any termination, expiration or cancellation of this
Agreement and the obligation hereunder shall apply whether or not such claims
are rightfully brought. PPI shall require each of its sublicensees hereunder to
agree to indemnify HGS in a manner consistent with this Paragraph 10.1.
10.2 HGS shall defend, indemnify and hold harmless PPI, licensors of PPI and
each of their respective directors, officers, shareholders, agents and
employees, from
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and against any and all liability, loss, damages, costs and expenses, including
reasonable attorneys' fees and expenses, (i) arising from or in connection with
a breach by HGS of any of the representations or warranties contained in Section
9 hereof, (ii) arising from or in connection with (A) any actual or threatened
action, suit or proceeding, or (B) any other act or omission, in the case of
either (A) or (B), by SB or any other THIRD PARTY in connection with or relating
to the SB/HGS License Agreement or any other agreement to which SB (or its
AFFILIATES) or any such THIRD PARTY (or its AFFILIATES), and HGS, are parties
that relates to the subject matter of this Agreement, provided that in the case
of (B), HGS' indemnification obligation under this Paragraph 10.2 shall (1) only
apply if such act or omission has the direct or indirect effect of depriving PPI
of any material benefit of this Agreement or impairs the right or ability of PPI
or HGS to perform their respective obligations hereunder (any such act or
omission which has such effect being referred to as a "SB ADVERSE EVENT") and
(2) be limited to PPI's direct and indirect costs and expenses (including
reasonable attorneys fees and expenses) incurred by PPI in connection with this
Agreement, including without limitation the performance by PPI of its
obligations hereunder, or (iii) resulting from claims, demands, costs or
judgments which may be made or instituted against any of them arising out of the
development, manufacture, possession, distribution, use, testing, sale or other
disposition of a PRODUCT by, on behalf of or through HGS or any THIRD PARTY
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granted rights by HGS (other than in connection with a suit or threatened suit
covered by Section 6.6 hereof). HGS' obligation to defend, indemnify and hold
harmless shall include claims, demands, costs or judgments, whether for money
damages or equitable relief by reason of alleged personal injury (including
death) to any person or alleged property damage; provided, however, the
indemnity shall not extend to any claim against an indemnified party to the
extent such claim results from the gross negligence, willful misconduct or
material breach of this Agreement of or by such indemnified party. HGS shall
have the exclusive right to control the defense of any action which is to be
indemnified in whole by HGS hereunder, including the right to select counsel
reasonably acceptable to PPI to defend PPI and to settle such action; provided
that, without the written consent of PPI (which shall not be unreasonably
withheld or delayed), HGS shall not agree to settle any claim against PPI to the
extent such claim has a material adverse effect on PPI. The provisions of this
paragraph shall survive and remain in full force and effect after any
termination, expiration or cancellation of this Agreement and HGS' obligation
hereunder shall apply whether or not such claims are rightfully brought. HGS
shall require each of its sublicensees hereunder to agree to indemnify PPI in a
manner consistent with this Paragraph 10.2.
10.3 A person or entity that intends to claim indemnification under this Article
10 (the "Indemnitee") shall promptly notify the other party (the "Indemnitor")
of any
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loss, claim, damage, liability, or action in respect of which the Indemnitee
intends to claim such indemnification, and the Indemnitor, after it determines
that indemnification is required of it, 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 Indemnitor does not assume the defense
thereof; or, 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 10 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 withheld unreasonably. The failure to deliver notice to the
Indemnitor within a reasonable time after the commencement of any such action
shall relieve the Indemnitor of any liability to the Indemnitee under this
Article 10 solely to the extent the Indemnitor suffers material prejudice as a
result of such failure, but failure 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 10. The Indemnitee under this Article 10, its employees and
agents, shall cooperate fully with the Indemnitor and its legal representatives
in the investigations of any action, claim or liability covered by this
indemnification. In the event that each party claims
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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.
10.4 The parties shall maintain insurance coverage with respect to their
activities and potential liabilities hereunder as is commercially reasonable in
the circumstances.
11. FORCE MAJEURE
11.1 If the performance of any party of this Agreement, or of any obligation
under this Agreement, is prevented, restricted, interfered with or delayed by
reason of any cause beyond the reasonable control of the party liable to
perform, the party so affected shall, upon giving written notice to the other
party, be excused from such performance to the extent of such prevention,
restriction, interference or delay, provided that the affected party shall use
its reasonable best efforts to avoid or remove such causes of non-performance
and shall continue performance with the utmost dispatch whenever such causes are
removed. When such circumstances arise, the parties shall discuss what, if any,
modification of the terms of this Agreement may be required in order to arrive
at an equitable solution.
12. DISPUTE RESOLUTION
12.1 This Agreement shall be construed and enforced in accordance with the laws
of the State of Delaware.
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12.2 In the event of any controversy, dispute or claim which may arise out of or
in connection with this Agreement, or the breach, termination or validity
thereof, other than with respect to patent validity and other than where a party
is seeking specific performance or other injunctive relief (collectively,
"DISPUTES"), the parties shall try to settle the Dispute amicably between
themselves in the manner set forth in this Paragraph 12.2. First, promptly upon
(and in any event within ten days after) the written request of either party to
the other, the JRC or the JDC, as applicable, shall meet to attempt to resolve
the Dispute. If at such meeting the Dispute is not fully resolved to the mutual
satisfaction of the parties, the Dispute shall promptly (and in any event within
five days after the aforesaid meeting of the JRC or JDC) be submitted to the
respective Chief Technical Officers of the parties who shall attempt to resolve
the Dispute. If the Dispute is not fully resolved to the mutual satisfaction of
the parties within fifteen days after being submitted to the respective Chief
Technical Officers of the parties, the Dispute shall promptly (and in any event
with three days after expiration of the fifteen day period referred to
immediately above) be submitted to the respective Chief Executive Officers of
the parties who shall attempt to resolve the Dispute. If the Dispute is not
fully resolved to the mutual satisfaction of the parties within fifteen days
after being submitted to the respective Chief Executive Officers of the parties,
the Dispute may be referred by either party for arbitration in accordance with
subsections 12.3 and 12.4 under the guidelines of the American
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Arbitration Association ("AAA") in Wilmington, Delaware under the commercial
rules then in effect for AAA, except as otherwise provided for herein.
12.3 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 such 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 DISPUTE and the reasons supporting such 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 a joint meeting, the arbitrator shall
decide the matter.
12.4 Unless otherwise agreed to by the parties, the arbitrator shall make such
decisions 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 may be entered in any court having jurisdiction
thereof.
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12.5 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.
12.6 This Article 12 shall not limit in any way the right of a party to bring an
action (and enforce a judgment) for equitable relief in any court of competent
jurisdiction.
13. SEPARABILITY
13.1 In the event any portion of this Agreement shall be held illegal, void or
ineffective, the remaining portions hereof shall remain in full force and
effect.
13.2 If any of the terms or provisions of this Agreement are in conflict with
any applicable statute or rule of law, then such terms or provisions shall be
deemed inoperative to the extent that they may conflict therewith and shall be
deemed to be modified to conform with such statute or rule of law.
13.3 In the event that the terms and conditions of this Agreement are materially
altered as a result of Paragraphs 13.1 or 13.2, the parties will, in good faith,
renegotiate the terms and conditions of this Agreement to resolve any
inequities.
14. ENTIRE AGREEMENT
14.1 This Agreement, together with the Appendices hereto, entered into as of the
date written above constitute the entire agreement between the parties relating
to the subject matter hereof and supersede all previous writings and
understandings. No
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terms or provisions of this Agreement shall be varied or modified by any prior
or subsequent statement, conduct or act of either of the parties, except that
the parties may amend this Agreement by written instruments specifically
referring to and executed in the same manner as this Agreement.
15. NOTICES
15.1 Any notice required or permitted under this Agreement shall be
hand-delivered or sent by express delivery service or certified or registered
mail, postage prepaid, or by fax with written confirmation by mail, to the
following addresses of the parties:
HUMAN GENOME SCIENCES, INC.
9410 Key West Avenue
Rockville, MD 20850
Attention: Business Development
Fax: 301-309-0092
copy to:
HUMAN GENOME SCIENCES, INC.
9410 Key West Avenue
Rockville, Maryland 20850
Attention: General Counsel
Fax: 301-309-8439
PRAECIS PHARMACEUTICALS INCORPORATED
One Hampshire Street
Fifth Floor
Cambridge, MA 02139-1572
Attention: Marc Silver
Vice President, Corporate Development
Fax: 617-494-8414
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copy to:
SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
One Beacon Street
31st Floor
Boston, MA 02108
Attention: Kent Coit
Fax: 617-573-4822
15.2 Any notice required or permitted to be given concerning this Agreement
shall be effective upon receipt by the party to whom it is addressed.
16. ASSIGNMENT
16.1 This Agreement and the licenses herein granted shall be binding upon and
inure to the benefit of the assignees and successors in interest of the
respective parties. Neither this Agreement nor any interest hereunder shall be
assignable by a party without the prior written consent of the other parties and
any attempted assignment contrary to this paragraph shall be void and without
force and effect provided, however, that without obtaining the consent of the
other party, a party may assign this Agreement or any of its rights or
obligations hereunder to any AFFILIATE or to any THIRD PARTY which acquires or
acquires control of such party's entire business or that part of its business to
which this Agreement relates, whether pursuant to license, merger,
consolidation, stock purchase, recapitalization, asset sale or otherwise,
provided that the assigning party remains liable under this Agreement and that,
unless the obligations of the assigning party would be assumed by the
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THIRD PARTY by operation of law, the THIRD PARTY assignee or surviving entity
assumes in writing all of its obligations under this Agreement.
17. COUNTERPARTS
17.1 This Agreement may be executed in counterparts, and each such counterpart
shall be deemed an original instrument, but such counterparts together shall
constitute but one agreement.
18. WAIVER
18.1 Any delay or failure in enforcing a party's rights under this Agreement or
any waiver as to a particular default or other matter shall not constitute a
waiver of such party's rights to the future enforcement of its rights under this
Agreement, nor operate to bar the exercise or enforcement thereof at any time or
times thereafter, excepting only as to an express written and signed waiver as
to a particular matter for a particular period of time.
18.2 Notwithstanding the foregoing, in the event PPI or HGS challenges whether
any payments contemplated hereunder (including, without limitation royalties or
milestones) are due, it shall have the right, but not the obligation, to make
such payments under protest (reserving all rights hereunder) pending resolution
of such dispute.
64
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19. INDEPENDENT RELATIONSHIP
19.1 Nothing herein contained shall be deemed to create an employment, agency,
joint venture or partnership relationship between the parties hereto or any of
their agents or employees, or any other legal arrangement that would impose
liability upon one party for the act or failure to act of the other party. No
party shall have any power to enter into any contracts or commitments or to
incur any liabilities in the name of, or on behalf of, the other party, or to
bind the other party in any respect whatsoever.
IN WITNESS WHEREOF, the parties, through their authorized officers, have
executed this Agreement as of the date first written above.
PRAECIS PHARMACEUTICALS INCORPORATED
BY: /s/ Malcolm L. Gefter
------------------------------------
Title: Chairman of the Board, Chief Executive Officer and President
HUMAN GENOME SCIENCES, INC.
BY: /s/ Arthur M. Mandell
------------------------------------
Arthur M. Mandell
Title: Senior Vice President, Corporate and Business Development
65
<PAGE>
Appendix A
Sample DRUG RESEARCH PLAN
1. Target Identification (HGS Sequence ID#)
2. Rationale
- Brief description of hypothesis
- Brief summary of supporting biological data on target
- Expected Indications for Product
3. Status of full length cloning and expression
- Nucleotide sequence encoding Target (as available)
4. Patent status
5. Estimated date for the start of small molecule screening. (No description
of the screen is required.)
6. Chemical optimization
- No details required
- Estimated date of start (can be updated)
7. Plan updates if and when a potential development compound is identified
- R&D Product (compound) code #/INN name/generic name (when
available)
- Notification when a compound enters preclinical development
- Notification when a compound enters clinical development
- Notification when regulatory approvals are sought
66
<PAGE>
EXHIBIT 10.9
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN
PORTIONS OF THIS DOCUMENT. SUCH PORTIONS HAVE BEEN
REDACTED AND MARKED WITH ASTERISKS (**). THE NON-
REDACTED VERSION OF THIS DOCUMENT HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
AN APPLICATION FOR CONFIDENTIAL TREATMENT.
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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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
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
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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
ARTICLE 11. MISCELLANEOUS..........................................32
11.1 Force Majeure....................................32
11.2 Assignment.......................................33
11.3 Severability.....................................33
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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.
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<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
<PAGE>
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>
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).
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
8
<PAGE>
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.
(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
9
<PAGE>
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.
(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.
10
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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.
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
11
<PAGE>
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 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
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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 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 par-
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ties 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 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
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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.
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).
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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.
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
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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 following 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 royal ties 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 pro-
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vided 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 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
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Base Royalty Rate with respect to Net Sales of such BI Product.
(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
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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 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
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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.
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.
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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
country, 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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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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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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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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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 Com
pounds 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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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 out
standing 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 out standing 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
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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
29
<PAGE>
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 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.
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(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.
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
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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 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
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<PAGE>
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.
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
33
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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
jurisdiction. 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 arbitra-
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<PAGE>
tion 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 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.
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<PAGE>
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
37
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
Patent Application Claims Included Claims Excluded
------------------ --------------- ---------------
- --------------------------------------------------------------------------------
U.S. Patent Appli- Compositions of Compositions of
cation Serial No. Matter: Matter:
08/404,831
13-17 and 30-32 1-12 and 20-29
Methods: Methods:
18-19, 37-44, 50-52 33-36, 45-49 and
and 59-62 53-58
- --------------------------------------------------------------------------------
U.S. Continuation- Compositions of Compositions of
in-Part Patent Matter: Matter:
Application
Serial No. 14-18 and 32-34 1-13 and 21-31
08/475,579
Methods: Methods:
19-20 and 40-47 35-39
- --------------------------------------------------------------------------------
<PAGE>
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.
Assay Functional Measurement Manpower
- ----- ---------------------- --------
A. Nucleation Assay *** *** FTE
B. Extension Assay *** *** FTE
C. Neurotoxicity *** *** FTE
D. Specificity *** *** FTE
<PAGE>
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
Assay Functional Measurement Manpower
----- ---------------------- --------
Animal Model *** ***
40
<PAGE>
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
o 2 rotary shakers
o Plate-reader flourimeter
o Spectrophotometer (96-well Plate Reader)
o Spectrophotometer (Cuvette)
o Computers (data management, direct connection to flourimeter)
o Cryostat
o Stereotaxtic Apparatus
Assay Specific Supplies
o Pipet tips
o Multi-pipettors
o Low-Bind 96 well plates
o Standard 96 well plates
o Reservoirs
o Computer Software
o Disposable Cuvettes
o Tissue Culture Media and Supplies
o Histochemical Supplies
o Animal Purchase Costs/Supplies/Housing
<PAGE>
o Osmotic Pumps
*** Approximately 4 lines omitted ***
<PAGE>
EXHIBIT 10.10
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN
PORTIONS OF THIS DOCUMENT. SUCH PORTIONS HAVE BEEN
REDACTED AND MARKED WITH ASTERISKS (**). THE NON-
REDACTED VERSION OF THIS DOCUMENT HAS BEEN SENT TO
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
AN APPLICATION FOR CONFIDENTIAL TREATMENT.
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 June 7, 1995 and foreign, PCT application
number PCT/US96/09852 filed June 7, 1996 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
<PAGE>
2
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 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
June 7, 1995 and foreign, PCT application number PCT/US96/09852 filed June 7,
1996.
(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,
<PAGE>
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
<PAGE>
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
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 fifty
thousand U.S. dollars ($50,000.00) upon execution of this Agreement. This
commitment is designed to partially reimburse the Licensor and IU for the costs
of the research leading to the Invention Rights licensed hereunder. ** (**) of
this Initial Fee, all payments under the Option Agreement and all patent-related
fees and expenses may be credited toward future fees, (including License Fees)
the Milestone Payments referred to in paragraph 4.2, and/or royalties payable to
IUF; however, such credit for fees and/or royalty, in any period, for any
country, shall not exceed ** of the fees or royalty due IUF for such period in
respect of such country, provided that any unused credit may be carried forward
to subsequent periods.
4.2 Milestone Payments. LICENSEE shall pay three (3) Milestone
Payments, reduced by credits allowed under paragraph 4.1 as follows:
(a) ** U.S. dollars ($**) 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 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:
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7
(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.
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
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8
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 purposes only, and without the right to Sublicense, to any and all
Improvements.
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9
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 material transfer from IU to LICENSEE will be mutually agreed upon under
a separate Uniform Biological Material
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10
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%).
8.2 Exchange Rate. All Payments hereunder shall be made in U.S.
dollars in the United States. In
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11
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 continue to prosecute, at its own expense, the
applications for United States Letters Patent identified in
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12
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.
ARTICLE XVI
Use of Name
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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
If to LICENSEE:
Attn: Director of Business Development
Praecis Pharmaceuticals, Inc.
One Hampshire Street
Cambridge, MA 02139
telecopier number: (617) 494-8414
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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.
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
<PAGE>
21
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.
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
------------------------------- -----------------------------------
<PAGE>
22
EXHIBIT A
Patent(s) and Patent Application(s)
United States patent Application number 08/480,494 filed June 7, 1995 PCT
application number PCT/US96/09852 filed June 7, 1996
<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>
EXHIBIT D
Uniform Biological Material Transfer Agreement
Non-Profit to Profit
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-
25
<PAGE>
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
26
<PAGE>
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
27
<PAGE>
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
28
<PAGE>
(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
29
<PAGE>
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:
--------------------------------------------- --------------------
Recipient's Scientist:
Name:
---------------------------------------------------------------------------
Title:
--------------------------------------------------------------------------
Signature: Date:
--------------------------------------------- --------------------
30
<PAGE>
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.
31
<PAGE>
4.02. Milestone Payment. LICENSEE shall pay Milestone Payments as follows:
(a) two hundred and fifty thousand dollars ($250,000) within
thirty (30) days of the execution of this Amendment;
(b) two hundred and fifty thousand dollars ($250,000) upon ***;
(c) ***;
(d) ***;
(e) ***;
(f) ***; and
(g) ***.
4.03 Royalty. LICENSEE shall pay to LICENSOR the following royalties:
(a) for the first *** dollars ($***) 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.
32
<PAGE>
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 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.
33
<PAGE>
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 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.
Advanced Research and Technology Institute, Inc. Praecis Pharmaceuticals, 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
34
<PAGE>
EXHIBIT 10.11
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN
PORTIONS OF THIS DOCUMENT. SUCH PORTIONS HAVE BEEN
REDACTED AND MARKED WITH ASTERISKS (**). THE NON-REDACTED
VERSION OF THIS DOCUMENT HAS BEEN SENT TO THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
AN APPLICATION FOR CONFIDENTIAL TREATMENT.
LICENSE AGREEMENT
Between
PHARMACEUTICAL APPLICATIONS ASSOCIATES LLC
C. DONALD WILLIAMS, M.D.C.G.P.
ROBERT MURDOCK, R.Ph.
and
PRAECIS PHARMACEUTICALS INCORPORATED
Dated as of: April 15, 1999
<PAGE>
TABLE OF CONTENTS
WITNESSETH................................................................. 1
DEFINITIONS................................................................ 2
GRANT OF LICENSE........................................................... 7
DEVELOPMENT AND COMMERCIALIZATION.......................................... 10
CONSIDERATION.............................................................. 12
PATENT PROSECUTION......................................................... 17
THIRD-PARTY INFRINGEMENT................................................... 19
PRODUCT LIABILITY.......................................................... 21
REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION............................ 21
ASSIGNMENT................................................................. 25
TERM AND TERMINATION....................................................... 26
INFORMATION................................................................ 29
PUBLICATIONS............................................................... 32
NOTICES AND OTHER COMMUNICATIONS........................................... 33
DISPUTE RESOLUTION......................................................... 34
MISCELLANEOUS PROVISIONS................................................... 36
EXHIBIT A (U.S. Patent Application No. 3742-901-2-IPROV
and related filings)....................................................... A-1
EXHIBIT B ( List of Individuals and Entities).............................. B-1
i
<PAGE>
LICENSE AGREEMENT
This Agreement is made and entered into as of the 15th day of April,
1999, (the "Effective Date") by and between Pharmaceutical Applications
Associates LLC, a limited liability company organized and existing under the
laws of the State of [ ] and having its principal office at 402 East Yakima
Avenue, Suite 330, Yakima, Washington 98901-2760 (hereinafter referred to as
"PAA"), C. Donald Williams, M.D.C.G.P. and Robert Murdock, R.Ph., each of whom
is a member of PAA (collectively, the "PAA Principals"), and PRAECIS
PHARMACEUTICALS INCORPORATED, a corporation organized and existing under the
laws of the State of Delaware and having its principal office at One Hampshire
Street, 5th Floor, Cambridge, Massachusetts 02139-1532 (hereinafter referred to
as "Licensee").
WITNESSETH
WHEREAS, PAA is the sole owner of the Technology (as later defined
herein), and has the right to grant the licenses granted herein with respect to
the Technology;
WHEREAS, Licensee wishes to acquire certain exclusive license rights
with respect to the Technology for the purpose of developing and commercially
exploiting the Technology, upon the terms and conditions hereinafter set forth;
WHEREAS, PAA is the sole owner of the Patent Application (as later
defined herein), and has the right to grant the licenses granted herein with
respect to the
<PAGE>
Patent Rights, the Licensed Products and the Licensed Processes (each as later
defined herein), upon the terms and conditions hereinafter set forth; and
WHEREAS, Licensee desires to obtain a license to the Patent Rights,
the Licensed Products and the Licensed Processes, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises 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:
1 - DEFINITIONS
For the purposes of this Agreement, the following words and phrases
shall have the following meanings:
1.1 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.
2
<PAGE>
1.2 "Developments" shall mean any findings, discoveries, inventions,
additions, modifications, formulations or changes made by or on behalf of either
party during the term of this Agreement which relate to the Technology, any
Licensed Product or any Licensed Process including, without limitation, new or
improved formulations or methods of administration, improvements in clinical
efficacy, improved side effect profiles, new medical indications for any
Licensed Product and improvements in the manufacturing process for any Licensed
Product; provided that Developments shall not include any of the foregoing as to
which Licensee is the owner pursuant to Section 3.3 hereof.
1.3 "Net Sales" shall mean gross invoiced price for Licensed
Products sold by Licensee or its Affiliates to a Third Party, after deduction of
(i) all customary trade and quantity discounts actually allowed, (ii) allowance
for credits and returns, and (iii) sales, purchase or turnover taxes (if any).
In the event a Licensed Product is sold in combination with one or more
components which are not Licensed Products, Net Sales, for purposes of
determining royalties on such combination sale, will be calculated by
multiplying Net Sales of the combination by the fraction A/(A+B), in which A is
the gross invoiced price of the Licensed Product if sold separately and B is the
invoiced price of the other components in the combination if sold separately. If
the Licensed Products and the other components in the combination are not sold
separately, then Net Sales will be calculated based upon the gross invoiced
price of the combination less (x) the foregoing discounts, allowances and
taxes, if any, and (y) the direct cost of manufacturing the
3
<PAGE>
components that are not Licensed Products. For purposes of this definition as
used throughout this Agreement, and as used in this Section 1.3, any Sublicensee
which sells Licensed Products shall be deemed an Affiliate of Licensee and not a
Third Party. For the avoidance of doubt, subject to the immediately preceding
sentence, Net Sales includes sales of Licensed Products by any Sublicensee to a
Third Party. Unless otherwise required by United Stated generally accepted
accounting principles, "Net Sales" of a Licensed Product shall be recognized on
the earlier of the date of issuance of an invoice in respect of such sale, or
the date of shipment of such Licensed Product, to a Third Party, in either case
by Licensee, its Affiliates or any Sublicensee.
1.4 "Technology" shall mean and collectively include (i) any and all
inventions, formulas, methods, know-how, plans, processes and products, whether
patentable or not or confidential or not, developed, conceived, discovered or
reduced to practice by or on behalf of PAA, any PAA Principal or their
respective Affiliates, on or before the Effective Date, including, without
limitation, any and all of the foregoing relating to the Patent Application, and
(ii) all tangible work in progress and tangible research materials, including,
without limitation, notebooks, samples, experimental and test results, technical
and non-technical data and specifications, characteristics and designs, whether
patentable or not or confidential or not, relating to the foregoing.
1.5 "Patent Application" shall mean the United States Patent
Application, together with its related continuations-in-part and counterpart
foreign patent filings, as listed on Exhibit A attached hereto.
4
<PAGE>
1.6 "Patent Rights" shall mean any and all rights arising from any
and all of the following:
(a) United States and foreign patents and/or patent applications
derived from or arising out of the Technology, PAA
Developments or Work Product (as defined in Section 3.3)
including, without limitation, the Patent Application;
(b) United States and foreign patents issued from the applications
described in (a) above and from divisions, continuations and
continuations-in-part of such applications; and
(c) any reissues, re-examinations or extensions of the patents and
applications described in (a) or (b) above.
1.7 "Licensed Product" shall mean any product or part thereof in the
Field of Use which (i) is covered in whole or in part by a Valid Claim in the
country in which any such product or part thereof is made, used, sold or
imported; or (ii) embodies, incorporates, is based upon or derived from, or is
manufactured using a Licensed Process.
1.8 "Licensed Product Launch" in a country shall mean the first
commercial sale (i.e., not for development purposes or in connection with the
obtaining of regulatory approval) of Licensed Product in such a country by
Licensee, its Affiliates, or any Sublicensee to a Third Party subsequent to
regulatory approval of such sale in such country.
1.9 "Licensed Process" shall mean any method, formula, formulation,
plan or process (including manufacturing process) in the Field of Use (i) which
is covered in whole or in part by a Valid Claim in the country in which such
method, formula,
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formulation, plan or process is used or practiced or (ii) which embodies,
incorporates or is based upon or derived from the Technology or the PAA
Developments.
1.10 "Field of Use" shall mean the management or treatment of any
type of pain or muscular or skeletal discomfort arising from any cause,
including without limitation trauma, diseases such as diabetes, herpes zoster,
arthritis, osteoporosis, cancer, chemotherapy or chemical injury.
1.11 "Third Party" shall mean any person or entity other than PAA, a
PAA Principal, Licensee and their respective Affiliates, subject, however, to
Section 1.3.
1.12 "Valid Claim" means a claim within a Patent Right contained in
any (i) unexpired and issued patent 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 which has been on file with the applicable patent office for seven
(7) years or less from the date on which the patent application was filed.
1.13 "IND" shall mean an Investigational New Drug Application or
foreign equivalent.
1.14 "Sublicensee" shall mean any direct or indirect grantee of any
or all rights granted to Licensee hereunder.
1.15 "PAA Developments" shall mean any and all Developments created
by or on behalf of PAA.
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1.16 "Licensee Developments" shall mean any and all Developments
created by or on behalf of Licensee.
1.17 As used herein, unless the context clearly indicates otherwise,
(i) the singular includes the plural and the plural includes the singular; and
(ii) the conjunctive includes the disjunctive and the disjunctive includes the
conjunctive.
2 - GRANT OF LICENSE
2.1 PAA hereby grants to Licensee a worldwide, exclusive (even as
against PAA, subject to Section 2.2) license, with the right to grant
sublicenses, to use the Technology and Developments, to practice under the
Patent Rights, and to make, have made, use, have used, develop, have developed,
offer for sale, sell, have sold, market, have marketed, import and have
imported, Licensed Products, and to use or practice the Licensed Processes, in
each case in the Field of Use. Without limitation of the foregoing, each party
acknowledges and agrees that Licensee shall have the exclusive right for the
duration of the license rights granted pursuant to this Agreement to engage in
development activities with respect to the Technology or any Licensed Product
or Licensed Process, in each case in the Field of Use, and that neither PAA nor
any PAA Principal or their respective Affiliates will engage in any such
development activity, except pursuant to Section 3.3 hereof or a separate
agreement in writing between the parties.
2.2 PAA and each PAA Principal hereby agrees not to grant any other
license with respect to the Technology, the Patent Rights, the Licensed Products
or the Licensed Processes, except that PAA may grant (i) non-conflicting
licenses (with the
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right to grant sublicenses) having terms consistent with this Agreement in the
Technology, Patent Rights and PAA Developments, in each case outside the Field
of Use and (ii) licenses (without the right to grant sublicenses) to each of the
PAA Principals, to use the Technology and PAA Developments and to practice under
the Patent Rights, to use Licensed Products, and to use or practice the Licensed
Processes, in each case in the Field of Use solely for the therapeutic treatment
of individual patients (current or future) in the ordinary course of such PAA
Principal's clinical practice substantially as currently conducted; provided,
however, that (x) Licensee shall have no obligation to provide PAA or any PAA
Principal with any Licensed Products or any documentation or other materials
relating to the Technology, Licensed Products, Licensed Processes or
Developments, except as expressly set forth herein and (y) neither PAA nor any
PAA Principal shall in connection with the exercise of the rights granted under
subsection (ii) represent that it is in any manner affiliated or associated with
Licensee or any Affiliate or Sublicensee and (z) neither PAA nor any PAA
Principal shall in connection with the rights granted under subsection (ii) make
use of any clinical data owned or developed by or on behalf of Licensee or its
Affiliates or Sublicensees. Any and all licenses (or sublicenses) granted
pursuant to this Section 2.2 shall be in writing and shall be submitted for and
subject to Licensee's prior review and written approval, which approval shall
not be withheld unless Licensee determines, in its reasonable judgment, that the
terms of such license (or sublicense) conflict with the terms of this Agreement.
The terms of any such license granted pursuant to clause (i) of this Section 2.2
shall require (and PAA or
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the licensing PAA Principal, as applicable, shall enforce such requirement) that
any sublicense, if permitted by such license, shall be subject to prior review
by and written approval of Licensee as provided in this Section 2.2. Licensee
agrees to enter into a reasonable written confidentiality agreement prior to the
disclosure of a license or sublicense for review pursuant to this Section 2.2.
2.3 PAA and each PAA Principal acknowledges and agrees that it has,
and will have, no rights of any kind with respect to any intellectual property
or work product of any kind owned or created by Licensee in connection with the
development of Licensed Products or otherwise, including without limitation any
Licensee Developments, except as separately agreed in writing by the parties.
2.4 Each party shall retain all right, title and interest in, and no
license is granted hereunder with respect to, any trademarks, trade names, logos
or similar identifying marks used by it in connection with any Licensed
Products or Licensed Processes, except that Licensee may state that it is
licensed by PAA to the extent provided herein.
2.5 Any and all sublicenses (including sublicenses granted by any
Affiliate of Licensee or any Sublicensee) granted pursuant to Section 2.1 hereof
shall be in writing and shall be consistent with the terms of this Agreement.
Copies of any and all such sublicenses shall be made available for review by
PAA, subject to PAA's entering into a confidentiality agreement on terms
reasonably satisfactory to Licensee (or the relevant Affiliate of Licensee or
Sublicensee) prior to any such review.
3 - DEVELOPMENT AND COMMERCIALIZATION
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3.1 Licensee, at its own cost and expense, shall use commercially
reasonable efforts to bring one or more Licensed Products to market through a
diligent clinical development and commercialization program; provided that
Licensee shall be deemed to have satisfied its obligations under this Section
3.1 if its uses efforts consistent with those which it would use for a product
owned by it which evidences substantially similar clinical and commercial
promise, taking into account Licensee's capital resources and other development
and commercialization commitments and programs.
3.2 Licensee shall have the sole right, in its own name and at its
own expense, to make any and all regulatory filings and submissions relating to
the development and commercialization of Licensed Products or Licensed
Processes in the Field of Use, including without limitation any IND filings.
3.3 During the term of this Agreement, PAA, through one or more PAA
Principals, shall provide reasonable consulting services as requested by
Licensee with respect to the Technology and the development of Licensed Products
and Licensed Processes. Such consulting services shall include, without
limitation, disclosing to Licensee all information known by or otherwise in the
possession of PAA or any PAA Principal with respect to any and all aspects of
the Technology, Developments, Licensed Products or Licensed Processes; provided,
however, that no PAA Principal shall be obligated to provide such consulting
services for more than two days in any one month. Such consulting services shall
be compensated at the rate of $** per day or $** per half day, plus
reimbursement for reasonable, documented travel (coach class) and lodging
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expenses. The parties agree that Licensee shall own all right, title and
interest in and to any and all inventions, discoveries, intellectual property
and work product resulting from the performance of such consulting services
(including any of the foregoing conceived or discovered by PAA, any PAA
Principal or their respective Affiliates, but excluding intellectual property
claimed in the Patent Application as in effect on the Effective Date or
otherwise disclosed in writing to Licensee by PAA on or prior to the Effective
Date) (collectively, the "Work Product"). For the avoidance of doubt, to the
extent that any Patent Rights arise from the Work Product, Licensee shall pay
royalties as set forth in Article 4 based upon Net Sales of Licensed Products
covered by a Valid Claim that is within such Patent Rights. Licensee shall
grant, and hereby does grant, to PAA a perpetual, non-exclusive, worldwide,
royalty-free, unlimited license, including the right to grant sublicenses, in
Licensee's rights in the Work Product outside the Field of Use. PAA and each PAA
Principal shall execute and deliver to Licensee such instruments of assignment,
releases or other documents as Licensee may request to effect or confirm
Licensee's ownership of the Work Product.
4 - CONSIDERATION
4.1 In order to induce PAA to enter into this Agreement, and in
consideration of the rights and license granted hereunder, subject to the
further provisions of this Article 4, Licensee shall pay or cause to be paid
royalties to PAA during the term of this Agreement as follows:
(a) a license issuance fee of ** ($**), which shall be deemed
earned and due immediately upon the Effective Date;
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(b) **% of annual Net Sales up to $**;
(c) **% of annual Net Sales between $** and $**;
(d) **% of annual Net Sales in excess of $**.
4.2 The royalty percentages set forth in Section 4.1 shall each be
reduced by ** (so that **% shall instead be **%, **% shall instead be **% and
**% shall instead be **%) at any time and in any country in which Licensee's,
its Affiliates, or any Sublicensees' making, having made, using, having used,
offering for sale, selling or having sold, marketing or having marketed or
importing or having imported a Licensed Product in such country without a
license or sublicense, as applicable, would not infringe a Valid Claim in that
country or a Valid Claim in the country where such Licensed Product is made or a
Valid Claim in the country where such Licensed Product is sold or used. In
addition, Licensee shall be entitled to reduce any royalties owed by it pursuant
to Section 4.1 by an amount equal to the sum of (i) any royalty or other
payments required to be paid by Licensee to any Third Party in order to use,
develop, manufacture or sell any Licensed Product or use or practice the
Technology or any Licensed Process as contemplated hereunder, whether in
connection with settlement of a third-party claim of infringement or otherwise,
and (ii) any and all damages, costs and expenses (including, without limitation,
reasonable attorneys' fees) incurred by Licensee in connection with the defense
of any claim that the intellectual property licensed by it from PAA hereunder
infringes any Third Party's rights, to the extent that such costs are not paid
to Licensee pursuant to the indemnification obligation set forth in Section 8.3
below. Notwithstand-
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ing the foregoing, Licensee shall not be entitled to reduce royalties owed
pursuant to Section 4.1 as provided for in this Section 4.2 by more than **
percent (**%) in any quarter, with any amounts by which Licensee would have been
entitled to reduce royalties owed hereunder but for the reaching of such limit
("Unutilized Amounts") being carried forward to future reporting periods. Within
thirty (30) days after the expiration of Licensee's royalty obligation with
respect to a particular country pursuant to Section 4.4, PAA shall reimburse
Licensee in an amount equal to the cumulative Unutilized Amounts for such
country.
4.3 (i) Royalty payments hereunder are due and payable and shall be
made quarterly, in arrears, within sixty (60) days after the end of each
calendar quarter in which the royalty accrues. All royalty payments shall be in
United States funds. The exchange rate applied, if applicable, shall be the
exchange rate published in the Wall Street Journal on the last business day of
the calendar quarter in which the royalty accrued. Royalty payments shall be
made to PAA by wire transfer to a bank account designated in writing, and shall
be accompanied by mailing to PAA a report, certified to be true and correct by
an officer of Licensee, setting forth, in reasonable detail, the basis on which
such royalty payment was calculated.
(ii) Royalties in respect of any Net Sales shall accrue at the time of
recognition of such Net Sales as provided in Section 1.3. In no event shall a
royalty be paid on an individual unit of Licensed Product more than once.
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(iii) Licensee shall be responsible for payment to PAA of royalties
accruing on Net Sales by an Affiliate or Sublicensee regardless of whether such
Affiliate or Sublicensee meets its royalty and other obligations, if any, to
Licensee.
(iv) Licensee agrees to pay interest to PAA on the amount of any
underpayment of royalties from the date payment was due until the date payment
is made. The applicable interest rate will be the average prime rate as
published in the Wall Street Journal plus three percent (3%) during such time.
(v) In the event Licensee asserts any monetary claim against PAA or any
PAA Principal, PAA hereby agrees and acknowledges that Licensee shall have the
right to set off against any royalty payment when due any amount claimed by
Licensee against PAA or such PAA Principal.
4.4 The duration of payment of royalties under this Article 4 in any
country shall continue for the longer of (i) ten (10) years from Licensed
Product Launch in that country or (ii) the date of the last to expire Valid
Claim which, except for the license granted hereby, would be infringed by
Licensee making, having made, using, having used, offering for sale or selling
or having offered for sale or sold, marketing or having marketed, or importing
or having imported, Licensed Product in that country. In the case of trade
secrets deemed to be Valid Claims pursuant to Section 5.2, the duration of
payment of royalties shall be as set forth in clause (i) of this Section 4.4.
Licensee's license granted hereunder shall continue in full force and effect and
shall be fully paid up
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and royalty free in any country where royalty obligations as provided for in
this Section 4.4 have expired.
4.5 (i) Licensee shall at all times during the term of this
Agreement keep accurate books of account, and maintain supporting documents,
which show the royalties to which PAA is entitled under this Agreement
(including royalties based upon Net Sales by Affiliates of Licensee and by
Sublicensees). Said books of account and supporting documentation, which shall
be retained by Licensee for at least two (2) years after any termination of this
Agreement, shall be open for audit and inspection during the term of this
Agreement and for a period of two (2) years after any termination of this
Agreement upon reasonable prior written notice by an independent certified
public accountant chosen by PAA and reasonably acceptable to Licensee, at PAA's
expense (except as hereinafter provided with respect to the expense of an audit
and inspection). Such certified public accountant shall have the right to audit
and inspect the books of account and supporting documentation of Licensee in
order to ensure compliance with Licensee's royalty obligations hereunder and
shall, upon execution of a confidentiality agreement on terms reasonably
acceptable to Licensee, have the right to make copies and extracts of said books
of account and supporting documentation and to prepare a written report
(including any such copies or extracts) detailing the results of the audit and
inspection and deliver such written report to PAA and PAA's financial advisors
and attorneys. Audits and inspections shall not take place more than once in
each calendar year and shall be limited
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to royalty obligations accruing not more than three (3) years prior to the date
of the audit and inspection.
(ii) In the event that an audit and inspection reveals that Licensee has
underpaid any royalty due PAA under this Agreement, PAA shall provide Licensee
with written notice of such underpayment and, in addition to any other available
remedy PAA may have, Licensee shall forthwith remit such underpayment to PAA in
the manner prescribed in subsection (i) of Section 4.3 with interest calculated
in accordance with subsection (iv) of Section 4.3. In the event that an audit
and inspection reveal that Licensee has under paid royalties due under this
Agreement by an amount exceeding ten percent (10%) in any twelve (12) month
period, PAA shall provide Licensee with written notice thereof, and in addition
to Licensee's obligation to remit payment in accordance with the preceding
clause (iv) and in addition to any other available remedy PAA may have, the cost
of such audit and inspection shall be payable by Licensee.
4.6 In the event that Licensee elects, in its sole discretion, to
file an IND in its own name with respect to a Licensed Product, Licensee shall
pay to PAA the sum of ** dollars ($**) within sixty (60) days of such filing.
5 - PATENT PROSECUTION
5.1 During the term of this Agreement, Licensee shall have the sole
initial right (i) to file such United States and/or foreign patent applications
covering patentable inventions included within the Technology or any
Developments created by or on behalf of PAA as Licensee shall, in its sole
discretion, deem advisable, (ii) to prosecute and
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defend all patent applications referred to in clause (i), and (iii) to maintain
in force any patents resulting from such applications. Licensee shall bear all
costs associated with the foregoing filing, prosecution, defense and
maintenance incurred after the Effective Date. Without limitation of the
foregoing, Licensee shall prosecute with reasonable diligence and at its sole
expense the Patent Application, except that Licensee shall not be obligated to
prosecute any divisional resulting from the Patent Application if such
divisional does not include at least one claim with substantial application in
the Field of Use, as determined by Licensee in its reasonable discretion.
5.2 If Licensee determines not to file any such patent application
after request by PAA, or not to prosecute any such patent application or to
maintain any such patents, Licensee shall timely provide PAA with written notice
of such determination, in which event PAA shall have the right to file or
prosecute such application or maintain such patents entirely at its own expense,
unless Licensee has a reasonable basis for such determination (including,
without limitation, Licensee's preference for keeping the relevant Technology or
Development a trade secret). Licensee's written notice of such determination
shall state the reasonable basis. If the reasonable basis is Licensee's
preference for keeping the relevant Technology or Development a trade secret,
the trade secret shall be identified in the written notice and such Trade Secret
shall become a Valid Claim for purposes of this Agreement. It shall be
unreasonable for Licensee to prefer to keep any Technology or Development a
trade secret if such Technology or Development is not material to the Field of
Use.
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5.3 Each party shall (i) timely advise the other in writing of its
intentions with respect to the filing, prosecution and maintenance of patent
applications and patents as set forth above in order to allow the other the
opportunity to comment thereon, which comments the party shall consider in good
faith, and (ii) at its own expense, provide the other with reasonable assistance
to facilitate the filing, prosecution and maintenance of patent applications and
patents as set forth above, and shall execute all documents which the other
party reasonably deems necessary or desirable therefor. Without limitation of
the foregoing clause (ii), PAA shall, within seven (7) days of the Effective
Date, cause to be delivered to Licensee all prosecution file history and other
documents relating to the Patent Application.
6 - THIRD-PARTY INFRINGEMENT
6.1 Each party shall inform the other promptly in writing if it
becomes aware of any (i) applications for a patent or issued patent that may
conflict with either party's intellectual property rights hereunder or (ii) acts
of infringement or unfair competition by any third party involving such
intellectual property rights, and shall provide the other with any evidence
thereof in its possession or control.
6.2 During the term of this Agreement, Licensee shall have the
right, but not the obligation, to prosecute and to settle any and all
infringement actions involving the Technology, Developments and/or the Patent
Rights in the Field of Use, provided that if the settlement, consent judgment or
other voluntary final disposition of any such action would affect the rights of
PAA outside the Field of Use, PAA's consent to such settlement
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shall be required, such consent not to be unreasonably withheld. In furtherance
of the foregoing right, PAA hereby agrees that PAA will, at Licensee's request
and expense, join as a party plaintiff in any such infringement action. Licensee
shall keep PAA reasonably informed of the litigation strategy and of the status
of the litigation in any such infringement action and consider in good faith
PAA's comments. The entire cost of any such infringement action prosecuted by
Licensee shall be borne by Licensee, and Licensee shall keep any damages and
costs recovered in connection therewith.
6.3 If within six (6) months after having been notified of any
alleged infringement, Licensee shall have been unsuccessful in persuading the
alleged infringer to desist and shall not have brought and shall not be
diligently prosecuting an infringement action, or if Licensee shall notify PAA
at any time prior thereto of its intention not to bring suit against any such
alleged infringer in the Field of Use, then, and in those events only, PAA shall
have the right, but not the obligation, to prosecute at its own cost and expense
any infringement action involving the Patent Rights, and PAA may, for such
purposes, join Licensee as a plaintiff as necessary to maintain standing. No
settlement, consent judgment or other voluntary final disposition of any such
action may be entered into without the consent of Licensee, which consent shall
not be unreasonably withheld. PAA shall keep any damages and costs recovered in
connection with its prosecution of an infringement action pursuant to this
Section 6.3.
6.4 In any action brought by either party in accordance with the
foregoing, the other party shall, at the request and expense of the party
bringing such suit,
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cooperate in all respects, including, to the extent possible, by having its
employees testify when requested and making available relevant records, papers,
information, samples, specimens, and the like.
7 - PRODUCT LIABILITY
Licensee shall at all times during the term of this Agreement and
thereafter indemnify, defend and hold harmless PAA, its members, stockholders,
directors, officers, employees and Affiliates, and each PAA Principal
(collectively, "Indemnified Persons") against all claims, proceedings, demands
and liabilities of any kind whatsoever, including legal expenses and reasonable
attorneys' fees, arising out of (i) the death of or injury to any person or
persons or out of any damage to property resulting from Licensee's, or any
Affiliate's or Sublicensee's use of the Technology or Developments, practicing
under the Patent Rights, making or having made, using or having used, offering
for sale or selling or having sold, marketing or having marketed or importing or
having imported, any product, or using or practicing any process, except where
attributable to the gross negligence or willful misconduct of any Indemnified
Person.
8 - REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
8.1 PAA and each of the PAA Principals, jointly and severally,
represent and warrant to Licensee as follows:
(i) Except to the extent licensed to Licensee hereby, as of
the Effective Date PAA owns the entire right, title and interest in and to
all intellectual property licensed to Licensee hereunder (the entire
right, title
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and interest of each of the PAA Principals therein having been duly,
validly and effectively assigned to PAA pursuant to instruments of
assignment, copies of which have previously been delivered to Licensee),
and PAA has all required right, power and authority to grant the licenses
granted hereunder.
(ii) To the best knowledge of PAA and each of the PAA
Principals, the Technology, Patent Rights and any PAA Developments in
existence as of the Effective Date do not and will not infringe any third-
party intellectual property rights when used in accordance with this
Agreement.
(iii) Except as set forth on Exhibit B hereto, there are no
outstanding options, licenses or agreements of any kind, as of the
Effective Date, between PAA, any PAA Principal or any Affiliate thereof
and any Third Party relating to the Technology, the Patent Rights or any
Licensed Product or Licensed Process.
(vi) To the best knowledge of PAA and each of the PAA
Principals, as of the Effective Date, there is and has been no
unauthorized use, infringement or misappropriation of any of PAA's
intellectual property rights in the Technology or the Patent Rights by
any person or entity.
(v) To the best knowledge of PAA and each of the PAA
Principals, as of the Effective Date, (A) all data describing clinical
obser-
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vations relating to the Technology or any Licensed Product or Licensed
Process prepared by or on behalf of PAA or any PAA Principal and
previously delivered to Licensee are true and correct in all material
respects, and (B) Licensee has been provided with all material information
in the possession or control of PAA, any PAA Principal or any Affiliate
thereof which is reasonably believed by them to be material to Licensee
entering into this Agreement, and such information does not knowingly
contain any untrue statement of material fact or knowingly omit to state
any material fact.
8.2 Each party represents and warrants to the other parties that (i)
it has the full right, power and authority to enter into this Agreement and to
perform its obligations hereunder, (ii) the execution of this Agreement and the
performance of its obligations hereunder does not and will not conflict with or
result in a breach (including with the passage of time) of any other agreement
to which it is a party, and (iii) 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 its terms.
8.3 PAA and the PAA Principals, jointly and severally, on the one
hand, and Licensee, on the other, shall indemnify and hold harmless the other
against any loss, damages or expense (including, without limitation, reasonable
attorneys' fees) resulting
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from any breach of this agreement by such party, including without limitation
any of the representations and warranties of such party contained herein.
8.4 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, PAA,
ITS MEMBERS, DIRECTORS, OFFICERS, EMPLOYEES, AND AFFILIATES AND EACH PAA
PRINCIPAL MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER
EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANT
ABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF PATENT RIGHTS CLAIMS,
ISSUED OR PENDING, AND THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE OR THAT THE SUBJECT MATTER LICENSED HEREIN CAN BE SUCCESSFULLY
COMMERCIALIZED.
8.5 IN NO EVENT SHALL A PARTY BE LIABLE HEREUNDER FOR INCIDENTAL OR
CONSEQUENTIAL OR PUNITIVE DAMAGES OF ANY KIND, INCLUDING ECONOMIC DAMAGE OR
INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF WHETHER THE PARTY SHALL BE
ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE
POSSIBILITY OF SUCH DAMAGES.
8.6 PAA and the PAA Principals, jointly and severally, represent and
warrant to, and covenant and agree with, Licensee, that (i) PAA has in place
with each PAA Principal, and will require as a condition of employment of each
PAA employee, agreements assigning to PAA all rights to inventions and other
intellectual property which relate to the Technology and any Developments,
Licensed Product or Licensed Process as are created or discovered by each such
PAA Principal or PAA employee, in the case of each PAA Principal, while a member
of PAA, and, in the case of each PAA employee, while employed by PAA, and (ii)
neither PAA nor any PAA Principal has entered, or will enter, into any agreement
inconsistent with the foregoing.
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9 - ASSIGNMENT
Neither party may assign this Agreement or its rights and
obligations hereunder without the prior, written consent of the other party,
such consent not to be unreasonably withheld; provided, however, that (i) the
foregoing shall not limit or impair in any manner Licensee's right to grant
sublicenses as provided herein, (ii) Licensee may assign this Agreement or its
rights hereunder to an entity which acquires, by sublicense or otherwise, rights
to Licensed Products (provided that in such event Licensee shall continue to be
obligated to perform Licensee's obligations hereunder), and (iii) Licensee or
PAA may assign this Agreement and its rights hereunder 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 (provided that in any
such event, Licensee or the successor entity or PAA or the successor entity in
such transaction shall continue to be liable to perform Licensee's or PAA's
obligations hereunder, as the case may be. This Agreement shall inure to the
benefit of and be binding upon the parties and their respective heirs,
executors, administrators, successors and permitted assigns. Notwithstanding any
assignment or anything in the foregoing to the contrary, PAA shall be and remain
solely liable under Section 3.3 hereof.
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10 - TERM AND TERMINATION
10.1 The term of this Agreement shall commence on the Effective Date
and, unless sooner terminated as provided in this Article 10, shall expire on a
country-by-country basis on the expiration of Licensee's royalty payment
obligations as provided in Section 4.5.
10.2 Licensee shall have the right to terminate this Agreement on a
country-by-country basis or in its entirety at any time (for any reason or no
reason) by providing PAA with at least sixty (60) days prior written notice of
termination, such termination to become effective at the expiration of such
sixty (60) day period or such later date as may be specified in such notice.
10.3 In the event a material breach of this Agreement (including,
without limitation, a material breach of any representation or warranty
contained in Article 8 hereof) by PAA or any PAA Principal on the one hand, or
Licensee on the other, the non-breaching party shall have the right to
terminate this Agreement by providing written notice of such termination to the
breaching party, but only if (i) the non-breaching party shall first have
provided the breaching party with written notice of such breach, specifying the
nature of such breach ("Breach Notice"), (ii) either (A) such breach, by its
nature, cannot be cured within ninety (90) days after receipt of such Breach
Notice or (B) if such breach is curable within such ninety (90) day period, the
breaching party fails to cure such breach within such ninety (90) day period and
(iii) such breach, either alone or in
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combination with other uncured breaches as to which Breach Notice has been
given, materially impairs the value of the Agreement as a whole to the
non-breaching party.
10.4 In the event of termination of this Agreement by Licensee under
Section 10.2 or by PAA under Section 10.3 or 10.8, (i) all licenses granted by
PAA to Licensee hereunder shall terminate, and (ii) at the request of PAA,
Licensee shall assign to PAA all regulatory filings, regulatory approvals and
clinical data owned and controlled by Licensee, and shall deliver to PAA all
documentation in its possession, relating to Licensed Products, Licensed
Processes or any Technology, or, to the extent such assignment is not legally
permissible, Licensee shall grant PAA the right to access, use and cross
reference such filings, approval and data. In the event of termination of this
Agreement by Licensee under Section 10.2, then PAA shall pay Licensee a royalty
upon any sales of Licensed Product which are made by or on behalf of PAA, its
Affiliates or any licensee or sublicensee (or sub-sublicensee) thereof after the
effective date of such termination. The amount of such royalty shall be
consistent with industry standards and shall be determined by mutual agreement
of PAA and Licensee after good faith negotiations; provided, however, that if
PAA and Licensee are unable to reach mutual agreement thereon, the matter shall
be submitted to arbitration generally in accordance with the procedures set
forth in Article 13 of this Agreement, and the arbitrator shall base his/her
decision on the following factors: (i) the value of any assigned filings,
approvals and/or data to the development and commercialization of the Licensed
Product; and (ii) the
26
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relative contributions of the parties to the development and commercialization
of the Licensed Product.
10.5 In the event of termination of the Agreement by Licensee under
Section 10.3, the rights and licenses granted by PAA to Licensee under this
Agreement shall, at Licensee's option, remain in effect, except that such rights
and licenses shall be on a royalty-free basis.
10.6 Upon termination of this Agreement for any reason, nothing
herein shall be construed to release either party from performance of any
obligation incurred or liability or payment accrued prior to the effective date
of such termination, and such termination shall be without prejudice to any
remedy that any party may have in addition to those rights as provided under
this Agreement. Articles 7 and 8, this Article 10, Article 11 and Articles 12
through 14 (with respect to such Articles 12 through 14, solely to the extent
applicable to provisions, rights or obligations which survive termination) shall
survive any such termination. Licensee and any permitted Sublicensees may,
however, after the effective date of any such termination, sell any and all
Licensed Products in inventory, and complete and sell any and all Licensed
Products in the process of manufacture, at the effective date of such
termination for a period of one year after the effective date of such
termination, subject to payment of royalties to PAA as herein provided.
10.7 In the event of termination of this Agreement by Licensee
pursuant to Section 10.3, any and all sublicenses to which a Sublicensee is a
party and which is in
27
<PAGE>
effect as of the effective date of such termination shall continue in full force
and effect, provided that such Sublicensee timely pays all royalties on Net
Sales by such Sublicensee directly to PAA and continues to comply with the other
terms of such sublicense. In the event of termination of the Agreement by either
party for any other reason, any Sublicensee hereunder not then in default shall
have the right to seek a license under reasonable terms and conditions from PAA,
which license PAA agrees to negotiate in good faith.
10.8 In the event that Licensee does not file an IND within three
(3) years of the Effective Date of this Agreement, PAA shall have the right to
terminate this Agreement upon thirty (30) days written notice to Licensee.
10.9 In the event that Licensee alleges in a proceeding in a court
or tribunal of competent jurisdiction or in an arbitration that any patent or
patent claim within the Patent Rights is invalid or unenforceable, PAA shall
have the right to terminate this Agreement upon thirty (30) days written notice
to Licensee.
11 - INFORMATION
11.1 As a result of the exercise of the rights and performance of
the obligations under this Agreement, each party (the "disclosing party") may
disclose to the other party (the "receiving party"), or the receiving party may
obtain access to, proprietary and confidential information of the disclosing
party.
11.2 Information shall be considered proprietary and confidential
only if (i) it is in written or other tangible form and is marked as being the
confidential informa-
28
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tion of the disclosing party or (ii) if disclosed verbally, it is reduced to
written form, marked as the confidential information of the disclosing party,
and transmitted to the receiving party within one week of the verbal disclosure
(individually and collectively, "Information").
11.3 Each party acknowledges the confidential character of the
Information and agrees that the Information is the valuable property of the
disclosing party. The receiving party agrees not to use any Information for any
purpose or disclose Information to any Third Party (other than a party's
officers, directors, members, employees, stock holders, attorneys, financial
advisors and other representatives), except as permitted by or in the
performance of this Agreement.
11.4 PAA further agrees to take reasonable measures which are
designed to ensure the continued secrecy of Information disclosed by it to
Licensee hereunder, subject to the exceptions contained in clauses (i) and
(ii)(A) of Section 11.5; provided that for purposes of this Section 11.4, (1)
the exception contained in clause (i)(C) of Section 11.5 shall apply only if
such Information entering into the public domain was not the result of action by
PAA or a PAA Principal or was in accordance with Section 12 and (2) references
in clause (ii)(A) of Section 11.5 to the "receiving party" shall be deemed to
refer to PAA.
11.5 The acknowledgments, agreements, and restrictions set forth in
the preceding provisions of this Article 11 shall not (i) apply to any
Information which (A) was rightfully in the receiving party's possession, as
evidenced by written records, prior
29
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to the date of this Agreement (other than by disclosure from the disclosing
party), without similar restrictions, (B) was disclosed to the receiving party
by a Third Party (without actual knowledge of the receiving party that such
disclosure was in breach of a duty of confidentiality of such Third Party), (C)
entered into the public domain without a breach of this Agreement, or (D) the
receiving party determines in good faith must be disclosed to comply with law or
an order or request of a governmental body, or (ii) (A) prevent Licensee or PAA,
upon and subject to the terms of this Agreement, from preparing, filing,
prosecuting or maintaining any patent applications or its resulting patents
related to the Technology, Licensed Products or Licensed Processes, (B) prevent
Licensee, its Affiliates or any Sublicensee (1) from disclosing Information to
persons or entities working on their behalf or to governmental agencies, to the
extent Licensee or such other persons or entities reasonably believe is required
or desirable to secure any government approval for the development, manufacture,
marketing or sale of any Licensed Product, or (2) upon imminent approval or
actual approval for registration by a governmental agency in a country of a drug
application for any Licensed Product, from disclosing Information to the extent
reasonably necessary to promote the use, marketing or sale of Licensed Product
in that country or (C) prevent Licensee or its Affiliates from disclosing
Information which Licensee determines in good faith is required by law or
reasonably necessary in connection with any financing, strategic transaction,
acquisition or disposition involving Licensee or any Affiliate thereof.
12 - PUBLICATIONS
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During the term of the Agreement, the following restrictions shall apply
with respect to disclosure by PAA or any PAA Principal or Affiliate (the
"Publishing Party") in any publication or presentation, in oral or written form,
of information or data relating to the Technology (collectively,
"Publications"):
(a) The Publishing Party shall provide Licensee with a copy of any
proposed Publication at least forty-five (45) days prior to
submission for publication (or presentation) so as to provide
Licensee with the opportunity to recommend any changes it
deems necessary to continue to maintain the confidentiality
of information or data disclosed by Licensee 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 Licensee notifies the Publishing Party ("Notice") within
thirty (30) days of receipt of the copy of the proposed
Publication that such Publication, in its reasonable judgment
(i) contains an invention for which Licensee desires to (and
is hereunder entitled to) pursue patent protection, or (ii)
could be expected to have a material adverse effect on the
commercial value of the information or data contained therein,
of any Information disclosed to Licensee hereunder or of any
aspect of the Technology disclosed to Licensee or licensed
hereunder, the Publishing Party shall prevent such
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<PAGE>
publication (or presentation) or delay such publication (or
presentation) for a reasonable period of time as specified by
Licensee. In the case of inventions, such delay shall be for a
period of time sufficient to permit the timely preparation and
filing of a patent application or applications on the
invention, and in no event less than one hundred eighty (180)
days from the date of Notice. Any dispute or disagreement
under this subsection (b) may be submitted to arbitration in
accordance with the procedures set forth in Article 14 hereof.
13 - NOTICES AND OTHER COMMUNICATIONS
Any notice or communication (including invoices) required to be given
hereunder shall be in writing and shall be considered properly given (a) on the
date delivered or sent if personally delivered against written receipt, (b) on
the date of receipt if sent by certified or registered mail, or (c) on the date
of receipt if sent by overnight mail or reputable over night courier, as
follows:
If to PAA or any PAA Principal:
PHARMACEUTICAL APPLICATIONS ASSOCIATES, LLC
402 East Yakima Avenue, Suite 330
Yakima, Washington 98901-2755
Attn: C. Donald Williams
Facsimile: (509) 454-3295
or such other address (and/or facsimile number) that PAA may advise in writing
in accordance with this Article 12;
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<PAGE>
If to Licensee:
PRAECIS PHARMACEUTICALS INCORPORATED
1 Hampshire Street
Cambridge, Massachusetts 02139
Attn.: Vice President of Corporate Development
Facsimile: (617) 494-8414
or such other address (and/or facsimile number) that Licensee may advise in
writing in accordance with this Article 12.
14 - DISPUTE RESOLUTION
14.1 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 respective Chief Executive Officers of Licensee and PAA. 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 Boston, Massachusetts in accordance with this subsection under
the guidelines of the American Arbitration Association ("AAA") and the
commercial rules then in effect for AAA, except as otherwise provided for
herein.
14.2 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.
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14.3 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.
14.4 The parties shall share equally the reasonable documented cost
of such arbitration proceeding. Each party shall be responsible for its own
costs and expenses in any such arbitration proceeding.
15 - MISCELLANEOUS PROVISIONS
15.1 This Agreement shall be construed, governed, interpreted and
applied in accordance with the laws of The Commonwealth of Massachusetts,
without giving effect to its conflicts of law principles, except that questions
affecting the construction and effect of any patent shall be determined by the
law of the country in which the patent was granted.
15.2 The parties hereto acknowledge that this Agreement (including
its Exhibits) sets forth the entire Agreement and understanding of the parties
with respect to the subject matter hereof, and shall not be subject to any
change or modification except by the execution of a written instrument
subscribed to by Licensee and PAA.
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15.3 The invalidity or enforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, each of which shall remain in full force and effect. In
addition, any such invalid or unenforceable provision shall be deemed amended or
replaced with a provision that is valid and enforceable which achieves, to the
fullest extent possible, the original objectives and intent of the parties as
reflected in the offending provision.
15.4 Licensee agrees to mark the Licensed Products sold in the
United States with all applicable United States patent numbers. All Licensed
Products shipped to or sold in other countries shall be marked in such manner as
to conform with the patent laws and practices of the country of manufacture
and/or sale.
15.5 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 subsequent failure to perform any
such term or condition by the other party.
15.6 Nothing herein shall be deemed to constitute either party as
the agent or representative of the other party. Each party shall be an
independent 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 or represent to have authority to speak for, represent or obligate the
other party in any way without prior written authority from the other party.
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15.7 No party will disclose the terms or conditions of this
Agreement to any Third Party (other than a party's officers, directors, members,
employees, stockholders, attorneys, financial advisors and other
representatives) 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 upon order
or request of any regulatory agency or commission of competent jurisdiction);
provided that such consent will not be unreasonably withheld and shall not be
required for any such disclosure by Licensee which Licensee determines in good
faith is required by law or reasonably necessary in connection with any
financing, strategic transaction, acquisition or disposition involving Licensee.
The restriction on disclosure contained herein shall not apply to any
information which is essentially identical to that contained in a previous
disclosure authorized hereunder.
15.8 In the event that PAA shall become insolvent, shall make an
assignment for 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 PAA to
Licensee 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 Licensee, as a licensee of such rights under this
Agreement,
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<PAGE>
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.
15.9 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.
15.10 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
15.11 Each of the parties hereto covenants and agrees that at all
times hereafter it will execute, acknowledge and deliver all such instruments
and documents which may be necessary, or with the other party may reasonably
request, to effectuate the rights and perform the obligations contemplated by
this Agreement.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the day and year first written above.
PRAECIS PHARMACEUTICALS
INCORPORATED
/s/ Mark A. Silver
----------------------------------------
Mark A. Silver
Vice President of Corporate Development
/s/ William L. Kubasek
----------------------------------------
William L. Kubasek
Director of Business Development
PHARMACEUTICAL APPLICATIONS
ASSOCIATES LLC
/s/ C. Donald Williams
----------------------------------------
By: C. Donald Williams
Its: President
/s/ C. Donald Williams
----------------------------------------
C. Donald Williams, M.D., C.G.P.
/s/ Robert Murdock
----------------------------------------
Robert Murdock, R.Ph.
38
<PAGE>
EXHIBIT A
U.S. Patent Application No. 3742-901-2-IPROV and related filings.
A-1
<PAGE>
EXHIBIT B
PAA has entered into Confidentiality Agreements with each of the following
individuals and entities:
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
**
PAA has not entered into any license agreements relating to the Technology, the
Patent Rights, or any Licensed Product or Licensed Process.
B-1
<PAGE>
EXHIBIT 10.12
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN
PORTIONS OF THIS DOCUMENT. SUCH PORTIONS HAVE BEEN
REDACTED AND MARKED WITH ASTERISKS (**). THE NON-
REDACTED VERSION OF THIS DOCUMENT HAS BEEN SENT TO
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
AN APPLICATION FOR CONFIDENTIAL TREATMENT.
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).
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<PAGE>
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.
1.14 "Product" shall have the meaning set forth in the preambles to this
Agreement.
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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
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
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<PAGE>
(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 Partners and such Affiliates (collectively, the
"Supplied Entities"), have requirements for Product during the
Development Period in addition to the
5
<PAGE>
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
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
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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
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
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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.
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
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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 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.
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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 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
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(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 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
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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 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,
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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 shipment 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
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set out in Annex D). All other Product quantities will be supplied at the
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
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
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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.
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,
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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.
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
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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, 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
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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 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
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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 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
19
<PAGE>
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 seven
(7) years from the Launch Date, except that it will be automatically
renewed for consecutive two (2) year 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 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
20
<PAGE>
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 forecasted 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.
21
<PAGE>
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.
22
<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 dispute arising under this Agreement which cannot be settled amicably shall
be submitted to binding arbitration in accordance with the International Chamber
of
23
<PAGE>
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 change its address for service from time to time by notice given in
accordance with the foregoing.
SECTION 18 - ENTIRE AGREEMENT
24
<PAGE>
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.
25
<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:
26
<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
27
<PAGE>
ANNEX A
PRAECIS
PHARMACEUTICALS
INCORPORATED
PPI-149 Drug Substance Tentative Specifications
- --------------------------------------------------------------------------------
Parameter *** Tentative Specification
- --------------------------------------------------------------------------------
Appearance *** White to off-white powder
- --------------------------------------------------------------------------------
Identification
o HPLC *** ***
o Mass Spectrometry *** ***
o Amino acid analysis *** ***
- --------------------------------------------------------------------------------
*** *** ***
- --------------------------------------------------------------------------------
*** *** ***
- --------------------------------------------------------------------------------
Water content *** ***
- --------------------------------------------------------------------------------
Specific rotation *** ***
- --------------------------------------------------------------------------------
*** *** ***
- --------------------------------------------------------------------------------
Residual solvents: *** ***
***
- --------------------------------------------------------------------------------
HPLC purity *** ***
- - Total impurities
- - Individual impurity
- --------------------------------------------------------------------------------
Microbial limits *** ***
- --------------------------------------------------------------------------------
Bacterial endotoxins *** ***
(LAL)
- --------------------------------------------------------------------------------
Peptide content *** ***
- --------------------------------------------------------------------------------
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
28
<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.
o Batch Production records
o Certificates of Analysis
o Development reports
o Facilities and instrumentation IQ/QQ/ and PQ
o Facilities Drug Master Files, to be included in CMC/DMF
o SOP's
o Change control
o Validation documentation - strategy, plan, protocol, report
o CMC section for NDA filing
o 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.
29
<PAGE>
Annex C - 5 Yr. Plan (1998-2002)
Year Quantity (***)
---- --------
1998 ***
1999 ***
2000 ***
2001 ***
2002 ***
30
<PAGE>
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
o *** 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 ***
o 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
o Delivery schedule: delivery schedule for the *** is as follows:
1. ***: deliveries not later than ***;
2. ***: deliveries not later than ***;
3. ***: deliveries not later than ***.
o 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.
o The prices for the *** is ***
31
<PAGE>
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 ***.
o For minimum orders of ***: ***
o For orders between***: ***
o For orders above ***: ***
32
<PAGE>
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
33
<PAGE>
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
34
<PAGE>
UCB-BIOPRODUCTS S.A.
- --------------------------------------------------------------------------------
Flow Chart Omitted
35
<PAGE>
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 ***
36
<PAGE>
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 -
***
First Aid -
If swallowed, wash out mouth with water provided person is conscious
Call a Physician
37
<PAGE>
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: ***
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
38
<PAGE>
EXHIBIT 10.13
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN
PORTIONS OF THIS DOCUMENT. SUCH PORTIONS HAVE BEEN
REDACTED AND MARKED WITH ASTERISKS (**). THE NON-
REDACTED VERSION OF THIS DOCUMENT HAS BEEN SENT TO
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
AN APPLICATION FOR CONFIDENTIAL TREATMENT.
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-CMC formulation ("CMC") 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 CMC 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 CMC; 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 CMC; 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>
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 CMC.
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 CMC 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 seven (7) years (the "Original Term"); provided
that commencing with the seventh anniversary of the date hereof and on each
subsequent anniversary, the term of this Agreement shall automatically be
extended for an additional twelve months 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 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.
2
<PAGE>
4. PRODUCTION UNIT AND EQUIPMENT
A. The parties recognize that additional equipment must be installed at the
Facility to permit SALSBURY to produce CMC in the required commercial
quantities. SALSBURY shall be responsible for the design, engineering,
installation and qualification of the additional equipment and facility for the
CMC 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 Four Million Nine Hundred Thousand Dollars
($4,900.00). The Production Facility shall be dedicated to PRAECIS over the
Original Term of this Agreement. SALSBURY shall make best efforts to commission
the Production Facility in April 1999. Although the Costs shall be paid for by
PRAECIS, SALSBURY shall own the Production Facility and all installed equipment
and PRAECIS shall have no claim thereon whatsoever.
B. Upon signing of this Agreement, PRAECIS shall execute a binding Purchase
Order for ** of CMC at a price of ** ($**) **, 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 CMC at a price
of ** ($**) **, for delivery in calendar year 1999.
C. In the event that PRAECIS does not proceed with the commercialization of CMC,
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 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 CMC.
D. All CMC 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
3
<PAGE>
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 CMC 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 CMC requirements during
the next month. SALSBURY shall deliver CMC 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 CMC
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
CMC 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.
CMC will be billed at the time the CMC 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
CMC 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 CMC and to maximize the conversion of Peptide to CMC, consistent with
the In-Process Limits (as defined herein).
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D. The parties shall seek to establish a mutually agreed program to reduce
manufacturing costs and improvement yields in the CMC 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 CMC produce per mole of peptide
reacted, and if Yield becomes higher, the sales price of CMC 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
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 ofCMCordered 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 CMC. 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 CMC to
PRAECIS designated locations, F.O.B. the Facility. CMC will be billed at
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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 CMC
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
CMC shipped.
B. SALSBURY and PRAECIS agree to jointly establish a release procedure for CMC
manufactured by SALSBURY. SALSBURY shall obtain prior written approval from
PRAECIS for any exemption in the In-Process Limits. If, at any time, CMC
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 CMC, 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 CMCproduced 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 CMC
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 CMC at the end of each calendar month and a listing of each
shipment of CMC made during such calendar month showing truck or car numbers,
date, weight and number of containers; and
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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 CMC during such calendar
month.
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 CMC
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 CMC 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 CMC.
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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
CMC at the Facility. Upon request, SALSBURY will provide to PRAECIS copies of
all manifests for shipping CMC 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 CMC.
SALSBURY will obtain from their raw material suppliers all other raw material
MSDS's utilized in the manufacture of the CMC 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 CMCand any substitute
CMC's at the Facility, in the case where modifications to the manufacture and
supply of CMC are not required by regulatory agencies and PRAECIS requests
modifications to the manufacture and supply of CMC, PRAECIS shall reimburse
SALSBURY promptly for all increased approval and compliance costs. If PRAECIS
offers and SALSBURY accepts substitute or additional CMC'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 CMC
to PRAECIS's customers.
16. TECHNICAL INFORMATION
A. PRAECIS has developed and is the owner of certain technical information
required to produce CMC (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
Information to SALSBURY on non-exclusive, royalty-free basis for the sole
purpose of producing CMC 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
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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 CMC manufactured by SALSBURY hereunder will meet the
In-Process Limits and will be made in accordance with worldwide cGMP;
(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 CMC hereunder shall meet the In-Process Limits shall be
suitable for use in the CMC;
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(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.
(ii) it is understood that SALSBURY has no control over the ultimate use
of the CMC once the CMC leaves the Facility, and SALSBURY shall have no
liability in connection with any use made of the CMC, 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 CMC; or
(b) arising out of any claim that the CMC, 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 CMC infringe any patent, copyright or trademark of any
third party; or
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<PAGE>
(c) otherwise arising out of the labeling or packaging of the CMC.
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 CMChereunder by SALSBURY, adequate
evidence of the fact (including amounts of coverage) of insurance coverage, more
particularly, worker's compensation, employer's liability and comprehensive
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 CMCand 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
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(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
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.
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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.
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 CMCshall 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.
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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.
SALSBURY shall not contact or communicate with PRAECIS's customers for the CMCin
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 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.
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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
---------------
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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 the
prior written consent of PRAECIS. CONFIDANT shall disclose CONFIDENTIAL
INFORMATION of PRAECIS only to its employees and consul-
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tants 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:
(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
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(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.
(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.
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(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.
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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
-----------------
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EXHIBIT B
SALSBURY CHEMICALS, INC. CPD 174
QUALITY ASSURANCE SPECIFICATIONS
CATEGORY: PRODUCT QC FLAG: QC
CODE NO: 2000300
NAME: PPI 149-CMC
SYNONYMS: ABARELIZ DEPOT
FORMULA: **
MOLECULAR WEIGHT: **
CAS NO: [183552-38-7]
DATE ISSUED: APRIL 24, 1998
REPLACES 04/09/1998
** **
DRUG PRODUCT INTERMEDIATE IN-PROCESS LIMITS
TEST ITEM LIMITS TEST METHOD
- --------- ------ -----------
1. Description White to off-white powder **
2. CMC 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) ** **
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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
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Manager
CHANGES: 1. Correct Replace date and Revision Number.
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EXHIBIT 10.14
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN PORTIONS OF THIS DOCUMENT.
SUCH PORTIONS HAVE BEEN REDACTED AND MARKED WITH ASTERISKS (**).
THE NON-REDACTED VERSION OF THIS DOCUMENT HAS BEEN SENT TO THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO AN APPLICATION FOR CONFIDENTIAL TREATMENT.
SUPPLY AGREEMENT
BETWEEN
OREAD PHAMACEUTICAL MANUFACTURING, INC.
AND
PRAECIS PHARMACEUTICALS INCORPORATED
FOR
ABARELIX-DEPOT POWDER
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TABLE OF CONTENTS
1. DEFINITIONS ..............................................................
2. PRODUCTION ARRANGEMENT ...................................................
2.1 Manufacturing ............................................................
2.2 Oread's Proposal 0210-E39-OP .............................................
2.3 Sub-Contracting ..........................................................
3. RAW MATERIALS, COMPONENTS, CONTAINERS, AND LABELING ......................
3.1 Supply ...................................................................
3.2 Labeling .................................................................
3.3 Verification .............................................................
3.4 Applicability of Labeling and Packaging Provisions .......................
4. INTERMEDIATE PHARMACEUTICAL INGREDIENT (Intermediate) ....................
4.1 Delivery of Intermediate .................................................
4.2 Segregation ..............................................................
4.3 Verification .............................................................
4.4 Discrepancy ..............................................................
4.5 Damage ...................................................................
4.6 Other Damage or Loss .....................................................
4.7 Remedy ...................................................................
4.8 Limitation of Liability ..................................................
5. FORECASTS AND ORDERS .....................................................
5.1 Forecasts ................................................................
5.2 Manufacturing Schedule ...................................................
5.3 Purchase Orders ..........................................................
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5.4 Permitted Amount To be Ordered ...........................................
5.5 Changes to Three Month Forecast ..........................................
5.6 Obsolete Materials .......................................................
5.7 Minimum Order Size .......................................................
5.8 No Purchase Obligation ...................................................
6. DELIVERY AND PAYMENT TERMS ...............................................
6.1 Shipping .................................................................
6.2 Storage ..................................................................
6.3 Payment ..................................................................
6.4 Invoice ..................................................................
6.5 Rejection of Batch Record ................................................
6.6 Discoveries after Payment ................................................
6.7 Sales and Use Taxes ......................................................
6.8 Production Fees ..........................................................
7. QUALITY CONTROL ..........................................................
7.1 Responsibility ...........................................................
7.2 Compliance ...............................................................
8. INSPECTION AND AUDITING RIGHTS ...........................................
8.1 Processing and Packaging .................................................
8.2 Inspections and Audits ...................................................
8.3 Non-Compliance ...........................................................
9. TESTING AND INSPECTION OF PRODUCT ........................................
9.1 Batch Records ............................................................
9.2 Independent Testing ......................................................
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9.3 Failure to Meet Specifications due to OREAD ..............................
9.4 Retain Samples ...........................................................
9.5 Long-term Stability Studies ..............................................
9.6 Outside Laboratory .......................................................
9.7 Deviations and Defects ...................................................
10. INVENTORY AND YIELD ......................................................
10.1 Intermediate Accountability Reports ......................................
10.2 Practical Yield ..........................................................
11. REGULATORY COMPLIANCE AND RELATED MATTERS ................................
11.1 NDA ......................................................................
11.2 Submissions to Regulatory Authorities ....................................
11.3 Inspections ..............................................................
11.4 Communications ...........................................................
11.5 Modifications to Equipment and Facility ..................................
11.6 Responsibility for Compliance ............................................
11.7 Drug Experience Reports ..................................................
12. HEALTH AND SAFETY ........................................................
12.1 Health and Safety Procedures .............................................
12.2 MSDS .....................................................................
12.3 Training .................................................................
12.4 Responsiveness ...........................................................
13. MAINTENANCE OF RECORDS AND REPORTS .......................................
13.1 By OREAD .................................................................
13.2 By PRAECIS ...............................................................
14. REVISIONS TO MASTER BATCH RECORD OR SPECIFICATIONS .......................
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14.1 Master Batch Record ......................................................
14.2 Difference in Cost .......................................................
14.3 OREAD Unable to Comply ...................................................
15. TRADEMARKS AND LABELING ..................................................
15.1 Use of Trademarks .......................................................
15.2 Reference to OREAD .......................................................
16. WASTE HANDLING AND DISPOSAL ..............................................
16.1 Waste Handling by OREAD ..................................................
16.2 Waste Contractor .........................................................
16.3 Audit Rights .............................................................
17. TITLE ....................................................................
18. WARRANTIES AND REPRESENTATIONS ...........................................
18.1 OREAD's Warranties .......................................................
18.2 PRAECIS's Warranties .....................................................
18.3 Disclaimer ...............................................................
19. RECALLS ..................................................................
19.1 Responsibility ...........................................................
19.2 PRAECIS Responsibility ...................................................
19.3 OREAD's Responsibility ...................................................
20. FORCE MAJEURE ............................................................
20.1 Excusing Performance .....................................................
20.2 Resumption ...............................................................
21. INDEMNIFICATION ..........................................................
21.1 PRAECIS's Indemnification ................................................
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21.2 OREAD's Indemnification ..................................................
21.3 Procedures ...............................................................
21.4 Insurance ................................................................
22. TERM AND TERMINATION .....................................................
22.1 Term .....................................................................
22.2 Termination ..............................................................
22.3 Bankruptcy or Insolvency .................................................
22.4 Inventory ................................................................
22.5 Product and Work in Process ..............................................
22.6 Intermediate and Other Materials .........................................
22.7 Equipment ................................................................
22.8 Liability ................................................................
23. CONFIDENTIALITY ..........................................................
24. INDEPENDENT CONTRACTOR ...................................................
25. PUBLIC STATEMENTS ........................................................
26. NOTICES ..................................................................
27. ASSIGNMENT ...............................................................
28 GOVERNING LAW ............................................................
29 ARBITRATION ..............................................................
30 SURVIVAL OF TERMS ........................................................
31. ADDITIONAL TERMS .........................................................
31.1 Entire Agreement .........................................................
31.2 Amendments; No Waiver ....................................................
31.3 Validity .................................................................
31.4 Headings .................................................................
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31.5 Counterparts .............................................................
vii
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SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (the "Agreement") is entered into as of February 2,
2000 by and between OREAD PHARMACEUTICAL MANUFACTURING, INCORPORATED.
("Oread") and Praecis Pharmaceuticals, Incorporated ("Praecis").
WHEREAS,Praecis intends to seek regulatory approval to market the pharmaceutical
product Abarelix-Depot, (the "API" ) as a sterile powder for reconstitution, in
the United States of America and various foreign countries: and
WHEREAS, Oread has the necessary facilities, equipment, personnel and
professional experience to fill the Product into vials, and label and package
the vials under cGMPs ; and
WHEREAS, Praecis desires to establish Oread as the filler, and may establish
Oread as the packager, of the Product;
NOW, THEREFORE, in consideration of the above and of the mutual covenants
contained herein and for other good and valuable consideration, receipt of which
is hereby acknowledged, the parties agree as follows:
1. DEFINITIONS
1.1 "Affiliate" of a party shall mean any corporation or other business
entity controlled by, controlling or under common control with, such party. For
this purpose "control" shall mean direct or indirect beneficial ownership of
more than fifty percent (50%) of the voting or income interest in such
corporation or other business entity.
1.2 "Batch" shall mean one (1) production lot of Product.
1.3 "Production Fees" shall mean the fees set forth in Schedule A.
1.4 "Batch Record" shall mean the document created as and after each Batch
is processed and packaged that, if complete and accurate, reflects and
incorporates all aspects of the Master Batch Record, the Certificate of
Analysis, and any MD Reports issued, with respect to such Batch.
1.5 "Certificate of Analysis" shall mean a certificate issued by Oread
stating that a Batch has been Processed and Packaged in accordance with the
Master Batch Record and stating the final release test results.
1.6 "cGMPs" shall mean the then-current Good Manufacturing Practices
applicable to the manufacture of pharmaceutical products for human use in the
United States andthe European Union, and testing per the Japanese Pharmacopeia.
1.7 "Components" shall mean the suitable vial, stopper, and seal, in which
the Product is contained as identified in the Master Batch Record.
1.8 "Containers" shall mean packaging boxes and shipping containers.
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1.9 "Contract Quarter" shall mean a three-month period commencing on the
first day of each January, April, July, and October of a Contract Year and
ending, respectively, on the last day of each March, June, September, and
December following during the term of this Agreement, provided, however, that
the first Contract Quarter shall begin upon FDA approval of the Facility as a
site to manufacture the Product and end on the ensuing March 31st, June 30th,
September 30th, or December 31st, as appropriate.
1.10 "Contract Year" shall mean a twelve-month period commencing on each
January 1 and ending on December 31 following during the term of this Agreement,
provided, however that the first Contract Year shall begin on the Effective Date
and end December 31, 2000, and the second Contract Year shall begin on January
1, 2001 and end December 31, 2001
1.11 "Effective Date" shall mean January 1st 2000
1.12 "Facility" shall mean Oread's facility at Palo Alto, California, or
any other Oread facility as agreed to in writing by the parties to this
Agreement.
1.13 "FDA" shall mean the United States Food and Drug Administration.
1.14 "Hazardous Waste" shall mean all hazardous waste, as defined by
applicable federal, state, and local laws and regulations, to the extent the
same arise out of Oread's Processing and Packaging of the Product in accordance
with this Agreement.
1.15 "Intermediate" shall mean Abarelix CMC bulk powder as received from
Praecis in accordance with this Agreement.
1.16 "Labeling" shall mean the printed labeling and package inserts for
the Product.
1.17 "MD Report" or "Manufacturing Deviation Report" shall mean a report
indicating any deviation from the Processing and Packaging procedures set forth
in the Master Batch Record.
1.18 "Manufacturing Schedule" shall mean the twelve-month rolling
manufacturing schedule for the Product at the Facility prepared by Oread and
delivered to Praecis in accordance with Section 5.2 hereof.
1.19 "Master Batch Record" shall mean the document containing the formula
(listing Intermediate and Raw Materials), procedures for the manufacturing
(listing Components and Containers), quality assurance of the Product and
in-process and finished product specifications for the Product, as set forth in
Schedule C, as such may be amended by the parties pursuant to Section 14.1.
1.20 "MSDS's" shall mean the Material Safety Data Sheets for the
Intermediate and the Product.
1.21 "NDA " shall mean the New Drug Application Product Abarelix-Depot
filed by Praecis with the FDA.
1.22 "Non-Hazardous Waste" shall mean all rejects or waste arising out of
Processing and/or Packaging, including without limitation, rejected or unusable
Raw Materials or Intermediate, disposable manufacturing equipment (including
filters used in Processing and Packaging), wash rinse, and previously used or
discarded protective clothing, except to the extent that any of the foregoing is
Hazardous Waste.
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1.23 "Package" and "Packaging" shall mean the act of inspecting, placing
the Labeling on and with the Product, and final packing of the Product into
Containers.
1.24 "PCR" or "Product Change Request" shall mean the document used by
either party to request a change to the Master Batch Record in accordance with
Section 14.1.
1.25 "Oread Approval Date", as applied to each Batch, shall mean the date
on which Oread's quality assurance department approves such Batch for shipment
in compliance with the Master Batch Record.
1.26 "Praecis Approval Date", as applied to each Batch, shall mean the
date on which Praecis' quality assurance department approves such Batch for
shipment in compliance with the Master Batch Record.
1.27 "Process" or "Processing" shall mean the pharmaceutical manufacturing
procedures, or any part thereof, involved in preparing the Components for use,
filling the Intermediate into vials and, sealing the vials with stoppers and
seals, in accordance with the Master Batch Record and applicable internal plant
test.
1.28 "Product" shall mean the filled vials containing the Intermediate.
1.29 "Raw Materials" shall mean any excipients necessary for Processing
(exclusive of the Intermediate) as listed in the Master Batch Record.
1.30 "Regulatory Authorities" shall mean the FDA or such other foreign
country equivalent regulatory agency as applicable and notified to Oread in
writing by Praecis as having regulatory governance over the manufacture or sale
of the Product manufactured under this Agreement.
1.31 "Requirements" shall mean those quantities of the Product that are
ordered by Praecis hereunder for clinical, development, and commercial use,
including samples.
1.32 "Schedules" shall mean the schedules and exhibits attached hereto and
incorporated herein by this reference.
1.33 "Specifications" shall mean the Raw Material, Component, Labeling,
and Container specifications and the in-process and finished product
specifications for release of the product, and stability specifications if
applicable, as mutually agreed in writing by the parties.
1.34 "Work in Process" shall mean the Intermediate and the Raw Materials
with respect to a Batch during the time period beginning at the time Oread
begins dispensing such Intermediate in accordance with the Master Batch Record
and ending at the Oread Approval Date.
2. PRODUCTION ARRANGEMENT
2.1 Manufacturing. Oread shall Process, Package and store, and shall
analyze for quality control and release the Product in accordance with the
Specifications and ship the Product in accordance with Praecis's instructions
and the terms and conditions of this Agreement. Additionally, Oread will
coordinate the irradiation of the filled vials at a supplier approved by
Praecis. A more complete description of the scope of work covered
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by this agreement is included in Oread's Proposal 0210-E339-OP, revision # 6,
dated December 18th 1998, a copy of which is attached (Schedule B).
2.2 Oread's Proposal 0210-E339-OP. Any work that was authorized under
Oread's Proposal 0210-E339-OP, revision # 6, dated December 18th 1998, or by a
subsequent authorized change order thereto and which work will continue past the
Effective Date, then such work and only such work as will be performed
subsequent to the Effective date shall be incorporated into and be subject to
the terms of this Agreement.
2.3 Sub-Contracting. Oread shall not, without prior written approval of
Praecis, sub-contract, delegate or assign any part of its responsibilities under
this agreement to another party.
3. RAW MATERIALS, COMPONENTS, CONTAINERS, AND LABELING
3.1 Supply. Oread shall acquire the all of the Raw Materials, Components,
Containers, and Labeling required for Processing and Packaging from vendors
mutually agreed to in writing by the parties, the cost of which shall be
included in the Batch Production Fee (as set forth in Schedule A). Praecis will
supply the required vials at no cost to Oread.
3.2 Labeling. Praecis shall be responsible for ensuring that the Labeling
conforms to all applicable laws, rules, regulations, and requirements of all
appropriate regulatory authorities. Praecis shall review the proofs for the
Labeling. The Labeling shall be shipped directly from the vendor to Oread. Oread
shall be responsible for ordering and paying for sufficient quantities of
Labeling as are required for the Packaging based upon the Three Month Forecast
(as defined in Section 5.1). Oread shall store the Labeling as required by any
relevant laws or regulations and shall place the Labeling on and with the
Product as specified by Praecis.
3.3 Verification. Oread shall inspect and test all Raw Materials,
Components, Containers, and Labeling according to the mutually agreed-upon
quality methods and procedures ( including Oread's reduced testing procedures
for Oread approved vendors), and shall certify that the materials received meet
the Specifications for the same and the applicable vendor certificates of
analysis.
3.4 Applicability of Labeling and Packaging Provisions. Not withstanding
the foregoing or any other provision of this Agreement, the provisions contained
herein with respect to Labeling and Packaging shall apply only if, and to the
extent that, Praecis elects, by written notice to Oread, to have Oread perform
such tasks.
4. INTERMEDIATE PHARMACEUTICAL INGREDIENT
4.1 Delivery of Intermediate. At least ten (10) days prior to the start
date of manufacture of a Batch set forth in the applicable Manufacturing
Schedule, Praecis shall furnish the Intermediate to Oread at the Facility, free
of charge, in such quantities as are necessary to enable Oread to manufacture
the quantities of Product set forth in the applicable Purchase Order for such
month.
4.2 Segregation. Oread shall keep all Intermediate segregated from other
materials in its control so as to maintain the confidentiality of the substance
and shall not allow any samples of the substance to be used or tested by any
party not under its direct supervisory control for any purposes and shall
perform only such tests and analysis as it reasonably and in good faith deems
necessary for this contract and shall maintain the confidentiality of such test
results in compliance with Paragraph 23 of this agreement.
4.3 Verification. Oread shall verify the quantity and chemical identity
of all Intermediate received by Oread according to the methods and procedures
set forth in the Specifications within five working (5) days of receipt by Oread
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of the Intermediate. Within such five (5) day period, Oread shall inform Praecis
in writing of any discrepancies in the quantity and/or identity of the
Intermediate received and the description of such Intermediate contained in the
documents accompanying each shipment of the Intermediate. Prior to use of the
Intermediate for Processing, Oread shall perform analytical testing on the
Intermediate as specified in the Specifications. Oread quality assurance will
release the Intermediate for use based upon the results of such analytical
testing.
4.4 Discrepancy. If Oread fails to inform Praecis of any discrepancies in
the quantity or identity of the Intermediate identified in Section 4.3 within
such five (5) day period or if within such five day period Oread discovers the
Intermediate has been lost or damaged as a result of Oread's failure to handle
the Intermediate in accordance with the terms of this Agreement, then upon
notice from Oread to Praecis of such discrepancy, loss or damage, Praecis shall
endeavor to supply Oread with additional Intermediate sufficient to manufacture
the scheduled Batch in accordance with the applicable Purchase Order, but if
Praecis is unable to supply such additional Intermediate, Praecis may cancel or
postpone the scheduled manufacturing without any liability. If Oread notifies
Praecis of a discrepancy in the quantity or identity of the Intermediate within
such five (5) day period, Praecis shall endeavor in good faith to ship
additional Intermediate within the time period necessary for Oread to
manufacture in accordance with the scheduled manufacturing date in accordance
with the applicable Purchase Order, but if such discrepancy results from loss or
damage arising from Oread's failure to handle the Intermediate in accordance
with the terms of this Agreement and Praecis is unable to supply such additional
Intermediate, Praecis may cancel or postpone the scheduled manufacturing without
any liability.
4.5 Damage. In the event of any damage to the Intermediate which Oread
cannot, within the foregoing five-day period, prove occurred prior to delivery
to Oread or if any such damage is the result of Oread's failure to handle the
Intermediate in accordance with the terms of this Agreement, then Oread shall
remedy such failure or damage in accordance with Section 4.7 below.
4.6 Other Damage or Loss. Except for any loss or damage resulting from
fire (other than one caused by the negligence of Oread), flood, tornado,
earthquake or other act of God beyond Oread's ability to control or to the
extent caused by Praecis's negligence or willful misconduct, Oread shall assume
all responsibility and liability for, and shall defend, indemnify and hold
Praecis harmless from and against, any loss of or damage to the Intermediate
while Oread has custody and control over the Intermediate, Work in Process
and/or the finished Product. Such responsibility and liability shall commence
upon the receipt of the Intermediate at the Facility and end upon the earlier of
(i) delivery of the Product containing such Intermediate to a common carrier at
the Facility for shipment to Praecis or its irradiation supplier, or (ii) with
respect to any Batch thirty (30)days following the Oread Approval Date, but only
if during such thirty (30) period Praecis has not duly instructed Oread with
respect to the shipment of such Batch.
4.7 Remedy. If any loss or damage to the Intermediate occurs as described
in Sections 4.4 or 4.5, then without limitation of any other right or remedy of
Praecis (except to the extent expressly provided in Section 4.8), (a) Oread
shall, at Oread's option, return the Intermediate to Praecis or dispose of same
according to Praecis's instructions or (b) if Oread is responsible for any
damage or loss described in Sections 4.4 or 4.5, Oread shall, at Praecis's
option, either (i) purchase from Praecis replacement Intermediate for a value
equal to Praecis's then-current cost for the Intermediate that is lost, damaged
or destroyed, or (ii) credit Praecis on its next invoice for an amount equal to
Praecis's then-current cost for such Intermediate.
4.8 Limitation of Liability. Notwithstanding the foregoing nor anything
contained elsewhere in this Agreement (other than in this Section 4.8 and the
provisions referred to in this Section 4.8), in no event shall Oread's liability
to Praecis for damages or losses of the Intermediate (excluding Intermediate
contained in recalled Product as set forth in Section 19.3, or in the case of
the willful misconduct or gross negligence of Oread) under this Agreement exceed
the lesser of (a)
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the replacement cost to Praecis of any lost or damaged Intermediate, or (b) $**%
of the equivalent per Batch or per vial Production fees that Oread would have
expected to be paid by Praecis for the amount of lost or damaged Intermediate;
provided, however, that the foregoing shall not limit the liability and
obligations of Oread set forth in Section 6.5, 6.6, 9.2 and 9.3 with respect to
Oread's costs (which cost excludes any Intermediate ) incurred correcting
deficiencies in, or reworking, a Batch or Batch Records in the circumstances
described in such Sections., The cost of the Intermediate is currently estimated
to be ** dollars ($** US) per gram.
5. FORECASTS AND ORDERS
5.1 Forecasts. On or before the fifteenth (15) day of each Contract
Quarter, Praecis will provide Oread with a non-binding written twelve (12) month
rolling forecast of the quantities of Product that Praecis expects to purchase
during each of the next twelve (12) months (each, a "Twelve Month Forecast"). On
or before the fifteenth (15) day of each month of each Contract Year, Praecis
will provide Oread with a written three-month rolling forecast of the quantities
of Product that Praecis expects to purchase during each of the next three (3)
months (each, a "Three Month Forecast" and, together with the Twelve-Month
Forecasts, the "Forecasts"). The Three Month Forecast is firm and may not be
changed except pursuant to Sections 5.3 and 5.5 below and shall be used by
Oread, among other things, to determine the quantities of Raw Materials to order
to prepare for manufacturing the Product.
5.2 Manufacturing Schedule. Within ten (10) days of Oread's receipt of a
Three Month Forecast from Praecis, Oread shall supply Praecis with a
Manufacturing Schedule on a rolling basis for the following twelve (12) months.
Such Manufacturing Schedule shall set forth for each of the twelve (12) months
covered thereby the proposed start and completion dates of manufacture of the
Batch(es) estimated in the most recent Forecasts to be purchased by Praecis
during such month, which dates shall be consistent with Oread supplying the
quantities of Product on the time frames set forth in the most recent Forecasts
and which manufacturing start date for the first such Batch to be purchased
during the first such month covered by such Manufacturing Schedule may not be
earlier than the tenth (10th) day of such month. The first three months of such
Manufacturing Schedule shall be firm and may not be altered without the written
consent of Praecis.
5.3 Purchase Orders. To order Product hereunder for delivery in a Contract
Quarter, Praecis shall submit a purchase order to Oread referencing this
Agreement at least fifteen (15) days prior to the proposed start date of
manufacture of the Product for that Contract Quarter, as set forth in the then
most recent Manufacturing Schedule covering such Contract Quarter (provided that
such Manufacturing Schedule calls for one or more Batches to begin manufacture
as of such proposed start date) and, subject to the terms of this Agreement,
setting forth the number of Batches to be Processed and Packaged, the time upon
which such Processing and Packaging must be completed, and the approximate
amount to be paid by Praecis for such Processing and Packaging based upon the
Guaranteed Yield (as defined hereafter) and the appropriate fees as listed in
Schedule A of this Agreement. The Purchase Order shall be in accordance with the
Three Month Forecast except as otherwise contemplated hereby. If Praecis fails
to either issue a Purchase Order or amend the Three Month Forecast to eliminate
a scheduled Batch at least ten (10) days prior to the scheduled manufacturing
start date for such Batch identified in the Three Month Forecast, Praecis shall
pay Oread the Production Fee for a single Batch. Such payment shall be due and
owing thirty (30) days after the start date for manufacture of such Batch as set
forth in the Manufacturing Schedule which provides for the manufacture of Batch
during the first three months covered by such Manufacturing Schedule. Upon
acceptance by Oread, the following aspects of each Purchase Order shall be
binding and become part of this Agreement: the number of Batches ordered, the
estimated Batch Production Fee, the commencement date of manufacturing, and the
delivery date. Oread shall Process and Package in accordance with such Purchase
Order. If there is a conflict or inconsistency between this Agreement and the
Purchase Orders, this Agreement shall govern.
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5.4 Permitted Amount To be Ordered. The quantities ordered for any month
will be no more than one hundred ten percent (110%) of the Three Month Forecast
for a month or an additional Batch, whichever is greater, provided Raw
Materials, Components, Containers, Labeling, and Intermediate are available for
the amounts over one hundred percent (100%). Oread will use its reasonable
efforts, but will be under no obligation, to supply Product in excess of this
permitted amount.
5.5 Changes to Three Month Forecast.
(a) Prior to Issuance of Purchase Order. If Praecis amends the Three
Month Forecast prior to issuing a Purchase Order and the Raw Materials,
Components, Containers, and Labeling purchased in accordance with the Three
Month Forecast cannot be used by Oread for other Batches or in the production of
any other products within six (6) months of such amendment, Praecis shall
reimburse Oread for one hundred percent (100%) of Oread's actual cost of such
unused Raw Materials, Components, Containers, and Labeling and shall have no
further liability on account of such amendment. Praecis may notify Oread of such
amendment verbally, but such notification shall be confirmed in writing through
the issuance by Praecis of a new Three Month Forecast within five (5) business
days of the verbal request. Notwithstanding the foregoing provisions of this
Section 5.5(a), Praecis may cancel, delay or reschedule a schedule Batch without
liability if Praecis reasonably believes that Oread's breach of any
representation, warranty or agreement contained herein would affect the Batch or
the Product.
(b) Payment Terms. Oread shall invoice Praecis for any amounts owed
under this Section at the time the re-scheduled or canceled Batch was originally
scheduled. All invoices shall be due and payable thirty (30) days following
receipt by Praecis of the invoice.
5.6 Obsolete Materials. Praecis shall pay to Oread the actual cost of any
Raw Materials and related Components, plus any related special disposal costs,
purchased by Oread for its performance of this Agreement rendered obsolete by
acts of Praecis or due to regulatory changes.
5.7 Minimum Order Size. The minimum size of any order for Product shall be
one Batch with larger orders being in whole number multiples of a Batch.
5.8 No Purchase Obligation. Except as otherwise set forth herein, at no
time during the term of this Agreement shall Praecis be obligated to issue any
Purchase Order or to order any minimum quantities of Product hereunder.
5.9 Inability or failure to supply. In the event Oread is unable to supply
Product in accordance with the terms hereof, and such inability is solely the
responsibility of Oread, then Oread shall promptly notify Praecis in writing of
such inability, which notice shall include a reasonably detailed explanation of
the reasons for such inability (an "Oread Product Supply Deficiency Notice").
Upon Praecis' receipt of an Oread Product Supply Deficiency Notice, or upon any
material failure by Oread to meet its supply obligations hereunder and Oread's
receipt from Praecis of a notice reasonably describing such material failure by
Oread (a "Praecis Default Notice"), then without limitation of any other right
or remedy of Praecis, if Oread's inability or material failure to supply Product
in accordance with the terms hereof is reasonably to continue for at least sixty
(60) days, Praecis shall have the right to (i) transfer the manufacture of some
or all of the quantity of Product provided for herein to be manufactured at the
Facility to one or more alternative suppliers, at an alternative manufacturing
site or sites, selected by Praecis and/or (ii) assign on-site Praecis
representative(s) for the purpose of providing significant input into the
direction and control of the manufacture of Product at the Facility, in
particular those activities that are performed solely and exclusively by Oread
for the purpose of meeting its obligations under this Agreement, and to the
extent reasonable and commercially practicable without violation of any laws or
regulations
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applicable to the manufacture of the Product at the Facility, or which would
require or in so doing result in Oread breaching any confidentiality agreement
or other binding agreement with a third party,. In case of either (i) or (ii),
Oread shall promptly provide (and Praecis shall be entitled to provide) to such
alternative supplier(s) and/or Praecis, as applicable, such technical transfer
information as may be necessary for such supplier(s) or Praecis as required
under section 5.9 (ii), as applicable, to qualify with all relevant regulatory
authorities. Except in the case of force majeure, in which case the provisions
of Article 20 shall apply, and without limitation of any other right or remedy
of Praecis, if the provisions of the Section 5.9 apply, Oread shall (a) at its
sole cost and expense, in addition to the provisions of technical transfer
information as provided above, take all other reasonable actions available to it
to facilitate the transfer, or the input by the on-site Praecis
representative(s) to the direction and control, of manufacture of Product as
described above and (b) be liable to Praecis for all out-of-pocket costs and
expenses incurred by Praecis in connection with such technical transfer
including such reasonable costs and expenses in connection with qualifying
itself or one or more alternative suppliers of Product with the relevant
regulatory authorities. In any case, Praecis shall act in a commercially
reasonable manner with respect to obtaining an alternative supply of Product as
contemplated above. Oread's total reimbursement to Praecis under Section 5.9 (b)
of the Agreement shall be limited to 28.5% of the total payments that have been
made to Oread by Praecis , including payments made prior to the effective date
of this contract during the twenty four (24) months immediatley preceding the
notification of the transfer, minus any prior such claims paid by Oread to
Praecis in the same 24-month period If within ninety (90) days after Praecis'
receipt of an Oread Product Supply Deficiency Notice or Praecis' delivery to
Oread of a Praecis Default Notice, as applicable, Oread provides Praecis with
evidence reasonably satisfactory to Praecis that Oread is able to and will meet
its supply obligations hereunder ("Cure Evidence"), then, unless this Agreement
has been terminated in accordance with Article 22, within sixty (60) days of
receiving such Cure Evidence Praecis shall resume purchasing Product from Oread
in accordance with the terms of this Agreement (subject to again ceasing such
purchasing as contemplated by this Section 5.9), provided that Praecis shall be
allowed to fulfill any outstanding obligations to other suppliers that were
incurred by Praecis due to Oread's failure or inability to supply Product to
Praecis.
6. DELIVERY AND PAYMENT TERMS
6.1 Shipping. Oread shall ship the Product f.o.b. the Facility in
accordance with the terms of the Purchase Order. Oread shall not ship any Batch
until Praecis notifies Oread in writing or the thirty (30) day period described
in Section 6.2 has expired. In no event shall Oread be required to ship any
Batch prior to the Oread's Approval Date for such Batch. If at the written
request of Praecis, Oread does agree to so ship the Product before Oread's
Approval Date, Praecis agrees to assume all transportation and handling costs
incurred subsequent to the initial shipment, should the Batch subsequently be
failed by Oread's quality assurance. Delivery of the Product by Oread to Praecis
shall be deemed to have taken place upon delivery to a common carrier at the
Facility, including shipments of Work in Process to Praecis contractors.
6.2 Storage. Oread shall store the Product at no cost for up to thirty
(30) days after the Oread Approval Date. After such thirty (30) day period,
Oread shall have no obligation to store the Product and may ship the Product to
Praecis. If Oread agrees to continue to store the Product, Praecis shall pay
Oread at a rate of ** dollars ($**) per pallet per month or portion thereof, and
all risk of loss to Product during such period shall be borne by Praecis.
6.3 Payment. Praecis shall pay Oread the Production Fees set forth in the
Purchase Order for Processing and Packaging, for the purchase of Raw Materials,
Containers, Components, and Labeling, and for the disposal of Hazardous Waste by
Oread in accordance with Section 16, provided
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that the Batch Record is not rejected pursuant to Section 6.5 unless such
rejection is invalidated pursuant to Section 9.2.
6.4 Invoice. On or after each Oread Approval Date during the term of this
Agreement, Oread shall invoice Praecis for the Production Fees applicable to the
Batch Processed and Packaged, which shall be based upon the Production Fee set
forth on the applicable Purchase Order. All invoices shall be due and payable by
Praecis thirty (30) calendar days after the date of the invoice, provided
Praecis receives, within 5 business days of the Oread Approval Date a copy of
the complete and accurate Certificate of Analysis and certificate of compliance
with cGMPs. For each day that the Certificate of Analysis or certificate of
compliance is delayed beyond the said five (5) business days, the due and
payable date of the related invoice shal be delayed one (1) day.
6.5 Rejection of Batch by Praecis. Praecis shall not be obligated to pay
the applicable invoice within the thirty (30) day period described in Section
6.4 if the Batch is rejected within such thirty (30) day period. The Batch shall
be assumed accepted unless Praecis notifies Oread in writing within thirty (30)
days after the receipt of such Batch by Praecis that Praecis has determined
that,due to the fault of Oread, either the Product does not conform to the
Specifications ( excepting failure to meet the Specifications caused by acts or
ommissions of Praecis or its agents, or during transportation to Praecis
designated destinations) or that the Batch Records are not complete. If Praecis
rejects the Product due to a deficient Batch Record within the foregoing time
period, Praecis shall provide Oread with verbal notice as soon as possible and
in any event within two (2) business days of such rejection and follow up with
written notice of such rejection within ten (10) days of the rejection setting
forth the basis for such rejection. If Oread fails to correct the deficiency
within ten (10) days of receipt of the written notice or if Praecis rejects the
correction because the Batch Record remains deficient, Praecis may, at its
option and in its sole discretion, either reject the Batch in its entirety or
require that Oread, at Oread's sole cost and expense, correct the deficiency. If
Praecis rejects the Batch and the Laboratory described in Section 9.2 agrees
that the Batch is deficient or Oread agrees that the Batch should have been
rejected, Oread shall reimburse Praecis for one hundred percent (100%) of
Praecis's then-current cost of the Intermediate contained in such Product,
subject to section 4.8 limitation, and, if Praecis so elects, Oread shall, to
the extent feasible, at its sole cost and expense, rework the Batch, and correct
the Batch Records, so that the Product conforms to the Specifications and the
Batch Records are complete.
6.6 Discoveries after payment. If, after payment is made for a Batch,
Praecis discovers concealed damage to the Product or that the Product fails to
conform to the Specifications, which event was not previously or otherwise
detectable in previous Praecis quality checks performed on a said Batch of
Product, or where the Product was in-transit to its destination for a period
that extended beyond 30 days after the Oread Approval Date, and the concealed
damage or failure to meet the Specifications were not a consequence of an
in-transit incident or event, Praecis shall have the same remedies as are
enumerated in Section 6.5 of this Agreement for rejection of a Batch by Praecis
as if the discovery was made within the thirty (30) days defined in Section 6.5.
Except for situations that may cause for a Product recall as defined in Section
19 of this Agreement, Praecis will have no remedies available under this Section
6.6 after sixty (60) days after the applicable Oread Approval Date.
6.7 Sales and Use Taxes. Praecis shall be responsible for the payment of
any sales and use taxes on the Product delivered by Oread to Praecis.
6.8 Production Fees. The Production Fees and other agreed considerations
shall be fixed for the first Contract Year as listed in Schedule A of this
Agreement. Beginning the second Contract Year and for each Contract Year
thereafter, Oread may increase the Production Fees and the other agreed
considerations by up to the percentage increase indicated in the Producer Price
Index ("PPI") published by the United States Department of Labor, Bureau of
Labor Statistics, from the first day to the last day of the preceding Contract
Year. If the PPI is not available for that period, the most similar available
index shall be used.
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7. QUALITY CONTROL
7.1 Responsibility. Oread shall be responsible for manufacture,
processing, packaging, holding and release testing of the Products in compliance
with the Specifications. Praecis shall be responsible for compliance of the
active ingredients and packaging and labeling components in accordance with FDA
and other regulatory requirements. Oread shall be responsible for storage and
testing of stability and retention samples. Each party will provide reasonable
assistance to the other if necessary to respond to FDA audits, inspections,
inquiries or requests concerning the Products.
7.2 Compliance. Oread shall comply with the quality assurance
methodologies set forth for the Master Batch Records, cGMPs, and Oread's
standard operating procedures relating to quality assurance in its manufacturing
operations.
8. INSPECTION AND AUDITING RIGHTS
8.1 Processing and Packaging. Oread shall permit Praecis or its
representatives (including representatives of any licensee or sublicensiee of
Praecis to observe and consult with Oread during the Processing and Packaging,
including the quality control testing and analysis of the Product.
8.2 Inspections and Audits. Oread shall permit Praecis or its authorized
representatives to enter the Facility upon reasonable notice and at reasonable
intervals to inspect and audit all equipment, facilities, operations, procedures
and records including records relating to quality assurance and regulatory
compliance as they pertain to the Product or to the system support used to
manufacture the Product, and to audit and certify Oread's laboratory where
quality control testing of the Product is conducted under this Agreement.
Praecis (or any licensee or sublicensee of Praecis) may carry out one general
GMP audit of Oread operations in any 12 month period without any additional
fees. Attendance on-site by Praecis (or any licensee or sublicensee of Praecis)
during a pre-approval inspection by Regulatory Authorities will incur no
additional fees. Audits necessitated by reasons caused by Oread will also be
permitted at no charge to Praecis. General audits of frequency greater than one
per year, or audits initiated by Praecis (or any licensee or sublicensee of
Praecis) that are not problem specific to Oread's conformance to the
requirements of this Agreement, will incur a fee covering the time Oread
employees or contractors spend supporting the audit charged at Oread's customary
hourly billing rates for the employees or contractors involved.
8.3 Non-Compliance. Should Praecis discover that Oread's methods and
procedures for Processing and/or Packaging are not in compliance with the Master
Batch Record, cGMPs, or any of the requirements of this Agreement, Oread agrees
immediately to correct, at Oread's expense, any such deficiencies.
9. TESTING AND INSPECTION OF PRODUCT
9.1 Batch Records. Oread shall endeavor in good faith to have the Oread's
Approval Date for a Batch occur within Thirty (30) days following manufacture of
such Batch. The Batch Record shall reflect and incorporate all aspects of the
Master Batch Record and shall include the applicable Certificates of Analysis
and any MD Reports issued during such Batch.
9.2 Independent Testing. If prior to Praecis's approval of the Batch
Record, the parties disagree concerning whether the Product meets Specifications
or whether the Batch Records are complete, either party may request, in writing,
at any time, that an independent laboratory be used to determine whether the
Product meets Specifications. Thereafter, the parties shall promptly name a
reputable independent laboratory (the "Laboratory") to test the Product for
compliance with the
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Specifications. Pending a decision by the Laboratory, Oread shall store the
Product in accordance with Section 6.2. If the Laboratory determines that the
Product meets Specifications and the Batch Records are complete, Praecis shall
(a) pay to Oread the amount invoiced for such Product pursuant to Section 6.4,
(b) pay to the Laboratory the amount of the fees charged by the Laboratory for
such testing, (c) pay to Oread the amount invoiced, if any, for storage of the
Product, and (d) provide Oread with instructions for the shipment of the Product
to Praecis. If the Laboratory determines that the Product does not meet
Specifications or that the Batch Records are not complete, (i) Oread shall (a)
pay to Praecis the then-current cost to Praecis of the Intermediate used to
Process such Product, (b) pay to the Laboratory the amount of the fees charged
by the Laboratory for such testing, (c) pay to Praecis any amount paid by
Praecis to Oread, if any, for storage of the Product, and (d) dispose of the
non-conforming Product, at Oread's sole cost and expense, in accordance with
Praecis's instructions, and (ii) if Praecis so elects, Oread shall, to the
extent feasible, at its sole cost and expense, rework the Batch, and correct the
Batch Records, so that the Product conforms to the Specifications and the Batch
Records are complete.
9.3 Failure to Meet Specifications due to Oread. If without resorting to
the independent testing described in Section 9.2, the parties agree that any
Product does not conform to the Specifications due to the fault of Oread or
failure of Oread to comply with any of its obligations under this Agreement, (a)
Oread shall pay Praecis: (i) the then-current cost to Praecis of the
Intermediate used to Process such Product; (ii) any amount paid by Praecis to
Oread for storage of the Product, and (iii) the Production Fee if previously
paid by Praecis for such Product and (iv) if Praecis so elects, Oread shall, to
the extent feasible, at Oread's sole cost and expense, rework the Batch, and
correct the Batch Records, so that the Product conforms to the Specifications
and the Batch Records are complete. To the extent such reworking and correction
is not feasible. Oread shall re-initiate manufacturing pursuant to this
Agreement, of substitute Product conforming to the Specifications as soon as
reasonably possible following receipt of the Intermediate but in no event later
than thirty (30) days following the date of the receipt by Oread of
Intermediate, or, if Oread is unable to obtain all required Raw Materials,
Components, and Containers from suppliers, the commencement of such thirty (30)
day time period shall be extended for such time period as is necessary for Oread
to obtain the same. Praecis shall pay to Oread a Production Fee for such
replacement Product in accordance with Section 6.4. Such non-conforming Product
shall be disposed of at Oread's sole cost and expense, in accordance with
Praecis's instructions. In addition, Oread shall have the right to suspend the
Processing for any Work in Process if Oread reasonably believes that such Work
in Process will not meet Specifications; provided, however, that, Oread shall
reimburse Praecis for one hundred percent (100%) of the then-current cost of the
Intermediate in such Work in Process.
9.4 Retained samples. Oread shall retain for at least one (1) year after
the expiration date of the applicable Batch a retain file sample, properly
stored from such Batch Processed or Packaged sufficient to perform each quality
control test specified in the Specifications at least two times in all other
respects in accordance with cGMPs. At the expiration of such one-year period,
Oread shall promptly return such file samples to Praecis.
9.5 Long-term Stability Studies. Oread will retain sufficient samples of
the finished Product to conduct long term stability studies. These samples will
be stored and tested in accordance with the protocol established for such
studies and agreed to in writing by Praecis and Oread. A copy of such protocol
is attached as Schedule D.
9.6 Outside Laboratory. Oread will not have analytical tests performed on
the Product by an outside laboratory until such outside laboratory has been
audited by Oread and/or Praecis [or if Praecis so elects, its licensee(s) or
sublicensee(s)] and approved in writing by Praecis, and such approval may be
withdrawn by Praecis at any time. If Praecis withdraws its approval of such
outside laboratory, Oread may suspend performance under this Agreement until
such time as Praecis has authorized another outside laboratory to perform such
analytical tests. Sample quantities, locations
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and replicate test numbers to be taken for Work in Process and release testing
of the Product will conform with procedures specified in the Master Batch
Record.
9.7 Deviations and Defects. Oread shall notify Praecis promptly in the
event of any procedural deviation from the Master Batch Record or test failure
noted in the Raw Materials, Components, Processing or Packaging. Unless
otherwise obligated by law or impractical due to requiring an immediate
response, such as a spill, Oread shall consult with Praecis before taking action
in connection with these events. Oread shall, at its sole expense, identify and
correct any Product defects that are caused solely by Oread's failure to perform
its responsibilities under this Agreement. During the term of this Agreement and
for a period of three (3) years following the Oread's Approval Date of each
Batch, Oread shall notify Praecis in writing in the event Oread discovers or has
reason to believe there are any cGMP violations by Oread or any vendor that
might have impacted the Product or if there are any defects in the Batch
Records.
10. INVENTORY AND YIELD
10.1 Intermediate Accountability Reports. Within fifteen (15) days after
the end of each Contract Quarter, Oread shall provide Praecis with a report
showing for such Contract Quarter the following information: (a) the amount of
Intermediate received each month; (b) the amount of Intermediate lost or
destroyed prior to Processing; (c) the amount of Intermediate issued to
production and to quality assurance for testing and retain samples; (d) the
amount of Intermediate held in inventory at the end of the Contract Quarter. If
more than two (2) percent (2%) of the amount of Intermediate received during a
Contract Quarter is lost or destroyed or otherwise unaccounted for, Oread shall
reimburse Praecis for one hundred percent (100%) of the then-current cost of the
Intermediate that has been lost, destroyed, or unaccounted for, subject to the
limit set forth in Section 4.8.
10.2 Practical Yield. The Production Fee is based upon a guaranteed yield of
vials of Product per Batch (the "Guaranteed Yield"). Within ten (10) days after
the end of each Contract Quarter, Oread shall provide Praecis with a report
showing the actual yield of Product produced from each Batch accepted by Praecis
during such Contract Quarter (the "Yield"). If the average yield for all such
Batches (the "Average Yield") is less than the Guaranteed Yield, Oread shall
credit Praecis with an amount equal to the product of (a) the Production Fee per
vial multiplied by 2 (two) multiplied by (b) the difference between the
Guaranteed Yield and the Average Yield multiplied by (c) the number of Batches
accepted by Praecis during such Contract Quarter. At the end of each Contract
Year, Oread and Praecis shall review the average Yield for all Batches accepted
by Praecis during such Contract Year. If such average Yield has been
consistently greater or less than the Guaranteed Yield during the course of such
Contract Year, the Guaranteed Yield may be revised by mutual agreement in
writing. The Guaranteed Yield for the first Contract Year shall be based on the
actual yield of acceptable vials filled during the Processing of the lots
designated as the "commercial validation" lots and the first ten lots of Product
filled after the completion of commercial validation, adjusted by a mutually
agreed loss factor for anticipated "typical commercial scale production losses".
In addition, the Guaranteed Yield may be revised by mutual agreement in writing
whenever significant changes are made to the production process. Oread shall
endeavor in good faith to achieve the highest practical yield on all Batches
11. REGULATORY COMPLIANCE AND RELATED MATTERS
11.1 NDA. Praecis shall be responsible for obtaining all FDA approvals
relating to registration of the Product, shall pay any applicable user fee for
such registration, and shall own the NDA. Praecis shall have similar
responsibilities for obtaining all foreign registrations and approvals to market
the Product in all countries outside of the US.
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11.2 Submissions to Regulatory Authorities. If Praecis is required to
submit to the Regulatory Authorities any information concerning the Processing,
Packaging, and marketing of the Product, Oread will provide to Praecis copies of
such documentation, data, and other information with respect to Processing,
Packaging, and the Facility as shall be necessary for such submission to the
Regulatory Authorities. Oread shall also make available its cooperation and
consultation if reasonably requested by Praecis and/or required by the
Regulatory Authorities for development of additional data or performance of
studies concerning the Product, and Praecis shall pay Oread's reasonable costs
therefor. Oread shall also provide, if required by the Regulatory Authorities,
information concerning its production processes and quality control procedures
with respect to the Product. Oread shall provide to Praecis all documentation,
data, and information referred to in this Section reasonably in advance of their
required submission to allow for Praecis's review and comments. Oread shall
endeavor in good faith to satisfactorily resolve all Praecis comments prior to
submission if such submission is to be made by Praecis Or its licensee(s) or
sublicensee(s).
11.3 Inspections. Oread shall allow representatives of Regulatory
Authorities to inspect and audit its Facility with respect to the Product and
any Components thereof and shall notify Praecis immediately of any impending
inspection or audit and no later than eight (8) hours following the arrival at
the facility of any inspector or auditor of a Regulatory Authority that may
involve the Product or any Components thereof. Praecis shall have the option of
having its representatives [and/or representatives of its licensee (s) or
sublicensee(s)] present, on-site, during any such inspection or audit by any
Regulatory Authorities and may only with Oread's express consent attend meetings
with such Regulatory Authorities to discuss the results of such inspection or
audit. Oread shall in its sole discretion refuse to allow Praecis be present or
in attendance at any such meetings.Oread shall notify Praecis in writing of the
results of such inspection or audit, immediately after such inspection or audit
has occurred, including without limitation providing to Praecis copies of any
resulting document of action (e.g., FDA Form 483 inspection observation report,
regulatory letters, etc.) resulting therefrom to the extent relevant to the
Product within three (3) days of their receipt. If any Regulatory Authority
determines that Oread is not in compliance with any applicable laws, rules,
regulations, or requirements, Oread shall promptly inform Praecis of its plans
to come into compliance with such laws, rules, regulations and requirements, to
the extent the Product is or may be affected, and shall continue to keep Praecis
informed of its progress until compliance has been attained.
11.4 Communications. If Oread submits documentation to the Regulatory
Authorities or otherwise communicates with Regulatory Authorities (including
without limitation one or more responses to the FDA under Section 11.3), which
communications relate to the Product or that could affect the Product, Praecis
or its representatives including representatives of Praecis' licesnsee(s) or
sublicensee(s) may review and comment on all such regulatory filings and other
communications prior to their submission, provided Oread shall have sole control
over the contents of such filings and communications. Oread shall advise Praecis
in advance of any planned changes to any regulatory filings or documents which
relate to the Product or that could affect the Product, and shall notify Praecis
immediately of any adverse finding by any Regulatory Authority that relates
directly to the Product or that could affect the Product.
11.5 Modifications to Equipment and Facility. Oread shall notify Praecis
of any significant modifications to parts of the Facility used for Processing,
Packaging or storage to the extent such modifications impact or could reasonably
be expected to impact the Product . Oread shall not implement any material
changes relating to the Product (including modifications to equipment) without
obtaining Praecis's prior written approval which approval shall not be
unreasonably withheld. A material change is defined as any change that (a)
impacts the regulatory commitments made to Regulatory Authorities for the
Product; (b) may require re-validation; (c) may affect the quality, purity,
identity or strength of the in-process or finished Product; or (d) could
reasonably be expected to result in changing or modifying the Praecis or Oread
Specifications, test methods, sampling procedures, standard operating
procedures, or the Master Batch Record with respect to the Product. The parties
to this Agreement shall agree in advance which party will pay for any expenses
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associated with any modifications and material changes made or proposed to be
made under this provision of the Agreement.
11.6 Responsibility for Compliance. Praecis shall be responsible for and
ensure the compliance of the Intermediate, and the Master Batch Record,
including Specifications and Labeling, with the requirements of applicable
Regulatory Authorities; provided, however, that the foregoing shall not limit
Oread's obligations hereunder. Oread shall comply with all applicable laws and
regulations, rules, ordinances, injunctions, orders and decrees, and shall
maintain in effect all required governmental permits, licenses, orders,
applications (including without limitation approvals with respect to the
Facility) and approvals regarding the Product and the use of its Facility to
Process, Package and store the Product, and Oread shall Process, Package and
store the Product in accordance with all such permits, licenses, orders,
applications and approvals.
11.7 Drug Experience Reports. Oread shall give Praecis prompt written
notice of any information Oread receives regarding the safety of the Product,
including any confirmed or unconfirmed information on adverse, serious or
unexpected events associated with the use of the Product. For serious,
unexpected events, immediate telephonic notice must be given by Oread to
Praecis, and written notice must be given by Oread to Praecis within three (3)
business days, after receipt of the information. For all other such information,
written notice must be given by Oread within fifteen (15) business days after
receipt of the information. Praecis shall send Oread copies of all priority
submissions and periodic reports relating to the Product sent to the FDA within
five (5) business days of the submission to the FDA. All responsibility and cost
for filing any reports with the regulatory authorities concerning such reactions
(including Drug Experience Reports) caused by Product manufactured for Praecis
shall be borne by Praecis. Praecis will be responsible at its cost for handling
Product complaints. Oread will provide assistance in responding to any
complaints including reviews of retained samples and Batch Records as well as
testing of Products engendering a complaint and retained samples if required.
The costs of such testing shall be borne by Praecis. However, if it is
determined that the Product complaint was directly or indirectly caused by
Oread's failure to Process and Package in accordance with the Master Batch
Record or if the Product complaint is related to the Product's failure to
conform to any of the Specifications at the time of the Oread Approval Date,
Oread shall reimburse Praecis for the reasonable actual costs of such testing.
12. HEALTH AND SAFETY
12.1 Health and Safety Procedures. Oread shall adhere to its internal
health and safety procedures for Processing and Packaging and the handling of
the Raw Materials, Intermediate, Hazardous Waste, Non-Hazardous Waste,
Components, and Product. Such procedures shall comply with all applicable
federal, state and local laws and regulations (including without limitation
federal, state and local health and safety laws and regulations).
12.2 MSDS. Oread shall comply with the procedures set forth in the MSDS
associated with the Intermediate and the Product and fully comply with each
MSDS. If either MSDS is amended, Praecis shall promptly provide Oread with all
such amendments. Oread shall, within thirty (30) days of receipt of such
amendment, notify Praecis in writing whether and the extent to which its
production costs for the Product will increase or decrease as a result of such
amendment. Any increase or decrease in Oread's production costs shall be
supported by documentation in form and content reasonably satisfactory to
Praecis. The Batch Production Fee will be increased or decreased, as of the date
such amendment impacted or impacts production costs, by the amount of such
additional or reduced production costs, and the related Schedules will be
amended accordingly.
12.3 Training. Oread shall educate and train all affected employees and
contractors about the potential hazards associated with the handling of the
Intermediate, Raw Materials, Hazardous Waste, and Non-Hazardous Waste and the
Processing, Packaging, analyzing, and handling of the Product, and on the proper
use of engineering controls, process equipment and personal protective
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equipment as referenced in the MSDS. Oread shall make the MSDS available to all
such employees and contractors. Oread shall maintain records of such training
for Praecis's review. The Master Batch Record shall specify procedures and
protections that are required in connection with Processing and Packaging.
Praecis shall have no responsibility for or liability with respect to educating,
training, or ensuring knowledge of any Oread employees and contractors about the
potential hazards associated with the handling of the Intermediate, Raw
Materials and Hazardous Waste or Non-Hazardous Waste and the analyzing,
handling, Processing and Packaging of the Product, or on the proper use of
engineering controls, process equipment or personal protective equipment as
referenced in the MSDS, and Oread shall indemnify and hold Praecis harmless in
connection with Oread's actions or inactions regarding the foregoing.
12.4 Responsiveness. If Praecis personnel at the Facility observe any
employees of Oread acting in violation of the MSDS's, or the Master Batch
Record, Oread shall take such prompt action as Oread deems appropriate to
respond to such observations. Praecis shall document the observations in writing
and Oread shall document the response in writing.
13. MAINTENANCE OF RECORDS AND REPORTS
13.1 By Oread. For the longer of (i) five (5) years from the date of the
Oread Approval Date of a Batch or (ii) the time required by all applicable
rules, laws, and regulations (the "Retention Period"), Oread shall keep and
maintain records sufficient to substantiate and verify its duties and
obligations relating to Processing and Packaging in respect of such Batch
including Batch Records, records of Purchase Orders received, certificates of
analysis from vendors for products received, Intermediate furnished, Product
Processed and Packaged, Work in Process, Intermediate and Product analyses, and
file samples. Oread shall also retain for the Retention Period any records
relating to regulatory compliance, environmental, health or safety and quality
assurance and quality control of the Product. Oread shall make all such records
available for inspection by Praecis or its representatives including
representatives of Praecis' licensee(s) or sublicensee(s) during the term hereof
and the Retention Period thereafter, and shall allow Praecis to copy such
records as Praecis and its licensee(s) and sublicensee(s) may designate. At the
end of such Retention Period, Oread will return to Praecis the Batch Records.
13.2 By Praecis. Praecis shall maintain such documentation relating to the
sale and distribution of the Product as is required by all applicable rules,
laws, and regulations.
14. REVISIONS TO MASTER BATCH RECORD OR SPECIFICATIONS
14.1 Master Batch Record. Any proposed change to the Master Batch Record
must be approved by both parties through the issuance and acceptance of a PCR.
No revisions to the Specifications that would affect the manufacture of the
Product shall be submitted to Regulatory Authorities unless approved in advance
by both parties in writing.
14.2 Difference in Cost. Praecis shall notify Oread in writing of any
proposed revisions to the Master Batch Record, or the Specifications, and Oread
shall, within thirty (30) days of receipt of such notice, notify Praecis in
writing whether and the extent to which its production costs for the Product
will increase or decrease as a result of such revision. Any increase or decrease
in Oread's production costs shall be supported by documentation in form and
content reasonably satisfactory to Praecis. If Praecis elects to adopt the
revision, the Batch Production Fee will be increased or decreased by the amount
of such additional or reduced production costs, and the related Schedules will
be amended accordingly.
14.3 Oread Unable to Comply. If Oread determines it is technically unable
to comply with a proposed revision of the Master Batch Record, or the
Specifications or Praecis is unwilling to accept any increase in the Batch
Production Fee arising therefrom, Praecis may choose in its sole
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discretion to either withdraw the proposed revision or terminate the Agreement
in accordance with Section 22.2.
15. TRADEMARKS AND LABELING
15.1 Use of Praecis Trademarks. The Labeling shall bear one or more
Praecis trademarks. Nothing contained herein shall give Oread any right to use
any Praecis trademark except to the extent that Oread is responsible for
affixing the Labeling on the Product, and Oread shall not obtain any right,
title or interest in any Praecis trademark by virtue of this Agreement or its
performance of services hereunder.
15.2 Reference to Oread. The Labeling shall contain the notation
"Manufactured by Oread for Praecis Pharmaceuticals, Inc.", or such similar
notation as may be agreed by the parties. Oread shall not affix to the Product
any label, stamp or other mark identifying Oread as the source of the Product
except as provided in this Section or as mutually agreed to in writing or as may
be required by applicable law or regulations.
16. WASTE HANDLING AND DISPOSAL
16.1 Waste Handling by Oread. Oread shall handle, package, label, store,
and coordinate transportation of all Hazardous Waste and Non-Hazardous Waste in
accordance with all applicable federal, state, and local laws and regulations.
Oread shall deliver the Hazardous Waste to a waste contractor for transport and
disposal (the "Waste Contractor"). Oread shall, at its sole cost and expense
dispose of all Non-Hazardous Waste in accordance with all applicable federal,
state, and local laws and regulations.
16.2 Waste Contractor. The Waste Contractor shall be a contractor who is
appropriately licensed to transport and dispose of the Hazardous Waste. Praecis
shall pay for the Waste Contractor's costs for transportation and disposal of
the Hazardous Waste. Hazardous Waste generated from activities performed
pursuant to this Agreement shall be collected and held seperately, and shall be
manifested seperately from all other wastes generated by Oread.
16.3 Audit Rights. Praecis retains the right to and at Praecis' election,
to have its licensee(s) or sublicensee(s) inspect Oread's waste handling,
packaging, storing, transportation and disposal activities, and any and all
records pertaining thereto, and shall have the right to make copies thereof.
Oread shall maintain copies of the Uniform Waste Manifest and certificates of
destruction, if any, from the approved incineration facility on file for
inspection by Praecis. Oread will inform Praecis promptly of any environmental
or regulatory issues that it becomes aware of that could jeopardize Oread's
ability to produce the Product pursuant to this Agreement.
17. TITLE
Title to all equipment provided by Praecis all Intermediate, all Work in
Process, and all Product shall at all times remain in Praecis (collectively, the
"Praecis Property") and Oread shall clearly identify all such equipment
containers containing all Intermediate and Product as being owned by Praecis.
Except for Work in Process, Praecis may at its sole discretion for any reason
notify Oread that it wishes to take possession of the Praecis Property and Oread
shall permit Praecis or its representatives to do so during regular business
hours and upon reasonable advance notice. Oread shall acquire no right, title or
interest of any kind in or to any Praecis Property. Except with Praecis's prior
written consent, the Praecis Property may be used by Oread only to satisfy its
obligations under the Agreement. Oread shall not take or permit any action
inconsistent with Praecis's ownership interest in the Praecis Property including
but not limited to the imposition of any lien or other encumbrance thereon, the
conveyance of any interest therein, or any use thereof, except as authorized by
the terms of this Agreement. If Oread fails to keep Praecis's title free and
clear of
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all liens, encumbrances and interests, without limitation of any other rights or
remedies of Praecis, Oread shall pay all costs associated with securing the
release of any such liens, encumbrances and interests on the Praecis Property.
18. WARRANTIES AND REPRESENTATIONS
18.1 Oread's Warranties. Oread hereby represents, warrants, and covenants
as follows:
(a) The Product shall be Processed and Packaged in accordance with
the Master Batch Record, and with any applicable regulations of the Regulatory
Authorities and cGMPs, and that, as of the Praecis Approval Date, the Product
shall conform with the Specifications.
(b) Oread shall comply in all respects with any law, regulation,
ordinance, order, injunction, decree or governmental requirement applicable to
the manufacture of the Product, the handling and storage of the Intermediate,
the handling of the Hazardous Waste prior to pick-up by the Waste Contractor,
and the handling and disposal of the Non-Hazardous Waste.
(c) Oread shall maintain in effect all required governmental
permits, licenses, orders, applications and approvals necessary for the
Processing and Packaging, and Oread shall Process and Package in accordance with
all such permits, licenses, orders, applications and approvals.
(d) The Process as set forth in the Master Batch Record does not
infringe on any known patent.
18.2 Praecis's Warranties. Praecis hereby represents and warrants as
follows:
(a) The Intermediate shall, at the time it is shipped to Oread,
(i) not be adulterated or misbranded within the meaning of the
Federal Food Drug and Cosmetic Act ("FFDCA") or within the meaning of any
applicable state or municipal law in which the definitions of adulteration and
misbranding are substantially the same as those contained in the FFDCA;
(ii) not be articles that may not, under Section 505 of the
FFDCA or any other provision of the FFDCA or any other applicable law, statute
or regulation, be introduced into interstate commerce;
(iii) have been manufactured, processed, and packed in
compliance with all requirements under the FFDCA (including drug establishment
registration and applicable good manufacturing practice) or under any other
applicable laws, rules, or regulations of the United States or any other country
in which the Intermediate is manufactured or in which the Product or
Intermediate will be distributed by Praecis, and
(iv) conform to the identifications for the Intermediate set
forth in the Master Batch Record and conform to all regulatory release
Specifications as documented in the certificate of analysis included with each
delivery of Intermediate, confirming the identity, purity, and other physical
attributes of such Intermediate.
(b) Except to the extend assigned, licensed or sublicensed pursuant
to any agreement between Praecis and Syntheloabo or other licensing or
collaboration arrangement
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between Praecis and a third party, Praecis owns all rights to the Praecis
trademark(s) used in the Labeling.
(c) The Labeling complies with all requirements of the Regulatory
Authorities.
18.3 Mutual 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, (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 its terms, and (iii) the execution,
delivery and performance by such party of this Agreement does not and will not
constitute a breach of , or conflict with, any agreement or instrument which is
binding on such party or its assets.
18.4 Disclaimer. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, PRAECIS AND OREAD MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF
ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING ANY EXPRESS OR IMPLIED WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
19. RECALLS
19.1 Responsibility. If any Product must be recalled by reason of failure
to meet any requirements of any Regulatory Authority or any other requirements
of law, Praecis shall have the sole responsibility to effect the recall. Oread
shall cooperate as reasonably required in Praecis's efforts in accordance with
Sections 19.2 and 19.3.
19.2 Praecis's Responsibility. If the failure to meet applicable legal
requirements resulting in a recall is not caused by the act or omission of
Oread, then Praecis shall reimburse Oread for any costs reasonably expended by
Oread to effect the recall. Praecis shall bear the cost of (a) any Intermediate
involved in such recall and (b) the Production Fee for any Product that is
recalled and (c) reimburse Oread on a time and materials basis not to exceed the
Production Fee, for any Work in Process, finished but non-approved Product, or
Product that cannot be shipped due to the condition requiring the recall,
provided that as of the date that the Processing and Packaging was suspended as
a result of the recall, such Work in Process had been Processed and Packaged in
accordance with the Master Batch Record, and the non-approved Product, and/or
Product conforms in all material respects to the Specifications and was
manufactured in accordance with the Processing and Packaging, quality assurance
and validation procedures set forth in the Specifications and with any
applicable regulations of any Regulatory Authorities, including cGMPs.
19.3 Oread's Responsibility. If the failure to meet applicable legal
requirements resulting in a recall is caused by the act or omission of Oread or
if the Product failed to conform as of the Oread Approval Date to any of the
Specifications resulting in a recall, Oread shall reimburse Praecis for (a) any
costs reasonably expended by Praecis to effect the recall, (b) any Production
Fees and shipping fees paid to Oread by Praecis for recalled Product and for any
Product that cannot be shipped due to the condition requiring the recall, and
(c) one hundred percent (100%) of Praecis's cost of the Intermediate contained
in recalled Product (to the extent such Intermediate cannot be reworked) and in
any Product that cannot be shipped due to the condition requiring the recall.
20. FORCE MAJEURE
20.1 Excusing Performance. Neither party hereto shall be liable in damages
for, nor shall this Agreement be terminable or cancelable by reason of, any
delay or default in such party's performance hereunder if such delay or default
is caused by events beyond such party's reasonable control including, but not
limited to, acts of God, regulation or law or other action of any
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government, war or insurrection, civil commotion, destruction of production
facilities or materials by earthquake, fire, flood, or storm, labor
disturbances, epidemic, or failure of suppliers, public utilities or common
carriers; provided, however, that nothing contained herein shall relieve either
party from the obligation to promptly pay in full all payments that may be due
to the other party under this Agreement.
20.2 Resumption. Each party shall employ all reasonable efforts, at its
cost, toward resumption of its performance hereunder if such performance is
delayed or interrupted by reason of force majeure.
21. INDEMNIFICATION
21.1 Praecis's Indemnification. Praecis shall defend, indemnify, and hold
harmless Oread, its officers, agents, employees and Affiliates from any loss,
claim, action, damage, expense or liability (including defense costs and
attorneys' fees) ("Claim") arising out of or related to (a) any injury to
Praecis employees while at the Facility; or (b) the breach of any
representation, warranty or obligation made by Praecis herein; or (c) the
handling, possession, use, or sale of the Product following delivery to a common
carrier pursuant to Section 6.1; (d) the transportation, recycling or disposal
of any Hazardous Waste after delivery to a Waste Contractor pursuant to this
Agreement; (e) patent infringement of a third party's patent by the Process as
set forth in the Master Batch Record; (f) work done by other contractors or any
employee of Praecis relating to the Product and not under the direct control of
or within the responsibilities of Oread as specified in this Agreement; or (g)
infringement of a trademark owned by a third party caused by the Labeling;
except to the extent any such Claim set forth herein is based on, arises out of,
is engendered by or is due to (x) Oread's failure to comply with the terms of
Section 16, (y) Oread's breach of any of its representations, warranties, or
obligations contained in this Agreement, or (z) the negligence or willful
misconduct of Oread or its Affiliates, officers, agents, or employees.
21.2 Oread's Indemnification. Oread shall defend, indemnify, and hold
harmless Praecis, its officers, agents, employees and Affiliates from any Claim
arising out of or relating to (a) the breach of any representation, warranty or
obligation of Oread herein; (b) liabilities associated with the environmental
contamination of the Facility and other locations except to the extent Praecis
is obligated to indemnify Oread under Section 21.1; (c) the handling or disposal
of the Non-Hazardous Waste; (d) handling or disposal of the Hazardous Waste
prior to delivery to a Waste Contractor pursuant to this Agreement; or (e)
negligence or willful misconduct of Oread or its officers, agents or employees,
including but not limited to any injury to Oread employees due to the failure to
follow the procedures set forth in the MSDS's; except to the extent any such
Claim set forth herein is based on, arises out of, is engendered by or due to
(x) Praecis's breach of any of its representations, warranties or obligations
contained in this Agreement or (y) the negligence or willful misconduct of
Praecis or its Affiliates, officers, agents or employees.
21.3 Procedures. Provided that prompt notice is given of any Claim by a
third party, the indemnifying party promptly will defend, contest, or otherwise
protect against any such Claim at its own cost and expense. The indemnified
party may, but will not be obligated to, participate at its own expense in a
defense thereof by counsel of its own choosing, but the indemnifying party shall
be entitled to control the defense unless the indemnified party has relieved the
indemnifying party from liability with respect to the particular matter. Except
as otherwise set forth herein, the indemnified party shall not, except at its
own cost and expense, compromise or settle, or seek to compromise or settle, any
such third party Claim. If the indemnifying party fails to timely defend,
contest, or otherwise protect against any such third party such Claim, the
indemnified party may, but will not be obligated to, defend, contest, or
otherwise protect against the same, and make any compromise or settlement
thereof. and recover the entire costs thereof from the indemnifying party,
including reasonable attorneys' fees, disbursements, and all amounts paid as a
result of such Claim or the compromise or settlement thereof. The indemnified
party shall cooperate and provide such assistance
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as the indemnifying party may reasonably request in connection with the defense
of the matter subject to indemnification.
21.4 Insurance. Praecis and Oread each hereby represent to the other that
it is sufficiently insured against any liability arising under this Agreement.
22. TERM AND TERMINATION
22.1 Term. The initial term of this Agreement shall be for five (5) years
and shall commence as of the Effective Date. At the end of the initial period
this Agreement will be automatically renewed and shall continue in effect until
terminated by either party in accordance with this Section 22.
22.2 Termination. Each party shall have the right to terminate this
Agreement, as follows:
(a) by either party without cause, effective fifteen (15) months after
written notice of such termination is given; provided, however, that in no event
shall this Agreement be terminated by Oread until the earlier of (i) the date
that an alternate manufacturing site chosen by Praecis is approved by the FDA
for manufacturing of the Product or (ii) twenty four (24) months from the date
of such written notice of termination, or
(b) by either party effective immediately upon written notice if the other
party is in material breach or default with respect to any term or provision
hereof and fails to cure the same within forty-five (45) days after notice of
said breach or default is given to the other party; or
(c) by Praecis upon immediate written notice to Oread if Praecis
determines the Process as set forth in the Master Batch Record may infringe the
patent of another party; or
(d) by Praecis upon immediate written notification if Oread is unable to
meet the Manufacturing Schedule and continues to be unable to meet the
Manufacturing Schedule for an additional 90 days after receiving an initial
notice from Praecis of its intent to terminate this Agreement pursuant to this
Section 22.2 (d), in which case Oread will reasonably cooperate with the
transfer of manufacturing the Product to an alternate manufacturing site
nominated by Praecis.
(e) In the event that either party terminates this Agreement under
sub-section (a) of this Section 22.2, the terminating party will reimburse the
other party for all commercially reasonable costs that the other party incurs in
accomodating the request to terminate.
(f) In the event this Agreement is terminated by Praecis under subsections
(b) or (d) of this Section 22.2, and such termination arises from Oread's
failure to supply Product as described in Section 5.9, then without limitation
of any other right or remedy of Praecis, Praecis shall have all of the rights,
and Oread shall have the obligations, set forth in such Section 5.9.
22.3 Bankruptcy or Insolvency: Either party shall have the right to
terminate this agreement effective upon written notice to the other party in the
event: (a) the non-notifying party becomes insolvent or makes an assignment for
the benefit of creditors; (b) a receiver is assigned to the non-notifying party;
or ( c ) bankruptcy proceedings are instituted against the non-notifying party
or on the non-notifying party's behalf.
22.4 Inventory. Upon termination of this Agreement, Oread shall furnish to
Praecis a complete inventory of all stock on hand of (i) the Intermediate, (ii)
Work in Process, (iii) finished Product, and (iv) all Praecis equipment, and all
Components, Containers and Labeling.
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22.5 Product and Work in Process. Upon termination of this Agreement,
Product manufactured pursuant to Purchase Orders from Praecis delivered to Oread
prior to the effective date of such termination shall be delivered by Oread to
Praecis and paid for in accordance with such Purchase Orders. If the termination
is by Oread due to a breach of this Agreement by Praecis or by Praecis pursuant
to Section 22.2(a), Praecis shall pay Oread for Work in Process as of the
effective date of such termination on a time and materials basis to be agreed
upon between the parties; provided, however, that Oread can reasonably
demonstrate that the Work in Process has been Processed in accordance with the
Master Batch Record up to the effective date of such termination, and provided,
further, that such payment shall not exceed the Batch Production Fee applicable
to such Work in Process. If the termination is by Praecis due to a breach of
this Agreement by Oread or by Oread pursuant to Section 22.1, Praecis may elect
to cancel any Work in Process as of the effective date of such termination and
owe no money for such Work in Process or may require Oread to complete the Work
in Process and upon the Oread Approval Date, pay Oread the Batch Production Fee
in accordance with Article 6.
22.6 Intermediate and Other Materials. Upon termination of this Agreement,
(i) Intermediate, Raw Materials, Components, Containers, and Labeling not
necessary to complete Work in Process as of the effective date of such
termination shall, at Praecis's option, either be disposed of by Oread in
accordance with Article 16 or returned to Praecis at Praecis's expense (except
in the case of termination by Praecis pursuant to Section 22.2(b) or 22.3 or by
Oread pursuant to Section 22.1, in which event Oread shall bear such expense) in
accordance with Praecis's instructions and (ii) unless such termination is by
Praecis pursuant to Section 22.2(b) or 22.3 or by Oread pursuant to Section
22.1, Praecis shall reimburse Oread for Oread's actual cost of such Raw
Materials, Components, Containers, and Labeling provided that Oread reasonably
purchased the same in accordance with the Three Month Forecast and only to the
extent that such Raw Materials, Components, Containers, and Labeling cannot be
used by Oread in the production of any other products.
22.7 Equipment. Upon termination of this Agreement, Praecis (except when
breached by Oread) shall pay all costs of disassembling, removing, and shipping
(including insurance) all equipment belonging to Praecis, all of which work
shall be done in accordance with Praecis's instructions.
22.8 Liability. The termination of this Agreement shall not operate to
release any party from any liability incurred prior to or upon termination
hereof.
23. CONFIDENTIALITY
Each party and its affiliates (the "Recipient") shall treat as confidential all
information provided to such party or its affiliates by the other party or its
Affiliates (the "Discloser") hereunder, including but not limited to information
relating to the Processing or Packaging. The Recipient shall not use such
information except for the express purposes contemplated by this Agreement and
shall not disclose such information to any individual or entity (except to such
of its employees and subcontractors who reasonably require same for the purposes
hereof and who are bound to the Recipient by like obligations as to
confidentiality and non-use) without the express written permission of the
Discloser. Notwithstanding the foregoing, the Recipient shall not be prevented
from using or disclosing any portion of such information: (a) that the Recipient
can demonstrate by its written records was known to it from a source other than
the Discloser prior to the disclosure hereunder; or (b) that is now, or becomes
in the future, public knowledge other than by breach of this Agreement by the
Recipient; or (c) that is lawfully obtained on a non-confidential basis by the
Recipient from a third party who is not obligated to retain such information in
confidence; or (d) that is independently developed by employees of the Recipient
or an Affiliate of the Recipient, which
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employees were not privy to nor had access to such information and which is
developed without use in any way of the information received from the Discloser;
or (e) that the Recipient reasonably determines in good faith is required by
law, regulation, rule, act, orderor request of any governmental authority or
agency to be disclosed by the Recipient; provided, however, that in the case of
(e), the Recipient gives the Discloser sufficient advance written notice to
permit the Discloser to seek a protective order with respect to such information
(if a protective order could be granted with respect to the disclosure of such
information) and thereafter the Recipient discloses only the minimum information
required to be disclosed in order to comply. The obligations of each party under
this Section shall remain in full force and effect for ten (10) years following
termination or expiration of this Agreement.
24. INDEPENDENT CONTRACTOR
Oread shall act solely as an independent contractor and nothing in this
Agreement shall be construed to give either party the power or authority to
enter into or incur, any commitments, expenses or liabilities whatsoever on
behalf of the other party. Nothing herein shall be construed to create the
relationship of partnership, principal and agent, or joint venture between
Praecis and Oread.
25. PUBLIC STATEMENTS
Except as a party reasonably determines in good faith is required by law,
regulation, rule, act, order or request of any governmental authority or agency,
neither party shall use or refer to, without the other party's prior written
consent, the name of such other party in any public statements, whether oral or
written, including, but not limited to, shareholder reports, communications with
stock market analysts, press releases or other communications with the media, or
prospectuses; provided, however, that each party may disclose to any third party
the existence and subject matter of this Agreement; and provided further that
each party may make disclosure of the existence, subject matter and terms of
this Agreement to the extent such party reasonably determines in good faith that
such disclosure is necessary or appropriate in connection with any financing,
strategic transaction, acquisition or disposition involving such party.
26. NOTICES
Any notice required or permitted to be given hereunder shall be deemed
sufficient if sent by facsimile or overnight courier, or delivered by hand to
Oread or Praecis at the respective addresses and facsimile numbers set forth
below or at such other address and facsimile number as either party hereto may
designate. If sent by facsimile, , notice shall be deemed given when the
transmission is completed if the sender has a confirmed transmission report. If
a confirmed transmission report does not exist, then the notice will be deemed
given when the notice is actually received by the person to whom it is sent. If
delivered by overnight courier, notice shall be deemed given when it has been
signed for. If delivered by hand, notice shall be deemed given when received.
All correspondence to Oread shall be addressed as follows:
Oread, Inc.
1501 Wakarusa Drive,
Lawerence, Kansas 66047 - 1803
Attention: Corporate Counsel
Fax: 785-749-1882
and an additional copy to:
Oread Pharmaceutical Manufacturing,
3401P Hillview Avenue,
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Palo Alto, CA 94303
Attention: Group VP, Pharmaceutical Manufacturing
Fax: 650-832-4600
All correspondence to Praecis shall be addressed as follows:
Praecis Pharmaceuticals Incorporated.
One Hampshire Street,
Cambridge,
Massachusetts, MA 02139-1572
Attention: Vice President - Corporate Development
Fax: 617/494-8414
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street, 31st Floor
Boston,
Massachusetts, MA 02108-3194
Attention: Kent A. Coit
Fax: 617/573-4822
27. ASSIGNMENT
Neither party may assign this Agreement nor any portion hereof nor
delegate its performance hereunder without the prior written consent of the
other party; provided, that without the consent of the other party, each party
may assign this Agreement to an Affiliate or to an acquiror of all or
substantially all of the assets of such party or that part of such business to
which this Agreement relates, whether pursuant to a merger, consolidation, stock
purchase, recapitalization, asset sale or otherwise, and Oread may assign this
Agreement to a purchaser of Oread's Facility or business provided, however, that
in any such case such party (or the successor entity in the case of a merger or
consolidation) shall remain liable for such party's obligations which have been
so assigned hereunder.
28. GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New York (regardless of its or of any other jurisdiction's
choice of law principles). Each party hereby consents to the personal
jurisdiction of the state and federal courts sitting in New York.
29. ARBITRATION
Except for the right of either party to apply to a court of competent
jurisdiction for a temporary restraining order, or preliminary injunction to
preserve the status quo or prevent irreparable harm pending the selection of and
issuance of a final decision by the arbitors pursuant to this section 29 any
dispute arising under this Agreement or regarding any breach or termination
hereof, shall be exclusively resolved by final and binding arbitration in
accordance with the rules ("Rules") of the American Arbitration Association
("AAA") then in effect. Either party may initiate such an arbitration proceeding
by giving written notice to the other party. Judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof. In any
arbitration pursuant
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to this Section 29, the award shall be rendered by a majority of the members of
a board of arbitration consisting of three members, one being appointed by each
party and the third, who shall be the chairman of the panel, being appointed by
mutual agreement of said two party-appointed arbitrators. In the event of
failure of said two arbitrators to agree within sixty (60) days after the
initiation of the arbitration proceeding upon the appointment of the third
arbitrator, the third arbitrator shall be appointed by the AAA in accordance
with the Rules In the event that either party shall fail to appoint an
arbitrator within thirty (30) days after the initiation (including by the other
party) of the arbitration proceeding, such arbitrator and the third arbitrator
shall be appointed by the AAA in accordance with the Rules. The place of
arbitration shall be New York, New York. The arbitrators shall apply the law of
the State of New York (regardless of its or any other jurisdiction's choice of
law principles. The losing party shall pay all costs and fees incurred as a
result of any arbitration
30. SURVIVAL OF TERMS
The provisions of Sections 9.5, 11.2, 11.3, 11.4, 11.7, 22.2(d), (e) and
(f), 22.3, 22.4, 22.5, 22.6, 22.7 and 22.8 Articles 13, 16, 17, 18, 19, 21, 23,
25, and 28, shall survive the termination or expiration of this Agreement.
31. ADDITIONAL TERMS
31.1 Entire Agreement. This Agreement constitutes the entire understanding
between the parties with respect to the subject matter hereof and supersedes and
replaces all previous negotiations, understandings, representations, writings,
and contract provisions and rights relating to the subject matter hereof. If
there is any conflict between this Agreement and the terms and conditions
contained on any Purchase Order or in any Schedule or Exhibit hereto, the terms
and conditions of this Agreement shall prevail.
31.2 Amendments: No Waiver. No provision of this Agreement may be amended,
revoked or waived except in writing signed and delivered by an authorized
officer of each party. No failure or delay on the part of either party in
exercising any right hereunder will operate as a waiver of, or impair, any such
right. No single or partial exercise of any such right will preclude any other
or further exercise thereof or the exercise of any other right. No waiver of any
such right will be deemed a waiver of any other right hereunder.
31.3 Validity. Should any part or provision of this Agreement be held
unenforceable or invalid, the invalid or unenforceable provision shall be
replaced with a provision which accomplishes, to the extent possible, the
original business purpose of such provision in a valid and enforceable manner,
and the remainder of this Agreement shall remain binding upon the parties.
31.4 Headings. The descriptive headings are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning of or
interpretation of this Agreement.
31.5 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but which together shall constitute a
single agreement.
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first hereinabove written.
Oread Pharmaceutical Praecis Pharmaceuticals,
Manufacturing, Inc Incorporated.
By /s/ Richard S. Hernandez By /s/ Marc A. Silver
----------------------------- -------------------------------
Name Richard S. Hernandez Name Marc A. Silver
----------------------------- -------------------------------
Title Chief Operating Officer Title VP, Corporate Development
----------------------------- -------------------------------
Date Date
----------------------------- -------------------------------
Schedule A - Production Fees / Pricing
Schedule B - Proposal 0210-E339-OP, Revision #6, December 18th 1998
Schedule C - Master Batch Record
Schedule D - Long-term Stability Studies Protocol
32
<PAGE>
Oread - Praecis Abarelix-Depot Powder Supply Agreement, January 1999
SCHEDULE A
Abarelix-Depot Powder Filling and Testing; Commercial Supplies Pricing
The fees for the commercial supplies of the Product, as defined under this
Agreement, will be finalized, in writing, by mutual agreement between the
parties based upon (w) the actual batch size of the commercial production lots
filed in the NDA for the Product, and (x) the fees proposed in Oread Proposal
No. 0210-E339-OP, (Revision #6, December 18th 1998), section 15.1.1 (b), signed
by Praecis on January 12th 1999 as summarized in the following table.
- --------------------------------------------------------------------------------
** ** ** ** **
- --------------------------------------------------------------------------------
** ** ** ** **
---------------------------------------------------------------
** ** ** **
---------------------------------------------------------------
** ** ** **
- --------------------------------------------------------------------------------
** **
- --------------------------------------------------------------------------------
The fees in the referenced Proposal were based upon several key assumptions with
respect to (y) the testing requirements for the Product, and (z) the operational
performance requirements of the filling equipment provided by Praecis. The
attached Schedule A-1 lists the assumed testing requirements, and Schedule A-2
lists the operational performance requirements for filling the Product into
vials, which went into the commercial supplies pricing calculations in the table
above. If any of the items listed in Schedule A-1 and A-2 materially change for
the eventual commercial lots contemplated in this Agreement, then Oread and
Praecis will negotiate in good faith a revised pricing schedule, which schedule
shall be in writing and agreed to by parties prior to proceeding with the work
required. For each % change in the per batch or per vial manufacturing fees
resulting from the negotiation referred to in the preceding sentence, Oread will
make a corresponding contrary % adjustment in the monthly suite maintenance
fees. An example worksheet of how such assumption changes would be documented is
attached in exhibit A-3.
<PAGE>
Oread - Praecis Abarelix-Depot Powder Supply Agreement, January 1999
A-2. Manufacturing/Filling Process Assumptions
- --------------------------------------------------------------------------------
Production Activity **
- --------------------------------------------------------------------------------
Filling environment **
- --------------------------------------------------------------------------------
Line set-up: **
- --------------------------------------------------------------------------------
Line speed **
- --------------------------------------------------------------------------------
Filling & vial wipe-down **
- --------------------------------------------------------------------------------
Packaging for shipment **
- --------------------------------------------------------------------------------
Line clean-up & **
wipe-down
- --------------------------------------------------------------------------------
Components preparation **
- --------------------------------------------------------------------------------
34
<PAGE>
Oread - Praecis Abarelix-Depot Powder Supply Agreement, January 1999
A-3. Changes in manufacturing process assumptions and fees
<TABLE>
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Proposal 0210-E339-OP, Production lot size ** ** **
Rev #6, Dec 18th 1998
- ---------------------------------------------------------------------------------------------------------------------
Expected yield ** ** **
----------------------------------------------------------------------
Price per Vial ** ** **
----------------------------------------------------------------------
Price per batch ** ** **
----------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Production ** ** **
Activity
- ---------------------------------------------------------------------------------------------------------------------
Filling ** ** ** ** **
environment
- ---------------------------------------------------------------------------------------------------------------------
Line set-up: ** ** ** ** **
- ---------------------------------------------------------------------------------------------------------------------
Line speed ** ** ** ** **
- ---------------------------------------------------------------------------------------------------------------------
Filling & vial ** ** ** ** **
wipe-down
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Packaging for ** ** ** ** **
shipment
- ---------------------------------------------------------------------------------------------------------------------
Line clean-up ** ** ** ** **
& wipe-down
- ---------------------------------------------------------------------------------------------------------------------
Components ** ** ** ** **
preparation
- ---------------------------------------------------------------------------------------------------------------------
Dissolution ** ** ** ** **
testing
- ---------------------------------------------------------------------------------------------------------------------
Sub-total Changes ** ** ** **
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
** ** ** **
- ---------------------------------------------------------------------------------------------------------------------
** ** ** **
- ---------------------------------------------------------------------------------------------------------------------
** ** ** **
- ---------------------------------------------------------------------------------------------------------------------
** ** ** **
- ---------------------------------------------------------------------------------------------------------------------
** ** ** **
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
C. Recommendation
o Use mid-point of revised per batch pricing for the manufacturing fees for
the commercial validation runs. Additional testing and reports and
one-time validation related activities will be priced out separately.
o When three validation lots have been run, mutually agree where the first
year's targeted efficiency standards should be set based on the scenarios
above.
o At the end of year one, or earlier if agreed between the parties, revise
the commercial pricing based on final, reasonably sustainable, efficiency
standards within the assumptions and price ranges provided above.
36
<PAGE>
EXHIBIT 10.15
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
PHARMACEUTICAL PEPTIDES, INC.
LICENSE AGREEMENT
(EXCLUSIVE)
Date: DECEMBER 23, 1993
<PAGE>
TABLE OF CONTENTS
WITNESSETH...................................................................1
DEFINITIONS..................................................................2
GRANT........................................................................4
DEVELOPMENT AND COMMERCIALIZATION............................................6
ROYALTIES....................................................................7
PATENT PROSECUTION...........................................................8
INFRINGEMENT.................................................................8
PRODUCT LIABILITY...........................................................10
EXPORT CONTROLS.............................................................12
NON-USE OF NAMES............................................................13
ASSIGNMENT..................................................................13
TERMINATION.................................................................14
PAYMENTS, NOTICES AND OTHER COMMUNICATIONS..................................15
MISCELLANEOUS PROVISIONS....................................................16
i
<PAGE>
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
PHARMACEUTICAL PEPTIDES, INC.
LICENSE AGREEMENT
This Agreement is made and entered into this 23rd day of December,
1993, (the "Effective Date") by and between MASSACHUSETTS INSTITUTE OF
TECHNOLOGY, a corporation duly organized and existing under the laws of the
Commonwealth of Massachusetts and having its principal office at 77
Massachusetts Avenue, Cambridge, Massachusetts 02139, U.S.A. (hereinafter
referred to as "M.I.T."), and PHARMACEUTICAL PEPTIDES, INC., a corporation duly
organized under the laws of the State of Delaware and having its principal
office at c/o Skadden, Arps, Slate, Meagher & Flom, 31st Floor, One Beacon
Street, Boston, MA 02108 (hereinafter referred to as "LICENSEE").
WITNESSETH
WHEREAS, M.I.T. is the owner of the TECHNOLOGY (as later defined
herein), and has the right to grant licenses with respect to the TECHNOLOGY;
WHEREAS, M.I.T. desires to have the TECHNOLOGY developed and
commercialized to benefit the public and is willing to grant a license thereto;
WHEREAS, LICENSEE has represented to M.I.T., to induce M.I.T. to enter
into this Agreement, that LICENSEE
<PAGE>
shall use its best efforts to exploit the TECHNOLOGY so that public utilization
shall result therefrom; and
WHEREAS, LICENSEE desires to obtain a license to the TECHNOLOGY, the
PATENT RIGHTS, the LICENSED PRODUCTS and the LICENSED PROCESSES (as such terms
are later defined herein) upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
1 - DEFINITIONS
For the purposes of this Agreement, the following words and phrases
shall have the following meanings:
1.1 "LICENSEE" shall include a related company of PHARMACEUTICAL
PEPTIDES, INC., the voting stock of which is directly or indirectly at least
fifty percent (50%) owned or controlled by PHARMACEUTICAL PEPTIDES, INC., an
organization which directly or indirectly controls more than fifty percent
(50%) of the voting stock of PHARMACEUTICAL PEPTIDES, INC. and an organization,
the majority ownership of which is directly or indirectly common to the
ownership of PHARMACEUTICAL PEPTIDES, INC.
1.2 "TECHNOLOGY" shall mean and collectively include any peptide
synthesis inventions, formulas, methods, plans, processes and/or products,
whether patentable or not or confidential or not, conceived, discovered or
reduced to
2
<PAGE>
practice before December 31, 1995, by or under the direction of Malcolm L.
Gefter or Ethan R. Signer, including, without limitation, in connection with MIT
Case No. 6272, "Molecular Mimics of Human Chorionic Gonadotropin" by Howard
Benjamin, Malcolm L. Gefter, Lauren Linton, Ethan R. Signer and Donny Strosberg,
in which M.I.T. has any ownership or other interest, and all tangible work in
progress and tangible research materials, including, without limitation,
notebooks, samples, experimental and test results, technical and nontechnical
data and specifications, characteristics and designs, whether patentable or not
or confidential or not, relating to the foregoing.
1.3 "PATENT RIGHTS" shall mean all of the following M.I.T. intellectual
property:
a. any United States or foreign patents and/or patent
applications derived from or arising out of the TECHNOLOGY;
b. United States and foreign patents issued from the applications
described in a. above and from divisionals and continuations
of these applications;
c. claims of U.S. and foreign continuation-in-part applications,
and of the resulting patents, which are directed to subject
matter specifically described in the U.S. and foreign
applications described in a or b above;
d. claims of all foreign patent applications, and of the
resulting patents, which are directed to subject matter
specifically described in the United States patents and/or
patent applications described in a, b or c above; and
3
<PAGE>
e. any reissues, re-examinations or extensions of United States
patents and applications, described in a, b or c above.
1.4 A "LICENSED PRODUCT" shall mean any product or part thereof which:
a. is covered in whole or in part by an issued, unexpired claim
or a pending claim contained in the PATENT RIGHTS in the
country in which any such product or part thereof is made,
used or sold; or
b. is manufactured by using a process or is employed to practice
a process which is covered in whole or in part by an issued,
unexpired claim or a pending claim contained in the PATENT
RIGHTS in the country in which any LICENSED PROCESS is used or
in which such product or part thereof is used or sold.
1.5 A "LICENSED PROCESS" shall mean any method, formula, plan or
process which is covered in whole or in part by an issued, unexpired claim or a
pending claim contained in the PATENT RIGHTS.
1.6 "TERRITORY" shall mean worldwide.
1.7 "FIELD OF USE" shall mean all fields.
2 - GRANT
2.1 M.I.T. hereby grants to LICENSEE the right and license in the
TERRITORY for the FIELD OF USE to use the TECHNOLOGY and to practice under the
PATENT RIGHTS and, to the extent not prohibited by other patents, to make, have
made, use, lease, sell and import LICENSED PRODUCTS and to practice the LICENSED
PROCESSES.
4
<PAGE>
2.2 LICENSEE agrees that LICENSED PRODUCTS leased or sold in the United
States shall be manufactured substantially in the United States.
2.3 M.I.T. hereby agrees that it shall not grant any other license with
respect to the PATENT RIGHTS, the LICENSED PRODUCTS or the LICENSED PROCESSES.
2.4 M.I.T. agrees not to license the TECHNOLOGY to any third party for
any commercial purposes. However, M.I.T. reserves the right to publish the
TECHNOLOGY or use it for noncommercial research purposes.
2.5 M.I.T. reserves the right to practice under the PATENT RIGHTS for
its own noncommercial research purposes.
2.6 LICENSEE shall have the right to enter into sublicensing agreements
for the rights, privileges and licenses granted hereunder. Upon any termination
of this Agreement, sublicensees' rights shall also terminate, subject to
Article 11.6 hereof.
2.7 LICENSEE agrees that any sublicenses granted by it shall provide
that the obligations to M.I.T. of Articles 2, 6, 7, 8, 9, 11, and 13 of this
Agreement shall be binding upon the sublicensee as if it were a party to this
Agreement. LICENSEE further agrees to attach copies of these Articles to
sublicense agreements.
5
<PAGE>
2.8 LICENSEE agrees to forward to M.I.T. a copy of any and all
sublicense agreements promptly upon execution by the parties.
2.9 The license granted hereunder shall not be construed to confer any
rights upon LICENSEE, such as by implication, estoppel or otherwise other than
those set forth herein.
2.10 The license granted herein is subject to third party sponsor
rights, if any, with respect to TECHNOLOGY developed after the Effective Date
of this Agreement, provided, however, that M.I.T. shall not grant any rights to
any other third party with respect to any TECHNOLOGY funded by H&H Business
Development Corp. (formerly Harris & Harris Venture Capital, Inc.) or Harris &
Harris Group, Inc.
2.11 M.I.T. further acknowledges and agrees that it has, and will have,
no rights of any kind with respect to any intellectual property generated by
LICENSEE, including any and all enhancements, modifications, or additions of,
to, or respecting the TECHNOLOGY or any LICENSED PRODUCT or LICENSED PROCESS,
unless covered by separate agreement.
3 - DEVELOPMENT AND COMMERCIALIZATION
3.1 LICENSEE shall use its best efforts to bring one or more LICENSED
PRODUCTS or LICENSED PROCESSES to market through a thorough, vigorous and
diligent program for
6
<PAGE>
exploitation of the TECHNOLOGY, the IMPROVEMENTS and any PATENT RIGHTS.
3.2 In addition, LICENSEE shall adhere to the following milestones:
a. LICENSEE shall deliver to M.I.T. on or before January 1, 1995,
a business plan showing the amount of money, number and kind
of personnel and time budgeted and planned for each phase of
development of the LICENSED PRODUCTS and LICENSED PROCESSES
and shall provide similar reports to M.I.T. on or before
January 1 of each year until such time as any securities of
LICENSEE are publicly traded.
b. LICENSEE shall raise equity capital of at least Nine Million
Dollars ($9,000,000.00) before January 1, 1995.
4 - ROYALTIES
4.1 In order to induce M.I.T. to enter into this Agreement, and in
consideration of the rights, privileges and license granted hereunder, LICENSEE
shall pay royalties to M.I.T. in the manner hereinafter provided:
a. License Issue Fee of One Dollar ($1.00), which said License
Issue Fee shall be deemed earned and due immediately upon the
Effective Date; and
b. Ninety-Eight Thousand, Eight Hundred and Forty-Four (98,844)
shares of common stock, and Fourteen Thousand, One Hundred and
Twenty-One (14,121) shares of Series B Convertible Preferred
Stock of LICENSEE, together constituting Seven Percent (7.00%)
of the fully diluted outstanding shares of LICENSEE after
giving effect to the consummation of LICENSEE'S first Nine
Million Dollars ($9,000,000.00) of investor equity investment.
7
<PAGE>
5 - PATENT PROSECUTION
5.1 At the request of LICENSEE, M.I.T. shall apply for, seek prompt
issuance of, and maintain during the term of this Agreement PATENT RIGHTS in the
United States and in such foreign countries as LICENSEE shall from time to time
select and notify M.I.T. The prosecution, filing and maintenance of all PATENT
RIGHTS patents and applications shall be the primary responsibility of M.I.T.;
provided, however, LICENSEE shall have reasonable opportunities to advise M.I.T.
and shall cooperate with M.I.T. in such prosecution, filing and maintenance.
5.2 Payment of all fees and costs relating to the filing, prosecution,
and maintenance of the PATENT RIGHTS shall be the responsibility of LICENSEE,
whether such fees and costs were incurred before or after the date of this
Agreement.
6 - INFRINGEMENT
6.1 LICENSEE shall inform M.I.T. promptly in writing of any alleged
infringement of the PATENT RIGHTS by a third party and of any available evidence
thereof.
6.2 During the term of this Agreement, LICENSEE shall have the right,
but shall not be obligated, to prosecute at its own expense all infringements
of the PATENT RIGHTS and, in furtherance of such right, M.I.T. hereby agrees
that LICENSEE may include M.I.T. as a party plaintiff
8
<PAGE>
in any such suit, without expense to M.I.T. The total cost of any such
infringement action commenced or defended solely by LICENSEE shall be borne by
LICENSEE and LICENSEE shall keep any recovery or damages for past infringement
derived therefrom.
6.3 If within six (6) months after having been notified of any alleged
infringement, LICENSEE shall have been unsuccessful in persuading the alleged
infringer to desist and shall not have brought and shall not be diligently
prosecuting an infringement action, or if LICENSEE shall notify M.I.T. at any
time prior thereto of its intention not to bring suit against any alleged
infringer in the TERRITORY for the FIELD OF USE, then, and in those events only,
M.I.T. shall have the right, but shall not be obligated, to prosecute at its
own expense any infringement of the PATENT RIGHTS in the TERRITORY for the FIELD
OF USE, and M.I.T. may, for such purposes, use the name of LICENSEE as party
plaintiff; provided, however, that such right to bring such an infringement
action shall remain in effect only for so long as the license granted herein
remains exclusive. No settlement, consent judgment or other voluntary final
disposition of the suit may be entered into without the consent of LICENSEE,
which consent shall not unreasonably be withheld.
9
<PAGE>
6.4 In any infringement suit as either party may institute 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.
6.5 LICENSEE, shall have the sole right in accordance with the terms
and conditions herein to sublicense any alleged infringer in the TERRITORY for
the FIELD OF USE for future use of the TECHNOLOGY and the PATENT RIGHTS.
7 - PRODUCT LIABILITY
7.1 LICENSEE shall at all times during the term of this Agreement and
thereafter, indemnify, defend and hold M.I.T., its trustees, directors,
officers, employees and affiliates, harmless against all claims, proceedings,
demands and liabilities of any kind whatsoever, including legal expenses and
reasonable attorneys' fees, arising out of the death of or injury to any person
or persons or out of any damage to property, or resulting from the production,
manufacture, sale, use, lease, consumption or advertisement of the LICENSED
PRODUCT(s) and/or LICENSED PROCESS(es) or arising from any obligation of
LICENSEE hereunder, except where attributable to M.I.T.'s gross negligence or
willful misconduct.
10
<PAGE>
7.2 At such time as LICENSEE initiates clinical studies on humans
and/or actively markets LICENSED PRODUCTS, LICENSEE shall obtain and carry in
full force and effect commercial, general liability insurance which shall
protect LICENSEE and M.I.T. with respect to events covered by Article 7.1
above. Such insurance shall be written by a reputable insurance company
authorized to do business in the Commonwealth of Massachusetts, shall list
M.I.T. as an additional named insured thereunder, shall be endorsed to include
product liability coverage and shall require thirty (30) days written notice to
be given to M.I.T. prior to any cancellation or material change thereof. The
limits of such insurance shall not be less than One Million Dollars ($1,000,000)
per occurrence with an aggregate of Three Million Dollars ($3,000,000) for
personal injury or death, and One Million Dollars ($1,000,000) per occurrence
with an aggregate of Three Million Dollars ($3,000,000) for property damage.
LICENSEE shall provide M.I.T. with Certificates of Insurance evidencing the
same. In the event the requirements of this paragraph are not consistent with
general industry norms or good business practices at the time, M.I.T. agrees to
negotiate in good faith to modify this paragraph.
7.3 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, M.I.T.,
ITS TRUSTEES, DIRECTORS, OFFICERS,
11
<PAGE>
EMPLOYEES, AND AFFILIATES MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF
ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF PATENT RIGHTS
CLAIMS, ISSUED OR PENDING, AND THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER
OR NOT DISCOVERABLE. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A
REPRESENTATION MADE OR WARRANTY GIVEN BY M.I.T. THAT THE PRACTICE BY LICENSEE OF
THE LICENSE GRANTED HEREUNDER SHALL NOT INFRINGE THE PATENT RIGHTS OF ANY THIRD
PARTY. IN NO EVENT SHALL M.I.T., ITS TRUSTEES, DIRECTORS, OFFICERS, EMPLOYEES
AND AFFILIATES BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND,
INCLUDING ECONOMIC DAMAGE OR INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF
WHETHER M.I.T. SHALL BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT
SHALL KNOW OF THE POSSIBILITY.
8 - EXPORT CONTROLS
It is understood that M.I.T. is 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
12
<PAGE>
require a license from the cognizant agency of the United States Government
and/or written assurances by LICENSEE that LICENSEE shall not export data or
commodities to certain foreign countries without prior approval of such agency.
M.I.T. neither represents that a license shall not be required nor that, if
required, it shall be issued.
9 - NON-USE OF NAMES
LICENSEE shall not use the names or trademarks of the Massachusetts
Institute of Technology or Lincoln Laboratory, nor any adaptation thereof, nor
the names of any of their employees, in any advertising, promotional or sales
literature without prior written consent obtained from M.I.T., or said employee,
in each case, except that LICENSEE may state that it is licensed by M.I.T. to
use the TECHNOLOGY, to practice under one or more of the patents and/or
applications comprising the PATENT RIGHTS, to make, have made, use, sell or
lease the LICENSED PRODUCTS and to practice the LICENSED PROCESS.
10 - ASSIGNMENT
This Agreement is not assignable and any attempt to do so shall be
void, except in conjunction with the sale of all or substantially all of
LICENSEE's business related
13
<PAGE>
to the TECHNOLOGY, the PATENT RIGHTS or LICENSED PRODUCTS and LICENSED
PROCESSES.
11 - TERMINATION
11.1 Subject to and without limitation of LICENSEE'S right of
assignment as set forth in Article 10, if LICENSEE shall cease to carry on its
business with respect to the rights granted in this Agreement, this Agreement
shall terminate upon notice by M.I.T.
11.2 Should LICENSEE fail to make any payment whatsoever due and
payable to M.I.T. hereunder within sixty (60) days after M.I.T. has given
written notice to LICENSEE of such failure and demanding such payment, M.I.T.
shall have the right to terminate this Agreement effective on thirty (30) days'
notice, unless LICENSEE shall make all such payments to M.I.T.. within said
thirty (30) day period.
11.3 Upon any material breach or default of this Agreement by LICENSEE
other than those occurrences set out in Articles 11.1 and 11.2 hereinabove,
which shall always take precedence in that order over any material breach or
default referred to in this Article 11.3, if LICENSEE fails to cure such
material breach or default within ninety (90) days after M.I.T. has given
written notice to LICENSEE of such breach or default, M.I.T. shall have the
right to terminate this Agreement and the rights, privileges and license granted
hereunder, effective on thirty (30) days'
14
<PAGE>
notice to LICENSEE, unless LICENSEE shall have cured any such material breach or
default prior to the expiration of such thirty (30) day period.
11.4 LICENSEE shall have the right to terminate this Agreement at any
time on six (6) months' notice to M.I.T., and upon payment of all amounts due
M.I.T. through the effective date of the termination.
11.5 Upon termination of this Agreement for any reason, nothing herein
shall be construed to release either party from any obligation that matured
prior to the effective date of such termination; and Articles 1, 7, 8, 9, 11.5,
11.6, and 13 shall survive any such termination. LICENSEE and any sublicensee
thereof may, however, after the effective date of such termination, sell all
LICENSED PRODUCTS, and complete LICENSED PRODUCTS in the process of manufacture
at the time of such termination and sell the same.
11.6 Upon termination of this Agreement for any reason, any
sublicensee not then in default shall have the right to seek a license from
M.I.T. M.I.T. agrees to negotiate such licenses in good faith under reasonable
terms and conditions.
12 - PAYMENTS, NOTICES AND OTHER COMMUNICATIONS
Any payment, notice or other communication pursuant to this Agreement
shall be sufficiently made or given on
15
<PAGE>
the date of mailing if sent to such party by certified first class mail, postage
prepaid, addressed to it at its address below or as it shall designate by
written notice given to the other party:
In the case of M.I.T.:
Director
Technology Licensing Office
Massachusetts Institute of Technology
77 Massachusetts Avenue, Room E32-300
Cambridge, Massachusetts 02139
In the case of LICENSEE:
President
Pharmaceutical Peptides, Inc.
c/o Skadden, Arps, Slate, Meagher & Flom
31st Floor, One Beacon Street
Boston, MA 02108
ATTN: Kent A. Coit
13 - MISCELLANEOUS PROVISIONS
13.1 This Agreement shall be construed, governed, interpreted and
applied in accordance with the laws of the Commonwealth of Massachusetts,
U.S.A., except that questions affecting the construction and effect of any
patent shall be determined by the law of the country in which the patent was
granted.
13.2 The parties hereto acknowledge that this Agreement sets forth the
entire Agreement and understanding of the parties hereto as to the subject
matter hereof, and shall not be subject to any change or modification except by
the execution of a written instrument subscribed to by the parties hereto.
16
<PAGE>
13.3 The provisions of this Agreement are sever able, and in the event
that any provisions of this Agreement shall be determined to be invalid or
unenforceable under any controlling body of the law, such invalidity or
unenforceability shall not in any way affect the validity or enforceability of
the remaining provisions hereof.
13.4 LICENSEE agrees to mark the LICENSED PRODUCTS sold in the United
States with all applicable United States patent numbers. All LICENSED PRODUCTS
shipped to or sold in other countries shall be marked in such manner as to
conform with the patent laws and practice of the country of manufacture or sale.
13.5 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.
13.6 Each of LICENSEE and M.I.T. shall take such actions, including
without limitation the execution and delivery of such additional instruments and
other documents, as may be necessary or appropriate to effectuate, carry out and
comply with the terms of this agreement.
17
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement the
day and year set forth below.
MASSACHUSETTS INSTITUTE OF PHARMACEUTICAL PEPTIDES, INC.
TECHNOLOGY
By /s/ JOHN T. PRESTON By /s/ MALCOLM L. GEFTER
---------------------------- -----------------------------
Name JOHN T. PRESTON Name MALCOLM L. GEFTER
Title Director of Tech- Title President
nology Development -----------------------------
----------------------------
Date December 23, 1993 Date December 23, 1993
---------------------------- -----------------------------
18
<PAGE>
Exhibit 10.16
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
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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
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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
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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
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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
Exhibit 10.17
LEASE
By and Between
PRAECIS PHARMACEUTICALS INCORPORATED
("Lessee")
and
BDG PISCATAWAY, LLC
("Lessor")
Dated: August 19, 1998
<PAGE>
TABLE OF CONTENTS
BASIC LEASE PROVISIONS AND DEFINITIONS..............................1
1. DESCRIPTION...................................................3
2. TERM. ........................................................4
3. BASIC RENT....................................................4
4. USE AND OCCUPANCY.............................................4
5. CARE AND REPAIR OF PREMISES/ENVIRONMENTAL.....................4
6. ALTERATIONS, ADDITIONS OR IMPROVEMENTS.......................13
7. ASSIGNMENT AND SUBLEASE......................................15
8. COMPLIANCE WITH RULES AND REGULATIONS........................20
9. DAMAGES TO BUILDING/WAIVER OF SUBROGATION....................20
10. EMINENT DOMAIN...............................................22
11. INSOLVENCY OF LESSEE, OTHER DEFAULTS.........................25
12. LESSOR'S REMEDIES ON DEFAULT.................................26
13. DEFICIENCY...................................................26
14. SUBORDINATION OF LEASE.......................................28
15. SECURITY DEPOSIT/LETTER OF CREDIT............................28
16. RIGHT TO CURE BREACH.........................................29
17. LIENS........................................................29
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18. RIGHT TO INSPECT AND REPAIR..................................30
19. SERVICES TO BE PROVIDED BY LESSOR............................31
20. INTERRUPTION OF SERVICES OR USE..............................32
21. ELECTRICAL AND OTHER UTILITY SERVICES........................32
22. ADDITIONAL RENT..............................................34
23. LESSEE'S ESTOPPEL............................................40
24. HOLDOVER TENANCY.............................................41
25. RIGHT TO SHOW PREMISES.......................................41
26. LESSEE IMPROVEMENT WORK AND LESSEE ALLOWANCE.................41
27. WAIVER OF JURY TRIAL/NON-MANDATORY COUNTERCLAIMS.............43
28. LATE CHARGE..................................................43
29. INSURANCE....................................................43
30. NO OTHER REPRESENTATIONS.....................................48
31. QUIET ENJOYMENT..............................................48
32. INDEMNITY. ..................................................48
33. APPLICABILITY TO HEIRS AND ASSIGNS...........................49
34. PARKING SPACES...............................................50
35. LESSOR'S EXCULPATION.........................................50
36. RULES OF CONSTRUCTION/APPLICABLE LAW.........................50
37. BROKER.......................................................51
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38. PERSONAL LIABILITY...........................................51
39. NO OPTION....................................................52
40. DEFINITIONS. ................................................52
41. LEASE COMMENCEMENT...........................................53
42. NOTICES......................................................53
43. ACCORD AND SATISFACTION......................................54
44. EFFECT OF WAIVERS............................................54
45. TIME OF ESSENCE..............................................54
46. MORTGAGEE'S NOTICE AND OPPORTUNITY TO CURE...................54
47. LESSOR'S RESERVED RIGHTS.....................................55
48. CORPORATE AUTHORITY..........................................55
49. GOVERNMENT REQUIREMENTS......................................55
50. RENEWAL OPTION...............................................55
51. SIGNS........................................................60
52. LESSEE'S RIGHT TO TERMINATE LEASE............................61
53. RIGHT OF FIRST OFFER.........................................61
54. NON-COMPETE..................................................63
55. USE OF ADDITIONAL FACILITIES.................................64
56. REPRESENTATION OF CONDITIONS OF DEMISED PREMISES.............64
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57. COUNTERPARTS.................................................64
LEASE
LEASE, made the 19th day of August, 1998 between BDG PISCATAWAY,
LLC, a New York limited liability company, whose address is c/o Blumenfeld
Development Group, Ltd., 6800 Jericho Turnpike, Syosset, New York 11791-4498
(hereinafter referred to as "Lessor"); and PRAECIS PHARMACEUTICALS INCORPORATED,
a Delaware corporation, whose address is 1 Hampshire Street, Cambridge,
Massachusetts 02139-1572 (hereinafter referred to as "Lessee").
PREAMBLE
BASIC LEASE PROVISIONS AND DEFINITIONS
In addition to other terms elsewhere defined in this Lease, the
following terms whenever used in this Lease should have only the meanings set
forth in this Section, unless such meanings are expressly modified, limited or
expanded elsewhere herein.
(1) Additional Rent: All sums in addition to Term Basic Rent payable
by Lessee to Lessor pursuant to the provisions of this Lease.
(2) Base Period Costs: As to the following:
(A) Base Operating Costs: Those costs incurred during Calendar
Year 1998, exclusive of extraordinary or one-time costs, except to
the extent such extraordinary or one-time costs would be included
in Operating Costs for a Comparison Period.
(B) Base Real Estate Taxes: Those Real Estate Taxes incurred
for the Building and Office Building Area during Calendar Year 1998.
(C) Base Utility and Energy Costs: Those utility and energy
costs incurred for the Building and Office Building Area during
Calendar Year 1998 (herein "Base Utility Rate").
(3) Brokers: NEWMARK PARTNERS, INC. ("Newmark") and CB COMMERCIAL
REAL ESTATE GROUP, INC. ("CB").
<PAGE>
(4) Building: The building located at 10 Knightsbridge Road (a/k/a
860 Centennial Avenue), Piscataway, New Jersey.
(5) Building Holidays: Those shown on Exhibit D.
(6) Demised Premises or Premises: The parties agree that the demised
premises for the purpose of this lease is as shown on Exhibit A hereto. The
parties agree that the area thereof which includes an allocable share of the
Common Facilities as defined in Subsection 40(B) shall be (the "Premises Area")
15,179 gross rentable square fee.
(7) Expiration Date: At 11:59 p.m. on November 30, 2008.
(8) Exhibits: The following Exhibits attached to this Lease are
incorporated herein and made a part hereof:
Exhibit A Premises
Exhibit A-1 Office Building Area
Exhibit B Rules and Regulations
Exhibit C Cleaning Services
Exhibit D Building Holidays
Exhibit E Lessee Improvement Work
Exhibit E-1 Removable Improvements
Exhibit F Lessor's Environmental Reports
Exhibit G Form of Subordination, Non-Disturbance and
Attornment Agreement
Exhibit H Roof Warranties Currently in Effect
Exhibit I Building System Warranties Currently in Effect
(9) Rent Commencement Date: December 1, 1998
(10) Term Basic Rent: Two Million Six Hundred Ten Thousand Seven
Hundred Ninety and 00/100 ($2,610,790) Dollars for the Term payable as follows:
2
<PAGE>
- --------------------------------------------------------------------------------
Annual Monthly
Period Basic Rent Basic Rent
- --------------------------------------------------------------------------------
Rent Commencement Date through the $242,864.00 $20,238.67
expiration of the 60th month following the
Rent Commencement Date
- --------------------------------------------------------------------------------
The fifth anniversary of the Rent $279,294.00 $23,274.50
Commencement Date through the expiration
of the 120th month following the Rent
Commencement Date.
- --------------------------------------------------------------------------------
(11) Lessee's Percentage: The fraction whose numerator is the
Premises Area and denominator is 64,871.036, subject to adjustment as provided
for in Subsection 40(A).
(12) Office Building Area: Lot 1A, Block 501A, on the tax map of the
Township of Piscataway, Middlesex County, New Jersey.
(13) Parking Spaces: A total of sixty-one (61) spaces, all of which
shall be unassigned.
(14) Permitted Uses: Pharmaceutical research and development
laboratory, general business offices uses and related activities by Lessee, any
division thereof which is not a separate legal entity, or any permitted assignee
or subtenant as herein provided, including Provid Research, the drug discovery,
chemistry division of Lessee.
(15) Term: Commencing on the date hereof and expiring ten (10) years
from the Rent Commencement Date unless extended pursuant to the renewal option
contained in Paragraph 50 hereof or terminated early due to a casualty or
condemnation or pursuant to the early termination option contained in Paragraph
52 hereof.
WITNESSETH:
For and in consideration of the covenants herein contained, and upon
the terms and conditions herein set forth, Lessor and Lessee agree as follows:
1. DESCRIPTION. Lessor hereby leases to Lessee, and Lessee hereby hires from
Lessor, the Demised Premises as defined in the Preamble (hereinafter called
"Demised Premises" or "Premises") which includes an allocable share of the
Common Facilities, as shown on the plan or plans, initialed by the parties
hereto, marked Exhibit A attached hereto, and made part of this Lease in the
Building as defined in the Preamble (hereinafter called the "Building"), which
is situated on the Office Building Area as defined in the Preamble (hereinafter
called "Office Building Area") as described on Exhibit A-1 attached hereto and
made part of this Lease,
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<PAGE>
together with the right to use in common with other Lessees of the Building,
their invitees, customers and employees, those public areas of the Common
Facilities as hereinafter defined.
2. TERM. The Premises are leased for the Term as defined in the Preamble.
3. BASIC RENT. The Lessee shall pay to Lessor during the Term the Term Basic
Rent as defined in the Preamble (hereinafter called "Term Basic Rent"), payable
in such coin or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and private debts. The
Term Basic Rent shall accrue at the Annual Basic Rent rate (as defined in the
Preamble) and shall be payable in advance on the first day of each calendar
month during the Term in monthly installments of Monthly Basic Rent as defined
in the Preamble. Lessee shall pay Basic Rent, and any Additional Rent as
hereinafter provided, to Lessor at Lessor's above stated address, or at such
other place as Lessor may designate in writing, without demand and without
counterclaim, deduction or setoff, except as expressly provided in this Lease.
As used in this Lease, Basic Rent shall mean either Term Basic Rent, Annual
Basic Rent or Monthly Basic Rent, as appropriate. Anything contained herein to
the contrary notwithstanding, no Term Basic Rent or the Additional Rent
described in Section 22 of this Lease shall be due or payable with respect to
any period prior to the Rent Commencement Date; it being agreed and understood,
however, that during such period, Lessee shall pay all other Additional Rent
which shall be due and payable pursuant to this Lease.
4. USE AND OCCUPANCY. Lessee shall use and occupy the Premises for the Permitted
Uses as defined in the Preamble and for no other purpose.
5. CARE AND REPAIR OF PREMISES/ENVIRONMENTAL.
(A) Lessee covenants to commit no act of waste and to take good
care of the Premises and the fixtures and appurtenances
thereon, and shall, in the use and occupancy of the Premises
comply with all laws, orders and regulations of the federal,
state and municipal governments or any of their departments
affecting the Premises. Lessee shall also comply with any and
all environmental requirements resulting from the Lessee's use
of the Premises; this covenant to survive the expiration or
sooner termination of the Lease. Notwithstanding the
foregoing, provided Lessee is not in continuing default under
this Lease beyond any notice and cure period and provided such
is not prohibited under any mortgage or ground lease
encumbering the Premises, Lessee shall have the right, at
Lessee's expense, to contest the applicability or validity, in
whole or in part, of any laws, codes, rules or regulations
with which Lessee shall be required to comply hereunder and,
so long as such proceeding is being conducted in good faith,
with due diligence and in compliance with the requirements of
any mortgage or ground lease encumbering the Premises (of
which requirements Lessor shall have given Lessee written
notice or, at Lessor's
4
<PAGE>
election, Lessor may provide Lessee with a copy of such
Mortgage or ground lease), Lessee may defer compliance
therewith pending the outcome of the contest, provided that
such deferral shall (i) not result in any deprivation in the
use of the Premises or the Building by any party entitled
thereto; (ii) not result in any civil or criminal liability on
the part of the Lessor or (iii) be completed at least 180 days
prior to the expiration of the term. Lessee hereby agreeing to
indemnify and hold the Lessor harmless from and against any
and all losses, costs, claims or expenses arising out of or
from such liability. Lessor shall, upon request by Lessee,
reasonably cooperate with such contest provided that Lessee
shall pay all costs incurred by Lessee in connection
therewith. Notwithstanding anything to the contrary contained
in this Lease, Lessor and Lessee agree that responsibility for
compliance with the Americans with Disabilities Act of 1990,
as the same may be amended or supplemented from time to time,
or any successor statute and related laws, rules and
regulations ("ADA") shall be allocated as follows: (i) Lessor
shall be responsible for compliance with the provisions of ADA
for all Common Facilities, exterior areas of the Building and
any common areas within the Building (excluding Lessee
Improvement Work); and (ii) Lessee shall be responsible for
compliance with the provisions of ADA within the Premises and
for all Lessee Improvement Work within or outside of the
Premises.
(B) Except for any repairs, maintenance or replacements
necessitated by the act(s) or omission(s) of Lessor, its
agents, servants, employees or contractors during the Term,
Lessee shall, at its sole cost and expense, make all necessary
non-structural repairs to the Premises and Lessee Improvement
Work. Lessee's obligation to repair shall not extend to
repairs that are necessitated by a requirement to comply with
laws that are the Lessor's obligation(s). Lessor shall keep in
good order and condition, and shall make all necessary repairs
to the Common Facilities, to include the structural portions
of the Building (including the roof, common areas, exterior
walls and exterior windows), to the parking areas, and to the
Building systems (including the heating, ventilating and air
conditioning, electrical and plumbing lines and systems,
except that Lessor shall not be responsible for maintaining or
repairing any Lessee Improvement Work, including, but not
limited to any separate split system HVAC system (the "Split
System") installed by Lessee to service all or a portion of
the Premises). In the event that Lessee installs a Split
System to service the Premises, Lessee shall (i) during the
Term enter into and pay for a service/labor contract with an
air conditioning and heating contractor reasonably acceptable
to Lessor, and (ii) deliver to Lessor copies of all warranties
covering such Split System and related work and, upon
termination of this Lease, assign such unexpired warranties to
Lessor. Notwithstanding
5
<PAGE>
the foregoing, the cost of all such repairs by Lessor shall be
included, subject to the other terms and conditions of this
Lease, as an Operating Cost (as defined in Paragraph 22A).
Lessor will not be responsible for making a repair to any
system or any utilities installed by Lessee, unless the repair
is necessitated by Lessor's or Lessor's agent's, servant's,
visitor's, employee's or licensee's negligence or willful
misconduct. Where a repair required to be made by Lessor has
been made necessary by misuse or neglect by Lessee or Lessee's
agents, servants, visitors or licensees, Lessor shall
nevertheless make the repair, but Lessee shall pay to Lessor,
as Additional Rent, within thirty (30) days of demand, the
reasonable cost therefor.
(C) All improvements made by Lessee to the Premises or Building
(exclusive of any previously existing improvements located at
the Building which are incorporated in those improvements made
by Lessee to the Premises or Building), which are so attached
to the Premises or Building that they cannot be removed
without material injury to the Premises or Building
(including, but not limited to the Split System), shall become
the property of Lessor upon expiration or earlier termination
of the Lease, whether paid for in whole or in part by Lessee,
and except for those improvements and alterations specifically
identified as such on Exhibit E-1 hereto (the "Removable
Improvements") shall be and remain a part of the Premises and
Building and the property of Lessor. Not later than the last
day of the Term, Lessee shall, at Lessee's sole cost and
expense, (i) remove all Lessee's personal property, the
Removable Improvements and those improvements made by Lessee
which do not become the property of Lessor as aforesaid,
including trade fixtures, movable paneling, movable partitions
and the like; (ii) repair all injury done by or in connection
with the installation or removal of said property and
improvements (if any); and (iii) surrender the Premises in at
least as good condition as they were at the beginning of the
Term, reasonable wear and tear and damage by fire or other
casualty (other than that caused by the willful or unlawful
misconduct of Lessee or Lessee's agents, employees or
visitors) excepted. Notwithstanding anything to the contrary
contained in this Lease, Lessee shall not be required, at or
prior to the expiration or earlier termination of this Lease,
to remove (i) computer access floors, standard construction
partitions and standard ceilings; or (ii) pipes, wires,
cables, conduit or the like from walls, ceilings or floors,
provided that Lessee properly cuts, caps and disconnects same
in a safe and lawful manner, flush with the applicable floor,
wall or ceiling. Except as otherwise agreed upon in a writing
signed by both Lessor and Lessee, all other property of Lessee
remaining on the Premises after the last day of the Term of
this Lease shall be conclusively deemed abandoned and may be
removed by Lessor, and
6
<PAGE>
Lessee shall reimburse Lessor for the reasonable cost of such
removal. Lessor may have any such property stored at Lessee's
risk and reasonable expense.
(D)
(i) In the event that Lessee is required to comply with the
New Jersey Industrial Site Recovery Act, N.J.S.A.
13:1K-6 et. seq. and its implementing regulations
("ISRA") because Lessee's operation at the Demised
Premises is an "industrial establishment" as defined by
ISRA, and if Lessee plans to change operations at the
Demised Premises, or plans to transfer ownership or
operations of the Demised Premises or closes its
operations at the Demised Premises and such action would
trigger the requirements of the ISRA, Lessee shall be
responsible for taking all actions to comply with the
ISRA, including, without limitation, filing all notices
and forms and undertaking all investigations and
remedial actions as required in order to complete the
ISRA process. Lessee shall provide copies of all its
submissions to the New Jersey Department of
Environmental Protection ("DEP") and all correspondence
received from the DEP to Lessor. Lessor agrees that it
will reasonably cooperate with Lessee's compliance with
ISRA hereunder, including, but not limited to, providing
documents and other information needed by Lessee to
complete forms and conduct investigations and executing
(to the extent necessary) any forms required by the ISRA
process.
(ii) Except as provided in the next sentence, Lessee shall be
responsible for all costs and expenses it incurs with
respect to compliance with ISRA to the extent that ISRA
has been triggered whether by current operation or as a
result of Lessee's change in operation, transfer of
ownership or operations or closing of operations. To the
extent that Lessee is required to undertake any field
sampling to investigate an area of concern and/or is
required to remediate any area of concern in connection
with the Demised Premises, and such area of concern is
an area of concern solely because of environmental
conditions that pre-date Lessee's occupancy of the
Demised Premises, or cause of actions or omissions of
persons other than Lessee or the employees, agents,
contractors or invitees of Lessee, Lessee shall not be
responsible for the investigation and remediation of
such areas and, in the event that such area of concern
is an area of concern solely because of environmental
conditions that predate Lessee's occupancy of the Demise
Premises or
7
<PAGE>
because of any acts or omissions of Lessor, its agents,
representatives or contractors, then Lessor shall
reimburse Lessee for the reasonable costs and expenses
incurred by Lessee for the investigation and remediation
of such areas.
(iii) If Lessor: (a) transfers ownership or operations of the
Demised Premises or the property that includes the
Demised Premises; or (b) closes its operations at the
Demised Premises or the property that includes the
Demised Premises, and as a result thereof triggers the
requirements of ISRA, subject to the following proviso,
Lessee shall not be responsible for taking any action to
comply with ISRA, including, without limitation, filing
any notices and forms and undertaking any investigations
or remedial actions required in order to complete the
ISRA process; provided, however, that Lessee shall be
responsible for remediating or otherwise responding to
any environmental condition which is caused by the acts
or omissions of Lessee or its agents, contractors,
representatives or invitees and shall otherwise
reasonably cooperate with Lessor as required below.
Lessor shall provide copies of Lessor's submissions to
the DEP and correspondence received from the DEP to
Lessee which relate in any part to the Demised Premises.
Lessee agrees that in the event that Lessor may be
required to comply with ISRA, Lessee will reasonably
cooperate with Lessor's compliance, including, but not
limited to, providing documents and other information
needed by Lessor to complete forms and conduct
investigations, and executing (to the extent necessary)
any forms required by the ISRA process. Except as
provided in the next sentence, Lessor shall be
responsible for all costs and expenses it incurs with
respect to compliance with ISRA to the extent that ISRA
has been triggered solely as a result of Lessor's
transfer of ownership or operations or closing of
operations. To the extent that Lessor is required to
undertake any field sampling to investigate an area of
concern and/or is required to remediate any area of
concern in connection with the Demised Premises, and
such area of concern is an area of concern primarily
because of environmental conditions caused by the
actions or omissions of Lessee or the employees, agents,
contractors or invitees of Lessee, Lessee shall
indemnify and reimburse Lessor for all reasonable costs
and expenses incurred by Lessee with respect to the
investigation and remediation of such areas.
(iv) In the event Lessee fails to comply with ISRA as stated
in this Subsection 5(D), and as a consequence thereof,
Lessor, as a matter
8
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of law, is unable to rent the Demised Premises, then the
Lessor shall treat the Lessee as one who has not removed
at the end of its Term, and thereupon be entitled to all
remedies against the Lessee provided by law in that
situation including a monthly rental as set forth in
Section 24 hereof, until such time as Lessee provides
Lessor with a negative declaration or confirmation that
any required clean-up plan has been successfully
completed.
(E) As used herein, Hazardous Substances shall be defined as any
hazardous chemical, hazardous substance, or hazardous or toxic
material, waste, pollutants or contaminants, asbestos or
petroleum or petroleum related substance or similar terms as
defined in The Comprehensive Environmental Responsibility
Compensation and Liability Act, as amended (42 U.S.C. 9601, et
seq.), the New Jersey Environmental Cleanup Act, as amended
and/or ISRA, the New Jersey Spill Compensation and Control
Act, as amended, N.J.S.A. 58:10-23.11b, et seq., any rules or
regulations promulgated thereunder, or in any other applicable
federal, state or local law, rule or regulation dealing with
environmental protection ("Environmental Laws"). It is
understood and agreed that the provisions contained in this
Section 5 shall be applicable notwithstanding the fact that
any substance shall not be deemed to be a Hazardous Substance
at the time of its use by the Lessee, but shall thereafter be
deemed to be a Hazardous Substance.
(F)
(i) Lessee shall comply in all material respects with all
applicable Environmental Laws with respect to its
occupancy and operations at the Demised Premises,
including, without limitation, obtaining all required
permits, licenses or approvals required pursuant to
applicable Environmental Laws with respect to Lessee's
occupancy and use of the Demised Premises.
(ii) Lessee shall only handle, use, manufacture, store,
process, transport or dispose of Hazardous Substances
with respect to its occupancy and operations at the
Demised Premises that are reasonably necessary and
useful in Lessee's business and operations. The amount
of Hazardous Substances that are maintained at the
Demised Premises at any one time shall only be that
amount of Hazardous Substances that are reasonably
necessary in connection with Lessee's business and
operations. Notwithstanding the foregoing, Lessee shall
only handle, use, manufacture, store, process, transport
or dispose of Hazardous Substances in material
compliance with all applicable Environmental Laws.
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<PAGE>
(iii) Lessee agrees that it shall provide to Lessor, upon
Lessor's request, copies of material safety data sheets
("MSDS") (to the extent Lessee is required to have such
sheets for a particular Hazardous Substance) with
respect to any Hazardous Substance that is used by
Lessee. Lessee shall provide such MSDS to Lessor within
thirty (30) days of Lessor's request.
(iv) Lessee shall use all reasonable efforts to ensure that
its operations do not result in environmental
contamination of the Demised Premises and/or Office
Building Area and that it will comply with all
applicable Environmental Laws relating to the
investigation and remediation of environmental
contamination in the event that its operations do cause
such contamination or potential contamination.
(v) Lessee shall conduct its operations so that it will not
be required to obtain a permit with respect to the
treatment, storage and disposal of hazardous waste
pursuant to the Federal Resource Conservation and
Recovery Act of 1976, as amended, or the analogous New
Jersey statute regulating the management of hazardous
waste. Lessee shall agree not to install any regulated
underground storage tank at the Demised Premises and/or
Office Building Area without the express written consent
of Lessor, which consent may be withheld for any reason
or no reason.
(vi) In performing any alterations to the Demised Premises
and/or Building permitted by this Lease, Lessee shall
not incorporate any Hazardous Substances into the
physical structure of the Demised Premises and/or
Building without the express written consent of Lessor,
such consent not to be unreasonably withheld.
(G) Lessor represents that based solely upon the contents of those
certain reports identified on Exhibit F hereto, except as set
forth in those certain reports identified on Exhibit F hereto
(which Lessee acknowledges having received and reviewed):
(i) There have been no releases (as defined by the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended) of Hazardous
Substances at the Demised Premises, except for releases
that have been investigated and/or remediated pursuant
to applicable Environmental Laws and as to which Lessor
(or such other party as was responsible for the release)
has obtained a no further action letter or negative
declaration from the
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DEP or the United States Environmental Protection Agency
("EPA").
(ii) There have been no filings, proceedings, investigations
or remedial actions conducted with respect to the
Demised Premises or the property containing the Demised
Premises pursuant to ISRA, or its predecessor, the
Environmental Cleanup Responsibility Act ("ECRA").
(iii) The Demised Premises do not contain any friable or
non-friable asbestos-containing material; electrical
equipment containing polychlorinated biphenyls; urea
formaldehyde insulation; underground storage tanks, or
septic systems.
(H) If Lessor, in its sole discretion, believes that the Demised
Premises or the environment may have become contaminated with
Hazardous Substances that must be reported, investigated,
removed, remediated or otherwise responded to, Lessor, in
addition to its other rights under this Lease, may enter upon
the Demised Premises and obtain samples from the Demised
Premises, including without limitation, the soil and
groundwater under the Demised Premises, for the purposes of
analyzing the same to determine whether and to what extent the
Demised Premises or the environment have become so
contaminated, provided that (i) Lessor shall provide Lessee
with reasonable notice of its intent to enter the Demised
Premises and conduct any inspection, including, but not
limited to, its intent to obtain samples, which notice shall
(except in the case of emergencies) be provided to Lessee at
least five (5) business days prior to the date of the intended
inspection; (ii) except in the case of an emergency, such
inspections shall be conducted during normal business hours
unless Lessee authorizes Lessor to make such inspections at
other hours; (iii) such inspections shall minimize, to the
greatest extent possible, any disruption to Lessee's
operations, which (except in the case of an emergency) shall
include rescheduling any such inspection at the reasonable
request of Lessee; (iv) such inspections shall not require
Lessee to reveal any confidential or proprietary information
related to Lessee's business or operations; (v) such
inspections shall be conducted at the sole cost and expense of
Lessor (subject to any other right of indemnification provided
pursuant to this Lease); (vi) Lessee shall have the right to
have its employees and representatives (including, but not
limited to, attorneys and environmental consultants) present
during the inspection, provided that such right does not
unreasonably interfere with Lessor's scheduling of such
inspection; (vii) Lessee shall have the right to collect (at
its own cost and expense) split samples; and (viii) Lessor
shall promptly provide copies
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of all reports, analyses and data with respect to the
inspection to Lessee, which Lessee agrees to keep
confidential, unless compelled to disclose such information by
a court or regulatory agency with jurisdiction over the
Demised Premises. Lessee may not perform any sampling,
testing, or drilling to locate any Hazardous Substances on, in
or about the Demised Premises without Lessor's prior written
consent, such consent not to be unreasonably withheld, except
that if Lessee is obligated to conduct sampling, testing or
drilling pursuant to ISRA or another applicable Environmental
Law, Lessee may do so only after delivering at least five (5)
days prior written notice to Lessor.
(I)
(i) In addition to any other indemnity contained in this
Lease, Lessee agrees to indemnify and hold harmless the
Lessor from and against any and all liabilities,
damages, claims, losses, judgments, causes of action,
fine, penalty costs and expenses (including the
reasonable fees and expenses of counsel, including costs
of reporting, investigation, remediation or other
response action) (collectively, "Environmental Damage")
which may be incurred by the Lessor or threatened
against the Lessor relating to or arising out of (a)
Lessee's failure to comply with applicable Environmental
Laws; (b) the release or disposal of Hazardous
Substances on or from the Demised Premises and/or Office
Building Area by Lessee or Lessee's employees, agents,
contractors, or invitees; or (c) Lessee's failure to
comply with covenants hereunder that relate to its use
and handling of Hazardous Substances or its compliance
with applicable Environmental Laws.
(ii) In addition to any other indemnity contained in this
Lease, Lessor agrees to defend, indemnify and hold
harmless the Lessee from and against all
Environmental Damages which may be incurred by
Lessee or threatened against Lessee relating to or
arising out of (a) Lessor's failure to comply with
applicable Environmental Laws, or (b) the release or
disposal of Hazardous Substances on or from the
Demised Premises or the property containing the
Demised Premises which occurred prior to Lessee's
occupancy of the Demised Premises or was otherwise
caused by the acts or omissions of Lessor, its agents,
representatives or contractors.
(iii) To the extent that any Environmental Damages are a
result of conditions that are covered by subsections
I(i) and I(ii) above, the parties' respective
obligations pursuant to this Section 5 shall be
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allocated comparatively, by taking into account the
amount and toxicity of the Hazardous Substances that
would be deemed the responsibility of Lessee pursuant to
subsection I(i) above or Lessor pursuant to subsection
I(ii) above, as well as the culpability of the parties
with respect to the condition requiring investigation or
remediation.
(J) Lessee shall provide to the Lessor for review and comment
copies of any documents that would be submitted to third
parties (including governmental bodies) regarding any material
environmental issues. Lessor shall provide its comments to
Lessee within five (5) business days after delivery of such
documents. For any matter where Lessor has an obligation to
defend, indemnify or hold harmless the Lessee under this
section, Lessee shall not be required to incur any cost or
expense, unless such cost or expense relates to an activity in
which Lessee is directed to engage by a regulatory agency or a
court.
(K) The covenants and agreements of Sections 5(D) through 5(J)
inclusive shall survive the termination or sooner expiration
of the Lease and surrender of the Demised Premises by Lessee
and shall also survive the sale, lease or assignment of the
Demised Premises (or property upon which the Demised Premises
is located) by Lessor.
6. ALTERATIONS, ADDITIONS OR IMPROVEMENTS.
(A) Except as otherwise provided herein, Lessee shall not, without
first obtaining the written consent of Lessor, make any
alterations, additions or improvements in, to or about the
Premises and/or Building. Except for alterations, additions or
improvements which affect the structural components or roof of
the Building or any of the Building's mechanical, heating,
ventilating, air conditioning, plumbing, electrical or other
systems, Lessor shall not unreasonably withhold or delay its
consent to any alteration, addition or improvement to the
Demised Premises. As a condition to Lessor consenting to any
alteration, addition or improvement to be made by Lessee which
will affect (i) the Building's roof, Lessee shall provide
Lessor with, among other things reasonably requested by
Lessor, documentary evidence stating that Lessee's proposed
work will not render any roof warranty which Lessor has
furnished to Lessee void or voidable (Lessor acknowledging
that Exhibit H lists the roof warranties currently in effect);
or (ii) the Building's mechanical, heating, ventilating, air
conditioning, plumbing, electrical or other systems, Lessee
shall, among other things reasonably requested by Lessor, (a)
provide Lessor which plans signed and sealed by CUH2A, Inc. or
another engineering firm,
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reasonably acceptable to Lessor (with experience in the design
of the type of Building system to be altered by Lessee),
indicating the scope of the work to be performed; Lessor
hereby agreeing that the provision of such Building services
to any other tenant in the Building will not be materially
diminished following completion of such work; unless Lessor
obtains approval from any affected tenant, and (b) provide
Lessor with documentary evidence stating that Lessee's
proposed work will not render any applicable Building system
warranty which Lessor has furnished to Lessee void or voidable
(Lessor acknowledging that Exhibit I lists the Building system
warranties currently in effect). Prior to commencing any
alterations, additions or improvements which may interrupt the
Building Services to other tenants, Lessee shall enter into a
written agreement with Lessor and all other tenants then
occupying the Building, in form and content reasonably
acceptable to Lessor and acceptable to such other tenants,
setting forth the dates and times when Lessee's proposed work
may interrupt the Building Services to such other tenants and
whereby such other tenants consent to the scheduled
interruptions. Any approval granted, or any agreement entered
into, by Lessor hereunder shall not be deemed to be a
certification by Lessor that the work to be performed by
Lessee will not interfere with or materially diminish the
affected Building services provided to the other Building
tenants. Any alterations, additions or improvements approved
by Lessor, shall be performed by Lessee, at its sole cost and
expense, using reputable licensed contractors and
subcontractors approved by Lessor, which approval shall not be
unreasonably withheld or delayed.
(B) All such alteration, addition or improvement work shall be
performed in a good and workmanlike manner using new materials
or materials of a quality consistent with first-class work of
similar type to the Lessee Improvement Work and in compliance
with all applicable statutes, laws, codes, rules, regulations
and requirements of all governmental and quasi-governmental
authorities having jurisdiction thereof and all requirements
of any mortgage or ground lease encumbering the Premises or
the insurer(s) insuring the Building (of which requirements
Lessor shall have given Lessee written notice or, at Lessor's
election, Lessor may provide Lessee with a copy of such
Mortgage or ground lease). Prior to performing any such
alteration, addition or improvement work, Lessee or its
contractor(s) shall obtain, at Lessee's sole cost and expense,
all necessary governmental and quasi-governmental permits,
approvals, certificates and authorizations relating to such
work and shall deliver copies thereof to Lessor. Upon
completion of any alteration, addition or improvement work,
Lessee shall promptly obtain, at its sole cost and expense,
and deliver to Lessee a copy of all required governmental and
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quasi-governmental certificates and/or sign-offs evidencing
such completion. Notwithstanding anything to the contrary
contained in this Lease, Lessee may make alterations,
improvements or additions to the Premises with an aggregate
cost within any 12 month period of less than $10,000.00
without the consent of Lessor being first obtained; provided,
however, that any such alterations, improvements or additions
(i) shall be made in a good and workmanlike manner; (ii) shall
be made in accordance with all of the other terms and
conditions of this Lease; (iii) shall not affect any areas of
the Building other than the Premises; (iv) are not prohibited
by any mortgage or ground Lease as aforesaid; and (v) do not
affect any structural elements of the Building or Building
systems.
(C) Lessor agrees that at no expense to Lessor, it will, to the
extent reasonably necessary, (i) execute applications required
by the local planning board and similar authorities, and (ii)
otherwise reasonably cooperation with Lessee, in connection
with Lessee obtaining the required governmental or
quasi-governmental approval of the Lessee Improvement Work and
challenging any applicable laws which threaten to prevent the
Premises from being used for the Permitted Use.
7. ASSIGNMENT AND SUBLEASE. Lessee may not mortgage, pledge, hypothecate,
assign, transfer or sublet this Lease or the Premises in any manner except as
specifically provided for in this Section 7:
(A) Lessee may assign this Lease or sublet the whole or any
portion of the Premises (including, but not limited to, an
assignment of this Lease made in connection with a spin-off
of the Provid Research division of Lessee, provided that
Lessee remains primarily liable under this Lease and the
Provid Research division's operations continue at the Demised
Premises), subject to Lessor's prior written consent, which
consent shall not be unreasonably withheld or delayed. All
assignments of this Lease or any sublease of the whole or any
portion of the Demised Premises (regardless of whether
Lessor's consent is required) shall be on the basis of the
following terms and conditions:
(i) The Lessee shall provide to Lessor the name and address
of the assignee or sub-lessee.
(ii) The assignee shall assume by written instrument all of
the obligations of this Lease or any subtenant shall
take subject to all of the obligations of this Lease,
and a copy of such assumption agreement or sublease, as
applicable, shall be furnished to Lessor together with
Lessee's written request for Lessor's consent, which
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<PAGE>
consent shall be granted or denied (with reasons for
such denial), within twenty (20) days after receipt of
Lessee's request therefor.
(iii) The Lessee and each assignee shall be and remain liable
for the observance of all of the covenants and
provisions of this Lease, including, but not limited to,
the payment of Term Basic Rent and Additional Rent
reserved herein, as and when required to be paid,
through the entire Term of this Lease, as the same may
be renewed, extended or otherwise modified if at all and
each subtenant shall take subject to all of the
covenants and provisions of this Lease, as the same
shall be renewed, extended or otherwise modified if at
all.
(iv) The acceptance by Lessor of any Basic Rent and/or
Additional Rent from the assignee or from any of the
subtenants or the failure of Lessor insist upon a strict
performance of any of the terms, conditions and
covenants herein shall not release Lessee herein, nor
any such assignee or subtenant, from any and all of the
obligations herein during and for the entire Term of
this Lease.
(v) Lessee shall reimburse Lessor for its reasonable
out-of-pocket expenses, incurred for reviewing and
processing each request for consent to any sublet or
assignment (including, but not limited to, reasonable
attorney's fees).
(vi) Lessee shall have no claim, and hereby waives the right
to any claim, against Lessor money damages by reason of
any refusal, withholding or delaying by Lessor of any
consent, and in such event, Lessee's only remedies
therefor shall be an action for specific performance,
injunction or declaratory judgment to enforce any such
requirement.
(B) If Lessor shall give its consent to any assignment of this
Lease or to any sublease, Lessee shall in consideration
therefor, pay to Lessor, as Additional Rent, fifty (50%)
percent of the Assignment Profits or the Sublease Profits, as
the case may be:
(i) "Assignment Profits" shall mean the amount by which all
sums and other considerations paid to Lessee by the
assignee for or by reason of such assignment exceeds the
brokerage commissions actually paid by Lessee in
connection with such assignment and other expenses
reasonably incurred by Lessee in connection with such
assignment for which Lessee provides reasonably
satisfactory evidence thereof to Lessor (including,
without limitation,
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reasonable legal fees and disbursements directly
incurred in connection with such assignment, improvement
allowances and other cash concessions (including
so-called "free rent") paid by Lessee, advertising
expenses, construction expenses, architectural and
planning expenses, any expenses payable to Lessor with
respect to the assignment or sublet (including without
limitation any payments paid or payable pursuant to
Section 7(A)(v) hereof), permitting and licensing costs
and lease takeover payments). Assignment Profits shall
exclude sums paid by the assignee for any Lessee's
personal property, equipment, and trade fixtures unless
the payment of such sums constitute a subterfuge to
avoid legitimate inclusion in the above-described
computation of Assignment Profits. The sums payable
under this Subsection B(i) shall be paid to Lessor as
and when paid by assignee to Lessee.
(ii) "Sublease Profits" shall mean the amount by which any
rents, additional charges or other consideration paid by
the sub-lessee to the Lessee in respect of the sublet
premises exceeds the sum of (1) the Annual Basic Rent
and Additional Rent accruing during the term of the
sublease in respect of the sublet premises (at the rate
per rentable square foot payable by Lessee hereunder),
(2) brokerage commissions actually paid by Lessee in
connection with the sublease (amortized over the term of
the sublease), (3) the unamortized portion (computed on
a straight-line basis over the term of the sublease in
accordance with generally accepted accounting principles
consistently applied) of the bona fide cost of (x) the
Lessee Improvement Work (net of the amount of the Lessee
Allowance) and (y) the alterations made by Lessee in
preparing the subleased space, and (4) other expenses
reasonably incurred by Lessee in connection with the
sublease for which Lessee provides satisfactory evidence
thereof to Lessor, amortized over the term of the
sublease (including without limitation, reasonable legal
fees and disbursements directly incurred in connection
with such sublease, improvements allowances and other
case concessions paid by Lessee, advertising expenses,
construction expenses, architectural and planning
expenses, any expenses payable to Lessor with respect to
the assignment or sublet (including without limitation
any payments paid or payable pursuant to Section 7(A)(v)
hereof), permitting and licensing costs and lease
takeover payments). Sublease Profits shall exclude sums
paid by the sub-lessee for any of Lessee's personal
property, equipment, and trade fixtures unless the
payment of such sums constitute a subterfuge to avoid
legitimate inclusion in the above-described computation
of
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Sublease Profits. The sums payable under this Subsection
B(2) shall be paid to Lessor as and when paid by the
sublessee to Lessee. Lessee shall use reasonable efforts
to collect from such sublessee all rents, additional
charges and other consideration owing to Lessee.
(C) Any sublet or assignment to an affiliated company shall not
require Lessor's prior written consent, but shall require
Lessee to deliver to Lessor at least fifteen (15) days prior
written notice of such assignment or sublease and all other
provisions of this Section, other than Sections 7(A)(ii), (v)
and 7(B), shall apply. As used herein, "affiliated company"
shall mean any corporation or other business entity which
controls, is controlled by, or is under common control with,
Lessee at the time of such assignment or subletting and at all
subsequent times that such party is in occupancy of the
Premises. For the purposes hereof, "control" shall be deemed
to mean with respect to a corporation, ownership of more than
50% of all of the voting stock of such corporation and with
respect to a partnership or other entity, the ownership of
more than 50% of all the legal and equitable interests in such
partnership or any other entity and the right to control the
management and decision-making of such partnership or other
entity. Lessee may, without the consent of Lessor, assign or
transfer this Lease or sublet the Premises in whole or in part
to: (i) a corporation or other entity into which or with which
Lessee is merged or consolidated; or (ii) a corporation or
other entity acquiring this Lease and all or substantially all
of the other property of Lessee and assuming all or
substantially all of the liabilities of Lessee; or (iii) a
corporation or other entity with which Lessee is or may become
affiliated; provided, however, that the same utilize the
Premises consistent with the uses provided for herein. In
connection with any transactions set forth in clauses (i),
(ii) or (iii) of this Section 7(C), Sections 7(A)(ii), (v) and
7(B) shall not apply. In addition, Section 7(B) shall not
apply with respect to an assignment or sublet relating to
Lessee's spin-off of its Provid Research division; provided
that Lessee remains primarily liable under this Lease and the
Provid Research division's operations continue at the Demised
Premises.
(D)
(i) In the event that any or all of Lessee's interest in the
Premises and/or this Lease is transferred by operation
of law to any trustee, receiver, or other representative
or agent of Lessee pursuant to any state or federal
bankruptcy or receivership statute or procedure, or to
Lessee as a debtor in possession, and subsequently any
or all of Lessee's interest in the Premises and/or this
Lease is offered by
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Lessee or any trustee, receiver, or other representative
or agent of Lessee pursuant to any state or federal
bankruptcy or receivership statute or procedure, as to
its estate or property (such person, firm or entity
being hereinafter referred to as the "Grantor"), for
assignment, conveyance, lease, or other disposition to a
person, firm or entity other than Lessor (each such
transaction being hereinafter referred to as a
"Disposition"), then, unless prohibited by applicable
law, it is agreed that Lessor has and shall have a right
of first refusal to purchase, take, or otherwise
acquire, the same upon the same terms and conditions as
the Grantor thereof shall accept upon such Disposition
to such other person, firm, or entity; and as each such
Disposition the Grantor shall given written notice to
Lessor in reasonable detail of all the terms and
conditions of such Disposition within twenty (20) days
next following its determination to accept the same but
prior to accepting the same, and Grantor, unless
prohibited by applicable law, shall not make the
Disposition until and unless Lessor has failed or
refused to accept such right of first refusal as to the
Disposition, as set forth herein.
(ii) Lessor shall have fifteen (15) business days next
following its receipt of the written notice as to such
Disposition in which to exercise the option to acquire
Lessee's interest by such Disposition, and the exercise
of the option by Lessor shall be effected by notice to
that effect sent to the Grantor; but nothing herein
shall require Lessor to accept a particular Disposition
or any Disposition, nor does the rejection of any one
such offer of first refusal constitute a waiver or
release of any one such offer of first refusal
constitute a waiver or release of the obligation of the
Grantor to submit other offers hereunder to Lessor. In
the event Lessor accepts such offer of first refusal,
the transaction shall be consummated pursuant to the
terms and conditions of the Disposition described in the
notice to Lessor. In the event Lessor rejects such offer
of first refusal, Grantor may consummate the Disposition
with such other person, firm, or entity; but any
decrease in the price sought from Lessor or any change
in the terms of payment for such Disposition shall
constitute a new transaction requiring a further option
of first refusal to be given to Lessor hereunder.
(E) Without limiting any of the provisions of Sections 11 and 12,
if pursuant to the Federal Bankruptcy Code (herein the
"Code"), or any similar law hereafter enacted having the same
general purpose, Lessor declines the right provided it in
Subsection 7(D) hereof and Lessee is permitted to
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assign this Lease notwithstanding the restrictions contained
in this Lease, adequate assurance of future performance by an
assignee expressly permitted under such Code shall be deemed
to mean the deposit of cash security in an amount equal to one
(1) year's Annual Basic Rent and Additional Rent for the next
succeeding twelve (12) months (which Additional Rent shall be
reasonably estimated by Lessor), which deposit shall be held
by Lessor for the balance of the Term, in an interest-bearing
account, as security for the full performance of all of
Lessee's obligations under this Lease.
(F) Except as specifically set forth above, no portion of the
Demised Premises or of Lessee's interest in this Lease may be
acquired by any other person or entity, whether by assignment,
mortgage, sublease, transfer, operation of law or act of the
Lessee, nor shall Lessee pledge its interest in this Lease.
8. COMPLIANCE WITH RULES AND REGULATIONS. Lessee shall observe and comply with
the rules and regulations hereinafter set forth in Exhibit B attached hereto and
made a part hereof and with such further reasonable rules and regulations as
Lessor may prescribe, on written notice to Lessee, for the safety, care and
cleanliness of the Building and the comfort, quiet and convenience of other
occupants of the Building. Lessor shall not enforce the rules and regulations in
a discriminatory manner. If there is any inconsistency between the rules and
regulations and the provisions set forth in the body of this Lease, the
provisions set forth in the body of this Lease shall prevail. Lessee shall not
place a load upon any floor of the Demised Premises exceeding the floor load per
square foot area which it was designed to carry (which information shall be
supplied to Lessee upon request, to the extent such information is in Lessor's
possession) and which is allowed by law. Lessor reserves the right to reasonably
prescribe the weight and position of all safes, business machines and mechanical
equipment. Such installations shall be placed and maintained by Lessee, at
Lessee's expense, in settings sufficient, in Lessor's reasonable judgment, to
absorb and prevent vibration, noise and annoyance. In no event shall any rule or
regulation be applicable to Lessee to the extent that such rule or regulation
would materially restrict Lessee's right to use and occupy the Demised Premises
for any of the purposes set forth as a Permitted Use.
9. DAMAGES TO BUILDING/WAIVER OF SUBROGATION.
(A) If the Building is damaged by fire or any other cause to such
extent that the cost of restoration, as reasonably estimated
by Lessor, will equal or exceed twenty-five (25%) percent of
the replacement value of the Building (exclusive of
foundations) just prior to the occurrence of the damage or if
any damage to the Premises costing more that Fifty Thousand
and 00/100 ($50,000) Dollars occurs within the last twelve
(12) months of the Term, then Lessor (or Lessee with respect
to such damage to the Premises within the last 12 months of
the Term) may, no later than the sixtieth (60th) day
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following the damage, give Lessee (or Lessor, as the case may
be) a notice of election to terminate this Lease. In said
event of election, this Lease shall be deemed to terminate
effective on the thirtieth (30th) day after the giving of said
notice. Lessee shall surrender possession of the Premises on
or before the effective date of termination and the Term Basic
Rent and any Additional shall be apportioned as of the date of
said termination date, and any Term Basic Rent or any
Additional Rent paid for any period beyond the effective
termination date shall be repaid to Lessee. If Lessor and
Lessee shall not have the right to terminate this Lease as
provided in this Section 9, or if, despite Lessor's or
Lessee's right to terminate, Lessor nor Lessee elects to
terminate this Lease pursuant to any right contained herein,
Lessor shall (except as set forth in the following sentence)
restore the Building and the Premises with reasonable
promptness, subject to Force Majeure, as hereinafter defined
and Lessee shall have no right to terminate this Lease, except
as specifically set forth in subsection 9(B) below.
Notwithstanding the foregoing, if Lessor is required to
restore the Building and Premises pursuant to the provisions
of this Section 9, Lessee shall, subject to Force Majeure,
promptly commence and prosecute restoration of all Lessee
Improvement Work, and such other fixtures, improvements or
systems owned and/or installed by Lessee, following
substantial completion of Lessor's restoration work (or at
such earlier time as Lessee and Lessor mutually agree). In
addition to all other applicable provisions of this Lease,
Lessee's restoration work shall be performed and completed in
accordance with the provisions of Sections 6 and 26 hereof.
(B) Anything contained in this Section 9 to the contrary
notwithstanding, within sixty (60) days after Lessee has given
written notice to Lessor of any damage to the Building that
materially impairs Lessee's ability to conduct its business in
the Premises, Lessor shall deliver to Lessee a statement
prepared by a reputable contractor selected by Lessor and
reasonably acceptable to Lessee, setting forth such
contractor's estimate as to the time required for Lessor to
repair such damage to the Building for which Lessor is
responsible. If the estimated time period exceeds one hundred
eighty (180) days from the date of such damage, Lessee may
elect to terminate this Lease by notice to Lessor not later
than thirty (30) days following receipt of such statement. If
Lessee shall not elect to terminate this Lease as aforesaid
(or is not entitled to terminate this Lease pursuant to this
Section), then Lessor and Lessee shall restore the Building
and the Premises as required herein with reasonable
promptness.
(C) In the event the Premises shall have been rendered
untenantable in whole or part due to damage by fire or other
casualty and this Lease shall not have been terminated
pursuant to subsections 9(A) or 9(B) above, then
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notwithstanding anything in this Section 9 to the contrary,
Lessee shall have the right to terminate this Lease if the
restoration work to be performed by Lessor with respect to the
Building shall not have been substantially completed within
one hundred eighty (180) days of the date of the occurrence of
the damage for any reason, subject to delay caused by Lessee
or Lessee's employees, agents, or contractors or Force
Majeure, but in no event later than two hundred forth (240)
days in the aggregate after the date of occurrence of the
damage. Lessee shall exercise its right to terminate this
Lease by giving written notice of termination to Lessor on or
before the date that is thirty (30) days after the expiration
of the aforesaid one hundred eighty (180) period, as extended
by Force Majeure as aforesaid. In the event Lessee exercises
its right to terminate this Lease, this Lease shall terminate
on the thirtieth (30th) day following Lessor's receipt of
Lessee's written notice of termination, unless the restoration
work to be performed by Lessor with respect to the Building
shall have been substantially completed within said thirty
(30) day period. In the event Lessor determines, as the
restoration work progresses, that it will not be able to
substantially complete the restoration work to be performed by
Lessor with respect to the Building within one hundred eighty
(180) days of the date of the vesting of title (whether for
Force Majeure or otherwise), Lessor shall promptly notify
Lessee in writing ("Delay Notice") of the Lessor's reasonable
estimate of time period required to substantially complete
such restoration work. Lessee shall be deemed to have
consented to a delay in the date for substantial completion of
the restoration work unless Lessee shall notify Lessor in
writing within ten (10) days of its receipt of the Delay
Notice that Lessee desires to terminate this Lease in which
event the Lease shall terminate thirty (30) days following
Lessor's receipt of the written termination notice, provided,
however, that Lessee shall not be permitted to terminate this
Lease pursuant to this sentence, if substantial completion of
Lessor's restoration work can reasonably be achieved within
two hundred forty (240) days of the date of the occurrence of
the damage. Term Basic Rent and Additional Rent shall be
apportioned as of the date of the occurrence of the damage if
the entire Premises shall have been rendered untenantable or
on the effective termination date if only part of the Premises
shall have been rendered untenantable.
(D) In any case in which use of the Premises (or access thereto)
is materially affected by any damage to the Building, there
shall be either an abatement or an equitable reduction in
Annual Basic Rent for the period for which and the extent to
which the Premises are not reasonably usable and enjoyable for
the purpose for which they are leased hereunder. The words
"restoration" and "restore" as used in this Section 9 shall
include repairs.
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If the damage results from the fault of Lessee, or Lessee's
agents, servants, visitors or licensees, Lessee shall not be
entitled to any abatement or reduction in Term Basic Rent,
except to the extent of any rent insurance received by Lessor.
10. EMINENT DOMAIN.
(A) If Lessee's use of the Premises or if Lessee's access to the
Premises or the parking area serving the Building are
materially affected such that Lessee cannot use the Premises
for its intended use during the remainder of the Term, due to
the taking by eminent domain of (i) the Premises or any part
thereof or any estate therein; or (ii) any other part of the
Building; then, in either event, this Lease shall terminate on
the date when title vests pursuant to such taking. The Term
Basic Rent, and any Additional Rent, shall be apportioned as
of said termination date and any Term Basic Rent or Additional
Rent paid for any period beyond said date shall be reimbursed
to Lessee. Under such circumstance, Lessee shall not be
entitled to any part of the award for such taking or any
payment in lieu thereof, but Lessee may file a separate claim
for any taking of the Lessee Improvement Work (less an amount
equal to the unamortized portion of the Lessee Allowance paid
to Lessee, computed on the straight-line basis over the
initial Term of this Lease), for loss of business and for
moving expenses, provided the same shall in no way affect or
diminish Lessor's award.
(B) In the event of a partial taking which does not effect a
termination of this Lease but does deprive Lessee of the use
of a portion of the Demised Premises, there shall either be an
abatement or an equitable reduction of the Term Basic Rent,
and an equitable adjustment reducing the Base Period Costs as
hereinafter defined depending on the period for which and the
extent to which the Premises so taken are not reasonably
usable for the purpose for which they are leased hereunder.
Lessee shall not be entitled to any part of the award for such
taking or any payment in lieu thereof, but Lessee may file a
separate claim for loss of business, provided the same shall
in no way affect or diminish Lessor's award. Under such
circumstances, Lessor shall include as part of its claim for
such eminent domain taking, an amount equal to the replacement
value of the Lessee Improvement Work affected by such taking.
Any net proceeds received by Lessor relating to the taking of
the Lessee Improvement Work shall be allocated as follows: (x)
first, to the Lessor an amount equal to the lesser of the
Lessee Allowance paid to Lessee, or an amount equal to the net
proceeds received by Lessor for the Lessee Improvement Work
affected by such taking, times a fraction where (a) the
numerator is the Lessee
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Allowance, and (b) the denominator is the total cost of the
Lessee Improvement Work, which shall be retained by Lessor
(subject to the provisions of the following sentence), and (y)
the balance, if any, to Lessee to be used for Lessee's
restoration obligations hereunder. To the extent that any
condemnation proceeds are retained by Lessor, such proceeds
shall be held by Lessor in trust, in an interest-bearing
account and provided no Event of Default has occurred and is
continuing, disbursed to Lessee subject to the same conditions
for disbursement of the Lessee Allowance as set forth in
Section 26(C) of this Lease, following final completion of the
restoration work required to be done by Lessee pursuant to
subsections 10(C) through 10(E) below.
(C) If this Lease is not terminated as provided in Section 10(A)
above, Lessor shall (except as set forth in the following
sentence) restore the Building and the Premises with
reasonable promptness following the date when title vests
pursuant to such taking, subject to Force Majeure, as
hereinafter defined and Lessee shall have no right to
terminate this Lease, except as specifically set forth in
subsection 10(D) below. Notwithstanding the foregoing, if
Lessor is required to restore the portion of the Building and
Premises affected by such taking, pursuant to the provisions
of this Section 10, Lessee shall, subject to Force Majeure,
promptly commence and prosecute restoration of all affected
Lessee Improvement Work, and such other fixtures, improvements
or systems owned and/or installed by Lessee, following
substantial completion of Lessor's restoration work (or at
such earlier time as Lessee and Lessor mutually agree). In
addition to all other applicable provisions of this Lease,
Lessee's restoration work shall be performed and completed in
accordance with the provisions of Sections 6 and 26 hereof.
(D) Anything contained in this Section 10 to the contrary
notwithstanding, within sixty (60) days after the date when
title vests pursuant to such taking described in Section 10(B)
above, Lessor shall deliver to Lessee a statement prepared by
a reputable contractor selected by Lessor and reasonably
acceptable to Lessee, setting forth such contractor's estimate
as to the time required for Lessor to restore the portion of
the Building for which Lessor is responsible. If the estimated
time period exceeds one hundred eighty (180) days from the
date when title vests pursuant to such taking, Lessee may
elect to terminate this Lease by notice to Lessor not later
than thirty (30) days following receipt of such statement. If
Lessee shall not elect to terminate this Lease as aforesaid
(or is not entitled to terminate this Lease pursuant to this
Section,) then Lessor and Lessee shall restore the Building
and the Premises as required herein with reasonable
promptness.
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(E) Notwithstanding anything in this Sectino10 to the contrary,
Lessee shall have the right to terminate this Lease if the
restoration work to be performed by Lessor with respect to the
Building shall not have been substantially completed, for any
reason, within one hundred eighty (180) days from the date
when title vests pursuant to such taking, subject to delay
caused by Lessee or Lessee's employees, agents, or contractors
or Force Majeure, but in no event later than two hundred forty
(240) days in the aggregate after the date when title vests
pursuant to such taking. Lessee shall exercise its right to
terminate this Lease by giving written notice of termination
to Lessor on or before the date that is thirty (30) days after
the expiration of the aforesaid one hundred eighty (180)
period, as extended by Force Majeure as aforesaid. In the
event Lessee exercises its right to terminate this Lease, this
Lease shall terminate on the thirtieth (30th) day following
Lessor's receipt of Lessee's written notice of termination,
unless the restoration work to be performed by Lessor with
respect to the Building shall have been substantially
completed within said thirty (30) day period. In the event
Lessor determines, as the restoration work progresses, that it
will not be able to substantially complete the restoration
work to be performed by Lessor with respect to the Building
within one hundred eighty (180) days of the date of the
vesting of title (whether for Force Majeure or otherwise),
Lessor shall promptly notify Lessee in writing ("Delay
Notice") of the Lessor's reasonable estimate of time period
required to substantially complete such restoration work.
Lessee shall be deemed to have consented to a delay in the
date for substantial completion of the restoration work unless
Lessee shall notify Lessor in writing within ten (10) days of
its receipt of the Delay Notice that Lessee desires to
terminate this Lease in which event the Lease shall terminate
thirty (30) days following Lessor's receipt of the written
termination notice, provided, however, that Lessee shall not
be permitted to terminate this Lease pursuant to this
sentence, if substantial completion of Lessor's restoration
work can reasonably be achieved within two hundred forty (240)
days of the date of the vesting of title.
11. INSOLVENCY OF LESSEE, OTHER DEFAULTS. If an Event of Bankruptcy (as
hereinafter defined) shall occur, Lessor may terminate this Lease forthwith and
upon notice of such termination Lessee's right to possession of the Demised
Premises shall cease, and Lessee shall then quit and surrender the Premises to
Lessor but Lessee shall remain liable as provided in Section 13 hereof.
The following shall be "Events of Bankruptcy" under this Lease:
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(A) Lessee's becoming insolvent, as that term is defined in Title
11 of the United States Code, entitled Bankruptcy, 11 U.S. C.
ss.101 et seq. (as may be amended, supplemented or replaced
from time to time, the "Bankruptcy Code"), or under the
insolvency laws of any State, District, Commonwealth or
Territory of the United States as applicable to Lessee (the
"Insolvency Laws");
(B) the appointment of a receiver or custodian for all or a
substantial portion of Lessee's property or assets, or the
institution of a foreclosure action upon all or a substantial
portion of Lessee's real or personal property which shall not
have been vacated, discharged or stayed or bonded pending
appeal within sixty (60) days from entry thereof;
(C) the filing of a voluntary petition by Lessee under the
provision of the Bankruptcy Code or Insolvency Laws;
(D) the filing of an involuntary petition against Lessee as the
subject debtor under the Bankruptcy Code or Insolvency Laws,
which is either dismissed within sixty (60) days of filing, or
results in the issuance of an order for relief against the
debtor, whichever is later; or
(E) Lessee's making or consenting to an assignment for the benefit
of creditors or a common law composition of creditors.
12. LESSOR'S REMEDIES ON DEFAULT. If Lessee defaults in the payment of Term
Basic Rent, or any Additional Rent, or defaults pursuant to Subsection 29(A)(v)
hereof or permits the Premises to become deserted, abandoned or vacated or
defaults in the performance of any of the other covenants and conditions hereof,
Lessor shall (except for a Term Basic Rent default, where at least two (2) other
Term Basic Rent defaults have occurred during the then preceding twelve (12)
month period of which Lessor has given Lessee notice) give Lessee notice of such
default, and if Lessee does not (i) pay the amount of Term Basic Rent within ten
(10) days of the giving of the aforementioned required notice, or if no notice
is required within ten (10) days from the date such payment was due, or (ii)
cure any Additional Rent default within ten (10) days of the giving of such
notice, or (iii) cure the default pursuant to Subsection 29(A)(v) within
forty-eight (48) hours of the giving of such notice, or (iv) cure any other
default within thirty (30) days after giving of such notice (provided that if
such other default is of such nature that it cannot be completely cured within
such period, if Lessee does not commence such curing within such thirty (30)
days and thereafter proceed with reasonable diligence and in good faith to cure
such default and such default is not thereafter cured within the lesser of (a)
one hundred twenty (120) days from the giving of such notice or (b) such period
of time from the giving of such Notice which equals the amount of time which
Lessor has to cure a similar non-monetary default as described in any underlying
mortgage, lease or trust deed, as same may be extended by said mortgagee, lessee
or trustee from time to time; it being agreed that Lessor shall provide
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Lessee with a copy of such mortgage, lease or trust deed or notice of the
relevant provisions) (each of the foregoing being an "Event of Default"), then
Lessor may terminate this Lease on not less than ten (10) days notice to Lessee,
and on the date specified in said notice, Lessee's right to possession of the
Demised Premises shall cease, and Lessee shall then quit and surrender the
Premises to Lessor, but Lessee shall remain liable as hereinafter provided. If
this Lease shall have been so terminated by Lessor pursuant to Sections 11 or 12
hereof, Lessor may at any time thereafter resume possession of the Premises by
any lawful means and remove Lessee or other occupants and their effects.
13. DEFICIENCY.
(A) In any case where Lessor has recovered possession of the
Premises by reason of Lessee's default, Lessor may, at
Lessor's option, occupy the Premises or cause the Premises to
be redecorated, altered, divided, consolidated with other
adjoining premises, or otherwise changed or prepared for
reletting, and may relet the Premises or any part thereof as
agent of Lessee or otherwise, for a term or terms to expire
prior to, at the same time as, or subsequent to, the original
expiration date of this Lease, at Lessor's option, and receive
the Term Basic Rent or Additional Rent therefor. Term Basic
Rent and Additional Rent so received shall be applied first to
the payment of such expenses as Lessor may have incurred in
connection with the recovery of possession, redecorating,
altering, dividing, consolidating with other adjoining
premises, or otherwise changing or preparing for reletting,
and the reletting, including brokerage and reasonable
attorney's fees, and then to the payment of damages in amounts
equal to the Term Basic Rent and Additional Rent hereunder and
to the costs and expenses of performance of the other
covenants of Lessee as herein provided. Lessee agrees, in any
such case, whether or not Lessor has relet, to pay to Lessor
damages equal to the Term Basic Rent and Additional Rent and
other sums herein agreed to be paid by Lessee, as and when
due, less the net proceeds of the reletting, if any, as
ascertained from time to time, as of the due date, and the
same shall be payable by Lessee on the several rents days
above specified, Lessee shall not be entitled to any surplus
accruing as a result of any such reletting nor shall any
surplus be applied to offset any damages referred to in the
preceding sentence. In reletting the Premises as aforesaid,
Lessor may grant rent concessions, and Lessee shall not be
credited therewith. No such reletting shall constitute a
surrender and acceptance or be deemed evidence thereof.
(B) Alternatively, in any case where Lessor has recovered
possession of the Premises by reason of Lessee's default,
Lessor may at Lessor's option, and at any time thereafter, and
without notice or other action by Lessor, and without
prejudice to any other rights or remedies it might have
hereunder
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or at law or equity, become entitled to recover from Lessee,
as damages for such breach, in addition to such other sums
herein agreed to be paid by Lessee, an amount equal to the
difference between (i) the Term Basic Rent and Additional Rent
reserved in this Lease from the date of such default to the
date of expiration of the Term demised (assuming the Lease had
not been terminated by reason of such default), as the same
may have been extended or renewed, and (ii) the then fair and
reasonable rental value of the Premises for the same period
(net of a six month reletting period); both discounted to
present worth at the then current Applicable Treasury Rate.
The "Applicable Treasury Rate" shall equal the then current
yield on U.S. Treasury obligations having a maturity which is
closest to the date of expiration of the Term demised
(assuming the Lease had not been terminated by reason of such
default), as the same may have been extended or renewed. Said
damages shall become due and payable to Lessor immediately
upon such breach of this Lease and without regard to whether
this Lease be terminated or not, and if this Lease be
terminated, without regard to the manner in which it is
terminated.
(C) Lessee hereby waives all right of redemption to which Lessee
or any person under Lessee might be entitled by any law now or
hereafter in force. In addition, if an Event of Default occurs
which results in the Lessor recovering possession of the
Demised Premises, Lessor shall be under no duty to mitigate
Lessee's damages as provided for in this Section 13. Lessor's
remedies hereunder are in addition to any remedy allowed by
law or in equity.
14. SUBORDINATION OF LEASE. Subject to the provisions contained in any
subordination, non-disturbance and attornment agreement executed by and among
Lessor, Lessee and the holder of any underlying lease, mortgage or trust deed,
this Lease and any option contained herein shall, at Lessor's option, or at the
option of any holder of any underlying lease or holder of any mortgage or trust
deed, be subject and subordinate to any such underlying leases and to any such
mortgage or trust deed which may now or hereafter affect the real property of
which the Premises form a part, and also to all renewals, modifications,
consolidations and replacements of said underlying leases and said mortgages or
trust deed. Although no instrument or act on the part of Lessee shall be
necessary to effectuate such subordination, Lessee will, nevertheless, execute
and deliver such further instruments confirming such subordination of this Lease
as may be desired by the holders of any said mortgage or trust deed or by any of
the Lessors under such underlying leases. If any mortgage or deed of trust is
foreclosed or if a deed in lieu of foreclosure covering the Office Building Area
is given to the holder of a mortgage or deed of trust (or its designee), Lessee
shall, on request, attorn to the holder of such mortgage, or deed of trust (or
its designee). If any underlying lease to which this Lease is subject shall be
terminated, Lessee shall, on request, attorn to the owner of the reversion.
Notwithstanding anything to the contrary contained herein, the foregoing
subordination of this Lease shall be
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conditioned on the holder of any underlying lease or holder of any mortgage or
trust deed entering into a subordination, non-disturbance and attornment
agreement ("SNDA") with Lessee substantially in the form attached hereto as
Exhibit G. With respect to any mortgage encumbering the Office Building Area on
the date hereof, Lessor shall deliver the SNDA on the date hereof. Lessor
represents that there are no ground or similar underlying leases currently
affecting the real property of which the Premises are a part.
15. SECURITY DEPOSIT/LETTER OF CREDIT. On or prior to the date hereof, Lessee
shall have deposited with Lessor an irrevocable standby letter of credit issued
by BankBoston, N.A., in the face amount of One Hundred Fifty Thousand Dollars
($150,000) and in form satisfactory to Lessor (the "Letter of Credit"). The
Letter of Credit shall have an initial term of five (5) years and thereafter,
during the Term, shall be renewed by Lessee not later than thirty (30) days
prior to the expiration of such Letter of Credit (as extended from time to
time). Each renewal Letter of Credit shall be issued by a bank or other
financial institution reasonably acceptable to Lessor (if the credit rating of
such entity is at least equal to that of the initial issuer as of the date
hereof then such entity shall be deemed acceptable to Lessor) and shall be in
the same amount and on the same terms and conditions as the initial Letter of
Credit. The obligation to renew the Letter of Credit shall continue throughout
the Term and the Letter of Credit shall not be permitted to expire or terminate
until at least ninety-one (91) days after the last day of the Term. If any Event
of Default has occurred, Lessor may at any time from time to time and without
prejudice to any other remedy, draw down all or any portion of the Letter of
Credit to the extent necessary to make good any arrears of any amount due but
not paid under this Lease, or any other damage, injury, expense or liability
caused to Lessor by such Event of Default. The Letter of Credit shall not be
considered an advance payment of rent or a measure of Lessor's damages in case
of default by Lessee. In the event of the sale or transfer of Lessor's interest
in the Demised Premises, Lessor shall have the right to transfer all or any
portion of Letter of Credit to the purchaser or transferee (and Lessee will take
such actions as are necessary to cause the Letter of Credit to be issued in the
name of such transferee), and upon such transfer Lessee shall thereafter look
only to the new lessor for the return of the Letter of Credit, and Lessor shall
thereupon be released from all liability to Lessee for the return of or account
for such Letter of Credit. If all or any portion of the Letter of Credit is
used, applied or retained by Lessor, Lessee shall, within ten (10) days after a
draw on the Letter of Credit, cause the amount available under the Letter of
Credit to be increased to One Hundred Fifty Thousand Dollars ($150,000). Draws
on the Letter of Credit shall require only delivery of a certification by Lessor
that there has occurred an Event of Default under the Lease and the issuer shall
be entitled to rely thereon without need to verify the factual accuracy thereof.
16. RIGHT TO CURE BREACH. If Lessee breaches any covenant or condition of this
Lease and if the giving of notice by Lessor is required pursuant to this Lease,
then if such breach is not cured within any applicable notice and cure period
contained in this Lease, Lessor may, on not less than (10) days prior written
notice to Lessee (except that no notice need be given in case of emergency),
cure such breach at the expense of Lessee and the reasonable amount of all
expenses, including reasonable attorneys' fees, with interest thereon at the
Interest Rate (as
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hereinafter defined) incurred by Lessor in so doing shall be deemed Additional
Rent payable on demand.
17. LIENS.
(A) Lessee shall not allow any lien or other encumbrance to be
filed upon any interest of Lessor or any ground or underlying
lessor in any portion of the Premises, the Building and/or
Office Building Area. If, because of any act or omission (or
alleged act or omission) of Lessee, any construction lien
claim or other lien (collectively "Lien"), charge, or order
for the payment of money or other encumbrance shall be filed
against Lessor and/or any ground or underlying lessor and/or
any portion of the Premises, the Building or Office Building
Area (whether or not such Lien, charge, order, or encumbrance
is valid or enforceable as such), Lessee shall, at its own
cost and expense, cause same to be discharged of record or
bonded within thirty (30) days after the filing thereof; and
Lessee shall indemnify and save harmless Lessor and all ground
and underlying lessor(s) against and from all costs,
liabilities, suits, penalties, claims, and demands, including
reasonable counsel fees, resulting therefrom. If Lessee fails
to comply with the foregoing provisions, Lessor shall have the
option of discharging or bonding any such Lien, charge, order,
or encumbrance, and Lessee agrees to reimburse Lessor for all
reasonable costs, expenses and other sums of money in
connection therewith (as Additional Rent) with interest at the
Interest Rate upon demand. All materialmen, contractors,
artisans, mechanics, laborers, and any other persons now or
hereafter contracting with Lessee of any contractor or
subcontractor of Lessee for the furnishing of any labor
services, materials, supplies, or equipment with respect to
any portion of the Premises, at any time from the date hereof
until the end of the Lease Term, are, to the extent allowed by
applicable law, hereby charged with notice that they are to
look exclusively to Lessee to obtain payment for same.
(B) "Interest Rate" shall mean a rate per annum equal to the prime
or base commercial lending rate from time to time announced by
Citibank N.A. (or its successors) to be in effect at its
principal office in New York, New York plus three (3%) percent
bu in no event in excess of the maximum rate of interest
permitted under applicable law.
18. RIGHT TO INSPECT AND REPAIR. Lessor may enter the Premises but shall not be
obligated to do so (except as required by any specific provision of this Lease)
at any reasonable time on prior reasonable notice (which need not to be in
writing, but Lessor shall make reasonable efforts to deliver same to Lessee) to
Lessee (except that no notice need be given in case of emergency) for the
purpose of inspection or the making of such repairs, replacement or
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additions, in, to, on and about the Premises as Lessor is required or permitted
to make hereunder or otherwise at the Building, as Lessor deems reasonably
necessary or desirable. Lessee shall be entitled to have a representative
accompany Lessor at the appointed time of entry; provided that such does not
unreasonably interfere with or prevent Lessor from taking the aforementioned
actions. Lessee shall have no claims or cause of action against Lessor by reason
thereof, but Lessor shall use reasonable efforts to minimize any such
disturbance consistent with practices in office buildings similar to the
Building in the Piscataway area.
19. SERVICES TO BE PROVIDED BY LESSOR.
(A) Subject to intervening laws, ordinances, regulations and
executive orders, if any, Lessor agrees to furnish during
Building Hours (as defined in Section 40D), except on holidays
as set forth on Exhibit D attached hereto and made a part
hereof, and at such other hours as provided herein, subject to
reimbursement as provided for in Section 21 and 22, the
following:
(i) The cleaning services, as set forth on Exhibit C
attached hereto and made a part hereof, and subject to
the conditions therein stated. Except as set forth on
Exhibit C, Lessee shall pay the cost of all other
cleaning services required by Lessee.
(ii) Heating, ventilating and air conditioning (herein
"HVAC") to the Premises; provided, however, that if
Lessee elects to install a Split System to service only
the Premises, then Lessor shall no longer be responsible
for furnishing HVAC to the Premises and the Annual Basic
Rent shall be reduced by $1 per gross rentable square
foot of space contained in the Premises. Lessor hereby
consents, subject to the other provisions of Section 6
and the applicable provisions of Section 5 of this
Lease, to the installation by Lessee of a Split System
for supplying HVAC to the Premises, and if Lessee makes
the foregoing election, then all of the foregoing shall
be included in the definition of Lessee Improvement
Work. Lessor shall, subject to the provisions of Section
6 and the applicable provisions of Section 5 of this
Lease, permit Lessee at Lessee's sole cost and expense,
to tie into the existing hot and cold water supply and
condenser water supply, the existing base Building
ventilation ductwork and other systems of the Building
as is reasonably necessary to adequately service the
Split System. Lessor shall furnish HVAC to the Common
Facilities together with Common Facilities lighting and
electric energy. Lessor shall provide electric energy
for overhead lighting and outlet usage in the Premises
during Building Hours and non-Building Hours (the
consumption costs of which shall be borne by Lessee),
which shall not exceed
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four (4) watts per square foot of the Premises per
working hour (it being agreed that Lessee may, as part
of its Lessee Improvement Work and if permitted by the
company providing electrical service to the Demised
Premises, upgrade the electrical capacity to
approximately 800 amps at 480/277 volts); provided,
however, that in the event that Lessee elects to have
the electric or any other utility serving the Premises
directly metered by the utility company providing such
service (rather than sub-metered by Lessor), then, upon
Lessor obtaining such direct service, the Lessor shall
not be responsible for providing any such electric or
utility service to the Premises and the work related to
such election shall be included in the definition of
Lessee Improvement Work.
(iii) During Building Hours and non-Building Hours, cold and
hot water for drinking and lavatory purposes and gas
service; subject to the provisions set forth in subject
A (ii) above regarding Lessee's election to have such
services directly metered.
(iv) Snow plowing and lawn care (including, without
limitation, the planting of seasonal plants in the
courtyard portion of the Office Building Area)
consistent with other buildings of similar class as that
of the Building in the area of the Building.
(v) No later than December 31, 1998, Lessor shall repave the
courtyard portion of the Office Building Area and
replant the area with seasonal plants.
(B) Lessee shall have access to the Building, parking area and the
Premises twenty-four (24) hours per day, seven (7) days per
week, subject to reasonable security provisions that may be
established from time to time by Lessor with respect to such
access during non Building Hours.
20. INTERRUPTION OF SERVICES OR USE. Interruption or curtailment of any service
maintained in the Building or at the Office Building Area, if caused by Force
Majeure, as hereinafter defined, shall not, except as otherwise provided herein,
entitle Lessee to any claim against Lessor or to any abatement of Term Basic
Rent or Additional Rent, and shall not constitute a constructive or partial
eviction. If the Premises are rendered untenantable in whole or in part, for a
period of ten (10) consecutive business days, by any interruption or curtailment
of any service maintained by Lessor, or for any other reason, including, without
limitation, Force Majeure, (other than any interruption of electric or any other
utility service not provided by Lessor pursuant to Section 19 above and/or by
any other interruption caused by misuse or neglect by Lessee, or Lessee's
agents, servants, visitors or licensees), there shall be a proportionate
abatement of Monthly Basic Rent from and after said tenth (10th) consecutive
business day and
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continuing for the period of such untenantability. The remedies provided for in
this Section 20 shall be Lessee's sole remedies for any interruption of service
or use as described above.
21. ELECTRICAL AND OTHER UTILITY SERVICES.
(A) Lessee, as part of the Lessee Improvement Work, shall install
all such sub-meters required to measure all electrical and
other utility consumption required for Lessee's use and
occupation of the Premises. Lessee shall be responsible for
the payment to Lessor, as Additional Rent, the amount charged
by the utility company furnishing such electrical power and
other utility service, as registered on each such sub-meter.
Lessor shall cause each such sub-meter to be read monthly and
shall invoice Lessee on a monthly basis for Lessee's
electrical and other utility consumption. Such amounts shall
be paid by Lessee within ten (10) days after being invoiced by
Lessor. Notwithstanding anything to the contrary contained in
this subsection 21(A), Lessee may elect, at Lessee's sole cost
and expense (subject to the provisions of Section 6 of this
Lease and otherwise subject to Lessor's reasonable approval),
to install a meter (or meters) to measure Lessee's electrical
and/or other utility consumption within the Premises. In the
event of such election, Lessee shall timely pay directly to
the applicable utility company furnishing services to the
Premises, all amounts charged for electric and utility
consumption. If Lessee shall obtain electricity or any other
utility directly from the applicable utility company, Lessee
shall have the right to use all existing risers, wires,
conduits and electrical and other applicable utility equipment
servicing the Premises in a manner consistent with its
intended use, subject to the other provisions of this Lease.
(B) Lessor shall not be liable in any way to Lessee for any
change, failure, inadequacy or defect in the supply or
character of electrical energy and/or other utility service
furnished to the Demised Premises, unless caused by the gross
negligence or willful misconduct of Lessor, Lessor's
employees, agents or contractors. Notwithstanding anything to
the contrary contained in this Lease, Lessee shall be
responsible for any repair, maintenance and replacement of any
electrical and/or other utility meter (or sub-meter), panel
board, wires, wiring, feeders, risers, pipes, plumbing, and
such other related fixtures and equipment installed by Lessee
and used in connection with the electrical and/or other
utilities furnished to the Demised Premises, at Lessee's
expenses, or if Lessor causes such work to be performed,
Lessee shall pay Lessor the reasonable charges therefor within
thirty (30) days of demand.
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(C) Lessee agrees not to connect any additional electrical
equipment of any type to the Buildings' electrical
distribution system, other than lamps, typewriters and other
similar customary office machines which consume comparable
amounts of electricity (including without limitation personal
computers and copy machines) and scientific electrical
equipment common to a research laboratory facility, without
the Lessor's prior written consent. In no event shall Lessee
use or install any fixtures, equipment or machines the use of
which in conjunction with other fixtures, equipment and
machines in the Demised Premises would result in an overload
of the electrical circuits servicing the Demised Premises. In
order to insure that such electrical capacity is not exceeded
and to avert any possible adverse effect upon the Building's
electrical system, Lessee shall not, except as otherwise
provided herein, without the prior consent of Lessor (which
consent shall not be unreasonably withheld or delayed,
provided that the withholding of consent shall be deemed
reasonable if it is based upon an unreasonably
disproportionate demand of electricity for the Demised
Premises as the Demised Premises relates to the Building as a
whole), make or perform or permit any alteration to wiring
installations or electrical facilities in or serving the
Demised Premises or any additions to the electrical fixtures,
business machines, or office equipment or appliances (other
than typewriters, desk top personal computers and similar low
energy consuming office machines and scientific electrical
equipment common to research laboratory facilities) in the
Demised Premises which utilize electrical energy. Lessor, at
its option, before the commencement of any work to be paid for
by Lessee hereunder or at any time thereafter, may require
Lessee to furnish to Lessor such security, whether by surety
bond, issued by a corporation satisfactory to Lessor, in form
and amount and licensed to do business in the State of New
Jersey, or otherwise, as Lessor shall deem reasonably
necessary to assure the payment for such work by Lessee.
(D) Lessee shall, at its expense, furnish and install all
replacement lighting tubes, lamps, ballasts and bulbs required
in the Premises.
22. ADDITIONAL RENT. It expressly agreed that Lessee will pay in addition to the
Term Basic Rent provided in Section 3 above, as additional rental to cover
Lessee's Percentage of the increased cost to Lessor, for each of the categories
enumerated herein, over the Base Period Costs for each such category.
(A) Operating Cost Escalation.
(i) If during the Lease Term the Operating Costs incurred
for the Building in which the Demised Premises are
located and Office
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Building Area for any calendar year or proportionate
part thereof if the Lease Term expires prior to the
expiration of a calendar year (herein the "Comparison
Period") shall be greater than the Base Operating Costs
(adjusted proportionately if the Comparison Period is
less than a calendar year), then Lessee shall pay to
Lessor, as Additional Rent, Lessee's Percentage of all
such excess Operating Costs. Operating Costs shall
include all reasonable costs and expenses of owning,
operating, managing, maintaining, repairing, replacing
and securing the Building and the Office Building Area
including, by way of illustration and not by way of
limitation: personal property taxes; asset and/or
property management fees; labor, including all wages and
salaries and benefits for those individuals rendering
services to the Building and/or the Office Building
Area, which are generally comparable to the wages,
salaries and benefits paid to those providing services
to other buildings of comparable quality in the general
area of the Building but not including any employees
above the rank of building or property manager; social
security taxes, and other taxes (excluding late payment
charges) which may be levied against Lessor upon such
wages and salaries; supplies; repairs, maintenance and
replacements; maintenance and service contracts;
painting; wall and window washing; tools and equipment
(which are not required to be capitalized under
generally accepted accounting principles); fire, rent,
liability and other insurance; trash removal; lawn care;
snow removal; sums levied, assessed, imposed or required
to be paid to any governmental authority on account of
the parking of motor vehicles, including all sums
required to be paid pursuant to transportation controls
imposed by the Environmental Protection Agency under the
Clean Air Act of 1970, or otherwise required to be paid
by any governmental authority with respect to the
parking, use, or transportation of motor vehicles, or
reduction or control of motor vehicle traffic, or motor
vehicle pollution; and all other items properly
constituting direct operating costs according to
standard accounting practices (hereinafter collectively
referred to as the "Operating Costs") but not including
Real Estate Taxes (as hereinafter defined), Utility and
Energy Costs, depreciation of Building or equipment;
principal or interest; income or excess profits taxes;
costs of maintaining Lessor's corporate existence;
franchise taxes; any expenditures required to be
capitalized (an "Included Capital Improvement") under
generally accepted accounting principles, unless said
expenditures are for the purpose of reducing Operating
Costs within the Building and Office Building Area (and
in such instance
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only to the extent of savings generated in connection
therewith or the amortized amount as provided herein, if
less) or are required under any mandatory governmental
law, ordinance or regulation, in which event the costs
thereof shall be included, but only to the extent of the
amortization of such Included Capital Improvement over
the useful life thereof; leasing commissions; tenant
work allowances (or work done for tenants); brokerage
commissions,; origination fees, points, mortgage
recording taxes, title charges and other costs or fees
incurred in connection with financing or refinancing or
sale or transfer of the Building or any portion thereof
or any interest therein; attorneys fees in connection
with leasing of space (or surrender, modification,
termination, extension or enforcement of any lease); any
expense paid to any related entity to the extent such
payment exceeds competitive charges in a bona fide
arms-length transaction; marketing, promotion and
advertising expenses; ground rent. As used in this
Subsection 22(A), the Base Period Costs for Operating
Costs shall be as defined in the Preamble.
(B) Fuel, Utilities and Electric Cost Escalation (hereinafter
"Utility and Energy Costs"). If during the Lease Term the
Utility and Energy Costs, including any fuel surcharges or
adjustments with respect thereto, incurred for water, sewer,
gas, electric, other utilities and heating, ventilating and
air conditioning for the Building to include all leased and
leasable areas (not separately billed or metered within the
Building) and Common Facilities electric lighting, water,
sewer and other utilities for the Building and Office Building
Area, for any Comparison Period shall be greater than the Base
Utility and Energy Costs (adjusted proportionately if the
Comparison Period is less than a calendar year), then Lessee
shall pay to Lessor, as Additional Rent, Lessee's Percentage
of all such excess Utility and Energy Costs. As used in this
Subsection 22(B), the Base Period Costs for Utility and Energy
Costs shall be as defined in the Preamble.
(C) Tax Escalation.
(i) If during the Lease Term the Real Estate Taxes for the
Building and Office Building Area at which the Demised
Premises are located for any Comparison Period shall be
greater than the Base Real Estate Taxes (adjusted
proportionately if the Comparison Period is less than a
calendar year), then Lessee shall pay to Lessor as
Additional Rent, Lessee's Percentage, as hereinafter
defined, of all such excess Real Estate Taxes.
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(ii) As used in this Subsection 22(C), the words and terms
which follow mean and include the following:
(a) The Base Period Costs for "Real Estate Taxes"
shall be as defined in the Preamble.
(b) "Real Estate Taxes" shall mean the property taxes
and assessments imposed upon the Building and
Office Building Area including, but not limited
to, real estate, city, county, village, school and
transit taxes, or taxes, assessments or charges
levied, imposed, or assessed against the Building
and Office Building Area by any other taxing
authority, whether general or specific, ordinary
or extraordinary, foreseen or unforeseen. If due
to a future change in the method of taxation, any
franchise, income or profit tax shall be levied
against Lessor in substitution for, or in lieu of,
or in addition to, any tax which would otherwise
not constitute a Real Estate Tax, such franchise,
income or profit tax shall be deemed to be a Real
Estate Tax for the purposes hereof. Any franchise,
income or profit tax which is in addition to any
tax which would otherwise constitute a Real Estate
Tax be deemed a Real Estate Tax if such tax is
customarily treated as a Real Estate Tax by the
owners of comparable office buildings in the
vicinity of the Building. Notwithstanding anything
contained herein to the contrary, Lessee shall
assume and pay to Lessor in full at the time of
paying the Term Basic Rent any excise, sales, use,
gross receipts or other taxes (other than an
income or excess profits tax) which may be imposed
on or measured by such Term Basic Rent or
Additional Rent or may be imposed on Lessor or on
account of the letting or which Lessor may be
required to pay or collect under any law now in
effect or hereafter enacted, but only to the
extent such taxes are imposed in lieu of or as a
substitute for the whole or any part of the
impositions that now constitute Real Estate Taxes.
(iii) The following shall be executed from Real Estate Taxes:
(a) except as expressly provided herein, any income,
excess profit taxes, capital stock taxes, federal
or state inheritance taxes, or estate taxes;
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(b) any license fee, business license fee, charge,
penalty or similar imposition or charge imposed by
a taxing authority except and only to the extent
that such charge or fee is levied or assessed in
lieu of a traditional ad valorem property tax; and
(c) any tax or assessment against property, real or
personal, of any firm, person, corporation or
other entity other than Lessor, including any
Lessee in the Building.
(D) Payment.
(i) At any time, and from time to time but no more than
twice in any calendar year for each of the escalation
categories (unless otherwise required pursuant to a
mortgage encumbering the Premises), after the
establishment of the Base Period Costs for each of the
categories referred to above, Lessor shall advise Lessee
in writing of Lessee's Percentage with respect to each
of the categories as estimated for the current Lease
Year and for each succeeding calendar year or
proportionate part thereof if the last period prior to
the Lease's termination is less than twelve (12) months
as then known to Lessor, and thereafter, Lessee shall
pay as Additional Rent, Lessee's percentage of the
excess of these costs over the Base Period Costs for the
then current period affected by such advice (as the same
may be periodically revised by Lessor as additional
costs are incurred, subject to the terms and conditions
hereof) in equal installments along with the payment of
Monthly Basic Rent on the first day of each month, such
new rates being applied to any months for which the
Monthly Basic Rent shall have already been paid which
are affected by the Operating Cost Escalation and/or
Utility and Energy Cost Escalation and/or Tax Escalation
Costs above referred to, as well as the unexpired months
of the current period, the adjustment for the then
expired months to be made at the payment of the next
succeeding installment of Monthly Basic Rent, all
subject to final adjustment at the expiration of each
calendar year.
(ii) The Base Period Costs during the calendar year in which
the Expiration Date occurs shall be prorated based on
the number of days during such calendar year that are
within the Term.
(E) Books and Records. Lessor shall maintain books of account
which shall be open to Lessee and its representatives at all
reasonable times so that
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Lessee can determine that such Operating, Utility, Energy and
Tax Costs have, in fact, been paid or incurred. Lessor shall,
for at least one (1) year after the end of the year in
question, keep files containing all such books, contracts,
instruments and other records with respect to such costs and
expenses. Lessee and/or Lessee's authorized employees,
accountants, auditors, agents or attorneys shall have the
right, upon reasonable notice to Lessor, to review, audit and
verify any and all such books, contracts, instruments and/or
records and to verify all monthly rent and/or any Additional
Rent. No such review or audit shall extend to periods of time
preceding the Rent Commencement Date, except to the extent
that any Operating Costs, Real Estate Taxes, Fuel and
Utilities Costs or Electric Costs related to such period are
or were being charged to Lessee, or form a material part of
the calculations relating to expenses or costs being charged
to Lessee. Lessor to the extent available shall furnish
Lessee, along with any bill or invoice relating to Real Estate
Taxes, with copies of the Real Estate Tax bill(s) applicable
thereto. Any disagreement with respect to any one or more of
said charges if not satisfactorily settled between Lessor and
Lessee with three (3) months after notice of such dispute is
served by either party, shall be referred by either party to
an independent certified public accountant to be mutually
agreed upon, and if such an accountant cannot be agreed upon,
the American Arbitration Association may be asked by either
party to select an arbitrator, whose decision on the dispute
will be final and binding upon both parties, who shall jointly
share any cost of such arbitration. Pending resolution of said
dispute, Lessee shall pay to Lessor the sum so billed by
Lessor subject to its ultimate resolution as aforesaid.
(F) Right of Review. Once Lessor shall have finally determined
said Operating, Utility and Energy or Tax Costs at the
expiration of a Lease Year, then as to the item so
established, Lessee shall only be entitled to dispute said
charge as finally established for a period of six (6) months
after such charge is finally established and communicated in
writing to Lessee, and Lessee specifically waives any right to
dispute any such charge at the expiration of said six (6)
month period.
(G) Occupancy Adjustment. If, with respect to Operating Cost
Escalation, as established in Subsection 22(A) hereof, and the
Utility and Energy Cost Escalation, as established in
Subsection 22(B) hereof, the Building is not ninety-five (95%)
percent occupied during the establishment of the respective
Base Periods, then the Base costs incurred with respect to
said Operating Cost or Utility and Energy Cost shall be
adjusted during any such period within the Base period so as
to reflect ninety-five (95%) percent occupancy. Similarly, if,
during any calendar year or
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proportionate part thereof subsequent to the Base Period the
Building is less than ninety-five (95%) percent occupied then
the actual costs incurred for Operating Cost and Utility and
Energy Cost shall be increased during any such period to
reflect ninety-five (95%) percent occupancy so that at all
times after the Base Period, the Utility and Energy Cost or
Operating Cost shall be actual costs, but in the event less
than ninety-five (95%) percent of the Building is occupied
during all or part of the calendar year involved, the Utility
and Energy Cost and Operating Cost shall not be less than that
which would have been incurred and ninety-five (95%) percent
of the Building been occupied. The aforesaid adjustment shall
only be made with respect to those items that are in fact
affected by variations in occupancy levels. To the extent any
Operating Cost or Utility and Energy Cost is separately billed
or metered or paid for directly by any Building lessee, to
include but not be limited to Lessee, or for which Lessor
receives reimbursements, said space shall be considered vacant
space for purposes of the aforesaid adjustment.
Notwithstanding anything to the contrary contained in this
Lease, Lessor shall not include in its calculation of
Operating Costs or Utility and Energy Costs any costs for
services not provided for Lessee's benefit, either solely or
in connection with such services provided to other tenants at
the Building.
(H) Lessee shall pay to Lessor, as Additional Rent, within ten
(10) days after being invoiced, such amounts charged by Lessor
for any Common Facilities services provided to accommodate (at
Lessee's request) Lessee's sole use of the Building after
Building Hours. Such amounts shall be billed monthly, at a
rate equal to the number of hours during such prior month that
such services, if any, are provided for Lessee's exclusive use
of the Building after Building Hours, such dollar amount to be
reasonably determined by Lessor's engineer, from time-to-time.
23. LESSEE'S ESTOPPEL.
(A) Each party hereto (as applicable, the "Certifying Party")
shall, from time to time, within fifteen (15) days of the
other party's written request (the "Requesting Party"),
execute, acknowledge and deliver to such Requesting Party a
written statement certifying that the Lease is unmodified and
in full force and effect, or that the Lease is in full force
and effect as modified and listing the instruments of
modification; the dates to which the Monthly Basic Rent and
Additional Rent and charges have been paid; and, to the best
of such Certifying Party's knowledge, whether or not the
Requesting Party is in default hereunder, and if so,
specifying the nature of the default and any such other
information as the Requesting Party may request. It is
intended that any such statement delivered pursuant to this
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Section may be relied on by a prospective purchaser of
Lessor's interest or mortgagee of Lessor's interest or
assignee of any mortgage of Lessor's interest or a permitted
assignee or subtenant of Lessee.
(B) The Certifying Party's failure to deliver such statement
within such time shall be conclusive upon such Certifying
Party that: (i) this Lease is in full force and effect and not
modified except as such Requesting Party may represent; (ii)
not more than one (1) installment of Monthly Basic Rent has
been paid in advance; (iii) there are no such defaults; and
(iv) notice to such Certifying Party shall be sent to such
Certifying Party's mailing address as set forth in this Lease.
Notwithstanding the presumptions of this Section, such
Certifying Party shall not be relieved of its obligation to
deliver said statement.
24. HOLDOVER TENANCY. If Lessee holds possession of the Premises after the Term
of this Lease, Lessee shall become a Lessee from month to month under the
provisions herein provided, but at a Monthly Basic Rent equal to the greater of
the fair market value of the Premises or two hundred (200%) percent of the
Monthly Basic Rent payable during the last full calendar month of the Term and
without the requirement for demand or notice by Lessor to Lessee demanding
delivery of possession of said Premises (but Additional Rent shall continue as
provided in this Lease), which sum shall be payable in advance on the first day
of each month, and such tenancy shall continue until terminated by Lessor, or
until Lessee shall have given to Lessor, at least thirty (30) days prior to the
intended date of termination, a written notice of intent to terminate such
tenancy, which termination date must be as of the end of a calendar month. The
time limitations described in this Section 24 shall not be subject to extension
for Force Majeure. Nothing herein contained shall be deemed to be a consent or
waiver by Lessor to a holdover by Lessee after the expiration or sooner
termination of this Lease. Lessee shall be liable for any and all damages
incurred by Lessor as a direct result of Lessee holding over following the
expiration or sooner termination of this Lease.
25. RIGHT TO SHOW PREMISES. Lessor may show the Premises to prospective
purchasers and mortgagees; and, during the twelve (12) months prior to
termination of this Lease, to prospective Lessees, during Building Hours on
reasonable notice to Lessee. Lessee shall be entitled to have a representative
accompany Lessor at the appointed time of entry; provided that such does not
unreasonably interfere with or prevent Lessor from taking the aforementioned
actions.
26. LESSEE IMPROVEMENT WORK AND LESSEE ALLOWANCE.
(A) Prior to June 30, 1999 (or in the event of delay caused by
Force Majeure, September 30, 1999, provided Lessee provides
Lessor with written notice explaining the circumstances
causing the completion delay), Lessee shall complete or cause
to be completed the work described in the first sentence
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of subsection 21(A) and on Exhibit E annexed hereto (as the
same may be modified from time-to-time, subject to Lessor's
reasonable approval, the "Lessee Improvement Work"). Prior to
commencing any work at the Premises, Lessee, at its expense,
shall cause to be prepared and shall deliver to Lessor space
plans for the Lessee Improvement Work. Such space plans shall
be subject to the prior written approval of Lessor, which
approval shall not be unreasonably withheld or delayed. Upon
approval of the space plans for the Lessee Improvement Work,
Lessee shall cause construction plans and specifications (as
the same may be modified from time-to-time, subject to
Lessor's reasonable approval, the "Plans and Specifications")
for the Lessee Improvement Work to be prepared by an architect
mutually agreeable to the parties, it being agreed by Lessor
that CUH2A, Inc. is an acceptable architect. The Plans and
Specifications shall be subject to the prior written approval
of Lessor, which approval shall not be unreasonably withheld
or delayed. Lessee shall prepare a list of general contractors
and subcontractors from which Lessee will solicit bids for the
Lessee Improvement Work. Such list shall be delivered to
Lessor for its written approval, which approval shall not be
unreasonably withheld or delayed and shall be conveyed to
Lessee within seven (7) business days after receipt of such
list from Lessor. Upon Lessor's request, Lessee shall provide
Lessor with proof that such general contractors are bondable
by a surety company acceptable to Lessor.
(B) Except for the Lessee Allowance, Lessee shall be reasonable
for all hard and soft costs and expenses with respect to the
design and construction of the Lessee Improvement Work. All
Lessee Improvement Work shall be performed in strict
accordance with the Plans and Specifications approved by
Lessor (other than insubstantial changes), in compliance with
the provisions of Section 6 of this Lease, in a good and
workmanlike manner and in strict compliance with all
applicable ordinances, laws, rules and regulations and the
requirements of all insurance policies covering the Building,
which requirements shall be communicated to Lessee. Lessee
hereby guaranties completion of all Lessee Improvement Work,
in strict accordance with the provisions of this Section 26.
Upon completion of the Lessee Improvement Work, Lessee or
Lessee's contractor(s) shall obtain all governmental and
quasi-governmental permits, approvals, authorizations and
certificates required to perform the Lessee Improvement Work,
Lessee or Lessee's contractor(s) shall obtain final signoff(s)
from all applicable governmental and quasi-governmental
authorities with respect to the Lessee Improvement Work and
shall promptly deliver copies thereof to Lessor.
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(C) Lessor hereby agrees to contribute towards the hard and soft
costs of the Lessee Improvement Work, a sum equal to: (a) the
lesser of: (i) the product of the Premises Area and Fifteen
Dollars and 00/100 ($15.00) or (ii) the actual out-of-pocket
costs and expenses incurred by Lessee for the design and
construction of the Lessee Improvement Work (except for the
costs and expenses incurred by Lessee to upgrade the Demised
Premises' electrical capacity to approximately 800 amps at
480/277 volts); and (b) in the event Lessee upgrades the
Demised Premises' electrical capacity as permitted by this
Lease, a portion of the actual out-of-pocket costs and
expenses incurred by Lessee up to an amount not to exceed
seven thousand five hundred dollars ($7,500) as follows: (i)
one hundred percent (100%) of such costs and expense up to the
first three thousand dollars ($3,000), (ii) fifty percent
(50%) of such costs and expenses, if any, in excess of the
first three thousand dollars ($3,000), up to twelve thousand
dollars ($12,000), and (ii) zero percent (0%) of such costs
and expenses, if any, in excess of twelve thousand dollars
($12,000) (the sum of the amounts described in clauses (a) and
(b) is referred to herein as the "Lessee Allowance"). Lessee
may include in the hard and soft costs, architect, engineer
and other consultant fees, general contractor costs, permits,
furniture relocation and assembly and reupholstery of
furniture. Following final completion of the Lessee
Improvement Work, Lessor shall disburse the Lessee Allowance
to Lessee within thirty (30) days of Lessee's request and upon
the furnishing of a final certificate of occupancy issued by
the applicable governmental authority, appropriate lien
waivers and the as-built Plans and Specifications for the
Lessee Improvement Work certified by the supervising
architect. Except for the Lessee Allowance, Lessor shall have
no obligation to make any improvements, alterations or
decorations to the Premises or any contributions or credits in
respect thereof.
27. WAIVER OF JURY TRIAL/NON-MANDATORY COUNTERCLAIMS.
IF LESSOR COMMENCES ANY SUMMARY PROCEEDINGS OR AN ACTION FOR NONPAYMENT OF
RENT, LESSEE SHALL NOT INTERPOSE ANY NON-MANDATORY COUNTERCLAIM OF ANY NATURE OR
DESCRIPTION IN ANY SUCH PROCEEDINGS OR ACTION. LESSEE AND LESSOR BOTH WAIVE A
TRIAL BY JURY OF ALL ISSUES ARISING IN ANY ACTION OR PROCEEDING BETWEEN THE
PARTIES HERETO OR THEIR SUCCESSORS, UNDER OR CONNECTED WITH THIS LEASE, OR ANY
OF ITS PROVISIONS.
28. LATE CHARGE. In addition to such other amounts to be paid by Lessee
following a default by Lessee under this Lease, Lessee, at Lessor's option,
shall pay as Additional Rent a "Late Charge" of four (4%) percent (but in no
event to exceed the maximum rate permitted by
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applicable law) of any installment of Monthly Basic Rent or Additional Rent paid
more than fifteen (15) days after the due date thereof for each monthly period
or portion thereof that the same remains unpaid, such Late Charge to cover the
extra expense involved in handling delinquent payment.
29. INSURANCE.
(A) Lessee's Insurance.
(i) Lessee covenants that during the entire Term hereof, at
its sole cost and expense, Lessee shall obtain, maintain
and keep in full force and effect the following
insurance:
(a) "All Risk" property insurance against fire, theft,
vandalism, malicious mischief, sprinkler leakage
and such additional perils as are now, or
hereafter may be, included in a standard extended
coverage endorsement from time to time in general
use in the State of New Jersey upon property of
every description and kind owned by Lessee and/or
under Lessee's care, custody or control located in
the Building or within the Office Building Area or
for which Lessee is legally liable or installed by
or on behalf of Lessee, including by way of
example and not by way of limitation, all Lessee
Improvement Work, furniture, fixtures, fittings,
installations and any other personal property.
(b) Commercial General Liability Insurance coverage
(on an occurrence basis form) to include personal
injury, bodily injury, broad form property damage,
operations hazard, blanket contractual liability,
naming Lessor and Lessor's mortgagee or trust deed
holder and ground Lessor (if any and if required
by prior written notice from Lessor to Lessee) as
additional named insureds in an amount per
occurrence of not less than Five Million and
00/100 ($5,000,000.00) Dollars combined single
limit bodily injury and property damage by either
a policy for underlying coverage policy or in
combination with an excess coverage policy.
(c) Business interruption insurance in such amounts as
will reimburse Lessee for direct or indirect loss
of earnings attributable to all perils commonly
insured against by prudent lessees or assumed by
Lessee pursuant to this
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Lease or attributable to prevention or denial of
access to the Premises, Building or Office
Building Area as a result of such perils.
(d) Worker's Compensation insurance in form and amount
as required by law.
(e) Any other form or forms of insurance or any
increase in the limits of any of the aforesaid
enumerated coverages or other forms of insurance
as Lessor or the mortgagees or ground lessors (if
any) of Lessor may reasonably require from time to
time if in the reasonable opinion of Lessor or
said mortgagees or ground Lessors said coverage
and/or limits become inadequate or less than that
commonly maintained by comparable Lessees in
comparable buildings in the Piscataway, New Jersey
area.
(ii) All insurance policies required pursuant to this
Subsection 29(A) shall be underwritten by insurers rated
A-(VIII) or better by A.M. Best Company who are licensed
to do business in the State of New Jersey and shall be
in form reasonably satisfactory from time to time to
Lessor. A certificate evidencing that such insurance is
in effect shall have been delivered to Lessor prior to
the date hereof. Such insurance certificate will provide
an undertaking by the insurers to notify Lessor and the
mortgagees or ground Lessors (if any) and of which
Lessee has notice of Lessor in writing not less than
thirty (30) days prior to any material change, reduction
in coverage, cancellation, or other termination thereof.
The foregoing notwithstanding, in the event that
Lessee's insurer's Best's rating is less than A-(VIII),
then Lessee may have such insurer underwrite the
aforesaid insurance but same shall be written with no
deductible.
(iii) In the event of damage to or destruction of the Building
and/or Premises, and such damage or destruction entitles
either Lessor or Lessee to terminate this Lease pursuant
to Section 9 hereof and the Lease is so terminated, then
such portion of Lessee's net insurance proceeds relating
to the Lessee Improvement Work and other leasehold
improvements and alterations which are so attached to
the Building that, had such damage not occurred, they
could not be removed without substantial damage to the
Building (but not Lessee's trade fixtures, equipment,
Removable Improvements, furniture or other personal
property of Lessee in the Premises)
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("Lessee's Improvement Proceeds"), shall be allocated as
follows: (a) first, to Lessor an amount up to but not
more than the unamortized portion of the Lessee
Allowance paid to Lessee (computed on a straight-line
basis over the initial Term of this Lease), and (b) the
balance, if any, to Lessee. If the termination of the
Lease is due to damage to the Building, and if the
Premises have not been so damaged, Lessee will
relinquish to Lessor, in accordance with and subject to
the provisions subsection 5(C) of this Lease, all Lessee
Improvement Work and other leasehold improvements and
alterations which are so attached to the Building that,
had such damage not occurred, they could not be removed
without substantial damage to the building (but not
Lessee's trade fixtures, Removable Improvements,
equipment, furniture or other personal property of
Lessee in the Premises). In the event of damage to or
destruction of the Building and/or Premises and such
damage or destruction does not entitle Lessor and Lessee
to terminate this Lease pursuant to Section 9 hereof
and/or both elect not to do so, then Lessee's
Improvement Proceeds shall be allocated as follows: (x)
first, to Lessor an amount equal to the lesser of the
Lessee Allowance paid to Lessee, or an amount equal to
the Lessee Improvement Proceeds amount times a fraction
where (a) the numerator is the Lessee Allowance, and (b)
the denominator is the total cost of the Lessee
Improvement work, which shall be retained by Lessor
(subject to the provisions of the following sentence),
and (y) the balance, if any, to Lessee to be used for
Lessee's restoration obligations hereunder. To the
extent that any of Lessee's Improvement Proceeds are
paid to Lessor, such proceeds shall be held by Lessor in
trust, in an interest-bearing account and provided no
Event of Default has occurred and is continuing,
disbursed to Lessee following final completion of such
restoration work by Lessee, subject to the same
conditions for disbursement of the Lessee Allowance as
set forth in Section 26(C) of this Lease.
(iv) Lessee agrees that it will not keep or use in or upon
the Premises or within the Building or Office Building
Area any article which is prohibited by any insurance
policy in force from time to time covering the Building
or Office Building Area of which Lessee has knowledge
unless Lessee pays for any increase in insurance
premiums directly resulting therefrom and provided that
such increase is based upon competitive insurance
industry rates. In the event Lessee's occupancy or
conduct of business in or on the Premises or Building or
Office Building area, whether or not
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Lessor has consented to the same, directly results in
any increase in premiums for insurance carried from time
to time by Lessor with respect to the Building or Office
Building Area, Lessee shall, within ten (10) days from
the date of Lessor's invoice therefor, (a) pay such
increase in premiums as Additional Rent, or (b) directly
communicate with the appropriate insurer in order to
dispute such increased premium charged to Lessor,
provided, however, that in the event that Lessee so
disputes such increased premium, Lessee shall pay to
Lessor the full amount of such charges and Lessor, if
Lessee is successful in negotiating a reduction in such
premium charges, or the refund thereof, shall promptly
reimburse Lessee for the proportionate amount of such
reduction or refund within ten (10) days after Lessor
recovers such adjustments. If Lessee ceases the activity
that resulted in the increase in premium, then provided
the insurer reduces the premium, Lessee will receive a
corresponding reduction. In determining whether
increased premiums are a direct result of Lessee's use
and occupancy, a schedule issued by the organization
computing the insurance rate on the Building or Office
Building Area showing the components of such rate shall
be conclusive evidence of the items and charges making
up such rate, subject to the provisions hereof. Lessee
shall promptly comply with all reasonable requirements
of the insurance authority or of any insurer now or
hereafter in effect relating to the Building, Office
Building Area or Premises.
(v) If any insurance policy carried by Lessor or Lessee
shall be canceled or cancellation shall be threatened or
the coverage thereunder reduced or threatened to be
reduced in any material way by reason of the use or
occupation of the Premises, Office Building Area or
Building or any part thereof by Lessee or any assignee
or sublessee of Lessee or anyone permitted by Lessee to
be upon the Premises, other than for the Permitted Use,
and if Lessee fails to remedy the conditions giving rise
to said cancellation or threatened cancellation or
reduction in coverage on or before the earlier of (a)
seventy-two (72) hours after notice thereof from Lessor,
or (b) prior to said cancellation or reduction becoming
effective, Lessee shall be in default hereunder and
Lessor shall have all of the remedies available to
Lessor pursuant to this Lease. Lessor represents and
warrants to Lessee that, as of the date hereof, Lessor
has notified its insurance company of Lessee's intended
use and occupancy of the Premises as described in the
definition of "Permitted Uses" and, to the Lessor's
actual knowledge, such use and occupancy by Lessee is
acceptable to Lessor's insurer and will
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not adversely impact the maintenance or coverage of any
of Lessor's insurance policies covering the Building.
(B) Lessor's Insurance. Lessor covenants and agrees that throughout the
Term it will insure the Building (excluding any property with
respect to which Lessee is obligated to insure pursuant to
Subsection 29(A)(i)(a) above) against damage by fire and standard
extended coverage perils and public liability insurance in such
reasonable amounts with such reasonable deductibles as required by
any mortgagee or ground Lessor (if any), or if none, as would be
carried by a prudent owner of a similar building in the area;
provided, however, that Lessor shall at all times during the Term of
this Lease keep and maintain (i) insurance against loss by fire and
hazards covered by extended coverage in an amount at least equal to
80% of the insurable value of the Building, (ii) comprehensive
general liability insurance, including personal injury and property
damage coverage, with limits at least equal to those required by
Lessee hereunder, and (iii) rental abatement insurance against
abatement of loss of rent in case of fire or other casualty or
cause. Lessor may, but shall not be obligated to, take out and carry
any other forms of insurance as it or the mortgagee or ground Lessor
(if any) of Lessor may require or reasonably determine available.
All insurance carried by Lessor on the Building or Office Building
Area shall be included as an Operating Expense pursuant to
Subsection 22(A). Notwithstanding its inclusion as an Operating
Expense or any contribution by Lessee to the cost of insurance
premiums by Lessee as provided herein, Lessee acknowledges that it
has no right to receive any proceeds from any such insurance
policies carried by Lessor except as otherwise provided herein.
Lessee further acknowledges that the exculpatory provisions of this
Lease as set forth in Section 35 and the provisions of Subsection
29(A) as to Lessee's insurance are designed to insure adequate
coverage as to Lessee's property and business without regard to
fault and to avoid Lessor obtaining similar coverage for said loss
for its negligence or that of its agents, servants or employees
which could result in additional costs includable as part of
Operating Expenses which are payable by Lessee. Lessor will not
carry insurance of any kind on any Lessee Improvement Work or on any
of Lessee's furniture or furnishings, or on any fixtures, equipment,
appurtenances or improvements of Lessee under this Lease and Lessor
shall not be obligated to repair any damage thereto or replace the
same.
(C) Waiver of Subrogation. Any property insurance policy, which either
party obtains in connection with the Premises, Building or Office
Building Area shall include a clause or endorsement denying the
insurer any rights of subrogation against the other party (i.e.
Lessor or Lessee) for all perils covered by said policy.
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30. NO OTHER REPRESENTATIONS. No representations or promises shall be binding on
the parties hereto except those representations and promises contained herein or
in some future writing signed by the party making such representation(s) or
promise(s).
31. QUIET ENJOYMENT. Lessor covenants that if, and so long as, Lessee pays the
Term Basic Rent, and any Additional Rent as herein provided, and performs the
covenants hereof, Lessor shall do nothing to affect Lessee's right to peaceably
and quietly have, hold and enjoy the Premises for the Term herein mentioned,
subject to the provisions of this Lease and to any mortgage or deed of trust to
which this Lease shall be subordinate, but subject to any of Lessee's rights
under any nondisturbance agreement.
32. INDEMNITY.
(A) Lessee is and shall be, except as otherwise provided herein, in
control and possession of the Demised Premises as provided herein,
and Lessor shall not be liable for any injury or damage to any
property or to any person happening on or about the Demised
Premises, or for any injury or damage to the Demised Premises, nor
to any property of Lessee, or of any other person contained therein,
unless such injury or damage is caused by or attributable to the
gross negligence or willful misconduct of Lessor, its agents,
servants, employees, contractors, licensees, or invitees.
(B) Lessee shall indemnify and save Lessor harmless against and from all
liabilities, claims, suits, fines, penalties, damages (except for
consequential damages), losses, fees, costs and expenses (including
reasonable attorneys' fees) which may be imposed upon, incurred by
or asserted against Lessor by reason of:
(i) Any work or thing done by Lessee, its agents or employees in,
on or about the Demised Premises or any part thereof,
including, but not limited to (except as otherwise agreed to
in writing by the other Building tenants, pursuant to Section
6 hereof), the interruption and/or diminution of Building
services provided to other tenants in the Building;
(ii) Any use, occupation, condition, operation by Lessee, its
agents or employees of the Demised Premises or any part
thereof or any occurrence in, on or about the Demised Premises
not caused by or attributable to the gross negligence or
willful misconduct of Lessor, its agents, servants, employees,
contractors, licensees, or invitees;
(iii) The negligence or willful misconduct of Lessee or any
sublessee or any employees, licensees or invitees of Lessee
occurring anywhere within the Premises, the Building or the
Building Office Area;
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(iv) Any accident, injury (including death) or damage, unless
caused by the gross negligence or willful misconduct of
Lessor, its agents, servants, employees, contractors,
licensees or invitees, to any third party or property owned by
someone other than Lessee and not under the care, custody or
control of the Lessee occurring in, on or about the Demised
Premises; and
(v) Any failure on the part of Lessee to perform or comply with
any of the covenants, agreements, terms or conditions
contained in this Lease.
(C) The provisions of this Section 32 shall survive expiration or
earlier termination thereof.
(D) Lessor shall indemnify and save Lessee harmless against and from all
liabilities, claims, suits, fines, penalties, damages (except for
consequential damages), losses, fees, costs and expenses (including
reasonable attorneys' fees) which may be imposed upon, incurred by
or asserted against Lessee by reason of the gross negligence or
willful misconduct of Lessor or any employee, servant, agent, or
contractor of Lessor.
33. APPLICABILITY TO HEIRS AND ASSIGNS. The provisions of this Lease shall apply
to, bind and inure to the benefit of Lessor and Lessee and their respective
heirs, successors, legal representatives and assigns, provided that nothing
herein shall be deemed to waive the provisions of Section 7 hereof. It is
understood that the term "Lessor" as used in this Lease means only the owner, a
mortgagee in possession or a master lessor of the Building and/or Building Area,
so that in the event of any sale of the Building and/or Building Area or of any
lease thereof or if a mortgagee shall take possession of the Premises, the
Lessor named herein shall be and hereby is entirely freed and relieved of all
covenants and obligations of Lessor hereunder accruing thereafter, and it shall
be deemed without further agreement that the purchaser, the ground lessee of the
Building, or the mortgagee in possession has assumed and agreed to carry out any
and all covenants and obligations of Lessor hereunder.
34. PARKING SPACES. Lessee's occupancy of the Demised Premises shall include the
use of those unassigned parking spaces as enumerated in the Preamble. Lessee
shall, upon request by Lessor, promptly furnish to Lessor the license numbers of
the cars operated by Lessee and its sublessees, licensees, invitees (on a
regular basis), concessionaires, officers and employees. If any vehicle of
Lessee, or of any sublessee, licensee, concessionaire, or of their respective
officers, agents or employees, is parked in any part of the Common Facilities
other than the employee parking area(s) designated therefor by Lessor, Lessee
shall pay to Lessor such reasonable charge as may be fixed by Lessor from time
to time. All amounts due under the provisions of this Section shall be deemed to
be Additional Rent. Nothing contained herein shall be deemed to impose any
obligation on Lessor to police the parking area. In no event shall the ratio or
parking spaces available for Lessee's use to square footage leased by less than
1 space per 250 rentable square feet.
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35. LESSOR'S EXCULPATION.
(A) Except as otherwise provided herein, Lessor shall not be liable to
Lessee for any loss suffered by Lessee including, but not limited to
(i) loss of or injury to Lessee or to Lessee's property or that for
which Lessee is legally liable including but not limited to theft or
burglary; or (ii) that which results from or is incidental to the
furnishing of or failure to furnish or the interruption in
connection with the furnishing of any service which Lessor is
obligated to furnish pursuant to this Lease; or (iii) any
interruption to Lessee's business. Nothing contained in the
preceding sentence shall be deemed to limit Lessor's liability
(excluding liability for consequential damages) resulting from
Lessor's gross negligence or willful misconduct; provided that in no
event shall Lessor be liable for any damage to improvements,
furniture, fixtures, fittings, installations or other property
covered by (or which should have been covered by) the "All Risk"
insurance required to be maintained by Lessee pursuant to Section
29(A)(i)(a) above.
(B) The aforesaid exculpatory Section is to induce the Lessor, in its
judgment, to avoid or minimize covering risks which are better
quantified and covered by Lessee either through insurance (or
self-insurance or combinations thereof if specifically permitted
pursuant to this Lease) thereby permitting potential cost savings in
connection with the Operating Expenses borne by Lessee pursuant to
Section 22.
36. RULES OF CONSTRUCTION/APPLICABLE LAW. Any table of contents, captions,
headings and titles in this Lease are solely for convenience of reference and
shall not affect its interpretation. This Lease shall be construed without
regard to any presumption or other rule requiring construction against the party
causing this Lease to be drafted. If any words or phrases in this Lease shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added, this lease shall be construed as if the words or
phrases so stricken out or otherwise eliminated were never included in this
Lease and no implication or inference shall be drawn from the fact said words or
phrases were so stricken out or otherwise eliminated. Each covenant, agreement,
obligation or other provision of this Lease on either party's part to be
performed, shall be deemed and construed as a separate and independent covenant
of such party, not dependent on any other provision of this Lease. All terms and
words used in this Lease, regardless of the number of gender in which they are
used, shall be deemed to include any other number and any other gender as the
context may require. This Lease shall be governed and construed in accordance
with the laws of the State of New Jersey, without regard for any of its
conflicts of law principles. If any of the provisions of this Lease, or the
application thereof to any person or circumstances, shall to any extent by
invalid or unenforceable, the remained of this Lease, or the application of such
provision or provisions to persons or circumstances other than those as to whom
or which it is held invalid or unenforceable, shall not be affected thereby, and
every provision of this Lease shall be valid and enforceable to the fullest
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extent permitted by law. In the event any provision of this Lease provides that
Lessor will not unreasonably withhold its consent or approval to any matter,
Lessee's sole and exclusive remedy, if it disputes whether Lessor unreasonably
withheld its consent, shall be to seek a declaratory judgment as to whether
Lessor unreasonably withholding its consent or approval to any matter.
37. BROKER. Lessor represents and warrants to Lessee that Newmark is Lessor's
sole broker with whom it has dealt or negotiated in bringing about this Lease,
and Lessee represents and warrants to Lessor that CB is Lessee's sole broker
with whom it has dealt or negotiated in bringing about this Lease. Lessor agrees
to pay any and all commission(s) owing to Newmark and CB in connection with this
transaction pursuant to the terms of a separate written agreement between Lessor
and each of Newmark and CB. Lessor and Lessee each hereby agree to indemnify and
hold the other harmless from any breach or claimed breach of their respective
foregoing representations, warranties and covenants.
38. PERSONAL LIABILITY. Notwithstanding anything to the contrary provided in
this Lease, it is specifically understood and agreed, such agreement being a
primary consideration for the execution of this Lease by Lessor, that there
shall be absolutely no personal liability on the part of the Lessor, its
constituent members (to include but not be limited to officers, directors,
partners and trustees), their respective successors, assigns or any mortgagee in
possession (for the purposes of this Section, collectively referred to as
"Lessor"), with respect to any of the terms, covenants and conditions of this
Lease, and that Lessee shall look solely to the equity of Lessor in the Building
and Building Area for the satisfaction of each and every remedy of Lessee in the
event of any breach by Lessor of any of the terms, covenants and conditions of
this Lease to be performed by Lessor, such exculpation of liability to be
absolute and without any exceptions whatsoever.
39. NO OPTION. The submission of this Lease for examination does not constitute
a reservation of or option for the Premises, and this Lease Agreement becomes
effective as a Lease Agreement only upon execution and delivery thereof by
Lessor and Lessee.
40. DEFINITIONS.
(A) Lessee's Percentage. The parties agree that Lessee's Percentage, as
defined in the Preamble, reflects and will be continually adjusted
to reflect the sum arrived at by dividing the gross square feet of
the area rented to Lessee (including an allocable share of all
Common Facilities) as set forth in the Preamble [the numerator],
plus any additional gross square footage leased from time to time
pursuant to this Lease, by the total number of gross square feet of
the entire Building (or additional buildings that may be constructed
within the Office Building Area) [the denominator], in each case
measured in accordance with BOMA standards. Lessor and Lessee agree
that on the date hereof the Building will be deemed to contain
64,871 rentable square feet. Lessor shall have the right to make
changes or revisions in the Common Facilities of the Building so as
to provide additional
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leasing area; provided, however, that such changes shall not
materially reduce the services Lessor is required to provide Lessee
hereunder to the terms and conditions of this Lease. Lessor shall
also, subject to the terms and conditions hereof, have the right to
construct additional buildings in the Office Building Area for such
purposes as Lessor may deem appropriate and subdivide the lands for
that purpose if necessary, and upon so doing, the Office Building
Area shall become the subdivided lot on which the Building in which
the Demised Premises is located. If any service provided for in
Subsection 22(A) or any utility provided for in Subsection 22(B) is
separately billed or separately metered within the Building and not
so in the applicable base year, then the square footage so billed or
metered shall be deemed vacant and if applicable subject to the
Occupancy Adjustment set forth in Subsection 22(G).
(B) Common Facilities. Common Facilities shall include, by way of
example and not by way of limitation, the non-assigned parking
areas; lobby; elevator(s), if applicable; fire stairs; public
hallways; public lavatories; all other general Building facilities
that service all Building lessees; air conditioning rooms; fan
rooms; janitors' closets; electrical closets, telephone closets;
elevator shafts and machine rooms; flues; stacks; pipe shafts; and
vertical ducts with their enclosing walls relating to services
provided to all Building lessees. Lessee's use of those Common
Facilities not open to all Lessees is subject to Lessor's consent.
Lessor may at any time close temporarily any Common Facilities to
make repairs or changes therein or to effect construction, repairs
or changes within the Building or Office Building Area, or to
discourage non-lessee parking or to prevent the dedication of the
same, and may do such other acts in and to the Common Facilities as
in its reasonable judgment may be desirable to improve the
convenience thereof but shall always in connection therewith
endeavor to minimize any inconvenience to Lessee. Lessee shall have,
as appurtenant to the Demised Premises, the right to use, in common
with other lessees in the Building and the Office Building Area,
without limitation, the common walkways and driveways necessary for
access to the Building and the Office Building Area, and all other
parts of the Building and/or the Office Building Area, designed or
intended by Lessor for the use of all Building lessees generally.
(C) Force Majeure. Force Majeure shall mean and include those situations
beyond either party's control, including by way of example and not
by way of limitation, acts of God; accidents; strikes; shortages of
labor; supplies or materials; inclement weather; or, where
applicable, the passage of time while waiting, in good faith, for an
adjustment of insurance proceeds. Any time limits required to be met
by either party hereunder, whether specifically made subject to
Force Majeure or not, except those related to the payment of Term
Basic Rent or Additional Rent and except as to the time periods set
forth in Section 24, shall, unless specifically stated to the
contrary elsewhere in this Lease, be automatically extended by the
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number of days by which any performance called for is delayed due to
Force Majeure.
(D) Building Hours. As used in this Lease, the Building Hours shall be
Monday through Friday, 8:00 a.m. to 6:00 p.m., and Saturdays from
8:00 a.m. to 1:00 p.m., excluding those holidays as set forth on
Exhibit D attached hereto and made a part hereof, except the Common
Facilities lighting in the Building and Office Building Area shall
be maintained for such additional hours as, in Lessor's reasonable
judgment, is necessary or desirable to insure proper operation of
the Building and Office Building Area. Notwithstanding the
foregoing, Lessee shall have access to the Premises seven (7) days
per week, twenty-four (24) hours per day, three hundred sixty-five
(365) days per year.
(E) Additional Rent. As used in this Lease, Additional Rent shall mean
all sums in addition to Term Basic Rent payable by Lessee to Lessor
pursuant to the provisions of this Lease.
41. LEASE COMMENCEMENT. Notwithstanding anything contained herein to the
contrary, Lessee may take possession of the Demised Premises on the date hereof
and Lessee shall be bound by, and comply with all of the provisions of this
Lease, except that Lessee shall not be required to pay any installment of Term
Basic Rent until December 1, 1998, when the first installment of Term Basic Rent
shall be due and payable.
42. NOTICES. Any notice by either party to the other shall be in writing and
shall be deemed to have been duly given only if delivered personally or sent by
registered mail or certified mail in a postpaid envelope addressed or sent by
recognized overnight courier service which provides written evidence of receipt
with next business day delivery specified, if to Lessee, at the following
address: Praecis Pharmaceuticals Incorporated, 1 Hampshire Street, Cambridge,
Massachusetts, 02139-1572, Attn: Chief Financial Officer, with a copy to the
Premises, Attn.: Gary L. Olson, Ph.D., and with a copy to Skadden, Arps, Slate,
Meagher & Flom LLP, One Beacon Street, Boston, Massachusetts, 02108-3194, Attn.:
Kent A. Coit, Esquire; if to Lessor, at Lessor's address as set forth above,
with a copy to the Premises and with a copy to Dechert Price & Rhoads, Attn.:
Glenn D. Blumenfeld, Esq., 4000 Bell Atlantic Tower, 1717 Arch Street,
Philadelphia, Pennsylvania 19103-2793, or, to either at such other address as
Lessee or Lessor, respectively, may designate in writing. Notice shall be deemed
to have been duly given if delivered personally, on delivery thereof, and if
mailed, upon the third (3rd ) day after the mailing thereof or if sent by
overnight courier service, upon the next business day after sending.
43. ACCORD AND SATISFACTION. No payment by Lessee or receipt by Lessor of a
lesser amount than the Monthly Basic Rent and additional charges payable
hereunder shall be deemed to be other than a payment on account of the earliest
stipulated Monthly Basic Rent and Additional Rent, nor shall any endorsement or
statement an any check or any letter
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accompanying any check or payment for Basic Rent or Additional Rent be deemed an
accord and satisfaction, and Lessor may accept such check or payment without
prejudice to Lessor's right to recover the balance of such Basic Rent and
Additional Rent or pursue any other remedy provided herein or by law.
44. EFFECT OF WAIVERS. No failure by Lessor to insist upon the strict
performance of any covenant, agreement, term or condition of this Lease, or to
exercise any right or remedy consequent upon a breach thereof, and no acceptance
by Lessor of full or partial Monthly Basic Rent or Additional Rent during the
continuance of any such breach, shall constitute a waiver of any such breach or
of such covenant, agreement, term or condition. No consent or waiver, express or
implied, by Lessor or of any breach of any covenant, condition or duty of Lessee
shall be construed as a consent or waiver to or of any other breach of the same
or any other covenant, condition or duty, unless in writing signed by Lessor.
45. TIME OF ESSENCE. Time shall be of the essence with respect to all dates and
time periods set forth in this Lease.
46. MORTGAGEE'S NOTICE AND OPPORTUNITY TO CURE. Lessee agrees to give any
mortgagee and/or trust deed holder, by registered mail or overnight courier, a
copy of any notice of default served upon Lessor, provided that, prior to such
notice, Lessee has been notified in writing (by way of notice of assignment of
rents and leases or otherwise) of the address of such mortgagees and/or trust
deed holders. Lessee further agrees that, if Lessor shall have failed to cure
such default within the time provided for in this Lease, then such mortgagee
and/or trust deed holder shall have an additional thirty (30) days within which
to cure such default, or if such default cannot be cured within that time, then
such additional time as may be reasonably necessary, provided that within such
thirty (30) days, such mortgagee and/or trust deed holder has commenced and is
diligently pursuing the remedies necessary to cure such default (including but
not limited to commencement of foreclosure proceedings if necessary to effect
such cure), in which event this Lease shall not be terminated while such
remedies are being so diligently pursued.
47. LESSOR'S RESERVED RIGHTS. Lessor and Lessee acknowledge that the Premises
are in a Building which is not open to the general public. Access to the
Building is restricted to Lessor, Lessee, their agents, employees and to their
invited visitors. In the event of a labor dispute including a strike, picketing,
informational or associational activities directed at Lessee or any other
Lessee, Lessor and Lessee agree to cooperate in making any reasonably necessary
change in operating conditions to reasonably restrict pedestrian, vehicular or
delivery ingress and egress to a particular location. Additionally, Lessor
reserves unto itself all rights not granted Lessee, including by way of example
and not by way of limitation, the right to change the name by which the Building
is commonly known; provided that, to the extent appropriate, Lessor shall notify
Lessee when Lessor exercises any such right reserved to Lessor. Notwithstanding
the foregoing, Lessor shall not change the name or street address of the
Building except upon sixty (60) days prior written notice to Lessee, except that
if the street address of the Building is
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modified by an entity other than Lessor or a person, firm, corporation or other
party related to or affiliated with Lessor, including any governmental entity,
the foregoing shall not be applicable.
48. CORPORATE AUTHORITY. Lessee represents and warrants that this Lease and
Lessee's execution of this Lease has been duly authorized and approved by the
Lessee's Board of Directors. The undersigned officers of Lessee, executing this
Lease on behalf of Lessee represent and warrant that they are officers of the
corporation with authority to execute this Lease on behalf of Lessee.
Concurrently with Lessee's execution and delivery of this Lease, Lessee will
provide Lessor with a Secretary's certificate attesting to a corporate
resolution confirming the aforesaid.
49. GOVERNMENT REQUIREMENTS. In the event of the imposition of mandatory
federal, state, or local governmental control, rules, regulations, or
restrictions on the use or consumption of energy or other utilities or with
respect to any other aspect of this Lease during the Term, both Lessor and
Lessee shall be bound thereby.
50. RENEWAL OPTION.
(A) Lessee shall have the right to extend the Term of this Lease for two
additional terms of five (5) years each commencing on the day
following the expiration of the initial or renewal Term, as
applicable, of this Lease (hereinafter referred to as the "Rent
Commencement Date of the Applicable Extension Term") provided that:
(i) Lessee shall give Lessor notice (hereinafter the "Extension
Notice") of its election to extend the term of this Lease,
which notice shall be given at least twelve (12) months prior
to the expiration date of the initial Term or first Extension
Term of this Lease, as applicable; and
(ii)
(a) Lessee has not assigned this Lease (other than pursuant
to Section 7(C) or in connection with a Provid Research
spin-off pursuant to Section 7(A)) or sublet more than
fifty percent (50%) of the Demised Premises to another
party (other than to a division, subsidiary or affiliate
of Lessee) which sublease is then in effect and there is
no continuing default, and no event has occurred which
with the giving of notice or the passage of time, or
both, would constitute a default on the part of Lessee
(for purposes of this Section 50, a "Default"), under
the Lease as of the time of the giving of the Extension
Notice and the Rent Commencement Date of the Applicable
Extension Term. Notwithstanding the foregoing, if a
Default exists on such date that Lessee gives Lessor an
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Extension Notice, such notice will not be invalid as a
result of the existence of such Default; provided that
Lessee cures such Default and delivers evidence thereof
to Lessor within sixty (60) days from the date the
Extension Notice is given. If Lessee fails to cure such
Default and provide Lessor with evidence thereof within
such sixty (60) day period, then the Extension Notice
shall become null and void upon notice from Lessor to
Lessee within seventy (70) days after the date the
Extension Notice is given and failure by Lessee to cure
the Default within five (5) days thereafter and this
Section 50 shall have no further force of effect and
shall be deemed deleted from this Lease.
(b) If Lessee timely gives the Extension Notice and the
conditions set forth in this subparagraph (ii) have been
satisfied or waived by Lessor, Lessee shall be
irrevocably bound to lease the Demised Premises
during the Applicable Extension Term on the terms
and conditions provided in this Section 50, including,
without limitation, at the Annual Base Rent
determined in accordance herewith. If Lessee does not
timely send an Extension Notice pursuant to this
Section 50A, this Section 50 shall have no force or
effect and shall be deemed deleted from this Lease.
(B) The Annual Basic Rent payable by Lessee to Lessor during the first
Extension Term shall be increased to ninety-five (95%) percent of
the fair market rent for the Premises and shall be increased to the
fair market value of the Premises for the second Extension Term, but
with the base years for Base Operating Costs, Base Real Estate Taxes
and Base Utility and Energy Costs being adjusted to the calendar
year commencing on the January 1 preceding the Rent Commencement
Date of the Applicable Extension Term. Fair market rent shall be
determined by Lessor, subject to the right of Lessee to arbitrate
the amount of fair market rent as hereinafter provided. At least
twelve (12) months prior to the expiration date of the initial Term
or first Extension Term, as applicable, but in no event more than
fifteen (15) months prior to the expiration date of the initial Term
or first Extension Term, as applicable, Lessee may give Lessor
notice of its desire to determine Lessor's good faith estimate of
the fair market rent for the Premises applicable to such Extension
Term. Within thirty (30) days after Lessor receives such notice,
Lessor shall give Lessee notice of such estimate.
(C)
(i) In the event Lessee is entitled to extend the Term hereunder,
and timely gives the Extension Notice in accordance with the
provisions of Section 50A hereof, and Lessee thereafter
disputes the fair market rent as
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determined by Lessor pursuant to Section 50B hereof then at
any time on or before the date occurring thirty (30) days
after Lessee has been notified by Lessor of the fair market
rent, Lessee may initiate the arbitration provided for herein
by giving notice from Lessee, which notice shall specify the
name and address of the person designated to act as an
arbitrator on its behalf.
(ii) Within ten (10) days after Lessor receives such notice from
Lessee, Lessor shall give notice to Lessee specifying the name
and address of the person designated to act as an arbitrator
on Lessor's behalf. If Lessor fails to notify Lessee of the
appointment of Lessor's arbitrator within such ten (10) day
period, then Lessee may request the appointment of the second
arbitrator in the same manner as hereinafter provided under
Paragraph 50C(iii) for the appointment of a third arbitrator
in a case where neither the two arbitrators appointed
hereunder nor the parties are able to agree upon such
appointment.
(iii) The two arbitrators so chosen shall meet within ten (10) days
after the second arbitrator is appointed, and if, within ten
(10) days after the second arbitrator is appointed the two
arbitrators do not agree upon the fair market rent, they shall
together appoint a third arbitrator. In the event of their
being unable to agree upon such appointment within fifteen
(15) days after the appointment of the second arbitrator, the
third arbitrator shall be selected by the Lessor and Lessee if
they can agree thereon within a further period of five (5)
days. If the Lessor and Lessee do not so agree, then Lessee,
on behalf of itself and Lessor and on notice to Lessor made
within thirty (30) days after the appointment of the second
arbitrator, may request such appointment by the American
Arbitration Association (or any successor organization
thereto) in accordance with its rules then prevailing or if
the American Arbitration Association (or such successor
organization) shall fail to appoint said third arbitrator
within thirty (30) days after such request is made, then
Lessee may apply within thirty (30) days after such thirty
(30) day period, on notice to Lessor, to a court of competent
jurisdiction for the appointment of such third arbitrator.
(iv) Each of the arbitrators selected as herein provided shall have
at least ten (10) years experience in the leasing and renting
of office space in first class buildings in Middlesex County,
New Jersey. In addition, each of the arbitrators shall be an
independent party not affiliated in any way with either Lessor
or Lessee.
(v) If a third arbitrator is chosen as provided in Section 50C
above, then such third arbitrator shall select either the fair
market rent determined by the
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arbitrator appointed by or for Lessor or the fair market rent
determined by the arbitrator selected by Lessee; the third
arbitrator may not select any other amount, and may not "split
the difference" between the determinations of the arbitrators
selected or appointed by or for the parties. The third
arbitrator shall so determine the fair market rent of the
Demised Premises and render a written certified report of his
determination to both Lessor and Lessee within ten (10) days
after appointment of the third arbitrator.
(vi) Each party shall pay the fees and expenses of the original
arbitrator appointed by or for such party, and all other
expenses (not including the attorneys fees and similar
expenses of the parties which shall be borne separately by
each of the parties) of the arbitration shall be borne by the
parties equally. If a third arbitrator is selected or
appointed, the fees and expenses of the third arbitrator shall
be borne equally by parties hereto.
(vii) In the event Lessee initiates the aforesaid arbitration
process and as of the date of expiration of the initial Term
or first Extension Term, as applicable, of this Lease, the
amount of fair market rent for the applicable Extension Term
has not been determined, Lessee shall pay the amount of Rent
and Additional Rent payable from Lessor to Lessee hereunder,
and when the determination of fair market rent has actually
been made, an appropriate retroactive adjustment shall
promptly be made effective as of the Rent Commencement Date of
the Applicable Extension Term, if any, or the last day of the
initial Term or first Extension Term, as applicable.
(viii) If Lessee fails to timely initiate the arbitration process or
fails to timely request the appointment of an arbitrator by
the American Arbitration Association (or such successor
organization) or by such court of competent jurisdiction, time
being of the essence, the Lessor's determination of the fair
market rent under Section 50B above shall be conclusive.
(D) Intentionally Deleted.
(E) If the determination of fair market rent shall be made by
arbitrators as set forth herein resulting in the Annual Basic Rent
payable by Lessee during the applicable Extension Term being more
than one hundred fifteen (115%) percent of the Annual Basic Rent
payable by Lessee as of the then Expiration Date, then Lessee shall
have the right, exercisable by notice to Lessee given not later than
fifteen (15) days after the final determination of fair market rent
by the arbitrators, to rescind its exercise of the option to renew
the Term, in which event the Term shall be deemed to expire on the
later of (i) sixty (60) days after the exercise of such
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rescission by Lessee, or (ii) the then Expiration Date. If Lessee
shall exercise such right of rescission, Lessee shall be responsible
for the fees and expenses of the arbitrator appointed by Lessor and
the fees and expenses of any third arbitrator appointed hereunder,
and, if applicable, any increase in Monthly Basic Rent as set forth
in Section 24 of this Lease, if Lessee continues to occupy the
Premises beyond the then Expiration Date.
(F) Except as otherwise provided in this Section 50, Lessee's occupancy
of the Leased Premises during either Extension Term shall be on the
same terms and conditions as are in effect immediately prior to the
expiration of the initial Term or first Extension Term, as
applicable, of this Lease, provided, however, Lessee shall have no
further right to extend the Term of this Lease beyond the second
Extension Term (or the first Extension Term, if the renewable option
is not effectively exercised during the Initial Term).
(G) If this Lease is renewed for an Extension Term, then Lessor or
Lessee can request the other party hereto to execute an instrument
setting forth the exercise of Lessee's right to extend the Term of
this Lease and the terms of such extension, including, without
limitation, the last day of such Extension Term.
(H) If Lessee exercises its right to extend the Term of this Lease for
an Extension Term pursuant to this Section 50, then the word "Term",
and the phrases "the Term of this Lease" or "the Term hereof", as
used in this Lease, shall be construed to include, when practicable
and appropriate, in Lessor's reasonable discretion, the applicable
Extension Term.
(I) For the purpose hereof fair market value shall be the rate a
prospective lessee would pay for rental of the Premises as of the
date which is the Rent Commencement Date of the applicable Extension
Term for the term of such Extension Term, taking into account all
relevant factors including, without limitation, determined (i) as if
the Premises were vacant and being placed on the market by Lessor
for rental to prospective Lessees who are not then occupants of the
Building, (ii) upon the assumption that the base years for Base
Operating Costs, Base Real Estate Taxes and Base Utility and Energy
Costs will be as provided in this Section, (iii) upon the assumption
that the Premises are to be leased "as is" in its then existing
condition for the applicable Extension Term on all of the terms
provided for in this Lease which are applicable to such Extension
Term, but expressly disregarding any enhancement to the fair market
rental value of the Premises on account of the value, in their then
existing condition, of alterations or installations in or to the
Premises, (iv) after considering costs and expenses (including,
without limitation, brokerage commissions, lost rental income during
any vacancy period and rent concessions) saved by Lessor by reason
of Lessor's not having to find a new Lessee for such space, (v)
after
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considering the nature of the standard work letter or work allowance
and other concessions and allowances then being offered by Lessors
of similar spaces in the vicinity to Lessees entering into new
leases for spaces of similar size and for similar terms and taking
into account the work letter provided herein, (vi) the age and
condition of the Building, (vii) the fact that Lessee will not incur
relocation costs, (viii) the remaining Term of this Lease, as well
as the portion of the Term then elapsed, (ix) the fact that the
Building is occupied by two (2) lessees, and (x) by taking into
account all other applicable circumstances.
51. SIGNS. No sign, advertisement or notice shall be affixed to or placed upon
any part of the Demised Premises which can be seen from the exterior of the
Premises or elsewhere in the Building by the Lessee, except in such manner, and
of such size, design and color as shall be reasonably approved in advance in
writing by the Lessor. Lessee may at its sole cost and expense construct and
maintain exterior signage, as set forth below. In the event Lessor approves any
sign(s) (including the sign(s) permitted to be installed pursuant to the
preceding sentence of this paragraph), Lessee shall, at its expense, keep such
sign(s) in good condition and repair and comply with all applicable governmental
ordinances and regulations related thereto. Lessee shall, at its expense, obtain
and maintain all necessary governmental approvals and permits required for the
erection and maintenance of the sign(s) and shall deliver copies thereof to
Lessor. No later than the last day of the Term, Lessee shall, at Lessee's
expense, remove all signs and repair all injury done by or in connection with
the installation or removal of the sign(s). Lessee shall have the right to
maintain the signs near the locations currently used by Hanover Insurance
Company (or lessee currently in the Building) or other location agreeable to
Lessor, provided that Lessee's signs are comparable in size and design to the
existing Hanover Insurance Company signs. Any material additions, changes or
alterations to such signs shall be subject to the Lessor's prior written
consent, not to be unreasonably withheld or delayed.
52. LESSEE'S RIGHT TO TERMINATE LEASE. Lessee shall have a one time right to
terminate this Lease, such termination to be effective November 30, 2005 by
giving at least twelve (12) months prior written notice, but no more than
fifteen (15) months prior written notice ("Termination Notice") thereof to
Lessor. In the event Lessee exercises its right to terminate the Lease as
provided herein, the Termination Notice shall be accompanied by a certified or
bank check payable to Lessor in the amount equal to One Hundred Fifty Thousand
Dollars ($150,000).
53. RIGHT OF FIRST OFFER.
(A) If at any time during the Tenn, Lessor shall desire to lease space
in the Building (any such space being referred to as the "Offer
Space"), then (subject to the right of first offer contained in the
lease between Lessor and Hanover Insurance Company, with respect to
space in the Building, as the same may be amended, extended, renewed
or otherwise modified from time to time) Lessor, before Lessor may
enter into a lease with a potential lessee for such Offer Space,
shall offer to Lessee the right to include the Offer Space within
the Premises upon all of
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the terms and conditions of this Lease, except as provided for in
this Paragraph 53A. Lessee's right to lease the Offer Space is
subject to the condition that, at the time Lessee delivers Lessee's
Acceptance Notice (as hereinafter defined): (i) not more than
fifteen percent (15%) of the rentable space of the Demised Premises
shall have been subleased by Lessee to persons which are not
affiliates of Lessee (use by Provid Research or any other division
which is not a separate legal entity of Lessee shall be deemed use
by Lessee), (ii) and Event of Default shall not have occurred and be
continuing, and (iii) Lessee shall have unconditionally and
irrevocably waived in writing its right to terminate this Lease
pursuant to Paragraph 52 hereof. Any termination, cancellation or
surrender of Lessee's interest in this Lease prior to the date on
which Lessee delivers Lessee's Acceptance Notice shall automatically
terminate Lessee's right to lease any Offer Space. Notwithstanding
anything herein to the contrary, if there shall be less than three
(3) years remaining on the Term of this Lease (taking into account
an Extension Term if Lessee shall have exercised its right to extend
the Term for such Extension Term), Lessee shall not have any rights
under this Paragraph 53. By way of example if the initial term is to
expire in thirty-six (36) months, Lessee may only exercise its
option for Offer Space if it previously or concurrently delivers an
Extension Notice.
(B) In the event Lessor desires to lease space in the Building, Lessor
shall deliver a written offer to Lessee (hereinafter "Offer
Notice"), which shall provide the following information: (i) the
annual basic rent for the Offer Space, (ii) the location of and the
number of rentable square feet of space comprising the Offer Space,
(iii) the estimated delivery date of the Offer Space ("Offer Space
Delivery Date"), and (iv) any other material business terms relating
to the lease of the Offer Space. All terms, including the annual
basic rent, for the Offer Space shall be bona-fide terms.
(C) Lessee shall have the right to accept the offer set forth in the
Offer Notice by delivering to Lessor an unconditional and
irrevocable written acceptance thereof hereinafter called "Lessee's
Acceptance Notice") within five (5) business days after Lessee's
receipt of the Offer Notice. If Lessee does not timely deliver
Lessee's Acceptance Notice to Lessor within said five (5) business
day period, or if Lessee timely gives written notice of its
intention to decline to exercise the right to lease the Offer Space,
time being of the essence, Lessor shall be free to lease the Offer
Space to any prospective Lessee on terms and conditions that are not
materially more favorable to the prospective Lessee than those set
forth in the Offer Notice. In the event Lessor desires to lease the
Offer Space to a prospective lessee on terms and conditions that are
materially more favorable to the Lessee than those set forth in the
Offer Notice, Lessor shall first comply with the provisions of this
Paragraph 53 before leasing the space to any prospective lessee.
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(D) Lessee's timely delivery of Lessee's Acceptance Notice shall be
deemed an irrevocable and unconditional agreement by Lessee to lease
the Offer Space on the terms and conditions set forth in this
Paragraph 53. Lessor shall give Lessee at least ten (10) days prior
written notice of the estimated Offer Space Deliver Date, which
estimate may be revised from time to time as appropriate, provided
that after any such revision Lessee shall receive at least ten (10)
days' prior written notice of the Offer Space Deliver Date. The
"Offer Space Rent Commencement Date" shall be the date on which the
Offer Space Deliver Date shall have occurred.
(E) If Lessor is unable to deliver the Offer Space to Lessee on the
estimated Offer Space Deliver Date due to the holding over or
retention of possession of a Lessee or sublessee of such space or
due to other reasons beyond Lessor's reasonable control, the
estimated Offer Space Delivery Date shall be extended by such period
of time that Lessor was so delayed. In such event, Lessor shall not
be subject to any liability for its failure to give possession of
such space to Lessee, and the validity of this Lease shall not be
impaired thereby and Lessee shall take possession of the Offer Space
when such space can be delivered to Lessee. Lessor hereby agrees to
use its good faith efforts to obtain possession of the Offer Space
on the estimated Offer Space Deliver Date. Notwithstanding the
foregoing, in the event that the Lessor is unable to deliver the
Offer Space within ninety (90) days (subject to extension due to
Force Majeure, or the acts of omissions of Lessee) from the initial
estimated Offer Space Deliver Date, then Lessee shall have the right
to terminate Lessee's acceptance of the Offer Space immediately upon
notice to Lessor.
(F) The following terms and conditions shall apply to the Offer Space:
(i) For purposes of calculating Additional Rent applicable to the
Offer Space, "Lessee's Percentage Share" with respect to the
Offer Space shall be a fraction, the numerator of which is the
number of rentable square feet of space in the Offer Space and
the denominator of which is the number of rentable square feet
of the Building as determined from time to time pursuant to
Section 40A hereof
(ii) Promptly following the Offer Space Rent Commencement
Date, Lessor and Lessee shall enter into a supplementary
agreement expressly confirming (a) the increase in the number
of square feet in the Premises, (b) the increase in the Annual
Basic Rent payable under this Lease, (c) the adjustment to the
Lessee Percentage and the Base Year applicable to the Offer
Space for purposes of computing Additional Rent, (d) the
increase in the number of parking spaces based on 4 parking
spaces for each 1000
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rentable square feet of space in the Offer Space, and (e) the
Offer Space Rent Commencement Date.
(iii) The Annual Basic Rent and Additional Rent (except as expressly
set forth in Subsection F above) for the Offer Space shall be
payable by Lessee to Lessor commencing on the Offer Space Rent
Commencement Date (prorated for any partial month). Commencing
as of the Offer Space Deliver Date, all of the terms,
covenants and conditions of this Lease (including, but not
limited to the term hereof) shall thereafter be effective and
applicable in all respects to the Offer Space as if such space
had been included as part of the original Leased Premises,
except as specifically provided otherwise in this Paragraph
53.
(iv) Lessee must lease all Offer Space offered by Lessor at any one
time if it desires to lease any of such space, unless
otherwise agreed by Lessor and Lessee.
54. NON-COMPETE. Lessee hereby covenants and agrees that during the Term of this
Lease and any extension or renewal thereof, Lessee shall not permit the
following activities to occur at the Demised Premises: (i) engage in the
business of underwriting or distributing life insurance, including without
limitation the sale and/or distribution of annuities, variable products and/or
other investment related insurance products; (ii) engage in the business of
underwriting or distributing property and casualty insurance; (iii) engage in
the business of providing retirement plan products and/or services guaranteed
investment products; (v) engage in the business of providing group managed care
benefit programs, or (vi) erect any sign on or adjacent to the Building relating
to any of the foregoing activities.
55. USE OF ADDITIONAL FACILITIES. Lessor shall within thirty (30) days from the
date hereof submit a written request on Lessee's behalf, to Hanover Insurance
Company ("Hanover"), the other current tenant in the Building, asking Hanover to
allow Lessee's employees and invitees to use Hanover's cafeteria. Lessor shall
make reasonable efforts to ensure that people do not smoke in the outdoor area
adjacent to the Demised Premises.
56. REPRESENTATION OF CONDITIONS OF DEMISED PREMISES. LESSOR HAS LET THE DEMISED
PREMISES TO LESSEE IN ITS PRESENT "AS IS" CONDITION, WITHOUT ANY REPRESENTATION
OR WARRANTY OF ANY KIND OR NATURE, EXPLICIT OR IMPLIED, OTHER THAN THOSE
REPRESENTATIONS SPECIFICALLY SET FORTH IN THIS LEASE. IT IS UNDERSTOOD AND
AGREED THAT LESSOR IS UNDER NO DUTY TO MAKE ANY REPAIRS, ALTERATIONS, OR
DECORATIONS AT THE INCEPTION OF THIS LEASE OR AT ANY TIME HEREAFTER, EXCEPT AS
SPECIFICALLY SET FORTH IN THIS LEASE.
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57. COUNTERPARTS. This Lease may be executed in any number of counterparts, each
of which taken together shall constitute one and the same original.
[signatures appear on next page]
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals the day and year first above written.
BDG PISCATAWAY, LLC, Lessor
By: BDG Piscataway, Inc.
By: /s/ Edward Blumenfeld
-----------------------------------
Name: Edward Blumenfeld
Title: President
PRAECIS PHARMACEUTICALS INCORPORATED,
Lessee
By: ___________________________________
Name: ___________________________
Title: __________________________
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals the day and year first above written.
BDG PISCATAWAY, LLC, Lessor
By: BDG Piscataway, Inc.
By: ___________________________________
Name: ___________________________
Title: __________________________
PRAECIS PHARMACEUTICALS INCORPORATED,
Lessee
By: /s/ Kevin F. McLaughlin
-----------------------------------
Name: Kevin F. McLaughlin
Title: Sr. V.P. and C.F.O.
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EXHIBIT A
PREMISES
[Map of 10 Knightsbridge]
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EXHIBIT A-1
OFFICE BUILDING AREA
[Map of 10 Knightsbridge Road]
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EXHIBIT B
BUILDING RULES AND REGULATIONS
1. Smoking is prohibited in all areas of the Building.
2. No common areas shall be obstructed nor shall refuse, furniture, boxes or
other items be placed therein by Lessee or its officers, agents, servants
or employees, or used for any purpose other than ingress and egress to and
from the Premises, or for going from one part of the Building to another
part of the Building. Lessor shall have the right to control and operate
the public portions of the Building, and the facilities furnished for the
common use of the Lessees, in such manner as Lessor deems best for the
benefit of the Lessees generally. No Lessee shall permit the visit to the
Demised Premises of persons in such numbers or under such conditions as to
interfere with the use and other public portions or facilities of the
Building without prior written consent of Lessor. Canvassing, soliciting
and peddling in the Building are prohibited.
3. Plumbing, fixtures and appliances shall be used only for the purpose for
which constructed, no other unsuitable material shall be placed therein.
4. No sign, directories, posters, advertisements, or notices shall be painted
or affixed on or to any of the windows or exterior doors, or in corridors
or other parts of the Building, except in such color, size and style and
in such places, as shall be first approved in writing by Lessor in its
discretion. Lessor shall have the right of remove all unapproved signs
without notice to the Lessee, at the expense of the Lessee. It is further
understood that furnishings in Lessee's area which are viewed from common
areas shall be subject to Lessor's approval.
5. Lessee shall not do or permit anything to be done in or about the Building
or bring or keep anything therein that will in any way increase the rate
of fire or other insurance on the Building, or on property kept therein or
otherwise increase the possibility of fire or other casualty.
6. Lessor shall have the right to prescribed the weight and position of heavy
equipment or objects which may over stress any portion of the floors of
the Premises. All damage done to the Building by the improper placing of
such heavy items will be repaired at the sole expense of Lessee.
7. Movement in or out of the Building of furniture or office equipment or
dispatch or receipt by Lessees of any bulky material, merchandise or
materials through the Building entrances or lobby shall be restricted to
such hours as Lessor shall
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designate. All such movement shall be under the supervision of Lessor by
prearrangement with Property Management before performance.
Such prearrangement initiated by Lessee shall include determination by
Lessor and subject to this decision and control, as to the time, method,
and routing of movement and as to limitations for safety or other concern
which may prohibit any article, equipment or any item from being brought
into the Building. The Lessees are to assume all risks as to the damage to
articles moved and injury to persons or public engaged or not engaged in
such movement, including equipment, property, and personnel of Lessor if
damaged or injured as a result of an act in connection with carrying out
this service for a Lessee from time of entering property to completion of
work; and Lessor shall not be liable for acts of any persons engaged in or
any damages or loss of any said property or persons resulting from any act
in connection with such service performed for a Lessee.
8. Lessee shall notify Property Management when safes or other heavy
equipment are to be taken in or out of the Building, and such moving shall
only be done after written permission is obtained from Lessor on such
conditions as Lessor shall require.
9. Lessee shall cooperate with Lessor's employees in keeping Premises neat
and clean. Any person employed by any Lessee to do janitor work within the
Demised Premises must obtain Lessor's consent and such person shall, while
in the Building and outside of said Demised Premises, comply with all
instructions issued by building personnel.
10. Lessee shall not cause or permit any improper noises in the Building, or
allow any unpleasant odors to emanate from the Premises, or otherwise
interfere, injure or annoy in any way other Lessees, or persons having
business with them.
11. Each Lessee shall be responsible for all persons for whom he authorizes
entry into or exit out of the Budding, and shall be liable to the Lessor
for all acts of such persons.
12. The Lessor does not maintain or clean suite finishes which are
non-standard, such as kitchens, bathrooms, wallpaper, special lights, etc.
However, should the need for repairs arise, the Lessor will arrange for
the work to be done at the Lessee's expense.
13. No animals shall be brought into or kept in or about the Building, except
in the normal course of business.
14. Except as provided in the Lessee's lease, no machinery of any kind other
than that which is subject to normal business practices, such as
typewriters, calculators, and business computers, shall be operated on the
Premises without the prior written consent of Lessor, nor shall Lessee use
or keep in the Building any inflammable or
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explosive fluid or substance, or any illuminating materials. No space
heaters or fans shall be operated in the Building.
15. No bicycles, motorcycles or similar vehicles will be allowed in the
Building.
16. There shall be no marking, painting, drilling into or in any way defacing
any part of the Demised Premises or the Building. No boring, cutting or
stringing of wires shall be permitted. Lessee shall not construct,
maintain, use or operate within the Demised Premises or elsewhere within
or on the outside of the Building, any electrical device, wiring or
apparatus in connection with a loud speaker system or other sound system.
17. Lessor has the right to evacuate the Building in the event of any
emergency or catastrophe.
18. No food and/or beverages shall be distributed from the Premises without
the prior written approval of the Property Management, except in
connection with the operation of vending machines installed for the
exclusive use of Lessee's employees or the operation of Lessee's lunch
room for Lessee's employees permitted under the Lease.
19. No additional locks shall be placed upon any door without the prior
written consent of Lessor. All necessary keys shall be surrendered upon
termination of Lessee's Lease, and Lessee shall then give Lessor or his
agent an explanation of the combination of all locks on the doors or
vaults.
20. Access plates to under floor conduits shall be left exposed. Where carpet
is installed, carpet shall be cut around access plates. Where Lessee
elects not to provide removable plates in their carpet for access into the
under floor duct system, it shall be the Lessee's responsibility to pay
for the removal and replacement of the carpet for any access needed into
the duct system at any time in the future.
21. Lessees will not relocate furnishings or cabinets adjacent to mechanical
or electrical access panels or over air conditioning outlets so as to
prevent operating personnel from servicing such units as routine or
emergency access may require. Cost of moving such furnishings for Lessor
access will be at Lessee's expense. The lighting and air conditioning
equipment of the Building will remain the exclusive charge of the Building
designated personnel.
22. Lessee shall comply with reasonable parking rules and regulations as may
be posted and distributed from time to time.
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23. No portion of the Building shall be used for the purpose of sleeping or
lodging or for any illegal purpose.
24. Lessor shall not be responsible for lost or stolen personal property,
money or jewelry from Lessee's leased area or public areas regardless of
whether such loss occurs when area is locked against entry or not.
25. All requests for keys, locks or graphics must be submitted in writing to
the Management Office.
26. Solicitation of any kind is strictly forbidden unless approved in advance
by the Management Office.
27. It is strongly recommended that an A, B, C Multi-Purpose fire extinguisher
be kept in each Lessee's area in an accessible location.
28. Lessor reserves the right to rescind any of these rules and regulations
and to make such other and further rules and regulations as in its
reasonable judgment shall, from time to time, be needed for the safety,
protection, care and cleanliness of the Buildings, the operation thereof,
the preservation of good order therein and the protection and comfort of
the Lessees and their agents, employees and invitees, which rules and
regulations, when made and written notice thereof is given to a Lessee,
shall be binding upon it in like manner as if originally herein
prescribed.
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EXHIBIT C
CLEANING SERVICES
SPECIFICATIONS FOR PROVID RESEARCH
Service
Days/Yr
*** ENTRANCE LOBBIES
* Fully Vacuum all carpets from wall to wall 260
* Spot clean door glass and side glass 260
* Vacuum walk-off mats 260
* Dust ledges, picture frames and moldings 260
*** OFFICES - CARPET
* Empty all trash receptacles and replace liners as necessary 260
* Remove all collected trash to designated area 260
* Dust all horizontal surfaces 52
* Dust all low reach areas 52
* Dust all surfaces above normal reach including sills, ledges, 12
moldings, shelves, door frames, pictures and vents
* Spot clean all walls, light switches and doors 52
* Vacuum all carpeted traffic lane areas 260
* Using tank vacuum or backpack, vacuum corners, edges and 12
chairs, then traffic vacuum all carpeted areas
* Dust all venetian blinds 4
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*** CORRIDORS - CARPET
* Dust all low reach areas 52
* Dust all surfaces above normal reach, including stills, 12
ledges, moldings, shelves, door frames, pictures and
vents
* Vacuum all carpeted traffic lane areas 260
* Using tank vacuum or backpack, vacuum corners, edges 12
and chairs, then traffic vacuum all carpeted areas
*** RESTROOMS
* Refill dispensers, empty trash, clean and sanitize all 260
restroom fixtures, wipe all counters, clean mirrors,
wipe chrome, spot wipe partitions, sweep and damp mop
floors using a germicidal cleaner
* Full clean all showers 260
*** KITCHEN - (If applicable)
* Dust all low reach areas 52
* Dust all surfaces above normal reach including sills, 12
ledges, moldings, shelves, door frames, pictures and
vents
* Wet mop entire area 52
* Using a standard floor machine, spray buff all hard 52
surface area
* Strip hard surface floor and recoat with three coats of 4
floor polish
*** MISCELLANEOUS
* This represents the minimum amount of supervision the 260
building may require
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LAB SPACE REASONABLY DESIGNATED FROM TIME TO TIME BY THE PARTIES SHALL BE
SPECIFICALLY EXCLUDED FROM THIS EXHIBIT AND LESSEE SHALL CLEARLY MARK SUCH AREAS
IN THE DEMISED PREMISES WHICH ARE NOT TO BE CLEANED BY LESSOR.
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EXHIBIT D
BUILDING HOLIDAYS
Seven Holidays
Washington's Birthday
Memorial Day
July 4th
Labor Day
Thanksgiving Day
Christmas Day
New Year's Day
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EXHIBIT E
LESSEE IMPROVEMENT WORK
<PAGE>
PROVID RESEARCH, INC.
10 Knightsbridge Road
Piscataway, NJ
PROJECT DESCRIPTION
The 15,000 square feet of space at 10 Knightsbridge leased by Provid Research,
Inc. will be fit out to accommodate up to 24 researchers and six administrative
employees. The initial phase of work provides laboratory and office space for 12
researchers, general administrative offices and conference space, and laboratory
support space.
The space is organized according to functional and work flow needs. The
administrative and reception functions are at the main entrance. The laboratory
and associated researcher office space occupies the central portion of the
building along with a common library and employee amenity space. Laboratory
support spaces such as chemical storage and the NMR lab are located toward the
rear of the space, near the service entrance. A mechanical room for HVAC,
plumbing and electrical equipment is also at this location.
Current plans call for minimizing the amount of equipment on the roof. It is
expected that two large exhaust fans and a possible air intake serving the air
handling unit in the mechanical room will be located on the roof. Other
miscellaneous penetrations to support required equipment and functions - e.g.,
plumbing vents - will also be provided.
Site work includes a transformer and trenching for a new electrical service and
revisions to existing exterior stairs accommodate a scissors lift near the
service entrance. A chiller may also be located on grade adjacent to the service
entrance. A nitrogen tank will be located near the mechanical room. The only
exterior wall change anticipated at this time is the removal of windows in the
mechanical space and the installation of a louver to supply air to the air
handling unit.
The interior is characterized by open spaces visually connected with interior
glazing. This is not only intended to maximize natural light throughout the
facility, but to reinforce interaction between all staff members. The interior
windows are floor-to-ceiling aluminum or wood frames in offices. Matching frames
will be provided in the labs, but the sills will be +/- 36" above the floor.
Doors will be solid core wood, painted or stained.
Interior partitions will be gypsum board on metal studs in most locations. They
will extend to the underside of the roof deck around the labs and conference
rooms. CMU partitions will enclose the mechanical room for sound control and
maintenance purposes. All will be painted.
Ceilings are primarily 8'-8" to align with the top of the exterior windows,
although the height in the laboratories is 9'-0" with a gypsum board fascia and
soffit constructed above those windows. The ceiling is up to 12'-0" high in a
very limited portion of the space to highlight the library. Lighting will be
primarily recessed deep cell parabolic lens fixtures with fluorescent lamps.
Laboratory casework will be either metal or wood units. Each lab module contains
two eight-foot long fume hoods. Laboratory services include hot and cold water,
nitrogen, vacuum, lab waste and power. All except lab waste will be distributed
overhead. The existing slab will be removed to accommodate the laboratory waste
line.
A single new 25,000 cfm air handling unit will serve both phases of the
laboratories. A VAV system design allows the unit to operate at reduced capacity
until the entire fit-out is complete. This unit will also serve the laboratory
support spaces and will provide some make-up air to the offices.
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Office space will be served by the existing air handling unit located on a
mezzanine above the toilet rooms. Its capacity of 15,000 cfm is adequate to
serve most of the office needs with limited supplemental air furnished by the
new unit.
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[Map of Provid Inc. -- 10 Knightsbridge Road -- Piscataway, N.J.]
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EXHIBIT E-1
REMOVABLE IMPROVEMENTS
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EXHIBIT F
LESSOR'S ENVIRONMENTAL REPORTS
Phase I Environmental Site Assessment dated April 3, 1997 with appendices
March 3, 1997 letter from Vincent Krisk, NJDEP to Hanover Insurance
January 28, 1997 letter from James Bono, NJDEP to Joseph Hudschock, NJ Sorge,
Inc.
January 7, 1997 letter from Todd Huffman, JM Sorge, Inc. to NJDEP with
attachments
Site Investigation Report, dated January, 1997
Phase I Environmental Site Assessment, 10 Knightsbridge Road, Piscataway, New
Jersey, with appendices dated October ___, 1997
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EXHIBIT G
SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
This Subordination, Nondisturbance and Attornment Agreement ("Agreement")
dated as of ___________, 1998, is made by and among PRAECIS PHARMACEUTICALS,
INCORPORATED, a Delaware corporation, having an address at 1 Hampshire Street,
Cambridge, Massachusetts 02139-1572 ("Tenant"), and _______________, a
___________________ corporation, having an address of ___________________,
______________________________ ("Lender"), and BDG PISCATAWAY, LLC, a New York
limited liability company, having an address at c/o Blumenfeld Development
Group, Ltd., 6800 Jericho Turnpike, Suite 102E, Syosset, New York 11791-4498
("Landlord").
1. Recitals.
1.1 Lease. Tenant is the lessee under a certain lease dated ____, 1998 (as
may be amended from time to time, the "Lease") of certain premises at 10
Knightsbridge Road (a/k/a 860 Centennial Avenue), Piscataway, New Jersey
(the "Leased Premises"), as described in the mortgage referred to below
(the "Mortgaged Property").
1.2 Mortgage. Lender is the holder of a Mortgage and Security Agreement
(the "Mortgage") from Landlord to Lender, covering Landlord's interest in
the Mortgaged Property, which Mortgage has been recorded at the Recorder's
Office of Middlesex County, New Jersey.
1.3 Consideration. In connection with the Mortgage, Lender has required
that Tenant subordinate Tenant's lien interest in the Mortgaged Property
under the Lease to the Mortgage and agree to attorn to the purchaser at
any foreclosure sale of the Mortgaged Property held under the Mortgage.
Tenant is willing to do so on the terms hereinafter set forth.
2. Agreements.
2.1 Covenants Regarding the Lease. Tenant agrees as follows:
(a) Tenant will not, without the prior written consent of Lender,
pay security deposits, rent or other amounts aggregating at
any time (specifically excepting prepayments for excess taxes,
operating expenses, utilities or similar charges) more than
thirty (30) days in advance under the Lease;
(b) Tenant will not, without the prior written consent of Lender,
amend or modify the Lease or any of the terms thereof, or,
except pursuant to terms of the Lease now existing, cancel,
terminate or surrender the Lease;
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(c) Tenant will not, without the prior written consent of Lender,
voluntarily subordinate the Lease to any other lien or
encumbrance.
2.2 Subordination of Lease. Tenant hereby agrees with Lender that the lien
interest of Tenant under the Lease shall be subject and subordinate to the
Mortgage and any renewals, extensions, modifications, consolidations or
replacements thereof and any advances thereunder.
2.3 Attornment by Tenant. Tenant agrees with Lender that, if the interest
of Landlord in the Mortgaged Property shall be transferred to and owned by
Lender or other entity by reason of foreclosure, deed in lieu of
foreclosure or otherwise, the Lease shall continue as a direct lease
between Tenant and the Lender or other entity, the Lender or other entity
shall recognize Tenant as the tenant under the Lease for the unexpired
balance of the term of said Lease and any extensions or renewals thereof,
and Tenant shall be bound to Lender or such other entity under all of the
terms, covenants and conditions of the Lease for the balance of the term
thereof remaining and any extensions or renewals thereof, with the same
force and effect as if Lender or such other entity were the lessor under
the Lease. Tenant hereby attorns to Lender or such other entity as its
landlord, said attornment to be effective and self-operative without the
execution of any further instruments on the part of any of the parties
hereto immediately upon Lender or such other entity succeeding to the
interest of the Landlord in the Mortgaged Property. Tenant agrees,
however, upon the election of Lender or such other entity and within
thirty (30) days of written demand by Lender or such other entity after it
acquires title to the Mortgaged Property, to execute an instrument in
recordable form in confirmation of the foregoing provisions.
2.4 Recognition and Nondisturbance. Lender agrees, with Tenant that, so
long as Tenant duly and promptly performs all of its obligations under the
Lease and hereunder, neither Lender nor any person, firm, partnership or
other entity claiming by, through or under Lender shall, in or after
taking possession of or acquiring title to the Mortgaged Property through
foreclosure proceedings, deed in lieu of foreclosure, or otherwise,
disturb the possession or other rights of Tenant under the Lease, and will
accept Tenant as lessee under the terms and conditions of, and for the
entire duration of, the term of the Lease, including any extensions and
renewals set forth in the Lease and any modifications or amendments
thereof to which Lender has previously agreed in writing, or which were in
effect prior to the date hereof. Lender, its successors and assigns, shall
not, however, be:
(a) liable for any breach, act of omission of any prior landlord
(including Landlord), except that nothing contained in this
Section 2.4(a) shall modify any liability of Lender for any
breach, act or omission which first
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occurs and continues after Lender takes possession of, or
acquires title to, the Mortgaged Property;
(b) subject to any offset or defense which Tenant might have
against any prior landlord (including Landlord), except that
nothing contained in this Section 2.4(b) shall modify any
right of offset or defense that Tenant may possess for any
breach, act of omission which first occurs and continues after
Lender takes possession of, or acquires title to, the
Mortgaged Property;
(c) bound by any payment of rent or additional rent (specifically
excepting prepayments for excess taxes, operating expenses,
utilities or similar charges) made by Tenant to Landlord more
than thirty (30) days in advance;
(d) bound by any security deposit which Tenant may have paid to
any prior landlord (including Landlord) unless such security
deposit has actually been delivered to Lender;
(e) bound by any amendment to, modification, extension or
termination of the Lease made after the date hereof without
the written consent of Lender; provided, however, that the
foregoing shall not include, and Lender shall be bound by, any
modification, extension or termination of the Lease pursuant
to the exercise by Tenant of any option currently contained in
the Lease; or
(f) bound by any provision in the Lease which obligates the
Landlord to erect or complete any building or to perform any
construction work or to make any improvements to the Mortgaged
Property or the Leased Premises; provided, however, that the
foregoing shall not negate any right which Tenant has or may
have under the terms of the Lease to terminate said Lease for
any failure to complete any construction or any improvements.
Notwithstanding the provisions of Article 2.4, specifically Section 2.4(e),
Lender may, at its election, choose to have the benefits of this Agreement with
respect to any amendment to, modification extension or termination of any Lease
entered into after the date of this Agreement without the written consent of
Lender.
The obligation of Lender to accept the attornment of Tenant and not to disturb
Tenant's possession of the Mortgaged Property under the Lease, as set forth
above, is expressly subject to the Tenant, at the time of Lender's taking
possession of or acquisition of title to the Mortgaged Property, not then being
in default beyond any cure period set forth in the Lease with respect to the
performance of any of Tenant's obligations under the Lease.
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2.5 Lender's Opportunity to Cure Landlord's Defaults. In the event that
Landlord defaults in the performance or observation of any of the terms,
conditions or agreements in the Lease, Tenant shall give written notice
thereof to Lender and Lender shall have the right (but not the obligation)
to cure such default. Tenant shall not take any action with respect to
such default under the Lease including, without limitation, any action in
order to terminate, rescind or avoid the Lease or to withhold any rental
thereunder, unless Lender, after receipt of such notice, fails to cure, or
cause to be cured, the specified default within a reasonable time, not to
exceed thirty (30) days, thereafter; but nothing herein shall be deemed to
impose any obligation on Lender to cure such default.
2.6 Lease Conditions. Tenant and Lender agree that this Agreement
satisfies any and all conditions or requirements in the Lease relating to
the subordination of the Lease to the Mortgage and the granting of a
nondisturbance agreement to Tenant by Lender. Any noncompliance with such
conditions is hereby waived. Tenant and Lender further agree that in the
event that there is any inconsistency between the terms and provisions
hereof and the terms and provisions of the Lease dealing with the
nondisturbance by Lender, the terms and provisions hereof shall be
controlling.
2.7 Assignment of Interest and Rents. Tenant acknowledges that Tenant has
notice that Landlord's interest under the Lease and the rent and all other
sums due thereunder have been assigned to Lender as part of the security
for the note secured by the Mortgage. In the event that Lender notifies
Tenant of a default under the Mortgage and demands that Tenant pay its
rent and all other sums due under the Lease to Lender, Tenant agrees that,
following Tenant's receipt of such notice, Tenant shall pay the rent and
all other sums due under the Lease to Lender. By its execution of this
Agreement, Landlord irrevocably directs Tenant to comply with this Section
2.7, notwithstanding any contrary direction, instruction or assertion by
Landlord. Such compliance shall not be deemed to violate the Lease, and
Landlord hereby releases Tenant from any and all claims arising out of
Tenant's compliance with this Section 2.7. Tenant shall be entitled to
full credit under the Lease for any rent or other sums paid to Lender
pursuant to this Section 2.7 to the same extent as if such rent or other
sums were paid directly to Landlord.
2.8 Election to Terminate. Tenant waives the provision of any statute or
rule of law now or hereafter in effect which may give or purport to give
Tenant any right or election to terminate or otherwise adversely affect
the Lease and the obligations of Tenant thereunder solely by reason of any
foreclosure proceeding in respect of the Mortgage.
2.9 Mortgagee's Interest. Anything herein or in the Lease to the contrary
notwithstanding, in the event that Mortgagee shall acquire title to the
Mortgaged Property, Mortgagee shall have no obligation, nor incur any
liability, in excess of Mortgagee's estate or interest, if any, in the
Mortgaged Property and Tenant shall look exclusively to such estate or
interest of Mortgagee, if any, in the Mortgaged Property for the payment
and discharge of any obligations imposed upon Mortgagee hereunder or
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under the Lease, and Mortgagee is hereby released and relieved of any
other liability hereunder or under the Lease. Tenant agrees that with
respect to any money judgment which may be obtained or secured by Tenant
against Mortgagee, Tenant shall look solely to the estate or interest
owned by Mortgagee in the Mortgaged Property, and the Tenant will not
collect, or attempt to collect any such judgment out of the other assets
of Mortgagee.
3. General.
3.1 Notices. All notices or other communications required or permitted to
be given pursuant to this Agreement shall be in writing and shall be
considered as properly given (i) if mailed by first class United States
mail, postage prepaid, registered or certified with return receipt
requested, (ii) by delivering same in person to the intended addressee, or
(iii) by delivery to Federal Express or another independent, nationally or
locally recognized, third party commercial delivery service for same day
or next day delivery. Notice so mailed shall be effective on the earlier
to occur of (a) the date received, or (b) one business day after delivery
to Federal Express or such other delivery service, postage prepaid. For
purposes of notice, the address of Lender shall be the address set forth
herein or such other address as Lender shall have notified Tenant, in
writing, in accordance with this Section 3.1, and the address of Tenant
shall be PRAECIS PHARMACEUTICALS INCORPORATED, 1 Hampshire Street,
Cambridge, Massachusetts, 02139-1572, Attn: Chief Financial Officer; with
a copy to the Premises, Attn.: Gary Olson, Ph.D. and with a copy to
Skadden, Arps, Slate, Meagher & Flom LLP, One Beacon Street, Boston,
Massachusetts, 02108-3194, Attn.: Kent A. Coit, Esquire or such other
address as Lender shall have notified Tenant, in writing, in accordance
with this Section 3.1, with a copy to the Leased Premises; provided,
however, that either party shall have the right to change its address for
notice hereunder to any other location within the continental United
States by the giving of ten (10) days' notice to the other party in the
manner set forth herein.
3.2 Captions for Convenience Only. The Article and Section entitlements
hereof are inserted for convenience of reference only and shall in no way
alter, modify, or define, or be used in construing the text of such
Articles or Paragraphs.
3.3 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the respective successors and assigns of the parties
hereto, which in the case of Lender shall expressly include any purchaser
at a foreclosure sale pursuant to the Mortgage, and such purchaser's
successors and assign.
3.4 Applicable Law. This Agreement shall be governed by the laws of the
state of New Jersey.
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3.5 Modification. This Agreement may not be modified except by an
amendment or other agreement in writing signed by the parties hereto or
their respective successors in interest. The terms, covenants and
conditions contained herein shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns,
specifically including but not limited to, Tenant's assignees and
subtenants, if any, and any purchaser at a sale of the Mortgaged Property
under or pursuant to the mortgage, include a transfer of title by deed in
lieu of foreclosure, if any.
[Signatures Commence on Next Page]
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WITNESS the execution hereof under seal as of the day and year first above
written.
"Tenant"
PRAECIS PHARMACEUTICALS,
INCORPORATED:
By: ________________________________
Name: __________________________
Title: _________________________
Hereunto duly authorized
"Lender"
______________________________________
By: ________________________________
Name: __________________________
Title: _________________________
Hereunto duly authorized
"Landlord"
BDG PISCATAWAY, LLC:
By: ________________________________
By: ____________________________
Name: __________________________
Title: _________________________
Hereunto duly authorized
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STATE OF ________________________ ss.
ss.
COUNTY OF ______________________ ss.
The foregoing instrument was ACKNOWLEDGED before me this ___ day
of_________, 20___ by ________________________ the _________ of a
_________________ on behalf of and as the free act and deed of said
_______________.
[SEAL]
______________________________________
Notary Public, State of ______________
My Commission Expires: Printed Name: ________________________
_________________________
[Acknowledgments Continue on Next Page]
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STATE OF ________________________ ss.
ss.
COUNTY OF ______________________ ss.
The foregoing instrument was ACKNOWLEDGED before me this ___ day
of_________, 20___ by ________________________ the _________ of a
_________________ on behalf of and as the free act and deed of said
_______________.
[SEAL]
______________________________________
Notary Public, State of ______________
My Commission Expires: Printed Name: ________________________
_________________________
[Acknowledgments Continue on Next Page]
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STATE OF ________________________ ss.
ss.
COUNTY OF ______________________ ss.
The foregoing instrument was ACKNOWLEDGED before me this ___ day
of_________, 20___ by ________________________ the _________ of a
_________________ on behalf of and as the free act and deed of said
_______________.
[SEAL]
______________________________________
Notary Public, State of ______________
My Commission Expires: Printed Name: ________________________
_________________________
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EXHIBIT H
ROOF WARRANTIES CURRENTLY IN EFFECT
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FIRESTONE
MODIFIED BITUMEN STANDARD ROOF SYSTEM LIMITED WARRANTY
Warranty: #RG000886 FBPCO # H04335 Square Footage 67,499 s.f.
Building Owner: BLUMENFELD DEVELOPMENT GROUP
Building Identification: HANOVER INSURANCE
Building Address: 10 KNIGHTSBRIDGE RD
PISCATAWAY, NJ 08854
Warranty Period: TWELVE (12) Years Beginning on 12/22/97
Roofing Contractor: INTEGRITY ROOFING, INC. (62626)
For the warranty period indicated above, Firestone Building Products Company
("Firestone"), Division of Bridgestone/Firestone, Inc., warrants to the Building
Owner ("Owner") above that Firestone will, subject to the Terms, Conditions,
Limitations, and Definitions set forth below, repair any leak in the Firestone
Modified Bitumen Roofing System ("System"). Firestone's repair obligation over
the life of this warranty is limited to the Owner's original cost of the System
installation.
TERMS, CONDITIONS, LIMITATIONS, AND DEFINITIONS
1. The System is limited to mean the Firestone brand membranes, Firestone
brand insulations, and other Firestone brand accessories when installed
in accordance with Firestone technical specifications.
2. In the event any leak should occur in the System: (a) the Owner must
give written notice to Firestone within thirty (3) days of any
occurrence of a leak. By notifying Firestone, the Owner authorizes
Firestone or its designee to investigate the cause of the leak. (b) If
upon investigation, Firestone determines that the leak is not excluded
under the Terms, Conditions, Limitations and Definitions set forth
below, the Owner's sole and exclusive remedy and Firestone's liability
shall be limited to the repair of the leak; (c) Should the
investigation reveal that the leak is excluded under the Terms,
Conditions, Limitations and Definitions set forth below, investigation
costs shall be paid by the Owner. Failure by Owner to pay for these
cost shall render this Modified Bitumen Standard Roof System Limited
Warranty ("Limited Warranty") null and void. If the cause of the leak
is determined by Firestone to be outside the scope of this Limited
Warranty, Firestone shall advise the
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Owner of the type and/or extent of repairs required to be made at the
Owner's expense which, if the Owner property makes, will permit this
Limited Warranty to remain in effect for the unexpired portion of its
term. Failure by the Owner to make these repairs in a reasonable manner
and within a reason able time shall render the unexpired portion of its
term. Failure by the Owner to make these repairs in a reasonable manner
and within a reasonable time shall render this Limited Warranty null
and void. (d) Any dispute, controversy or claim between the Owner and
Firestone concerning this Limited Warranty shall be settled by final
and binding arbitration in accordance with the American Arbitration
Associations's rules for the construction industry.
3. Firestone shall have no obligation under this Limited Warranty unless
and until Firestone has been paid in full for all materials, supplies,
services, warranty costs and other costs which are included in, or
incidental to, the System.
4. Firestone shall have no obligation under this Limited Warranty, or an
other liability, nor or in the future if a leak of damage is cause by
(a) Natural forces, disasters, or acts of God including, but not
limited to, winds, hurricanes, tornadoes, hail, lightning, earthquakes,
atomic radiation, insects, or animals; (b) Any act(s), conduct or
omission(s) by any person, or act(s) or war, which damages the System
or which impairs the Membrane's ability to resist leaks (c) Failure by
the Owner to use reasonable care in maintaining the System, said
maintenance to include, but not limited to those items listed on the
reverse side of this Limited Warranty titled "Firestone Roofing Car and
Maintenance Requirements;" (d) Deterioration or failure of building
components, including, but not limited to, the roof substrate, walls,
mortar, HVAC units, etc.: (e) Condensation or infiltration of moisture
in, through, or around the walls, copings, rooftop hardware or
equipment, building structure or underlying or surrounding materials;
(f) any acid, oil, harmful chemical, chemical or physical reaction and
the like which come in contract with the System, which damages the
System, or which impairs the System's ability to resist leaks; (g)
Alterations or repairs to the System not approved in writing by
Firestone; (h) The architecture, engineering, construction or design of
the roof, roofing system, or building. Firestone does not undertake any
analysis of the architecture or engineering required to evaluate what
type of roof system is appropriate; (i) A change in building use or
purpose; (j) Failure to give proper notice as set forth in paragraph
1(a) above; (k) ponded water.
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5. This Limited Warranty shall be transferable subject to Firestone
inspection, written approval, and payment of the current transfer fee.
6. During the term of this Limited Warranty, Firestone, its designated
representative or employees shall have free access to the roof during
regular business hours. In the event that roof access is limited due to
security or other restrictions, Owner shall reimburse Firestone for
all reasonable costs incurred during inspection and/or repair of the
System which are due to delays associated with said restrictions.
Owner shall be responsible for the removal and replacement of any
overburdens, superstrata or overlays, either permanent or temporary, as
necessary to expose the surface of the System for inspection and/or
repair.
7. Firestone's failure to enforce any of the terms or conditions stated
herein shall not be construed as a waiver of such provision or of any
other terms and conditions of this Limited Warranty.
8. This Limited Warranty shall be governed and construed in accordance
with the laws of the State of Indiana without regard to conflict of
law.
FIRESTONE DOES NOT WARRANT PRODUCTS INCORPORATED OR UTILIZED IN THIS
INSTALLATION WHICH IS NOT FURNISHED. FIRESTONE SPECIFICALLY DISCLAIMS LIABILITY,
UNDER THE THEORY OF LAW, ARISING OUT OF THE INSTALLATION OR PERFORMANCE OR, OR
DAMAGES SUSTAINED BY OR CAUSED BY, PRODUCTS NOT FURNISHED BY FIRESTONE. THIS
LIMITED WARRANTY SUPERSEDES AND IS IN LIEU OF ALL WARRANTIES OR GUARANTEES
WHETHER WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION,
WARRANTIES OR MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THIS
LIMITED WARRANTY SHALL BE THE OWNER'S SOLE AND EXCLUSIVE REMEDY AGAINST
FIRESTONE, AND FIRESTONE SHALL NOT BE LIABLE FOR ANY CONSEQUENTIAL, SPECIAL,
INCIDENT OR OTHER DAMAGES INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS OR
DAMAGE TO THE BUILDING OR ITS CONTENTS OR THE ROOF DECK. THIS LIMITED WARRANTY
CANNOT BE AMENDED, ALTERED OR MODIFIED IN ANY WAY EXCEPT IN WRITING SIGNED BY
THE PRESIDENT OF FIRESTONE OR A PERSON TO WHOM HIS AUTHORITY HAS BEEN DELEGATED
IN WRITING. NO OTHER PERSON HAS ANY
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AUTHORITY TO BIND FIRESTONE WITH ANY REPRESENTATION OR WARRANTY WHETHER ORAL OR
WRITTEN.
FIRESTONE BUILDING PRODUCTS COMPANY
By: George Furman
AUTHORIZED
SIGNATURE: /s/ George Furman
TITLE: Manager, Product Services
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FIRESTONE ROOFING CARE AND MAINTENANCE REQUIREMENTS
(For Modified Bitumen Standard Roof System Limited Warranty)
Congratulations on your purchase of a Firestone Roofing System! Your roof is a
valuable asset and as such should be properly maintained. All roofs and roofing
systems require periodic maintenance to perform as designed and to keep your
Limited Warranty in full force and effect.
1. The roof must be inspected at least twice yearly (in the Spring and
Fall), and after any severe storms. Record maintenance procedures as
they occur. Log all access times and parties working on the roof.
2. Proper maintenance and good roofing practice requires that podded water
(defined as standing water on the roof forty-eight (48) hours after its
stops raining) must not be allowed on the roof. Roofs must have slope
to drain and all drain are must remain clean. Bag and remove all debris
from the roof since debris on the roof surface with be quickly swept
into drains by rains. This will allow for proper water run-off and
avoid overloading the roof with podded water.
3. The Firestone Roofing System cannot be exposed to acids, solvents,
greases, oil, fats, chemicals and the like. If the Firestone Roofing
System is subject to contact with any such materials, contact Firestone
immediately.
4. The Firestone Roofing System is designed to be a waterproofing
membrane. If there is to be roof traffic for any reason, contact your
Firestone Licenced Applicator before proceeding for the installation of
approved protective walkways.
5. Firestone Roofing Membranes may require maintenance of the surface of
the membrane in order to perform as designed:
a. Smooth surface APP roofing membranes require the application
of an approved liquid coating, such as Aluminum Roof Coating.
If this coating is not applied as part of the initial roofing
installation, it must be applied within the first five year s
after the roof is installed. In addition, this coating should
be maintained as needed to recover any areas of the coating
that have blistered, peeled or worn through.
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b. Granule surfaced APP or SBS roofing membranes require the
applica tion of additional roofing granules wherever the
original factory application of granules has worn through due
to roof traffic or some other event.
6. All counterflashing, metal work, drains, skylights, equipment curb and
supports, and any other rooftop accessories functioning in conjunction
with the Firestone Roofing System must be properly maintained at all
times. In addition, roof sealants (including, but not limited to,
Firestone Pourable Sealer and General Purpose Sealant) are not covered
under this warranty and must be maintained per Firestone Technical
Specifications.
7. In any additional equipment is to be installed on your roof (e.g. HVAC
units, TV antennas, etc.), contact Firestone, in writing, for approval
before proceeding.
8. Should there be an addition to the building, requiring tie-in to the
existing Firestone Roofing System, contact Firestone before proceeding
to ensure the tie-in is in accordance with Firestone specifications.
9. Should you have a leak:
(a) Check for the obvious: clogged roof drains, loose
counterflashings, broken skylights, open grills or vents,
broken water pipes.
(b) Note conditions resulting in leakage. Heavy or light rain,
wind direction, temperature and time of day that the leak
occurs are all important clues to tracing roof leaks. Note
whether the leak stops shortly after each rain or continues to
drip until the roof is dry. If you are prepared with the
facts, the diagnosis and repair of the leak can proceed more
rapidly.
(c) Contact Firestone Warranty Claims at 1-800-451-4511
immediately...but please don't call until you are reasonably
sure that the Firestone Roofing System is the cause of the
leak.
Firestone feels that the preceding requirements will assist you, the building
owner, in maintaining a watertight roof for many years. Remember, your roof is
an invest ment. To maximize your return on this investment, maintenance is not
only essential, but required.
99
<PAGE>
FIRESTONE
BUILDING PRODUCTS
NOBODY COVERS YOU BETTER.
525 Congressional Boulevard-Carmel, IN 46032-5607
1-800-428-4442 1-317-575-7000 1-317-575-7100
100
<PAGE>
FIRESTONE
NOW THAT YOU HAVE A NEW FIRESTONE
ROOFING SYSTEM...
Congratulations on your purchase of a Firestone Roofing System! Your new roof is
a valuable asset and as such should be properly maintained. All roofs require
periodic maintenance to perform as designed and to keep your Limited Warranty in
full force and effect. The "Firestone Roofing Care and Maintenance Guidelines"
printed on the back of your Firestone Roof System Limited Warranty contain a
number of important items to assist you in maintaining a watertight roof for
many years. These maintenance guidelines recommend that the roof be inspected at
least twice yearly. Although this inspection can be performed by any qualified
person selected by you, FIRESTONE RECOMMENDS THAT AT LEAST ONE INSPECTION EVERY
YEAR BE CONDUCTED BY THE FIRESTONE LICENSED APPLICATOR WHO INSTALLED YOUR ROOF.
Whenever an inspection of the roof is performed, Firestone recommends that the
following items be included:
- --------------------------------------------------------------------------------
1. ROOF CONDITIONS REQUIRING PERIODIC INSPECTION:
Periodic inspection of the following items is very important to assure that the
Firestone Roofing System has not been exposed to conditions not covered by
Firestone's Limited Warranty:
a. ROOF TRAFFIC & WALKWAYS: As stated in Firestone's System Design
Instructions for all Firestone Roofing Systems, "Walkways help protect
the membrane from damage due to necessary roof-top service traffic."
Please note that walkways should be maintained at all roof access
points, around all mechanical equipment which requires maintenance and
at all areas where roof traffic more frequent that once a month is
anticipated. IF, BECAUSE OF TRAFFIC REQUIREMENTS, WALKWAYS NEED TO BE
INSTALLED ON YOUR ROOF, CONTACT YOUR FIRESTONE LICENSED APPLICATOR
BEFORE PROCEEDING.
101
<PAGE>
b. DISCHARGES: All components of the Firestone roof system must be
protected from discharges, such as petroleum products, greases, oils
and fats, acids and the like. If the building will have any such
discharges, please contact Firestone for suggested methods of
protection. IF, BECAUSE OF THE PRESENCE OF CHEMICAL DISCHARGES,
PROTECTION MEASURES ARE RECOMMENDED, CONTACT YOUR FIRESTONE LICENSED
APPLICATOR BEFORE PROCEEDING.
c. Ponding Water: Proper maintenance and good roofing practice suggests
that ponded water (defined as standing water on the roof forty-eight
(48) hours after it stops raining) should not be allowed on the roof.
Roofs must have slope to drain and all drain areas must remain clean.
If podded water areas are observed on the roof that cannot be corrected
by periodic cleaning of drain areas, contact your Firestone License
Applicator.
d. Storms: The roof must be inspected after any severe storm,
especially after any storm that involves high sustained winds, heavy
wind gusts or tornado-like conditions. All roof surfaces should be
inspected for damage caused by wind-blown debris. The roof also should
be inspected after any hail or ice storm which could damage the roofing
system. If storm-related damage to the roof system is observed, contact
your Firestone Licensed Applicator before proceeding.
e. Moisture Infiltration: It is very important to inspect the roofing
system for moisture infiltration from sources excluded by Firestone's
Limited Warranty.
These sources can include but are not limited to:
1. Latent moisture in a pre-existing roofing system or roof
insulation remaining beneath the Firestone Roofing System.
2. Moisture infiltration in or through building walls,
copings, mortar joints and roof-top equipment.
3. Condensation of water vapor within the roofing system due
to temperature and humidity differentials.
Because inspection for moisture infiltration requires professional roofing
experience, Firestone strongly recommends that this inspection be performed by a
Firestone Licensed Applicator at least once a year.
102
<PAGE>
2. NON-FIRESTONE MATERIALS
In some instances, non-Firestone supplied materials are used in conjunction with
Firestone Roofing Systems. These materials may include, but are not limited to
the following items:
a. Locally-fabricated sheet metal flashings.
b. Non-Firestone sealants at roof terminations.
c. Non-Firestone roof insulations.
d. Non-Firestone insulation fastening devices, including but not
limited to roofing screws, insulation plates, construction adhesives
and roofing asphalt.
e. Preservative-treated wood nailers and blocking.
f. Roof drains and drain inserts.
g. Pre-fabricated roof curbs.
h. Concrete walkway or ballast pavers.
i. Stone ballast.
j. Roof coatings.
k. Penetration pocket sealants.
Because such items are not warranted by Firestone, it is important for you to
establish an ongoing inspection and maintenance program to assure that the
performance of non-Firestone materials does not adversely affect the
weathertight integrity of the Firestone roofing system. Sheet metal items should
be checked for weathertightness and re-anchored/recaulked as needed. Nailers and
blocking should be checked for soundness, and replaced or re-secured if
necessary. Roof drains and drain inserts should be cleared of any debris.
Sealants should be inspected for shrinking or cracking and replaced as required.
The integrity of roof insulation and insulation attachments should be verified.
Walkway pavers should be checked for cracking or splitting and replaced if
necessary. Ballast stone should be checked for deterioration due to freeze/thaw
conditions. In addition, all ballasted roofs should be inspected for localized
wind displacement of the ballast, especially along perimeter roof areas. In the
event ballast displacement is observed, the ballast should be re-dispersed
uniformly and the addition of larger ballast stones should be considered.
103
<PAGE>
3. FIRESTONE PRODUCTS REQUIRING PERIODIC MAINTENANCE:
Some Firestone roof coatings and sealants require periodic maintenance to assure
long-term performance and to keep Firestone Limited Warranty in full force and
effect. These products include but are not limited to the following items:
a. Firestone Supplied Coatings.
b. Firestone S-10 Pourable Sealer.
c. Firestone General Purpose Sealant.
d. Firestone Metal Flashing.
Because such items must be maintained to keep the Firestone Limited Warranty in
full force and effect, it is important for you to establish an ongoing
inspection and maintenance program to assure that the performance of these
products does not adversely affect the weathertight integrity of the Firestone
roofing system. Roof coatings should be checked for cracking, peeling or
cracking and recoated as necessary. Sealants should be inspected for shrinkage
or cracking and replaced as required. Firestone metal flashing should be checked
for weathertightness and re-anchored/recaulked as needed. Maintenance to
Firestone products must be performed by a Firestone Licensed Applicator.
4. FIRESTONE PRODUCTS REQUIRING PERIODIC INSPECTION
Although the following Firestone products do not necessarily require periodic
maintenance to assure long-term performance, periodic inspection is very
important to assure that these products have not been exposed to conditions
excluded by Firestone's Limited Warranty:
a. The Firestone Roofing Membrane should be inspected for tears or
punctures caused by wind storms, falling objects, roof traffic and the like.
If the Firestone membrane is supplied with a factory applied coating, such as
roofing granules, the coating should be inspected for any discontinuities
caused by abrasion from wind, roof traffic or other sources. Tears, punctures
and abrasions to the membrane must be repaired by a Licensed Firestone
Applicator using Firestone specified repair procedures.
In addition, the membrane should be inspected for any contamination
from discharges, such as petroleum products, greases, oils and fats,
acids and the like. If any such discharges are observed on the
membrane, please contact Firestone for suggested methods of protection.
If, because of the presence of
104
<PAGE>
chemical discharges, protection measures are recommended by Firestone,
contact your Firestone Licensed Applicator before proceeding.
FIRESTONE WALL FLASHINGS also should be inspected for tears, punctures,
abrasion and contamination from discharges, following the same
procedures as for the Firestone Roof Membrane.
- --------------------------------------------------------------------------------
5. ROOF INSPECTIONS AND SAFETY:
Inspection of any roof should be undertaken only by qualified persons who are
familiar with safe roofing practice, including all applicable occupational
health and safety regulations relating to roofing and construction. FIRESTONE
RECOMMENDS THAT ALL ROOF INSPECTIONS BE PERFORMED BY A FIRESTONE LICENSED
APPLICATOR OR A SIMILAR ROOFING PROFESSIONAL.
- --------------------------------------------------------------------------------
6. ARRANGING FOR PERIODIC ROOF INSPECTIONS:
Please note that the cost of periodic inspections of you roof, either by your
Firestone Licensed Applicator or by any other roofing professional, are not
included in the cost of your Limited Warranty. Firestone recommends that you
contact your Firestone Licensed Applicator to obtain a proposal for inspection
and maintenance services.
Firestone feels that the preceding guidelines will help you maintain a
watertight roof for many years. Whenever you have questions concerning your
roofing system, do not hesitate to contact your Firestone Licensed Applicator or
your local Firestone Sales Representative.
FIRESTONE
BUILDING PRODUCTS
NOBODY COVERS YOU BETTER.
525 Congressional Boulevard-Carmel, IN 46032-5607
1-800-428-4442 1-317-575-7000 1-317-575-7100
105
<PAGE>
[Graphic regarding roof information]
106
<PAGE>
[EXHIBIT I -- BUILDING SYSTEM WARRANTIES CURRENTLY IN EFFECT]
[NONE]
107
<PAGE>
BDG PISCATAWAY, LLC
6800 JERICHO TURNPIKE
SYOSSET, NEW YORK 11791-4498
August 19, 1998
Praecis Pharmaceuticals Incorporated
1 Hampshire Street
Cambridge, Massachusetts 02139-1572
Attention: Kevin McLaughlin
Re: Lease dated as of the date hereof (the "Lease") by and between
BDG Piscataway, LLC ("Lessor") and Praecis Pharmaceuticals
Incorporated ("Lessee") for certain space, as more
particularly described in the Lease (the "Demised Premises"),
in the building (the "Building") located at the property
commonly known as 10 Knightsbridge Road, Piscataway, New
Jersey (the "Office Building Area")
Dear Mr. McLaughlin:
Lessor and Lessee have entered into the above-referenced Lease with
respect to the Demised Premises. Capitalized terms used herein and not otherwise
defined shall have the meanings given to them in the Lease. Lessor and Lessee
have agreed to enter into this side letter regarding certain provisions of the
Lease. Notwithstanding anything to the contrary contained in the Lease, lessor
and Lessee, intending to be legally bound, agree as follows:
1. Lessor agrees that the insurance certificate to be delivered by Lessee
prior to the date of the Lease, pursuant to paragraph 29(A)(ii) of the
Lease, may be delivered to Lessor after the date of the Lease, but in no
event later than the date upon which Lessee takes possession of the
Demised Premises pursuant to paragraph 41 of the Lease.
2. Lessee acknowledges and agrees that the work to be performed by Lessor
pursuant to paragraph 19(A)(v) of the Lease has been completed.
3. Lessee agrees to pay within 10 days after being invoiced, as Additional
Rent, the amounts described in Schedule 1 attached hereto and made a part
hereof, for HVAC service provided, at the request of Lessee (such request
to be made within a reasonable period of time prior to requiring such
service), after Building Hours by Lessor to the Demised Premises (if any)
or to the Building for Lessee's sole benefit.
<PAGE>
4. Lessor and Lessee each agree to insert the attached Exhibit E-1 into their
respective counterpart versions of the Lease, which the parties agree is
hereby incorporated into the Lease.
Unless explicitly set forth above, all other terms and conditions of
the Lease remain unchanged and in full force and effect. Kindly execute this
letter below to acknowledge your acceptance of the above provisions. This letter
may be executed in counterparts.
AGREED TO AND ACCEPTED BY:
Praecis Pharmaceuticals Incorporated
By: ___________________________
Name:
Title:
BDG Piscataway, LLC
By: BDG Piscataway, Inc.
By: /s/ David Blumenfeld
------------------------------
Name: David Blumenfeld
Title: Vice President
<PAGE>
4. Lessor and Lessee each agree to insert the attached Exhibit E-1 into their
respective counterpart versions of the Lease, which the parties agree is
hereby incorporated into the Lease.
Unless explicitly set forth above, all other terms and conditions of
the Lease remain unchanged and in full force and effect. Kindly execute this
letter below to acknowledge your acceptance of the above provisions. This letter
may be executed in counterparts.
AGREED TO AND ACCEPTED BY:
Praecis Pharmaceuticals Incorporated
By: /s/ Kevin F. McLaughlin
-------------------------------
Name: Kevin F. McLaughlin
Title: Sr. V.P. and C.F.O.
BDG Piscataway, LLC
By: BDG Piscataway, Inc.
By: ______________________________
Name:
Title:
<PAGE>
Schedule 1
An amount equal to the product of the Overtime Hours of HVAC service
provided by Lessor at Lessee's request during any given calendar month
multiplied by Fifty Dollars ($50). The foregoing dollar amount shall be subject
to increases from time to time upon at least thirty (30) days prior written
notice from Lessor to Lessee, such increases to reflect actual costs incurred by
Lessor to provide such additional HVAC service after Building Hours at Lessee's
request.
"Overtime Hours" means the aggregate number of hours electrical
energy is consumed or HVAC service is provided, as applicable, at all hours
other than Building Hours.
<PAGE>
EXHIBIT E-1
Removable Improvements
1. Laboratory Benches;
2. Laboratory Hoods;
3. Nitrogen Tanks and Stands; and
4. all other items reasonably requested in writing by Lessor to be
designated as "Removable Improvements" in connection with Lessor's
approval of Lessee's Plans and Specifications, provided same shall
be reasonably agreed to in writing by Lessee.
<PAGE>
SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
This Subordination, Nondisturbance and Attornment Agreement ("Agreement")
dated as of August 19, 1998, is made by and among PRAECIS PHARMACEUTICALS,
INCORPORATED, a Delaware corporation, having an address at 1 Hampshire Street,
Cambridge, Massachusetts 02139-1572 ("Tenant"), and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, a New York banking corporation, having an address of 60
Wall Street, New York, New York 10260-0060 ("Lender"), and BDG PISCATAWAY, LLC,
a New York limited liability company, having an address at c/o Blumenfeld
Development Group, Ltd., 6800 Jericho Turnpike, Suite 102E, Syosset, New York
11791-4498 ("Landlord").
1. Recitals.
1.1 Lease. Tenant is the lessee under a certain lease dated August 19,
1998 (as may be amended from time to time, the "Lease") of certain
premises at 10 Knightsbridge Road (a/k/a 860 Centennial Avenue),
Piscataway, New Jersey (the "Leased Premises"), as described in the
mortgage referred to below (the "Mortgaged Property").
1.2 Mortgage. Lender is the holder of a Mortgage and Security agreement
(the "Mortgage") from Landlord to Lender, covering Landlord's interest in
the Mortgaged Property, which Mortgage has been recorded at the Recorder's
Office of Middlesex County, New Jersey.
1.3 Consideration. In connection with the Mortgage, Lender has required
that Tenant subordinate Tenant's lien interest in the Mortgaged Property
under the Lease to the Mortgage and agree to attorn to the purchaser at
any foreclosure sale of the Mortgaged Property held under the Mortgage.
Tenant is willing to do so on the terms hereinafter set forth.
2. Agreements.
2.1 Covenants Regarding the Lease. Tenant agrees as follows:
(a) Tenant will not, without the prior written consent of lender,
pay security deposits, rent or other amounts aggregating at
any time (specifically excepting prepayments for excess taxes,
operating expenses, utilities or similar charges) more than
thirty (30) days in advance under the Lease.
(b) Tenant will not, without the prior written consent of Lender,
amend or modify the Lease or any of the terms thereof, or,
except pursuant to terms of the Lease now existing, cancel,
terminate or surrender the Lease;
<PAGE>
(c) Tenant will not, without the prior written consent of Lender,
voluntarily subordinate the Lease to any other lien or
encumbrance.
2.2 Subordination of Lease. Tenant hereby agrees with Lender that the lien
interest of Tenant under the Lease shall be subject and subordinate to the
Mortgage and any renewals, extensions, modifications, consolidations or
replacements thereof and any advances thereunder.
2.3 Attornment by Tenant. Tenant agrees with Lender that, if the interest
of Landlord in the Mortgaged Property shall be transferred to and owned by
Lender or other entity by reason of foreclosure, deed in lieu of
foreclosure or otherwise, the Lease shall continue as a direct lease
between Tenant and the Lender or other entity, the Lender or other entity
shall recognize Tenant as the tenant under the Lease for the unexpired
balance of the term of said Lease and any extensions or renewals thereof,
and Tenant shall be bound to Lender or such other entity under all of the
terms, covenants and conditions of the Lease for the balance of the term
thereof remaining and any extensions or renewals thereof, with the same
force and effect as if Lender or such other entity were the lessor under
the Lease. Tenant hereby attorns to Lender or such other entity as its
landlord, said attornment to be effective and self-operative without the
execution of any further instruments on the part of any of the parties
hereto immediately upon Lender or such other entity succeeding to the
interest of the Landlord in the Mortgaged Property. Tenant agrees,
however, upon the election of Lender or such other entity and within
thirty (30) days of written demand by Lender or such other entity after it
acquires title to the Mortgaged Property, to execute an instrument in
recordable form in confirmation of the foregoing provisions.
2.4 Recognition and Nondisturbance. Lender agrees, with Tenant that, so
long as Tenant duly and promptly performs all of its obligations under the
Lease and hereunder, neither Lender nor any person, firm, partnership or
other entity claiming by, through or under Lender shall, in or after
taking possession of or acquiring title to the Mortgaged Property through
foreclosure proceedings, deed in lieu of foreclosure, or otherwise,
disturb the possession or other rights of Tenant under the Lease, and will
accept Tenant as lessee under the terms and conditions of, and for the
entire duration of, the term of the Lease, including any extensions and
renewals set forth in the Lease and any modifications or amendments
thereof to which Lender has previously agreed in writing, or which were in
effect prior to the date hereof. Lender, its successors and assigns, shall
not, however, be:
(a) liable for any breach, act or omission of any prior landlord
(including Landlord), except that nothing contained in this
Section 2.4(a) shall modify any liability of Lender for any
breach, act or omission which first occurs and
<PAGE>
continues after Lender takes possession of, or acquires title
to, the Mortgaged Property;
(b) subject to any offset or defense which Tenant might have
against any prior landlord (including Landlord), except that
nothing contained in this Section 2.4(b) shall modify any
right of offset or defense that Tenant may possess for any
breach, act or omission which first occurs and continues after
Lender takes possession of, or acquires title to, the Mortgage
Property;
(c) bound by any payment of rent or additional rent (specifically
excepting prepayments for excess taxes, operating expenses,
utilities or similar charges) made by Tenant to Landlord more
than thirty (30) days in advance;
(d) bound by any security deposit which Tenant may have paid to
any prior landlord (including Landlord) unless such security
deposit has actually been delivered to Lender;
(e) bound by any amendment to, modification, extension or
termination of the Lease made after the date hereof without
the written consent of Lender; provided, however, that the
foregoing shall not include, and Lender shall be bound by, any
modification, extension or termination of the Lease pursuant
to the exercise by Tenant of any option currently contained in
the Lease; or
(f) bound by any provision in the Lease which obligates the
Landlord to erect or complete any building or to perform any
construction work or to make any improvements to the Mortgaged
Property or the Leased Premises; provided, however, that the
foregoing shall not negate any right which Tenant has or may
have under the terms of the lease to terminate said Lease for
any failure to complete any construction or any improvements.
Notwithstanding the provisions of Article 2.4, specifically Section 2.4(e),
Lender may, at its election, choose to have the benefits of this Agreement with
respect to any amendment to, modification extension or termination of any Lease
entered into after the date of this Agreement without the written consent of
Lender.
The obligation of Lender to accept the attornment of Tenant and not to disturb
Tenant's possession of the Mortgaged Property under the Lease, as set forth
above, is expressly subject to the Tenant, at the time of Lender's taking
possession of or acquisition of title to the Mortgaged Property, not then being
in default beyond any cure period set forth in the Lease with respect to the
performance of any of Tenant's obligations under the Lease.
2.5 Lender's Opportunity to Cure Landlord's Defaults. In the event that
Landlord defaults in the performance or observation of any of the terms,
conditions or agreements
<PAGE>
in the Lease, Tenant shall give written notice thereof to Lender and
Lender shall have the right (but not the obligation) to cure such default.
Tenant shall not take any action with respect to such default under the
Lease including, without limitation, any action in order to terminate,
rescind or avoid the Lease or to withhold any rental thereunder, unless
Lender, after receipt of such notice, fails to cure, or cause to be cured,
the specified default within a reasonable time, not to exceed thirty (30)
days, thereafter; but nothing herein shall be deemed to impose any
obligation on Lender to cure such default.
2.6 Lease Conditions. tenant and Lender agree that this Agreement
satisfies any and all conditions or requirements in the Lease relating to
the subordination of the Lease to the Mortgage and the granting of a
nondisturbance agreement to Tenant by Lender. Any noncompliance with such
conditions is hereby waived. Tenant and Lender further agree that in the
event that there is any inconsistency between the terms and provisions
hereof and the terms and provisions of the Lease dealing with the
nondisturbance by Lender, the terms and provisions hereof shall be
controlling.
2.7 Assignment of Interest and Rents. Tenant acknowledges that Tenant has
notice that Landlord's interest under the Lease and the rent and all other
sums due thereunder have been assigned to Lender as part of the security
for the note secured by the Mortgage. In the event that Lender notifies
Tenant of a default under the Mortgage and demands that Tenant pay its
rent and all other sums due under the Lease to Lender, Tenant agrees that,
following Tenant's receipt of such notice, Tenant shall pay the rent and
all other sums due under the Lease to Lender. By its execution of this
Agreement, Landlord irrevocably direct Tenant to comply with this Section
2.7, notwithstanding any contrary direction, instruction or assertion by
Landlord. Such compliance shall not be deemed to violate the Lease, and
Landlord hereby releases Tenant from any and all claims arising out of
Tenant's compliance with this Section 2.7. Tenant shall be entitled to
full credit under the Lease for any rent or other sums paid to Lender
pursuant to this Section 2.7 to the same extent as if such rent or other
sums were paid directly to Landlord.
2.8 Election to Terminate. Tenant waives the provision of any statute or
rule of law now or hereafter in effect which may give or purport to give
Tenant any right or election to terminate or otherwise adversely affect
the Lease and the obligations of Tenant thereunder solely by reason of any
foreclosure proceeding in respect of the Mortgage.
2.9 Mortgagee's Interest. Anything herein or in the Lease to the contrary
notwithstanding, in the event that Mortgagee shall acquire title to the
Mortgaged Property, Mortgagee shall have no obligation, nor incur any
liability, in excess of Mortgagee's estate or interest, if any, in the
Mortgaged Property and Tenant shall look exclusively to such estate or
interest of Mortgagee, if any, in the Mortgaged Property for the payment
and discharge of any obligations imposed upon Mortgagee hereunder or under
the Lease, and Mortgagee is hereby released and relieved of any other
liability hereunder or under the Lease. Tenant agrees that with respect to
any money judgment
<PAGE>
which may be obtained or secured by Tenant against Mortgagee, Tenant shall
look solely to the estate or interest owned by Mortgagee in the Mortgaged
Property, and the Tenant will not collect, or attempt to collect any such
judgment out of the other assets of Mortgagee.
3. General.
3.1 Notices. All notices or other communications required or permitted to
be given pursuant to this Agreement shall be in writing and shall be
considered as properly given (i) if mailed by first class United States
mail, postage prepaid, registered or certified with return receipt
requested, (ii) by delivering same in person to the intended addressee, or
(iii) by delivery to Federal Express or another independent, nationally or
locally recognized, third party commercial delivery service for same day
or next day delivery. Notice so mailed shall be effective on the earlier
to occur of (a) the date received, or (b) one business day after delivery
to Federal Express or such other delivery service, postage prepaid. For
purposes of notice, the address of Lender shall be the address set forth
herein or such other address as Lender shall have notified Tenant, in
writing, in accordance with this Section 3.1, and the address of Tenant
shall be PRAECIS PHARMACEUTICALS INCORPORATED, 1 Hampshire Street,
Cambridge, Massachusetts, 02139-1572, Attn: Chief Financial Officer; with
a copy to the Premises, Attn: Gary Olson, Ph.D. and with a copy to
Skadden, Arps, Slate, Meagher & Flom LLP, One Beacon Street, Boston,
Massachusetts, 02108-3194, Attn: Kent A. Coit, Esquire or such other
address as Lender shall have notified Tenant, in writing, in accordance
with this Section 3.1, with a copy to the Leased Premises; provided,
however, that either party shall have the right to change its address for
notice hereunder to any other location within the continental United
States by the giving of ten (10) days' notice to the other party in the
manner set forth herein.
3.2 Captions for Convenience Only. The Article and Section entitlements
hereof are inserted for convenience of reference only and shall in no way
alter, modify, of define, or be used in construing the text of such
Articles of Paragraphs.
3.3 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the respective successors and assigns of the parties
hereto, which in the case of Lender shall expressly include any purchaser
at a foreclosure sale pursuant to the Mortgage, and such purchaser's
successors and assign.
3.4 Applicable Law. This Agreement shall be governed by the laws of the
state of New Jersey.
3.5 Modification. This Agreement may not be modified except by an
amendment or other agreement in writing signed by the parties hereto or
their respective successors in interest. The terms, covenants and
conditions contained herein shall inure to the benefit
<PAGE>
of and be binding upon the parties hereto and their respective successors
and assigns, specifically including but not limited to, Tenant's assignees
and subtenants, if any, and any purchaser at a sale of the Mortgaged
Property under or pursuant to the mortgage, include a transfer of title by
deed in lieu of foreclosure, if any.
3.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which taken together shall constitute one and the
same original.
<PAGE>
[Signatures Commence on Next Page]
<PAGE>
WITNESS the execution hereof under seal as of the day and year first
above written.
"Tenant"
PRAECIS PHARMACEUTICALS,
INCORPORATED
By: ________________________________________
Name: __________________________________
Title: _________________________________
Hereunto duly authorized
"Lender"
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ Nancy S. Alto
--------------------------------------
Name: Nancy S. Alto
Title: Vice President
Hereunto duly authorized
"Landlord"
BDG PISCATAWAY, LLC:
By: BDG Piscataway, Inc.
By: /s/ David Blumenfeld
----------------------------------
Name: David Blumenfeld
Title: Vice President
Hereunto duly authorized
<PAGE>
STATE OF ________________________ ss.
ss.
COUNTY OF ______________________ ss.
The foregoing instrument was ACKNOWLEDGED before me this ___ day of
____________, 19__ by _____________________________ the _________________ of a
_____________________ on behalf of and as the free act and deed of said
_______________________.
[SEAL]
______________________________________
Notary Public, State of ______________
My Commission Expires: Printed Name: ________________________
_________________________
STATE OF NEW YORK ss.
ss.
COUNTY OF NEW YORK ss.
The foregoing instrument was ACKNOWLEDGED before me this 24th day of
August, 1998 by Nancy S. Alto the Vice President of a corporation on behalf
of and as the free act and deed of said corporation.
[SEAL]
/s/ Maryellen Dillon
------------------------------------
Notary Public, State of New York
My Commission Expires: Printed Name: Maryellen Dillon
March 9, 2000
[Acknowledgments Continue on Next Page]
<PAGE>
STATE OF NEW YORK ss.
ss.
COUNTY OF NASSAU ss.
The foregoing instrument was ACKNOWLEDGED before me this 26th day of
August, 1998 by David Blumenfeld the Vice President of an LLC on behalf of
and as the free act and deed of said LLC.
[SEAL]
/s/ Barbara A. Liotta
------------------------------------
Notary Public, State of New York
My Commission Expires: Printed Name: Barbara A. Liotta
January 20, 2000
<PAGE>
WITNESS the execution hereof under seal as of the day and year first
above written.
"Tenant"
PRAECIS PHARMACEUTICALS,
INCORPORATED
By: /s/ Kevin F. McLaughlin
--------------------------------------
Name: Kevin F. McLaughlin
Title: V.P. and C.F.O.
Hereunto duly authorized
"Lender"
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: ________________________________________
Name: __________________________________
Title: _________________________________
Hereunto duly authorized
"Landlord"
BDG PISCATAWAY, LLC:
By: BDG Piscataway, Inc.
By: ____________________________________
Name: ______________________________
Title: _____________________________
Hereunto duly authorized
<PAGE>
STATE OF MASSACHUSETTS ss.
ss.
COUNTY OF ESSEX ss.
The foregoing instrument was ACKNOWLEDGED before me this 6th day of
August, 1998 by Kevin F. McLaughlin the V.P. and C.F.O. of a corporation on
behalf of and as the free act and deed of said corporation.
[SEAL]
/s/ Mary O'Malley
-------------------------------------
Notary Public, State of Massachusetts
My Commission Expires: Printed Name: Mary O'Malley
November 30, 1998
STATE OF ________________________ ss.
ss.
COUNTY OF ______________________ ss.
The foregoing instrument was ACKNOWLEDGED before me this ___ day of
____________, 19__ by _____________________________the _________________of a
_____________________ on behalf of and as the free act and deed of said
_______________________.
[SEAL]
______________________________________
Notary Public, State of ______________
My Commission Expires: Printed Name: ________________________
_________________________
[Acknowledgments Continue on Next Page]
<PAGE>
STATE OF ________________________ ss.
ss.
COUNTY OF ______________________ ss.
The foregoing instrument was ACKNOWLEDGED before me this ___ day of
____________, 19__ by _____________________________ the _________________ of a
_____________________ on behalf of and as the free act and deed of said
_______________________.
[SEAL]
______________________________________
Notary Public, State of ______________
My Commission Expires: Printed Name: ________________________
_________________________
<PAGE>
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated February 2,
2000 in the Registration Statement (Form S-1) and related Prospectus of
PRAECIS PHARMACEUTICALS INCORPORATED for the registration of $156,400,000 of
its common stock.
Ernst & Young LLP
Boston, Massachusetts
February 2, 2000
The foregoing consent is in the form that will be signed upon stockholder
approval of the two-for-one split of the Company's common stock described in
Note 6 to the financial statements.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 2, 2000
<PAGE>
EXHIBIT 23.3
[LETTERHEAD OF LAHIVE & COCKFIELD, LLP]
February 8, 2000
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 as filed with the Securities
and Exchange Commission on February 8, 2000.
Very truly yours,
LAHIVE & COCKFIELD, LLP
/s/ Giulio A. DeConti, Jr.
Giulio A. DeConti, Jr.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL STATEMENTS OF PRAECIS PHARMACEUTICALS INCORPORATED AS OF,
AND FOR THE YEAR ENDED, DECEMBER 31, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 94,525
<SECURITIES> 0
<RECEIVABLES> 8,121
<ALLOWANCES> 0
<INVENTORY> 21,100
<CURRENT-ASSETS> 134,288
<PP&E> 10,256
<DEPRECIATION> 4,213
<TOTAL-ASSETS> 140,331
<CURRENT-LIABILITIES> 48,068
<BONDS> 0
0
35
<COMMON> 64
<OTHER-SE> 87,617
<TOTAL-LIABILITY-AND-EQUITY> 140,331
<SALES> 0
<TOTAL-REVENUES> 61,514
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 54,937
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,484
<INCOME-PRETAX> 11,050
<INCOME-TAX> 1,800
<INCOME-CONTINUING> 9,250
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,250
<EPS-BASIC> 1.510
<EPS-DILUTED> 0.240
</TABLE>
