<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 9, 1999.
REGISTRATION NO. 333-72077
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PEPTIDE THERAPEUTICS GROUP PLC
(Exact name of registrant as specified in its charter)
N/A
(Translation of registrant's name into English)
<TABLE>
<S> <C> <C>
ENGLAND AND WALES 2834 N/A
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
PETERHOUSE TECHNOLOGY PARK, 100 FULBOURN ROAD, CAMBRIDGE, CB1 9PT, ENGLAND
011-44-1223-275-300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
DR. JOHN BROWN
CHIEF EXECUTIVE
PEPTIDE THERAPEUTICS GROUP PLC
PETERHOUSE TECHNOLOGY PARK,
100 FULBOURN ROAD
CAMBRIDGE, CB1 9PT, ENGLAND
011-44-1223-275-300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
WITH COPIES TO:
MICHAEL LYTTON, ESQ. JOHN M. WESTCOTT, JR. ESQ.
STANLEY KELLER, ESQ. HALE AND DORR LLP
PAUL KINSELLA, ESQ. 60 STATE STREET
PALMER & DODGE LLP BOSTON, MASSACHUSETTS 02109
ONE BEACON STREET (617) 526-6000
BOSTON, MASSACHUSETTS 02108
(617) 573-0100
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after the Registration Statement becomes effective and
all other conditions to the merger described in the enclosed prospectus and
proxy statement have been satisfied or waived.
------------------------
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. / /
------------------------
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 9, 1999
THE INFORMATION IN THIS PROSPECTUS/PROXY STATEMENT IS NOT COMPLETE AND MAY BE
CHANGED. PEPTIDE MAY NOT ISSUE ITS ORDINARY SHARES IN THE MERGER UNTIL THE
REGISTRATION STATEMENT CONTAINING THIS PROSPECTUS/PROXY STATEMENT IS DECLARED
EFFECTIVE BY THE SECURITIES AND EXCHANGE COMMISSION. THIS PROSPECTUS/PROXY
STATEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT A SOLICITATION
OF AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
<PAGE>
ORAVAX, INC.
38 SIDNEY STREET
CAMBRIDGE, MASSACHUSETTS 02139
(617) 494-1339
April 12, 1999
Dear Stockholder:
The board of directors of OraVax has unanimously approved a merger in which
OraVax will become a wholly-owned subsidiary of Peptide Therapeutics Group plc.
If the merger is completed, you will receive a portion of a Peptide ordinary
share for each share of OraVax common stock you own. The precise portion of a
Peptide ordinary share which you will receive will depend on the market value of
Peptide ordinary shares just prior to completion of the merger, as described in
the accompanying prospectus/proxy statement.
We cannot complete the merger unless the holders of OraVax common stock
adopt the merger agreement. We will hold a special meeting of OraVax
stockholders to vote on the merger agreement. The date, time and place of the
special meeting are as follows:
May 10, 1999
10:00 a.m., local time
Offices of Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING, PLEASE TAKE THE TIME TO VOTE BY COMPLETING AND MAILING THE ENCLOSED
PROXY CARD TO US. IF YOU SIGN, DATE AND MAIL YOUR PROXY CARD WITHOUT INDICATING
HOW YOU WISH TO VOTE, YOUR PROXY WILL BE COUNTED AS A VOTE IN FAVOR OF THE
MERGER AGREEMENT. IF YOU FAIL TO RETURN YOUR CARD, THE EFFECT WILL BE A VOTE
AGAINST THE MERGER AGREEMENT.
The accompanying prospectus/proxy statement gives you detailed information
about the proposed merger. In addition, you may obtain other information about
OraVax from documents filed with the SEC. We encourage you to read this entire
document carefully. PLEASE PAY PARTICULAR ATTENTION TO THE "RISK FACTORS"
SECTION BEGINNING ON PAGE 20 WHICH DESCRIBES CERTAIN RISKS THAT YOU SHOULD
CONSIDER IN DECIDING WHETHER TO VOTE IN FAVOR OF THE MERGER AGREEMENT.
On behalf of the board of directors of OraVax, I urge you to vote in favor
of the merger agreement.
Lance K. Gordon, Ph.D.
President and Chief Executive Officer
NEITHER THE SEC NOR ANY STATE SECURITIES REGULATORS HAS APPROVED THE ORDINARY
SHARES TO BE ISSUED IN THE MERGER OR DETERMINED THAT THIS PROSPECTUS/PROXY
STATEMENT IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This prospectus/proxy statement is dated April 12, 1999, and is first being
mailed to stockholders on or about April 14, 1999.
<PAGE>
ORAVAX, INC.
38 SIDNEY STREET
CAMBRIDGE, MASSACHUSETTS 02139
(617) 494-1339
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 10, 1999
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of OraVax,
will be held at the offices of Hale and Dorr LLP, 60 State Street, Boston,
Massachusetts 02109, on May 10, 1999, at 10:00 a.m., local time, for the
following purposes:
(1) To adopt a merger agreement which provides for:
- the acquisition of OraVax by Peptide Therapeutics Group plc; and
- the conversion of each share of OraVax common stock into a portion of a
Peptide ordinary share (as determined by the share exchange formula in the
merger agreement).
A copy of the merger agreement is attached as Annex A to the accompanying
proxpectus/proxy statement.
(2) To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.
Only holders of OraVax common stock at the close of business on March 11,
1999 are entitled to notice of, and to vote at, the meeting and any adjournments
or postponements thereof.
Adoption of the merger agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of OraVax common stock entitled
to vote at the meeting. The executive officers and directors of OraVax and
certain of their affiliates, who in the aggregate held approximately 7% of the
outstanding shares as of the record date, have agreed to vote to adopt the
merger agreement.
UNDER DELAWARE LAW, STOCKHOLDERS OF ORAVAX HAVE CERTAIN RIGHTS OF APPRAISAL
IN CONNECTION WITH THE MERGER AS DESCRIBED IN THE ACCOMPANYING PROSPECTUS/PROXY
STATEMENT.
Information regarding the merger, the merger agreement, OraVax, Peptide and
related matters is contained in the accompanying prospectus/proxy statement and
the annexes thereto, which are incorporated by reference herein and form a part
of this notice.
By Order of the Board of Directors
Lance K. Gordon, Ph.D.
President and Chief Executive Officer
Cambridge, Massachusetts
April 12, 1999
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY CARD AND PROMPTLY MAIL IT IN THE ENCLOSED ENVELOPE
IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES AT THE SPECIAL MEETING. NO
POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
FOR ASSISTANCE, PLEASE CALL OUR PROXY SOLICITOR KISSEL BLAKE AT 1-800-554-7733.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary.................................................................................................... 1
Summary Financial Information.............................................................................. 8
Unaudited Pro Forma Condensed Consolidated Balance Sheet and Statements of Operations...................... 12
Comparative Per Share Data................................................................................. 17
Comparative Market Price and Dividend Information.......................................................... 18
Comparative Market Price Information..................................................................... 18
Comparative Dividend Information......................................................................... 18
Risk Factors............................................................................................... 20
Forward-Looking Statements May Prove Inaccurate............................................................ 25
The Special Meeting........................................................................................ 26
General.................................................................................................. 26
Matters to be Considered at the Special Meeting.......................................................... 26
Record Date; Voting Rights; Voting at the Meeting........................................................ 26
Voting of Proxies........................................................................................ 26
Solicitation of Proxies.................................................................................. 27
Background and Reasons for the Merger...................................................................... 27
Background of the Merger................................................................................. 27
OraVax's Reasons for the Merger; Recommendation of the OraVax Board of Directors......................... 31
Opinion of Financial Advisor to the OraVax Board of Directors............................................ 32
Interests of Certain Persons in the Merger............................................................... 37
Peptide's Reasons for the Merger......................................................................... 38
Management After the Merger................................................................................ 39
Executive Officers and Directors......................................................................... 39
Compensation of Directors and Executive Officers......................................................... 41
Options to Purchase Securities From Peptide.............................................................. 42
The Merger and the Merger Agreement........................................................................ 43
Structure of the Merger.................................................................................. 43
Effective Time and Effects of the Merger................................................................. 43
Merger Consideration..................................................................................... 43
No Fractional Peptide Shares............................................................................. 44
Exchange of Share Certificates........................................................................... 44
Treatment of OraVax Common Stock Options and Warrants.................................................... 44
Representations and Warranties........................................................................... 45
Certain Covenants........................................................................................ 46
Conditions to the Merger................................................................................. 47
Amendments; Waivers...................................................................................... 48
No Solicitation by OraVax................................................................................ 48
Termination of the Merger Agreement...................................................................... 48
Termination Fees and Expenses............................................................................ 48
Treatment of Preferred Stock if the Merger Agreement is Terminated....................................... 50
Federal Securities Law Consequences...................................................................... 51
Deregistration of OraVax Shares; Listing of Peptide Shares............................................... 51
Appraisal Rights......................................................................................... 52
Covenant Not to Sell Peptide Shares...................................................................... 53
Accounting Treatment..................................................................................... 53
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Arrangements with PMC and OraVax......................................................................... 53
Description of Bridge Loan............................................................................... 56
Peptide Shareholder Materials............................................................................ 57
Material Tax Consequences.................................................................................. 58
General.................................................................................................. 58
United States Federal Income Tax Consequences............................................................ 59
United States Federal Income Tax Consequences of the Ownership of Peptide Shares......................... 59
U.K. Tax Consequences of Owning Peptide Shares........................................................... 62
Description of Peptide..................................................................................... 64
General.................................................................................................. 64
Business................................................................................................. 64
Scientific Background.................................................................................... 64
Product Portfolio........................................................................................ 66
Strategic Alliances and Collaborations................................................................... 68
Technology Platforms and Research Programs............................................................... 71
Properties............................................................................................... 74
Employees................................................................................................ 74
Litigation............................................................................................... 74
Ownership of Peptide Shares................................................................................ 75
Beneficial Ownership by Management of Peptide............................................................ 75
Beneficial Ownership of Certain Stockholders............................................................. 75
Selected Financial Information of Peptide.................................................................. 76
Peptide Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 78
Overview................................................................................................. 78
Rights Issue............................................................................................. 78
Preliminary 1998 Financial Information................................................................... 78
Results of Operations.................................................................................... 80
Liquidity and Capital Resources.......................................................................... 82
Year 2000................................................................................................ 83
Euro Conversion.......................................................................................... 84
Reconciliation of U.K. GAAP to U.S. GAAP................................................................. 84
Description of OraVax...................................................................................... 86
General.................................................................................................. 86
Business................................................................................................. 86
Scientific Background.................................................................................... 87
Products Under Development............................................................................... 87
Manufacturing............................................................................................ 92
Patents and Proprietary Rights; Technology Agreements.................................................... 93
Government Regulation.................................................................................... 96
Employees................................................................................................ 98
Academic Consultants..................................................................................... 98
Properties............................................................................................... 98
Legal Proceedings........................................................................................ 98
OraVax Stock Ownership..................................................................................... 100
Stock Ownership of Certain Beneficial Owners and Management of OraVax, Inc............................... 100
Selected Financial Information of OraVax................................................................... 102
OraVax Management's Discussion and Analysis of Financial Condition and Results of Operations............... 103
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Business Overview........................................................................................ 103
PMC: Dengue License Agreement and Sponsorship of Japanese Encephalitis................................... 104
Nasdaq Delisting......................................................................................... 104
Results of Operations.................................................................................... 105
New Accounting Pronouncements............................................................................ 106
Liquidity and Capital Resources.......................................................................... 107
Year 2000 Compliance..................................................................................... 109
Description of Peptide Ordinary Shares..................................................................... 111
Dividends................................................................................................ 111
Rights in a Winding Up................................................................................... 111
Voting................................................................................................... 111
Preemptive Rights........................................................................................ 112
Variation of Rights and Share Capital.................................................................... 112
Disclosure of Interests.................................................................................. 112
Miscellaneous............................................................................................ 113
Comparison of Rights of OraVax Stockholders and Peptide Shareholders....................................... 114
Voting Rights............................................................................................ 114
Action By Written Consent................................................................................ 115
Sources and Payment of Dividends......................................................................... 115
Rights of Purchase and Redemption........................................................................ 116
Special Meeting of Shareholders.......................................................................... 116
Rights of Appraisal...................................................................................... 117
Preemptive Rights........................................................................................ 118
Amendment of Governing Instruments....................................................................... 118
Shareholder Votes on Certain Transactions................................................................ 119
Rights of Inspection..................................................................................... 120
Classification of the Board of Directors................................................................. 120
Removal of Directors..................................................................................... 121
Vacancies on the Board of Directors...................................................................... 121
Liability of Directors and Officers...................................................................... 121
Indemnification of Directors and Officers................................................................ 121
Shareholders' Suits...................................................................................... 122
Certain Provisions Relating to Share Acquisitions........................................................ 123
Anti-Takeover Provisions................................................................................. 123
Disclosure of Interests.................................................................................. 124
Certain London Stock Exchange Listing Requirements....................................................... 125
Enforceability of Civil Liabilities........................................................................ 126
Legal Matters.............................................................................................. 126
Experts.................................................................................................... 126
Where You Can Find More Information........................................................................ 126
Index to Financial Statements of Peptide Therapeutics Group plc, OraVax, Inc. and OraVax Merieux Co. and
Merieux OraVax Co. Partnerships.......................................................................... F-1
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Annex A Restated Agreement and Plan of Acquisition, as amended
Annex B Opinion of Hambrecht & Quist
Annex C Section 262 of the Delaware General Corporation Law
Annex D Form of Voting Agreement
</TABLE>
iii
<PAGE>
SUMMARY
This summary highlights selected information from this document. For a more
complete description of the transaction, you should read the entire document,
including the materials attached as annexes. We have included page references in
parentheses to direct you to more complete descriptions of the topics we have
summarized.
REFERENCES IN THIS PROSPECTUS/PROXY STATEMENT TO "U.S. DOLLARS", "$", OR
" CENTS" ARE TO THE CURRENCY OF THE UNITED STATES. REFERENCES TO "POUNDS
STERLING", "POUNDS", "L", "PENCE" OR "P" ARE TO THE CURRENCY OF THE UNITED
KINGDOM. THERE ARE 100 PENCE TO EACH POUND. SOLELY FOR YOUR CONVENIENCE, THIS
PROSPECTUS/PROXY STATEMENT CONTAINS TRANSLATIONS OF CERTAIN POUND STERLING
AMOUNTS INTO U.S. DOLLARS AT SPECIFIED RATES. THESE TRANSLATIONS SHOULD NOT BE
TAKEN AS ASSURANCES THAT THE POUND STERLING AMOUNTS ACTUALLY REPRESENT SUCH U.S.
DOLLAR AMOUNTS OR COULD BE CONVERTED INTO U.S. DOLLARS AT THE RATE INDICATED OR
AT ANY OTHER RATE. FURTHERMORE, THESE TRANSLATIONS DO NOT CONSTITUTE AN ESTIMATE
OF THE EXCHANGE RATE THAT WILL APPLY WHEN PEPTIDE SHARES ARE VALUED FOR
DETERMINING THE NUMBER OF PEPTIDE SHARES YOU WILL RECEIVE IN THE MERGER.
THE TABLE BELOW SETS FORTH, FOR THE PERIODS AND DATES INDICATED, THE
EXCHANGE RATE FOR THE U.S. DOLLAR AGAINST THE POUND BASED ON THE NOON BUYING
RATE, EXPRESSED IN DOLLARS PER POUND STERLING. THE PERIOD AVERAGE IS BASED ON
THE AVERAGE OF THE NOON BUYING RATES ON THE LAST DAY OF EACH MONTH DURING THE
PERIOD.
<TABLE>
<CAPTION>
PERIOD
HIGH LOW AVERAGE PERIOD END
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1993................................................................. 1.5900 1.4175 1.4965 1.4775
1994................................................................. 1.5319 1.4615 1.5392 1.5665
1995................................................................. 1.6440 1.5302 1.5803 1.5535
1996................................................................. 1.7123 1.4948 1.5733 1.7123
1997................................................................. 1.7035 1.5775 1.6397 1.6427
1998................................................................. 1.7222 1.6114 1.6573 1.6628
1999 (THROUGH MARCH 26, 1999)........................................ 1.6598 1.5960 1.6339 1.6226
</TABLE>
THE COMPANIES (PAGES 64 AND 86)
ORAVAX, INC.
38 Sidney Street, 4th Floor
Cambridge, Massachusetts 02139
(617) 494-1339
OraVax is a biopharmaceutical company engaged in the discovery, development
and commercialization of vaccines and antibody products for the prevention and
treatment of human infectious diseases. Its product candidates fall into two
categories:
- Vaccines that stimulate the body's own immunity to provide long term
protection against disease; and
- Antibody products that provide immediate passive immunity to treat
existing infections or to protect against an acute disease risk.
PEPTIDE THERAPEUTICS GROUP PLC
Peterhouse Technology Park
100 Fulbourn Road
Cambridge, CB1 9PT, England
011-44-1223-275-300
Peptide is a biopharmaceutical company engaged in the research and
development of novel vaccines and other drugs. Peptide's business strategy is to
establish preliminary evidence that a drug is
1
<PAGE>
effective in treating a particular illness. After developing this evidence, the
company seeks to collaborate with major pharmaceutical companies to complete the
regulatory approval, manufacturing and marketing of the drug.
Peptide is an English company. Its shares are listed on the London Stock
Exchange.
THE MERGER AND THE MERGER AGREEMENT
SUMMARY OF THE TRANSACTION (PAGE 43)
In the proposed merger, OraVax will become a wholly-owned subsidiary of
Peptide, and OraVax stockholders will become Peptide shareholders. The merger
agreement is attached as Annex A. You should read the merger agreement as it is
the legal document that governs the merger.
WHAT YOU WILL RECEIVE IN THE MERGER (PAGE 43)
The merger consideration will equal approximately $17 million. Peptide will
pay it in Peptide shares, which will be allocated pro rata among OraVax
stockholders. Currently, there are about 22 million shares of Oravax common
stock outstanding. Peptide owns two million of those shares but will not receive
any of the merger consideration for its shares. Assuming the $17 million is
split among the remaining 20 million shares, you will receive Peptide shares
worth $0.85 for each share of Oravax common stock.
The number of Peptide shares you will receive for each share of OraVax
common stock you own depends on two factors:
- the average closing price of Peptide shares on the London Stock Exchange
during the ten trading days which end on the third trading day prior to
the closing date of the merger, and
- the exchange rates in effect on those days for converting pounds sterling
to dollars.
We have agreed that we will not deem the value of a Peptide share to be less
than $1.49 or more than $2.24. We call this limitation a "collar." It means that
Peptide will not be required to issue any additional shares if the market value
of a Peptide share falls below $1.49, and will not reduce any further the number
of shares it issues if the market value is above $2.24. Put another way, the
market value of the Peptide shares you receive will decrease if the market value
of a Peptide share falls below $1.49 and will increase if the market value of a
Peptide share increases above $2.24.
We will not know the market value of Peptide shares for purposes of
determining the number of shares Peptide will issue until three days before the
closing date. Therefore, you will not know, at the time you vote on the merger
agreement, how many Peptide shares you will receive if the merger occurs.
On March 26, 1999, the closing price of a Peptide share on the London Stock
Exchange was $1.65. If the closing had occurred on that date, the Peptide share
price used to determine the number of Peptide shares you would have received was
$1.71. We calculated this figure by converting the closing prices of Peptide on
the LSE between March 10 and March 23 to dollars and averaging them.
The following table illustrates the range in the number of Peptide shares
issuable to the OraVax stockholders depending on the value of the Peptide shares
used for calculating the merger consideration. It assumes 20 million shares of
OraVax common stock entitled to share $17 million in merger consideration.
2
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE NUMBER
OF PEPTIDE
SHARES TO BE NUMBER OF PEPTIDE SHARES
PEPTIDE SHARE ISSUED TO FOR ONE SHARE OF ORAVAX
PRICE ORAVAX STOCKHOLDERS COMMON STOCK
- ------------------ ------------------- ---------------------------
<S> <C> <C>
$1.49 11,409,000 0.57
$1.54 11,039,000 0.55
$1.59 10,692,000 0.53
$1.64 10,365,600 0.52
$1.69 10,059,000 0.50
$1.74 9,770,000 0.49
$1.79 9,497,000 0.47
$1.84 9,239,000 0.46
$1.89 8,995,000 0.45
$1.94 8,763,000 0.44
$1.99 8,543,000 0.43
$2.04 8,333,000 0.42
$2.09 8,134,000 0.40
$2.14 7,944,000 0.40
$2.19 7,763,000 0.39
$2.24 7,589,000 0.38
</TABLE>
The following chart and examples show the effect of the collar assuming
Peptide will issue Peptide shares valued at $17 million to the holders of 20
million OraVax shares.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PEPTIDE SHARE PRICE NUMBER OF PEPTIDE SHARES TO BE
<S> <C>
in Dollars at
Closing Issued for each OraVax Share
1 0.5705
1.49 0.5705
2.24 0.3795
2.75 0.3795
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AGGREGATE MARKET VALUE OF PEPTIDE
PEPTIDE SHARE PRICE SHARES
<S> <C>
in Dollars at
Closing to be Received (in millions)
1 $11.40
1.49 $17.00
2.24 $17.00
2.75 $20.90
</TABLE>
3
<PAGE>
Once the merger is approved and the closing date is set, you will be able to
determine the number of Peptide shares you will receive. You will need to
calculate the average closing price as we did above. You can determine the
number of Peptide shares which you are entitled if you:
- first divide the merger consideration by the market value of a Peptide
share; this gives you the number of Peptide shares to be issued in the
merger;
- next, divide the number of Peptide shares to be issued in the merger by
the number of outstanding shares of OraVax common stock; this gives you
the conversion ratio; and
- finally, multiply the number of OraVax shares you hold by the conversion
ratio.
Here are examples of how the equation works:
EXAMPLE 1: IF THE MARKET VALUE OF A PEPTIDE ORDINARY SHARE IS $1.87 (FOR
PURPOSES OF THIS EXAMPLE ONLY), THEN 100 SHARES OF ORAVAX COMMON STOCK WOULD
CONVERT INTO THE RIGHT TO RECEIVE APPROXIMATELY 45 PEPTIDE ORDINARY SHARES.
EXAMPLE 2: IF THE MARKET VALUE OF A PEPTIDE ORDINARY SHARE IS $2.24 OR MORE
(FOR PURPOSES OF THIS EXAMPLE ONLY), THEN 100 SHARES OF ORAVAX COMMON STOCK
WOULD CONVERT INTO THE RIGHT TO RECEIVE APPROXIMATELY 37 PEPTIDE ORDINARY
SHARES.
EXAMPLE 3: IF THE MARKET VALUE OF PEPTIDE ORDINARY SHARES IS $1.49 OR LESS
(FOR PURPOSES OF THIS EXAMPLE ONLY), THEN 100 SHARES OF ORAVAX COMMON STOCK
WOULD CONVERT INTO THE RIGHT TO RECEIVE APPROXIMATELY 57 PEPTIDE ORDINARY
SHARES.
REQUIRED VOTE (PAGE 26)
Shareholders of OraVax owning a majority of its outstanding common stock
will have to vote in favor of the merger agreement for it to be adopted.
OraVax's officers and directors and their affiliates owned about 3.7% of the
outstanding OraVax common stock on the record date. They intend to vote all of
these shares in favor of the merger. In addition, Peptide will vote the 9.9% of
outstanding OraVax common stock it owns in favor of the merger.
APPRAISAL RIGHTS (PAGE 52)
You will have the right to an appraisal of the value of your OraVax shares
in connection with the merger.
TAX CONSEQUENCES (PAGE 58)
The merger will not be a tax-free reorganization under United States federal
tax law. As a result, you will probably recognize gain or loss in the merger.
Tax matters are very complicated and the tax consequences of the merger to you
will depend on the facts of your own situation.
You should read carefully the discussion under "Material Tax
Consequences--United States Federal Income Tax Consequences." In view of the
complexities of U.S. federal income and other tax laws, we urge you to consult
with your tax advisor regarding, among other things, the federal, state, local
and foreign income tax consequences of the merger applicable to your specific
circumstances.
ORAVAX'S REASONS FOR THE MERGER (PAGE 31)
The OraVax board of directors believes that the merger is in the best
interests of OraVax and its stockholders. In reaching its decision, the OraVax
board of directors considered a number of factors, including the following:
- The OraVax board of directors' belief that the merger would provide OraVax
with the additional capital it needs to continue its operations;
4
<PAGE>
- The results of operations, financial condition, competitive position and
prospects of OraVax and Peptide, both on a historical and future basis and
as separate and combined entities;
- The OraVax board of directors' belief that the analyses of Hambrecht &
Quist supported the OraVax board of director's conclusion that the merger
consideration is fair from a financial point of view to OraVax
stockholders; and
- The opportunity for OraVax's stockholders to become shareholders of
Peptide, which allows the OraVax stockholders to participate in the future
of the combined entity.
OraVax needs significant additional funds to continue its research and
development programs. If the merger is not completed, OraVax will not be able to
fund its operations and will attempt to raise money by selling securities or
entering into collaboration agreements. If it fails to raise funds, OraVax will
significantly scale back its operations and may ultimately file for bankruptcy
protection. In addition, if the merger agreement is terminated because the
OraVax stockholders do not approve the merger agreement or because OraVax
breaches the merger agreement, then Peptide would have the right to require
OraVax to buy the 1,951 shares of OraVax preferred stock held by Peptide. OraVax
does not currently have the $2.3 million to make that purchase. If OraVax is
unable to pay for the shares, Peptide would have the right to convert them into
shares of OraVax common stock, which would increase Peptide's aggregate
ownership interest in OraVax to approximately 28%, based on the conversion price
on April 2, 1999 of $0.3566. If the merger agreement is terminated under these
circumstances, OraVax will evaluate its options at that time.
FAIRNESS OPINION OF ORAVAX'S FINANCIAL ADVISOR (PAGE 32)
On November 9, 1998, Hambrecht & Quist delivered its written opinion to the
OraVax board of directors that the consideration to be paid in the merger is
fair to the holders of OraVax common stock from a financial point of view. This
opinion was delivered prior to a January 28, 1999 amendment to the merger
agreement increasing the merger consideration payable to OraVax common
stockholders from $12 million to $17 million. A revised opinion has not been
delivered.
The full text of the written opinion of Hambrecht & Quist, which sets forth
the assumptions made, matters considered and limits on the review undertaken, is
attached as Annex B to this document. We urge you to read such opinion carefully
and in its entirety.
PEPTIDE'S REASONS FOR THE MERGER (PAGE 38)
The Peptide board of directors unanimously approved the merger agreement and
the merger. The Peptide board of directors believes the merger provides
strategic advantages, including:
- Expansion of its product portfolio to achieve a critical mass of product
candidates;
- Access to OraVax's complementary vaccine product portfolio and its
proprietary technology platform, ChimeriVax-TM-; and
- The ability to acquire OraVax's rights as a 50% joint venture partner in
the H. PYLORI collaboration with Pasteur Merieux Connaught, which we refer
to as PMC in this document.
CONDITIONS TO THE MERGER (PAGE 47)
OraVax and Peptide will not complete the merger unless they satisfy or waive
the following conditions:
- The OraVax stockholders adopt the merger agreement;
- No court or government agency issues an injunction or order prohibiting
the merger;
- The representations and warranties made in the merger agreement are
accurate;
5
<PAGE>
- OraVax stockholders who exercise appraisal rights hold fewer than 5% of
the outstanding OraVax common stock; and
- Peptide lists the Peptide shares to be issued in the merger on the London
Stock Exchange.
TERMINATION OF THE MERGER AGREEMENT (PAGE 48)
OraVax and Peptide can agree in writing at any time to terminate the merger
agreement.
The merger agreement may be terminated by either OraVax or Peptide if any of
the following occurs:
- The merger is not completed by July 31, 1999, provided that neither
Peptide or OraVax has the right to terminate if its breach has caused the
delay;
- A court or governmental agency issues an injunction or order prohibiting
the merger;
- The OraVax stockholders do not adopt the merger agreement; or
- The other party violates any material term of the merger agreement and
fails to rectify the violation within 20 days of notice.
OraVax may terminate the merger agreement if it enters into a more favorable
alternative transaction without violating the terms of the merger agreement.
Peptide may terminate the merger agreement if the OraVax board of directors
withdraws or modifies, in a manner adverse to Peptide, its recommendation that
OraVax stockholders adopt the merger agreement.
TERMINATION FEE (PAGE 48)
If the merger agreement is terminated because
- OraVax breaches the agreement,
- OraVax enters into an alternative transaction agreement or
- the OraVax board changes its recommendation of the merger,
OraVax will be required to pay Peptide's out-of-pocket expenses. If the
termination involves an alternative acquisition proposal or a failure of the
OraVax board of directors to recommend adoption of the merger agreement,
however, OraVax will be required to pay Peptide the higher of these out-of-
pocket expenses and $750,000. If the termination involves an alternative
acquisition proposal by PMC, OraVax will be required to pay Peptide the higher
of these out-of-pocket expenses and $1.5 million.
NO SOLICITATION OF COMPETING TRANSACTIONS (PAGE 48)
The merger agreement restricts OraVax's ability to solicit or encourage
alternative acquisition transactions. OraVax must promptly notify Peptide if it
receives offers or proposals for any such alternative transactions.
TREATMENT OF PREFERRED STOCK IF THE MERGER IS TERMINATED (PAGE 50)
If the merger agreement is terminated because the OraVax stockholders do not
approve the merger agreement, Peptide will have the right to sell to OraVax the
shares of OraVax preferred stock it purchased at the time it entered into the
merger agreement. The sale price would be approximately $2.3 million. OraVax
does not currently have $2,3 million in cash. If it is unable to pay this
amount, Peptide would have the right to convert all the preferred stock it owns
into common stock. Under those circumstances, based on the conversion price on
April 2, 1999 of $0.3566, if Peptide converted all of its preferred stock, it
would own approximately 28% of the outstanding OraVax common stock.
6
<PAGE>
ACCOUNTING TREATMENT (PAGE 53)
Peptide will account for the merger under the acquisition method of
accounting, a method provided for under generally accepted accounting principles
in the U.K., which is similar to purchase accounting under U.S. generally
accepted accounting principles.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (PAGE 17)
OraVax common stock was traded on the Nasdaq National Market through
November 16, 1998. Since November 17, 1998, OraVax common stock has traded on
the OTC Bulletin Board. Peptide shares are listed on the London Stock Exchange.
On November 10, 1998, the last full trading day prior to the public announcement
of the merger, OraVax's common stock closed at $0.4062 per share, and Peptide
shares closed at 112.5 pence per share or $1.87 using a dollar/pound sterling
exchange rate of 1.6580, which was the exchange rate that day. On March 12,
1999, OraVax common stock closed at $.500 per share and Peptide shares closed at
107.8 pence per share or $1.76 using a dollar/pound sterling exchange rate of
1.63, which was the exchange rate that day.
7
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The tables on the following two pages present summary consolidated financial
information for Peptide and OraVax. This information has been derived from their
respective consolidated financial statements and notes, certain of which are
included in this prospectus/proxy statement. This information is only a summary
and should be read in conjunction with the historical financial statements of
Peptide and OraVax and the related notes contained in this prospectus/proxy
statement.
The financial information of Peptide, except for the interim financial
information dated June 30, 1998 and 1997, has been derived from audited
financial statements. The financial information of OraVax, except for the
interim financial information dated September 30, 1998 and 1997, has been
derived from audited financial statements.
All unaudited financial information presented has been derived from
unaudited consolidated financial statements, and in the opinion of Peptide's and
OraVax's management reflects all normal recurring adjustments necessary for a
fair presentation.
The financial information of Peptide has been prepared in accordance with
United Kingdom generally accepted accounting principles, which differs in
respects from United States generally accepted accounting principles. The
principal differences between U.K. GAAP and U.S. GAAP are summarized in Note 21
of Peptide's audited consolidated financial statements. The translation of
pounds sterling into U.S. dollars for the six months ended June 30, 1998 has
been made at the rate of L1.00 = $1.6695 based upon the noon buying rate on June
30, 1998. Such translation is provided solely for the convenience of the reader
and does not reflect financial information in accordance with generally accepted
accounting principles for foreign currency translations.
On March 22, 1999, Peptide announced its preliminary results for the year
ended December 31, 1998. You can find unaudited 1998 financial information under
"Peptide Management's Discussion and Analysis of Financial Condition and Results
of Operations--Preliminary 1998 Financial Information."
8
<PAGE>
<TABLE>
<CAPTION>
PEPTIDE YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
1995 1996 1997 1997 1998 1998
--------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
U.K. GAAP
Turnover (revenues)................... L 160 L 153 L 2,795 L 2,525 L 195 $ 326
Operating expenses.................... 3,995 6,216 10,791 5,979 5,111 8,533
--------- --------- --------- --------- --------- ---------
Operating loss........................ (3,835) (6,063) (7,996) (3,454) (4,916) (8,207)
Interest receivable, net.............. 223 1,469 1,542 755 649 1,084
Tax on loss on ordinary activities.... (9) -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Loss on ordinary activities after
taxation............................. (3,621) (4,594) (6,454) (2,699) (4,267) (7,123)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Loss per ordinary share............... L (0.20) L (0.14) L (0.18) L (0.08) L (0.12) $ (0.20)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
1995 1996 1997 1997 1998 1998
--------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
U.S. GAAP
Operating expenses.................... L 3,999 L 6,324 L 12,399 L 7,057 L 4,840 $ 8,081
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Net loss.............................. (3,625) (4,702) (7,250) (3,562) (3,813) (6,365)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Basic and diluted net loss per
share................................ L (0.21) L (0.14) L (0.20) L (0.10) L (0.11) $ (0.18)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997 1998 1998
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
U.K. GAAP
Cash and liquid resources............. L20,556 L20,751 L15,862 $ 26,482
Working capital....................... 19,410 19,369 14,807 24,721
Fixed assets.......................... 2,498 2,863 3,177 5,304
Total assets.......................... 24,977 25,342 21,530 35,944
Long-term obligations................. -- -- -- --
Shareholders' equity.................. 23,168 23,466 19,413 32,410
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997 1998 1998
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
U.S. GAAP
Cash, cash equivalents and short-term
investments.......................... L20,556 L20,751 L15,862 $ 26,482
Working capital....................... 19,410 19,369 14,807 24,721
Fixed assets.......................... 2,498 2,863 3,177 5,304
Total Assets.......................... 23,913 24,314 20,307 33,902
Long-term obligations................. -- -- -- --
Shareholders' Equity.................. 22,104 22,438 18,190 30,368
</TABLE>
9
<PAGE>
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
ORAVAX 1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues...................................................................... $ 8,745 $ 8,853 $ 10,800
Operating expenses............................................................ 25,282 18,429 17,358
---------- ---------- ----------
Operating loss................................................................ (16,537) (9,576) (6,558)
Equity in operating loss of joint venture..................................... (5,085) (6,236) (5,844)
---------- ---------- ----------
Net loss...................................................................... $ (21,622) $ (15,812) $ (12,402)
---------- ---------- ----------
---------- ---------- ----------
Net loss to common stockholders............................................... $ (21,622) $ (15,812) $ (13,825)
---------- ---------- ----------
---------- ---------- ----------
Basic and diluted net loss per share.......................................... $ (2.46) $ (1.58) $ (0.92)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
---------- ----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................................................. $ 10,274 2,538
Short-term investments.................................................................... 1,054 --
Working capital (deficit)................................................................. 6,596 (5,335)
Total assets.............................................................................. 16,497 4,850
Long-term obligations..................................................................... 1,298 119
Redeemable convertible preferred stock.................................................... 2,464 --
Shareholders' equity (deficit)............................................................ 6,474 (3,233)
</TABLE>
10
<PAGE>
Peptide and OraVax are providing the following summary pro forma financial
information to give OraVax stockholders a better picture of what results of
operations and financial position of the combined businesses of Peptide and
OraVax might have looked like had the merger occurred on an earlier date. This
information is provided for illustrative purposes only and does not show what
the results of operations and financial position of Peptide would have been if
the merger had actually occurred on the dates assumed. This information also
does not indicate what Peptide's future operating results or consolidated
financial position will be.
Please see "Unaudited Pro Forma Condensed Consolidated Balance Sheet and
Statements of Operations" on pages 12-16 for a more detailed explanation of this
analysis.
<TABLE>
<CAPTION>
PRO FORMA REFLECTING MERGER
<S> <C> <C> <C> <C>
YEAR ENDED SIX
DECEMBER MONTHS
31, ENDED
1997 JUNE 30,
----------- 1998
---------
(UNAUDITED)
(UNAUDITED)
PRO FORMA STATEMENTS OF OPERATIONS DATA:
U.S. GAAP
Revenues.......................................... $ 14,095 $ 4,996
Total operating expenses.......................... 39,951 18,342
Interest income, net.............................. 2,588 1,041
----------- ---------
Net loss from operations.......................... (23,268) (12,305)
Equity in operations of joint venture............. (6,236) (2,979)
----------- ---------
Net loss.......................................... $ (29,504) $ (15,284)
----------- ---------
----------- ---------
Basic and diluted net loss per ordinary share..... $ (0.66) $ (0.34)
----------- ---------
----------- ---------
Weighted average ordinary shares outstanding...... 44,674,940 45,133,385
----------- ---------
----------- ---------
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
1998
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
PRO FORMA BALANCE SHEET DATA:
U.S. GAAP
Cash, cash equivalents and investments......... $ 26,787
Working capital................................ 14,671
Total assets................................... 47,754
Long-term obligations, excluding current
portion...................................... 1,210
Total stockholders' equity..................... 32,368
Book value per common share.................... .71
</TABLE>
11
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENTS OF
OPERATIONS
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30,
1998 gives effect to the merger as if it had occurred on such date. The
Unaudited Pro Forma Condensed Consolidated Statements of Operations for the year
ended December 31, 1997 and the six months ended June 30, 1998 give effect to
the merger as if it had occurred on January 1, 1997. The merger consideration
will be allocated pro rata among the outstanding shares of OraVax common stock
and will be payable in Peptide shares. For the purpose of determining the number
of Peptide shares which will be payable as the merger consideration, a Peptide
share will be valued at the average closing price of Peptide shares on the
London Stock Exchange during the ten trading days ending on the third trading
day prior to the closing date of the merger. This value will be converted from
pounds sterling to dollars at the then current exchange rates. The value of a
Peptide share for these purposes, however, will not be below $1.49 or above
$2.24. The unaudited pro forma condensed consolidated financial statements have
been prepared assuming the total purchase price for the OraVax common stock will
be approximately $17 million and the market value of the Peptide shares is
$1.87, the mid-point between $1.49 and $2.24. As a result, Peptide will issue
approximately 9,090,909 ordinary shares for the merger consideration. Because
the assumptions may not reflect the actual results for the periods presented,
the pro forma net loss per ordinary share would be between $(0.63) and $(0.68)
for the year ended December 31, 1997 and $(0.32) and $(0.35) for the six months
ended June 30, 1998, using the conversion value of a Peptide share of $1.49 and
$2.24 respectively. Peptide and OraVax believe that the assumptions used in
preparing the Unaudited Pro Forma Condensed Consolidated Balance Sheet and
Statements of Operations provide a reasonable basis on which to present such pro
forma financial statements. The Unaudited Pro Forma Condensed Consolidated
Balance Sheet and Statements of Operations are for informational purposes only
and do not purport to be indicative of the results that would have actually been
obtained had the merger been completed as of the assumed date or for the periods
presented, or which may be obtained in the future. For the purpose of the pro
forma financial information, Peptide has allocated the purchase price using its
best estimate. The Unaudited Pro Forma Condensed Consolidated Balance Sheet and
Statements of Operations should be read in conjunction with Peptide's and
OraVax's Management's Discussion and Analysis of Financial Condition and Results
of Operations and Peptide's and OraVax's Consolidated Financial Statements,
including the notes, appearing elsewhere in this prospectus/proxy statement.
12
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
U.K. GAAP U.S. GAAP U.S. GAAP U.S. GAAP PRO FORMA
PEPTIDE ADJUSTMENTS PEPTIDE PEPTIDE(2) ORAVAX ADJUSTMENTS PRO FORMA
---------- ----------- ---------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash....................... L 9,308 L -- L 9,308 $ 15,540 $ 4,107 $ (4,200)(3) $ 15,447
Short-term investments..... 6,554 -- 6,554 10,942 398 -- 11,340
Accounts receivable........ 1,062 -- 1,062 1,773 -- -- 1,773
Prepaids and other current
assets................... -- -- -- -- 288 -- 288
---------- ----------- ---------- ----------- --------- ----------- -----------
Total current assets... 16,924 -- 16,924 28,255 4,793 (4,200) 28,848
Property and equipment,
net........................ 3,177 -- 3,177 5,304 2,578 5,000(3) 12,882
Long-term investments........ 1,429 (1,223 1d) 206 343 -- -- 343
Investment in and advances to
Joint Venture.............. -- -- -- -- (299) -- (299)
Other assets................. -- -- -- -- 257 5,723(3) 5,980
---------- ----------- ---------- ----------- --------- ----------- -----------
Total assets........... L 21,530 L (1,223) L 20,307 $ 33,902 $ 7,329 $ 6,523 $ 47,754
---------- ----------- ---------- ----------- --------- ----------- -----------
---------- ----------- ---------- ----------- --------- ----------- -----------
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Current maturities of debt
and capital lease
obligations.............. L -- L -- L -- $ -- $ 975 $ -- $ 975
Accounts payable and
accrued expenses......... 2,117 -- 2,117 3,534 3,667 6,000(4) 13,201
---------- ----------- ---------- ----------- --------- ----------- -----------
Total current
liabilities.......... 2,117 -- 2,117 3,534 4,642 -- 8,176
Long-term portion of debt and
capital lease
obligations................ -- -- -- -- 1,210 -- 1,210
Shareholders' equity......... 19,413 (1,223 1d) 18,190 30,368 1,477 17,000(3) 32,368
(1,477)(4)
(15,000)(3)
---------- ----------- ---------- ----------- --------- ----------- -----------
Total liabilities and
shareholders'
equity............... L 21,530 L (1,223) L 20,307 $ 33,902 $ 7,329 $ 6,523 $ 47,754
---------- ----------- ---------- ----------- --------- ----------- -----------
---------- ----------- ---------- ----------- --------- ----------- -----------
</TABLE>
See notes to unaudited pro forma condensed consolidated balance sheet and
statements of operations for discussion of adjustments.
13
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
U.K. GAAP U.S. GAAP U.S. GAAP U.S. GAAP PRO FORMA
PEPTIDE ADJUSTMENTS PEPTIDE PEPTIDE(2) ORAVAX ADJUSTMENTS PRO FORMA
---------- ----------- ---------- ---------- --------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............ L 2,795 L 439 (1c L 3,607 $ 5,925 $ 8,170 $ -- $ 14,095
373 (1b
Research and
development....... 9,745 373 (1b 10,118 16,621 14,589 -- 31,210
Selling, general and
administrative.... 1,485 796 (1a 2,281 3,747 3,422 1,572(6) 8,741
Other income........ (439) 439 (1c -- -- -- -- --
---------- ----------- ---------- ---------- --------- -------------- ------------
Total operating
expenses.......... 10,791 1,608 12,399 20,368 18,011 1,572 39,951
Interest income,
net............... 1,542 -- 1,542 2,533 265 (210)(7) 2,588
---------- ----------- ---------- ---------- --------- -------------- ------------
Net loss from
operations........ (6,454) (796) (7,250) (11,910) (9,576) (1,782) (23,268)
Equity in operations
of joint
venture........... -- -- -- -- (6,236) -- (6,236)
---------- ----------- ---------- ---------- --------- -------------- ------------
Net loss............ L (6,454) L (796) L (7,250) $ (11,910) $ (15,812) $ (1,782) $ (29,504)
---------- ----------- ---------- ---------- --------- -------------- ------------
---------- ----------- ---------- ---------- --------- -------------- ------------
Basic and diluted
net loss per
ordinary share.... L (0.20) $ (.66)
---------- ------------
---------- ------------
Weighted average
ordinary shares
outstanding....... 35,584,031 9,090,909 44,674,940
---------- -------------- ------------
---------- -------------- ------------
</TABLE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXPECT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
U.K. GAAP U.S. GAAP U.S. GAAP U.S. GAAP PRO FORMA
PEPTIDE ADJUSTMENTS PEPTIDE PEPTIDE(2) ORAVAX ADJUSTMENTS PRO FORMA
---------- ----------- ---------- ----------- --------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............ L 195 L 126 (1c L 378 $ 632 $ 4,394 $ (30)(5) $ 4,996
57 (1b
Research and
development....... 4,479 57 (1b 4,536 7,573 7,158 (30)(5) 14,701
Selling, general and
administrative.... 758 (454) 1a) 304 508 1,847 1,286(6) 3,641
Other income........ (126) 126 (1c -- -- -- -- --
---------- ----------- ---------- ----------- --------- -------------- ------------
Total operating
expenses.......... 5,111 (271) 4,840 8,081 9,005 1,256 18,342
Interest income,
net............... 649 649 1,084 62 (105)(7) 1,041
---------- ----------- ---------- ----------- --------- -------------- ------------
Net loss from
operations........ (4,267) 454 (3,813) (6,365) (4,549) (1,391) (12,305)
Equity in operations
of joint
venture........... -- -- -- -- (2,979) -- (2,979)
---------- ----------- ---------- ----------- --------- -------------- ------------
Net loss............ L (4,267) L 454 L (3,813) $ (6,365) $ (7,528) $ (1,391) $ (15,284)
---------- ----------- ---------- ----------- --------- -------------- ------------
---------- ----------- ---------- ----------- --------- -------------- ------------
Basic and diluted
net loss per
ordinary share.... L (0.11) $ (.34)
---------- ------------
---------- ------------
Weighted average
ordinary shares
outstanding....... 36,042,476 9,090,909 45,133,385
---------- -------------- ------------
---------- -------------- ------------
</TABLE>
See notes to unaudited pro forma condensed consolidated balance sheet and
statements of operations for discussion of adjustments.
14
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET AND STATEMENTS OF OPERATIONS
(1) Peptide's consolidated financial statements are prepared in accordance with
U.K. GAAP, which differs in significant respects from U.S. GAAP.
(a) The principal difference between the U.K. GAAP and U.S. GAAP statement
of operations for Peptide relates to the accounting for stock options
granted to employees. Peptide has granted stock options that will vest
upon the attainment of certain targets. Under U.K. GAAP, there is no
accounting for these grants after the initial grant date. Under U.S.
GAAP, Accounting Principles Board (APB) Opinion 25, the company would be
required to follow variable plan accounting for these grants and measure
compensation expense as the difference between the exercise price and the
fair market value of the stock during each accounting period. Increases
in the fair market value of the stock would result in a charge to
operations and decreases in the fair market value of the stock would
result in a credit to operations. The resulting charge to operations
would be approximately L796,000 for the year ended December 31, 1997. Due
to declines in the market value of Peptide stock, the company would have
recorded a credit to operations of approximately L454,000 for the six
months ended June 30, 1998.
(b) Certain Peptide accounts have been reclassified to conform with U.S.
GAAP. In the statement of operations, Peptide has reclassified amounts
received under government grants to revenue. Under U.K. GAAP, these
grants were presented as a reduction in research and development expense.
Peptide reclassified L373,000 and L57,000 to revenue for the year ended
December 31, 1997 and the six-months ended June 30, 1998, respectively.
(c) In addition, Peptide has also reclassified amounts received as
reimbursements under research and development agreements to revenue.
Under U.K. GAAP, these reimbursements were presented as a component of
operating expenses under the caption "other income." Peptide reclassified
L439,000 and L126,000 for the year ended December 31, 1997 and the
six-months ended June 30, 1998.
(d) In the balance sheet, Peptide has reclassified the cost of purchasing
its own shares as a reduction of stockholders' equity. Under U.K. GAAP,
the cost of the shares purchased, L1,223,000, was presented as an asset.
(2) Translation of pounds sterling into dollars has been made at the rate of
L1.00 = $1.6695 or L1.00 = $1.6427 (the noon buying rates on June 30, 1998
and December 31, 1997). Such translation is provided solely for the
convenience of the reader and does not reflect financial information in
accordance with generally accepted accounting principles for foreign
currency translation.
(3) Gives effect to the purchase of OraVax including the purchase of outstanding
shares of OraVax preferred stock for $2,950,000, cash acquisition costs of
approximately $1,250,000, the assumption of net liabilities of approximately
$4,500,000 and the issuance to OraVax stockholders of 9,090,909 Peptide
ordinary shares, valued at $17,000,000, assuming a valuation of $1.87 per
share. The total purchase price is approximately $25,700,000.
Peptide's best estimate of the purchase price allocation is as follows:
<TABLE>
<CAPTION>
Current assets........................................................ $4,793,000
<S> <C>
Property and equipment................................................ 7,578,000
Intangible assets..................................................... 5,980,000
In-process research and development................................... 15,000,000
Liabilities assumed................................................... (7,651,000)
----------
$25,700,000
----------
----------
</TABLE>
Intangible assets includes amounts to be allocated to workforce,
collaboration contracts and goodwill.
15
<PAGE>
The amount preliminarily allocated to in-process research and
development projects was determined by estimating the costs to develop the
technology into commercially viable products, estimating cash flows
resulting from the expected revenues generated from such products, and
discounting the net cash flows back to their present value using a
risk-adjusted discount rate. Consideration was given to the value creation
efforts of OraVax prior to the close of the acquisition. These projections
are based on Peptide's estimates of market size and growth, expected trends
in technology and the expected timing of new product introductions. These
estimates are subject to change, given the uncertainties of the development
process, and no assurance can be given that deviations from these estimates
will not occur.
As of the acquisition date, technological feasibility of the in-process
technology has not been established and the technology has no alternative
future use. If these projects are not successfully developed, Peptide will
not realize the value assigned to the in-process research and development
and the value of the other acquired intangible assets may become impaired.
Further work is being conducted to finalize the allocations and there can be
no assurances that there will not be significant deviations in the final
allocations.
For purposes of the pro forma statements of operations, acquired in
process research and development was assumed to have been written off prior
to the periods presented herein. Accordingly, the pro forma statements of
operations do not include such charge.
(4) Gives effect to the recognition of net liabilities to be assumed in the
acquisition.
(5) Reflects the elimination of $30,000 for intercompany transactions.
(6) Gives effect to amortization expense of $1,972,000 for the year ended
December 31, 1997 and $986,000 for the six-months ended June 30, 1998 for
goodwill and acquired intangible assets totaling approximately $5,723,000
over an estimated useful life of ten years and additional depreciation
expense of $1,000,000 for the year ended December 31, 1997 and $500,000 for
the six-months ended June 30, 1998 for the property and equipment fair value
in excess of its net book value. The increase of $5,000,000 has been
depreciated over a five year period.
(7) Gives effect to a reduction in interest income of $210,000 for the year
ended December 31, 1997 and $105,000 for the six-months ended June 30, 1998
as a result of utilizing cash for the OraVax acquisition. The reduction in
interest income was calculated based on the cash paid for OraVax preferred
stock of $2,950,000, cash transaction costs of $1,200,000 and an assumed
average interest rate of 5%.
16
<PAGE>
COMPARATIVE PER SHARE DATA
The following tables set forth unaudited historical per share data of
Peptide and OraVax and the combined per share data on an unaudited pro forma
basis after giving effect to the merger using the purchase method of accounting
for business combinations under U.S. GAAP, and assuming, for purposes of this
data only, that one Peptide share will be issued in exchange for 0.5705, 0.4545
or 0.3795 of a share of OraVax common stock, based on a conversion ratio of
$1.49, $1.87, or $2.24 respectively. Book value per share is computed by
dividing stockholders' equity by the number of shares of common stock
outstanding at the end of each period. Equivalent pro forma data reflect the
earnings per share and book value per share that each share would have been
entitled to if the merger occurred on January 1, 1997. This data should be read
in conjunction with the selected financial information and the unaudited pro
forma condensed consolidated financial statements included elsewhere in this
prospectus/proxy statement. The pro forma combined financial data is not
necessarily indicative of the operating results or financial position that would
have been achieved if the merger had been consummated as of the beginning of the
periods presented, nor is it necessarily indicative of the future operating
results or financial position of Peptide or OraVax.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1997 1998
--------------------- ---------------------
<S> <C> <C>
PEPTIDE--HISTORICAL
Loss per common share (Basic and diluted):
U.K. GAAP....................................................... L (0.18) L (0.12)
--------------------- ---------------------
--------------------- ---------------------
U.S. GAAP....................................................... L (0.20) L (0.11)
--------------------- ---------------------
--------------------- ---------------------
Book value per share at period end
U.K. GAAP....................................................... L 0.65 L 0.53
--------------------- ---------------------
--------------------- ---------------------
U.S. GAAP....................................................... L 0.63 L 0.50
--------------------- ---------------------
--------------------- ---------------------
ORAVAX--HISTORICAL
Earnings per common share:
Basic and diluted............................................... $ (1.58) $ (0.75)
--------------------- ---------------------
--------------------- ---------------------
Book value per share at period end.............................. $ 0.62 $ 0.11
--------------------- ---------------------
--------------------- ---------------------
PEPTIDE/ORAVAX--PRO FORMA COMBINED--BASED ON A CONVERSION VALUE OF
$1.49 PER SHARE
Earnings per common share:
Basic and diluted............................................... $ (0.63) $ (0.32)
--------------------- ---------------------
--------------------- ---------------------
Book value per share at period end................................ $ 0.82 $ 0.68
--------------------- ---------------------
--------------------- ---------------------
ORAVAX--EQUIVALENT PRO FORMA--BASED ON A CONVERSION VALUE OF $1.49
PER SHARE
Earnings per common share:
Basic and diluted............................................... $ (0.36) $ (0.18)
--------------------- ---------------------
--------------------- ---------------------
Book value per share at period end................................ $ 0.47 $ 0.39
--------------------- ---------------------
--------------------- ---------------------
PEPTIDE/ORAVAX--PRO FORMA COMBINED--BASED ON A CONVERSION VALUE OF
$1.87 PER SHARE
Earnings per common share:
Basic and diluted............................................... $ (0.66) $ (0.34)
--------------------- ---------------------
--------------------- ---------------------
Book value per share at period end................................ $ 0.86 $ 0.71
--------------------- ---------------------
--------------------- ---------------------
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
1997 1998
--------------------- ---------------------
<S> <C> <C>
ORAVAX--EQUIVALENT PRO FORMA--BASED ON A CONVERSION VALUE OF $1.87
PER SHARE
Earnings per common share:
Basic and diluted............................................... $ (0.30) $ (0.15)
--------------------- ---------------------
--------------------- ---------------------
Book value per share at period end................................ $ 0.39 $ 0.32
--------------------- ---------------------
--------------------- ---------------------
PEPTIDE/ORAVAX--PRO FORMA COMBINED--BASED ON A CONVERSION VALUE OF
$2.24 PER SHARE
Earnings per common share:
Basic and diluted............................................... $ (0.68) $ (0.35)
--------------------- ---------------------
--------------------- ---------------------
Book value per share at period end................................ $ 0.89 $ 0.74
--------------------- ---------------------
--------------------- ---------------------
ORAVAX--EQUIVALENT PRO FORMA--BASED ON A CONVERSION VALUE OF $2.24
PER SHARE
Earnings per common share:
Basic and diluted............................................... $ (0.26) $ (0.13)
--------------------- ---------------------
--------------------- ---------------------
Book value per share at period end................................ $ 0.34 $ 0.28
--------------------- ---------------------
--------------------- ---------------------
</TABLE>
18
<PAGE>
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION
COMPARATIVE MARKET PRICE INFORMATION
Peptide shares are traded on the London Stock Exchange under the symbol
"PTE." Until November 16, 1998, OraVax common stock traded on the Nasdaq
National Market under the symbol "ORVX." The Nasdaq delisted OraVax common stock
on November 17, 1998. Since November 17, 1998, OraVax common stock has traded on
the OTC-Bulletin Board under the symbol "ORVX." The following tables set forth
the high and low closing mid market prices for the Peptide shares and the high
and low per share sale prices for the OraVax common stock. On March 11, 1999,
Peptide announced the completion of an equity fund raising by way of a 4 for 5
rights issue. See "Peptide Management's Discussion and Analysis of Financial
Conditions and Results of Operations--Rights Issue." Peptide share prices have
been adjusted to reflect the rights issue.
PEPTIDE
<TABLE>
<CAPTION>
PRICE RANGE
--------------------
HIGH LOW
--------- ---------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997
First Quarter............................................................................. 337.6p 195.1p
Second Quarter............................................................................ 283.3 259.9
Third Quarter............................................................................. 281.2 253.2
Fourth Quarter............................................................................ 281.6 226.0
YEAR ENDED DECEMBER 31, 1998
First Quarter............................................................................. 262.9 226.0
Second Quarter............................................................................ 258.7 189.6
Third Quarter............................................................................. 206.5 70.8
Fourth Quarter............................................................................ 106.0 65.7
YEAR ENDED DECEMBER 31, 1999
First Quarter (through March 26, 1999).................................................... 125.1 65.7
</TABLE>
ORAVAX
<TABLE>
<CAPTION>
PRICE RANGE
----------------------
HIGH LOW
---------- ----------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1997
First Quarter........................................................................... $ 7.000 $ 2.375
Second Quarter.......................................................................... 3.625 2.250
Third Quarter........................................................................... 2.750 2.125
Fourth Quarter.......................................................................... 4.250 1.750
YEAR ENDED DECEMBER 31, 1998
First Quarter........................................................................... 2.3750 1.5630
Second Quarter.......................................................................... 2.0630 0.9690
Third Quarter........................................................................... 1.2500 0.1875
Fourth Quarter.......................................................................... 0.5469 0.1875
YEAR ENDED DECEMBER 31, 1999
First Quarter (through March 26, 1999).................................................. 0.7031 0.4219
</TABLE>
COMPARATIVE DIVIDEND INFORMATION
Peptide has never paid any cash dividends on its shares and does not
anticipate paying cash dividends in the foreseeable future.
OraVax has never paid any cash dividends on its common stock and does not
anticipate paying cash dividends in the foreseeable future.
19
<PAGE>
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE RISKS ASSOCIATED WITH OWNING PEPTIDE
SHARES FOLLOWING THE MERGER IN DECIDING HOW TO VOTE. THESE RISKS ARE DESCRIBED
BELOW.
BECAUSE DEVELOPMENT OF OUR DRUG CANDIDATES WILL INVOLVE A LENGTHY AND COMPLEX
PROCESS, WE ARE NOT CERTAIN WE WILL BE ABLE TO DEVELOP ANY MARKETABLE VACCINES
OR OTHER DRUGS.
To date, neither Peptide nor OraVax has completed the full clinical
development of any drug candidate. Following the merger, we will have only ten
drug candidates, and we are still conducting preclinical tests on two of these.
We will need to conduct extensive and costly additional research and development
and preclinical and clinical testing of our drug candidates prior to
commercialization. This development process takes several years. In addition, we
or our partners will need to obtain regulatory approvals to conduct clinical
trials and manufacture drugs.
We may fail to successfully develop a vaccine and other potential drug for
many reasons including:
- the drug may fail in preclinical studies;
- clinical trials may not demonstrate that the drug is safe and effective in
humans; and
- we may not obtain required regulatory approvals.
Please see "Description of Peptide--Product Portfolio" and "Description of
OraVax-- Products under Development" for a description of the stage of
development of each of our drug candidates.
ANY MARKETABLE VACCINES OR OTHER DRUGS WE DEVELOP MAY NOT BE COMMERCIALLY
SUCCESSFUL.
Neither Peptide nor OraVax has generated any revenue from drug sales, and we
do not expect to generate significant revenue for several years. The success of
any vaccine and other drug which we develop will depend on whether:
- we produce the drug at a reasonable price;
- we convince doctors to prescribe the drug;
- patients accept the drug; and
- the drug is more effective than alternatives.
BECAUSE BOTH PEPTIDE AND ORAVAX ARE EARLY STAGE BIOTECHNOLOGY COMPANIES THAT
HAVE A HISTORY OF OPERATING LOSSES, WE ANTICIPATE FUTURE LOSSES AND MAY NEVER
BECOME PROFITABLE.
Neither Peptide nor OraVax has ever been profitable. As of December 31,
1998, Peptide had an accumulated deficit of approximately L25.1 million and
OraVax had an accumulated deficit of $84.5 million. On a pro forma basis, we had
a net loss of $29.9 million in 1997 and a net loss of $15.0 million for the six
months ended June 30, 1998. OraVax generated a net loss of $12,402 during 1998.
Peptide's preliminary results indicated a loss on ordinary activities of
L7,513,000 during 1998. We expect to incur operating losses over the next
several years and may never be profitable. To date, each company has generated
revenue through license fees, milestones and research and development funding
from its partners. For the foreseeable future, we expect that our level of
revenues and our operating results will depend on our ability to enter into new
partnerships while maintaining existing partnerships. In order to support the
research and development of each company's drug candidates, we plan to incur
significant expenses considerably in excess of expected revenue. Please see
"Peptide Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "OraVax Management's Discussion and Analysis of Financial
Condition and Result of Operation" for a discussion of each company's recent
operating results.
WE WILL REQUIRE SIGNIFICANT ADDITIONAL FINANCING, AND THIS FINANCING MAY NOT BE
AVAILABLE OR MAY BE AVAILABLE ONLY ON TERMS THAT DILUTE OUR SHAREHOLDERS.
Developing vaccines is expensive. We will require substantial cash to
complete the research
20
<PAGE>
and development of our drug candidates. Additional financing may not be
available on favorable terms or at all. If we are unable to raise additional
funds when we need them, we may be required to delay, reduce or eliminate some
of our drug development programs.
On December 31, 1998, Peptide had L9.8 million in cash and liquid resources.
This represented a decrease of L6.0 million from L15.8 million on June 30, 1998.
Peptide raised L20.6 million in March. Peptide's management believes that the
company has sufficient cash to fund operations through mid-2000. We may need to
raise cash sooner, however, due to a number of factors including if:
- opportunities to accelerate research and development or clinical testing;
- failure to achieve milestones under existing strategic alliances;
- the inability to establish and maintain additional collaborations and
licensing arrangements;
- costs incurred establishing and protecting patents and other intellectual
property rights; and
- expenses incurred in meeting regulatory requirements.
Please see "Peptide Management's Discussion and Analysis of Financial
Condition and Results of Operations" for a discussion of Peptide's liquidity and
capital resources.
IF WE FAIL TO OBTAIN ADEQUATE INTELLECTUAL PROPERTY RIGHTS FOR OUR DRUG
CANDIDATES, COMPETITORS WILL BE ABLE TO TAKE ADVANTAGE OF OUR RESEARCH AND
DEVELOPMENT EFFORTS.
Our success will depend, in large part, on our ability to obtain and
maintain patent or other proprietary protection for our technologies, drugs and
processes. We may not be able to obtain patent protection for the composition of
matter of discovered compounds, processes developed by our employees or medical
uses of compounds discovered through our technology. Legal standards relating to
patents covering pharmaceutical or biotechnological inventions and the scope of
claims made under these patents are still developing. There is no consistent
policy regarding the breadth of claims allowed in biotechnology patents. Our
patent position is highly uncertain and involves complex legal and factual
questions. Please see "Description of Peptide--Product Portfolio" and
"Description of OraVax--Patents and Proprietary Rights; Technology Agreements"
for more information on each company's patent position.
WE MAY INCUR SUBSTANTIAL COSTS AS A RESULT OF LITIGATION OR OTHER PROCEEDINGS
RELATING TO PATENT AND OTHER INTELLECTUAL PROPERTY RIGHTS.
We may have to initiate litigation to enforce our patent and license rights.
If our competitors file patent applications that claim technology also claimed
by us, we may have to participate in interference or opposition proceedings to
determine the priority of invention. An adverse outcome could subject us to
significant liabilities and require us either to cease using a technology or to
pay license fees.
We could incur substantial costs in any litigation or other proceeding
relating to patent rights, even if it is resolved in our favor. Some of our
competitors may be able to sustain the costs of complex litigation more
effectively than we can because of their substantially greater resources.
Uncertainties relating to any patent, pending patent or intellectual property
litigation could have a material adverse effect on our ability to enter into
collaborations or raise additional funds.
OUR SUCCESS IS HIGHLY DEPENDENT ON OUR COLLABORATORS.
Our collaborators have substantial responsibility for the development and
commercialization of our drug candidates. These collaborators also have
significant discretion over the resources they devote to these efforts. Our
success, therefore, will depend on the ability and efforts of these outside
parties in performing their responsibilities. We cannot guarantee that these
collaborators will devote sufficient resources to collaborations with us or that
our drug candidates can be developed and commercialized without these
collaborators.
21
<PAGE>
Currently, Peptide's most important collaborators are SmithKline Beecham and
Medeva. OraVax's most important partner is PMC. After the merger, our business
will rely significantly on these three strategic partners. If the relationship
with any one of these partners does not work out, our results of operations may
be adversely impacted.
We cannot guarantee that:
- we will be able to establish additional collaborative arrangements or
license agreements;
- any new arrangements or agreements will be on favorable terms; or
- any collaborative arrangements or agreements will prove successful.
We currently do not plan to develop significant manufacturing, marketing or
sales capabilities. Our future success, consequently, will depend on our ability
to negotiate alliances for such services and upon the efforts and skill of the
companies providing these services.
Please see "Description of Peptide-- Strategic Alliances and Collaborations"
for a discussion concerning Peptide's significant strategic alliances.
REGULATION BY GOVERNMENT AGENCIES IMPOSES SIGNIFICANT COSTS AND RESTRICTIONS ON
THE DEVELOPMENT OF PHARMACEUTICAL PRODUCTS FOR HUMAN USE, LIKE THE DRUGS WE
ARE DEVELOPING.
Our ability and that of our collaborative partners to successfully satisfy
regulatory requirements will significantly determine our future success.
Regulators may not grant required regulatory approvals for our pharmaceutical
products, or they may not grant such approvals in a timely manner. The
production and sale of health care products and the provision of health care
services are highly regulated. In particular, the U.S. FDA and comparable
agencies in foreign countries, including the Medicines Control Agency in the
U.K., must approve human therapeutic and preventive products before they are
marketed. This approval process can involve lengthy and detailed laboratory and
clinical testing, sampling activities and other costly and time-consuming
procedures. This regulation may delay the time at which our vaccines or other
drugs can first be sold, limit how they may be used or adversely impact third
party reimbursement relating to their use.
OUR COMPETITORS IN THE BIOTECHNOLOGY AND PHARMACEUTICAL INDUSTRIES MAY HAVE
SUPERIOR DRUGS, MANUFACTURING CAPABILITY OR MARKETING EXPERTISE.
Our business may fail because we face intense competition from major
pharmaceutical companies and specialized biotechnology companies engaged in the
development of vaccines and other drugs directed at infectious diseases and
allergic disorders. Many of our competitors, such as SmithKline Beecham and
Pasteur Merieux Connaught, have greater financial and human resources and more
experience in research and development. Our competitors may develop safer or
more effective vaccines and drugs, implement more effective approaches to sales
and marketing or establish superior proprietary positions. We anticipate that we
will face increased competition in the future as new companies enter our markets
and alternative drugs and technologies become available.
WE MAY NOT BE ABLE TO KEEP UP WITH THE RAPID TECHNOLOGICAL CHANGE IN THE
BIOTECHNOLOGY AND PHARMACEUTICAL INDUSTRIES WHICH COULD MAKE OUR VACCINES OR
OTHER DRUGS OBSOLETE.
The field of biotechnology is characterized by significant and rapid
technological change. Research and discoveries by others may result in medical
insights or breakthroughs which render our drug candidates obsolete before they
generate any revenue.
THIRD PARTY REIMBURSEMENT AND HEALTH CARE COST CONTAINMENT INITIATIVES MAY
CONSTRAIN OUR FUTURE REVENUES.
A significant portion of our future revenue may depend on payments by third
party payers, including government health administration authorities and private
health insurers. We may not be able to sell our vaccines and other drugs
22
<PAGE>
profitably if reimbursement is unavailable or limited. More and more third party
payers are attempting to contain health care costs in ways that are likely to
impact the drugs we are developing including:
- challenging the prices charged for health care products;
- limiting both coverage and the amount of reimbursement for new therapeutic
products;
- denying or limiting coverage for drugs that are approved by the regulatory
agencies but are considered experimental by third party payers; and
- refusing to provide coverage when an approved drug is used in a way that
has not received regulatory marketing approval.
WE FACE PRODUCT LIABILITY RISKS AND MAY NOT BE ABLE TO OBTAIN ADEQUATE
INSURANCE.
The testing, marketing and sale of the vaccines and other drugs we are
developing involve significant product liablity risks. We may be held liable for
adverse reactions resulting from the use of our vaccines or other drugs.
Currently, we have only limited amounts of product liability insurance and this
insurance may not provide adequate coverage against product liability claims. We
also may not be able to obtain additional insurance in the future on acceptable
terms, and any additional insurance we do obtain may not provide adequate
coverage against any asserted claims.
YEAR 2000 ISSUES COULD CAUSE INTERRUPTION OR FAILURE OF OUR COMPUTER SYSTEMS.
We use a significant number of computer systems and software programs in our
operations, including applications used in support of research and development
activities, accounting and various administrative functions. Although Peptide
believes that its internal systems and software applications contain source code
that is able to interpret appropriately the dates following December 31, 1999,
our failure to make or obtain necessary modifications to our systems and
software could result in system interruptions or failures that could have an
adverse effect on our business. Similarly, failure by our key service providers,
vendors and worldwide research and development, manufacturing and clinical trial
partners to make their computer software programs and operating systems Year
2000 compliant could have a material adverse effect on our business. Please see
"Peptide Management's Discussion and Analysis of Financial Condition and Results
of Operations--Year 2000" for a discussion regarding Peptide's Year 2000
analysis.
OraVax is in the process of conducting a company-wide assessment of its
computer systems and operations infrastructure to identify computer hardware,
software and control systems that are not Year 2000 compliant. For additional
information addressing OraVax's exposure to the Year 2000 issues, please see
"OraVax Management's Discussion and Analysis of Financial Condition and Results
of Operations--Year 2000 Compliance."
PEPTIDE AND ORAVAX MAY NOT SUCCESSFULLY INTEGRATE OPERATIONS.
The integration of our operations will require, among other things:
- educating the employees of each company about the technologies and
programs of the other company;
- coordinating or combining research and development efforts;
- identifying and allocating collaborative relationships in a coherent
manner; and
- aligning the strategic plans of two previously independent management
teams.
The difficulties of this integration may be increased by the geographical
separation of our two companies and our employees. Most of Peptide's research
and development operations are located outside of the United States. OraVax's
research and development operations are located in the United States.
Integration will require the dedication of management resources that may
temporarily distract management's attention from the day-to-day business of the
23
<PAGE>
combined company. If we fail to integrate the companies quickly and efficiently,
the combined company's business and results of operations could be impaired.
THE LOSS OF KEY EMPLOYEES COULD WEAKEN OUR SCIENTIFIC EXPERTISE AND DELAY THE
DEVELOPMENT OF OUR DRUGS.
Both Peptide and Oravax are, and the combined company will be, significantly
dependent on certain scientific and management personnel including Dr. Lance
Gordon, President of OraVax, Dr. Thomas Monath, Vice President of Research and
Medical Affairs at OraVax, Dr. Lawrence Garland, Director of Research and
Development at Peptide, Dr. Michael Darsley, Director of Molecular Immunology at
Peptide, Dr. Philip Bedford, Director of Development at Peptide and Dr. Alan
Lamont, Director of Biology at Peptide. Biotechnology companies such as Peptide
and OraVax are highly dependent on employees who have an in-depth and long term
understanding of the companies technologies, products, programs, collaborative
relationships and strategic goals. The loss of these employees could have a
negative impact on the business and prospects of the combined company. In
addition, in recent months OraVax has reduced the number of its employees. As a
result, the impact of losing any additional OraVax employees could be
substantial.
The biotechnology industry has a highly competitive market for qualified
scientific and managerial employees. During the pre-merger and integration
periods, competitors may try to recruit the employees of Peptide and OraVax.
Employees of both companies may also decide to leave due to the uncertainty
surrounding the merger.
BECAUSE PEPTIDE'S STOCK PRICE HAS BEEN HIGHLY VOLATILE, THE MARKET VALUE OF THE
SHARES YOU WILL HOLD MAY FLUCTUATE SIGNIFICANTLY.
The market price for Peptide shares and the securities of other emerging
biotechnology companies have been volatile. During 1998, our share price ranged
from 262.9p to 65.7p. Please see "Comparative Market Price and Dividend
Information" for additional historical price information. Factors that could
significantly impact the market price of Peptide shares in the future include:
- announcements concerning research activities, technological innovations or
clinical trials by us or our competitors;
- governmental regulatory initiatives;
- the FDA approving or denying new drug applications;
- patent or proprietary rights developments;
- public concern as to the safety or ethical implications of biotechnology
products; and
- general market conditions.
EXCHANGE RATE FLUCTUATIONS MAY REDUCE THE VALUE OF PEPTIDE SHARES FOR U.S.
HOLDERS.
Individuals and entities located in the U.S. who hold Peptide shares will
bear exchange rate risk. Although recent fluctuations in the dollar/ pound
sterling exchange rate have not been significant, fluctuations may be
significant in the future. The Peptide shares issued in the merger will only be
traded on the London Stock Exchange. As a result, U.S. holders of Peptide shares
who would like to sell their shares must sell them on the London Stock Exchange
and then have the proceeds of the sale converted into a dollar amount. These
holders may receive a reduced dollar value upon the sale of their shares as the
result of the dollar/pound sterling exchange rate in effect at that time which
may have no relation to the operations or prospects of Peptide.
THE ABSENSE OF A U.S. TRADING MARKET FOR PEPTIDE SHARES MAY RESULT IN DELAY AND
EXPENSE FOR U.S. SHAREHOLDERS.
Peptide currently does not intend to list its shares on any U.S. stock
exchange or on the Nasdaq. Peptide also has no current plans to create an ADR
program for its shares. As a result, it may be time consuming and expensive for
U.S. shareholders to dispose of their Peptide shares. Quotations for Peptide
shares are not generally available in U.S. newspapers.
24
<PAGE>
Quotations are available in the U.S. edition of the FINANCIAL TIMES and on a
Nasdaq-Amex Web site at http://www.nasdaq-uk.com. Some U.S. brokerage firms may
add a surcharge to their customary commissions for trades executed offshore,
although we understand the major U.S. brokerage firms do not. Sales of Peptide
shares may result in a U.K. stamp tax of 50p per 100 pounds sterling; however,
this tax is usually paid by the purchaser.
PEPTIDE'S ORGANIZATION IN ENGLAND AND WALES MAY CAUSE CONFUSION FOR U.S.
SHAREHOLDERS
The laws of England and Wales, including the Companies Acts, and Peptide's
memorandum and articles of association govern the rights of holders of Peptide
shares. These rights differ from the rights of stockholders in typical United
States corporations.
OraVax stockholders may have difficulty understanding and assessing their
rights as Peptide shareholders due to their unfamiliarity with corporate law and
procedure in the U.K. Similarly, OraVax stockholders may have difficulty
locating attorneys or other advisors in the U.S. who are familiar with the
rights of a shareholder in a U.K. corporation.
UNITED STATES JUDGMENTS MAY NOT BE ENFORCEABLE AGAINST PEPTIDE.
Judgments of United States courts, including those predicated on the civil
liability provisions of the federal securities laws of the United States, may
not be enforceable in English courts. As a result, stockholders of Peptide who
obtain a judgment against Peptide in the United States may not be able to
require Peptide to pay the amount of the judgment.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE
OraVax and Peptide have made forward-looking statements in this document.
These statements are subject to risks and uncertainties, and OraVax and Peptide
cannot guarantee that these statements will prove to be correct. Forward-looking
statements relate to future periods and include statements about: product
development; receipt of regulatory approvals; projected cash needs; benefits of
the merger; and financial results.
Generally, the words "believes," "expects," "anticipates" and similar
expressions identify forward-looking statements. You should understand that
several factors could cause results to differ materially from those expressed in
our forward-looking statements. These factors include: adverse changes in
economic conditions generally or in the markets served by OraVax and Peptide; a
significant delay in the expected completion of the merger; and the matters
discussed in this prospectus/proxy statement under the heading "Risk Factors."
Both OraVax and Peptide disclaim any obligation to update forward-looking
statements.
25
<PAGE>
THE SPECIAL MEETING
GENERAL
This prospectus/proxy statement is being furnished to OraVax stockholders in
connection with the solicitation of proxies by the board of directors of OraVax
for use at the special meeting of stockholders to be held on May 10, 1999, at
the offices of Hale and Dorr LLP, 60 State Street, Boston, MA 02109, commencing
at 10:00 a.m., local time, and at any adjournment or postponement of the
meeting.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the special meeting, OraVax stockholders will consider and vote on:
(1) Adoption of the merger agreement; and
(2) Such other business as may properly come before the special meeting.
RECORD DATE; VOTING RIGHTS; VOTING AT THE MEETING
The board of directors of OraVax has fixed March 11, 1999 as the record
date. Accordingly, only holders of record shares of OraVax common stock at the
close of business on March 11, 1999 are entitled to notice of and to vote at the
special meeting. Each holder of record shares of OraVax common stock on the
record date is entitled to cast one vote per share, exercisable in person or by
a properly executed proxy, at the special meeting. As of the record date, there
were 22,113,040 shares of OraVax common stock outstanding and entitled to vote.
Such shares were held by approximately 192 holders of record.
Under OraVax by-laws, the holders of a majority of shares of OraVax common
stock outstanding and entitled to vote at the special meeting will constitute a
quorum. Shares of OraVax common stock represented in person and by proxy will be
counted for purposes of determining whether a quorum is present.
The affirmative vote of the holders of a majority of the shares of OraVax
common stock outstanding is required to adopt the merger agreement. As of the
record date, the directors of OraVax and certain of their affiliates and the
executive officers of OraVax beneficially owned approximately 3.7% of the
outstanding shares of OraVax common stock. Each of those individuals has advised
OraVax that he intends to vote to adopt the merger agreement. Additionally,
Peptide owns approximately 9.9% of the outstanding OraVax common stock and
intends to vote in favor of adopting the merger agreement.
VOTING OF PROXIES
Properly executed proxies that have not been revoked will be voted at the
special meeting in accordance with the instructions indicated in the proxies. If
no instructions are indicated, such proxies will be voted FOR adoption of the
merger agreement.
If any other matters are properly presented at the special meeting,
including consideration of a motion to adjourn the meeting to another time or
place for the purpose of soliciting additional proxies, the persons named in the
enclosed form of proxy will have discretion to vote on such matters in
accordance with their best judgment (unless authorization to use such discretion
is withheld). OraVax is not aware of any matters expected to be presented at the
special meeting other than adoption of the merger agreement.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by
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- filing with the Secretary of OraVax (including by telegram or facsimile),
a written notice of revocation bearing a later date than the date of the
proxy or by giving notice of revocation at the special meeting,
- duly executing a later-dated proxy relating to the same shares and
delivering (including by telegram or facsimile) it to the Secretary of
OraVax or
- attending the special meeting and voting in person.
In order to vote in person at the special meeting, OraVax stockholders must
attend the meeting and cast their votes in accordance with the voting procedures
established for the meeting. Attendance at the special meeting will not in and
of itself revoke a proxy. Any written notice of revocation or subsequent proxy
must be sent to:
OraVax, Inc.
38 Sidney Street
Cambridge, MA 02139
Facsimile: (617) 494-1741
Attention: Secretary
Shares of OraVax common stock held of record by a broker which are present
in person or represented by proxy will be counted for purposes of determining a
quorum. If, however, under rules applicable to brokers, a broker does not have
discretionary voting authority to vote on any matter at the special meeting in
the absence of instructions from the beneficial owners, then such shares
(although present for quorum purposes) will not be considered entitled to vote
on such matter ("broker non-votes"). Broker non-votes and abstaining votes will
not be counted in favor of adopting the merger agreement. Since adoption
requires the affirmative vote of a majority of the outstanding shares of OraVax
common stock, abstentions and broker non-votes will have the same effect as
votes to reject the merger agreement.
SOLICITATION OF PROXIES
OraVax will pay the expenses of the solicitations for the special meeting.
In addition to solicitation by mail, directors, officers and employees of OraVax
may solicit proxies in person or by telephone, telegram or other means of
communication. OraVax will not pay these persons additional compensation for
solicitation of proxies but may reimburse them for reasonable out-of-pocket
expenses. OraVax has retained Kissell Blake at an estimated cost of $5,000, plus
reimbursement of expenses, to assist in its solicitation of proxies. OraVax also
will make arrangements with custodians, nominees and fiduciaries for forwarding
of proxy solicitation materials to beneficial owners of shares held of record by
the custodians, nominees and fiduciaries, and OraVax will reimburse the
custodians, nominees and fiduciaries for their reasonable expenses.
BACKGROUND AND REASONS FOR THE MERGER
BACKGROUND OF THE MERGER
OraVax completed a successful public offering of its common stock in June
1995 and a secondary offering in June 1996. As a development-stage biotechnology
company, OraVax required additional financing in 1997 but was unable to obtain
such financing in the public securities markets. The securities markets for
small biotechnology companies were weak, and OraVax failed to achieve sufficient
success in the clinical trials of its product candidates to attract investors.
In March 1997, OraVax announced the results of phase 3 clinical trials for
HNK20, its product designed to treat respiratory infections in infants. The
trials failed to demonstrate the efficacy of the product, and the market price
of OraVax common stock rapidly declined from approximately $7 per
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share prior to the announcement to approximately $2.50 per share within two
weeks after the announcement. Throughout the balance of 1997, OraVax pursued
negotiations with additional potential corporate partners. OraVax did conclude
an agreement with Medeva to distribute Medeva's yellow fever vaccine in the U.S.
However, OraVax was unable to enter into sufficient further collaborations to
provide either substantial cash payments to OraVax or the foundation for raising
capital in the public securities market. In December 1997, OraVax raised
approximately $6 million in a private placement of its 6% convertible preferred
stock which is convertible into shares of OraVax common stock at a discount to
the market price at the time of conversion.
During 1998, OraVax continued to seek further financing through additional
private equity sales, corporate collaborations, or a business combination. The
limited cash resources of the company were depleted by ongoing operations during
the first nine months of 1998. At June 30, 1998 net assets were $1.9 million,
failing to meet the minimum of $4 million required for continued listing on the
Nasdaq National Market. The market price of OraVax common stock further declined
from the range of $2.00 at the start of 1998 to a low of $.18 during August,
1998. During this period of rapid stock price decline, holders of the 6%
convertible preferred stock converted many of their preferred shares into common
stock at a discount to the trading price. These conversions resulted in the
issuance of approximately 9 million shares of common stock, increasing the
outstanding shares of common stock from approximately 10,400,000 shares at
December 31, 1997 to approximately 20 million shares at December 31, 1998. At
the end of August 1998, OraVax was notified by Nasdaq that its common stock
would be delisted for failure to meet the minimum bid price of $1.00 as well as
the minimum net asset requirement.
OraVax continued to seek additional financing throughout this period and
received a number of financing proposals. The company rejected many of such
offers because they offered inadequate funding or involved convertible
securities with features which were disadvantageous to OraVax. It seriously
considered a proposal by a venture capital partnership to invest up to $20
million in cash in a private placement for a major ownership position through
convertible preferred stock. The proposal evolved as the OraVax stock price
declined, and the final form of the proposal, considered by the OraVax board of
directors in late August and early September 1998, would have required issuance
of $16 million of preferred stock convertible into ownership of 65% and the
establishment of a stock option pool comprising 10% of the outstanding common
stock of OraVax. The proposal also contained antidilution protection in the
event of future conversion of outstanding convertible preferred stock and
required a substantial reduction of OraVax's operations and cash expenses, in
order to permit the new capital to fund operations for at least 24 months
following the financing. OraVax believed the spending limitations would have
conflicted with its contractual obligations under product development
arrangements and would have limited the potential of some of its programs.
OraVax estimated the value of this investment to be approximately $.32 per share
at the time of the closing, subject to further reduction under antidilution
provisions. However, it would not provide any immediate liquidity to the OraVax
stockholders but would very substantially dilute the interest of each existing
stockholder. The proposal would have required the issuance to the investor of
preferred stock convertible into approximately 50 million additional shares of
common stock at a time when 17 million shares were already outstanding.
A second proposal was made by PMC, joint venture partner of OraVax since
1995 in the H. PYLORI joint venture. PMC discussed the purchase of additional
ownership in the joint venture from OraVax for $2.5 million to $4 million. The
OraVax board felt that this proposal would not provide adequate cash to sustain
operations, even at a reduced spending level, for a sufficient time to raise
additional capital for its long-term needs. In addition, the proposal would have
required OraVax to give up valuable technology at well below the fair value of
such technology. While addressing limited short-term cash needs, the proposal
would not have provided enough financing to permit OraVax to rebuild value for
its stockholders. Eventually, the discussions over this proposal led to a $3
million bridge loan
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from PMC which was closed on November 2, 1998, secured by a portion of OraVax's
rights in its existing joint venture with PMC to develop vaccines against H.
PYLORI.
A third proposal was an offer from a small cap biotechnology company to
acquire OraVax for stock of the acquiring company. The initial proposal
suggested a range of value, with the bottom of the range equal to $9 million in
stock, and the final proposal, by letter dated September 24, 1998, was for $13
million in stock. The OraVax board of directors felt this proposal was
inadequate financially, particularly given the absence of a good strategic fit
with the potential acquiror.
On September 8, 1998, Peptide sent to OraVax a letter outlining the terms of
a proposed stock-for-stock merger transaction for total consideration of $5
million to $7 million to the stockholders of OraVax. While OraVax considered the
price inadequate, OraVax management was familiar with Peptide and believed there
was the potential for a strategic fit between the two companies. A year earlier,
in November, 1997, Peptide had visited OraVax and made a presentation on
Peptide's SALMONELLA vector technology, which was relevant to OraVax's H. PYLORI
project. These earlier discussions resulted in an option agreement between
OraVax and Peptide, dated April 24, 1998, designed to allow the parties to
evaluate the technical feasibility of H. PYLORI vaccines formulated with
SALMONELLA vectors. The two companies had continued to communicate frequently to
discuss scientific matters relating to the collaboration.
Peptide's September 8, 1998 letter was followed by considerable discussion
between the management of OraVax and Peptide, and on September 22, 1998, a
meeting took place at OraVax between OraVax's management and board of directors
representatives and the management of Peptide. The potential synergies between
the two companies were reviewed, and Peptide orally increased its offer to $13
million.
On October 1, 1998, Peptide sent a further letter to OraVax confirming the
increase in its proposed consideration in the merger to $13 million. Further
discussions between OraVax and Peptide management took place.
During the week of October 5, 1998, members of OraVax management traveled to
England and met with Peptide and their financial and legal advisors, exploring
the strategic fit of the two companies and conducting due diligence necessary to
evaluate the potential value of Peptide shares to OraVax stockholders.
On October 11, 1998, Peptide informed OraVax management that it would
increase its offer to $15 million and provide immediate bridge financing of $5
million secured by tangible assets of OraVax.
The OraVax board of directors valued the Peptide offer at approximately $.61
per share, or a premium of 178% over OraVax's closing price of $.22 per share on
October 6, 1998. OraVax analyzed the potential dilutive effect on this offer of
Peptide's need to obtain further financing to provide for the cash needs of the
combined company. Even after taking into consideration dilution associated with
Peptide's anticipated financing, the effective price still exceeded the proposed
financing alternative. The OraVax board of directors viewed Peptide's limited
cash resources as a risk; however, the strategic fit of the two companies
appeared to be excellent. The combined company would have a more diversified
product offering and larger critical mass. Peptide's investment bank, BT
Alex.Brown, expressed confidence in the ability to complete a financing to
provide adequate cash for the combined company.
As compared to the venture capital investment, the Peptide proposal offered
greater value to OraVax stockholders and the prospect of more diversified
products and larger critical mass. As compared to the sale of technology to PMC,
the Peptide transaction offered the prospect of retaining valuable technology
while obtaining financing for a much longer period into the future. As compared
to the other acquisition proposed, the Peptide transaction offered better
financial terms and a better strategic fit.
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After significant analysis, discussion and negotiation with various parties,
the OraVax board of directors on October 11, 1998 authorized management to move
forward with the negotiation of a combination with Peptide. An exclusivity
agreement was signed on October 12, 1998 providing for exclusive negotiations
until November 2, 1998. OraVax management met with representatives of Peptide
both at OraVax's offices in Cambridge, Massachusetts and at Peptide's offices in
Cambridge, England.
During the same period, OraVax negotiated with the holders of most of the
remaining outstanding shares of its 6% convertible preferred stock and obtained
the right for Peptide to purchase 2,584 shares for a price of approximately $3
million. These shares could at that time have been convertible into
approximately 15.8 million shares of OvaVax common stock, or approximately 45%
of the outstanding shares of OraVax common stock at that time. OraVax also
obtained agreement from its joint venture partner, PMC, to the proposed merger
with Peptide and obtained $3 million in bridge financing from PMC on November 2,
1998. The exclusivity agreement between OraVax and Peptide was extended to
November 10, 1998.
Between October 12, 1998 and November 10, 1998, representatives of Peptide
and OraVax and their respective advisors continued their due diligence reviews.
In addition, members of both management teams and their financial and legal
advisors participated in ongoing negotiations regarding the terms of the
proposed transaction. During this period, counsel for OraVax and Peptide
communicated numerous times to review and discuss drafts of the merger
agreement, the terms of potential bridge loans from Peptide to OraVax, and other
ancillary documents.
On November 9, 1998 the OraVax board of directors met, with representatives
of Hambrecht & Quist and Hale and Dorr participating, to review and discuss the
terms of the transaction. Following presentations and advice from its advisors
and discussion of the proposed transaction and of available alternatives, the
OraVax board of directors unanimously approved the merger and authorized
execution of the merger agreement, a loan agreement providing bridge financing
of up to a maximum of $5 million from Peptide, and other ancillary documents.
The merger agreement was executed on November 10, 1998 along with the
related bridge loan agreement of $5 million, secured by all the assets of OraVax
except its H. PYLORI technology. Peptide purchased 2,584 of the outstanding
shares of convertible preferred stock (representing, at that time, approximately
95% of the outstanding shares of convertible preferred stock) from the holders
of this stock for approximately $3 million on November 10, 1998.
On November 11, 1998 prior to the opening of trading of Peptide's shares on
the London Stock Exchange, Peptide announced the merger. OraVax also announced
the merger in the United States prior to the opening of trading of the OraVax
common stock on the Nasdaq National Market.
On December 30, 1998, PMC sent a letter to OraVax indicating that PMC was
considering making an offer to acquire OraVax on terms superior to the
consideration to be paid by Peptide under the merger agreement. OraVax sent a
copy of PMC's letter to Peptide, as required under the merger agreement. In
response to PMC's letter, members of Peptide's management met independently with
PMC and negotiated a series of agreements, including a standstill agreement
under which PMC agreed not to make an offer to acquire OraVax and an agreement
by PMC to make a $3 million equity investment in Peptide shares in connection
with and conditioned upon consummation of the merger. PMC and Peptide also
agreed that the OraVax technology relating to vaccines for Japanese encephalitis
and tick-borne encephalitis would be licensed to PMC and that the joint venture
with PMC would be granted licenses to OraVax technology for the development of
vaccines for hepatitis C contingent on the merger being consummated.
Since the merger was announced, OraVax has received increased interest from
prospective purchasers of the company's leasehold interests, leasehold
improvements and equipment in its Canton, Massachusetts, manufacturing facility.
Based on these indications of interest, OraVax has explored the
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sale of its interests in this facility. Based on the further developments with
PMC and with the Canton facility, which indicated increased value for OraVax
assets, the OraVax board of directors met on January 25, 1999 and authorized a
letter from OraVax to Peptide on January 26, 1999 notifying Peptide that the
OraVax board of directors believed the total consideration to be paid by Peptide
in the merger should be increased.
OraVax and Peptide engaged in extensive further discussion of the merger
terms over the next day, and the parties finally agreed to amend the merger
agreement to increase the total merger consideration, including amounts
previously paid by Peptide to purchase OraVax preferred stock, from $15 million
to $20 million, the increase taking the form of additional Peptide shares. The
OraVax board of directors met on January 27, 1999 and received oral advice from
Hambrecht & Quist, its financial advisors, that an increase in the purchase
price from $15 to $20 million would result in a transaction that was fair to the
OraVax stockholders given the new developments. The OraVax board of directors
approved the terms of the merger as amended, authorized amendment of the merger
agreement and confirmed to Peptide that it is the OraVax board of directors'
intention to recommend adoption of the merger agreement, as amended, to the
OraVax stockholders.
The merger agreement was amended on January 28, 1999. Announcement of the
amendment was made in the United States after the close of trading of OraVax
common stock on January 28, 1999, and simultaneously in England, after the close
of trading on the London Stock Exchange.
ORAVAX'S REASONS FOR THE MERGER; RECOMMENDATION OF THE ORAVAX BOARD OF DIRECTORS
In the course of reaching its decision to approve the merger agreement, the
OraVax board of directors consulted with OraVax's legal, accounting and
financial advisors as well as with OraVax's management, and considered the
following material positive factors:
- The OraVax board of directors' view that the merger would provide OraVax
with the additional capital necessary to continue its operations;
- The OraVax board of directors' view that the merger would eliminate the
need for OraVax to pursue alternative funding opportunities or file for
bankruptcy protection;
- The OraVax board of directors' view that OraVax's business, when combined
with Peptide's business following the merger, will have greater critical
mass and enhanced prospects for success in the rapidly changing and
increasingly competitive biotechnology and pharmaceutical industries;
- Peptide's financial ability to complete the proposed merger, including the
associated financing of OraVax's operations in the interim period;
- The terms and conditions of the proposed merger;
- The prospects for positive long-term performance of Peptide shares;
- The presentation of OraVax's financial advisor, Hambrecht & Quist, and the
opinion of such firm to the effect that the merger would be fair, from a
financial point of view, to the stockholders of OraVax;
- The OraVax board of directors' assessment of OraVax's alternatives to
enhance stockholder value and conclusion that the proposed merger presents
the most favorable opportunity to do so.
The OraVax board of directors also considered a number of potentially
negative material factors in its deliberations concerning the merger, including;
- The risk that the advantages of the merger might not be realized;
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- The fact that OraVax stockholders would receive stock in a U.K. company
traded on the London Stock Exchange rather than on a U.S. market; and
- The risk that the value of the Peptide shares might decline by the time of
consummation of the merger, thus reducing the total consideration
available to the OraVax stockholders.
In evaluating these factors and risks, the OraVax board of directors
concluded that the Peptide merger would provide a significantly greater
financial benefit to OraVax stockholders than any of the alternatives available
to OraVax. The OraVax board of directors also concluded that the larger critical
mass and more diversified products of the combined company would offer
significant advantages in obtaining financing, negotiating collaborative
arrangements, mitigating the risks of each product, and attracting and retaining
key employees. The OraVax board of directors also weighed the risk that the
advantages of the combined operations might not be realized and the risk that
the value of the Peptide shares received in the merger might decline. In
addition, the OraVax board of directors weighed the analyses and information
contained in the oral presentation and the fairness opinion of Hambrecht &
Quist, its financial advisor. In balance, considering all these factors and
risks, including the fairness opinion of Hambrecht & Quist described below, the
OraVax board of directors concluded that the terms of the merger are fair to,
and in the best interests of the OraVax stockholders. Accordingly, the OraVax
board of directors recommends that the OraVax stockholders vote for adoption of
the merger agreement.
OPINION OF FINANCIAL ADVISOR TO THE ORAVAX BOARD OF DIRECTORS
The OraVax board of directors engaged Hambrecht & Quist to act as its
financial advisor in connection with the merger. Hambrecht & Quist rendered its
oral opinion (subsequently confirmed in writing) on November 9, 1998 to the
OraVax board of directors that, as of such date, the merger consideration to be
paid by Peptide in the merger is fair to OraVax stockholders from a financial
point of view.
A copy of Hambrecht & Quist's opinion dated November 9, 1998, which sets
forth the assumptions made, matters considered, the scope and limitations of the
review undertaken and the procedures followed by Hambrecht & Quist is attached
as Annex B to this proxy statement/prospectus. We advise OraVax stockholders to
read this opinion in its entirety. OraVax stockholders should note that the
opinion expressed by Hambrecht & Quist was provided for the information of the
OraVax board of directors in its evaluation of the merger and does not
constitute a recommendation to any stockholder as to how such stockholder should
vote with respect to the merger agreement. The OraVax board of directors did not
place limitations on Hambrecht & Quist with respect to the investigation made or
the procedures followed in preparing and rendering its opinion. OraVax
stockholders should also note that the opinion was delivered prior to the
January 28, 1999 amendment to the merger agreement increasing the merger
consideration payable to OraVax common stockholders from $12 million to $17
million and a revised opinion has not been delivered.
In connection with its review of the merger, and in arriving at its opinion,
Hambrecht & Quist, among other things:
- reviewed publicly available financial statements of Peptide and OraVax and
other relevant financial and operating data of Peptide and OraVax made
available to Hambrecht & Quist from published sources and from the
internal records of Peptide and OraVax;
- reviewed internal financial and operating information, including
projections, relating to Peptide and OraVax prepared by the management of
Peptide and OraVax;
- discussed the business, financial condition and prospects of Peptide and
OraVax with each company's senior managers;
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- reviewed the recent reported prices and trading activity for Peptide
shares and OraVax common stock;
- compared the prices and trading activity and financial performance of
Peptide and OraVax with that of comparable publicly-traded companies;
- reviewed the financial terms, to the extent publicly available, of certain
comparable merger and acquisition transactions;
- reviewed drafts of the merger agreement; and
- performed such other analyses and considered such other information as
Hambrecht & Quist deemed relevant.
In rendering its opinion, Hambrecht & Quist assumed and relied upon the
accuracy and completeness of all of the foregoing information without assuming
any responsibility for independent verification of such information. Hambrecht &
Quist did not prepare any independent evaluation or appraisal of any of the
assets or liabilities of OraVax or Peptide, nor did they conduct a physical
inspection of the properties and facilities of OraVax or Peptide.
With respect to the financial projections made available to Hambrecht &
Quist and used in its analysis, Hambrecht & Quist assumed that they reflected
the best currently available estimates and judgments of the expected future
financial performance of OraVax and Peptide, respectively. For purposes of its
opinion, Hambrecht & Quist assumed that neither Peptide nor OraVax was a party
to any pending transactions, including external financings, recapitalizations or
material merger discussions, other than the merger and those activities
disclosed to Hambrecht & Quist or undertaken in the ordinary course of
conducting their respective businesses. Hambrecht & Quist's opinion was
necessarily based upon market, economic, financial and other conditions as they
existed and could be evaluated as of the date of its opinion. Any material
change in such conditions would require a reevaluation of its option. Hambrecht
& Quist expressed no opinion as to the price at which Peptide shares would trade
subsequent to the effective time of the merger.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. The summary
of the Hambrecht & Quist analyses set forth below does not purport to be a
complete description of the analyses underlying the Hambrecht & Quist opinion.
In reviewing the analyses preformed, Hambrecht & Quist identified some elements
which were positive to the merger, some elements which were neutral to the
merger, and some elements which were negative to the merger. In arriving at its
opinion, Hambrecht & Quist did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative and subjective
judgments as to the significance and relevance of each analysis and factor.
Those analyses and factors contributed in varying ways to Hambrecht and Quist's
opinion that the merger consideration to be paid by Peptide in the merger is
fair to OraVax stockholders from a financial point of view.
Accordingly, Hambrecht & Quist believes that its analyses and the summary
set forth below must be considered as a whole. Hambrecht & Quist believes that
selecting portions of its analyses, or of the summary set forth below, without
considering all factors and analyses, could create an incomplete view of the
processes underlying its opinion. In performing its analyses, Hambrecht & Quist
made numerous assumptions with respect to industry performance, general business
and economic conditions and other matters, many of which are beyond the control
of OraVax and Peptide. The analyses performed by Hambrecht & Quist and
summarized below are not necessarily indicative of actual values or actual
future results, which may be significantly more or less favorable than suggested
by such analyses. Additionally, analyses relating to the values of businesses do
not purport to be appraisals or to reflect the prices at which businesses
actually may be sold.
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The following is a summary of the material financial analyses performed by
Hambrecht & Quist in connection with its fairness opinion:
TRANSACTION ANALYSIS
Hambrecht & Quist reviewed and analyzed the proposed terms of the merger and
performed a sensitivity analysis of the merger consideration to be received by
OraVax stockholders. In this sensitivity analysis, Hambrecht & Quist used
fluctuating values of Peptide's shares, and an exchange ratio of L1.00 to $1.66
as of November 10, 1998. On the basis of its analysis, Hambrecht & Quist
observed the following:
- OraVax shareholders would receive approximately $12,040,125 of value in
Peptide shares, subject to reduction if Peptide's share price falls below
$1.49 or to increase in the event that Peptide's share price rises above
$2.24;
- based on Peptide's closing share price of $1.87 on November 6, 1998, the
merger consideration would be fixed at $12,040,125, or approximately $0.61
per share of OraVax common stock, which represented a 143.6% premium to
OraVax's closing price of $0.25 on November 6, 1998 and a 178.4% premium
to OraVax's closing price of $0.22 on October 6, 1998; and
- based on Peptide's closing share price of $1.87 on November 6, 1998,
OraVax stockholders would own approximately 14.8% of Peptide following the
merger; however that number could increase to 17.8% if Peptide's share
price falls below $1.49 or decrease to 12.6% if Peptide's share price
rises above $2.24.
For the purpose of this analysis, Hambrecht & Quist did not include the
incremental dilutive effect that the Peptide rights offering would have on the
ownership of the OraVax stockholders in Peptide after the merger.
ANALYSIS OF ALTERNATIVES TO THE MERGER
Hambrecht & Quist reviewed and analyzed OraVax's alternatives to the
proposed merger. Hambrecht & Quist observed that in the first six months of
1998, OraVax's net loss was approximately $1.3 million per month and that as of
November 9, 1998, OraVax had cash and marketable securities of approximately
$3.1 million, including $3.0 million from the PMC bridge loan. Based on OraVax's
historical net loss, Hambrecht & Quist estimated that OraVax had less than three
months of cash and that even allowing for the reduction of net loss as a result
of potential partnerships, OraVax would have less than four months to accomplish
one of the following alternatives to the proposed merger:
- raise money through a financing;
- find an alternative acquirer;
- raise funding through a sale of assets; or
- file for bankruptcy protection.
Hambrecht & Quist analyzed each of these alternatives and their respective
advantages and disadvantages for the OraVax board of directors.
In order to determine the relative benefits of the merger compared to a
potential financing, Hambrecht & Quist reviewed the only other financing
proposal being evaluated by the management of OraVax, a proposal by a venture
capital partnership. Hambrecht & Quist analyzed the proposed financing in light
of the value to the OraVax stockholders accorded by the merger, and noted that,
under the financing proposal:
- shareholders of OraVax received no immediate value;
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- the proposed financing required immediate downsizing of OraVax operations;
and
- the proposed financing diluted current shareholders by approximately 75%
and provided no diversification of research and development risk.
In order to determine the relative benefits of the merger compared to a
merger with another potential acquirer, Hambrecht & Quist along with the
management of OraVax, reviewed other potential acquirers, including an offer
from a small cap biotechnology company. After such review, Hambrecht & Quist
determined no other offer to be as attractive, from a financial or strategic
perspective, as the proposed merger with Peptide.
In order to determine the relative benefits of the merger compared to
raising funding through a sale of assets, Hambrecht & Quist reviewed with OraVax
its saleable assets primarily consisting of OraVax's manufacturing facility in
Canton, Massachusetts. After such review, Hambrecht & Quist determined that the
sale of those assets in a timely manner would be insufficient to fund the
company's continued operations for six months.
In order to determine the relative benefits of the merger compared to filing
for bankruptcy protection, Hambrecht & Quist reviewed the Peptide offer. After
such review, Hambrecht & Quist determined that the merger offered greater
potential shareholder value and increased visibility of the future of the
business than filing for bankruptcy protection.
COMPARABLE COMPANY ANALYSIS
Hambrecht & Quist reviewed the market value, cash, technology value
(consisting of market value plus debt, less cash), revenues for the latest
available 12 month period, net income for the latest available 12 month period,
as well as the ratio of the technology value to revenues for the latest
available 12 month period of the large capitalization vaccine companies and the
small capitalization vaccine companies set forth in the table below and compared
this data to the corresponding data for each of OraVax and Peptide. This
analysis indicated technology values and technology value to revenue multiples
as indicated below:
<TABLE>
<CAPTION>
TECHNOLOGY
TECHNOLOGY VALUE/
VALUE REVENUES
----------- ---------------
($MILLIONS)
<S> <C> <C>
ORAVAX.......................................................... $ 4.7 0.5X
PEPTIDE......................................................... $ 43.2 NM (> 50X)
Aviron.......................................................... 320.1 NM (> 100x)
BioChem Pharma.................................................. 2,391.9 12.4
Chiron.......................................................... 4,286.4 3.4
North American Vaccine.......................................... 513.2 53.3
LARGE CAP VACCINE AVERAGE....................................... 1,877.9 23.0
Avant Immunotherapeutics........................................ 31.2 7.9
Biomira......................................................... 67.4 8.6
Cantab Labs..................................................... 28.2 4.6
Corixa.......................................................... 45.6 3.6
Genelabs Technologies........................................... 72.0 4.8
Ribi ImmunoChem Research........................................ 25.0 4.3
SMALL CAP VACCINE AVERAGE....................................... 44.9 5.6
</TABLE>
While OraVax and Peptide are small cap vaccine companies, Hambrecht & Quist
included the large cap vaccine companies in this comparison in order to increase
the size and scope of the comparable group and to give a more accurate picture
of the vaccine sector as a whole. In addition, these
35
<PAGE>
comparisons demonstrate that the entire sector had not underperformed and
illustrate the difference in stock market and operational performance between
the small cap and large cap vaccine companies.
STOCK TRADING HISTORY ANALYSIS
Hambrecht & Quist examined the comparable price performance from December
31, 1996 to November 6, 1998 of OraVax common stock, Peptide ordinary shares,
the Comparable Vaccine Companies, the Nasdaq Composite and the Nasdaq
Biotechnology Index. This analysis indicated the price performance data below:
<TABLE>
<CAPTION>
PRICE PERFORMANCE
FROM
12/31/96 TO
11/6/98
-----------------
<S> <C>
OraVax......................................................................................... -95.2%
Peptide........................................................................................ -54.1%
Comparable Vaccine Companies................................................................... +29.0%
Nasdaq Composite............................................................................... +42.3%
Nasdaq Biotechnology Index..................................................................... +18.7%
</TABLE>
SELECTED COMPARABLE TRANSACTION ANALYSIS
Hambrecht & Quist compared the merger with twenty-seven selected comparable
merger and acquisition transactions in the biotechnology area. Hambrecht & Quist
reviewed the premiums paid to closing stock prices in such transactions, as well
as selected two closely comparable transactions done in 1998, Megabios'
acquisition of GeneMedicine, and Gene Logic's acquisition of Oncormed. This
analysis indicated the premium paid data below:
<TABLE>
<CAPTION>
SELECTED COMPARABLES AVERAGE PREMIUM
---------------------------------------- PAID
PREMIUM PAID TO PREMIUM PAID TO IN ALL COMPARABLE PREMIUM PAID TO
DAYS PRIOR TO ANNOUNCEMENT GENEMEDICINE ONCORMED TRANSACTIONS ORAVAX
- --------------------------------------------- ------------------- ------------------- ----------------- -----------------
<S> <C> <C> <C> <C>
One Day...................................... 14.2% 13.8% 37.7% 143.6%
One Week..................................... 10.7% 20.6% 39.4% 143.6%
One Month.................................... 7.3% 7.7% 48.9% 178.4%
</TABLE>
Hambrecht & Quist did not attempt to prepare any further quantitative
valuation analyses based on these acquisition transactions because Hambrecht &
Quist believed that differences in the technologies of each company and
differences in the market conditions at the times such acquisitions were made
would make such analyses meaningless.
No company or transaction used in the analyses is identical to OraVax,
Peptide or the merger. Accordingly, an analysis of the results of the foregoing
is not mathematical; rather it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
companies and other factors that could affect the public trading values of the
companies or company to which they are compared. The foregoing description of
Hambrecht & Quist's opinion is qualified in its entirety by reference to the
full text of such opinion, which is attached at Annex B to this proxy
statement/prospectus.
CERTAIN RELATIONSHIP; TERMS OF ENGAGEMENT
Hambrecht & Quist, as part of its investment banking services, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, strategic transactions, corporate restructurings,
negotiated underwritings, secondary distributions of listed and unlisted
36
<PAGE>
securities, private placements and valuations for corporate and other purposes.
The OraVax board of directors selected Hambrecht & Quist to serve as its
financial advisor in connection with the proposed transaction with Peptide
because it is an internationally recognized investment banking firm whose
professionals have substantial experience in merger and acquisition transactions
similar to the merger. In the ordinary course of business, Hambrecht & Quist may
actively trade in the equity securities of OraVax and Peptide for its own
account and for the accounts of its customers and, accordingly, may at any time
hold a long or short position in such securities. Hambrecht & Quist may in the
future provide additional investment banking or other financial advisory
services to Peptide.
Pursuant to an engagement letter dated October 23, 1998, OraVax has agreed
to pay Hambrecht & Quist a fee in connection with its services as financial
advisor to the OraVax board of directors and the rendering of a fairness
opinion. OraVax has agreed to pay a fee of $200,000 upon the delivery of the
fairness opinion. The fairness opinion fee shall be credited against any
transaction fee (as described below). Upon consummation by OraVax of the merger,
OraVax shall pay Hambrecht & Quist a transaction fee, payable in cash on
closing, of $250,000 less any fees previously paid. OraVax has agreed to
reimburse Hambrecht & Quist for its reasonable out of pocket expenses, and to
indemnify Hambrecht & Quist against certain liabilities, including liabilities
under the federal securities laws or relating to or arising out of Hambrecht &
Quist's engagement as financial advisor. The amount of compensation to be paid
to Hambrecht & Quist was determined by negotiations between the OraVax board of
directors and Hambrecht & Quist.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the OraVax board of directors with
respect to the merger agreement, OraVax stockholders should be aware that
Peptide has agreed to assume and continue the existing employment agreements
between OraVax and Lance Gordon, the President and Chief Executive Officer of
OraVax, and Thomas Monath, the Vice President, Research and Medical Affairs of
OraVax. Peptide also expects to elect Lance Gordon to the Peptide board of
directors following the merger. As a result, Drs. Gordon and Monath will benefit
from the completion of the merger in ways that do not apply to all OraVax
stockholders, in the form of continued employment with agreed upon terms, and in
the case of Dr. Gordon, in the form of a seat on the Peptide board of directors.
The board of directors of OraVax was aware of these interests and took these
interests into account in approving the merger agreement.
The key benefits and protections afforded to Dr. Gordon under the employment
agreement that Peptide will assume and continue are as follows:
- he is entitled to an annual base salary and a bonus;
- his employment agreement is terminable only upon six months written notice
unless the termination is for cause; and
- he is entitled to a severance payment equal to 50% of his annual base
salary if Peptide elects not to extend the employment agreement or
terminates him without cause.
The key benefits and protections afforded to Dr. Monath under the employment
agreement that Peptide will assume and continue are as follows:
- he is entitled to an annual salary and a bonus; and
- he is entitled to receive his current salary and benefits for a period of
six months if Peptide terminates him without cause.
37
<PAGE>
PEPTIDE'S REASONS FOR THE MERGER
The board of directors of Peptide has unanimously approved the merger
agreement and the merger. In reaching its decision, the Peptide board of
directors considered a number of factors, including the following:
- The complementary nature of the companies' product candidates and
technology platforms;
- The similarity of the companies' business strategy and therapeutic focus;
- The ability to acquire OraVax's rights as a 50% joint venture partner in
the H. PYLORI collaboration with PMC;
- The potential for accelerating the receipt of product revenues due to the
later stage of development of the OraVax Arilvax-Registered Trademark-
yellow fever vaccine;
- The perceived reduced risk associated with an expanded product portfolio;
- That the merger would bring together the alliances between OraVax and PMC
and Peptide and SmithKline Beecham;
- Access to OraVax scientists and research and development infrastructure;
and
- Opportunities to reduce the combined cash burn rate of the merged entity,
through potentially more efficient deployment of resources and increased
access to collaborators.
Having considered each of these advantages, the Peptide board of directors
determined that Peptide, as a result of the merger, would be a stronger and
larger company with a much broader range of product opportunities and
collaborative relationships, which would help to mitigate the risks inherent in
the biotechnology industry. Each of these advantages would enable the combined
company to be better positioned to obtain future financing, to increase its
research and development efforts and to more rapidly exploit its products and
technologies. The Peptide board of directors concluded that the combined effect
of these advantages would create a sustainable business over the long term.
Accordingly, having evaluated each of these advantages, the Peptide board of
directors concluded that the merger was in the best interests of its
shareholders.
38
<PAGE>
MANAGEMENT AFTER THE MERGER
EXECUTIVE OFFICERS AND DIRECTORS
The following individuals will serve as the executive officers and directors
of Peptide following the effective time of the merger:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Alan Goodman*.............................. 48 Non-Executive Chairman
John Brown................................. 44 Chief Executive Officer
Gordon Cameron............................. 33 Finance Director
Nicolas Higgins............................ 42 Commercial Director
Lance Gordon............................... 51 Director, North America
Alan Dalby*................................ 62 Non-Executive Director
Sir Brian Richards*........................ 66 Non-Executive Director
Alan Smith*................................ 54 Non-Executive Director
</TABLE>
- ------------------------
*Member of the Audit Committee and the Remuneration Committee.
ALAN GOODMAN has worked extensively in senior financial and general
management roles within a number of major U.K. companies, particularly in the
biotechnology and healthcare industries. In 1984, while Mr. Goodman was the
Finance director, Agricultural Genetics Company Limited completed a significant
financing. In 1989, he joined the board of Medeva plc to create a new
independent pharmaceutical group. In 1991, after retiring from the board of
Medeva plc, he concentrated on developing ATM, a company which has completed a
number of significant transactions in the healthcare sector. During 1992, he was
acting chief executive of Chiros Limited (now Chiroscience Group plc). He is
co-founder of Peptide and was appointed Chief Executive of Peptide in November
1993. He was appointed Deputy Chairman and Regional Director, North America in
February 1997 and became Chairman in May 1998. He is also a director of a number
of bioscience companies in the U.K., including Oxford Biomedica plc.
JOHN BROWN joined Peptide as Finance Director in March 1995 from
stockbrokers Sutherland and Partners (Edinburgh) Ltd where he was Head of
Research. From 1982 to 1987, he worked in research and development at Glaxo
Group Research, where he supervised projects on peptides and peptide mimetics.
From 1987 to 1991, he worked at PA Consulting Group Limited on due diligence
assignments, mergers and acquisitions and public offerings. In 1991, he joined
the Edinburgh stockbroker, Bell Lawrie White, covering the pharmaceutical and
biotechnology sectors before his move to Sutherland and Partners in early 1993.
He holds a PhD in Pharmacology and an MBA. Dr. Brown was appointed Chief
Executive in March 1997.
GORDON CAMERON has an MA in Economics and qualified as a Chartered
Accountant with Ernst & Young in 1991. After leaving Ernst & Young he spent two
years in corporate finance with Hill Samuel Bank. In 1993 he moved to N M
Rothschild & Sons Limited where he worked on a variety of mergers, acquisitions
and other corporate finance assignments. In particular, he was a key member of
the advisory team to Peptide's initial public offering in November 1995. In 1996
he joined Peptide and was appointed Finance Director in March 1997. He was also
appointed Company Secretary in February 1998.
NICOLAS HIGGINS has a BSc in Biochemistry, an MSc in Biochemical Engineering
and an MSc in the Management of Intellectual Property. He began his career with
Unilever Research in 1980. In 1982, he joined PA Consulting Group Limited and,
as a founding member of the biotechnology group, worked on a variety of
assignments in the life sciences area. In 1986, he moved to Porton International
Ltd where he managed a number of development projects. In 1990, he took on
special responsibility for the management of Porton's intellectual property
including the assessment of licensing opportunities. He
39
<PAGE>
joined Peptide in January 1994 with responsibility for the management of its
intellectual property, became Licensing Director in October 1996 and was
appointed Commercial Director in March 1997.
LANCE GORDON has served as the President and Chief Executive Officer and a
member of the Board of Directors of OraVax since June 1990. From January 1989 to
June 1990, Dr. Gordon served as senior vice president of North American Vaccine,
Inc., a biopharmaceutical company. From April 1988 to January 1989, he served as
chief executive officer of American Vaccine Corporation and Selcore
Laboratories, Inc., both of which are biopharmaceutical companies. From 1987 to
1988, Dr. Gordon was associate director, Infectious & Inflammatory Diseases,
Clinical Pharmacology--Drug Medical Affairs, of E.R. Squibb & Sons, Inc., a
pharmaceutical company. From 1981 to 1987, he was director, Immunobiology
Research at Connaught Laboratories, Ltd., a pharmaceutical company. During his
seven years with Connaught Laboratories, Ltd., Dr. Gordon was responsible for
both bacterial and viral research and development programs. He was the inventor
and project director of the Connaught Haemophilus influenzae type b conjugate
vaccine, PhoHibit. Dr. Gordon also serves on the advisory boards of the
not-for-profit Albert Sabin Foundation and BioSciences Contract Production, a
private biopharmaceutical services company. Dr. Gordon received a B.A. from the
University of California at Humboldt and a Ph.D. in Biomedical Science from the
University of Connecticut. Dr. Gordon completed his post-doctoral fellowship at
the Howard Hughes Medical Institute.
ALAN DALBY was appointed a non-Executive Director of Peptide in May 1998. He
is currently chairman of Reckitt & Colman PLC and a non-executive director of
Medeva plc. He is also a director of two U.S.-based biotechnology companies,
Alteon Inc. and Mitotix Inc. Mr. Dalby is the former chairman and chief
executive officer and a founder of Cambridge NeuroScience, Inc., an emerging
pharmaceutical company focused on neurobiology. Prior to joining Cambridge
NeuroScience, Inc., he was executive vice president and member of the board of
directors of SmithKline Beckman Corporation, spending 30 years with the company,
before retiring in 1987. He has held posts in the Pharmaceutical Manufacturers
Association.
SIR BRIAN RICHARDS joined Peptide from British Biotech plc (formerly British
Biotechnology Group plc) where he was Chairman and co-founder. He gained a PhD
from King's College London, following 13 years in academic medical research and
teaching at Kings College, University of London. He co-founded the research
laboratories at High Wycombe for G D Searle & Co. Ltd., the Chicago-based
pharmaceutical company, which pioneered the application of gene technology to
pharmaceuticals. British Biotechnology was established in Oxford in 1986
following the acquisition of G D Searle by Monsanto Inc. Sir Brian is chairman
of both Alizyme plc and Laboratory of the Government Chemistry Holdings Ltd. He
is also a non-executive director of Innogenetics (Belgium), Imperial Cancer
Research Technology Limited and Drug Royalty Corporation (Canada). He has been
an adviser to several U.K. government committees and sits on the Gene Therapy
Advisory Committee for the Department of Health. He is a visiting professor at
the University College of Wales, Aberystwyth and was Knighted in 1997. Sir Brian
is chairman of the Remuneration Committee.
ALAN SMITH was group managing director of Anglian Water plc until December
31, 1997. He started his career in local government, where he rose to assistant
treasurer for Suffolk County Council, prior to joining Anglian Water as
principal finance officer in 1974. He moved to become assistant director of
finance for Southern Water Authority from 1974-1980. He rejoined Anglian Water
in 1980 as finance director and became group managing director in 1990. He was
closely involved in the privatisation and initial public offering of Anglian
Water. Mr. Smith became a Director of Peptide in 1995 and is Chairman of the
Audit Committee.
40
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The compensation paid in respect of the year ended December 31, 1998 to the
directors and executive officers of Peptide who served during the year was as
set forth below. All of Peptide's executive officers are also directors:
<TABLE>
<CAPTION>
OTHER ANNUAL
NAME SALARY BONUS COMPENSATION
- --------------------------------------------------------------- --------- --------- -------------
L L L
<S> <C> <C> <C>
CURRENT DIRECTORS
Alan Goodman(1)................................................ 103,333 10,833 11,386
John Brown(2).................................................. 190,000 22,550 33,493
Gordon Cameron(3).............................................. 108,750 13,200 20,720
Nicolas Higgins................................................ 112,500 13,200 21,686
Alan Dalby(4).................................................. 13,333 -- --
Sir Brian Richards(5).......................................... 33,333 -- 279
Alan Smith..................................................... 20,000 -- --
FORMER DIRECTORS
Nancy Lane(6).................................................. 6,667 -- --
</TABLE>
- ------------------------
(1) In addition to the above, an overseas allowance of L32,670 was paid to Mr.
Goodman to assist with housing and living expenses performing his role as
Regional Director, North America.
(2) Dr. Brown has elected to receive 50% of his bonus in Peptide shares under
the rules of the Long-Term Incentive Plan.
(3) Mr. Cameron has elected to receive 50% of his bonus in Peptide shares under
the rules of the Long-Term Incentive Plan.
(4) Mr. Dalby was not appointed to the Board of Directors until May 1, 1998.
(5) Sir Brian Richards ceased to be Non-Executive Chairman on May 1, 1998, and
at that time became a Non-Executive Director.
(6) Dr. Lane retired from the Board of Directors with effect from May 1, 1998.
The aggregate amount of compensation paid by Peptide to all directors and
officers as a group, for services in all capacities, for the year ended December
31, 1998 was L735,763.
Peptide operates a discretionary annual bonus plan for all of its executive
directors. Bonuses are based on a percentage of base salary, up to a maximum of
50%. Bonuses are paid, at the discretion of the Remuneration Committee, in
recognition of each director's contribution to the success of the company. The
performance objectives established with respect to bonuses are intended to be
both challenging and realistic. Under the rules of the Long-Term Incentive Plan,
directors can elect to receive up to 50% of their bonus payable in new Peptide
shares.
The aggregate amount payable by Peptide during the year ended December 31,
1998 to provide for pension, retirement or similar benefits for Peptide's
director's pursuant to Peptide's pension plan was L41,125.
41
<PAGE>
OPTIONS TO PURCHASE SECURITIES FROM PEPTIDE
The following table sets forth certain information concerning options to
acquire new Peptide shares held by Peptide's directors as of March 26, 1999.
<TABLE>
<CAPTION>
NUMBERS OF SHARES EARLIEST DATE
OVER WHICH OPTIONS OF
GRANTED EXERCISE PRICE EXERCISE EXPIRATION DATE
------------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Alan Goodman............................. 14,149(1) L2.12 09/07/99 09/07/06
140,973(2) L2.05 11/09/99 11/09/03
-------
155,122
John Brown............................... 180,000(3) L0.10 22/11/95 27/09/02
70,000(3) L0.10 22/11/95 10/11/02
30,000(2) L2.00 28/11/98 28/11/02
14,149(1) L2.12 09/07/99 09/07/06
77,314(2) L2.05 11/09/99 11/09/03
5,909(4) L1.65 01/11/99 01/05/00
75,431(5) nil(5) 02/07/01 02/01/02
-------
452,803
Gordon Cameron........................... 145,000(2) L2.00 20/12/99 20/12/03
15,000(1) L2.00 20/12/99 20/12/06
45,259(5) nil(5) 02/07/01 02/01/02
12,187(4) L0.80 01/11/01 01/05/02
-------
217,446
Nicolas Higgins.......................... 259,260(3) L0.10 22/11/95 13/05/01
740(3) L0.10 22/11/95 07/10/01
20,000(2) L2.00 28/11/98 28/11/02
14,149(1) L2.12 09/07/99 09/07/06
68,290(2) L2.05 11/09/99 11/09/03
45,259(5) nil(5) 02/07/01 02/01/02
-------
407,698
Sir Brian Richards....................... 250,000(3) L0.10 22/11/95 19/08/01
30,000(2) L2.00 28/11/98 28/11/02
14,149(1) L2.12 09/07/99 09/07/06
77,802(2) L2.05 11/09/99 11/09/03
-------
371,951
</TABLE>
- ------------------------
(1) These options were granted under the Peptide Therapeutics 1996 Approved
Share Option Scheme. In order for these options to be exercised in full, the
growth in Peptide's share price over a specified consecutive three-year
period will have to exceed the growth of the total shareholder return for
the FTSE-A All-Share (900) Index over the same period.
(2) These options were granted under the Peptide Therapeutics 1995 Unapproved
Share Option Scheme. In order for these options to be exercised in full, the
growth in Peptide's share price over a specified consecutive three-year
period will have to exceed the growth of the total shareholder return for
the FTSE-A All-Share (900) Index over the same period.
(3) These options were granted under the Peptide Therapeutics Group plc 1994
Unapproved Share Scheme.
(4) These options were granted under the Peptide Therapeutics 1995 Savings
Related Share Option Scheme.
(5) These "nil-cost" options were awarded under the Peptide Therapeutics Share
Incentive Plan. The options are awards of shares which can only become
vested if the market capitalization of Peptide increases by at least 50%
over the period between the granting of the award and vesting. The exercise
price for the shares is a nominal L1.
The total number of Peptide shares underlying options granted to Peptide's
directors and executive officers is 1,605,020.
42
<PAGE>
THE MERGER AND THE MERGER AGREEMENT
The following is a summary of significant provisions of the merger
agreement. The merger agreement is attached as Annex A and is incorporated into
this prospectus/proxy statement by reference. You should read the merger
agreement for a complete understanding of its terms.
STRUCTURE OF THE MERGER
The merger agreement provides that, following the approval of the merger
agreement by the OraVax stockholders and the satisfaction or waiver of the other
conditions to the merger, OraVax will become a wholly-owned subsidiary of
Peptide and OraVax stockholders will become Peptide shareholders.
EFFECTIVE TIME AND EFFECTS OF THE MERGER
We expect to close the merger prior to May 31, 1999. The merger will be
effective upon the filing of appropriate documents with the Delaware Secretary
of State, or, a later time that we specify in these documents. Peptide and
OraVax plan to file these documents soon after the closing.
MERGER CONSIDERATION
The merger agreement provides that, at the effective time of the merger,
each share of OraVax common stock outstanding immediately prior to the effective
time, other than shares owned by OraVax, Peptide or their subsidiaries, will be
converted into the right to receive a pro rata share of $20 million less the sum
of (A) amounts paid to purchase outstanding shares of OraVax preferred stock and
(B) the intrinsic value of outstanding OraVax common stock options and warrants.
Peptide and OraVax estimate that Peptide will pay approximately $2.95 million to
acquire shares of preferred stock and preferred stock warrants and that the
intrinsic value of OraVax options will be approximately $0.01 million. Using
these estimates, holders of outstanding shares of OraVax common stock will
receive approximately $17 million in merger consideration. OraVax estimates that
approximately 20 million shares of OraVax common stock will share this merger
consideration. Assuming that merger consideration equal to $17 million is split
among 20 million shares, each share of OraVax common stock would convert into
$0.85 worth of the merger consideration. The figures used in this paragraph are
estimates. Actual amounts will depend on the cost to purchase the OraVax
preferred stock, warrants and options to purchase OraVax common stock and the
number of shares of OraVax common stock outstanding immediately prior to the
effective time.
As of March 12, 1999, OraVax had outstanding 22,113,040 shares of common
stock and the following convertible securities:
- Stock options exercisable for an aggregate of 1,185,975 shares of common
stock
- Warrants exercisable for an aggregate of 84,086 shares of common stock;
and
- 1,957 shares of preferred stock convertible into shares of common stock,
of which 1,951 shares are held by Peptide and 6 shares are held by
entities who have agreed to redeem their shares for cash in the merger.
Most of OraVax's outstanding options and warrants have per share exercise
prices which exceed $0.85.
Peptide will use Peptide shares to pay the merger consideration. These
Peptide shares will be valued at between $1.49 and $2.24 by reference to the
average of the closing prices for Peptide shares during the ten trading days
ending on the third trading day prior to the closing date of the merger, as
reported by the London Stock Exchange, with each closing price converted into
U.S. dollars based on the midpoint of the dollar/pound sterling exchange rate
for such day, as reported by THE FINANCIAL TIMES. If this calculation indicates
a market value for Peptide shares of less than $1.49, then we will
43
<PAGE>
deem the market value to be $1.49, and if the calculation indicates a market
value for Peptide shares of more than $2.24, then we will deem the market value
to be $2.24. On March 26, 1999, the per share closing price for a Peptide share
was 101.5 pence and the midpoint of the dollar/pound sterling exchange rate was
$1.620, yielding a dollar value of $1.64.
Immediately following execution of the merger agreement, Peptide purchased
2,584 shares of OraVax preferred stock for approximately $2.95 million. Peptide
continues to hold 1,951 of these shares. Under the merger agreement, at the
effective time, outstanding shares of OraVax preferred stock owned by Peptide
will be cancelled, and outstanding shares of OraVax preferred stock owned by
third parties will be automatically converted into the right to receive $1,090
per share plus accrued but unpaid dividends. These third parties have agreed not
to convert their share of preferred stock prior to the closing of the merger.
On January 4, 1999, Peptide converted 633 shares of OraVax preferred stock
into 2,193,537 shares of OraVax common stock. The shares of OraVax common stock
owned by Peptide will be cancelled in the merger.
Peptide will be entitled to withhold from the consideration payable to any
holder of OraVax common stock such amounts as it is required to deduct or
withhold under the tax laws of the United States or the United Kingdom.
NO FRACTIONAL PEPTIDE SHARES
Peptide will not issue fractional shares in the merger. Instead, Peptide
will pay to each holder of shares of OraVax common stock who otherwise would be
entitled to receive a fraction of a Peptide share an amount in cash, without
interest, equal to the fraction multiplied by the market value of a Peptide
share.
EXCHANGE OF SHARE CERTIFICATES
Following the closing, we will mail transmittal forms to record holders of
OraVax common stock for use in exchanging OraVax common stock certificates for
Peptide share certificates and, any cash for fractional shares. We will send
instructions specifying details of the exchange with the transmittal forms.
ORAVAX STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE
A TRANSMITTAL FORM.
After the effective time of the merger, each certificate evidencing shares
of OraVax common stock, until surrendered and exchanged, will be deemed, for all
purposes, to evidence the right to receive the number of Peptide shares into
which the shares of OraVax common stock evidenced by such certificate have been
converted and the right to receive any cash payment in lieu of a fractional
Peptide share.
TREATMENT OF ORAVAX COMMON STOCK OPTIONS AND WARRANTS
At the effective time of the merger, each outstanding option to purchase
shares of OraVax common stock under the OraVax 1990 Stock Option Plan and the
OraVax 1995 Stock Option Plan, whether or not exercisable, will be assumed by
Peptide. Each OraVax option so assumed will continue to have, and be subject to,
the same terms and conditions set forth in the applicable OraVax stock option
plan immediately prior to the effective time, except that:
- each option will be exercisable for that number of Peptide shares equal to
the product of the number of shares of OraVax common stock that were
issuable upon exercise of the option immediately prior to the effective
time multiplied by the exchange ratio, rounded down to the nearest whole
number of Peptide shares;
- the per share exercise price for the Peptide shares issuable upon exercise
of the assumed option will be equal to the quotient determined by dividing
the exercise price per share of OraVax
44
<PAGE>
common stock at which such option was exercisable immediately prior to the
effective time by the exchange ratio, rounded up to the nearest whole
cent; and
- the vesting of options to purchase an aggregate of 321,132 shares of
OraVax common stock will be accelerated.
The exchange ratio means the quotient determined by dividing (x) the common
stock consideration payable with respect to OraVax common stock by (y) the
product of (A) the market value of a Peptide share and (B) the number of shares
of OraVax common stock outstanding immediately prior to the effective time of
the merger, less any shares held by OraVax or its subsidiaries, or by Peptide or
its affiliates.
The merger will accelerate the vesting of 321,132 stock options held by
OraVax's senior management. At this time, the exercise price of each of these
stock options is greater than $0.85. As a result, OraVax does not anticipate
incurring a non-recurring charge in connection with the accelerated vesting.
As of March 12, 1999, 1,185,975 shares of OraVax common stock were issuable
upon the exercise of outstanding OraVax options, which options, assuming an
exchange ratio of 0.50 of a Peptide share per OraVax share, will be converted to
become options to purchase approximately 592,988 Peptide shares. The weighted
average exercise price per share of all OraVax options outstanding as of March
12 was $2.86 per share.
At the effective time of the merger, Peptide will assume each outstanding
warrant to purchase shares of OraVax common stock, whether or not exercisable.
Each warrant assumed by Peptide will continue to have, and be subject to, the
terms and conditions set forth in the applicable warrant immediately prior to
the effective time except that
- each warrant will be exercisable for that number of Peptide shares equal
to the product of the number of shares of OraVax common stock that are
issuable upon exercise of such OraVax warrant immediately prior to the
effective time multiplied by the exchange ratio, rounded down to the
nearest whole number of Peptide shares, and
- the per share exercise price for the Peptide shares issuable upon exercise
of such assumed warrant will be equal to the quotient determined by
dividing the exercise price per share of OraVax common stock at which such
warrant was exercisable immediately prior to the effective time by the
exchange ratio rounded to the nearest whole cent.
At March 12, 84,086 shares of OraVax common stock were issuable upon the
exercise of outstanding and vested OraVax warrants to purchase common stock,
which will be converted, assuming an exchange ratio of 0.50 of a Peptide share
per OraVax share, into warrants to purchase approximately 42,043 Peptide shares
at the effective time. The weighted average exercise price per OraVax share of
all OraVax warrants outstanding as of March 12, 1999 is $1.975.
REPRESENTATIONS AND WARRANTIES
OraVax and Peptide have each made customary representations and warranties
to the other in the merger agreement relating to, among other things:
- their organization, the organization of their subsidiaries and similar
corporate matters;
- their capital structure;
- the authorization, execution, delivery and performance of the merger
agreement and the absence of conflicts, violations or defaults under their
organizational documents and other agreements and documents or conflicts
with or violations of any laws as a result of executing the merger
agreement;
- governmental consents and filings;
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- financial statements;
- the absence of undisclosed liabilities and material adverse events since
June 30, 1998;
- brokers' and finders' fees incurred in connection with the merger; and
- the information provided for inclusion in this prospectus/proxy statement.
In addition to the representations and warranties described above, OraVax
has made representations and warranties to Peptide as to the following:
- that OraVax has taken all actions so that no "fair price," "business
combination," "control share," "acquisition" or similar statute will apply
to the merger;
- the filing of tax returns and the payment of taxes;
- title to its properties;
- ownership, use and non-infringement of intellectual property rights;
- its employee benefit plans;
- compliance with governmental regulations concerning employees and
relations with employees;
- compliance with environmental laws and other environmental matters;
- disclosure of material agreements and commitments;
- receipt of a fairness opinion;
- maintenance of insurance coverage;
- the filing of reports with the SEC and the accuracy of the information in
such reports; and
- the status of commercial relationships.
In addition to the representations and warranties described above, Peptide
has made representations and warranties to OraVax as to the following:
- the filing of documents with the London Stock Exchange and the accuracy of
the information in such documents;
- the capitalization of the subsidiary Peptide formed to effect the merger;
and
- the business activities of the subsidiary Peptide formed to effect the
merger.
CERTAIN COVENANTS
INTERIM OPERATIONS OF ORAVAX
From the date of the execution of the merger agreement until the effective
time of the merger, OraVax has agreed to carry on its business in the ordinary
course consistent with past practice. OraVax has also agreed to use reasonable
commercial efforts to keep available the services of its officers and employees,
maintain its properties and assets in good condition and to keep insurance
policies in effect. These obligations are subject to exceptions provided in the
merger agreement and any other exceptions that are agreed to in writing by
Peptide.
During the period before the effective time, OraVax, without Peptide's
consent and subject to exceptions, will not do or agree to do any of the
following:
- Establish, amend, modify or terminate any employee benefit plan;
- Sell or transfer, or mortgage, pledge or create or permit to be created
any security interest on, any of its assets other than sales or transfers
in the ordinary course of business and in amounts not exceeding $10,000;
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- Incur any indebtedness for borrowed money, obligation or liability or
enter into any contracts or commitments involving potential payments of
$25,000 or more, other than for up to $50,000 for clinical trials;
- Change the compensation payable to any officer, director, employee, agent
or consultant, or enter into any employment, severance or other agreement
with any officer, director, employee, agent or consultant;
- Make any change in the number of shares of its capital stock authorized,
issued or outstanding or grant or accelerate the exercisability of, any
option, warrant or other right to purchase, or to convert any obligation
into, shares of its capital stock, or declare or pay any dividend or other
distribution with respect to any shares of its capital stock, or sell or
transfer any shares of its capital stock, except upon the exercise by
officers, directors and employees of options outstanding on the date of
the merger agreement and disclosed in the merger agreement;
- Amend its certificate of incorporation or by-laws;
- Make, or permit to be made, any material acquisition of property or
assets;
- Make or change any material election in respect of taxes, adopt or change
any accounting method in respect to taxes, enter into any closing
agreement, settle any claim or assessment in respect to taxes, or consent
to any extension or waiver of the limitation period applicable to any
claim or assessment in respect to taxes; or
- Enter into or modify, or permit a subsidiary to enter into or modify, any
material license, development, research or collaborative agreement with
any other person or entity.
ORAVAX SPECIAL MEETING; RECOMMENDATIONS OF THE ORAVAX BOARD
OraVax has agreed to cause the OraVax special meeting to be held as promptly
as practicable after the signing of the merger agreement. The OraVax board of
directors has agreed to solicit from its stockholders proxies in favor of the
adoption of the merger agreement and to take all other actions necessary or
advisable to secure the vote or consent of the OraVax stockholders required to
adopt the merger agreement.
CERTAIN OTHER COVENANTS
The merger agreement contains mutual covenants, including covenants relating
to public announcements, notifications, access to information, reporting of the
transaction for federal income tax purposes, obtaining consents and approvals,
and confidential treatment of non-public information.
The merger agreement also contains a covenant by OraVax to provide Peptide
with a list of individuals and entities which may be affiliates of OraVax within
the meaning of Rule 145 under the Securities Act, and to use its best efforts to
cause such individuals and entities to agree not to dispose or offer to dispose
of any Peptide shares received in the merger outside the U.S. during the first
180 days following the merger.
The merger agreement also contains covenants of Peptide, including covenants
obligating Peptide to use reasonable commercial efforts to have the Peptide
shares to be issued in connection with the merger admitted to listing on the
Official List of the London Stock Exchange.
CONDITIONS TO THE MERGER
CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER
The obligations of Peptide and OraVax to consummate the merger are subject
to the satisfaction or waiver of the following conditions:
- OraVax stockholders must adopt the merger agreement;
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- The registration statement of which this proxy statement/prospectus is a
part must have become effective under the Securities Act and not be
subject to any stop order or related proceeding by the SEC;
- All state securities or "blue sky" authorizations necessary to carry out
the merger must have been obtained and be in full force and effect;
- No applicable law or regulation, judgment, injunction, order or decree of
a court of competent jurisdiction may prohibit or enjoin the consummation
of the merger;
- We must obtain all required approvals from governmental entities; and
- The London Stock Exchange must admit the Peptide shares to be issued in
the merger to its Official List.
CONDITIONS TO THE OBLIGATIONS OF PEPTIDE
The obligations of Peptide to effect the merger are subject to the
satisfaction or waiver of the following additional conditions:
- The representations and warranties of OraVax contained in the merger
agreement must be accurate in all material respects;
- OraVax must deliver customary legal opinions and other documents described
in the merger agreement;
- Each of the individuals and entities who is an affiliate of OraVax must
deliver to Peptide an agreement restricting resale of the Peptide shares;
- PricewaterhouseCoopers LLP, independent public accountants for OraVax,
must deliver to Peptide letters regarding the financial statements and
certain financial information in this prospectus/proxy statement;
- Not more than five percent (5%) of the shares of OraVax common stock
issued and outstanding on the closing date of the merger may have
exercised dissenters' rights;
- Lance Gordon and Thomas Monath must have agreed to continue their
employment arrangements with OraVax after the merger; and
- OraVax must have obtained all required third party waivers and consents.
CONDITIONS TO THE OBLIGATIONS OF ORAVAX
The obligation of OraVax to effect the merger is subject to the satisfaction
or waiver of the following additional conditions:
- The representations and warranties of Peptide contained in the merger
agreement must be accurate in all material respects; and
- Peptide must deliver to OraVax customary legal opinions and other
documents.
AMENDMENTS; WAIVERS
Peptide and OraVax generally may amend or waive any provisions of the merger
agreement. However, after the OraVax stockholders adopt the merger agreement,
Peptide and OraVax cannot amend the agreement to change the formula for
determining the consideration payable to OraVax stockholders or to materially
adversely affect them, without the further approval of the stockholders.
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NO SOLICITATION BY ORAVAX
OraVax has agreed not to (1) solicit, initiate or knowingly encourage
discussions with any third party regarding a business combination involving
OraVax or any subsidiary of OraVax or (2), except as required by fiduciary
duties, participate in negotiations with, or furnish information to, a third
party seeking to engage in such a transaction. OraVax has agreed to inform
Peptide of any offer, proposal or inquiry relating to any acquisition proposal
and to promptly furnish to Peptide copies of any written communications or
documents received with respect to the acquisition proposal.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time prior to the effective
time, whether before or after approval of the merger agreement by Peptide
shareholders or OraVax stockholders:
- By mutual written consent of Peptide and OraVax;
- By OraVax:
- for significant uncured breaches by Peptide; or
- upon OraVax entering into an agreement with a third party to consummate
a qualified acquisition proposal;
- By Peptide:
- for significant uncured breaches by OraVax; or
- if the OraVax board of directors has withdrawn or modified in a manner
adverse to Peptide its approval or recommendation of the merger
agreement;
- By Peptide or OraVax:
- if the effective time has not occurred on or before July 31, 1999
unless its breach is the reason that the merger has not been
consummated;
- if there is a non-appealable government action prohibiting the
consummation of the merger; or
- if OraVax stockholders do not vote to adopt the merger agreement within
ninety (90) days after the date the registration statement of which
this proxy statement/prospectus forms a part is declared effective by
the SEC; provided, however, that OraVax may not terminate the merger
agreement where the failure to obtain the required stockholder approval
has been caused by its action or failure to act in breach of the merger
agreement;
TERMINATION FEES AND EXPENSES
PAYMENT OF EXPENSES OF THE MERGER GENERALLY
OraVax and Peptide will share equally the fees and expenses incurred in
connection with the printing and filing of this proxy statement/prospectus and
the registration statement. Except as described below, OraVax and Peptide will
each pay the fees and expenses it incurrs in connection with the merger.
PAYMENT OF PEPTIDE EXPENSES BY ORAVAX
OraVax will reimburse Peptide for (1) its costs and expenses related to
entering into the merger agreement and seeking to consummate the merger,
including fees and expenses payable to legal,
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accounting and financial advisors and (2) the costs and expenses, including
legal fees and expenses, relating to the financing commitment of Peptide to
OraVax, if:
- Peptide terminates the merger agreement because OraVax has breached a
representation, warranty, covenant or agreement under the merger agreement
or because the OraVax board of directors has withdrawn or modified its
recommendation of the merger in a manner adverse to Peptide or has taken
any action not permitted by the merger agreement with respect to any
acquisition proposal by a third party; or
- OraVax terminates the merger agreement because of its decision to accept a
qualified acquisition proposal as permitted by the merger agreement.
In addition to any payment of Peptide expenses by OraVax pursuant to the
merger agreement, OraVax has agreed to pay Peptide:
- $750,000 less amounts paid by OraVax to reimburse Peptide's fees and
expenses, if the merger agreement is terminated for certain reasons and at
such time a third party has made, or disclosed an intention to make, an
acquisition proposal; or
- $1,500,000 less certain amounts paid by OraVax to reimburse Peptide's fees
and expenses, if the merger agreement is terminated for certain reasons
and OraVax enters into an agreement to consummate or consummates an
acquisition proposal with PMC.
NO LIMITATIONS ON RECOVERING FOR WILLFUL BREACH
If the merger agreement is terminated because of a willful breach by the
other company, the merger agreement does not limit the remedies the terminating
party may seek.
TREATMENT OF PREFERRED STOCK IF THE MERGER AGREEMENT IS TERMINATED
Concurrently with entering into the merger agreement, Peptide purchased
2,584 shares of OraVax preferred stock from OraVax preferred stockholders. On
January 4, 1999, Peptide converted 633 of these shares; it continues to hold the
other 1,951. If the merger agreement is terminated because
- the OraVax stockholders do not approve the merger agreement,
- OraVax has breached the merger agreement, or
- OraVax has entered into an alternative business combination,
Peptide has the right to sell these shares of OraVax preferred stock to OraVax.
The sale price would be approximately $1,090 per share, the price Peptide paid
for the shares. OraVax could be obligated to pay a total of about $2.3 million
to Peptide. If this amount were not paid within 3 days, Peptide would have the
right to convert all of the preferred stock it owns into common stock. Using the
conversion price in effect on April 2, 1999, $0.3566, Peptide would be able to
increase its ownership of outstanding OraVax common stock to approximately 28%.
The total number of shares of OraVax common stock that Peptide would receive in
the conversion of the 1,951 shares is determined by multiplying 1,951 shares by
the $1000 par value of the shares and then dividing by the conversion price. The
conversion price at the time of conversion would equal the lowest trading price
of the OraVax common stock during the 22 consecutive trading days immediately
preceding the conversion date less a discount. The discount was 18.5% on April
2, 1999 and increases to 21% by June 1999. If the market price for OraVax common
stock declined from current levels, Peptide would receive a higher number of
shares of OraVax common stock upon conversion and, consequently, own a greater
percentage of the outstanding shares.
OraVax does not currently have $2.3 million in cash. In the event Peptide
has the right to require OraVax to purchase its preferred stock, OraVax will not
be able to make the required payment without raising additional funds in a very
short period of time. Peptide has not determined whether it would exercise its
conversion right under theses circumstances.
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If the merger agreement is terminated because
- Peptide has breached the agreement,
- a governmental entity has prohibited the merger or
- Peptide and OraVax have agreed to terminate,
then OraVax has the right to purchase the preferred stock owned by Peptide at
the same price. Because OraVax has limited cash resources, it would only be able
to exercise this right if it
- raised money from investors,
- received a substantial licensing fee or milestone payment or
- was able to borrow money.
Even if OraVax were able to raise sufficient funds to purchase the preferred
stock, it may need to deploy the cash for working capital purposes, rather than
making the purchase.
Peptide has agreed not to sell shares of preferred stock, other than to
OraVax, during the 90 days following termination of the merger agreement. After
this 90 day period, Peptide and OraVax have agreed that conversions will
- be based on a conversion price calculated by reference to the lowest price
during the five days prior to conversion;
- be based on a the conversion price of not less than $0.31; and
- not be subject to the 10% limitation on common stock ownership following
conversion.
Conversions are currently
- based on a conversion price calculated by reference to the lowest price
during the twenty-two days prior to conversion;
- not subject to a minimum conversion price; and
- not permitted if the conversion would increase the holder's ownership of
OraVax common stock to 10% or more.
FEDERAL SECURITIES LAW CONSEQUENCES
OraVax stockholders may freely transfer the Peptide shares received in the
merger, unless they are individuals and entities who are deemed to be
"affiliates" of OraVax before the merger, or affiliates of Peptide after the
merger. Persons who may be deemed to be affiliates of OraVax or Peptide
generally include individuals or entities that control, are controlled by, or
are under common control with, the company and may include executive officers
and directors as well as principal stockholders. These affilates risk being
charactertized as "underwriters" when they sell Peptide shares received in the
merger. The U.S. securities laws require registration of shares sold by
underwriters. An affilate can avoid being characterized as an underwriter and,
therefore, avoid the Securities Act registration requirements by selling shares
in compliance with Rule 145 or Rule 144 under the Securities Act. Rule 145
covers sales by OraVax affiliates, and Rule 144 covers sales by Peptide
affiliates. Each rule limits the number of shares an affiliate can sell in a
particular period of time. The merger agreement requires OraVax to use its best
efforts to cause each of its affiliates to execute and deliver to Peptide a
written agreement to the effect that such affiliate will not offer or sell or
otherwise dispose of Peptide shares issued to the affiliate in or pursuant to
the merger in violation of the Securities Act or the related rules and
regulations adopted by the SEC.
DEREGISTRATION OF ORAVAX SHARES; LISTING OF PEPTIDE SHARES
Upon consummation of the merger, OraVax common stock will be deregistered
under the Exchange Act and will cease to be traded on the OTC Bulletin Board.
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A condition to the merger is that the Peptide shares issued in the merger
are admitted to the Official List of the London Stock Exchange and Peptide has
agreed to use reasonable commercial efforts to obtain this admission.
APPRAISAL RIGHTS
If the merger is completed, an OraVax stockholder who:
- continues to hold shares through the effective time of the merger,
- strictly complies with the procedures set forth under Section 262 of the
Delaware General Corporation Law, and
- has not voted in favor of the merger,
may obtain an appraisal of those shares from the Delaware Court of Chancery
under Section 262 and receive payment for the "fair value" of those shares in
place of the merger consideration.
OraVax stockholders considering seeking appraisal of their shares of OraVax
common stock should note that the fair value of their shares determined under
Section 262 could be more, the same or less than the merger consideration they
would receive if they did not seek appraisal of their shares. The costs of the
appraisal proceeding may be determined by the Chancery Court and allocated among
the parties as the Chancery Court deems equitable in the circumstances. Upon
application of a OraVax stockholder, the Chancery Court may order all or a
portion of the expenses incurred by any OraVax stockholder in connection with
the appraisal proceeding including, without limitation, reasonable attorney's
fees and the fees and expenses of experts, to be charged pro rata against the
value of all shares of OraVax common stock entitled to appraisal. In the absence
of such a determination or assessment, each OraVax stockholder bears his, her or
its own expenses.
The statutory right of appraisal granted by Section 262 requires strict
compliance with the procedures set forth in Section 262. Failure to follow any
of those procedures may result in a termination or waiver of appraisal rights
under Section 262. The following is a summary of Section 262 and is qualified by
reference to Section 262, a copy of which is attached hereto as Annex C. OraVax
stockholders should carefully read Section 262 as well as information discussed
below to determine their rights to appraisal.
An OraVax stockholder who elects to exercise the right to an appraisal under
Section 262 must deliver a written letter demanding appraisal of such
stockholder's shares to OraVax prior to the vote on the adoption of the merger
agreement. The written letter must identify the record owner of the shares and
expressly request an appraisal. All written letters should be delivered to the
following address:
Secretary
OraVax, Inc.
38 Sidney Street
Cambridge, Massachusetts 02139
The written letter demanding appraisal must be in addition to any proxy or
vote against adoption of the the merger agreement; neither voting against,
abstaining from voting nor failing to vote on the adoption of the merger
agreement will constitute a demand for appraisal within the meaning of Section
262.
The record owner must sign the written letter demanding appraisal, fully and
correctly, as that person's name appears on the common stock certificates. If
the shares are owned of record by a trustee, guardian or custodian, on behalf of
another person, the trustee, guardian or custodian must sign the letter. If the
shares are owned of record by or for more than one person, all the joint owners
must sign the letter. An authorized agent, including an agent for two or more
joint owners, may execute the letter demanding appraisal for a record owner;
however, the agent must identify the record owner(s) and expressly disclose the
fact that, in exercising the demand, he is acting as agent for the record
owner(s).
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A record owner, such as a broker, who holds shares of OraVax common stock as
a nominee for others may exercise his right of appraisal with respect to the
shares for all or less than all such persons. In this case, the letter must set
forth the number of shares covered by such demand. Where the number of shares is
not expressly mentioned, the demand will be presumed to cover all shares
outstanding in the name of such record owner.
Stockholders electing to exercise their appraisal rights under Section 262
must not vote for adoption of the merger agreement. If a stockholder returns a
signed proxy but does not specify a vote against adoption of the merger
agreement or a direction to abstain, the proxy will be voted FOR adoption of the
merger agreement, which will have the effect of waiving that stockholder's
appraisal rights.
Within 10 days after the effective time of the merger, OraVax will give
written notice of the effective time of the merger to each stockholder who has
satisfied the requirements of Section 262. Within 120 days after the effective
time of the merger, OraVax or any of these dissenting stockholders may file a
petition in the court demanding a determination of the fair value of the shares
of OraVax common stock of all dissenting stockholders. Any dissenting
stockholder who desires such petition to be filed should file a petition on a
timely basis unless the dissenting stockholder receives notice that a petition
has been filed by OraVax or another dissenting stockholder.
If a petition for appraisal is timely filed, the court will determine which
stockholders are entitled to appraisal rights and thereafter will determine the
fair value of the shares of OraVax common stock held by dissenting stockholders,
together with a fair rate of interest on this amount. Fair value does not
include any element of value arising from the accomplishment or expectation of
the merger, but the court takes into account all relevant factors.
From and after the effective time of the merger, no dissenting stockholder
has any rights of an OraVax stockholder with respect to his shares, except the
right to receive the fair value payment and to receive payment of any dividends
or other distributions payable to OraVax stockholders of record as of a date
prior to the effective time of the merger. If a dissenting stockholder delivers
to OraVax a written withdrawal of the demand for an appraisal within 60 days
after the effective time of the merger, or after that date with the written
approval of OraVax, or if no petition for appraisal is filed within 120 days
after the effective time, then the right of the dissenting stockholder to an
appraisal will cease, and the dissenting stockholder will be entitled to receive
only the merger consideration.
COVENANT NOT TO SELL PEPTIDE SHARES
In connection with the merger, each of OraVax's officers and directors will
agree not to offer to sell, sell or otherwise dispose of the Peptide shares
received in the merger outside of the United States during the 180 days
following the effective time of the merger.
ACCOUNTING TREATMENT
The merger will be treated as an acquisition on Peptide's financial
statements. The acquisition method of accounting for business combinations under
generally accepted accounting principles in the U.K. is similar to the purchase
method of accounting under generally accepted accounting principles in the U.S.
ARRANGEMENTS WITH PMC AND ORAVAX
PMC and OraVax formed a joint venture, also referred to as PM-O, in 1995 to
develop a vaccine to treat and prevent H. PYLORI infections, believed to be one
of the principal causes of peptic ulcers. A more detailed discussion of the
formation of PM-O appears in "Description of OraVax--Products Under
Development." As described below, Peptide has several contractual arrangements
with PMC and PM-O.
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PM-O COLLABORATION
In April 1998, Peptide entered into agreements with PM-O which grant PM-O a
worldwide exclusive option to use Peptide's proprietary oral vaccine delivery
technology for the development of oral H. PYLORI vaccines. PM-O is supplying its
proprietary H. PYLORI antigens which Peptide is incorporating into its oral
vaccine delivery system. PM-O is funding the costs of this research program. On
successful conclusion of this research program, PM-O has an option to take a
license and will be responsible for all future clinical development and
associated costs. Exercise of this option will trigger payment of a license fee
to Peptide, and Peptide will have a right to milestone payments and royalties on
future sales of the vaccine.
As a result of the merger, Peptide will gain indirect ownership in OraVax's
fifty-percent share in PM-O. In addition, as part of an agreement between
Peptide and PMC on January 25, 1999, upon the completion of the merger OraVax
will enter into an agreement with PMC to add the development of vaccines against
hepatitis C infections to the research program conducted by PM-O. Besides the
addition of the hepatitis C vaccines program, the joint venture agreements
between PMC and OraVax will continue to govern the operations of PM-O after the
merger. The terms of the hepatitis C vaccines program are described below.
OVERVIEW AGREEMENT
On January 25, 1999, Peptide and PMC entered into an overview agreement that
forms an alliance between the two companies with respect to OraVax's
ChimeriVax-TM- platform technology effective upon completion of the merger.
Peptide agreed to cause OraVax to sign several agreements upon completion of the
merger and, PMC agreed, conditioned on consummation of the merger, to make a $3
million investment in Peptide shares. In addition to an agreement to add the
hepatitis C vaccine program to PM-O, Peptide agreed to cause OraVax to enter
into the following agreements following the merger:
- JE/TBE AGREEMENT. The JE/TBE agreement will grant PMC an exclusive
worldwide license to use the ChimeriVax-TM- technology for the development
and commercialization of Japanese encephalitis vaccines and tick-borne
encephalitis vaccines. PMC will make payments to OraVax based on the
successful achievement of specific milestones for JE and TBE vaccines and
will pay royalties on net sales of licensed products. OraVax will perform
research and development activities directed toward the JE vaccines. If
requested by PMC, OraVax will perform research and development activities
for TBE vaccines at PMC's expense. The value of license fees and milestone
payments which may be received by OraVax in the future, if any, depends
upon the success of the collaborative research relating to the development
of JE and TBE vaccines. Therefore, the value of future license fees and
milestone payments, if any, cannot be accurately estimated, and OraVax may
not receive any such payments. If the collaboration is successful, OraVax
may receive up to an aggregate total of $25 million in license fees and
milestone payments over the term of the agreement but actual receipts
under the agreement may be substantially less than that amount.
- HEPATITIS C LICENSES. Under license agreements with PM-O, OraVax will
grant PM-O an exclusive worldwide license to use the ChimeriVax-TM-
technology for the development and commercialization of vaccines for the
prevention, treatment or cure of hepatitis C infections in humans. PM-O
will pay a license fee and make milestone payments to OraVax. In
accordance with the PM-O joint venture agreement, OraVax and PMC will
share equally in profits from the sales of hepatitis C vaccines and in all
future research, development, clinical and commercialization costs of the
vaccines. The value of license fees and milestone payments which may be
received by OraVax in the future, if any, depends upon the success of the
collaborative research relating to the development of hepatitis C
vaccines. Therefore, the value of future license fees and milestone
payments, if any, cannot be accurately estimated, and OraVax may not
receive any such payments. If the collaboration is successful, OraVax may
receive up to an
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aggregate total of $22.5 million in license fees and milestone payments
over the term of the agreement but actual receipts under the agreement may
be substantially less than that amount.
- MILESTONE DEFERRAL AGREEMENT. In consideration of the receipt by OraVax of
research funding, milestone payments and royalties under the dengue
license agreement, JE/TBE agreement, hepatitis C licenses and PM-O joint
venture amendment, PMC or PM-O may, at their option, defer up to $3
million in milestone payments payable to OraVax under such agreements. Any
deferred milestone payments related to any licensed product under
agreements between PMC and OraVax will be paid in equal portions with the
remaining milestone payments for that product.
If the overview agreement is terminated, if Peptide fails to complete the
merger, or if PMC fails to make the equity investment in Peptide ordinary
shares, then Peptide is not required to cause OraVax to execute these
agreements. The overview agreement may be terminated at any time prior to the
effective time of the merger:
- by mutual written consent of the parties;
- upon termination of the merger agreement; or
- by PMC upon
- the public announcement of a tender or exchange offer for securities of
OraVax by any person other than PMC,
- any event that would entitle Peptide to terminate the merger agreement,
- upon the public announcement of the submission to OraVax of an
acquisition proposal by any person other than PMC, or
- breach of certain representations and warranties contained in the
overview agreement.
STANDSTILL AGREEMENT
On January 25, 1999, Peptide and PMC entered into a standstill agreement,
which provides that, prior to the effective time of the merger or the
termination of the standstill agreement, PMC will not directly or indirectly:
- acquire or make any proposal to acquire any securities of OraVax except by
way of stock dividends or other distributions or offerings made by OraVax
on a pro rata basis to OraVax stockholders, or seek or propose any merger,
consolidation, business combination, tender or exchange offer or sale or
purchase of all or a substantial portion of the assets of OraVax;
- solicit proxies to vote, or seek to advise or influence any person with
respect to the voting of any OraVax common stock;
- form, join or in any way participate in a "group" within the meaning of
Section 13(d)(3) of the Exchange Act of 1934, as amended, with respect to
any OraVax common stock or in connection with any of the foregoing;
- have any discussions or enter into any arrangements, understandings or
agreements with, or advise, assist or encourage, any other persons in
connection with any of the foregoing; or
- announce an intention to take any of those actions.
PMC is not restricted by the standstill agreement from negotiating with
OraVax with respect to a licensing transaction involving the hepatitis C vaccine
program or an acquisition proposal if OraVax initiates negotiations with PMC or
if OraVax or Peptide initiates negotiations with any person other than PMC.
The standstill agreement may be terminated at any time prior to the
effective time of the merger:
- by mutual written consent of the parties;
- by PMC or Peptide upon the termination of the merger agreement; or
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- by PMC upon
- the public announcement of a tender or exchange offer for OraVax common
stock,
- the occurrence of certain events that would entitle Peptide to
terminate the merger agreement,
- the public announcement of the submission to OraVax of a bona fide
acquisition proposal by any person other than PMC, or
- any modification or amendment of the merger agreement which PMC
reasonably determines to be adverse to OraVax stockholders or which
extends the July 31, 1999 termination date of the merger agreement.
Under the standstill agreement, Peptide must promptly inform PMC when it
becomes aware of any termination events or the submission of an acquisition
proposal to OraVax. The standstill agreement will terminate on October 31, 1999
if it has not terminated prior to that date.
SUBSCRIPTION AGREEMENT
Under a subscription agreement dated January 25, 1999 between PMC and
Peptide, PMC has agreed to invest the pounds sterling equivalent of $3 million
for new shares in Peptide at 78 pence per share. The subscription agreement is
conditional on the satisfaction of certain conditions prior to July 31, 1999,
including the consummation of the merger.
DESCRIPTION OF BRIDGE LOAN
Peptide has committed to lend up to $5 million to OraVax under a loan
agreement dated as of November 10, 1998. The rate of interest on the loans under
the loan agreement is 9% per annum. Peptide's obligation to lend is subject to
the satisfaction of several conditions, including the grant by OraVax of (i) a
perfected security interest in all its assets and intellectual property other
than H. PYLORI related patents and OraVax's interest in the PM-O joint venture
and (ii) leasehold mortgages on OraVax's leasehold interests in Cambridge and
Canton, Massachusetts.
The loan agreement provides that Peptide will lend up to $5 million to
OraVax prior to the consummation of the merger if OraVax has not breached the
merger agreement and has exhausted its other financing sources. OraVax's ability
to borrow in this circumstance is restricted by cash expenditure projections set
forth in the loan agreement which are subject to revision upon agreement of
OraVax and Peptide. However, if the merger agreement is terminated as a result
of a material breach by Peptide, joint agreement between OraVax and Peptide or a
failure of Peptide's shareholders to approve the merger, Peptide's commitment to
lend is limited to $3 million.
In each of the foregoing cases, Peptide's commitment will be reduced by the
amount of any termination fees payable to Peptide pursuant to the merger
agreement and any cash proceeds received by OraVax from the disposition of
assets, including the license of intellectual property. The loans are subject to
mandatory prepayment (and the commitment to lend simultaneously reduced) in the
event of the receipt by OraVax of any insurance proceeds, proceeds from the
issuance of equity securities or the incurrence of indebtedness or proceeds from
the disposition of assets (including the license of intellectual property).
OraVax may prepay the loans, at its option, at any time without premium or
penalty. Peptide's commitment to lend is terminated on the occurrence of
customary events of default including the failure of OraVax to pay principal or
interest under the loan agreement or in respect of other debts, OraVax's
bankruptcy and related events and breach by OraVax of any of its material
agreements.
As of the date of this prospectus/proxy statement, OraVax has not incurred
any indebtedness under the loan agreement. If OraVax does borrow amounts from
Peptide and the merger agreement is not adopted by OraVax stockholders or is
terminated, then OraVax could be required to sell or license its technology or
other assets to repay the loan. In this regard, OraVax is exploring the
possibility of selling its interest in its Canton, Massachusetts manufacturing
facility. OraVax believes that cash
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proceeds from such a sale would be sufficient to repay any amounts that it may
borrow under the loan agreement.
PEPTIDE SHAREHOLDER MATERIALS
The holders of a majority of the Peptide shares voting in person or by proxy
approved the merger and other matters related to the merger, including an
increase in the authorized share capital of Peptide at an extraordinary general
meeting of Peptide which was convened on February 15, 1999. A circular
comprising a prospectus and listing particulars relating to Peptide was prepared
pursuant to the rules of the London Stock Exchange and sent to the shareholders
of Peptide on January 29, 1999. A copy of the circular has been delivered to the
Registrar of Companies in England and Wales for registration. The contents of
the circular do not form part of, nor are they incorporated into, this
prospectus/proxy statement.
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MATERIAL TAX CONSEQUENCES
GENERAL
The following discussion summarizes the material U.S. federal income tax
consequences of the merger to holders of OraVax common stock. It also summarizes
the material U.S. and U.K. income tax consequences to holders of OraVax common
stock who hold or dispose of Peptide shares received in the merger. This summary
is limited to U.S. persons who hold OraVax common stock and will hold Peptide
shares as capital assets. A U.S. person means:
- a citizen or resident of the U.S.;
- a corporation or partnership organized in the U.S.; or
- an estate or trust that is subject to U.S. federal income taxation without
regard to the source of its income.
The following discussion does not address the tax consequences to persons
subject to special tax treatment. Examples of such persons include the
following:
- foreign persons or entities;
- persons whose "functional currency" is not the U.S. dollar;
- tax-exempt organizations;
- securities dealers;
- regulated investment companies;
- real estate investment trusts, real estate mortgatge investment conduits
and financial asset securitization investment trusts;
- financial institutions and insurance companies;
- persons subject to alternative minimum tax;
- persons who acquired OraVax common stock by exercising stock options or
otherwise as compensation;
- persons holding OraVax common stock as part of a hedging, conversion,
short sale or integrated transaction or a straddle; and
- holders of 10% or more of the voting shares of Peptide.
In addition, the following discussion is based upon current law and current
interpretations of the law, which could change or may be interpreted
differently. Changes in the law, furthermore, could have retroactive effect.
This summary is provided for general information purposes only. Neither OraVax
nor Peptide has requested a ruling from the IRS with regard to the tax
consequences of the merger or of holding or disposing of Peptide shares received
in the merger.
The statements of U.K. tax laws set forth below summarize the material U.K.
tax effects of the merger to U.S. holders but do not address potential U.K. tax
effects relevant to the merger. The statements of U.K. law are based on U.K. tax
laws and U.K. Inland Revenue practice in force as at the date of this
prospectus/proxy statement and are subject to any changes in U.K. law occurring
after that date. While this summary is principally directed to U.K. tax law, it
does not address the tax position of U.K. holders of Peptide ordinary shares.
The tax treatment of a U.S. holder of Peptide ordinary shares may vary depending
on such holder's particular situation, and certain shareholders may be subject
to special rules not discussed below, including:
- insurance companies;
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- tax exempt organizations;
- entities that are residents of more than one country;
- financial institutions;
- dealers;
- broker-dealers; or
- entities which, alone, or together, with one or more associated
corporations, control directly or indirectly more than 10% of the voting
shares of Peptide.
ORAVAX STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING
THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND THE U.S. AND U.K.
INCOME TAX CONSEQUENCES OF HOLDING OR DISPOSING OF THE PEPTIDE SHARES IN LIGHT
OF THEIR PARTICULAR SITUATIONS, AS WELL AS CONCERNING ANY CONSEQUENCES ARISING
UNDER THE LAWS OF ANY OTHER TAX JURISDICTION, INCLUDING ANY STATE, LOCAL, OR
OTHER FOREIGN JURISDICTION, AND ANY ESTATE OR GIFT TAX CONSIDERATIONS.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The merger will be treated as a taxable sale of OraVax common stock by
OraVax stockholders for federal income tax purposes. It will not be a
tax-deferred "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code because Peptide will acquire substantially all of the
outstanding OraVax 6% convertible preferred stock for cash as part of the
merger. Accordingly, a U.S. holder of OraVax common stock will recognize gain,
or loss, equal to the amount by which the fair market value of the Peptide
shares received by such holder in the merger or the amount by which the cash
received pursuant to the exercise of dissenters' appraisal rights exceeds, or is
less than, the holder's adjusted basis for the shares of OraVax common stock
surrendered in the merger. Gain or loss must be computed separately for blocks
of OraVax common stock acquired at different times and for different amounts.
Such gain or loss will be long-term capital gain or loss if the shares of OraVax
common stock have been held for more than one year. A U.S. holder's adjusted tax
basis in the Peptide shares received in the merger will equal the fair market
value of such shares at the effective time of the merger. A U.S holder's holding
period for the Peptide shares received in the merger will begin on the day
following the effective time of the merger.
The receipt of consideration pursuant to the merger or the exercise of
dissenters' appraisal rights may be subject, under certain circumstances, to
"backup withholding" at a 31% rate. Backup withholding generally applies only if
the holder:
- fails to furnish his or her social security or other taxpayer
identification number within a reasonable time after the request therefor;
- furnishes an incorrect taxpayer identification number;
- is notified by the Internal Revenue Service that he or she has failed to
report properly interest or dividends; or
- fails, under certain circumstances, to provide a certified statement,
signed under penalty of perjury, that the taxpayer identification number
provided is the correct number and that he or she is not subject to backup
withholding.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE OWNERSHIP OF PEPTIDE SHARES
TAXATION OF DISTRIBUTIONS
Distributions made with respect to Peptide shares, including the amount of
any treaty payment or and any U.K. withholding tax will, to the extent paid out
of the current or accumulated earnings and
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profits of Peptide, be treated for U.S. federal income tax purposes as
foreign-source dividend income. Distributions in excess of this amount will be
treated as a non-taxable return of capital to the extent of the U.S. holder's
adjusted tax basis in the Peptide shares, and any excess over such basis will be
taxable as capital gain. Dividends paid by Peptide generally will not be
eligible for the dividends received deduction allowed to corporations under
Section 243 of the Internal Revenue Code.
For federal income tax purposes, dividends paid in pounds sterling will be
translated into their U.S.-dollar-value equivalents based upon the exchange rate
in effect on the date the dividend is received by the U.S. holder, regardless of
whether such amounts are actually converted into U.S. dollars. A U.S. holder
will have a basis in the pounds sterling equal to this U.S.-dollar-value
equivalent. Any gain or loss realized on a subsequent conversion or other
disposition of the pounds sterling will be treated as ordinary income or loss.
U.S. CREDIT FOR U.K. TAXES WITHHELD
U.S. holders will generally be able to claim a credit against their U.S.
federal income tax liability for U.K. withholding tax deducted from dividends
received on their Peptide shares. For these purposes, dividends paid on the
Peptide shares generally will be treated as income from sources outside the
U.S., and generally will constitute passive income.
THE FOREIGN TAX CREDIT RULES ARE COMPLEX, AND U.S. HOLDERS ARE URGED TO
CONSULT WITH THEIR TAX ADVISORS TO DETERMINE WHETHER AND TO WHAT EXTENT A CREDIT
WOULD BE AVAILABLE. U.S. HOLDERS THAT DO NOT ELECT TO CLAIM A FOREIGN TAX CREDIT
MAY INSTEAD CLAIM A DEDUCTION FOR U.K. WITHHOLDING TAX.
TAXATION OF CAPITAL GAINS
A U.S. holder will recognize gain or loss for U.S. federal income tax
purposes upon the sale or other taxable disposition of Peptide shares in an
amount equal to the difference between the amount realized on such disposition
and the adjusted tax basis in the shares disposed of. This gain or loss
generally will be subject to U.S. federal income tax, and will be treated as
long-term capital gain or loss if the U.S. holder has held the shares disposed
of for more than one year. Capital losses realized on such a disposition will be
subject to certain limitations on deductibility. Gain and, under recently
finalized Treasury Regulations, loss recognized by a U.S. holder on such a
disposition of Peptide shares will generally be treated as income from sources
within the U.S. for purposes of the foreign tax credit limitations discussed
above, unless the gain is attributable to an office or fixed place of business
maintained by the U.S. holder outside the U.S., and certain other conditions are
met.
BACKUP WITHHOLDING
Payments made in respect of Peptide shares may be subject to a 31% U.S.
backup withholding tax. Backup withholding generally will not apply, however, to
a holder who furnishes a correct taxpayer identification number or certificate
of foreign status or who is otherwise exempt from backup withholding, and who
makes any required certification. Backup withholding is not an additional tax,
and amounts withheld from payments would be treated as a credit against the U.S.
federal income tax liability of a U.S. holder, provided that the required
information is furnished to the IRS.
UNITED STATES ANTI-DEFERRAL FEDERAL INCOME TAX ISSUES
The Internal Revenue Code contains certain "anti-deferral" provisions which,
if applicable, would change the U.S. federal income tax consequences of holding
or disposing of Peptide shares discussed above. These provisions apply to
foreign corporations classified as any of the following:
- "foreign personal holding companies;"
- "passive foreign investment companies;" or
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- "controlled foreign corporations."
These provisions generally seek to reduce or eliminate the effect of the
deferral of U.S. taxes on certain undistributed earnings of such foreign
corporations, with the result that in some cases income may be required to be
recognized before an actual cash distribution is made.
As of the date of this prospectus/proxy statement, Peptide does not believe
that it will be classified as a foreign personal holding company, a passive
foreign investment company, or a controlled foreign corporation following the
merger, and therefore believes that these anti-deferral provisions will not
apply to U.S. holders holding Peptide shares. This conclusion is based upon a
review by Arthur Andersen, Peptide's accountants, of existing financial data and
projections for Peptide and OraVax for 1999, and on the application of the U.S.
tax rules and regulations to these financial data and projections. Any change in
the ownership structure or in the makeup of the assets or income of Peptide or
OraVax from those reflected in these financial data and projections could change
this conclusion.
If Peptide were determined to be a foreign personal holding company, a
passive foreign investment company or a controlled foreign corporation the
treatment of U.S. holders holding Peptide shares would differ from that
discussed above. Specifically, if Peptide were classified as a passive foreign
investment company for any period following the merger, U.S. holders of Peptide
shares would generally be required to treat all "excess distributions" with
respect to such shares as if such amounts were ordinary income earned ratably
over the holding period for such shares. Excess distributions for this purpose
would include gain realized on the disposition of such shares as well as certain
distributions made by Peptide. Amounts treated under this analysis as earned in
the year of the disposition or distribution or in any year before the first year
in which Peptide was a passive foreign investment company would be included in
the holder's ordinary income for the year of the disposition or distribution.
All remaining amounts would be subject to tax at the highest ordinary income tax
rate that would have been applicable in the year in which such amounts were
treated as earned, and interest would be charged on the tax payable with respect
to such amounts. In addition, if Peptide were classified as a passive foreign
investment company, Peptide shares acquired from a decedent generally would not
receive a "stepped-up" basis but would, instead, have a tax basis equal to the
lower of the decedent's basis or the fair market value of such shares. If
Peptide were to agree to comply with certain reporting requirements, however,
U.S. holders could timely elect for the first year during their holding period
of their Peptide shares in which Peptide was a passive foreign investment
company to treat Peptide as a qualified electing fund. Such an election
generally would require such holders to include currently in income for each
year in which Peptide was a passive foreign investment company their pro rata
share of the earnings and profits of Peptide, but would avoid the application of
the excess distribution rules and other adverse tax consequences described
above. Recently proposed Treasury Regulations also provide that, if Peptide were
a passive foreign investment company, U.S. holders could elect, a
"mark-to-market" election, to annually mark-to-market their Peptide shares, and
include as ordinary income the excess of the value of such shares over their
basis. U.S. holders making such an election would likewise be allowed an
ordinary deduction, up to the amount of previously recognized gains, for years
in which their basis in their Peptide shares exceeded their value. A mark-to-
market election could generally be made without the need for any information
from Peptide, and, if made for the first year during a U.S. holder's holding
period for which Peptide was a passive foreign investment company, would avoid
the application of the excess distribution rules described above.
Neither Peptide nor its advisors have any obligation to inform U.S. holders
of future changes in circumstances that could result in Peptide being classified
as an entity subject to the Internal Revenue Code's anti-deferral provisions in
the future. U.S. HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING
THE POTENTIAL APPLICATION OF THESE ANTI-DEFERRAL PROVISIONS TO PEPTIDE FOR
PERIODS OF TIME FOLLOWING THE MERGER, AS WELL AS THE POTENTIAL DESIRABILITY OF
MAKING A QUALIFIED ELECTING FUND OR "MARK-TO-MARKET" ELECTION FOR THEIR PEPTIDE
SHARES IF PEPTIDE WERE CLASSIFIED AS A PASSIVE FOREIGN INVESTMENT COMPANY.
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U.K. TAX CONSEQUENCES OF OWNING PEPTIDE SHARES
TAXATION OF DIVIDENDS
A U.K. company is liable to account for advance corporation tax on the
payment of a dividend. The rate of advance corporation tax is currently 25% of
the cash dividend paid. Under the provisions of the income tax convention
currently in force between the U.K. and the U.S. a U.S. holder who is an
individual or a corporate portfolio holder of Peptide shares will be entitled to
receive from the U.K. Inland Revenue a refund. The amount of the tax treaty
payment will be equal to the tax credit in respect of advance corporation tax
minus a withholding of 15% of the aggregate of the cash dividend plus the tax
credit. On the basis of an advance corporation tax rate of 25% of the dividend,
an L80 dividend would result in a L20 payment of advance corporation tax by
Peptide. The amount of the dividend and rate of advance corporation tax have
been selected for illustrative purposes only. The tax credit related to the
dividend would be equal to L20. The U.S. holder who is an individual or a
corporate portfolio holder would be entitled to receive a L5 tax treaty payment,
calculated by reducing the L20 tax credit by withholding tax of L15. Accordingly
such U.S. holder would have a total net receipt of L85. Under current proposals
the rate of tax credits will be halved from 20% to 10% of the gross dividend for
dividends paid on or after April 6, 1999 with the result that a U.S. holder who
is an individual or a corporate portfolio holder would not be entitled to
receive any tax treaty payment. Thus, using the example set out above, an L80
dividend will result in the U.S. holder only receiving L80.
A U.S. holder of Peptide shares nonetheless will not be entitled to claim
the tax treaty payment described above if:
- the holding of the Peptide shares is effectively connected with
- a permanent establishment situated in the U.K. through which the U.S.
holder carries on business in the U.K.,
- a fixed base in the U.K. from which the U.S. holder performs
independent personal services; or
- in the case of a U.S. holder that is a U.S. corporation where the U.S.
holder is:
- also a resident of the U.K. or
- in certain circumstances, an investment or holding company at least
25% of the capital of which is held, directly, or indirectly, by
persons that are not individuals, residents or nationals of the U.S.
Special rules may also apply if the U.S. holder is exempt from tax in the U.S.
on dividends paid by Peptide. The refund may not be available in the case of a
U.S. holder who owns 10% or more of the class of shares in respect of which the
dividend is paid to the extent that the dividend can only have been paid out of
profits which were earned, or from income which was received, in a period ending
12 months or more before the date on which the U.S. holder becomes the owner of
10% or more of the class of shares in question. If the U.S. holder of Peptide
shares is a U.S. partnership, trust or estate, the refund will be available only
to the extent that the income derived by such partnership, trust or estate is
subject to U.S. tax either as the income of a U.S. resident in its hands or in
the hands of its partners or beneficiaries as the case may be.
U.K. TAXATION OF CAPITAL GAINS
A U.S. holder who is not resident, or ordinarily resident, for tax purposes
in the U.K. will not be liable for U.K. tax on capital gains on the disposal of
Peptide shares unless the U.S. holder carries on a trade, profession or vocation
in the U.K. through a branch or agency and the Peptide shares are or
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have been used by, held by, or acquired for use by or for the purposes of such
trade, profession, vocation, branch or agent.
U.K. INHERITANCE TAX ON ESTATES AND GIFTS
The estate and gift tax convention in force between the U.S. and the U.K.
provides that the U.K. tax to which the convention applies is capital transfer
tax and that it will also apply to identical or substantially similar taxes
which are imposed subsequently. On January 1, 1998 capital transfer tax was
replaced by inheritance tax. It is understood that in practice the U.S. tax
authorities and the U.K. Inland Revenue apply the convention on the basis that
inheritance tax has replaced capital transfer tax as the tax to which the
convention now applies, although the convention has not been amended to that
affect.
On the basis of that practice, Peptide shares held in the U.S. by an
individual who is domiciled for the purposes of the estate and gift tax
convention in the U.S. and is not for the purposes of the convention a national
of the U.K., will not be subject to inheritance tax on the individual's death or
on a transfer of the Peptide shares during the individual's lifetime. However,
special rules apply in the case of Peptide shares held in trust or as part of
the business property of a permanent establishment in the U.K. or related to the
fixed base in the U.K. of a person providing independent personal services.
U.K. STAMP DUTY AND STAMP DUTY RESERVE TAX
Any transfer of the Peptide shares may result in the stamp duty liability at
the rate of 0.5% of the consideration. There is no charge to ad valorem stamp
duty on gifts. On a transfer of Peptide shares from a nominee to the beneficial
owner, if the nominee has at all times held the Peptide shares on behalf of the
transferee, under which no beneficial interest passes and which is neither a
sale, nor arises under or following a contract of sale, nor is in contemplation
of sale, a fixed 50p stamp duty will be payable. The amount of ad valorem stamp
duty is generally calculated at the applicable rate on the purchase of the
Peptide shares.
The issue of the Peptide shares to U.S. holders as part of the merger will
not attract U.K. stamp duty.
A stamp duty reserve tax generally at a rate 0.5% on the consideration, is
currently payable on any agreement to transfer ordinary shares or any interest
therein unless:
- an instrument transferring the shares is executed;
- stamp duty, generally at a rate of 0.5% is paid; and
- the instrument is stamped on or before the last day of the month following
the month in which the agreement is made, or, where the agreement is
conditional, the last day of the month following the month in which it
becomes unconditional.
The duty will, however, be refundable if within 6 years the agreement is
completed by an instrument which has been duly stamped, generally at a rate of
0.5%.
Increased U.K. stamp duty and stamp duty reserve tax charges will apply if
the Peptide shares are issued or transferred to a custodian for a clearing
system or to a depositary who issues depositary receipts in respect of such
shares. These are generally at the rate of 1.5% of the consideration paid or the
market value of the Peptide shares depending on the circumstances.
THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL
OF THE U.S. AND U.K. INCOME TAX CONSEQUENCES OF THE MERGER OR THE OWNERSHIP OR
DISPOSITION OF PEPTIDE SHARES. THIS DISCUSSION IS INCLUDED FOR GENERAL
INFORMATION PURPOSES ONLY AND MAY NOT APPLY TO A PARTICULAR STOCKHOLDER IN LIGHT
OF SUCH STOCKHOLDER'S PARTICULAR CIRCUMSTANCES. STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF
THE MERGER OR THE OWNERSHIP OR DISPOSITION OF PEPTIDE SHARES, INCLUDING THE
APPLICATION OF STATE, LOCAL AND OTHER FOREIGN TAX LAWS.
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DESCRIPTION OF PEPTIDE
GENERAL
Peptide was incorporated in England and Wales in 1993 under the Companies
Act 1985 as a private company with the name Dutybonus Company Limited, with
registered number 2863682. Its registered office, head office and principal
place of business in the United Kingdom is Peterhouse Technology Park, 100
Fulbourn Road, Cambridge, CB1 9PT. Peptide was re-registered as a public limited
company with the name Peptide Therapeutics plc with effect from May 10, 1994.
Peptide changed its name to Peptide Therapeutics Group plc in July 1994. Peptide
was listed on the London Stock Exchange in November 1995.
Peptide is the holding company of Peptide Therapeutics Limited, Peptide
Mimetics Limited, Cambium Limited and Peptide Therapeutics Employees' Trustees
Limited, a group of companies principally involved in the research and
development of novel biopharmaceutical products.
BUSINESS
Peptide is a biopharmaceutical company engaged in research and early-stage
clinical development of vaccines and other drugs directed primarily at
infectious diseases and allergic disorders. Peptide's goal is to develop
preliminary evidence that a drug is safe and effective and then collaborate with
a larger pharmaceutical company to complete development. Recently Peptide has
expanded its drug candidate portfolio and has acquired or developed in-house a
number of technology platforms designed to provide the basis for developing
future drug candidates. Peptide's long-term strategy is to generate royalty
revenue under collaborations and alliances with larger pharmaceutical companies
which are responsible for manufacturing and marketing the products.
SCIENTIFIC BACKGROUND
Peptide's primary product candidates are designed to assist the immune
system to either (1) protect against diseases caused by infectious organisms, or
pathogens, such as bacteria and viruses or (2) limit or avoid allergic reactions
to allergens. The immune system is comprised of two divisions: systemic and
mucosal. The systemic immune system protects the blood and deep tissues of the
body. The mucosal immune system protects mucosal surfaces, such as digestive,
respiratory and genitourinary tracts and the surface of the eye. The immune
system produces antibodies that combat foreign organisms and substances by
neutralizing them or initiating a process to remove them from the body. There
are five classes of antibodies: IgA, IgE, IgM, IgG and IgD. IgA is generally
associated with the mucosal immune system and IgE and IgM are generally
associated with the systemic immune system. IgE, which may play a crucial role
in the body's defense against certain parasites, is key component in the process
resulting in many allergic reactions. The role of IgD is not well understood.
The discussion below regarding Peptide's product candidates and technologies
includes certain terms common to discussions of the immune system. These terms
include:
ALLERGEN. A substance known to be an agent which causes immediate
hypersensitivity, such as pollen, animal fur or house dust proteins.
ANTIBIOTIC. A small molecule capable of slowing down or stopping microbial
growth by blocking metabolic pathways.
ANTIBODY. A protein molecule formed by the immune system which reacts
specifically with the antigen that induced its synthesis.
ANTIGEN. Any substance which can elicit the formation of specific
antibodies.
ATTENUATE. To reduce the disease producing ability of a micro-organism.
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AUTOIMMUNE. Relating to or caused by antibodies that attack molecules, cells
or tissues of the organism producing them.
ATOPY. A clinical syndrome comprising a combination of the allergic symptoms
of asthma, eczema and hay fever.
BACTERIOPHAGE. A virus that is parasitic within a bacterium.
EPITOPE. A molecule or portion of a molecule capable of binding to an
antibody.
IMMUNOGENIC. Capable of causing antibody formation.
IMMUNOMODULATION. The act of targeting receptors in the immune response
system to diminish their biological effects.
PATHOGEN. An organism which causes disease.
PEPTIDE. A compound made up of two or more amino acids.
PROTEASE. An enzyme which takes part in the breaking down of proteins.
INFECTIOUS DISEASES
Pharmaceutical products can assist in immune protection against infectious
diseases either by stimulating the body's own immune system to produce
antibodies directed at a particular pathogen or by directly introducing a
natural or synthetic antibody or other component which reacts with the pathogen.
Vaccines, for example, operate by introducing to the immune system dead or
disabled pathogens or fragments of pathogens, so that, upon subsequent exposure
to the pathogen in its active state, the immune system is able to quickly react
and neutralize the pathogen.
ALLERGIC DISORDERS
Allergic disorders involve an antigen triggering an immune response which
results in an adverse reaction. The immune systems of some humans and other
animals react to certain allergens by significantly increasing the levels of
certain antibodies in the blood stream. These antibodies, in turn, stimulate the
production of histamine and/or other chemicals. The release of these chemicals
causes the symptoms associated with various types of allergic reactions.
Pharmaceutical products which block production of the relevant antibodies or
block the activation of the chemical release may alleviate allergic reactions.
PRODUCT DEVELOPMENT
Drug development often occurs in four stages: preclinical analysis, phase 1
clinical trials, phase 2 clinical trials and phase 3 clinical trials. Government
requirements for preclinical data must be satisfied. Drug developers obtain
preclinical data from studies in animals or in a laboratory. These preclinical
studies provide a basis for evaluating both the safety and the scientific
rationale for a phase 1 studies in human volunteers. phase 1 clinical studies
are generally performed in healthy human subjects or, occasionally, in selected
patients with the targeted disease or disorder. The goal of the phase I study is
to establish initial data about safety and tolerance of the drug in humans.
Also, the first data regarding the absorption, distribution, metabolism and
excretion of the drug in humans, or the immune response to a vaccine, may be
obtained. In phase 2 human clinical studies, evidence is sought about the
desired therapeutic efficacy of a drug or antibody, or the immune response to a
vaccine, in limited studies with small numbers of carefully selected subjects.
Efforts are made to evaluate the effects of various dosages and to establish an
optimal dosage level and dosage schedule. Additional safety data are also
gathered from these studies. The phase 3 clinical development program consists
of expanded, large scale, multicenter studies of patients with the target
disease or disorder, or in the case of a preventive
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antibody or vaccine, who are susceptible to the disease. The goal of these
studies is to obtain definitive statistical evidence of the efficacy and safety
of the proposed drug and dosage regimen. At the same time that the human
clinical program is being performed, additional animal studies may also be
conducted. In addition, expensive, long duration toxicity, teratogenicity and
carcinogenicity studies may be required to demonstrate the safety of drug
administration for the extended period of time required for effective therapy.
Also, a variety of laboratory, animal and initial human studies are performed to
establish manufacturing methods for the drug, as well as stable, effective
dosage forms.
PRODUCT PORTFOLIO
Peptide, together with its collaborative partners, is developing the
following product candidates:
<TABLE>
<CAPTION>
STAGE OF
PRODUCT CANDIDATE PRIMARY INDICATION(S) DEVELOPMENT PARTNER
- ----------------------------------- ----------------------------------- ------------ ------------------------------
<S> <C> <C> <C>
Allergy vaccine.................... Allergies Phase 2 SmithKline Beecham
Oral typhoid vaccine............... Typhoid Phase 2 Medeva
Tolerising peptide (rye grass)..... Hay fever Phase 2 SmithKline Beecham
Oral ETEC vaccine.................. Travelers' diarrhea Phase 1 Medeva
Veterinary allergy vaccine......... Flea bite allergy Phase 1 Pfizer
Oral H. PYLORI vaccine............. Peptic ulcers Preclinical Pasteur Merieux--OraVax
</TABLE>
ALLERGY VACCINE
DESCRIPTION. Peptide's allergy vaccine is designed to reduce or prevent
allergic responses involving IgE antibodies. Potential indications include
anaphylaxis, severe food allergies, allergic rhinitis and atopic asthma.
DEVELOPMENT STATUS. Peptide has completed a phase 2 clinical trial on
patients with severe food allergies. In this trial the vaccine was well
tolerated and afforded protection in a double blind, placebo controlled food
allergen challenge. In February 1997 Peptide signed a licensing and
collaboration agreement with SmithKline Beecham to continue the development of
its allergy vaccine.
A joint project team from SmithKline Beecham and Peptide has been
established, and Peptide has transferred its allergy vaccine technology to
SmithKline Beecham. SmithKline Beecham is conducting extended phase 2
feasibility trials to investigate the efficacy of the vaccine for a range of
allergic indications. Initial results from the trials are expected by the third
quarter of 1999.
INTELLECTUAL PROPERTY. Peptide has European and U.S. patents relating to
its allergy vaccine and has applied for a patent in Japan. Peptide has patents
pending in Europe, Japan and the U.S. which relate to alternative allergy
vaccines.
ORAL TYPHOID VACCINE
DESCRIPTION. Peptide's oral typhoid vaccine is a live vaccine consisting of
attenuated S. TYPHI bacteria. The attenuations are designed to weaken the
bacteria to a degree such that they no longer cause disease but still evoke an
immune response. Because the vaccine has been designed to induce both systemic
and mucosal immune responses, it should offer the prospect of improved efficacy
over existing oral and injectable typhoid vaccines. In addition, because it will
be administered in a single oral dose, Peptide believes it would result in
improved patient compliance over the currently available oral typhoid vaccine
that requires patients to have three or four separate doses.
DEVELOPMENT STATUS. A phase 2 trial of a single dose, live attenuated oral
typhoid vaccine was successfully completed in January 1999. The trial, which was
co-sponsored by the National Institute of
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Allergy and Infectious Diseases in the U.S., compared two dose levels of vaccine
against placebo in 80 volunteers at the Center for Vaccine Development at the
University of Baltimore in Maryland.
The results of the trial confirmed that, when given as a single oral dose,
the vaccine is well tolerated, does not cause bacteremia and elicits both a
mucosal and systemic immune response. This provides a basis for the further
development of the vaccine for use in travellers and in populations where
typhoid fever is widespread, and supports the use of Peptide's proprietary S.
TYPHI technology for the development of other oral vaccines.
In keeping with its strategy to out-license products after phase 2 clinical
trials, Peptide now intends to seek a partner to continue the development of its
oral typhoid vaccine. Under an agreement entered into in January 1997, Medeva
has an option to license this product candidate.
INTELLECTUAL PROPERTY. Glaxo Wellcome holds a group of patents and patent
applications relating to this vaccine and has granted an exclusive license to
Medeva. Medeva has given an exclusive sub-license to Peptide under the terms of
a collaboration entered into in January 1997. Medeva recently successfully
opposed a potentially conflicting patent family owned by a third party at the
European Patent Office on behalf of Peptide. There are parallel patents in the
U.S. to those which Medeva opposed at the European Patent Office.
TOLERISING PEPTIDE (RYE GRASS)
DESCRIPTION. Peptide's tolerising peptide is derived from a rye grass
allergen. This product candidate is designed to prevent hay fever caused by rye
grass pollen. Tolerising drugs are designed to prevent allergic or autoimmune
responses by taking advantage of the tendency of the human body to develop
tolerance for substances to which it is repeatedly exposed.
DEVELOPMENT STATUS. A phase 2 clinical trial of the tolerising peptide (rye
grass) for the prevention of hay fever was successfully completed in January
1999. The trial involved 129 patients at four centers in the U.K. and was
conducted during hay fever season. Prior to inclusion in the study, patients
were divided into "moderate" and "severe" groups according to their skin test
reponse.
The results of the phase 2 clinical trial showed that the treatment was well
tolerated with no serious treatment-related adverse events in either group. In
severely allergic patients, the treatment was associated with a clear reduction
in the combined hay fever symptom and medication score and a delay in the use of
rescue medication. No such effects were apparent in the moderately allergic
group.
Peptide has initiated a second phase 2 trial in the UK in severely allergic
patients to be conducted during the 1999 hay fever season. At the same time,
Peptide is seeking a partner for this drug candidate. SmithKline Beecham has an
option to license this drug candidate.
INTELLECTUAL PROPERTY. Peptide has filed a group of patent applications
relating to this product candidate in the U.S., Europe and Japan.
ORAL ENTEROTOXIGENIC E. COLI VACCINE
DESCRIPTION. This vaccine is under development using an approach of
rational attenuation similar to that used to generate Peptide's oral typhoid
vaccine.
This vaccine is designed to protect humans against travelers' diarrhea, the
principal cause of which is ETEC (ENTEROTOXIGENIC E. COLI). This vaccine, if
developed, is expected to be orally administered.
DEVELOPMENT STATUS. A phase 1 trial of Peptide's oral ETEC vaccine
commenced in October 1998. In this initial trial Peptide has supplied two
strains of ETEC attenuated in different ways for testing in an in-patient
dose-ranging study in 30 healthy volunteers. The trial is the first in a series
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of Phase I trials designed to determine which of the attenuations results in the
most appropriate balance of safety and effectiveness.
INTELLECTUAL PROPERTY. Peptide has an exclusive license to certain patents
relating to this vaccine and has filed an additional patent application.
VETERINARY ALLERGY VACCINE
DESCRIPTION. Using an approach similar to that used with its allergy
vaccine, Peptide has identified peptides which it believes may be suitable for
the development of vaccines to moderate the allergic response in dogs and
horses. The principal indications for such vaccines include flea bite allergy in
dogs and atopy in horses.
DEVELOPMENT STATUS. Peptide's veterinary allergy vaccine is being developed
in collaboration with Pfizer. In March 1999, Pfizer commenced a
proof-of-principle trial in allergic dogs.
INTELLECTUAL PROPERTY. The patents and patent applications applicable to
Peptide's allergy vaccine also relate to these product candidates. Peptide is
aware of a third party patent application which has claims covering the relevant
dog peptide.
H. PYLORI VACCINE
DESCRIPTION. The gastric pathogen, H. PYLORI, is believed to be responsible
for most peptic ulcer disease. Studies of H. PYLORI have led to the
identification of candidate antigens which could be incorporated in a novel
vaccine against peptic ulcer disease. In collaboration with PM-O, a joint
venture formed by OraVax and PMC, Peptide is attempting to develop an oral
vaccine to protect against H. PYLORI. The vaccine under development uses
Peptide's attenuated SALMONELLA oral vaccine delivery system.
DEVELOPMENT STATUS. Peptide has incorporated the H. PYLORI antigens into
its SALMONELLA delivery system. The candidate strains are currently being
evaluated by PM-O.
INTELLECTUAL PROPERTY. The patents and patent applications applicable to
its oral typhoid vaccine also relate to this product candidate as well as
additional patents and patent applications covering means of expressing foreign
antigens into SALMONELLA.
STRATEGIC ALLIANCES AND COLLABORATIONS
Peptide believes that future sales of Peptide's products will be maximized
if undertaken by established pharmaceutical companies, with Peptide receiving
license fees, milestone payments and royalties on sales. Peptide has entered
into several such collaborations, including four in the past two years with
multinational pharmaceutical companies.
To access new opportunities Peptide evaluates technology from third parties
which potentially could be developed by Peptide. Peptide acquires rights to such
technology through agreements with pharmaceutical companies, biotechnology
companies, universities and other research organizations. Peptide has entered
into such agreements with Medeva, the Medical Research Council, Peptimmune and
several universities in the U.K.
Details of Peptide's principal strategic alliances and collaborations are
set out below.
MEDEVA
In January 1997 Peptide entered into a collaboration with Medeva for the
research, development and marketing of novel, non-injectable vaccines. Three
vaccines are in development: oral typhoid, oral ETEC and oral H. PYLORI.
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Under the terms of this collaboration, Peptide acquired, for total
consideration of L1 million, an oral and nasal vaccine delivery technology,
rights to several vaccine product candidates and rights to a portfolio of 19
patent families. In addition, Peptide has provided L1 million of funding to
Medeva towards the cost of the development program which is taking place within
Medeva's vaccine research unit. Medeva has a right of first refusal to license
any products developed from the alliance and has rights to participate in the
revenues Peptide generates from licensing a product to a third party. Medeva
purchased from Peptide approximately L3 million of Peptide ordinary shares at
340p per share at the time of entering the alliance.
SMITHKLINE BEECHAM
In February 1997, Peptide entered into a strategic alliance with SmithKline
Beecham to continue the research and development of Peptide's allergy vaccine
and the related research portfolio.
Under the terms of the agreements, Peptide received L6 million, with Smith
Kline Beecham purchasing from Peptide L3.6 million of Peptide ordinary shares at
360p per share and paying L2.4 million in license fees. Peptide could receive up
to an additional L21.7 million if it achieves certain clinical development and
regulatory milestones. In addition, Peptide will receive royalties on any future
product sales. Under the agreements, SmithKline Beecham acquired exclusive
worldwide rights to market products arising from the alliance. The alliance
involves a collaborative research and development program. SmithKline Beecham
will pay all clinical and associated development costs of the allergy vaccine
and any other product candidates arising from the alliance. Under the
agreements, Peptide is required to make available approximately 20% of its
research and development budget for this research program.
SmithKline Beecham also acquired an option for a license for the tolerising
peptide (rye grass) product candidate. SmithKline Beecham is scheduled to decide
whether to exercise the option following its review of the final phase 2 trial
report which is expected in the first quarter of 1999. Any license fees,
milestone payments and royalties on the tolerising peptide negotiated with
SmithKline Beecham would be in addition to those described above.
PFIZER
In December 1997 Peptide entered into an agreement with Pfizer for the
development of Peptide's veterinary allergy vaccine. Under the terms of the
agreement, Pfizer acquired a two year exclusive option for a worldwide license
for Peptide's veterinary allergy vaccine. Pfizer is obligated to conduct and pay
for all costs of the research and clinical development program for evaluating
the vaccine.
MEDICAL RESEARCH COUNCIL
In February 1998 Peptide entered into a research collaboration with the
Medical Research Council under the LINK Award Scheme, a U.K. Government
initiative promoting partnership between industry and research organizations.
Under the terms of this collaboration Peptide and the Medical Research
Council are working jointly towards the development of novel antibacterial drugs
based on the inhibition of bacterial proteases. These drugs will target bacteria
which are not currently amenable to treatment with antibiotics or are becoming
resistant to them. The Medical Research Council is identifying target proteases
and Peptide is applying its RAPiD-TM- technology (which is described below) to
design novel potent and specific inhibitors of these proteases and investigate
their therapeutic application.
Peptide and the Medical Research Council are jointly funding the three-year
project under the LINK award scheme, and Peptide has an exclusive license to the
intellectual property generated from the project.
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PEPTIMMUNE
In March 1998 Peptide entered into a collaboration with Peptimmune, a U.S.
biotechnology company based in Cambridge, Massachusetts. The purpose of the
collaboration is to develop novel inhibitors of the protease CATHEPSIN S by
applying Peptide's RAPiD technology. Inhibitors of this enzyme have the
potential to treat disorders of the immune system, including autoimmune
diseases, allergies and atopic asthma.
Peptide and Peptimmune are sharing all costs for the development of the
product candidates up to demonstration of proof-of-principle and will benefit
equally from the commercialization of any products arising from the
collaboration. If the agreement is terminated prior to the completion of the
collaboration because of a default by either Peptide or Peptimmune, then the
share of any revenues generated from the commercialization of any products
allocated to the defaulting party will be limited to a minimum of 5% and a
maximum of 30% depending on the date of termination and the stage of development
of the target novel inhibitors.
PASTEUR MERIEUX-ORAVAX
In April 1998 Peptide entered into an agreement with PM-O for the
development of an oral vaccine against H. PYLORI, one of the principal causes of
peptic ulcers. PM-O is a joint venture formed between Pasteur Merieux Connaught,
one of the world's largest vaccine companies, and OraVax.
Under the terms of the agreement PM-O has a worldwide exclusive option to
use Peptide's proprietary oral vaccine delivery technology for the development
of a vaccine to prevent H. PYLORI infection. PM-O is supplying its proprietary
H. PYLORI antigens which Peptide is incorporating into its oral vaccine delivery
system. PM-O is funding the costs of this research program.
If this research program is successful, PM-O has an option to take a license
and will be responsible for all future clinical development and associated
costs. Exercise of this option would trigger a license fee, milestone payments
and royalties on any future sales of the vaccine.
ELI LILLY AND COMPANY
In November 1998, Peptide entered into a research collaboration with Eli
Lilly and Company. Under the terms of the agreement, Lilly is providing funding
to Peptide to apply its proprietary RAPiD technology to four protease targets
provided by Lilly.
NOVARTIS AG
In November 1998, Peptide entered into a research collaboration with
Novartis. Under the terms of this agreement, Novartis is providing funding to
Peptide to apply its proprietary RAPiD technology to one protease target
provided by Novartis.
UNIVERSITY COLLABORATIONS
Peptide has research collaborations with several universities to augment its
in-house capabilities. These include the University of Cambridge (combinatorial
chemistry), Bristol University (directed immunomodulation), University of Oxford
(inflammatory mechanisms), and the University of Newcastle (combinatorial
chemistry).
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TECHNOLOGY PLATFORMS AND RESEARCH PROGRAMS
Since its initial public offering, Peptide has acquired or developed four
proprietary technology platforms. Technology platforms represent methods for
developing new drugs. A summary of Peptide's technology platforms and the
associated research programs is set out below:
<TABLE>
<CAPTION>
TECHNOLOGY PLATFORM APPLICATION RESEARCH PROGRAMS
- ------------------------------------- ----------------------------------------------- -------------------------
<S> <C> <C>
MolVaD-Registered Trademark-......... To develop novel injectable vaccines Meningitis B
Anti-IgE
Mucosal Vaccine Delivery............. To develop novel oral and nasal vaccines Other antigen targets
RAPiD-TM-............................ To develop novel protease inhibitor drugs Der p 1
Factor Vlla
Cathepsin S
Bacterial proteases
Lilly collaboration
Novartis collaboration
Directed Immunomodulation............ To develop novel immunotherapeutic drugs Multiple sclerosis
</TABLE>
MOLVAD-REGISTERED TRADEMARK-
DESCRIPTION OF THE TECHNOLOGY. MolVaD (Molecular Vaccine Design) is a
technique employing bacteriophage peptide display to design novel vaccines.
MolVaD facilitates the discovery of new immunogens by employing protective
antibodies to select peptides which mimic key structural features of the target
organism. These peptides can be selected from bacteriophage libraries containing
approximately one billion distinct peptide structures. The bacteriophage
themselves can be used as carriers for immunogenic peptides and induce
protective antibodies against a disease causing organism. Such peptides can then
be used to elicit the production of antibodies which are specific for the target
organism. With MolVaD, Peptide believes it has developed a proprietary position
from which it can generate novel vaccine product candidates.
In June 1996 Peptide acquired a patent family from Cambridge Bacteriophage
Technology Limited covering the expression of peptides on the surface of
filamentous bacteriophage and the use of these bacteriophage as a vaccine
delivery system. The patent for this technology has been granted by the European
Patent Office and is pending at the United States Patent and Trademark Office
and in Japan.
A third-party patent which covers certain aspects of bacteriophage display
is being opposed by Peptide at the European Patent Office. The same third party
is opposing Peptide's bacteriophage display patent at the European Patent
Office. There are parallel patents in the U.S. to these patents.
RESEARCH PROGRAMS. MolVaD is being applied to develop two vaccines:
- Meningitis B--The bacterium N. MENINGITIDIS is a major cause of
meningitis, a potentially lethal infection, typically affecting children.
There are three dominant forms of the organism, serotypes A, B and C.
Although vaccines to A and C are available, none is available for B. Such
a vaccine is a much needed element in a multi-component vaccine to protect
children against meningitis. MolVaD is being used to identify peptides
which mimic the polysaccharide coat of N. MENINGITIDIS that will be
suitable for the development of an active vaccine against meningitis B.
Several leads have been identified and these are being optimized for
immunogenicity.
- Anti-IgE--As part of the collaboration with SmithKline Beecham, MolVaD is
being employed to identify epitopes on the IgE antibody which may
represent new allergy vaccine targets.
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MUCOSAL VACCINE DELIVERY
DESCRIPTION OF THE TECHNOLOGY. This technology platform enables the
development of novel mucosal (oral and nasal) vaccines. Most infectious agents
enter the body through mucosal surfaces. The mucosa are capable of mounting an
immune response, yet many current injectable vaccines elicit a poor immune
response in the mucosa. Mucosal vaccination can be effected by oral or nasal
delivery of antigens in an appropriate carrier and therefore provides protection
against such infectious agents where it is most needed. Mucosal vaccination is
better tolerated and is more easily and conveniently administered than
conventional vaccination by injection.
The development of mucosal vaccines for certain diseases has been hindered
by the lack of suitable delivery systems and adjuvants to induce a mucosal
immune response. Peptide's technology potentially overcomes these two problems.
This technology platform comprises two inter-related technologies:
- live attenuated oral vaccines, e.g. the oral typhoid vaccine and the oral
ETEC vaccine; and
- the use of these attenuated strains as carriers of antigens, e.g. the oral
H. PYLORI vaccine.
Peptide acquired the rights to the intellectual property covering this
technology platform from Medeva. These rights include a total of 19 patent
families which have potential application to mucosal vaccine delivery.
RESEARCH PROGRAMS.
- Antigen Targets--The attenuated S. TYPHI oral vaccine delivery system has
the potential to be used as a carrier for a number of other antigens.
Peptide is considering several other antigens which could be incorporated
into its proprietary delivery system to develop novel oral vaccines.
Peptide believes that this delivery system could be exploited by Peptide
either alone or in collaboration with other parties in a similar manner to
the collaboration agreement reached with PM-O on the oral H. PYLORI
vaccine.
RAPID-TM-
DESCRIPTION OF THE TECHNOLOGY. RAPiD (Rational Approach to Protease
Inhibitor Design) is a proprietary technology which applies the techniques of
combinatorial chemistry to provide a novel means of developing protease
inhibitors.
Proteases are a type of enzyme and are potential therapeutic targets because
they play an integral role in the development of many diseases. Peptide believes
that inhibition of proteases may therefore be used as the basis of effective
drugs.
RAPiD has the advantage over conventional drug discovery techniques of being
able to deliver, in a matter of weeks rather than months, information for the
design of protease inhibitors. RAPiD can be used to: (i) rapidly identify novel
protease substrates; (ii) establish high throughput screens; (iii) map the
protease catalytic sites; and hence (iv) enable the design and synthesis of
potent and selective protease inhibitors.
Five patent applications have been filed covering RAPiD and its associated
technologies.
RESEARCH PROGRAMS. RAPiD is being employed in six research programs:
- Factor VIIa Inhibitor--Factor VIIa is one of several proteases involved in
the blood coagulation process. Anticoagulants are used by patients with a
history of cardiovascular disease (including heart attack, stroke and
thrombosis). Peptide is using its RAPiD technology to develop potent and
selective drugs to inhibit Factor VIIa and to develop a new class of
anticoagulants.
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- Cathepsin S Inhibitor--Cathepsin S is a protease that has been shown to
play a critical role in the presentation of antigens to the immune system.
An inhibitor to Cathepsin S could have application in a number of diseases
where suppression of the immune response would be of benefit such as
autoimmune disease, graft vs. host disease, allergy and atopic asthma.
Using its RAPiD technology Peptide is developing inhibitors to Cathepsin S
in collaboration with Peptimmune and its collaborators at The Brigham and
Women's Hospital in Boston, Massachusetts.
- Der p 1 Inhibitor--House dust mite feces are known to induce asthma in
susceptible children. It is believed that proteases from the mite may be
responsible for their allergic response and that the major allergen is a
protease called Der p 1. Peptide has used its RAPiD technology to develop
potent, selective inhibitors of this enzyme and, in collaboration with the
University of Southampton, is currently exploring the therapeutic
potential of these agents as drugs to limit the onset and severity of
asthma in susceptible individuals.
- Lilly Collaboration--Under a research collaboration with Lilly, Peptide is
applying RAPiD to four protease targets provided by Lilly.
- Novartis Collaboration--Under a research collaboration with Novartis,
Peptide is applying RAPiD to one protease target provided by Novartis.
- Bacterial Protease Inhibitors--Antibiotic resistance is a growing problem.
Several bacterial diseases are difficult to treat as they are either not
amenable to treatment with antibiotics or the causative bacteria are
becoming resistant to antibiotics. New approaches to treatment are
therefore required. Proteases which are secreted by resistant bacteria
represent potential new drug targets. The Medical Research Council, with
whom Peptide is collaborating on this project, is identifying target
proteases to which Peptide is applying its RAPiD technology to design
novel and specific inhibitors of these proteases and investigate their
therapeutic application. The most advanced project in the Medical Research
Council collaboration is to develop an inhibitor of the protease
GINGIPAIN. This is an important protease secreted by the organism P.
GINGIVALIS responsible for periodontal (gum) disease and recently
implicated as a factor in cardiovascular disease. Peptide and the Medical
Research Council are also evaluating several other bacterial protease
targets.
DIRECTED IMMUNOMODULATION
DESCRIPTION OF THE TECHNOLOGY. Directed immunomodulation is a means of
controlling the effects of T cells. T cells are the critical components of the
immune system which control the immune response to antigens. In allergy and
certain other disease states this immune response may not be beneficial and can
lead to certain organ and tissue damage.
Peptide is developing peptides which are capable of tolerising (switching
off) T cells that are directing an inappropriate, and therefore harmful, immune
response. Peptide's approach is to identify the critical epitope (recognition
sequence) which promotes T cell activation and then use this epitope as a
template to design novel immunotherapeutic drugs.
RESEARCH PROGRAMS. Peptide's research effort in this area is currently
focused on multiple sclerosis. Multiple sclerosis is an autoimmune disease in
which components of the body's own immune system attack the myelin sheath which
surrounds certain nerves and damage the normal transmission of signals down the
nerve.
Peptide is using its directed immunomodulation technology to develop
modified peptides that have the ability to tolerise those cells of the immune
system responsible for the disease. Several product candidates have been
identified and these are currently being optimized. Peptide is carrying out this
project in collaboration with Bristol University and the Multiple Sclerosis
Society.
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PROPERTIES
Until March 29, 1999, Peptide leased facilities on the Cambridge Science
Park in Cambridge, England. Peptide has assigned each of these leases to new
tenants and has since moved to new premises in Cambridge. On December 16, 1998
it entered into a 25-year lease on a new 30,000 square foot purpose-built
research and development building on the Peterhouse Technology Park on the south
side of Cambridge and between then and March 29, 1999 the building has been
fitted out to Peptide's specification prior to its occupation. The annual rental
on the new premises is L520,000 per annum.
EMPLOYEES
At the time of its listing on the London Stock Exchange in November 1995
Peptide had 29 employees. It has recruited actively since then and at March 26,
1999 had 88 employees, of which approximately 74 are engaged in research and
development and 42 have a Ph.D.
LITIGATION
There are no material legal proceedings pending to which Peptide or any of
its subsidiaries is a party.
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OWNERSHIP OF PEPTIDE SHARES
BENEFICIAL OWNERSHIP BY MANAGEMENT OF PEPTIDE
The following table sets forth information with respect to the Peptide
shares owned of record and beneficially owned as of March 26, 1999 (unless
otherwise noted), by:
- each named current director of Peptide,
- each named executive officer of Peptide, and
- all directors and officers of Peptide as a group.
The business address of each of the directors and executive officers is
Peterhouse Technology Park, 100 Fulbourn Road, Cambridge, CB1 9PT, England.
<TABLE>
<CAPTION>
PERCENT OF
PEPTIDE CURRENT
NUMBER OF ISSUED SHARE CAPITAL
PEPTIDE PRIOR TO THE
NAME SHARES(5) MERGER(5)
- ------------------------------------------------------------------------- ---------------- ---------------------
<S> <C> <C>
Alan Goodman............................................................. 3,132,818(1) 4.75%
John Brown............................................................... 289,000(2) *
Gordon Cameron........................................................... 4,500 *
Nicolas Higgins.......................................................... 284,500(2) *
Sir Brian Richards....................................................... 384,458(2 (3) 0.58%
Alan Dalby............................................................... 9,000 *
Alan Smith............................................................... 1,800 *
All executive officers and directors as a group (7 persons).............. 4,106,076(4) 6.23%
</TABLE>
- ------------------------
(1) Includes 738,766 shares held by ATM Investments Limited, a company in which
Mr. Goodman is the controlling shareholder.
(2) Includes 280,000 shares issuable upon exercise of share options exercisable
within the 60-day period following January 27, 1999.
(3) Consists of 78,458 shares owned jointly by Abacus Trustees (Jersey) Limited
and Abacus (C.I.) Limited, the trustees of a trust of which Sir Brian
Richards is the settlor.
(4) See footnotes (1) through (3) above.
(5) Includes shares to be issued under the recent rights issue and the
subsequent dilutive effect.
BENEFICIAL OWNERSHIP OF CERTAIN STOCKHOLDERS
The following table sets forth information as to the stockholders known to
Peptide to be the beneficial owners of more than 5% of Peptide shares. The
information with respect to Peptide shares is based on information known to
Peptide as of March 26, 1999. Percentages shown are based on 36,579,039 shares
outstanding on March 26, 1999, plus the additional 29,263,231 shares to be
issued under the rights issue, for a total of 65,842,270 shares.
<TABLE>
<CAPTION>
PERCENT OF
PEPTIDE CURRENT
ISSUED SHARE
NUMBER OF PEPTIDE CAPITAL PRIOR TO THE
NAME AND ADDRESS BENEFICIAL OWNERS SHARES(1) MERGER(1)
- ------------------------------------------------------------------------- ----------------- ---------------------
<S> <C> <C>
3i Group plc............................................................. 4,062,818(1) 6.17%
91 Waterloo Road
London SEI 8XP, England
</TABLE>
- ------------------------
(1) Includes shares to be issued under the recent rights issue and the
subsequent dilutive effect.
75
<PAGE>
SELECTED FINANCIAL INFORMATION OF PEPTIDE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected financial information of Peptide for each of the
fiscal years in the five-year period ended December 31, 1997 has been derived
from Peptide's audited consolidated financial statements. The consolidated
financial statements as of December 31, 1996, December 31, 1997 and June 30,
1998 and for each of the fiscal years in the three-year period ended December
31, 1997, and the six month periods ended June 30, 1998 and 1997, and the report
thereon, are included elsewhere in this prospectus/proxy statement. The
consolidated balance sheet data at June 30, 1998 and the consolidated statement
of operations data for the six months ended June 30, 1997 and 1998 are derived
from unaudited consolidated financial statements. The unaudited consolidated
financial statements include all adjustments consisting of only normal recurring
adjustments that Peptide considers necessary for a fair presentation of its
financial position and results of operations for these periods. The selected
financial data has been prepared in accordance with U.K. GAAP, which differs in
respect from U.S. GAAP. The principal differences between U.K. GAAP and U.S.
GAAP are summarized in Note 21 of Peptide's Audited Consolidated Financial
Statements appearing elsewhere in this prospectus/proxy statement. The selected
data below as of and for the six-month period ended June 30, 1998 are not
necessarily indicative of the results of operations to be expected for the
fiscal year ending December 31, 1998. Translation of pounds sterling into U.S.
dollars for the six months ended June 30, 1998 has been made at the rate of
L1.00 = $1.6695 based upon the noon buying rates on June 30, 1998. This
translation is provided solely for the convenience of the reader and does not
reflect financial information in accordance with generally accepted accounting
principles for foreign currency translations. The following information should
be read in conjunction with "Peptide Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Peptide's Consolidated
Financial Statements and the notes thereto appearing elsewhere in this
prospectus/proxy statement.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
1993 1994 1995 1996 1997 1997 1998 1998
--------- --------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
U.K. GAAP
Turnover (Revenues).............. L 90 L 50 L 160 L 153 L 2,795 L 2,525 L 195 $ 326
OPERATING EXPENSES:
Research & development costs,
net............................ 263 1,875 2,954 4,956 9,745 5,410 4,479 7,478
Administrative expenses.......... 66 918 1,041 1,260 1,485 784 758 1,265
Other operating income........... -- -- -- -- (439) (215) (126) (210)
--------- --------- --------- --------- --------- --------- --------- ---------
Total operating expenses......... 329 2,793 3,995 6,216 10,791 5,979 5,111 8,533
--------- --------- --------- --------- --------- --------- --------- ---------
Operating loss................... (239) (2,743) (3,835) (6,063) (7,996) (3,454) (4,916) (8,207)
Interest receivable, net......... 1 21 223 1,469 1,542 755 649 1,084
Tax on loss on ordinary
activities..................... -- -- (9) -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- ---------
Loss on ordinary activities after
taxation....................... L (238) L(2,722) L(3,621) L(4,594) L (6,454) L(2,699) L(4,267) $ (7,123)
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Loss per ordinary share.......... L(0.99) L (2.08) L (0.20) L (0.14) L (0.18) L (0.08) L (0.12) $ (0.20)
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
1995 1996 1997 1997 1998 1998
--------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. GAAP
Operating expenses....................... L 3,999 L 6,324 L12,399 L 7,057 L 4,840 $ 8,081
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Net loss................................. (3,625) (4,702) (7,250) (3,562) (3,813) (6,365)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Basic and diluted net loss per share..... L (0.21) L (0.14) L (0.20) L (0.10) L (0.11) $ (0.18)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
</TABLE>
76
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1993 1994 1995 1996 1997 1998 1998
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
U.K. GAAP
Cash and liquid resources.......... L211 L1,081 L27,220 L20,556 L20,751 L15,862 $ 26,482
Working capital.................... 148 1,773 25,949 19,410 19,369 14,807 24,721
Fixed assets....................... 84 208 814 2,488 2,863 3,177 5,304
Total assets....................... 428 2,360 29,458 24,977 25,342 21,530 35,944
Long-term obligations.............. -- 30 65 -- -- -- --
Shareholders' equity............... 232 1,951 27,762 23,168 23,466 19,413 32,410
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997 1998 1998
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. GAAP
Cash, cash equivalents and short-
term investments............... L20,556 L20,751 L15,862 $ 26,482
Working capital.................. 19,410 19,369 14,807 24,721
Fixed assets..................... 2,488 2,863 3,177 5,304
Total assets..................... 23,913 24,314 20,307 33,902
Long-term obligations............ -- -- -- --
Shareholders' equity............. 22,104 22,438 18,190 30,368
</TABLE>
77
<PAGE>
PEPTIDE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Since its incorporation in 1993, Peptide has been engaged in the research
and development of novel drugs and vaccines.
To date, Peptide has not received any revenues from the sale of products and
does not expect to receive any such revenues before 2002. The first product
revenues are anticipated from sales of either an allergy vaccine or an oral
typhoid vaccine. If successfully developed, Peptide intends to seek a
collaborative partner to undertake sales of these products, from which Peptide
would expect to receive royalties. Peptide's losses incurred since inception
have resulted principally from expenditures on research and development. Peptide
expects to incur significant operating losses over the next several years due
primarily to expanded research and development efforts, preclinical testing and
clinical trials of its product candidates and the acquisition of additional
technologies. Results of operations may vary significantly from quarter to
quarter depending on, among other factors, the progress of Peptide's research
and development efforts, the receipt, if any, of milestone payments, the timing
of certain expenses and the establishment of collaborative research agreements.
On November 10, 1998 Peptide entered into an agreement to acquire OraVax in
a transaction anticipated to close prior to the end of the first quarter of
1999. The merger would create a larger biopharmaceutical company involved in the
development of novel drugs, vaccines and antibody products that control
significant human diseases. The merged company would have a total of ten
products in development, eight of which are currently in clinical trials, with
the other two scheduled to go into clinical trials in the next twelve months,
and multiple corporate partnerships including ones with PMC and SmithKline
Beecham.
RIGHTS ISSUE
On March 11, 1999, Peptide announced the completion of a rights issue with
net proceeds of L20.6 million. Raising this money satisfied a condition to the
merger. In the offering Peptide sold 29,263,231 new shares at a price of 78
pence per share. Each Peptide shareholder had the opportunity to purchase 4 new
Peptide shares for every 5 shares he held. BT Alex. Brown International
underwrote the rights issue.
PRELIMINARY 1998 FINANCIAL INFORMATION
On March 22, 1999, Peptide announced its preliminary results for the year
ended December 31, 1998. Selected unaudited 1998 financial information is
presented below. These are not "statutory accounts" within the meaning of
Section 240 of the Companies Act 1985. The audited statutory accounts for the
year ended December 31, 1998 will be sent to Peptide's shareholders in the
notice of its annual general meeting. The following table and discussion
reflects Peptide's proposed reclassification in connection with the issuance of
its 1998 statutory accounts of L439,000 in 1997 from other operating income to
turnover. This reclassification does not affect amounts previously reported for
1997 operating losses or loss on ordinary activities after taxation. The data in
the table are in thousands, except the per share data.
78
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
STATEMENT OF OPERATIONS DATA:
U.K. GAAP
Turnover (Revenues)........................................................................ L 731 L 3,234
Operating Expenses:
Research and development costs, net........................................................ (8,107) (9,745)
Administrative expenses.................................................................... (1,277) (1,485)
--------- ---------
Total Operating Expenses................................................................... 9,384 11,230
--------- ---------
Operating loss............................................................................. (8,653) (7,996)
Preferred dividend receivable.............................................................. 22 --
Net interest receivable.................................................................... 1,118 1,542
--------- ---------
Loss on ordinary activities before and after tax........................................... L(7,513) L(6,454)
--------- ---------
--------- ---------
Loss per ordinary share.................................................................... L (20.7)p L (18.1)p
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
U.S. GAAP
Operating expenses............................................................................. L 8,476 L12,399
--------- ---------
--------- ---------
Net loss....................................................................................... (6,605) (7,250)
--------- ---------
--------- ---------
Basic and diluted net loss per share........................................................... L (18.2)p L (20.4)p
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
BALANCE SHEET DATA:
U.K. GAAP
Cash and liquid resources................................................................... L 9,754 L20,751
Working capital............................................................................. 8,660 19,369
Fixed assets................................................................................ 3,875 2,863
Total assets................................................................................ 20,006 25,342
Long-term obligations....................................................................... -- --
Shareholders' equity........................................................................ L16,204 L23,466
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
U.S. GAAP
Cash, cash equivalents and short-term investments........................... L 9,754 L20,751
Working capital............................................................. 8,660 19,369
Fixed assets................................................................ 3,875 2,863
Total Assets................................................................ 18,122 24,314
Long-term obligations....................................................... -- --
Shareholders' Equity........................................................ 14,320 22,438
</TABLE>
79
<PAGE>
Peptide's total revenues for 1998 were L0.7 million, representing a decrease
of L2.5 million from L3.2 million in 1997. Revenue in 1997 was higher than in
1998 primarily because of a L2.4 million license fee paid by SmithKline Beecham
in 1997.
Research and development expenses decreased L1.6 million to L8.1 million
from L9.7 million in 1997. The 1997 figure included a L1 million payment to
Medeva for its mucosal vaccine patents.
During 1998, Peptide made a number of non-recurring cash expenditures.
First, Peptide spent L1.0 million preparing its new leased office space for
occupancy. Second, the Peptide Employee Share Trust acquired L0.7 million of
Peptide shares to cover future share option exercises by employees. Third, in
connection with the merger, Peptide acquired L1.8 million of OraVax convertible
preferred stock. Peptide ended 1998 with cash and liquid resources of L9.8
million.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
Peptide's total revenues decreased to L195,000 in the six months ended June
30, 1998 from L2,525,000 in the six months ended June 30, 1997. In the six
months ended June 30, 1998, Peptide's revenues consisted primarily of L185,000
in revenue relating to Peptide's agreements with Alizyme and PM-O and L9,000
from sales of reagents. In addition Peptide received L126,000 of other operating
income relating to development costs incurred by Peptide on its allergy vaccine
and charged to SmithKline Beecham. In the six months ended June 30, 1997,
Peptide's revenues consisted of L2,400,000 in license fees from SmithKline
Beecham in respect of the allergy vaccine and L125,000 in revenue relating to
Peptide's agreement with Alizyme. In May 1996 Peptide entered into an agreement
with Alizyme under which Peptide agreed to provide certain services relating to
the use of Peptide's combinatorial chemistry techniques in exchange for
committed funding by Alizyme of L250,000 per year for a three year period. Other
operating income for the period included development costs of L215,000 incurred
by Peptide on its allergy vaccine and charged to SmithKline Beecham.
Research and development expenses decreased to L4,479,000 in the six months
ended June 30, 1998 from L5,410,000 in the six months ended June 30, 1997. The
reduction is primarily due to the payment in 1997 of L1,000,000 to Medeva for
its mucosal vaccine technology. Other research and development expenses,
primarily staff costs, laboratory supplies, external research and clinical trial
costs and intellectual property costs, were all maintained at a similar level to
the six months ended June 30, 1997. Government grants (netted against research
and development expenses) decreased to L57,000 in the six months ended June 30,
1998 from L144,000 in the six months ended June 30, 1997, as SmithKline Beecham
assumed more of the development costs on the allergy vaccine directly, thereby
reducing the level of claims made under the SpurPlus grant. SpurPlus is a UK
government grant administered by the Department of Trade and Industry to assist
companies in the progression of development stage products. Under the scheme, a
percentage of Peptide's expenditures are reimbursed. The maximum under the
scheme is L450,000 of reimbursement for L1,500,000 of expenditure.
Administrative expenses decreased to L758,000 in the six months ended June
30, 1998 from L784,000 in the six months ended June 30, 1997, primarily
reflecting a lower number of executive directors.
Net interest income decreased to L649,000 in the six months ended June 30,
1998 from L755,000 in the six months ended June 30, 1997, due primarily to lower
average levels of cash and liquid investments.
Peptide incurred a net loss of L4,267,000 in the six months ended June 30,
1998 compared to a net loss of L2,699,000 in the six months ended June 30, 1997,
due to the lower level of revenue partially offset by the lower levels of costs.
80
<PAGE>
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
Peptide's total revenues increased to L2,795,000 in 1997 from L153,000 in
1996. In 1997, Peptide's revenues consisted of L2,400,000 in license fees from
SmithKline Beecham in respect of the allergy vaccine, approximately L250,000 and
approximately L90,000 in revenue relating to Peptide's agreements with Alizyme
and Pfizer, respectively, L50,000 from other revenues and L5,000 from sales of
reagents. In addition, Peptide received L439,000 of other operating income
relating to development costs incurred by Peptide on the allergy vaccine and
recharged to SmithKline Beecham. In 1996, Peptide's revenues consisted of
L63,000 in revenue relating to Peptide's agreement with Alizyme, L20,000 from
other revenues and L70,000 from sales of reagents. No other operating income was
received in 1996 as the collaboration with SmithKline Beecham did not commence
until 1997.
Research and development expenses increased to L9,745,000 in 1997 from
L4,956,000 in 1996. Part of the increase is attributable to the L1,000,000
payment to Medeva in 1997 for its mucosal delivery technology, product
candidates and patents and Peptide's contribution of L500,000 to Medeva to fund
the development program within Medeva's Vaccine Research Unit. The remaining
increase reflected an expansion in scientific personnel and in the number of the
research and development programs, both of which contributed to an increase in
the level of laboratory supplies. It also reflected the clinical progress made
over the year as several projects entered into and progressed through clinical
trials. Government grants (netted against research and development expenses)
increased to L373,000 in 1997 from L97,000 in 1996, as activity on the allergy
vaccine increased and further claims were made under the SpurPlus grant.
Administrative expenses increased to L1,485,000 in 1997 from L1,260,000 in
1996, reflecting the general expansion of the company and its facilities.
Net interest income increased to L1,542,000 in 1997 from L1,469,000 in 1996,
due to slightly lower average levels of cash and liquid investments being more
than offset by higher interest rates on invested monies.
Peptide incurred a net loss of L6,454,000 in 1997 compared to a net loss of
L4,594,000 in 1996, primarily reflecting increased research and development
costs more than offsetting the increased revenue.
YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995
Peptide's total revenues decreased to L153,000 in 1996 from L160,000 during
1995. In 1996, Peptide's revenues consisted of L63,000 in revenue relating to
Peptide's agreement with Alizyme, L20,000 from other revenues and L70,000 from
sales of reagents. In 1995, Peptide's revenues consisted of L120,000 from other
collaborative revenues and L40,000 from sales of reagents.
Research and development expenses increased to L4,956,000 in 1996 from
L2,954,000 in 1995. The increase reflected an expansion in scientific personnel
and in the number of the research and development programs, both of which
contributed to an increase in the level of laboratory supplies. Government
grants (netted against research and development expenses) increased to L97,000
in 1996 from L30,000 in 1995, as claims began to be made under the SpurPlus
grant for the allergy vaccine.
Administrative expenses increased to L1,260,000 in 1996 from L1,041,000 in
1995, reflecting the general expansion of Peptide and its facilities.
Net interest income increased to L1,469,000 in 1996 from L222,000 in 1995,
due to higher average levels of cash and liquid investments, following receipt
of L30,659,000 of net proceeds from equity issuances during 1995.
81
<PAGE>
Peptide incurred a net loss of L4,594,000 in 1996 compared to a net loss of
L3,621,000 in 1995, reflecting the overall increase in costs as expansion of the
company took place following its listing on the London Stock Exchange.
LIQUIDITY AND CAPITAL RESOURCES
From inception through June 30, 1998 Peptide has financed its operations
primarily by equity issuances totaling L43,687,000, up-front license fees and
milestone payments totaling L2,690,000, research and development revenues
totaling L1,090,000 and sales of reagents of L125,000 and government grants
totaling L557,000. As of June 30, 1998, Peptide had cash, cash equivalents and
marketable securities totaling L15,862,000. In addition it held investments in
Alizyme (market value at June 30, 1998 of L167,000) and in Peptide ordinary
shares, through Peptide's Employee Share Ownership Trust (market value at June
30, 1998 of L1,343,000).
Peptide has entered into licensing agreements with various corporations.
These licenses provide for the payment of license fees, royalties and milestone
payments to Peptide under certain circumstances. In 1997 Peptide received
L2,795,000 under these agreements. In addition, Peptide has entered into certain
agreements with corporations and universities which require Peptide to pay
license fees, royalties and milestone payments under certain circumstances. In
1997 Peptide incurred fees and payments of L54,000 under these agreements.
In connection with a licensing deal on the allergy vaccine entered into in
February 1997, SmithKline Beecham purchased from Peptide L3,600,000 of Peptide
ordinary shares, at 360p per share which was above the market price at such
time. In connection with the purchase by Peptide from Medeva of mucosal vaccine
technology and the related collaboration entered into in January 1997, Medeva
purchased from Peptide L3,000,000 of Peptide ordinary shares, at 340p per share
which was above the market price at such time.
From inception through June 30, 1998, Peptide has acquired an aggregate of
L4,057,000 of laboratory and office equipment. In addition, Peptide leases its
office and laboratory facilities under operating leases. Through June 30, 1998,
Peptide had expended L817,000 for leasehold improvements to those leased
facilities. In March 1998 Peptide entered into an agreement to lease a new
30,000 square foot (net) research and development building. The total cost of
fitting out the building to meet Peptide's specifications will be approximately
L4,600,000. The developer has agreed to contribute approximately L2,300,000
toward the cost, reducing the total funding required by Peptide to approximately
L2,300,000. Through June 30, 1998 Peptide had expended L528,000 for this
facility.
Peptide's aggregate cash and liquid resources were L20,751,000 at December
31, 1997, an increase of L261,000 since December 31, 1996. Cash used by
operations during the period, principally to support research and development,
was L5,190,000. Peptide expended L1,338,000 for property and equipment and
repaid L65,000 of its capital lease obligations. It received L6,788,000 from the
issue of new shares, made up of L3,600,000 from SmithKline Beecham, L3,000,000
from Medeva and the balance from the exercise of share options.
Peptide's aggregate cash and liquid resources were L15,862,000 at June 30,
1998, a decrease of L4,889,000 since December 31, 1997. Cash used by operations
during the period, principally to support research and development, was
L4,328,000. Peptide expended L579,000 for property and equipment and lent a
total of L195,000 to Peptide's Employee Share Ownership Trust to finance the
purchase by it of shares in Peptide. It received L214,000 from the issue of new
shares, primarily from the exercise of share options. At December 31, 1998, cash
and liquid resources had dropped to L9.8 million.
Since inception, Peptide's cash expenditures have exceeded its revenues on
an annualized basis. Peptide's future capital requirements will depend on many
factors, including, but not limited to, the progress of its research and
development programs, the progress of preclinical and clinical testing, the
82
<PAGE>
time and costs involved in obtaining regulatory approvals, the cost of filing,
prosecuting, defending and enforcing any patent claims and other intellectual
property rights, competing technological and market developments, changes in
Peptide's existing research relationships, the ability of Peptide to establish
collaborative arrangements, receipt of any license fees and royalties and the
acquisition of additional facilities and capital equipment.
During March 1999, Peptide completed a financing which resulted in the
receipt by Peptide of L20.6 million. Peptide believes that it will have
sufficient cash to fund its operations through mid-2000. Changes in Peptide's
research and development plans or other events affecting Peptide's operations,
however, may result in accelerated or unexpected expenditures. If additional
funds are raised by issuing equity securities in the financing discussed above
or otherwise, dilution to existing stockholders may result and future investors
may be granted rights superior to those of existing stockholders.
YEAR 2000
The Year 2000 problem is the result of computer programs having been written
using two digits, rather than four, to define the applicable year. Computer
programs and embedded computer chips may be unable to distinguish between the
years 1900 and 2000. Any computer hardware, software, research and development,
manufacturing or administrative equipment, and operational infrastructure
systems used by Peptide or by its external business partners may recognize a
year using "00" as the last two digits, as the year 1900 rather than the year
2000.
During the first quarter of 1998, Peptide implemented an internal Year 2000
compliance task force. The goal of the task force is to identify and minimize
disruptions to Peptide's business that could result from the Year 2000 problem,
and to minimize liabilities that Peptide might incur in connection with the Year
2000 problem. The task force consists of employees of Peptide representating
major operational functions. It is headed by Gordon Cameron, Finance Director,
and reports to the Audit Committee of the Board of Directors.
Peptide has conducted a company-wide assessment of its computer systems and
operations infrastructure to identify computer hardware, software, research and
development equipment and process control systems that are not Year 2000
compliant, or to develop contingency plans. Peptide expects to have these steps
completed soon.
Peptide has also identified and prioritized significant providers, vendors,
suppliers and worldwide research and development, manufacturing and clinical
trial related third parties that are critical to business operations. Peptide is
in the process of communicating with these external parties, through interviews
and questionnaires, to ascertain their Year 2000 compliance. These evaluations
will be followed by the development of contingency plans, including alternate
service providers and contractors, vendors and suppliers. Peptide expects to
have these steps completed soon. Going forward, Peptide will use its best
efforts to ensure that new service providers and contractors, vendors and
suppliers are Year 2000 compliant before engaging in business with them.
Peptide's greatest risk is the failure of critical, worldwide research and
development, manufacturing or clinical trial related service contractors not
being Year 2000 compliant. Because of the significant number of these external
service contractors and the vast number of business systems used by these
parties, Peptide may experience some disruption in its business operations.
Peptide is unable to determine at this time whether the consequences of Year
2000 failures by these parties will have a material impact on Peptide's business
operations. Peptide believes that with the implementation of contingency plans,
including identifying alternative service contractors, the possibility of
material interruptions of normal operations should be reduced. However, there is
no assurance that Peptide will be successful in finding alternative service
contractors. In the event that Peptide is unable to replace Year 2000
non-compliant service contractors, Peptide's business operations could be
adversely affected.
83
<PAGE>
To date, Peptide has not incurred any material costs related to the
assessment of its internal and external Year 2000 compliance. The total costs of
Peptide's Year 2000 compliance efforts are not expected to be more than L40,000.
Peptide is using its reasonable efforts to ensure internal and external Year
2000 compliance. However, there can be no guarantee that Peptide's assessment
and correction efforts will prove accurate. Key external business partners may
be unsuccessful in solving their Year 2000 issues and Peptide may be
unsuccessful in identifying alternative critical service providers and
contractors, vendors and suppliers. As a result, Year 2000 problems may
adversely impact Peptide's business operations. Peptide's readiness program is
an ongoing process and the estimates of the costs and completion dates described
above are subject to change.
EURO CONVERSION
On January 1, 1999, 11 of the 15 member countries of the European Union
established fixed conversion rates between their existing currencies and a new
common currency called the "euro." This represents an initial step in a process
expected to culminate in the replacement of the existing currencies with the
euro. The United Kingdom is one of the four member countries that are not
participating in the conversion to the euro. The conversion to the euro by the
participating countries, and any decision in the future by the United Kingdom to
participate, would have operational and legal implications for some of Peptide's
business activities. These include technical adaptation of internal systems to
accommodate euro-denominated transactions, long-term competitive implications of
the conversion and the effect on market risk with respect to financial
instruments.
RECONCILIATION OF U.K. GAAP TO U.S. GAAP
Peptide's consolidated financial statements are prepared in accordance with
U.K. GAAP, which differs in significant respects from U.S. GAAP.
The principal difference between the U.K. GAAP and U.S. GAAP statement of
operations for Peptide relates to the accounting for stock options granted to
employees. Peptide has granted stock options that will vest upon the attainment
of certain targets. Under U.K. GAAP, there is no accounting for these grants
after the initial grant date. Under U.S. GAAP, APB Opinion 25, Peptide would be
required to follow variable plan accounting for these grants and measure
compensation expense as the difference between the exercise price and the fair
market value of the stock during each accounting period over the vesting period
of the options. Increases in the fair market value of the stock would result in
a charge to operations and decreases in the fair market value of the stock would
result in a credit to operations.
Peptide's net loss for the years ended December 31, 1995, 1996 and 1997 and
the six months ended June 30, 1997 and 1998 was L3,621,000, L4,594,000,
L6,454,000, L2,699,000 and L4,267,000, respectively under U.K. GAAP. Under U.S.
GAAP, Peptide would have reported net losses of L3,625,000, L4,702,000,
L7,250,000, L3,562,000 and L3,813,000, respectively.
Certain Peptide accounts have been reclassified to conform with U.S. GAAP.
In the statement of operations, Peptide has reclassified amounts received under
government grants to revenue. Under U.K. GAAP, these grants were presented as a
reduction in research and development expense. In addition, Peptide has also
reclassified amounts received as reimbursements for research and development
agreements to revenue. Under U.K. GAAP, these reimbursements were presented as a
component of operating expenses under the caption, other income. In the balance
sheet, Peptide has reclassified the cost of its own shares purchased as a
reduction of stockholders' equity. Under U.K. GAAP, the shares purchased were
presented as an asset.
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Another significant difference between U.K. GAAP and U.S. GAAP relates to
the accounting for business combinations. Under U.K. GAAP, the entire purchase
price premium is capitalized as goodwill and amortized over its estimated useful
life. Under U.S. GAAP, the purchase price premium is allocated to identifiable
intangibles, including in process research and development and goodwill.
Furthermore, under U.S. GAAP, there is a write-off, as of the date of the
acquisition, of that portion of the purchase price allocated to research and
development projects where technological feasibility has not yet been
established and for which there are no alternative future uses while the other
identifiable intangibles and goodwill are capitalized and amortized over their
estimated useful lives. Based on a preliminary estimate, the acquisition of
OraVax will result in an in-process research and development charge of
approximately $15,000,000 under U.S. GAAP. This would be reported as a
reconciling item between U.K. GAAP and U.S. GAAP in the period in which the
transaction is consummated.
Another difference between U.K. GAAP and U.S. GAAP relates to accounting for
income taxes. For U.S. GAAP purposes, under SFAS No. 109 deferred tax assets and
liabilities are recognized based on temporary differences between the financial
reporting and tax basis of assets and liabilities using statutory rates. SFAS
109 provides for deferred tax assets to be reduced by a valuation allowance, if
based upon the weight of available evidence, management believes that it is more
likely than not that the deferred tax asset will not be realized. As of December
31, 1997, Peptide had a gross deferred tax asset of approximately L5,197,000.
For U.S. GAAP purposes, Peptide has recorded a full valuation against this asset
due to the uncertainty surrounding the realizability of this asset based on the
risk factors discussed on pages 18-21. Under U.K. GAAP, Peptide would record the
benefit of the operating loss carryforwards in the period that the losses are
utilized to offset taxable income.
Other reconciling differences are detailed in Note 21 to the Peptide
consolidated financial statements.
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DESCRIPTION OF ORAVAX
GENERAL
OraVax, Inc. was incorporated in Delaware in 1990 and has its principal
offices and laboratories at 38 Sidney Street, Cambridge, Massachusetts
(telephone: (617) 494-1339).
BUSINESS
OraVax is engaged in the discovery, development and commercialization of
vaccine and antibody products for the prevention and treatment of human
infectious diseases. OraVax's products are vaccines that stimulate the body's
own immunity to provide long term protection against disease, as well as
antibody products that provide immediate passive immunity to treat existing
infections or to protect against an acute disease risk. OraVax's focus has been
on diseases of the mucosal surfaces and has been broadened to include a series
of arboviral (insect borne) diseases addressable by single-dose live viral
vaccines.
OraVax is currently pursuing five proprietary product development programs.
The diseases targeted by these programs include:
- peptic ulcers and gastritis;
- yellow fever;
- a group of viral diseases related to yellow fever, including Japanese
encephalitis, dengue, tick borne encephalitis and hepatitis C;
- antibiotic-associated colitis; and
- viral pneumonia in children;
OraVax's product candidates are designed to generate either mucosal or systemic
immunity, as appropriate to each specific disease target. OraVax also has
developed a portfolio of biologic production technologies.
OraVax's product candidates include the following:
<TABLE>
<CAPTION>
PRODUCT CANDIDATE INDICATION TECHNOLOGY STATUS
- --------------------------- --------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
Helicobacter pylori Prevention and treatment of Recombinant protein vaccine Phase 2 trials ongoing
(H. PYLORI) vaccines peptic ulcers and gastritis
HNK 20 antibody Prevention of pneumonia Monoclonal IgA antibody On hold pending third party
caused by respiratory nosedrop funding of phase 3 trials
syncytial virus in high
risk children
CdVax vaccine and CdIG Prevention/treatment of Toxoid vaccine and hyper- Toxoid IND filed in
immune-globulin antibiotic-associated immune globulin September 1998; phase 1
colitis trial initiated first
quarter of 1999
ChimeriVax-TM- Japanese Prevention of infection by Chimeric live attenuated IND expected to be filed in
encephalitis (follow on the Japanese en- viral vaccine 1999
products include dengue, cephalitis virus and other
hepatitis C, TBE) flaviviruses
Arilvax-Registered Trademark- Prevention of infection by Single-dose live attenuated OraVax to facilitate US
YF vaccine (a product of the yellow fever virus viral vaccine registration (already
Medeva Pharma Limited) marketed in the UK and
Europe); Medeva to fund
phase 3 trials scheduled
for 1999
</TABLE>
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To date, OraVax has not received any revenues from the sale of products and
does not expect to receive any such revenues until late 2000, at the earliest.
The first product revenues are anticipated from sales of the yellow fever
vaccine, under OraVax's partnership with Medeva. OraVax's losses incurred since
inception have resulted principally from expenditures under its research and
development programs, and OraVax expects to incur significant operating losses
for the foreseeable future due primarily to research and development efforts,
preclinical testing and clinical trials of its product candidates, the
acquisition of additional technologies, and the performance of commercialization
activities.
SCIENTIFIC BACKGROUND
The human immune system is comprised of two systems: systemic and mucosal,
each including immunity mediated directly by the cells of the immune system,
"cell mediated immunity" and immunity mediated by antibody proteins, "humoral
immunity." Immunologically reactive cells react directly with the target
antigens on viruses or bacteria to inactivate them and also have direct
cytotoxic effects on virally infected cells. The systemic humoral immune system,
which protects the blood and deep tissues of the body, relies on antibodies
composed principally of IgG and IgM immunoglobulins. The mucosal immune system,
which protects mucosal surfaces, such as the digestive, respiratory and
genitourinary tracts and the surface of the eye, relies on antibodies composed
principally of the IgA class of immunoglobulins. Historically, vaccine or
antibody development has been focused on the systemic immune system, with the
objective of increasing IgG antibodies in the blood by injecting vaccines or
specific preformed immunoglobulins.
Conventional vaccines and antibodies are designed to provide systemic, as
opposed to mucosal immunity and are administered by injection. Such products
include:
- routine childhood vaccines such as diphtheria, tetanus, pertussis,
hepatitis B, measles, mumps and rubella;
- adult vaccines such as influenza and hepatitis B; and
- immune globulins such as rabies and cytomegalovirus.
These products provide immunity to infection only after the infecting organism
has entered the bloodstream or deep tissues of the body. In contrast, mucosal
vaccines and antibody products are not injected but rather are applied to
mucosal surfaces (e.g., orally or intranasally). Mucosal vaccines are designed
to prevent infection at the point of entry into the body, prior to deep tissue
penetration. Mucosal vaccine and antibody products may prevent or treat
infections that are not susceptible to a systemic immunity approach and can also
complement the effectiveness of systemic immunity.
PRODUCTS UNDER DEVELOPMENT
VACCINES AGAINST H. PYLORI
MARKET OPPORTUNITY. OraVax is developing vaccines designed to prevent and
treat peptic ulcers and chronic gastritis caused by H. PYLORI. According to an
NIH consensus statement dated February 1994, H. PYLORI has been associated with
virtually all duodenal ulcer cases and more than 80% of gastric ulcer cases. It
is estimated that at least five million people suffer from active peptic ulcers
each year and approximately 350,000 to 500,000 new cases are diagnosed annually
in the United States. Approximately 600,000 patients are hospitalized each year
in the United States with peptic ulcers. Additionally, H. PYLORI has been
classified as a Class I carcinogen which has been associated with a majority of
stomach cancers.
ORAVAX APPROACH. OraVax is developing vaccines to treat H. PYLORI
infection, to prevent reinfection in previously-infected persons and to
stimulate immunity in uninfected persons. OraVax believes that vaccines directed
against H. PYLORI, if successfully developed, would eventually be considered for
routine
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administration as treatment for peptic ulcer disease and chronic gastritis and
as a preventive for the full spectrum of H. PYLORI-caused diseases.
OraVax is evaluating antigens derived from H. PYLORI bacteria, as well as
several formulation technologies for use in vaccines designed to combat existing
infections (treatment of chronic gastritis or recurrent peptic ulcer) and/or to
prevent primary infection or reinfection. Preclinical and clinical studies have
confirmed the activity of OraVax's leading, proprietary vaccine candidate
antigen, the urease protein. Pre-clinical studies indicated that, when given by
the mucosal route or by injection, urease has both prophylactic and therapeutic
activity.
OraVax is conducting phase 2 clinical trials with its leading candidate
vaccine called UreAB. The vaccine is based on urease. Urease is present in all
strains of H. PYLORI and is exposed on the surface of the bacteria as a target
for an antibody.
In October 1996, OraVax announced results of a phase 2 safety and
immunogenicity study of recombinant urease, formulated with a mucosal adjuvant.
While the study involved a small population, it provided evidence that the
vaccine could have therapeutic activity in humans naturally infected with H.
PYLORI. These results are consistent with earlier results in animal models.
Based on the results indicating therapeutic activity of UreAB, efforts are
being directed toward optimizing the vaccine formulation. In October, 1997
OraVax initiated a second phase 2 safety and immunogenicity clinical study at
the Beth Israel-Deaconess Medical Center, Boston, the objective of which is to
optimize the formulation of UreAB. The study is in progress.
OraVax is also undertaking three other clinical studies, with the objective
of identifying populations in which vaccine efficacy can be measured. In January
1997 OraVax initiated a study in Mexico City in which up to 200 H.
PYLORI-infected children and adults are being followed after antibiotic cure to
determine the incidence of reinfection. A similar study in Lima, Peru was
initiated in January 1998. The results of these studies, which are expected to
take 18-24 months, could provide a basis for phase 2 and 3 trials of the ability
of immunization to prevent reinfection. In a third study, initiated in October
1997 at the Veterans Administration Medical Center and Baylor University,
Houston, Texas, healthy uninfected volunteers are being challenged with H.
PYLORI. This study will provide a human challenge model in which the
prophylactic activity of UreAB can be determined. Results are expected in 1999.
COLLABORATION FOR H. PYLORI PRODUCT WITH PMC. In March 1995, OraVax formed
a joint venture with Pasteur Merieux Serums & Vaccins S.A., now Pasteur Merieux
Connaught, for the development, manufacturing, marketing and sale of
immuno-therapeutic and preventive vaccines against H. PYLORI infections in
humans. OraVax and PMC will share equally in profits from the sales of H. PYLORI
VACCINES and in all future research, development, clinical and commercialization
costs. OraVax and PMC estimate that research, development and clinical costs
will exceed $50.0 million. PMC is providing technical expertise and will also
provide marketing expertise to the joint venture. PMC made an initial payment of
$3.2 million directly to OraVax which included $0.6 million to recognize the
value of research and development conducted by OraVax in the first quarter of
1995 prior to the formation of the joint venture, and a milestone payment of
$2.6 million to recognize the value of technology previously developed by OraVax
and made available to the joint venture. In addition, PMC purchased $2.5 million
of OraVax preferred stock. Subsequently, PMC purchased an additional $1.0
million of common stock in OraVax's initial public offering. In addition, PMC
agreed to pay OraVax directly up to $12.0 million during the development period,
subject to the achievement of certain clinical and regulatory milestones, of
which $0.6 million was paid to OraVax in December 1995. However, OraVax cannot
guarantee that any milestones which trigger such future payments will be
achieved.
Beginning in the second quarter of 1995, research, development and
commercialization activities of the joint venture were conducted through two
equally controlled partnerships which have contracted with OraVax to perform the
research, development and clinical trial activities. OraVax earned
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$6.6 million, $7.6 million and $7.7 million under these contracts during 1996,
1997 and 1998, respectively. In addition, during 1996, the joint venture entered
into research and development contracts with PMC and third parties. The research
and development budgets of the two partnerships comprising the joint venture are
established by joint committees in which each of the parties has an equal
participation and role. The venturers will pay approximately equal shares of the
agreed budgets. OraVax will receive revenue from the partnerships for the
research and development work which is requested to be performed by OraVax and
funded by the partnerships. OraVax cannot guarantee, however, that it will be
selected to perform such work. OraVax and PMC each licensed to the joint venture
upon its formation the right to use all of their respective existing proprietary
technologies relating to vaccines for the treatment or prevention of H. PYLORI,
except for so-called naked DNA technology (for an injectable vaccine) which is
the subject of a separate collaboration between PMC and a third party.
Additional technology in the H. PYLORI field acquired by either party since the
formation of the joint venture is required to be offered to the joint venture.
The joint venture itself has also obtained licenses to relevant technology from
third parties, including a license in November 1996 of the complete genome
sequence of H. PYLORI from MedImmune and Human Genome Sciences.
Any marketing activities of the joint venture will be managed by the joint
venture's marketing committee which is controlled by PMC.
OraVax and PMC each have a contractual right to withdraw from the joint
venture only in the event that there is a failure to efficiently and effectively
carry out the research and development program or a failure both of urease, and
of any other antigen or combination of antigens or formulations to work and
irreconcilable differences on how to proceed, in either case subject to
arbitration. In the event of termination, in all cases except breach, both
parties can commercialize the target products upon payment of cross-royalties.
HNK20 INTRANASAL IGA ANTIBODY AGAINST RSV
MARKET OPPORTUNITY. OraVax is developing HNK20, a monoclonal IgA antibody
product designed to prevent viral pneumonia in children caused by respiratory
syncytial virus or RSV. In the United States, approximately 250,000 children
annually have moderate to severe underlying medical problems that put them at
risk of contracting viral pneumonia from RSV infection.
ORAVAX APPROACH. OraVax is developing its HNK20, a monoclonal IgA antibody,
designed for administration by nose drop. Based on the results of primate
studies, the OraVax product candidate appears to be safe and provide protection
with small doses of antibody administered daily by nose drop. Studies in several
species, including nonhuman primates, indicate that HNK20 is effective when
administered once daily. OraVax expects that its product, if successfully
developed, would be used to protect those children at risk from RSV infection,
particularly during the winter season when RSV infection is most prevalent.
OraVax received approval from the FDA to initiate clinical trials of HNK20
under an Investigational New Drug Application or IND filed in March 1994. Safety
of HNK20 was initially demonstrated in phase 1/2 clinical studies in adults. A
phase 1 safety trial in children was completed in July 1995. A phase 2 safety
and pharmacology trial in premature infants and infants with bronchopulmonary
dysplasia at high risk of contracting RSV viral pneumonia was completed in April
1996. Results of the studies indicated that HNK20 was well tolerated in the
target population; however, no significant differences were observed between the
HNK20 group and the placebo group related to the incidence of RSV infections,
pneumonia or hospitalization.
In May 1996, OraVax initiated a phase 3 study designed to determine the
prophylactic effectiveness of intranasal administration of HNK20 in premature
infants and infants with bronchopulmonary dysplasia at high risk of contracting
RSV viral pneumonia. The results, announced in March 1997, failed to demonstrate
a statistically-significant reduction in hospitalization. However, the results
indicated that infants treated with HNK20 experienced a 24% reduction in lower
respiratory tract
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infection and an 11.4% reduction in the frequency of hospitalization relative to
infants receiving placebo, with a greater reduction observed in younger infants.
OraVax believes that an additional phase 3 study could be conducted in the
northern hemisphere to test the efficacy of HNK20, at an elevated dose level, in
infants under four months of age at study entry. OraVax will need to secure
additional partnerships or other sources of funding in order to conduct such a
study.
CDVAX AND CDIG AGAINST ANTIBIOTIC-ASSOCIATED COLITIS
MARKET OPPORTUNITY. OraVax is developing CdVax, a vaccine designed to
prevent antibiotic-associated colitis caused by Clostridium difficile (C.
DIFFICILE). Antibiotic treatment results in a decrease in the number of
non-disease causing bacteria in the intestine, a condition allowing the rapid
growth of the antibiotic-resistant C. DIFFICILE. The C. DIFFICILE bacteria
produce two toxins known as A and B toxins that cause intestinal inflammation
and fluid secretion.
ORAVAX APPROACH. OraVax has developed CdVax, containing chemically
inactivated A and B toxins which could be administered prior to exposure to the
C. DIFFICILE bacteria. Preclinical trials in animal models with CdVax have
provided preliminary indications that CdVax is effective in prevention of C.
DIFFICILE induced disease. A potential use for the vaccine is to stimulate
high-level antitoxin antibodies in plasma donors. These plasma donations will be
used to prepare an immune globulin product (CdIG) for use in the short-term
prophylaxis and therapy of C. DIFFICILE infections.
In October 1997, OraVax was awarded a phase 2 Small Business Innovation
Research or SBIR grant totaling $690,000 from the National Institutes of Health
in support of CdVax and CdIG development. OraVax has filed an orphan drug
application for the colitis indication and filed an IND with the U.S. FDA in
1998. Clinical trials were initiated in February 1999.
CHIMERIVAX-TM- PLATFORM TECHNOLOGY
OraVax has developed a platform technology for the construction of vaccines
against a number of viral infections caused by members of the family
FLAVIVIRIDAE (Flaviviruses). The underlying technology was developed jointly by
St. Louis University and an exclusive worldwide license was granted to OraVax on
September 8, 1997. Flavivirus infections of medical significance include
hepatitis C, dengue, Japanese encephalitis, tick-borne encephalitis, St. Louis
encephalitis, and yellow fever. OraVax has developed vaccine candidates against
two disease targets, Japanese encephalitis and dengue, and has initiated
research and development on a product candidate addressing hepatitis C and are
fully funded by NIH.
ARILVAX-REGISTERED TRADEMARK- VACCINE AGAINST YELLOW FEVER
In November 1997, OraVax acquired exclusive U.S. sales, marketing and
distribution rights to the Arilvax-Registered Trademark- yellow fever vaccine
from Medeva Pharma Limited. OraVax also agreed to work with Medeva to introduce
the vaccine into other international markets.
Under the terms of the agreement, OraVax will conduct clinical studies
necessary for U.S. registration of the vaccine and will market and distribute
the product to both civilian and military groups in the U.S.
Arilvax-Registered Trademark- is currently marketed by Medeva in Europe and
selected Asian markets. Medeva will fund all costs associated with the
agreed-upon clinical trials and with securing regulatory approval in the U.S.
Based on the established performance of Arilvax-Registered Trademark- in other
markets and discussions with the U.S. FDA, Medeva anticipates submitting a U.S.
product license application (PLA) in 2000. OraVax does not anticipate incurring
any material net expenditures under this agreement until 2000 at which time,
assuming a U.S. PLA is filed, it would expect to incur premarketing and
predistribution costs. OraVax believes it can market
Arilvax-Registered Trademark- effectively, with a small sales force, since the
market is currently restricted to the U.S. military and to physicians and travel
medicine clinics approved by state health departments.
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JE VACCINE AGAINST INFECTION BY THE JAPANESE ENCEPHALITIS VIRUS
OraVax is developing a vaccine for prevention of Japanese encephalitis (JE)
viral infections. JE is a potentially fatal neurotropic viral infection common
in Asia, including Japan Korea, Taiwan, China, India and Thailand. The World
Health Organization has identified a high priority for the development of safer
and less expensive vaccines against JE, which would ensure its use in endemic
regions. In addition, a safer vaccine that requires only a single dose for
immunization would better meet the needs of travelers and military. OraVax has
demonstrated safety and preclinical efficacy of its JE vaccine based on the
ChimeriVax-TM- technology in animal models, including nonhuman primates. OraVax
is currently in pilot production under the FDA's good manufacturing practices,
and expects to file an IND and initiate clinical trials during 1999. In November
1998, Oravax entered into a partnership with PMC for sponsorship of the
ChimeriVax-TM- Japanese encephalitis vaccine.
DENGUE FEVER
Dengue is a mosquito-borne viral infection. The disease is characterized by
two distinct clinical syndromes: (1) dengue fever, a debilitating acute disease
characterized by fever, rash and muscle and joint pain and (2) dengue
hemorrhagic fever (DHF) characterized by prostration, bleeding and shock. Dengue
occurs throughout the tropical regions of the world, and is intermittently
introduced into the United States, Australia and Europe, with ensuing outbreaks.
To OraVax's knowledge, currently there is no specific treatment and no vaccine
is available for prevention of the infection.
There are four distinct viruses that cause dengue fever (dengue types 1-4).
OraVax has developed a candidate ChimeriVax-TM- vaccine against dengue type 2
which is in preclinical development. OraVax's objective is to develop a vaccine
containing all four dengue serotypes. In November 1998, OraVax entered into a
partnership with PMC for commercialization of the ChimeriVax-TM- dengue vaccine.
HEPATITIS C
Hepatitis C virus causes an estimated 20% of all cases of viral hepatitis,
and is the agent responsible for 80-90% of all cases of "nonA-nonB viral
hepatitis." OraVax believes that its ChimeriVax-TM- technology could be used in
developing a vaccine that would stimulate both humoral and cellular immunity
against hepatitis C. As with dengue, a multivalent vaccine is required, with
simultaneous immunization against two or three different hepatitis C types
representing the majority of types causing human illness.
TICK-BORNE ENCEPHALITIS
Tick-borne encephalitis or TBE, which can cause severe illness or death,
afflicts individuals in eastern Europe and the former USSR. OraVax believes its
ChimeriVax-TM- technology could be used in developing a TBE vaccine that would
have significant advantages over existing vaccines including, single dose, life
long immunity, safety and low cost.
OTHER ORAVAX TECHNOLOGIES
In addition to OraVax's three principal product development programs, OraVax
has rights to certain other technologies which may have the potential to be
developed into products. These technologies also build on OraVax's knowledge of
the mucosal immune system and immunology.
IGA ANTIBODY TECHNOLOGY. OraVax's IgA antibody technology includes methods
for stimulating IgA antibody production, producing recombinant secretory
component and linking IgA antibody to secretory component. OraVax's current
efforts in these areas are focused on the development of the HNK20 monoclonal
IgA antibodies against RSV. OraVax holds a U.S. patent relating to the HNK20
monoclonal IgA antibody and has filed patent applications in Europe and Japan.
In addition, OraVax has filed a U.S. patent application claiming the DNA
encoding the RSV-recognition site. OraVax also
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has an exclusive worldwide license from Harvard University to a patent
application covering complexes of antibody and secretory component and methods
for producing such complexes, including methods for the production of
recombinant secretory component and for linking IgA antibodies to secretory
component.
VIRICLE TECHNOLOGY. The bluetongue virus (BTV) afflicts sheep and cattle in
livestock raising regions, including the western United States, Australia and
South Africa, causing still births. Genetically engineered virus-like particles
known as Viricles-Registered Trademark- were developed as a vaccine against BTV
in sheep and against african horse sickness. OraVax has incorporated a portion
of the C. DIFFICILE gene into these virus-like particles and has shown that the
resulting Viricle vaccine stimulates antibody against both BTV and C. DIFFICILE.
SHIGELLA LIVE VECTOR ORAL VACCINE TECHNOLOGY. Infection by Shigella
bacteria is the leading cause of bacillary dysentery. Bacillary dysentery is a
worldwide problem, with the highest incidence among children in developing
countries. While certain antimicrobial drugs may provide protection against
Shigella, the widespread use of such drugs has not been recommended because of
their side effects and the possibility of inducing the development of drug
resistant strains of bacteria.
COPOLYMER MICROSPHERE TECHNOLOGY. OraVax has a non-exclusive license to a
patent application covering the use of copolymer microsphere technology in the
development of oral vaccines directed against five specific disease targets,
including H. PYLORI and C. DIFFICILE. However, this technology is not currently
used in formulating any OraVax product candidates. OraVax has a non-exclusive
license to an issued U.S. patent relating to the use of copolymer microspheres
in injected vaccines. OraVax is aware of an additional issued U.S. patent
relating to selective release of active ingredients through the use of copolymer
microspheres.
HYDROXYAPATITE. OraVax has an exclusive license from Harvard University to
a patent covering the use of hydroxyapatite crystals as a particulate carrier
for antigens used as oral vaccines. The patent titled "Hydroxyapatite-Antigen
Conjugates and Methods for Generating a Poly-Ig Immune Response", was issued in
August of 1995, US patent #5,443,832.
LICENSE OF CAGA. In September 1996, OraVax entered into a licensing
agreement with BioMerieux Vitek, Inc. granting bioMerieux exclusive rights to
develop automated human diagnostic products incorporating a proprietary OraVax
antigen. The antigen, called CagA, is a component of H. PYLORI. Strains of H.
PYLORI producing CagA are thought to be among the most virulent. Under the terms
of the agreement, BioMerieux receives an exclusive, royalty-bearing sublicense
to manufacture, use, sell, lease, and otherwise distribute any licensed products
for use in the field of in vitro diagnostic tests using instruments that perform
automatic, multiparametric immunoanalysis. This sublicense is worldwide, except
in Japan, where coexclusive rights were granted. Additionally, in March of 1998,
OraVax entered into a separate licensing agreement with Biomerica, Inc. for the
diagnostic use of CagA in in-office diagnostic tests. Under the terms of the
agreement, Biomerica receives an exclusive, royalty-bearing, worldwide,
sublicense to manufacture, use, sell, lease, and otherwise distribute any
licensed products for use as a single diagnostic test, or a component of a
diagnostic test that incorporates the CagA antigen and is intended for single
use. OraVax retains all rights to the use of CagA for vaccines to treat or
prevent diseases caused by H. PYLORI infection. CagA was originally identified
by Martin J. Blaser, M.D., Timothy Cover, M.D. and Murali Tummuru, Ph.D. of
Vanderbilt University School of Medicine. In 1993, OraVax acquired worldwide
exclusive rights to CagA patented by Vanderbilt University.
MANUFACTURING
At present, OraVax's ability to manufacture its products is limited to
clinical trial quantities. OraVax does not have the capability to manufacture
commercial quantities of products.
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UREAB ORAL VACCINE
The UreAB vaccine product used in the phase 1 clinical trials is
manufactured in the biological production facility of the Walter Reed Army
Institute of Research in Forest Glen Section, Silver Spring, Maryland under a
cooperative research and development agreement with the United States Army.
OraVax anticipates the continued use of this facility to support phase 2 and at
least the initial portion of any phase 3 trials. OraVax's partner, PMC, has
initiated manufacturing based on the FDA's good manufacturing practices at its
facilities in Marcy l'Etoile (Lyon) France, and should be able to provide
vaccine for phase 3 trials.
HNK20 LNTRANASAL ANTIBODY
Manufacturing of HNK20 for phase 1 and phase 2 clinical trials has been
performed by OraVax at its primary facility in Cambridge, Massachusetts and by
third parties under contract to OraVax. The product used in the phase 3 clinical
trials conducted in the southern hemisphere which commenced at the end of the
second quarter of 1996 was manufactured by a contract manufacturer. OraVax had
previously anticipated using product from inventory produced by this contract
manufacturer to conduct a second phase 3 trial in North America during the
winter of 1997-1998. However, during an audit conducted by OraVax in October
1997 of an additional contract manufacturer, OraVax discovered that improper
handling of the product by the latter manufacturer during a step which is not
part of the current process, precluded the clinical use of this supply of HNK20.
The conduct of the trial will require additional funding and OraVax continues to
seek potential corporate partners for such funding.
CDAB VACCINE
Product for early clinical trials has been manufactured by third parties
under contract to OraVax and under a cooperative research and development
agreement with the Walter Reed Army Institute of Research. OraVax, however, may
elect to manufacture product for further clinical trials in its own facilities
in Cambridge or Canton, Massachusetts.
PATENTS AND PROPRIETARY RIGHTS; TECHNOLOGY AGREEMENTS
The following sets forth OraVax's proprietary position with respect to its
principal product development programs.
RSV PRODUCT DEVELOPMENT PROGRAM
OraVax's patent application, filed worldwide, describing the HNK20
monoclonal IgA antibody issued in the United States in 1996. OraVax has filed a
United States patent application claiming the DNA encoding the RSV-recognition
site. OraVax is not aware of any other patents or patent applications describing
this antibody.
H. PYLORI PRODUCT DEVELOPMENT PROGRAM
In addition to its own inventions, OraVax has worldwide rights to inventions
made by six groups of researchers in the field of H. PYLORI:
During 1997 OraVax and its joint venture partner, PMC, also acquired a
worldwide exclusive license to the Vibrovec live-vector vaccine delivery system
from Virus Research Institute in Cambridge, Massachusetts for antigens being
evaluated by the partners. The joint venture partners also completed option
agreements with Aquila covering the QS21 adjuvant. Separately, OraVax secured an
exclusive option agreement with IOMAI for their transdermal vaccine delivery
system.
HUMAN GENOME SCIENCES/MEDIMMUNE. In November 1996, OraVax and PMC entered
into a research and licensing agreement with Human Genome Sciences, Inc., or HGS
and MedImmune, licensing the complete genome sequence of H. PYLORI for the
development of vaccines. Under this
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agreement, OraVax and PMC have control and responsibility for filing patents on
new molecular discoveries for use in the development of vaccines against H.
PYLORI infection. Financial terms of the agreement call for OraVax and PMC to
make license payments to HGS/MedImmune beginning with execution of the agreement
and upon issuance of the first U.S. patent. In addition to royalties on any
future sales, future milestone payments will be paid to HGS/MedImmune to reflect
attainment of certain product development and revenue goals. During 1997, OraVax
and PMC filed several additional patent applications covering new molecules
identified using the genome sequence information.
CASE WESTERN RESERVE UNIVERSITY. In October 1993, OraVax entered into an
assignment agreement with its collaborators at Case Western Reserve University
or CWRU and a research agreement with these collaborators and CWRU. Pursuant to
the agreement, OraVax has been assigned preexisting patent rights claiming oral
immunization using H. PYLORI antigens. One patent was issued in the U.S. in
1996. The research agreement provides for sponsorship by PM-O of the continuing
development work of the collaborators in the field of H. PYLORI, including the
development of:
- monoclonal antibodies against urease and other antigens;
- adjuvants to be used in conjunction with an oral vaccine directed against
H. PYLORI; and
- animal models for the testing of oral vaccines directed against H. PYLORI.
Under the terms of the research agreement, OraVax will be granted a
worldwide exclusive license to inventions made in the course of sponsored
research.
CENTRE HOSPITALIER UNIVERSITAIRE VAUDOIS (CHUV); MAX-PLANCK INSTITUTE. In
April 1992, OraVax entered into a research and development agreement with the
Foundation Pour La Recherche Des Maladies GastroIntestinales (Gastrofonds) in
Lausanne, Switzerland pursuant to which OraVax is sponsoring research in the
field of H. PYLORI at the CHUV in Lausanne, Switzerland, and at the Max-Planck
Institute in Tubingen, Germany. Pursuant to this agreement, Gastrofonds, who
represents collaborating inventors at the CHUV and the Max-Planck Institute,
have assigned to OraVax title to two patent applications covering urease as a
vaccine for prevention and treatment of H. PYLORI infection. Also pursuant to
this agreement, Gastrofonds has granted OraVax a worldwide exclusive license to
all patent rights and know-how developed during the course of the sponsored
research in the field of vaccine and secretory IgA products for prevention or
treatment of infections caused by H. PYLORI.
INSTITUT PASTEUR. OraVax also has a co-exclusive license, with PMC, to an
issued patent and two patent applications owned by the Institut Pasteur covering
the H. PYLORI urease antigen, heat shock protein A (hspa) and other antigens.
SAINT BARTHOLOMEW'S HOSPITAL MEDICAL COLLEGE. In October 1992, OraVax
entered into an agreement with The Medical College of Saint Bartholomew's
Hospital in London, England (St. Bart's) pursuant to which OraVax sponsored,
from October 1992 through August 1995, research relating to the development of
vaccine candidates for use in an oral vaccine directed against H. PYLORI. Under
the agreement, OraVax was granted a worldwide nonexclusive license to
preexisting patent rights and know-how in the field of H. PYLORI developed by
St. Bart's, and a worldwide exclusive license to all patent rights and know-how
developed during the course of the sponsored research.
VANDERBILT UNIVERSITY. In September 1993, OraVax entered into a license
agreement with Vanderbilt University pursuant to which Vanderbilt has granted to
OraVax an exclusive worldwide license to patent rights to a specific region of
the gene for an H. PYLORI antigen, the Cag A antigen, as a vaccine and
diagnostic means and methods for detecting predisposition to peptic ulceration,
and to related know-how.
OraVax anticipates that its H. PYLORI vaccine products will be used in
conjunction with mucosal adjuvants or mucosal antigen delivery systems. The
UreAB vaccine formulation tested in a phase 2 clinical trial uses the native
heat-labile enterotoxin (LT) produced by E. coli as a mucosal adjuvant.
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OraVax is aware of a patent application owned by a competitor claiming use of LT
combined with H. PYLORI antigens, including urease, against H. PYLORI infection.
Whether this application will issue in the U.S. or in other countries is
uncertain. OraVax currently has a license to the U.S. Navy's patent application
covering the use of native LT as a mucosal adjuvant. OraVax is aware of a patent
owned by the Kitasato Institute that also claims the use of native LT. OraVax is
also conducting research on the polyphosphazene mucosal adjuvant and the Vibrio
cholerae live-vector delivery system under an option from Virus Research
Institute in Cambridge, Massachusetts. Other formulation technologies being
evaluated include mutants of LT that may have advantages in greater safety or
potency, the Shigella live-vector system developed by OraVax and technologies
developed or controlled by PMC. It is possible that the joint venture may need
to obtain a license to the patent rights owned by a third party covering a
mucosal adjuvant or mucosal antigen delivery system, and OraVax does not know
whether it will be able to obtain any such license on favorable terms.
C. DIFFICILE PRODUCT DEVELOPMENT PROGRAM
In March 1993, OraVax entered into a collaborative development and license
agreement with Techlab, Inc. pursuant to which OraVax is sponsoring research and
the development of vaccines for the prevention of diseases caused by C.
DIFFICILE. With respect to technology developed during the course of the
collaboration, OraVax will have title to all patent rights and know-how invented
by OraVax employees or developed jointly by OraVax and Techlab employees, and
Techlab will have title to all patent rights and know-how developed solely by
its employees. Techlab has granted to OraVax a worldwide exclusive license to
technology owned solely by Techlab. OraVax has filed a patent application
covering its C. DIFFICILE vaccine product candidate and related technology.
OraVax owns this patent application and any patents issued under the
application.
GENERAL
OraVax's future success will depend, in part, upon its ability to develop
patentable products and technologies and obtain patent protection for its
products and technologies both in the U.S. and abroad. OraVax cannot guarantee
that additional patent applications owned or licensed by OraVax will issue as
patents or that patent protection will be secured for any particular technology.
Neither can OraVax guarantee that patents which are issued will be valid or that
they will provide OraVax with meaningful protection against competitors or with
a competitive advantage. OraVax cannot guarantee that patents will not be
challenged or designed around by others. OraVax could incur substantial costs in
proceedings before the U.S. Patent and Trademark Office, including interference
proceedings. These proceedings could also result in adverse decisions as to the
patentability of OraVax's licensed or assigned inventions. Further, OraVax
cannot guarantee that it will not infringe upon existing or future patents owned
by others. Neither can OraVax guarantee that it will not need to acquire
licenses under patents belonging to others for technology potentially useful, or
necessary to OraVax, or that such licenses will be available to OraVax, if at
all, on terms acceptable to OraVax. Moreover, OraVax cannot guarantee that any
patent issued to or licensed by OraVax will not be infringed by others. Also,
OraVax cannot guarantee that third parties will not bring suit against OraVax
for patent infringement or for declaratory judgment to have the patents owned or
licensed by OraVax declared invalid. OraVax also relies on trade secrets and
other unpatented proprietary technology. OraVax cannot guarantee that it can
meaningfully protect its rights in such unpatented technology or that others
will not independently develop substantially equivalent products and processes
or otherwise gain access to OraVax's technology.
OraVax is engaged in research and development collaborations and licensing
arrangements with a number of academic, government and commercial research
groups. OraVax has entered into these agreements to secure rights to certain
technologies, processes and compounds that it believes may be important to the
development of its products. In general, the research and development agreements
provide for OraVax sponsorship of research and development in exchange for
exclusive, royalty-bearing
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licenses or options to the technology developed during the course of the
sponsored research. Certain of these agreements also include nonexclusive
licenses to preexisting technology rights. In general, the license agreements
grant to OraVax exclusive licenses in exchange for varying combinations of
license fees, milestone payments, royalties and minimum royalties. In addition,
the license agreements typically place commercialization obligations on OraVax
which, if not satisfied, may result in the licensor having the right to render
the license nonexclusive or to terminate the agreement. In certain instances,
OraVax has obtained assignments of technology, although OraVax's ownership, in
some cases, is subject to forfeiture for failure to commercialize. Typically,
the agreements are terminable by either party for breach. Further, the research
agreements are generally terminable in the discretion of either party and the
license agreements are generally terminable by OraVax in its discretion.
GOVERNMENT REGULATION
Regulation by governmental authorities in the U.S. and other countries will
be a significant factor in the manufacturing and marketing of any products that
may be developed by OraVax. The nature and extent to which such regulation may
apply to OraVax will vary depending on the nature of any such products. All of
OraVax's products will require regulatory approval by governmental agencies
prior to commercialization. Human therapeutics, in particular, are subject to
rigorous preclinical and clinical testing and other approval procedures by the
FDA and similar health authorities in foreign countries. Various federal
statutes and regulations also govern or influence the manufacturing, safety,
labeling, storage, record keeping and marketing of such products.
The Immunization Practices Advisory Committee or ACIP of the CDC has a role
in setting the market for most, if not all, of the products OraVax intends to
make. The ACIP meets quarterly to review developing data on licensed vaccines,
and those approaching license, as well as epidemiologic data on the need for
these products. The recommendations of ACIP on the appropriate use of vaccines
and related products are published in the Morbidity and Mortality Weekly Report
and reprinted in several journals. The CDC develops epidemiologic data in
support of the need for new vaccines and monitors vaccine usage and changes in
disease incidence. In addition CDC staff frequently act as key advisors to the
FDA in their review process.
OraVax believes that both its vaccines and antibody products will be
classified by the FDA as "biologic products" as opposed to "drug products." New
biologic products must satisfy several requirements in order to receive
regulatory approval, including:
- preclinical laboratory and animal tests;
- submission by OraVax of:
(1) an IND application to the FDA or to an individual physician, or
(2) a request for approval of intrastate trials to an institutional review
board of a research institution, one of which must become effective
before human clinical trials begin;
- the performance of well-controlled clinical trials; and
- product license application or PLA submitted to the FDA containing the
results of clinical and manufacturing information prior to commercial sale
or shipment of the product.
During the approval process, the FDA must confirm that appropriate standards
were maintained during product testing and that the product meets regulatory
standards for safety and efficacy.
In addition to obtaining FDA approval for each PLA, an establishment license
application or ELA must be filed and approved by the FDA for the manufacturing
facilities for a biologic product before commercial marketing of the biologic
product is permitted. As a consequence of regulatory reforms initiated in 1995,
a formal ELA may not be needed for some of OraVax's product candidates. However,
manufacturing practices will continue to be subject to FDA regulations and
review. The regulatory process may take many years and requires the expenditure
of substantial resources. Before testing of
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any agents with potential therapeutic value in healthy human test subjects or
patients may begin, government requirements for preclinical data must be
satisfied. These data, obtained from studies in animals, as well as from
laboratory studies, are generally submitted in an IND application or its
equivalent in countries outside the United States where clinical studies are to
be conducted. These preclinical data must provide an adequate basis for
evaluating both the safety and the scientific rationale for the initial phase 1
studies in human volunteers.
Phase 1 clinical studies are generally performed in healthy human subjects
or, occasionally, in selected patients with the targeted disease or disorder.
The goal of the phase 1 study is to establish initial data about safety and
tolerance of the drug in humans. Also, the first data regarding the absorption,
distribution, metabolism and excretion of the drug in humans, or the immune
response to a vaccine, may be obtained. In phase 2 human clinical studies,
evidence is sought about the desired therapeutic efficacy of a drug or antibody,
or the immune response to a vaccine, in limited studies with small numbers of
carefully selected subjects. Efforts are made to evaluate the effects of various
dosages and to establish an optimal dosage level and dosage schedule. Additional
safety data are also gathered from these studies. The phase 3 clinical
development program consists of expanded, large scale, multicenter studies of
patients with the target disease or disorder, or in the case of a preventive
antibody or vaccine, who are susceptible to the disease. The goal of these
studies is to obtain definitive statistical evidence of the efficacy and safety
of the proposed product and dosage regimen.
At the same time that the human clinical program is being performed,
additional non-clinical (animal) studies may also be conducted. In addition,
expensive, long duration toxicity, teratogenicity (birth defects) and
carcinogenicity studies may be required to demonstrate the safety of drug
administration for the extended period of time required for effective therapy.
Also, a variety of laboratory, animal and initial human studies are performed to
establish manufacturing methods for the drug, as well as stable, effective
dosage forms. All data obtained from this comprehensive development program are
submitted as a PLA to the FDA and the corresponding agencies in other countries
for review and approval. FDA approval of the PLA and the associated
manufacturing documentation is required before marketing may begin in the United
States. Although the FDA's policy is to review priority applications within 180
days of their filing, in practice longer times may be required. The FDA
frequently requests that additional information be submitted requiring
significant additional review time. Essentially, all proposed products of OraVax
will be subject to demanding and time-consuming PLA or similar approval
procedures in the countries where OraVax intends to market its products. These
regulations define not only the form and content of the development of safety
and efficacy data regarding the proposed product, but also impose specific
requirements regarding manufacture of the product, quality assurance, packaging,
storage, documentation and record keeping, labeling and advertising, and
marketing procedures. Effective commercialization also requires inclusion of
OraVax's products in national, state, provincial, or institutional formularies
or cost reimbursement systems.
In addition, the activities of OraVax, and its potential partners and
licensees are subject to laws and regulations regarding, among other things:
- occupational safety;
- the use and handling of radioisotopes;
- environmental protection;
- laboratory and manufacturing working conditions;
- handling and disposition of potentially hazardous materials; and
- use of laboratory animals.
Whether or not FDA approval has been obtained, approval of a product by
comparable regulatory authorities may be necessary in foreign countries prior to
the commencement of marketing of the product in such countries. The approval
procedure varies among countries, can involve additional
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testing, and the time required may differ from that required for FDA approval.
Although there is now a centralized European Community approval mechanism in
place, each European country may nonetheless impose its own procedures and
requirements, many of which are 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. OraVax expects
to rely on corporate partners and licensees, along with OraVax's expertise, to
obtain governmental approval in foreign countries of drug formulations utilizing
its compounds.
EMPLOYEES
As of March 12, 1999, OraVax employed a work force of 65 persons including
61 persons employed full-time, of which 7 are temporary employees, and 4 persons
employed part-time. Of this total work force, 51 persons are engaged in research
and development activities and 14 are devoted to facilities support and
administrative activities. Sixteen persons hold Ph.D. or M.D. degrees. A
significant number of OraVax's management and professional employees have had
prior experience with pharmaceutical, biotechnology or medical products
companies. OraVax believes that it has been successful in attracting skilled and
experienced scientific personnel. However, competition for such personnel is
intense. OraVax believes that its relationships with its employees are good.
ACADEMIC CONSULTANTS
OraVax has relationships with a number of academic consultants. These
persons are not employees of OraVax. Accordingly, OraVax has limited control
over their activities and can expect only limited amounts of their time to be
dedicated to OraVax's activities. These persons may or may not enjoy
relationships with other commercial entities, some of which could compete with
OraVax. Although the precise nature of each relationship varies, the consultants
generally sign agreements which provide for confidentiality of OraVax's
proprietary information and results of studies but not for the assignment of
inventions. OraVax cannot guarantee that it will be able to maintain the
confidentiality of its technology, the dissemination of which could have a
materially adverse effect on OraVax's business. Further, OraVax cannot guarantee
that it will be able to license inventions and technology discovered by such
consultants.
PROPERTIES
OraVax's administrative offices and research facilities consist of an
aggregate of approximately 53,000 square feet of leased space at 38 Sidney
Street in Cambridge, Massachusetts. In addition, OraVax leases a 47,000 square
foot manufacturing facility in Canton, Massachusetts, designed and equipped for
the commercial production of biologic products. The facility is not currently in
use. When it entered into this lease, OraVax purchased leasehold improvements
and other related assets from the former tenant, payable in installments through
1999. Since the merger was announced, OraVax has received increased interest
from prospective purchasers of its leasehold interests, leasehold improvements
and equipment in the Canton facility. Based on these indications of interest,
OraVax has explored the sale of its interests in the facility.
LEGAL PROCEEDINGS
By letter dated September 8, 1998, the Securities and Exchange Commission
requested OraVax to furnish the SEC staff with documents for use in connection
with an SEC inquiry re: In the Matter of OraVax, Inc. (MB-998). The requested
documents generally pertain to statements made in SEC filings by OraVax
regarding OraVax's relationship with the U.S. Department of Defense's Joint
Vaccine Acquisition Program. OraVax has responded to the SEC's request and to
date has received no further requests or information concerning this matter.
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On December 23, 1997, OraVax sold 240,000 shares of common stock to an
institutional investor, at a purchase price of $1.9125 per share, in a private
placement which closed simultaneously with a private placement of 6,300 shares
of OraVax 6% convertible preferred stock, at $1,000 per share. The institutional
investor has expressed claims as follows: (i) that OraVax should issue
additional shares of common stock to the investor under an anti-dilution
provision of the stock purchase agreement pursuant to which the investor
purchased its shares, and (ii) that OraVax should pay damages to the investor
because OraVax failed to afford the investor "piggyback" registration rights in
connection with the OraVax's registration of the preferred stock on February 5,
1998.
OraVax believes it has meritorious defenses to these claims and does not
believe that the issuance of the preferred stock (or the subsequent issuance of
common stock upon conversion of shares of the preferred stock) triggered the
anti-dilution provision because the preferred stock was issued on the same date
as the common stock issued to the investor. As to the piggyback registration
rights, OraVax believes that the investor had actual notice of the registration
of the preferred stock in February 1998 and took no action to invoke its rights
at the time, did not exercise its demand registration rights for almost three
months after they became available on April 23, 1998, and still has not sold any
of its shares--all of which OraVax registered for resale on August 6, 1998. To
date, no litigation has been filed by the investor on these claims.
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ORAVAX STOCK OWNERSHIP
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF ORAVAX, INC.
The following table sets forth certain information, as of April 2, 1999,
with respect to the beneficial ownership of OraVax's Common Stock by the
following persons:
- each person known by OraVax to own beneficially more than 5% of the
outstanding shares of Common Stock;
- each director of OraVax;
- each executive officer of OraVax; and
- all directors and executive's officers of OraVax as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
OF COMMON STOCK PERCENTAGE OF TOTAL VOTING
BENEFICIALLY COMMON STOCK CAPITAL STOCK
BENEFICIAL OWNER OWNED OUTSTANDING OUTSTANDING
- ---------------------------------------------------------------- ----------------- --------------- -------------
<S> <C> <C> <C>
5% STOCKHOLDERS
Peptide Therapeutics Group plc (1)............................ 7,664,653 27.8% 27.8%
DIRECTORS
Lance K. Gordon (2)........................................... 306,694 1.4% 1.4%
Andre L. Lamotte (3).......................................... 610,857 2.8% 2.8%
Douglas MacMaster (4)......................................... 43,600 * *
Allen Misher (5).............................................. 18,333 * *
OTHER EXECUTIVE OFFICERS
Robert J. Gerety (6).......................................... 93,030 * *
Brigid A. Makes (7)........................................... 27,500 * *
Thomas P. Monath (8).......................................... 196,010 * *
All directors and executive officers as a group (9)............. 1,296,024 5.9% 5.9%
</TABLE>
- ------------------------
* Less than 1%.
(1) Includes 5,471,116 shares of OraVax common stock into which the 1,951 shares
of OraVax preferred stock owned by Peptide would have been convertible on
April 2, 1999 if the 10% ownership limitation did not apply. The conversion
price is the lowest trading price of the OraVax common stock during the 22
consecutive trading days immediately preceding the date of conversion
reduced by a conversion discount of 18.5% on April 2, 1999, which increases
to 21% by June 1999.
(2) Includes 225,221 shares which Dr. Gordon has the right to acquire within 60
days after April 2, 1999 upon exercise of outstanding stock options.
(3) Includes 424,993 shares held by Medical Science Partners, L.P. ("MSP"),
26,320 shares held by Medical Science II Co-Investment L.P. ("MSP II-Co")
and 149,544 shares held by Medical Science Partners II, L.P. ("MSP II"). Dr.
Lamotte is the Managing General Partner of Medical Science Ventures, the
General Partner of MSP and is the Managing General Partner of Medical
Science Ventures II, the General Partner of MSP II and MSP II-Co, and may be
deemed to be the beneficial owner of the shares held by MSP, MSP II and MSP
II-Co although Dr. Lamotte disclaims beneficial ownership of such shares.
The address of Dr. Lamotte is c/o MSP, 161 Worcester Road, Framingham, MA
01701. Includes 10,000 shares which Dr. Lamotte may acquire upon the
exercise of options within 60 days after April 2, 1999.
(4) Includes 23,600 shares which Mr. MacMaster may acquire upon the exercise of
options within 60 days after April 2, 1999.
(5) Includes 13,333 shares which Dr. Misher may acquire upon the exercise of
options within 60 days after April 2, 1999.
(6) Includes 31,250 shares which Dr. Gerety may acquire upon the exercise of
options within 60 days after April 2, 1999.
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(7) Includes 22,500 shares which Ms. Makes may acquire upon the exercise of
options within 60 days after April 2, 1999.
(8) Includes 161,056 shares which Dr. Monath may acquire upon the exercise of
options within 60 days after April 2, 1999.
(9) Includes 486,960 shares which all directors and executive officers as a
group may acquire upon the exercise of options within 60 days after April 2,
1999.
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SELECTED FINANCIAL INFORMATION OF ORAVAX
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following selected historical consolidated financial information for
OraVax for each of the fiscal years in the five-year period ended December 31,
1998 has been derived from OraVax's audited consolidated financial statements.
The consolidated financial statements for the years ended December 31, 1996,
1997 and 1998 are included elsewhere in this prospectus/proxy statement. The
following information should be read in conjunction with "OraVax Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
OraVax's Audited Consolidated Financial Statements and the notes thereto
included elsewhere in this prospectus/proxy statement.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998
---------- ------------ ------------ ------------- -------------
STATEMENT OF OPERATIONS DATA:
Revenues:
Collaborative research and development... $ -- $ 8,684 $ 6,595 $ 7,587 $ 9,841
Government grants and other.............. 257 311 870 583 701
Interest................................. 51 1,080 1,280 683 258
---------- ------------ ------------ ------------- -------------
308 10,075 8,745 8,853 10,800
Expenses:
Research and development................. 8,406 12,450 21,009 14,589 13,017
General and administrative............... 2,580 3,299 3,750 3,422 4,072
Interest................................. 190 87 523 418 269
---------- ------------ ------------ ------------- -------------
11,176 15,836 25,282 18,429 17,358
Equity in joint venture.................... (2,436) (5,085) (6,236) (5,844)
---------- ------------ ------------ ------------- -------------
Net loss................................... (10,868) (8,197) (21,622) (15,812) (12,402)
Net loss to common stockholders............ (10,968) (8,305) (21,622) (15,812) (13,825)
Basic and diluted loss per share........... $ (1.90) $ (2.46) $ (1.58) $ (.92)
Weighted average number of basic and
diluted shares outstanding............... 4,377,131 8,794,775 10,031,222 15,075,593
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998
---------- ------------ ------------ ------------- -------------
BALANCE SHEET DATA:
Cash and investments....................... $ 3,706 $ 27,631 $ 22,125 $ 11,328 $ 2,538
Total assets............................... 5,195 29,833 28,744 16,497 4,850
Working capital............................ 1,400 23,109 14,694 6,596 (5,335)
Long term obligations...................... 462 492 2,659 1,298 119
Redeemable convertible preferred stock..... -- -- -- 2,464 --
Convertible preferred stock................ 27,331 -- -- 3,137 2,022
Total stockholders' equity (deficit)....... (25,038) 24,513 18,424 6,474 (3,233)
</TABLE>
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ORAVAX MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS OVERVIEW
OraVax's mission is the discovery, development and commercialization of
vaccines and antibody products for the prevention or treatment of human
infectious diseases. OraVax's products are vaccines that stimulate the body's
own immunity to provide long term protection against disease, as well as
antibody products that provide immediate passive immunity to treat existing
infections or to protect against acute disease risk.
The ultimate success of OraVax is dependent upon its ability to raise
capital through equity financings, direct financings, corporate partnerships,
sale of product and interest income on invested capital. OraVax plans to finance
near term cash needs principally through its existing cash reserves, together
with interest earned thereon, revenues earned under its H. pylori collaboration
and Dengue license agreement with PMC, sponsorship of OraVax's Japanese
encephalitis program by PMC, sponsorship of the U.S. development of the yellow
fever vaccine, Arilvax-Registered Trademark-, by Medeva, and previously awarded
government grants. Additional capital will be required to ensure the on-going
viability of OraVax. OraVax believes, based upon its current operating plan,
that, in addition to its available cash balances and known revenues, it will
need additional financing in the second quarter of 1999 in order to fund its
operations. Peptide has agreed to provide bridge financing on a secured basis
under certain circumstances. This bridge financing will be secured with the
intangible assets of OraVax. In the event the merger with Peptide is not
approved by the shareholders of both companies, OraVax would be required to seek
other sources of financing. While management believes that additional capital
may be available to fund operations if the merger is not approved, OraVax cannot
assure that additional funds will be available when required, on terms
acceptable to OraVax.
On November 10, 1998, OraVax entered into an agreement to merge with Peptide
in a transaction expected to close during the second quarter of 1999. The merger
would create a larger biopharmaceutical company involved in the development of
novel drugs, vaccines and antibody products that control significant human
diseases. The merged company would have a total of ten products in development,
eight of which are currently in clinical trials, with the other two scheduled to
go into clinical trials in the next twelve months, and multiple corporate
partnerships including those with PMC and SmithKline Beecham. The new business
combination would result in a broader portfolio of product programs, and greater
market presence and potential for expanded corporate partnerships.
To date, OraVax has not received any revenues from the sale of products and
does not expect to receive any such revenues until late 2000, at the earliest.
The first product revenues are anticipated from sales of the yellow fever
vaccine, Arilvax-Registered Trademark-, under OraVax's partnership with Medeva.
Operations have been funded principally through public and private placements of
equity securities, equipment lease financing, revenues from OraVax's joint
venture with PMC, government grants and interest income. Since inception,
OraVax's cash expenditures have exceeded its revenues principally as a result
from expenditures under its research and development programs. OraVax expects to
continue to incur operating losses over the next several years primarily due to
expanded research and development efforts, preclinical testing and clinical
trials of its product candidates, the acquisition of additional technologies,
the establishment of manufacturing capability and the performance of
commercialization activities. Results of operations may vary significantly from
quarter to quarter depending on, among other factors, the progress of OraVax's
research and development efforts, the receipt, if any, of milestone payments,
the timing of certain expenses and the establishment of collaborative research
agreements. These conditions raise substantial doubt about OraVax's ability to
continue as a going concern.
Under the terms of the joint venture agreement with PMC, ownership of the
joint venture is based upon the proportion of the working capital paid in by
OraVax versus PMC over the life of the joint
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venture. To date OraVax and PMC have equally supported the budget and each has
approximately 50% ownership. The funding of the H. PYLORI program with PMC at
50% ownership has approximated $6.0 million to $6.5 million annually for OraVax
to date, which is a substantial portion of OraVax's total expenditures. Under
the agreement, a shortfall in funding by OraVax does not constitute a default of
the joint venture. If OraVax's funding, since inception of the partnership,
falls below 40% of the total for greater than a six-month period, PMC would get
an additional seat on the board of directors, giving it effective overall
control of the joint venture.
PMC: DENGUE LICENSE AGREEMENT AND SPONSORSHIP OF JAPANESE ENCEPHALITIS
In November 1998, OraVax entered into a license agreement with PMC for the
development of a vaccine against Dengue fever, based upon OraVax's
Chimerivax-TM- platform technology. This technology utilizes the yellow fever
17D vaccine virus as a vector for genes of related viruses. Under the license
agreement, OraVax agreed to develop the vaccine through completion of phase 1
clinical trials. PMC agreed to fund 100% of the research, development and
clinical costs through phase 1 clinical trials. In addition, OraVax granted PMC
a worldwide exclusive license to the Dengue vaccine and PMC will address
advanced development, manufacturing, sales, marketing and distribution. As a
term of the Dengue agreement, PMC had an option, through December 31, 1998, to
negotiate a separate agreement to license OraVax's vaccine against Japanese
encephalitis, also based on OraVax's Chimerivax-TM- platform technology. In
exchange for the option, PMC agreed to fund 100% of the research, development
and clinical costs through the completion of phase 1 clinical trials.
OraVax and PMC estimate the research, development and clinical costs of both
the Dengue and JE vaccines through phase 1 clinical trials to exceed $11.0
million. PMC began funding, as of October 1, 1998, the research, development and
clinical costs under the Dengue and JE programs, and paid the company $1.2
million in December 1998, of which $1.1 million was earned in the fourth quarter
of 1998. In addition, PMC agreed to pay OraVax up to $12.2 million during the
Dengue development period, subject to the achievement of certain development,
clinical and regulatory milestones, of which $1.0 million was paid to the
company in November 1998 to recognize the value of research and development
conducted by OraVax prior to the execution of the license agreement. However,
OraVax cannot guarantee that the milestones which trigger such future payments
will be achieved. Also, PMC agreed to pay OraVax royalties on future net sales
of licensed Dengue product. A research and development committee was formed to
oversee the direction of the Dengue and JE programs, and consists of three
members each from OraVax and PMC. The research and development committee has
approved funding of costs under both the Dengue and JE programs through December
1999. The license agreement provides for a research and development term from
October 1, 1998 through the completion of phase 1 clinical studies with respect
to the JE and Dengue programs. Upon expiration of such term, OraVax and PMC may
in good faith discuss extending their collaborative relationship to later stages
of development of the JE and Dengue vaccines. In addition, the license agreement
provides PMC certain rights of termination, but, absent any breach, PMC may not
terminate the license agreement before the earlier of twelve months from
execution of the license agreement or the completion of phase 1 clinical studies
under the JE program.
NASDAQ DELISTING
At June 30, 1998, OraVax's net tangible assets (total assets minus goodwill
and liabilities) were $1.5 million. The minimum net tangible asset requirement
for continued listing by the Nasdaq National Market is $4.0 million. OraVax
received a notice of delisting from the Nasdaq Stock Market, Inc. indicating
that because OraVax was not in compliance with the minimum net tangible asset
requirement OraVax's stock would be delisted from trading on the Nasdaq National
Market. OraVax was also notified by Nasdaq of non-compliance with the minimum $1
per share bid price and minimum requirement for the public market float of $5
million. OraVax appealed the delisting and a hearing was granted before an NASD
panel concerning the delisting issues. OraVax presented its plans to the panel
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and continued to update Nasdaq on the progress of these plans. OraVax was
delisted from the Nasdaq National Market on at the close of market November 16,
1998. OraVax began trading on the OTC Bulletin Board on November 17, 1998. Upon
closing of the proposed merger, holders of OraVax's common stock will receive
ordinary shares of Peptide, which are traded on the London Stock Exchange.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
OraVax's total revenues increased to $10,800,000 in 1998 from $8,853,000 in
1997. In 1998, OraVax's revenues consisted of $7,682,000 earned under its H.
PYLORI joint venture with PMC, $2,159,000 earned under its Dengue license
agreement with PMC, $701,000 from government grants and other research revenues,
and $258,000 in interest earned on invested funds. In 1997, OraVax's revenues
consisted of $7,587,000 earned under its H. PYLORI joint venture with PMC,
$583,000 from government grants and other research revenues, and $683,000 in
interest earned on invested funds. The increase in revenue was attributable
principally to OraVax's November 1998 license agreement, under its Dengue
program, with PMC, which included a $1.0 million payment upon execution of the
license agreement and OraVax earned $1,159,000 under sponsorship of research and
development activities. In addition, the increase in OraVax's 1998 revenue was
attributable to increases in research and development activities of the joint
venture with PMC, in grant revenue from a October 1997 award of a C.DIFFICILE
phase 2 Small Business Innovation Research (SBIR) grant from the National
Institute of Health (NIH) and in license revenue earned in connection with the
1998 sub-license of its CagA antigen to BioMerica, Inc. which were offset by a
decrease in interest income as a result of declining cash investments.
OraVax's total costs and expenses decreased to $17,358,000 in 1998 from
$18,429,000 in 1997. Research and development expenses decreased 11% to
$13,017,000 in 1998 from $14,589,000 in 1997. Significant contributors to
OraVax's research and development expenditures in 1998 versus 1997 included the
conduct of four small-scale phase 2 clinical studies under its H. PYLORI program
and advanced activities under its Japanese encephalitis program, including the
investment in other aspects of the ChimeriVax family of vaccine opportunities.
These expenditures were offset by a decrease in costs resulting from expenses
that were incurred in 1997, under the RSV program, that were not incurred in
1998, and from aggressive cost control. General and administrative expenses
increased 19% to $4,072,000 in 1998 from $3,422,000 in 1997 principally due to
advanced H. PYLORI and ChimeriVax patent efforts, business development costs as
OraVax continues to focus its efforts on obtaining strategic collaborations,
legal costs associated with OraVax's pursuit of potential equity financings and
business combinations, and legal and investment banking costs associated with
the planned merger with Peptide offset by a decrease in expenses associated with
OraVax's workforce reduction in the second quarter of 1997. Interest expense
decreased to $269,000 in 1998 from $418,000 in 1997, principally due to the
expiration of some equipment leases and in addition, OraVax did not enter into
any new equipment leases during the period due to the low volume of capital
equipment expenditures.
OraVax accounts for its investment in the H. PYLORI joint venture
partnerships under the equity method of accounting. Accordingly, OraVax recorded
its $5,844,000 and $6,236,000 share of the joint venture partnerships' losses in
1998 and 1997, respectively. The decreased loss is principally due to third
party obligations, incurred by the joint venture partnerships in 1997 as
compared to 1998, which were offset by an increase in the 1998 budgeted research
and development activities of both OraVax and PMC.
OraVax incurred a net loss from operations of $12,402,000 in 1998 compared
to a net loss from operations of $15,812,000 in 1997.
In the first quarter of 1998, OraVax began recognizing the annual cumulative
6% dividend that accrues in stock and the amortization of the conversion
discount, related to the December 1997
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convertible preferred stock financing. At December 31, 1997, the value of the
discount was $1,675,800, which is being amortized over the eighteen month
discount period by accreting preferred dividends as a credit to additional
paid-in-capital and a charge to retained earnings.
OraVax incurred a net loss to common shareholders of $13,825,000 in 1998
compared to a net loss to common shareholders of $15,812,000 in 1997.
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
OraVax's total revenues increased to $8,853,000 in 1997 from $8,745,000 in
1996. In 1997, OraVax's revenues consisted of $7,587,000 earned under its H.
PYLORI joint venture with PMC, which was entered into during 1995, $583,000 from
government grants and other research revenues, and $683,000 in interest earned
on invested funds. In 1996, OraVax's revenues consisted of $6,595,000 earned
under its H. PYLORI joint venture with PMC, $870,000 from government grants and
other research revenues, and $1,280,000 in interest earned on invested funds.
The increased revenue was attributable to increased budgeted activities, for
research and development, of the joint venture with PMC offset by a decrease in
interest income as a result of declining cash investments and a decrease in
grant revenue as a result of expired grants from the National Institute of
Health.
OraVax's total costs and expenses decreased to $18,429,000 in 1997 from
$25,282,000 in 1996. Research and development expenses decreased 31% to
$14,589,000 in 1997 from $21,009,000 in 1996, principally reflecting the 1996
conduct of both a phase 2 clinical trial under its H.PYLORI program and a phase
3 clinical trial under its RSV program, and the 1996 production of necessary
supplies of clinical materials for its phase 3 clinical trial. In addition,
OraVax reduced its workforce by approximately 25% in early April 1997. General
and administrative expenses decreased 9% to $3,422,000 in 1997 from $3,750,000
in 1996 as decreased expenses associated with the workforce reduction in the
second quarter of 1997 offset increases which OraVax had incurred in the first
quarter of 1997 as compared to the same period in 1996. Interest expense
decreased to $418,000 in 1997 from $523,000 in 1996, principally due to the
expiration of some equipment leases.
OraVax accounts for its investment in the H. PYLORI joint venture
partnerships, through which the joint venture began conducting its research
beginning in the second quarter of 1995, under the equity method of accounting.
Accordingly, the company recorded its $5,085,000 and $6,236,000 share of the
joint venture partnerships' losses during the years ended December 31, 1996 and
1997, respectively. The increased loss was principally attributable to increased
budgeted activities, for research and development, of the joint venture in 1997
as compared with 1996.
OraVax incurred a net loss of $15,812,000 in 1997 compared to a net loss of
$21,622,000 in 1996.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No.133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. The statement requires companies to
recognize all derivatives as either assets or liabilities, with the instruments
measured at fair value. The accounting for changes in fair value, gains or
losses, depends on the intended use of the derivative and its resulting
designation. The statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. OraVax will adopt SFAS 133 on January 1, 2000,
but does not expect such adoption to have a material impact on its financial
statements.
In February 1998, the Accounting Standards Executive Committee ("AcSEC")
issued Statement of Position ("SoP") 98-1, "Accounting for Costs of Computer
Software Developed or Obtained for Internal Use." SoP 98-1 establishes the
accounting for costs of software products developed or
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purchased for internal use, including when such costs should be capitalized.
OraVax does not expect SoP 98-1, which is effective for OraVax beginning January
1, 1999, to have a material effect on its financial position or results of
operations.
In April 1998, the AcSEC issued SoP 98-5, "Reporting on the Costs of
Start-Up Activities." Start-up activities are defined broadly as those one-time
activities related to opening a new facility, introducing a new product or
service, conducting business in a new territory, conducting business with a new
class of customer, commencing some new operation or organizing a new entity.
Under SoP 98-5, the cost of start-up activities should be expensed as incurred.
SoP 98-5 is effective for OraVax beginning January 1, 1999 and OraVax does not
expect its adoption to have a material effect on its financial position or
results of operations.
LIQUIDITY AND CAPITAL RESOURCES
In March 1995, OraVax entered into a joint venture with PMC for the
development, manufacturing, marketing and sale of immuno-therapeutic and
preventive vaccines against H. PYLORI infections in humans. OraVax and PMC will
share equally in profits from the sales of H. PYLORI vaccines and in all future
research, development, clinical and commercialization costs. OraVax and PMC
estimate that research, development and clinical costs will exceed $50.0
million. PMC is providing technical expertise and will also provide marketing
expertise to the joint venture. PMC made an initial payment of $3.2 million
directly to OraVax which included $0.6 million to recognize the value of
research and development conducted by OraVax in the first quarter of 1995 prior
to the formation of the joint venture, and a milestone payment of $2.6 million
to recognize the value of technology previously developed by OraVax and made
available to the joint venture. In addition, PMC purchased $2.5 million of
OraVax's series preferred stock. Subsequently, PMC purchased an additional $1.0
million of common stock in OraVax's initial public offering. In addition, PMC
agreed to pay OraVax directly up to $12.0 million during the development period,
subject to the achievement of certain clinical and regulatory milestones, of
which $0.6 million was paid to the company in December 1995. However, OraVax
cannot guarantee that the milestones which trigger such future payments will be
achieved. Beginning in the second quarter of 1995, research, development and
commercialization activities of the joint venture were conducted through two
equally controlled partnerships which have contracted with OraVax to perform
research and development and clinical trial activities. OraVax earned $6.6
million, $7.6 million and $7.7 million under these contracts in 1996, 1997 and
1998, respectively. In addition, during 1996, 1997 and 1998, the joint venture
entered into research and development contracts with PMC and third parties. The
research and development budgets of the two partnerships comprising the joint
venture are established by joint committees in which each of the venturers has
an equal participation and role. The venturers will pay approximately equal
shares of the agreed budgets. OraVax will receive revenue from the partnerships
for the research and development work which is requested to be performed by
OraVax and funded by the joint venture. OraVax cannot guarantee, however, that
OraVax will be selected to perform such work. The joint venture provides for
certain rights of termination, but, absent any breach, either party may
unilaterally terminate the joint venture. The venturers have agreed to fund
through the joint venture, on an annual basis, the research and development,
clinical and pharmaceutical development costs, and the executive committee of
the joint venture has currently approved funding of such costs through December
1999.
In January 1996, the OraVax leased an approximately 47,000 square foot
GMP-compliant manufacturing facility in Canton, Massachusetts and acquired
related equipment and leasehold improvements from the former tenant. This
facility was specifically designed and equipped by the former tenant for the
manufacture of biological products. OraVax's strategy was to develop its
manufacturing facilities for producing both pilot-scale and commercial
quantities of its products. This facility would also accommodate production
development activities for OraVax's proprietary products depending on the
outcome of product development. Existing building and capital equipment leases,
which include renewal and purchase options, were transferred to the company. In
addition, the
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company purchased leasehold improvements and other related assets from the
former tenant, payable in installments through 1999. OraVax is currently
assessing its options relating to the facility, including the sale of its
related interests.
In June 1996, OraVax sold 2,300,000 shares of its common stock for $7.25 per
share in a follow-on public offering, providing net proceeds of approximately
$15.2 million.
In December 1997, OraVax sold 6,300 shares of its 6% convertible preferred
stock, for $1,000 per share, in a private placement financing, providing gross
proceeds of $6.3 million, of which $4.9 million was received in 1997 and $1.4
million in January 1998. Net proceeds were approximately $5.6 million. In
connection with the private placement financing, warrants for 630 shares of
convertible preferred stock, at a price of $1,000 per share, were issued to the
placement agents of the transaction. The warrants will expire on December 23,
2002.
In December 1997, OraVax sold 240,000 shares of its common stock, for
$1.9125 per share, in a private placement financing, providing net proceeds of
$396,000. In connection with the private placement financing, warrants for
24,000 shares of common stock, at a price of $1.9125 per share, were issued to
the syndicators of the transaction. The warrants will expire on December 23,
2002.
In November, 1998, OraVax obtained a short-term bridge loan, in the amount
of $3 million, from PMC to support operations. OraVax pledged 12% ownership in
the H. PYLORI joint venture as collateral. OraVax granted PMC a controlling vote
in the joint venture, regarding all marketing-related decisions, thereby
granting PMC overall direction of marketing-related matters. OraVax will retain
equal voting authority in all non-marketing-related decisions. In addition,
OraVax authorized PMC, or should PMC elect, PMC's affiliates, to act as the
principal marketing entity for any joint venture products. The loan was to be
repaid in two installments: $2 million on January 31, 1999 and $1 million on
June 30, 1999, and bears interest at an annual rate of 5.42% which is payable
when each installment of principal is due. However, the loan was subsequently
amended to require repayment of $3 million upon the earlier of consummation of
the merger or July 31, 1999.
In the event that OraVax defaults on the loan, PMC would, by virtue of the
company's pledge of 12% ownership in the joint venture to secure the loan,
increase its ownership interest in the joint venture to 62%, thereby obtaining
overall direction of all joint venture matters. OraVax's share of future
research, development, clinical and commercialization costs, and of profits from
target product sales would then decrease from the present 50% to 38%.
OraVax's aggregate cash and investments were $2,538,000 at December 31,
1998, a decrease of $8,790,000 since December 31, 1997. Cash used by operations
during the period, principally to support research and development, was
$5,455,000. OraVax expended $52,000 for property and equipment, repaid
$1,257,000 of its capital lease obligations, and repaid $260,000 of its
installment debt, net of accrued interest, during the period. In addition,
OraVax invested $6,232,000 in the joint venture during the year ended December
31, 1998. In early 1998, OraVax received the $1,400,000 remainder of cash
proceeds from the December 1997 convertible preferred stock financing. In the
fourth quarter of 1998, OraVax received a $3 million short-term loan from PMC to
support continuing operations. Also, OraVax received $66,000 in proceeds from
common stock issuances during the period.
In September, 1997 OraVax was selected by Medeva, as the exclusive marketer
and distributor of Medeva's live-attenuated yellow fever vaccine,
Arilvax-Registered Trademark-, in the United States. OraVax also agreed to work
with Medeva to introduce the vaccine into other international markets. Under the
terms of the agreement, OraVax will conduct clinical studies necessary for U.S.
registration of the vaccine and will market and distribute the product to both
civilian and military groups in the U.S. Arilvax-Registered Trademark- is
currently marketed by Medeva in Europe and selected Asian markets. Medeva will
fund all costs associated with the agreed-upon clinical trials and with securing
regulatory approval in the U.S. Based on the established performance of
Arilvax-Registered Trademark- in other markets and discussions with the FDA,
Medeva anticipates submitting a U.S. product license application (PLA) in 2000.
OraVax does not anticipate
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incurring any material net expenditures under this agreement until 2000 at which
time, assuming a U.S. PLA is filed, it would expect to incur premarketing and
predistribution costs.
To date, OraVax has not received any revenues from the sale of products and
does not expect to receive any such revenues until late 2000, at the earliest.
The first product revenues are anticipated from sales of the yellow fever
vaccine, Arilvax-Registered Trademark-, under OraVax's partnership with Medeva.
Operations have been funded principally through public and private placements of
equity securities, equipment lease financing, revenues from OraVax's H. PYLORI
joint venture and Dengue license agreement with PMC, sponsorship of OraVax's
Japanese encephalitis program by PMC, government grants and interest income.
Since inception, OraVax's cash expenditures have exceeded its revenues
principally as a result from expenditures under its research and development
programs. OraVax expects to continue to incur operating losses over the next
several years primarily due to expanded research and development efforts,
preclinical testing and clinical trials of its product candidates, the
acquisition of additional technologies, the establishment of manufacturing
capability and the performance of commercialization activities. Results of
operations may vary significantly from quarter to quarter depending on, among
other factors, the progress of OraVax's research and development efforts, the
receipt, if any, of milestone payments, the timing of certain expenses and the
establishment of collaborative research agreements. These conditions raise
substantial doubt about OraVax's ability to continue as a going concern.
Pending completion of its merger with Peptide, OraVax plans to finance its
cash needs in the near term principally through its existing cash reserves,
together with interest earned thereon, revenues earned under its H. PYLORI joint
venture and Dengue license agreement with PMC, sponsorship of the company's
Japanese encephalitis program by PMC, sponsorship of the U.S. development of the
yellow fever vaccine, Arilvax-Registered Trademark-, by Medeva, and previously
awarded government grants. Additional capital will be required to ensure the
on-going viability of OraVax. OraVax believes, based upon its current operating
plan, that, in addition to its available cash balances and known revenues, it
will need additional financing in the second quarter of 1999 in order to fund
OraVax's operations. Peptide has agreed to provide bridge financing on a secured
basis under certain circumstances. This bridge financing will be secured with
the intangible assets of OraVax. In the event the merger with Peptide is not
approved by the shareholders of both companies, OraVax would be required to seek
other sources of financing. While management believes that additional capital
may be available to fund operations if the merger is not approved, OraVax cannot
assure that additional funds will be available when required, on terms
acceptable to the company. Changes in OraVax's research and development plans or
other events affecting OraVax's operations may result in accelerated or
unexpected expenditures. OraVax is continuing to review its burn rate and has
implemented expenditure initiatives to conserve its cash resources, including
putting non-essential expenditures on hold. OraVax in the meantime continues to
pursue corporate collaborations and the award of new government grants. OraVax
cannot guarantee that additional financing will be available from any of these
sources, or if available, will be available on satisfactory terms. OraVax's
inability to obtain needed funding on satisfactory terms may require the company
to delay, scale back or eliminate one or more of its planned product development
programs, scale back its planned manufacturing operations or enter into
collaborative arrangements that may require OraVax to issue additional equity or
relinquish rights to certain technologies or product candidates that the company
would not otherwise issue or relinquish.
YEAR 2000 COMPLIANCE
The Year 2000 problem is the result of computer programs having been written
using two digits, rather than four, to define the applicable year. Computer
programs and embedded computer chips may be unable to distinguish between the
years 1900 and 2000. Any computer hardware, software, research and development,
manufacturing or administrative equipment, and operational infrastructure
systems used by OraVax or by its external business partners may recognize a year
using "00", as the last two digits, as the year 1900 rather than the year 2000.
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During the second quarter of 1998, OraVax implemented an internal Year 2000
compliance task force. The goal of the task force is to identify and minimize
disruptions to OraVax's business that could result from the Year 2000 problem,
and to minimize liabilities that OraVax might incur in connection with the Year
2000 problem. The task force consists of employees of OraVax and is
representative of major business functions.
OraVax has conducted a company-wide assessment of its computer systems and
operations infrastructure to identify computer hardware, software, research and
development equipment and process control systems that are not Year 2000
compliant. OraVax intends to replace, upgrade or modify any of its
business-critical systems that are not Year 2000 compliant, or to develop
contingency plans. OraVax anticipates to have these steps completed by the end
of the third quarter in 1999.
OraVax has also identified and prioritized significant service providers,
vendors, suppliers, and worldwide research and development, manufacturing and
clinical trial related third parties that are critical to business operations.
OraVax is in the process of communicating with these external parties, through
interviews and questionnaires, to ascertain their Year 2000 compliance. These
evaluations will be followed by the development of contingency plans, including
identifying alternate service providers and contractors, vendors and suppliers.
OraVax anticipates to have these steps completed by the end of the third quarter
in 1999. Going forward, OraVax will use its best efforts to ensure that new
service providers and contractors, vendors and suppliers are Year 2000 compliant
before engaging in business with them.
OraVax's greatest risk is the failure of critical, worldwide research and
development, manufacturing or clinical trial related service contractors not
being Year 2000 compliant. Because of the significant number of these external
service contractors and the vast number of business systems used by these
parties, OraVax may experience some disruption in its business operations.
OraVax is unable to determine at this time whether the consequences of Year 2000
failures by these parties will have a material impact on OraVax's business
operations. OraVax believes that with the implementation of contingency plans,
including identifying alternate service contractors, the possibility of material
interruptions of normal operations should be reduced. However, OraVax cannot
guarantee that OraVax will be successful in finding alternate service
contractors. In the event that OraVax is unable to replace Year 2000
non-compliant service contractors, OraVax's business operations could be
adversely affected.
To date, OraVax has not incurred nor identified any material costs related
to the assessment of its internal and external Year 2000 compliance. The costs
of OraVax's Year 2000 compliance efforts have been minimal to date, and OraVax
does not anticipate incurring any material costs to ensure internal and external
Year 2000 compliance.
OraVax is using its reasonable best efforts to ensure internal and external
Year 2000 compliance. However, OraVax cannot assure that its assessment and
correction efforts will prove accurate. Key external business partners may be
unsuccessful in solving their Year 2000 issues and OraVax may be unsuccessful in
identifying alternate critical service providers and contractors, vendors and
suppliers. As a result, Year 2000 problems may adversely impact OraVax's
business operations. OraVax's readiness program is an ongoing process and the
estimates of costs and completion dates described above are subject to change.
Because of these and other factors, past financial performance should not be
an indicator of future performance. Investors should not use historical trends
to anticipate future results and should be aware that the trading price of the
OraVax's common stock may be subject to wide fluctuations in response to
quarter-to-quarter variations in operating results, changes in the biotechnology
and pharmaceutical industries and recommendations by analysts or other events.
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DESCRIPTION OF PEPTIDE ORDINARY SHARES
The following summarizes certain rights of holders of the Peptide ordinary
shares based on the Peptide memorandum and articles of association and English
law in force as of the date of this prospectus/proxy statement. The summary does
not purport to be complete and is qualified in its entirety by reference to the
articles of association.
The authorized share capital of Peptide is 100,000,000 ordinary shares of
10p each, of which 36,579,039 Peptide ordinary shares had been issued as of
March 26, 1999. Each of the issued Peptide ordinary shares is fully paid and not
subject to any further calls or assessments by Peptide. There are no conversion
rights, redemption provisions or sinking fund provisions related to the Peptide
ordinary shares. The Peptide ordinary shares are issued in registered form.
In the following description, a shareholder is the person registered in the
register of members of Peptide as the holder of the relevant share.
DIVIDENDS
Peptide has never paid cash dividends on its ordinary shares. Any dividends
on the Peptide ordinary shares must be declared and paid according to the amount
paid up on the Peptide ordinary shares (otherwise than in advance of calls) but
no dividend shall be declared in excess of the amount recommended by the
directors. The directors may from time to time pay to the members of Peptide
such interim dividends as appear to the directors to be justified by the profits
of Peptide available for distribution. There are no fixed dates on which
entitlement to dividends arises on the Peptide ordinary shares.
RIGHTS IN A WINDING UP
In the event of a winding-up or reduction of capital of Peptide involving
repayment, the assets of Peptide available for distribution among the members
would be divided between the holders of the Peptide ordinary shares according to
the respective number of shares held by them and in accordance with the
provisions of the Companies Act. The liquidator may, with the sanction of an
extraordinary resolution of Peptide and subject to the Companies Act, divide
among the members in specie the whole or any part of the assets of Peptide in
such manner as he may determine.
VOTING
Voting at any general meeting of the Peptide shareholders is by a show of
hands unless a poll is duly demanded. A poll may be demanded by:
- the chairman of the meeting;
- at least three shareholders present in person or by proxy, and who are
entitled to vote at the meeting;
- any shareholder(s) present in person or by proxy, who represent in the
aggregate at least 10% of the voting rights of all shareholders entitled
to vote at the meeting;
- any shareholder(s) present in person or by proxy, who hold shares
providing a right to vote at the meeting on which the aggregate sum paid
up on such shares is equal to not less than 10% of the total sum paid upon
all the shares providing that right; or
- any shareholder present in person or by proxy, in the case of a resolution
to confer, vary, revoke or renew authority or approval for an off-market
purchase by Peptide of its own shares.
On a show of hands, every holder of Peptide ordinary shares who is present
in person at a general meeting of Peptide will have one vote, and on a poll,
every holder of Peptide ordinary shares who is
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present in person or by proxy will have one vote per share. The necessary quorum
for a shareholder meeting is a minimum of two persons entitled to vote on the
business to be transacted, each being a shareholder or a proxy for a shareholder
or a duly authorized representative of a corporation. Unless otherwise required
by law or the Articles of Association, voting in a general meeting is by
ordinary resolution which include among other matters:
- resolutions for the election of directors;
- the approval of financial statements;
- the declaration of final dividends;
- the appointment of auditors;
- the increase of authorized share capital; or
- the grant of authority to allot shares.
An ordinary resolution requires the affirmative vote of a majority of the
votes cast at a meeting at which there is a quorum. A special or extraordinary
resolution, for example, relating to certain matters concerning, among other
things, an alteration of the articles of association, or a winding-up of
Peptide, or modifying the rights of any class of shares at a meeting of the
holders of such class, requires the affirmative vote of not less than
three-fourths of the votes cast. Meetings are generally convened upon advance
notice of 21 or 14 clear days, not including the days of delivery or receipt of
the notice or the day of the meeting, depending on the nature of the business to
be transacted.
PREEMPTIVE RIGHTS
Under the Companies Act, the issue of equity securities that are, or are to
be, paid for wholly in cash, other than shares held under an employees' share
scheme, must be offered in the first instance to the existing shareholders in
proportion to the respective nominal values of their holdings on the same or
more favorable terms, unless a special resolution to the contrary has been
passed in a general meeting of shareholders. In this context, equity securities
generally means, in relation to Peptide, Peptide ordinary shares, or shares with
no restrictions on the amounts receivable in a distribution of dividends or
capital and all rights to subscribe for or convert into such shares.
VARIATION OF RIGHTS AND SHARE CAPITAL
Peptide may by ordinary resolution increase its share capital or consolidate
and divide all or any of its share capital into shares of larger amounts.
Subject to the provisions of the Companies Act, Peptide may also subdivide its
shares or any of them into shares of smaller amount or cancel or reduce the
nominal value of any shares which have not been taken or agreed to be taken by
any person. Subject to the provisions of the Companies Act, Peptide may by
special resolution reduce its share capital, any capital redemption reserve and
any share premium account. Peptide may also, subject to such approvals as are
required by the Companies Act, purchase its own shares.
Subject to the provisions of the Companies Act, the rights attached to any
class of shares may, unless the terms of issue of that class provide otherwise,
be varied with the written consent of the holders of three-fourths in nominal
value of the issued shares of that class, or with the sanction of an
extraordinary resolution passed at a separate meeting of the holders of the
shares of that class.
DISCLOSURE OF INTERESTS
The Companies Act gives Peptide power to require persons who it knows are,
or has reasonable cause to believe to be, or to have been within the previous
three years, interested in its relevant share capital to disclose prescribed
particulars of those interests. For this purpose "relevant share capital"
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means issued share capital of Peptide carrying the right to vote in all
circumstances at a general meeting of Peptide. Failure to provide the
information requested within 14 days after the date of sending of the notice may
result in sanctions being imposed against the holder of the relevant shares as
provided in the Companies Act. The articles of association allow the board to
impose such restrictions as they see fit from the following: the withdrawal of
voting rights of such shares and restrictions on the rights to receive dividends
on and to transfer such shares. In this context, the term "interest" is broadly
defined and will generally include an interest of any kind in shares, including
the interest of a holder of a Peptide ordinary share. In addition, under the
Companies Act, any person who acquires either alone or, in certain
circumstances, with others a direct or indirect interest in the relevant share
capital of Peptide in excess of the "notifiable percentage" which is currently
3%, or 10% for certain types of interest, is obligated to disclose prescribed
information to Peptide with respect to those shares within two business days. An
obligation of disclosure also arises where such person's notifiable interest
subsequently falls below the notifiable percentage or where, above that level,
the percentage of Peptide's relevant capital in which such person is interested
increases or decreases.
MISCELLANEOUS
There are currently no United Kingdom foreign exchange controls on the
payment of dividends on the Peptide ordinary shares or the conduct of operations
of Peptide. There are no restrictions under the articles of association or under
English law that limit the right of non-resident or foreign owners to hold or
vote the Peptide ordinary shares.
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COMPARISON OF RIGHTS OF ORAVAX STOCKHOLDERS AND PEPTIDE SHAREHOLDERS
The rights of OraVax stockholders are currently governed by the Delaware
General Corporation Law, OraVax's second amended and restated certificate of
incorporation and OraVax's bylaws. The rights of Peptide shareholders are
currently governed by English law, including the Companies Act and Peptide's
memorandum and articles of association. As a result of the merger, stockholders
of OraVax will receive ordinary shares of Peptide, and thereby become Peptide
shareholders whose rights will be governed by Peptide's articles of association
and English law. There are a number of differences between the rights of OraVax
stockholders and the rights of Peptide shareholders. The following is a summary
of material differences between the rights of OraVax stockholders and the rights
of Peptide shareholders. To understand these differences fully, you should read
the relevant provisions of the DGCL, the Companies Act, OraVax's certificate of
incorporation and bylaws, and Peptide's memorandum and articles of association.
OraVax's certificate of organization and bylaws may be obtained by writing or
telephoning the Secretary of OraVax at the following address:
OraVax, Inc.
38 Sidney Street 4(th) Floor
Cambridge, Massachusetts 02139
Telephone: (617) 494-1339
Peptide's memorandum and articles of association may be obtained by writing
or telephoning the Secretary of Peptide at the following address:
Peptide Therapeutics Group plc
Peterhouse Technology Park
100 Fulbourn Road
Cambridge, CB1 9PT England
Telephone: 011-44-1223-275-300
Under Section 14 of the Exchange Act and the proxy rules promulgated under
the Exchange Act, OraVax is required to comply with certain notice and
disclosure requirements relating to the solicitation of proxies in respect of
stockholder meetings. As a foreign private issuer, Peptide is not subject to the
proxy rules. However, Peptide is subject to the Companies Act and the listing
rules of the London Stock Exchange regulating notices of shareholder meetings.
Under the applicable Companies Act and the London Stock Exchange requirements,
notice of a shareholder meeting is normally accompanied by a shareholder
circular (or, in the case of an annual general meeting, by an annual report and
accounts) containing an explanation of the purpose of the meeting and the
recommendations of the board of directors with respect to actions to be taken.
Following the merger, Peptide will be subject to the requirements of the
Exchange Act. Peptide, for example, will be required to file periodic reports
with the SEC. Furthermore, with respect to the shares issued in the merger,
Peptide will be subject to the liability provisions of Sections 11 and 12 of the
Securities Act and Rule 10b-5 under the Exchange Act.
In the following comparison, a shareholder of Peptide is the person
registered in the register of members of Peptide as the holder of the shares.
VOTING RIGHTS
Under Section 212 of the DGCL, each stockholder is entitled to one vote per
share unless the certificate of incorporation provides otherwise. In addition,
the certificate of incorporation may provide for cumulative voting in the
election of directors of the corporation. The OraVax certificate of
incorporation does not provide for cumulative voting at elections of directors.
A quorum consists of a majority of the shares entitled to vote, unless otherwise
required by law.
Under English law, the voting rights of shareholders are governed by a
company's articles of association, subject to the statutory right of
shareholders to demand a poll (a vote by the nominal value of shares held) at a
general meeting. As described in the above section titled "Description of
Peptide
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Ordinary Shares--Voting," the Peptide articles of association provide that a
poll may be demanded in certain circumstances. Cumulative voting is essentially
unknown under English law. Under English law, two shareholders present in person
constitute a quorum for purposes of a general meeting, unless the company's
articles of association specify otherwise. Peptide's articles of association
specify that two shareholders present in person or by proxy and entitled to vote
constitute a quorum. Any Peptide shareholder on the register may vote in person
or, assuming the proxy is received by Peptide at least 48 hours prior to the
time set for the meeting, by proxy.
ACTION BY WRITTEN CONSENT
Section 228 of the DGCL provides that any action required or permitted to be
taken by stockholders may be effected by a written consent of a majority of the
holders of the outstanding stock having not less than the minimum number of
votes that would be necessary to take such action at a meeting at which all
shares entitled to vote thereon were present and voted, unless the corporation's
certificate of incorporation otherwise provides. OraVax's certificate of
incorporation provides that any action required or permitted to be taken by
stockholders must be effected at a duly called annual or special meeting of
stockholders. Stockholders may not take action by written consent
Under English law, a company's articles of association may provide that a
resolution in writing executed by or on behalf of each shareholder who would
have been entitled to vote upon it if it had been proposed at a general meeting
at which he was present will be as valid and effectual as if it had been passed
at a general meeting properly convened and held. Such a written resolution
requires the unanimous consent of all such shareholders entitled to attend and
vote. Peptide's articles of association contain such a provision.
SOURCES AND PAYMENT OF DIVIDENDS
Section 154 of the DGCL permits a corporation to pay dividends on common
stock, subject to any restrictions contained in the certificate of
incorporation, either (1) out of its surplus or (2) if there is no surplus, out
of its net profits for the fiscal year in which the dividend is declared and/or
the preceding fiscal year; except that no dividends may be paid out of such net
profits if the net assets of the corporation are less than the aggregate amount
of capital represented by the issued and outstanding stock having a preference
upon the distribution of assets. Surplus is defined in the DGCL as the amount by
which net assets (total assets less total liabilities) exceeds the capital of
the corporation. In accordance with the DGCL, capital is determined by the board
of directors and shall not be less than the aggregate par value of the
outstanding capital stock of the corporation having par value. The OraVax
certificate of incorporation and the OraVax bylaws do not restrict the payment
of dividends.
Under English law, a company may pay dividends on its ordinary shares,
subject to the prior rights of its preferred shareholders, only out of its
distributable profits (accumulated realized profits (not previously utilized by
distribution or capitalization) less accumulated realized losses) and not out of
share capital, which includes share premiums (paid-in surplus). Amounts credited
to the share premium account (representing the excess of the consideration for
the issue of shares over the aggregate par value of such shares) may not be paid
out as cash dividends but may be used, among other things, to pay up unissued
shares which may then be distributed to shareholders in proportion to their
holdings. The excess of the fair value of the shares to be issued in the merger
over their par value will be credited to a share premium account, which is part
of other additional capital, as permitted by the Companies Act. In addition, a
public company such as Peptide may make a distribution at any time only if, at
that time and immediately after such distribution, the amount of its net assets
is not less than the aggregate of its called-up (i.e., issued and paid-up) share
capital and undistributable reserves. Under English law, a dividend must be
declared by reference to relevant accounts showing the availability of
distributable reserves for such dividend. Peptide has historically paid no
dividends. Holders of Peptide ordinary shares must approve any final dividend to
be paid by Peptide at the annual
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general meeting of Peptide but no dividend can exceed the amount recommended by
the Peptide board. The Peptide board has the power under Peptide's articles of
association to declare and pay interim dividends.
RIGHTS OF PURCHASE AND REDEMPTION
Under Section 172 the DGCL, a corporation may purchase or redeem shares of
any class of its capital stock, but subject generally to the availability of
sufficient lawful funds therefor and provided at all times that, at the time of
any such redemption, the corporation shall have outstanding shares of one or
more classes or series of capital stock, which have full voting rights that are
not subject to redemption.
Under English law, a company may issue redeemable shares if authorized by
its articles of association and subject to the conditions stated therein.
Peptide's articles of association permit the issue of redeemable shares with the
sanction of a special resolution. Such shares may be redeemed only if fully paid
and, in the case of public companies, only, subject as provided below, out of
distributable profits or the proceeds of a new issue of shares issued for the
purpose of the redemption. When redeemable shares are redeemed wholly out of
profits, the amount by which the par value of the company's issued share capital
is diminished on cancellation of the redeemed shares must be transferred to the
capital redemption reserve, which is generally treated as paid-up share capital.
In addition, any amount payable on redemption of any redeemable shares in excess
of the par value of such shares may be paid out of the proceeds of a fresh issue
of shares up to an amount equal to the lesser of (1) the aggregate of the
premiums received by the company on the issue of those shares or (2) the amount
of the company's share premium account as at the time of the redemption
including any sum transferred to that account in respect of premiums on the new
issue. A company may purchase its own shares, including any redeemable shares,
if authorized by its articles of association previously approved by an ordinary
resolution of its shareholders in the case of an on-market purchase (which, in
the case of Peptide, means on the London Stock Exchange only) or a special
resolution in other cases. The above provisions that apply to redemption of
redeemable shares apply also to purchases by a company of its own shares. The
London Stock Exchange, on which the Peptide ordinary shares are listed, requires
that purchases pursuant to a general authority granted by shareholders of 15% or
more of a company's share capital must be made by way of either a tender or
partial offer to all shareholders. In the case of a tender offer, the shares
must be purchased at a stated maximum or fixed price. Notice of a tender offer
must be given by advertising in two U.K. national newspapers at least seven days
before the offer closes. Unless a tender or partial offer is made to all
shareholders on the same terms, purchases below the 15% threshold may be made
pursuant to a general authority granted by shareholders through the market in
the ordinary way only if the price is not more than 5% above the average of the
middle market quotations taken from the London Stock Exchange Official List for
the five trading days before the purchase date.
SPECIAL MEETING OF SHAREHOLDERS
Under the DGCL, a special meeting of stockholders may be called by the board
of directors or by such person or persons as may be authorized by the
certificate of incorporation or bylaws. OraVax's certificate of incorporation
and OraVax's by-laws provide that special meetings of stockholders may be called
by the chairman of the board or directors, the chief executive officer or the
board of directors.
Under English law, an extraordinary general meeting of shareholders may be
called by the board of directors or (notwithstanding any provision to the
contrary in a company's articles of association) by a request from shareholders
holding not less than one-tenth of the paid-up capital of the company carrying
voting rights at general meetings. An ordinary resolution, other than an
ordinary resolution to remove a director which requires 28 clear days' notice
requires 14 clear days' notice, and requires a majority vote of those present,
in person or by proxy, and voting. An extraordinary or special resolution
requires 21 clear days' notice and a three-quarters majority vote of those
present, in person or by
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proxy, and voting. The term "clear days' notice" means calendar days and
excludes the date of mailing, the deemed date of receipt of such notice (which
is provided for in the articles of association when first-class mail is
employed), and the date of the meeting itself. Extraordinary resolutions are
relatively unusual and are confined to certain matters out of the ordinary
course of business such as a proposal to wind up the affairs of the company.
Proposals which are the normal subject of special resolutions generally involve
proposals to:
- change the name of the company;
- alter its capital structure;
- change or amend the rights of shareholders;
- permit the company to issue new shares for cash without applying the
shareholder's pre-emptive rights;
- to amend the company's objects (purpose) clause in its memorandum of
association and articles of association
- carry out certain other matters where a special resolution is required by
either the company's articles of association or the Companies Act.
change the name of the company, to alter its capital structure, to change or
amend the rights of shareholders, to permit the company to issue new shares for
cash without applying the shareholders' pre-emptive rights and to amend the
company's objects (purpose) clause in its memorandum of association and articles
of association and to carry out certain other matters where either the company's
articles of association or the Companies Act prescribe that a "special
resolution" is required. All other proposals relating to the ordinary course of
the company's business such as the election of directors would be the subject of
an ordinary resolution.
RIGHTS OF APPRAISAL
Under Section 262 of the DGCL, stockholders who follow prescribed statutory
procedures are entitled, in the event of certain mergers or consolidations, to
surrender their shares to the corporation in exchange for the judicially
determined "fair value" of such shares. Such stockholders are entitled to such
appraisal rights unless the shares of stock (or depositary receipts in respect
thereof) held by the stockholder are either (1) listed on a national securities
exchange or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. or (2)
held of record by more than 2,000 holders. No appraisal rights are available for
any shares of stock of the constituent corporation surviving a merger if the
merger did not require for its approval the vote of the stockholders of the
surviving corporation as provided in the DGCL. Regardless of this provision
appraisal rights are available for the shares of any class or series of stock of
a constituent corporation if its holders are required by the terms of an
agreement of merger or consolidation to accept for such stock anything except
the following:
- shares of stock or depositary receipts of the surviving or resulting
corporation in the merger or consolidation;
- shares of stock or depositary receipts of any other corporation, which
shares of stock or depositary receipts, at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the NASD or held of record by more than
2,000 holders;
- cash in lieu of fractional shares or fractional depositary receipts
described in the two above clauses;
- any combination of the shares of stock, depositary receipts and cash in
lieu of fractional shares, or fractional depositary receipts described in
all of the above clauses.
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While English law does not generally provide for appraisal rights, if a
shareholder applies to a court as described in the section entitled "Shareholder
Votes on Certain Transactions" below, the court may specify such terms for the
acquisition as it considers appropriate. English law provides shareholders with
rights to dissent in respect of a reorganization of a company under Section 110
of the Insolvency Act of 1986 of Great Britain. In addition, dissenters' rights
exist where an offeror who, pursuant to a takeover offer for a company, has
acquired or contracted to acquire not less than nine-tenths in value of the
shares to which the offer relates, seeks to compulsorily acquire outstanding
minority shareholdings.
PREEMPTIVE RIGHTS
Unless the certificate of incorporation expressly provides otherwise,
stockholders of a Delaware corporation do not have preemptive rights. The OraVax
certificate of incorporation does not provide for preemptive rights.
Under English law, the issue for cash of equity securities (securities which
with respect to dividends or capital carry a right to participate beyond a
specified amount) or rights to subscribe for or convert into equity securities
must be offered in the first instance to the existing equity shareholders in
proportion to the respective nominal values of their holdings, unless a special
resolution has been passed in a general meeting of shareholders to the contrary.
As is the custom of many English companies listed on the London Stock Exchange,
at its annual general meeting each year Peptide seeks general disapplication by
special resolution of statutory preemption rights on an annual basis: (1) in
respect of the entire unissued ordinary share capital where the equity
securities are to be issued by way of rights to existing shareholders and (2) to
disapply the statutory preemption rights on the issue for cash or equity
securities representing no more than five percent of the company's then issued
ordinary share capital.
AMENDMENT OF GOVERNING INSTRUMENTS
Under Section 242 of the DGCL, a corporation's board of directors may
propose, and its stockholders may adopt, one or more amendments to the
corporation's certificate of incorporation. Unless the certificate of
incorporation otherwise provides, such amendments may be adopted by the vote of
holders of a majority of the outstanding shares entitled to vote thereon, and a
majority of the outstanding stock of each class entitled to vote thereon as a
class. OraVax's certificate of incorporation provides that certain provisions of
the certificate of organization relating to the:
- election of removal of directors;
- special meetings of stockholders; and
- prohibition against stockholder action by written consent,
may only be amended with the vote of the holders of 75% of the shares entitled
to vote for the election of directors. Under the DGCL, the power to amend the
bylaws of a corporation is vested in the stockholders, but a corporation in its
certificate of incorporation may also confer such power upon the board of
directors. OraVax's certificate of incorporation and the OraVax bylaws provide
that the board of directors may amend the bylaws.
Under English law, the shareholders have the authority to alter, delete,
substitute or add to the objects clause in a company's memorandum and all
provisions of its articles of association by a vote of not less than
three-quarters of the shareholders entitled to vote and who do vote, either in
person or by proxy, at a general meeting. In the case of certain alterations to
the memorandum of association, the dissenting shareholders have a right to apply
to the courts to cancel the alterations. Under English law, the board of
directors is not authorized to change the memorandum or the articles of
association. Amendments affecting the rights of the holders of any class of
shares may, depending on the rights attached to such class and the nature of the
amendments, also require approval of the classes affected in separate class
meetings.
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SHAREHOLDER VOTES ON CERTAIN TRANSACTIONS
Under Section 241 of the DGCL, the vote of a majority of the outstanding
shares of capital stock entitled to vote generally is necessary to approve a
merger or other reorganization or a sale of all or substantially all of the
assets of the corporation.
Shareholder approval is usually required under the rules of the London Stock
Exchange for an acquisition or disposition by a listed company, if the net
assets of the company or business to be acquired or disposed of represent 25% or
more of the net asset value of the company or 25% or more of the value of the
company using any of the various other criteria prescribed by the listing rules
of the London Stock Exchange. Where the size of the acquisition or disposal
falls below that level, certain information may nevertheless be required to be
published or circulated to shareholders. Shareholder approval may also be
required for an acquisition or disposal of assets between, or a joint investment
by, a listed company and certain parties including:
- directors of the company or its subsidiaries;
- holders of 10% of the nominal value of any class of the company's or any
holding company's or subsidiary's shares having the right to vote in all
circumstances at general meetings of the relevant company; or
- any associate of the above.
Under the Companies Act, fundamental corporate changes, such as the passing
of a resolution for winding up, non pro rata issuances for cash, reduction of
capital (subject to sanction by the court) and certain repurchases of shares may
be authorized by a special resolution passed at a general meeting of
shareholders. Subject to the provisions of the Companies Act, if at such time,
the capital of Peptide is divided into different classes of shares and the
amendment or other resolution would cause any of the special rights attached to
any class of shares to be varied or abrogated, the amendment must also be
sanctioned by the holders of at least three-quarters in nominal value of the
issued shares of the class concerned.
The Companies Act provides for schemes of arrangement, which are
arrangements or compromises between a company and (any class of) its
shareholders or (any class of) its creditors and are used for certain types of
reconstructions, amalgamations, capital reorganizations or takeovers. They
require the approval at an extraordinary general meeting of the company convened
by order of the court of a majority in number of the shareholders representing
75% in value of the capital or class of creditors or shareholders or class of
shareholders present and voting, either in person or by proxy, and the sanction
of the court. Once so approved and sanctioned, all creditors and shareholders
(of the relevant class) are bound by the terms of the scheme. A dissenting
shareholder would have no rights comparable to dissenter's rights described
below. A scheme of reconstruction under Section 110 of the Insolvency Act may be
made when a company is being wound up voluntarily under which, with the sanction
of a special resolution of shareholders in a general meeting the whole or part
of the company's business or property is transferred to a second company in
consideration for the issue or transfer to them of shares in the second company.
Any dissenting shareholder can require the liquidator to abstain from carrying
the resolution into effect or to purchase his interest at a price agreed or
determined by arbitration. The Companies Act also provides that where a takeover
offer (as defined therein) is made for the shares of a company incorporated in
the U.K. and, within four months of the date of the offer the offeror has, by
virtue of acceptances of the offer, acquired or contracted to acquire not less
than nine-tenths in value of the shares of any class to which the offer relates,
the offeror may, within two months of reaching the nine-tenths level, by notice
require shareholders who do not accept the offer to transfer their shares on the
terms of the offer. A dissenting shareholder may apply to the court within six
weeks of the date on which such notice was given objecting to the transfer or
its proposed terms. The court is unlikely, in the absence of fraud or oppression
to exercise its discretion to order that the acquisition not take effect, but it
may specify such terms of the transfer as it finds appropriate. A minority
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shareholder is also entitled in these circumstances to require the offeror to
acquire his shares on the terms of the offer.
RIGHTS OF INSPECTION
The DGCL allows any stockholder, upon written demand under oath stating the
purpose thereof, to have the right during the usual hours for business to
inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose means a purpose reasonably related to such person's
interest as a stockholder.
Except when closed in accordance with the provisions of the Companies Act,
the register and index of names of shareholders of a company, together with
certain other registers required to be maintained by such company, may be
inspected during business hours by its shareholders without charge and by other
persons upon payment of a fee, and copies may be obtained on payment of a fee.
The shareholders of an English public company may, without charge, also inspect
the minutes of meetings of the shareholders during business hours and obtain
copies upon payment of a fee. The published annual accounts of a public company
are required to be laid before the shareholders in general meeting and a
shareholder is entitled to a copy of such accounts. Copies are filed with the
Registrar of Companies in England and Wales from whom copies are publicly
available upon payment of the appropriate fee. The shareholders of Peptide have
no rights to inspect its accounting records or minutes of meetings of its
directors. Certain registers required to be kept by the company are open to
public inspection and service contracts of directors of the company (which have
more than 12 months unexpired or require more than 12 months' notice to
terminate) must be available for inspection during business hours. Rights of
inspection during business hours mean that the company must make the register,
index or document available for inspection for not less than two hours during
the period between 9:00 a.m. and 5:00 p.m. on each business day. The rules of
the London Stock Exchange require the service contracts of directors to be open
for inspection at certain times for periods longer than two hours.
CLASSIFICATION OF THE BOARD OF DIRECTORS
Under the DGCL, the certificate of incorporation of a Delaware corporation
may provide for the classification of the board of directors in order to stagger
the terms of directors. The term "classified board" generally means the
specification of selected board seats for a term of more than one year (but not
more than three years), with different classes of board seats coming up for
election each year. The OraVax certificate of incorporation and the OraVax
bylaws provides that the board is divided into three classes, as nearly as equal
in number as possible, with the term of office of the directors of each class to
expire at the third succeeding annual meeting after their election and until
their successors are elected and shall qualify.
English law permits a company to provide for the classification of the board
of directors with respect to the time for which directors severally hold office.
Peptide's articles of association provide that there shall not be less than two
directors, nor more than ten. All directors are subject to the general corporate
law requirements concerning the removal of directors. One-third of the directors
(or, if their number is not a multiple of three, the number nearest to but not
greater than one-third)-- excluding any director appointed by the directors
since the last annual general meeting--are required to retire from office by
rotation at each annual general meeting and are eligible to be re-elected by the
shareholders. The directors to retire are selected on the basis of time in
office since their last election. Any director appointed by the directors since
the last annual general meeting is required to retire at the next following
annual general meeting and is then eligible for election, but is not taken into
account in determining which directors are to retire by rotation at such
meeting.
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REMOVAL OF DIRECTORS
Under the DGCL, the entire board of directors or any individual director of
a corporation with a classified board may be removed from office by the
stockholders only for cause, unless the certificate of incorporation provides
otherwise. If the stockholders are entitled to cumulative voting in the election
of directors, no individual director may be removed without cause if the number
of votes cast against the resolution for his removal would be sufficient if
cumulatively voted to elect such director to the board. OraVax's certificate of
incorporation and the OraVax bylaws provide that directors may be removed from
office only for cause by the affirmative vote of holders of at least two-thirds
of the shares entitled to vote for the election of directors. OraVax's
certificate of incorporation does not provide for cumulative voting.
Under the Companies Act, shareholders have the right to remove a director
without cause by ordinary resolution of which special notice of 28 clear days
has been given to the company, irrespective of the provisions of the articles of
association of the company.
VACANCIES ON THE BOARD OF DIRECTORS
Under the DGCL, the board of directors of a corporation may fill any vacancy
on the board, including vacancies resulting from an increase in the number of
directors. OraVax's certificate of incorporation provides that vacancies in the
board of directors may be filled by a majority vote of the directors then in
office, although less than a quorum, or by a sole remaining director.
Under English law, shareholders of an English public company may, by
ordinary resolution at a meeting at which any director retires by rotation,
appoint a person who is willing to be a director either to fill a vacancy or as
an additional director. The board of directors also has the power to appoint a
director to fill a vacancy or as an additional director, subject to such
conditions as may be set out in the company's articles of association, provided
that such appointment will only last until the next following annual general
meeting of the company, at which the director concerned may be re-elected.
LIABILITY OF DIRECTORS AND OFFICERS
The DGCL permits a Delaware corporation to include in its certificate of
incorporation a provision eliminating the personal liability of directors for
monetary damages for certain breaches of fiduciary duty in a lawsuit by or on
behalf of the corporation or in an action by stockholders of the corporation.
The OraVax certificate of incorporation eliminates a director's monetary
liability in a lawsuit by or on behalf of the corporation or in an action by
stockholders of the corporation to the full extent permitted by the DGCL.
English law does not permit a company to exempt any director or other
officer of the company or any person employed by the company as auditor from any
liability in respect of any negligence, default, breach of duty or breach of
trust of which he may be guilty in relation to the company.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the DGCL provides that a corporation may, and in certain
circumstances, must, indemnify its directors, officers, employees and agents for
expenses, judgments or settlements actually and reasonably incurred by them in
connection with suits and other legal actions or proceedings if they acted in
good faith and in a manner they 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 their conduct was unlawful. In
any such suit or action brought by or on behalf of the corporation such
indemnification is limited to expenses reasonably incurred in defense or
settlement of the suit or action. The DGCL also permits a corporation to adopt
procedures for advancing expenses to directors, officers and others without the
need for a case-by-case determination of eligibility, so long as in the case of
officers and directors, they undertake to repay the amounts advanced if it is
ultimately determined that the officer or director was not entitled to be
indemnified. The OraVax certificate of
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incorporation and OraVax bylaws contain provisions for advancing expenses in the
manner provided for in the DGCL. The DGCL permits corporations to purchase and
maintain insurance for directors and officers against liability for expenses,
judgments or settlements whether or not the corporation would have the power to
indemnify such persons therefor.
OraVax has entered into contracts with each of its independent directors
requiring OraVax to indemnify such persons and to advance litigation expenses to
such persons to the fullest extent permitted by applicable law.
English law does not permit a company to indemnify a director or an officer
of the company or any person employed by the company as auditor against any
liability in respect of negligence, default, breach of duty or breach of trust
in relation to the company. This general rule does not apply where a director,
officer or auditor incurs liability in defending any legal proceedings (whether
civil or criminal) in which judgment is given in his favor or in which he is
acquitted or in certain instances where, although he is liable, a court finds
that such director, officer or auditor acted honestly and reasonably and that
having regard to all the circumstances he ought fairly to be excused and relief
is granted by the court. The indemnification provisions under English law may be
sufficiently broad to permit indemnification of Peptide's executive officers and
directors for liabilities arising under the Securities Act of 1933. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling Peptide pursuant to the
foregoing provisions, Peptide has been informed that in the opinion of the SEC
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable. Section 310 of the Companies Act enables
companies to purchase and maintain insurance for directors, officers and
auditors against any liability which would otherwise attach to them in respect
of any negligence, default, breach of duty or breach of trust in relation to the
company. Peptide maintains director and officer liability insurance.
SHAREHOLDERS' SUITS
Under Delaware law, a stockholder may institute a lawsuit against one or
more directors, either on his own behalf, or derivatively on behalf of the
corporation. An individual stockholder may also commence a lawsuit on behalf of
himself and other similarly situated stockholders when the requirements for
maintaining a class action under Delaware law have been met. Section 102(b)(7)
of the DGCL enables a corporation in its certificate of incorporation to
eliminate or limit the personal liability of a director for monetary damages for
violations of the director's fiduciary duty, except for the following:
- any breach of a director's 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;
- liability under Section 174 of the DGCL which provides for director
liability for unlawful payment of dividends or unlawful stock purchases or
redemptions; or
- any transaction from which a director derived an improper personal
benefit.
Under English law shareholders have the right to institute a lawsuit on
behalf of the company in certain limited circumstances. In addition, Section 459
of the Companies Act permits a shareholder whose name is on the register of
members of the company (including U.S. persons) to apply for a court order when
the company's affairs are being or have been conducted in a manner unfairly
prejudicial to the interests of the shareholders, or when any actual or proposed
act or omission of the company is or would be so prejudicial. A court when
granting relief has wide discretion, including authorizing civil proceedings to
be brought in the name of the company by a shareholder on such terms as the
court may direct. Except in these limited respects, English law does not permit
class action lawsuits by shareholders on behalf of the company or on behalf of
other shareholders.
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Judgments of United States courts, including judgments against Peptide,
based on the civil liability provisions of the federal securities laws of the
United States, may not be enforceable in English courts. See "Enforceability of
Civil Liabilities."
CERTAIN PROVISIONS RELATING TO SHARE ACQUISITIONS
Section 203 of the DGCL prohibits a corporation which has securities traded
on a national securities exchange, designated on Nasdaq or held of record by
more than 2,000 stockholders from engaging in certain business combinations,
including:
- merger, sale of substantial assets, loan or substantial issuance of stock
with an interested stockholder; or
- an interested stockholder's affiliates or associates, for a three-year
period beginning on the date the interested stockholder acquires 15% or
more of the outstanding voting stock of the corporation.
The restrictions on business combinations do not apply if (1) the Board of
Directors gives prior approval to the transaction in which the 15% ownership
level is exceeded; (2) the interested stockholder acquires, in the transaction
pursuant to which the interested stockholder becomes the owner of 15% or more of
the outstanding stock, 85% of the corporation's stock (excluding those shares
owned by persons who are directors and also officers as well as employee stock
plans in which employees do not have a confidential right to determine whether
shares held subject to the plan will be tendered in a tender or exchange offer);
or (3) the business combination is approved by the board of directors and
authorized at a meeting of stockholders by the holders of at least two-thirds of
the outstanding voting stock, excluding shares owned by the interested
stockholder. Although a Delaware corporation may elect, pursuant to its
certificate of incorporation or bylaws, not to be governed by this provision,
the OraVax certificate of incorporation and the OraVax bylaws contain no such
election.
In the case of a company listed on the London Stock Exchange, shareholder
approval must be obtained for certain acquisitions or disposals of assets
involving directors or substantial shareholders or their associates as described
in the section entitled "Shareholder Votes on Certain Transactions." In
addition, takeovers of public companies are regulated by the City Code on
Takeovers and Mergers, non-statutory rules unenforceable at law but administered
by the Panel on Takeovers and Mergers, a body comprising representatives of
certain City of London financial and professional institutions which oversees
the conduct of such takeovers. One of the provisions of the City Code provides
that (1) when any person acquires, whether by a series of transactions over a
period of time or not, shares which (taken together with shares held or acquired
by persons acting in concert with him) carry 30% or more of the voting rights of
a public company; or (2) when any person, together with persons acting in
concert with him, holds not less than 30% but not more than 50% of the voting
rights and such person, or any person acting in concert with him, acquires in
any period of 12 months additional shares carrying more than 1% of the voting
rights, then such person must generally make an offer for all of the equity
shares of the company (whether voting or non-voting) for cash, or accompanied by
a cash alternative, at not less than the highest price paid for the relevant
shares during the 12 months preceding the date of the offer.
ANTI-TAKEOVER PROVISIONS
Under the rights agreement of OraVax, each outstanding share of OraVax
common stock also represents a right that, under certain circumstances, may
trade separately from the shares of OraVax common stock. The rights are not
currently exercisable. However, under certain circumstances they permit their
holders (other than an acquiror) to purchase at a favorable price a number of
shares of OraVax common stock or securities of a successor to OraVax with the
result that an acquiror's interest in OraVax would be substantially diluted. The
description and terms of the rights are set forth in the
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rights agreement. Immediately after entering into the merger agreement, the
rights agreement was amended so that it does not apply to the approval,
execution and delivery of the merger agreement.
Peptide does not have any comparable anti-takeover plan. Under English law,
directors of a company have a fiduciary duty to take only those actions which
are in the interests of the company. Generally speaking, anti-takeover
provisions are not actions which under English law fall within this category.
Under the City Code a company is prohibited from taking any action without the
approval of its shareholders at a general meeting held at any time after a bona
fide offer has been communicated to its board or after its board has reason to
believe that bona fide offer might be imminent which action could effectively
result in a bona fide offer being frustrated or in the shareholders being denied
an opportunity to decide on its merits.
DISCLOSURE OF INTERESTS
Acquirors of shares of OraVax common stock are subject to disclosure
requirements under Section 13(d)(1) of the Exchange Act and Rule 13d-1 of the
Exchange Act. These rules which provide that any person who becomes the
beneficial owner of more than 5% of the issued and outstanding shares of OraVax
common stock must file a Schedule 13D with the SEC disclosing certain specified
information, and send a copy of the Schedule 13D to OraVax and to the securities
exchange on which the security is traded within 10 days after such acquisition.
After the merger, acquirors of Peptide ordinary shares will be required to
comply with, among other things, the provisions of Section 13(d) of the Exchange
Act and Rule 13d-1 thereunder.
Section 198 of the Companies Act provides that a person, company and other
legal entity who acquires an interest or becomes aware that he has acquired an
interest of 3% (or 10% for certain types of interest) or more of any class of
shares comprised in a public company's "relevant share capital" is obliged to
notify that company of his interest within two days following the day on which
the obligation arises. Relevant share capital means that company's issued share
capital carrying rights to vote in all circumstances at general meetings of the
company). Thereafter, notice must be given to the company of any changes in
respect of whole percentage figure increases or decreases, rounded down to the
next whole number or which reduce such interest below 3% (or 10%, as
appropriate). The Peptide ordinary shares are "relevant share capital" for this
purpose.
In addition, the Companies Act provides that a public company may by notice
in writing, require a person whom the company knows or reasonably believes to
be, or to have been at any time during the three years immediately preceding the
date on which the notice is issued, interested in shares comprised in the
company's "relevant share capital" to confirm that fact or to indicate whether
or not that is the case. In addition, when the person holds or has during
relevant time held an interest in such shares, that person must give such
further information as may be required relating to his interest and any other
interest in the shares of which he is aware. The disclosure must be made within
such reasonable period as may be specified in the relevant notice (which may,
depending on the circumstances, be as short as one or two days).
For the purpose of the above obligations, the interest of a person in shares
means any kind of interest in shares including interests in any shares in which:
- a person's spouse, child or stepchild under the age of 18 is interested;
- a corporate body is interested and either:
(1) that corporate body or its board of directors is in the habit of
acting based on that person's directions or instructions, or
(2) that person is entitled to control or controls one-third or more of
the voting power of that corporate body; or
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- another party is interested and the person and that other party are
parties to a concert party agreement under Section 204 of the Companies
Act.
A concert party agreement is a agreement which provides for one or more
parties to it to acquire interests in shares of a particular public company,
which imposes obligations or restrictions on any one or more of the parties as
to the use, retention or disposal of such interests acquired pursuant to such
agreement and any interest in the company's shares is in fact acquired by any of
the parties pursuant to the agreement. Such concert party agreement need not be
in writing.
When a Section 212 notice is served by a company on a person who is or was
interested in shares of the company and that person fails to give the company
any information required by the notice within the time specified in the notice,
the company may apply to the court for an order directing that the shares in
question be subject to restrictions prohibiting any transfer of those shares,
the exercise of voting rights in respect of such shares, the issue of further
shares in respect of such shares and, other than in a liquidation, payments,
including dividends, in respect of such shares. Such restrictions may also void
any agreement to transfer such shares. In addition, a person who fails to
fulfill the obligations described above is subject to criminal penalties in the
United Kingdom. Under the Peptide articles of association certain of the powers
of imposing restrictions granted to the courts may be imposed by its board of
directors in certain circumstances.
CERTAIN LONDON STOCK EXCHANGE LISTING REQUIREMENTS
In addition to the provisions of its articles of association and the
Companies Act, Peptide is subject to the listing rules of the London Stock
Exchange made under Section 142 of the United Kingdom Financial Services Act
1986 and in particular to the continuing obligations under those rules. Among
other things these require a listed company to notify the London Stock Exchange
of any major new developments in its sphere of activities which are not public
knowledge which may by virtue of the effect of these developments on its assets
and liabilities or financial position or the general course of its business,
lead to a substantial movement in the price of its listed securities. Peptide
must ensure equality of treatment for all holders of listed securities who are
in the same position. When its securities are listed on more than one stock
exchange, Peptide must ensure that equivalent information is made available to
the market on each exchange on which its securities are listed. In addition, the
Peptide articles of association, the general law and/or the listing rules impose
obligations on listed companies to send the following information to
shareholders:
- details relating to certain acquisitions, disposals, takeovers, mergers
and offers either made by or in respect of the company; and
- an explanatory circular, whenever a general meeting of the shareholders is
convened. If the meeting includes any business other than routine business
at an annual general meeting, it must specify the general nature of such
business (routine business means declarations of dividends, considering
the report and accounts, election of directors in place of those retiring,
appointment and fixing of remuneration of auditors or the manner in which
fixed).
In addition to the above requirements, a company is required to notify the
London Stock Exchange of certain notifications received by the company of:
- persons holding an interest in 3% or more of any class of the company's
relevant share capital;
- any changes on the company's board of directors;
- any purchase or redemption by the company of its own equity securities;
- any directors' interests, including changes in the shares or the
debentures of their company; and
- changes in the capital structure of the company.
Unaudited half yearly reports of results for the first six months of any
fiscal year and an unaudited preliminary announcement of results for each full
fiscal year must also be published.
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ENFORCEABILITY OF CIVIL LIABILITIES
Peptide is a public limited company organized under the laws of England and
Wales. Most of Peptide's officers and directors reside principally in the United
Kingdom. A significant portion of the assets of Peptide are located outside of
the United States, although the combined company will have assets in the United
States following completion of the merger. As a result, it may not be possible
for investors to effect service of process upon Peptide within the United States
or to enforce against Peptide, in United States courts or courts outside of the
United States, judgments obtained in United States courts predicated upon the
civil liability provisions of the federal securities laws of the United States.
There is doubt as to the enforceability in England, in original actions or in
actions for enforcement of judgments of United States courts, of civil
liabilities predicated solely upon such securities laws.
Individual shareholders of an English company, including U.S. persons, have
the right under English law to bring lawsuits on behalf of the company in which
they are a shareholder, and on their own behalf against the company, in certain
limited circumstances. Except in limited circumstances, English law does not
permit class action lawsuits by shareholders. See "Comparison of Rights of
OraVax Stockholders and Peptide Shareholders--Shareholders' Suits."
LEGAL MATTERS
Certain legal matters relating to the Peptide ordinary shares will be passed
upon by Palmer & Dodge LLP, Boston, Massachusetts, United States counsel for
Peptide. The legality and validity of the Peptide ordinary shares to be issued
under the terms of the merger agreement if issued in a manner referred to in
this prospectus/proxy statement will be passed upon by Weil, Gotshal & Manges
LLP, London, England, United Kingdom counsel for Peptide.
EXPERTS
The consolidated financial statements of Peptide as of December 31, 1997 and
1996, and for each of the three years in the period ended December 31, 1998,
included in this prospectus/proxy statement have been audited by Arthur
Andersen, independent chartered accountants, as indicated in their report with
respect thereto, and included herein in reliance upon the authority of said firm
as experts in giving said reports.
The consolidated financial statements of OraVax as of December 31, 1998 and
1997 and for each of the three years in the period ended December 31, 1998
included in this prospectus/proxy statement have been audited by
PricewaterhouseCoopers LLP, independent auditors, as set forth in their report
with respect thereto, and are included herein in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
The combined financial statements of OraVax Merieux Co. and Merieux OraVax
Co. included in this prospectus/proxy statement have been audited by
PricewaterhouseCoopers LLP, as set forth in their report with respect thereto,
and are included herein in reliance upon the authority of such firm as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
OraVax files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information filed by OraVax at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms.
OraVax's SEC filings are also available to the public from commercial document
retrieval services and at the web site maintained by the SEC at
"http://www.sec.gov."
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Peptide has filed a registration statement on Form F-4 to register with the
SEC the Peptide ordinary shares to be issued to holders of OraVax common stock
in the merger. This prospectus/proxy statement is a part of that registration
statement and constitutes a prospectus of Peptide in addition to being a proxy
statement of OraVax for the Special Meeting. As allowed by SEC rules, this
prospectus/ proxy statement does not contain all the information you can find in
the registration statement or the exhibits to the registration statement.
You should rely only on the information contained or incorporated by
reference in this prospectus/ proxy statement to vote on the approval and
adoption of the merger agreement. Neither OraVax nor Peptide has authorized
anyone to provide you with information that is different from what is contained
in this prospectus/proxy statement. This prospectus/proxy statement is dated
March 31, 1999. You should not assume that the information contained in the
prospectus/proxy statement is accurate as of any date other than such date, and
neither the mailing of this prospectus/proxy statement to stockholders nor the
issuance of Peptide ordinary shares in the merger shall create any implication
to the contrary.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PEPTIDE THERAPEUTICS GROUP PLC
Report of Independent Chartered Accountants.......................................... F-2
Consolidated Profit and Loss Accounts for the years ended December 31, 1995, 1996 and
1997 and the six months ended June 30, 1997 and 1998............................... F-3
Consolidated Balance Sheets as of December 31, 1996 and 1997 and as of June 30,
1998............................................................................... F-4
Consolidated Cash Flow Statements for the years ended December 31, 1995, 1996 and
1997 and the six months ended June 30, 1997 and 1998............................... F-5
Notes to the Consolidated Financial Statements....................................... F-6
ORAVAX, INC.
Report of Independent Accountants.................................................... F-30
Consolidated Balance Sheets as of December 31, 1997 and 1998......................... F-31
Consolidated Statements of Operations for the years ended December 31, 1996, 1997,
and 1998........................................................................... F-32
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended
December 31, 1996, 1997, and 1998.................................................. F-33
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1997,
and 1998........................................................................... F-34
Notes to Consolidated Financial Statements........................................... F-35
ORAVAX MERIEUX CO. AND MERIEUX ORAVAX CO. PARTNERSHIPS
Report of Independent Accountants.................................................... F-53
Combined Balance Sheets as of December 31, 1997 and 1998............................. F-54
Combined Statements of Operations for the years ended December 31, 1996, 1997 and
1998............................................................................... F-55
Combined Statements of Partners' Capital (Deficit) for the period from inception
(March 31, 1995) through December 31, 1995 and the years ended December 31, 1996,
1997 and 1998...................................................................... F-56
Combined Statements of Cash Flows for the period from inception (March 31, 1995)
through December 31, 1995 and the years ended December 31, 1996, 1997 and 1998..... F-57
Notes to Combined Financial Statements............................................... F-58
</TABLE>
F-1
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS
TO THE DIRECTORS OF PEPTIDE THERAPEUTICS GROUP PLC:
We have audited the financial statements on pages F-3 to F-29 which have
been prepared under the historical cost convention and in accordance with the
accounting policies set out on pages F- 6 to F-7.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The company's directors are responsible for the preparation of the financial
statements. It is our responsibility to form an independent opinion, based on
our audits, on those financial statements and to report our opinion to the
directors.
BASIS OF OPINION
We conducted our audit in accordance with United Kingdom Auditing Standards
issued by the Auditing Practices Board, which do not differ in any significant
respect from United States Generally Accepted Auditing Standards. An audit
includes examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the directors in the preparation of
the financial statements and of whether the accounting policies are appropriate
to the circumstances of the company and of the group, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion, the financial statements give a true and fair view of the
state of affairs of the group as of December 31, 1996 and 1997 and of the
group's loss or profit and cash flows for each of the three years ended December
31, 1995, 1996 and 1997, and in accordance with Generally Accepted Accounting
Principles in the United Kingdom.
RECONCILIATION TO US GAAP
Accounting practices used by the group in preparing the accompanying
financial statements conform with Generally Accepted Accounting Principles in
the United Kingdom, but do not conform with accounting principles generally
accepted in the United States. A description of theses differences and a
reconciliation of net loss and shareholders' equity to United States Generally
Accepted Accounting Principles is set out in Note 21.
Arthur Andersen
Chartered Accountants
Cambridge, England
1 May 1998
F-2
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ENDED SIX MONTHS ENDED
31 DECEMBER, 30 JUNE,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
NOTE UNAUDITED
<S> <C> <C> <C> <C> <C> <C>
L000 L000 L000 L000 L000
TURNOVER........................................ (2) 160 153 2,795 2,525 195
Research and development costs, net........... (2,954) (4,956) (9,745) (5,410) (4,479)
Administrative expenses....................... (1,041) (1,260) (1,485) (784) (758)
Other operating income........................ -- -- 439 215 126
--------- --------- --------- --------- ---------
OPERATING LOSS.................................. (3,835) (6,063) (7,996) (3,454) (4,916)
Interest receivable........................... 236 1,485 1,545 758 649
Interest payable and similar charge........... (3) (13) (16) (3) (3) --
--------- --------- --------- --------- ---------
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION..... (3,612) (4,594) (6,454) (2,699) (4,267)
--------- --------- --------- --------- ---------
Tax on loss on ordinary activities............ (9) -- -- -- --
--------- --------- --------- --------- ---------
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION...... (4) (3,621) (4,594) (6,454) (2,699) (4,267)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Loss per ordinary share....................... (7) (20.2)p (13.5)p (18.1)p (7.6)p (11.8)p
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
There were no recognized gains or losses, other than the loss on ordinary
activities after taxation and therefore a statement of total recognized gains
and losses has not been included in these financial statements.
A statement of movements on reserves is given in note 14.
The accompanying notes are an integral part of these consolidated profit and
loss accounts.
F-3
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
30 JUNE,
-----------
31 DECEMBER,
-------------------- 1998
-----------
1996 1997
--------- --------- UNAUDITED
NOTE L000 L000 L000
<S> <C> <C> <C> <C>
FIXED ASSETS
Tangible assets.......................................... (8) 2,488 2,863 3,177
Investments.............................................. (9) 1,270 1,234 1,429
--------- --------- -----------
3,758 4,097 4,606
--------- --------- -----------
CURRENT ASSETS
Debtors.................................................. (10) 663 494 1,062
Liquid resources......................................... (15) 20,551 20,709 12,365
Cash..................................................... (15) 5 42 3,497
--------- --------- -----------
21,219 21,245 16,924
CREDITORS:
Amounts falling due within one year...................... (11) (1,809) (1,876) (2,117)
--------- --------- -----------
NET CURRENT ASSETS......................................... 19,410 19,369 14,807
--------- --------- -----------
NET ASSETS................................................. 23,168 23,466 19,413
--------- --------- -----------
--------- --------- -----------
CAPITAL AND RESERVES
Called-up share capital.................................. (12) 3,392 3,588 3,630
Share premium account.................................... (13) 30,889 37,446 37,617
Accumulated deficit...................................... (13) (11,113) (17,568) (21,834)
--------- --------- -----------
SHAREHOLDERS' FUNDS--ALL EQUITY............................ 23,168 23,466 19,413
--------- --------- -----------
--------- --------- -----------
</TABLE>
Signed on behalf of the Board
JOHN BROWN, CHIEF EXECUTIVE
GORDON CAMERON, FINANCE DIRECTOR
1 May 1998
The accompanying notes are an integral part of these consolidated balance
sheets.
F-4
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
CONSOLIDATED CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ENDED SIX MONTHS ENDED
31 DECEMBER, 30 JUNE,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
UNAUDITED
<S> <C> <C> <C> <C> <C>
L000 L000 L000 L000 L000
NET CASH OUTFLOW FROM OPERATING ACTIVITIES (NOTE 16).................... (3,052) (5,190) (7,024) (3,584) (4,962)
--------- --------- --------- --------- ---------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received..................................................... 129 1,198 1,844 916 634
Interest paid......................................................... -- (2) -- -- --
Interest element of finance lease payments............................ (1) (20) (10) (8) --
--------- --------- --------- --------- ---------
Net cash inflow....................................................... 128 1,176 1,834 908 634
--------- --------- --------- --------- ---------
TAXATION
Withholding tax....................................................... (9) -- -- -- --
--------- --------- --------- --------- ---------
Net cash outflow...................................................... (9) -- -- -- --
--------- --------- --------- --------- ---------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Payment to acquire own shares through ESOP trust...................... (1,064) -- -- -- (195)
Purchase of tangible fixed assets..................................... (419) (1,994) (1,338) (516) (579)
Purchase of trade investments......................................... -- (250) -- -- --
Sale of tangible fixed assets......................................... 2 2 -- -- --
Sale of trade investments............................................. -- 49 -- -- --
--------- --------- --------- --------- ---------
Net cash outflow...................................................... (1,481) (2,193) (1,338) (516) (774)
--------- --------- --------- --------- ---------
NET CASH OUTFLOW FROM BUSINESS ACTIVITIES............................. (4,414) (6,207) (6,528) (3,192) (5,102)
--------- --------- --------- --------- ---------
MANAGEMENT OF LIQUID RESOURCES
Net cash (placed on)/withdrawn from deposit........................... (27,220) 6,669 (158) (3,365) 8,344
Purchase of corporate bonds........................................... -- (3,756) -- -- --
Sale of corporate bonds............................................... -- 3,756 -- -- --
--------- --------- --------- --------- ---------
Net cash (inflow)/outflow............................................. (27,220) 6,669 (158) (3,365) 8,344
--------- --------- --------- --------- ---------
FINANCING
Issue of ordinary share capital....................................... 31,871 -- 6,752 6,643 214
Exercise of option over issued shares held by ESOP.................... -- -- 36 -- --
Payment of issue costs................................................ (2,212) (227) -- -- --
Payment of undertaking on shares...................................... 792 -- -- -- --
Capital element of finance lease payments............................. (73) (55) (65) (43) (1)
--------- --------- --------- --------- ---------
Net cash inflow/(outflow)............................................. 30,378 (282) 6,723 6,600 213
--------- --------- --------- --------- ---------
(DECREASE)/INCREASE IN CASH............................................. (1,256) 180 37 43 3,455
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN FUNDS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEAR ENDED ENDED
31 DECEMBER, 30 JUNE,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
UNAUDITED
L000 L000 L000 L000 L000
<S> <C> <C> <C> <C> <C>
(Decrease)/increase in cash........................................... (1,256) 180 37 43 3,455
Increase/(decrease) in liquid resources............................... 27,220 (6,669) 158 3,365 (8,344)
--------- --------- --------- --------- ---------
Increase/(decrease) in cash and liquid resources...................... 25,964 (6,489) 195 3,408 (4,889)
Changes in finance leases............................................. (112) 55 65 43 1
--------- --------- --------- --------- ---------
Movement in net funds................................................. 25,852 (6,434) 260 3,451 (4,888)
Net funds at beginning of period...................................... 1,072 26,924 20,490 20,490 20,750
--------- --------- --------- --------- ---------
Net funds at end of period............................................ 26,924 20,490 20,750 23,941 15,862
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated cash flow
statements.
F-5
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(1) ACCOUNTING POLICIES
A summary of the principal Group accounting policies, all of which have been
applied consistently throughout the periods presented, is set out below:
(a) BASIS OF ACCOUNTING The financial statements have been prepared in
accordance with applicable accounting standards and under the historical
cost convention. The financial statements have been prepared under United
Kingdom Generally Accepted Accounting Principles (U.K. GAAP). A
reconciliation from U.K. GAAP to United States Generally Accepted
Accounting Principles (U.S. GAAP) is set out in note 21.
The interim accounts for the six months ended 30 June 1997 and 1998 have
been prepared in accordance with the accounting policies adopted for the
annual accounts for the year ended 31 December 1997. The results for the
six months ended 30 June 1997 and 1998 have not been audited and do not
constitute statutory accounts within the meaning of Section 240 of the
Companies Act 1985. In the opinion of the Directors, all adjustments
necessary for a fair statement of the results for these periods have been
made, such adjustments being of a normal recurring nature. The results of
operations for the six months ended 30 June 1998 are not indicative of
the results expected for the year ending 31 December 1998.
(b) BASIS OF CONSOLIDATION The Group financial statements consolidate the
financial statements of Peptide Therapeutics Group plc and of its
subsidiary undertaking, Peptide Therapeutics Limited.
(c) TANGIBLE FIXED ASSETS Fixed assets are stated at original historical
cost. Depreciation is provided at rates calculated to write off the cost
of each asset on a straight-line basis over its expected useful life to
its residual value, as follows:
<TABLE>
<S> <C>
Computers and office equipment............ -33% per annum
Motor vehicles............................ -25% per annum
Fixtures and fittings..................... -20% per annum
Laboratory equipment...................... -14% per annum
</TABLE>
(d) INVESTMENTS Fixed asset investments are shown at cost less provision for
permanent diminution in value.
(e) FOREIGN CURRENCIES Transactions denominated in foreign currencies are
recorded in the local currency at actual exchange rates as at the date of
the transaction. Monetary assets and liabilities denominated in foreign
currencies are translated at the rates ruling at the balance sheet date.
Any gain or loss arising from a change in exchange rates subsequent to
the date of the transaction is included as an exchange gain or loss in
the profit and loss account.
(f) TAXATION Corporation tax payable is provided on taxable profits at the
current rate. Deferred taxation (which arises from differences in the
timing of the recognition of items, principally depreciation, in the
financial statements and by tax legislation) has been calculated on the
liability method. Deferred taxation is provided on timing differences
which will probably reverse, at the rates of tax likely to be in force at
the time of the reversal. Deferred tax is not
F-6
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
provided on timing differences which, in the opinion of the Directors,
will probably not reverse.
(g) RESEARCH AND DEVELOPMENT Research and development costs are written off
in the period in which they are incurred.
(h) TURNOVER Group turnover comprises the value of sales (excluding VAT and
similar taxes, trade discounts and intra-group transactions) and income
derived from license fees, contract research fees, development milestone
payments and royalties receivable from third parties in the normal course
of business. Contract research fees are recognized in the accounting
period in which the related work is carried out. License fees and
development milestone payments, which are nonrefundable and require no
future obligations of Peptide, are recognized when they fall
contractually due.
Expenses incurred as part of research and development programs and
recharged to the collaborative partner are shown as other operating
income.
(i) GOVERNMENT GRANTS Grants intended to contribute towards specific costs
are recognized in line with the proportion of those costs incurred.
Government grants, which have been netted against research and
development expense, were L30, L97, L373, L144 and L57 for the year ended
31 December 1995, 1996 and 1997 and the six months ended 30 June 1997 and
1998, respectively.
(j) PENSION COSTS The Group provides pensions to all employees both through
contributions to personal pension schemes and through a
self-administered, Inland Revenue approved pension scheme. All schemes
are defined contribution schemes. All pension contributions are charged
to the profit and loss account. Any difference between amounts charged to
the profit and loss account and contributions paid to private pension
schemes is shown in the balance sheet under creditors falling due within
one year.
(k) LEASES Assets held under finance leases are initially reported at fair
value of the asset, with an equivalent liability categorized as
appropriate under creditors due within or after one year. The asset is
depreciated over its useful economic life. Finance charges are allocated
to accounting periods over the period of the lease to produce a constant
rate of charge on the outstanding balance. Rentals are apportioned
between finance charges and reduction of the liability, and allocated to
other operating expenses. The Group entered into operating leases as
described in note 18. Rentals under operating leases are charged on a
straight-line basis over the lease term, even if the payments are not
made on such a basis.
F-7
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(2) TURNOVER
The geographical analysis of turnover by destination is as follows:
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ENDED SIX
31 DECEMBER, MONTHS
----------------------------------- ENDED
1995 1996 1997 30 JUNE,
----- ----- --------- ---------
L000 L000 L000 1997
---------
L000
<S> <C> <C> <C> <C>
United Kingdom................................................................. -- 63 250 125
Europe......................................................................... 9 21 2,405 2,400
North America.................................................................. 31 69 140 --
Japan.......................................................................... 120 -- -- --
--- --- --------- ---------
160 153 2,795 2,525
--- --- --------- ---------
--- --- --------- ---------
<CAPTION>
-----
<S> <C>
United Kingdom................................................................. 125
Europe......................................................................... 40
North America.................................................................. 30
Japan.......................................................................... --
---
195
---
---
</TABLE>
All turnover originates in the United Kingdom.
(3) INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
31 DECEMBER,
-------------------------------------
1995 1996 1997
----- ----- -----
L000 L000 L000
<S> <C> <C> <C>
On bank overdrafts and other amounts repayable within five years.................. 1 2 --
Interest element of finance lease charges, due within one year.................... 12 14 3
-- -- --
13 16 3
-- -- --
-- -- --
<CAPTION>
SIX MONTHS ENDED
30 JUNE,
-------------
1997
-----
<S> <C> <C>
On bank overdrafts and other amounts repayable within five years.................. -- --
Interest element of finance lease charges, due within one year.................... 3 --
-- --
3 --
-- --
-- --
</TABLE>
F-8
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(4) LOSS ON ORDINARY ACTIVITIES BEFORE AND AFTER TAXATION
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE
31 DECEMBER, SIX MONTHS ENDED
------------------------------- 30 JUNE,
1995 1996 1997 --------------------
--------- --------- --------- 1997
--------- 1998
L000 L000 L000 L000 ---------
L000
<S> <C> <C> <C> <C> <C>
Loss on ordinary activities before taxation is stated after crediting:
Grant income.............................................................. 30 97 373 144 57
Other operating income.................................................... -- -- 439 215 126
And after charging:
Depreciation on tangible fixed assets
- -owned.................................................................... 121 402 573 266 337
- -held under finance leases................................................ 24 30 30 15 --
Government grants written off............................................. 10 -- -- -- --
Hire of office equipment and motor vehicles under operating leases........ 113 69 59 22 21
Other operating lease rentals............................................. 150 144 171 85 98
Staff costs (see note 5).................................................. 1,459 2,560 3,514 1,622 1,728
Auditors' renumeration
- -audit services........................................................... 8 29 19 -- --
- -taxation services........................................................ 2 12 23 -- 4
- -other services........................................................... 4 10 1 -- 1
</TABLE>
(5) STAFF COSTS
The average monthly number of employees (including Executive Directors) was:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
31 DECEMBER,
-------------------------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Research and development.......................................................... 19 43 59
Administration.................................................................... 9 18 24
-- -- --
28 61 83
-- -- --
-- -- --
<CAPTION>
FOR THE
SIX MONTHS ENDED
30 JUNE,
-------------
1997 1998
----- -----
<S> <C> <C>
Research and development.......................................................... 54 65
Administration.................................................................... 23 23
-- --
77 88
-- --
-- --
</TABLE>
F-9
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
Their aggregate remuneration comprised:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE
31 DECEMBER, SIX MONTHS ENDED
------------------------------- 30 JUNE,
1995 1996 1997 --------------------
--------- --------- --------- 1997
--------- 1998
L000 L000 L000 L000 ---------
L000
<S> <C> <C> <C> <C> <C>
Wages and salaries........................................................ 1,236 2,194 2,913 1,269 1,464
Social security costs..................................................... 115 238 306 142 145
Other pension costs (see note 18c)........................................ 74 127 194 110 90
Redundancy................................................................ 4 1 -- -- --
Compensation for loss of office........................................... 30 -- 101 101 29
--------- --------- --------- --------- ---------
1,459 2,560 3,514 1,622 1,728
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
(6) DIRECTORS' REMUNERATION, INTERESTS AND TRANSACTIONS
The remuneration paid in respect of Directors who served during the years
were as follows:
<TABLE>
<CAPTION>
TOTAL TOTAL TOTAL
1995 1996 1997
DIRECTORS L L L
- ------------------------------------------------------------------------------------ --------- --------- ---------
<S> <C> <C> <C>
EXECUTIVE:
Sir Brian Richards.................................................................. 155,016 153,076 35,902
Alan Goodman........................................................................ 230,254 230,747 283,876
John Brown.......................................................................... 94,367 126,385 245,245
Gordon Cameron...................................................................... -- -- 120,128
Nicolas Higgins..................................................................... -- 24,081 151,454
Daniel Roach........................................................................ 121,027 130,186 24,555
--------- --------- ---------
TOTAL............................................................................... 600,664 664,475 861,160
--------- --------- ---------
NON-EXECUTIVE:
Sir Brian Richards.................................................................. -- -- 57,825
Alan Smith.......................................................................... 3,333 20,000 20,000
Nancy Lane.......................................................................... 3,333 20,000 20,000
Andrew Allars....................................................................... 17,917 20,000 3,333
--------- --------- ---------
TOTAL............................................................................... 24,583 60,000 101,158
--------- --------- ---------
FORMER DIRECTORS.................................................................... 148,483 43,851 --
--------- --------- ---------
TOTAL............................................................................... 773,730 768,326 962,318
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-10
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(6) DIRECTORS' REMUNERATION, INTERESTS AND TRANSACTIONS (CONTINUED)
DIRECTORS' INTERESTS The interests in the shares of the Company and its
subsidiaries for the Directors who held office during the years are described
below:
SHAREHOLDINGS IN THE COMPANY
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF
ORDINARY ORDINARY ORDINARY
SHARES SHARES SHARES
OF 10P EACH OF 10P EACH OF 10P EACH
31 DECEMBER 31 DECEMBER 31 DECEMBER
1995 1996 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Sir Brian Richards................................................. 101,920 101,920 101,920
Alan Goodman....................................................... 3,041,390 3,041,390 3,041,390
Denis Stanworth.................................................... 2,208,560 2,208,560 --
Nancy Lane......................................................... 2,500 2,500 2,500
Alan Smith......................................................... 500 500 500
Daniel Roach....................................................... 1,575,750 1,575,750 1,593,877
Andrew Allars...................................................... -- 40,000 40,000
</TABLE>
F-11
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(6) DIRECTORS' REMUNERATION, INTERESTS AND TRANSACTIONS (CONTINUED)
OPTIONS OVER SHARES IN THE COMPANY
<TABLE>
<CAPTION>
OPTIONS OVER ORDINARY SHARES OF 10P EACH
------------------------------------------------ EXERCISE
DIRECTORS 1.1.95 GRANTED EXERCISED 31.12.95 PRICE
- ------------------------------------------------------------ --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Sir Brian Richards.......................................... 250,000 -- -- 250,000 L0.10
-- 30,000 -- 30,000 L2.00
--------- ----------- ----------- ----------- -----
280,000
Alan Goodman................................................ 500,000 -- (500,000) -- L1.00
--------- ----------- ----------- ----------- -----
Mr. McCarthy................................................ 250,000 -- (250,000) -- L1.00
----------- -----
John Brown.................................................. -- 180,000 -- 180,000 L0.10
-- 70,000 -- 70,000 L0.10
-- 30,000 -- 30,000 L2.00
--------- ----------- ----------- ----------- -----
280,000
Daniel Roach................................................ 250,000 -- (250,000) -- L1.00
-- 30,000 -- 30,000 L2.00
--------- ----------- ----------- ----------- -----
30,000
<CAPTION>
EARLIEST
DATE OF EXPIRY
DIRECTORS EXERCISE DATE
- ------------------------------------------------------------ --------- ---------
<S> <C> <C>
Sir Brian Richards.......................................... 22.11.95 19.08.01
28.11.98 28.11.02
--------- ---------
Alan Goodman................................................ 22.11.95 --
--------- ---------
Mr. McCarthy................................................ 22.11.95 --
--------- ---------
John Brown.................................................. 22.11.95 27.09.02
22.11.95 10.11.02
28.11.98 28.11.02
--------- ---------
Daniel Roach................................................ 22.11.95 --
28.11.98 28.11.02
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OVER ORDINARY SHARES OF 10P EACH
------------------------------------------------ EXERCISE
DIRECTORS 1.1.96 GRANTED 31.12.96 PRICE
- ------------------------------------------------------------ --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Sir Brian Richards.......................................... 250,000 -- 250,000 L0.10
30,000 -- 30,000 L2.00
-- 14,149 14,149 L2.12
-- 77,802 77,802 L2.05
--------- ----------- ----------- -----
371,951
-----------
Alan Goodman................................................ -- 14,149 14,149 L2.12
-- 140,973 140,973 L2.05
--------- ----------- ----------- -----
155,122
-----------
John Brown.................................................. 180,000 -- 180,000 L0.10
70,000 -- 70,000 L0.10
30,000 -- 30,000 L2.00
-- 14,149 14,149 L2.12
-- 77,314 77,314 L2.05
-- 5,909 5,909 L1.65
--------- ----------- ----------- -----
377,372
-----------
Nicolas Higgins............................................. 259,260 -- 259,260 L0.10
740 -- 740 L0.10
20,000 -- 20,000 L2.00
-- 14,149 14,149 L2.12
-- 68,290 68,290 L2.05
--------- ----------- ----------- -----
362,439
-----------
Daniel Roach................................................ 30,000 -- 30,000 L2.00
-- 14,149 14,149 L2.12
-- 38,778 38,778 L2.05
--------- ----------- ----------- -----
82,927
-----------
<CAPTION>
EARLIEST
DATE OF EXPIRY
DIRECTORS EXERCISE DATE
- ------------------------------------------------------------ --------- ---------
<S> <C> <C>
Sir Brian Richards.......................................... 22.11.95 19.08.01
28.11.98 28.11.02
09.07.99 09.07.06
11.09.99 11.09.03
--------- ---------
Alan Goodman................................................ 09.07.99 09.07.06
11.09.99 11.09.03
--------- ---------
John Brown.................................................. 22.11.95 27.09.02
22.11.95 10.11.02
28.11.98 28.11.02
09.07.99 09.07.06
11.09.99 11.09.03
15.10.99 15.04.00
--------- ---------
Nicolas Higgins............................................. 22.11.95 13.05.02
22.11.95 07.10.02
28.11.98 28.11.02
09.07.99 09.07.06
11.09.99 11.09.03
--------- ---------
Daniel Roach................................................ 28.11.98 28.11.02
09.07.99 09.07.06
11.09.99 11.09.03
--------- ---------
</TABLE>
F-12
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(6) DIRECTORS' REMUNERATION, INTERESTS AND TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
OPTIONS OVER ORDINARY SHARES OF 10P EACH
------------------------------------------------------------- EARLIEST DATE
DIRECTORS 1.1.97 GRANTED EXERCISED LAPSED 31.12.97 EXERCISE PRICE OF EXERCISE EXPIRY DATE
- ------------------- --------- ----------- ----------- ----------- ----------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sir Brian
Richards........... 250,000 -- -- -- 250,000 L0.10 22.11.95 19.08.01
30,000 -- -- -- 30,000 L2.00 28.11.98 28.11.02
14,149 -- -- -- 14,149 L2.12 09.07.99 09.07.06
77,802 -- -- -- 77,802 L2.05 11.09.99 11.09.03
--------- ----- ----------- ----------- ----------- ----- ------------- -----------
371,951
-----------
Alan Goodman....... 14,149 -- -- -- 14,149 L2.12 09.07.99 09.07.06
140,973 -- -- -- 140,973 L2.05 11.09.99 11.09.03
--------- ----- ----------- ----------- ----------- ----- ------------- -----------
155,122
-----------
John Brown......... 180,000 -- -- -- 180,000 L0.10 22.11.95 27.09.02
70,000 -- -- -- 70,000 L0.10 22.11.95 10.11.02
30,000 -- -- -- 30,000 L2.00 28.11.98 28.11.02
14,149 -- -- -- 14,149 L2.12 09.07.99 09.07.06
77,314 -- -- -- 77,314 L2.05 11.09.99 11.09.03
5,909 -- -- -- 5,909 L1.65 01.11.99 01.05.00
--------- ----- ----------- ----------- ----------- ----- ------------- -----------
377,372
-----------
Gordon Cameron..... 145,000 -- -- -- 145,000 L2.00 20.12.99 20.12.03
15,000 -- -- -- 15,000 L2.00 10.12.99 20.12.06
-- 3,735 -- -- 3,735 L2.61 01.11.00 01.05.01
--------- ----- ----------- ----------- ----------- ----- ------------- -----------
163,735
-----------
Nicolas Higgins.... 259,260 -- -- -- 259,260 L0.10 22.11.95 13.05.02
740 -- -- -- 740 L0.10 22.11.95 07.10.02
20,000 -- -- -- 20,000 L2.00 28.11.98 28.11.02
14,149 -- -- -- 14,149 L2.12 09.07.99 09.07.06
68,290 -- -- -- 68,290 L2.05 11.09.99 11.09.03
-- 3,735 -- -- 3,735 L2.61 01.11.00 01.05.01
--------- ----- ----------- ----------- ----------- ----- ------------- -----------
366,174
-----------
Daniel Roach....... 30,000 -- 18,000 12,000 -- L2.00 02.03.97 02.09.97
14,149 -- 14,149 -- -- L2.12 02.03.97 02.09.97
38,778 -- 38,778 -- -- L2.05 02.03.97 02.09.97
--------- ----- ----------- ----------- ----------- ----- ------------- -----------
--
-----------
</TABLE>
(7) LOSS PER ORDINARY SHARE
Basic loss per ordinary share is based on a Group loss for the period
divided by the number of ordinary shares issued and ranking for dividend during
the periods as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE
31 DECEMBER, SIX MONTHS ENDED
---------------------------------------- 30 JUNE,
1995 1996 1997 --------------------------
------------ ------------ ------------ 1997 1998
L000 L000 L000 ------------ ------------
L000 L000
<S> <C> <C> <C> <C> <C>
Loss on ordinary activities after taxation.... (3,621) (4,594) (6,454) (2,699) (4,267)
Loss per ordinary share....................... (20.2)p (13.5)p (18.1)p (7.6)p (11.8)p
Weighted average ordinary shares.............. 17,894,288 33,919,130 35,584,031 35,291,887 36,042,476
</TABLE>
F-13
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(8) TANGIBLE FIXED ASSETS
The movement in the periods was as follows:
<TABLE>
<CAPTION>
OFFICE FIXTURES AND MOTOR LABORATORY COMPUTER
EQUIPMENT FITTINGS VEHICLES EQUIPMENT EQUIPMENT
GROUP L'000 L'000 L'000 L'000 L'000
- ------------------------------------------------------- --------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
COST
At 31 December 1996.................................... 49 828 20 1,941 259
Additions.............................................. 8 345 -- 583 146
Disposals.............................................. -- -- -- (149) --
-- --
----- ----- ---
At 31 December 1997.................................... 57 1,173 20 2,375 405
Additions.............................................. 3 381 22 239 19
Disposals.............................................. -- -- (20) (3) --
-- --
----- ----- ---
At 30 June 1998........................................ 60 1,554 22 2,611 424
-- --
-- --
----- ----- ---
----- ----- ---
DEPRECIATION
At 31 December 1996.................................... 22 253 2 243 89
Charge for year........................................ 15 147 5 331 105
Disposals.............................................. -- -- -- (45) --
-- --
----- ----- ---
At 31 December 1997.................................... 37 400 7 529 194
Charge for period...................................... 5 90 3 178 60
Disposals.............................................. -- -- (8) (1) --
-- --
----- ----- ---
At 30 June 1998........................................ 42 490 2 706 254
-- --
-- --
----- ----- ---
----- ----- ---
NET BOOK VALUE
At 31 December 1996.................................... 27 575 18 1,698 170
-- --
-- --
----- ----- ---
----- ----- ---
At 31 December 1997.................................... 20 773 13 1,846 211
-- --
-- --
----- ----- ---
----- ----- ---
At 30 June 1998........................................ 18 1,064 20 1,905 170
-- --
-- --
----- ----- ---
----- ----- ---
<CAPTION>
TOTAL
GROUP L'000
- ------------------------------------------------------- ---------
<S> <C>
COST
At 31 December 1996.................................... 3,097
Additions.............................................. 1,082
Disposals.............................................. (149)
---------
At 31 December 1997.................................... 4,030
Additions.............................................. 664
Disposals.............................................. (23)
---------
At 30 June 1998........................................ 4,671
---------
---------
DEPRECIATION
At 31 December 1996.................................... 609
Charge for year........................................ 603
Disposals.............................................. (45)
---------
At 31 December 1997.................................... 1,167
Charge for period...................................... 336
Disposals.............................................. (9)
---------
At 30 June 1998........................................ 1,494
---------
---------
NET BOOK VALUE
At 31 December 1996.................................... 2,488
---------
---------
At 31 December 1997.................................... 2,863
---------
---------
At 30 June 1998........................................ 3,177
---------
---------
</TABLE>
Included within fixtures and fittings are professional fees incurred on the
proposed move to, and fit out of, a new building. These fees have been
capitalized as leasehold improvements. The Group will not commence depreciation
on the costs related to the new building until occupation in April 1999.
Assets held under finance leases included in the above are laboratory
equipment with a net book value of L0.15m and L0.12m at 31 December 1996 and 31
December 1997 respectively. The depreciation charged during the years ended 31
December 1995, 1996, 1997 and six months ended 30 June 1997 was L0.02m, L0.03m,
L0.03m and L0.02m respectively. There were no leases outstanding in 1998.
F-14
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(9) FIXED ASSET INVESTMENTS
<TABLE>
<CAPTION>
31 DECEMBER, 30 JUNE,
-------------------- -----------
1996 1997 1998
--------- --------- -----------
L'000 L'000 L'000
<S> <C> <C> <C>
Trade investments......................................................................... 206 206 206
Investment in own shares.................................................................. 1,064 1,028 1,223
--------- --------- -----
1,270 1,234 1,429
--------- --------- -----
--------- --------- -----
</TABLE>
TRADE INVESTMENTS
<TABLE>
<CAPTION>
L'000
-----
<S> <C>
COST
At 31 December 1996 and 1997 and 30 June 1998................................................................. 206
AMOUNTS WRITTEN OFF
At 31 December 1996 and 1997 and 30 June 1998................................................................. --
---
NET BOOK VALUE
At 31 December 1996 and 1997 and 30 June 1998................................................................. 206
---
---
</TABLE>
Trade investments additions represent 515,000 ordinary shares of 2p each in
Alizyme plc, purchased for 40p each. As of 31 December 1997, the mid-market
price of these shares was 35p each. As of 30 June 1998, the mid-market price was
32.5p each.
SUBSIDIARY UNDERTAKINGS
<TABLE>
<CAPTION>
PROPORTION OF PROPORTION OF
ORDINARY SHARES VOTING RIGHTS
HELD BY THE HELD BY THE
COMPANY COMPANY
------------------- -----------------
<S> <C> <C>
Peptide Therapeutics Limited......................................................... 100% 100%
Peptide Mimetics Limited............................................................. 100% 100%
Peptide Therapeutics
Employees' Trustees Limited......................................................... 100% 100%
</TABLE>
The principal activity of Peptide Therapeutics Limited is the research and
development of novel biopharmaceutical products. Peptide Mimetics Limited has
not traded in the year. Peptide Therapeutics Employees' Trustees Limited acts as
the trustee of the Peptide Therapeutics Employees' Trust. There are no other
assets or liabilities of this subsidiary and it has not traded during the period
presented. Peptide Therapeutics Limited and Peptide Mimetics Limited are
registered in England and Wales. Peptide Therapeutics Employees' Trustees
Limited is registered in Jersey.
F-15
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
INVESTMENT IN OWN SHARES
<TABLE>
<CAPTION>
L'000
---------
<S> <C>
COST AND NET BOOK VALUE
31 December 1996............................................................................................. 1,064
Disposals.................................................................................................... (36)
---------
31 DECEMBER 1997............................................................................................. 1,028
Additions.................................................................................................... 195
---------
30 JUNE 1998................................................................................................. 1,223
---------
---------
</TABLE>
Disposals of L0.036m represent options exercised over 18,000 shares by Dr
Roach.
As of 31 December 1996, 31 December 1997 and 30 June 1998, Peptide
Therapeutics Employees' Trustees Limited held 531,990, 513,990 and 588,990
ordinary shares, respectively, in the Company with a total market value of
L1.1m, L1.0m and L1.2m on behalf of the Peptide Therapeutics Employees' Trust.
See note 20 for discussion of U.S. GAAP presentation.
(10) DEBTORS
<TABLE>
<CAPTION>
31 DECEMBER, 30 JUNE,
------------------------ -----------
1996 1997 1998
----- ----- -----------
L'000 L'000 L'000
<S> <C> <C> <C>
Trade debtors............................................................................... 1 95 93
VAT reclaimable............................................................................. 101 83 82
Prepayments and accrued income.............................................................. 561 316 887
--- --- -----
663 494 1,062
--- --- -----
--- --- -----
</TABLE>
(11) CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
31 DECEMBER, 30 JUNE,
-------------------- -----------
1996 1997 1998
--------- --------- -----------
L'000 L'000 L'000
<S> <C> <C> <C>
Obligations under finance leases.......................................................... 66 1 --
Trade creditors........................................................................... 964 991 1,303
Social security and PAYE.................................................................. 84 130 90
Payments on account....................................................................... 187 187 187
Accruals.................................................................................. 508 567 537
--------- --------- -----
1,809 1,876 2,117
--------- --------- -----
--------- --------- -----
</TABLE>
F-16
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(12) CALLED-UP SHARE CAPITAL
<TABLE>
<CAPTION>
NUMBER L'000
------------ ---------
<S> <C> <C>
AUTHORISED ORDINARY SHARES OF 10P EACH
31 December 1996............................................................................... 43,200,000 4,320
31 December 1997............................................................................... 43,200,000 4,320
30 June 1998................................................................................... 43,200,000 4,320
ALLOTTED, CALLED UP AND FULLY PAID ORDINARY SHARES OF 10P EACH
31 December 1996............................................................................... 33,920,280 3,392
31 December 1997............................................................................... 35,876,014 3,588
30 June 1998................................................................................... 36,300,804 3,630
</TABLE>
SHARE OPTION SCHEMES
The Company encourages employee participation in its shares through share
ownership and has established four share option schemes: the Peptide
Therapeutics Group plc 1994 Unapproved Share Option Scheme ("the 1994 Scheme"),
the Peptide Therapeutics 1995 Unapproved Share Option Scheme ("the 1995
Scheme"), the Peptide Therapeutics 1996 Approved Share Option Scheme ("the 1996
Scheme") and the Peptide Therapeutics 1995 Savings-Related Share Option Scheme
("the SAYE Scheme"). Grants and exercise of options under the above schemes are
subject to the Company's Code of Conduct for dealing in shares and the Model
Code.
The 1994 Scheme had 1,477,490, 1,477,490 and 1,140,935 ordinary shares
outstanding as of 31 December 1996, 31 December 1997, and 30 June 1998,
respectively. Options may be exercised at any time since application for listing
of the Company's shares on the London Stock Exchange until the seventh
anniversary of the date of grant. The exercise price of the options is 10p per
ordinary share. No further options may be granted under this scheme.
The 1995 Scheme had 2,316,022, 2,696,223 and 2,588,474 ordinary shares
outstanding as of 31 December 1996, 31 December 1997, and 30 June 1998,
respectively. Of these, options for 516,990, 486,990 and 436,990 as of 31
December 1996, 31 December 1997, and 30 June 1998, respectively are already in
issue and held by Peptide Therapeutics Employees' Trustees Limited as part of
its entire holding of 531,990, 513,990 and 588,990, as of 31 December 1996, 31
December 1997, and 30 June 1998, respectively. Normally these options are only
exercisable between the third and seventh anniversary of the date of grant. The
exercise price of the option is derived from the average closing mid-price over
the three days prior to grant. In order for these options to be exercised in
full, the growth in the Company's share price over a specified consecutive three
year period will have to exceed the growth of the total shareholder return for
the FT-SE-A All-Share (900) Index over the same period. See note 20 for
difference between U.K. GAAP and U.S. GAAP.
The 1996 Scheme had 1,047,666, 1,154,649 and 1,097,332 ordinary shares
outstanding as of 31 December 1996, 31 December 1997, and 30 June 1998,
respectively. Of these, options for 15,000 shares as of 31 December 1996, 31
December 1997, and 30 June 1998, respectively, are already in issue and held by
Peptide Therapeutics Employees' Trustees Limited as part of its entire holding
of 531,990, 513,990 and 588,990, as of 31 December 1996, 31 December 1997, and
30 June 1998, respectively.
F-17
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
Normally these options are only exercisable between the third and seventh
anniversary of the date of grant. The exercise price of the option is derived
from the average closing mid-price over the three days prior to grant. In order
for these options to be exercised in full, the growth in the Company's share
price over a specified consecutive three year period will have to exceed the
growth of the total shareholder return for the FT-SE-A All-Share (900) Index
over the same period. See note 20 for difference between U.K. GAAP and U.S.
GAAP.
The SAYE Scheme had 121,391, 159,411 and 152,654 ordinary shares outstanding
as of 31 December 1996, 31 December 1997, and 30 June 1998, respectively.
Normally these options are only exercisable between the third anniversary of the
date of grant and six months thereafter. The exercise price of the option is
derived from a 20% discount to the average closing mid-price over the three days
prior to grant.
(13) RESERVES
<TABLE>
<CAPTION>
SHARE PREMIUM ACCOUNT PROFIT AND LOSS
----------------------- ACCOUNT
L'000 ---------------------
L'000
<S> <C> <C>
31 December 1996...................................................... 30,889 (11,113)
New share capital subscribed.......................................... 6,557 --
Loss for the period................................................... -- (6,454)
------ -------
31 December 1997...................................................... 37,446 (17,568)
New share capital subscribed.......................................... 171 --
Loss for period....................................................... -- (4,267)
------ -------
30 June 1998.......................................................... 37,617 (21,835)
------ -------
------ -------
</TABLE>
(14) RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
31 DECEMBER, 30 JUNE,
------------------------------- -----------
1995 1996 1997 1998
--------- --------- --------- -----------
L'000 L'000 L'000 L'000
<S> <C> <C> <C> <C>
Loss for the period........................................................... (3,621) (4,594) (6,454) (4,267)
New share capital subscribed, net............................................. 29,432 -- 6,752 214
--------- --------- --------- -----------
Net (decrease)/increase in shareholders' funds................................ 25,811 (4,594) 298 (4,053)
Opening shareholders' funds................................................... 1,951 27,762 23,168 23,466
--------- --------- --------- -----------
Closing shareholders' funds................................................... 27,762 23,168 23,466 19,413
--------- --------- --------- -----------
--------- --------- --------- -----------
</TABLE>
(15) CASH AND LIQUID RESOURCES
The Company manages its funds in a portfolio of cash, bank and treasury
deposits, and liquid investments with maturities chosen to meet its short and
medium term cash requirements. Maturity
F-18
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(15) CASH AND LIQUID RESOURCES (CONTINUED)
periods do not exceed 18 months. Since March 1998, the Company's liquid reserves
have been managed on a discretionary basis by a third party within the above
parameters which have been set by the Board.
<TABLE>
<CAPTION>
31 DECEMBER, 30 JUNE,
-------------------- -----------
1996 1997 1998
--------- --------- -----------
L'000 L'000 L'000
<S> <C> <C> <C>
Cash................................................................................... 5 42 3,497
Liquid resources....................................................................... 20,551 20,709 12,365
--------- --------- -----------
Total cash and liquid resources........................................................ 20,556 20,751 15,862
--------- --------- -----------
--------- --------- -----------
</TABLE>
(16) RECONCILIATION OF THE OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE
31 DECEMBER, SIX MONTHS ENDED
------------------------------- 30 JUNE,
1995 1996 1997 ----------------------
--------- --------- --------- 1997 1998
L'000 L'000 L'000 --------- -----------
L'000 L'000
<S> <C> <C> <C> <C> <C>
Operating loss....................................................... (3,835) (6,063) (7,996) (3,454) (4,916)
Depreciation......................................................... 145 432 603 281 336
Decrease/(increase) in debtors....................................... 25 (15) (131) (899) (552)
Increase in creditors................................................ 611 450 395 488 156
Loss on sale of tangible fixed assets................................ 2 11 105 -- 14
Gain on sale of trade investments.................................... -- (5) -- -- --
--------- --------- --------- --------- -----------
Net cash outflow from operating activities........................... (3,052) (5,190) (7,024) (3,584) (4,962)
--------- --------- --------- --------- -----------
--------- --------- --------- --------- -----------
</TABLE>
F-19
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(17) ANALYSIS OF NET FUNDS
<TABLE>
<CAPTION>
FINANCE CASH LIQUID TOTAL
LEASES --------- RESOURCES ---------
----------- L'000 ----------- L'000
L'000 L'000
<S> <C> <C> <C> <C>
Opening balance 1 January 1996................................................ (121) (175) 27,220 26,924
Management of liquid resources................................................ -- -- (6,669) (6,669)
Increase in cash.............................................................. -- 180 -- 180
Capital element of finance lease payments..................................... 55 -- -- 55
--- --------- ----------- ---------
Closing balance 31 December 1996.............................................. (66) 5 20,551 20,490
Management of liquid resources................................................ -- -- 158 158
Increase in cash.............................................................. -- 37 -- 37
Capital element of finance lease payments..................................... 65 -- -- 65
--- --------- ----------- ---------
Closing balance 31 December 1997.............................................. (1) 42 20,709 20,750
Management of liquid resources................................................ -- -- (8,344) (8,344)
Increase in cash.............................................................. -- 3,455 -- 3,455
Capital element of finance lease payments..................................... 1 -- -- 1
--- --------- ----------- ---------
Closing balance 30 June 1998.................................................. -- 3,497 12,365 15,862
--- --------- ----------- ---------
--- --------- ----------- ---------
</TABLE>
(18) FINANCIAL COMMITMENTS
a) LEASE COMMITMENTS The Group has not entered into any leases in respect
of vehicles and office equipment during the periods presented. The total
rental expense for the years ended 31 December 1995, 1996 and 1997 and
for the six months ended 30 June 1997 and 1998 for existing leases was
L0.11m, L0.07m, L0.06m, L0.02m and L0.02m, respectively. The Group has
entered into cancellable leases in respect to certain land and buildings
on short-term leases. The rentals for the years ended 31 December 1995,
1996 and 1997 and for the six months ended 30 June 1997 and 1998 on these
leases were L0.15m, L0.14m, L0.17m, L0.09m and L0.1m, respectively.
The Group entered a lease on 30 March 1998 in respect of a further unit
on the Cambridge Science Park, which has not been taken into account in
the following analysis. In addition, the Group entered into an additional
lease for a research and development facility, which is to commenced in
December 1998. See note 19.
The minimum accrual rentals under the foregoing leases are as follows:
<TABLE>
<CAPTION>
31 DECEMBER, 31 DECEMBER,
------------------------ ------------------------
PROPERTY VEHICLES AND EQUIPMENT
------------------------
1997 ------------------------
1996 ----- 1996 1997
----- L'000 ----- -----
L'000 L'000 L'000
<S> <C> <C> <C> <C>
GROUP
Operating leases which expire:
Within one year................................................................ 163 109 13 13
Within two to five years....................................................... -- -- 32 --
-- --
--- ---
163 109 45 13
-- --
-- --
--- ---
--- ---
</TABLE>
F-20
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(18) FINANCIAL COMMITMENTS (CONTINUED)
- ------------------------
b) CAPITAL COMMITMENTS At 31 December 1997, capital commitments contracted
but not provided for were L0.15m (1996--L0.03m).
c) PENSION ARRANGEMENTS The Group provides pension benefits to all
full-time employees on a defined contribution basis. The Company operates
a self-administered, Inland Revenue approved pension scheme for Executive
Directors and a limited number of senior employees. Other employees may
operate private personal pension schemes. The pension cost for the years
ended 31 December 1995, 1996 and 1997 and the six month periods ended 30
June 1997 and 1998 were L0.07m, L0.13m, L0.19m, L0.11m and L0.09m,
respectively. At 31 December 1996, 31 December 1997 and 30 June 1998 the
Group owed L4,343, L3,078 and L688, respectively to the pension schemes.
These amounts are shown in the balance sheet under creditors falling due
within one year.
(19) COLLABORATION AGREEMENTS
(a) SmithKline Beecham Agreement
In February 1997, the Company signed a licensing and collaboration agreement
with SmithKline Beecham to continue the development of its Allergy Vaccine.
SmithKline Beecham acquired exclusive worldwide rights to market products
arising from the agreement and will pay all clinical and associated development
costs of the Allergy Vaccine as well as for any other product candidates arising
from the alliance. The Company received a non-refundable L2.4m license payment
upon entering into the agreement. The Company also has the ability to receive up
to an additional L23.7m, payable upon achievement of clinical development and
product registration milestones. In addition, the Company will receive royalties
on any future product sales. As part of the collaboration agreement, SmithKline
Beecham purchased L3.6m of ordinary shares, at 360p per share.
The Company has recorded L2.4 million of turnover related to this
collaboration for the year ended 31 December 1997 and six months ended 30 June
1997. In addition, the Company recorded other operating income of L439, L215 and
L125 for the year ended 31 December 1997 and the six months ended 30 June 1997
and 1998, respectively for development costs on the Allergy Vaccine that was
reimbursed by SmithKline Beecham.
(b) Medeva Agreement
In January 1997, Peptide entered into a collaboration with Medeva for the
research, development and marketing of novel, non-injectable vaccines.
Under the terms of this collaboration, Peptide acquired, for total
consideration of L1 million, an oral and nasal vaccine delivery technology,
rights to several vaccine product candidates and rights to a portfolio of 19
patent families. In addition, Peptide has provided L1 million of funding to
Medeva towards the cost of the development program which is taking place within
Medeva's vaccine research unit. This funding was recorded as research and
development expense during 1997. Medeva has an option to license any products
developed from the alliance and has rights to participate in the revenues
Peptide generates from licensing a product to a third party. Medeva purchased
from Peptide approximately L3 million of Peptide ordinary shares at 340p per
share at the time of entering the alliance.
F-21
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(20) POST BALANCE SHEET EVENTS
On 12 March 1998, the Group entered into an agreement to lease a new 30,000
square foot purpose-built research and development facility in the Peterhouse
Technology Park on the south side of Cambridge. The lease commenced on December
16, 1998 and is for a 25-year term with annual payments of L520,000.
On 10 November 1998, the Group entered into an agreement to acquire OraVax,
Inc. ("OraVax"), a United States based corporation. The transaction will take
the form of a merger with OraVax, Inc. becoming a wholly owned subsidiary of the
Group. The Group will issue stock and cash totaling approximately $17.0 million
in consideration for the merger. Simultaneous with the execution of the merger
agreement, the Group purchased approximately 95% of OraVax's outstanding 6%
convertible preferred stock for an aggregate purchase price of approximately
$3.0 million. Completion of the merger is subject to certain conditions,
including approval by the shareholders of each company and the Group raising
additional capital to provide sufficient working capital for the combined
company following the merger, as required by the rules of the London Stock
Exchange. The merger will be accounted for using the acquisition method of
accounting under U.K. GAAP.
(21) SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN U.K. GAAP FOLLOWED BY THE GROUP
AND U.S. GAAP
The group's consolidated financial statements have been prepared under U.K.
GAAP, which differs in certain respects from U.S. GAAP. The principal
differences between the group's accounting policies under U.K. GAAP and U.S.
GAAP are set out in the table below.
RECONCILIATION OF NET LOSS FROM U.K. GAAP TO U.S. GAAP
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE
31 DECEMBER, SIX MONTHS ENDED
------------------------------- 30 JUNE,
1995 1996 1997 --------------------
--------- --------- --------- 1997 1998
L'000 L'000 L'000 --------- ---------
L'000 L'000
<S> <C> <C> <C> <C> <C>
Net loss as reported under U.K. GAAP............................ (3,621) (4,594) (6,454) (2,699) (4,267)
Adjustments for:
Compensation costs under variable plan accounting for stock
options....................................................... 4 108 796 863 (454)
--------- --------- --------- --------- ---------
Net loss as reported under U.S. GAAP............................ (3,625) (4,702) (7,250) (3,562) (3,813)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The principal difference between U.K. GAAP and U.S. GAAP for Peptide relates
to the accounting for stock options granted to employees. Peptide has granted
stock options that will vest upon the attainment of certain targets. Under U.K.
GAAP, there is no accounting for these grants after the initial grant date.
Under U.S. GAAP, Accounting Principles Board (APB) Opinion 25, ACCOUNTING FOR
STOCK ISSUED TO EMPLOYEES, the Company would be required to follow variable plan
accounting for these grants and measure compensation expense as the difference
between the exercise price and the fair market value of the stock during each
accounting period over the vesting period of the options. Increases in fair
market value of the stock would result in a charge to operations and decreases
in the fair market value of the stock would result in a credit to operations.
There is no tax effect related to the adjustments included above.
F-22
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
LOSS PER SHARE UNDER U.S. GAAP
Under U.S. GAAP, the Group would compute loss per share under Statement of
Financial Accounting Standards (SFAS) No. 128 EARNINGS PER SHARE. Under SFAS No.
128, basic net loss per ordinary share is computed using the weighted average
number of shares of common stock outstanding during the period. Diluted net loss
per ordinary share for Peptide is the same as basic net loss per ordinary share
as the effects of the Company's potential ordinary share equivalents are
antidilutive.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE
31 DECEMBER, SIX MONTHS ENDED
---------------------------------------- 30 JUNE,
1995 1996 1997 --------------------------
------------ ------------ ------------ 1997 1998
L'000 L'000 L'000 ------------ ------------
L'000 L'000
<S> <C> <C> <C> <C> <C>
Basic and diluted loss per ordinary share..... (20.3)p (13.9)p (20.4)p (10.1)p (10.6)p
Shares used in computing basic loss per
ordinary share.............................. 17,894,288 33,919,130 35,584,031 35,291,887 36,042,476
Antidilutive securities, not included above... 1,917,490 4,832,499 5,284,725 4,879,864 4,826,741
</TABLE>
Antidilutive securities represent stock options outstanding which have not
been included in the calculation of loss per ordinary share as the impact of
including such shares in the calculation of loss per share would be
antidilutive.
RECONCILIATION OF SHAREHOLDERS' EQUITY FROM U.K. GAAP TO U.S. GAAP
<TABLE>
<CAPTION>
31 DECEMBER, JUNE 30,
------------------------------- -----------
1995 1996 1997 1998
--------- --------- --------- -----------
L000 L000 L000 L000
<S> <C> <C> <C> <C>
As reported under U.K. GAAP................................................... 27,762 23,168 23,466 19,413
Reclassification of cost of investment in Group shares........................ (1,064) (1,064) (1,028) (1,223)
--------- --------- --------- -----------
As reported under U.S. GAAP................................................... 26,698 22,104 22,438 18,190
--------- --------- --------- -----------
--------- --------- --------- -----------
</TABLE>
The principal difference between shareholders' equity under U.K. GAAP and
U.S. GAAP relates to the presentation for accounting for the purchase of the
Group shares. Under U.K. GAAP, the Group has classified the cost of shares
purchased as a fixed asset investment (see note 9). For U.S. GAAP purposes, the
cost of Group shares is shown as treasury stock and presented as a component of
shareholders' equity.
F-23
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' EQUITY UNDER U.S. GAAP
<TABLE>
<CAPTION>
CALLED UP SHARE CAPITAL TREASURY STOCK
-------------------------- ----------------------
NUMBER OF SHARE PREMIUM ACCUMULATED DEFERRED NUMBER OF
SHARES SHARE VALUE ACCOUNT LOSS COMPENSATION SHARES COST
----------- ------------- ----------------- ------------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, 31 December
1994................... 1,507,522 1,508 3,341 (2,898) -- -- --
Issuance of ordinary
share capital.......... 374,106 374 5,098 -- -- -- --
Effect of ten-for-one
stock split............ 16,934,652 -- -- -- -- -- --
Issuance of ordinary
share capital.......... 15,100,000 1,510 22,450 -- -- -- --
Deferred compensation
related to grant of
stock options.......... -- -- 127 -- (127) -- --
Amortization of deferred
compensation related to
grant of stock
options................ -- -- -- -- 4 -- --
Payment to acquire own
shares through ESOP
trust.................. -- -- -- -- -- 531,990 (1,064)
Loss for the period under
U.S. GAAP.............. -- -- -- (3,625) -- -- --
----------- ----- ------ ------------- ------ ----------- ---------
Balance, 31 December
1995................... 33,916,280 3,392 31,016 (6,523) (123) 531,990 (1,064)
Deferred compensation
related to grant of
stock options.......... -- -- 118 -- (118) -- --
Amortization of deferred
compensation related to
grant of stock
options................ -- -- -- -- 108 -- --
Exercise of stock
options................ 4,000 -- -- -- -- -- --
Loss for the period under
U.S. GAAP.............. -- -- -- (4,702) -- -- --
----------- ----- ------ ------------- ------ ----------- ---------
Balance, 31 December
1996................... 33,920,280 3,392 31,134 (11,225) (133) 531,990 (1,064)
Deferred compensation
related to grant of
stock options.......... -- -- 1,387 -- (1,387) -- --
Amortization of deferred
compensation related to
grant of stock
options................ -- -- -- -- 796 -- --
Issuance of shares
through ESOP trust..... -- -- -- -- -- (18,000) 36
Exercise of stock
options................ 90,927 9 142 -- -- -- --
Issuance of ordinary
share capital.......... 1,864,807 187 6,415 -- -- -- --
Loss for the period under
U.S. GAAP.............. -- -- -- (7,250) -- -- --
----------- ----- ------ ------------- ------ ----------- ---------
Balance, 31 December
1997................... 35,876,014 3,588 39,078 (18,475) (724) 513,990 (1,028)
Exercise of stock
options................ 424,360 42 171 -- -- -- --
Deferred compensation
related to grant of
stock options.......... -- -- (1,463) -- 1,463 -- --
Reversal of amortization
of deferred
compensation related to
grant of stock
options................ -- -- -- -- (454) -- --
Payment to acquire own
shares through ESOP
trust.................. -- -- -- -- -- 75,000 (195)
Loss for the period under
U.S. GAAP.............. -- -- -- (3,813) -- -- --
----------- ----- ------ ------------- ------ ----------- ---------
Balance, 30 June 1998.... 36,300,374 3,630 37,786 (22,288) 285 588,990 (1,223)
----------- ----- ------ ------------- ------ ----------- ---------
----------- ----- ------ ------------- ------ ----------- ---------
<CAPTION>
TOTAL
SHAREHOLDERS'
EQUITY
---------------
<S> <C>
Balance, 31 December
1994................... 1,951
Issuance of ordinary
share capital.......... 5,472
Effect of ten-for-one
stock split............ --
Issuance of ordinary
share capital.......... 23,960
Deferred compensation
related to grant of
stock options.......... --
Amortization of deferred
compensation related to
grant of stock
options................ 4
Payment to acquire own
shares through ESOP
trust.................. (1,064)
Loss for the period under
U.S. GAAP.............. (3,625)
------
Balance, 31 December
1995................... 26,698
Deferred compensation
related to grant of
stock options.......... --
Amortization of deferred
compensation related to
grant of stock
options................ 108
Exercise of stock
options................ --
Loss for the period under
U.S. GAAP.............. (4,702)
------
Balance, 31 December
1996................... 22,104
Deferred compensation
related to grant of
stock options.......... --
Amortization of deferred
compensation related to
grant of stock
options................ 796
Issuance of shares
through ESOP trust..... 36
Exercise of stock
options................ 151
Issuance of ordinary
share capital.......... 6,602
Loss for the period under
U.S. GAAP.............. (7,250)
------
Balance, 31 December
1997................... 22,438
Exercise of stock
options................ 214
Deferred compensation
related to grant of
stock options.......... --
Reversal of amortization
of deferred
compensation related to
grant of stock
options................ (454)
Payment to acquire own
shares through ESOP
trust.................. (195)
Loss for the period under
U.S. GAAP.............. (3,813)
------
Balance, 30 June 1998.... 18,190
------
------
</TABLE>
F-24
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
DEFERRED TAXES
U.S. GAAP requires the application of SFAS No. 109, ACCOUNTING FOR INCOME
TAXES, which requires the recognition of deferred tax assets and liabilities for
expected future tax consequences of events that have been recognized in the
financial statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax bases of assets and liabilities using the enacted tax rates in
effect for the year in which the differences are expected to reverse. SFAS No.
109 provides for deferred tax assets to be reduced by a valuation allowance, if
based upon the weight of available evidence, it is more likely than not that the
deferred tax asset will not be realized. SFAS No. 109 requires deferred tax
assets and liabilities to be adjusted when the tax rates or other provisions of
the income tax laws change. The analysis using SFAS No. 109 for the Group is as
follows:
<TABLE>
<CAPTION>
31 DECEMBER,
--------------------
<S> <C> <C>
1996 1997
--------- ---------
L000 L000
Losses carried forward............................................................................ 4,040 5,392
Other timing items................................................................................ (615) (195)
--------- ---------
3,425 5,197
Valuation allowance............................................................................... (3,425) (5,197)
--------- ---------
Deferred tax asset................................................................................ -- --
--------- ---------
--------- ---------
</TABLE>
The Groups' tax losses carried forward have no expiration date but are
available only to offset future income generated by the same line of business.
Given the Group's history of operating losses and the risks associated with
operating an early-stage biotechnology company, including those discussed in
"Risk Factors" on pages 18-21, Peptide has provided a full valuation allowance
for the deferred tax asset recognizable under U.S. GAAP.
F-25
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
SHARE OPTION
The Group's directors and employees have been granted options over ordinary
shares under the following shares option plans: The 1994 Scheme, The 1995
Scheme, The 1996 Scheme and the SAYE Scheme. Under U.S. GAAP, the Group would
have accounted for these plans under APB Opinion No. 25 and elected the
disclosure only alternative under SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION under which certain pro forma disclosures would be required. The
Group has computed the pro forma disclosures required by SFAS No. 123 using the
Black-Scholes option pricing model. The assumptions used are as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEAR ENDED ENDED
31 DECEMBER, 30 JUNE,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
Risk-free interest rate............................................. 6.25% 5.99% 6.11% 6.24% 5.52%
Expected dividend yield............................................. -- -- -- -- --
Expected lives (years).............................................. 3 3 3 3 3
Expected volatility................................................. 65% 65% 65% 65% 65%
Weighted average grant date fair value.............................. 0.46p 0.97p 1.48p 1.51p 1.32p
Weighted average remaining contractual life of options outstanding
(years)........................................................... 6.13 6.04 5.10 5.32 4.73
</TABLE>
The effect of applying SFAS No. 123 would be as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEAR ENDED ENDED
31 DECEMBER, 30 JUNE,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
L000 L000 L000 L000 L000
Net loss
As reported under U.S. GAAP..................................... (3,625) (4,702) (7,250) (3,562) (3,813)
Pro forma under U.S. GAAP....................................... (3,701) (5,459) (7,631) (3,249) (4,906)
Basic and diluted net loss per share
As reported under U.S. GAAP..................................... (20.3)p (13.9)p (20.4)p (10.1)p (10.6)p
Pro forma under U.S. GAAP....................................... (20.7)p (16.1)p (21.4)p (9.20)p (13.6)p
</TABLE>
F-26
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
The stock option activity for all plans is as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES PRICE RANGE WEIGHTED AVERAGE PRICE
---------------- ----------- -----------------------
<S> <C> <C> <C>
Outstanding, 31 December 1994................................. 1,183,490 L.10 L.10
Granted....................................................... 735,000 .10-2.00 1.23
Exercised..................................................... (1,000) .10 .10
---------------- ----------- -----
Outstanding, 31 December 1995................................. 1,917,490 .10-2.00 .53
Granted....................................................... 2,918,009 2.00-2.12 2.06
Exercised..................................................... (3,000) .10 .10
---------------- ----------- -----
Outstanding, 31 December 1996................................. 4,832,499 .10-2.12 1.46
Granted....................................................... 645,153 2.98-3.47 3.09
Exercised..................................................... (90,927) 2.00-2.12 1.67
Canceled...................................................... (102,000) 2.00-2.12 2.06
---------------- ----------- -----
Outstanding, 31 December 1997................................. 5,284,725 .10-3.47 1.64
Granted....................................................... 148,000 2.80-2.85 2.80
Exercised..................................................... (424,360) .10-2.12 .50
Canceled...................................................... (181,624) 2.00-2.12 2.06
---------------- ----------- -----
Outstanding, 30 June 1998..................................... 4,826,741 L.10-3.47 L1.76
---------------- ----------- -----
---------------- ----------- -----
Exercisable, 30 June 1998..................................... 1,140,935 L.10 L.10
---------------- ----------- -----
---------------- ----------- -----
</TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
The consolidated statement of cash flows prepared under U.K. GAAP presents
substantially the same information as that required under U.S. GAAP by SFAS No.
95, STATEMENT OF CASH FLOWS. These standards differ however with regard to
classification of items within the statements and the definition of cash and
cash equivalents.
Under U.K. GAAP, cash comprises only cash in hand and deposits repayable on
demand. Deposits are repayable on demand if they can be withdrawn at any time
without notice and without penalty or if a maturity or period of notice of not
more than 24 hours or one working day has been agreed. Under U.S. GAAP, cash
equivalents are short term highly liquid investments, generally with original
maturities of three months or less, that are readily convertible to known
amounts of cash and present insignificant risk of changes in value because of
changes in interest rates.
Under U.K. GAAP, cash flows are presented separately for operating
activities, returns on investments and servicing of finance, taxation, capital
expenditure and financial investment, management of liquid resources and
financing activities. U.S. GAAP requires only three categories of cash flow
activity to be reported: operating, investing and financing. Cash flows from
taxation and returns on investments and servicing of finance under U.K. GAAP
would, with the exception of dividends paid, be shown under operating activities
under U.S. GAAP. The payment of dividends would be included as a financing
activity under U.S. GAAP. Management of liquid resources under U.K. GAAP would
be included as cash and cash equivalents under U.S. GAAP to the extent that the
amount involved have a maturity
F-27
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
of less than three months are convertible into known amounts of cash. Summary
statements of cash flow presented under U.S. GAAP are given below:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE
31 DECEMBER, SIX MONTHS ENDED
------------------------------- 30 JUNE,
1995 1996 1997 --------------------
--------- --------- --------- 1997 1998
L'000 L'000 L'000 --------- ---------
L'000 L'000
<S> <C> <C> <C> <C> <C>
Net cash used in operating activities........................ (2,758) (4,166) (5,227) (2,676) (4,328)
Net cash (used in)/provided by investing activities.......... (449) (11,393) 2,262 1,686 1,566
Net cash provided by/(used in) financing activities.......... 29,314 (282) 6,723 6,600 18
--------- --------- --------- --------- ---------
Increase/(decrease) in cash and cash equivalents............. 26,107 (15,841) 3,758 5,610 (2,744)
Beginning cash and cash equivalents.......................... 1,085 27,192 11,351 11,351 15,109
--------- --------- --------- --------- ---------
Ending cash and cash equivalents............................. 27,192 11,351 15,109 16,961 12,365
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following information is presented in compliance with the requirements
of SFAS No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES. Under SFAS No. 115, debt securities that the Company has the
positive intent and ability to hold to maturity are reported at amortized cost
and are classified as held-to-maturity securities. These securities include cash
equivalents and short-term investments. At 31 December 1996 and 1997 and 30 June
1998, the Group has classified all investments as held-to-maturity. Cash, cash
equivalents and short-term investments at 31 December 1996 and 1997 and 30 June
1998 consisted of the following (at amortized cost, which approximates fair
market value):
<TABLE>
<CAPTION>
31 DECEMBER, 30 JUNE,
-------------------- -----------
1996 1997 1998
--------- --------- -----------
L'000 L'000 L'000
<S> <C> <C> <C>
Cash and cash equivalents:
Cash and overnight investment....................................................... 5 42 3,497
Certificates of deposit............................................................. 11,351 15,109 5,811
--------- --------- -----------
11,356 15,151 9,308
Short-term investments:
Certificates of deposit............................................................. 9,200 5,600 6,554
--------- --------- -----------
Total cash, cash equivalents and short-term investments............................. 20,556 20,751 15,862
--------- --------- -----------
--------- --------- -----------
</TABLE>
COMPREHENSIVE INCOME
SFAS No. 130, REPORTING COMPREHENSIVE INCOME, requires disclosure of all
components of comprehensive income on an annual and interim basis for fiscal
years after 15 December 1997. Comprehensive income is defined as the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources. The Company's comprehensive net
loss for the six months ended 30 June 1998 is the same as reported net loss for
the period.
F-28
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
NEW ACCOUNTING STANDARDS
In July 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 requires certain financial and
supplementary information to be disclosed on an annual and interim basis for
each reportable segment of an enterprise. Unless impracticable, companies would
be required to restate prior period information upon adoption.. This statement
is effective for fiscal years beginning after 15 December 1997 and is not
expected to have a material effect on the Group's consolidated financial
position or results of operations.
In February 1998, the FASB issued SFAS No. 132, EMPLOYERS' DISCLOSURES ABOUT
PENSIONS AND OTHER POSTRETIREMENT BENEFITS, which standardizes the disclosure
requirements for pensions and other postretirement benefits to the extent
practicable, requires additional information on changes of the benefit
obligations for the fair market values of plan assets that will facilitate
financial analysis and eliminates certain disclosures that are no longer as
useful as they were when SFAS No. 87, EMPLOYERS' ACCOUNTING FOR PENSIONS, SFAS
No. 88, EMPLOYERS' ACCOUNTING FOR SETTLEMENTS AND CURTAILMENTS OF DEFINED
BENEFIT PENSION PLANS AND FOR TERMINATION BENEFITS and SFAS No. 106, EMPLOYERS'
ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS, were issued. SFAS
No. 132 suggests combined formats for presentation of pension and other
postretirement benefit disclosures. This statement is effective for the fiscal
years beginning after 15 December 1997 and is not expected to have a material
effect on the Group's consolidated financial position or results of operations.
In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. This statement is effective for the
fiscal years beginning after 15 December 1999 and is not expected to have a
material effect on the Group's consolidated financial position or results of
operations.
F-29
<PAGE>
ORAVAX, INC.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of OraVax, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows present fairly, in all material respects, the financial position of
OraVax, Inc. at December 31, 1997 and 1998, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has suffered recurring losses from operations
and will require additional funds to continue operations into the second quarter
of 1999, both of which raise substantial doubt about its ability to continue as
a going concern. Management's plans in regard to these matters are described in
Note A. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
As discussed in Note D, the Company has restated its 1997 balance sheet and
statement of stockholders' equity for the presentation of the Company's 6%
Convertible Preferred Stock and related conversion discount.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
March 1, 1999
F-30
<PAGE>
ORAVAX, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------
<S> <C> <C>
1997 1998
---------- ----------
ASSETS
Cash and cash equivalents................................................................. $ 10,274 $ 2,538
Short-term investments.................................................................... 1,054 --
Prepaid and other current assets.......................................................... 1,529 91
---------- ----------
Total current assets...................................................................... 12,857 2,629
Property and equipment, net............................................................... 3,524 1,859
Investment in and advances to (from) joint venture........................................ (535) (147)
Restricted investments.................................................................... 394 398
Other assets.............................................................................. 257 111
---------- ----------
Total assets.............................................................................. $ 16,497 $ 4,850
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable.......................................................................... $ 935 $ 922
Accrued expenses.......................................................................... 3,659 2,213
Obligation under capital leases........................................................... 1,316 327
Bridge loan--related party................................................................ -- 3,000
Installment debt.......................................................................... 260 1,019
Deferred revenue.......................................................................... 91 483
---------- ----------
Total current liabilities................................................................. 6,261 7,964
Obligation under capital leases, excluding current portion................................ 416 119
Installment debt, excluding current portion............................................... 882 --
---------- ----------
Total liabilities......................................................................... 7,559 8,083
Mandatory redeemable convertible preferred stock $.001 par value, 2772 shares issued and
outstanding in 1997..................................................................... 2,464 --
Commitments and contingencies (Note J)
Stockholders' equity (deficit):
Preferred stock, $.001 par value; 2,000,000 shares authorized in
1997 and 1998; none issued or outstanding............................................. -- --
Convertible preferred stock, $.001 par value; 9,000 shares
authorized in 1997 and 1998; 3,528 and 2,590 shares issued and outstanding
in 1997 and 1998 (liquidation preference $2,590)...................................... 3,137 2,022
Common stock, $.001 par value; 25,000,000 and 50,000,000 shares
authorized in 1997 and 1998; 10,371,543 and 19,919,503 shares issued
and outstanding in 1997 and 1998...................................................... 10 20
Additional paid-in capital.............................................................. 74,115 79,279
Deferred compensation................................................................... (94) (35)
Accumulated deficit..................................................................... (70,694) (84,519)
---------- ----------
Total stockholders' equity (deficit)...................................................... 6,474 (3,233)
---------- ----------
Total liabilities and stockholders' equity (deficit)...................................... $ 16,497 $ 4,850
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-31
<PAGE>
ORAVAX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------------------
<S> <C> <C> <C>
1996 1997 1998
---------- ------------ ------------
Revenue:
Collaborative research and development
--related party...................................................... $ 6,595 $ 7,587 $ 9,841
Government grants and other............................................ 870 583 701
Interest............................................................... 1,280 683 258
---------- ------------ ------------
8,745 8,853 10,800
---------- ------------ ------------
Expenses:
Research and development............................................... 21,009 14,589 13,017
General and administrative............................................. 3,750 3,422 4,072
Interest............................................................... 523 418 269
---------- ------------ ------------
25,282 18,429 17,358
---------- ------------ ------------
Loss from operations..................................................... (16,537) (9,576) (6,558)
Equity in operating loss of joint venture................................ (5,085) (6,236) (5,844)
---------- ------------ ------------
Net loss................................................................. (21,622) (15,812) (12,402)
Accretion to conversion discount of Convertible
Preferred Stock........................................................ -- -- 1,207
Convertible Preferred Stock dividend..................................... -- -- 216
---------- ------------ ------------
Net loss to common stockholders.......................................... $ (21,622) $ (15,812) $ (13,825)
---------- ------------ ------------
---------- ------------ ------------
Basic and diluted loss per share......................................... $ (2.46) $ (1.58) $ (.92)
Weighted average number of basic and diluted shares
outstanding............................................................ 8,794,775 10,031,222 15,075,593
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-32
<PAGE>
ORAVAX, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PREFERRED PREFERRED COMMON COMMON PAID-IN DEFERRED ACCUMULATED
SHARES STOCK SHARES STOCK CAPITAL COMPENSATION DEFICIT
----------- ----------- ----------- ------------- --------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,1995... -- -- 7,615,865 $ 8 $ 58,061 $ (296) $ (33,260)
Issuance of common stock.... 2,313,822 2 15,340 -- --
Issuance of common
stock-401k................ -- -- 18,509 -- 97 -- --
Exercise of common stock
options................... -- -- 27,625 -- 21 -- --
Amortization of deferred
compensation.............. -- -- -- -- -- 73 --
Net loss.................... -- -- -- -- -- -- (21,622)
----------- ----------- ----------- --- --------- ----- ------------
Balance, December 31,1996... 9,975,821 10 73,519 (223) (54,882)
Issuance of common stock.... -- -- 276,146 -- 480 -- --
Issuance of common
stock-401k................ -- -- 50,723 -- 89 -- --
Exercise of common stock
options................... -- -- 68,853 -- 51 -- --
Issuance Convertible
Preferred Stock........... 3,528 $ 3,137 -- -- -- -- --
Amortization of deferred
compensation.............. -- -- -- -- -- 66 --
Reversal of deferred
compensation.............. -- -- -- -- (63) 63 --
Non-cash stock
compensation.............. -- -- -- 39 -- --
Net loss.................... -- -- -- -- -- -- (15,812)
----------- ----------- ----------- --- --------- ----- ------------
Balance, December 31,1997... 3,528 3,137 10,371,543 10 74,115 (94) (70,694)
Issuance of common stock.... -- -- 159,634 -- 65 -- --
Issuance of common
stock-401k................ -- -- 160,000 -- 72 -- --
Exercise of common stock
options................... -- -- 2,315 -- 1 -- --
Issuance of common stock
warrants.................. -- -- -- -- 32 -- --
Common stockholder release
of mandatory redemption
feature................... 2,772 2,464 -- -- -- -- --
Issuance of common
stock--Preferred Stock
conversions............... (3,716) (3,795) 8,276,011 8 3,787 -- --
Preferred Stock dividends... -- 216 -- -- -- -- (216)
Preferred Stock accretion to
conversion discount....... -- -- -- -- 1,207 -- (1,207)
Issuance of common stock and
Preferred Stock to
repurchase Preferred Stock
warrants.................. 6 -- 950,000 2 -- -- --
Amortization of deferred
compensation.............. -- -- -- -- -- 59 --
Net loss.................... -- -- -- -- -- -- (12,402)
----------- ----------- ----------- --- --------- ----- ------------
Balance, December 31,1998... 2,590 $ 2,022 19,919,503 $ 20 $ 79,279 $ (35) $ (84,519)
----------- ----------- ----------- --- --------- ----- ------------
----------- ----------- ----------- --- --------- ----- ------------
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
(DEFICIT)
------------
<S> <C>
Balance, December 31,1995... $ 24,513
Issuance of common stock.... 15,342
Issuance of common
stock-401k................ 97
Exercise of common stock
options................... 21
Amortization of deferred
compensation.............. 73
Net loss.................... (21,622)
------------
Balance, December 31,1996... 18,424
Issuance of common stock.... 480
Issuance of common
stock-401k................ 89
Exercise of common stock
options................... 51
Issuance Convertible
Preferred Stock........... 3,137
Amortization of deferred
compensation.............. 66
Reversal of deferred
compensation.............. 0
Non-cash stock
compensation.............. 39
Net loss.................... (15,812)
------------
Balance, December 31,1997... 6,474
Issuance of common stock.... 65
Issuance of common
stock-401k................ 72
Exercise of common stock
options................... 1
Issuance of common stock
warrants.................. 32
Common stockholder release
of mandatory redemption
feature................... 2,464
Issuance of common
stock--Preferred Stock
conversions............... --
Preferred Stock dividends... --
Preferred Stock accretion to
conversion discount....... --
Issuance of common stock and
Preferred Stock to
repurchase Preferred Stock
warrants.................. 2
Amortization of deferred
compensation.............. 59
Net loss.................... (12,402)
------------
Balance, December 31,1998... $ (3,233)
------------
------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-33
<PAGE>
ORAVAX, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER
31,
-------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- --------- ---------
Cash flows from operating activities:
Net loss from operations....................................................... $ (21,622) $ (15,812) $ (12,402)
Adjustments to reconcile net loss from operations to net cash used in operating
activities:
Depreciation............................................................... 2,028 2,183 1,784
Equity in operations of joint venture...................................... 5,085 6,236 5,844
Amortization of debt discount.............................................. -- 148 137
Non-cash compensation...................................................... 170 194 164
Changes in operating assets and liabilities:
Prepaid expenses and other current assets................................ 76 101 38
Other assets............................................................. (200) 59 47
Accounts payable......................................................... 74 (200) (13)
Accrued expenses......................................................... 1,301 6 (1,446)
Deferred revenue......................................................... 47 (855) 392
--------- --------- ---------
Net cash used in operating activities............................................ (13,041) (7,940) (5,455)
--------- --------- ---------
Cash flows from investing activities:
Purchases of short-term investments............................................ (17,378) (5,422) --
Sales and maturities of short-term investments................................. 25,918 11,183 1,054
Expenditures for property and equipment........................................ (1,361) (253) (52)
Proceeds from sale-leaseback of property and equipment......................... 775 -- --
Investment in and advances to joint venture.................................... (5,254) (5,082) (6,232)
--------- --------- ---------
Net cash provided by (used in) investing activities.............................. 2,700 426 (5,230)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from common stock issuances, net...................................... 15,363 531 66
Proceeds from preferred stock issuances, net................................... -- 4,201 1,400
Proceeds from short-term bridge loan........................................... -- -- 3,000
Principal payments under capital lease obligations............................. (1,488) (1,530) (1,257)
Principal payments of installment debt, net.................................... (500) (330) (260)
--------- --------- ---------
Net cash provided by financing activities........................................ 13,375 2,872 2,949
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents............................. 3,034 (4,642) (7,736)
Cash and cash equivalents at beginning of period................................. 11,882 14,916 10,274
--------- --------- ---------
Cash and cash equivalents at end of period....................................... $ 14,916 $ 10,274 $ 2,538
--------- --------- ---------
--------- --------- ---------
Interest paid during the year.................................................... $ 384 $ 418 $ 269
--------- --------- ---------
--------- --------- ---------
</TABLE>
Supplemental non-cash investing and financing activities:
Convertible Preferred Stock conversions as of December 31, 1998 : 3,716 shares
of Convertible Preferred Stock, including applicable stock dividends, had been
converted into 8,276,011 shares of Common Stock.
Convertible Preferred Stock Warrants: In November 1998, the Company issued
950,000 shares of Common Stock and six shares of Convertible Preferred Stock to
repurchase warrants for 630 shares of Convertible Preferred Stock, which had
been issued to the placement agents in connection with the December 1997 private
placement financing.
Property and equipment: Expenditures for property and equipment, in the year
ended December 31, 1998, excluded $70,000 of equipment lease renewals.
The accompanying notes are an integral part of the consolidated financial
statements.
F-34
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. NATURE OF BUSINESS:
On November 10, 1998, the Company entered into an agreement to merge with
Peptide Therapeutics Group plc ("Peptide") in a transaction now expected to
close during the second quarter of 1999. (See Note B)
OraVax's mission is the discovery, development and commercialization of
vaccines and antibody products for the prevention or treatment of human
infectious diseases. OraVax's products are vaccines that stimulate the body's
own immunity to provide long term protection against disease, as well as
antibody products that provide immediate passive immunity to treat existing
infections or to protect against acute disease risk.
The ultimate success of the Company is dependent upon its ability to raise
capital through equity financings, direct financings, corporate partnerships,
sale of product and interest income on invested capital. The Company plans to
finance near term cash needs principally through its existing cash reserves,
together with interest earned thereon, revenues earned under its H. PYLORI
collaboration (the "Joint Venture") and Dengue license agreement with Pasteur
Merieux Connaught ("PMC"), sponsorship of the Company's Japanese encephalitis
program by PMC, sponsorship of the U.S. development of the yellow fever vaccine,
Arilvax-Registered Trademark-, by Medeva Pharma Limited ("Medeva"), and
previously awarded government grants. Additional capital will be required to
ensure the on-going viability of the Company. The Company believes, based upon
its current operating plan, that, in addition to its available cash balances and
known revenues, it will need additional financing in the second quarter of 1999
in order to fund the Company's operations. Peptide has agreed to provide bridge
financing on a secured basis under certain circumstances. This bridge financing
will be secured with the intangible assets of the Company. In the event the
merger with Peptide is not approved by the shareholders of both companies, the
Company would be required to seek other sources of financing. While management
believes that additional capital may be available to fund operations if the
merger is not approved, there can be no assurance that additional funds will be
available when required, on terms acceptable to the Company.
To date, the Company has not received any revenues from the sale of products
and does not expect to receive any such revenues until late 2000, at the
earliest. The first product revenues are anticipated from sales of the yellow
fever vaccine, Arilvax-Registered Trademark-, under the Company's partnership
with Medeva. Operations have been funded principally through public and private
placements of equity securities, equipment lease financing, revenues from the
Company's H. PYLORI joint venture and Dengue license agreement with PMC,
sponsorships of the Company's Japanese encephalitis program by PMC, government
grants and interest income. Since inception, the Company's cash expenditures
have exceeded its revenues principally as a result from expenditures under its
research and development programs. The Company expects to continue to incur
operating losses over the next several years primarily due to expanded research
and development efforts, preclinical testing and clinical trials of its product
candidates, the acquisition of additional technologies, the establishment of
manufacturing capability and the performance of commercialization activities.
Results of operations may vary significantly from quarter to quarter depending
on, among other factors, the progress of the Company's research and development
efforts, the receipt, if any, of milestone payments, the timing of certain
expenses and the establishment of collaborative research agreements. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern.
The Company is subject to risks common to companies in the biotechnology
industry including, but not limited to, development by the Company or its
competitors of new technological innovations,
F-35
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
dependence on key personnel, protection of proprietary technology, manufacturing
limitations, third party reimbursements, collaborative arrangements, and
compliance with government regulations.
B. PROPOSED MERGER WITH PEPTIDE THERAPEUTICS GROUP PLC:
On November 10, 1998, the Company entered into an agreement to be merged
with Cambridge, England based Peptide for stock of Peptide and cash totaling
approximately $15 million which was subsequently increased to $20 million.
Peptide is a biopharmaceutical company engaged in the research and development
of novel drugs and vaccines, and is listed on the London Stock Exchange, under
the symbol PTE. Peptide currently has four products in clinical development with
several pre-clinical and research programs. The Company and its Joint Venture
partner PMC are already collaborating with Peptide in using Peptide's
proprietary platform technology to create oral vaccines for the treatment of H.
PYLORI. The merger will create a larger biopharmaceutical company involved in
the development of novel drugs, vaccines and antibody products that control
significant human diseases. The merged company will have a total of ten products
in development, eight of which are currently in clinical trials, with the other
two scheduled to go into clinical trials in the next twelve months, and multiple
corporate partnerships including those with PMC, Medeva and SmithKline Beecham.
This new business combination will result in a broader portfolio of product
programs, greater market presence and potential for expanded corporate
partnerships.
A condition to the merger is that Peptide shall have completed a financing
that results in Peptide receiving net cash proceeds which, together with
existing financing available to Peptide, is sufficient for the present working
capital requirements of the combined entity in accordance with the rules of the
London Stock Exchange. This condition will be satisfied by Peptide raising
approximately 20.6 million pounds sterling (net of expenses) by an issue of new
Peptide ordinary shares in the form of a rights issue. This rights issue has,
except for the rights of certain Peptide shareholders who have irrevocably
undertaken to take up their rights, been fully underwritten by BT Alex Brown
International. In addition the merger is contingent upon approval by the
shareholders of each company. The merger is now anticipated to be completed
during the second quarter of 1999.
On November 10, 1998, simultaneous with the execution of the Merger
Agreement with Peptide, Peptide purchased 2,584 shares, or approximately 95%, of
the Company's then outstanding Convertible Preferred Stock for an aggregate
price of approximately $2.95 million. Under the Merger Agreement, at the
effective time, outstanding shares of the Convertible Preferred Stock owned by
Peptide will be canceled and the outstanding shares of the Convertible Preferred
Stock owned by third parties will be automatically converted into the right to
receive $1,090 per share plus accrued but unpaid dividends. These third parties
have contractually agreed to redeem their shares for cash.
On November 20, 1998, the Company issued 950,000 shares of Common Stock and
six shares of Convertible Preferred Stock to repurchase warrants for 630 shares
of Convertible Preferred Stock, which had been issued to the placement agents in
connection with the December 1997 private placement financing.
On December 30, 1998, the Company received a letter from PMC indicating that
PMC was considering making a proposal that might result in greater value for the
Company's shareholders than the merger with Peptide. The Company sent a copy of
PMC's letter to Peptide, as required under the Merger Agreement. In response to
PMC's letter, members of Peptide's management met independently with PMC and
negotiated a series of agreements, including a standstill agreement under which
PMC agreed not to make an offer to acquire the Company and an agreement by PMC
to make a $3 million equity investment in Peptide ordinary shares in connection
with and conditioned upon consummation of
F-36
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
the merger. PMC and Peptide also agreed that the Company's technology relating
to vaccines for Japanese encephalitis and tick-borne encephalitis would be
licensed to PMC and that the joint venture with PMC would be granted licenses to
the Company's technology for the development of vaccines against Hepatitis C
contingent on the merger being consummated. In addition, the Company's
short-term loan agreement, in the amount of $3 million, with PMC was amended to
extend the repayment terms to be the earlier of consummation of the merger or
July 31, 1999. (See Note M)
On January 4, 1999, Peptide converted 633 shares of the Convertible
Preferred Stock into 2,193,537 shares of Common Stock. The shares of Common
Stock owned by Peptide will be canceled in the merger.
Since the merger was announced, the Company has received increased interest
from prospective purchasers of the Company's leasehold interests, leasehold
improvements and equipment in its Canton, Massachusetts, manufacturing facility.
Based upon these indications of interest, the Company has explored the sale of
its related interests in this facility.
On January 28, 1999, the Merger Agreement was amended to increase Peptide's
acquisition price from $15 million to $20 million based on the developments
regarding its relationship with PMC, and the increased interest in the Company's
Canton facility, which indicated increased value for the Company's assets. The
additional $5 million of consideration will be in the form of Peptide shares.
C. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, OraVax JVM, Inc. and OraVax Securities Corp.,
which were incorporated in 1995. Intercompany transactions and balances have
been eliminated in consolidation.
JOINT VENTURE
The Company accounts for its investment in its Joint Venture Partnerships
under the equity method of accounting. (Note M)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of management's estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of temporary cash investments. The Company
restricts temporary cash investments to institutions with high credit standing.
F-37
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
RESTRICTED INVESTMENTS
At December 31, 1997 and 1998, the Company held investments of $394,000 and
$398,000, respectively, that are restricted as to their use by varying leasing
arrangements. These investments in US Government and Agency obligations are
available for sale, and are carried at amortized cost plus accrued interest,
which approximates fair market value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The Company provides for
depreciation using the straight-line method over the lesser of the lease term or
the estimated useful lives of the related assets, generally three to seven
years.
When assets are retired or otherwise disposed of, the assets and related
accumulated depreciation and amortization are eliminated from the accounts and
any resulting gains and losses are included in operations in the period of
disposal.
REVENUE RECOGNITION
Revenue under the Company's collaborative research and development agreement
is recognized as related expenses are incurred. The Company recognizes milestone
payments as revenue when the milestones are achieved. (Note M)
The Company recognizes government grant revenue as the related expenses are
incurred.
The Company does not recognize as revenue amounts received which are
refundable or involve future obligations.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred.
COMPUTATION OF NET LOSS PER COMMON SHARE
The Company follows Statement of Accounting Standards No.128 ("SFAS 128"),
which requires the presentation of Basic and Dilutive earnings per share. Basic
net loss per share is computed using the weighted average number of common
shares outstanding during the period, plus the dilutive effect of common stock
equivalents. Common stock equivalent shares consist of stock options,
Convertible Preferred Stock and stock warrants. The dilutive computations do not
include common stock equivalents for stock options of 890,809, 1,175,242 and
1,185,534 for the years ended December 31, 1996, 1997 and 1998, respectively,
Convertible Preferred Stock convertible to 2,016,163 and 8,738,586 shares of
Common Stock for the years ended December 31, 1997 and 1998, respectively, and
warrants convertible to 24,000 and 84,086 shares of Common Stock for the years
ended December 31, 1997 and 1998, respectively, as inclusion would be
anti-dilutive.
INCOME TAXES
The Company recognizes deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial reporting
and tax bases of liabilities and assets using enacted tax rates in effect in the
years in which the differences are expected to reverse. Potential future income
tax benefits resulting from net
F-38
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
operating losses, unused research and experimentation credits, and other timing
differences will be recognized as taxable income becomes available to absorb
them.
ACCRETION OF CONVERTIBLE PREFERRED STOCK
In December 1997, in a private placement financing, the Company issued 6,300
shares of 6% Convertible Preferred Stock ("Convertible Preferred Stock"), for
$1,000 per share, providing cash proceeds of $5.6 million, net of $700,000 in
deal costs. Holders of the Convertible Preferred Stock are entitled to a
conversion discount that starts at 5% in December 1997 and increases to a
maximum of 21% by June 1999. At December 31, 1997, the value of the discount was
$1,675,800, which is being amortized over the eighteen month discount period by
accreting preferred dividends as a credit to additional paid-in capital and a
charge to retained earnings (See Note D).
COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No.130, "Reporting Comprehensive Income". This Statement
requires that all items recognized under accounting standards as components of
comprehensive earnings be reported in an annual financial statement that is
displayed with the same prominence as other annual financial statements. This
Statement also requires that an entity classify items of other comprehensive
earnings by their nature in an annual financial statement. For example, other
comprehensive earnings may include foreign currency translation adjustments,
minimum pension liability adjustments, and unrealized gains and losses on
marketable securities classified as available-for-sale. For the twelve months
ended December 31, 1998 and 1997, comprehensive income was the same as net
income.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No.133 (SFAS 133), "Accounting for Derivative
Instruments and Hedging Activities". This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. The statement requires companies to
recognize all derivatives as either assets or liabilities, with the instruments
measured at fair value. The accounting for changes in fair value, gains or
losses, depends on the intended use of the derivative and its resulting
designation. The statement is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The Company will adopt SFAS 133 by January 1,
2000, but does not expect such adoption to have a material impact on its
financial statements.
In February 1998, the Accounting Standards Executive Committee ("AcSEC")
issued Statement of Position ("SoP") 98-1, "Accounting for Costs of Computer
Software Developed or Obtained for Internal Use." SoP 98-1 establishes the
accounting for costs of software products developed or purchased for internal
use, including when such costs should be capitalized. The Company does not
expect SoP 98-1, which is effective for the Company beginning January 1, 1999,
to have a material effect on its financial position or results of operations.
In April 1998, the AcSEC issued SoP 98-5, "Reporting on the Costs of
Start-Up Activities." Start-up activities are defined broadly as those one-time
activities related to opening a new facility, introducing a new product or
service, conducting business in a new territory, conducting business with a new
class of customer, commencing some new operation or organizing a new entity.
Under SoP 98-5, the cost of start-up activities should be expensed as incurred.
SoP 98-5 is effective for the Company
F-39
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
beginning January 1, 1999 and the Company does not expect its adoption to have a
material effect on its financial position or results of operations.
D. EFFECT OF RESTATEMENTS
During the course of discussions with the staff of the Securities and
Exchange Commission (the "Commission), certain issues were raised regarding the
presentation of the Convertible Preferred Stock and the calculation of the
conversion discount attributable to the private placement financing that
occurred in December 1997 (See Note K).
The Company originally calculated the value of the discount as $846,788,
which was recorded as a deferred financing cost and an addition to
paid-in-capital at December 31, 1997 and was to be amortized over the eighteen
month discount period. In the Second Quarter of 1998, the Company changed the
amortization period from eighteen to twelve months to reflect the volume of
conversions of the preferred stock to common stock. During fiscal 1999, after
consideration of the issues raised by the Commission staff and a re-examination
of the facts surrounding the assumptions used in the calculation, the Company
recalculated the amount of the discount as $1,675,800, eliminated the deferred
financing costs at December 31, 1997 and revised its amortization schedule to
recognize the discount as a return to preferred shareholders over the original
eighteen month discount period on which the shareholders could realize the
discount by accreting preferred dividends as a credit to additional paid-to
capital and a charge to retained earnings in each reporting period. As a result,
the amount of the discount recognized in the year ended December 31, 1998 was
$1,207,000.
The Company originally presented the Convertible Preferred Stock as a
component of stockholders' equity at December 31, 1997. Upon further review of
the Preferred Stock Purchase Agreement and based on discussions with the
Commission, the Company has determined that $2,464,186 of the total issuance has
mandatory redemption features and, therefore, should not be included in
stockholders' equity at December 31, 1997. The amount was determined based on
the number of common shares into which the preferred stock was convertible at
December 31, 1997 that were subject to shareholders approval which was voted on
March 10, 1998.
The restatements of the 1997 financial statements had no effect on the
Company's net loss applicable to common stockholders or basic and diluted loss
per share. Total assets and stockholders' equity as previously reported and as
restated, are as follows (in thousands):
<TABLE>
<S> <C>
Total assets--previously reported.................................. $ 17,344
Adjustment related to recalculation of preferred stock discount.... (847)
As adjusted........................................................ $ 16,497
Total stockholders' equity--as previously reported................. $ 9,785
Adjustment related to presentation of preferred stock that is
redeemable....................................................... (2,464)
Adjustment related to recalculation of preferred stock discount.... (847)
As adjusted........................................................ $ 6,474
</TABLE>
F-40
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
E. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1998
--------- ---------
Furniture and equipment.................................................... $ 493 $ 540
Computer hardware and software............................................. 197 203
Leasehold improvements..................................................... 2,626 2,626
Equipment under capital lease.............................................. 4,353 3,979
--------- ---------
7,669 7,348
Less accumulated depreciation.............................................. 4,145 5,489
--------- ---------
Property and equipment, net................................................ $ 3,524 $ 1,859
--------- ---------
--------- ---------
</TABLE>
The net book value of equipment under capital lease was $1,579,000 and
$372,000 at December 31, 1997 and 1998, respectively.
F. ACCRUED EXPENSES:
Accrued expenses consisted of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1998
--------- ---------
Research and development contracts......................................... $ 1,985 $ 974
License fees............................................................... 63 155
Financing related deal costs............................................... 751 --
Other...................................................................... 860 1,084
--------- ---------
Total accrued expenses..................................................... $ 3,659 $ 2,213
--------- ---------
--------- ---------
</TABLE>
G. INCOME TAXES:
Deferred tax assets and deferred tax liabilities are recognized based on
temporary differences between the financial reporting and tax basis of assets
and liabilities using statutory rates. A valuation allowance is recorded against
deferred tax assets if it is more likely than not that some or all of the
deferred tax assets will not be realized.
F-41
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The components of deferred taxes were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
--------------------
<S> <C> <C>
1997 1998
--------- ---------
Capitalization of costs, principally research and development........... $ 11,943 $ 11,472
Property, plant and equipment........................................... 898 1,133
Capital leases.......................................................... -- 9
Accrued expenses........................................................ 358 275
Net operating loss...................................................... 13,459 18,267
Tax credits............................................................. 2,586 3,112
--------- ---------
Gross deferred tax asset................................................ 29,244 34,268
Valuation allowance..................................................... (29,244) (34,268)
--------- ---------
Net deferred tax asset.................................................. $ -- $ --
--------- ---------
--------- ---------
</TABLE>
As of December 31, 1998, the Company had available federal net operating
loss carryforwards of approximately $45,795,000 and $2,131,000 of federal tax
credits, which may be used to offset future taxable income. These carryforwards
expire beginning in 2005. Due to the uncertainty surrounding the realization of
the net operating loss carryforwards in future tax returns, the net deferred tax
assets have been fully offset by a valuation allowance. The valuation allowance
increased by $5,024,000 from December 31, 1997 to December 31, 1998.
The Company has experienced ownership changes as defined under Section 382
of the Internal Revenue Code. Ownership changes limit the future use of the net
operating loss and credit carryforwards created prior to the ownership change.
If the full amount of the limitation is not used in any year, the amount not
used increases the allowable limit in the subsequent year.
H. CAPITAL LEASES:
During the year ended December 31, 1998, the Company did not enter into any
new sale-leaseback or direct lease arrangements due to the low volume of capital
equipment expenditures. In addition, during the same period, the Company renewed
$70,000 of existing equipment leases. During 1996, an equipment lease assumed by
the Company in connection with its lease of a manufacturing facility in Canton,
Massachusetts, was capitalized in the amount of $2,773,000. Interest paid on
capital leases during the years ended December 31, 1996, 1997 and 1998 was
$372,000, $270,000, and $105,000, respectively.
Minimum future payments under the Company's capital leases as of December
31, 1998 were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- ------------------------------------------------------------------------------------- -----------
<S> <C>
1999................................................................................. $ 351
2000................................................................................. 124
-----
475
Less amount representing interest.................................................... 29
-----
446
Less current obligation.............................................................. 327
-----
Long-term obligation................................................................. $ 119
-----
-----
</TABLE>
F-42
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
I. INSTALLMENT DEBT:
In January 1996, the Company leased an approximately 47,000 square foot,
good manufacturing practices ("GMP"), manufacturing facility in Canton,
Massachusetts and acquired related equipment and leasehold improvements from the
former tenant. This facility was specifically designed and equipped by the
former tenant for the manufacture of biological products. The Company's strategy
was to develop its manufacturing facilities for producing both pilot-scale and
commercial quantities of its products. The facility would also accommodate
production development activities for OraVax's proprietary products depending on
the outcome of product development. Existing building and capital equipment
leases, which contain renewal and purchase options were transferred to the
Company. In addition, the Company purchased leasehold improvements and other
related assets from the former tenant, capitalized in the amount of $1,824,000,
with the related debt payable in installments through 1999 collateralized by a
leasehold mortgage and collateral assignment of OraVax's interest in the
building lease. The Company is currently assessing its options relating to the
facility, including the sale of its related interests.
Future minimum payments under the installment purchase are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- ------------------------------------------------------------------------------------- ---------
<S> <C>
1999................................................................................. $ 1,050
---------
1,050
Less amount representing interest.................................................... 31
---------
1,019
Less current obligation.............................................................. 1,019
---------
Long-term obligation................................................................. $ 0
---------
---------
</TABLE>
J. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
The Company leases office and laboratory facilities in Cambridge,
Massachusetts under an operating lease which contains renewal options and
expires in March 2001. In addition, the Company has an operating lease for a
manufacturing facility in Canton, Massachusetts, containing renewal and purchase
options and expiring in June 2002. The noncancelable future payments as of
December 31, 1998 were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- ------------------------------------------------------------------------------------- -----------
<S> <C>
1999................................................................................. 1,430
2000................................................................................. 1,434
2001................................................................................. 511
2002................................................................................. 101
</TABLE>
Rent expense for leased facilities during the years ended December 31, 1996,
1997 and 1998 was $1,862,000, $2,051,000 and $2,159,000, respectively.
F-43
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AGREEMENTS
The Company is party to various agreements, principally contracted research
and clinical trials, for which noncancelable minimum future payments as of
December 31, 1998 were $1,205,000 payable in the year ended December 31, 1999.
In addition, under certain of these and other agreements, the Company may
pay royalties on future sales of specified products.
POTENTIAL LITIGATION
On December 23, 1997, the Company sold 240,000 shares of Common Stock to an
institutional investor at a purchase price of $1.9125 per share, in a private
placement which closed simultaneously with a private placement of 6,300 shares
of the Company's 6% Convertible Preferred Stock ("Preferred Stock"), at $1,000
per share, to a group of investors. The institutional investor has expressed
claims, as follows: (i) that the Company should issue additional shares of
Common Stock to the investor under a "most favored nations" clause in the Stock
Purchase Agreement pursuant to which the investor purchased its Common Stock and
(ii) that the Company should pay damages to the investor because the Company
failed to afford the investor "piggyback" registration rights in connection with
the Company's registration of the Preferred Stock on February 5, 1998.
The Company believes it has good defenses to these claims. It does not
believe that the issuance of the Preferred Stock (and the subsequent issuance of
Common Stock upon conversions of shares of the Preferred Stock) triggered the
"most favored nations" clause because the Preferred Stock was issued on the same
Closing Date as the Common Stock issued to the investor. As to the "piggyback"
registration rights, the Company believes that the investor had actual notice of
the registration of the Preferred Stock in February, 1998 and took no action to
invoke its rights at the time, did not exercise its demand registration rights
for almost three months after they became available on April 23, 1998, and still
has not sold any of its shares--all of which the Company registered for resale
on August 6, 1998. To date, no litigation has been filed by the investor on
these claims.
K. PREFERRED STOCK:
The Company issued an aggregate of 964,803 shares of Series Redeemable
Convertible Preferred Stock for net cash proceeds of $27,231,000 (the "Series
Preferred Stock") at various dates since its inception through December 31,
1994.
In January and March 1995, the Company issued an aggregate of 216,237 shares
of Series Preferred Stock for net cash proceeds of $9,232,000.
During 1994 and 1995, $100,000 and $108,000, respectively, to accrete the
redeemable convertible preferred stock to its redemption value on a
straight-line basis, was recorded in noncash transactions.
In June 1995, all outstanding shares of Series Preferred Stock were
converted to 5,019,383 shares of common stock in connection with the closing of
the Company's initial public offering.
In December 1997, in a private placement financing, the Company issued 6,300
shares of 6% Convertible Preferred Stock ("Convertible Preferred Stock"), for
$1,000 per share, providing cash proceeds of $5.6 million, of which $4.2 million
was received in 1997 and $1.4 million in 1998, net of $700,000 in deal costs, to
the Company. The holders of the Convertible Preferred Stock receive an annual
cumulative 6% dividend, which accrues in stock. All of the Convertible Preferred
shares are
F-44
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
fully convertible into shares of the company's Common Stock, at the option of
the holder. The conversion price is the lowest trading price of the Common Stock
during the 22 consecutive trading days immediately preceding the date of
conversion reduced by a conversion discount that starts at 5% in December 1997
and increases to a maximum of 21% by June 1999. At December 31, 1997, the value
of the discount was $1,675,800, which is being amortized over the eighteen month
discount period by accreting preferred dividends as a credit to additional
paid-in-capital and a charge to retained earnings. At December 31, 1997,
$2,464,186 of the total issuance had mandatory redemption features, based on the
number of common shares into which the preferred stock was convertible that were
subject to shareholders' aproval, and, therefore, was not included in
stockholders' equity. Upon approval by the common shareholders on March 10, 1998
eliminating any restriction on convertibility, the mandatorily redeemable
portion of the Convertible Preferred Stock was transferred to stockholders'
equity (See Note D). The number of shares sold on any given date is limited to
the greater of 4,000 shares, 10% of the average daily trading volume of the
Common Stock for the 5 trading days immediately preceding such sale, as reported
by Nasdaq or such principal exchange, or 10% of the trading volume of the Common
Stock on the day of such sale, as reported by Nasdaq or such principal exchange.
The conversion price is at all times also subject to customary anti-dilution
adjustment for events such as stock splits, stock dividends, reorganizations and
certain mergers affecting the Company's Common Stock. On December 23, 2002, all
outstanding shares of the Convertible Preferred Stock, including any accrued
dividends thereon, will automatically be converted into the Company's Common
Stock at the conversion price on such date. Each share of Convertible Preferred
Stock is also entitled to a liquidation preference of $1,000 per share, plus any
accrued but unpaid dividends, in preference to any other class or series of
capital stock of the Company. Except to determine whether such stock is entitled
to its liquidation preference under certain circumstances, and as provided by
applicable law, holders of the Convertible Preferred Stock have no voting
rights. In February 1998, 7,294,737 shares were registered for conversion. In
connection with the private placement financing, warrants for 630 shares of
Convertible Preferred Stock, at a price of $1,000 per share, were issued to the
placement agents of the transaction. The warrants will expire on December 23,
2002.
In March 1998, the Company's shareholders approved the December 1997
Convertible Preferred Stock Financing.
In November 1998, simultaneous with the execution of the Merger Agreement
with Peptide, Peptide purchased 2,584 shares, approximately 95%, of the
Company's then outstanding Convertible Preferred Stock for an aggregate price of
approximately $2.95 million. Under the Merger Agreement, at the effective time,
outstanding shares of the Convertible Preferred Stock owned by Peptide will be
canceled and outstanding shares of the Convertible Preferred Stock owned by
third parties will be automatically converted into the right to receive $1,090
per share plus accrued but unpaid dividends. These third parties have
contractually agreed to redeem these shares for cash. If the merger is
terminated because of a breach of the Merger Agreement by Peptide or a mutual
decision by both parties to terminate the Merger Agreement, OraVax has the right
to repurchase Peptide's Convertible Preferred Stock at the price Peptide paid
for it. In all other events of termination of the Merger Agreement, Peptide has
the right to sell the Convertible Preferred Stock to OraVax at the price it paid
for it.
In November 1998, the Company issued 950,000 shares of Common Stock and six
shares of Convertible Preferred Stock to repurchase warrants for 630 shares of
Convertible Preferred Stock, which had been issued to the placement agents in
connection with the December 1997 private placement financing.
During 1998, 3,716 shares of the Convertible Preferred Stock, including
applicable stock dividends, had been converted into 8,276,011 shares of Common
Stock.
F-45
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
L. STOCKHOLDERS' EQUITY:
COMMON STOCK
During 1998, 3,716 shares of the Convertible Preferred Stock, including
applicable stock dividends, had been converted into 8,276,011 shares of Common
Stock.
In November 1998, the Company issued 950,000 shares of Common Stock and six
shares of Convertible Preferred Stock to repurchase warrants for 630 shares of
Convertible Preferred Stock, which had been issued to the placement agents in
connection with the December 1997 private placement financing.
In July 1998, the Company issued warrants for 60,086 shares of common stock,
at a price of $2.00 per share, to one of its investors, a principal of which is
a member of the Company's Board of Directors. The $32,000 estimated fair value
of these warrants was charged to general and administrative expense. The
warrants will expire on December 23, 2002.
In June 1998, the Company's stockholders approved an increase in the
authorized shares of common stock to 50,000,000 shares.
In December 1997, in a private placement financing, the Company sold 240,000
shares of its common stock, par value $.001 per share, for $1.9125 per share,
providing net proceeds of $396,000 to the Company. In connection with the
private placement financing, warrants for 24,000 shares of common stock, at a
price of $1.9125 per share, were issued to the syndicators of the transaction.
The warrants will expire on December 23, 2002.
In June 1996, the Company sold 2,300,000 shares of its common stock, par
value $.001 per share, for $7.25 per share in a follow-on stock offering,
providing net proceeds of $15,215,000 to the Company.
In June 1995, the Company sold 2,300,000 shares of its common stock, par
value $.001 per share, for $10.00 per share in an initial public offering,
providing net proceeds of $20,676,000 to the Company. In connection with the
initial public offering, all outstanding shares of Series Preferred Stock were
converted to common stock.
In March 1995, the Company's stockholders approved an increase in the
authorized shares of common stock to 25,000,000 shares and authorized 2,000,000
shares of a new class of preferred stock, par value $.001 per share.
STOCK OPTIONS
The Company follows FAS No. 123, "Accounting for Stock-Based Compensation."
FAS 123 established financial accounting and reporting standards for stock-based
employee compensation plans. The statement defines a new method of accounting
for employee stock compensation plans using a fair value based method, under
which compensation costs is measured and recognized in results of operations.
Alternatively, FAS 123 allows an entity to retain the accounting for employee
stock compensation plans defined under Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees." The Company retained
the accounting defined in APB No. 25 under which no compensation expense is
recognized for fixed stock option grants to employees provided that the grant
price equals or is greater than fair market value. As required, the Company will
disclose the pro forma effects of stock-based compensation using the fair value
based method defined under FAS 123.
F-46
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Incentive stock options granted under the Company's 1990 and 1995 stock
option plans (the "Plans") may not be granted at a price less than the fair
market value of the common stock on the date of grant (or less than 110% of fair
market value in the case of employees or officers holding 10% or more of the
voting stock of the Company). Nonqualified stock options may be granted at an
exercise price established by the Board of Directors, which may be less than,
equal to or greater than the fair value of the common stock on the date of
grant. Options granted under the Plans generally vest over three- to five-year
periods, and expire not more than ten years from the date of grant, or not more
than five years from the date of grant in the case of incentive stock options
granted to an employee or officer holding 10% or more of the voting stock of the
Company.
The Company's 1996 Employee Stock Purchase Plan (the "ESPP") permits
employees to purchase common stock of the Company at the lesser of 85% of its
fair value at the beginning or end of related six month payroll withholding
periods. During 1996, 1997 and 1998, 13,822, 36,146 and 159,634 shares,
respectively, were sold to employees under the ESPP. At December 31, 1998, there
were no shares of common stock reserved for future issuances under the ESPP, and
as a result the Company's ESPP plan has been suspended until completion of the
planned merger with Peptide.
Had compensation cost for options issued under OraVax's stock option plan
and Employee Stock Purchase Plan been determined based on the fair value at the
grant dates consistent with the methods defined under FAS 123, OraVax's net loss
and loss per share would have been increased to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
<S> <C> <C> <C>
1996 1997 1998
---------- ---------- ----------
Net loss as reported (in thousands)....................... $ (21,622) $ (15,812) $ (13,825)
Pro forma (in thousands).................................. $ (21,877) $ (16,233) $ (14,196)
Basic and diluted loss per share.......................... $ (2.46) $ (1.58) $ (.92)
Pro forma................................................. $ (2.49) $ (1.62) $ (.94)
</TABLE>
The fair value of each stock option granted is estimated on the grant date
using the Black-Scholes pricing model with the following weighted-average
assumptions.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- --------- ---------
Expected Option Term........................................... 5 years 5 years 5 years
Expected Option Volatility..................................... 65% 70% 90%
Risk Free Interest Rate........................................ 6.13% 6.54% 5.59%
Expected Dividend Yield........................................ 0% 0% 0%
</TABLE>
The weighted average fair value of options granted under the plans during
each of the years ended December 31, 1996, 1997 and 1998, was $7.32, $1.66 and
$.78, respectively.
F-47
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The fair value of each option granted under the Employee Stock Purchase Plan
is estimated on the grant date using the Black-Scholes pricing model with the
following weighted-average assumptions.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- --------- ---------
Expected Option Term........................................ 1/2 year 1/2 year 1/2 year
Expected Option Volatility.................................. 65% 70% 90%
Risk Free Interest Rate..................................... 5.32% 5.62% 5.46%
Expected Dividend Yield..................................... 0% 0% 0%
</TABLE>
The weighted-average fair value of options granted under the Employee Stock
Purchase Plan during each of the years ended December 31, 1996, 1997 and 1998
was $3.11, $.97 and $.10, respectively. Because some options vest over several
years and additional awards are generally made each year, the pro forma amounts
may not be representative of the effects on net income in future years.
A summary of the status of OraVax's stock option plan for the years ended
December 31, 1996, 1997 and 1998 is as follows:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
---------- -----------------
<S> <C> <C>
Outstanding at December 31, 1995............................... 802,807 2.27
Granted...................................................... 127,610 12.18
Exercised.................................................... (27,625) .78
Canceled..................................................... (11,983) 5.21
----------
Outstanding at December 31, 1996............................... 890,809 3.70
Granted...................................................... 498,683 2.63
Exercised.................................................... (68,853) .74
Canceled..................................................... (145,367) 5.61
----------
Outstanding at December 31, 1997............................... 1,175,272 3.18
Granted...................................................... 186,300 1.07
Exercised.................................................... (2,315) .49
Canceled..................................................... (173,723) 3.47
----------
Outstanding at December 31, 1998............................... 1,185,534 2.89
----------
----------
</TABLE>
F-48
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- --------------------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C>
WTD. AVERAGE WTD.
REMAINING AVERAGE WTD. AVERAGE
RANGE OF #OUTSTANDING CONTRACTUAL EXERCISE #OPTIONS EXERCISE
EXERCISE PRICE AT 12/31/98 LIFE PRICE EXERCISABLE PRICE
------------------- --------------- ----------- ------------------ -------------
$0.313--$0.344 26,000 9.63 $ 0.32 0 N/A
0.706-- 1.059 280,499 6.37 0.88 174,371 $ 0.78
1.125 -- 1.125 3,800 9.49 1.13 0 N/A
1.875 -- 2.705 622,214 6.95 2.53 446,979 2.56
3.000 -- 3.625 170,586 7.70 3.14 58,648 3.25
6.625 -- 8.750 8,025 7.32 7.76 3,640 7.74
12.000 --14.750 74,410 7.17 13.32 40,096 13.31
$0.235--$14.750 1,185,534 7.01 $ 2.89 723,733 2.81
</TABLE>
At December 31, 1998, options to purchase 717,337 shares of common stock
remained available for future grants under the plans. At December 31, 1998,
1,902,871 shares of common stock remained reserved to satisfy the issuance of
shares under outstanding and future grants under the plans.
In connection with certain stock option grants in 1995, the Company recorded
$141,000 of deferred compensation expense which is being amortized and charged
to operations over the five-year vesting period of the related options. In
addition, $250,000 of compensation expense was recorded in 1995 in connection
with the vesting of certain milestone-based stock options. In 1997, $39,000 of
compensation expense was recorded in connection with the vesting of certain
performance based options and the extension of the term of certain options.
M. JOINT VENTURE AND PMC SHORT-TERM BRIDGE LOAN:
In March 1995, the Company entered into a collaboration (the "Joint
Venture") with PMC for the development, manufacturing, marketing and sale of
immuno-therapeutic and preventive vaccines against H. PYLORI infection in
humans. OraVax and PMC will share equally in profits from the sales of H. PYLORI
vaccines and in all future research, development, clinical and commercialization
costs. PMC is providing technical expertise and will also provide marketing to
the Joint Venture. PMC made an initial payment of $3.2 million directly to
OraVax which included $0.6 million to recognize the value of research and
development conducted by OraVax in the first quarter of 1995 prior to forming
the Joint Venture, and a milestone payment of $2.6 million to recognize the
value of technology previously developed by OraVax and made available to the
Joint Venture. In addition, PMC purchased $2.5 million of the Company's Series
Preferred Stock. Subsequently, PMC purchased an additional $1.0 million of
common stock in the Company's initial public offering. In addition, PMC agreed
to pay the Company directly up to an additional $12.0 million during the
development period, subject to the achievement of certain clinical and
regulatory milestones, of which $0.6 million was paid to OraVax in December
1995. Beginning in the second quarter of 1995, research, development and
commercialization activities of the Joint Venture were conducted through two
equally controlled partnerships (the "Joint Venture Partnerships") which have
contracted with OraVax to perform the research, development and clinical trial
activities. OraVax earned $6,595,000, $7,587,000 and $7,682,000 under these
contracts during 1996, 1997 and 1998, respectively. In addition, during 1996,
1997 and 1998, the Joint Venture entered into research and development contracts
with PMC and third parties. The research and development budgets of the two
partnerships comprising the Joint Venture are established by joint committees in
which each of the
F-49
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
venturers has an equal participation and role. The venturers will pay
approximately equal shares of the agreed upon budgets. OraVax will receive
revenue from the partnerships for research and development work which is
requested to be performed by OraVax and funded by the Partnerships.
OraVax and PMC each invested approximately $4.5 million, $5.8 million and
$6.2 million in 1996, 1997 and 1998, respectively, to fund the Joint Venture's
operations. OraVax accounts for its investments in the Joint Venture
Partnerships under the equity method of accounting and, accordingly, recorded
its $5,085,000, $6,236,000 and $5,844,000 share of the Joint Venture
Partnerships' net losses during 1996, 1997 and 1998, respectively. Following are
the Joint Venture Partnerships' summarized combined balance sheets as of
December 31, 1997 and 1998, and the summarized combined statement of operations
for the period March 31, 1995 (inception) through December 31, 1995, for the
years ended December 31, 1996, 1997 and 1998 and cumulative from inception
(March 31, 1995) through December 31, 1998.
OraVax and Merieux each licensed to the Joint Venture upon its formation the
right to use all of their respective existing proprietary technologies relating
to vaccines for the treatment of H. PYLORI, except for so- called naked DNA
technology (for an injectable vaccine) which is the subject of a separate
collaboration by Merieux with the third party. Additional technology in the H.
PYLORI field acquired by either party since the formation of the Joint Venture
is required to be offered to the Joint Venture. The Joint Venture itself has
also obtained licenses to relevant technology from third parties, including a
license in November, 1996 of the complete genome sequence of H. PYLORI from
MedImmune and Human Genome Sciences.
On November 2, 1998, the Company obtained a short-term bridge loan, in the
amount of $3 million, from PMC to support operations. The Company pledged 12%
ownership in the Joint Venture as collateral. The Company granted PMC a
controlling vote, in the Joint Venture, regarding all marketing-related
decisions, thereby granting PMC overall direction of marketing-related matters.
The Company will retain equal voting authority in all non-marketing-related
decisions. In addition, the Company authorized PMC, or should PMC elect, PMC's
affiliates, to act as the principal marketing entity for any Joint Venture
products. The loan was to be repaid in two installments: $2 million on January
31, 1999 and $1 million on June 30, 1999, and bears interest at an annual rate
of 5.42% which is payable when each installment of principal is due. However,
the loan was subsequently amended to require repayment of $3 million upon the
earlier of consummation of the merger or July 31, 1999.
In the event that the Company defaults on the loan, PMC would, by virtue of
the Company's pledge of 12% ownership in the Joint Venture to secure the loan,
increase its ownership interest in the Joint Venture to 62%, thereby obtaining
overall direction of all Joint Venture matters. The Company's share of future
research, development, clinical and commercialization costs, and of profits from
target product sales would then decrease from the present 50% to 38%.
F-50
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JOINT VENTURE PARTNERSHIPS
(DEVELOPMENT STAGE ENTERPRISES)
COMBINED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
ASSETS
Cash....................................................................... $ 625 $ 648
Prepaid expenses--related party............................................ 623 920
--------- ---------
$ 1,248 $ 1,568
--------- ---------
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable--OraVax................................................... $ 382 $ 183
Accounts payable--PMC...................................................... 595 1,500
Accounts payable--Other.................................................... 1,240 79
Partners' capital:
OraVax................................................................... (485) (97)
PMC...................................................................... (484) (97)
--------- ---------
$ 1,248 $ 1,568
--------- ---------
--------- ---------
</TABLE>
JOINT VENTURE PARTNERSHIPS
(DEVELOPMENT STAGE ENTERPRISES)
COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Interest income................................... $ 16 $ 22 $ 23
------------ ------------ ------------
Contract research expense--OraVax................. 6,595 7,587 7,682
Contract research expense--PMC.................... 2,258 2,375 3,481
Contract research expense--other.................. 1,139 2,508 539
Legal and administrative expenses................. 85 15 --
------------ ------------ ------------
Total expenses.................................... 10,077 12,485 11,702
------------ ------------ ------------
Net loss.......................................... $ (10,061) $ (12,463) $ (11,679)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
N. PMC: DENGUE LICENSE AGREEMENT AND SPONSORSHIP OF JAPANESE ENCEPHALITIS:
In November 1998, the Company entered into a license agreement, under its
Dengue program, with PMC for the development of a vaccine against Dengue fever,
based upon the Company's Chimerivax-TM- platform technology. This technology
utilizes the yellow fever 17D vaccine virus as a vector for genes of related
viruses. Under the license agreement, the Company agreed to develop the vaccine
through completion of Phase I clinical trials. PMC agreed to fund 100% of the
research, development and clinical costs through Phase I clinical trials. In
addition, the Company granted PMC a worldwide
F-51
<PAGE>
ORAVAX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
exclusive license to Dengue and PMC will address advanced development,
manufacturing, sales, marketing and distribution. As a term of the Dengue
agreement, PMC had an option, through December 31, 1998, to negotiate a separate
agreement to license the Company's vaccine against Japanese encephalitis ("JE"),
also based on the Company's Chimerivax-TM- platform technology. In exchange for
the option, PMC agreed to fund 100% of the research, development and clinical
costs through the completion of Phase I clinical trials.
The Company and PMC estimate the research, development and clinical costs of
both the Dengue and JE vaccines through Phase I clinical trials to exceed $11.0
million. PMC began funding, as of October 1, 1998, the research, development and
clinical costs under the Dengue and JE programs, and paid the Company $1.2
million in December 1998, of which $1.1 million was earned in the current
period. In addition, PMC agreed to pay the Company up to $12.2 million during
the Dengue development period, subject to the achievement of certain
development, clinical and regulatory milestones, of which $1.0 million was paid
to the Company in November 1998 to recognize the value of research and
development conducted by the Company prior to the execution of the license
agreement. However, there can be no assurance that the milestones which trigger
such future payments will be achieved. Also, PMC agreed to pay the Company
royalties on future net sales of licensed Dengue product. A Research and
Development Committee was formed to oversee the direction of the Dengue and JE
programs, and consists of three members from each the Company and PMC. The
Research and Development Committee has approved funding of costs under both the
Dengue and JE programs through December 1999. The license agreement provides for
a research and development term from October 1, 1998 through the completion of
Phase I clinical studies with respect to the JE and Dengue programs. Upon
expiration of such term, the Company and PMC may in good faith discuss extending
their collaborative relationship to later stages of development of the JE and
Dengue vaccines. In addition, the license agreement provides PMC certain rights
of termination, but, absent any breach, PMC may not terminate the license
agreement before the earlier of twelve months from execution of the license
agreement or the completion of Phase I clinical studies under the JE program.
O. RELATED PARTIES:
The Company has a consulting agreement with the chairman of its Board of
Directors under which, and together with fees paid to him for his services as
chairman, he was paid $51,000, $39,000 and $43,000 during 1996, 1997 and 1998,
respectively. In 1996, the Company entered into a consulting agreement with
another member of its Board of Directors under which, and together with fees
paid to him for his services as a director, he was paid $8,000, $16,000 and
$8,000 during 1996, 1997 and 1998, respectively. In 1997, the Company entered
into a consulting agreement with a third member of its Board of Directors under
which, and together with fees paid to him for his services as a director, he was
paid $10,000 and $7,000 during 1997 and 1998, respectively.
In July 1998, the Company issued warrants for 60,086 shares of common stock,
at a price of $2.00 per share, to one of its investors, a principal of which is
a member of the Company's Board of Directors. The warrants will expire on
December 23, 2002. (See Note L.)
P. EMPLOYEE BENEFITS:
The Company has a 401(k) retirement plan in which substantially all of its
permanent employees are eligible to participate. Participants may contribute up
to 15% of their annual compensation to the plan, subject to statutory
limitations. For 1996, 1997 and 1998, the Company declared discretionary
matching aggregate contributions to the plan of $97,000, $89,000 and $72,000,
respectively, paid in 18,509, 50,723 and 160,000 shares of the Company's common
stock, respectively. At December 31, 1998, there were no available shares of
common stock reserved for future issuances under the plan.
F-52
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of OraVax Merieux Co. and Merieux OraVax Co.:
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, partners' capital and cash flows present
fairly, in all material respects, the financial position of OraVax Merieux Co.
and Merieux OraVax Co. (both development stage enterprises) at December 31, 1997
and 1998, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, and cumulative from
inception (March 31, 1995) through December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the partnerships' management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
March 1, 1999
F-53
<PAGE>
ORAVAX MERIEUX CO. AND
MERIEUX ORAVAX CO. PARTNERSHIPS
(DEVELOPMENT STAGE ENTERPRISES)
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1998
------------ ------------
<S> <C> <C>
ASSETS
Cash.................................................................................. $ 625,055 $ 647,944
Prepaid expenses--related parties..................................................... 623,164 920,341
------------ ------------
Total assets.......................................................................... $ 1,248,219 $ 1,568,285
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL LIABILITIES
Accounts payable--OraVax.............................................................. $ 382,421 $ 183,118
Accounts payable--PMC................................................................. 595,096 1,500,022
Accounts payable--other............................................................... 1,240,059 79,478
Commitments and contingencies (Note D)
Partners' capital (deficit):
OraVax.............................................................................. (485,164) (97,343)
PMC................................................................................. (484,193) (96,990)
------------ ------------
Total liabilities and partners' capital (deficit)..................................... $ 1,248,219 $ 1,568,285
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-54
<PAGE>
ORAVAX MERIEUX CO. AND
MERIEUX ORAVAX CO. PARTNERSHIPS
(DEVELOPMENT STAGE ENTERPRISES)
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
CUMULATIVE
(INCEPTION
THROUGH
YEAR ENDED YEAR ENDED YEAR ENDED 1998)
DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31,
----------------- ----------------- ----------------- --------------
<S> <C> <C> <C> <C>
Revenue
Interest Income...................... $ 16,393 $ 21,509 $ 22,889 $ 60,791
Expenses:
Contract research expense--
OraVax........................... 6,595,003 7,587,421 7,681,788 26,732,011
Contract research expense-- PMC.... 2,257,985 2,375,000 3,480,856 8,113,841
Contract research expense--
other............................ 1,139,033 2,507,559 539,486 4,186,078
Legal and administrative
expenses......................... 85,777 15,020 -- 100,797
----------------- ----------------- ----------------- --------------
Total expenses......................... 10,077,798 12,485,000 11,702,130 39,132,727
----------------- ----------------- ----------------- --------------
Net loss............................... $ (10,061,405) $ (12,463,491) $ (11,679,241) $ (39,071,936)
----------------- ----------------- ----------------- --------------
----------------- ----------------- ----------------- --------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-55
<PAGE>
ORAVAX MERIEUX CO. AND
MERIEUX ORAVAX CO. PARTNERSHIPS
(DEVELOPMENT STAGE ENTERPRISES)
COMBINED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FOR THE PERIOD FROM INCEPTION (MARCH 31, 1995) THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
PASTEUR MERIEUX
ORAVAX MERIEUX AMERICA
JVM, INC. CONNAUGHT HOLDING, INC. TOTAL
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Capital contributions............................... $ 2,885,851 $ 2,014,444 $ 866,793 $ 5,767,088
Net loss............................................ (2,435,847) (1,700,322) (731,630) (4,867,799)
------------- ------------- ------------- --------------
Balance, December 31, 1995.......................... 450,004 314,122 135,163 899,289
Capital contributions............................... 4,503,600 3,143,700 1,352,700 9,000,000
Net loss............................................ (5,034,754) (3,521,082) (1,505,569) (10,061,405)
------------- ------------- ------------- --------------
Balance, December 31, 1996.......................... $ (81,150) $ (63,260) $ (17,706) $ (162,116)
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
Capital contributions............................... 5,832,751 4,062,359 1,761,140 11,656,250
Net loss............................................ (6,236,765) (4,361,714) (1,865,012) (12,463,491)
------------- ------------- ------------- --------------
Balance, December 31, 1997.......................... $ (485,164) $ (362,615) $ (121,578) $ (969,357)
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
Capital contributions............................... 6,232,113 4,350,278 1,871,874 12,454,265
Net loss............................................ (5,844,292) (4,087,734) (1,747,215) (11,679,241)
------------- ------------- ------------- --------------
Balance, December 31, 1998.......................... $ (97,343) $ (100,071) $ 3,081 $ (194,333)
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-56
<PAGE>
ORAVAX MERIEUX CO. AND
MERIEUX ORAVAX CO. PARTNERSHIPS
(DEVELOPMENT STAGE ENTERPRISES)
COMBINED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (MARCH 31, 1995) THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
CUMULATIVE
(INCEPTION
THROUGH
YEAR ENDED ENDED YEAR YEAR ENDED DECEMBER 31,
DECEMBER 31, 1996 DECEMBER 31, 1997 DECEMBER 31, 1998 1998)
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss.......................... $ (10,061,405) $ (12,463,491) $ (11,679,241) $ (39,071,936)
Changes in operating assets and
liabilities:
Prepaid expenses................ (147,012) 423,137 (297,177) (920,341)
Accounts payable................ 1,335,862 881,714 (454,958) 1,762,618
----------------- ----------------- ----------------- -----------------
Net cash used by operating
activities........................ (8,872,555) (11,158,640) (12,431,376) (38,229,659)
Cash flows from financing
activities:
Capital contributions............. 9,000,000 11,656,250 12,454,265 38,877,603
----------------- ----------------- ----------------- -----------------
Net increase in cash and cash
equivalents....................... 127,445 497,610 22,889 647,944
Cash and cash equivalents at
beginning of period............... -- 127,445 625,055 --
----------------- ----------------- ----------------- -----------------
Cash and cash equivalents at end of
period............................ $ 127,445 $ 625,055 $ 647,944 $ 647,944
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-57
<PAGE>
ORAVAX MERIEUX CO. AND
MERIEUX ORAVAX CO. PARTNERSHIPS
(DEVELOPMENT STAGE ENTERPRISES)
NOTES TO COMBINED FINANCIAL STATEMENTS
A. NATURE OF BUSINESS:
A collaboration between Pasteur Merieux Connaught ("PMC"), a societe anonyme
existing and organized under the laws of the Republic of France, and OraVax,
Inc. (OraVax), a corporation existing and organized under the laws of the State
of Delaware, was formed on March 31, 1995 (the "Collaboration").
In accordance with the Master Agreement of the Collaboration (the
"Agreement"), two partnerships, Merieux OraVax Co. and OraVax Merieux Co., both
development stage enterprises (the "Partnerships") were formed. The Partnerships
conduct all activities relative to the research, development, registration,
commercialization, manufacturing, marketing, sales and distribution of
immunotherapeutic and preventative vaccines against Helicobacter pylori
infections in humans which use the urease protein or any of its sub-units as an
antigen. The partnerships began operations on April 1, 1995. The two
collaborators, OraVax and PMC have established their intent to own the
partnerships equally on an aggregated basis, to share expenses equally, and to
share profits and losses equally. The capital contributions of each partner are
determined by budgets established annually by committees on which each of the
partners has equal representation and an equal vote. It is the intent of the
partners to share such additional capital contributions equally.
Merieux OraVax Co. is a French partnership whose partners are PMC and OraVax
JVM, Inc. ("OraVax JVM"), a wholly-owned subsidiary of OraVax. The term of the
partnership is ninety-nine years. The initial interest of each partner in
Merieux OraVax Co. is as follows:
<TABLE>
<S> <C>
PMsv.................................................................. 49.9%
OraVax JVM............................................................ 50.1%
</TABLE>
The second partnership comprising the Collaboration is OraVax Merieux Co., a
Massachusetts general partnership, whose partners are OraVax JVM and Merieux
American Holding, Inc. ("MAHI"), an affiliate of PMC. The initial interest of
each partner in OraVax Merieux Co. is as follows:
<TABLE>
<S> <C>
MAHI.................................................................. 50.1%
OraVax JVM............................................................ 49.9%
</TABLE>
While the partnership interests of the partners in each partnership are
slightly different, the Collaboration has been structured with the intent of
having all costs, capital, profits and losses shared equally by PMC and OraVax
(through their respective affiliates). As a matter of partnership accounting,
the capital contributions shall be made equally, to be consistent with the
respective partnership interests for each partner as set forth above.
In the event of a default by a partner in the payment of capital
contributions to fund at least 80% of its share of the operating budget, the
Agreement calls for negotiation to resolve any disagreement. If the partners
fail to negotiate a resolution of the issue, the partner which has paid its
contribution shall take control of the partnership from the partner failing to
have contributed its share. Except for such a default, it is the intent of the
Collaboration that control remain equal between OraVax and PMC.
F-58
<PAGE>
ORAVAX MERIEUX CO. AND
MERIEUX ORAVAX CO. PARTNERSHIPS
(DEVELOPMENT STAGE ENTERPRISES)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
A. NATURE OF BUSINESS: (CONTINUED)
The partners of OraVax Merieux Co. and Merieux OraVax Co., both development
stage enterprises, have agreed to fund through the Partnerships the research and
development, clinical and pharmaceutical development costs of the Collaboration
as approved by its executive committee at least through December 1999.
The ultimate success of the Partnerships is dependent upon their ability to
raise capital through partners' contributions, equity and debt placement, sale
of product and interest income on invested capital. The Partnerships' capital
requirements may change depending upon numerous factors, including progress of
their research and development programs, time required to obtain regulatory
approvals, resources the Partnerships devote to self-funded projects,
proprietary manufacturing methods and advanced technologies and demand for the
Partnerships' products, if and when approved.
While management believes that additional capital will be available to fund
operations, there can be no assurance that additional funds will be available
when required, on terms acceptable to the Partnerships.
The Partnerships are subject to risks common to entities in the
biotechnology industry including, but not limited to, development by the
Partnerships or their competitors of new technological innovations, dependence
on key personnel, protection of proprietary technology and compliance with
government regulations.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of OraVax Merieux Co.
and Merieux OraVax Co. Intercompany transactions and balances have been
eliminated in combination.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred.
CASH AND CASH EQUIVALENTS
The Partnerships consider all highly liquid instruments purchased with an
original maturity of three months or less to be cash equivalents.
INCOME TAXES
In conformity with the Internal Revenue Code and applicable state and local
tax statutes, taxable income or loss of the Partnerships is required to be
reported in the tax returns of the partners in accordance with the terms of the
partnership agreements and, accordingly, no provision has been made in the
accompanying financial statements for income taxes.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of management's estimates and
assumptions that affect the reported amounts of assets
F-59
<PAGE>
ORAVAX MERIEUX CO. AND
MERIEUX ORAVAX CO. PARTNERSHIPS
(DEVELOPMENT STAGE ENTERPRISES)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
C. RELATED PARTY TRANSACTIONS
The Partnerships entered into research and development contracts, with
OraVax, Inc., the parent company of OraVax JVM and with PMC, to perform contract
research and development for the Partnerships. Funds transferred to OraVax for
the years ended December 31, 1996, 1997 and 1998 were $6,642,015, $7,205,000 and
$7,655,282, respectively. Contract research and development performed by OraVax
during the same periods were $6,595,003, $7,587,421 and $7,681,788,
respectively. Funds transferred to PMC for the years ended December 31, 1996,
1997 and 1998 were $2,357,985, $2,425,000 and $3,144,000, respectively. Contract
research and development performed by PMC during the same period was $2,257,985,
$2,375,000 and 3,480,856, respectively.
At December 31, 1997 and 1998, prepaid expenses represented funds
transferred to OraVax and PMC in advance of performance under its research and
development contracts. At December 31, 1998, accounts payable included
liabilities to OraVax and PMC in the amounts of $183,118 and $1,500,022,
respectively.
D. COMMITMENTS AND CONTINGENCIES
The Partnerships are party to research and license agreements with third
parties for which non-cancelable minimum future payments as of December 31, 1998
were $750,000, payable in 1999. In addition, under these agreements, the Company
may pay milestones and/or royalties of future sales of specified products.
F-60
<PAGE>
ANNEX A
RESTATED
AGREEMENT AND PLAN OF ACQUISITION
AMONG
PEPTIDE THERAPEUTICS GROUP PLC
PEACH ACQUISITION CORP.,
AND
ORAVAX, INC.
------------------------
DATED AS OF NOVEMBER 10, 1998
---------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
SECTION 1 -- THE MERGER.................................................................................... 1
1.1 The Merger................................................................................ 1
1.2 Effective Time............................................................................ 1
1.3 Effects of the Merger..................................................................... 1
1.4 Certificate of Incorporation and By-Laws.................................................. 1
1.5 Directors and Officers.................................................................... 1
1.6 Conversion of Stock....................................................................... 1
1.7 Seller Options and Seller Warrants........................................................ 3
1.8 Closing of Seller Transfer Books.......................................................... 4
1.9 Dissenting Shares......................................................................... 4
1.10 Exchange of Certificates.................................................................. 4
1.11 No Fractional Shares...................................................................... 5
1.12 No Liability.............................................................................. 5
1.13 Lost Certificates......................................................................... 5
1.14 Withholding Rights........................................................................ 5
1.15 [Reserved]................................................................................ 5
1.16 Further Assurances........................................................................ 5
SECTION 2 -- REPRESENTATIONS AND WARRANTIES OF SELLER...................................................... 6
2.1 Organization and Qualification............................................................ 6
2.2 Authority to Execute and Perform Agreements............................................... 6
2.3 Capitalization and Title to Shares........................................................ 6
2.4 Seller Subsidiaries and Seller Joint Ventures............................................. 7
2.5 SEC Reports............................................................................... 8
2.6 Financial Statements...................................................................... 8
2.7 Absence of Undisclosed Liabilities........................................................ 8
2.8 No Material Adverse Change................................................................ 8
2.9 Books and Records......................................................................... 8
2.10 Tax Matters............................................................................... 9
2.11 Compliance with Laws...................................................................... 10
2.12 No Breach................................................................................. 11
2.13 Actions and Proceedings................................................................... 11
2.14 Contracts and Other Agreements............................................................ 11
2.15 Bank Accounts, Brokerage Accounts and Powers of Attorney.................................. 12
2.16 Properties................................................................................ 12
2.17 Intellectual Property..................................................................... 13
2.18 Commercial Relationships.................................................................. 13
2.19 Employee Benefit Plans.................................................................... 13
2.20 Employee Matters.......................................................................... 15
2.21 Transactions with Management.............................................................. 15
2.22 Insurance................................................................................. 15
2.23 Anti-Takeover Laws........................................................................ 16
2.24 Brokerage................................................................................. 16
2.25 Environmental Matters..................................................................... 16
2.26 Proxy Statement and Registration Statement................................................ 17
2.27 PMC Waiver................................................................................ 18
2.28 Fairness Opinion.......................................................................... 18
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
SECTION 3 -- REPRESENTATIONS AND WARRANTIES OF PARENT...................................................... 18
3.1 Organization.............................................................................. 18
3.2 Authority to Execute and Perform Agreement................................................ 18
3.3 LSE Reports............................................................................... 18
3.4 Capitalization............................................................................ 19
3.5 Financial Statements...................................................................... 19
3.6 Absence of Undisclosed Parent Liabilities................................................. 19
3.7 No Material Adverse Change................................................................ 19
3.8 Actions and Proceedings................................................................... 19
3.9 No Breach................................................................................. 19
3.10 Proxy Statement and Registration Statement................................................ 20
3.11 Brokerage................................................................................. 20
SECTION 4 -- REPRESENTATIONS AND WARRANTIES REGARDING MERGER SUB........................................... 20
4.1 Organization and Corporate Power.......................................................... 20
4.2 Corporate Authorization................................................................... 20
4.3 Non-Contravention......................................................................... 20
4.4 No Business Activities.................................................................... 20
SECTION 5 -- COVENANTS AND AGREEMENTS...................................................................... 21
5.1 Conduct of Business....................................................................... 21
5.2 Corporate Examinations and Investigations................................................. 22
5.3 Expenses.................................................................................. 22
5.4 Authorization from Others................................................................. 22
5.5 Further Assurances........................................................................ 22
5.6 Preparation of Disclosure Documents....................................................... 22
5.7 Public Announcements and Confidentiality.................................................. 23
5.8 Affiliate Letters......................................................................... 24
5.9 Stock Exchange Listing.................................................................... 24
5.10 No Solicitation........................................................................... 24
5.11 Updates to Parent Disclosure Schedule..................................................... 24
5.12 Updates to Seller Disclosure Schedule..................................................... 25
5.13 Voting Seller Preferred Stock............................................................. 26
5.14 FIRPTA Compliance......................................................................... 26
5.15 Reporting................................................................................. 26
5.16 Working Capital Requirement............................................................... 26
SECTION 6 -- CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH PARTY TO CONSUMMATE THE MERGER................
26
6.1 Approvals................................................................................. 26
6.2 Registration Statement.................................................................... 26
6.3 Absence of Order.......................................................................... 26
6.4 Regulatory Approvals...................................................................... 26
6.5 Capital Raising........................................................................... 26
6.6 Admission to LSE.......................................................................... 27
SECTION 7 -- CONDITIONS PRECEDENT TO THE OBLIGATIONS OF MERGER SUB AND PARENT TO CONSUMMATE THE MERGER.....
27
7.1 Representations, Warranties and Covenants................................................. 27
7.2 Secretary of State Certificates........................................................... 27
7.3 Secretary's Certificate................................................................... 27
7.4 Affiliate Letters......................................................................... 27
7.5 Opinion of Counsel to Seller.............................................................. 27
7.6 Certificate of Merger..................................................................... 27
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
7.7 Comfort Letter............................................................................ 28
7.8 Dissenting Shares......................................................................... 28
7.9 Employment Agreements..................................................................... 28
7.10 Voting Agreements......................................................................... 28
7.11 Consents.................................................................................. 28
7.12 Purchase of Preferred Stock............................................................... 28
SECTION 8 -- CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER TO CONSUMMATE THE MERGER.....................
28
8.1 Representations, Warranties and Covenants................................................. 28
8.2 Opinion of Counsel to Parent.............................................................. 29
8.3 Merger Documents.......................................................................... 29
SECTION 9 -- TERMINATION, AMENDMENT AND WAIVER............................................................. 29
9.1 Termination............................................................................... 29
9.2 Effect of Termination..................................................................... 30
9.3 Termination Fees.......................................................................... 30
9.4 Seller Preferred Stock Put and Call Rights................................................ 31
9.5 Amendment................................................................................. 32
9.6 Waiver.................................................................................... 32
SECTION 10 -- MISCELLANEOUS................................................................................ 32
10.1 No Survival............................................................................... 32
10.2 Notices................................................................................... 32
10.3 Entire Agreement.......................................................................... 33
10.4 Governing Law............................................................................. 33
10.5 Binding Effect; No Assignment............................................................. 33
10.6 Variations in Pronouns.................................................................... 33
10.7 Counterparts.............................................................................. 33
</TABLE>
iii
<PAGE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A Form of Affiliate Letter
Exhibit B Form of Employment Agreements
Exhibit C Potential Seller Preferred Stock
Modifications
</TABLE>
SCHEDULES
<TABLE>
<S> <C>
Schedule 1.0 Individuals Executing Voting Agreements
Schedule 1.5 Directors and Officers of the Surviving
Corporation
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF ACQUISITION
THIS AGREEMENT AND PLAN OF ACQUISITION (this "Agreement") dated as of
November 10, 1998, as amended, is among Peptide Therapeutics Group plc
("Parent"), a corporation organized under the laws of England and Wales, Peach
Acquisition Corp. ("Merger Sub"), a Delaware corporation and a wholly-owned
subsidiary of Parent, and OraVax, Inc. ("Seller"), a Delaware corporation. The
parties wish to effect the acquisition of Seller by Parent through a merger of
Merger Sub with and into Seller on the terms and conditions hereof (the
"Merger"). As a condition to, and concurrently with the execution of, this
Agreement, each director, executive officer and stockholder of Seller listed on
Schedule 1.0 has executed and delivered to Parent an irrevocable agreement to
vote all shares of voting stock held by such person in favor of the approval of
this Agreement, the merger and the transactions contemplated hereby.
In consideration of the mutual representations, warranties and covenants
contained herein, the parties hereto agree as follows:
SECTION 1--THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions hereof, and
in accordance with the General Corporation Law of the State of Delaware (the
"DGCL"), Merger Sub shall be merged with and into Seller. The Merger shall occur
at the Effective Time (as defined herein). Following the Merger, Seller shall
continue as the surviving corporation (the "Surviving Corporation") and be a
wholly-owned subsidiary of Parent, and the separate corporate existence of
Merger Sub shall cease.
1.2 EFFECTIVE TIME. As soon as practicable after satisfaction or waiver of
all conditions to the Merger, the parties shall cause a Certificate of Merger
with respect to the Merger to be filed and recorded in accordance with Section
252 of the DGCL and shall take all such further actions as may be required by
law to make the Merger effective. The Merger shall be effective at such time as
the Certificate of Merger is duly filed with the Secretary of State of Delaware
in accordance with the DGCL or at such later time as is specified in the
Certificate of Merger (the "Effective Time"). Immediately prior to the filing of
the Certificate of Merger, a closing (the "Closing") will be held at the offices
of Palmer & Dodge LLP, One Beacon Street, Boston, Massachusetts (or such other
place as the parties may agree) for the purpose of confirming the foregoing (the
date on which the Closing occurs being hereafter referred to as the "Closing
Date").
1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
Sections 259, 260 and 261 of the DGCL.
1.4 CERTIFICATE OF INCORPORATION AND BY-LAWS. The Certificate of
Incorporation and By-Laws of Merger Sub, in each case as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation and
By-Laws of the Surviving Corporation immediately after the Effective Time
(except that Article I of the Certificate of Incorporation shall be amended as
of the Effective Time so that the name of the Surviving Corporation shall be
"OraVax, Inc.").
1.5 DIRECTORS AND OFFICERS. The directors and officers of the Surviving
Corporation immediately after the Effective Time shall be the individuals
identified on Schedule 1.5.
1.6 CONVERSION OF STOCK
(a) At the Effective Time, by virtue of the Merger and without any action on
the part of Parent, Merger Sub or Seller:
(i) All shares of common stock, $0.001 par value per share, of Seller
(the "Seller Common Stock") outstanding immediately prior to the Effective
Time, other than (A) shares held by Seller as treasury stock or shares held
by any Seller Subsidiary (as defined in Section 2.4) and shares held
A-1
<PAGE>
by Parent or its affiliates and (B) Dissenting Shares (as defined in Section
1.9), shall be converted into and become the right to receive, in the
aggregate, that number (subject to payment of cash in lieu of fractional
shares as provided in Section 1.11) of ordinary shares, nominal value of 10
pence per share, of Parent ("Parent Common Stock"), determined by dividing
(x) the Common Stock Consideration (as defined below) by (y) the Market
Value (as defined below) of a share of Parent Common Stock. The "Common
Stock Consideration" shall mean $20,000,000 less the sum of (A) $2,953,334
(the amount an affiliate of Parent paid on or about November 10, 1998 to
acquire approximately 65% of the then outstanding shares of Seller Preferred
Stock) (B) amounts payable by Parent pursuant to Section 1.6(a)(ii)
provided, however, no deduction shall be made for payments pursuant to
section 1.6(a)(ii) with respect to shares of Seller Preferred Stock which
Parent or its affiliates acquired on or about November 10, 1998 and
subsequently transferred, (C) the excess of (x) the number of shares of
Seller Common Stock represented by each Seller Option and Seller Common
Warrant multiplied by the Conversion Ratio less (y) the exercise price for
such shares for which (x) exceeds (y) (as such terms are hereinafter
defined) and (D) all amounts paid or payable pursuant to Section 1.7(b) or
otherwise paid or payable by Parent to acquire Seller Preferred Warrants.
The Common Stock Consideration shall be reduced by the consideration that
would otherwise be allocable to Dissenting Shares if the holders thereof had
not properly exercised rights under the DGCL. The Common Stock Consideration
shall be increased by the percentage by which (x) the number of shares of
Seller Common Stock outstanding at the Effective Time less (1) shares held
by Seller as treasury stock, (2) shares held by any Seller Subsidiary, (3)
shares held by Parent or its affiliates and (4) Dissenting Shares exceeds
(y) the number of shares of Seller Common Stock outstanding at the Effective
Time less (1) shares held by Seller as treasury stock, (2) shares held by
any Seller Subsidiary, (3) shares held by Parent of its affiliates, (4)
Dissenting Shares and (5) without double counting, the number of shares of
Seller Common Stock held by third parties who acquired those shares,
directly or indirectly, from Parent or its affilitates, including by
conversion of Seller Preferred Stock acquired, directly or indirectly, from
Parent or its affiliates.
(ii) Each share of Seller 6% Convertible Preferred Stock ("Seller
Preferred Stock") which has not been converted into Seller Common Stock
prior to the Effective Time, other than shares of Seller Preferred Stock
held by Parent or its affiliates, shall be converted into the greater of (x)
the right to receive in cash $1,090.00 (the "Per Share Preferred Stock
Consideration") plus accrued but unpaid dividends and (y) the Liquidation
Preference pursuant to the terms of the Seller Preferred Stock.
(iii) All shares of Seller Common Stock held at the Effective Time by
Seller as treasury stock or by a Seller Subsidiary, and all shares of Seller
Preferred Stock and Seller Common Stock held at the Effective Time by Parent
or its affiliates, shall be cancelled and no payment shall be made with
respect thereto.
(iv) All Dissenting Shares shall be handled in accordance with Section
1.9.
(v) Each share of common stock of Merger Sub, $0.01 par value per share,
outstanding immediately prior to the Effective Time shall be converted into
and become one outstanding fully paid and nonassessable share of common
stock of the Surviving Corporation.
(b) For the purpose of this Agreement, "Market Value" of a share of Parent
Common Stock shall mean the average of the per share closing prices of Parent
Common Stock as reported by the London Stock Exchange (the "LSE") for the 10
trading days ending on the third trading day prior to the Closing Date, with
each per share closing price converted to a U.S. dollar value using the exchange
rate for such day equal to the midpoint between the bid price and ask price
reported in THE FINANCIAL TIMES. Notwithstanding the foregoing, (i) if the
Market Value of a share of Parent Common Stock computed in accordance with the
previous sentence is less than $1.49 per share, Market Value of a
A-2
<PAGE>
share of Parent Common Stock shall mean $1.49 and (ii) if the Market Value of a
share of Parent Common Stock computed in accordance with the previous sentence
is greater than $2.24 per share, Market Value of a share of Parent Common Stock
shall mean $2.24.
(c) The Common Stock Consideration shall be allocated among the applicable
holders of shares of Seller Common Stock outstanding immediately prior to the
Effective Time by allocating to such holders that Market Value of shares of
Parent Common Stock determined by multiplying the number of shares of Seller
Common Stock held by each such holder by the Conversion Ratio. The "Conversion
Ratio" shall mean the quotient obtained by dividing the Common Stock
Consideration (prior to any reduction with respect to amounts otherwise
allocable to Dissenting Shares) by the number of shares of Seller Common Stock
outstanding immediately prior to the Effective Time less the number of shares
cancelled pursuant to Section 1.6(a)(iii) to the extent outstanding. The
"Exchange Ratio" shall mean the quotient obtained by dividing the Conversion
Ratio by the Market Value of a share of Parent Common Stock.
(d) If within the period beginning 13 trading days prior to the Closing Date
and ending on the Closing Date, there is a change in the number of issued and
outstanding shares of Parent Common Stock as the result of reclassification,
subdivision, recapitalization, combination, exchange, stock split (including
reverse stock split), stock dividend or distribution or other similar
transaction (other than the Merger), the number of shares of Parent Common Stock
issued in the Merger shall be equitably adjusted to eliminate the effect of such
event.
1.7 SELLER OPTIONS AND SELLER WARRANTS.
(a) At the Effective Time, each outstanding option to purchase shares of
Seller Common Stock (each a "Seller Option") under the Seller's 1990 Stock
Option Plan and 1995 Stock Option Plan (together the "Seller Stock Option
Plans"), whether or not exercisable, will be assumed by Parent. Each Seller
Option so assumed by Parent under this Agreement will continue to have, and be
subject to, the same terms and conditions set forth in the applicable Seller
Stock Option Plan immediately prior to the Effective Time (including, without
limitation, any repurchase rights), except that (i) each Seller Option will be
exercisable (or will become exercisable in accordance with its terms) for that
number of shares of Parent Common Stock equal to the product of the number of
shares of Seller Common Stock that were issuable upon exercise of such Seller
Option immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock, and
(ii) the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such assumed Seller Option will be equal to the quotient
determined by dividing the exercise price per share of Seller Common Stock at
which such Seller Option was exercisable immediately prior to the Effective Time
by the Exchange Ratio, rounded up to the nearest whole cent. After the Effective
Time, Parent will issue to each holder of an outstanding Seller Option a notice
describing the foregoing assumption of such Seller Option by Parent. The
adjustment provided herein with respect to any Seller Options which are
"incentive stock options" as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code") shall be and is intended to be effected in a
manner which is consistent with Section 424(a) of the Code.
(b) Each outstanding warrant to acquire Seller Preferred Stock (a "Seller
Preferred Warrant"), whether or not then exercisable, shall become the right to
receive from Parent, to the extent positive, the Per Share Preferred Stock
Consideration multiplied by the number of shares of Preferred Stock covered by
the Seller Preferred Warrant, less the aggregate exercise price.
(c) At the Effective Time, each outstanding warrant to purchase shares of
Seller Common Stock (each a "Seller Common Warrant" and together with the Seller
Preferred Warrants the "Seller Warrants"), whether or not exercisable, will be
assumed by Parent. Each Seller Common Warrant so assumed by Parent under this
Agreement will continue to have, and be subject to, the same terms and
conditions set forth in the applicable Seller Common Warrant immediately prior
to the Effective Time
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(including, without limitation, any repurchase rights), except that (i) each
Seller Common Warrant will be exercisable (or will become exercisable in
accordance with its terms) for that number of shares of Parent Common Stock
equal to the product of the number of shares of Seller Common Stock that are
issuable upon exercise of such Seller Common Warrant immediately prior to the
Effective Time multiplied by the Exchange Ratio, rounded down to the nearest
whole number of shares of Parent Common Stock, and (ii) the per share exercise
price for the shares of Parent Common Stock issuable upon exercise of such
assumed Seller Common Warrant will be equal to the quotient determined by
dividing the exercise price per share of Seller Common Stock at which such
Seller Common Warrant was exercisable immediately prior to the Effective Time by
the Exchange Ratio rounded to the nearest whole cent. After the Effective Time,
Parent will issue to each holder of an outstanding Seller Common Warrant a
notice describing the foregoing assumption of such Seller Common Warrant by
Parent.
1.8 CLOSING OF SELLER TRANSFER BOOKS. At the Effective Time, the stock
transfer books of Seller shall be closed and no transfer of Seller Common Stock
shall thereafter be made.
1.9 DISSENTING SHARES
(a) Shares of capital stock of Seller held by a stockholder who has properly
exercised appraisal rights with respect thereto in accordance with Section 262
of the DGCL (collectively, the "Dissenting Shares") shall not be converted into
Common Stock Consideration. From and after the Effective Time, a stockholder who
has properly exercised such appraisal rights shall no longer retain any rights
of a stockholder of Seller or the Surviving Corporation, except those provided
under Section 262 of the DGCL.
(b) Seller shall give Parent (i) prompt notice of any written demands under
Section 262 of the DGCL with respect to any shares of capital stock of Seller,
any withdrawal of any such demand and any other instruments served pursuant to
the DGCL and received by Seller and (ii) the right to participate in all
negotiations and proceedings with respect to any such demands. Seller shall
cooperate with Parent concerning, and shall not, except with the prior written
consent of Parent, voluntarily make any payment with respect to, or offer to
settle or settle, any such demands.
1.10 EXCHANGE OF CERTIFICATES. Parent shall authorize one or more persons
to act as Exchange Agent hereunder (the "Exchange Agent"). As soon as
practicable after the Effective Time, Parent shall cause the Exchange Agent to
mail to all former holders of record of Seller Common Stock that was converted
into the right to receive shares of Parent Common Stock pursuant to Section
1.6(a)(i) instructions for surrendering their certificates representing Seller
Common Stock in exchange for a certificate or certificates representing Parent
Common Stock and cash payments in lieu of fractional shares. Parent shall also
notify all holders of Seller Options and Seller Common Warrants of the
conversion of their options and warrants to rights to purchase shares of Parent
Common Stock. Upon surrender of a Seller Common Stock certificate for
cancellation to the Exchange Agent, together with a letter of transmittal and
other requested documents and in accordance with the instructions thereon, the
holder of such certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock into
which the shares of Seller Common Stock theretofore represented by such
certificate so surrendered shall have been converted pursuant to the provisions
of this Agreement. Until surrendered in accordance with the provisions of this
Section, each Seller Common Stock certificate (other than certificates for
shares to be canceled in accordance with Section 1.6.(a)(iii) and Dissenting
Shares, if any) shall represent for all purposes shares of Parent Common Stock.
Parent Common Stock into which Seller Common Stock shall be converted in the
Merger at the Effective Time shall be deemed to have been issued at the
Effective Time. If any certificates representing shares of Parent Common Stock
are to be issued in a name other than that in which the Seller Common Stock
certificate surrendered is registered, it shall be a condition of such exchange
that the person requesting such exchange shall deliver to the Exchange Agent all
documents necessary to evidence and effect such transfer and shall pay to the
Exchange Agent any transfer or
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other taxes required by reason of the issuance of a Parent Common Stock
certificate in a name other than that of the registered holder of the
certificate surrendered or establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not applicable. Beginning the date which is
six months following the Closing Date, Parent shall act as the Exchange Agent
and thereafter any holder of an unsurrendered Seller Common Stock certificate
shall look solely to Parent for any amounts to which such holder may be due,
subject to applicable law.
1.11 NO FRACTIONAL SHARES. No certificates representing fractional shares
of Parent Common Stock shall be issued pursuant to this Agreement. No fractional
interest shall entitle the owner to vote or to any other rights of a security
holder. In lieu of fractional shares, each individual or entity who would
otherwise have been entitled to a fractional share of Parent Common Stock
hereunder, will receive an amount in cash (without interest) determined by
multiplying such fraction by the Market Value of one share of Parent Common
Stock (determined in accordance with Section 1.6).
1.12 NO LIABILITY. None of Parent, Merger Sub, Seller, the Surviving
Corporation or the Exchange Agent shall be liable to any Person in respect of
any shares (or dividends or distributions with respect thereto) or cash payments
delivered to a public official pursuant to any applicable escheat, abandoned
property or similar law.
1.13 LOST CERTIFICATES. If any certificate representing shares of Seller
Common Stock, shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such certificate or option to be
lost, stolen or destroyed and, if required by Parent, the posting by such person
of a bond in such reasonable amount as Parent may direct as indemnity against
any claim that may be made against it with respect to such certificate, the
Exchange Agent will deliver in exchange for such lost, stolen or destroyed
certificate, applicable payments under this Agreement.
1.14 WITHHOLDING RIGHTS. Each of the Surviving Corporation and Parent
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Seller Common
Stock, Seller Options or Seller Warrants such amounts as it is required to
deduct and withhold with respect to the making of such payment under the Code,
or any provision of state, local or foreign tax law, including the tax laws of
the United Kingdom. To the extent that amounts are so withheld by the Surviving
Corporation or Parent, as the case may be, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Seller Common Stock, Seller Options or Seller Warrants, as the
case may be, in respect of which such deduction and withholding was made.
1.15 [RESERVED].
1.16 FURTHER ASSURANCES. At and after the Effective time, the officers and
directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of Seller or Merger Sub, any deeds, bills of
sale, assignments or assurances and to take and do, in the name and on behalf of
Seller or Merger Sub, any other actions and things to vest, perfect or confirm
of record or otherwise in the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or assets acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
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SECTION 2--REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth on the disclosure schedule delivered to Parent on the
date hereof (the "Seller Disclosure Schedule"), the section numbers of which are
numbered to correspond to the section numbers of this Agreement to which they
refer, Seller hereby makes the following representations and warranties:
2.1 ORGANIZATION AND QUALIFICATION
(a) Each of Seller, each Seller Subsidiary and each Seller Joint Venture (as
defined in Section 2.4(c)) is a corporation or other legal entity duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has corporate or similar power and authority to own, lease and
operate its assets and to carry on its business as now being and as heretofore
conducted. Each of Seller, each Seller Subsidiary and each Seller Joint Venture
is qualified or otherwise authorized to transact business as a foreign
corporation or other organization in all jurisdictions in which such
qualification or authorization is required by law, except for jurisdictions in
which the failure to be so qualified or authorized could not reasonably be
expected to have a material adverse effect on the assets, properties, business,
results of operations or financial condition of Seller and the Seller
Subsidiaries taken as a whole (but excluding any change, effect, condition,
event or circumstance arising out of or attributable to (i) changes, effects,
conditions, events or circumstances that generally affect the industries in
which Seller or the Seller Subsidiaries operate (including legal and regulatory
changes) or (ii) changes arising from the consummation of the transactions
contemplated hereby or the announcement of the execution of this Agreement) (a
"Seller Material Adverse Effect").
(b) Seller has previously provided to Parent true and complete copies of the
charter and bylaws or other organizational documents of Seller, each Seller
Subsidiary and Seller Joint Venture as presently in effect, and neither Seller
nor any Seller Subsidiary nor any Seller Joint Venture is in default in any
material respect in the performance, observation or fulfillment of any of such
documents.
2.2 AUTHORITY TO EXECUTE AND PERFORM AGREEMENTS. Seller has the corporate
power and authority to enter into, execute and deliver this Agreement and,
subject to the approval of this Agreement and the Merger by the holders of
Seller Common Stock, to perform fully its obligations hereunder. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Seller. No other action on the part of Seller is necessary to consummate the
transactions contemplated hereby (other than approval by the holders of Seller
Common Stock of this Agreement and the Merger). This Agreement has been duly
executed and delivered by Seller and, subject to the foregoing, constitutes a
valid and binding obligation of Seller, enforceable in accordance with its
terms.
2.3 CAPITALIZATION AND TITLE TO SHARES
(a) Seller is authorized to issue 50,000,000 shares of Seller Common Stock,
of which 17,762,712 shares were issued and outstanding as of November 5, 1998.
All of the issued and outstanding shares of Seller's Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of pre-emptive
rights.
(b) Seller has reserved 1,206,023 shares of Seller Common Stock for issuance
pursuant to all of the Seller Options. Seller Options to purchase 1,206,023
shares of Seller Common Stock were outstanding as of October 28, 1998. The
Seller Disclosure Schedule includes a true and complete list of all Seller
Options with vesting schedules and exercise prices. True and complete copies of
all instruments (or the forms of such instruments) referred to in this section
have been previously furnished to Parent.
(c) (i) Seller has reserved 84,086 shares of Seller Common Stock for
issuance pursuant to all of the Seller Common Warrants. Seller Common Warrants
to purchase 84,086 shares of Seller Common Stock were outstanding as of November
5, 1998.
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(ii) Seller has reserved 630 shares of Seller Preferred Stock for
issuance pursuant to all of the Seller Preferred Warrants and 4,061,157
shares of Seller Common Stock for issuance pursuant to conversion of such
shares of Seller Preferred Stock. Seller Preferred Warrants to purchase 630
shares of Seller Preferred Stock were outstanding as of November 5, 1998.
(iii) The Seller Disclosure Schedule includes a true and complete list of
all outstanding warrants with vesting schedules and exercise prices. True
and complete copies of all instruments (or the forms of such instruments)
referred to in this section have been previously furnished to Parent.
(d) Seller is authorized to issue 2,000,000 shares of Preferred Stock,
$0.001 par value per share. Seller has designated 9,000 such shares as 6%
Convertible Preferred Stock, 2,746 of which were outstanding as of November 5,
1998, and 200,000 of such shares as "Series A Junior Participating Preferred
Stock," all of which have been reserved for issuance under Seller's Shareholder
Rights Plan and none of which are outstanding. No other shares of Preferred
Stock are outstanding. All of the issued and outstanding shares of Seller
Preferred Stock are non-voting and are duly authorized, validly issued, fully
paid, nonassessable and free of pre-emptive rights.
(e) Except pursuant to (1) the conversion of outstanding shares of Parent
Preferred Stock described in Section 2.3(d), (2) the exercise of outstanding
Seller Options described in Section 2.3(b), (3) the exercise of outstanding
Seller Common Warrants described in Section 2.3(c)(i), (4) the exercise of
outstanding Seller Preferred Warrants described in Section 2.3(c)(ii), (5) the
conversion of shares of Seller Preferred Stock received upon exercise of
outstanding Seller Preferred Warrants described in Section 2.3(c)(ii) and the
exercise of rights with respect to the Series A Junior Participating Preferred
Stock referred to in Section 2.3(d), there are not as of the date hereof, and at
the Effective Time there will not be, any other shares of capital stock of
Seller authorized or outstanding or any subscriptions, options, conversion or
exchange rights, warrants, repurchase or redemption agreements, or other
agreements, claims or commitments of any nature whatsoever obligating Seller to
issue, transfer, deliver or sell, or cause to be issued, transferred, delivered,
sold, repurchased or redeemed, additional shares of the capital stock or other
securities of Seller or obligating Seller to grant, extend or enter into any
such agreement. To the best knowledge of Seller, there are no shareholder
agreements, voting trusts, proxies or other agreements, instruments or
understandings with respect to the voting of the capital stock of Seller, except
as set forth in the Seller Disclosure Schedule.
(f) Seller does not own beneficially any shares of capital stock of Parent.
2.4 SELLER SUBSIDIARIES AND SELLER JOINT VENTURES
(a) The Seller Disclosure Schedule sets forth all of the Seller Subsidiaries
and the jurisdiction in which each is incorporated and organized. Except as set
forth on the Seller Disclosure Schedule, all issued and outstanding shares or
other equity interests of each Subsidiary are owned directly by Seller free and
clear of any charges, liens, encumbrances, security interests or adverse claims.
As used in this Agreement, "Seller Subsidiary" means any corporation or other
legal entity of which Seller or any Seller Subsidiary owns, directly or
indirectly, 50% or more of the stock or other equity interest entitled to vote
for the election of directors or similar position.
(b) There are not as of the date hereof, and at the Effective Time there
will not be, any subscriptions, options, conversion or exchange rights,
warrants, repurchase or redemption agreements, or other agreements, claims or
commitments of any nature whatsoever obligating any Seller Subsidiary to issue,
transfer, deliver or sell, or cause to be issued, transferred, delivered, sold,
repurchased or redeemed, additional shares of the capital stock or other
securities of Seller or any Seller Subsidiary or obligating Seller or any Seller
Subsidiary to grant, extend or enter into any such agreement. To the best of
knowledge of Seller, there are no shareholder agreements, voting trusts, proxies
or other agreements, instruments or understandings with respect to the voting of
the capital stock of any Seller Subsidiary.
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(c) The Seller Disclosure Schedule sets forth for each Seller Joint Venture,
the interest held by the Seller and the jurisdiction in which such Seller Joint
Venture is organized. Except as set forth on the Seller Disclosure Schedule,
interests in Seller Joint Ventures held by Seller are held directly by Seller,
free and clear of any charges, liens, encumbrances, security interest or adverse
claims. The term "Seller Joint Venture" means any corporation or other entity
(including partnerships and other business associations) that is not a Seller
Subsidiary and in which the Seller or one or more Seller Subsidiaries owns an
equity interest (other than equity interests held for passive investment
purposes which are less than 10% of any class of the outstanding voting
securities or other equity of any such entity).
2.5 SEC REPORTS. Seller has previously delivered to Parent its (i) Annual
Report on Form 10-K for the year ended December 31, 1997 (the "Seller 10-K"), as
filed with the Securities and Exchange Commission (the "SEC"), (ii) all proxy
statements relating to Seller's meetings of stockholders held or to be held
since December 31, 1997 and (iii) all other reports filed by Seller with the SEC
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") since
December 31, 1995. As of their respective dates or as amended prior to the date
hereof, such reports complied, and all reports filed by Seller with the SEC
under the Exchange Act between the date of this Agreement and the Closing Date
will comply, in all material respects with applicable SEC requirements and did
not, or in the case of reports filed on or after the date hereof will not,
contain any 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. Since
December 31, 1995, Seller has timely filed, and between the date of this
Agreement and the Closing Date will timely file, with the SEC all reports
required to be filed under Section 13, 14 or 15(d) of the Exchange Act. Except
as set forth in the Seller Disclosure Schedule, each person required to make
filings under Section 16 of the Exchange Act since December 31, 1997, based on
such person's relationship with Seller, has timely made all filings required
under such section.
2.6 FINANCIAL STATEMENTS. The consolidated financial statements contained
in the Seller 10-K and in Seller's quarterly reports on Form 10-Q for the
quarters ended March 31, 1998 and June 30, 1998 (the "Seller 10-Qs") have been
prepared from, and are in accordance with, the books and records of Seller and
present fairly, in all material respects, the consolidated financial condition
and results of operations of Seller and the Seller Subsidiaries as of and for
the periods presented therein, all in conformity with generally accepted
accounting principles applied on a consistent basis, except as otherwise noted
therein and subject, in the case of the unaudited financial statements included
in the Seller 10-Qs, to normal year-end adjustments, which are not, in the
aggregate, material.
2.7 ABSENCE OF UNDISCLOSED LIABILITIES. As at December 31, 1997, Seller
and the Seller Subsidiaries had no material liabilities of any nature, whether
accrued, absolute, contingent or otherwise (including without limitation,
liabilities as guarantor or otherwise with respect to obligations of others or
liabilities for taxes due or then accrued or to become due), required to be
reflected or disclosed in the balance sheet dated December 31, 1997 (or the
notes thereto) included in the Seller 10-K (the "Seller Balance Sheet") that
were not adequately reflected or reserved against on the Seller Balance Sheet.
Seller has no material liabilities of any nature, whether accrued, absolute,
contingent or otherwise, other than liabilities (i) adequately reflected or
reserved against on the Seller Balance Sheet, (ii) reflected in Seller's
unaudited balance sheet dated June 30, 1998 included in the Seller 10-Q for the
quarter ended June 30, 1998, (iii) which have arisen since June 30, 1998 in the
ordinary course of business of Seller in amounts and of a nature consistent with
past practices or (iv) included on the Seller Disclosure Schedule.
2.8 NO MATERIAL ADVERSE CHANGE. Since June 30, 1998, there has not been
any Seller Material Adverse Effect.
2.9 BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of Seller, all of which have been made available to
Parent, are complete and correct in all
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material respects and have been maintained in accordance with sound business
practices and the requirements of Section 13(b)(2) the Exchange Act, including
the maintenance of an adequate system of internal controls. The Seller minute
books contain in all material respects accurate and complete records of all
meetings held of, and corporate action taken by, the stockholders, the Board of
Directors and committees of the board of directors of the Seller, and no meeting
of any such stockholders, Board of Directors or committee has been held for
which minutes have not been prepared and are not contained in such minute books.
At the Closing, all of those books and records will be in the possession of
Seller.
2.10 TAX MATTERS
(a) For purposes of this Agreement, the term "Tax" (and, with correlative
meaning, "Taxes" and "Taxable") means all United States federal, state, and
local, and all foreign, income, profits, franchise, gross receipts, payroll,
transfer, sales, employment, use, property, excise, value added, ad valorem,
estimated, stamp, alternative or add-on minimum, recapture, environmental,
withholding and any other taxes, charges, duties, impositions or assessments,
together with all interest, penalties, and additions imposed on or with respect
to such amounts, including any liability for taxes of a predecessor entity. "Tax
Return" means any return, declaration, report, claim for refund, or information
return or statement filed or required to be filed with any taxing authority in
connection with the determination, assessment, collection or imposition of any
Taxes.
(b) All Tax Returns required to be filed on or before the date hereof by or
with respect to the Seller and the Seller Subsidiaries have been filed within
the time and in the manner prescribed by law. All such Tax Returns are true,
correct and complete in all material respects, and all Taxes owed by the Seller
or the Seller Subsidiaries, whether or not shown on any Tax Return, have been
paid. The Seller and the Seller Subsidiaries file Tax Returns in all
jurisdictions where they are required to so file, and no claim has ever been
made by any taxing authority in any other jurisdiction that the Seller or the
Seller Subsidiaries are or may be subject to taxation by that jurisdiction.
(c) There are no liens or other encumbrances with respect to Taxes upon any
of the assets or properties of the Seller or the Seller Subsidiaries, other than
with respect to Taxes not yet due and payable.
(d) No audit is currently pending with respect to any Tax Return of the
Seller or the Seller Subsidiaries, nor is the Seller or its officers or
directors aware of any information which has caused or should cause them to
believe that an audit by any tax authority may be forthcoming. No deficiency for
any Taxes has been proposed in writing against the Seller or the Seller
Subsidiaries, which deficiency has not been paid in full. No issue relating to
the Seller or the Seller Subsidiaries or involving any Tax for which the Seller
or the Seller Subsidiaries might be liable has been resolved in favor of any
taxing authority in any audit or examination which, by application of the same
principles, could reasonably be expected to result in a deficiency for Taxes of
the Seller or the Seller Subsidiaries for any subsequent period, and neither the
Seller nor its officers or directors knows of any other basis for the assertion
of such a deficiency.
(e) There are no outstanding agreements, waivers or arrangements extending
the statutory period of limitation applicable to any claim for, or the period
for the collection or assessment of, Taxes due from or with respect to the
Seller or the Seller Subsidiaries for any taxable period, no power of attorney
granted by or with respect to the Seller or the Seller Subsidiaries relating to
Taxes is currently in force, and no extension of time for filing any Tax Return
required to be filed by or on behalf of the Seller or any Seller Subsidiary is
in force. The Seller has delivered to the Purchaser complete and correct copies
of all income Tax Returns, audit reports and statements of deficiencies for each
of the last three taxable years filed by or issued to or with respect to the
Seller or the Seller Subsidiaries.
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(f) With respect to any period for which Tax Returns have not yet been
filed, or for which Taxes are not yet due or owing, the Seller has, in
accordance with generally accepted accounting principles, made due and
sufficient accruals for such Taxes in the Seller 10-Q for the quarter ended June
30, 1998.
(g) No consent to the application of Section 341(f)(2) of the Code (or any
predecessor provision) has been made or filed by or with respect to the Seller
or the Seller Subsidiary or any of their assets or properties. None of the
assets or properties of the Seller or the Seller Subsidiaries are or will be
required to be treated as being (i) owned by any other person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended
and in effect immediately before the enactment of the Tax Reform Act of 1986, or
(ii) tax-exempt use property within the meaning of Section 168(h)(1) of the
Code.
(h) The Seller and the Seller Subsidiaries have not been and are not
currently in violation (or, with or without notice or lapse of time or both,
would be in violation) of any applicable law or regulation relating to the
payment or withholding of Taxes, and all withholding and payroll Tax
requirements required to be complied with by the Seller and the Seller
Subsidiaries up to and including the date hereof have been satisfied.
(i) The Seller and the Seller Subsidiaries are not and have never been a
party to or bound by, nor do they have or have they ever had any obligation
under, any Tax sharing agreement or similar contract or arrangement. Neither the
Seller nor any Seller Subsidiary has any liability for the Taxes of any other
person under Treasury Regulation 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract, or otherwise.
(j) There is no contract or agreement, plan or arrangement obligating the
Seller or the Seller Subsidiaries to make any payment that would not be
deductible by reason of Section 162(m) or 280G of the Code. Neither the Seller
nor any Seller Subsidiary has agreed to, or is required to, make any adjustments
under Section 481(a) of the Code by reason of a change in accounting method or
otherwise.
(k) Neither the Seller nor the Seller Subsidiaries are or were during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code.
(l) Seller's net operating loss carryover (calculated in accordance with the
provisions of Section 172 of the Code) as of December 31, 1997, equaled
$31,462,165.
2.11 COMPLIANCE WITH LAWS
(a) Seller and the Seller Subsidiaries have all licenses, permits,
franchises, orders or approvals of any federal, state, local or foreign
governmental or regulatory body necessary for the conduct of the business of
Seller and the Seller Subsidiaries (collectively, "Permits") except for such
Permits, the failure of which to obtain could not reasonably be expected to have
a Seller Material Adverse Effect; such Permits are in full force and effect; and
no proceeding is pending or, to the best knowledge of Seller, threatened to
revoke or limit any Permit. The Seller Disclosure Schedule contains a true and
complete list of all Permits.
(b) Seller and the Seller Subsidiaries are not in violation of and have no
liabilities, whether accrued, absolute, contingent or otherwise, under any
federal, state, local or foreign law, ordinance or regulation or any order,
judgment, injunction, decree or other requirement of any court, arbitrator or
governmental or regulatory body, including without limitation laws relating to
the operation of clinical testing laboratories, labor and employment practices,
health and safety, zoning, pollution or protection of the environment, including
without limitation laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, or industrial, toxic
or hazardous substances or wastes into the environment, or otherwise relating to
the manufacture, processing, distribution, use,
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treatment, storage, disposal, transport or handling of Hazardous Materials (as
defined in Section 2.24), except for violations of or liabilities under any of
the foregoing which could not, in the aggregate, reasonably be expected to have
a Seller Material Adverse Effect. During the last three years, neither Seller
nor any of the Seller Subsidiaries has received notice of, and there has not
been any citation, fine or penalty imposed against Seller or any of the Seller
Subsidiaries for, any such violation or alleged violation. To the best knowledge
of Seller, neither Seller nor any of the Seller Subsidiaries has received any
such notice of violation more than three years ago which has not been resolved.
2.12 NO BREACH. Except for (a) the filing of a proxy statement with the
SEC and (b) the filing of the Certificate of Merger with the Secretary of State
of Delaware, the execution, delivery and performance of this Agreement by Seller
and the consummation by Seller of the transactions contemplated hereby will not
(i) violate any provision of the Certificate of Incorporation or By-Laws of
Seller; (ii) except as set forth on the Seller Disclosure Schedule, violate,
conflict with or result in the breach of any of the terms or conditions of,
result in modification of, or otherwise give any other contracting party the
right to terminate, or constitute (or with notice or lapse of time or both
constitute) a default under, any material instrument, contract or other
agreement to which Seller, any of the Seller Subsidiaries or any Seller Joint
Venture is a party or to which any of them or any of their assets or properties
is bound or subject; (iii) violate any law, ordinance or regulation or any
order, judgment, injunction, decree or other requirement of any court,
arbitrator or governmental or regulatory body applicable to Seller or the Seller
Subsidiaries or by which any of Seller's or the Seller Subsidiaries' assets or
properties is bound; (iv) violate any Permit; (v) require any filing with,
notice to, or permit, consent or approval of, any governmental or regulatory
body or (vi) result in the creation of any lien or other encumbrance on the
assets or properties of Seller, a Seller Subsidiary or a Seller Joint Venture,
excluding from the foregoing clauses (ii), (iii), (iv), (v) and (vi) violations,
breaches and defaults which, and filings, notices, permits, consents and
approvals the absence of which, in the aggregate, could not reasonably be
expected to have a material adverse effect on the ability of Seller to
consummate the transactions contemplated hereby or a Seller Material Adverse
Effect.
2.13 ACTIONS AND PROCEEDINGS. There are no outstanding orders, judgments,
injunctions, decrees or other requirements of any court, arbitrator or
governmental or regulatory body against Seller, any Seller Subsidiary or any of
their assets or properties. Except as set forth in the Seller Disclosure
Schedule, there are no actions, suits or claims or legal, administrative or
arbitration proceedings pending or, to the best knowledge of Seller, threatened
against Seller, any Seller Subsidiary, any Seller Joint Venture or any of their
securities, assets or properties that individually or in the aggregate could
reasonably be expected to have a material adverse effect upon the transactions
contemplated hereby or a Seller Material Adverse Effect. To the best knowledge
of Seller, there is no fact, event or circumstance now in existence that
reasonably could be expected to give rise to any action, suit, claim, proceeding
or investigation that individually or in the aggregate could be reasonably
expected to have a material adverse effect upon the transactions contemplated
hereby or upon the Business of Seller.
2.14 CONTRACTS AND OTHER AGREEMENTS. Neither Seller nor any Seller
Subsidiary is a party to or bound by, and neither they nor their properties are
subject to, any contract or other agreement required to be disclosed in a Form
10-K or Form 10-Q of the SEC which is not disclosed in the Seller 10-K or the
Seller 10-Qs. All of such contracts and other agreements and each of the
contracts set forth on the Seller Disclosure Schedule are valid, subsisting, in
full force and effect, binding upon Seller, and to the best knowledge of Seller,
binding upon the other parties thereto in accordance with their terms, and
Seller and the Seller Subsidiaries have paid in full or accrued all amounts now
due from them thereunder and have satisfied in full or provided for all of their
liabilities and obligations thereunder which are presently required to be
satisfied or provided for and are not in default under any of them, nor, to the
best knowledge of Seller, is any other party to any such contract or other
agreement in default thereunder, nor does any condition exist that with notice
or lapse of time or both would constitute a default thereunder.
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The Seller Disclosure Schedule sets forth a list of the following contracts
and other material agreements to which Seller or any Seller Subsidiary is a
party or by or to which they or their assets or properties are bound or subject:
(a) any agreement (i) involving research, development or licenses or (ii)
that individually requires aggregate expenditures by Seller and/or any Seller
Subsidiary in any one year of more than $25,000;
(b) any indenture, trust agreement, loan agreement or note that involves or
evidences outstanding indebtedness, obligations or liabilities for borrowed
money in excess of $25,000;
(c) any lease, sublease, installment purchase or similar arrangement for the
purchase, use or occupancy of real or personal property (i) that individually
requires aggregate expenditures by Seller and/or any Seller Subsidiary in any
one year of more than $25,000 or (ii) pursuant to which Seller or any Subsidiary
is the lessor of any real property which has rentals over $25,000 per year,
together with the date of termination of such leases, the name of the other
party and the annual rental payments required to be made under such leases;
(d) any agreement of surety, guarantee or indemnification, other than (i) an
agreement in the ordinary course of business with respect to obligations in an
amount not in excess of $25,000 or (ii) indemnification provisions contained in
leases not otherwise required to be disclosed;
(e) (i) any agreement, including without limitation employment agreements
and bonus plans, relating to the compensation of (A) officers, (B) employees
earning more than $50,000 year, (C) former employees or (D) consultants and (ii)
any agreements, contracts or commitments with any such individuals which contain
change of control of severance obligations;
(f) any agreement containing covenants of Seller or a Seller Subsidiary not
to compete in any line of business, in any geographic area or with any person or
covenants of any other person not to compete with Seller or a Seller Subsidiary
or in any line of business of Seller or a Seller Subsidiary;
(g) any agreement granting or restricting the right of Seller or any Seller
Subsidiary to use a trade name, trade mark, logo or Proprietary Rights (as
defined in Section 2.17 hereof);
(h) any agreement with any customer or supplier that cannot be terminated
without penalty in excess of $25,000 by Seller or any Subsidiary within one
year; and
(i) any agreement with a change of control provision or with restrictions or
limitations on, or consent requirements with respect to, assignments.
True and complete copies of all of the contracts and other agreements set forth
on the Disclosure Schedule have been previously provided to Parent.
2.15 BANK ACCOUNTS, BROKERAGE ACCOUNTS AND POWERS OF ATTORNEY. The Seller
Disclosure Schedule identifies all bank accounts or brokerage accounts used in
connection with the operations of Seller and the Seller Subsidiaries, whether or
not such accounts are held in the name of Seller, lists the respective
signatories therefore and lists the names of all persons holding a power of
attorney from Seller or a Seller Subsidiary and a summary of the terms thereof.
2.16 PROPERTIES. Seller and the Seller Subsidiaries own no real property.
Seller or a Seller Subsidiary owns or has a valid leasehold interest in all of
the buildings, structures, leasehold improvements, equipment and other tangible
property material to the Business of Seller, all of which are in good and
sufficient operating condition and repair, ordinary wear and tear excepted, for
the conduct of their business in accordance with past practices and neither
Seller nor any Seller Subsidiary has received notice that any of such property
is in violation of any existing law or any building, zoning, health, safety or
other ordinance, code or regulation except for such violations which,
individually or in the aggregate, could not reasonably be expected to have a
Seller Material Adverse Affect.
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2.17 INTELLECTUAL PROPERTY. Seller, the Seller Subsidiaries and the Seller
Joint Ventures own, or are licensed to use, or otherwise have the right to use
all patents, trademarks, service marks, trade names, trade secrets, franchises,
inventions and copyrights, all information regarding the registration of any of
the foregoing, or applications therefor, and all grants and licenses or other
rights running to or from Seller or a Seller Subsidiary or a Seller Joint
Venture relating to any of the foregoing, that are material to the Business of
Seller (collectively, the "Proprietary Rights"). A list of all such registered
copyrights, trademarks, tradenames, patents and patent applications has been
previously delivered to Parent and is included on the Seller Disclosure
Schedule. All patents, registered trademarks and copyrights set forth on the
list referred to above are valid and subsisting and all "taxes" or "annuities"
with respect thereto have been paid. Seller is not aware of any claim by any
third party that the Business of Seller as currently conducted or proposed to be
conducted infringe upon the proprietary rights of others, nor has Seller or the
Seller Subsidiaries received any notice or claim of infringement from any third
party of such infringement by Seller or any Seller Subsidiary. Seller is not
aware of any infringement by any third party on, or any competing claim of right
to use or own any of, the Proprietary Rights of Seller, the Seller Subsidiaries
and the Seller Joint Venture. Seller, the Seller Subsidiaries and the Seller
Joint Venture have the right to use, free and clear of claims or rights of
others, all customer lists and computer software material to their business as
presently conducted. Except as disclosed on the Seller Disclosure Schedule,
Seller, the Seller Subsidiaries and the Seller Joint Venture have the
unencumbered right to sell their products and services (whether now offered for
sale or under development) free from any royalty or other obligations to third
parties. To the best knowledge of Seller, none of the activities of the
employees of Seller on behalf of Seller violates any agreement or arrangement
which any such employees have with former employers.
2.18 COMMERCIAL RELATIONSHIPS. The relationships of Seller, the Seller
Subsidiaries and the Seller Joint Ventures with their collaborators and contract
manufacturers are generally good commercial working relationships. Except as set
forth on the Seller Disclosure Schedule, no such entity has canceled or
otherwise terminated its relationship with Seller, a Seller Subsidiary or a
Seller Joint Venture or has, during the last twelve months, materially altered
its relationship with Seller, a Seller Subsidiary or a Seller Joint Venture.
Except as set forth on the Seller Disclosure Schedule, Seller does not know of
any plan or intention of any such entity, and has not received any written
threat or notice from any such entity, to terminate, cancel or otherwise
materially and adversely modify its relationship with Seller, a Seller
Subsidiary or a Seller Joint Venture.
2.19 EMPLOYEE BENEFIT PLANS
(a) The Seller Disclosure Schedule sets forth a complete list of all
pension, savings, profit sharing, retirement, deferred compensation, employment,
welfare, fringe benefit, insurance, short and long term disability, incentive,
bonus, stock, vacation pay, severance pay and similar plans, programs or
arrangements, including without limitation all employee benefit plans as defined
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (the "Plans") maintained by Seller or the Seller Subsidiaries
or to which the Seller or any of the Seller Subsidiaries are parties or required
to contribute.
(b) Seller has delivered or made available to Parent current, accurate and
complete copies of (i) each Plan that has been reduced to writing and all
amendments thereto, (ii) a summary of the material terms of each Plan that has
not been reduced to writing, including all amendments thereto, (iii) the summary
plan description for each Plan subject to Title I of ERISA, and in the case of
each other Plan, any similar employee summary (including but not limited to any
employee handbook description), (iv) for each Plan intended to be qualified
under Section 401(a) or Section 501(c)(9) of the Code, the most recent
determination letter or exemption determination issued by the Internal Revenue
Service ("IRS"), (v) for each Plan with respect to which a Form 5500 series
annual report/ return is required to be filed, the most recently filed such
annual report/return and annual report/ return for the two preceding years,
together with all schedules and exhibits, (vi) all insurance contracts,
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administrative services contracts, trust agreements, investment management
agreements or similar agreements maintained in connections with any Plan, (vii)
copies of any correspondence from the IRS, Department of Labor ("DOL") or other
U.S. government agency or department relating to an audit or an asserted or
assessed penalty with respect to a Plan or relating to requested relief from any
liability or penalty (including, but not limited to, any correspondence relating
to the IRS's EPCRS, VCR or CAP programs or the DOL's amnesty programs for later
filers and non-filers), (viii) for each Plan that is a defined benefit pension
plan, copies of the most recent actuarial valuation report and actuarial
valuation report for the two preceding years, (ix) for each Plan that is
intended to be qualified under Code Section 401(a), copies of compliance testing
results (nondiscrimination testing (401(a)(4), ADP, ACP, multiple use), 402(g),
415 and top-heavy tests) for the most recent plan year and two preceding plan
years, and (x) copies of COBRA and HIPPA forms and notices used for each Plan
that is a group health plan. No employee benefit handbook or similar employee
communication relating to any Plan nor any written communication of benefits
under such Plan described the Plan in a manner materially inconsistent with the
documents and summary plan descriptions relating to such Plan that have been
delivered pursuant to the following sentence.
(c) There is no entity (other than the Seller or any Seller Subsidiary) that
together with the Seller or any Seller Subsidiary would be treated as a
single-employer within the meaning of Section 414(b), (c), (m) or (o) of the
Code or Section 4001(b) of ERISA. Neither the Seller nor any Seller Subsidiary
has ever maintained, contributed to or incurred any liability under any
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA or a "multiple
employer plan" as defined in Section 413(c) of the Code. Neither Seller nor any
Seller Subsidiary has incurred any liability under Sections 4062, 4063 or 4201
of ERISA.
(d) Each Plan maintained by Seller or a Seller Subsidiary which is intended
to be qualified under either Section 401(a) or 501(c)(9) of the Code ("Qualified
Plans") is so qualified. Each Plan has been administered in all material
respects in accordance with the terms of such Plan and the provisions of any and
all statutes, orders or governmental rules or regulations, including without
limitation ERISA and the Code, and to the knowledge of Seller, nothing has been
done or not done with respect to any Plan that could result in any liability on
the part of the Seller or any Seller Subsidiary under Title I of ERISA or
Chapter 43 of the Code. All reports, forms and notices required to be filed with
respect to each Plan, including without limitation Form 5500 series annual
reports/returns and PBGC Form 1s, have been timely filed. All contributions,
premiums and other amount due to or in connection with each Plan under the terms
of the Plan or applicable law have been timely made.
(e) No "reportable event" as defined at Section 4043 of ERISA has occurred
with respect to any Plan subject to Title IV of ERISA. With respect to each Plan
subject to Title IV of ERISA, such Plan has no unfunded benefit liabilities and
such Plan could be terminated in a "standard termination" under Section 4041(b)
of ERISA on or before the Effective Time without any additional contribution
from any contributing employer (but disregarding any other prerequisites for
terminating such Plan). With respect to each Plan subject to Section 412 of the
Code, there is no accumulated funding deficiency (whether or not waived) under
such Plan.
(f) All claims for benefits incurred by employees on or before the Closing
Date are or will be fully covered by third-party insurance policies or programs.
Except for continuation of health coverage to the extent required under Section
4980B of the Code or Section 601 et seq. of ERISA, other applicable law or as
otherwise set forth in this Agreement, there are no obligations under any Plan
providing benefits after termination of employment.
(g) Neither the Seller nor any Seller Subsidiary has contracted with any
"leased employee" within the meaning of Section 414 of the Code or any
"independent contractor".
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(h) Except for individual employment agreements, each Plan can be amended,
modified or terminated without advanced notice to or consent by any employee,
former employee or beneficiary, except as required by law.
2.20 EMPLOYEE MATTERS
(a) Seller and the Seller Subsidiaries, collectively, have approximately 48
full-time equivalent employees as of November 10, 1998 and generally enjoy good
employer-employee relations. Neither Seller nor any Seller Subsidiary is
delinquent in payments to any of its employees or consultants for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed by them to the date hereof or amounts required to be reimbursed to
such employees. Except as indicated in the Seller Disclosure Schedule, upon
termination of the employment of any employees, none of Seller, the Seller
Subsidiaries nor Parent will by reason of the Merger or anything done prior to
the Effective Time be liable to any of such employees for severance pay or any
other payments (other than accrued salary, vacation or sick pay in accordance
with normal policies). True and complete information as to all current
directors, officers, employees or consultants of Seller and the Seller
Subsidiaries including, in each case, name, current job title and annual rate of
compensation has been previously made available to Parent.
(b) Seller and each Seller Subsidiary (i) is in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to employees, (ii)
has withheld all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to employees, (iii) is not liable for any
arrears of wages or any taxes or any penalty for failure to comply with any of
the foregoing, and (iv) is not liable for any payment to any trust or other fund
or to any governmental entity, with respect to unemployment compensation
benefits, social security or other benefits or obligations for employees (other
than routine payments to be made in the normal course of business and consistent
with past practice).
(c) No work stoppage or labor strike against Seller or any Seller Subsidiary
is pending or threatened. Neither Seller nor any Seller Subsidiary is involved
in or, to the knowledge of the Seller, threatened with, any labor dispute,
grievance, or litigation relating to labor, safety or discrimination matters
involving any employee, including without limitation charges of unfair labor
practices or discrimination complaints, that, if adversely determined, would
result in material liability to Seller. Neither Seller nor any Seller Subsidiary
has engaged in any unfair labor practices within the meaning of the National
Labor Relations Act that would, directly or indirectly result in material
liability to Seller. Neither Seller nor any Seller Subsidiary is presently, nor
has it been in the past, a party to or bound by any collective bargaining
agreement or union contract with respect to employees other than as set forth in
the Seller Disclosure Schedule and no collective bargaining agreement is being
negotiated by the Seller or any Seller Subsidiary. No union organizing campaign
or activity with respect to non-union employees of the Seller or any Seller
Subsidiary is ongoing, pending or, to the knowledge of the Seller, threatened.
2.21 TRANSACTIONS WITH MANAGEMENT. No executive officer or director of
Seller has (whether directly or indirectly through another entity in which such
person has a material interest, other than as the holder of less than 2% of a
class of securities of a publicly traded company) any material interest in (a)
any property or assets of Seller (except as a stockholder), (b) any current
competitor, customer, supplier or agent of Seller or a Seller Subsidiary or (c)
any person which is currently a party to any material contract or agreement with
Seller or a Seller Subsidiary.
2.22 INSURANCE. The Seller Disclosure Schedule sets forth a list of all
policies or binders of fire, liability, product liability, workmen's
compensation, vehicular, directors' and officers' and other insurance held by or
on behalf of Seller and the Seller Subsidiaries. Such policies and binders are
in full force and effect, are reasonably believed to be adequate for the
businesses engaged in by Seller and
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the Seller Subsidiaries and are in conformity with the requirements of all
leases or other agreements to which Seller or the relevant Seller Subsidiary is
a party and, to the best knowledge of Seller, are valid and enforceable in
accordance with their terms. Neither Seller nor any Seller Subsidiary is in
default with respect to any provision contained in any such policy or binder nor
has any of the Seller or a Seller Subsidiary failed to give any notice or
present any claim under any such policy or binder in due and timely fashion.
There are no outstanding unpaid claims under any such policy or binder. Neither
Seller nor any Seller Subsidiary has received notice of cancellation or
non-renewal of any such policy or binder.
2.23 ANTI-TAKEOVER LAWS. Seller has taken all action necessary such that
no "fair price," "business combination," "control share acquisition" or similar
statute will be applicable to the transactions contemplated by this Agreement.
2.24 BROKERAGE. Except as indicated on the Seller Disclosure Schedule, no
broker, finder, agent or similar intermediary has acted on behalf of Seller in
connection with this Agreement or the transactions contemplated hereby, and
there are no brokerage commissions, finders' fees or similar fees or commissions
payable in connection herewith based on any agreement, arrangement or
understanding with Seller, or any action taken by Seller.
2.25 ENVIRONMENTAL MATTERS
(a) Neither Seller nor any of the Seller Subsidiaries has violated or is in
violation of Environmental Law, and except as authorized by Environmental Laws,
neither Seller nor any of the Seller Subsidiaries has generated, used, handled,
transported or stored any Hazardous Materials. There has been no generation,
use, handling, storage or disposal of any Hazardous Materials in violation of
any Environmental Law at any site owned or premises leased by Seller or any of
the Seller Subsidiaries during the period of Seller's or such Seller
Subsidiary's ownership or lease or, to the best of Seller's knowledge, prior
thereto, nor has there been or is there threatened any release of any
Environmental Contaminants into, on, at or from any such site or premises,
including without limitation into the ambient air, groundwater, surface water,
soils or subsurface strata, during such period or, to the best of Seller's
knowledge, prior thereto in violation of any Environmental Law or which created
or will create an obligation to report or remediate such release. There is no
underground storage tank or other container at any site owned or premises leased
by Seller or Seller Subsidiary or to the best of Seller's knowledge on any site
formerly owned or premises formerly leased by Seller.
(b) Neither Seller nor any Subsidiary has received written notification
that, and Seller has no knowledge that, any site currently or formerly owned or
premises currently or formerly leased by Seller or any of Seller Subsidiary is
the subject of any federal, state or local civil, criminal or administrative
investigation evaluating whether, or alleging that, any remedial action is
necessary to respond to a release or a threatened release of any Environmental
Contaminant into the environment. No such site or premises is listed, or to
Seller's knowledge, proposed for listing, on the National Priorities List or the
Comprehensive Environmental Response, Compensation, and Liability Information
System, both as provided under the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), or any comparable state or local
governmental lists. Neither Seller nor any Seller Subsidiary has received
written notification of, and Seller has no knowledge of, any potential
responsibility of Seller or any Seller Subsidiary pursuant to the provisions of
(i) Section 104(e) of CERCLA (ii) any similar Environmental Law, or (iii) any
order issued pursuant to the provisions of any such Environmental Law with
respect to Environmental Contaminants used, manufactured, generated, stored, or
treated at, transported from, or disposed of on, any site currently or formerly
owned or premises currently or formerly leased by Seller or any Seller
Subsidiary.
(c) Seller and the Seller Subsidiaries have obtained all permits required by
Environmental Law necessary to enable it to conduct its respective business and
is in compliance with all material aspects of said permits.
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(d) There is no environmental or health and safety matter that reasonably
could be expected to have a Seller Material Adverse Effect. Seller has
previously furnished to Parent copies of any and all environmental audits or
risk assessments, site assessments, documentation regarding off-site disposal of
Hazardous Materials or Release of Environmental Contaminant, spill control plans
and material correspondence with any governmental agency or other entity
regarding the foregoing.
(e) For purposes of this Agreement:
(i) "Environmental Laws" means any Federal, state, local or foreign laws
(including common law), regulations, codes, rules, orders, ordinances,
permits, requirements and final governmental determinations pertaining to
the environment, pollution or protection of human health or the environment,
as adopted or in effect in the jurisdictions in which the applicable site or
premises are located, including without limitation, the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. Section
9601 et seq.; the Emergency Planning and Community Right-to-Know Act, 42
U.S.C. Section 11001 et seq.; the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq.; the Federal Water Pollution Control Act, 33
U.S.C. Section 1251 et seq.; the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. Section 136 et seq.; the Toxic Substance Control
Act, 15 U.S.C. Section 2601 et seq.; the Oil Pollution Act of 1990, 33
U.S.C. Section 1001 et seq.; the Hazardous Materials Transportation Act, as
amended, 49 U.S.C. Section 1801 et seq.; the Atomic Energy Act, as amended
42 U.S.C. Section 2011 et seq.; the Occupational Safety and Health Act, as
amended, 29 U.S.C. Section 651 et seq.; the Federal Food, Drug and Cosmetic
Act, as amended 21 U.S.C. Section 301 et seq. (insofar as it regulates
employee exposure to Hazardous Substances), and any state or local statute
of similar effect, including Mass. Gen. L. C. 21E and the Massachusetts
Contingency Plan, 310 C.M.R. 40.000 et seq.; and any laws relating to
protection of safety, health or the environment which regulate the use of
biological agents or substances including medical or infectious wastes as
any such laws have been amended;
(ii) "Environmental Contaminant" means Hazardous Materials, or any other
pollutants, contaminants, toxic or constituent substances or waste
radioactive substances, materials or special wastes, petroleum or petroleum
products, polychlorinated byphenals, asbestos containing materials, or any
other substance or material, in each case regulated by applicable
Environmental Laws;
(iii) "Hazardous Materials"(A) any chemicals, materials or substances
defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants,"
"hazardous air pollutants," "contaminants," "toxic chemicals," "toxics,"
"hazardous chemicals," "extremely hazardous substances," "pesticides," "oil"
or related materials as defined in any applicable Environmental Law or (B)
any petroleum or petroleum products, oil, natural or synthetic gas,
radioactive materials, asbestos-containing materials, urea formaldehyde foam
insulation, and radon; and
(iv) "Release" has the meaning specified in CERCLA.
2.26 PROXY STATEMENT AND REGISTRATION STATEMENT
(a) None of the information supplied or to be supplied by Seller for
inclusion or incorporation by reference in the registration statement on Form
F-4 to be filed with the SEC in connection with the issuance of shares of Parent
Common Stock in the Merger (the "Registration Statement") will, at the time the
Registration Statement is filed with the SEC, at any time it is amended or
supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading. None of the information supplied or to be supplied by Seller for
inclusion or incorporation by reference in the proxy statement/prospectus
included in the Registration Statement related to the Seller Stockholder Meeting
(as defined in Section 5.6(b)) (the "Proxy Statement/
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Prospectus"), on the date it is first mailed to holders of Seller Common Stock
or at the time of the Seller Stockholder Meeting, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Seller will
use its best efforts to ensure that the Proxy Statement/Prospectus will comply
as to form in all material respects with the requirements of the Exchange Act
and the Securities Act and the rules and regulations of the SEC thereunder.
(b) None of the information supplied or to be supplied by Seller for
inclusion in the Super Class 1 Shareholder Circular (comprising listing
particulars under Part IV of the Financial Services Act of 1986 of the United
Kingdom, as amended (the "FSA")) (the "Parent Disclosure Document") will, on the
date the Parent Disclosure Document is first mailed to shareholders of Parent
and at the time of the extraordinary general meeting of Parent shareholders (the
"Parent Shareholder Meeting") to vote on approval of the Merger, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
2.27 PMC WAIVER. Pasteur Merieux Connaught ("PMC") has agreed that
consummation of the Merger will not constitute a "Change in Control" of Seller
as defined in Section 15.2 of the Master Agreement between the Seller and PMC
dated as of March 31, 1995.
2.28 FAIRNESS OPINION. Seller has received an opinion from Hambrecht &
Quist, dated as of the date hereof, to the effect that as of the date hereof,
the consideration to be received by Seller's stockholders in the Merger is fair
from a financial point of view and will deliver to Parent a copy of such written
opinion.
SECTION 3--REPRESENTATIONS AND WARRANTIES OF PARENT
Except as set forth on the disclosure schedule delivered to Seller on the
date hereof (the "Parent Disclosure Schedule"), the section numbers of which are
numbered to correspond to the section numbers of this Agreement to which they
refer, Parent hereby makes the following representations and warranties:
3.1 ORGANIZATION. Parent is a public limited company duly incorporated and
validly existing under the laws of England and Wales. Each of the Parent
Subsidiaries (as defined below) is a corporation duly organized, validly
existing and in good standing (where such concept is recognized) under the laws
of its jurisdiction of incorporation. Each of Parent and its Subsidiaries has
full corporate power and authority to own, lease and operate its assets and to
carry on its business as now being and as heretofore conducted. As used in this
Agreement, "Parent Subsidiary" means any corporation or other legal entity of
which Parent or any Parent Subsidiary owns, directly or indirectly, 50% or more
of the stock or other equity interest entitled to vote for the election of
directors.
3.2 AUTHORITY TO EXECUTE AND PERFORM AGREEMENT. Parent has the corporate
power and authority to enter into, execute and deliver this Agreement and,
subject to obtaining necessary approvals of its shareholders, to perform fully
its obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent, subject to the approval
of the shareholders of Parent of the Merger and this Agreement and the creation
and issue of a sufficient amount of authorized ordinary share capital of Parent,
and the granting of authority pursuant to Section 80 Companies Act 1985. This
Agreement has been duly executed and delivered by Parent and constitutes its
valid and binding obligation, enforceable in accordance with its terms.
3.3 LSE REPORTS. Since December 31, 1997, Parent has filed in a timely
manner with the LSE all documents and announcements required to be filed by it
pursuant to the rules of the LSE and such documents and announcements complied
in all material respects with applicable LSE requirements and
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did not contain any 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. Between the date of this Agreement and the Closing Date, Parent will
file in a timely manner all documents and announcements required to be filed by
it pursuant to the rules of the LSE in relation to the Merger and such documents
and announcements will comply in all material respects with applicable LSE
requirements.
3.4 CAPITALIZATION. The authorized capital of Parent is 43,200,000 shares
of Parent Common Stock, of which 36,465,804 shares were issued and outstanding
as of November 10, 1998. The shares of Parent Common Stock which comprise the
Common Stock Consideration will, when issued in accordance with the terms of
this Agreement, be duly and validly issued fully paid and non-assessable.
3.5 FINANCIAL STATEMENTS. The consolidated audited accounts of Parent for
the financial year of Parent ended December 31, 1997 (a) show a true and fair
view of the assets, liabilities and state of affairs of Parent as at December
31, 1997 and of the loss of Parent for the financial year covered by those
accounts; and (b) were prepared in accordance with the Companies Act 1985 and,
save as otherwise noted or disclosed therein, all applicable United Kingdom
generally accepted accounting principles applied on a consistent basis.
3.6 ABSENCE OF UNDISCLOSED PARENT LIABILITIES. As at December 31, 1997,
Parent had no material liabilities of any nature, whether accrued, absolute,
contingent or otherwise (including, without limitation, liabilities as guarantor
or otherwise with respect to obligations of others or liabilities for taxes due
or then accrued or to become due), required to be reflected or disclosed in the
balance sheet dated December 31, 1997 (or the notes thereto) that were not
adequately reflected or reserved against on such balance sheet. Parent has no
such liabilities, other than liabilities (i) adequately reflected or reserved
against on such balance sheet, (ii) reflected in Parent's unaudited consolidated
balance sheet (or the notes thereto) dated June 30, 1998, (iii) incurred since
June 30, 1998 in the ordinary course of business or (iv) that would not, in the
aggregate, have a material adverse effect on the assets, properties, business,
results of operations or financial condition of Parent and the Parent
Subsidiaries taken as a whole (but excluding (A) any change, effect, condition,
event or circumstance arising out of or attributable to (i) changes, effects,
conditions, events or circumstances that generally affect the industries in
which Parent or the Parent Subsidiary operate (including legal and regulatory
changes) or (ii) changes arising from the consummation of the transactions
contemplated hereby or the announcement of the execution of this agreement or
(B) any adverse changes in the market price of the Parent Common Stock) (a
"Parent Material Adverse Effect").
3.7 NO MATERIAL ADVERSE CHANGE. Since June 30, 1998, there has not been
any Parent Material Adverse Effect.
3.8 ACTIONS AND PROCEEDINGS. There are no actions, suits or claims or
legal, administrative or arbitration proceedings pending or, to the best
knowledge of Parent, threatened against Parent or any Parent Subsidiary that
individually or in the aggregate could reasonably be expected to have a material
adverse effect upon the transactions contemplated hereby or a Parent Material
Adverse Effect. To the best knowledge of Parent, there is no fact, event or
circumstance now in existence that reasonably could be expected to give rise to
any suit, action, claim, investigation or proceeding that individually or in the
aggregate could reasonably be expected to have a material adverse effect upon
the transactions contemplated hereby or a Parent Material Adverse Effect.
3.9 NO BREACH. Except for (a) the filing of the Registration Statement
with the SEC, (b) filings with various blue sky authorities, (c) the filing of
the Certificate of Merger with the Secretary of State of Delaware, (d) the
filing of the Super Class 1 Shareholder Circular with and its approval by the
London Stock Exchange and compliance with the rules of the London Stock Exchange
and (e) the matters listed in the Parent Disclosure Schedule, the delivery and
performance of this Agreement by Parent and consummation by it of the
transactions contemplated hereby will not (i) violate any
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provision of the articles of association of Parent; (ii) violate, conflict with
or result in the breach of any of the terms or conditions of, result in
modification of the effect of, or otherwise give any other contracting party the
right to terminate, or constitute (or with notice or lapse of time or both
constitute) a default under, any material instrument, contract or other
agreement to which Parent or a Parent Subsidiary is party or to which either of
them or any of their assets or properties is bound or subject; (iii) violate any
law, ordinance or regulation or any order, judgment, injunction, decree or
requirement of any court, arbitrator or governmental or regulatory body
applicable to Parent or a Parent Subsidiary or by which any of their assets or
properties is bound; (iv) require any filing with, notice to, or permit, consent
or approval of, any governmental or regulatory body or (v) result in the
creation any lien or other encumbrance on the assets or properties of Parent or
a Party Subsidiary, excluding from the foregoing clauses (ii), (iii), (iv) and
(v) violations, breaches and defaults which, and filings, notices, permits,
consents and approvals the absence of which, in the aggregate, would not have a
material adverse effect on the ability of Parent to consummate the transactions
contemplated hereby or a Parent Material Adverse Effect.
3.10 PROXY STATEMENT AND REGISTRATION STATEMENT. None of the information
supplied or to be supplied by Parent for inclusion in the Registration Statement
will, at the time the Registration Statement is filed with the SEC, at any time
it is amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by Parent for inclusion or incorporation by reference in the Proxy
Statement/Prospectus will, at the date it is first mailed to holders of Seller
Common Stock or at the time of the Seller Stockholder Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
3.11 BROKERAGE. Except as indicated on the Parent Disclosure Schedule, no
broker, finder, agent or similar intermediary has acted on behalf of Parent or
Merger Sub in connection with this Agreement or the transactions contemplated
hereby, and there are no brokerage commissions, finders' fees or commissions
payable in connection herewith based on any agreement, arrangement or
understanding with Parent or Merger Sub, or any action taken by them.
SECTION 4--REPRESENTATIONS AND WARRANTIES REGARDING MERGER SUB
Parent and Merger Sub hereby make the following representations and
warranties:
4.1 ORGANIZATION AND CORPORATE POWER. Merger Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware.
4.2 CORPORATE AUTHORIZATION. Merger Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by the Merger Sub
of this Agreement and the consummation by Merger Sub of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Merger Sub, enforceable against it in accordance with its terms.
4.3 NON-CONTRAVENTION. The execution, delivery and performance by Merger
Sub of this Agreement and the consummation by Merger Sub of the transactions
contemplated hereby do not and will not contravene or conflict with the
Certificate of Incorporation or By-Laws of Merger Sub.
4.4 NO BUSINESS ACTIVITIES. Merger Sub was formed specifically for the
purpose of consummating the transactions contemplated by this Agreement and has
not conducted and will not conduct any business activities unrelated to the
transactions contemplated hereby.
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SECTION 5--COVENANTS AND AGREEMENTS
The parties covenant and agree as follows:
5.1 CONDUCT OF BUSINESS. Except with the prior written consent of Parent,
which will not be unreasonably withheld, or as set forth in Section 5 of the
Seller Disclosure Schedule, and except as otherwise contemplated herein, during
the period from the date hereof to the Closing Date, Seller shall observe the
following covenants:
(a) AFFIRMATIVE COVENANTS PENDING CLOSING. Seller shall:
(i) PRESERVATION OF PERSONNEL. Use reasonable commercial efforts to
preserve intact and keep available the services of Seller's present
employees;
(ii) INSURANCE. Use reasonable commercial efforts to keep in effect
casualty, public liability, worker's compensation and other insurance
policies in coverage amounts not less than those in effect at the date of
this Agreement;
(iii) PRESERVATION OF THE BUSINESS; MAINTENANCE OF PROPERTIES, CONTRACTS.
Use reasonable commercial efforts to preserve the Business of Seller,
advertise, promote and market Seller's business activities in accordance
with past practices over the last twelve months, keep Seller's properties
intact, preserve Seller's goodwill and Seller's business, maintain all
physical properties in such operating condition as will permit the conduct
of Seller's business on a basis consistent with past practice, and perform
and comply in all material respects with the terms of the contracts set
forth in the Seller Disclosure Schedule;
(iv) INTELLECTUAL PROPERTY RIGHTS. Use best efforts to preserve and
protect the Proprietary Rights;
(v) ORDINARY COURSE OF BUSINESS. Operate Seller's business solely in the
ordinary course consistent with past practices;
(vi) SELLER OPTIONS AND WARRANTS. Take all actions necessary with
respect to Seller Options and Seller Warrants to effectuate the terms of
this Agreement, provided, however, Parent shall have the right to approve
any agreements to modify terms of the underlying instruments.
(b) NEGATIVE COVENANTS PENDING CLOSING. Seller shall not without the prior
consent of Parent:
(i) BENEFIT PLANS. Establish, amend, modify or terminate any Plan
(as defined in Section 2.19(a)), except as required by law, without the
written consent of Parent;
(ii) DISPOSITION OF ASSETS. Sell or transfer, or mortgage, pledge
or create or permit to be created any security interest on, any of its
assets, including its Proprietary Rights, other than sales or transfers
in the ordinary course of business and in amounts not exceeding $10,000
or the creation of security interests under existing arrangements
disclosed in the Seller Disclosure Schedule;
(iii) LIABILITIES. Incur any indebtedness for borrowed money,
obligation or liability or enter into any contracts or commitments
involving potential payments to or by Seller or Seller Subsidiaries of
$25,000 or more;
(iv) COMPENSATION. Change the compensation payable to any officer,
director, employee, agent or consultant, or enter into any employment,
severance or other agreement with any officer, director, employee, agent
or consultant of Seller or a Seller Subsidiary;
(v) CAPITAL STOCK. Make any change in the number of shares of its
capital stock authorized, issued or outstanding or grant or accelerate
the exercisability of, any option, warrant or other right to purchase, or
to convert any obligation into, shares of its capital stock, or declare
or pay any dividend or other distribution with respect to any shares of
its
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capital stock, or sell or transfer any shares of its capital stock,
except upon the exercise by officers, directors and employees of options
outstanding on the date hereof and disclosed herein;
(vi) CHARTER AND BY-LAWS. Amend the Certificate of Incorporation or
By-laws of Seller;
(vii) ACQUISITIONS. Make, or permit to be made, any material
acquisition of property or assets;
(viii) TAXES. Make or change any material election in respect of
Taxes, adopt or change any accounting method in respect to Taxes, enter
into any closing agreement, settle any claim or assessment in respect to
Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect to Taxes; or
(ix) AGREEMENTS. Enter into or modify, or permit a Seller
Subsidiary to enter into or modify, any material license, development,
research or collaborative agreement with any other person or entity.
5.2 CORPORATE EXAMINATIONS AND INVESTIGATIONS. Prior to the Effective
Time, Parent shall be entitled, through its employees and representatives, to
have such access to the assets, properties, business and operations of Seller,
as is reasonably necessary or appropriate in connection with Parent's
investigation of Seller with respect to the transactions contemplated hereby.
Any such investigation and examination shall be conducted at reasonable times
and under reasonable circumstances so as to minimize any disruption to or
impairment of Seller's business and Seller shall cooperate fully therein. No
investigation by Parent shall diminish or obviate any of the representations,
warranties, covenants or agreements of Seller contained in this Agreement. In
order that Parent may have full opportunity to make such investigation, Seller
shall furnish the representatives of Parent during such period with all such
information and copies of such documents concerning the affairs of Seller as
such representatives may reasonably request and cause its officers, employees,
consultants, agents, accountants and attorneys to cooperate fully with such
representatives in connection with such investigation.
5.3 EXPENSES. Subject to Section 9, Seller and Parent shall bear their
respective expenses incurred in connection with the preparation, execution and
performance of this Agreement and the transactions contemplated hereby,
including without limitation, all fees and expenses of agents, representatives,
counsel and accountants.
5.4 AUTHORIZATION FROM OTHERS. Prior to the Closing Date, the parties
shall use their reasonable commercial efforts to obtain all authorizations,
consents and Permits of others, required to permit the consummation of the
transactions contemplated by this Agreement.
5.5 FURTHER ASSURANCES. Each of the parties shall execute such documents,
further instruments of transfer and assignment and other papers and take such
further actions as may be reasonably required or desirable to carry out the
provisions hereof and the transactions contemplated hereby. Each party shall use
its respective reasonable commercial efforts to take other such actions to
ensure that to the extent within its control or capable of influence by it that
the transactions contemplated by this Agreement shall be fully carried out in a
timely fashion.
5.6 PREPARATION OF DISCLOSURE DOCUMENTS
(a) As soon as practicable following the date of this Agreement, Seller and
Parent shall prepare the Proxy Statement/Prospectus. Seller shall, in
cooperation with Parent, file the Proxy Statement/ Prospectus with the SEC as
its preliminary proxy statement and Parent shall, in cooperation with Seller,
prepare and file with the SEC the Registration Statement, in which the Proxy
Statement/Prospectus will be included. Each of Seller and Parent shall use
reasonable commercial efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such filing
and to keep the Registration Statement effective as long as is necessary to
consummate the Merger. Seller
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shall mail the Proxy Statement/Prospectus to its stockholders as promptly as
practicable after the Registration Statement is declared effective under the
Securities Act and, if necessary, after the Proxy Statement/Prospectus shall
have been so mailed, promptly circulate supplemental or amended proxy material,
and, if required in connection therewith, resolicit proxies. Parent shall also
take any action (other than qualifying to do business in any jurisdiction in
which Parent is not now so qualified) required to be taken under any applicable
United States state securities laws in connection with the issuance of shares of
Parent Common Stock in connection with the Merger, and Seller shall furnish all
information concerning Seller and the holders of Seller Common Stock as may be
reasonably requested in connection with any such action.
(b) (i) Seller shall, as soon as practicable following the date of this
Agreement and the effectiveness of the Registration Statement, duly call, give
notice of, convene and hold a meeting of its stockholders (the "Seller
Stockholders Meeting") for the purpose of obtaining the required stockholder
votes with respect to this Agreement, (ii) the Board of Directors of Seller,
unless otherwise required pursuant to the applicable fiduciary duties of the
Board of Directors of Seller to the stockholders of Seller (as determined in
good faith by the Board of Directors of Seller based upon the advice of outside
counsel), shall recommend adoption of this Agreement by its stockholders and
(iii) Seller shall take all lawful action to solicit such adoption.
(c) In connection with the Parent Shareholder Meeting, to the extent
required by applicable law, (i) Parent shall, as soon as practicable after the
date of this Agreement and in accordance with the listing rules of the LSE
(including making the statements contemplated by Section 6.5), prepare and
submit to the LSE for approval the Parent Disclosure Document, and shall use
reasonable commercial efforts to have such document formally cleared by the LSE
and shall thereafter publish the Parent Disclosure Document and mail the same to
its shareholders in compliance with all legal requirements applicable to the
Parent Shareholder Meeting and the listing rules of the LSE and (ii) if
necessary, after the Parent Disclosure Document has been so posted, promptly
circulate amended, supplemental or supplemented materials and, if required in
connection therewith, resolicit votes.
(d) Except as required by law, no amendment or supplement to the Proxy
Statement/Prospectus or the Registration Statement shall be made by Parent or
Seller without the approval of the other party (which shall not be unreasonably
withheld). Each party shall advise the other party, promptly after it receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop
order, of the suspension of the qualification of shares of Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or of any request by the SEC for amendment of the Proxy Statement/ Prospectus or
the Registration Statement or comments thereon and responses thereto or requests
by the SEC for additional information.
5.7 PUBLIC ANNOUNCEMENTS AND CONFIDENTIALITY. Any press release or other
information to the press or any third party with respect to this Agreement or
the transactions contemplated hereby or related to Seller by Parent (including
officers of Parent or entities controlled by Parent), or relating to Parent by
Seller (including officers of Seller or entities controlled by Seller) shall
require the prior approval of Parent and Seller, which approval shall not be
unreasonably withheld, provided that a party shall not be prevented from making
such disclosure as it shall be advised by counsel is required by law or the
rules of any stock exchange on which shares of Parent Common Stock are listed.
Each party shall keep confidential and shall not use in any manner any
information or documents obtained from the other concerning its assets,
properties, business and operations, unless readily ascertainable from public
information, already known or subsequently developed by such party
independently, received from a third party not under an obligation to keep such
information confidential or otherwise required by law. If this Agreement
terminates, all copies of any documents obtained from another party will be
returned, except that one copy thereof may be retained by counsel to the party
returning such documents in order to evidence compliance hereunder.
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5.8 AFFILIATE LETTERS. Prior to the Closing Date, Seller shall identify to
Parent all persons who, at the time of the Seller Stockholder Meeting, Seller
believes may be "affiliates" of Seller within the meaning of Rule 145 under the
Securities Act. Seller shall use its best efforts to provide Parent with such
information as Parent shall reasonably request for purposes of making its own
determination of persons who may be deemed to be affiliates of Seller. Seller
shall use its best efforts to deliver to Parent prior to the Closing Date a
letter from each of such affiliates identified by Seller and Parent in
substantially the form attached hereto as Exhibit A (the "Affiliate Letters").
5.9 STOCK EXCHANGE LISTING Parent shall, prior to posting the Parent
Disclosure Document, prepare and submit to the LSE a listing application
covering the shares of Parent Common Stock to be issued in the Merger represent
the right to receive, and shall use reasonable commercial efforts to obtain,
prior to the Effective Time, agreement by the LSE for the admission of such
shares of Parent Common Stock to the Official List of the LSE, and Seller shall
cooperate with Parent with respect to such listing.
5.10 NO SOLICITATION
(a) Seller will not, and will not permit any of its directors, officers,
employees, agents or other representatives or those of any of its Subsidiaries
to, (i) solicit, initiate or knowingly encourage discussions with any person
other than the Parent (a "Third Party"), relating to the possible acquisition of
Seller or any Seller Subsidiary or of all or a material portion of the assets or
capital stock of Seller or any Seller Subsidiary or any merger or other business
combination involving Seller or any Seller Subsidiary (an "Acquisition
Proposal") or (ii) participate in any negotiations regarding, or furnish to any
other person information with respect to, any effort or attempt by any other
person to do or to seek any Acquisition Proposal. Seller agrees to inform Parent
orally and in writing in reasonable detail (including without limitation the
applicable terms and conditions and identity of the other person) within one
business day of receipt of any offer, proposal or inquiry relating to any
Acquisition Proposal and of any modification thereof or any proposed agreement
and to promptly furnish to the Parent copies of any written communications or
documents received with respect to the foregoing.
(b) Notwithstanding the provisions of Section 5.10(a), at any time prior to
the date on which stockholders of Seller vote to approve the Merger, Seller and
its officers, directors, employees, representatives and agents may, to the
extent the Board of Directors of Seller determines, in good faith, based upon
the advice of outside counsel, that the Board's fiduciary duties under
applicable law requires it to do so, (i) furnish or cause to be furnished
information concerning the Seller's business, properties or assets to a Third
Party in connection with a Qualified Acquisition Proposal (as hereinafter
defined) (subject to such Third Party executing a confidentiality agreement with
terms at least as restrictive as the confidentiality agreement between Seller
and Parent), (ii) enter into, participate in, conduct or engage in discussions
or negotiations with such Third Party regarding such Qualified Acquisition
Proposal, or (iii) upon termination of this Agreement as permitted in Section
9.1, enter into an agreement to consummate a Qualified Acquisition Proposal. As
used herein, "Qualified Acquisition Proposal" means a bona fide, unsolicited,
written Acquisition Proposal on terms and conditions that the Board of Directors
of Seller (after consultation with financial advisors) determines to be superior
to the Merger and to be in the best interests of Seller and its stockholders, is
reasonably capable of being financed by such Third Party and is reasonably
likely to be consummated. In addition, nothing herein shall prohibit the
Seller's Board of Directors from taking a position with respect to an
Acquisition Proposal in accordance with Rules 14a-9 and 14e-2 promulgated under
the Exchange Act.
5.11 UPDATES TO PARENT DISCLOSURE SCHEDULE
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(a) Between the date hereof and the Closing Date, Parent shall promptly
notify Seller in writing of:
(i) the discovery by Parent of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes an inaccuracy in or breach of any
representation or warranty made by Parent in this Agreement;
(ii) any event, condition, fact or circumstance that occurs, arises or
exists after the date of this Agreement and that would cause or constitute
an inaccuracy in or breach of any representation or warranty made by Parent
in this Agreement; if (A) such representation or warranty had been made as
of the time of the occurrence, existence or discovery of such event,
condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
(iii) any breach of any covenant or obligation of Parent; and
(iv) any event, condition, fact or circumstance that would make the
timely satisfaction of any of the conditions to Closing impossible or
unlikely.
(b) If any event, condition, fact or circumstance that is required to be
disclosed pursuant to Section 5.11(a) requires any change in the Parent
Disclosure Schedule, or if any such event, condition, fact or circumstance would
require such a change assuming the Parent Disclosure Schedule were dated as of
the date of the occurrence, existence or discovery of such event, condition,
fact or circumstance, then Parent shall promptly deliver to Seller an update to
the Parent Disclosure Schedule specifying such change. No such update shall be
deemed to supplement or amend the Parent Disclosure Schedule for the purpose of
(i) determining the accuracy of any of the representations and warranties made
by Parent in this Agreement, or (ii) determining whether any of the conditions
set forth in Sections 6 or 8 has been satisfied.
5.12 UPDATES TO SELLER DISCLOSURE SCHEDULE
(a) Between the date hereof and the Closing Date, Seller shall promptly
notify Parent in writing of:
(i) the discovery by Seller of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes an inaccuracy in or breach of any
representation or warranty made by Seller in this Agreement;
(ii) any event, condition, fact or circumstance that occurs, arises or
exists after the date of this Agreement and that would cause or constitute
an inaccuracy in or breach of any representation or warranty made by Seller
in this Agreement; if (A) such representation or warranty had been made as
of the time of the occurrence, existence or discovery of such event,
condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
(iii) any breach of any covenant or obligation of Seller; and
(iv) any event, condition, fact or circumstance that would make the
timely satisfaction of any of the conditions to Closing impossible or
unlikely.
(b) If any event, condition, fact or circumstance that is required to be
disclosed pursuant to Section 5.12(a) requires any change in the Seller
Disclosure Schedule, or if any such event, condition, fact or circumstance would
require such a change assuming the Seller Disclosure Schedule were dated as of
the date of the occurrence, existence or discovery of such event, condition,
fact or circumstance, then Seller shall promptly deliver to the Company an
update to the Seller Disclosure Schedule specifying such change. No such update
shall be deemed to supplement or amend the Seller Disclosure Schedule for the
purpose of (i) determining the accuracy of any of the representations and
warranties
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made by Seller in this Agreement, or (ii) determining whether any of the
conditions set forth in Sections 6 or 7 has been satisfied.
5.13 VOTING SELLER PREFERRED STOCK. To the extent shares of Seller
Preferred Stock are entitled to vote on the Merger, Parent agrees to vote all
shares of Seller Preferred Stock which it is entitled to vote in favor of the
Merger.
5.14 FIRPTA COMPLIANCE. On or prior to the Closing Date, the Seller shall
deliver to the Parent a properly executed statement in a form reasonably
acceptable to the Parent for purposes of satisfying the Parent's obligations
under Treasury Regulation Section 1.1445-2(c)(3).
5.15 REPORTING. It is the parties' intent that the Merger shall be treated
for United States federal income tax purposes as a taxable acquisition by Parent
of the stock of Seller and each of the parties to this Agreement shall, unless
advised by their counsel that such reporting is not available, report the Merger
for federal income tax purposes as such a taxable acquisition.
5.16 WORKING CAPITAL REQUIREMENT. Between the date hereof and the Closing
Date, Parent shall not take any action out of the ordinary course of its
business that would materially increase the Minimum Financing Requirement as
defined in Section 6.5 below and shall use reasonable commercial efforts to
complete the financing contemplated by Section 6.5 below.
SECTION 6--CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH PARTY TO CONSUMMATE
THE MERGER
The respective obligations of each party to consummate the Merger shall be
subject to the satisfaction or waiver by mutual consent of the parties, at or
before the Effective Time, of each of the following conditions:
6.1 APPROVALS. Seller shall have obtained all approvals of holders of
shares of capital stock of Seller necessary to approve this Agreement and the
transactions contemplated hereby and (ii) Parent shall have obtained all
approvals of holders of shares of capital stock of Parent necessary to approve
this Agreement and the transactions contemplated hereby.
6.2 REGISTRATION STATEMENT. The Registration Statement shall have been
declared effective and shall remain effective and shall not be subject to a stop
order at the Effective Time. All state securities or "blue sky" authorizations
necessary to carry out the transactions contemplated hereby shall have been
obtained and be in full force and effect.
6.3 ABSENCE OF ORDER. No temporary restraining order, preliminary or
permanent injunction or other order issued by a court or other governmental
entity of competent jurisdiction shall be in effect and have the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger;
provided, however, that the provisions of this section shall not be available to
any party whose failure to fulfill its obligations under this Agreement shall
have been the cause of, or shall have resulted in, such order or injunction.
6.4 REGULATORY APPROVALS. All required approvals from governmental
entities shall have been obtained; provided, however, that the provisions of
this section shall not be available to any party whose failure to fulfill its
obligations under this Agreement shall have been the cause of, or shall have
resulted in, such failure to obtain such approval.
6.5 CAPITAL RAISING. Between the date of this Agreement and on or prior to
the Closing Date, Parent shall have completed a financing (by way of an issue of
new shares or a debt instrument or otherwise) resulting in the receipt by Parent
of net cash proceeds in an amount at least equal to the Minimum Financing
Requirement. For purposes of this Section 6.5, "Minimum Financing Requirement"
means that amount of financing which, when added to the existing financing
available to Parent and Parent Subsidiaries (after giving affect to the Merger),
enables:
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(a) BT Alex. Brown (Parent's financial adviser) to give the written
confirmation to the LSE required by Rule 2.14 of the Listing Rules of the LSE,
which includes without limitation confirmation that the working capital
available to Parent and Parent Subsidiaries (after giving effect to the Merger)
is sufficient for its present requirements; and
(b) Parent to make a clean working capital statement in the Parent
Disclosure Document in compliance with Rule 6.E.16 of the LSE Listing Rules, to
the effect that in its opinion the working capital available to Parent and
Parent's Subsidiaries as a combined group (after giving effect to the Merger) is
sufficient for its present requirements.
6.6 ADMISSION TO LSE. The LSE shall have admitted the Parent Common Stock
to be issued in the Merger to the Official List (subject only to the allotment
of such shares) and such admission shall have become effective in accordance
with paragraph 7.1 of the Listing Rules of the LSE.
SECTION 7--CONDITIONS PRECEDENT TO THE OBLIGATIONS OF MERGER SUB AND PARENT TO
CONSUMMATE THE MERGER
The obligations of Merger Sub and Parent to consummate the Merger are
subject, at the option of Parent acting in accordance with the provisions of
this Agreement with respect to termination hereof, to the fulfillment of the
following conditions, any one or more of which may be waived by Parent:
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations and
warranties made by the Seller in this Agreement and in each of the other
agreements and instruments delivered by Seller in connection with the
transactions contemplated by this Agreement shall have been accurate as of the
date of this Agreement and shall be accurate as of the Closing Date as if made
at the Closing Date (without giving effect to any update to the Seller
Disclosure Schedule except as to matters previously approved by Parent in
writing), except in each case where the failure to be so accurate (without
giving effect to any materiality or knowledge qualifications contained therein)
could not reasonably be expected to have a Seller Material Adverse Effect.
Seller shall have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be performed or complied
with by it on or prior to the Effective Time. Seller shall have delivered to
Parent a certificate from its chief financial officer, dated the Closing Date,
to the foregoing effect.
7.2 SECRETARY OF STATE CERTIFICATES. Seller shall have delivered a copy of
the Certificate of Incorporation of the Seller, as in effect immediately prior
to the Closing Date, certified by the Delaware Secretary of State and a
certificate, as of the most recent practicable date, of the Delaware Secretary
of State as to Seller's corporate good standing.
7.3 SECRETARY'S CERTIFICATE. Seller shall have delivered a certificate of
the Secretary of Seller dated as of the Closing Date, certifying as to (i) the
incumbency of officers of Seller executing documents executed and delivered in
connection herewith, (ii) a copy of the Certificate of Incorporation of the
Seller as in effect immediately prior to the Closing Date; (iii) a copy of the
By-Laws of the Company, as in effect on and as of the Closing Date, (iv) a copy
of the resolutions of the Board of Directors of the Company authorizing and
approving the applicable matters contemplated hereunder and (v) a copy of the
resolutions of the stockholders of Seller authorizing and approving the
applicable matters contemplated hereunder.
7.4 AFFILIATE LETTERS. Parent shall have received the Affiliate Letters
referred to in Section 5.8.
7.5 OPINION OF COUNSEL TO SELLER. Parent shall have received the opinion
of Hale and Dorr LLP, counsel to Seller, dated the Closing Date and in
substantially the form previously agreed to by the parties.
7.6 CERTIFICATE OF MERGER. Seller shall have executed and delivered the
Certificate of Merger referred to in Section 1.2.
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7.7 COMFORT LETTER. Parent shall have received a letter, dated as of a
date not more than two days prior to the date that the Registration Statement is
declared effective, and shall have received a subsequent letter, dated as of a
date not more than two days prior to the Closing Date, from
PricewaterhouseCoopers LLP, independent public accountants for Seller, in form
and substance reasonably satisfactory to Parent, to the effect that (i) they are
independent accountants within the meaning of the Securities Act and the
Exchange Act, (ii) in their opinion, the financial statements of Seller included
in the Registration Statement which were reported on by such firm comply as to
form in all material respects with the applicable accounting requirements of the
Securities Act and the Exchange Act, (iii) on the basis of limited procedures
specified in their letter, which need not constitute an audit, comfort regarding
Seller's consolidated financial position as of, and for the period ended
September 30, 1998, and that nothing has come to their attention which would
give them reason to believe that (A) since September 30, 1998 to the date of
such letter there has been any increase in the outstanding capital stock or
rights, securities, options or obligations exercisable for or convertible into
shares of capital stock, or any increase in the long term debt or short term
borrowings, of Seller, (B) there has been any change greater than $10,000 since
September 30, 1998 in the balance sheet items of Seller set forth on its balance
sheet at September 30, 1998 or (C) there has been any increase in the net loss
of Seller since September 30, 1998 as compared with the corresponding period for
the prior year, except in all instances, for any such increase, change or
decrease referred to in or contemplated or described in the Registration
Statement or contemplated by or disclosed pursuant to this Agreement.
7.8 DISSENTING SHARES. The Dissenting Shares of Seller Common Stock shall
not exceed five percent (5%) of the shares of Seller Common Stock issued and
outstanding on the Closing Date.
7.9 EMPLOYMENT AGREEMENTS. Lance Gordon and Thomas Monath shall have
executed and delivered to Parent, prior to the Closing Date, an agreement in the
form of Exhibit B hereto.
7.10 VOTING AGREEMENTS. Each of the individuals and entities listed on
Schedule 1.0 shall have executed a voting agreement in form and substance
satisfactory to Parent and each such agreement shall be in full force and
effect.
7.11 CONSENTS. Seller shall have obtained waivers or consents, which shall
remain in full force and effect, with respect to each agreement required to be
disclosed on Section 2.14(i) of the Seller Disclosure Schedule (other than
employment agreements) such that the terms of each such agreement are unchanged
by the Merger except to the extent failure to obtain such waivers or consents,
individually or in the aggregate, could not reasonably be expected to have a
Seller Material Adverse Effect and such agreement remains in full force and
effect following the Effective Time.
7.12 PURCHASE OF PREFERRED STOCK. Parent shall have acquired for cash the
shares of Seller Preferred Stock which are subject to the Stock Purchase
Agreement, made as of October 19, 1998.
SECTION 8--CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLER
TO CONSUMMATE THE MERGER
The obligation of Seller to consummate the Merger is subject, at the option
of Seller acting in accordance with the provisions of this Agreement with
respect to termination hereof, to the fulfillment of the following conditions,
any one or more of which may be waived by it:
8.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. Except for changes
contemplated by this Agreement, the representations and warranties made by
Parent and Merger Sub in this Agreement and in each of the other agreements and
instruments delivered to Seller in connection with the transactions contemplated
by this Agreement shall have been accurate as of the date of this Agreement, and
shall be accurate as of the Closing Date as if made at the Closing Date (without
giving effect to any update to the Parent Disclosure Schedule except as to
matters previously approved by Seller in writing) except
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in each case where the failure to be so accurate (without giving effect to any
materiality or knowledge qualifications contained therein) could not reasonably
be expected to have a Parent Material Adverse Effect. Each of Merger Sub and
Parent shall have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be performed or complied
with by it on or prior to the Effective Time. Merger Sub and Parent shall have
delivered to Seller a certificate from an authorized officer dated the Closing
Date, to the foregoing effect.
8.2 OPINION OF COUNSEL TO PARENT. Seller shall have received the opinions
of Palmer & Dodge LLP and Weil, Gotshal & Manges LLP, counsel to Merger Sub and
Parent, dated the Closing Date and in substantially the forms previously agreed
to by the parties.
8.3 MERGER DOCUMENTS. Merger Sub shall have executed and delivered the
Certificate of Merger referred to in Section 1.2.
SECTION 9--TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether prior to or after approval by Parent shareholders or
Seller stockholders:
(a) By mutual written consent of Parent and Seller;
(b) By Seller:
(i) by written notice to Parent (provided that Seller is not then in
material breach of any representation, warranty, covenant or other agreement
contained herein) if there shall have been a material breach of any of the
covenants or agreements or any of the representations or warranties
contained in this Agreement on the part of Parent, which breach is either
not cured with twenty (20) days following written notice to Parent or by its
nature cannot be cured prior to the Closing Date; provided, however, that
Seller shall not have the right to terminate this Agreement pursuant to this
Section 9.1(b)(i) because of the breach of any representation or warranty
unless such breach, together with all such other breaches, would entitle
Seller not to consummate the transactions contemplated hereby under Section
8.1; or
(ii) by written notice to Parent upon Seller's entering into an
agreement with a Third Party to consummate a Qualified Acquisition Proposal
as permitted by Section 5.10(b);
(c) By Parent:
(i) by written notice to Seller (provided that Parent is not then in
material breach of any representation, warranty, covenant or other agreement
contained herein) if there shall have been a material breach of any of the
covenants or agreements or any of the representations or warranties
contained in this Agreement on the part of Seller, which breach is either
not cured with twenty (20) days following written notice to Seller or by its
nature cannot be cured prior to the Closing Date; provided, however, that
Parent shall not have the right to terminate this Agreement pursuant to this
Section 9.1(c)(i) because of the breach of any representation or warranty
unless such breach, together with all such other breaches, would entitle
Parent not to consummate the transactions contemplated hereby under Section
7.1; or
(ii) by written notice to Seller, if, prior to the Effective Time,
Seller's Board of Directors (A) shall have failed to recommend, or shall
have withdrawn or modified in a manner adverse to Parent its approval or
recommendation of, the Merger or this Agreement or (B) shall take any action
(other than as permitted under clauses (i) and (ii) of the first sentence of
Section 5.10(b)) with respect to any Acquisition Proposal by a third party
other than to recommend rejection of the Acquisition Proposal;
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(d) By Parent or Seller:
(i) by written notice to the other, if the Effective Time shall not have
occurred on or before July 31, 1999; provided, however, that the right to
terminate this Agreement under this Section 9.1(d)(i) shall not be available
to any party whose breach of a representation or warranty or failure to
fulfill any covenant or agreement under this Agreement has been the cause of
or resulted in the failure of the Merger to occur on or before such date;
(ii) by written notice to the other, if any governmental entity shall
have issued any injunction or taken any other action permanently
restraining, enjoining or otherwise prohibiting the consummation of the
Merger and such injunction or other action shall have become final and
non-appealable;
(iii) by written notice to the other, if the required approval of the
shareholders of Seller shall not have been obtained within ninety (90) days
after the Registration Statement has been declared effective by the SEC or
by reason of the failure to obtain the required vote upon a vote taken at a
meeting of shareholders duly convened therefor or at any adjournment
thereof; provided, however; that the right to terminate this Agreement
pursuant to this Section 9(d)(iii) shall not be available to Seller where
the failure to obtain the required shareholder approval shall have been
caused by the action or failure to act of Seller in breach of this
Agreement; or
(iv) by written notice to the other, if the required approval of the
shareholders of Parent shall not have been obtained within ninety (90) days
after mailing its Super Class 1 Circular relating to this Agreement or by
reason of the failure to obtain the required vote upon a vote taken at a
meeting of shareholders duly convened therefor or at any adjournment
thereof; provided, however; that the right to terminate this Agreement
pursuant to this Section 9(d)(iv) shall not be available to Parent where the
failure to obtain the required shareholder approval shall have been caused
by the action or failure to act of Parent in breach of this Agreement.
9.2 EFFECT OF TERMINATION. If this Agreement is terminated as provided in
Section 9.1, this Agreement shall forthwith become void and have no effect,
without liability on the part of Parent and Seller and their respective
directors, officers, shareholders or stockholders, except that (i) the
provisions of this Section 9, Section 5.3 relating to expenses, Section 5.7
relating to publicity and confidentiality to the extent provided therein shall
survive; and (ii) no such termination shall relieve any party from liability by
reason of any willful breach by such party of any of its representations,
warranties, covenants or agreements contained in this Agreement, except to the
extent provided in Section 9.3(d).
9.3 TERMINATION FEES
(a) Seller shall reimburse Parent for (i) its costs and expenses related to
entering into this Agreement and seeking to consummate the transactions
contemplated by this Agreement, including fees and expenses payable to legal,
accounting and financial advisors relating to the Merger and (ii) the costs and
expenses, including legal fees and expenses, relating to the financing
commitment of Parent to Seller, if:
(i) Parent has terminated this Agreement pursuant to Section 9.1(c); or
(ii) Seller has terminated this Agreement pursuant to Section
9.1(b)(ii).
(b) In addition to any amount that may be payable to Parent pursuant to
Section 9.3(a), Seller shall pay to Parent:
(i) $750,000 if (A) Parent has terminated this Agreement pursuant to
Section 9.1(c)(i) because of a willful breach by Seller and at the time of
such breach a Third Party shall have made, or disclosed an intention to
make, an Acquisition Proposal, (B) Parent has terminated this Agreement
pursuant to Section 9.1(c)(ii), (C) Parent or Seller has terminated this
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Agreement pursuant to Section 9.1(d)(iii) and at the time of the event
giving rise to such termination a Third Party shall have made, or disclosed
an intention to make, an Acquisition Proposal, or (D) Seller has terminated
this Agreement pursuant to Section 9.1(b)(ii) upon entering into an
agreement with a Third Party other than PMC to consummate a Qualified
Acquisition Proposal, provided that there shall be credited any amount paid
pursuant to Section 9.3(a); or
(ii) $1,500,000 if (A) Parent has terminated this Agreement pursuant to
Section 9.1(c)(i) because of a willful breach by Seller or Section
9.1(e)(ii) and prior thereto or within 12 months thereafter Seller enters
into an agreement to consummate or consummates an Acquisition Proposal with
PMC, (B) Parent or Seller has terminated this Agreement pursuant to Section
9.1(d)(iii) and prior thereto or within 12 months thereafter Seller enters
into an agreement to consummate or consummates an Acquisition Proposal with
PMC or (C) Seller has terminated this Agreement pursuant to Section
9.1(b)(ii) upon entering into an agreement with PMC to consummate a
Qualified Acquisition Proposal, provided that there shall be credited any
amount paid pursuant to Section 9.3(a) except that if the agreement is
entered into or the transaction is consummated prior to February 28, 1999,
the amount credited shall be limited to amounts paid pursuant to clause (i)
of Section 9.3(a) in excess of $250,000.
(c) Payments.Any payments required by this Section 9.3 will be payable by
the party liable to the other party (by wire transfer of immediately available
funds to an account designated by the party entitled to such payment) within
five (5) business days after demand by such party.
(d) Enforcement.The parties agree that the agreements contained in this
Section 9.3 are an integral part of the transactions contemplated by this
Agreement. The parties acknowledge and agree that damages upon termination of
the Agreement under the circumstances referred to in Section 9.3(b) are not
reasonably ascertainable and the payment pursuant to such section constitutes
liquidated damages and not a penalty, and shall be Parent's exclusive remedy
upon such termination. The payments pursuant to Section 9.3(a) are intended to
provide reimbursement for out-of-pocket expenses and not damages for termination
of this Agreement under the circumstances referred to therein, and such payments
shall not relieve any party from liability for the willful breach by it of any
of its representations, warranties, covenants or agreements contained in this
Agreement and the non-breaching party may pursue any remedies available to it at
law or in equity, including recovery for such damages to which it may be
entitled. Notwithstanding anything to the contrary contained in Section 9.3, if
one party fails to promptly pay to the other any amount due under Section 9.3,
in addition to any amounts paid or payable pursuant to such section, the
defaulting party shall pay the costs and expenses (including legal fees and
expenses) in connection with any action, including the filing of any lawsuit or
other legal action, taken to collect payment, together with interest on the
amount of any unpaid fee at an annual rate of 7% from the date such fee was
required to be paid.
9.4 SELLER PREFERRED STOCK PUT AND CALL RIGHTS.
(a) If this Agreement is terminated (1) by Seller pursuant to 9(b)(i); (2)
by Parent or Seller pursuant to Section 9.1(d)(i), Section 9.1(d)(ii) or Section
9.1(d)(iv); or (3) by mutual consent of Parent and Seller pursuant to Section
9.1(a), then Seller shall have the right (but not the obligation), exercisable
by written notice to Parent during the ninety (90) days immediately following
the date of such termination, to purchase from Parent all outstanding shares of
Seller Preferred Stock owned by Parent, at a per share purchase price equal to
$1,090 plus accrued dividends.
(b) If this Agreement is terminated (1) by Seller pursuant to Section
9.1(b)(ii), (2) by Parent pursuant to Section 9.1(c); (3) by Parent or Seller
pursuant to Section 9.1(d)(i), Section 9.1(d)(ii) or Section 9.1(d)(iii), or (4)
by mutual consent of Parent and Seller pursuant to Section 9.1(a), then Parent
shall have the right (but not the obligation), exercisable by written notice to
Seller during the ninety (90) days immediately following the date of such
termination, to sell to Seller all outstanding
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shares of Seller Preferred Stock owned by Parent at a per share purchase price
equal to $1,090 plus accrued dividends.
(c) Seller shall pay to Parent by wire transfer of immediately available
funds amounts payable under Section 9.4(a) or 9.4(b) within three business days
of the date of the exercise notice.
(d) Parent agrees that, other than pursuant to Section 9.4(a) or 9.4(b),
during the period from the date of termination of this Agreement until the
ninety-first day following termination of this Agreement, without the prior
written consent of Seller, it will not sell, transfer or otherwise dispose of
any shares of Seller Preferred Stock owned by it on the date of termination of
this Agreement, or convert such shares of Seller Preferred Stock into shares of
Seller Common Stock; provided, however, such limitations shall terminate if
Seller fails to timely pay in accordance with Section 9.4(c) any amounts due
Parent under Section 9.
(e) If (i) Seller has the right, under Section 9.4(a), to purchase all
outstanding shares of Seller Preferred Stock owned by Parent but does not
exercise such right and (ii) either (A) Parent does not have the right under
Section 9.4(b) to sell to Seller all outstanding shares of Seller Preferred
Stock owned by Parent or (B) Parent has such right but does not exercise it,
then on and after the ninety-first day following termination, Parent shall not
convert any shares of Seller Preferred Stock except in accordance with the
modified terms set forth in Exhibit C.
(f) If Parent notifies Seller of the exercise of its right under Section
9.4(b) to sell to Seller all outstanding shares of Seller Preferred Stock owned
by Parent and Seller fails to timely pay in accordance with Section 9.4(c) the
amounts due Parent, the 10% limitation on beneficial ownership upon conversion
shall not apply.
9.5 AMENDMENT. This Agreement may not be amended except by an instrument
signed by each of the parties hereto; provided, however, that after adoption of
this Agreement by the stockholders of Seller, without the further approval of
the stockholders of Seller, no amendment may be made that (a) alters or changes
the amount or kind of consideration to be received as provided in Section 1.6 or
(b) alters or changes any of the terms and conditions of this Agreement if such
alteration or change would materially adversely affect the stockholders of
Seller.
9.6 WAIVER. At any time prior to the Effective Time, any party hereto may
(a) extend the time for the performance of any of the obligations or other acts
of any other party hereto or (b) waive compliance with any of the agreements of
any other party or any conditions to its own obligations, in each case only to
the extent such obligations, agreements and conditions are intended for its
benefit; provided that any such extension or waiver shall be binding upon a
party only if such extension or waiver is set forth in a writing executed by
such party.
SECTION 10--MISCELLANEOUS
10.1 NO SURVIVAL. None of the representations, warranties, covenants and
agreements of any party in this Agreement or in any certificate delivered by any
party pursuant hereto shall survive the Merger.
10.2 NOTICES. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed given when so delivered in
person, by overnight courier, by facsimile transmission (with receipt confirmed
by telephone or by automatic transmission report) or two business days after
being sent by registered or certified mail (postage prepaid, return receipt
requested), as follows:
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(a) if to Parent, to:
Peptide Therapeutics Group plc
321 Cambridge Science Park
Milton Road
Cambridge CB4 4WG
England
Attn: Gordon Cameron
Telephone: 01223 423333
Facsimile: 01223 423341
with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
Attn: Michael Lytton, Esq.
Telephone: (617) 573-0100
Facsimile: (617) 227-4420
(b) if to Seller, to:
OraVax, Inc.
38 Sidney Street
Cambridge, MA 02139
Attn: Lance Gordon
Telephone: (617) 494-1339
Facsimile: (617) 494-0924
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attn: John M. Westcott, Jr., Esq.
Telephone: (617) 526-6000
Facsimile: (617) 526-5000
Any party may by notice given in accordance with this Section 10.2 to the other
parties designate another address or person for receipt of notices hereunder.
10.3 ENTIRE AGREEMENT. This Agreement contains the entire agreement among
the parties with respect to the Merger and related transactions, and supersedes
all prior agreements, written or oral, with respect thereto, other than
confidentiality agreements.
10.4 GOVERNING LAW. This Agreement shall be governed by the law of the
State of Delaware.
10.5 BINDING EFFECT; NO ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement is not assignable without the prior written
consent of the other parties hereto.
10.6 VARIATIONS IN PRONOUNS. All pronouns and any variations thereof refer
to the masculine, feminine or neuter, singular or plural, as the context may
require.
10.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first stated above.
<TABLE>
<S> <C> <C>
PEPTIDE THERAPEUTICS GROUP plc
By /s/ John R. Brown
Name: John Brown
Title: Chief Executive
PEACH ACQUISITION CORP.
By /s/ John R. Brown
Name: John Brown
Title: President
ORAVAX, INC.
By /s/ Lance Gordon
Name: Lance Gordon
Title: President and CEO
</TABLE>
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EXHIBIT C
The terms of the Seller Preferred Stock shall be as follows:
I. The Conversion Price shall be the lowest closing price of the Common Stock
for the 5 consecutive trading days ending with the trading day prior to the
Conversion Date, reduced by the Applicable Percentage in effect on the
Conversion Date; provided, however, that in no event shall the Conversion
Price (after reduction by the Applicable Percentage) be less than $0.31 per
share.
II. A share of 6% Preferred may be converted into Common Stock without regard to
whether following such conversion the holder thereof together with
affiliates of such holder would be the beneficial owner of 10% or more of
the Common Stock of the corporation.
Capitalized terms used in this Exhibit C shall have the meaning ascribed to them
in the Seller's Certificate of Designations of 6% Convertible Preferred Stock.
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ANNEX B
November 9, 1998
Confidential
The Board of Directors
OraVax, Inc.
38 Sidney Street
Cambridge, MA 02139
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of common stock (the "Common
Stock") of OraVax, Inc. ("OraVax" or the "Company") of the consideration to be
received by such shareholders in connection with the proposed merger of the
Company (the "Merger") with and into Peach Acquisition Corp. ("Merger Sub"), a
wholly owned subsidiary of Peptide Therapeutics Group plc ("Peptide
Therapeutics") pursuant to the Agreement and Plan of Merger to be dated as of
November 10, 1998, among Peptide Therapeutics, Merger Sub and OraVax (the
"Agreement").
We understand that the terms of the Agreement provide, among other things,
that Peptide Therapeutics will issue ordinary shares of Peptide Therapeutics
having a value of approximately $12,040,125 in exchange for all outstanding
OraVax common stock, provided, however, that the aggregate number of ordinary
shares issued at closing will not exceed 8,080,620 and will not be less than
5,375,055, as more fully set forth in the Agreement. For purposes of this
opinion, we have assumed that the Merger will qualify as a taxable
reorganization under the United States Internal Revenue Code for the
shareholders of the Company and that the Merger will be accounted for as a
purchase.
Hambrecht & Quist LLC ("Hambrecht & Quist"), as part of its investment
banking services, is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, strategic transactions,
corporate restructurings, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes. We have acted as a financial advisor to the Board of
Directors of OraVax in connection with the Merger, and we will receive a fee for
our services, which include the rendering of this opinion.
In connection with our review of the Merger, and in arriving at our opinion,
we have, among other things:
(i) reviewed the publicly available financial statements of Peptide
Therapeutics for recent years and interim periods to date and certain
other relevant financial and operating data of Peptide Therapeutics made
available to us from published sources and from the internal records of
Peptide Therapeutics;
(ii) reviewed certain internal financial and operating information,
including certain projections, relating to Peptide Therapeutics
prepared by the management of Peptide Therapeutics;
(iii) discussed the business, financial condition and prospects of Peptide
Therapeutics with certain of its officers;
(iv) reviewed the publicly available financial statements of OraVax for
recent years and interim periods to date and certain other relevant
financial and operating data of OraVax made available to us from
published sources and from the internal records of OraVax;
(v) reviewed certain internal financial and operating information, including
certain projections, relating to OraVax prepared by the management of
OraVax;
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(vi) discussed the business, financial condition and prospects of OraVax
with certain of its officers;
(vii) reviewed the recent reported prices and trading activity for the
ordinary stock of Peptide Therapeutics and the common stock of OraVax
and compared such information and certain financial information for
Peptide Therapeutics and OraVax with similar information for certain
other companies engaged in businesses we consider comparable;
(viii) reviewed the financial terms, to the extent publicly available, of
certain comparable merger and acquisition transactions;
(ix) reviewed drafts of the Agreement; and
(x) performed such other analyses and examinations and considered such other
information, financial studies, analyses and investigations and
financial, economic and market data as we deemed relevant.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all of the information concerning Peptide Therapeutics or OraVax
considered in connection with our review of the Merger, and we have not assumed
any responsibility for independent verification of such information. We have not
prepared any independent valuation or appraisal of any of the assets or
liabilities of Peptide Therapeutics or OraVax; nor have we conducted a physical
inspection of the properties and facilities of either company. With respect to
the financial forecasts and projections made available to us and used in our
analysis, we have assumed that they reflect the best currently available
estimates and judgments of the expected future financial performance of Peptide
Therapeutics and OraVax. For purposes of this opinion, we have assumed that
neither Peptide Therapeutics nor OraVax is a party to any pending transactions,
including external financings, recapitalizations or material merger discussions,
other than the Merger and those activities disclosed to us or undertaken in the
ordinary course of conducting their respective businesses. Our opinion is
necessarily based upon market, economic, financial and other conditions as they
exist and can be evaluated as of the date of this letter and any change in such
conditions would require a reevaluation of this opinion. We express no opinion
as to the price at which Peptide Therapeutics will trade subsequent to the
Effective Time (as defined in the Agreement).
It is understood that this letter is for the information of the Board of
Directors in connection with their review of the Merger and may not be used for
any other purpose without our prior written consent; provided, however, that
this letter may be reproduced in full in the proxy statement/prospectus relating
to the Merger. This letter does not constitute a recommendation to any
stockholder as to how such stockholder should vote on the Merger.
Based upon and subject to the foregoing and after considering such other
matters as we deem relevant, we are of the opinion that as of the date hereof
the consideration to be received by the holders of the Common Stock in the
Merger is fair to such holders from a financial point of view. We express no
opinion, however, as to the adequacy of any consideration received in the Merger
by Peptide Therapeutics or any of its affiliates.
Very truly yours,
HAMBRECHT & QUIST LLC
By /s/ DAVID G. GOLDEN
------------------------------------------
David G. Golden
Managing Director
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ANNEX C
PROVISIONS OF THE DELAWARE GENERAL CORPORATION LAW
RELATING TO RIGHTS OF DISSENTING STOCKHOLDERS
SECTION 262--APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of stock on
the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing
pursuant to Section228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in
a stock corporation and also a member of record of a nonstock corporation;
the words "stock" and "share" mean and include what is ordinarily meant by
those words and also membership or membership interest of a member of a
nonstock corporation; and the rods "depository receipt" mean a receipt or
other instrument issued by a depository representing an interest in one or
more shares, or fractions thereof, solely of stock of a corporation, which
stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series of
stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section251, (other than a merger effected pursuant to
Section 251(g) of this title), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange
or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or (ii) held of record by more than 2,000 holders; and further provided
that no appraisal rights shall be available for any shares of stock of
the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the holders of the surviving
corporation as provided in subsections (f) of Section251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
SectionSection251, 252, 254, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed
on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more
than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph;
or
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d. Any combination of the shares of stock, depository receipts and cash
in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a, b, and c, of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation party
to a merger effected under Section253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the
assets of the corporation. If the certificate of incorporation contains such
a provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting
of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal rights
are available pursuant to subsections (b) or (c) hereof that appraisal
rights are available for any or all of the shares of the constituent
corporations, and shall include in such notice a copy of this section.
Each stockholder electing to demand the appraisal of his shares shall
deliver to the corporation, before the taking of the vote on a merger or
consolidation, a written demand for appraisal of his shares. Such demand
will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing
to take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section 228 or
Section 253 of this title, each constituent corporation, either before or
after the effective date of the merger or consolidation or within ten
days thereafter, shall notify each of the holders of any class of series
of stock of such constituent corporation who are entitled to appraisal
rights of the approval of the merger or consolidation and that appraisal
rights are available for any or all shares of such class or series of
stock of such constituent corporation, and shall include in such notice a
copy of this section; provided that, if the notice is given on or after
the effective date of the merger or consolidation, such notice shall be
given by the surviving or resulting corporation to all such holders of
any class or series os stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after
the effective date of the merger or consolidation, shall, also notify
such stockholders of the effective date of the merger or consolidation.
Any stockholder entitled to appraisal rights may, within 20 days after
the mailing of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holders shares. Such demand
will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such holder's shares. If such notice did not
notify stockholders of the
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effective date of the merger or consolidation, either (1) each such
constituent corporation shall send a second notice before the effective
date of the merger or consolidation notifying each of the holders of any
class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent
more than 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal
rights and who has demanded appraisal of such holder's shares in
accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall, in
the absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record
date that shall be not more than 10 days prior to the date the notice is
given, provided, that if the notice is given on or after the effective
date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior
to the effective date, the record date shall be the close of business on
the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation, the
surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the
effective date of the merger or consolidation, any stockholder shall have
the right to withdraw his demand for appraisal and to accept the terms
offered upon the merger or consolidation. Within 120 days after the
effective date of the merger or consolidation, any stockholder who has
complied with the requirements of subsections (a) and (d) hereof, upon
written request, shall be entitled to receive from the corporation surviving
the merger or resulting from the consolidation a statement setting forth the
aggregate number of shares not voted in favor of the merger or consolidation
and with respect to which demands for appraisal have been received and the
aggregate number of holders of such shares. Such written statement shall be
mailed to the stockholder within 10 days after his written request for such
a statement is received by the surviving or resulting corporation or within
10 days after expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register
in Chancery in which the petition was filed a duly verified list containing
the names and addresses of all stockholders who have demanded payment for
their shares and with whom agreements as to the value of their shares have
not been reached by the surviving or resulting corporation. If the petition
shall be filed by the surviving or resulting corporation, the petition shall
be accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper
of general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the court, and the costs thereof
shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the stockholders
who have complied with this section and who have become entitled to
appraisal rights. The Court may require the
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stockholders who have demanded an appraisal for their shares and who hold
stock represented by certificates to submit their certificates of stock to
the Register in Chancery for notation thereon of the pendency of the
appraisal proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court shall
appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all relevant
factors, including the rate of interest which the surviving or resulting
corporation would have had to pay to borrow money during the pendency of the
proceeding. Upon application by the surviving or resulting corporation or by
any stockholder entitled to participate in the appraisal proceeding, the
Court may, in its discretion, permit discovery or other pretrial proceedings
and may proceed to trial upon the appraisal prior to the final determination
of the stockholder entitled to an appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting corporation pursuant
to subsection (f) of this section and who has submitted his certificates of
stock to the Register in Chancery, if such is required, may participate
fully in all proceedings until it is finally determined that he is not
entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares, together
with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders
of shares represented by certificates upon the surrender to the corporation
of the certificates representing such stock. The Court's decree may be
enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of
any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value
of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or
to receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed
within the time provided in subsection (e) of this section, or if such
stockholder shall deliver to the surviving or resulting corporation a
written withdrawal of his demand for an appraisal and an acceptance of the
merger or consolidation, either within 60 days after the effective date of
the merger or consolidation as provided in subsection (e) of this section or
thereafter with the written approval of the corporation, then the rights of
such stockholder to an appraisal shall cease. Notwithstanding the foregoing,
no appraisal proceeding in the Court of Chancery shall be dismissed as to
any stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares of
such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation. (Last amended by Ch. 299,
L. '96, eff. 2-1-96 and Ch. 349, L. '96, eff. 7-1-96.)
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ANNEX D
STOCKHOLDER VOTING AGREEMENT
This Stockholder Voting Agreement (the "Agreement") dated as of November ,
1998 is by and between Peptide Therapeutics Group plc ("Peptide"), a corporation
organized under the laws of England and Wales, and the undersigned stockholder
("Stockholder") of OraVax, Inc. (the "Seller"), a Delaware corporation.
RECITALS
A. Concurrently with the execution of this Agreement, Parent, Seller and
Peach Acquisition Corporation ("Merger Sub"), a Delaware corporation and a
wholly owned subsidiary of Parent, have entered into an Agreement and Plan of
Merger (the "Merger Agreement") which provides for a merger of Seller with and
into the Merger Sub (the "Merger"). Pursuant to the Merger, shares of common
stock of Seller will be converted into the right to receive American Depositary
Shares, each representing 10 ordinary shares, nominal value of 10 pence per
share of Parent on the basis set forth in the Merger Agreement.
B. The Stockholder is the record holder and beneficial owner (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of such number of shares of the outstanding capital stock of Seller as is
indicated on the final page of this Agreement (the "Shares").
C. Parent desires the Stockholder to agree, and the Stockholder is willing
to agree, (i) not to transfer or otherwise dispose of any of the Shares, or any
other shares of capital stock of Seller acquired hereafter and prior to the
Expiration Date (as defined in Section 1 below) (together with the Shares, the
"Subject Shares"), except as otherwise permitted hereby, and (ii) to vote the
Subject Shares so as to facilitate consummation of the Merger.
NOW, THEREFORE, intending to be legally bound, the parties agree as follows:
1. AGREEMENT TO RETAIN SHARES. Stockholder agrees not to transfer (except
as may be specifically required by court order), sell, exchange, pledge or
otherwise dispose of or encumber any of the Subject Shares, or to make any offer
or agreement relating thereto, at any time prior to the Expiration Date. As used
herein, the term "Expiration Date" shall mean the earlier to occur of such date
and time as (i) the Merger shall become effective in accordance with the
provisions of the Merger Agreement and (ii) the Merger Agreement shall be
terminated pursuant to Section 9.1 thereof.
2. AGREEMENT TO VOTE SUBJECT SHARES. At every meeting of the stockholders
of Seller called with respect to any of the following, and at every adjournment
thereof, and on every action or approval by written consent of the stockholders
of Seller with respect to any of the following, Stockholder shall vote the
Subject Shares: (i) in favor of approval of the Merger Agreement and the Merger
and any matter that could reasonably be expected to facilitate the Merger; and
(ii) against approval of any proposal made in opposition to or competition with
consummation of the Merger and against any merger, consolidation, sale of
assets, reorganization or recapitalization, with any party other than with
Parent and its affiliates, and against any liquidation or winding up of Seller
(each of the foregoing is hereinafter referred to as an "Opposing Proposal").
Stockholder agrees not to take any actions contrary to Stockholder's obligations
under this Agreement.
3. IRREVOCABLE PROXY. Concurrently with the execution of this Agreement,
Stockholder agrees to deliver to Parent a proxy in the form attached hereto as
Exhibit I (the "Proxy"), which shall be irrevocable to the extent provided under
the Delaware General Corporation Law, with respect to the
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total number of shares of capital stock of Seller beneficially owned (as such
term is defined in Rule 13d-3 under the Exchange Act) by Stockholder set forth
therein.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
STOCKHOLDER. Stockholder hereby represents, warrants and covenants to Parent as
follows:
4.1. OWNERSHIP OF SHARES. Stockholder (i) is and will be at the time
of the action of the stockholders of Seller on the Merger the beneficial
owner of the Shares and the Subject Shares, which at the date hereof and at
all times up until the Expiration Date will be free and clear of any liens,
claims, options, charges or other encumbrances; (ii) does not beneficially
own any shares of capital stock of Seller other than the Shares (excluding
shares as to which Stockholder currently disclaims beneficial ownership in
accordance with applicable law); and (iii) has full power and authority to
make, enter into and carry out the terms of this Agreement and the Proxy.
4.2. NO PROXY SOLICITATIONS. Stockholder will not, and will not permit
any entity under Stockholder's control to: (i) solicit proxies or become a
"participant" in a "solicitation" (as such terms are defined in Regulation
14A under the Exchange Act) with respect to an Opposing Proposal or
otherwise encourage or assist any party in taking or planning any action
that would compete with, restrain or otherwise serve to interfere with or
inhibit the timely consummation of the Merger in accordance with the terms
of the Merger Agreement; (ii) initiate a stockholders' vote or action by
consent of stockholders of Seller with respect to an Opposing Proposal; or
(iii) become a member of a "group" (as such term is used in Section 13(d) of
the Exchange Act) with respect to any voting securities of Seller that takes
any action in support of an Opposing Proposal.
5. NO LIMITATION ON DISCRETION AS DIRECTOR. This Agreement is intended
solely to apply to the exercise by Stockholder in his or her individual capacity
of rights attaching to ownership of the Subject Shares, and nothing herein shall
be deemed to apply to, or to limit in any manner the discretion of Stockholder
with respect to, any action which may be taken or omitted by him or her acting
in his or her fiduciary capacity as a director of Seller.
6. ADDITIONAL DOCUMENTS. Stockholder hereby covenants and agrees to
execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Parent or Stockholder, as the case may be, to carry out
the intent of this Agreement.
7. CONSENT AND WAIVER. Stockholder hereby gives any consents or waivers
that are reasonably required for the consummation of the Merger under the terms
of any agreements to which Stockholder is a party or pursuant to any rights
Stockholder may have.
8. TERMINATION. This Agreement shall terminate and shall have no further
force or effect as of the Expiration Date.
9. MISCELLANEOUS.
9.1. SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
9.2. BINDING EFFECT AND ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, neither this Agreement nor
any of the rights, interests or obligations of the parties hereto may be
assigned by either party without prior written consent of the other.
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9.3. AMENDMENTS AND MODIFICATION. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
9.4. SPECIFIC PERFORMANCE; INJUNCTIVE RELIEF. The parties hereto
acknowledge that Parent will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements
of Stockholder set forth herein. Therefore, it is agreed that, in addition
to any other remedies that may be available to Parent upon any such
violation, Parent shall have the right to enforce such covenants and
agreements by specific performance, injunctive relief or by any other means
available to Parent at law or in equity.
9.5. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and sufficient if delivered in
person, by cable, telegram or facsimile, or sent by mail (registered or
certified mail, postage prepaid, return receipt requested) or overnight
courier (prepaid) to the respective parties as follows:
(a) if to Parent, to:
Peptide Therapeutics Group plc
321 Cambridge Science Park:
Milton Road
Cambridge, England CB4 4WG
Attn: John R. Brown
Telephone: 011-44-1223-423-333
Facsimile: 011-44-1223-423-341
with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
Attn: Michael Lytton, Esq.
Telephone: (617) 573-0100
Facsimile: (617) 227-4420
(b) if to the Stockholder:
To the address for notice set forth on the last page hereof.
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attn: John M. Westcott, Jr., Esq.
Telephone: (617) 526-6000
Facsimile: (617) 526-5000
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall only be
effective upon receipt.
9.6. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the internal laws of the Commonwealth of
Massachusetts.
9.7. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties in respect of the subject matter hereof, and
supersedes all prior negotiations and understandings between the parties
with respect to such subject matter.
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9.8. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
9.9. EFFECT OF HEADINGS. The section headings herein are for
convenience only and shall not affect the construction of interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have caused this Stockholder Voting
Agreement to be duly executed on the date and year first above written.
PEPTIDE THERAPEUTICS GROUP PLC
By:
- --------------------------------------------------------------------------------
Name:
- --------------------------------------------------------------------------------
Title:
- --------------------------------------------------------------------------------
STOCKHOLDER:
By:
- --------------------------------------------------------------------------------
Stockholder's Address for Notice:
--------------------------------------
--------------------------------------
--------------------------------------
Shares beneficially owned:
________________ shares of Common
Stock
Shares subject to outstanding options:
________________ shares of Common
Stock
[Signature Page to Stockholder Voting Agreement]
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 155 of the registrant's Articles of Association provides: "Subject
to the provisions of the Companies Acts but without prejudice to any indemnity
to which he may otherwise be entitled, every director, alternate director,
secretary, auditor or other officer of the Company shall be indemnified out of
the assets of the Company against all costs, charges, expenses, losses, damages
and liabilities incurred by him in or about the execution of his duties or the
exercise of his powers or otherwise in relation thereto including (without
prejudice to the generality of the foregoing) any liability incurred by him in
defending any proceedings, whether criminal or civil, which relate to anything
done or omitted or alleged to have been done or omitted by him as an officer or
employee of the Company in which judgment is given in his favor or in which he
is acquitted, or which are otherwise disposed of without any finding or
admission of material breach of duty on his part or in connection with any
application in which relief is granted to him by the court from liability for
negligence, default, breach of duty or breach of trust in relation to the
affairs of the Company." Pursuant to the provisions of Section 310(3) of the
Companies Act 1985 (as amended by the Companies Act 1989) the Company may
purchase and maintain insurance to indemnify any director, officer, manager or
auditor of the Company, or any company which is a member of the Group. Section
310 of the Companies Act 1985 (as amended by Section 137 of the Companies Act
1989) provides as follows:
"310. Provisions exempting officers and auditors from liability
(1) This section applies to any provision, whether contained in a
company's articles or in any contract with the company or otherwise, for
exempting any officer of the company or any person (whether an officer or
not) employed by the company as auditor from, or indemnifying him against,
any liability which by virtue of any rule of law would otherwise attach to
him in respect of any negligence, default, breach of duty or breach of trust
of which he may be guilty in relation to the company.
(2) Except as provided by the following subsection, any such provision
is void.
(3) This section does not prevent a company
(a) from purchasing and maintaining for any such officer or auditor
insurance against any such liability; or
(b) from indemnifying any such officer or auditor against any liability
incurred by him;
(i) in defending any proceedings (whether civil or criminal) in which
judgment is given in his favor or he is acquitted, or
(ii) in connection with any application under Section 144(3) or (4)
(acquisition of shares by innocent nominee) or Section 727 (general power to
grant relief in case of honest and reasonable conduct) in which relief is
granted to him by the court."
Section 727 of the Companies Act 1985 provides as follows:
"727. Power of court to grant relief in certain cases
"(1) If in any proceedings for negligence, default, breach of duty or breach of
trust against an officer of a company or a person employed by a company as
auditor (whether he is or is not an officer of the company) it appears to
the court hearing the case that that officer or person is or may be liable
in respect of the negligence, default, breach of duty or breach of trust,
but that he has acted honestly and reasonably, and that having regard to all
the circumstances of the case (including those connected with his
appointment) he ought fairly to be excused for the negligence, default,
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breach of duty or breach of trust, that court may relieve him, either wholly
or partly, from his liability in such terms as it thinks fit.
(2) If any such officer or person as above-mentioned has reason to apprehend
that any claim will or might be made against him in respect of any
negligence, default, breach of duty or breach of trust, he may apply to the
court for relief; and the court on the application has the same power to
relieve him as under this section it would have had if it had been a court
before which proceedings against that person for negligence, default, breach
of duty or breach of trust had been brought.
(3) Where a case to which subsection (1) applies is being tried by a judge with
a jury, the judge, after hearing the evidence, may, if he is satisfied that
the defendant or defender ought in pursuance of that subsection to be
relieved either in whole or in part from the liability sought to be enforced
against him, withdraw the case in whole or in part from the jury and
forthwith direct judgment to be entered for the defendant or defender on
such terms as to costs or otherwise as the judge may think proper."
These indemnification provisions may be sufficiently broad to permit
indemnification of the registrant's executive officers and directors for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act").
The registrant, with approval of the registrant's Board of Directors,
maintains director and officer liability insurance.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENTS.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Restated Agreement and Plan of Acquisition, dated as of November 10, 1998, among Peptide Therapeutics
Group plc, Peach Acquisition Corp. and OraVax, Inc. (attached as Annex A to the Prospectus/Proxy
Statement included in this Registration Statement).
2.2 Amendment No. 1 to Restated Agreement and Plan of Acquisition dated January 8, 1999, among Peptide
Therapeutics Group plc, Peach Acquisition Corp. and OraVax, Inc.*
2.3 Amendment No. 2 to the Restated Agreement Plan of Acquisition dated January 28, 1999, among Peptide
Therapeutics Group plc, Peach Acquisition Corp. and OraVax, Inc. (Incorporated herein by reference to
Amendment No. 2 to Schedule 13D filed on January 28, 1999 by Peptide Therapeutics Group plc).
3.1 Memorandum and Articles of Association of Peptide Therapeutics Group plc.*
5.1 Opinion of Weil, Gotshal & Manges LLP with respect to the legality of the securities registered hereby.*
10.1 Collaboration Agreement between Peptide Therapeutics Limited and Eli Lilly and Company dated November 4,
1998.+
10.2 Option Agreement between Peptide Therapeutics Limited and the joint ventures between OraVax, Inc. and
Pasteur Merieux Serums et Vaccins known as Pasteur Merieux OraVax S.N.C. and OraVax Merieux Co. dated
April 27, 1998.+
10.3 Collaboration Agreement between Peptide Therapeutics Limited and Peptimmune, Inc. dated March 13. 1998.+
10.4 Collaborative Research and Option Agreement between Peptide Therapeutics Limited and Pfizer, Inc. dated
December 22, 1997.+
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.5 Research and Development and License Agreement between Peptide Therapeutics Limited and SmithKline
Beecham plc dated February 7, 1997.+
10.6 Sales Agreement between Peptide Therapeutics Limited, Peptide Therapeutics Group plc, Evans Medical
Limited and Medeva plc dated January 30, 1997.+
10.7 Assignment and Variation Agreement between Peptide Therapeutics Limited, the University of Maryland at
Baltimore and Medeva plc dated September 10, 1997.+
10.8 Collaboration Agreement between Peptide Therapeutics Limited and Novartis Pharma AG dated November 1,
1998.+
10.9 Amendment No. 1 to Research and Development and License Agreement between Peptide Therapeutics Limited
and SmithKline Beecham plc dated November 25, 1998.*
10.10 Overview Agreement between Peptide Therapeutics Limited and Pasteur Merieux Serums et Vaccins S.A. dated
January 25, 1999.+
10.11 Standstill Agreement between Peptide Therapeutics Group plc and Pasteur Merieux Serums et Vaccins S.A.
dated January 25, 1999. (Incorporated herein by reference to Amendment No. 2 to Schedule 13D filed on
January 28, 1999 by Peptide Therapeutics Group plc.)
10.12 Lease Agreement between The Master Fellows and Scholars of Trinity College Cambridge and Peptide
Therapeutics Group plc dated May 24, 1996 with respect to Unit 329 Phase V Cambridge Science Park,
Milton Road, Cambridge, England.*
10.13 Lease Agreement among The Master Fellows and Scholars of Trinity College, Chefaro Proprietaries Limited
and NED-INT Holdings Limited dated March 29, 1994 with respect to Unit 327 Phase V Cambridge Science
Park, Milton Road, Cambridge, England.*
10.14 Lease Agreement between The Master Fellows and Scholars of Trinity College Cambridge and IBRD Europe,
Inc. dated April 29, 1993 with respect to Unit 324 Phase 5 Cambridge Science Park, Milton Road,
Cambridge, England.*
10.15 Lease Agreement between the Master Fellows and Scholars of Trinity College Cambridge and IBRD Europe,
Inc. dated November 26, 1992 with respect to Unit 321 Phase 5 Cambridge Science Park, Milton Road,
Cambridge, England.*
10.16 Director's Service Agreement between Peptide Therapeutics Group plc and Nicolas Higgins dated November
29, 1996, as amended September 18, 1998.*
10.17 Director's Service Agreement between Peptide Therapeutics Group plc and Gordon Cameron dated March 1,
1997, as amended September 18, 1998.*
10.18 Director's Service Agreement between Peptide Therapeutics plc and John Brown dated March 1, 1997.*
10.19 Letter of Appointment between Peptide Therapeutics Group plc and Alan Dalby dated March 25, 1998.*
10.20 Letter of Appointment between Peptide Therapeutics Group plc and Alan Smith dated January 8, 1998, as
amended April 30, 1998.*
10.21 Letter of Appointment between Peptide Therapeutics Group plc and Sir Brian Richards dated March 1, 1997,
as amended May 1, 1998.*
10.22 Letter of Appointment between Peptide Therapeutics Group plc and Alan Goodman dated July 14, 1998.*
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.23 Peptide Therapeutics Group plc 1994 Unapproved Share Option Scheme.*
10.24 Peptide Therapeutics Group plc 1995 Savings--Related Share Option Scheme.*
10.25 Peptide Therapeutics Group plc 1995 Unapproved Share Option Scheme.*
10.26 Peptide Therapeutics Group plc 1996 Approved Share Option Scheme.*
10.27 Peptide Therapeutics Group plc Share Incentive Plan.*
21.1 Subsidiaries of Peptide Therapeutics Group plc.*
23.1 Consent of Weil, Gotshal & Manges (included as part of Exhibit 5.1).
23.2 Consent of Arthur Andersen, independent auditors.
23.3 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.4 Consent of Lance Gordon to serve as a director.*
23.5 Consent of Hambrecht & Quist LLP.*
24.1 Powers of Attorney.*
99.1 Form of proxy to be mailed to stockholders of OraVax, Inc.*
</TABLE>
- ------------------------
* Previously filed.
+ Confidential treatment has been requested for the deleted portions of
Exhibits 10.1, 10.2, 10.3, 10.4, 10.5, 10.6, 10.7, 10.8 and 10.10.
(B) FINANCIAL STATEMENT SCHEDULES.
Not applicable.
(C) FAIRNESS OPINION.
Included in Part I as Annex B to the Prospectus/Proxy Statement contained in
this Registration Statement. Form of opinion of Hambrecht & Quist (attached as
Annex B to the included in this Registration Statement).
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
II-4
<PAGE>
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
(4) To file a post-effective amendment to the registration statement to include
any financial statements required by Rule 3-19 of this chapter at the start
of any delayed offering or throughout a continuous offering. Financial
statements and information otherwise required by Section 10(a)3 of the Act
need not be furnished, provided that the registrant includes in the
prospectus, by means of a post-effective amendment, financial statements
required pursuant to this paragraph (a)(4) and other information necessary
to ensure that all other information in the prospectus is at least as
current as the date of those financial statements.
(b) The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the registrant undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(c) The undersigned registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (a)(1) immediately proceeding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Act and is used
in connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, as amended (the
"Securities Act"), each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial BONA FIDE offering thereof.
(d) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means and
(ii) to arrange or provide for a facility in the U.S. for the purpose of
responding to such requests. This includes information contained in
documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(f) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions discussed in Item 20 hereof, or
otherwise, the registrant has been advised that in the opinion of the
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
II-5
<PAGE>
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 hereby, 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.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cambridge, England, on
April 9, 1999.
PEPTIDE THERAPEUTICS GROUP PLC
By: /s/ JOHN R. BROWN
-----------------------------------------
John R. Brown
Chief Executive
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ JOHN R. BROWN
- ------------------------------ Chief Executive (Principal April 9, 1999
John R. Brown Executive Officer)
Finance Director
* (Principal Financial
- ------------------------------ Officer and Chief April 9, 1999
Gordon B. Cameron Accounting Officer)
*
- ------------------------------ Non-Executive Chairman April 9, 1999
Alan G. Goodman
*
- ------------------------------ Commercial Director April 9, 1999
Nicolas Higgins
*
- ------------------------------ Non-Executive Director April 9, 1999
Alan Dalby
*
- ------------------------------ Non-Executive Director April 9, 1999
Sir Brian Richards
*
- ------------------------------ Non-Executive Director April 9, 1999
Alan Smith
*
- ------------------------------ Authorized U.S. April 9, 1999
Alan Dalby Representative
<TABLE>
<S> <C> <C> <C>
*By: /s/ JOHN R. BROWN
-------------------------
John R. Brown
ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Restated Agreement and Plan of Acquisition, dated as of November 10, 1998, among Peptide Therapeutics
Group plc, Peach Acquisition Corp. and OraVax, Inc. (attached as Annex A to the Prospectus/Proxy
Statement included in this Registration Statement).
2.2 Amendment No. 1 to Restated Agreement and Plan of Acquisition dated January 8, 1999, among Peptide
Therapeutics Group plc, Peach Acquisition Corp. and OraVax, Inc.*
2.3 Amendment No. 2 to Restated Agreement and Plan of Acquisition dated January 28, 1999, among Peptide
Therapeutics Group plc, Peach Acquisition Corp. and OraVax, Inc. (Incorporated herein by reference to
Amendment No. 2 to Schedule 13D filed on January 28, 1999 by Peptide Therapeutics Group plc.)
3.1 Memorandum and Articles of Association of Peptide Therapeutics Group plc.*
5.1 Opinion of Weil, Gotshal & Manges LLP with respect to the legality of the securities registered hereby.*
10.1 Collaboration Agreement between Peptide Therapeutics Limited and Eli Lilly and Company dated November 4,
1998.+
10.2 Option Agreement between Peptide Therapeutics Limited and the joint ventures between OraVax, Inc. and
Pasteur Merieux Serums et Vaccins known as Pasteur Merieux OraVax S.N.C. and OraVax Merieux Co. dated
April 27, 1998.+
10.3 Collaboration Agreement between Peptide Therapeutics Limited and Peptimmune, Inc. dated March 13. 1998.+
10.4 Collaborative Research and Option Agreement between Peptide Therapeutics Limited and Pfizer, Inc. dated
December 22, 1997.+
10.5 Research and Development and License Agreement between Peptide Therapeutics Limited and SmithKline
Beecham plc dated February 7, 1997.+
10.6 Sales Agreement between Peptide Therapeutics Limited, Peptide Therapeutics Group plc, Evans Medical
Limited and Medeva plc dated January 30, 1997.+
10.7 Assignment and Variation Agreement between Peptide Therapeutics Limited, the University of Maryland at
Baltimore and Medeva plc dated September 10, 1997.+
10.8 Collaboration Agreement between Peptide Therapeutics Limited and Novartis Pharma AG dated November 1,
1998.+
10.9 Amendment No. 1 to Research and Development and License Agreement between Peptide Therapeutics Limited
and SmithKline Beecham plc dated November 25, 1998.*
10.10 Overview Agreement between Peptide Therapeutics Limited and Pasteur Merieux Serums et Vaccins S.A. dated
January 25, 1999.+
10.11 Standstill Agreement between Peptide Therapeutics Group plc and Pasteur Merieux Serums et Vaccins S.A.
dated January 25, 1999. (Incorporated herein by reference to Amendment No. 2 to Schedule 13D filed on
January 28, 1999 by Peptide Therapeutics Group plc.)
10.12 Lease Agreement between The Master Fellows and Scholars of Trinity College Cambridge and Peptide
Therapeutics Group plc dated May 24, 1996 with respect to Unit 329 Phase V Cambridge Science Park,
Milton Road, Cambridge, England.*
10.13 Lease Agreement among The Master Fellows and Scholars of Trinity College, Chefaro Proprietaries Limited
and NED-INT Holdings Limited dated March 29, 1994 with respect to Unit 327 Phase V Cambridge Science
Park, Milton Road, Cambridge, England.*
10.14 Lease Agreement between The Master Fellows and Scholars of Trinity College Cambridge and IBRD Europe,
Inc. dated April 29, 1993 with respect to Unit 324 Phase 5 Cambridge Science Park, Milton Road,
Cambridge, England.*
10.15 Lease Agreement between the Master Fellows and Scholars of Trinity College Cambridge and IBRD Europe,
Inc. dated November 26, 1992 with respect to Unit 321 Phase 5 Cambridge Science Park, Milton Road,
Cambridge, England.*
10.16 Director's Service Agreement between Peptide Therapeutics Group plc and Nicolas Higgins dated November
29, 1996, as amended September 18, 1998.*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.17 Director's Service Agreement between Peptide Therapeutics Group plc and Gordon Cameron dated March 1,
1997, as amended September 18, 1998.*
10.18 Director's Service Agreement between Peptide Therapeutics plc and John Brown dated March 1, 1997.*
10.19 Letter of Appointment between Peptide Therapeutics Group plc and Alan Dalby dated March 25, 1998.*
10.20 Letter of Appointment between Peptide Therapeutics Group plc and Alan Smith dated January 8, 1998, as
amended April 30, 1998.*
10.21 Letter of Appointment between Peptide Therapeutics Group plc and Sir Brian Richards dated March 1, 1997,
as amended May 1, 1998.*
10.22 Letter of Appointment between Peptide Therapeutics Group plc and Alan Goodman dated July 14, 1998.*
10.23 Peptide Therapeutics Group plc 1994 Unapproved Share Option Scheme.*
10.24 Peptide Therapeutics Group plc 1995 Savings-Related Share Option Scheme.*
10.25 Peptide Therapeutics Group plc 1995 Unapproved Share Option Scheme.*
10.26 Peptide Therapeutics Group plc 1996 Approved Share Option Scheme.*
10.27 Peptide Therapeutics Group plc Share Incentive Plan.*
21.1 Subsidiaries of Peptide.*
23.1 Consent of Weil, Gotshal & Manges (included as part of Exhibit 5.1).
23.2 Consent of Arthur Andersen, independent auditors.
23.3 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.4 Consent of Lance Gordon to serve as a director.*
23.5 Consent of Hambrecht & Quist LLP.*
24.1 Powers of Attorney.*
99.1 Form of proxy to be mailed to stockholders of OraVax, Inc.*
</TABLE>
- ------------------------
* Previously filed.
+ Confidential treatment has been requested for the deleted portions of
Exhibits 10.1, 10.2, 10.3, 10.4, 10.5, 10.6, 10.7, 10.8 and 10.10.
<PAGE>
EXHIBIT 10.1
DATED November 4, 1998
----------------------
PEPTIDE THERAPEUTICS LIMITED
- and -
ELI LILLY AND COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COLLABORATION AGREEMENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT
This agreement is made on November 4, 1998 between PEPTIDE THERAPEUTICS
LIMITED (No. 2774777) whose registered office is at 321 Cambridge Science Park,
Milton Road, Cambridge, CB4 4WG, United
Kingdom ("Peptide")
and
ELI LILLY AND COMPANY whose registered office is at Lilly Corporate Center,
Indianapolis, Indiana 46285, USA ("Lilly").
Together referred to as "the Parties".
WHEREAS:
(A) Peptide has developed a system for the discovery of substrates and
the development of inhibitors of protease enzymes known as RAPiD
(Rational Approach to Protease Inhibitor Design);
(B) Lilly has a potential interest in acquiring rights to the RAPiD
technology and, prior to entering into such a transaction wishes to
evaluate the technology by carrying out a pilot study;
(C) In order to carry out the pilot study, Lilly has identified four
Target Proteases for which Peptide will use its RAPiD technology to
develop FRET based Substrates;
(D) Following successful completion of the Programme and written
notice by Lilly prior to December 31, 1999 to Peptide of its desire
to enter into a Technology Transfer Agreement, the Parties shall
negotiate in good faith a Technology Transfer Agreement.
<PAGE>
IT IS AGREED as follows:
1. DEFINITIONS
1.1 "Arising IP" means any Intellectual Property resulting from the
Programme carried out by Peptide including the Data.
1.2 "Background IP" means all Intellectual Property owned by either
party prior to this Agreement or generated during the term of this
Agreement but not resulting from the Programme. For the avoidance of
doubt, the Parties recognize that Lilly owns all Intellectual
Property related to the Target Proteases and Peptide owns all
Intellectual Property related to RAPiD.
1.3 "Control Protease" means one of the Target Proteases that Lilly
chooses to use as a control in the Programme.
1.4 "Data" means the data relating to the Target Proteases generated
during the Programme by Peptide.
1.5 "FRET" means Fluorescence Resonance Energy Transfer.
1.6 "Know How" means all technical and scientific
information necessary or useful in developing Substrates not at
present in the public domain held in any form (including, without
limitation, that comprised in or derived from drawings, data,
formulae, specifications, notes, chemical compounds, computer
software, component lists, instructions, manuals, reports and
process descriptions).
1.7 "Intellectual Property" means any and all interest, whether legal or
beneficial, arising under the laws of England or elsewhere in
patent, copyright, design right, rights in confidentiality, trade
mark rights and any other analogous rights, applications for any of
the foregoing (and the right to make such applications) including
Know How.
1.8 "Press Release" means the press release to be released by Peptide on
the signing of this Agreement as set out in Addendum III
1.9 "Programme" means a programme of work whereby Peptide will apply
RAPiD to each of the four Target Proteases supplied by Lilly as set
out in more detail in Addendum II. The purpose of the Programme is
to identify a Substrate for each Target Protease.
<PAGE>
1.10 "RAPiD" means Peptide's proprietary system for discovering
substrates and developing inhibitors of protease enzymes.
1.11 "Report" means a report summarizing the Data for all the Target
Proteases to be provided by Peptide to Lilly.
1.12 "Substrate" means a FRET substrate for a Target
Protease
1.13 "Target Proteases" means up to four proteases to be supplied by
Lilly to Peptide.
1.14 "Technology Transfer Agreement" means the agreement to be entered
into by the Parties allowing for the transfer of the RAPiD
technology by Peptide to Lilly consistent with the terms described
in Addendum I and other terms which are customary under similar
circumstances.
2. THE PROGRAMME
2.1 As soon as reasonably practicable following signing this Agreement,
Lilly shall provide Peptide with sufficient quantity of each of the
Target Proteases required for the Programme and any information
necessary or useful for the assay of each of the Target Proteases.
2.2 Peptide agrees to use reasonable endeavours to carry out the
Programme and to deliver to Lilly the Report and the Data for each
of the Target Proteases by December 31, 1998 or as soon as is
reasonably practicable. In addition, if Peptide has identified a
FRET Substrate for any of the Target Proteases, Peptide will supply
Lilly with approximately 10 mg of such Substrate for evaluation
by Lilly. If the generic library does not give a hit for a Target
Protease, then Peptide shall still supply any Data to Lilly for
evaluation.
2.3 Lilly, at its sole option, may enter into a Technology Transfer
Agreement with Peptide by providing Peptide with notice of the same
at any time during the Option Period pursuant to terms negotiated by
the parties in good faith that are consistent with the terms
described in Addendum I and other terms that are customary under
similar circumstances. For purposes of this Agreement the term
"Option Period" shall mean the period commencing on the effective
date of this
<PAGE>
Agreement and ending on the later of either: (i) December 31,
1999 or (ii) four months after Lilly has received all Data,
Substrates and Report as contemplated under this Agreement.
3. CONSIDERATION
In consideration of Peptide carrying out the Programme, Lilly agrees to
make payments to Peptide after signing this Agreement, exclusive of any
applicable sales taxes in the following manner:
[]*
Notwithstanding anything to the contrary in this Agreement, under no
circumstance shall Lilly make payments to Peptide under this Agreement in
excess of
(i) []* and
(ii) $400,000 in aggregate of all services contemplated under this
Agreement.
4. INTELLECTUAL PROPERTY
4.1 All Background IP shall remain the property of the party owning such
Background IP prior to this Agreement.
4.2 All Arising IP, all Data and any Substrates shall be the property of
Peptide.
4.3 Lilly shall have an exclusive, worldwide, perpetual, royalty-free
license for Arising IP, Data and Substrate relating to each Target
Protease that it has paid the []* license fee for under 3, above.
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
4.4 Peptide shall, at the request of Lilly, file any patent applications
covering Arising IP at Lilly's cost. Such patent applications shall
be filed in the name of Peptide and shall form part of the license
to Lilly in 4.3 above.
4.5 If Lilly does not exercise its option to take a license under 3
(iii) above for a Target Protease then Lilly shall have no rights to
use any of the Arising IP, Data or Substrate for that Target
Protease at any time for any purpose whatsoever.
5. CONFIDENTIALITY
The Parties hereby acknowledge that the Confidentiality Agreement dated
September 3, 1998 entered into between the Parties covers all aspects of
the handling of Confidential Information anticipated by this Agreement.
Background IP, Arising IP and Data shall be included as Confidential
Information.
6. WARRANTIES AND UNDERTAKINGS
The Parties exclude to the fullest extent permitted by law any warranties,
conditions, undertakings or terms implied by operation of law (statutory
or otherwise).
7. ASSIGNMENT
Neither party shall assign or transfer or purport to assign or transfer
any of its rights or obligations under this Agreement except with the
prior written consent of the other party save that either party may at any
time assign or transfer any of its rights or obligations under this
Agreement to any of its Affiliates. Affiliates for the purpose of this
Agreement shall mean any entity Controlled by such party. Controlled shall
mean direct or indirect beneficial ownership of fifty percent (50%) or
more of the voting income or equity interest in a business entity. This
Agreement shall be binding upon and shall inure to the benefit of the
Parties hereto, their successors and assigns.
8. COSTS
<PAGE>
Except as otherwise expressly provided in this Agreement, each party shall
pay its own costs of and incidentals to the negotiation, preparation,
execution and implementation by it of this Agreement and of all other
documents referred to in it.
9. FURTHER ASSURANCE
Each party shall, at its own cost, do and execute or procure to be done
and executed all necessary acts, deeds, documents and things reasonably
within its power to give effect to this Agreement.
10. GENERAL
10.1 This Agreement constitutes the entire agreement between the Parties
relating to the subject matter of this Agreement (except for the
Confidentiality Agreement dated September 3, 1998) and supersedes
all previous such agreements whether made orally or in writing.
10.2 No variation of this Agreement shall be valid unless it is in
writing and signed by or on behalf of each of the Parties.
10.3 The failure to exercise or delay in exercising right or remedy under
this Agreement shall not constitute a waiver of the right or remedy
or a waiver of any other rights or remedies and no single or partial
exercise of any right or remedy under this Agreement shall prevent
any further exercise of the right or remedy or the exercise of any
other right or remedy.
10.4 Nothing in this Agreement shall be construed as creating a
partnership between the Parties or as constituting either party as
the agent of the other party for any purpose whatsoever and neither
party shall have the authority or power to bind the other party or
to contract in the name of or create a liability against the other
party in any way or for any purpose.
10.5 If the performance of any part of this Agreement by either party, or
of any obligation under this Agreement, is prevented, restricted,
interfered with or delayed by reason of any cause beyond the control
of the party liable to perform, unless conclusive evidence to the
contrary is
<PAGE>
provided, 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 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.
11. GOVERNING LAW AND JURISDICTION
This Agreement shall be governed by the laws of England and the Parties
hereto hereby irrevocably submit to the non-exclusive jurisdiction of the
English Courts.
12. COUNTERPARTS
This Agreement may be executed in any number of counterparts each of
which, when executed and delivered, shall be an original, but all the
counterparts together shall constitute one and the same instrument.
13. TERM
This Agreement will expire upon the end of the Option Period as set
forth in 2.3, above, unless earlier terminated by Lilly in writing to
Peptide.
14. ANNOUNCEMENTS
The Parties agree that immediately following the execution of this Agreement the
Press Release may be released by Peptide. No other public announcement,
communication or circular (other than to the extent required by law, the London
Stock Exchange Limited or the panel on take-overs and mergers or any other
regulatory body in any jurisdiction) concerning the transactions referred to in
this Agreement shall be made or dispatched by either party for so long as this
Agreement continues in force without the prior written consent of the other
party, such consent not to be unreasonably withheld or delayed.
<PAGE>
IN WITNESS WHEREOF, the Parties, through their authorized officers, have
executed this Agreement as of the date first written above.
PEPTIDE THERAPEUTICS LIMITED
By: /s/ Nicolas Higgins
------------------------------
Name: Nicolas A. Higgins
----------------------------
Title: Commercial Director
---------------------------
ELI LILLY AND COMPANY
By: /s/ [ILLEGIBLE]
------------------------------
Name: [ILLEGIBLE]
----------------------------
Title: November 4, 1998
---------------------------
<PAGE>
Addendum I
Term of the agreement for a License to the RAPiD technology: 10 years
License fee to RAPiD and Libraries (improvements and upgrades) and technology
to develop Protease inhibitors:
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
Addendum II
Work Programme
For each of the Target Proteases received by Peptide from Lilly, Peptide will
endeavour to:
1. Set up a protease assay using assay conditions received from Lilly, if
available.
2. Screen generic RAPiD library with the protease. The generic library contains
over [ ]* FRET compounds that are potential protease substrates.
3. Analyse substrates cleaved using Peptide's FOCUS software, and provide Lilly
with this data, including in the FOCUS software format.
4. With Lilly, identify which substrates to synthesise as single compounds
for further analysis.
5. Synthesise single substrate compounds and determine kinetics on these
compounds.
6. Provide Lilly with a report describing the work carried out, the data on
the substrates, and [ ]* of one of the substrates (if available).
7. []*
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
Addendum III
The Press Release
Peptide Therapeutics Group plc
Collaboration with Eli Lilly on development of protease inhibitors
Peptide Therapeutics Group plc ("Peptide") (Cambridge, UK) announces that it has
entered into a research collaboration with Eli Lilly and Company ("Lilly")
(Indianapolis, USA). Under the terms of the agreement, Peptide will apply its
proprietary `RAPiD' protease inhibitor drug discovery technology to four
protease targets provided by Lilly.
John Brown, CEO of Peptide said "We are delighted to be working with such a
significant corporate partner as Lilly. RAPiD is already being applied to
several in-house and collaborative programmes and the addition of Lilly as
another partner provides further endorsement of the technology's potential."
Enquiries:
Peptide Therapeutics Group plc Tel: 01223 423333
Dr John Brown, CEO
Financial Dynamics Tel: 0171 831 3113
John Bick
NOTES TO EDITORS
1. RAPiD
Peptide's proprietary RAPiD (Rational Approach to Protease Inhibitor Design)
technology exploits novel combinatorial and medicinal chemistry techniques, and
enables the rapid development of potent and selective protease inhibitor drugs.
RAPiD can be applied to all classes of proteases and, in addition to inhibitors,
also provides substrates (suitable for high throughput screening), a wealth of
structure activity relationship data for the protease, and probe inhibitors for
drug target validation.
Peptide is applying its RAPiD technology internally to develop protease
inhibitor drugs for several diseases but is also commercialising the technology
through collaborations with pharmaceutical companies.
2. Peptide
Peptide is a biopharmaceutical development company based in Cambridge, UK.
Peptide's strategy is to discover novel drugs and vaccines using innovative
proprietary
<PAGE>
technologies and to develop these products through royalty-bearing alliances
with leading pharmaceutical companies who will then complete the development and
manufacture and market the product.
<PAGE>
EXHIBIT 10.2
[LETTERHEAD]
April 27, 1998
By telefax: 011 44 1223 423 111
Mr. N.A. Higgins
Peptide Therapeutics Limited
321 Cambridge Science Park
Milton Road
Cambridge CB4 4WG
England
Dear Nick:
This letter is intended to outline the general terms which have been agreed
between Peptide Therapeutics ("PT") and the joint ventures between OraVax, Inc.
and Pasteur Merieux Serums et Vaccins S.A. known as Merieux OraVax S.N.C. and
OraVax Merieux Co. ("PM-O").
This letter provides for terms and conditions of an option granted by PT to PM-O
in order to allow PM-O to evaluate the technical feasibility of H. pylori
vaccines formulated with PT's Salmonella vectors. For this part, this letter is
hereinafter referred to as the "Option Agreement."
This letter also expresses the intent of the parties to negotiate in good
faith a license agreement to be executed by their authorized representatives.
Under the license agreement, PM-O will obtain rights to develop and
commercialize H. pylori vaccines formulated with any PT's Salmonella vector
(the "PT Technology"). Until the execution of this license agreement or until
July 31, 1999, whichever is sooner. PT will negotiate exclusively with PM-O
regarding the use of the PT Technology with the PM-O program H. pylori
antigens, and non-exclusively regarding the use of the PT Technology for all
other H. pylori antigens.
Option Agreement
Option Period April 1, 1998 through completion by PM-O of Phase I
trials of a vaccine utilizing the PT technology or
July 31, 1999, whichever comes first.
Option PT will grant to PM-O an exclusive option to an exclusive,
worldwide license to PT's Salmonella Technology for the
development, manufacture, use and/or sale of prophylactic
and therapeutic human vaccines against H. pylori infection,
under a License Agreement containing the terms set out below
<PAGE>
Feasibility Study The parties will perform a joint Feasibility Study to
evaluate the utility of the PT technology in PM-O's H.
pylori vaccines in two stages as described in Attachments A
and B.
Option Fee PM-O will pay PT a non-refundable Option Fee of $200,000, in
three installments, subject to the following:
[ ]* on execution of this Option Agreement
[ ]* on successful completion by PT of items 1-5 of
Attachment A. In the event PT can not successfully
complete items 1-5 of Attachment A, this second
installment shall not be payable by PM-O, and the parties
will have the option to not proceed with items 6 and 7 of
Attachment A and item 3 of Attachment B.
[ ]* in the event the parties elect to proceed with
items 6 and 7 of Attachment A and item 3 of Attachment B
and on completion by PT of step 7 of Attachment A
The parties will keep each other informed of their
activities under the Feasibilty Study and report the results
of their work to each other in a timely manner.
Reporting PM-O will inform PT on or before thirty (30) days after the
termination of the Option of its decision whether or not to
proceed with commercial development of PT's technology under
the License Agreement terms proposed below.
Exercise of Option In the event PM-O elects to proceed with commercial
development of PT's technology, the parties will enter into
a License Agreement containing the terms set out below,
such License Agreement to be entered into by the parties
on the earlier of completion by PM-O of Phase I trials of
a vaccine utilizing the PT technology or July 31, 1999.
In the event PM-O declines to proceed with commercial
development, the Option Agreement shall be terminated and
all PT patent rights will revert to PT.
Confidentiality During the term of the Option Period any confidential
information received by one party from the other party shall
be governed by the terms of the Confidential Disclosure
Agreement between PT and PM-O dated May 8, 1997, save that
PM-O and PT shall have the right to use and disclose to
third parties data and results from the Feasibility Study
solely for research and development activities relating to
the other party's technology, provided such disclosure is
made under obligations of confidentiality similar to those
of the aforementioned Confidential Disclosure Agreement
between PT and PM-O.
- -----------------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
2
<PAGE>
License Agreement
Grant PT will grant to PM-O an exclusive license for human
applications to its Salmonella typhimurium and Salmonella
typhi vectors and all related patents, patent applications
and know-how (the "PT technology"), the right to sublicense,
for use with the PM-O program H. pylori antigens, and a
non-exclusive license regarding the use of the PT technology
for all other H. pylori antigens.
Territory Worldwide
Term The term of the license will be the longer of (i) ten
(10) years from product launch on a country-by-country
basis or (ii) through the last to expire of relevant
patents owned or licensed to Peptide Therapeutics. PM-O
will have the right to terminate on ninety (90) days
notice, with all rights to the PT Technology reverting
to Peptide Therapeutics, at no additional cost to PM-O.
PM-O Diligence PM-O will exert reasonable efforts to develop and introduce
requirements the PT technology into the commercial market.
Royalty PM-O will pay to PT []* royalties on net sales of licensed
products (whether by PM-O or any licensee); in the event
PM-O is required to license other third party technologies,
this rate may be reduced by []* of royalties due to such
third parties, but in no event will the rate payable by PM-O
be reduced to less than (i) []* if the PT technology is
the only adjuvant or delivery system required to
commercialize a licensed product; (ii) []* if PM-O is
required to license other adjuvant or delivery system
technologies in order to commercialize a licensed product;
(iii) []* if PT know-how only is used by PM-O to
commercialize a licensed product. []*
License Fee On execution of the License Agreement, PM-O will pay PT a
non-refundable signing fee of []*.
Milestone payments PM-O will pay to PT the following milestone payments:
[]*
- ----------------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
3
<PAGE>
[]*
[]*
General If the parties agree that PT should provide additional
services (such as process development/manufacturing of
clinical lots, toll manufacture, etc.), then the parties
agree to negotiate additional payments to reflect this added
input by PT.
Governing Law Option and License Agreement to be under English law and
jurisdiction.
Please indicate Peptide Therapeutics agreement to the terms set out below in the
space provided below.
/s/ Lance K. Gordon /s/ Paul Kirkconnell
- ------------------------------------ ------------------------------------
Lance K. Gordon, Ph.D. Paul Kirkconnell
OraVax Merieux Co. Merieux OraVax S.N.C.
/s/ Nicolas Higgins
- ------------------------------------
Nicolas Higgins
Director
Peptide Therapeutics Limited
- -----------------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
4
<PAGE>
ATTACHMENT A
CONFIDENTIAL
Feasibility Study for H. pylori Vaccine
Peptide Therapeutics Workplan
[]*
- ------------------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
5
<PAGE>
ATTACHMENT B
CONFIDENTIAL
Feasibility Study for H. pylori Vaccine
PM-O Workscope
[]*
- -----------------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
6
<PAGE>
EXHIBIT 10.3
DATED MARCH 13, 1998
PEPTIDE THERAPEUTICS LIMITED
and
PEPTIMMUNE INC.
COLLABORATION AGREEMENT
<PAGE>
1
THIS AGREEMENT is made on March 13, 1998
BETWEEN:
(1) PEPTIDE THERAPEUTICS LIMITED, a company incorporated in England and Wales
(registered no.2774777), whose registered office is at 321 Cambridge
Science Park, Milton Road, Cambridge CB4 4WG ("PT"); and
(2) PEPTIMMUNE INC., a company incorporated in Delaware whose registered
office is at 840 Memorial Drive, Cambridge, MA 02139-3771 USA ("PI"),
together referred to as "the Parties".
WHEREAS:
(A) PT has developed the RAPiD(TM) (Rational Approach to Protease Inhibitor
Design) technology to enable the RAPiD development of protease inhibitors;
(B) PI has determined that inhibition of Cathepsin S is a suitable way to
suppress the class II MHC-associated immune response in mammals.
Inhibition of Cathepsin S is therefore considered an appropriate method
for the treatment of autoimmune diseases, allergic responses and organ
transplant or tissue graft rejection. A patent application in this field
has been submitted by the Massachusetts Institute of Technology ("MIT").
PI is the exclusive licensee under an Agreement with MIT dated May 5,
1997, and as amended March 13,1998, a copy of which is attached at
Schedule 3 (the "MIT Agreement"). PI also has an agreement with Brigham
and Women's Hospital of Boston (the "Hospital").
(C) PT and PI have agreed to establish a collaboration to use RAPiD(TM) to
develop inhibitors for Cathepsin S and to commercialise these inhibitors.
THIS AGREEMENT WITNESSES as follows:
1. INTERPRETATION
1.1. In this Agreement:
"Affiliate" means any company or other entity 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 (or such lesser percentage which is the
maximum allowed to be owned by a foreign
corporation in a
<PAGE>
2
particular jurisdiction) having the power to vote
on or direct the affairs of the entity and any
person, firm, company or other entity actually
controlled by, controlling or under common control
with a Party to this Agreement.
"Effective Date" means the date of execution of this Agreement.
"Field" means Cathepsin S inhibitors for use in the
treatment of autoimmune and allergic diseases and
to prevent organ transplant and tissue graft
rejection.
"Intellectual means patents, patent applications, trade marks,
Property" service marks, registered designs, applications for
any of the foregoing; trade and business names,
unregistered trade marks and service marks,
copyrights, rights in designs, Inventions, rights
under licences, consents, orders, statutes or
otherwise howsoever in relation to any such rights,
and rights of the same or similar effect or nature,
in any part of the world.
"Invention" means innovative patentable subject matter and
shall include both subject matter capable of such
exploitation under intellectual property rights and
subject matter capable of such exploitation by
reasons of its confidential nature and, without
prejudice to the generality of the foregoing, the
said expression shall include computer software,
biological material and plant varieties.
"Inventors" means persons who devise Inventions and shall
include both authors of computer software and
authors of any copyright material relevant to an
Invention.
"Know-How" means all non-patentable technical and scientific
information necessary or useful in practising PI
Rights or PT Rights not at present in the public
domain held in any form (including, without
limitation, that comprised in or derived from
drawings, data, formulae, specifications, notes,
chemical compounds, computer software, component
lists, instructions, manuals, technical brochures,
catalogues and process descriptions).
<PAGE>
3
"PI Rights" all rights in any Intellectual Property or
Know-how owned or controlled by or at the free
disposal of PI, other than the MIT Agreement, or
any Affiliate of PI at the date of this Agreement
which relate to Cathepsin S and the Project.
"Project" means the programme of research and development to
be carried out by PT and PI as more particularly
described in the Work Programme.
"Project Rights" means rights in any Inventions, Intellectual
Property or Know How within the Field arising from
the Project or work done on or in connection with
the Project. For avoidance of doubt, Project Rights
shall not include PT Rights or PI Rights.
"PT Rights" all rights in any Intellectual Property or Know-how
owned or controlled by or at the free disposal of
PT or any Affiliate of PT at the date of this
Agreement and relating to RAPiD(TM) and its
associated technologies which relate to the
Project.
"Revenue" means all consideration actually received net of
any and all royalties, milestone, licence fee and
other similar payments for patent and or
intellectual property use rights necessary to the
commercialisation of the Project Rights payable to
third parties, who are not Affiliates, by either or
both of the Parties from third parties which result
from the commercialisation of the Project Rights
(including without limitation development funds,
payments for options for licences, paid up
licences, stage payments under licences, milestone
payments and royalties). The payment of
consideration in the form of anything other than
cash payments shall only be permitted with the
express written consent of both Parties unless one
of the Parties is no longer a Party to this
Agreement.
"Work Programme" means the programme of work as set out at Schedule
1.
1.2. In this Agreement, a statutory provision includes a reference to:
1.2.1 (a) the statutory provision as modified or re-enacted or both from
time to
<PAGE>
4
time before the date of this Agreement; and
(b) any subordinate legislation made under the statutory provision
before the date of this Agreement;
1.2.2 persons includes a reference to any body corporate, unincorporated
association or partnership;
1.2.3 a person includes a reference to that person's legal personal
representatives, successors and permitted assigns;
1.2.4 a Clause or Schedule, unless the context otherwise requires, is a
reference to a clause of or schedule to this Agreement and the
Schedules shall form an integral part of this Agreement;
1.3. The headings in this Agreement shall not affect the interpretation of this
Agreement.
2. THE PROJECT
2.1. The Parties shall diligently carry out the Project and shall procure that
the Project is carried out by suitably qualified staff.
2.2. Neither Party shall sub-contract any work on the Project without the prior
written consent of the other Party. As at the Effective Date, it is agreed
that PI will subcontract all animal studies necessary to establish
biological proof-of-principle as identified in Clause 2.5.
2.3. PT and PI shall set up a Project Management Team. This team will consist
of both scientific and commercial representatives of both PT and PI. The
role of the Project Management Team shall be to co-ordinate the
collaboration and to manage the day-to-day running of the Project. The
Project Management Team shall not go beyond the limits of the Project as
set out in this Agreement and shall have no authority to bind the Parties
with respect to any obligations to third parties nor to incur any costs
beyond those contained in budgets approved by the Parties without the
prior written agreement of the Parties.
2.4. Within one month of the Effective Date the Project Management Team shall
meet and shall agree to the major milestones of the Project together with
the time limits and budgets for achievement of these milestones. If the
Parties are unable to reach such agreement within 30 days then the
Agreement shall terminate.
<PAGE>
5
2.5. The Project will aim to illustrate []*
2.6. PT and PI shall each provide research reports to each other on a monthly
basis. These reports shall detail progress made in the Project in the
previous month. The Project Management Team shall meet at least every
three months to review progress of the Project and to determine strategy
for the development of the Project.
2.7. Each Party shall bear its own costs for its part in the Project. Each
Party shall keep account of its costs on the basis defined at Schedule 2
hereto and shall produce an accounting on a quarterly basis. It is the
intent of the Parties that each Party shall bear approximately 50% of the
costs of the Project.
2.8. For the avoidance of doubt, all persons employed or appointed as
subcontractors or agents by either Party on the Project, shall remain the
sole responsibility of that Party and that Party shall remain liable for
the payment of the salaries and fees (and all taxation and other
contributions payable thereon) of such persons.
2.9. Neither Party shall work on the development of inhibitors of Cathepsin S
in collaboration with or at the request of or on behalf of any third party
until termination of this Agreement.
3. TERMINATION
3.1. Either Party (the "Initiating Party") may terminate this Agreement with
immediate effect by notice in writing to the other Party (the "Defaulting
Party") on or at any time after the occurrence of any of the events
specified in Clause 3.2 in relation to the Defaulting Party.
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
6
3.2. The events are:
3.2.1 a material breach by the Defaulting Party of any of its material
obligations under this Agreement which (if the breach is capable of
remedy) the Defaulting Party has failed to remedy within 120 days
after receipt of notice in writing from the Initiating Party
identifying the breach and requiring the Defaulting Party to remedy
the breach; or
3.2.2 the passing by the Defaulting Party of a resolution (or similar) for
its winding-up or the making by a court of competent jurisdiction of
an order (or similar) for the winding-up of the Defaulting Party or
the dissolution of the Defaulting Party (other than for the purposes
of corporate restructuring); or
3.2.3 the making of an administration order (or similar) in relation to
the Defaulting Party or the appointment of a receiver (or similar
officer) over, or the taking of possession or sale by an
encumbrancer of, any of the Defaulting Party's assets; or
3.2.4 the Defaulting Party making an arrangement or composition with its
creditors generally or making an application to a court of competent
jurisdiction for protection from its creditors generally; or
3.2.5 the Defaulting Party ceasing, or threatening to cease, to carry on
all or substantially all of its business activities.
4. CONSEQUENCES OF TERMINATION
4.1. All rights and obligations of the Parties shall cease to have effect
immediately upon termination of this Agreement except that termination
shall not affect:
4.1.1 the accrued rights and obligations of the Parties at the date of
termination; and
4.1.2 the continued existence and validity of the rights and obligations
of the Parties under Clauses 4.3, 4.4, 4.5, 6.1, 6.2, 6.5, 6.6, 6.9,
6.14, and 7 and the provisions set out in Schedule 1 and any
provisions of this Agreement necessary for the interpretation or
enforcement of this Agreement
and if termination of this Agreement is pursuant to Clause 3.2 above then
the Party not in breach shall be free to continue the Project alone or
with a third party and the Defaulting Party shall automatically assign its
rights in the Project Rights to the other Party at no cost and shall grant
to the other Party perpetual, royalty free, non-exclusive licences (with
rights to sub-license) to PI Rights (where PI is
<PAGE>
7
the Defaulting Party) or to PT Rights (where PT is the Defaulting Party).
4.2. If the Parties agree that the objectives of the Project cannot be met
within the agreed timescale referred to in Clause 2.5 of this Agreement or
the objectives of the Project have not been met within 24 months of the
Effective Date then this Agreement shall immediately terminate.
4.2.1 PT shall own all PT Rights and Project Rights which are improvements
to or extensions of RAPiD including compound libraries.
4.2.2 PI shall own all PI Rights and Project Rights which are improvements
to or extensions of PI Rights.
4.2.3 Any Inventions and Intellectual Property related to pharmacophores,
compounds and inhibitors of Cathepsin S generated as a result of the
Project shall be jointly assigned to PT and PI pursuant to Clause 6.
4.3. In the event of the termination of this Agreement, other than pursuant to
Clause 2.4 or 4.2, then the Defaulting Party shall receive a percentage
share of any Revenue generated by the other Party such a share being
calculated on the following basis:
4.3.1 If the Agreement is terminated prior to the first anniversary of the
Effective Date, then the Defaulting Party's share shall be []*
4.3.2 If the Agreement is terminated after the first anniversary of the
Effective Date but before any Cathepsin S inhibitors undergo
toxicology studies then the Defaulting Party's share shall be []*
4.3.3 if the Agreement is terminated after one or more Cathepsin S
inhibitors has entered toxicology studies but before approval to
begin human clinical studies then the Defaulting Party's share shall
be []*
4.3.4 if the Agreement is terminated after one or more Cathepsin S
inhibitors receives approval to begin human clinical studies then
the Defaulting Party's share shall be []*
The Defaulting Party will continue to receive such a Revenue share for the
period of 20 (twenty) years or until the expiration all patents and
supplementary protection certificates resulting from the Project,
whichever is longer.
4.4. If this Agreement is terminated otherwise than pursuant to Clause 2.4.
or 4.2. and PI is the Defaulting Party, (a) PI hereby grants to PT
effective on termination of this Agreement an exclusive sub-license in
the Field to the MIT Agreement as amended and attached hereto as
Schedule 3, and (b) PI agrees to not compete with PT in the Field for a
period of one (1) year following the termination of this Agreement.
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
8
4.5 In the case of PT being the Defaulting Party, PT agrees not compete with
PI in the Field for a period of one (1) year following the termination of
the Agreement.
5. WARRANTIES AND UNDERTAKINGS
5.1. PI hereby represents, warrants and undertakes to PT that:
5.1.1 All of PI's employees are subject to strict confidentiality
obligations and all discoveries, Inventions and Intellectual
Property made by employees during the course of his/her employment
by PI are owned absolutely by PI;
5.1.2 The terms of all contracts for the provision of services to PI by
independent contractors contain provisions whereby the contractor is
subject to strict confidentiality obligations and all discoveries,
Inventions and Intellectual Property in the Field made by the
independent contractor in performing the service contracted for are
owned absolutely by PI save where the Hospital is the contractor
in which case the Hospital will only be required to use reasonable
efforts not to disclose any Confidential Information and any
discoveries. Inventions and Intellectual Property solely created by
the Hospital ("Hospital New Technology") shall be the property of
the Hospital and PI shall use its best efforts to take a licence of
Hospital New Technology, if such licence of New Hospital Technology
is necessary to conduct the Project in the Field;
5.1.3 PI shall, at the Effective Date, have obtained all necessary
consents and permissions from MIT as may be required under the MIT
Agreement in order for PI to be able to enter into and perform its
obligations under this Agreement and sub-license PI Rights to PT and
to any third parties;
5.1.4 at the Effective Date PI is not aware of any royalties or other
payments which are or may become payable to third parties in respect
of the PI Rights with the exception of the MIT Agreement.
5.2. PT hereby represents, warrants and undertakes to PI that:
5.2.1 the employment contracts of all of PI's employees contain provisions
whereby the employee is subject to strict confidentiality
obligations and all discoveries, Inventions and Intellectual
Property made by the employee during the course of his/her
employment by PT are owned absolutely by PT;
5.2.2 the terms of all contracts for the provision of services to PT by
<PAGE>
9
independent contractors contain provisions whereby the contractor is
subject to strict confidentiality obligations and all discoveries,
Inventions and Intellectual Property in the Field made by the
independent contractor in performing the service contracted for are
owned absolutely by PT;
5.2.3 PT owns full legal and beneficial title to the PT Rights;
5.2.4 at the Effective Date PT is not aware of any royalties or other
payments which are or may become payable to third parties in respect
of the PT Rights.
5.3. Each Party warrants and represents that:
5.3.1 it has all necessary permissions, consents and licences to carry out
the Project as detailed in the Work Programme;
5.3.2 it shall ensure that it will be ready and able to undertake the
Project within 1 (one) month of the date hereof.
6. INTELLECTUAL PROPERTY
6.1. PT shall retain ownership of the PT Rights.
6.2. PI shall retain ownership of the PI Rights
6.3. Should any new biological targets outside the Field be generated as a
result of the Project, PI shall be the owner of all rights pertaining to
such targets. PT shall have a 90-day right of proposal and negotiation to
propose a research and development project for such target, such
negotiation period to occur immediately after the date PT is notified that
the target has been identified. If PT and PI have not entered into a
written agreement for such proposed project at the end of such 90-day
period, then PT shall have no further rights in respect of such target,
and PI shall proceed as it sees fit; provided, however, that for the
180-day period following such 90-day period, PI shall not enter into an
agreement in respect of such target on terms less favourable to PI than
those last offered to PI by PT during such 90-day period.
6.4. Each Party hereby grants to the other Party a non-exclusive, royalty-free
licence (or sub-licence where appropriate and with the approval of the
head licensee if required) for so long as this Agreement remains in force
and has not been terminated (but not thereafter) to use such of the PT or
PI Rights or sub-licence rights in the Field to the MIT Agreement as are
necessary for the sole purpose of carrying out the Project.
6.5. All Project Rights shall be jointly owned by PT and PI (except as
otherwise
<PAGE>
10
specifically provided for in this agreement) and the Parties shall not
disclose the same and shall procure that the Inventors under their
respective control do not disclose the same to any third party except with
the other Party's prior written consent. Each Party shall (and shall
procure that those of its employees and others under its control engaged
on the Project shall if requested) transfer or assign such Project Rights
to the other Party.
6.6 All Intellectual Property and Know How resulting from the Project outside
of the Field shall be owned as follows:
6.6.1 Any new biological targets (other than Cathepsin S) shall be owned
by PI;
6.6.2 Any Invention or improvements relating to RAPiD and compound
libraries shall be owned by PT;
6.6.3 Any other Intellectual Property shall be jointly owned. Each Party
hereby grants to the other a perpetual, royalty-free, worldwide
licence (with right to sub-license) to use as it sees fit the
Project Rights that continue to be jointly owned.
6.7 Each Party shall ensure that the other Party is promptly informed of all
Inventions arising from the Project or work done on or in connection with
the Project and shall also ensure that nothing is done by anyone under its
control to prejudice the grant in the United Kingdom, the United States of
America or any other part of the world of any patent or other protection
in respect of any Invention arising from the Project or work done on or in
connection with the Project.
6.8 In the event of a person other than an employee of a Party being employed
on the Project that Party shall before such person is permitted to work on
the Project obtain the signature of that person to an undertaking covering
(a) nondisclosure of Confidential Information and (b) the ownership of
rights in Inventions, Intellectual Property and Know How arising from the
Project each in terms as if the person were a Party to this Agreement
save where the Hospital is employed on the Project in which case the
Hospital will only be required to use reasonable efforts not to disclose
any Confidential Information.
6.9 In order to facilitate the exploiting of any Invention arising from the
Project as effectively as possible each Party shall, and shall use all
reasonable endeavours to procure that the Inventors shall, from time to
time supply the other Party and its nominees (including licensees) with
any drawings, models, designs, technical data, computer software,
information, Know-How, biological material, or plant varieties in their
possession relating to the Invention.
6.10 The Parties will file any applications for patents covering jointly-owned
Project Rights in the joint names of both Parties. The cost of
prosecution of these patent applications and of maintenance and protection
of any patents granted,
<PAGE>
11
as a result of these applications, shall be shared equally between PT and
PI. The foregoing does not apply to patent applications filed by the
Hospital unless licensed jointly by the Parties.
6.11 For the avoidance of doubt, the Parties anticipate that the
commercialisation of Cathepsin S inhibitors developed during or in
connection with the Project will be through the licensing of such
inhibitors to a major pharmaceutical company. On such a commercialisation
PT and PI shall each grant the licensee or sub-licensee such licences and
sub-licences to PT Rights, PI Rights and the MIT Agreement as necessary to
develop Cathepsin S inhibitors developed during or in connection with the
Project.
6.12 All money received by either Party from a third party in respect of
Project Rights shall first be used to pay for any royalty or other
payments due to the owners of intellectual property rights licensed by one
of the Parties and necessary to commercialisation of the Project Rights.
All money received by either Party from such a third Party shall then be
used to reimburse each of the Parties, on a pro rata basis, for costs
incurred in the Project in accordance with Clause 2.7. Thereafter, PT and
PI shall share equally all Revenue after the payment of any continuing
royalties or other payments as described in the first sentence of this
Clause 6.12, which shall be shared equally by the Parties.
6.13 In the event that a bona fide offer is made to the Parties in relation to
the commercialisation of Cathepsin S inhibitors developed during or in
connection with the Project and the Parties cannot agree on whether to
accept such an offer then the Party which is unwilling to accept the offer
(the "Refusing Party") shall be obliged to pay the Party which is willing
to accept the offer (the "Accepting Party") the sum of 50% (fifty percent)
of the total written and irrevocable offer made by a third party (such an
offer to be a transaction at arms length) in order to purchase the
Refusing Party's rights in the Project Rights.
6.14 Infringement of Patents of Third Parties
(a) PI shall defend any suit, action or proceeding brought against itself
or PT alleging the infringement or misappropriation of any patent or any
other proprietary right of a third party by reason of the use of the PI
Rights in the Project. PT shall give PI prompt written notice of the
commencement of any such suit, action or proceeding or any claim of
infringement against PT and will furnish to PI a copy of each
communication relating to the alleged infringement and shall give to PI
all authority (including the right to exclusive control of the defense and
settlement of any such suit, action or proceeding), information and
assistance necessary to defend or settle any such suit, action or
proceeding. PI shall keep PT advised as to, and consult with PT from time
to time in respect of, all material developments with respect to such
suit, action or proceeding or any settlement negotiations in connection
therewith. PI shall pay (i) all expenses (including reasonable attorneys'
fees) incurred in connection with any such suit,
<PAGE>
12
action or proceeding and (ii) any actual damages and costs finally awarded
against the infringing party as the result of any such suit, action or
proceeding, or the amount payable in any settlement of any such suit,
action or proceeding to the extent either arise from the PI Rights. In no
event shall PI be required to pay to PT any indirect, special, incidental
or consequential damages of any kind as a result of or in connection with
any such suit, action or proceeding or the settlement thereof. For
purposes of this Clause 6.14(a), PI rights shall include any Project
Rights assigned exclusively to PI.
(b) PT shall defend any suit, action or proceeding brought against itself
or PI alleging the infringement or misappropriation of any patent or any
other proprietary right of a third party by reason of the use of the PT
Rights in the Project. PI shall give PT prompt written notice of the
commencement of any such suit, action or proceeding or any claim of
infringement against PI and will furnish to PT a copy of each
communication relating to the alleged infringement and shall give to PT
all authority (including the right to exclusive control of the defense and
settlement of any such suit, action or proceeding), information and
assistance necessary to defend or settle any such suit, action or
proceeding. PT shall keep PI advised as to, and consult with PI from time
to time in respect of, all material developments with respect to such
suit, action or proceeding or any settlement negotiations in connection
therewith. PT shall pay (i) all expenses (including reasonable attorney's
fees) incurred in connection with any such suit, action or proceeding and
(ii) any actual damages and costs finally awarded against the infringing
party as the result of any such suit, action or proceeding, or the amount
payable in any settlement of any such suit, action or proceeding to the
extent either arise from the PT Rights. In no event shall PT be required
to pay to PI any indirect, special, incidental or consequential damages as
a result of or in connection with any such suit, action or proceeding or
the settlement thereof. For purposes of this Clause 6.14(b), PT rights
shall include any Project Rights assigned exclusively to PT.
(c) Unless otherwise agreed by the parties, PI and PT shall jointly defend
any suit, action or proceeding brought against either or both of PI or PT,
alleging the infringement or misappropriation of any patent or any other
proprietary right of a third party by reason of the use of the
jointly-owned Project Rights in the Project. If such suit, action or
proceeding or any claim of infringement is brought against either PI or PT
(the "Named Party"), such Named Party shall give the other party prompt
written notice of the commencement of any such suit, action or proceeding
or any claim of infringement and will furnish the other party with a copy
of each communication relating to the alleged infringement and shall share
equally all authority (including the control of the defense and settlement
of any such suit, action or proceeding), information and assistance
necessary to defend or settle any such suit, action or proceeding. The
Named Party shall keep the other party advised as to and consult in
respect of all developments with respect to such suit, action or
proceeding or any settlement negotiations in connection
<PAGE>
13
therewith. The parties shall share equally (i) all expenses (including
reasonable attorney's fees) incurred in connection with any such suit,
action or proceeding and (ii) any actual damages and costs finally awarded
against the infringing party as the result of any such suit, action or
proceeding, or the amount payable in any settlement of any such suit,
action or proceeding to the extent either arise from the Project Rights.
In no event shall either party be required to pay the other any indirect,
special, incidental or consequential damages as a result of or in
connection with any such suit, action or proceeding or the settlement
thereof.
7. CONFIDENTIALITY
7.1. For the purposes of this Clause, "Confidential Information" means all
information of a confidential nature disclosed (whether in writing,
verbally or any other means and whether directly or indirectly) by one
Party ("the Disclosing Party") to the other Party ("the Receiving Party")
whether before or after the Effective Date including, without limitation,
any information relating to the Disclosing Party's products, operations,
processes, plans or intentions, product information, Know How,
Intellectual Property, Inventions, trade secrets, market opportunities and
business affairs.
7.2. Subject always to Clause 7.5 during the term of this Agreement and after
termination or expiration of this Agreement for any reason whatsoever the
Receiving Party shall:
7.2.1 keep the Confidential Information confidential; and
7.2.2 not disclose the Confidential Information to any other person other
than with the prior written consent of the Disclosing Party or in
accordance with Clause 7.5; and
7.2.3 not use the Confidential Information for any purpose other than the
performance of its obligations or the exercise of its rights under
this Agreement.
7.3. During the term of this Agreement the Receiving Party may disclose the
Confidential Information to its employees, sub-contractors or agents or
others engaged on the Project and to potential licensees in terms of
Clause 6.10 (the "Recipient") to the extent that it is necessary for the
purposes of effectively carrying on the Project or commercialising
Cathepsin S inhibitors developed during the Project.
7.4. The Receiving Party shall procure that each Recipient is made aware of and
complies with all the Receiving Party's obligations of confidentiality
under this Agreement and shall obtain the signature of the Recipient to an
undertaking covering (a) non-disclosure of confidential information and
(b) the ownership of
<PAGE>
14
rights in Inventions, Intellectual Property and Know How arising from the
Project each in terms as if the Recipient were a Party to this Agreement
save where the Hospital is the Recipient in which case the Hospital
will only be required to use reasonable efforts not to disclose any
Confidential Information.
7.5. The obligations contained in Clauses 7.2 and 7.4 shall not apply to any
Confidential Information which:
7.5.1 is at the Effective Date or at any time after the Effective Date
comes into the public domain other than through breach of this
Agreement by the Receiving Party or any Recipient; or
7.5.2 can be shown by the written records of the Receiving Party to have
been known by the Receiving Party before disclosure by the
Disclosing Party to the Receiving Party; or
7.5.3 subsequently comes lawfully into the possession of the Receiving
Party from a third Party under no obligation of confidence to the
Disclosing Party in respect of such Confidential Information.
7.6. Each Party shall use reasonable endeavours to ensure that no disclosure or
publication or dissemination of work done on or in connection with the
Project takes place in any manner (whether orally or in writing or
otherwise) without the prior written consent of the other Party except as
specified in Clauses 7.3 and 7.4.
8. ANNOUNCEMENTS
No public announcement, communication or circular (other than to the
extent required by law, The London Stock Exchange Limited or the Panel on
Takeovers and Mergers or any other regulatory body in any jurisdiction or
by PT or PI for the purpose of raising funds) concerning the transactions
referred to in this Agreement shall be made or dispatched for so long as
this Agreement continues in force by either Party without the prior
written consent of the other Party (such consent not to be unreasonably
withheld or delayed). The Parties agree that immediately following the
execution of this Agreement a press release shall be released concerning
the completion of this Agreement along with the major commercial terms and
that similar press releases shall be released throughout the term of the
project as major milestones are achieved.
<PAGE>
15
9. GENERAL
9.1. This Agreement constitutes the entire agreement between the Parties
relating to the subject matter of this Agreement and supersedes all
previous such agreements whether written, oral or in any other form.
9.2. No variation of this Agreement shall be valid unless it is in writing and
signed by or on behalf of each of the Parties.
9.3. The failure to exercise or delay in exercising a right or remedy under
this Agreement shall not constitute a waiver of the right or remedy or a
waiver of any other rights or remedies and no single or partial exercise
of any right or remedy under this Agreement shall prevent any further
exercise of the right or remedy or the exercise of any other right or
remedy.
9.4. Except as expressly provided in this Agreement the rights and remedies
contained in this Agreement are cumulative and not exclusive of any rights
or remedies provided by law.
9.5. Any date, time or period referred to in this Agreement is of the essence
except only to the extent to which the Parties agree in writing to vary
it, in which event the varied date, time or period is of the essence.
9.6. Nothing in this Agreement shall be construed as creating a partnership
between the Parties or as constituting either Party as the agent of the
other Party for any purpose whatsoever and neither Party shall have the
authority or power to bind the other Party or to contract in the name of
or create a liability against the other Party in any way or for any
purpose.
9.7. Neither Party shall assign or transfer or purport to assign or transfer
any of its rights or obligations under this Agreement except with the
prior written consent of the other Party provided however that either
Party may assign any of its rights or obligations under this Agreement to
any Affiliate, if the assigning Party guarantees the performance of such
Affiliate of the assigned obligations under this Agreement, or to any
company with which it may merge or consolidate or to which it may sell all
or substantially all of its assets, without obtaining the consent of the
other Party.
9.8. Any notice or other communication under or in connection with this
Agreement shall be in writing and shall be delivered personally or sent by
first class post pre-paid recorded delivery (and air mail if overseas) or
by fax, to the Party due to receive the notice or communication at its
address set out in this Agreement or such other address as either Party
may specify by notice in writing to the other.
<PAGE>
16
9.9 This Agreement is governed by, and shall be construed in accordance with,
English law. The courts of England shall have exclusive jurisdiction to
hear and determine any suit, action or proceedings, and to settle any
disputes, which may arise out of or in connection with this Agreement
(respectively, "Proceedings" and "Disputes") and, for such purpose, each
of the Parties hereby irrevocably submit to the jurisdiction of the courts
of England.
9.10 Each Party irrevocably waives any objection which it might at any time
have to the courts of England being nominated as the forum to hear and
determine any Proceedings and to settle any Disputes and agrees not to
claim that the courts of England are not a convenient or appropriate
forum.
9.11 Each Party shall use its reasonable endeavours to carry out the tasks
allocated to it in Schedule 1 hereto. If a Party uses reasonable
endeavours to accomplish the tasks allocated to it, such Party's failure
to accomplish those tasks shall not be deemed to be a breach of this
Agreement.
9.12 Except for claims arising from the breach of Clauses 7 and 2.9 and the
non-competition provisions of Clauses 4.4 and 4.5 of this Agreement, in no
event shall either party be required to pay the other party any indirect,
special, incidental or consequential damages of any kind as a result of or
in connection with any suit, action or proceeding, brought by a party to
this Agreement or a third party, or the settlement thereof.
<PAGE>
17
IN WITNESS WHEREOF this Agreement has been executed by the Parties on the date
which first appears in this Agreement.
FOR PEPTIDE THERAPEUTICS LIMITED:
/s/ N A Higgins Signature of Director
- ------------------------
N. A. Higgins Name of Director
- ------------------------
FOR PEPTIMMUNE INC.:
/s/ Ben R. Bronstein Signature of Officer
- ------------------------
Ben R. Bronstein Name of Officer
- ------------------------
President Officer Title
- ------------------------
<PAGE>
18
SCHEDULE 1
Work Programme
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
19
SCHEDULE 2
Accounts
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
EXHIBIT 10.4
COLLABORATIVE RESEARCH AND OPTION AGREEMENT
This COLLABORATIVE RESEARCH AND OPTION AGREEMENT is entered into as of
December 22, 1997 by and between PFIZER INC., a Delaware corporation, having an
office at 235 East 42nd Street, New York, New York 10017 and its Affiliates
("Pfizer"), and PEPTIDE THERAPEUTICS LIMITED ("Peptide"), a corporation having
an office at 321 Cambridge Science Park, Milton Road, Cambridge CB4 4WG,
England.
WHEREAS, Peptide has developed a vaccine candidate for the prevention and/or
treatment of allergy; and
WHEREAS, Peptide has already granted an exclusive world-wide license for human
applications of the vaccine to SmithKline Beecham plc; and
WHEREAS, Peptide wishes to grant an exclusive world-wide license for
veterinary applications of the vaccine to Pfizer; and
WHEREAS, Pfizer has the capability to undertake research for the discovery and
evaluation of agents for prevention and/or treatment of allergy and also the
capability for clinical analysis, manufacturing and marketing with respect to
such agents;
NOW, THEREFORE, the parties agree as follows:
1. Definitions
Whenever used in this Agreement, the terms defined in this Section 1 shall have
the meanings specified.
1.1 "Allergy Vaccine" means the vaccine comprising a certain peptide
sequence from the target animal species from the fourth constant region
of IgE coupled to a carrier. Examples of peptide sequences include but
are not limited to;
[]*
[]*
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
1.2 "Affiliate" means any corporation or other legal entity owning, directly
or indirectly, fifty percent (50%) or more of the voting capital shares
or similar voting securities of Pfizer or Peptide; any corporation or
other legal entity fifty percent (50%) or more of the voting capital
shares or similar voting rights of which is owned, directly or
indirectly, by Pfizer or Peptide or any by a corporation or other legal
entity which owns, directly or indirectly, fifty percent (50%) or more
of the voting capital shares of similar voting rights of which is owned,
directly or indirectly, by a corporation or other legal entity which
owns, directly or indirectly, fifty percent (50%) or more of the voting
capital shares or similar voting securities of Pfizer or Peptide.
1.3 "Research Plan" means the written plan describing the research and
budgets for the research to be carried out by Pfizer pursuant to this
Agreement, as may be amended from time to time. The current Research
Plan is attached to and made a part of this Agreement as Exhibit A.
1.4 "Research Program" is the research program in the Area conducted by
Pfizer pursuant to the Research Plan in effect during the Contract
Period.
1.5 "Effective Date" is December 22, 1997.
1.6 "Contract Period" means the period beginning on the Effective Date and
ending on the date on which this Agreement terminates.
1.7 "Area" means veterinary applications of the Allergy Vaccine which shall,
for the avoidance of doubt, exclude any and all applications to humans
of the Peptide Technology.
1.8 "Technology" means and includes all materials, technology, technical
information, know-how, expertise and trade secrets within the Area.
1.9 "Peptide Patents" means (i) the patents and patent applications set out
in Exhibit B including all continuations, continuations-in-part,
divisions, and renewals, all letters patent granted thereon, and all
reissues, re-examinations and extensions thereof and (ii) any
corresponding patent applications in additional countries and (iii) any
patents and
<PAGE>
patent applications owned or controlled solely by Peptide which Peptide
is free to offer to Pfizer and covering improvements and/or other
developments of the patents and patent applications mentioned in (i) and
(ii) hereinbefore
1.10 "Peptide Technology" means Technology that Peptide has the lawful right
to disclose or otherwise transfer use rights to Pfizer and that is or
was:
(a) developed by employees of or consultants to Peptide alone or
jointly with third parties prior to the Effective Date; or
(b) acquired by purchase, license, assignment or other means from
third parties by Peptide prior to the Effective Date.
(c) for the avoidance of doubt Peptide Technology shall include
"Peptide Patents set forth in parts (i) and (ii) of section 1.9".
1.11 "Joint Technology" means Technology that is or was:
(a) developed by employees of or consultants to Pfizer using Peptide
Technology during the Contract Period;
(b) developed by employees of or consultants to Peptide alone or
jointly with third parties in the Area during the Contract
Period, except for Technology so developed that Peptide is
prohibited to disclose or otherwise transfer use rights to Pfizer
by the terms of an agreement in existence at such time as the
subject matter thereof became a part of the Research Plan; or
(c) acquired by purchase, license, assignment or other means from
third parties by Peptide in the Area during the Contract Period,
except for Technology so acquired that Peptide is prohibited to
disclose or otherwise transfer use rights to Pfizer by the terms
of an agreement in existence at such time as the subject matter
thereof became a part of the Research Plan.
1.12 "Pfizer Technology" means Technology that Pfizer has the lawful right to
disclose or otherwise transfer use rights to Peptide and that is or was:
<PAGE>
(a) developed by employees of or consultants to Pfizer alone or
jointly with third parties prior to the Effective Date or during
the Contract Period.
(b) acquired by purchase, license, assignment or to other means from
third parties by Pfizer prior to the Effective Date or during the
Contract Period.
1.13 "Peptide Confidential Information" means all information about any
element of the Peptide or Joint Technology which is disclosed by Peptide
to Pfizer and designated "Confidential" in writing by Peptide at the
time of disclosure to Pfizer to the extent that such information as of
the date of disclosure to Pfizer is not (i) known to Pfizer other than
by virtue of a prior confidential disclosure to Pfizer by Peptide; or
(ii) disclosed in published literature, or otherwise generally known to
the public through no fault or omission of Pfizer; or (iii) obtained
from a third party free from any obligation of confidentiality to
Peptide.
1.14 "Pfizer Confidential Information" means all information about any
element of Pfizer or Joint Technology which is disclosed by Pfizer to
Peptide and designated "Confidential" in writing by Pfizer at the time
of disclosure to Peptide to the extent that such information as of the
date of disclosure to Peptide is not (i) known to Peptide other than by
virtue of a prior confidential disclosure to Peptide by Pfizer; or (ii)
disclosed in published literature, or otherwise generally known to the
public through no fault or omission of Peptide; or (iii) obtained from a
third party free from any obligation of confidentiality to Pfizer.
1.15 "Joint Patent Rights" means all patentable inventions within Joint
Technology including all the valid claims of patent applications,
whether domestic or foreign, claiming such patentable inventions,
including all continuations, continuations-in-part, divisions, and
renewals, all letters patent granted thereon, and all reissues,
re-examinations and extensions thereof.
1.16 "Product" means the Allergy Vaccine or any product for the prevention
and/or treatment of allergy in animals, the manufacture, use, sale,
offer for sale or import of which would infringe a valid claim within
Peptide Patents or Joint Patent Rights in the absence of a license.
<PAGE>
2. Research Program
2.1 Purpose. Pfizer shall conduct the Research Program throughout the
Contract Period. All Technology in the Area developed in the Research
Program will become part of the Joint Technology. The objective of the
Research Program is to develop prophylactic and/or therapeutic vaccines
against allergy for animals, based on the Allergy Vaccine.
2.2 Research Plan. The Research Plan is described in the attached Exhibit A.
The attached Research Plan, and any subsequent Research Plan, shall be
amended from time to time, as needed, and made part of this Agreement.
2.3 Exclusivity. Peptide agrees that during the Contract Period, and in the
Area, neither Peptide nor any of its Affiliates shall sponsor any other
research, or engage in any research sponsored by any third party without
Pfizer's consent.
2.4 Reports and Materials
2.4.1 Reports. During the Contract Period, Pfizer shall furnish to Peptide:
(a) brief summary written reports within ten (10) business days after
the end of each three-month period commencing on the Effective
Date, describing its progress under the Research Plan; and
(b) comprehensive written reports within forty-five (45) days after
the end of the twelve (12) month period commencing on the
Effective Date, describing in detail the work accomplished by it
under the Research Plan and discussing and evaluating the results
of such work.
2.4.2 Materials. Peptide shall, during the Contract Period, as a matter of
course as described in the Research Plan, or upon Pfizer's written or
oral request, furnish to Pfizer samples of Allergy Vaccine and other
reagents in reasonable quantities which are necessary for Pfizer to
carry out its responsibilities under the Research Plan.
<PAGE>
2.5 Laboratory Facilities and Personnel. Pfizer shall provide suitable
laboratory facilities, equipment and personnel for the work to be done
by Pfizer in carrying out the Research Program. Peptide shall provide
technical assistance to Pfizer in carrying out the Research Plan as may
be requested and/or required by Pfizer during the Contract Period. Such
technical assistance may include visits by Peptide personnel to Pfizer
facilities. In the event Pfizer requests that Peptide personnel visit
Pfizer facilities, Pfizer shall reimburse Peptide for reasonable costs
associated with such visit, including lodging and travel expenses.
2.6 Diligent Efforts. Pfizer shall use reasonably diligent efforts to
achieve the objectives of the Research Program. Pfizer shall carry out
the Research Program using qualified personnel in accordance with
generally accepted professional standards for such work; however, it is
recognised by both parties that the work is developmental or
experimental in nature and there can be no guarantee of success or that
any particular result can be obtained in a timely fashion.
3. Funding the Research Program
3.1 Research Funding. Pfizer shall perform the research in accordance with
the Research Plan at no cost to Peptide, except as otherwise provided in
this Agreement.
4. Treatment of Confidential Information
4.1 Confidentiality
4.1.1 Pfizer and Peptide each recognise that the other's Confidential
Information constitutes highly valuable, confidential information.
Subject to, the obligations set forth in sections 4.2 and 4.3, Pfizer
and Peptide each agree that during the term of this Agreement and for
seven (7) years thereafter, it will keep confidential, and will cause
its Affiliates to keep confidential, all Peptide Confidential
Information or Pfizer Confidential Information, as the case may be,
that is disclosed to it, or to any of its Affiliates pursuant to this
Agreement. Neither Pfizer nor Peptide nor any of their respective
Affiliates shall use such Confidential Information except as
expressly permitted in this Agreement.
<PAGE>
4.1.2 Pfizer and Peptide each agree that any disclosure of the other's
Confidential Information to any officer, employee or agent of the
other party or of any of its Affiliates shall be made only if and to
the extent necessary to carry out its responsibilities under this
Agreement and shall be limited to the maximum extent possible
consistent with such responsibilities. Pfizer and Peptide each agree
not to disclose the other's Confidential Information to any third
parties under any circumstance without written permission from the
other party. Each party shall take such action, and shall cause its
Affiliates to take such action, to preserve the confidentiality of
each other's Confidential Information as it would customarily take to
preserve the confidentiality of its own Confidential Information.
Each party, upon the other's request, will return all the Confidential
Information disclosed to the other party pursuant to this Agreement,
including all copies and extracts of documents, within sixty (60) days
of the request upon the termination of this Agreement except for one
(1) copy which may be kept for the purpose of complying with
continuing obligations under this Agreement.
4.1.3 Pfizer represents that all of its employees, and any consultants to
Pfizer, participating in the Research Program who shall have access to
Peptide Technology or Joint Technology and Peptide Confidential
Information are bound by agreement to maintain such information in
confidence.
4.2 Publication. Notwithstanding any matter set forth with particularity in
this Agreement to the contrary, results obtained in the course of the
Research Program may be submitted for publication following scientific
review by the Peptide and Pfizer management. After receipt of the
proposed publication by both Pfizer and Peptide management's written
approval or disapproval shall be provided by Pfizer and Peptide within
sixty (60) days or time otherwise sufficient to allow for filing for
patent protection on the contents of the publication. In the event of
disagreement concerning approval or disapproval, Pfizer shall have final
decision making authority.
4.3 Publicity. Except as required by law, or the rules of any stock
exchange, neither party may disclose the terms of this Agreement nor the
research described in it without the written consent of the other party,
which consent shall not be unreasonably withheld. However, Pfizer
acknowledges that Peptide wishes to announce the signing of this
Agreement without disclosing any commercial terms and shall provide a
draft press
<PAGE>
release for Pfizer's approval prior to such announcement which shall not
be unreasonably withheld or delayed.
4.4 Disclosure of Inventions. Pfizer shall promptly inform Peptide about all
inventions in the Area that are conceived, made or developed in the
course of carrying out the Research Program by employees of, or
consultants to, Pfizer.
4.5 Restrictions on Transferring Materials. Pfizer and Peptide recognise
that the biological, synthetic chemical and biochemical materials which
are part of Pfizer Technology, Peptide Technology or Joint Technology,
represent valuable commercial assets. Therefore, throughout the Contract
Period and for seven (7) years thereafter, subject to the license rights
granted in Section 5.3, Peptide and Pfizer agree not to transfer such
materials of the other party or joint materials to any third party,
unless prior written consent for any such transfer is obtained from the
other party.
5. Intellectual Property Rights. The following provisions (section 6, 7 and
8) relate to rights in the intellectual property developed or used by
Pfizer during the course of carrying out the Research Program.
6. Ownership. All Peptide Confidential Information and Peptide Technology
shall be owned by Peptide. All Pfizer Confidential Information and
Pfizer Technology shall be owned by Pfizer. All Joint Technology shall
be owned jointly by Peptide and Pfizer. All Joint Patent Rights shall be
jointly owned.
7. Grant of Research Licenses. Peptide grants to Pfizer a nonexclusive,
irrevocable, world-wide, royalty-free license, including the right to
grant sub-licenses to Affiliates, to make and use Peptide Confidential
Information and Peptide Technology and Joint Technology and Joint Patent
Rights for all research purposes other than the sale or manufacture for
sale of products or processes.
8. Grant of License Option. As consideration for Pfizer's performance of
the Research Program and the payment by Pfizer to Peptide on the date
of signing this Agreement of the total sum of one hundred and fifty
thousand US dollars (US $150,000.00), during the term of this Agreement
and for a period of six (6) months thereafter, Pfizer shall have the
exclusive option to acquire an exclusive world-wide, royalty bearing,
license,
<PAGE>
including the right to grant sub-licenses, to make, use, sell, offer for
sale and import Products under all Peptide's right, title and interest
in the Peptide Technology, Joint Technology and Joint Patent Rights in
every country in the world. If Pfizer wishes to take up the option then
the parties shall negotiate in good faith to reach agreement on the
terms of the license which shall include the terms set forth in Exhibit
C.
9. Term and Termination
9.1 Term. Unless sooner terminated or extended, this Agreement shall expire
two (2) years from the Effective Date.
9.2 Events of Termination. The following events shall constitute events of
termination ("Events of Termination"):
(a) any written representation or warranty by Peptide or Pfizer, or
any of its officers, made under or in connection with this
Agreement shall prove to have been incorrect in any material
respect when made, or
(b) Peptide or Pfizer shall fail in any material respect to perform
or observe any term, covenant or understanding contained in this
Agreement or in any of the other documents or instruments
delivered pursuant to, or concurrently with this Agreement, and
any such failure shall remain unremedied for ninety (90) days
after written notice to the failing party.
9.3 Termination
9.3.1 Upon the occurrence of any Event of Termination, the party not
responsible may, by notice to the other party, terminate this Agreement.
9.3.2 Pfizer may terminate this Agreement, with or without cause, upon ninety
(90) days notice to Peptide.
9.3.3 If Pfizer terminates this Agreement pursuant to Section 9.2(a) or
9.2(b), the license option set forth in Section 8 shall continue
according to its terms. If Peptide terminates
<PAGE>
this Agreement pursuant to Section 9.2(a) or 9.2(b), that license shall,
only upon mutual agreement of the parties, continue according to its
terms.
9.3.4 Termination of this Agreement for any reason shall be without prejudice
to any other remedies which either party may otherwise have.
9.3.5 If Pfizer do not exercise the License Option as described in section 8
then Pfizer shall;
(i) grant to Peptide a royalty free perpetual license with a right
of sub-license for research purposes to use the Joint
Technology within the Area
(ii) grant to Peptide a royalty bearing perpetual license with a
right of sub-license for commercial purposes to use the Joint
Technology within the Area. The commercial terms for such a
license to be reasonable taking into account the relative
contribution of the Joint Technology and the Peptide
Technology
10. Representations and Warranties. Peptide and Pfizer each represent and
warrant as follows:
10.1 It is a corporation duly organised validly existing and is in good
standing and is qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the conduct of its
business or the ownership of its properties requires such qualification
and has all requisite power and authority, corporate or otherwise, to
conduct its business as now being conducted, to own, lease and operate
its properties and to execute, deliver and perform this Agreement.
The execution, delivery and performance by it of this Agreement have
been duly authorised by all necessary corporate action and do not and
will not (a) require any consent or approval of its stockholders, (b)
violate any provision of any law, rule, regulations, order, writ,
judgement, injunctions, decree, determination award presently in effect
having applicability to it or any provision of its certificate of
incorporation or by-laws or (c) result in a breach of or constitute a
default under any material agreement, mortgage, lease, license, permit
or other instrument or obligation to which it is a party or by which it
or its properties may be bound or affected.
<PAGE>
10.2 This Agreement is a legal, valid and binding obligation of it
enforceable against it in accordance with its terms and conditions,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganisation or similar laws, from time to
time in effect, affecting creditor's rights generally.
10.3 It is not under any obligation to any person, or entity, contractual or
otherwise, that is conflicting or inconsistent in any respect with the
terms of this Agreement or that would impede the diligent and complete
fulfilment of its obligations.
10.4 It has good and marketable title to or valid leases or licenses for, all
of its properties, rights and assets necessary for the fulfilment of its
responsibilities under the Research Program, subject to no claim of any
third party other than the relevant lessors, licensors or lienors.
11. Covenants of Peptide and Pfizer other than Reporting Requirements.
Throughout the Contract Period, Peptide and Pfizer each shall:
11.1 maintain and preserve its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and qualify and
remain qualified as a foreign corporation in good standing in each
jurisdiction in which such qualification is from time to time necessary
or desirable in view of their business and operations or the ownership
of their properties.
11.2 comply in all material respects with the requirements of all applicable
laws, rules, regulations and orders of any government authority to the
extent necessary to conduct the Research Program, except for those laws,
rules, regulations, and orders it may be contesting in good faith.
12. Indemnification. Pfizer will indemnify Peptide for damages,
settlements, costs, legal fees and other expenses incurred in connection
with a claim against Peptide based on any action or omission of Pfizer,
its agents or employees related to the obligations of Pfizer under this
Agreement, provided, however, that the foregoing shall not apply (i)
the claim is found to be based upon the negligence, recklessness or
willful misconduct of Peptide or (ii) if Peptide fails to give Pfizer
prompt notice of any claim it receives.
<PAGE>
such failure materially prejudices Pfizer with respect to any
claim or action to which Pfizer's obligation pursuant to this
Section applies, Pfizer, in its sole discretion, shall choose
legal counsel, shall control the defense of such claim or
action and shall have the right to settle same on such terms
and conditions as it deems advisable.
13. Notices. All notices shall be in writing mailed via certified mail,
return receipt requested, courier, or facsimile transmission addressed
as follow, or to such other address as may be designated from time to
time:
If to Pfizer: To Pfizer at its address as set forth at the beginning
of this Agreement.
Attention: Vice President, Animal Health Discovery
Research with copy to: Legal Division, Groton, CT 06345.
If to Peptide: Peptide at its address as set forth at the beginning of
this Agreement.
Attention: Commercial Director.
Notices shall be deemed given as of the date received.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of England.
15. Miscellaneous
15.1 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective legal representatives,
successors and permitted assigns.
15.2 Headings. Paragraph headings are inserted for convenience of reference
only and do not form a part of this Agreement.
15.3 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original.
15.4 Amendment, Waiver. This Agreement may be amended, modified, superseded
or cancelled, and any of the terms may be waived, only by a written
instrument executed by each party or, in the case of waiver, by the
party or parties waiving compliance. The
<PAGE>
delay or failure of any party at any time or times to required
performance of any provisions shall in no manner affect the rights at a
later time to enforce the same. No waiver by any party of any condition
or of the breach of any term contained in this Agreement, whether by
conduct, or otherwise, in any one or more instances, shall be deemed to
be, or considered as, a further or continuing waiver of any such
condition or of the reach of such term or any other term of this
Agreement.
15.5 No Third Party Beneficiaries. No third party including any employee of
any party to this Agreement, shall have or acquire any rights by reason
of this Agreement. Nothing contained in this Agreement shall have or
acquire any rights by reason of this Agreement. Nothing contained in
this Agreement shall be deemed to constitute the parties partners with
each other or any third party.
15.6 Assignment and Successors. This Agreement may not be assigned by either
party, except that each party may assign this Agreement and the rights
and interests of such party, in whole or in part, to any of its
Affiliates, any purchaser of all or substantially all of its assets or
to any successor corporation resulting from any merger or consolidation
of such party with or into such corporations.
15.7 Force Majeure. Neither Pfizer nor Peptide shall be liable for failure of
or delay in performing obligations set forth in this Agreement, and
neither shall be deemed in breach of its obligations, if such failure or
delay is due to natural disasters or any causes reasonably beyond the
control of Pfizer or Peptide.
15.8 Severability. If any provision of this Agreement is or becomes invalid
or is ruled invalid by any court of competent jurisdiction or is deemed
unenforceable, it is the intention of the parties that the remainder of
the Agreement shall not be affected.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorised representatives.
PFIZER INC
By: /s/ illegible
-----------------------------------
Title: President, Central Reasearch
--------------------------------
Vice President, Pfizer Inc.
PEPTIDE THERAPEUTICS LIMITED
By: /s/ NA Higgins
-----------------------------------
Title: Commercial Director
--------------------------------
<PAGE>
EXHIBIT A
Anti-IgE Vaccine
Development Plan for Decapeptide from Peptide Therapeutics
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
EXHIBIT B
The Patents
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
EXHIBIT C
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
EXHIBIT 10.5
CONFIDENTIAL
R&D AND LICENSE AGREEMENT
This License Agreement ("Agreement") is made effective as of the seventh
(7th) day of February 1997 ("Effective Date"), between PEPTIDE THERAPEUTICS
LIMITED, having a place of business at 321 Cambridge Science Park, Milton Road,
Cambridge CB4 4WG, United Kingdom (herein referred to as "PTL") and SMITHKLINE
BEECHAM PLC, having a place of business at New Horizons Court, Great West Road,
Brentford, Middlesex TW8 9EP, United Kingdom (herein referred to as "SB").
WITNESSETH THAT:
WHEREAS, PTL is the owner of and/or controls all right, title and interest
in certain patents, identified in Schedule A hereto, and know-how relating to
anti IgE vaccine(s); and
WHEREAS, PTL has developed and/or controls certain technologies relating to
prevention, control and/or treatment of allergic disorders in humans which may
be useful for the development of active or passive prophylactic or therapeutic
anti IgE vaccine(s) against allergies.
WHEREAS, PTL and SB have an interest to enter into a research collaboration
for the development and commercialisation of the above mentioned vaccines.
WHEREAS, SB has an interest in acquiring simultaneously a worldwide and
exclusive license under any existing and future patent, patent applications,
know how and improvements owned, controlled or developed by PTL relating to the
above mentioned technologies.
1
<PAGE>
NOW, THEREFORE, in consideration of the covenants and obligations expressed
herein and intending to be legally bound, and otherwise to be bound by proper
and reasonable conduct, the parties agree as follows :
1. DEFINITIONS
1.01 "AFFILIATE(S)" shall mean any corporation, 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 (or such lesser percentage which is the maximum
allowed to be owned by a foreign corporation in a particular
jurisdiction) 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
with a party to this Agreement.
1.02 "COMBINATION" shall mean a PRODUCT which contains also one or more
therapeutically and/or prophylactically active antigens and/or
allergens which are not included in TECHNOLOGY. Any COMBINATION is a
PRODUCT.
1.03 "FIELD" shall mean prevention, control and/or treatment of any and
all allergic disorders in humans, (including but not limited to Type
1 hypersensitivity (allergy) reactions) mediated by IgE immune
activity and/or other immune mechanisms, excluding SPECIFIC FIELD.
1.04 "KNOW-HOW" shall mean all present and future technical information,
materials and know-how which relate to PRODUCT which are now and/or
at anytime during the term of this Agreement developed, owned,
proprietary to and/or controlled by PTL and/or any AFFILIATES of
PTL, and which are necessary for or useful to the development,
production and commercialisation of PRODUCT. KNOW-HOW shall include,
without limitation, all chemical, pharmacological, toxicological,
clinical, assay, control and manufacturing data and any other
information relating thereto and any materials, seeds, strains,
reagents and media. KNOW-HOW shall not include PATENTS.
1.05 "NET SALES VALUE" shall mean the gross receipts from sales of
PRODUCT in the TERRITORY by SB and/or its AFFILIATES and/or its
sublicensees and/or its distributors to THIRD PARTIES less the
following deductions :
2
<PAGE>
(i) []* of the gross receipts to cover transportation charges,
including insurance; and
(ii) SB's standard costs for PRODUCT formulation, filling and
packaging, for syringes and other administration devices
combined with, or contained in, commercial packaging; and
(iii) 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 PRODUCT, including
without limitation, contributions and payments required by any
governmental authorities as liability provisions and/or made
pursuant to injury compensation schemes and/or as PRODUCT
liability insurance premiums; and
(iv) trade, quantity and cash discounts, commissions and other
customary rebates; and
(v) allowances or credits to customers or charges back from
customers on account of rejection or return of PRODUCT subject
to royalty under this Agreement or on account of retroactive
price reductions affecting such PRODUCT; and
(vi) royalties payable and/or paid by SB to THIRD PARTIES on the
manufacture, use and/or sale of PRODUCT []* .
Sales between or among SB and its AFFILIATES or sublicensees or
distributors shall be excluded from the computation of NET SALES
VALUE except where such AFFILIATES or sublicensees are end users,
but NET SALES VALUE shall include the subsequent final sales to
THIRD PARTIES by such AFFILIATES or sublicensees or distributors.
If a PRODUCT is sold as a COMBINATION, NET SALES VALUE of
COMBINATION shall be multiplied by the fraction A/A+B where A is the
unit invoice price of a separately sold PRODUCT which contains as
specific immunogenic material only those antigen(s) and/or
allergen(s) contained in COMBINATION which are included in
TECHNOLOGY and B is the unit invoice price of a separately sold
vaccine which contains as specific immunogenic
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
3
<PAGE>
material only those antigen(s) and/or allergen(s) contained in
COMBINATION but which are not included in TECHNOLOGY.
If the unit invoice price of (i) a separately sold PRODUCT which
contains the antigen(s) and/or allergen(s) which are included in
TECHNOLOGY and/or (ii) a separately sold vaccine which contains
antigen(s) and/or allergen(s) contained in COMBINATION but which are
not included in TECHNOLOGY, is not available and the parties are
unable to agree on an alternative arrangement, the parties shall
agree within 60 days of a request from one of the parties the
appointment of an independent expert ("the Expert") to determine the
relative value of the vaccines described in (i) and (ii) of this
paragraph ("the Vaccine Values"). The Expert shall act as expert and
not as arbitrator and the Expert fee shall be split equally between
the parties. The Expert shall be instructed to take into account a
statement of facts relating to vaccines described in (i) and (ii) as
are agreed by the parties and all relevant market circumstances in
determining the Vaccine Values. The Expert will present to both
parties in writing the determined Vaccine Values together with a
statement justifying the underlying calculations and assumptions.
The decision of the Expert shall be final and binding on the
parties.
If the parties are unable to agree within sixty (60) days the
appointment of an Expert, the following formula shall apply: NET
SALES VALUE of COMBINATION shall be multiplied by a fraction X/Y
wherein X is the number of antigen(s) and/or allergen(s) contained
in PRODUCT which are included in TECHNOLOGY and Y is the total
number of antigens and/or allergens included in COMBINATION.
1.06 "OTHER KNOW-HOW" shall mean technical information, materials and
know-how, excluding OTHER PATENTS, which are owned and/or controlled
by THIRD PARTIES and which are or may become necessary or useful for
the development, production and/or commercialisation of PRODUCT.
1.07 "OTHER PATENTS" shall mean patents and/or patent applications owned
and/or controlled by THIRD PARTIES having claims which would be
infringed by SB making, having made, using, having used, selling or
having sold PRODUCT.
1.08 "PATENTS" shall mean all patents and patent applications which are
or become owned and/or controlled, in whole or in part, by PTL
and/or any AFFILIATES of PTL and under which PTL has, now or in the
future, the right to grant licenses and which generically or
specifically claim PRODUCT and/or use of PRODUCT
4
<PAGE>
and/or a process for manufacturing PRODUCT, and/or intermediates
used in such process. Included within the definition of PATENTS are
any continuations, continuations-in-part, divisions, patents of
addition, reissues, renewals or extensions (other than SPC) thereof.
Also included within the definition of PATENTS but subject to
Section 2.08 are any patents or patent applications which
generically or specifically claim or have claims covering any
improvements of PRODUCT or intermediates or manufacturing processes
required or useful for production of PRODUCT which are developed by
PTL, and/or under which PTL otherwise has the right to grant
licenses or sublicenses, now or in the future, during the term of
this Agreement. The current list of patent applications and patents
encompassed within PATENTS is set forth in Schedule A attached
hereto.
1.09 "PRODUCT" shall mean any and all therapeutic and/or prophylactic
vaccine(s) for use in the FIELD in any formulation, configuration,
combination and/or delivery system, which is included in TECHNOLOGY.
1.10 "PTG' shall mean Peptide Therapeutics Group plc a company
incorporated in England and Wales (Registered number 2863682) which
registered office is at 321 Cambridge Science Park, Milton Road,
Cambridge, CB4 4WG, United Kingdom.
1.11 "PTL" shall mean Peptide Therapeutics Limited.
1.12 "SB" shall mean SmithKline Beecham plc
1.13 "SPC" shall mean all Supplementary Protection Certificates for
medicinal products and their equivalents provided under the Council
Regulation (EEC) No 1768/92 of June 18, 1992.
1.14 "SPECIFIC FIELD" shall mean prevention, control and/or treatment of
allergic disorders in humans using []* .
1.15 "TECHNOLOGY" shall mean KNOW HOW and/or PATENTS.
1.16 "TERRITORY" shall mean all the countries and territories in the
world.
1.17 "THIRD PARTY(IES)" shall mean any party which is neither a party to
this Agreement nor an AFFILIATE.
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
5
<PAGE>
For the purpose of this Agreement, except as otherwise expressely provided
in this Agreement or unless the context otherwise requires : (a) defined
terms include the plural as well as the singular and the use of any gender
shall be deemed to include the other gender; (b) references to "Articles",
"Sections" and other subdivisions and to "Schedules" and "Exhibits" without
reference to a document, are to designated Articles, Sections and other
subdivisions of, and to Schedules and Exhibits to, this Agreement; (c) the
use of the term "including" means "including but not limited to"; and (d)
the words "herein", "hereof", "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular provisions.
2. RESEARCH COLLABORATION
2.01. Subject to Sections 2.02 and 2.03 hereunder, the parties shall
undertake a two (2) year collaborative research program starting
from the Effective Date (hereinafter "Research Program") dedicated
to the demonstration of technical feasibility and development of
PRODUCT by PTL aimed at inter alia:
[]*
as further outlined in Schedule B attached hereto.
PTL agrees to make available resources in the amount of two
million pounds sterling (L2,000,000) per year to support the
performance of the Research Program and shall dedicate at least
75% (seventy five percent) of the two million pounds sterling
(L2,000,000) annual funding (`Dedication') to the accomplishment
of steps (i), (ii) and (iii) as specified above in this
Section 2.01. At SB's request, PTL will provide written evidence
of such Dedication (`Evidence').
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
6
<PAGE>
2.02 Schedule B shall be supplemented within twelve (12) months of the
Effective Date by an additional Schedule (`Schedule D') which will
form part of this Agreement and which shall detail a specific
experimental strategy designed to achieve the broader objectives
outlined in Schedule B.
In Schedule D, SB shall as appropriate revise the objectives and
plans outlined in Schedule B and shall set certain scientific
milestones. In the event such milestones are not achieved as
determined by SB, PTL shall at SB's request, allocate greater or
fewer resources under the Research Program or the Extended Research
Program (as defined in Section 2.03) as the case may be, to any
scientific or developmental objectives including if appropriate
steps (i) to (iv) above identified by SB within the limits stated in
Section 2.01.
2.03 At SB's sole discretion, the Research Program shall be extended by
quarterly periods for at most one (1) additional year starting
on the second anniversary of the Effective Date ("Extended Research
Program"). To support the performance of the Extended Research
Program SB and PTL shall each pay half of a two million pounds
sterling (L2,000,000) per year funding level pro-rata with period
of extension with the same provisions regarding Dedication and
Evidence as detailed above in Section 2.01 or as modified pursuant
to Section 2.02, second paragraph.
2.04 Any further extension and appropriate funding of the Research
Program beyond the Extended Research Program will be subject to
prior written agreement between both parties.
2.05 SB shall have an unconditional and irrevocable option which it may
exercise through written notification to PTL within thirty (30) days
of the expiration of the Research Program or the Extended Research
Program, as the case may be , to discontinue the collaboration with
PTL in the FIELD. In such case, the provisions of Sections 4.02 and
12.03 shall apply.
2.06 SB will conduct all activities related to toxicological and clinical
developments of PRODUCT and such activities shall be under SB's sole
control and expense. PTL shall however use its reasonable endeavours
to seek additional public sector grant funding for such
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
7
<PAGE>
activities, such funding to be wholly contributed to the Research
Program or Extended Research Program to the extent allowed by the
grant-giving body.
2.07 During the Research Program and the Extended Research Program if
any, either party shall submit to the other party quarterly progress
reports detailing the research and development work accomplished in
the previous quarter.
2.08 Any invention or discovery in the FIELD made solely by PTL during
the course of the Research Program and Extended Research Program if
any, shall be owned solely by PTL. Any invention or discovery in the
FIELD made solely by SB during the course of the Research Program
and Extended Research Program if any, shall be owned solely by SB.
Any invention or discovery in the FIELD made jointly by PTL and SB
during the course of the Research Program and Extended Research
Program if any, shall be jointly owned by SB and PTL.
2.09 Any patent and/or patent application arising out of an invention or
discovery in the FIELD made solely by an employee or agent of SB
shall be filed in the name of SB. Any patents and/or patent
application arising out of an invention or discovery in the FIELD
made solely by an employee or agent of PTL shall be filed in the
name of PTL and such PATENTS shall be automatically and exclusively
licensed to SB by PTL hereunder. Any patents and/or patent
applications arising out of an invention or discovery in the FIELD
made jointly by SB and PTL shall be filed in the joint names of SB
and PTL, provided that (i) claims covering epitopes from, or
mimetopes of, the constant region of IgE, whether or not coupled to
a carrier shall fall under PATENTS and such PATENTS shall be
automatically and exclusively licensed to SB by PTL hereunder and
(ii) PTL will grant to SB an irrevocable, exclusive, fully paid-up,
royalty free license under PTL's rights to any subject matter other
than mentioned in (i) above contained in such jointly made invention
or discovery.
8
<PAGE>
3. GRANT
3.01 PTL hereby grants to SB and to any AFFILIATES of SB an exclusive
license, with the right to grant sublicenses, under TECHNOLOGY and
any SPC to make, have made, use, have used, sell, offer for sale,
have sold, keep and/or import in the TERRITORY all subject matter
encompassed within TECHNOLOGY including any and all PRODUCTS,
subject to the terms and conditions of this Agreement.
4. PAYMENTS AND ROYALTIES
4.01 SB shall make the following non refundable payment to PTL : two
million four hundred thousand pounds sterling (L2,400,000)
upon the Effective Date as consideration for the license and rights
granted hereunder.
In addition SB shall grant to PTL an interest free loan of [ ]*
for a duration of up to six (6) months. PTL shall at the expiration
of this loan sell SB [ ]* unencumbered ordinary shares of PTG at a
price of three pounds and sixty pence (L3.60) per share and SB
shall purchase these [ ]* unencumbered ordinary shares of PTG at a
price of three pounds and sixty pence (L3.60) per share according
to the terms of a Subscription Agreement attached hereto as
Schedule C. As also provided for in Schedule C, PTL agrees to
undertake its best efforts to obtain the necessary approvals of
PTG including PTG's shareholder approval to make available these
shares.
In addition SB shall purchase to a value of [ ]* unencumbered
ordinary shares of PTG at a price of three pounds and sixty pence
(L3.60) per share, under the Subscription Agreement attached
hereto as Schedule C, such shares to be tradeable only according
to the provisions of the Subscription Agreement.
4.02 If SB has not exercised its option after the expiration of the
Research Program or the Extended Research Program, as the case
may be, pursuant to Section 2.05 above, SB shall immediately pay
PTL a lump sum (`Licence Maintenance Fee') of two million pounds
sterling (L 2,000,000) and this Agreement shall
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
9
<PAGE>
continue in full force and effect. If SB has exercised its option
to discontinue said collaboration pursuant to Section 2.05 above,
PTL shall immediately pay SB a lump sum of two million pounds
sterling (L 2,000,000) and all rights and licences granted by PTL
hereunder shall revert back to PTL without prejudice to the
provisions of Sections 2.08 and 2.09 above.
PTL agrees that it will not raise debt senior to the above
obligation to pay SB two million pounds sterling (L 2,000,000)
and further agrees that existing debts and liabilities will not be
accorded greater seniority than said obligation. PTL further agrees
to maintain sufficient cash reserves on hand during the Research
Program and Extended Research program as the case may be to meet
said obligation.
For the avoidance of doubt, on the expiration of any Extended
Research Program, any funding provided by SB for the Extended
Research Program shall not be refundable to SB.
4.03 SB shall pay once only the following amounts to PTL upon achievement
of the following Milestones:
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
10
<PAGE>
[]*
For the avoidance of doubt, the maximum Milestones payable,
assuming all Milestones have been achieved, shall be twenty one
million six hundred and seventy thousand pounds sterling
(L21,670,000).
In Section 4.03 the following terms shall have the meanings defined
below:
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
11
<PAGE>
[]*
For the avoidance of doubt, if any Submission or Approval covers
more than one of the indications defined above then the Milestone
payments for all the indications covered by such Submission or
Approval shall be payable.
All Submission and Approval Milestones are fully creditable against
current and future royalties provided that such credits shall not
cause the royalties payable in any one calendar year to be reduced
by more than fifty percent (50 %). However any unused credit will be
carried forward to any following calendar year.
4.04 As consideration for the license under PATENTS granted to SB under
this Agreement and subject to Sections 4.06 and 5, SB shall pay the
following royalties ("Patent Royalty") :
[]*
from sales of PRODUCT in countries in which PTL has a granted,
unencumbered, unrevoked PATENT covering such PRODUCT.
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
12
<PAGE>
Patent Royalty obligations hereunder in each country of the
TERRITORY shall expire upon the expiration, lapse or invalidation of
the last remaining PATENT covering PRODUCT in such country or
fifteen (15) years from the date of first bona fide commercial sale
of PRODUCT in such country, whichever comes first.
4.05 As consideration for the license to KNOW-HOW granted to SB under
this Agreement and subject to Section 5, SB shall pay to PTL for a
period of ten (10) years from the first bona fide commercial sale of
PRODUCT anywhere in the TERRITORY the following royalties ("Know-How
Royalty") :
[]*
from sales of PRODUCT in countries where PTL has no granted,
unencumbered, unrevoked PATENT covering such PRODUCT.provided that
the making, using or selling of PRODUCT actually uses KNOW-HOW which
is both secret and substantial and has been identified as such by
PTL in writing.
4.06 SB's royalty obligations under Section 4.04 shall become effective
in each country in the TERRITORY at such time as anunrevoked and
unencumbered PATENT covering PRODUCT is granted in such country. In
the event that any person or party initiates any legal proceeding or
proceeding at a competent patent office challenging the validity,
scope or enforceability of a PATENT in any country in the TERRITORY,
then the Patent Royalty payable on NET SALES VALUE in such country
shall, during pendency of the proceeding, be paid into a separate
account (`Escrow Account') of SB from which no amounts can be
withdrawn during such pendency without the prior consent of PTL. The
Escrow
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
13
<PAGE>
Account shall be at a UK bank and the number and address of
the account shall be communicated to PTL. If the validity and
enforceability of claims in the PATENT which cover PRODUCT are
upheld by a court or other legal tribunal or competent patent office
from which no appeal is or can be taken, then the amount of Patent
Royalty paid into the Escrow Account, during the period of
suspension, less any Know-How Royalty paid under Section 4.05, shall
be promptly paid to PTL with any interest earned thereon. If the
claims in the PATENT which cover PRODUCT are held to be invalid or
otherwise unenforceable by a court or other legal or administrative
tribunal from which no appeal is or can be taken then the amount of
Patent Royalty paid into the Escrow Account with any interest earned
thereon shall be transferred to SB and no further Patent Royalty
shall be owed. Further, a holding of invalidity or unenforceability
of any PATENT, from which no further appeal is or can be taken,
shall not affect any obligation accrued before payment of Patent
Royalty into the Escrow Account, but shall eliminate royalties
otherwise due under such PATENT from the date such holding becomes
final.
4.07 NET SALES VALUE for the purposes of calculating the Patent Royalty
or Know-How Royalty under Section 4.04 and 4.05 respectively shall
be determined separately.
5. COMPULSORY LICENSES AND THIRD PARTY LICENSES
5.01 In the event that a governmental agency in any country or territory
grants or compels PTL, or SB, to grant a license under TECHNOLOGY to
any THIRD PARTY for products that compete with PRODUCT, SB shall
have the benefit in such country or territory (and in any other
country into which products that compete with PRODUCT are sold by
such THIRD PARTY compulsory licensee) of any terms granted to such
THIRD PARTY to the extent that such terms are more favourable to the
THIRD PARTY than those granted to SB under this Agreement.
5.02 The parties recognize that OTHER PATENTS and/or OTHER KNOW-HOW may
exist. (i) If at any time during the term of this Agreement, SB, at
its sole discretion deems it useful or necessary to seek a license
under OTHER PATENTS and/or OTHER KNOW-HOW from any THIRD PARTIES in
order to practice the license granted by PTL to SB hereunder and
avoid infringement during such exercise in a particular country or
(ii) in the event that royalties
14
<PAGE>
and/or fees are payable by SB to THIRD PARTIES on sales of PRODUCT
(which may include, but shall not be limited to, royalties and/or
fees payable for adjuvants, carriers and/or other technology
included in PRODUCT) other than pursuant to (i) above,such THIRD
PARTY royalties and/or fees shall be deducted from royalties
otherwise due to PTL under Section 4.04 and 4.05 as follows :
- []* of royalties and/or fees payable to THIRD PARTIES shall be
deducted for such royalties and/or fees as are of an amount less
than or equal to []* of that portion of total annual NET SALES
VALUE which exceeds []*; and
- []* of all other royalties and/or fees payable to THIRD PARTIES
shall be deducted.
5.03 Without prejudice to the provision contained in Section 4.03 last
paragraph, no deductions from royalties made under Section 5.02
above may have the effect of reducing royalties otherwise due to PTL
under Section 4.04 by more than []* in any calendar year nor
royalties otherwise due to PTL under Section 4.05 by more
than []* in any calendar year. However any unused credit will be
carried forward to any following calendar year.
5.04 Nothwithstanding Sections 5.02 and 5.03, in the event that (i) SB
establishes by means of written evidence provided to PTL, or (ii)
failing provision of such evidence that the parties agree (such
agreement not to be unreasonably withheld), or (iii) failing such
agreement that a court of competent jurisdiction declares, that
royalties and/or fees are payable by SB to THIRD PARTIES on sales of
PRODUCT and such royalties and/or fees arise from inclusion of the
Immunogen or the Immunogenic Conjugate in PRODUCT, such THIRD PARTY
royalty and/or fee shall be deducted in full from any royalties
payable by SB to PTL
In any negotiation with such THIRD PARTY, SB shall use its
reasonable endeavours to minimise royalties and/or fees payable to
the THIRD PARTY.
For the purposes of this Section 5.05, `Immunogen' and `Immunogenic
Conjugate' shall have the meaning given in the claims of granted
European Patent EP0477231 and in PCT/GB 95/02580 (= W096/14333) as
amended by attorney letter of 18th September 1996, respectively.
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
15
<PAGE>
For the avoidance of doubt, "inclusion of Immunogen in PRODUCT" or
"inclusion of Immunogenic Conjugate in PRODUCT" shall mean that the
PRODUCT including such Immunogen or Immunogenic Conjugate is
susceptible of inducing an immune response to the epitope included
in such Immunogen or Immunogenic Conjugate when presented to the
immune system, whether in admixture with other materials, as a
conjugate or otherwise joined to a carrier entity or molecule
including T-cell epitopes.
For epitopes other than those included in Immunogenic Conjugate or
Immunogen and developed during the Research Programme or Extended
Research Program, the parties shall discuss prior to development of
any such other epitope whether they expect any THIRD PARTY fees
and/or royalties to be due. In the event that the parties have
agreed to proceed with development of such an epitope then such
THIRD PARTY royalty and/or fees payable shall be fully deducted from
any royalties payable by SB to PTL provided that one of the
conditions referred to under (i), (ii) or (iii) in the first
paragraph of this Section 5.05 has been met and SB has used
reasonable endeavours to minimise royalties and/or fees payable to
such THIRD PARTY.
6. TOLERISING PEPTIDE OPTION
6.01 "Clinical Study" shall mean []*
"Clinical Report" shall mean []*
6.02 PTL hereby grants to SB an exclusive option exerciseable as set out
in this Section 6 for a period of two (2) years from the Effective
Date for a worldwide and exclusive license to the TOLERISING PEPTIDE
as described in []*
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
16
<PAGE>
[]*
6.03 The option granted in 6.02 shall be exerciseable by SB following
receipt of the Clinical Report by SB. If a written expression of
interest is received by PTL from SB within three (3) months of
receipt of the Clinical Report by SB the parties shall negotiate in
good faith the terms of the licence which will conform to minimum
terms to be agreed by the parties within three (3) months of the
Effective Date. If no such written expression of interest is
received by PTL from SB, PTL will be free to deal in the TOLERISING
PEPTIDE as it sees fit provided however that PTL shall not offer a
licence to the TOLERISING PEPTIDE to any THIRD PARTY within one
(1) year of the termination of such three (3) month period without
first offering such a licence to SB on substantially the same
conditions as those considered for offer to the THIRD PARTY.
7. DEVELOPMENT
7.01 SB will, in accordance with SB's reasonable business and scientific
judgement, exercise its reasonable efforts and diligence in
developing and commercialising PRODUCT and in undertaking
investigations and actions required to obtain appropriate
governmental approvals to market PRODUCT. All such activity shall be
undertaken at SB's expense. At SB's request, PTL shall supply to SB
reasonable technical assistance in undertaking such investigations
and actions.
7.02 SB shall report to PTL on the status and progress of SB's efforts to
develop and commercialise PRODUCT at such times and in such manner
as PTL may reasonably request.
7.03 PTL shall supply any KNOW-HOW which SB may require and shall provide
to SB, at SB's request, technical assistance within its area of
expertise concerning development, production and commercialisation
of PRODUCT. Provision of such technical assistance shall include,
but not be limited to, visits by PTL personnel to SB at PTL's
expense, and visits by SB personnel to PTL, at SB's expense, at
times and for periods of time upon which the parties will agree.
7.04 On completion of the Research Program or the Extended Research
Program, as the case may be, SB agrees, in furtherance of its
obligations under Sections 7.01 and 7.02, to dedicate minimum
resources to developing and
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
17
<PAGE>
commercialising PRODUCT of []* annually. SB agrees to provide
evidence of such dedication on each six (6) monthly anniversary
of the Effective Date following the expiration of the Research
Program or the Extended Research Program as the case may be. In
the event of SB failing to dedicate this annual minimum resources,
PTL shall be entitled to serve written notice to SB pursuant to
Section 12.04.
8. EXCHANGE OF INFORMATION AND CONFIDENTIALITY
8.01 During the term of this Agreement, SB shall have full access to all
matters encompassed within TECHNOLOGY and PTL shall upon the request
of SB promptly disclose and/or supply SB with all TECHNOLOGY.
8.02 During the term of this Agreement, SB shall have full access to (and
PTL will promptly disclose upon request of SB) all technology,
information, inventions, data, process technology and any other
information related to PRODUCTS, whether patentable or not, which
PTL may develop, acquire or otherwise have or obtain rights or
access to, and where appropriate the foregoing shall be subject to
Sections 2.08 and 2.09 above. Either party will at least once a year
disclose to the other party indicative commercial information
related to PRODUCT as follows: general review of progress, size of
target populations, timetable for regulatory approvals and clinical
trial plans. PTL agrees that this information carries no warranty as
to its accuracy and SB is not obliged to proceed to any action based
thereon.
8.03 During the term of this Agreement, each party shall promptly
disclose to the other party any information that it obtains or
develops regarding the utility and safety of PRODUCT and shall
promptly report to the other party any confirmed information of
serious or unexpected reactions or side effects related to the
utilisation or medical administration of PRODUCT.
8.04 During the term of this Agreement and for five (5) years thereafter,
irrespective of any termination earlier than the expiration of the
term of this Agreement, PTL and SB shall not use or reveal or
disclose to THIRD PARTIES any confidential information received from
the other party including that referred to in Sections 7.04, 8.02
and 8.03 or otherwise developed by either party in the performance
of activities in furtherance of this Agreement without first
obtaining the written consent of the other party, except as may be
otherwise provided herein, or as
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
18
<PAGE>
may be required for purposes of investigating, developing,
manufacturing or marketing PRODUCT or for securing essential or
desirable authorisations, privileges or rights from governmental
agencies, or is required to be disclosed to a governmental agency,
or is necessary to file or prosecute patent applications concerning
PRODUCT or to carry out any litigation concerning PRODUCT. This
confidentiality obligation shall not apply to such information which
is or becomes a matter of public knowledge, or is already in the
possession of the receiving party, or is disclosed to the receiving
party by a THIRD PARTY having the right to do so, or is subsequently
and independently developed by employees of the receiving party or
AFFILIATES thereof who had no knowledge of the confidential
information disclosed. The parties shall take reasonable measures to
ensure that no unauthorised use or disclosure is made by others to
whom access to such information is granted.
8.05 Nothing herein shall be construed as preventing either party from
disclosing any information received from the other party to an
AFFILIATE or sublicensee or distributor, provided such AFFILIATE or
sublicensee or distributor has undertaken a similar obligation of
confidentiality with respect to the confidential information.
8.06 All confidential information disclosed by one party to the other
shall remain the intellectual property of the disclosing party. In
the event that a court or 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 insure that the court, other tribunal or
appointee maintains such information in confidence in accordance
with the terms of this Agreement.
8.07 No public announcement or other disclosure to THIRD PARTIES
concerning the existence of or terms of this Agreement shall be
made, either directly or indirectly, by any party to this Agreement,
except as may be legally required or as may be required for
recording purposes, without first obtaining the approval of the
other party and agreement upon the nature and text of such
19
<PAGE>
announcement or disclosure, such agreement not to be unreasonably
withheld or delayed. For the avoidance of doubt, the parties agree
that it will be deemed unreasonable for SB to withhold or delay
agreement relating to announcements about achievement of milestones
under Section 4.03 and about the current status (phase) of clinical
trials and it will be deemed reasonable for SB to withhold or delay
agreement relating to announcements describing details of clinical
trials including data. The party desiring to make any such public
announcement or other disclosure shall use reasonable efforts to
inform the other party of the proposed announcement or disclosure in
reasonable sufficient time prior to public release, and shall use
reasonable efforts to provide the other party with a written copy
thereof, in order to allow such other party to comment upon such
announcement or disclosure.
8.08 Neither SB nor PTL shall submit for written or oral publication any
manuscript, abstract or the like which includes data or other
information generated and provided by the other party without first
obtaining the prior written consent of the other party, which
consent shall not be unreasonably withheld. The contribution of each
party shall be noted in all publications or presentations by
acknowledgement or coauthorship, whichever is appropriate.
9. PATENT PROSECUTION AND LITIGATION
9.01 Subject to Section 2.08 and 2.09 above, PTL shall be responsible for
the filing, prosecution and maintenance of PATENTS at its own
expense. PTL shall disclose to SB the complete texts of all patents
and patent applications filed and/or controlled by PTL which relate
to PRODUCT as well as all information received concerning the
institution or possible institution of any interference, opposition,
re-examination, reissue, revocation, nullification or any official
proceeding involving a PATENT anywhere in the TERRITORY. SB shall
have the right to review all such pending applications and other
proceedings and make recommendations to PTL concerning them and
their conduct and PTL shall take any such SB comment and
recommendation into consideration. PTL agrees to keep SB promptly
and fully informed of the course of patent prosecution or other
proceedings including the provision to SB of copies of substantive
communications, search reports and THIRD PARTY observations
submitted to or received from patent offices throughout the
TERRITORY. PTL shall provide such patent consultation to SB at no
cost to SB. SB shall hold all
20
<PAGE>
information disclosed to it under this section as confidential
subject to the provisions of Sections 8.04 and 8.05.
9.02 SB shall have the right but not the obligation to assume
responsibility for any PATENT or any part of a PATENT which PTL
desires, after consultation with SB, to abandon or otherwise cause
or allow to be forfeited.
9.03 In the event of the institution of any suit by a THIRD PARTY against
PTL, SB or their AFFILIATES or SB's sublicensees or distributors for
patent infringement involving the manufacture, use, sale,
distribution or marketing of PRODUCT anywhere in the TERRITORY, the
party sued shall promptly notify the other party in writing. SB
shall have the right but not the obligation to defend such suit at
its own expense. PTL and SB shall assist one another and cooperate
in any such litigation at the other's request without expense to the
requesting party.
9.04 In the event that PTL or SB becomes aware of actual or threatened
infringement of a PATENT anywhere in the TERRITORY, that party shall
promptly notify the other party in writing. Following expiration of
the Research Program or Extended Research Program, as the case may
be, SB 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 PTL's name in connection therewith. If SB has not
commenced a particular infringement action within ninety (90) days
of notification of any such infringement, PTL, after notifying SB in
writing, shall be entitled to bring such infringement action at its
own expense. During the Research Program or Extended Research
Program, as the case may be, SB and PTL shall agree on bringing
either jointly or solely any infringement action against any THIRD
PARTY and expenses will be shared equally. The party conducting such
action shall have full control over its conduct, including
settlement thereof. In any event, PTL and SB shall assist one
another and cooperate in any such litigation at the other's request
without expense to the requesting party.
9.05 PTL and SB shall recover their respective actual out-of-pocket
expenses, or equitable proportions thereof, associated with any
patent litigation or settlement thereof from any recovery made by
any party. Any excess amount shall be shared between SB and PTL,
with the party conducting a particular infringement action receiving
[]* and the other party receiving []* of such excess.
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
21
<PAGE>
9.06 The parties shall keep one another informed of the status of and of
their respective activities regarding any patent litigation or
settlement thereof concerning PRODUCT.
9.07 PTL shall authorise SB to act as PTL's agent for the purpose of
making any application for any extensions of the term of PATENTS and
shall provide reasonable assistance therefor to SB, at PTL's expense
(In the United States of America as permitted under Title 35 of the
United States Code).
9.08 PTL, on behalf of itself, its officers, agents and successors hereby
waives any and all actions and causes of action, claims and demands
whatsoever in law or equity of any kind against SB and its
AFFILIATES based upon the exercise by SB of its rights under this
Section 9, except in the case of gross negligence and/or wilful
misconduct by SB.
9.09 SB recognises that bringing an infringement action under Section
9.04 may result in a counterclaim of invalidity of PATENTS and/or
claims in PATENTS. In defending such counterclaim(s), SB agrees to
take into reasonable consideration the legitimate rights and
interests of PTL and/or any licensee(s) of PTL in relation to patent
claims in the field of animal health contained in PATENTS, bearing
in mind SB's prime interest in the maintenance of a strong patent
position covering PRODUCT.
10. TRADEMARKS
10.01 SB, at its expense, shall be responsible for the selection,
registration and maintenance of all trademarks which it employs in
connection with PRODUCT and shall own and/or control such
trademarks. Nothing in this Agreement shall be construed as a grant
of rights, by license or otherwise, to PTL to use such trademarks
for any purpose.
11. STATEMENTS AND REMITTANCES
11.01 SB shall keep and require its AFFILIATES and sublicensees and
distributors to keep complete and accurate records of all sales of
PRODUCT under the licenses granted herein. PTL shall have the right,
at PTL's expense, through a certified public accountant or like
person reasonably acceptable to SB, to
22
<PAGE>
examine the records of SB and its AFFILIATES during regular business
hours during the life of this Agreement and for six (6) months after
its termination ; provided, however, that such examination shall not
take place more often than once a year and shall not cover such
records for more than the preceding two (2) years and provided
further that such accountant shall report to PTL only as to the
accuracy of the royalty statements and payments.
11.02 Within sixty (60) days after the close of each calendar six (6)
month period , SB shall deliver to PTL a true accounting of all
PRODUCTS sold by SB, its AFFILIATES, sublicensees and distributors
during such semester and shall at the same time pay all royalties
due. Such accounting shall show sales on a country-by-country and
product-by-product basis.
11.03 Any tax paid or required to be withheld by SB on account of
royalties payable to PTL under this Agreement shall be deducted from
the amount of royalties otherwise due. SB shall secure and send to
PTL proof of any such taxes withheld and paid by SB for the benefit
of PTL.
11.04 All royalties due under this Agreement shall be payable in pounds
sterling. If governmental regulations prevent remittances from a
foreign country with respect to sales made in that country, the
obligation of SB to pay royalties on sales in that country shall be
suspended until such remittances are possible. PTL shall have the
right, upon giving written notice to SB, to receive payment in that
country in local currency.
11.05 Monetary conversions from the currency of a foreign country in which
PRODUCT is sold into British currency shall be made at the exchange
rate in force on the last business day of the period for which the
royalties are being paid as published by Banque Generale de
Belgique, Brussels, Belgium, or on another basis mutually agreed to
by both parties in writing.
12. TERM AND TERMINATION
12.01 Unless otherwise terminated , this Agreement shall expire upon
the expiration, lapse or invalidation of the last remaining PATENT
in the TERRITORY or twenty (20) years after the Effective Date,
whichever comes later. Expiration of the Agreement under this
Section 12.01 shall not preclude SB from continuing to
23
<PAGE>
exercise the rights and licenses granted to it hereunder without any
further royalty or other obligation.
12.02 For the avoidance of doubt, this Agreement may not be terminated by
either party (except under Sections 12.04 or 12.06) during the
Research Period or Extended Research Period.
12.03 This Agreement will terminate if and when SB decides to exercise its
option pursuant to Section 2.05 to discontinue the collaboration
with PTL in the FIELD.
12.04 If either party fails or neglects to perform any material covenants
or provisions of this Agreement and if such default is not corrected
within sixty (60) days after receiving written notice from the other
party with respect to such default, such other party shall have the
right to terminate this Agreement by giving written notice to the
party in default provided the notice of termination is given within
six (6) months of the default and prior to correction of the
default.
12.05 At any time after the Research Program or Extended Research Program,
as the case may be, SB may terminate this Agreement by giving PTL at
least sixty (60) days written notice thereof.
12.06 Either party may terminate this Agreement if, at any time, the other
party shall file in any court or agency pursuant to any statute or
regulation of (the United States or of) any (individual) state or
(foreign) country, a petition in bankruptcy or insolvency or for
reorganisation 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 proceeding, and such
petition shall not be dismissed with 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.
12.07 Notwithstanding the bankruptcy of PTL, or the impairment of
performance by PTL of its obligations under this Agreement as a
result of bankruptcy or insolvency of PTL, SB shall be entitled to
retain the licenses granted herein, without any further obligations
to PTL, subject to PTL's right to terminate this Agreement for
reasons other than bankruptcy or insolvency as expressly provided in
this Agreement.
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<PAGE>
13. RIGHTS AND DUTIES UPON TERMINATION
13.01 Upon termination of this Agreement and subject to the provisions
contained in Section 2, PTL shall have the right to retain any sums
already paid by SB hereunder, and SB shall pay all sums accrued
hereunder which are then due.
13.02 Upon termination of this Agreement under Sections 12.04, 12.05 and
12.06, SB shall notify PTL of the amount of PRODUCT SB, its
AFFILIATES and its sublicensees and its distributors then have on
hand, the sale of which would, but for the termination, be subject
to royalty, and SB and its AFFILIATES and its sublicensees and its
distributors shall thereupon be permitted to sell that amount of
PRODUCT provided that SB shall pay the royalty thereon at the time
herein provided for.
13.03 Termination of this Agreement shall terminate all outstanding
obligations and liabilities between the parties arising from this
Agreement except those described in Sections 2.08, 2.09, 8.04, 8.05,
8.07, 8.08, 9.03, 9.06, 9.07, 9.08, 10.01, 11.01, 11.02, 11.03,
11.04, 11.05, 13.01, 13.02, 13.03, 16.01, 17.01 and 19.01.
13.04 Upon termination under Sections12.03, 12.04 (but only in the event
SB is the party in default), 12.05 or 12.06 (but only in the event
SB is the `other party'), and providing SB or an AFFILIATE of SB has
ceased to, or does not, conduct activities in the FIELD, or in any
SPECIFIC FIELD as the case may be, within six (6) months after
termination, PTL shall have a first right to negotiate with SB a
license of rights in such FIELD or SPECIFIC FIELD, to any invention
or discovery owned by SB as are referred to in Sections 2.08 and
2.09.
13.05 Without prejudice to Section 2.09 and Section 12.07, in the case of
termination under Section 12.04 the non-breaching party, or in the
case of termination under Section 12.06 the `other party', or either
party in the case of termination otherwise than under Sections 12.04
and 12.06, shall have the rights to exploit any jointly owned
know-how and /or patents in the FIELD, without any further
obligations to the other party, provided that this grant clause
shall in no event be construed as granting rights to SB to use PTL's
solely owned TECHNOLOGY, nor to PTL to use any of SB's solely owned
know-how,inventions, discoveries
25
<PAGE>
and/or patents in the FIELD irrespective of whether jointly owned
patents or know-how relate to the same subject matter, and in the
event such solely owned patents dominate the jointly owned patents
in any manner, the party in need of a licence thereto will have to
seek this licence from the other party independently, and such other
party shall have no obligation whatsoever to come to an agreement
with said party in need
13.06 Nothwithstanding anything to the contrary in this Agreement, the
parties agree that upon termination of this Agreement for any reason
whatsoever, other than a termination under Sections 12.04 or 12.06,
rights to any invention or discovery []* For the avoidance of doubt,
it is acknowledged and agreed by the parties that both parties will
be free to exercise the rights assigned to them under this Section
13.06.
14. WARRANTIES AND REPRESENTATIONS
14.01 PTL warrants that it owns or has the right to license the entire
right, interest and, where appropriate, title in PATENTS and
KNOW-HOW and has the right to enter into this Agreement.
14.02 Nothing in this Agreement shall be construed as a warranty that
PATENTS are valid or enforceable or that their exercise does not
infringe any patent rights of THIRD PARTIES. PTL hereby represents
that it has no present knowledge from which it can be inferred that
PATENTS are invalid or that their exercise would infringe patent
rights of THIRD PARTIES.
14.03 PTL acknowledges that, in entering into this Agreement, SB has
relied or will rely upon information supplied by PTL, information to
be supplied by PTL, and information which PTL has caused or will
cause to be supplied to SB by PTL's agents and representatives
pursuant to that certain Confidentiality Agreement signed by SB s.a.
on 6th March 1996 and by PTL on March 11, 1996 , (all of such
information being hereinafter referred to collectively as "Product
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
26
<PAGE>
Information"). PTL warrants and represents that so far as it is
aware the Product Information related to PRODUCT and/or TECHNOLOGY
is and will be timely (depending on the circumstances) and accurate
and complete in all material respects and that it has undertaken
such steps as are necessary to ascertain such accuracy and
completeness. Subject to PTL's compliance with its warranty as to
accuracy and completeness above, SB accepts it will not contest
Product Information as supplied. PTL further warrants and represents
that to the best of its knowledge it has and will supply information
concerning TECHNOLOGY and PRODUCT which is material to the value of
the TECHNOLOGY.
14.04 PTL warrants and represents that its directors, scientists, and
allergies project team have no present knowledge of the existence of
any pre-clinical or clinical data or information concerning the
TECHNOLOGY and PRODUCT which suggests that there may exist toxicity,
safety and/or efficacy concerns which are likely to materially
impair the utility and/or safety of the PRODUCT.
14.05 PTL warrants that the agreement between PTL and British Technology
Group Limited ("BTG") of 16th June 1994 has been terminated and that
the intellectual property previously licensed to PTL by BTG under
this agreement has now been fully assigned to PTL. SB acknowledges
it has received a copy of the assignment document (appropriately
redacted to remove any reference to commercial terms) by the
Effective Date.
14.06 PTL agrees it will undertake its reasonable efforts to have
suppliers maintainfor the duration of the Research Program or the
Extended Research Program, as the case may be, supplies of materials
to SB for clinical trial purposes and in particular supplies of
keyhole limpet hemacyanin (`KLH') currently produced by Biosyn GmbH
and of the decapeptide - KLH conjugate currently produced by Biomira
Inc. PTL further agrees it will undertake reasonable efforts to have
such material supplied in a form similar in all respects to material
used previously in clinical studies carried out by PTL or under
PTL's control.
15. FORCE MAJEURE
15.01 If the performance of any part of this Agreement by either party, 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, unless conclusive
evidence to the contrary is provided, the
27
<PAGE>
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.
16. GOVERNING LAW AND JURISDICTION
16.01 This Agreement shall be deemed to have been made in the United
Kingdom and its form, execution, validity, construction and effect
shall be determined in accordance with the laws of England and shall
be subject to the non-exclusive jurisdiction of the English Courts.
17. SEPARABILITY
17.01 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.
17.02 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.
17.03 In the event that the terms and conditions of this Agreement are
materially altered as a result of paragraphs 17.01 or 17.02, the
parties will renegotiate the terms and conditions of this Agreement
to resolve any inequities.
18. ENTIRE AGREEMENT
18.01 This Agreement, entered into as of the date written above,
constitutes the entire agreement between the parties relating to the
subject matter hereof and supersedes all previous writings and
understandings. No terms or provisions of this Agreement shall be
varied or modified by any prior or subsequent
28
<PAGE>
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.
19. NO WAIVER
19.01 The failure of either party at any time to exercise any of its
respective rights under this Agreement shall not be deemed a waiver
thereof, nor shall such failure in any way prevent either party, as
the case may be, from subsequently asserting or exercising such
rights.
20. NOTICES
20.01 Any notice required or permitted under this Agreement shall be sent
by certified mail, return receipt requested, postage pre-paid to the
following addresses of the parties :
if to PTL :
Peptide Therapeutics Limited
Cambridge Science Park,
Milton Road, Cambride CB4 4WG
United Kingdom
Attention : The Company's Secretary
Copy to : The Commercial Director
If to SB :
SmithKline Beecham plc
New Horizons Court
Great West Road
Brentford, Middlesex TW8 9EP
United Kingdom
29
<PAGE>
with copy to : SmithKline Beecham Biologicals Manufacturing S.A.
rue de l'Institut 89
1330 Rixensart, Belgium
Attention : Senior Vice President, General Manager
Additional copy to : Vice President, Director
Business and Strategy
Development
20.02 Any notice required or permitted to be given concerning this
Agreement shall be effective upon receipt by the party to whom it is
addressed.
21. ASSIGNMENT AND CHANGE OF CONTROL
21.01 Neither this Agreement nor any interest hereunder shall be
assignable or transferable by either party without the written
consent of the other provided, however, that either party may assign
this Agreement to any AFFILIATE or to any corporation with which it
may merge or consolidate or to which it may sell all or
substantially all of its assets, without obtaining the consent of
the other party provided the interests of the other party are not
materially affected.
IN WITNESS WHEREOF, the parties, through their authorised officers, have
executed this Agreement as of the date first written above.
PEPTIDE THERAPEUTICS LIMITED
BY : Illegible
SMITHKLINE BEECHAM PLC
BY : Illegible
30
<PAGE>
List of Schedules
Schedule A : CURRENT PATENTS
Schedule B : R&D Plan
Schedule C : Subscription Agreement
Schedule D : To be provided within twelve months from Effective Date.
31
<PAGE>
Schedule A
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
SCHEDULE B
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
EXHIBIT 10.6
DATED 30th January 1997
(1) MEDEVA PLC
(2) EVANS MEDICAL LIMITED
(3) PEPTIDE THERAPEUTICS LIMITED
(4) PEPTIDE THERAPEUTICS GROUP PLC
----------------------
SALE AGREEMENT
----------------------
Stringer Saul
Marcol House
293 Regent Street
London W1R 7PD
<PAGE>
Date: 30th January 1997
Parties:
(1) MEDEVA PLC whose registered office is at 10 St James's Street, London
SW1A 1EF ("Medeva")
(2) EVANS MEDICAL LIMITED whose registered office is at Evans House, Regent
Park, Kingston Road, Leatherhead, Surrey KT22 7PQ ("the Vendor")
(3) PEPTIDE THERAPEUTICS LIMITED whose registered office is at 321
Cambridge Science Park, Milton Road, Cambridge CB4 4WG ("the
Purchaser")
(4) PEPTIDE THERAPEUTICS GROUP PLC whose registered office is at 321
Cambridge Science Park, Milton Road, Cambridge CB4 4WG ("Peptide")
Recitals:
A The Vendor carries on, inter alia, research and development into the
delivery of vaccine antigens at its premises at Imperial College.
B The Vendor wishes to sell and the Purchaser wishes to purchase the
rights of the Vendor in technology associated with the delivery of
certain of such vaccine antigens on the terms and conditions set out
herein.
C The Vendor is a wholly-owned subsidiary of Medeva.
D The Purchaser is a wholly-owned subsidiary of Peptide.
Operative provisions:
1 Interpretation
1.1 In this Agreement including the Schedules:
1.1.1 the following words and expressions have the following meanings, unless
they are inconsistent with the context:
"AFFILIATE" in respect of any party means any
holding company of that party or a
subsidiary of that party or any company
directly or indirectly in common
ownership with that party to the extent
of more than fifty per cent. (50%) of
its shares or stock having the power to
vote at a general meeting (or
equivalent) being owned by that party or
such holding company and the terms
"holding company" and "subsidiary" shall
have the meaning attributed to them by
the Companies Act
1
<PAGE>
1985 as amended by the Companies Act
1989.
"ASSETS" the assets (or rights in respect of
assets) of the Vendor to be purchased by
the Purchaser as described in clauses
2.1 to 2.4.
"COMPLETION" completion of the acquisition of the
Assets in accordance with clause 5.
"CONSIDERATION" the consideration for the sale of the
Assets as specified in clause 4.1.
"DANBIOSYST AGREEMENT" an agreement between Danbiosyst UK
Limited and Medeva Europe Limited
dated 5 October 1995.
"DISCLOSURE BUNDLE" the documents and the information
contained in such documents as are
annexed to the Disclosure Letter or are
referred to or specified in the
Disclosure Letter or such documents.
"DISCLOSURE LETTER" the disclosure letter of today's
date from the Vendor to the Purchaser
with reference to clause 18 and Schedule
2.
"DOSSIERS" any material within the possession of
the Vendor (and not subject to any
obligation of confidentiality to any
third party) which is included within
the Vendor's United States IND
application in respect of CVD 908.
"DUE DATE" the first anniversary of the Effective
Date.
"DUNDEE AGREEMENT" such agreement as might be entered
between The Wellcome Foundation Limited
or its successors and the University
of Dundee as contemplated in the
"Dundee Letter" (as defined in the
Disclosure Letter).
"DISCLOSURES" the disclosures set out in the
Disclosure Letter and the Disclosure
Bundle.
"EFFECTIVE DATE" the close of business on the date
of Completion.
"EXCLUDED ASSETS" all assets of the Vendor other
than those specifically identified
herein as the Assets.
2
<PAGE>
"HUMAN VACCINE FIELD" shall have the meaning ascribed to it
in the Wellcome Agreement.
"HEPATITIS FIELD" the treatment or prophylaxis of viral
hepatitis and all and any products
processes technology and services as
relate thereto or are of application
therefor.
"IMPERIAL COLLEGE" Imperial College of Science Technology
and Medicine at Exhibition Road London
SW7
"INFLUENZA PROJECT" the Influenza project which relates to
the development of technology falling
within the scope of patents []*
"INTELLECTUAL PROPERTY any and all interest whether
RIGHTS" legal or beneficial arising under the
laws of England or elsewhere in letters
patent, copyright, design right, rights
in confidentiality, trade mark rights
and any other analogous rights,
applications for any of the foregoing
(and the right to make such
applications).
"KNOW-HOW" the technical information of the Vendor
to be assigned or licensed hereunder to
the Purchaser which know-how is
necessary to enable the Purchaser to
enjoy the benefits conferred upon it
under this Agreement in respect of the
`A' `B' `C' and `D' Patents, and where
such Know-How is described as `A', `B'
`C' or `D' Patent Know-How it is all
such Know-How which relates to the `A'
`B' `C' or `D' Patents respectively.
"LEASEHOLD PROPERTY" the leasehold premises owned and
occupied by the Vendor at Imperial
College.
"LEASE" the lease or underlease under which the
Leasehold Property is held.
"MARYLAND AGREEMENT" an agreement between Medeva and
University of Maryland at Baltimore
dated 20 September 1994.
"PATENTS" the `A' Patents the `B' Patents the `C'
Patents and the `D' Patents collectively
and in respect of `A', `B', `C' and `D'
Patents referred to
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
3
<PAGE>
below any other patents claiming
priority from the patents so listed or
which are in respect of the same
invention as the patents so listed
including any continuation, continuation
in part or divisional patents or
applications.
"`A' PATENTS" the patents and patent applications as
listed in Part A of Schedule 1
"`B' PATENTS" the patents and patent applications
listed in Part B of Schedule1.
"`C' PATENTS" the patents and patent applications
listed in Part C of Schedule 1.
"`D' PATENTS" the patents listed in Part D of Schedule
1
"`D' FIELD" the use of protein carriers for antigens
for mucosal delivery other than in
respect of []* infections.
"PROJECT MEETINGS" those meetings as described in clause
6.11
"REGULATIONS" the Transfer of Undertakings (Protection
of Employment) Regulations 1981.
"STOCKS" samples of all strains and recombinant
DNA constructs necessary for the use of
the technology within the VR Field being
the property of the Vendor or its
Affiliates and being in the Vendor's
possession (save in particular for those
materials and consumables related to the
Hepatitis Field).
"STOCK EXCHANGE" The International Stock Exchange of the
United Kingdom and the Republic of
Ireland Limited.
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
4
<PAGE>
"VR FIELD" the technology within the scope
of the `A' Patents, the Human Vaccine
Field, the `D' Field and any
improvements thereto or developments
thereof, but excluding in every case the
Hepatitis Field
"VR PROJECTS" the following development projects:
mucosal vaccines for the prevention or
treatment of []*
"WARRANTIES" the warranties and representations of
the Vendor contained in this Agreement
including those set out in Schedule 2 of
this Agreement.
"WARRANTY CLAIM" any claim by the Purchaser against the
Vendor for breach of any of the
Warranties.
"WELLCOME AGREEMENT" an agreement dated 17 January 1991 and
between The Wellcome Foundation
Limited ("TWFL"), the Vendor, Medeva,
and Wellcome Plc together with all
schedules thereto and the Side Letter
comprising the reservations to the
Patent Agreement and the Technology
Agreement both dated 10 April 1991,
and the subsequent assignment and
separate licence documents both dated
May 1994 and between TWFL, Burroughs
Welcome Co. and the Vendor, and the
reservations attached thereto.
1.1.2 all references to a statutory provision or enactment shall be construed
as including references to:
1.1.2.1 any statutory modification, consolidation or re-enactment (whether
before or after today's date) for the time being in force;
1.1.2.2 all regulations or orders made pursuant to it;
1.1.2.3 any statutory provision of which it is a consolidation, re-enactment or
modification;
1.1.3 except where the context otherwise requires, words denoting the
singular include the plural and vice versa; words denoting any gender
include all genders; words denoting persons include firms and
corporations and vice versa;
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
5
<PAGE>
1.1.4 unless otherwise stated, a reference to a clause, sub-clause or
Schedule is a reference to a clause or a sub-clause of, or a Schedule
to, this Agreement;
1.1.5 clause headings are for ease of reference only and do not affect the
construction of this Agreement.
1.1.6 Where clauses or paragraphs in this Agreement or the Schedules contain
the expression "....to the best of the knowledge and belief of...." or
"....so far as....is/are aware...." or phrases having a similar meaning
or effect, they shall be deemed to be followed by the words "....having
made all due and careful enquiries of officers and employees of the
Vendor and its Affiliates and without making enquiry of any third
party(ies)...." in every case.
2 Agreement for Sale
2.1 Subject to the terms and conditions of this Agreement, and in
particular clause 2.2 below:
2.1.1 the Vendor hereby assigns to the Purchaser the `A' Patents and the `A'
Patent Know-How;
2.1.2 the Vendor hereby grants to the Purchaser an exclusive world wide
royalty free sub-licence within the Human Vaccine Field (terminable
only as provided in clauses 2.8 to 2.12) of the Vendor's rights under
the `B' Patents and the `B' Patent Know-How in so far as is necessary
to enable the Purchaser to enjoy the benefits conferred upon it in
respect of the `B' Patents, subject to any restrictions and
reservations thereon contained in the Wellcome Agreement and the
Maryland Agreement;
2.1.3 the Vendor hereby grants to the Purchaser a non-exclusive world wide
royalty free sub-licence within the Human Vaccine Field (terminable
only as provided in clauses 2.8 to 2.12) of the Vendor's rights under
the `C' Patents to the extent necessary to enable the Purchaser to
exercise the inventions the subject-matter of the `A', `B', or `D'
Patents or the New Applications without infringing the `C' Patents and
the `C' Patent Know-How in so far as is necessary to enable the
Purchaser to enjoy the benefits conferred upon it in respect of the `C'
Patents, subject to any restrictions and reservations thereon contained
in the Wellcome Agreement and the Maryland Agreement;
2.1.4 the Vendor hereby grants to the Purchaser a non-exclusive world wide
royalty free licence within the `D' Field (terminable only as provided
in clauses 2.8 to 2.12) of the Vendor's rights under the `D' Patents to
the extent only that such licence is necessary to enable the Purchaser
to work within the `D' Field without infringing the `D' Patents and the
`D' Patent Know-How insofar as is necessary to enable the Purchaser to
enjoy the benefits conferred upon it in respect of the `D' Patents,
subject to any restrictions and reservations therein contained in the
Wellcome Agreement and the Maryland Agreement.
6
<PAGE>
2.2 The assignments licences and sub-licences pursuant to clause 2.1 above
shall be subject in each and every case to the grant by the Purchaser
to the Vendor of, and the Purchaser hereby grants to the Vendor, an
exclusive world wide irrevocable royalty-free licence (including the
right to sub-license) for all purposes in the Hepatitis Field.
2.3 The Vendor shall transfer to the Purchaser the Stocks.
2.4 The Vendor shall within sixty (60) days of the Effective Date supply
the Dossiers to the Purchaser.
2.5 The Purchaser shall acquire no rights of whatsoever nature to the
Excluded Assets.
2.6 Where title to any of the Assets lies with an Affiliate of the Vendor
the Vendor covenants to procure the transfer and assignment of title to
such Assets in accordance with the terms of this Agreement. In respect
of any such Assets the Vendor shall be responsible for payment of such
proportion of the consideration payable hereunder in respect of those
Assets to its relevant Affiliates and no additional consideration shall
be payable by the Purchaser in respect thereof to such Affiliate.
2.7 The licences and/or sub-licences hereby granted to the Purchaser in
respect of the Patents and the Know-How shall remain in full force and
effect subject to clauses 2.8 to 2.12 until the expiration of the
relevant `B', `C' or `D' Patent in question.
2.8 The Vendor may terminate any or all licences or sub-licences granted
under this Agreement in respect of the Patents and/or the Know-How by
notice in writing to the Purchaser if the Purchaser or any sub-licensee
of the Purchaser is in material breach of the terms of this Agreement
including without limitation upon exploitation of any `B' Patent or `C'
Patent or of any `B' Patent Know-How or `C' Patent Know-How outside the
Human Vaccine Field or in contravention of any restrictions or
reservations thereon contained in the Wellcome Agreement or the
Maryland Agreement by the Purchaser or at the Purchaser's behest, or
any exploitation of any `D' Patent outside the `D' Field, or any
exploitation of any Patent or any of the Know-How within the Hepatitis
Field by the Purchaser or at the Purchaser's behest provided that the
Vendor has notified the Purchaser of its objection to such breach and
the Purchaser has not remedied such breach within 45 days of such
notice.
2.9 The Vendor may terminate all licences or sub-licences granted under
this Agreement in respect of the Patents or Know-How forthwith upon
notice if the Purchaser shall become insolvent or if a receiver,
administrator, manager or similar officer shall be appointed in respect
of the whole or substantial part of its assets or if any order shall be
made or a resolution passed for winding-up the Purchaser (other than a
resolution for a members' voluntary winding-up of the Purchaser for the
purpose of a bona fide amalgamation or reconstruction).
2.10 Any or all licences or sub-licences granted under this Agreement in
respect of the Patents and/or the Know-How shall determine expire or be
revoked upon
7
<PAGE>
the termination expiry or revocation of any licence or sub-licence
pursuant to which the Vendor has granted rights to the Purchaser
hereunder.
2.11 If the Purchaser shall have failed for any reason whatsoever to pay any
amount due and payable and not the subject of any bona fide dispute
under and in accordance with the terms of this Agreement this Agreement
and any and all licences or sub-licences granted hereunder shall upon 7
days written notice by the Vendor terminate forthwith unless otherwise
agreed by the parties.
2.12 The Purchaser shall not itself act nor omit to act, nor procure nor
allow any other person to act nor omit to act, in any way prejudicial
to the Patents or the grant of patents the subject of applications
comprised in the Patents or any licences held by the Vendor or its
Affiliates under the Patents, and without limiting or restricting the
Purchaser's legal rights to challenge any patent, the Vendor may
terminate any of the licences or sub-licences granted hereunder to the
Purchaser should the Purchaser act in contravention of this clause
2.12.
3 Tangible know how
3.1 The parties agree and recognise that only a portion of the Know-How to
be assigned or licensed hereunder has been reduced to tangible form.
Such tangible `A', `B', `C' and `D' Patent Know-How shall be
transferred to the Purchaser within a period of two years and in
accordance with a schedule to be agreed by the parties. The Know-How
that can be and has not at the date of this Agreement been reduced to
tangible form, shall be reduced to a tangible form as soon as is
reasonably practicable and transferred to the Purchaser in accordance
with a Schedule as the Purchaser may reasonably request and which the
Vendor shall use its reasonable endeavours to agree provided always
that the Vendor shall subject to clauses 5.5 and 21 be entitled to use
and retain duplicate copies of all Know-How.
3.2 The duplicate copies of all Know-How retained by the Vendor under the
provisions of clause 5.5 shall be held securely by the Vendor and the
Vendor shall take all reasonable precautions to keep the `A' Patent
Know-How and the `B' Patent Know-How confidential for a period of five
(5) years from the date hereof.
3.3 The Vendor's obligations under this clause 3 shall be deemed part of
and shall be subject always to the limitations on the Vendor's
obligations contained in clause 3 of the secondment agreement of
today's date entered between the Vendor and the Purchaser ("the
Secondment Agreement"), and shall otherwise be conducted in accordance
therewith.
4 Payments
4.1 The Consideration for the sale by the Vendor of the Assets shall be
one million pounds sterling ((L)1,000,000) which shall be paid by
the Purchaser in sterling in cash in one lump sum upon Completion.
8
<PAGE>
4.2 The Funding Contribution as referred to in clause 13 shall be one
million pounds sterling ((L)1,000,000) which shall be paid by the
Purchaser in two equal annual instalments, each of which instalments
shall be five hundred thousand pounds ((L)500,000) payable in
sterling in cash with the first instalment payable in one lump sum upon
Completion and the second instalment payable in one lump sum upon the
Due Date.
4.3 The IP Management Fee as referred to in clause 11 shall be one
million pounds sterling ((L)1,000,000) which shall be paid by the
Purchaser in two equal annual instalments, each of which instalments
shall be five hundred thousand pounds ((L)500,000) payable in sterling
in cash with the first instalment payable in one lump sum upon
Completion and the second instalment payable in one lump sum upon
Due Date.
4.4 All payments under this Agreement or contemplated hereunder, including,
but not limited to any payments made by the Vendor in respect of
persons employed by the Purchaser and seconded to the Vendor as
referred to in clause 6.5.1 shall be exclusive of any Value Added Tax
or any tax or charge levied in substitution therefor, which shall be
payable in addition to such payments contemporaneously therewith.
4.5 All amounts payable to the Vendor by the Purchaser shall be paid by way
of telegraphic transfer to National Westminster Bank Plc, PO Box 34, 15
Bishopsgate, London EC2P 2AP, Sort Code 50-00-00, []*
4.6 The Purchaser shall upon completion provide the Vendor with an executed
Bill of Exchange, drawn by the Vendor on and accepted by Barclay's Bank
("the Bank") in a form reasonably satisfactory to the Vendor in respect
of and in the amount of the second instalments of both the Funding
Contribution and the IP Management Fee, totalling one million pounds
sterling ((L)1,000,000) payable by the Bank on demand on the Due Date
or at any time thereafter.
5 Completion
5.1 The sale and purchase shall be completed immediately upon exchange of
this Agreement when all the matters set out in this clause 5 shall be
effected.
5.2 The Vendor shall deliver to the Purchaser, at the offices of Medeva or
such other address as the parties may agree, such of the Assets as are
capable of being transferred by delivery.
5.3 The Vendor shall cause to be delivered or (if so requested by the
Purchaser) made available to the Purchaser such documents in agreed
form as are reasonably required by the Purchaser to complete the sale
and purchase of the Assets.
5.4 The parties (as appropriate) shall enter into and exchange certified
Board Minutes evidencing the approval of this Agreement and the other
documents and transactions
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
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hereby contemplated and duly authorising the signing thereof by the
representatives of the parties.
5.5 In addition to the specific rights set out in clause 21, the Purchaser
shall permit the Vendor on reasonable notice to inspect and take copies
of all or any of the original documents delivered to the Purchaser
pursuant to clauses 5.2 and 5.3. Such rights of inspection and copying
shall continue for a period of seven (7) years from the Effective Date.
Where by reason of any statutory provision or regulation the Vendor is
required to retain the originals of any documents or records which
relate to the Patents and/or the Know-How the Vendor may retain such
documents or records and to fulfil its obligations in respect of the
above by delivering to the Purchaser copies of all such documents and
records and providing to the Purchaser the same rights to inspect and
take copies as are provided to the Vendor under this clause 5.5.
5.6 Upon completion of the matters referred to above the Purchaser shall
pay the amounts specified in clause 4 in accordance therewith and shall
deliver to the Vendor the irrevocable letter of credit pursuant to
clause 4.6 above.
6 Continuing development
6.1 The parties acknowledge and agree that it is in their best interests to
pursue development programmes for proposals or projects currently
existing and/or associated with the Assets. The Development Projects
shall comprise:
6.1.1 the VR Projects; and,
6.1.2 the New Applications (as defined in clause 6.3.1 below).
6.2 The Purchaser hereby undertakes to use all reasonable endeavours
diligently and expeditiously to pursue and develop, whether directly or
indirectly, and/or to procure the pursuit and development of, up to and
including clinical proof of principle stage, the Development Projects.
Progress in respect thereof shall be reviewed and monitored at Project
Meetings. The Purchaser shall agree with the Vendor a programme of
development regarding each of the Development Projects and the
Purchaser shall pursue and develop each Development Project diligently.
6.3 In performing its obligations under clause 6.2 the Purchaser shall
throughout the term of this Agreement and for so long as the Assets
remain capable of use or exploitation:
6.3.1 seek and pursue, to the extent agreed at Project Meetings or to the
extent the Purchaser believes it to be commercially sound, novel or
unexploited products, processes, or technology or new uses or
applications thereof or any means of delivery of any of the
aforementioned, using or incorporating the Assets whether or not in
combination with or within such other products processes technology and
know-how at the disposal of the Purchaser, other than the Assets (such
novel or unexploited products, processes, services or technology being
"New Applications").
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All New Applications shall be deemed included and comprised in
Development Projects; and,
6.3.2 utilise, to the extent agreed at Project Meetings or to the extent the
Purchaser believes it to be commercially sound, all products,
processes, technology and know-how at its disposal, whether at the
Effective Date or at any time thereafter coming under its ownership or
control or otherwise being at its disposal.
6.4 The Purchaser hereby undertakes to notify the Vendor in writing of any
New Application (including any commencement of a further Phase in any
clinical development thereof) no later than the first Project Meeting
following the same being identified, developed or discovered. The
Purchaser shall give the Vendor further notice as soon as reasonably
practicable should the Purchaser intend to commercialise any New
Application or should the Purchaser be approached by any third party
with a view to such commercialisation. The Purchaser shall give the
Vendor first option to negotiate in good faith over the rights to
such commercialisation. If the Vendor does not wish to take up such
rights or terms cannot be agreed in good faith between the Purchaser
and the Vendor, the Purchaser shall be entitled to offer such rights
to a third party (subject to the other terms of this Agreement)
provided that the terms upon which the rights are offered to the
third party, would not be, if they were offered to the Vendor, more
favourable to the Vendor than the terms which were offered to the
Vendor. If no agreement is reached with any such third party, then
upon the rights to such New Application being further offered for
commercialisation at any later stage of development the Purchaser
shall be obliged to offer such rights to the Vendor on a first
option basis. In furtherance of the above the Purdhaser shall
provide the Vendor in confidence with relevant and adequately
detailed information regarding any New Application to enable the
Vendor to evaluate the New Application and consider whether and upon
what terms it wishes to enter into good faith negotiations with the
Purchaser for the commercialisation of the New Application. In all
dealings in relation to this clause the parties shall act in a
timely fashion. Upon the Vendor's request, the Purchaser shall enter
such good faith negotiations with the Vendor as contemplated by this
clause.
6.5 In consideration of the Funding Contribution payable by the Purchaser,
the Vendor shall in conjunction with the Purchaser assist in the
pursuit and development of the Development Projects for a period of two
(2) years from the Effective Date, unless agreed otherwise. Such
assistance by the Vendor shall be deemed part of and shall be subject
always to the limitations on the Vendor's obligations contained in
clause 3 of the Secondment Agreement, and shall otherwise be conducted
in accordance therewith and shall include, but not be limited to:
6.5.1 at the Purchaser's cost in all things the secondment to the Vendor on
the terms of the Secondment Agreement of up to three (3) or, with the
agreement of the Vendor, four (4) employees of the Purchaser ("the VR
Employees") being persons relevantly and adequately qualified to such
an extent that they could effectively work on the Development Projects
unsupervised . The VR Employees are subject to the approval
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of Dr S Chatfield, and shall be deployed by the Vendor in the Leasehold
Property to conduct and undertake the pursuit and development of the
Development Projects;
6.5.2 dedicating as the Vendor considers appropriate suitably qualified
personnel to work in conjunction with the VR Employees in undertaking
the pursuit and development of the Development Projects; and,
6.5.3 agreeing with the Purchaser the programmes of development in respect of
the Development Projects.
6.6 In addition to the Funding Contribution the Purchaser shall indemnify
and keep indemnified the Vendor against any and all costs expenses or
liability suffered or incurred by the Vendor associated with the
secondment to the Vendor of the VR Employees. In the event that any of
the VR Employees are dismissed or deemed to be dismissed by the Vendor
at any time during or at the end of the period of their secondment with
the Vendor, then the Purchaser will indemnify the Vendor against all
and any claims for unfair dismissal, redundancy payments, wrongful
dismissal, breach of contract and any claims for sex discrimination or
race discrimination arising out of the unfair dismissal claims, such
indemnity to include any monies paid to the VR Employees to settle the
claims or as a result of awards of damages, compensation, protective or
additional awards; the indemnity shall also cover all legal costs and
expenses reasonably incurred by the Vendor in relation to settling,
contesting and dealing with any such claims.
6.7 Pursuant to the indemnity in clause 6.6 above, the Purchaser shall
reimburse the Vendor against invoices on a monthly basis for any costs
reasonably incurred by the Vendor in relation to the VR Employees.
6.8 In respect of each of the VR Projects, unless the Purchaser shall have
taken substantial and effective steps to pursue and confirmed its
intention to pursue any such of the VR Projects within a period of
twenty four (24) months from the Effective Date, then the Vendor shall
have the right to acquire from the Purchaser such VR Project together
with those rights granted to the Purchaser hereunder as are required to
develop or work such VR Project on terms and conditions as might
reasonably be agreed between the parties.
6.9 The extent of assistance and support to be provided by the Vendor
whether through the services of the VR Employees or otherwise shall be
in respect only of those aspects of the Development Projects which can
be reasonably conducted and completed at the Vendor's laboratory at the
Leasehold Property. Any development or other support, including
clinical trials production, shall be conducted in accordance with
clause 6.10 below.
6.10 The Vendor shall provide to the Purchaser technical development support
including, where relevant clinical trials production, (subject to the
Vendor's production commitments) in respect of any vaccines which the
Purchaser may have under development, or which might be discovered by
or come under the control of the Purchaser, and such development
support shall be solely at the Purchaser's expense,
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at a cost to be agreed between the parties prior to the Vendor
affording such development support. It is the intention of the parties
that the cost of such development support and the terms upon which it
will be provided by the Vendor will be the subject of a Development
Agreement between the parties on terms to be negotiated and finalised
when appropriate.
6.11 The Vendor and the Purchaser shall convene and attend through their
nominees development review meetings ("Project Meetings") regularly but
no less frequently than every six months during the term of this
Agreement. Project Meetings shall have the purpose of:
6.11.1 the compilation and agreement of programmes of development for each
Development Project;
6.11.2 the review and monitoring of the progress or status of each Development
Project including, but not limited to, New Applications;
6.11.3 attending to such other matters as the Project Meetings might decide.
6.12 Each party may nominate at any one time two nominees to attend Project
Meetings. The two nominees of the Vendor (currently Dr S Chatfield and
Dr P Cozens) and the two nominees of the Purchaser (currently Mr N
Higgins and Dr P Laing) shall constitute the first Project Meeting. The
said nominees shall by agreement set the agenda for each meeting and
shall be free to invite the attendance of such personnel of the Vendor
or Purchaser as they see fit. The Vendor and the Purchaser shall
consider and discuss within the Project Meetings such matters as either
party may think relevant regarding the seeking and pursuit of New
Applications and Development Projects, the Influenza Project and the
utilisation of the Assets, and strive to reach agreement in respect
thereof. Failing agreement, and having provided reasonable
justification for not agreeing, the Purchaser shall be responsible for
development decisions in respect of the Development Projects, and the
Vendor shall be responsible for development decisions in respect of the
Influenza Project.
7 Influenza Project
7.1 In respect of the Influenza Project the Purchaser acknowledges and
agrees that the Vendor shall retain control of and continue the
development of such project, unless and until such project is
terminated, either because they have been successful or because the
Vendor no longer wishes to proceed with them.
7.2 In the event that an Influenza Project is successfully completed the
benefits arising from such exploitation shall be dealt with pursuant to
clauses 14.3 and 14.4. The Vendor shall be entitled to utilise an
appropriate portion of the Funding Contribution in the carrying out of
the Influenza Project.
7.3 The Purchaser hereby acknowledges and agrees that the Vendor has and
shall retain at all times (subject to the grant back provisions of
clause 14.4), all rights in and to the Influenza Project and any and
all products, processes and technology that might
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<PAGE>
be comprised therein or arise as a result of the pursuit or development
thereof and, for the avoidance of doubt, the Purchaser shall obtain no
rights of whatsoever nature in the Influenza Project, regardless of any
input or assistance it might provide in the pursuit or development
thereof, other than in respect of any express rights to which it might
be entitled in accordance with clause 14.3 or 14.4 hereof.
7.4 The Purchaser hereby grants irrevocably to the Vendor or its nominee
the first option to the exclusion of any other person to acquire from
the Purchaser the exclusive rights to market any and all Influenza
products, processes or technology (other than in respect of the
Influenza Project) developed acquired or controlled by the Purchaser,
whether or not the same utilises involves or comprises the Assets or
any part thereof or arises from conduct of the Development Projects.
Such right as is granted to the Vendor is a right to acquire the said
marketing rights at a consideration to be negotiated, but which in no
event shall be more than the then prevailing market rate for such
rights, the parties appreciating and intending to take account of the
contribution made by the Vendor to the Purchaser's ability to develop,
acquire or control the said product, process or technology, including
but not limited to the Vendor supplying research and clinical trial
materials, and the implementation and transfer of the Know-How, and
such other information assistance, and guidance as the Vendor may have
supplied. For the avoidance of doubt, the right granted to the Vendor
by the Purchaser hereunder shall be a continuing right of first option
in respect of each product, process or item of technology so developed,
acquired or controlled by the Purchaser, regardless of whether or not
the Vendor has exercised the right granted to it in respect of such
products, processes or technology previously identified or notified to
it.
8 Vendor's further rights and option to acquire rights
8.1 The Purchaser hereby grants irrevocably to the Vendor or its nominee
the right to negotiate with the Purchaser (or such other party as might
be the beneficial owner thereof) marketing rights for all products,
processes or technology (including any commencement of a further Phase
in any clinical development thereof), other than in respect of
Influenza, which might be identified, developed or come under the
control of the Purchaser and which fall within the VR Field and arise
as a result of the conduct of the Development Projects. In relation
thereto, the Purchaser shall notify the Vendor in writing no later than
the first Project Meeting following such products process or technology
being developed identified or acquired. The Purchaser shall give the
Vendor further notice as soon as reasonably practicable should the
Purchaser intend to commercialise any such product process or
technology or should the Purchaser be approached by any third party
with a view to such commercialisation. The Purchaser shall give the
Vendor first option to negotiate in good faith over the rights to
such commercialisation. If the Vendor does not wish to take up such
rights or terms cannot be agreed in good faith between the Purchaser
and the Vendor, the Purchaser shall be entitled to offer such rights
to a third party (subject to the other terms of this Agreement)
provided that the terms upon which the rights are offered to the
third party would not be, if they were offered to the Vendor, more
favourable to the Vendor than the terms which were offered to the
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Vendor. If no agreement is reached with any such third party, then
upon the rights to such product process or technology being further
offered for commercialisation at any later stage of development the
Purchaser shall be obliged to offer such rights to the Vendor on a
first option basis. In furtherance of the above the Purchaser shall
provide the Vendor in confidence with relevant and adequately
detailed information regarding any product process or technology to
enable the Vendor to evaluate the product process or technology and
consider whether and upon what terms it wishes to enter into good
faith negotiations with the Purchaser for the commercialisation of
the product process or technology. In all dealings in relation to
this clause the parties shall act in a timely fashion. Upon the
Vendor's request, the Purchaser shall enter such good faith
negotiations with the Vendor as contemplated by this clause.
8.2 The Vendor's rights and options contained in clauses 7 and 8 may be
assigned by the Vendor without consent to any purchaser of the Vendor's
vaccine business or a substantial part thereof, provided that such
right to assign is exercised by the Vendor on or before 30 June 1997
after which date the Vendor's right to assign such rights and options
shall lapse.
9 Glaxo Wellcome funding option
9.1 The Purchaser acknowledges that the Vendor is currently negotiating
with Glaxo Wellcome Plc ("GW") regarding GW agreeing to fund a
development programme ("the Programme") to be conducted by the
Vendor at Imperial College in respect of Helicobacter Pylori ("the
Option"). The Vendor shall continue diligently to pursue the
negotiations with GW in respect of agreeing the terms of the Option,
such terms to include a right of assignment by the Vendor. Should
the Option be granted on terms which permit the assignment of the
Option to the Purchaser, then the Vendor, as soon as reasonably
practicable, and subject to obtaining necessary consents shall assign
the Option to the Purchaser. If such assignment is concluded the
Purchaser shall assume all the Vendor's rights and obligations under
the Option, but shall subcontract the Programme to the Vendor who
will carry out the Programme at no cost to the Purchaser. All monies
received by the Purchaser under or in respect of the Option from GW
shall be passed forthwith to the Vendor without deduction and shall
not be subject to the provisions of clause 14.2. Any benefits
arising from exploitation of technology arising from the Programme
shall be treated in accordance with clause 14.2. Should the terms of
the Option not be agreed between the Vendor and GW or should the
terms of the Option not permit assignment to the Purchaser or should
consent to the assignment not be obtained, neither the Vendor nor
Medeva shall have any obligation to the Purchaser as regards the
Option, the funding from GW, the Programme or any income or
remuneration arising therefrom. Nothing in this clause 9 shall
affect the Purchaser's obligations to the Vendor in respect of
clause 14.2.
10 Manufacture by Vendor
10.1 For so long as the Purchaser shall be meeting its obligations regarding
the Funding Contribution or for so long as it shall continue to fund
the Influenza Project, the Vendor shall continue to supply to the
Purchaser for the sole purpose of conducting
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the Influenza Projects, batches of Influenza virus antigens of such
strains and in such quantities as the Vendor might reasonably be
expected to supply in accordance with the Purchaser's requests.
10.2 The Vendor's obligations to supply hereunder shall be subject to the
Vendor's production commitments and it is acknowledged and agreed by
the Purchaser that any such request from the Purchaser does not oblige
the Vendor to embark on Influenza virus antigen production chiefly or
solely for the purposes of meeting the Purchaser's requirements under
this Agreement.
11 Intellectual property
11.1 In consideration of the payment of the IP Management Fee by the
Purchaser, as from the Effective Date and for a period of two (2) years
thereafter ("the Management Period"), the Vendor shall diligently
assume the management of the `A', `B' and `C' Patents, , comprising
prosecution and maintenance thereof (including the defence of
opposition and revocation proceedings) and shall promptly pay all
renewal and other fees and costs thereof actually incurred or where the
last due date for payment falls within the Management Period.
11.2 The Vendor shall consult with and keep the Purchaser informed regarding
the conduct of the management of the `A', `B' and `C' Patents, , taking
account of all reasonable requests of the Purchaser.
11.3 Without prejudice to the generality of clause 11.1 the Vendor shall
diligently prosecute to grant all subsisting patent applications within
the `A', `B' and `C' Patents, and use its reasonable endeavours to
secure the broadest monopoly reasonably obtainable consistent with
avoiding serious prejudice to the validity of such granted patents.
11.4 Upon expiry of the Management Period:
11.4.1 the Purchaser shall assume all responsibility for the management of the
`A' Patents and shall consult with and keep the Vendor informed
regarding the conduct thereof, taking account of all reasonable
requests of the Vendor;
11.4.2 the Purchaser shall assume all responsibility for the management,
subject to the requirements of the Wellcome Agreement, of the `B'
Patents and `C' Patents, with the costs thereof to be borne jointly
between the Purchaser and the Vendor. The Purchaser shall consult with
and keep the Vendor informed regarding the conduct of the management of
the `B' Patents or the `C' Patents thereof taking account of all
reasonable requests of the Vendor;
11.4.3 the Vendor shall transfer or make available to the Purchaser all
documentation records and information reasonably necessary to enable
the Purchaser to assume management of the Patents, other than the `D'
Patents;
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11.4.4 The parties shall jointly bear any opposition or revocation costs
incurred in respect of any of the Patents, other than the `D' Patents.
11.5 Notwithstanding anything to the contrary expressed or implied herein
upon the expiry of the Management Period all responsibility for
conducting those duties specified in or contemplated in clauses 11.1 to
11.3 herein shall pass to the Purchaser, subject to the requirements of
the Wellcome Agreement, and further provided that the Purchaser shall
notify and consult with the Vendor and take into account the Vendor's
reasonable requirements in respect of those Patents and Intellectual
Property Rights in which the Vendor retains any interest whether by way
of ownership, licence, or contingent right to acquire any such rights.
11.6 Any and all Intellectual Property Rights of whatsoever nature arising
as a result of the pursuit or development of the Development Projects
and/or the use or exploitation of the Assets shall be dealt with as
follows:-
11.6.1 all such Intellectual Property Rights other than those arising from the
Influenza Project shall be the sole and exclusive property of the
Purchaser subject to any licence rights to the Vendor specified in
clause 11.7 below;
11.6.2 all such Intellectual Property Rights which arise from or relate to the
[]* Project shall be the sole and exclusive property of the Vendor.
11.7 The Purchaser shall grant to the Vendor the following licence rights in
respect of any such Intellectual Property Rights to which the Purchaser
becomes entitled in accordance with clause 11.6.1:
11.7.1 where such Intellectual Property Rights have application in the
Hepatitis Field, the Purchaser shall grant to the Vendor an exclusive
world wide royalty free irrevocable licence without limit of time and
with the right of sub-licence for all uses in the Hepatitis Field.
11.8 Any improvements developed by the Purchaser falling within the scope of
the `A', `B' or `C' Patents shall belong to the Purchaser subject to a
royalty free irrevocable non-exclusive licence in favour of the Vendor
within the Hepatitis Field. Any improvements developed by the Purchaser
falling within the scope of the `D' Patents shall belong to the Vendor
subject to an exclusive royalty free licence in favour of the Purchaser
within the `D' Field. All other improvements shall belong exclusively
to the party making the same. Should the Vendor be assigned the `B'
Patents or any of them from GW or the proprietor thereof, with the
right to assign attached thereto, the Vendor will assign to the
Purchaser at the Purchaser's cost any such `B' Patent, subject to any
consents restrictions reservations or third party rights attached
thereto Any such `B' Patent subject to any such consents, restrictions,
reservations or third party rights shall for the purposes of this
Agreement be deemed an `A' Patent upon its assignment
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12 Interest in Patents
12.1 Following the expiry of the Management Period the Purchaser shall
forthwith notify the Vendor should, in respect of any of the `A'
Patents, the Purchaser elect to abandon the prosecution of any
application in any jurisdiction with the effect that all rights
emanating from any application based on or claiming priority from any
patent within any patent family denoted by an MPC number referred to in
the first column of Schedule 1 in that jurisdiction would be lost
leaving no rights outstanding, or the Purchaser elects not to renew any
granted patent. Upon receiving such notification from the Purchaser,
the Vendor may, within 30 days of receipt of such notice, inform the
Purchaser that the Vendor desires such Patent to be assigned to it and
the Purchaser shall at the Vendor's cost, and for the consideration of
(L)1, assign such Patent to the Vendor and shall transfer and or
make available to the Vendor all documentation records and information
reasonably necessary to enable the Vendor to assume management of any
such `A' Patents. Until such assignment is effected and appropriately
recorded the Purchaser shall ensure that the said Patent shall be
maintained and shall not lapse nor be abandoned.
12.2 In respect of any one or more of the `B' Patents or the `C' Patents,
the Purchaser may notify the Vendor in writing at any time during the
term of this Agreement that it no longer requires a sub-licence from
the Vendor in respect of such Patents whereupon such Patents shall be
deemed deleted from Schedule 1 hereto and the Purchaser shall no longer
be responsible for any costs related to such Patents and any
sub-licence under the relevant Patents shall be deemed revoked.
Following service of such written notice the Vendor may in its absolute
discretion abandon or otherwise deal with such Patents as it sees fit.
12.3 At any time following the date of this Agreement the Vendor may give
notice to the Purchaser that any of the Patents is of no further
interest to the Vendor and, within ninety (90) days of receipt of such
notice, the Purchaser shall by counter-notice inform the Vendor either
that:
12.3.1 the Patent may be abandoned forthwith; or
12.3.2 subject to the Vendor's existing commitments to third parties (if any)
the Purchaser desires the Patent to be assigned to it and, subject to
the Vendor being free to assign as requested, the Vendor shall at the
Purchaser's cost assign such Patent to the Purchaser on terms and
conditions to be agreed.
13 Vaccine research unit funding
13.1 The Purchaser hereby agrees to pay to the Vendor by way of contribution
to the funding of Medeva's vaccine research unit at Imperial College
the Funding Contribution being an amount of one million pounds sterling
((L)1,000,000) payable in two equal yearly instalments of
(L)500,000 (five hundred thousand pounds) per annum in accordance
with clause 4.2.
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13.2 The Funding Contribution shall be an unconditional and non-refundable
payment by the Purchaser and may be applied by the Vendor and/or
Medeva's vaccine research unit as they see fit, provided such
application of the Funding Contribution shall be reasonably related to
the conduct of research or the acquisition maintenance replacement or
repair of facilities of Medeva's vaccine research unit.
14. Benefits from exploitation
14.1 Should the Purchaser its Affiliates or connected persons license sell
or otherwise dispose of or derive in any way any income or revenue from
any product process or technology resulting from use of or exploitation
in any way of the VR Technology and/or the Development Projects (other
than in relation to Helicobacter Pylori which shall be dealt with in
accordance with clause 14.2 or the Influenza Projects, which shall be
dealt with in accordance with clauses 14.3 and 14.4), the Purchaser
shall pay to the Vendor an amount equal to []* of the Net Consideration
(as herein defined), whether in money or money's worth, received by
the Purchaser its Affiliates or connected persons in respect of any
such licence sale disposal use or exploitation. Such percentage of
Net Consideration shall be payable by the Purchaser to the Vendor as
follows:
14.1.1 where such consideration is payable in a lump sum or by instalments
within 30 days of such lump sum or instalment being payable and/or,
14.1.2 where such consideration is payable by way of royalty or in any other
manner, within 30 days of the due date for payment of the said royalty
or other payment.
14.2 Should the Purchaser its Affiliates or connected persons license sell
or otherwise dispose of or derive in any way any income or revenue from
Helicobacter Pylori and any product, process or technology in relation
thereto, resulting from use of or exploitation in any way of the
Assets, the Purchaser shall pay to the Vendor an amount equal to []*
of the Net Consideration, whether in money or money's worth, received
by the Purchaser its Affiliates or connected persons in respect of any
such licence sale disposal use or exploitation. Such percentage of
Net Consideration shall be payable by the Purchaser as follows:-
14.2.1 where such consideration is payable in a lump sum or by instalments
within 30 days of such lump sum or instalment being payable; and/or
14.2.2 where such consideration is payable by way of royalty or in any other
manner, within 30 days of the due date for payment of the said royalty
or other payment.
14.3 Should the Vendor its Affiliates or connected persons license sell or
otherwise dispose of or derive in any way any income or revenue from
any product, process or technology arising from the Influenza Projects
the Vendor shall pay to the Purchaser an amount equal to []* of the
Net Consideration whether in money or money's worth, received by the
Vendor its Affiliates or connected persons in respect of any such
licence, sale or other disposal. Such percentage of Net Consideration
shall be payable by the Vendor to the Purchaser as follows:-
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
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14.3.1 where such consideration is payable in a lump sum or by instalments,
within 30 days of such lump sum or instalment being payable and/or
14.3.2 where such consideration is payable by way of royalty or in any other
manner within 30 days of the due date for payment of the said royalty
or other payment.
14.4 Should in respect of the Influenza Projects the Vendor decide that it
does not wish to continue with any or all of the Influenza Projects, or
should the Vendor have taken no substantial or effective steps to
pursue any or all of the Influenza Projects within a period of twenty
four (24) months from the Effective Date, then in any such event the
Purchaser shall be entitled to acquire from the Vendor the right to
exploit any process, product or technology arising from any such
Influenza Project for the sum of []* subject to any third party
consents rights or obligations, existing or contingent, in relation
thereto. At the Purchaser's request and cost in all things, in relation
to any exploitation of output from the Influenza Project acquired by
the Purchaser pursuant to this clause 14.4, the Vendor shall where
possible and subject to any consents required, grant a sub-licence of
the Vendor's rights in the patents and know-how licensed to the Vendor
under the Danbiosyst Agreement to any third party nominated by the
Purchaser. In such case where the Purchaser has acquired such a right
from the Vendor, should the Purchaser its Affiliates or connected
persons license, sell or otherwise dispose of or derive in any way any
income or revenue from any rights arising from the Influenza Project or
any product, process or technology in relation thereto, the Purchaser
shall pay to the Vendor an amount equal to []* of the Net
Consideration, whether in money or money's worth, received by the
Purchaser its Affiliates or connected persons in respect of any such
licence, sale or other disposition. Such percentage of Net
Consideration shall be payable by the Purchaser as follows:
14.4.1 where such consideration is payable in a lump sum or by instalments,
within 30 days of such lump sum or instalment being payable and/or
14.5 where such consideration is payable by way of royalty or in any other
manner within 30 days of the due date for payment of the said royalty
or other payment.
14.6 "Net Consideration" shall for the purposes of this Agreement mean all
gross income or revenue received whether in money or money's worth
less:
14.6.1 costs of manufacture; and
14.6.2 reasonable direct sales and marketing costs, but in no event shall
there be deducted any costs of development nor deduction of other costs
which would have the intention or effect of recovering capital
expenditure whether for the Assets or any other assets utilised in the
development of the products processes or technology in respect of which
such revenue or income is derived; and
14.6.3 any royalty payable under the Maryland Agreement, the Dundee
Agreement or the Danbiosyst Agreement.
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
20
<PAGE>
14.7 No payments shall be due from either party under this clause 14 in
relation to income derived from the other party nor from the Vendor
to the Purchaser in respect of any income received from GW pursuant
to the Option.
14.8 For the purposes of this Agreement, "connected persons" shall mean in
respect of each party, persons (not being Affiliates) subject to the
influence or effective control, whether direct or indirect, of that
party or its Affiliates, to the extent that such person is effectively
an Affiliate of that party.
15 Guarantee
15.1 In consideration of the Purchaser entering into this Agreement and
subject to 15.2 below Medeva hereby guarantees as guarantor but not as
primary obligor to the Purchaser the performance and observance by the
Vendor in all material respects of its obligations under this Agreement
and any agreement or other document entered into with the Purchaser
pursuant hereto.
15.2 Nothing in this Agreement shall make the Vendor liable in respect of
anything done or omitted to be done on or following the Effective Date
by the Purchaser and the Purchaser shall indemnify the Vendor in
respect of any liability (which liability shall include without
limitation, all losses, costs, claims, expenses, damages, legal and
other professional fees and expenses on a party and party basis) which
it may incur as a result of anything so done or omitted to be done
other than in respect of any liability or indemnity arising in respect
of any express provision hereof.
15.3 In consideration of the Vendor entering into this Agreement and subject
to 15.4 below Peptide hereby guarantees as guarantor but not as primary
obligor to the Vendor the performance and observance by the Purchaser
in all material respects of its obligations under this Agreement and
any agreement or other document entered into with the Vendor pursuant
hereto.
15.4 Nothing in this Agreement shall make the Purchaser liable in respect of
anything done or omitted to be done on or following the Effective Date
by the Vendor and the Vendor shall indemnify the Purchaser in respect
of any liability (which liability shall include without limitation, all
losses, costs, claims, expenses, damages, legal and other professional
fees and expenses on a party and party basis) which it may incur as a
result of anything so done or omitted to be done other than in respect
of any liability or indemnity arising in respect of any express
provision hereof.
16 Regulations
16.1 The Vendor and the Purchaser acknowledge that the transfer of rights
and assets pursuant to this Agreement may constitute a transfer subject
to the Regulations and accordingly that the terms and conditions,
rights, benefits and obligations of and to some or all of the employees
engaged by the Vendor in conducting research in respect of the Assets
may transfer pursuant to such regulations to the Purchaser. Accordingly
the Purchaser agrees with the Vendor that if for any reason the
Regulations should operate so as to transfer the contract of employment
of any
21
<PAGE>
person employed by the Vendor the Purchaser will indemnify and keep
indemnified the Vendor from and against any liability which the Vendor
may incur in connection with or arising out of its dismissal of any
such person or the termination of the contract of employment relating
to any such person or the transfer of the contract of employment of any
such person including but not, limited to claims for notice pay,
redundancy payments, protective awards, additional awards, compensation
for unfair dismissal, sex discrimination and/or race discrimination and
damages for breach of contract. Such indemnity shall include all costs
and expenses, including legal costs and expenses, reasonably incurred
by the Vendor in settling, contesting and dealing with any such claims.
17 Value Added Tax
17.1 The Purchaser shall pay to the Vendor an amount equivalent to the VAT
chargeable on the transactions contemplated in this Agreement against
the production by the Vendor of the appropriate VAT invoice.
18 Warranties
18.1 The Vendor warrants to the Purchaser that the Warranties, save as set
out in the Disclosure Letter, are in all material respects true and
accurate and not misleading at the date of this Agreement.
18.2 The Vendor acknowledges that the Purchaser in entering into this
Agreement is relying on the Warranties. Save for the Warranties the
Purchaser is not relying on any other, undertakings, representations or
warranties when entering into this Agreement.
18.3 The rights of and remedies available to the Purchaser in relation to
the Warranties shall not be affected by Completion.
18.4 The liability of the Vendor in respect of the Warranties shall be
limited by the provisions of Schedule 3.
18.5 The Purchaser warrants that as at the date hereof and save for the
Licence Agreement ("the Mochida Agreement") entered into with Mochida
Pharmaceutical Company, Limited ("Mochida") the Purchaser has not
entered into any arrangements with any third parties pursuant to which
such third parties may obtain rights over or in respect of any of the
proprietary rights and/or information arising from the performance of
or contemplated by this Agreement including but not limited to the
Development Projects.
18.6 The Purchaser further warrants that the terms of the Mochida Agreement
oblige the Purchaser to negotiate exclusively with Mochida with a view
to granting an exclusive licence to Mochida in respect of Japan
regarding:
18.6.1 various existing patents in which, prior to the date of this Agreement,
the Purchaser had a pre-existing interest; and
22
<PAGE>
18.6.2 other patents filed by or assigned to or exclusively licensed to the
Purchaser in its sole name only.
18.7 The Purchaser further warrants that any licence entered into pursuant
to the negotiations with Mochida will comply in all respects with all
terms conditions and restrictions (whether contractual or otherwise and
including any terms in relation to sub-licensing) to which the
Purchaser is subject in relation to the Patents or the Know-How, and in
so doing the Purchaser will not be in breach of the Mochida Agreement.
19 Restrictive Trade Practices Act
19.1 No provision contained in this Agreement by virtue of which this
Agreement is registerable under the Restrictive Trade Practices Act
1976 shall come into effect until the day after the particulars of this
Agreement or a memorandum of it have been delivered to the Office of
Fair Trading in accordance with the Restrictive Trade Practices Act
1976.
20 Assignment and Sub-Licensing
20.1 The Purchaser may assign any or all of the `A' Patents and the `A'
Patent Know-How but not the `A' Patent Know-How independently of the
`A' Patent to which it relates with the prior written consent of the
Vendor, which consent shall not be unreasonably withheld.
20.2 The Purchaser may license any or all of the `A' Patents and the `A'
Patent Know How, but not the `A' Patent Know-How independently of the
`A' Patent to which it relates and upon effecting such licences, the
Purchaser shall notify the Vendor of the value and effect of the
licences, their subject matter, and the identity of the licensees.
20.3 The Purchaser shall not sub-license:
20.3.1 any or all of the Purchaser's rights in the `B' Patents and the `B'
Patent Know-How;
20.3.2 any or all of the Purchaser's rights in the `C' Patents and the `C'
Patent Know-How;
20.3.3 any or all of the Purchaser's rights in the `D' Patents and the `D'
Patent Know-How;
without first obtaining in each and every case the prior written
consent of the Vendor and in respect only of the `B' and `C' Patents
and the `B' and `C' Patent Know-How such consent shall not be
unreasonably withheld and further provided that the Purchaser shall not
sub-license any of the `B', `C' or `D' Patent Know-How independently of
the Patents to which it relates.
20.4 The Purchaser shall be prohibited from assigning any or all of its
rights under the `B', `C' or `D' Patents or the `B', `C' or `D' Patent
Know How, or this Agreement in whole or in part provided that the
Purchaser, subject where appropriate to any consents required under the
Wellcome Agreement, may otherwise freely assign this Agreement or the
benefit of any licences or sub-licences granted hereunder to its
Affiliates for so
23
<PAGE>
long as they remain such and provided that such companies are
registered in England or Wales and/or that the terms of this Agreement
will be given effect to and expressed to be enforceable against such
assignee within England and Wales and/or the Purchaser and/or Peptide
shall guarantee performance of this Agreement and any licence or
sub-licence granted hereunder by such Affiliate.
20.5 Each of the Purchaser and the Vendor shall notify the other promptly on
completion thereof any assignment, licence or sub-licence effected.
20.6 Any purported assignment or sub-license by the Purchaser in
contravention of this clause 20 shall be voidable by the Vendor.
21 Access to Records
21.1 Within such records and other documentation to be retained by the
Vendor and/or to be transferred to the Purchaser in accordance with
clause 5.5. herein there may be information of a confidential nature or
which does not relate exclusively to the Assets in the VR Field. Such
information insofar as it is in or comes into the possession of the
Purchaser or its employees or agents, and is covered by confidentiality
agreements between the Vendor or its Affiliates and third parties shall
be subject to the confidentiality provision in clause 30 of this
Agreement and, where the terms of such third party confidentiality
agreements are known to or are disclosed to the Purchaser it shall
ensure that it will not do anything or omit to do anything which if
done or omitted to be done by the Vendor or its Affiliates would amount
to a breach of such confidentiality agreement.
21.2 Upon request, the Purchaser shall grant to the Vendor access to such
records and relevant personnel upon reasonable notice and such
information and/or assistance as the Vendor might require shall be
provided during normal working hours unless the Purchaser and the
Vendor otherwise agree.
22 Announcements
22.1 The parties agree that save for the press announcement in the form to
be agreed which shall not be released in any event prior to this
Agreement coming into force, no public announcement of any kind shall
be made in respect of this Agreement except as specifically agreed in
writing between the Vendor and the Purchaser, or except to the extent
that an announcement is required by the Stock Exchange. Any
announcement by any party shall in any event be issued only after prior
consultation with the other.
23 Costs
23.1 All expenses incurred by or on behalf of the parties, including all
fees of agents, solicitors and accountants employed by either of the
parties in connection with the negotiation, preparation and execution
of this Agreement shall be borne solely by the party which incurred
them.
24
<PAGE>
24 Further Assurance
24.1 The Vendor hereby agrees at the cost of the Purchaser that it will do
all such acts, execute all such documents and the like that may be
reasonably necessary to perfect title to the `A' Patents in the name of
the Purchaser and to enable the Purchaser to record such assignments in
patent offices or equivalent office records and with respect to the `B'
Patents, the `C' Patents and the `D' Patents, each party hereby agrees
to provide at the other's cost all reasonable assistance to that other
to register the licences granted hereunder, where so required or
desirable under national laws, in the name of the other and where
necessary to execute such confirmatory assignments or short form
licences as may be necessary.
25 Taxation
25.1 The Purchaser or the Vendor shall be entitled to deduct or withhold any
amounts in respect of taxation which are required by law or practice of
the relevant tax authority to be deducted or withheld from any payments
made under this Agreement
26 Communications
26.1 All communications between the parties with respect to this Agreement
shall be in writing and will be effectively given if delivered to the
address of the intended recipient as set out below or sent by facsimile
to the intended recipient at the following numbers:
MEDEVA PLC 10 St James's Street
London SW1A 1EF
Attn: Company Secretary
Fax: 0171 930 1516
EVANS MEDICAL LIMITED Evans House
Regent Park
Kingston Road
Leatherhead
Surrey KT22 7PQ
Attn: Managing Director
Fax: 01372 364 018
25
<PAGE>
PEPTIDE THERAPEUTICS GROUP PLC 321 Cambridge Science Park
Milton Road
Cambridge
CB4 4WG
Attn: Company Secretary
Fax: 01223 423 111
PEPTIDE THERAPEUTICS LIMITED 321 Cambridge Science Park
Milton Road
Cambridge
CB4 4WG
Attn: Company Secretary
Fax: 01223 423 111
Provided that any party hereto may give notice in accordance with this
clause to the other parties hereto of a new address or facsimile number
to be used for the purposes of this clause.
26.2 A notice, approval, consent or other communication shall take effect
from the time it is received (or, if earlier, the time it is deemed to
have been received in accordance with sub-clause 26.3) unless a later
time is specified in it.
26.3 A letter or facsimile is deemed to be received:
26.3.1 in the case of a posted letter, unless actually received earlier, on
the third (7th, if posted to or from a place outside the United
Kingdom) day after posting;
26.3.2 in the case of facsimile, on production of a transmission report from
the machine from which the facsimile was sent which indicates that the
facsimile was sent in its entirety to the facsimile number of the
recipient.
27 Entire agreement and schedules
27.1 This Agreement and the Schedules the Disclosures and all documents
entered into pursuant hereto shall constitute the entire agreement and
understanding between the parties with respect to all matters which are
referred to.
27.2 All the Schedules form part of this Agreement.
27.3 This Agreement shall be binding upon each party's successors and
assigns.
28 Invalidity
28.1 If any term or provision in this Agreement shall in whole or in part be
held to any extent to be illegal or unenforceable under any enactment
or rule of law, that term or provision or part shall to that extent be
deemed not to form part of this Agreement and the enforceability of the
remainder of this Agreement shall not be affected.
26
<PAGE>
29 Proper law
29.1 The construction, validity and performance of this Agreement shall be
governed by the laws of England and the parties hereby submit to the
non-exclusive jurisdiction of the English Courts.
30 Confidentiality
30.1 The Vendor shall, and shall procure that its Affiliates and employees,
agents and contractors, keep confidential any and all confidential
information of the Purchaser and shall not disclose the same to any
third party without the prior written consent of the Purchaser.
30.2 The Purchaser shall, and shall procure that its Affiliates and
employees, agents and contractors, keep confidential any and all
confidential information relating to the business of the Vendor or the
Assets (save only for such information which relates exclusively to the
business of the Purchaser or the Assets assigned or licensed
exclusively to the Purchaser) in its possession or knowledge prior to
or on the Effective Date or which comes into its possession or
knowledge thereafter, including, without limitation, the Excluded
Assets, and shall not disclose the same to any third party (other than
potential collaborators or licensees/sub-licensees provided such
collaborators or licensees/sub-licensees are subject to a duty to
retain any such information in confidence on terms no less onerous than
those contained herein) without the prior written consent of the
Vendor.
30.3 The obligations in clauses 30.1 and 30.2 do not apply to information:
30.3.1 which is in the public domain at the Effective Date;
30.3.2 which comes into the public domain after the Effective Date otherwise
than by the act or omission of the recipient; or
30.3.3 which the recipient acquires from a third party (not being an Affiliate
of the other party) who did not derive such information from the other
party or derived such information from the other party without
obligation of confidence; or
30.3.4 which the recipient is required to disclose by law provided that prior
to disclosure pursuant to this sub-section the recipient shall, if
practicable, give the other party notice of the requirement to make
such disclosure and shall, if the other party so requests and subject
to the other party indemnifying the recipient in a form reasonably
acceptable to the recipient, take such steps as the other party shall
require to resist such disclosure or to secure obligations of
disclosure from the party to whom disclosure is so required by law.
27
<PAGE>
SCHEDULE 1
[]*
- ---------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which
confidential treatment has been requested, has been filed separately with
the Securities and Exchange Commission.
28
<PAGE>
SCHEDULE 2
WARRANTIES
The Vendor hereby warrants and undertakes as at the date hereof to the Purchaser
in terms of the Warranties set out below subject to any qualifications fairly
disclosed in the Disclosure Letter or the Disclosure Bundle.
(i) the Vendor is the registered proprietor of each of the `A' Patents and
the licensee under an exclusive licence within the Human Vaccine Field
of the `B' Patents and `C' Patents and `D' Patents;
(ii) as at the Effective Date all renewal and other fees due in respect of
the Patents have been duly paid;
(iii) the Vendor is not aware, having made no specific enquiry of any third
party, of any prior art which could have a material effect on the
validity of the Patents, other than the information disclosed in the
files made available to the Purchaser's patent agents prior to the date
hereof;
(iv) the Vendor is not aware of any act that it has done that will prevent
any application within the `A' Patents and the `B' Patents from
proceeding to grant in the US, the European Patent Convention countries
and Japan (but no warranty is given that such Patents will be granted);
(v) the Vendor has not granted nor is subject to any licences (including
any Licences of Right and/or Compulsory Licence or any other
permissions) for use of any of the Patents to any third party;
(vi) the Vendor has not been notified that the exercise by the Vendor of the
Patents infringes the rights of any third party;
(vii) the Vendor is entitled to enter into and carry out the provisions of
this Agreement and has full power and authority to assign and/or
license rights in respect of the Patents and other Intellectual
Property as envisaged by this Agreement;
(viii) so far as the Vendors are aware, having made no specific enquiry of any
third party, there is no subsisting infringement by any third party of
any of the Patents or other Intellectual Property assigned or licensed
under this Agreement;
(ix) so far as the Vendors are aware the Disclosure Letter contains true,
complete and accurate lists of all documentation in the possession,
custody or control of the Vendor, material to establishing the Vendor's
acquisition of title to the `A' Patents and the `B' Patents;
29
<PAGE>
(x) so far as the Vendors are aware, the Vendor is not in breach of any
material terms of the licences or agreements relating to the Patents
licensed and assigned under this Agreement as listed in the Disclosure
Letter;
(xi) []*
(xii) []*
(xiii) []*
(xiv) []*
(xv) []*
(xvi) []*
(xvii) []*
(xviii) []*
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
30
<PAGE>
SCHEDULE 3
----------
VENDOR PROTECTION
-----------------
1 The provisions of this schedule operate to limit the liability of the
Vendor under the Warranties and references to `such liabilities' shall
be construed accordingly.
2 No liability shall arise in respect of such liabilities unless the
amount thereof, where aggregated with the amount of any other claim
then or previously made by the Purchaser, exceeds the sum of (L)200,000
in which event the whole of such claims and not merely the excess
of (L)200,000 shall be recoverable but subject always to paragraph 3
below.
3 The aggregate liability of the Vendor in respect of such liabilities
shall not exceed (L)3,000,000.
4 The Purchaser confirms that it has not entered into this Agreement in
reliance upon any representation undertaking or warranty other than the
Warranties.
5 In the event that the Purchaser is entitled to claim under any one or
more of the Warranties and/or any other provisions of this Agreement,
any payments made in respect of any such claim shall pro tanto satisfy
and discharge any claim which is capable of being made under any other
Warranties and/or such provisions in respect of the same subject
matter.
6 No claim shall be brought against the Vendor in respect of any breach
of the Warranties unless (i) notice in writing of any such claim
including details of the material facts giving rise to the claim and
the identity of the Warranty against which the breach is alleged is
given to the Vendor as soon as reasonably practicable after the facts
giving rise to the claim are known to the Purchaser and (ii) any such
notice has been given to the Vendor by the Purchaser prior to the first
anniversary of the date of this Agreement.
7 In the event that the Vendor makes any payment in respect of any claim
for breach of any Warranties and subsequent to the date of such payment
the Purchaser recovers any sum including but not limited to the
proceeds of any policy of insurance or receives any benefit which is
referable to such payment or to the circumstances giving rise to such
claim in respect of which such payment was made then the Purchaser
shall forthwith repay to the Vendor such amount that is so recovered or
referable not exceeding the amount paid by the Vendor in respect of
such claim net of costs of any such recovery or benefit.
31
<PAGE>
SCHEDULE 4
----------
THE ANNOUNCEMENTS
-----------------
[TO BE AGREED]
32
<PAGE>
IN WITNESS WHEREOF the duly authorised representatives of the parties have duly
executed this Agreement the date first before written.
SIGNED by GARRY WATTS )
for and on behalf of MEDEVA PLC ) GARRY WATTS
in the presence of: )
SIGNED by GARRY WATTS )
for and on behalf of EVANS MEDICAL ) GARRY WATTS
LIMITED in the presence of: )
SIGNED by JOHN ROBERT BROWN )
for and on behalf of PEPTIDE THERAPEUTICS ) JOHN ROBERT BROWN
LIMITED in the presence of: )
SIGNED by JOHN ROBERT BROWN )
for and on behalf of PEPTIDE THERAPEUTICS ) JOHN ROBERT BROWN
GROUP PLC in the presence of: )
33
<PAGE>
EXHIBIT 10.7
Dated 10 September 1997
PEPTIDE THERAPEUTICS LIMITED
-and-
UNIVERSITY OF MARYLAND, BALTIMORE
-and-
MEDEVA PLC
--------------------------------------------------------------
--------------------------------------------------------------
ASSIGNMENT AND VARIATION AGREEMENT
--------------------------------------------------------------
--------------------------------------------------------------
<PAGE>
THIS ASSIGNMENT AND VARIATION AGREEMENT is made on this 10th day of September,
1997, (the "Effective Date") ("Agreement")
BY:
(1) PEPTIDE THERAPEUTICS LIMITED a company incorporated in England and
Wales (No. 2774777) whose registered office address is at 321 Cambridge
Science Park, Milton Road, Cambridge, CB4 4WG England ("Peptide"); and
(2) UNIVERSITY OF MARYLAND, BALTIMORE of 515 W. Lombard Street, Baltimore,
Maryland 21201, USA (the "University") formerly named UNIVERSITY OF
MARYLAND AT BALTIMORE; and
(3) MEDEVA PLC (No. 2086530) whose registered office address is at 10 St.
James's Street, London SW1A 1EF England ("Medeva").
WHEREAS
(A) In January 1991, Medeva and its affiliates acquired the exclusive rights
to use technology developed at the Wellcome Research Laboratories,
Beckenham, Kent in the field of attenuated mutants of Salmonella typhi for
human vaccines. These rights were licensed to Peptide by an agreement
dated 30 January 1997 ("Peptide Agreement").
(B) The University has the exclusive rights to use technology developed at its
Center for Vaccine Development ("CVD") in the field of []*
(C) By an Agreement of 20 September 1994 made between the University and
Medeva, University and Medeva agreed to collaborate in the further
development of []* ("The Principal Agreement").
(D) In or around May 1995, Medeva terminated the "Project" (as that term is
defined under the Principal Agreement) and the Principal Agreement fell
dormant.
(E) The parties have now agreed that Peptide take an assignment from Medeva of
the Principal Agreement on the terms and conditions and with the
modifications to the Principal Agreement and its schedules set out below.
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
1
<PAGE>
IT IS AGREED as follows:
1 ASSIGNMENT OF THE PRINCIPAL AGREEMENT
1.1 In consideration of Peptide agreement to assume all the obligations and
liabilities of Medeva under the Principal Agreement from the Effective
Date, Medeva hereby assigns and Peptide hereby accepts the assignment of
the Principal Agreement on the terms herein (the "Assignment").
1.2 In consideration of (a) Peptide agreeing to accept the terms and
conditions of the Principal Agreement from the Effective Date and (b)
Medeva and Peptide accepting the terms and conditions of this Agreement,
the University hereby consents to the Assignment without further recourse
against Medeva for any reason whatsoever, []*.
1.3 With effect from the effective Date all contractual rights and obligations
under the Principal Agreement shall be enforceable exclusively between the
University and Peptide as fully as if Peptide had been an original party
to the Principal Agreement in place of Medeva from the Effective Date save
only that
1.3.1 the Principal Agreement shall be varied as set out in clause 2
1.3.2 for the avoidance of doubt it is accepted by University the
Termination of the Project by Medeva was valid and University
has no claim against Medeva in relation to its work under the
Project. Further, such termination of the Project by Medeva
shall have no effect upon the new project to be commenced by
Peptide with Medeva following the Effective Date.
2. VARIATIONS TO PRINCIPAL AGREEMENT
2.1 The main body of the Principal Agreement shall be varied as from the
Effective Date as follows:
2.1.1. The Recitals shall be deleted;
2.1.2 The definition for "Project Coordinator" shall be changed as
follows:
"Project Coordinator" means in the case of Peptide, Dr P Bedford,
and in the case of the University, Dr. M. Levine; or such other
person as a party may substitute from time to time by written
notice to the other party.
- -----------------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
2
<PAGE>
2.1.3 By this Agreement Medeva transfers to Peptide all rights assigned
or licensed to it under the Principal Agreement for the
bacterial salmonella typhoid strains known as CVD 908 and
CVD 906. Peptide acknowledges that the University owns Background
Intellectual Property Rights in CVD 908 and CVD 906.
Medeva's rights in such strains have been transferred from
Medeva to Peptide under the terms of this Principal Agreement
and this Assignment and Variation of Agreement. Medeva as a
result of the transfer of its rights in CVD 908 and CVD 906 will
have no further right to use them except under a separate
executed agreement between University and Medeva or under licence
from Peptide in respect of arrangements entered into under the
Peptide Agreement.
2.2 The Schedules to the Principal Agreement shall be varied as from the
Effective Date as follows:
2.2.1. Schedule 3 shall be replaced completely by the new Schedule 3
text set out in Schedule 1 to this agreement.
3. GENERAL
3.1 Save as set out in this Agreement, the Principal Agreement shall remaining
full force and effect save that it is assigned as from the Effective Date
from Medeva to Peptide.
3.2 University and Medeva agree that any Foreground Intellectual Property
developed under the Principal Agreement prior to the Effective Date shall
form part of the rights carried forward as Foreground Intellectual
Property under the Principal Agreement as assigned to Peptide.
3.3 Medeva shall pass control of all Foreground Technical Information received
from University to Peptide.
3.4 Medeva assigned to Peptide the rights granted under the Principal
Agreement with respect to University Background Technology Information
(BTI) and university Background Intellectual Property Rights (BIPR).
Medeva no longer has the right to use University BTI or University BIPR
save in respect of any arrangements entered into directly with University
of Peptide, including under licence pursuant to the Peptide Agreement.
3.5 All licences granted by University to Medeva and by Medeva to University
under the Principal Agreement terminate forthwith.
3.6 []*
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
3
<PAGE>
[]*
3.7 University hereby releases Medeva from any and all liability arising out
of or relating to the Principal Agreement. Any liability arising from a
breach of the continuing obligation referred to in clause 3.6 above shall
be a liability arising under this Agreement.
3.8 Peptide will assume obligations for all the terms and conditions under the
Principal Agreement, and this Agreement, specifically for clause 16 -
Indemnity. Peptide's Indemnity obligations apply to actions and events
occurring on or after the Effective Date.
Signed by their duly authorised representatives to be effective as of 10th
September, 1997.
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
4
<PAGE>
SCHEDULE I
Variations to and Replacements of Schedules
to the Principal Agreement
1. PHASE II CLINICAL TRIAL OF ATTENUATED SALMONELIA TYPHI ORAL LIVE VECTOR
VACCINE CVD 908-htrA.
Total Budget: $304,388
Payment Schedule: 4 equal instalments prior to treatment of each cohort
of 20 volunteers (80 volunteers total) or quarterly, whichever is sooner.
2.* OUTPATIENT VACCINATION OF VOLUNTEERS IN PREPARATION FOR CHALLENGE
Total Budget: $133,243
Payment Schedule: after recruitment but prior to vaccination of
volunteers.
3.* INPATIENT CHALLENGE OF VACCINATED VOLUNTEERS AND CONTROLS
Total Budget: $440,189
Payment Schedule: half in advance of challenge and half on successful
completion of inpatient follow-up period.
Studies dependent on successful establishment of challenge model.
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
5
<PAGE>
SIGNED by a duly authorised officer )
for and on behalf of ) /s/ N.A. Higgins
PEPTIDE THERAPEUTICS LIMITED )
In the presence of:- )
N.A. Higgins
Signature of Witness: /s/ Paul Wallace
Name of Witness: Paul Wallace
Address: 11, Lisle Lane, Ely, Cambs, UK
SIGNED by a duly authorised officer )
for and on behalf of ) /s/ N. A. Higgins
UNIVERSITY OF MARYLAND, BALTIMORE )
formerly named UNIVERSITY OF MARYLAND ) N. A. Higgins
AT BALTIMORE in the presence of:- )
Signature of Witness: /s/ Mary L. Leach
Name of Witness: Mary L. Leach
Address: [Illegible]
[Illegible]
Baltimore, MD 21201
SIGNED by a duly authorised officer )
for and on behalf of ) Wm Bogre
MEDEVA PLC )
In the presence of:
Signature of Witness: /s/ J. Murphy
Name of Witness J. Murphy
Solicitor
Address: 10 St. James's St.
London, SW1
6
<PAGE>
DATED 20th September 1994
--------------------------------------------------------------------
MEDEVA PLC
-and-
UNIVERSITY OF MARYLAND AT BALTIMORE
--------------------------------------------------------------------
BIPARTITE COLLABORATION AGREEMENT
--------------------------------------------------------------------
STRINGER SAUL
Marcol House
293 Regent Street
London W1R 7PD
Tel: 071-631 4048
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . . . . . . 1
2. OBLIGATIONS OF THE PARTIES . . . . . . . . . . . . . . . . . . . . . . 4
3. MANAGEMENT OF THE TYPHOID PROJECTS . . . . . . . . . . . . . . . . . . 6
4. FOREGROUND TECHNICAL INFORMATION AND FOREGROUND INTELLECTUAL
PROPERTY RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5. BACKGROUND TECHNICAL INFORMATION AND BACKGROUND INTELLECTUAL
PROPERTY RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6. OTHER INTELLECTUAL PROPERTY INTERESTS . . . . . . . . . . . . . . . . 15
7. ROYALTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
8. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9. WARRANTIES AND LIABILITIES . . . . . . . . . . . . . . . . . . . . . 21
10. DURATION AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . 23
11. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
12. LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
13. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
14. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
15. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
16. INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
<PAGE>
SCHEDULE 1(a)
Background Intellectual Property Rights of Medeva
SCHEDULE 1(b)
Background Intellectual Property Rights of University
SCHEDULE 2(a)
Background Technical Information of Medeva
SCHEDULE 2(b)
Background Technical Information of University
SCHEDULE 3
Research Programme and Budget
SCHEDULE 4(a)
Third Party Arrangements known to Medeva
SCHEDULE 4(b)
Third Party Arrangements known to University
SCHEDULE 5
Materials Release Agreement
SCHEDULE 6
Confidential Disclosure Agreement
SCHEDULE 7
Adverse conditions to be covered
<PAGE>
BIPARTITE COLLABORATION AGREEMENT
THIS AGREEMENT is made the 20th day of September 1994, by and between
MEDEVA PLC of 10 St James's Street, London SW1A 1EP (hereinafter referred to as
"Medeva") of the first part
AND
UNIVERSITY OF MARYLAND AT BALTIMORE of 520 W. Lombard Street, Baltimore,
Maryland 21201, USA (hereinafter referred to as the "University") of the second
part.
WHEREAS:
A) Medeva and its Affiliates have the exclusive rights to use technology
developed at the Wellcome Research Laboratories, Beckenham, Kent, U.K. in
the field of attenuated mutants of Salmonella typhi for human vaccines.
B) The University has the exclusive rights to use technology developed at its
Center for Vaccine Development ("CVD") in the field of attenuated mutants
of Salmonella typhi bacteria for human vaccines, and has the resources for
clinical trials of human vaccines.
C) The parties now wish to collaborate in the further development of
recombinant attenuated strains of Salmonella typhi for use as a single
dose oral typhoid vaccine and to agree to the terms and conditions
applicable to their collaboration.
NOW THEREFORE it is hereby agreed by and between the parties as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement the following terms shall have the following meanings
unless the context requires otherwise:
(a) "Affiliate" means a company, partnership, or other entity which
directly or indirectly controls, is controlled by or is under common
control with the relevant party to this Agreement. "Control" means the
ownership of more than 50% of the issued share capital or the legal
power to direct or cause the direction of the general management and
policies of the entity in question.
(b) "Background Intellectual Property Rights" means Intellectual Property
Rights (as hereinafter defined) to be made available by a party for
use in the
and for the purposes of this Agreement "Animals" means all non-human
animals;
1
<PAGE>
Typhoid Project (as hereinafter defined), pursuant to clause 2.2(c)
including those specified in Schedules 1(a) and 1(b) attached hereto.
(c) "Background Technical Information" means Technical Information (as
hereinafter defined) to be made available by a party for use in the
Typhoid Project pursuant to clause 2.2(c) including but not limited to
those specified in Schedules 2(a) and 2(b) attached hereto.
(d) "Core Typhoid Project" means the Typhoid Project as envisaged by the
research programme and budget set out in Schedule 3 hereto as amended
from time to time under the provisions of clause 2.2(b).
(e) "Field" shall mean the prevention or reduction in susceptibility to
infectious disease in human beings by administration to human beings
of a substance that induces immunity in human beings against such
disease;
For the avoidance of doubt Field shall exclude:-
(i) insofar as they relate exclusively to Animals;
(a) products and services for the treatment,
alleviation, prevention or control of
disease in, nuisance to or other adverse
conditions in Animals;
(b) products for production, improvement in
or for the economic management of Animals
by substances that are biologically
active in Animals;
and for the purposes of this Agreement "Animals"
means all non-human Animals;
(ii) products and services insofar as they relate
exclusively to or are exclusively for;
(a) the diagnosis of disease in human beings;
(b) the therapeutic treatment of disease in
human beings;
(c) vaccines for use by administration to
human beings for the treatment or
prophylaxis of all immuno deficiency
virus infections.
(f) "Foreground Intellectual Property Rights" means Intellectual
Property Rights (as hereinafter defined) obtained, discovered, found,
produced, made by or generated in the course of work on a Typhoid
Project.
2
<PAGE>
(g) "Foreground Technical Information" means Technical Information (as
hereinafter defined) obtained, discovered, found, produced, made by or
generated in the course of work on a Typhoid Project.
(h) "Intellectual Property Rights" means patents, registered designs,
copyrights and trademarks and applications for any of the foregoing
and any form of protection afforded by law to ideas, concepts,
inventions and the right to apply for any of the foregoing.
(i) "Know-How" means any technical data and information arising directly
from or used in the course of a Typhoid Project which a party holds as
non-public and is capable of being employed in respect of a Second
Generation Product (as hereinafter defined) or process by which a
Second Generation Product is manufactured or used.
(j) "Net Sales" means the aggregate sales revenue of a Second
Generation Product (determined by gross invoice price) less all
reasonable relevant discounts, credits, transportation charges, excise
and other taxes and duties and with allowance made for returns and
replacements. For the purposes of calculating royalties due to the
University pursuant to this Agreement Net Sales shall include the
amounts referred to in the final sentence of clause 5.3(b) of this
Agreement.
(k) "Project Coordinator" means in the case of Medeva, Dr S N Chatfield
and in the case of the University, Dr M Levine; or such other person
as a party may substitute from time to time by written notice to the
other party.
(l) "Project Management Committee" means, with respect to a Typhoid
Project, a Committee consisting of both Project Coordinators.
(m) "Proprietary Information" (sometimes referred to as "Confidential
Information") shall have the meaning set forth in clause 8 of this
Agreement.
(n) "Regulatory Agency" means a government body concerned with the
granting of marketing authorisation for human vaccines.
(o) "Second Generation Product" means any oral typhoid vaccine which is
derived from recombinant attenuated strains of Salmonella typhi
possessing; []*
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
3
<PAGE>
(p) "Technical Information" means technical information, know-how,
show-how and data of any kind including but not limited to designs,
drawings, techniques, processes, formulae, reports, specifications,
procedures, instructions, substances and bacterial strains.
(q) "Typhoid Project" means a research programme to develop and/or work or
studies directed towards the development of a Second Generation
Product.
1.2 Where appropriate, words denoting a singular number only shall include the
plural and vice versa.
1.3 Reference to any statute or statutory provision or regulation includes a
reference to such statute, statutory provision or regulation as from time to
time amended, extended or re-enacted.
2. OBLIGATIONS OF THE PARTIES
2.1 (a) Each party undertakes to carry out its duties as defined in Schedule 3
in accordance with the timescales and costs detailed therein, or in
modifications or supplements to Schedule 3. The costs of work carried
out at or under the auspices of the University as specified in
Schedule 3, or in modifications or supplements to Schedule 3 shall be
borne by Medeva.
(b) Medeva shall have the right to monitor the clinical trials carried out
at or under the auspices of the University by having representatives
in attendance and shall have the right to audit (at reasonable times
and at its own expense) information associated with these trials.
(c) Medeva shall pay the University at quarterly intervals in advance one
quarter of the total budget for the year in which the quarter falls.
The total budget figure for the relevant year is the figure specified
as "TOTAL COSTS YEAR..." on page 1 of Schedule 3 (as the same may be
modified or supplemented from time to time in accordance with the
provisions of clause 2.2(b)).
(d) The provisions of 2.1(a) to (c) above shall apply mutatis mutandis
to any additional or new Schedule drawn up pursuant to clause 2.3, and
the work envisaged thereby.
2.2 The obligations of each party in order to carry out a Typhoid Project shall
be as follows:
(a) to communicate fully and promptly to the Project Coordinator of the
other party all such Foreground Intellectual Property Rights,
Foreground Technical
4
<PAGE>
Information, Background Intellectual Property Rights and Background
Technical Information necessary for such other party to carry out its
part of such Typhoid Project;
(b) to comply with all reasonable requests and requirements of the Project
Management Committee consistent with the research programme and the
budget for such Typhoid Project and in the case of the Core Typhoid
Project the research programme and budget contained in Schedule 3;
Medeva shall have the right either directly or through the Project
Management Committee to give its prior approval to any decision
designed to initiate human clinical trials. Medeva shall be entitled
to make modifications to or to supplement the research programme and
budget contained in Schedule 3 provided that any changes to the budget
or to the scheduling of studies arising from such modifications or
supplements shall be subject to the consent of the University such
consent not to be unreasonably withheld or delayed.
(c) when the Project Management Committee decides to pursue any Second
Generation Product, to contribute to such Typhoid Project Background
Intellectual Property Rights and Background Technical Information
which (i) such party owns, (ii) such party is not prohibited from
contributing to such Typhoid Project pursuant to any written
agreements such party may have with a third party that is not an
Affiliate of such party, and (iii) is required for the construction,
evaluation and exploitation of the Second Generation Product in
question.
2.3 Where either party wishes to undertake work in relation to a Typhoid
Project other than the work as currently envisaged by Schedule 3 hereto (as the
same may be amended from time to time under the provisions of clause 2.2(b)),
that party shall notify the other through its Project Coordinator. If the
proposal is approved by both Project Coordinators a new document setting out the
details of the research programme and budget for such work shall be executed as
an additional Schedule to this Agreement.
2.4 In respect of the Core Typhoid Project, at least four (4) months prior
to expiration of []* from the date of this Agreement, the parties shall enter
into good faith negotiations to reach agreement upon a revised Schedule 3 for
the []* of the Core Typhoid Project.
2.5 On the completion of each study in the course of carrying out a Typhoid
Project the results of such study shall be submitted to the relevant Project
Management Committee and Medeva shall have sufficient time to review such
results before the parties embark on the next stage or further study within that
Typhoid Project unless Medeva has specifically agreed in writing to proceed with
such further work in advance of having the opportunity to review such results.
Medeva shall have the right to terminate such Typhoid
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
5
<PAGE>
Project by notice in writing without proceeding to carry out any further study
or work or proceeding to commercialise a Second Generation Product. Medeva
shall be entitled to terminate a study in progress but if it does so Medeva
shall be liable, in accordance with clause 2.1(a) of this Agreement for the
costs of that study which at the time of termination have been committed to and
which have been or cannot avoid being incurred.
2.6 Medeva acknowledges that it has been provided by the University with the
bacterial salmonella typhi strains known as CVD 908 and CVD 906. Medeva
acknowledges that the University owns Background Intellectual Property Rights
in CVD 908 and CVD 906. Such strains have been provided to Medeva under the
terms of this Agreement and accordingly the agreements previously entered
into covering the provision of such strains and the work carried out
thereunder shall have no further force and effect upon the signing of this
Agreement. All Know-How, Technical Information and Intellectual Property
Rights arising from the work carried out pursuant to []* shall, for the
purposes of this Agreement, constitute Foreground Technical Information
and/or Foreground Intellectual Property Rights owned jointly by Medeva and
the University.
2.7 The parties acknowledge that in the course of carrying out work on a
Typhoid Project it may become impracticable or impossible to continue due to
information indicating that the proposed Second Generation Product is not safe
or efficacious. In such circumstances if appropriate amendments or variations to
the research programme and budget are not agreed by the parties as soon as
practicable following the availability of the relevant information, the
relevant Typhoid Project shall terminate and payments to the University in
accordance with the approved budget for that Typhoid Project shall cease 3
months from the date upon which the Typhoid Project is so terminated or earlier
if mutually agreed.
3. MANAGEMENT OF THE TYPHOID PROJECTS
3.1 The following provisions of this clause 3 apply to all Typhoid Projects
individually.
3.2 Meetings of the Project Management Committee shall normally be held at
quarterly intervals and otherwise as may be deemed necessary or desirable by the
parties. Meetings shall review the progress of Typhoid Project work performed to
date and objectives for the following months. No meetings shall be held unless
both members of the Project Management Committee (or an authorised delegate) for
that Project or work attend either by personal appearance or by teleconference
call.
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
6
<PAGE>
3.3 Each party shall submit to the other party:
(a) Progress reports at least ten days prior to each Project Management
Committee meeting, which shall include, but not be limited to, details
of strains, materials, reagents and protocols developed during the
course of such Typhoid Project work.
(b) Brief quarterly updates.
(c) On completion of sufficient clinical trials to support a product
licence application, a full report detailing all work carried out on
such Typhoid Project and results obtained. Such reports shall be
prepared to standards suitable for submission to Regulatory Agencies.
3.4 The University shall submit to Medeva annual statements of expenditure on
such Typhoid Project. The form of such statements shall be approved by Medeva
but in any event shall contain sufficient information to enable the items of
expenditure to be compared with the various budgeted items of expenditure:
(i) in the case of the Core Typhoid Project in Schedule 3, as the same may
be modified or supplemented from time to time in accordance with the
provisions of clause 2.2(b); and
(ii) in the case of any other Typhoid Project in the additional Schedule to
be executed pursuant to the provisions of clause 2.3.
3.5 At intervals of no less than 12 months, the University, at the request of
Medeva shall allow Medeva or its agents reasonable access to such information as
they may reasonably require to audit the University's expenditure statements for
up to the preceding 3 years. Such agents, if any, shall be accountants who are
familiar with financial recordkeeping practices for institutions receiving
United States government grants, and shall be subject to the approval of the
University, which approval shall not be unreasonably withheld or delayed. Such
access shall be granted only at the University's place of business and only
during the regular business hours of the University. The University undertakes
to ensure that all relevant information which Medeva or its agents may
reasonably require to carry out such audit is maintained at the University's
place of business or is positioned there at the time of such audit. The expense
of such audit shall be borne by Medeva.
4. FOREGROUND TECHNICAL INFORMATION AND FOREGROUND INTELLECTUAL PROPERTY
RIGHTS
4.1 Each party undertakes to monitor Foreground Technical Information with
respect to Second Generation Products for material which may be eligible for
Intellectual Property Rights protection and to notify promptly the other party
thereof.
7
<PAGE>
4.2 All Foreground Technical Information and Foreground Intellectual Property
Rights shall be owned by the party or parties which first develop such
Foreground Technical Information or Foreground Intellectual Property Rights.
4.3 (a) In respect of Foreground Technical Information or Foreground
Intellectual Property Rights owned solely or jointly by the
University, the University hereby grants or agrees to grant to Medeva
a worldwide, royalty-bearing (in accordance with the provisions of
clause 7), irrevocable (subject to the provisions of clause 10)
licence to use such Foreground Technical Information and Foreground
Intellectual Property Rights within the Field, subject to the
provisions of this clause 4 and of clause 6. Medeva shall be the
University's exclusive licensee of such Foreground Technical
Information and Foreground Intellectual Property Rights within the
Field, subject to the provisions of this clause 4.
(b) Medeva hereby grants or agrees to grant to the University, subject
always to the University adhering to the provision of clause 9.2, a
worldwide, royalty-free, irrevocable (subject to the provisions of
clause 10) license to use Foreground Technical Information and
Foreground Intellectual Property Rights which Medeva owns exclusively
or jointly with the University for the sole purpose of education and
academic research but not for any work done for the benefit of an
organisation which has an interest in commercially exploiting or
authorising the commercial exploitation of such work.
(c) Such licences shall take effect as of the date that the relevant
Foreground Technical Information or Foreground Intellectual Property
Rights shall come into existence.
4.4 Initial Patent Protection will be sought on all Foreground Intellectual
Property Rights unless Medeva considers that initial patent protection should
not be sought, in which case the provisions of clause 4.6(a) shall apply. The
procedure for obtaining initial patent protection for Foreground Intellectual
Property Rights, up to and including UK and US priority applications, shall be
implemented by the Project Management Committee for the relevant Typhoid
Project. Such Project Management Committee may appoint either the patent
department of Medeva or an independent chartered patent agent or patent attorney
to undertake any such work under the instructions of such Project Management
Committee. For Foreground Intellectual Property Rights owned exclusively or
jointly by the University, the University shall have the right to approve such
patent agent or patent attorney such approval not to be withheld or delayed.
Where necessary the parties shall jointly or severally execute any power of
attorney or other document to enable such patent agent or patent attorney to
perform its duties hereunder efficiently. If the relevant Project Management
Committee shall
8
<PAGE>
take such steps to obtain initial patent protection the costs of obtaining such
protection, including the costs of the first filing, shall be borne by Medeva.
4.5 (a) All costs, charges and expenses incidental to or consequent upon any
form of legal action concerning the prosecution and/or defence of the
Foreground Intellectual Property Rights including proceedings for the
revocation of any Foreground Intellectual Property Rights or for the
grant of a compulsory licence thereunder shall be borne and paid by
Medeva.
(b) If Medeva decides to commence any proceedings (including counterclaims
and actions for declaratory judgment) in respect of alleged
infringement of any of the Foreground Intellectual Property Rights,
all costs, charges and expenses incidental to or consequent upon such
proceedings shall be borne and paid by Medeva, the right to direct and
settle such proceedings shall belong to Medeva and all damages and
other sums recovered in such proceedings and any other benefit of the
judgment and order therein shall belong to Medeva.
(c) The University agrees that Medeva shall have the right to use the
University's name in any proceeding brought by Medeva pursuant to
clause 4.5(a) and (b) so that such proceeding may be conducted by
Medeva in the name of the University if appropriate. Medeva shall
notify the University prior to the use of the University's name in any
proceeding pursuant to this clause 4.5(c). The University further
agrees to sign such documents and do whatever may be necessary and
advisable to further the conduct of such proceeding in the name of
Medeva and/or the University.
(d) If Medeva commences a proceeding in the name of the University
pursuant to clause 4.5(c) and the University is subsequently
countersued in such proceeding or if the University is sued by
original action relating or arising from Medeva's use of the
Foreground Intellectual Property Rights, Medeva at its cost shall
defend the University and its Regents, officers, employees and agents
in such countersuit and shall indemnify the University and its
Regents, officers employees and agents against any and all losses
incurred by them as a result of such countersuit.
4.6 (a) In the event that Medeva chooses not to pursue patent protection in
the US Patent Office, European Patent Office or Japanese Patent Office
for any Foreground Intellectual Property Right owned exclusively or
jointly by the University, within six months of its receipt of notice
from the University regarding the existence of such Foreground
Intellectual Property
9
<PAGE>
Right, Medeva shall notify the University of its decision, and the
University may thereafter elect to pursue protection for such
Foreground Intellectual Property Rights in such Patent Offices at its
own expense and, in such circumstances, clauses 4.5(a) and (b) shall
not apply. Where, in the circumstances referred to above, the
University obtains a granted patent the provisions of clause 4.6(c)
below shall apply.
(b) If Medeva pursues protection efforts in any country with respect to
any Foreground Intellectual Property Rights owned exclusively or
jointly by the University, and thereafter chooses to abandon such
protection efforts in that country, it shall notify the University of
its decision, and the University may thereafter elect to pursue
protection in such Patent Office for such Foreground Intellectual
Property Rights at its own expense and, in such circumstances, clauses
4.5(a) and (b) shall not apply. Where, in the circumstances referred
to above, the University obtains a granted patent the provisions of
clause 4.6(c) below shall apply.
(c) Where in the circumstances referred to in 4.6(a) and (b) above, the
University is successful in obtaining a granted patent as a
consequence of Medeva choosing not to pursue such patent protection or
abandoning its efforts to obtain such protection, the University shall
notify Medeva in writing that such a patent has been granted and that
such notification is made under this clause 4.6(c). Within ninety (90)
days of notification under this clause 4.6(c), Medeva may choose to
reimburse the University its reasonable costs of obtaining such
granted patent and the Intellectual Property Rights covered under such
granted patent will be part of this Agreement. If Medeva chooses not
to reimburse the University its reasonable costs of obtaining such
granted patent within such ninety (90) day period, Medeva shall have
no ownership right in such patent(s) and the University shall be
entitled to licence such patent rights to other entities which are not
parties to this Agreement, subject to the provisions of clause 6 of
this Agreement. In such circumstances clauses 4.5(a) and (b) shall
not apply.
4.7 Each party shall have the right to review and comment upon any applications
filed for Foreground Intellectual Property Rights prior to filing; provided,
however, that the Project Management Committee may approve the filing of an
application for Foreground Intellectual Property Rights prior to the receipt of
comments from each party (but subsequent to giving notice to each party of such
intent to file and providing each party with a draft of the proposed filing) if
the Project Management Committee reasonably deems that such filing is necessary
to prevent the loss of rights with respect
10
<PAGE>
to the subject matter of such filing to non-parties to this Agreement. Each
party shall cooperate with the other with respect to preparation of applications
and further pursuit of Foreground Intellectual Property Rights.
4.8 (a) Medeva as exclusive or joint owner of any foreground Technical
Information or Foreground Intellectual Property Rights shall be
entitled, at any time, to use the same for its own profit without
accounting to the University (except for the payment of royalties
due pursuant to this Agreement), and shall have the right to assign
or licence such Foreground Technical Information or Foreground
Intellectual property Rights. Medeva shall notify the University as
soon as practicable following any such assignment and/or granting of
any licence of the fact that such assignment or licence has been
entered into and the identity of the assignee or licensee.
(b) Medeva as licensee of any Foreground Technical Information or
Foreground Intellectual Property Rights shall be entitled, at any
time, to use the same subject always to the provisions of this
Agreement. Medeva may make use of the Foreground Technical
Information for its own profit without accounting to the University
(except for the payment of royalties due pursuant to this Agreement)
but subject to the provisions of this clause 4, and Medeva shall
have the right to assign its interest or grant sub-licenses to such
Foreground Technical Information. Medeva shall notify the University
as soon as practicable following any such assignment and/or granting
of any sub-licence of the fact that such assignment or sub-licence
has been entered into and the identity of the assignee or
sub-licensee.
(c) If Medeva sub-licenses or assigns its interest in any Foreground
Technical Information or Foreground Intellectual Property Rights it
shall ensure that any sub-licensee or assignee agrees to be bound by
the terms and conditions of this Agreement, and shall ensure that
any such sub-licence or assignment is granted or made on terms
consistent in all respects with the terms and conditions of this
Agreement and any act or omission by any sub-licensee or assignee
which would, if done or omitted to be done by Medeva, be a breach of
this Agreement shall be deemed to be a breach of this Agreement by
Medeva.
5 BACKGROUND TECHNICAL INFORMATION AND
BACKGROUND INTELLECTUAL PROPERTY RIGHTS
5.1 (a) Subject to the provisions of this clause 5 and of clause 4, clause
6, and of clause 7, the University hereby grants to Medeva within
the Field the
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following rights with respect to Background Technical Information
and Background Intellectual Property owned exclusively or jointly by
the University:
(i) An exclusive worldwide licence under Background Intellectual
Property Rights, Background Technical Information and Know-How
to make, have made, use, lease, and sell (including the right
to assign and sub-licence) an htrA deletion (ahtrA) in
CVD908 (hereinafter "ahtrACVD908") or an htra deletion
(ahtrA) in CVD906 (hereinafter "ahtrACVD906").
(ii) An exclusive worldwide licence under Background Intellectual
Property Rights, Background Technical Information and Know-How
to make, have made, use, lease and sell including the right to
assign and sub-licence) a Second Generation Product
containing a min deletion (min) plus a htrA mutation
(hereinafter "min htrA).
(iii) A non-exclusive worldwide licence under Background
Intellectual Property Rights, Background Technical Information
and Know-How to make, have made, use, lease, and sell
(including the right to assign and sub-licence) a Second
Generation Product containing a min delection (amin) is CVD908
(hereinafter aminCVD908).
(iv) An exclusive, worldwide, royalty-bearing (in accordance with
clause 7), irrevocable (subject to the provisions of clause
10) licence under Background Intellectual Property Rights to
make, use and sell products within the Field.
Notwithstanding the above licenses the University acknowledges
that the hteX mutation is the property of Medeva and the license
as granted in (i) and (ii) above applies purely in relation to the
use of CVD908 and/or CVD906 and min deletions. No license is
required by Medeva in respect of aro and htrA deletions and/or
mutations the rights in which are the property of Medeva. The
University also acknowledges that the information and rights
relating to the combinations of CVD908, CVD906 and htrA deletions
and/or mutations for the purposes of this Agreement are foreground
Technical Information or foreground Intellectual Property Rights
held exclusively by Medeva.
(b) Licences of the University's Background Technical Information and
Background Intellectual Property
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Rights to Medeva shall take effect as of the date that the
University becomes obligated to contribute such Background Technical
Information and/or Background Intellectual Property Rights to the
relevant typhoid Project.
5.2 (a) Medeva shall have a right to file in the name of the University
applications for patents, inventor's certificates and other property
rights in the United States and foreign countries relating to the
University's Background Technical Information and Background
Intellectual Property Rights relevant to that Typhoid Project and
any improvements, modifications and variations thereto, including
but not limited to the right to file, register, prosecute and
maintain patents and patent applications. The University will
cooperate and execute all documents in connection with the filing
and/or prosecution of said applications. Medeva will reimburse to
the University its reasonable costs and expenses of such
co-operation.
(b) With respect to the University's Background Technical Information
and Background Intellectual Property Rights the provisions of clause
5.2(a) above shall be exercised by Medeva by providing to and/or
consulting with the University in respect of its exercise of such
rights and allowing the University to submit the relevant
applications for patents and other matters referred to above to the
relevant patent attorneys and where necessary Medeva shall request
the University to engage the patent attorneys and/or agents referred
to in clause 5.2(c) below subject to Medeva bearing the reasonable
costs thereof. If at any time the University shall fail to deal in a
reasonable and expeditious manner with the submission for and
prosecution and maintenance of such rights Medeva shall have the
right to deal with all such matters directly itself.
(c) Medeva shall engage patent attorneys and/or agents to prosecute such
applications, and Medeva shall. pay the legal expenses and
governmental fees including maintenance fees. The University shall
have the right to approve such patent attorneys and/or agents, such
approval not to be unreasonably withheld or delayed. Medeva shall
have exclusive control of the prosecution of all such applications,
including discretion as to the amendment of claims, appeal of final
rejections, and abandonment of any application. In the event that
Medeva chooses to abandon any such application, it will notify the
University of its decision to abandon, and the University may
thereafter elect to continue prosecution of said application at its
own expense. Medeva will notify the University at least 90 days
before discontinuing support of any application and will pay all
expenses
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or fees accrued in connection with the application until the
expiration of said notice.
(d) Medeva shall keep the university informed as to the status of the
applications which it has filed and will provide the University with
copies of all patent applications, office actions and materials
relevant to the applications.
5.3 (a) Medeva shall have the right, at its own expense, to enforce
patents and other property rights against persons infringing the
University's Background Technical Information or Background
Intellectual Property Rights in any country. The University agrees
that Medeva shall have the right to use the University's name in any
such action, suit, or proceeding so that such action, suit, or
proceeding may be conducted by Medeva in the name of the University
if appropriate. The University further agrees to sign such documents
and do whatever may be necessary and advisable to further the
conduct of such action, suit, or proceeding in the name of Medeva
and/or the University.
(b) If Medeva commences any proceedings (including counterclaims and
actions for declaratory judgment) in respect of any alleged
infringement of any of the University's Background Technical
Information or Background Intellectual Property Rights, all costs,
charges and expenses incidental to or consequent upon such
proceedings shall be borne and paid by Medeva, the right to direct
and settle such proceedings shall belong to Medeva and all damages
and other sums recovered in such proceedings and any other benefit
of the judgment and order therein shall belong to Medeva. In
calculating any royalties due to the University pursuant to clause 7
of this Agreement, Net Sales shall include any damages received in
lieu of sales revenues (after deduction of all reasonable costs,
charges, and expenses incidental to or consequent upon the recovery
of such damages and the proceedings relating thereto) which may be
received by or distributed to Medeva pursuant to this clause 5.3(b),
and clause 4.5(b) and 5.3(a).
(c) Medeva shall also have the right, at its own expense, to defend
(including, at its discretion, the taking of appeals) any action,
suit, or proceeding instituted against the University and/or Medeva
based on any claim that practice of the University's Background
Technical Information or Background Intellectual Property Rights
constitutes an infringement of any letters patent or other rights of
any other person.
(d) If Medeva commences a proceeding in the name of the University
pursuant to clause 5.3(a) or 5.3(b) and
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the University is subsequently countersued in such proceeding or if
the University is sued by original action with respect to Medeva's
use of University Background Technical Information or Background
Intellectual Property Rights, Medeva shall defend the University and
its Regents, officers, employees and agents in such countersuit and
shall indemnify the University and its Regents, officers, employees
and agents against any and all losses incurred by them as a result
of such countersuit.
6. OTHER INTELLECTUAL PROPERTY INTERESTS
6.1 Subject, to all other provisions of this Agreement, Medeva hereby grants to
the University a licence to use Background Technical Information and Background
Intellectual Property Rights belonging to Medeva for the sole purpose of
education and academic research (which shall not include any work done for the
benefit of an organisation which has an interest in commercially exploiting or
authorising the commercial exploitation of such work).
6.2 In respect of licenses granted by or to one party under technical
Information or Intellectual Property Rights pursuant to this Agreement the other
party shall at the request and cost of that party execute and do all such deeds,
acts, matters and things as are requisite for securing official registration or
recordation of such licences in any jurisdiction where such registration or
recordation is desired by that party.
6.3 Medeva represents and warrants to the University that the royalty
arrangements described in Schedule 4(a) are, to the best of its knowledge and
belief at the date of execution of this Agreement, the only royalty payments
which may become due as a result of the sale of a Second Generation Product. The
University represents and warrants to Medeva that the royalty arrangements
described in Schedule 4(b) are, to the best of its knowledge and belief at the
date of execution of this Agreement, the only royalty payments which may become
due as a result of the sale of a Second Generation Product. Each party
undertakes to inform the other party of any additional third party royalties
promptly after identifying that such royalties may be applicable to a Typhoid
Project or to a Second Generation Product arising from such Typhoid Project.
6.4 (a) In the event of CVD wishing to collaborate with or undertake
work on or utilising Salmonella typhi strains or antigens for any
commercial entity not party to this Agreement using Background
Technical Information, Background Intellectual Property Rights,
Foreground Technical Information or Foreground Intellectual Property
Rights owned exclusively by the University, the University must
first offer in writing to Medeva the right of first refusal to
perform such collaboration or undertake such work with the
University in lieu of such third party commercial entity, upon terms
and conditions that are the same in all material respects as those
offered by
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the University to such entity. Medeva shall have the right to
participate in and fund all or part of the work proposed pursuant to
this clause 6.4(a). In the event that Medeva decides not to
participate within 90 days of its receipt of such written offer the
University shall be entitled to proceed with such collaboration or
undertake such work with the third party commercial entity upon
terms and conditions that are the same in all material respects as
those contained in the written offer to Medeva, provided that Medeva
shall be entitled to such royalties and/or payments as may be fair
and reasonable under the circumstances. If Medeva makes no response
within said 90 days it shall be assumed that Medeva does not wish to
so participate provided that Medeva has been notified that the
relevant written offer is made by the University under this clause
6.4(a).
(b) In the event of the University wishing to collaborate with or
undertake work on or utilising (i) Salmonella typhi strains or
antigens used in a Typhoid Project using Background Technical
Information, Background Intellectual Property Rights, or (ii)
Salmonella typhi strains or antigens whether or not used in a
Typhoid Project using Foreground Technical Information or Foreground
Intellectual Property Rights; in both cases owned jointly by the
University and Medeva for any commercial entity not a party to this
Agreement the University must first obtain the written consent of
Medeva. Moreover, the University shall offer in writing to Medeva
the right of first refusal to perform such collaboration or
undertake such work with the University in lieu of such third party
commercial entity, upon terms and conditions that are the same in
all material respects as those offered by the University to such
entity. Medeva shall have the right to participate in and fund all
or part of the work proposed pursuant to this clause 6.4(b). Medeva
shall have 90 days from its receipt of the University's written
offer to notify the University (i) whether it wishes to participate
in the collaboration or work and/or (ii) whether or not it consents
to the University undertaking the collaboration or work with such
commercial entity not party to this Agreement. In the event that
Medeva decides not to participate but gives its written consent,
then as a term of such consent; Medeva shall be entitled to such
royalties and/or payments as may be fair and reasonable under the
circumstances. If Medeva makes no response within said 90 days its
consent shall be assumed provided that Medeva has been notified that
the written offer is made under this clause 6.4(b).
(c) No such rights to collaborate or undertake work are available to the
University in respect of any Foreground or Background Technical
Information or
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Foreground or Background Intellectual Property Rights in which the
University does not have an ownership interest.
6.5 Following execution of this Agreement any bacterial strains or other
materials (excluding products intended for use by customers of Medeva) covered
by this Agreement shall only be released to third parties under a Materials
Release Agreement the form of which shall be as that appended as schedule 5 of
this Agreement. Provided, however, that the University may modify the form of
the Materials Release Agreement as required by policies of third parties which
are academic institutions if the third parties agree to make absolutely no
commercial or non-academic use of the materials without the prior consent of
both parties to this Agreement. Each party shall, promptly upon releasing any
materials covered by this Agreement, send to the other party a copy of the
Materials Release Agreement executed by the recipient of such materials.
6.6 (a) Medeva recognises that it is the policy of the University that the
results (including Technical Information and related Intellectual
Property Rights) of the work of the University employees and
students engaged in the Project ("the Researchers") must be
publishable. Medeva agrees that Researchers shall be permitted to
present at symposia and national or regional professional meetings,
and to publish in journals, theses, dissertations, and otherwise,
the methods and results of work carried out by the Researchers in
respect of the Typhoid Project.
(b) Medeva shall be furnished with accurate and complete copies of any
proposed publication or transcript of any proposed presentation at
least sixty (60) days in advance of the submission of such proposed
publication or presentation to a journal, editor, or other third
party or in the case of an oral presentation at least sixty (60)
days prior to the date of such presentation. Medeva shall have
forty-five (45) days after receipt of said copies to object to such
proposed presentation or publication either because there is
patentable subject matter which needs protection and/or there is
confidential information of Medeva contained in the proposed
publication or presentation.
(c) Any confidential information of Medeva identified by Medeva shall be
deleted from the proposed publication or presentation unless Medeva
consents to its inclusion (such consent not to be unreasonably
withheld) or unless Medeva agrees to treat the confidential
information as patentable information, as set forth in the following
paragraph.
(d) In the event that Medeva objects to a Researcher's publication or
presentation due to the proposed disclosure of patentable
information, the Researcher shall refrain from making any
publication or
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<PAGE>
presentation including that patentable information for (a) one year
from date of receipt of the objection, if the patentable information
was developed by Medeva, or (b) ninety days from date of receipt of
the objection, if the patentable information was developed by
Researchers solely or in collaboration with personnel of Medeva. The
delay in publication or presentation is to permit Medeva to file
patent application(s) with the US Patent and Trademark Office, UK
and/or other patent office(s) directed to the patentable subject
matter contained in the proposed publication or presentation.
(e) Following publication by Researcher(s) or the University, Medeva
shall have the right to freely publish, reproduce, and use any such
publication subject to the terms and conditions set forth herein,
and subject to any copyright interest of entities that are not
parties to this Agreement.
7. ROYALTIES
7.1. The University shall be entitled to fair and reasonable payments from
Medeva in respect of its commercialisation of Second Generation Products and/or
its commercial use or licensing of Background Technical Information, Background
Intellectual Property, Foreground Technical Information and Foreground
Intellectual Property Rights of the University. Such payments shall be
determined on a royalty basis of []* of Net Sales in the relevant jurisdictions.
7.2 Payments made to the University under this clause 7 shall be payable,
based on Net Sales in each country in which royalty payments are due, from
the commencement of commercial exploitation (defined as the sale of []* for
purposes other than clinical or regulatory testing uses) in that country of
the Second Generation Product or product as defined in paragraph 5.1(a)(iv)
(in this clause 'product') in question:
(a) where the product is subject to Foreground or Background
Intellectual Property Rights in the form of patent claim(s) which
are owned by the University and licensed to Medeva until the expiry
or revocation of all relevant patent claim in that country in which
such patent exists; or
(b) where the product is not covered by a patent claim(s) but is
comprised of Foreground or Background Technical Information owned by
the University, or of Foreground or Background Intellectual Property
Rights which are owned by the University, until Background or
Foreground such Technical Information has entered into the public
domain, or for a period of ten years from the date of commencement
of commercial exploitation (as defined above in this clause 7.2) in
any country of the EEC or the USA whichever is the
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
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earlier.
7.3 Royalties shall be payable by Medeva to the University in United States
dollars by cheque or by electronic funds transfer to an account designated by
the University. To the extent sales may have been made by Medeva in a foreign
country such royalties shall be first determined in the currency in which the
sales to which the royalties relate are made and then if necessary converted to
their equivalent in United States dollars. The exchange rate to be used for the
purposes of conversion into United States dollars will be the most favourable
rate which Medeva can reasonably obtain from its bankers from time to time and
upon the day upon which funds are converted.
7.4 To the extent that statutes, laws, codes or government regulations
(including currency exchange regulations) shall prevent or limit royalty
payments by Medeva in any country Medeva shall render to the University annual
reports of sales in respect of which royalties are earned in such country. All
monies due and owing to the University as provided in such annual reports shall
be deposited by Medeva in a local bank in such country in an account to be
designated by the University in writing or alternatively paid to the University
or deposited in its account as directed in writing by the University in any
other country where such payment or deposit is lawful under such currency
restrictions.
7.5 Interest shall be due on payments to the University required by any
paragraph of this clause 7 that are more than thirty (30) days late, interest to
accrue at the rate of []*
7.6 Royalties shall be due from Medeva with respect to Net Sales by Medeva, its
Affiliates, its licensees, sub-licensees, assignees and any other party selling
Second Generation Products with the direct authorisation of Medeva provided
however that in respect of each individual product royalty shall only be payable
once, such payment arising on the first arms length sale of such individual
product.
7.7 (a) During the term of this Agreement and for three (3) years
thereafter Medeva shall keep and require each assignee, sub-licensee
and Affiliate selling Second Generation Products by authorisation of
Medeva to keep complete true and accurate records containing all
particulars that may be necessary to enable royalties payable to the
University hereunder to be determined and shall permit the said
records to be inspected at any time during normal business hours and
upon reasonable notice by an independent auditor appointed by the
University for such purposes and acceptable to Medeva. Medeva shall
not unreasonably withhold its acceptance of such auditor.
(b) The auditor shall report to the University only the amount of
royalty payable to the University in the period under consideration.
The audit shall be at
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
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the University's expense unless the audit shows an under-payment of
royalty due to the University of 10% or more for any six months
royalty period (ending on either 30 June or 31 December) in the one
year period preceding the audit, in which case the audit expense
shall be borne by Medeva.
(c) Within ninety (90) days from each 30 June and 31 December of each
year, Medeva shall deliver to the University a report of the Total
Net Sales and the calculation of royalty due to University for the
six month period concerned.
(d) With each report submitted Medeva shall pay to the University the
royalties due and payable for the period covered by the report. Such
reports and payments shall be sent to the University at its address
set out in clause 14 or such other address that may be notified in
accordance with the provisions of that clause.
8. CONFIDENTIALITY
8.1 Any and all knowledge, know-how, show-how, practice, process or other
information including Background and Foreground Technical Information, Know-How,
and Intellectual Property Rights, disclosed or submitted to either party by the
other or arising in the course of a Typhoid Project shall be Proprietary
Information and/or Confidential Information and, subject to the provisions of
clauses 6.6 and 8.5, shall be received and maintained by the receiving party,
which in the case of Medeva shall include its Affiliates, in strict confidence
and shall not be disclosed to any third party. Neither party shall use the
other's Proprietary Information and/or Confidential Information for any purpose
other than the purposes of or as contemplated by this Agreement; provided,
however, that prior to any disclosure to a party's employees and in the case of
the University the Researchers in the course of such use, each employee or
Researcher shall be apprised of the duty to maintain in strict confidence the
Proprietary Information and/or Confidential Information and not to use it for
any purpose other than in accordance with this Agreement and the University
shall ensure that each such Researcher shall sign a confidentiality agreement in
the form attached as Schedule 6. The University's obligation to have such
agreement by Researchers shall be effective upon execution of this Agreement.
8.2 Nothing contained herein will in any way restrict or impair either party's
right to use, disclose, or otherwise deal with the other party's Proprietary
Information and/or Confidential Information which:
(a) at the time of its receipt is generally available in the public
domain, or thereafter becomes available to the public through no act
of the receiving party; or
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<PAGE>
(b) was independently known prior to receipt thereof, or was made
available to such receiving party as a matter of lawful right by a
third party.
8.3 The above obligations for confidentiality shall survive termination of this
Agreement for any reason whatsoever. With respect to each item of Proprietary
Information and/or Confidential Information, such obligations for
confidentiality shall survive until such item ceases to be confidential or 5
years from the date of termination of this Agreement, whichever is the earlier.
8.4 Each party will notify the other of any subpoena or judicial order seeking
protection or discovery of the other party's Proprietary Information and/or
Confidential Information.
8.5 Medeva acknowledges that the University, as a public agency, is subject to
Maryland laws regarding access to public information. In general, those Laws
permit the University to withhold from disclosure specific details of research
projects as well as trade secrets and/or confidential commercial information
received from other parties. Medeva asserts that their Proprietary Information
and/or Confidential Information consists of trade secrets or confidential
commercial information and the University agrees to oppose disclosure of the
Proprietary Information and/or Confidential Information in the event of a public
information request seeking the Proprietary Information and/or Confidential
Information. The University will notify Medeva of any such requests pursuant to
this clause 8.5 and will allow Medeva to participate in the opposition to the
request to the extent permitted by law.
8.6 Medeva acknowledges that under University of Maryland System policy the
University undertakes to use reasonable efforts to maintain the confidentiality
of Proprietary Information/Confidential Information but cannot accept Liability
if such efforts fail.
9. WARRANTIES AND LIABILITIES
9.1 Each party:
(a) undertakes to use all reasonable endeavours to ensure the accuracy
of all Background and Foreground Technical information and
Intellectual property Rights provided by it pursuant to this
Agreement and in the event of any error therein, promptly upon being
notified of the same, or of the same coming to its notice, to use
all reasonable endeavours to supply the appropriate corrections;
(b) warrants its right to disclose such Background and Foreground
Technical Information and Intellectual Property Rights;
(c) Warrants that it has full corporate power and authority to enter
into this Agreement and to enter into the transactions and
arrangements contemplated
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<PAGE>
hereby and to perform its obligations under this Agreement in
accordance with the terms contained herein; and
(d) warrants that neither the execution of this Agreement nor the
consummation of the transactions referred to or contemplated herein
shall contravene the terms of that party's constitution or the terms
of any third Party arrangements, that no registration, consent or
approval or other action by administrative or government authority
is required in connection with the execution, delivery and
performance of this Agreement, and that this Agreement when executed
by both parties and delivered will constitute the valid and binding
obligations of such party.
9.2 The parties recognise that inventions, copyrightable works and other
proprietary information sometime arise from research sponsored in whole or in
part by agencies of the Federal Government. Nonetheless, the University
represents and warrants to Medeva that (1) all activities pertaining to the
research and basic development of CVD 906 and CVD 908 up to the point of
clinical trials in human subjects have been conducted by the University
without the assistance of any direct government contract or government grant
funds, and (2) CVD 906 and CVD 908 are provided herein free from claim,
encumbrances, and restrictions of any nature whatsoever by any other person,
subject to any rights that the United States government may have. The
University further agrees to take whatever steps are necessary to prevent
rights in any Foreground Technical Information and any Foreground
Intellectual Property Rights from arising in, or inuring to the benefit of,
any person not a party to this Agreement, subject to any rights that the
United States government may have.
9.3 (a) Medeva represents and warrants to the University that it or its
Affiliates owns all right, title and interest to all the Background
Intellectual Property Rights described in Schedule 1(a). The
University represents and warrants to Medeva that it owns all right,
title and interest to all the Background Intellectual Property
Rights described in Schedule 1(b), subject to any rights that the
United States government may have in such Background Property
Rights.
(b) Medeva represents and warrants to the University that it or its
Affiliates owns all right, title and interest to all Background
Technical Information described in Schedule 2(a). The University
represents and warrants to Medeva that it owns all right, title and
interest to all Background Technical Information described in
Schedule 2(b), subject to any rights that the United States
government may have in such Background Technical Information.
9.4 The provisions of this clause 9 shall survive the
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<PAGE>
termination of this Agreement for any reason whatsoever.
10. DURATION AND TERMINATION
10.1 This Agreement shall be deemed to have become effective as of the date that
it is signed, and shall continue in respect of any Typhoid Project, subject to
the provisions of this clause 10, Clause 2.5 and clause 2.7 until the completion
of that Typhoid Project, as determined by unanimous vote of such Project
Management Committee for that Typhoid Project, or until otherwise determined by
written agreement of the parties.
10.2 (a) If Medeva having due regard for its usual business considerations,
wishes to withdraw from that Typhoid Project in addition to its
rights under clause 2.5 it may do so upon written notice to the
University of its termination of interest. Upon termination under
this clause the provision of clause 10.4 below shall apply.
(b) No party shall be entitled to utilise or take advantage of any right
to withdraw from a Typhoid Project while such party is in "default"
in respect of that Typhoid Project under clause 10.3.
10.3 In the event of either party ("the party in default");
(a) being in material breach of its obligations under this Agreement
which if capable of remedy is not remedied within 60 days of notice
from the other party requiring that it be remedied, or
(b) being or becoming bankrupt or insolvent or making any assignment for
the benefit of its creditors or having a receiver, administrator, or
administrative receiver or manager appointed in respect of its
undertaking or any of its assets or (otherwise than as a solvent
entity for the purpose of and followed by a merger or reorganisation
whereunder its successors shall be fully and effectually bound by
its obligations hereunder) commencing to be wound up,
then, and without prejudice to any other rights or remedies of either party, the
party not in default shall have the right by notice to the party in default to
terminate this Agreement and the termination shall take effect (i) in
relation only to the Typhoid Project or Typhoid Projects in respect of which the
default occurs in the case of a material breach under 10.3(a) above; or, (ii) if
the material breach relates to the Agreement as a whole or in the case of
termination under clause 10.3(b) above the termination shall apply to all
Typhoid Projects. In such event the following provisions of this clause 10.3
shall apply either to the relevant Typhoid Project or Typhoid Projects or to all
Typhoid Projects as the case may be.
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<PAGE>
(c) The party in default shall make available to the other party (i) any
Foreground Technical Information and Foreground Intellectual
Property Rights generated by the party, and (ii) any Background
Technical Information and Background Intellectual Property Rights
which are owned by such party in default, which are necessary for
the purposes referred to in clauses 10.3(e) and (g) below and which
the party in default is not prohibited from making available to the
other party due to written agreements, existing as of the date of
the termination notice delivered to such party pursuant to clause
10.3(a) or (b), with any third party that is not an Affiliate of
such party in default;
(d) The party in default's rights under clause 4 and clause 6 to own or
utilise any Foreground Intellectual Property Rights and Foreground
Technical Information shall cease;
(e) The other party's rights under clause 4 and clause 6 to utilise any
of such party in default's Foreground Intellectual Property Rights
and Foreground Technical Information shall survive and remain in
effect, and such rights shall remain subject to any royalty
obligations and other restrictions contained in clause 4 and clause
7;
(f) The party in default's rights under clause 5.1 or clause 6.1, as the
case may be, to utilise any of the other party's Background
Intellectual Property Rights and Background Technical information
shall cease;
(g) The other party's rights under clause 5.1(a) and (iv) or clause 6.1
as the case may be, to utilise any of such party in default's
Background Intellectual Property Rights and Background Technical
Information shall survive and remain in effect, without regard to
the restrictions contained in clauses 5 and 6 (except for clause
6.4). In the event that the University is the party in default the
royalty obligations in clause 7 shall be modified so that the
University shall only be entitled to a royalty of 1% of Net Sales
from the date of such default in respect of Net Sales in the
country(ies) where the University holds a granted patent which would
be infringed by the use, sale or offer to sell of the Second
Generation Product concerned. In such circumstances Medeva shall be
entitled to retain all royalties payable to the University (without
prejudice to any other rights which Medeva may have at law or under
this Agreement) up to an amount equal to the damages, losses, costs
and liabilities which arise directly or indirectly as a result of
the University's default.
24
<PAGE>
(h) Where the University is the party in default Medeva's rights under
clauses 5.1(a)(ii) and (iii) shall continue and survive subject to
the payment of royalty in accordance with the obligations in clause
7.
(i) The provisions of clauses 1, 2.6, 4.5(c) and (d), 5.3, 6.1, 6.4(c),
6.6, 8, 9, 10, 11, 15.3 and 16 shall survive any such default by any
of the parties.
10.4 Upon termination of this Agreement for any cause other than default under
clause 10.3;
(a) Each party participating in a Typhoid Project shall make available
to the other party participating in that Typhoid Project (i) any
Foreground Technical Information and Foreground Intellectual
Property Rights generated by such party in the course of that
Typhoid Project, and (ii) any Background Technical Information and
Background Intellectual Property Rights which are owned by such
party, which are necessary to exploit any Foreground Technical
Information or Foreground Intellectual Property Rights generated by
any of the parties in such Project, and which such party is not
prohibited from making available to the other parties due to written
agreements, existing as of the date of the termination, with any
third party that is not an Affiliate of such party.
(b) Each party's rights under clause 4 and clause 6 to utilise any
Foreground Intellectual Property Rights and Foreground Technical
Information existing as of the date of termination shall survive
such termination, and such rights shall remain subject to any
royalty obligations and other restrictions contained in clause 4,
clause 6 and clause 7;
(c) Each party's rights under clause 5.1 or 6.1, as the case may be, to
utilise any of the other party's Background Intellectual Property
Rights and Background Technical Information required to be made
available hereunder to such party prior to the date of termination
shall survive such termination, and such party may continue to
utilise such Background Intellectual Property Rights and Background
Technical Information subject to any royalty obligations and other
restrictions contained in clause 4, clause 6 and clause 7; and
(d) The provisions of clauses 1, 2.6, 4.5(c) and (d), 5.3, 6.1, 6.4(c),
6.6, 8, 9, 10, 11, 15.3 and 16 and this 10.4 shall survive any such
termination of this Agreement.
25
<PAGE>
11. ASSIGNMENT
The University shall not assign, sub-licence, mortgage or charge any of its
right, licences or obligations under this Agreement (save as expressly provided
for herein), or grant rights hereunder or otherwise delegate the performance of
its obligations without the prior written consent of Medeva, which consent shall
not be unreasonably withheld. Medeva may, in good faith, assign its rights and
the performance of its obligations and may grant sub-licences without consent
subject to the limitations imposed by other clauses of this Agreement. In
granting any sub-licence hereunder Medeva shall ensure that the terms upon which
such sub-licences are granted contain provisions relating to the payment of
royalty consistent with the provisions of clause 7 of this Agreement and Medeva
shall take appropriate steps in the case of any breach of such provisions by
such sub-licensees.
12. LAW
(a) This Agreement shall be governed by and construed in accordance with
the laws of State of Maryland (U.S.A) without regard to the
principles of conflicts of law, except that any issues regarding the
licence by Medeva of Background Intellectual Property Rights shall
be governed by English Law.
(b) In any suit arising pursuant to or relating to this Agreement to
which the University is a party, the parties to this Agreement agree
that: (i) the Federal and State Courts in the State of Maryland
located in Baltimore City or Baltimore County shall have personal
jurisdiction over each of them; (ii) such Courts shall have
jurisdiction over the subject matter of any such suit; and (iii)
such Courts shall be a proper venue for any such suit.
13. FORCE MAJEURE
The parties shall not be responsible for failure to perform any of the
obligations imposed by this Agreement, provided such failure shall be occasioned
by fire, flood, explosion, lightning, windstorm, earthquake, subsidence of soil,
failure or destruction, in whole or in part, of machinery or equipment, or
failure of supply of materials, discontinuity in the supply of power,
governmental interference, civil commotion, riot, war, strikes, labour
disturbance, transportation difficulties, labour shortage, death, disability, or
unavailability of key research personnel, or any cause beyond the reasonable
control of the parties.
26
<PAGE>
The affected party shall notify the other party as soon as practicable of the
occurrence of any of the above events. Both parties shall make every reasonable
effort to minimise the effect of force majeure upon the performance of the
Agreement.
The affected party shall notify the other party as soon as practicable of the
cessation of the relevant event. If either party shall be excused from
performance of any of its obligations for a continuous period of six (6) months
or more then the unaffected party may terminate this Agreement by seven (7)
days notice in writing provided that the relevant events continue throughout the
notice period.
14 NOTICES
Any notice, claim, demand or other communication given hereunder to be effective
shall be in writing and transmitted by certified mail, postage prepaid, or by
carrier providing a receipt of delivery to the recipient, at the addressee
stated below. Either party may notify the other in the manner set forth above at
the following addresses (or such other addresses as either party may notify to
the other in accordance with the provisions of this clause):
UNIVERSITY Maria C Freire, Ph.D.
Assistant Vice President for
Technology Development
UMAB
Fifth Floor
511 West Lombard Street
Baltimore, Maryland 21201
and copy by FAX to: 410-706-5035
copy to; Susan Gillette
Senior University Counsel
Second Floor
520 West Lombard Street
Baltimore, Maryland 21201
and copy by FAX to: 410-706-7682
and to: Dr Myron M Levine
UMAB
School of Medicine
9th Floor - MSTF Building
10 South Pine Street
Baltimore, Maryland 21201
and copy by FAX to: 410-706-6205
27
<PAGE>
MEDEVA Mr R Stephen Harris
Medeva International
Evans House
Regent Park
Leatherhead
Surrey KT22 7PQ
and copy by fax to: (44 71 636 2306)
and shall be deemed to be duly given when delivered if delivered by courier or
certified mail, postage prepaid; or when sent, if transmitted by telex or
facsimile transmission (receipt automatically confirmed) during normal business
hours of recipient.
15. GENERAL
15.1 This Agreement (which includes the content of all schedules hereto)
embodies and sets forth the entire agreement and understanding of the parties
and supersedes all prior oral or written agreements, understandings or
arrangements relating to the subject matter of this Agreement. Neither party
shall be entitled to rely on any agreement, understanding or arrangement which
is not expressly set forth in this Agreement.
15.2 This Agreement shall not be amended, modified, varied or supplemented
except in writing signed by duly authorised representatives of the parties.
15.3 In the event that either party requires the other party to execute any
further document which may be reasonably required for the purpose of recording
or memorialising any licence granted hereunder, the party receiving such request
shall promptly execute such further document provided that the terms of such
document are substantially similar to the terms of the licence granted herein
and do not operate to modify, amend or supplement in any way the terms of the
licence granted herein.
15.4 No failure or delay on the part of either party hereto to exercise any
right or remedy under this Agreement shall be construed or operated as a waiver
thereof nor shall any single or partial exercise of any right or remedy under
this Agreement preclude the exercise of any other right or remedy or preclude
the further exercise of such right or remedy as the case may be. The rights and
remedies provided in this Agreement are cumulative and are not exclusive of any
rights or remedies provided by law.
15.5 Any announcement, disclosure or publicity relating to a Typhoid Project or
the contents of this Agreement shall not be made by either party hereto without
first obtaining the written approval of the other. Nothing shall restrict a
party from making any disclosure of a Typhoid Project or the contents of this
Agreement as required by law or regulation, nor, in response to third party
enquiries, from acknowledging the existence of this Agreement as a
28
<PAGE>
development agreement in respect of attenuated strains of Salmonella Typhi for
human vaccines.
15.6 Nothing herein shall constitute the relationship of employer and employee
or any partnership, and it is expressly agreed that neither party hereto will
hold itself out as an agent of the other party.
15.7 This Agreement shall inure to the benefit of and be binding upon the
parties hereto, their successors and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer upon any person, other
than the parties hereto, any rights or remedies under or by reason of this
Agreement.
15.8 The invalidity or unenforceability of any provision of this Agreement shall
not affect the other provisions hereof, and the Agreement shall be construed in
all respects as if such invalid or unenforceable provisions were omitted.
Furthermore, upon the request of either party hereto, the parties to this
Agreement shall add, in lieu of such invalid or unenforceable provisions,
provisions as similar in terms to such invalid or unenforceable provisions may
be possible and legal, valid and enforceable.
15.9 The captions to the clauses contained in this Agreement are for reference
only, they do not form a substantive part of this Agreement, and shall not
restrict or enlarge any substantive provision of this Agreement.
15.10 This Agreement may be executed in any number of counterparts, each of
which shall be considered an original but all of which shall constitute the
Agreement by and among the parties.
16. INDEMNITY
(a) Medeva shall indemnify and defend the University, the University
of Maryland System, and the State of Maryland the the officers,
agents, servants, employees and regents of the foregoing
(collectively, the "State entities") against any and all claims
or liabilities to third parties, including expenses and costs of
claims and suits, for any such third parties' loss, damage,
injury, or loss of life, if such claims or liabilities (a) arise
from commercial sale of any Second Generation Product
manufactured by Medeva or through an assignment, licence, or
sub-licence from Medeva; (b) arise from negligence of Medeva or
its officers, servants or agents or third parties acting on
behalf of or under authorisation from Medeva in the performance
of this Agreement; or (c) arise out of the use by Medeva or its
officers, servants or agents or any third party acting on behalf
or under authorisation from Medeva of products or processes
licensed to Medeva by the University. Researchers shall not be
deemed to be "officers, servants or agents" of Medeva or "third
parties acting on behalf of or under authorisation from Medeva"
with respect to their work on a Typhoid
29
<PAGE>
Project.
(b) As a condition of indemnification by Medeva under this clause 16,
the University shall promptly notify Medeva in writing upon the
University's receipt or notification of any claims or liabilities
described herein and shall co-operate fully with Medeva in the
defence of such claims and liabilities. Medeva shall have the
conduct of all matters and proceedings relating to such claims
and liabilities and may assert all defences available to the
State entities, including the defences of governmental, sovereign
and statutory immunity.
(c) This clause shall not be construed to require Medeva to indemnify
the State entities with respect to: (1) claims or liabilities
that are attributable to the fault or negligence of the
University, a Researcher, or another State entity, unless Medeva
is more at fault or negligent as compared to the University, the
Researcher or the State entity; or (2) claims or liabilities
arising from the use of technology or intellectual property
rights by a licensee of the University as permitted by this
Agreement; or (3) claims or liabilities arising out of the
negligent administration of any product or claims or liabilities
for medical malpractice where the negligent administration or
medical malpractice is carried out (whether as part of a clinical
trial or otherwise) by or on behalf of a State entity or a
permitted licensee of the University.
(d) In no event will Medeva be liable pursuant to this Agreement for
damages caused by the University's failure to perform its
responsibilities under this Agreement unless the University's
failure is caused by Medeva.
(e) In addition to the foregoing, Medeva agrees that (subject to
16(c) above) should any clinical trials volunteers suffer adverse
affects from the utilisation of any vaccine in accordance with
the established protocol under a Typhoid Project, Medeva will be
responsible for paying for all costs incurred by such clinical
trial volunteers and/or CVD as a result of the adverse effects of
the use of the vaccine as outlined in Schedule 7, Adverse
Conditions to be covered or as agreed by the parties in respect
of future Typhoid Projects.
30
<PAGE>
(f) Provided that there is no breach of this clause 16 by Medeva,
University will not bring any suit or claim against Medeva as a
defendant or as a third party defendant in connection with
personal injury claims arising from or related to participating
in clinical trials which are asserted by or on behalf of
volunteers.
Signed by their duly authorised representatives to be effective as of 20th
September 1994.
31
<PAGE>
SCHEDULE 1(a)
Background Intellectual Property Rights of Medeva
Schedule 1(a) - Medeva's Background Intellectual Property Rights
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
32
<PAGE>
SCHEDULE 1(b)
Background Intellectual Property Rights of University
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
33
<PAGE>
SCHEDULE 2(a)
Background Technical Information of Medeva
NONE
34
<PAGE>
SCHEDULE 2(b)
Background Technical Information of University
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
35
<PAGE>
SCHEDULE 3
Research Programme and Budget
36
<PAGE>
INVESTIGATIONAL PLAN FOR CLINICAL STUDIES
OF []*
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
CENTER FOR VACCINE DEVELOPMENT
MEDEVA PLC
CLINICAL STUDIES WITH []*
ROLLUP OF COSTS, BY YEAR
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
CENTER FOR VACCINE DEVELOPMENT
MEDEVA PLC
CLINICAL STUDIES WITH []*
TABLE 1a, CORE COSTS, []*
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
CENTER FOR VACCINE DEVELOPMENT
MEDEVA PLC
CLINICAL STUDIES WITH []*
TABLE 1b, CORE COSTS, []*
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
CENTER FOR VACCINE DEVELOPMENT
MEDEVA PLC
CLINICAL STUDIES WITH []*
TABLE 1c, CORE COSTS, []*
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
CENTER FOR VACCINE DEVELOPMENT
MEDEVA PLC
CLINICAL STUDIES WITH []*
TABLE 3a, CORE COSTS, []*
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
CENTER FOR VACCINE DEVELOPMENT
MEDEVA PLC
CLINICAL STUDIES WITH []*
TABLE 2b, CORE COSTS, []*
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
CENTER FOR VACCINE DEVELOPMENT
MEDEVA PLC
CLINICAL STUDIES WITH []*
TABLE 2c, CORE PERSONNEL COSTS, []*
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
CENTER FOR VACCINE DEVELOPMENT
MEDEVA PLC
CLINICAL STUDIES WITH []*
TABLE , []*
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
CENTER FOR VACCINE DEVELOPMENT
MEDEVA PLC
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
SCHEDULE 4(a)
Third Party Arrangements known to Medeva
Arrangements pursuant to which third party rights arise in respect of Background
Intellectual Property Rights and Background Technical Information:-
6.3(a) - Medeva
The Licence granted pursuant to this Agreement under Medeva's Background
Intellectual Property Rights which are set out in Schedule 1(a) is subject to
the payment of a royalty of [ ] *depending upon interpretation of terms of
the Licence the rate may be [ ] *on net sales to the Wellcome Foundation
Limited and ultimately by them to Lynxvale Limited, the employer of the
original inventor. Net sales are classified as the gross sales of product
which makes use of the invention the subject of the aforementioned Background
Intellectual Property Rights and which is covered by a valid claim in any
patent granted in respect of such rights less actual credit allowances for
spoiled, damaged, outdated and returned products and for retroactive price
reductions and less the amounts of trade and cash discounts not already
credited at the time of invoice, transportation and handling charges payable
and all sales taxes, excise taxes, use taxes or import/export duties actually
paid and less all other invoiced allowances and adjustments actually credited
to customers.
- ------------------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
37
<PAGE>
SCHEDULE 4(b)
Third Party Arrangements known to University
NONE
38
<PAGE>
SCHEDULE 5
Materials Release Agreement
To: [A]
Re: [supply of X]
Thank you for your recent request concerning the above material (hereinafter
called "the Sample") for experimental use. I am pleased to inform you that we
are able to release to you the Sample and certain information including safety
data relevant thereto. However, in order to protect our commercial interests
and to fulfil our obligations under relevant laws and obligations the Sample
will be released to you under the following conditions:
1. The Sample is provided for experimental use only in animals or in vitro
and must not be administered to humans.
2. Use of the Sample is restricted to the experimental protocol or to the
field of the research which you have already notified to us in writing.
Prior to the commencement of experimental work with the Sample ("the
Work") you will advise us, if you have not already done so, of the names
of the person or persons conducting the Work.
3. Access to the Sample will be restricted to your own personnel in your
own laboratories, namely, [X], or to such other laboratory within your
organization which you specify to us in writing and to which we confirm
that we have no objection. Neither the Sample nor any sub-unit nor
derivative thereof may be transferred from such laboratories without our
prior written consent.
4. We reserve title in the property of the Sample supplied. The transfer of
the Sample to you does not constitute a license of any kind (except as
provided for explicitly in Paragraph 2) nor does such transfer convey to
you any of our property rights in such material.
5. You will ensure that all persons involved in the conduct of the Work are
made aware of the terms of this Agreement and agree to comply with it.
6. The Sample and all information with respect thereto supplied by us
pursuant to this Agreement must be maintained as confidential by you and
your laboratory or organization as the case may be. Within your
laboratory or organization information supplied by us pursuant to this
Agreement shall only be released to the persons referred to in this
Agreement, and to other persons who have legal need to know of the
information; provided that all such persons shall agree to be bound by
the terms of this Agreement prior to their receipt of the Sample and/or
information.
39
<PAGE>
7. You will be responsible for ensuring that there is no disclosure of the
Work to any third party verbally, in writing or otherwise without your
obtaining our prior written consent.
8. As soon as possible after the conclusion of the Work and/or upon the
termination and/or expiry of this Agreement (whichever will first occur)
you will send to us a written summary report of the Work.
9. Neither you nor your laboratory or organization nor any person or
persons within it or involved in the conduct of the Work shall make any
commercial or other use of the sample or any sub-unit or derivative
thereof or any information with respect thereto supplied by us pursuant
to this Agreement, or the results of the Work, unless such commercial or
other use is permitted by us in writing and governed by a further
written agreement to which we are a party.
10. You understand that any patent or other property right arising from the
Work shall be our property, and you shall assign any such patent or
property right to us and execute any documents necessary to effectuate
such assignment promptly upon our request.
11. At the conclusion of the Work and/or termination and/or expiry of this
Agreement whichever is earlier, you will at our option arrange for the
destruction to our complete satisfaction or the return to us of any
remaining portion of the Sample, any sub-unit or derivative thereof and
any information relating thereto. Such return shall be in accordance
with our specific instructions or otherwise in a receptacle and/or
packaging previously approved by us.
12. We shall not be responsible for any personal injury or property damage
suffered in the course of the Work, whether such injury or damage is
suffered by your laboratory or organization, the personnel engaged in
the Work, or any other persons or entities.
13. Subject to the continuing obligations contained herein, this Agreement
shall be in effect throughout the duration of the Work and for a period
of ten (10) years from the date of completion of the Work.
14. This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Maryland (USA), without regard to the
principles of conflicts of laws or (in accordance with English law.)
If you will please indicate acceptance of the above conditions by signing and
dating the duplicate of this letter and returning it to [z] at the above
address we will arrange for delivery of the Sample.
40
<PAGE>
We would advise you that we will update the safety data during the
continuance of this Agreement insofar as further relevant information becomes
known to us during that period and you hereby undertake to comply fully with
any such updates.
Should you require further information in this matter, please write directly
to [z] at the above address.
Yours sincerely
________________________
For and on behalf of [B]
Date:___________________
________________________
Accepted and agreed
For and on behalf of [A]
41
<PAGE>
SCHEDULE 6
----------
Confidential Disclosure Agreement
---------------------------------
This Agreement, made and entered into this ___ day of __________, 19__,
by and between, MEDEVA PLC and the UNIVERSITY OF MARYLAND AT BALTIMORE,
(hereinafter "RESEARCH COLLABORATORS"), and [employee name]___________________
_____________________ having an address at ___________________________________
______________________________________________________________________________
_____________________ (hereinafter "XYZ").
XYZ, who is an employee or student of University of Maryland at
Baltimore ("UMAB") will be working on a research project undertaken by the
RESEARCH COLLABORATORS relating to SALMONELLA TYPHI (hereinafter "THE
PROJECT"). In the course of XYZ's activities in support of THE PROJECT, XYZ
(a) will develop information proprietary to the RESEARCH COLLABORATORS and
(b) will receive oral and written disclosures of information developed by the
RESEARCH COLLABORATORS (collectively hereinafter "INFORMATION"). In
consideration of employment by UMAB and/or the opportunity to work with the
INFORMATION, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, XYZ agrees to the following:
1. Subject to the terms and conditions of this Agreement XYZ will keep
confidential, and will prevent disclosure, directly or indirectly, of, all
INFORMATION received by XYZ (whether by means of written or oral disclosure
or otherwise), except with the prior written consent of RESEARCH
COLLABORATORS, their employees or agents, and will not use any INFORMATION
received from RESEARCH COLLABORATORS except as may be necessary for the
benefit of THE PROJECT. This Agreement conveys no right or licence for XYZ to
use the INFORMATION other than as expressly recited herein. ALL INFORMATION
received by XYZ, together with all copies thereof and all materials relating
thereto, including but not limited to reports, papers, surveys, letters,
drawings, computer printouts and software relating to the INFORMATION, will
be returned promptly to RESEARCH COLLABORATORS upon request. XYZ will follow
any procedures established by UMAB with respect to preventing disclosure of
INFORMATION.
2. Obligations of XYZ under Paragraph 1 hereof shall not apply to any
information which XYZ can prove was: (i) independently known to XYZ prior to
disclosure of such information to XYZ by RESEARCH COLLABORATORS, so long as
such information was not acquired directly or indirectly from RESEARCH
COLLABORATORS; (ii) lawfully obtained after the date of this Agreement by XYZ
from a third party (other than RESEARCH COLLABORATORS) having the legal right
to transmit the same; or (iii) which is generally available to the public or
which becomes generally available to the public through no act or fault of XYZ.
42
<PAGE>
3. No liability shall arise under this Agreement due to XYZ's
disclosure of INFORMATION made pursuant to judicial or governmental order,
provided that XYZ notifies RESEARCH COLLABORATORS as soon as possible and in
any event prior to such disclosure and cooperates with RESEARCH COLLABORATORS
in the event they elect to contest legally and avoid such disclosure.
4. Obligations of XYZ hereunder shall be in effect throughout the
duration of THE PROJECT and shall continue for a period of five (5) years
from the date at which UMAB's activities regarding THE PROJECT have concluded.
5. XYZ understands that under UMAB policy XYZ is required to use
reasonable efforts to protect the INFORMATION. XYZ shall exercise at least
the same degree of care as UMAB normally takes to preserve and safeguard its
own proprietary information, and in any event shall take reasonable measures
to maintain the confidentiality of the INFORMATION. XYZ acknowledges that any
RESEARCH COLLABORATOR may bring action against XYZ, at law or in equity, to
bar disclosures by XYZ in violation of this Agreement, and/or to recover
damages caused by XYZ as a result of disclosures in violation of this
Agreement.
6. All INFORMATION transferred to or developed by XYZ pursuant to
this Agreement shall be and/or remain the property of the party or parties
disclosing such information to XYZ, and none of the proprietary rights in
such information shall be conveyed to XYZ by means of such transferal.
7. XYZ shall not export directly or indirectly any INFORMATION or any
products utilizing any such INFORMATION to any country (or citizen of such
country) for which the U.S. Government or any agency thereof, at the time of
export, requires an export licence or other government approval, without
first obtaining the express written consent of RESEARCH COLLABORATORS and
without first obtaining necessary consent to do so from such agencies of the
U.S. Government as shall be required by the applicable statutes and
regulations then in effect.
8. In the event that any of the INFORMATION is or becomes the subject
of any patent application, patent, copyright application or copyright, XYZ
agrees and understands that RESEARCH COLLABORATORS will have all the rights
and remedies available to them under the law as a result of said patent
applications, patents, copyright applications or copyrights, and that
disclosure of such INFORMATION to XYZ does not in any way affect those
rights and remedies.
9. This Agreement contains our entire understanding with respect to
matters contained herein. It may not be changed or modified orally, but only
by an instrument in writing, signed by the parties hereto, which states that
it is an amendment to this Agreement.
43
<PAGE>
10. Failure to insist upon strict compliance with any of the terms,
covenants or conditions of this Agreement shall not be deemed a waiver of
such terms, covenants or conditions, nor shall any waiver or relinquishment
of any right or power hereunder at any one time or more times be deemed a
waiver or relinquishment of such right or power at any other time or times.
11. The invalidly or unenforceability of any provision of this Agreement
shall not effect the other provisions hereof, and the Agreement shall be
construed in all respects as if such invalid or unenforceable provisions were
omitted. Furthermore, upon the request of any party hereto, the parties to
this Agreement shall add, in lieu of such invalid or unenforceable
provisions, provisions as similar in terms to such invalid or unenforceable
provisions as may be possible and legal, valid and enforceable.
12. This Agreement shall not be assigned by any party hereto without
the express prior written consent of the other parties.
13. This Agreement shall be governed by the laws of the State of
Maryland, without regard to the principles of conflicts of laws.
UNIVERSITY OF MARYLAND AT BALTIMORE
FOR RESEARCH COLLABORATORS
By
---------------------------------
- --------------------- Title
XYZ -----------------------------
44
<PAGE>
SCHEDULE 7
Adverse conditions to be covered
Coverage
For the duration of the clinical study and for a period of three (3) years
afterward.
Conditions
Acute abdomen (including appendicitis, mesenteric adenitis, perforation,
peritonitis)
cholecyatitis
nonspecific febrile illness not due to other obvious causes (only for 90 days
post vaccine)
45
<PAGE>
For and on behalf of MEDEVA PLC
Date: Sept. 8th, 1994
/s/ R.S. Harris
- -------------------------------------------
R.S. Harris (Name)
- -------------------------------------------
Director (Title)
- -------------------------------------------
For and on behalf of UNIVERSITY OF MARYLAND AT BALTIMORE
Date: 9.20; 1994
/s/ DAVID J RAMSAY DM
- -------------------------------------------
DAVID J RAMSAY DM; DPhil (Name)
- -------------------------------------------
President (Title)
- -------------------------------------------
47
<PAGE>
EXHIBIT 10.8
PEPTIDE THERAPEUTICS LIMITED
- and -
NOVARTIS PHARMA AG
------------------------------------------------------------------------------
COLLABORATION AGREEMENT
------------------------------------------------------------------------------
<PAGE>
CONTENTS
1 Definition
2 The Programme
3 Consideration
4 Intellectual Property
5 Licence Agreement
6 Confidentiality
7 Publications
8 Warranties and Undertakings
9 Announcements
10 Assignment
11 Costs
12 Further Assurance
13 Term
14 General
15 Governing Law and Jurisdiction
16 Counterparts
Schedule 1 - Research Plan
Schedule 2 - Licence Agreement
<PAGE>
THIS AGREEMENT is made on 1st November 1998
BETWEEN:-
(1) PEPTIDE THERAPEUTICS LIMITED (No 2774777) whose registered office is at
321 Cambridge Science Park, Milton Road, Cambridge, CB4 4WG UK
("PEPTIDE"); and
(2) NOVARTIS PHARMA AG whose registered office is at Lichtstrasse 35,
CH-4002, Basel, Switzerland ("NOVARTIS").
Together referred to as "the Parties", each singly as a "Party".
WHEREAS
(A) Peptide has developed a system for the discovery of substrates and the
development of inhibitors of protease enzymes known as RAPiD (Rational
Approach to Protease Inhibitor Design);
(B) Novartis has identified the Target Protease for which they wish to
develop Substrates and Inhibitors as such terms are hereinafter
defined;
(C) The Parties have agreed that Peptide will carry out the Programme on
the Target Protease using RAPiD and endeavour to provide a Substrate
and Data (as hereinafter defined) to Novartis; and
(D) Following completion of the Programme, Novartis will have the option to
enter into a licence agreement with Peptide to allow use of the
Substrate and Data.
IT IS AGREED as follows:
1 DEFINITION
1
<PAGE>
"AFFILIATE(S)" In the case of either Party, a corporation
or other entity which, directly or
indirectly, controls, is controlled by or is
under common control with, that 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.
"ARISING IP" Any Intellectual Property resulting from the
Programme carried out by Peptide including
Data.
"BACKGROUND IP" All Intellectual Property owned by or
available to either Party prior to this
Agreement or generated during the term of
this Agreement but not resulting from the
Programme. For the avoidance of doubt the
Parties recognise that Novartis owns all
Intellectual Property related to the Target
Protease as well as to any compounds for
which Novartis discovers a pharmacological
activity with respect to such Target
Protease, and Peptide owns all Intellectual
Property related to RAPiD.
2
<PAGE>
"CONFIDENTIAL INFORMATION"
All information disclosed by one Party ("the
Disclosing Party") to the other ("the
Receiving Party") whether before or after
the date of this Agreement which is not in
the public domain including without
prejudice to the generality of the
foregoing; know-how and/or documents
relating to or comprising the Background IP;
know-how and/or documents relating to or
comprising the Arising IP, and the Data and
any information relating to the Disclosing
Party's products, operations, processes,
plans or intentions, know-how, intellectual
property, inventions, trade secrets, market
opportunities and business affairs.
"DATA" The data relating to the Target Protease
generated during the Programme by or on
behalf of Peptide.
"FRET" Fluorescence Resonance Energy Transfer.
"INHIBITOR" Any inhibitor of the Target Protease.
"INTELLECTUAL PROPERTY" Any and all interest whether legal or
beneficial arising under the laws of England
or elsewhere in patent, copyright, design
right, rights in confidentiality, trade mark
rights and any other analogous rights,
applications for any of the foregoing (and
the right to make such applications)
including Know How.
3
<PAGE>
"KNOW HOW" Technical and scientific information,
necessary or useful in developing
Substrates, not at present in the public
domain and held in any form (including,
without limitation, that comprised in or
derived from drawings, data, formulae,
specifications, notes, chemical compounds,
computer software, component lists,
instructions, manuals, reports and process
descriptions) by either Party to this
Agreement.
"LICENCE AGREEMENT" The agreement to be entered into to allow
Novartis to use the Substrate and the Data,
the form of which is set out in Schedule 2.
"OPTION PERIOD" A period of two (2) months from receipt
by Novartis of the Report or Substrate,
if identified, (whichever is the later)
allowing Novartis to evaluate the Data.
"PRESS RELEASE" The press release announcing the conclusion
of this Agreement the wording of which
having been mutually agreed by the Parties .
"PROGRAMME" The research programme, outlined in Schedule
1, during the performance of which Peptide
will apply RAPiD to the Target Protease
supplied by Novartis, and the purpose of
which is to identify a Substrate for the
Target Protease.
"RAPID" Peptide's proprietary system for discovering
substrates and developing inhibitors of
protease enzymes.
"REPORT" A written report summarising the Data to be
provided by Peptide to Novartis.
4
<PAGE>
"SUBSTRATE" A FRET substrate for the Target Protease
having a []* and selected by Novartis as
being suitable for use in an assay for
measuring the proteolytic activity of
Target Protease.
"TARGET PROTEASE" []*
2 THE PROGRAMME
2.1 Within []* of signing this Agreement, Novartis shall provide Peptide
with sufficient Target Protease required for the Programme and any
available information necessary to assay the Target Protease.
2.2 Peptide agrees to use reasonable endeavours to carry out the Programme
and to deliver to Novartis the Report as soon as is reasonably
practicable. In addition, if Peptide has identified a Substrate for
the Target Protease, Peptide will promptly supply Novartis with
approximately []* of the Substrate for evaluation by Novartis. In
any event Peptide shall provide the Report to Novartis within []* of
the date of this Agreement.
3 CONSIDERATION
In consideration of Peptide carrying out the Programme Novartis
agrees to pay to Peptide [ ]* exclusive of any applicable sales taxes
thereon within [ ]* of (a) signing this Agreement and (b)
receipt of an invoice for this amount from Peptide, whichever is later.
4 INTELLECTUAL PROPERTY
4.1 For the avoidance of doubt all Background IP shall remain the property
of the Party owning such Background IP prior to this Agreement or
generating or acquiring it during the term of this Agreement.
5
<PAGE>
4.2 Any Arising IP and all Data shall be the property of Peptide.
4.3 Novartis shall have a sole licence during the Option Period to use the
Data and the Substrate only for the purpose of internally evaluating
the Data and the Substrate.
5 LICENCE AGREEMENT
5.1 During the Option Period Novartis may elect to enter into the License
Agreement in the form set out in Schedule 2.
5.2 In the event Novartis elects not to enter into the License Agreement
during the Option Period, the following terms and conditions shall
apply, subject to Clause 6 hereof:
(a) Novartis shall make no further use or disclosure of the Data
nor of any data which has been derived, in part or in its
entirety, from or by use of the Data; and
(b) Novartis shall make no further use or disclosure of the
Substrate provided or identified by Peptide nor any substrate
derived from such Substrate nor shall it make any further use
or disclosure of any associated Data related to the Substrate;
and
(c) Novartis shall make no further use or disclosure of any of the
Confidential Information provided to it by Peptide; and
(d) Novartis shall return to Peptide all Data and Confidential
Information received by it in any format whatsoever together
with any and all copies of such Data and Confidential
Information which may have been made in any format whatsoever
and agrees to destroy any remaining quantities of Substrate.
6 CONFIDENTIALITY
6
<PAGE>
6.1 During the term of this Agreement and for a period of 5 years after
termination or expiration of this Agreement for any reason
whatsoever the Receiving Party shall;
6.1.1 keep the Confidential Information confidential;
6.1.2 not disclose the Confidential Information to any other person
or entity other than with the prior written consent of the
Disclosing Party; and
6.1.3 not use the Confidential Information for any purpose other
than the performance of its obligations or the exercise of its
rights under this Agreement.
The Receiving Party shall procure that its employees and the employees of its
Affiliates are made aware of and comply with all the Receiving Party's
obligations of confidentiality under this Agreement as if these employees were a
party to this Agreement.
6.2 The obligations contained in Clause 6.1 shall not apply to any
Confidential Information which: -
6.2.1 at the date of this Agreement or at any time after the date of
this Agreement is, or comes into, the public domain other than
through breach of this Agreement by the Receiving Party or any
Recipient;
6.2.2 can be shown by the Receiving Party to the satisfaction of the
Disclosing Party to have been known by the Receiving Party
before disclosure by the Disclosing Party to the Receiving
Party;
6.2.3 subsequently comes lawfully into the possession of the
Receiving Party from a third party under no obligation of
confidence to the Disclosing Party in respect of such
Confidential Information;
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
7
<PAGE>
6.2.4 is subsequently and independently developed by employees of
the Receiving Party or Affiliates thereof who had no knowledge
of the Confidential Information disclosed; or
6.2.5 is required by law, by any court of competent jurisdiction or
by any other appropriate regulatory body (including without
limitation the London Stock Exchange Limited and the Panel on
Take-overs and Mergers).
7 PUBLICATIONS
Neither Novartis nor Peptide shall submit for written or oral publication any
manuscript, abstract or the like which includes data or other information
generated and provided by the other Party without first obtaining the prior
written consent of the other Party, which consent shall not be unreasonably
withheld. The contribution of each Party shall be noted in all publications or
presentations by acknowledgement or co-authorship, whichever is appropriate.
8 WARRANTIES AND UNDERTAKINGS
The Parties exclude to the fullest extent permitted by law any warranties,
conditions, undertakings or terms implied by operation of law (statutory or
otherwise).
9 ANNOUNCEMENTS
The Parties agree that immediately following the execution of this Agreement the
Press Release may be released by the Parties . No other public announcement,
communication or circular (other than to the extent required by law, the London
Stock Exchange Limited or the Panel on Take-overs and Mergers or any other
regulatory body in any jurisdiction) concerning the transactions referred to in
this agreement shall be made or dispatched by either Party for so long as this
Agreement continues in force without the prior written consent of the other
Party, such consent not to be unreasonably withheld or delayed.
10 ASSIGNMENT
8
<PAGE>
Neither Party shall assign or transfer or purport to assign or transfer any of
its rights or obligations under this Agreement except with the prior written
consent of the other Party save that either Party may at any time assign or
transfer any of its rights or obligations under this Agreement to any of its
Affiliates. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto, their successors and assigns.
11 COSTS
Except as otherwise expressly provided in this Agreement, each Party shall pay
its own costs of and incidental to the negotiation, preparation, execution and
implementation by it of this Agreement and of all other documents referred to in
it.
12 FURTHER ASSURANCE
Each Party shall at its own cost do and execute or procure to be done and
executed all necessary acts, deeds, documents and things reasonably within its
power to give effect to this Agreement.
13 TERM
This Agreement shall come into effect on the date first written above and shall
end on expiry of the Option Period.
14 GENERAL
14.1 This Agreement constitutes the entire agreement between the Parties
relating to the subject matter of this Agreement and supersedes all
previous such agreements whether made orally or in writing.
14.2 No variation of this Agreement shall be valid unless it is in writing
and signed by or on behalf of each of the Parties.
14.3 The failure to exercise or delay in exercising right or remedy under
this Agreement shall not constitute a waiver of the right or remedy or
a waiver of any other rights or remedies
9
<PAGE>
and no single or partial exercise of any right or remedy under this
Agreement shall prevent any further exercise of the right or remedy or
the exercise of any other right or remedy.
14.4 Nothing in this Agreement shall be construed as creating a partnership
between the Parties or as constituting either Party as the agent of the
other Party for any purpose whatsoever and neither Party shall have the
authority or power to bind the other Party or to contract in the name
of or create a liability against the other Party in any way or for any
purpose.
14.5 If the performance of any part of this Agreement by either Party, or of
any obligation under this Agreement, is prevented, restricted,
interfered with or delayed by reason of any cause beyond the control of
the Party liable to perform, unless conclusive evidence to the contrary
is provided, 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 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.
14.6 Provisions of this Agreement which, by their nature, are intended to
survive termination of this Agreement, shall so survive.
15 GOVERNING LAW AND JURISDICTION
This Agreement shall be governed by the laws of England and Wales and
the parties hereto hereby irrevocably submit to the jurisdiction of the
English Courts.
16 COUNTERPARTS
10
<PAGE>
This Agreement may be executed in any number of counterparts each of
which when executed and delivered shall be an original, but all the
counterparts together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties, through their authorised officers, have
executed this Agreement as of the date first written above.
Signed on behalf of )
PEPTIDE THERAPEUTICS LIMITED )
Signed on behalf of )
NOVARTIS PHARMA AG )
11
<PAGE>
SCHEDULE 1
RESEARCH PLAN
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
12
<PAGE>
SCHEDULE 2
LICENCE AGREEMENT
THIS AGREEMENT is made on ...............................199
BETWEEN:-
(1) PEPTIDE THERAPEUTICS LIMITED (No 2774777) whose registered office
address is at 321 Cambridge Science Park, Milton Road, Cambridge, CB4
4WG UK ("PEPTIDE"); and
(2) NOVARTIS PHARMA AG whose registered office address is at Lichstrasse 35,
CH-4002, Basel, Switzerland ("NOVARTIS").
WHEREAS
(A) Peptide and Novartis entered into a Collaboration Agreement on
[ ] under which Peptide agreed to carry out a Programme on the
Target Protease using RAPiD and to endeavor to provide a Substrate
and Data to Novartis.
(B) Peptide has successfully completed the Programme.
(C) Novartis has elected to exercise its option under the Collaboration
Agreement to take a licence to Data, Background IP, and Substrate
arising from the programme of work on the terms and conditions of this
Agreement.
IT IS AGREED as follows:-
1 INTERPRETATION
Unless expressly stated otherwise all terms used herein shall have the
meaning set forth in the Collaboration Agreement.
13
<PAGE>
"EDC DECLARATION" means the point at which a development
compound is declared an Early Development
Compound (EDC) by Novartis' Innovation
Management Board or some other similar
body, authorising the completion of the
preclinical development programme thereby
allowing progression of the compound to
Phase I clinical trials.
FIRST REGULATORY APPROVAL means authorisation for marketing a Product
by the United States Food and Drug
Administration or by the governing health
authority in any other country or region.
"IND" means Investigational New Drug application,
or the like, as defined in the applicable
laws and regulations of the governmental
drug regulatory agencies in each country.
"PATENTS" means all patents and patent applications
anywhere in the world which are or become
owned and/or controlled, in whole or in
part, by Peptide and any Affiliates of
Peptide and under which Peptide otherwise
has, now or in the future, the right to
grant licences and which generically or
specifically claim Substrate or which have
claims covering Substrate, a process for
manufacturing Substrate, and/or
intermediates used in such process and/or
use of Substrate. Included within the
definition of Patents are any
continuations, continuations-in-part,
divisions, patents of addition, reissues,
renewals or extensions thereof.
"PRODUCT" means an Inhibitor of Target Protease
developed or commercialised by Novartis for
any therapeutic, diagnostic or prognostic
health-care applications whose potential
was identified through the use of the Data
and/or Substrate supplied by Peptide.
14
<PAGE>
"TERRITORY" means the world.
"THIRD PARTY(IES)" means any party which is neither a Party to this
Agreement nor an Affiliate.
2 GRANT
2.1 Peptide hereby grants to Novartis and its Affiliates an exclusive
worldwide licence under Patents and other Peptide Intellectual
Property, to use the Data, Substrate-relevant Backgroup IP and Arising
IP for the sole purpose of identifying, characterising or developing
Inhibitors subject to the terms and conditions of this Agreement. For
the avoidance of doubt this licence shall not give Novartis any rights
to use RAPiD for any purpose whatsoever including the finding of
additional Substrate(s) or Inhibitor(s).
2.2 Novartis shall be entitled to grant sub-licences under the licence set
forth in clause 2.1 above but shall remain responsible for the payments
and other obligations to Peptide set forth herein.
3 PAYMENTS
3.1 In consideration of the licence granted to Peptide to Novartis under
this Agreement Novartis agrees to pay to Peptide the following
non-refundable amounts:-
3.1.1 an annual licence fee of [ ]* payable by Novartis
to Peptide beginning on the first anniversary of this Agreement
and subsequently on each anniversary of the execution of this
Agreement for a period of [ ]*, whichever is the
shorter;
3.1.2 success fees, depending on the speed with which Novartis will
effect an EDC Declaration of a Product:
- -----------------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
15
<PAGE>
(1) if such EDC Declaration of a Product occurs within [ ]* from the
date of this Licence Agreement, Novartis will make to Peptide the
milestone payments specified in column "B" below, whenever a Product
crosses one of the milestone events indicated in column "A";
(2) if such EDC Declaration of a Product occurs within [ ]* from the
date of this Licence Agreement, Novartis will make to Peptide the
milestone payments specified in column "C" below, whenever a Product
crosses one of the milestone events indicated in column "A";
(3) if such EDC Declaration of a Product occurs within [ ]* from the
date of this Licence Agreement, Novartis will make to Peptide the
milestone payments specified in column "D" below, whenever a Product
crosses one of the milestone events indicated in column "A";
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
A B C D
<S> <C> <C> <C>
- ------------------------------------------------------------------------------
Time taken to get to EDC
Declaration [ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------
EDC Declaration
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------
IND Non-refusal
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------
First Regulatory Approval
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------
TOTAL
[ ]* [ ]* [ ]*
- ------------------------------------------------------------------------------
</TABLE>
- ---------------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
16
<PAGE>
3.1.3 If a Product is abandoned during development after one or more of the
milestone payments above has been made, and if a back-up Product is
developed to replace such abandoned Product, then no milestone
payment shall be made in respect of the back-up Product which
milestone payment has already been made in respect of the abandoned
Product.
3.2 All payments to be made by Novartis to Peptide pursuant to this Agreement
shall be made in pounds sterling within thirty (30) days of receipt of an
invoice from Peptide. Novartis shall promptly report to Peptide the
occurrence of any event which would trigger a milestone payment according
to Clause 3.1 above.
3.3 All payments shall be exclusive of any taxes (including where applicable
Value Added Tax and withholding tax) which shall be payable in addition to
such payments by the maker of such payments.
4 DEVELOPMENT
4.1 Novartis will use commercially reasonable efforts and diligence to achieve
the milestones set out in 3.1.2 above.
17
<PAGE>
4.2 Novartis shall report to Peptide at six monthly intervals on the status
and progress of Novartis's efforts to achieve the milestones set out in
3.1.2 above, until such time as Novartis abandons efforts to develop
Products.
5 EXCHANGE OF INFORMATION AND CONFIDENTIALITY
5.1 During the term of this Agreement, Novartis shall have full access to all
matters encompassed within Data and Peptide shall promptly disclose
and/or supply Novartis with all Data.
5.2 During the term of this Agreement and for five (5) years thereafter,
irrespective of any termination earlier than the expiration of the term
of this Agreement, Peptide and Novartis shall keep the Confidential
Information confidential and not use or reveal or disclose to Third
Parties any Confidential Information received from the other Party or
developed by either Party in the performance of activities in furtherance
of this Agreement without first obtaining the written consent of the
disclosing party:
5.2.1 except as may be otherwise provided herein; or
5.2.2 as may be required for purposes of investigating, developing,
manufacturing or marketing Substrate or Product or for securing
essential or desirable authorisations, privileges or rights from
governmental agencies; or
5.2.3 is required by law, by any court of competent jurisdiction or by
any other appropriate regulatory body (including without limitation
the London Stock Exchange Limited and the Panel on Take-overs and
Mergers).
5.2.4 is necessary to file or prosecute patent applications concerning
Substrate Inhibitors or to carry out any litigation concerning
Substrate or Inhibitors.
5.3 The confidentiality obligation in Clause 5.2 shall not apply to such
information which:
18
<PAGE>
5.3.1 at the date of this Agreement or at any time after the date of
this Agreement is, or comes into, the public domain other than
through breach of this Agreement by the receiving Party or any
Recipient;
5.3.2 can be shown by the Receiving Party to the satisfaction of the
Disclosing Party to have been known by the Receiving Party before
disclosure by the Disclosing Party to the Receiving Party;
5.3.3 subsequently comes lawfully into the possession of the
Receiving Party from a third party under no obligation of
confidence to the Disclosing Party in respect of such Confidential
Information;
5.3.4 is subsequently and independently developed by employees of the
Receiving Party or Affiliates thereof who had no knowledge of the
Confidential Information disclosed; or
5.3.5 is required by law, by any court of competent jurisdiction or
by any other appropriate regulatory body (including without
limitation the London Stock Exchange Limited and the Panel on
Take-overs and Mergers).
The parties shall take reasonable measures to ensure that no unauthorised
use or disclosure is made by others to whom access to such Confidential
Information is granted.
5.4 Nothing herein shall be construed as preventing either Party from
disclosing any information received from the other Party to an Affiliate,
sub-licensee or distributor, provided such Affiliate, sub-licensee or
distributor has undertaken a similar obligation of confidentiality with
respect to the Confidential Information in terms as if such recipient
were a Party to this Agreement.
5.5 All Confidential Information disclosed by one Party to the other shall
remain the property of the Disclosing Party. In the event that a court or
other legal or administrative tribunal, directly or through an appointed
master, trustee or receiver, assumes partial or complete
19
<PAGE>
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.
5.6 No public announcement or other disclosure to Third Parties concerning
the existence of or terms of this Agreement shall be made, either
directly or indirectly, by any Party to this Agreement, except as may be
legally required or as may be required for recording purposes, without
first obtaining the approval of the other Party and agreement upon the
nature and text of such announcement or disclosure such agreement not to
be unreasonably withheld or delayed. The Parties agree that immediately
following the execution of this Agreement a Press Release may be
released by the Parties concerning the completion of this Agreement the
contents of which will be mutually agreed by them. Similar mutually
approved Press Releases may be released throughout the term of the
Agreement as major milestones are achieved.
5.7 Neither Novartis nor Peptide shall submit for written or oral
publication any manuscript, abstract or the like which includes data or
other information generated and provided by the other Party without
first obtaining the prior written consent of the other Party, which
consent shall not be unreasonably withheld. The contribution of each
Party shall be noted in all publications or presentations by
acknowledgement or co-authorship, whichever is appropriate.
20
<PAGE>
6 PATENT PROSECUTION AND LITIGATION
6.1 Peptide shall be responsible for the filing, prosecution and maintenance
of Patents at its own expense.
6.2 Peptide agrees to keep Novartis promptly and fully informed of the
course of patent prosecution or other proceedings. Novartis shall hold
all information disclosed to it under this section as confidential
subject to the provisions of Clause 5.
6.3 Novartis shall have the right to assume responsibility for any Patent or
any part of a Patent that relates to Substrate which Peptide desires,
after consultation with Novartis, to abandon or otherwise cause or allow
to be forfeited.
6.4 In the event that Peptide or Novartis becomes aware of actual or
threatened infringement of a Patent anywhere in the Territory, that
Party shall promptly notify the other Party in writing. Novartis 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
Peptide's name in connection therewith. If Novartis does not commence a
particular infringement action within ninety (90) days of notifying
Peptide of any such infringement, Peptide after notifying Novartis in
writing, shall be entitled to bring such infringement action at its own
expense. The Party conducting such action shall have full control over
its conduct, including settlement thereof. In any event, Peptide and
Novartis shall assist one another and cooperate in any such litigation
at the other's request.
6.5 Peptide and Novartis shall recover their respective actual out-of pocket
expenses, or equitable proportions thereof, associated with any
litigation or settlement thereof from any recovery made by any Party.
Any excess amount shall be shared between Novartis and Peptide, with
each Party receiving 50% (fifty percent) of such excess.
6.6 The parties shall keep one another informed of the status of and of
their respective activities regarding any litigation or settlement
thereof concerning Substrate or Product.
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6.7 Peptide shall authorise Novartis to act as Peptide's agent for the
purpose of making any application for any extensions of the term of
Patents and shall provide reasonable assistance therefor to Novartis,
at Novartis' expense (In the United States of America as permitted
under Title 35 of the United States Code).
7. TERM AND TERMINATION
7.1 If either Party fails or neglects to perform any material covenants or
provisions of this Agreement and if such default is not corrected
within sixty (60) days after receiving written notice from the other
Party with respect to such default, such other Party shall have the
right to terminate this Agreement by giving written notice to the Party
in default provided the notice of termination is given within six (6)
months of the default and prior to correction of the default.
7.2 Either Party (the "Solvent Party") may terminate this Agreement if, at
any time, the other Party (the "Insolvent Party") shall file in any
court or agency pursuant to any statute or regulation of (the United
States or of) any (individual) state or (foreign) country, a petition
in bankruptcy or insolvency or for reorganisation or for an arrangement
or for the appointment of a receiver or trustee of the Party or of its
assets, or if the Insolvent 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
proceeding, and such petition shall not be dismissed with sixty (60)
days after the filing thereof, or if the Insolvent Party shall propose
or be a party to any dissolution or liquidation, or if the Insolvent
Party shall make an assignment for the benefit of creditors.
7.3 Notwithstanding the bankruptcy of Peptide, or the impairment of
performance by Peptide of its obligations under this Agreement as a
result of bankruptcy or insolvency of Peptide, Novartis shall be
entitled to retain the licenses granted herein, without any further
obligations to Peptide, subject to Peptide's right to terminate this
Agreement for reasons other than bankruptcy or insolvency as expressly
provided in this Agreement.
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8 RIGHTS AND DUTIES UPON TERMINATION
8.1 Upon termination of this Agreement, Peptide shall have the right to
retain any sums already paid by Novartis hereunder, and Novartis shall
pay all sums accrued hereunder which are then due.
8.2 Termination of this Agreement shall terminate all outstanding
obligations and liabilities between the parties arising from this
Agreement except those which, by their nature, are intended to survive
termination of the Agreement.
9 WARRANTIES AND REPRESENTATIONS
9.1 The Parties exclude to the fullest extent permitted by law any
warranties, conditions, undertakings or terms implied by operation of
law (statutory or otherwise).
9.2 Nothing in this Agreement shall be construed as a warranty that Patents
are or will be valid or enforceable or that their exercise does not or
will not infringe any patent rights of Third Parties.
10. GENERAL
10.1 If the performance of any part of this Agreement by either Party, 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, unless conclusive
evidence to the contrary is provided, 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
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.
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10.2 This Agreement shall be deemed to have been made in the United Kingdom
and its form, execution, validity, construction and effect shall be
determined in accordance with the laws of England and shall be subject
to the jurisdiction of the English Courts and each of the Parties
hereby irrevocably submits to the jurisdiction of the English Courts.
10.3 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.
10.4 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.
10.5 In the event that the terms and conditions of this Agreement are
materially altered as a result of Clauses 10.3 or 10.4, the parties
will renegotiate the terms and conditions of this Agreement to resolve
any inequities.
10.6 This Agreement, entered into as of the date written above and together
with the surviving provisions of the Collaboration Agreement,
constitutes the entire agreement between the parties relating to the
subject matter hereof and supersedes all previous writings and
understandings. No terms or provisions of this Agreement shall be
varied or modified by an 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.
10.7 The failure of either Party at any time to exercise any of their
respective rights under this Agreement shall not be deemed a waiver
thereof, nor shall such failure in any way prevent either Party, as the
case may be, from subsequently asserting or exercising such rights.
10.8 Any notice required or permitted under this Agreement shall be sent by
certified mail, return receipt requested, postage pre-paid to the
following addresses of the parties:
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if to Peptide:
Peptide Therapeutics Limited
321 Cambridge Science Park,
Milton Road, Cambridge CB4 4WG
United Kingdom
Attention: The Company Secretary
if to Novartis:
Novartis Pharma AG
P.O. Box
CH-4002 Basel-Switzerland
Attention: The Legal Department
Any notice required or permitted to be given concerning this Agreement
shall be effective upon receipt by the Party to whom it is addressed.
10.9 Neither this Agreement nor any interest hereunder shall be assignable
or transferable by either Party without the written consent of the
other provided, however, that either Party may assign this Agreement to
any Affiliate or to any corporation with which it may merger or
consolidate or to which it may sell all or substantially all of its
assets, without obtaining the consent of the other providing the
interests of that other Party are not materially affected. This
Agreement and the licenses herein granted shall be binding upon and
inure to the benefit of the successors in interest of the respective
parties.
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IN WITNESS WHEREOF, the parties through their authorised officers, have
executed this Agreement as of the date first written above
Signed on behalf of )
PEPTIDE THERAPEUTICS LIMITED )
Signed on behalf of )
NOVARTIS PHARMA AG )
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EXHIBIT 10.10
OVERVIEW AGREEMENT
THIS AGREEMENT is entered into as of January 25, 1999 by and between
Peptide Therapeutics Limited, a corporation organized and existing under the
laws of England and Wales ("Limited"), and Pasteur Merieux Serums & Vaccins
S.A., a societe anonyme existing and organized under the laws of the Republic of
France ("PMC"). Capitalized terms used but not otherwise defined herein shall
have the meanings assigned to them in that certain Master Agreement dated as of
March 31, 1995 by and between PMC and OraVax, Inc. ("OraVax").
WHEREAS, Peptide Therapeutics Group plc ("Peptide"), Peach Acquisition
Corp. ("Peach") and OraVax, Inc. have entered into an Agreement and Plan of
Acquisition, dated November 10, 1998 (the "Merger Agreement"), whereby OraVax is
to be merged with and into Peach by way of a merger (the "Merger") with OraVax
as the surviving corporation;
WHEREAS, Peptide has transferred all of the issued and outstanding
stock of Peach to Limited;
WHEREAS, effective upon the effective time of the Merger (the
"Effective Time"), OraVax will become a wholly-owned subsidiary of Limited;
NOW, THEREFORE, in consideration of the mutual agreements herein set
forth and for other good and valuable consideration the receipt of which is
hereby acknowledged, the parties hereby agree as follows:
ARTICLE I
COVENANTS, REPRESENTATIONS AND ACKNOWLEDGEMENTS OF LIMITED
1.1 At the Effective Time and subject to satisfaction of the conditions
to effectiveness set forth in Article III hereof, Limited hereby covenants to
cause (i) OraVax to enter into each of the agreements attached hereto as Annexes
A - E (each a "New Agreement" and collectively, the "New Agreements") and (ii)
representatives of OraVax in the Partnerships to approve and cause to be
executed the agreements attached hereto as Annexes B and C.
1.2 Limited covenants and agrees to appoint CT Corporation, 1633
Broadway, New York, New York as its agent for service of process prior to
February 9, 1999 unless this Agreement has been terminated prior to such time.
1.3 Limited agrees to use its best efforts to cause OraVax to maintain
all of its rights that are being acquired by PMC under the New Agreements until
the Effective Time. Under no circumstances shall Limited or any of its
affiliates authorize, permit or consent to any action by OraVax which could have
the effect of depriving PMC of any of the rights which it is acquiring under the
New Agreements. In the event that Peptide, Limited or OraVax cannot, at the
Effective Time, perform its obligations under any of the license agreements
attached hereto
<PAGE>
as Annexes A - C due to any action or omission of Peptide, Limited, or OraVax
(or any of their respective Affiliates), such failure shall constitute a
material breach of this Agreement and any and all other agreements executed
between Limited or Peptide and PMC (or any of their respective Affiliates)
(including, without limitation, any agreement by which PMC (or any of its
Affiliates) purchase any of the ordinary shares or other equity interests in
Peptide).
1.4 Limited hereby represents and warrants that:
(a) Limited owns all of the issued and outstanding shares of Peach
free and clear of any encumbrance and except for the shares of Peach
owned by Limited, there are no shares of any class or series of capital
stock, and no preferred stock, bonds, debentures, notes, debt
instruments, evidences of indebtedness or other securities of any kind
(including, without limitation, any stock options or stock appreciation
rights), of Peach authorized, issued or outstanding. Peach has not
issued any securities in violation of any preemptive or similar rights.
(b) Limited is a corporation duly incorporated and validly
existing and (to the extent applicable) in good standing under the laws
of its jurisdiction of organization, with the corporate power to own,
lease and operate its properties and to carry on its business as now
conducted.
(c) Limited has all necessary corporate power and authority to
enter into this Agreement and to consummate the transactions
contemplated hereby.
(d) The execution, delivery and performance of this Agreement by
Limited does not conflict with or contravene the articles or
certificate of incorporation or by-laws, regulations or partnership
agreement (or other comparable governing instruments with different
names) of Limited, nor will the execution, delivery or performance of
this Agreement conflict with or result in a breach of, or entitle any
party thereto to terminate, any material agreement or instrument to
which Limited is a party, or by which any of its assets or properties
is bound.
(e) This Agreement has been duly authorized, executed and
delivered by Limited and constitutes a legal, valid and binding
agreement of Limited, enforceable against Limited in accordance with
its terms, except as enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization or other similar laws affecting
creditors' rights generally.
(f) OraVax is validly existing as a corporation in good standing
under the laws of Delaware, with corporate power to enter into each of
the New Agreements and when executed, each of the New Agreements will
constitute legal, valid and binding obligations of OraVax, enforceable
against OraVax in accordance with their terms, subject to applicable
bankruptcy insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies
generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith
and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
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(g) The execution, delivery and performance of the New Agreements
by OraVax will not result in any violation of any law, rule or
regulation and will not result in the violation of the certificate of
incorporation or bylaws of OraVax or any writ, judgment or decree to
which OraVax is a party.
(h) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is
required for the execution and delivery of any of the New Agreements
and the performance by OraVax of the transactions contemplated by the
New Agreements.
1.5 Limited acknowledges that: (i) each of the New Agreements has been
negotiated at arms-length, (ii) during such negotiations Limited was represented
by counsel and was free from any undue influence or duress, (iii) the New
Agreements in the forms attached represent the terms and conditions agreed to by
the parties and that there are no other agreements or understandings with
respect to such agreements and such agreements accurately reflect all agreements
required to be reached in respect of the matters discussed therein.
ARTICLE II
SPECIFIC PERFORMANCE; CONSENT TO JURISDICTION
2.1 Limited agrees that, in view of the unique rights which are the
subject of and affected by this Agreement, in the event that Limited breaches
this Agreement, monetary damages could not be calculated and would not fairly
compensate PMC or be an adequate remedy to PMC for the damages resulting from
such breach. Accordingly, Limited agrees that if Limited breaches this
Agreement, PMC is entitled to specific performance requiring Limited to comply
with the terms of the New Agreements hereof as an alternative to any other
remedies available to PMC at PMC's sole discretion, PROVIDED, HOWEVER, that any
such election by PMC shall not limit PMC's right to incidental and/or
consequential damages, if any, caused by Limited's breach of this Agreement. In
any action successfully brought by PMC pursuant to this Section 2.1 for such
breach, Limited agrees to reimburse PMC for any costs or expenses incurred in
connection with such action, including, without limitation, expert witness fees
and reasonable attorneys fees. Limited further agrees and acknowledges that any
such action by PMC for injunctive relief may be brought in federal court for the
Southern District of New York or in the Supreme Court of New York, County of New
York, that there is jurisdiction over Limited in both the federal court for the
Southern District of New York, and the Supreme Court of New York, County of New
York and that Limited will not challenge the jurisdiction or venue of either of
those courts over Limited.
ARTICLE III
CONDITIONS TO EFFECTIVENESS
3.1 The obligations of the parties under Section 1.1 are subject to (i)
the execution and delivery of that certain First Amendment to Facility Agreement
dated of even date herewith between PMC and OraVax JVM, Inc. and (ii) the
execution and delivery of that certain Subscription Agreement dated of even date
herewith between PMC and Peptide and payment of the Subscription Price.
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ARTICLE IV
TERMINATION
4.1 This Agreement may be terminated at any time prior to the Effective
Time:
(a) By mutual written consent of the parties hereto;
(b) By PMC, by written notice to Limited:
(i) upon the public announcement of a tender offer or exchange
offer by any person other than PMC or an affiliate of PMC for
securities of OraVax;
(ii) upon the occurrence of any event under the Merger Agreement
that would entitle Peptide to terminate the Merger Agreement
(irrespective of any waivers that may be given by Peptide to
OraVax under the Merger Agreement and irrespective of any
breach by Peptide of any representations, warranties,
covenants or other agreements contained in the Merger
Agreement);
(iii) upon the public announcement of, or PMC otherwise becoming
aware of, the submission to OraVax by any person other than
PMC or an affiliate of PMC of an Acquisition Proposal (as
defined in the Merger Agreement); or
(iv) if any of the representations and warranties in Article I are
not true and correct at the Effective Time or if the covenant
contained in Section 1.2 has not been performed by
February 9, 1999.
4.2 Limited shall promptly notify PMC of the occurrence, to its
knowledge, of any event referenced in Sections 4.1(b)(ii) above or the
submission of an Acquisition Proposal referenced in Section 4.1(b)(iii) above.
4.3 This Agreement shall terminate automatically upon any termination
of the Merger Agreement.
4.4 No termination of this Agreement shall relieve any party from
liability by reason of any breach by such party of any of its covenants or
representations contained herein occurring prior to the termination of this
Agreement.
ARTICLE V
MISCELLANEOUS
5.1 PUBLICITY. PMC and Peptide shall cooperate in the preparation of a
mutually-agreeable press release and other publicity disclosing the existence of
this Agreement and their business relationship. Except for the information
disclosed in such press release or publicity, neither PMC nor Peptide shall
disclose the existence or any terms of this Agreement
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<PAGE>
without the prior written consent of the other party (which consent shall not be
unreasonably withheld), except for such limited disclosure as may be reasonably
necessary to either party's bankers, investors, attorneys or other professional
advisors, or in connection with a merger or acquisition, or as may be required
by law in the offering of securities or in securities or regulatory filings or
otherwise, PROVIDED, THAT, the party disclosing such information shall provide a
copy of the proposed disclosure to the other party before it is disclosed and
afford the other party a reasonable amount of time to provide comments on such
proposed disclosure.
5.2 All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed given when so delivered in
person, by overnight courier, by facsimile transmission (with receipt confirmed
by telephone or by automatic transmission report) or two business days after
being sent by registered or certified mail (postage prepaid, return receipt
requested), as follows:
(a) If to Limited, to:
Peptide Therapeutics Limited
321 Cambridge Science Park
Milton Road
Cambridge CB4 4WG
England
Attn: Chief Executive
Telephone: 01223 423333
Facsimile: 01223 423341
with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
Attn: Michael Lytton, Esq.
Telephone: (617) 573-0100
Facsimile: (617) 227-4420
(b) If to PMC, to:
Pasteur Merieux Serums & Vaccins S.A.
58, avenue Leclerc
69007 Lyon, France
Attn: Senior Vice President, Corporate and Legal
Affairs, and General Counsel
Telephone: 011 33 4 37 37 77 84
Facsimile: 011 33 4 37 37 70 61
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
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590 Madison Avenue
New York, New York 10022
Attn: L. Kevin O'Mara, Jr.
Telephone: (212) 872-1000
Facsimile: (212) 872-1002
Any party may by notice given in accordance with this Section 5.2 to the other
parties designate another address or person for receipt of notices hereunder.
5.3 This Agreement shall be construed in accordance with and governed
by the internal laws of the State of New York, without regard for its conflicts
of laws principles.
5.4 This Agreement may be amended, modified or supplemented only by
written agreement of the parties hereto.
5.5 This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. This Agreement is not assignable without the
prior written consent of the other party hereto.
5.6 This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
5.7 This Agreement contains the entire agreement among the parties in
respect of the subject matter contained herein, and supersedes all prior
agreements, written or oral, with respect thereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first written above.
PEPTIDE THERAPEUTICS LIMITED
By: /s/ Nicolas A. Higgins
---------------------------------
Name: Nicolas A. Higgins
Title: Commercial Director
PASTEUR MERIEUX SERUMS & VACCINS S.A.
By: /s/ Paul Kirkconnell
---------------------------------
Name: Paul Kirkconnell
Title: Corporate Vice President
<PAGE>
ANNEX A TO
EXHIBIT 10.10
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (the "Agreement") is effective as of ________
____________, 1999, between OraVax, Inc. ("OraVax"), a corporation organized
and existing under the laws of the State of Delaware, as Licensor
("Licensor") and Pasteur Merieux Serums & Vaccins S.A., a corporation
organized under the laws of France, as Licensee ("Licensee").
W I T N E S S E T H:
WHEREAS, Licensor owns or possesses certain proprietary rights and
know-how relating to the creation of genetically engineered live attenuated
flavivirus vaccines from recombinant yellow fever 17D virus;
WHEREAS, Licensee desires to obtain from Licensor, and Licensor desires
to grant to Licensee, a license under Licensor's proprietary rights and know-how
to research, develop, manufacture, market, sell and distribute Licensed Products
(as defined below);
NOW THEREFORE, in consideration of the covenants, conditions, and
undertakings hereinafter set forth, it is agreed by and among the parties as
follows:
ARTICLE 1
DEFINITIONS
"Affiliate" shall mean, with respect to any Person, (i) any other
Person of which securities or other ownership interests representing fifty
percent (50%) or more of the voting interests of such other Person are, at the
time such determination is made, owned, Controlled or held directly or
indirectly, by such Person, or (ii) any other Person which, at the time such
determination is being made, is Controlling, Controlled by or under common
Control with, such Person. For the purposes hereof, "Control," whether used as a
noun or verb, refers to the possession directly or indirectly, of the power to
direct, or cause the direction of, the management or policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Agency" shall mean any supranational, national, regional, state or
local government regulatory authority in the Territory responsible for granting
approvals for the manufacture or sale of Licensed Products.
"Development Costs" shall mean the costs incurred by Licensor in
connection with the performance of Development Work pursuant to any Research and
Development Program.
"Dengue License" means the license agreement by and between Licensee
and OraVax effective as of October 1, 1998.
<PAGE>
"Dengue Vaccine" shall mean a vaccine either therapeutically or
prophylactically active against dengue viruses that makes use of, or is based
upon, the Technology licensed to the Licensee pursuant to the Dengue License.
"Development Work" shall mean the research and development activities
to be performed by Licensor pursuant to an agreed-upon Research and Development
Program.
"Fields of Use" shall mean the JEV Field and the TBE Field, and "Field
of Use" shall mean one of them.
"Improvements" shall mean any improvements to the Licensed Product
which are first conceived, discovered or actually reduced to practice during and
after the performance of the Development Work under an agreed-upon Research and
Development Program.
"Intellectual Property" shall mean, collectively, Inventions and
Improvements.
"Inventions" shall mean any inventions, ideas, discoveries which are
first conceived, discovered or actually reduced to practice before, during and
after the performance of the Development Work under an agreed-upon Research and
Development Program and are related to a Licensed Product.
"JEV Field" means shall mean the development and commercialization of
JEV Vaccines.
"JEV Vaccine" shall mean a vaccine either therapeutically or
prophylactically active against Japanese encephalitis viruses that makes use of
Licensor's ChimeriVax technology for the creation of genetically engineered
live attenuated flavivirus vaccines from recombinant yellow fever 17D virus.
"Legal Requirements" shall mean all laws, statutes, ordinances, codes,
rules, regulations, published standards, permits, judgments, decrees, writs,
injunctions, rulings, orders and other requirements of all Public Authorities.
"Licensed Know-How" shall mean any biological materials, and any
research and development information, inventions, know-how, pre-clinical,
clinical and other technical data, in each case which are not generally known or
available, which are owned, licensed or otherwise held by Licensor with the
right to license or sublicense the same to Licensee as of the date hereof or at
any time hereafter and which are necessary or useful for the making, using or
selling of Licensed Products as provided in this Agreement.
"Licensed Product(s)" shall mean any product within the Fields of Use.
"Major Country" shall mean France, Germany, Italy, the United Kingdom
or the United States.
"Net Sales" shall mean the gross invoice price to Third Parties of any
Licensed Product, less: (i) retroactive price reductions and rebates customary
to the trade or required by law, credits for returns and allowances, all to the
extent actually allowed, (ii) sales or other excise taxes or duties imposed upon
and paid by Licensee, or any of its Affiliates or Permitted
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Sublicensees with respect to such sales, and (iii) transportation charges and
insurance for transportation to the extent separately invoiced or separately
reported on the invoice and paid by the Third Party. Notwithstanding the
foregoing, Net Sales shall not include sales between or among Affiliates for
resale by an Affiliate.
"Patent Rights" shall mean:
(a) all patents and patent applications owned or controlled by
Licensor, or licensed to Licensor with rights to grant sublicenses
thereunder, anywhere in the world as of the date hereof or at any time
hereafter relating to a Field of Use and which are (i) listed on
Schedule A, (ii) issued, assigned or licensed to Licensor at any time
hereafter and that are necessary or useful for the making, using or
selling of Licensed Products as provided in this Agreement, or (iii)
based on any Inventions that are necessary or useful for the making,
using or selling of Licensed Products as provided in this Agreement,
and
(b) any improvement patents, reissues, confirmations, renewals,
extensions, counterparts, divisions, continuations,
continuations-in-part or patent-of-addition issued, assigned or
licensed to Licensor of or relating to the patents or patent
applications described in clause (a) hereof.
"Permitted Sublicensee" shall mean any Affiliate of Licensee, and any
other Person approved in writing by Licensor prior to the granting of the
applicable sublicense.
"Person" shall mean any natural person, corporation, firm, business
trust, joint venture, association, organization, company, partnership or other
business entity, or any government, or any agency or political subdivision
thereof.
"Public Authority" shall mean any supranational, national, regional,
state or local government, court, governmental agency, authority, board, bureau,
instrumentality or regulatory body.
"Research and Development Program" shall have the meaning set forth in
Section 4.1(a).
"TBE Field" shall mean the development and commercialization of TBE
Vaccines.
"TBE Vaccines" shall mean a vaccine either therapeutically or
prophylactically active against tick-borne encephalitis viruses that makes use
of Licensor's ChimeriVax technology for the creation of genetically
engineered live attenuated flavivurus vaccines from recombinant yellow fever
17D virus.
"Technology" shall mean the Patent Rights and Licensed Know-How.
"Territory" shall mean all countries of the world.
"Third Party" shall mean any Person which is not a party or an
Affiliate of a party hereto.
"Valid Claim" shall mean a claim of an issued and unexpired patent
included within the Patent Rights that has not been held unenforceable or
invalid by a court or other governmental
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agency of competent jurisdiction in a final adjudication from which no appeal
can be taken and that has not been specifically admitted by the Licensor to be
invalid or unenforceable through statements or actions that legally bind the
Licensor to such admission.
ARTICLE 2
GRANT OF RIGHTS
2.1 LICENSE. Subject to the terms and conditions of this Agreement,
Licensor hereby grants to Licensee a right and license, with the right to grant
sublicenses, under the Technology to research, have researched, make, have made,
use, sell, distribute, import and export Licensed Products in the Territory,
which right and license shall be exclusive even as to Licensor; provided that
Licensor shall retain the right to research, have researched, make, have made
and use Licensed Products for all purposes unrelated to the commercialization of
Licensed Products.
2.2 EXCLUSIVITY. In order to assure Licensee of the exclusive rights
under the Technology to commercialize Licensed Products granted in Section 2.1
hereof, Licensor shall not itself sell, distribute, import or export Licensed
Products in the Territory or grant to a Third Party any rights or licenses to
research, have researched, make, have made, use, sell, distribute, import or
export Licensed Products in the Territory, except as provided by this Agreement
and for so long as the rights and licenses granted in Section 2.1 remain in
force pursuant to this Agreement.
2.3 SUBLICENSES.
(a) The rights granted under Section 2.1 may be sublicensed by
Licensee (or any Permitted Sublicensee) to any Permitted Sublicensee.
In the event that Licensee (or any Permitted Sublicensee) desires to
sublicense any rights granted under Section 2.1 to any Third Party,
Licensee shall furnish to Licensor for its approval, which shall not be
unreasonably withheld or delayed, a prior draft of the proposed
sublicense agreement, which shall be on substantially the same terms
(other than Section 3.3) as this Agreement and (y) provide Licensor
with an executed copy of any such approved sublicense agreement. In the
event that Licensee (or any Permitted Sublicensee) desires to amend any
sublicense agreement theretofore approved by Licensor, such amendment
shall similarly require Licensor's prior approval, which similarly
shall not be unreasonably withheld or delayed.
(b) Each sublicense agreement concluded by Licensee hereunder
shall include a requirement that the Permitted Sublicensee maintain
records and permit inspection on terms similar to those set forth in
Section 10.4 of this Agreement. At Licensor's request and subject to
the terms of the applicable sublicense agreement, Licensee shall
arrange for an independent public accountant selected by Licensor to
inspect the records of its Permitted Sublicensee(s) for the purpose of
verifying payments due to Licensor and shall cause such accountant to
report the results thereof to Licensor.
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(c) Each sublicense agreement concluded by Licensee hereunder will
include indemnification provisions similar to those set forth in
Section 8.3 hereof naming Licensee and Licensor (and their respective
officers, directors, employees and agents) as indemnified parties.
(d) All sublicenses granted hereunder shall terminate upon
termination of this Agreement; provided that upon expiration of the
Term pursuant to Section 5.1 hereof (prior to any termination
hereunder), Licensee (or the applicable Permitted Sublicensee) shall
have a fully paid-up, royalty-free, non-cancelable license, subject (in
the case of Licensee's Permitted Sublicensees) to the terms of the
applicable sublicense and the payment by Licensee of amounts accrued
prior to such expiration.
2.4 DISCLOSURE OF TECHNOLOGY. Promptly following the execution of this
Agreement, and periodically thereafter as such information becomes available to
Licensor, Licensor shall provide to Licensee copies of all information and
materials in tangible form related to the Technology that are reasonably
necessary to or useful in the researching, making, using, selling, distributing,
importing or exporting of Licensed Products. Without limiting the generality of
the foregoing, if at any time Licensee elects to manufacture a Licensed Product,
Licensor shall, upon notice from Licensee, transfer Licensed Know-How relating
to manufacturing of the Licensed Product to Licensee, together with seed stock
or other biological materials within the definition of Licensed Know-How.
ARTICLE 3
COMPENSATION
3.1 COMPENSATION FOR PAST RESEARCH AND DEVELOPMENT EXPENSES RELATING
TO LICENSOR'S TBE VACCINE KNOW-HOW. Subject to the following sentence,
Licensee shall pay to Licensor compensation of []* in respect of Licensor's
past research and development expenses relating to TBE Vaccine (the
"Reimbursement Payment"). In the event that the Licensee fails to make the
Reimbursement Payment when due, the license granted hereunder in respect of
TBE Vaccine shall terminate, but the license granted with respect to JEV
Vaccine shall continue in full force and effect. Any payment by Licensee
hereunder shall be made by Licensee by the later to occur of []*
3.2 MILESTONE FEES. Licensee shall pay to Licensor the amounts
specified below within []* following the accomplishment of the
corresponding events specified below (each, a "Milestone"):
(i) []*
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
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(ii) []*
(iii) []*
(iv) []*
(v) []*
(vi) []*
(vii) []*
(viii) []*
(ix) []*
(x) []*
The foregoing amounts shall be paid by Licensee (on behalf of itself,
its Affiliates and Permitted Sublicensees) only once.
3.3 ROYALTIES.
(A) ROYALTY RATES.
(i) Licensee shall pay Licensor a royalty of []* (the
"Patent Royalty") on quarterly Net Sales of Licensed Product by
Licensee, its Affiliates
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
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and Permitted Sublicensees in countries where at least one Valid
Claim exists during all periods of such existence. Such royalty
shall be payable on a country-by-country basis until the
expiration of the last remaining Valid Claim in any such country.
(ii) In the case of countries in which the Patent Rights
consist solely of patent applications, Licensee shall pay
Licensor the Patent Royalty on quarterly Net Sales of Licensed
Product by Licensee, its Affiliates and Permitted Sublicensees
in such countries until the first to occur of (A) issuance of a
Valid Claim (in which case subsection (i) above shall apply)
and (B) the conclusion of five continuous years after the date
of first commercial sale of Licensed Products in such country
during which the only existing Patent Rights in such country
were one or more patent applications (in which case the
following sentence shall apply. Upon the conclusion of five
continuous years after the date of first commercial sale of
Licensed Products in a country during which the only existing
Patent Rights in such country were one or more patent
applications, Licensee shall pay Licensor a royalty of []* (the
"Know-How Royalty") on quarterly Net Sales of Licensed Product
by Licensee, its Affiliates and Permitted Sublicensees in such
country for two additional years provided, however, that upon
issuance of a Valid Claim in such country at any time
thereafter, Licensee shall pay Licensor in accordance with
subsection (i) above.
(iii) Licensee shall pay Licensor the Know-How Royalty on
quarterly Net Sales of Licensed Product by Licensee, its
Affiliates and Permitted Sublicensees, in countries where no
Patent Rights exist and in countries where the only existing
Patent Rights have, for a period of five continuous years or
longer been patent applications, for a period of seven (7)
years from the date of first commercial sale of Licensed
Product in such country; PROVIDED, HOWEVER, that if at any time
thereafter Patent Rights come to exist in any such country,
Licensee shall pay royalties to Licensor in accordance with
subsection (i) or (ii) above as appropriate. In no event shall
the Know-How Royalty be payable in respect of any Net Sales
upon which the Patent Royalty is payable.
(B) REDUCTION FOR THIRD PARTY ROYALTIES. In the event that
Licensee, its Affiliate(s) or Permitted Sublicensee(s), in its
reasonable judgment, determines it to be necessary or desirable to
license in Third Party patents or technology relating to the Licensed
Product and is required to pay royalties to one or more Third Parties
in respect of such patents or technology (that in the absence of such
royalty payments would be infringed by the researching, making, using,
selling, distributing, importing or exporting of the applicable
Licensed Product) in order to enable Licensee, such Affiliate or such
Permitted Sublicensee to realize Net Sales, then the royalties
otherwise payable to Licensor in respect of such Net Sales shall be
reduced by []* the royalties paid to such Third Parties;
provided, however, that in no event shall such reduction exceed
[]* of the royalties on such Net Sales otherwise due to Licensor.
(C) RIGHT TO CURE CERTAIN THIRD PARTY OBLIGATIONS; OFFSET.
Licensee acknowledges that the patent applications set forth on
Schedule A hereto are co-owned
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
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by Licensor with St. Louis University, in accordance with the
agreement attached hereto as Schedule B. In the event that
Licensor defaults on its obligations under the agreement attached
hereto as Schedule B, Licensor shall promptly notify Licensee of
such default and shall, at Licensee's request, cooperate with
Licensee to enable Licensee to cure such breach on behalf of
Licensor. Licensee shall be entitled to deduct from the royalties
otherwise payable to Licensor in respect of Net Sales hereunder
all royalties and other expenses incurred under this Section
3.3(c) that are reasonably necessary to ensure that Licensee's
rights under this Agreement are not compromised by such default.
3.4 FUNDING OF RESEARCH AND DEVELOPMENT PROGRAM. The parties agree that
Licensee shall be responsible for funding all research and development costs
with respect to the Licensed Products. With respect to JEV Vaccine, Licensee
shall reimburse Licensor for the Development Costs, including the development
program costs for the JEV Vaccine development program to be carried out by
Licensor through the completion of a Phase I clinical study in adults, in
accordance with the Dengue License. Such JEV Vaccine development program shall
otherwise be conducted and managed consistent with Article 4 hereof. In the
event that Licensee wishes to continue to fund further Development Work, such
further funding shall be made in accordance with the provisions of Article 4
hereof.
3.5 SINGLE ROYALTY; NON-ROYALTY SALES. It is understood that in no
event shall more than one royalty be payable under Section 3.3 with respect to a
particular unit of Licensed Product. No royalty shall be payable under this
Article 3 with respect to sales of Licensed Products among Licensee, its
Affiliates, Permitted Sublicensees and their Affiliates (provided that such
sales are for the purpose of facilitating resales to Third Parties), but a
royalty shall be due upon the subsequent sale of the Licensed Product to a Third
Party. No royalty shall be payable for (i) Licensed Product used in clinical
trials, or (ii) Licensed Product used by Licensee, its Affiliates or Permitted
Sublicensees for research, or (iii) customary quantities of Licensed Product
distributed as free samples.
ARTICLE 4
RESEARCH AND DEVELOPMENT
4.1 RESEARCH AND DEVELOPMENT PROGRAM.
(A) GENERAL. In the event that Licensee so requests, and subject
to agreement by the parties hereto on the research and development
program to be conducted in respect of any Licensed Product (each, a
"Research and Development Program"), Licensor agrees to perform or have
performed for the Licensee the Development Work set forth in any such
Research and Development Program, and Licensee hereby agrees to fund
the Research and Development Program in accordance with the terms and
conditions set forth below. Such research and development programs
shall be generally consistent with the programs established by the
parties for JEV Vaccines and Dengue Vaccines except as may be modified
to account for any differences in the technology of such Licensed
Product. Without limiting the generality of the foregoing, the parties
agree that upon the reasonable request of Licensee (subject to Section
9.1 hereof), Licensor shall prepare
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<PAGE>
clinical constructs in respect of TBE Vaccine, provided that the
parties can agree on the budget therefor (including the number of and
costs of the FTE's assigned to the project).
(B) SUBCONTRACTING. Licensor may subcontract any or all of its
obligations under this Article 4, subject to obtaining the prior
written consent of Licensee, which consent shall not be unreasonably
withheld. In the event that Licensor desires to subcontract any
material part of its obligations under this Article 4 to any Third
Party, Licensor shall (x) furnish to Licensee for its approval a prior
draft of the proposed subcontract agreement, which shall be in form and
substance satisfactory to Licensee, (y) provide Licensee with an
executed copy of any such approved subcontract agreement, and (z) keep
Licensee informed of the status of any such subcontracting
arrangements. In the event that Licensor desires to amend any
subcontract agreement theretofore approved by Licensee, such amendment
shall similarly require Licensee's prior approval. No such subcontract
shall relieve Licensor of its obligations under this Agreement.
(C) RESEARCH AND DEVELOPMENT COMMITTEE, PRINCIPAL INVESTIGATOR.
The Development Work (if any) shall be performed under the supervision
and direction of the Principal Investigator who shall be an employee of
Licensor and shall be chosen by the Research and Development Committee.
The Research and Development Committee shall consist of three
individuals nominated by Licensor and three individuals nominated by
Licensee. The Research and Development Committee shall review the
progress of the Development Work and will approve or reject material
changes to the Development Work plan. The Research and Development
Committee can change its number of members (maintaining equal
representation of both Licensee and Licensor) and its membership upon
the decision of a majority of its members. The Research and Development
Committee shall survive the term of the Research and Development
Program in an advisory role until a time mutually agreeable to Licensee
and Licensor or, in the absence of mutual agreement, until one year
following product licensure of a Licensed Product in a Major Country.
The members of the Research and Development Committee shall be senior
executives from the various research and development disciplines of
Licensor and Licensee. The initial members of the Research and
Development Committee are indicated in Appendix A hereto.
(D) REPLACEMENT OF PRINCIPAL INVESTIGATOR. In the event that the
Principal Investigator is unwilling or unable to perform his or her
duties hereunder, Licensor shall promptly appoint a successor mutually
agreeable to the parties.
(E) REPORTS. The Principal Investigator shall provide written
progress reports, summarizing in reasonable detail the current status
and progress of each Research and Development Program (i) within thirty
(30) days after the end of each calendar quarter and (ii) as soon as
practicable whenever, in the Principal Investigator's judgment, an
Invention has been created or reduced to practice.
(F) VISITATION. Duly authorized representatives of Licensee shall
have the right at reasonable times and upon reasonable notice to visit
the facilities where any Development Work is being performed in order
to monitor progress of the Development Work.
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4.2 FUNDING.
(A) GENERAL. Licensor shall provide (or cause to be provided)
to Licensee, prior to the beginning of each quarter in which
Development Work is to be performed in accordance with a Research
and Development Plan, an invoice setting forth the projected
Development Costs to be incurred for such quarter in accordance with
any Research and Development Program. Licensee shall pay such
invoice within thirty (30) days of receipt thereof to the extent
that such Development Costs are included in the Research and
Development Plan (as modified from time to time by the Research and
Development Committee). Licensor hereby covenants and agrees that
any funding provided to Licensor under this Section 4.2 shall be
used as contemplated by the applicable Research and Development
Program. Services provided by Licensor at Licensee's request that
are outside the scope of a Research and Development Program shall be
separately invoiced by Licensor and separately funded by Licensee on
the basis for determining costs set forth in Appendix A hereto.
(B) RECONCILIATION. Within thirty (30) days after the end of
each quarter in which Development Work is performed in accordance
with a Research and Development Plan, Licensor shall provide (or
cause to be provided) to Licensee a statement reconciling the
projected Development Costs previously paid by Licensee for such
quarter against the actual Development Costs incurred by Licensor
for such quarter. In the event that such reconciliation demonstrates
that such previous payment exceeded such actual Development Costs,
Licensee shall be entitled to recoup the excess from Licensor. In
the event that such reconciliation demonstrates that such actual
Development Costs exceeded such previous payment, Licensor shall be
entitled to reimbursement of the excess from Licensee. At the option
of the party to whom any such adjustment is owed, such excess shall
be paid to such party by the other party within thirty (30) days
after such statement is provided or an appropriate adjustment shall
be made to the next invoice provided to Licensee setting forth
projected Development Costs (in which case such adjustment shall be
subtracted from or added to actual Development Costs, as
appropriate, for purposes of the subsequent reconciliation relating
to the quarter to which such invoice relates).
(C) COST OF COMPONENTS. Any component that, by mutual agreement of
Licensee and Licensor, is supplied by Licensee to Licensor in
connection with the Development Work to performed hereunder shall be
supplied to Licensor at no cost.
4.3 SUBLICENSE AND LICENSE.
(a) In the event that, and for so long as, any Research and Development
Program is on-going, Licensee hereby grants to Licensor a fully paid,
non-exclusive, royalty-free sublicense, with the right to grant sublicenses
(subject to Section 4.1(b) hereof), under the rights and licenses granted
pursuant to Section 2.1 above to research, develop, make and have made the
applicable Licensed Product in the Territory solely for the purposes of
performing the Development Work pursuant to the applicable Research and
Development Program.
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(b) In the event that, and for so long as, any Research and Development
Program is on-going, Licensee hereby grants to Licensor a fully paid,
non-exclusive, royalty-free license, with the right to grant sublicenses
(subject to Section 4.1(b) hereof), under the Intellectual Property owned by
Licensee as specified in Sections 4.4(d) and 4.4(e) hereof to research, develop,
make and have made the applicable Licensed Products in the Territory solely for
the purposes of performing the Development Work pursuant to the applicable
Research and Development Program.
4.4 OWNERSHIP OF INVENTIONS AND IMPROVEMENTS.
(a) All Intellectual Property developed solely by Licensor
pursuant to a Research and Development Program shall be owned solely by
Licensor, and such Intellectual Property shall be deemed to be included
in the Technology.
(b) All Intellectual Property developed jointly by Licensor and
Licensee pursuant to a Research and Development Program and solely
relating to a Licensed Product shall be owned jointly by the parties
and Licensee shall have an exclusive right and license to Licensor's
interest in such Intellectual Property pursuant to Section 2.1 above.
(c) All Intellectual Property developed jointly by Licensor and
Licensee pursuant to the Research and Development Program and not
solely relating to a Licensed Product shall be owned jointly by the
parties and both parties shall have the right to use and exploit such
Intellectual Property freely without accounting to one another for such
use and exploitation.
(d) All Intellectual Property developed solely by Licensee
pursuant to a Research and Development Program and solely relating to a
Licensed Product shall be owned solely by Licensee.
(e) All Intellectual Property developed solely by Licensee and
which is not solely related to a Licensed Product shall be owned by
Licensee. The parties shall, at Licensor's request, enter into good
faith negotiations for a grant of licenses to such Intellectual
Property from Licensee to Licensor for use outside of the Fields of
Use.
(f) Licensor agrees to include provisions assuring Licensee's
rights under this Section 4.4 in every sublicense granted pursuant to
Section 4.3 above.
4.5 DISPUTE RESOLUTION.
(a) The parties agree to use their best efforts to resolve
amicably any deadlock between the parties or their respective
representatives, with respect to any scientific matter and will not
take any action inconsistent therewith. The resolution of any deadlock
pursuant to this Section 4.5 shall be binding on the parties for all
purposes.
(b) In the event that the parties or their respective
representatives are deadlocked concerning any scientific matter, the
parties shall thereupon consult with each other in good faith on a
regular basis (including at least one meeting between the Chief
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Scientific Officer of Licensor and the Chief Scientific Officer of
Licensee for their consideration and resolution, and if no decision is
then reached, at least one meeting between the Chief Executive Officer
of Licensor and the Chief Executive Officer of Licensee) to attempt to
resolve such matters as promptly as practicable and each party hereby
agrees to use its best efforts to schedule such meetings within sixty
(60) days after the occurrence of the deadlock.
(c) In the event that, following the aforementioned consultations,
the parties remain deadlocked regarding any scientific matter, such
deadlock shall be referred, at the election of either party and by
notice in writing to the other party, to a panel of scientific
mediators as provided in this paragraph (c) ("Scientific Mediation").
In any Scientific Mediation, there shall be three scientific experts in
the pharmaceuticals area (without regard to nationality) who shall act
as the mediators (the "Scientific Mediators"). The party requesting
Scientific Mediation shall appoint one individual to serve as one of
the Scientific Mediators, and shall notify the other party of such
appointment in the aforementioned notice. Within fifteen (15) days
after receipt of such notice, the other party shall appoint one
individual to serve as a Scientific Mediator, but if the other party
shall fail to make such appointment within such period, such party may
request the Swedish Arbitration Committee of the ICC to make such
appointment. The two Scientific Mediators shall, within fifteen (15)
days of the appointment of the second Scientific Mediator appoint a
third individual to serve as a Scientific Mediator and chairperson of
the mediation board, but if the two Scientific Mediators shall fail to
make such appointment within such period, then such party or the other
party may request the Swedish Arbitration Committee of the ICC to make
such appointment. No Confidential Information shall be disclosed to
such Scientific Mediators unless and until each such Scientific
Mediator has entered into a confidentiality agreement, in form and
substance satisfactory to both parties. The Scientific Mediators shall
be advised of the positions taken by each of the parties to such
mediation and shall work with them in an effort to resolve the
scientific deadlock within sixty (60) days after the appointment of the
third Scientific Mediator. If the scientific deadlock is not resolved
within such period, there shall be no further Scientific Mediation, but
the Chief Executive Officer of Licensor and the Chief Executive Officer
of Licensee shall consult one more time in an effort to resolve the
deadlock.
ARTICLE 5
TERM AND TERMINATION
5.1 TERM. This Agreement shall become effective as of the date
hereof and, subject to the other provisions of this Article 5, shall continue
in full force and effect on a country-by-country basis until the later of (a)
the date on which no Valid Claim exists in such country, or (b) ten (10)
years from the date of the first commercial sale of a Licensed Product in
such country (or such other period, not to exceed ten (10) years from first
commercial sale of such product, as may be permissible under the applicable
law of any country in which such product is sold) (the "Term"). Upon the
expiration of the Term on a country-by-country basis, Licensee will have a
fully paid, royalty-free, freely sublicensable license to make, have made,
use, sell, distribute, import and export Licensed Products in each such
country, and Licensee
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shall have no further payment obligation to Licensor, other than for payments
that accrue prior to such expiration, for milestone payments that may accrue
after such expiration and for Development Costs that may be incurred after such
expiration.
5.2 TERMINATION FOR BREACH. In the event of a material breach of this
Agreement (including the breach of a representation or warranty), which breach
is not cured within sixty (60) days after written notice is given by the
non-breaching party to the breaching party specifying the breach, the
non-breaching party, in addition to any other remedy which it may have, shall be
entitled to terminate this Agreement.
5.3 OPTIONAL TERMINATION BY LICENSEE. Licensee may terminate this
Agreement at any time by giving Licensor at least ninety (90) days prior
written notice.
5.4 TERMINATION STANDSTILL. Notwithstanding anything to the contrary
contained herein, Licensee may not terminate this Agreement for any reason
before the earlier of (i) June 30, 2000 or (ii) the completion of the Phase I
JEV Vaccine clinical trial demonstrating safety and seroconversion, as set
forth in the Research and Development Program in respect thereof, all as
described in and pursuant to, the Dengue License.
5.5 RIGHTS ON TERMINATION.
(a) In the event that this Agreement is terminated pursuant to
Section 5.2 due to a material breach by Licensor, (i) the rights and
licenses granted to Licensee in Section 2.1 hereof shall remain in
effect, subject to Licensee's payment of []* of the royalties and []*
of the milestone payments that that would otherwise accrue after such
termination, (ii) the rights and licenses granted to Licensor in
Section 4.3 shall terminate, (iii) subject to Article 7 hereof, any
Confidential Information provided to Licensor in tangible form shall be
promptly returned to Licensee or destroyed, at Licensee's option and
(iv) Licensee shall have the rights set forth in Section 8.3 in respect
of such breach.
(b) In the event that this Agreement is terminated pursuant to
Section 5.2 due to a material breach by Licensee, (i) all licenses
granted hereunder, except the license granted to Licensor pursuant to
Section 4.3(b), shall terminate, (ii) the license granted to Licensor
pursuant to Section 4.3(b) shall be []* (iii) subject to Article 7
hereof, any Confidential Information and Licensed Know-How provided
to Licensee in tangible form shall be promptly returned to Licensor
or destroyed, at Licensor's option, and (iv) Licensor shall have the
rights set forth in Section 8.3 in respect of such breach.
(c) In the event that this Agreement is terminated pursuant to
Section 5.3 at Licensee's option, (i) all licenses granted hereunder,
except the license granted to Licensor pursuant to Section 4.3(b),
shall terminate, (ii) the license granted to Licensor pursuant to
Section 4.3(b) shall be []* (iii) subject to Article 7 hereof, any
Confidential Information and Licensed Know-How provided to Licensee in
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tangible form shall be promptly returned to Licensor or destroyed, at
Licensor's option, and (iv) Licensor and Licensee shall negotiate in
good faith a percentage royalty to be paid by Licensor to Licensee,
based upon the commercialization of Licensed Products subsequently
undertaken by Licensor, that compensates Licensee for Licensor's
exploitation of Intellectual Property developed during the course of a
Research and Development Program using Licensee's funding at a level
commensurate with the level of royalties Licensor pays to Third Parties
in arm's-length transactions for licenses of intellectual property with
similar commercial value.
(d) In the event that a Research and Development Program is
terminated by Licensee prior to the completion of its term for any
reason, Licensee shall, in addition to any other payments due
hereunder, make a payment equal to the budgeted Development Costs
set forth in the Development Plan for the three (3) month period
following the termination date. Also in the event of such
termination, Licensor shall, and shall cause its employees, agents
and subcontractors (including, without limitation, the Principal
Investigator) performing any Development Work to, wind up as
expeditiously as possible all Development Work that is in progress
at the date of such termination. Following such termination and
winding up, Licensor shall submit to Licensee a final invoice
setting forth the three months' budgeted Development Costs and the
Development Costs (including the winding up costs) associated with
Development Work performed by Licensor (or its subcontractor)
through such termination and winding up and Licensee shall pay such
final invoice within thirty (30) days to the extent that the
budgeted Development Costs and the Development Costs were included
in the Development Plan and the costs of winding up are reasonable
and directly related to the winding up of the Development Work.
(e) In the event Licensee terminates this Agreement, all rights to
Intellectual Property owned jointly pursuant to Section 4.4(c) shall
remain the property of both Licensor and Licensee with divided control
and the parties shall enter into good faith negotiations for the grant
of an exclusive right and license to Licensee's interest in such
Intellectual Property from Licensee to Licensor. In the event of
Licensee's termination of this Agreement, the parties shall also enter
into good faith negotiations for the grant of a license to Intellectual
Property owned by Licensee pursuant to Section 4.4(d) from Licensee to
Licensor.
(f) Articles 7 and 11, and Sections 2.3, 5.1, 5.4, 5.5, 5.6, 8.3,
10.3 and 10.4, shall survive the expiration and any termination of this
Agreement. Except as otherwise provided in this Section 5.5(f), all
rights and obligations of the parties under this Agreement shall
terminate upon the expiration or termination of this Agreement.
(g) Termination of this Agreement for any reason shall not release
either party hereto from any liability which at the time of such
termination has already accrued to the other party.
5.6 In the event that Licensee terminates this Agreement for any
reason, and Licensee decides to continue the development of a Japanese
encephalitis vaccine or a tick-borne encephalitis vaccine other than a Licensed
Product, Licensee shall in good faith, but with no
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legal obligation, consider maintaining a collaborative relationship with
Licensor relating to such development.
5.7 Subject to applicable law to the contrary, Licensee or Licensor may
terminate this Agreement upon written notice to the other party if the other
party makes a general assignment for the benefit of creditors, is the subject of
proceedings in voluntary or involuntary bankruptcy or has a receiver or trustee
appointed for substantially all of its property; provided that in the case of an
involuntary bankruptcy proceeding such right to terminate shall only become
effective if the other party consents thereto or such proceeding is not
dismissed within sixty (60) days after the filing thereof. Each of the parties
hereto acknowledges and agrees, subject to applicable law to the contrary, that
this Agreement (i) constitutes a license of Intellectual Property (as such term
is defined in the United States Bankruptcy Code, as amended (the "Code")), and
(ii) is an executory contract, with significant obligations to be performed by
each party hereto. The parties agree that Licensee may fully exercise all of its
rights and elections under the Code, if any, including, without limitation,
those set forth in Section 365(n) of the Code. The parties further agree that,
in the event that Licensee retains its rights as a licensee under the Code
pursuant to such an exercise, Licensee shall be entitled to complete access to
any technology licensed to it hereunder and all embodiments of such technology.
Subject to applicable law to the contrary, such embodiments of the technology
shall be delivered to Licensee not later than (a) the commencement of bankruptcy
proceedings against Licensor, unless Licensor elects to perform its obligations
under this Agreement, or (b) if not delivered under (a) above, upon the
rejection of this Agreement by or on behalf of Licensor.
ARTICLE 6
PATENTS AND INFRINGEMENTS
6.1 PURSUIT AND MAINTENANCE OF PATENT RIGHTS. Licensor shall, at its
own expense, file, prosecute and maintain Patent Rights. Licensor agrees to keep
Licensee informed as to the status of the Patent Rights and shall provide
Licensee with copies of all filings and correspondence of a substantive nature
with respect to patents or patent applications relating to the Patent Rights to
be made or sent to the United States Patent and Trademark Office or its
counterpart in any country of the Territory and copies of all correspondence of
a substantive nature that Licensor receives from such Persons with respect to
the Patent Rights. In the event that Licensor chooses not to prosecute a patent
in the Territory in the case of certain Intellectual Property or chooses not to
prosecute a patent in a certain country in the Territory that is based upon the
same patentable subject matter upon which Patent Rights are based, then Licensee
shall be entitled to prosecute such patent and Licensor shall reasonably
cooperate with Licensee in such prosecution; provided however that the
prosecution by Licensee of any patent pursuant to this Section shall not create
any ownership interest in such Intellectual Property or in such patentable
subject matter by Licensee that Licensee would not otherwise have hereunder.
6.2 NOTICE OF INFRINGEMENT. Each party shall promptly notify the other
of any conflicting use or any act of infringement or appropriation of any Patent
Right by unauthorized Persons which comes to its attention.
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6.3 ENFORCEMENT AND DEFENSE. Upon becoming aware of a conflicting use
or an act of infringement, and communicating about the same pursuant to Section
6.2 above, Licensee shall discuss with Licensor the nature of and circumstances
surrounding such conflicting use or act of infringement. Subject to the consent
of Licensor, which consent shall not be unreasonably withheld, Licensee shall
thereafter, at its own expense, have the right but not the obligation to
initiate actions and take steps relating to such conflicting use or act of
infringement. Licensee may settle any dispute with a Third Party regarding such
conflicting use or act of infringement; provided that Licensee shall not have
the right to settle, compromise or take any action in any dispute which
diminishes, limits or inhibits the scope, validity or enforceability of the
Patent Rights without the express written consent of Licensor. In the event that
Licensee exercises its rights under this Section 6.3, Licensee agrees to keep
Licensor fully informed of all developments in connection with any settlements
and negotiations and to consult with Licensor prior to making any final
settlement, consent judgment or other voluntary disposition of the matter. If
Licensee chooses not to take or continue any action or step relating to such
conflicting use or act of infringement, Licensor shall have the right to engage
in negotiations and proceedings relating to such conflicting use or act of
infringement solely at its own expense; provided that it keeps Licensee fully
informed of the progress of such negotiations and proceedings and consults with
Licensee prior to making any final settlement, consent judgment or other
voluntary disposition of the matter. Each party agrees to cooperate with the
other to the fullest extent possible with respect to any negotiations or
proceedings under this Section 6.3.
6.4 EQUITABLE DIVISION OF RECOVERIES BY LICENSEE. In the event that
Licensee elects to initiate actions or take steps relating to a conflicting use
or act of infringement pursuant to Section 6.3 above, and Licensee is thereby
able to recover from a Third Party by settlement or otherwise any damages or
other compensation in respect of such conflicting use or act of infringement,
such damages and other compensation shall be divided equitably between Licensee
and Licensor in a manner commensurate with the division of economic benefits
relating to sales of Licensed Products contemplated by this Agreement.
ARTICLE 7
CONFIDENTIALITY
7.1 Except as expressly set forth in this Article 7, each party shall,
and shall cause its Affiliates and its and their respective officers, directors,
employees, agents and subcontractors (collectively, "Representatives") to, keep
confidential any and all technical, commercial, scientific and other proprietary
data, processes, documents or other information (whether in oral, written or
electronic form) or physical object (including, without limitation, intellectual
property, marketing data, agreements between any party and a Third Party,
license applications, and business plans and projections of any party) acquired
from the other party, its Affiliates or any of their respective Representatives
in respect of the transactions contemplated by this Agreement and which relate
(in the case of a party) to the other party or any of its Affiliates or their
respective businesses or products ("Confidential Information"), and each party
shall not disclose directly or indirectly, and shall cause its respective
Affiliates and Representatives not to disclose directly or indirectly, any
Confidential Information to anyone outside such Person, such Affiliates and
their respective Representatives, except that the
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foregoing restriction shall not apply to any information disclosed hereunder to
any Person if such Person (the "Receiving Person") can demonstrate that such
Confidential Information:
(a) is or hereafter becomes generally available to the trade or
public other than by reason of any breach hereof;
(b) was already known to the Receiving Person or such Affiliate or
Representative as shown by written records;
(c) is disclosed to the Receiving Person or such Affiliate or
Representative by a third party who has the right to disclose such
information;
(d) is developed by or on behalf of the Receiving Person or any of
its Affiliates independently, without reliance on Confidential
Information received hereunder; or
(e) is, based on such Person's good faith judgment with the advice
of counsel, otherwise required to be disclosed in compliance with
applicable Legal Requirements by a Public Authority (and, in such case,
such information shall remain Confidential Information for all other
purposes unless and until subparagraphs (a) through (d) above otherwise
apply).
7.2 Except in furtherance of their respective rights and obligations
hereunder, each party agrees that it shall not (and shall not permit any of its
Affiliates to) at any time use any Confidential Information in the conduct of
its businesses without the prior written consent of the other party. The
obligations set forth in this Article 7 shall extend to copies, if any, of
Confidential Information made by any of the Persons referred to in Section 7.1
and to documents prepared by such Persons which embody or contain Confidential
Information, and to any electronic data files containing Confidential
Information.
7.3 Each party shall deal with Confidential Information so as to
protect it from disclosure with a degree of care not less than that used by it
in dealing with its own information intended to remain exclusively within its
knowledge and shall take reasonable steps to minimize the risk of disclosure of
Confidential Information.
7.4 The obligations set forth in this Article 7 shall survive the
expiration, termination or assignment of this Agreement for a period of
fifteen (15) years thereafter.
7.5 Within thirty (30) days after the termination of this Agreement,
any Receiving Person shall (and shall cause its Affiliates and Representatives
to), at the option of the person making disclosure (the "Disclosing Person"),
return to the Disclosing Person or destroy all Confidential Information in its
or their possession; provided, however, that the Receiving Person may, upon
notice to the Disclosing Person, retain in its legal files or in the office of
outside legal counsel one copy of any document solely for use in legal
proceedings to which such document relates and for archival purposes. Such
notice shall set forth, in reasonable detail, a list of the documents so
retained.
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7.6 Licensor agrees to use reasonable efforts to protect the
confidentiality, if applicable, of Technology that it licenses outside the Field
of Use in a manner commensurate with the manner in which such confidentiality is
protected hereunder.
ARTICLE 8
REPRESENTATIONS, WARRANTIES AND COVENANTS
8.1 Representations and Warranties of Licensee.
(a) Licensee is a corporation duly incorporated and validly
existing and (to the extent applicable) in good standing under the laws
of its jurisdiction of organization, with the corporate power to own,
lease and operate its properties and to carry on its business as now
conducted.
(b) Licensee has all necessary corporate power and authority to
enter into this Agreement and to consummate the transactions
contemplated hereby.
(c) The execution, delivery and performance of this Agreement by
License does not conflict with or contravene the articles or
certificate of incorporation or by-laws, regulations or partnership
agreement (or other comparable governing instruments with different
names) of Licensee, nor will the execution, delivery or performance of
this Agreement conflict with or result in a breach of, or entitle any
party thereto to terminate, any material agreement or instrument to
which Licensee is a party, or by which any of its assets or properties
is bound.
(d) This Agreement has been duly authorized, executed and
delivered by Licensee and constitutes a legal, valid and binding
agreement of Licensee, enforceable against Licensee in accordance with
its terms, except as enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization or other similar laws affecting
creditors' rights generally.
8.2 REPRESENTATIONS, WARRANTIES AND COVENANTS OF LICENSOR.
(a) Licensor is a corporation duly incorporated and validly
existing as a corporation and in good standing under the laws of the
State of Delaware, with the corporate power to own, lease and operate
its properties and to carry on its business as now conducted.
(b) Licensor has all necessary corporate power and authority to
enter into this Agreement and to consummate the transactions
contemplated hereby.
(c) The execution, delivery and performance of this Agreement by
Licensor does not conflict with or contravene its certificate of
incorporation or by-laws, nor will the execution, delivery or
performance of this Agreement conflict with or result in a breach of,
or entitle any party thereto to terminate, any material agreement or
instrument to which Licensor is a party, or by which any of its assets
or properties is bound. No Third Party has any right, title or interest
in or to any Technology in the Fields of Use.
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(d) This Agreement has been duly authorized, executed and
delivered by Licensor and constitutes a legal, valid and binding
agreement of Licensor, enforceable against Licensor in accordance with
its terms, except as enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization or other similar laws affecting
creditors' rights generally.
(e) Licensor owns or has rights to use and exploit under licenses
(and to license or sublicense) all of its rights under the Technology.
There have been no material claims made against Licensor asserting the
invalidity or unenforceability of, or with respect to the Patent
Rights, the misuse of, the Patent Rights or Licensed Know-How, nor is
Licensor aware that any such claims exist. Licensor has not received a
notice of conflict of the Technology with the asserted rights of
others, or otherwise challenging its rights to use any of the
Technology. None of the rights of Licensor under the Patent Rights or
Licensed Know-How will be adversely affected by the execution, delivery
or performance of this Agreement, or the consummation of the
transactions contemplated herein.
(f) Licensor has not filed for protection under the United States
Bankruptcy Code, as amended (the "Code"), nor does it have any
intention of doing so. No Third Party has filed or commenced, nor to
the knowledge of Licensor has any Third Party threatened to file or
commence, a proceeding under the Code against Licensor.
8.3 INDEMNIFICATION.
(A) INDEMNITY BY LICENSEE. Licensee hereby agrees to indemnify,
defend and hold harmless Licensor, its officers, directors,
employees and agents from and against any liabilities, claims,
damages, costs, expenses (including reasonable attorneys' fees),
judgments payable or incurred in respect of claims by or claims
asserted or threatened by Third Parties (collectively, "Damages")
arising out of, based upon or resulting from (i) the development,
manufacture, sale or use of any Licensed Product, (ii) a breach of
this Agreement (including the breach of a representation or
warranty) by Licensee, or (iii) the negligence or willful misconduct
of Licensee, except to the extent that in any case any such Damages
arise out of, are based upon or result from (i) a breach of this
Agreement (including the breach of a representation or warranty) by
Licensor, or (ii) the negligence or willful misconduct of Licensor.
(B) INDEMNITY BY LICENSOR. Licensor hereby agrees to indemnify,
defend and hold harmless Licensee, its officers, directors,
employees and agents from and against any Damages arising out of,
based upon or resulting from (i) a breach of this Agreement
(including the breach of a representation or warranty) by Licensor,
or (ii) the negligence or willful misconduct of Licensor, except to
the extent that in either case any such Damages arise out of, are
based upon or result from (i) a breach of this Agreement (including
the breach of a representation or warranty) by Licensee, or (ii) the
negligence or willful misconduct of Licensee.
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(C) INDEMNIFICATION PROCEDURES.
(i) Any party entitled to indemnification under paragraph (a)
or (b) of this Section 8.3 (an "Indemnified Party") shall promptly
notify the party potentially responsible for such indemnification
(the "Indemnifying Party") upon becoming aware of any claim or
claims asserted or threatened against such Indemnified Party which
could give rise to a right of indemnification under this
Agreement; PROVIDED, HOWEVER, that the failure to give such notice
shall not relieve the Indemnifying Party of its indemnity
obligation hereunder except to the extent that such failure
prejudices its rights hereunder.
(ii) the Indemnifying Party shall have the right to
defend, at its sole cost and expense, such claim by all
appropriate proceedings, which proceedings shall be prosecuted
diligently by the Indemnifying Party to a final conclusion or
settled at the discretion of the Indemnifying Party; PROVIDED,
HOWEVER, that the Indemnifying Party may not enter into any
compromise or settlement unless (x) the Indemnified Party
consents thereto, which consent shall not be unreasonably
withheld, or (y) such compromise or settlement includes as an
unconditional term thereof the giving by each claimant or
plaintiff to the Indemnified Party of a release from all
liability in respect of such claim.
(iii) The Indemnified Party may participate in, but not
control, any defense or settlement of any claim by the
Indemnifying Party pursuant to this Section 8.3 and shall bear its
own costs and expenses with respect to such participation;
PROVIDED, HOWEVER, that the Indemnifying Party shall bear such
costs and expenses if counsel for the Indemnifying Party shall
have reasonably determined that such counsel may not properly
represent both the Indemnifying Party and the Indemnified Party.
(iv) If the Indemnifying Party fails to notify the
Indemnified Party within twenty (20) days after receipt of notice
of a claim in accordance with Section 8.3(c)(i) hereof that it
elects to defend the Indemnified Party pursuant to this Section
8.3(c), or if the Indemnifying Party elects to defend the
Indemnified Party but fails to prosecute or settle the claim
diligently, then the Indemnified Party shall have the right to
defend, at the sole cost and expense of the Indemnifying Party,
the claim by all appropriate proceedings, which proceedings shall
be diligently prosecuted by the Indemnified Party to a final
conclusion or settled; PROVIDED, HOWEVER, that in no event shall
the Indemnifying Party be required to indemnify the Indemnified
Party for any amount paid or payable by the Indemnified Party in
the settlement of any such claim agreed to without the consent of
the Indemnifying Party, which shall not be unreasonably withheld.
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ARTICLE 9
DILIGENCE IN COMMERCIALIZING LICENSED PRODUCTS
9.1 GENERAL. Licensee shall use commercially reasonable efforts to
promptly and fully research, develop, register, market and sell and to continue
to market and sell Licensed Product in each country in which Licensee reasonably
determines that there is a market potential for such Licensed Product.
9.2 NOTIFICATION. Licensee shall promptly notify Licensor in writing if
at any time Licensee ceases to promptly and fully research, develop and/or
obtain regulatory approval for and/or market and sell a Licensed Product in any
country.
9.3 REVERSION OF RIGHTS TO LICENSOR. If, at any time subsequent to the
payment of the Reimbursement Payments, Licensee fails to use commercially
reasonable efforts to promptly and fully research, develop, register, market and
sell and to continue to market and sell Licensed Product in any country, the
rights and licenses granted to Licensee with respect to such country shall
terminate, upon [ ]* days prior written notice to Licensee from Licensor,
subject to Licensee's right to reestablish in good faith its efforts pursuant to
Section 9.1 above with respect to such country within such [ ]* period.
ARTICLE 10
ACCOUNTING AND RECORDS
10.1 REPORTS. Licensee agrees to make quarterly written reports to
Licensor within ninety (90) days after the end of each calendar quarter in which
royalties are due under this Agreement, stating in each such report with respect
to Licensed Products, the number, description, and aggregate Net Sales of
Licensed Products sold during the calendar quarter and upon which a royalty is
payable under Article 3 above.
10.2 PAYMENT. Concurrently with the making of each such report of
Section 10.1, Licensee shall pay to Licensor the royalties at the rate specified
in Section 3.3, if any such royalties are due. All payments by Licensee to
Licensor hereunder shall be made in United States dollars. If any currency
conversion shall be required in connection with the calculation of royalties or
the payment of other compensation hereunder, such conversion shall be made by
using the rate of exchange published in The Wall Street Journal for the last
business day of the applicable calendar quarter.
10.3 WITHHOLDING TAXES. The payments referred to in Article 3 above
shall be net of all withholding taxes and other taxes that Licensee or any of
its Affiliates are required by law to withhold or pay; PROVIDED, HOWEVER, that
if, in regard to any withholding tax paid by Licensee, Licensor is able to
realize a benefit in the form of a corresponding tax credit that it is actually
able to use to reduce its tax payments, then Licensor shall reimburse Licensee
for such withholding tax to the extent of such realized benefit. Licensor shall
furnish Licensee with appropriate documents supporting application of the most
favorable rate of withholding tax
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
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available under applicable tax treaties and shall use commercially reasonable
efforts to secure all tax credits in respect of withholding taxes paid by
Licensee hereunder available to it.
10.4 RECORDS; INSPECTION.
(a) Licensee shall keep complete, true and accurate books of
account and records for the purpose of determining the amounts payable
to Licensor under this Agreement. Such books and records shall be kept
at Licensee's principal place of business for at least three (3) years
following the end of the calendar quarter to which they pertain, and
will be open for inspection during such three (3) year period by an
independent public accountant not providing accounting services to
Licensor, Licensee or any of their respective Affiliates that is
reasonably acceptable to both parties, for the purpose of verifying
Licensee's quarterly written reports. Such inspections may be made no
more than once each calendar year, during normal business hours and
upon thirty (30) days prior notice. Any such information shall be
considered to be Confidential Information of Licensee.
(b) Inspections conducted under this Section 10.4 shall be at the
expense of Licensor, unless an underpayment exceeding five percent (5%)
of the royalties paid during the period covered by the inspection is
established in the course of any such inspection, whereupon all costs
relating thereto, as well as any unpaid royalties due and owing to
Licensor, shall be paid by Licensee within thirty (30) days after the
notification by Licensor to Licensee that an underpayment has been
discovered.
ARTICLE 11
MISCELLANEOUS
11.1 PUBLICITY. Licensee and Licensor shall cooperate in the
preparation of a mutually-agreeable press release and other publicity disclosing
the existence of this Agreement and their business relationship. Except for the
information disclosed in such press release or publicity, neither Licensee nor
Licensor shall disclose the existence or any terms of this Agreement without the
prior written consent of the other party (which consent shall not be
unreasonably withheld), except for such limited disclosure as may be reasonably
necessary to either party's bankers, investors, attorneys or other professional
advisors, or in connection with a merger or acquisition, or as may be required
by law in the offering of securities or in securities or regulatory filings or
otherwise.
11.2 WAIVER. It is agreed that no waiver by any party hereto of any
breach or default of any of the covenants or agreements herein set forth shall
be deemed a waiver as to any subsequent and/or similar breach or default.
11.3 INDEPENDENT CONTRACTORS. The relationship of the parties hereto is
that of independent contractors. Neither Licensor nor Licensee hereto is an
agent, partner or joint venturer of the other for any purpose.
11.4 COMPLIANCE WITH LAWS. In exercising their rights under this
Agreement, both parties shall fully comply with the requirements of any and all
applicable laws, regulations,
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rules and orders of any governmental body having jurisdiction over the exercise
of rights under this Agreement.
11.5 NOTICES. Any notice required or permitted to be given to the
parties hereto shall be deemed to have been properly given if delivered in
person or when received if mailed by first class certified mail or sent by
facsimile to the other party at the address or facsimile number, as applicable,
indicated below or to such other addresses or facsimile numbers as may be
designated in writing by the parties from time to time during the term of this
Agreement.
Licensor: OraVax, Inc.
38 Sidney Street
Cambridge, Massachusetts 02139
Attention: Lance Gordon
Telephone: (617) 494-1339
Facsimile: (617) 494-0924
with a copy to: Michael E. Lytton, Esq.
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
Telephone: (617) 573-0100
Facsimile: (617) 227-4420
Licensee: Pasteur Merieux Serums & Vaccins S.A.
58, avenue Leclerc
69007 Lyon, France
Attention: Senior Vice President, Corporate
and Legal Affairs, and General
Counsel
Telephone: 011.33.4.37.37.77.84
Facsimile: 011.33.4.37.37.70.61
with a copy to: L. Kevin O'Mara, Jr., Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, NY 10022
Telephone: (212) 872-1021
Facsimile: (212) 872-1002
11.6 COMPLETE AGREEMENT. It is understood and agreed among the parties
that this Agreement and the Dengue License constitute the entire agreement with
respect to the subject matter of this Agreement, both written and oral, among
the parties, and that all prior
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agreements respecting the subject matter hereof, either written or oral,
expressed or implied, shall be abrogated, canceled, and are null and void and of
no effect. No amendment or change hereof or addition hereto shall be effective
or binding on any of the parties hereto unless reduced to writing and executed
by the respective duly authorized representatives of each of the parties hereto.
11.7 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision and the parties shall exert their best efforts to amend
this Agreement to include a provision which is valid, legal and enforceable and
which carries out the original intent of the parties.
11.8 COUNTERPARTS AND HEADINGS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and both together
shall be deemed to be one and the same agreement. All headings and any cover
page or table of contents are inserted for convenience of reference only and
shall not affect the Agreement's meaning or interpretation.
11.9 GOVERNING LAW. All matters affecting the interpretation, validity
and performance under this Agreement shall be governed by the internal laws of
the State of New York, without regard for its conflict of laws principles.
11.10 FORCE MAJEURE. No party shall be liable to the other, or be in
default under the terms of this Agreement, for its failure to fulfill its
obligations hereunder to the extent such failure arises for any reason beyond
its control including, without limitation, strikes, lockouts, labor disputes,
acts of God, acts of nature, acts of governments or their agencies, fire, flood,
storm, power shortages or power failure, war, sabotage, inability to obtain
sufficient labor, raw materials, fuel or utilities, or inability to obtain
transportation (each, an "Event of Force Majeure"); provided that the party
relying on the provisions of this Section 11.10 shall forthwith give to the
other notice of its inability to observe or perform the provisions of this
Agreement and the reasons therefor; and provided further that the suspension of
the obligations of the party so affected shall continue only for so long as such
Event of Force Majeure continues.
11.11 ASSIGNMENT. This Agreement shall not be assignable by any party
without the prior written consent of the other (which consent shall not be
unreasonably withheld), except that any party may assign this Agreement to an
Affiliate or to a successor in interest or transferee of all or substantially
all of its assets.
11.12 SUCCESSORS. Subject to the limitations on assignment herein, this
Agreement shall be binding upon and inure to the benefit of the successors in
interest and assigns of Licensor and Licensee. In order for such assignment to
be effective any such assignee of a party's interest shall expressly assume in
writing the performance of all the terms and conditions of this Agreement to be
performed by said party and such assignment shall not relieve the assignor of
any of its obligations under this Agreement.
11.13 EXPENSES. Licensee and Licensor shall each bear its own expenses,
including, without limitation, the fees and disbursements of its respective
counsel and
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accountants, in connection with the negotiation and execution of this Agreement
and the consummation of the transactions contemplated hereby.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
one or more counterparts, on the day and year first above written.
ORAVAX, INC. PASTEUR MERIEUX SERUMS & VACCINS S.A.
By: By:
------------------------ ------------------------
Name: Name: Paul Kirkconnell
Title: Title: Corporate Vice President
<PAGE>
APPENDIX A
INITIAL MEMBERSHIP OF RESEARCH AND DEVELOPMENT COMMITTEE*
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
SCHEDULE A
PATENT RIGHTS
[]*
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
<PAGE>
ANNEX B TO
EXHIBIT 10.10
U.S. HEPATITIS C LICENSE AGREEMENT
This LICENSE AGREEMENT (the "Agreement" or "License") is entered
into as of __________, 1999 by and between ORAVAX MERIEUX CO., a general
partnership organized under the laws of Massachusetts, ("Licensee") and ORAVAX,
INC., a corporation organized under the laws of the State of Delaware, ("OraVax"
or "Licensor").
W I T N E S S E T H
WHEREAS, Licensor owns or possesses certain proprietary rights and
know-how relating to vaccines for the prevention, treatment or cure of hepatitis
C in humans (the "Field");
WHEREAS, Licensee desires to obtain from Licensor, and Licensor
desires to grant to Licensee, a license under Licensor's proprietary rights and
know-how to research, develop, manufacture, market, sell and distribute Target
Products (as defined below);
NOW, THEREFORE, in consideration of the mutual promises, conditions,
covenants and undertakings hereinafter set forth, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. DEFINITIONS.
All capitalized terms used in this Agreement and not otherwise defined
herein shall have the meanings set forth in the Master Agreement (as defined
below) and such definitions are incorporated herein by reference.
1.1 "Affiliate" shall mean, with respect to either OraVax or
Licensee, (i) any Person (including a partnership) of which securities or other
ownership interests representing 50% or more of the equity or 50% or more of the
ordinary voting power are, at the time such determination is being made, owned,
Controlled or held, directly or indirectly, by such Party, or (ii) any other
Person which, at the time such determination is being made, is Controlling,
Controlled by or under common Control with, such Party.
1.2 "Basic Technology" shall mean the inventions described in the
patents and patent applications set forth on SCHEDULE A attached hereto.
1.3 "Collaboration" refers to the time period during which the U.S.
Partnership is in effect.
1.4 "Control", whether used as a noun or verb, shall mean the
possession, directly or indirectly, of the power to direct, or cause the
direction of, the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise
<PAGE>
1.5 "Improvements" shall mean any Technology which enhances the
effectiveness of or is an improvement upon any aspect of the OraVax Technology,
which is conceived, discovered, actually reduced to practice, obtained by,
licensed (with right to sublicense) or otherwise acquired by one or more of the
Parties and/or one or more of the Partnerships, or by one or more of their
Controlled Affiliates after the date of this Agreement and prior to the
termination of the Collaboration. Improvements shall include, by way of
illustration but not limitation, enhancements in the form of improving the
process for making the Target Products so that they are made in a less expensive
or more expeditious manner, increasing the immunological or therapeutic
effectiveness of the Target Products, discovering additional biological
information as it relates to the expression of the Target Products, discovering
additional substitutions in the Target Products which increase immunological or
therapeutic effectiveness and discovering new applications of the Target
Products in other fields of use.
1.6 "Independent Improvement" shall mean any Improvement conceived,
discovered, developed, licensed or otherwise acquired after the date of this
Agreement but prior to any termination of the Collaboration, which was
conceived, discovered, developed, licensed (with the right to sublicense) or
otherwise acquired by either Licensee, OraVax or their Controlled Affiliates due
to funding outside of the Programs by such Party or its Controlled Affiliate.
1.7 "Licensed Technology" shall mean, collectively, the OraVax
Technology and OraVax' Independent Improvements.
1.8 "Master Agreement" shall mean that certain Master Agreement by
and between PMC and OraVax dated as of March 31, 1995, as amended by that
certain Amendment Agreement dated November 2, 1998 and that certain Amendment
Agreement dated as of the date hereof.
1.9 "Net Sales" shall mean with respect to sales of the product
concerned for any period for which the applicable calculation is being made, the
gross amount invoiced to customers less (i) returns and allowances, (ii) trade
and/or quantity discounts, (iii) sales, use, value-added, excise taxes and
similar taxes and duties, (iv) an additional amount which would reasonably
approximate the actual cash discounts, if any, given to customers.
1.10 "OraVax Technology" shall mean the Basic Technology and any
other Technology other than Severable Technology which (i) relates and is useful
to research, development, use and exploitation of Target Products and (ii) is
owned, licensed or otherwise held by OraVax or any of its Controlled Affiliates
at the date of this Agreement with the right to license or sublicense the same
to the Partnerships.
1.11 "OraVax Technology Agreement" shall mean any agreement or
understanding pursuant to which OraVax has acquired rights to any of the
Licensed Technology.
1.12 "Partnership(s)" shall mean, collectively, the SNC and the U.S.
Partnership and, individually, either the SNC or the U.S. Partnership.
1.13 "Person" shall mean any natural person, corporation, firm,
business trust, joint venture, association, organization, company, partnership
or other business entity, or any government, or agency or political subdivision
thereof.
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1.14 "PMC" shall mean Pasteur Merieux Serums & Vaccins S.A., a French
SOCIETE ANONYME, whose registered head office is located at 58, avenue Leclerc,
69007 Lyon, France.
1.15 "Proprietary Rights" shall mean patent rights (including, but not
limited to, all granted patents and pending patent applications), copyrights,
trade secret rights and similar rights, and licenses and sublicenses under such
rights.
1.16 "Severable Technology" shall mean any Technology, which (i) is
not Licensed Technology, and (ii) results during the Collaboration from funding
outside the Collaboration and has or was expected to have applications and uses
outside of the Field but (iii) is useful or potentially useful to the research,
development, manufacture, use or exploitation of Target Products. Severable
Technology shall include, by way of illustration but not limitation, adjuvants,
microencapsulation techniques or any innovation allowing a change in the means
of delivery or the addition of another antigen for use against hepatitis C.
Without limiting the generality of the foregoing, the parties agree that
PMC's vero cell technology constitutes Severable Technology.
1.17 "SNC" shall mean the SOCIETE EN NOM COLLECTIF established by
OraVax and PMC under French law to pursue the Collaboration outside the United
States.
1.18 "Sublicensed Affiliate" shall mean, with respect to either OraVax
or Licensee, any Affiliate with an express or implied (e.g., under a
distribution agreement) license or sublicense to research, develop, make, have
made, market, sell, distribute or use Target Products.
1.19 "SNC License Agreement" shall mean that certain license agreement
of even date herewith by and between OraVax, as licensor, and the SNC, as
licensee.
1.20 "Target Product" shall mean any vaccine for the prevention,
treatment or cure of hepatitis C infections in humans; provided, however, that
any product containing one or more antigens for use against indications other
than hepatitis C shall not be a Target Product unless both Parties shall agree
in writing to extend the definition to include such product. In addition, no
product shall be deemed a Target Product unless either (i) such product utilizes
a method, vaccine or composition described in whole or in part in any of the
patents or any of the original patent applications of the pending patent
applications listed in SCHEDULE A attached hereto or (ii) the research,
development, manufacture or use of such product has or will use Technology
described in whole or in part in any of the patents or any of the original
patent applications of the pending patent applications listed in SCHEDULE A
attached hereto. All references in this definition to patents and patent
applications are solely for the purpose of incorporating the descriptions of the
method, vaccine, composition and/ or Technology contained therein and shall not
be deemed to require that a patent shall issue from any pending patent
application or deemed to require that any patent, whether existing or
subsequently issued, shall be valid or enforceable. Any product that is not a
Target Product shall be deemed a Target Product only if during the term of the
Collaboration the Executive Committee determines to extend the definition of
Target Product to such product.
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1.21 "Technology" shall mean:
(a) the subject matter of any and all relevant patents and/or pending
patent applications, including, but not limited to, the information contained in
such patents and patent applications, any divisions, continuations, and
continuations-in-part based thereon, any patents which may issue therefrom and
any reissues, patents of addition or importation; and
(b) any and all relevant inventions (whether or not patentable),
ideas, processes, formulas, technical information, trade secrets, developments,
discoveries, data, the subject matter of any and all copyrights, drawings,
techniques, documents, laboratory note books, pre-clinical and clinical case
reports and report forms, scientific and medical reports, models, and know-how,
including by way of example and in no way limiting the foregoing, any biological
materials and chemical compounds including but not limited to structural genes,
genetic sequences, promoters, enhancers, probes, linkage probes, vectors, hosts,
plasmids, peptides, polypeptides, transformed cell lines, transgenic animals,
proteins, biological modifiers, antigens, reagents, hybridomas, antibodies,
toxins, lectins, enzymes, lipids, hormones, viruses, cells or parts of cells,
cell lines, fragments of any of the foregoing, and any other biologically active
material or compound, whether or not occurring naturally or howsoever derived,
modified, conjugated, cross-linked, immobilized, reduced, purified or produced,
whether by recombinant DNA techniques and/or otherwise.
1.22 "United States" shall mean the United States of America and its
dependent territories and possessions.
1.23 "U.S. Partnership" shall mean the partnership established by PMC
and OraVax to pursue the Collaboration in the United States.
2. LICENSE GRANT.
2.1 ORAVAX LICENSE TO THE U.S. PARTNERSHIP. Subject to all of the
terms and limitations of this Agreement, OraVax hereby grants to the U.S.
Partnership, a nationwide license under its Proprietary Rights to use the
Licensed Technology in the Field to research, develop, make, have made, market,
sell, distribute and use the Target Products in the United States. The foregoing
license is limited, and may be exercised solely as provided herein; provided,
however, that any such limitation is without prejudice to the U.S. Partnership's
exercise of any rights it may now hold or hereafter obtain independently in
respect of any Technology other than the Licensed Technology.
2.2 UNDERTAKINGS. Except as provided herein, the licensee granted
under Section 2.1 hereof shall be exclusive in the Field. The U.S. Partnership
undertakes that during the term of the Collaboration it shall commercially
exploit its interest in the Licensed Technology within the Field in the United
States.
3. COMPENSATION.
3.1 LICENSE FEE. In consideration of the licenses granted hereunder,
Licensee shall pay to Licensor a license fee of []* on the later to
occur of []*
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
4
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[]*
3.2 MILESTONE FEES. Licensee shall, with the exception of clause
(vi) hereof, pay to Licensor the amounts specified below within []* following
the accomplishment by Licensee, of the corresponding event set forth below
(each, a "Milestone"):
(i) []*
(ii) []*
(iii) []*
(iv) []*
(v) []*
(vi) []*
The foregoing amounts shall be paid by Licensee only once.
3.3 ROYALTIES. Licensee shall pay Licensor a minimum royalty of []*
which shall be payable in any year when the U.S. Partnership have any sales of
Target Products in the United States, which shall be paid with reasonable
promptness upon receipt of an invoice following the close of the year concerned.
3.4 TAXES. Licensee may withhold from any payments due the Licensor
under this Agreement the appropriate withholding taxes, if any, applicable to
such payments. Licensee shall remit the withheld taxes to the appropriate taxing
authorities, and shall provide to Licensor an official certificate of payments
of such taxes or any other documentation and evidence necessary to verify
payment thereof.
3.5 RECORDS, ACCOUNTING. If the Collaboration is terminated pursuant
to Section 11 hereof, PMC and OraVax and their successors and assigns shall keep
and maintain detailed and accurate books and records with regard to Net Sales,
royalties, payments received from sublicensees and payments due to the other and
the calculation thereof.
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
5
<PAGE>
4. ORAVAX' RETAINED RIGHTS. Except for the license granted to the U.S.
Partnership under Section 2.1 hereof, and the license granted to the SNC
pursuant to the SNC License Agreement, OraVax retains all right, title and
interest to the Licensed Technology, subject to all the terms, conditions,
limitations and restrictions of this Agreement, the SNC License Agreement and
the Master Agreement. OraVax' retained rights include, but are not limited to,
(a) the right to use the Licensed Technology for research, development and
manufacturing the Target Products in the Field on behalf of the Collaboration,
and (b) the right to use and exploit the Licensed Technology outside the Field.
5. LIMITED RIGHT TO GRANT SUBLICENSES. During the term of the
Collaboration the U.S. Partnership shall only be entitled to grant sublicenses
to use the Licensed Technology within the Field for the purposes and benefit of
the Collaboration.
6. THIRD PARTY AGREEMENTS. The U.S. Partnership agrees to comply with
all terms, conditions and restrictions applicable to it imposed by the OraVax
Technology Agreements as the same exist as of the date hereof and any agreements
with third parties relating to any OraVax Independent Improvements.
7. IMPROVEMENTS; DISCLOSURE.
7.1 INDEPENDENT IMPROVEMENTS. Any and all Proprietary Rights to any
Independent Improvement conceived, discovered, developed, licensed or otherwise
acquired during the term of the Collaboration, shall, as between the Licensee
and OraVax, be owned by the party that expended the funding for the Independent
Improvement. Notwithstanding the foregoing, any OraVax Independent Improvement
during the term of the Collaboration shall automatically be included within the
license granted under Section 2.1 hereof and automatically included in any
sublicenses granted in accordance with this Agreement without any change or
adjustment to the payments due between the parties hereunder.
7.2 DISCLOSURE. OraVax and the Licensee agree to promptly disclose to
each other any Improvement which either party conceives, discovers, develops,
licenses or otherwise acquires rights to, during the term of the Collaboration;
provided, however, that if OraVax or the Licensee is offered or obtains
something which would otherwise be an Improvement from a third party but which
is subject to restrictions on disclosure and use, then such party shall notify
the other party of the existence and restrictions on the disclosure and use of
the Improvement and shall consult with the other party on a good faith basis as
to whether the parties need to jointly negotiate a license to obtain disclosure
and use of the Improvement for the purposes of the Collaboration; and, provided,
further, that except as set forth in the foregoing proviso, there shall be no
restrictions on the right of the Licensor to receive Improvements hereunder,
including, but not limited to, pursuant to Section 6 above.
8. SEVERABLE TECHNOLOGY. OraVax and PMC hereby agree that Severable
Technology is not subject to, or included in, any license granted under this
Agreement. Severable Technology shall be owned by the party that conceives,
discovers, develops, licenses or otherwise acquires the same.
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<PAGE>
9. CONFIDENTIALITY. The terms of this Agreement and all Licensed
Technology, Improvements, and all other information disclosed pursuant to this
Agreement shall be subject to the provisions of Article 21 of the Master
Agreement.
10. PATENT MATTERS. Any and all matters relating to patent prosecution
and protection of a party's Proprietary Rights with respect to the Licensed
Technology and Independent Improvements thereto shall be determined in
accordance with Section 7.5 of the Master Agreement.
11. TERM AND TERMINATION.
11.1 TERM. The term of this Agreement shall commence on the date
hereof and shall continue until the Partnership is terminated and dissolved as
set forth in the Master Agreement. In the event that the Partnership is
dissolved (i) both OraVax and PMC shall have co-exclusive rights to the Licensed
Technology, (ii) neither PMC nor OraVax shall have the right to grant
sublicenses of the Licensed Technology, and (iii) neither PMC nor OraVax shall
have the right, either on its own or pursuant to any agreement or arrangement
with a third party to manufacture, have manufactured, sell, have sold, market,
develop or distribute a product derived from the Licensed Technology without the
written consent of the other.
11.2 TERMINATION. This Agreement shall terminate and all rights
granted by Licensor hereunder shall revert to the Licensor in the event that
[(a) PMC, either alone or in collaboration with a third party, owns or has
worldwide rights to a vaccine for the prevention, treatment or cure of
hepatitis C in humans that is in Phase II clinical trials, and (b) PMC
refuses to permit the Partnership (i) to develop and commercialize a Target
Product either by itself or in collaboration with a third party when it
would be commercially reasonable to do so or (ii) to sublicense the rights
licensed hereunder to a third party in a commercially reasonable transaction.]
This Agreement shall also terminate and all rights granted by Licensor
hereunder shall revert to Licensor in the event that PMC fails to make a
required capital contribution necessary to permit the Partnership to make the
payments set forth in Section 3.1 or 3.2 hereof.
11.3 INCORPORATION BY REFERENCE AND SURVIVAL. Any accrued rights to
payment and any cause of action or remedies for breach of this Agreement shall
survive termination. Section 7.5 (Patent Matters) and Articles 17 (Arbitration),
18 (Indemnification) and 21 (Confidentiality) of the Master Agreement are hereby
incorporated herein by reference and shall survive for the purposes hereof in
accordance herewith without regard to any termination of the Master Agreement.
Without limiting the generality of the foregoing, the parties agree that this
Agreement constitutes a "Future Agreement" within the meaning of the Master
Agreement.
11.4 TRANSFER OF TECHNOLOGY ON TERMINATION. Upon termination of this
Agreement, any documents, records, materials or other tangible manifestations of
the Licensed Technology shall be transferred, returned or retained in accordance
with the relevant provisions of the Master Agreement.
11.5 REMEDIES. Termination is not the sole remedy under this Agreement
and, whether or not termination is effected, all other remedies will remain
available.
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<PAGE>
12. ARBITRATION. Any and all disputes in relation to any aspect of this
Agreement shall be settled by final and binding arbitration pursuant to
applicable provisions set forth in Article 17 of the Master Agreement.
13. PROPRIETARY RIGHTS. As of the Effective Time: (a) OraVax or one or
more of its Affiliates owns or has rights to use and exploit all OraVax
Technology; (b) there have been no material claims made against OraVax or any of
its Affiliates asserting the invalidity, unenforceability of, or misuse of, any
of OraVax' Proprietary Rights to the OraVax Technology; (c) neither OraVax nor
any of its Affiliates has received a notice from a third party indicating that
any aspect of the OraVax Technology may conflict with the asserted rights of
others, or otherwise challenging OraVax' rights to use any of the OraVax
Technology; (d) to OraVax' best knowledge, the present use by OraVax or any of
its Affiliates of such OraVax Technology does not violate or infringe in any
material respect any such rights of others or constitute a material breach under
any agreement with a third party; (e) the OraVax Technology Agreements are the
only agreements to which OraVax or any of its Affiliates are a party pursuant to
which payments may be due in respect of OraVax Technology; (f) the agreements
listed and described on Annex A hereto are the only agreements to which OraVax
or any of its Affiliates is a party affecting OraVax' rights to use and exploit
all of the OraVax Technology; (g) OraVax is in full compliance in all material
respects with the terms and conditions of each of the OraVax Technology
Agreements; (h) each of the OraVax Technology Agreements constitutes the valid
and binding obligations of OraVax and each other party thereto and shall be
enforceable against OraVax and, against each other party thereto in accordance
with its terms (subject, however, to any limitations with respect to enforcement
which may be imposed in connection with bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the enforcement of creditors' rights
generally, and except that no representation or warranty is made as to the
availability of any equitable remedy in connection with the enforcement of any
term thereof). None of the rights of OraVax or any of its Affiliates to such
OraVax Technology will be adversely affected by the execution, delivery or
performance of this Agreement. OraVax and its Affiliates have taken all action
reasonably necessary, using its current standard business practices, to protect
such OraVax Technology.
EXCEPT AS SPECIFICALLY PROVIDED FOR IN THIS SECTION 13, ORAVAX DISCLAIMS ALL
WARRANTIES RELATING TO THE LICENSED TECHNOLOGY, EXPRESS OR IMPLIED, INCLUDING,
BUT NOT LIMITED TO, ANY WARRANTIES AGAINST INFRINGEMENT OF THIRD PARTY RIGHTS,
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
14. CERTAIN COVENANTS RELATING TO ORAVAX TECHNOLOGY. OraVax hereby
covenants to indemnify and hold PMC and the U.S. Partnership harmless against
any and all claims, costs and damages in the event that, at any time or from
time to time, the amount of any and all royalties and license or other fees
which may be payable under the OraVax Technology Agreements to the extent
that any such royalties exceed [ ]* of net sales.
OraVax covenants and agrees at all times during the Collaboration, and
thereafter so long as PMC or its Affiliates or successors and assigns has any
rights to any of the OraVax Technology, (i) to take all action reasonably
necessary to protect all of its rights to the OraVax Technology, including, but
not limited to, the OraVax Technology Agreements, (ii) to comply
- ----------
* This portion of the Exhibit has been omitted pursuant to
a Request for Confidential Treatment under Rule 406 of the
Securities Act of 1933, as amended. The complete Exhibit,
including the portions for which confidential treatment has been
requested, has been filed separately with the Securities and
Exchange Commission.
8
<PAGE>
fully with the terms and conditions of each of the OraVax Technology Agreements
(including, but not limited to any royalty or license (or other) fee
obligations) and otherwise maintain such Agreements in full force and effect;
(provided that OraVax shall not be responsible for adverse effects on the OraVax
Technology Agreements to the extent caused, by the actions of PMC or its
Controlled Affiliates or their successors and assigns unless expressly licensed
or authorized by OraVax pursuant to the Master Agreement or any Closing or
Future Agreement); and (iii) to promptly furnish PMC with copies of any and all
written notices OraVax or any of its directors, officers, employees, agents or
representatives may at any time receive in connection with any of the OraVax
Technology Agreements.
15. INDEMNIFICATION. Each of OraVax and the Licensee shall defend
indemnify and hold harmless the other and their respective Affiliates to the
full extent provided in Article 18 of the Master Agreement.
16. ASSIGNMENT. The rights and obligations of the parties under this
Agreement may not be assigned or transferred without the prior written consent
of the other.
17. EXPORT REGULATIONS. The U.S. Partnership hereby agrees to comply with
all export laws and restrictions and regulations of the Department of Commerce
of the United States or other United States, French or any other country's
agency or authority, and not to knowingly export, or allow the export or
re-export of any Technology, Target Product or any derivative or direct product
thereof, in violation of any such restrictions, laws or regulations, or, without
all required licenses and authorizations to Afghanistan, the People's Republic
of China or any Group Q, S, W, Y or Z country specified in the then current
Supplement No. 1 to Section 770 of the U.S. Export Administration Regulations
(or any successor supplement or regulations).
18. IMPORT REGULATIONS. This Agreement is subject to all of the United
States', France's (or any other country's, as appropriate) laws and regulations
controlling the import of drugs and biological products, technical data,
laboratory prototypes and other commodities and Technology.
19. NOTICES.
Any notice or other communication required or permitted hereunder
shall be in writing and shall be deemed given when so delivered in person, by
overnight courier, by facsimile transmission (with receipt confirmed by
telephone or by automatic transmission report) or two business days after being
sent by registered or certified mail (postage prepaid, return receipt
requested), as follows:
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<PAGE>
(a) if to Licensor, to:
OraVax, Inc.
38 Sidney Street
Cambridge, Massachusetts 02139
Attn: Lance Gordon
Telephone: (617) 494-1339
Facsimile: (617) 494-0924
with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
Attn: Michael Lytton, Esq.
Telephone: (617) 573-0100
Facsimile: (617) 227-4420
(b) if to Licensee, to:
OraVax Merieux Co.
38 Sidney Street
Cambridge, Massachusetts 02139
Attn: Lance Gordon
with a copy to:
Pasteur Merieux Serums & Vaccins S.A.
58, avenue Leclerc
69007 Lyon, France
Attn: Senior Vice President,
Legal and Corporate Affairs and General Counsel
Telephone: 011.33.4.37.37.77.84
Facsimile: 011.33.4.37.37.70.61
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attn: L. Kevin O'Mara, Jr., Esq.
Telephone: (212) 872-1000
Facsimile: (212) 872-1002
Any party may by notice given in accordance with this Section 19 to
the other parties designate another address or person for receipt of notices
hereunder.
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<PAGE>
20. WAIVER. Any term or condition of this Agreement may be waived or
qualified at any time by either Party by a written instrument executed by such
Party. No omission, delay or failure on the part of any Party in exercising any
rights hereunder, and no partial or single exercise hereof, will constitute a
waiver of such rights or of any other rights hereunder.
21. MODIFICATIONS. This Agreement may be amended, modified or supplemented
only by a written instrument duly executed by both parties which instrument
shall specifically indicate that it is the desire of the parties to amend,
modify or supplement the Agreement.
22. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to its
conflict of law rules.
23. SEVERABILITY. If any provision of this Agreement is ultimately held to
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions hereof shall not in any way be affected or impaired
thereby, unless the absence of the invalidated provision materially adversely
affects the substantive rights of the parties. To the extent permitted by
applicable law, each Party waives any provision of law which renders any
provision hereof invalid, illegal or unenforceable in any respect. In the event
that any provision of this Agreement shall be held to be invalid, illegal or
unenforceable, the parties shall in such an instance use their best efforts to
replace the invalidated provision by a valid, legal and enforceable provision
which, insofar as practical, implements the purposes hereof.
24. AFFILIATES. Each of OraVax and PMC shall cause its respective
Controlled Affiliates to comply fully with the provisions of this Agreement to
the extent such provisions specifically relate, or are intended to specifically
relate, to such Controlled Affiliates, as though such Controlled Affiliates were
expressly named as joint obligors hereunder.
25. EXECUTION. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original.
26. HEADINGS. The Section headings in this Agreement are solely for the
convenience and reference of the Parties and are not intended to be descriptive
of the entire contents of, or to affect, any of the terms or provisions hereof.
[The remainder of this page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, this LICENSE AGREEMENT has been executed by each
of the parties on the date first above written.
ORAVAX, INC.
By:_______________________________________
Name:
Title:
ORAVAX MERIEUX CO.
By:_______________________________________
Name:
Title:
By:_______________________________________
Name:
Title:
<PAGE>
ANNEX C TO
EXHIBIT 10.10
S.N.C. HEPATITIS C LICENSE AGREEMENT
This LICENSE AGREEMENT (the "Agreement" or "License") is
entered into as of __________, 1999 by and between MERIEUX ORAVAX S.N.C., a
French SOCIETE EN NOM COLLECTIF, whose registered head office is at 58, avenue
Leclerc, 69007 Lyon, France, ("Licensee") and ORAVAX, INC., a corporation
organized under the laws of the State of Delaware, ("OraVax" or "Licensor").
W I T N E S S E T H
WHEREAS, Licensor owns or possesses certain proprietary rights
and know-how relating to vaccines for the prevention, treatment or cure of
hepatitis C in humans (the "Field");
WHEREAS, Licensee desires to obtain from Licensor, and
Licensor desires to grant to Licensee, a license under Licensor's proprietary
rights and know-how to research, develop, manufacture, market, sell and
distribute Target Products (as defined below);
NOW, THEREFORE, in consideration of the mutual promises,
conditions, covenants and undertakings hereinafter set forth, the parties
hereto, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS.
All capitalized terms used in this Agreement and not otherwise
defined herein shall have the meanings set forth in the Master Agreement (as
defined below) and such definitions are incorporated herein by reference.
1.1 "Affiliate" shall mean, with respect to either OraVax or Licensee,
(i) any Person (including a partnership) of which securities or other ownership
interests representing 50% or more of the equity or 50% or more of the ordinary
voting power are, at the time such determination is being made, owned,
Controlled or held, directly or indirectly, by such Party, or (ii) any other
Person which, at the time such determination is being made, is Controlling,
Controlled by or under common Control with, such Party.
1.2 "Basic Technology" shall mean the inventions described in the
patents and patent applications set forth on SCHEDULE A attached hereto.
1.3 "Collaboration" refers to the time period during which the S.N.C.
is in effect.
1.4 "Control", whether used as a noun or verb, shall mean the
possession, directly or indirectly, of the power to direct, or cause the
direction of, the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise
<PAGE>
1.5 "Improvements" shall mean any Technology which enhances the
effectiveness of or is an improvement upon any aspect of the OraVax Technology,
which is conceived, discovered, actually reduced to practice, obtained by,
licensed (with right to sublicense) or otherwise acquired by one or more of the
Parties and/or one or more of the Partnerships, or by one or more of their
Controlled Affiliates after the date of this Agreement and prior to the
termination of the Collaboration. Improvements shall include, by way of
illustration but not limitation, enhancements in the form of improving the
process for making the Target Products so that they are made in a less expensive
or more expeditious manner, increasing the immunological or therapeutic
effectiveness of the Target Products, discovering additional biological
information as it relates to the expression of the Target Products, discovering
additional substitutions in the Target Products which increase immunological or
therapeutic effectiveness and discovering new applications of the Target
Products in other fields of use.
1.6 "Independent Improvement" shall mean any Improvement conceived,
discovered, developed, licensed or otherwise acquired after the date of this
Agreement but prior to any termination of the Collaboration, which was
conceived, discovered, developed, licensed (with the right to sublicense) or
otherwise acquired by either Licensee, OraVax or their Controlled Affiliates due
to funding outside of the Programs by such Party or its Controlled Affiliate.
1.7 "Licensed Technology" shall mean, collectively, the OraVax
Technology and OraVax' Independent Improvements.
1.8 "Master Agreement" shall mean that certain Master Agreement by and
between PMC and OraVax dated as of March 31, 1995, as amended by that certain
Amendment Agreement dated November 2, 1998 and that certain Amendment Agreement
dated as of the date hereof.
1.9 "Net Sales" shall mean with respect to sales of the product
concerned for any period for which the applicable calculation is being made, the
gross amount invoiced to customers less (i) returns and allowances, (ii) trade
and/or quantity discounts, (iii) sales, use, value-added, excise taxes and
similar taxes and duties, (iv) an additional amount which would reasonably
approximate the actual cash discounts, if any, given to customers.
1.10 "OraVax Technology" shall mean the Basic Technology and any other
Technology other than Severable Technology which (i) relates and is useful to
research, development, use and exploitation of Target Products and (ii) is
owned, licensed or otherwise held by OraVax or any of its Controlled Affiliates
at the date of this Agreement with the right to license or sublicense the same
to the Partnerships.
1.11 "OraVax Technology Agreement" shall mean any agreement or
understanding pursuant to which OraVax has acquired rights to any of the
Licensed Technology.
1.12 "Partnership(s)" shall mean, collectively, the SNC and the U.S.
Partnership and, individually, either the SNC or the U.S. Partnership.
1.13 "Person" shall mean any natural person, corporation, firm,
business trust, joint venture, association, organization, company, partnership
or other business entity, or any government, or agency or political subdivision
thereof.
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1.14 "PMC" shall mean Pasteur Merieux Serums & Vaccins S.A., a French
SOCIETE ANONYME, whose registered head office is located at 58, avenue Leclerc,
69007 Lyon, France.
1.15 "Proprietary Rights" shall mean patent rights (including, but not
limited to, all granted patents and pending patent applications), copyrights,
trade secret rights and similar rights, and licenses and sublicenses under such
rights.
1.16 "Severable Technology" shall mean any Technology, which (i) is not
Licensed Technology, and (ii) results during the Collaboration from funding
outside the Collaboration and has or was expected to have applications and uses
outside of the Field but (iii) is useful or potentially useful to the research,
development, manufacture, use or exploitation of Target Products. Severable
Technology shall include, by way of illustration but not limitation, adjuvants,
microencapsulation techniques or any innovation allowing a change in the means
of delivery or the addition of another antigen for use against hepatitis C.
Without limiting the generality of the foregoing, the parties agree that
PMC's vero cell technology constitutes Severable Technology.
1.17 "SNC" shall mean the SOCIETE EN NOM COLLECTIF established by
OraVax and PMC under French law to pursue the Collaboration outside the United
States.
1.18 "Sublicensed Affiliate" shall mean, with respect to either OraVax
or Licensee, any Affiliate with an express or implied (e.g., under a
distribution agreement) license or sublicense to research, develop, make, have
made, market, sell, distribute or use Target Products.
1.19 "Target Product" shall mean any vaccine for the prevention,
treatment or cure of hepatitis C infections in humans; provided, however, that
any product containing one or more antigens for use against indications other
than hepatitis C shall not be a Target Product unless both Parties shall agree
in writing to extend the definition to include such product. In addition, no
product shall be deemed a Target Product unless either (i) such product utilizes
a method, vaccine or composition described in whole or in part in any of the
patents or any of the original patent applications of the pending patent
applications listed in SCHEDULE A attached hereto or (ii) the research,
development, manufacture or use of such product has or will use Technology
described in whole or in part in any of the patents or any of the original
patent applications of the pending patent applications listed in SCHEDULE A
attached hereto. All references in this definition to patents and patent
applications are solely for the purpose of incorporating the descriptions of the
method, vaccine, composition and/ or Technology contained therein and shall not
be deemed to require that a patent shall issue from any pending patent
application or deemed to require that any patent, whether existing or
subsequently issued, shall be valid or enforceable. Any product that is not a
Target Product shall be deemed a Target Product only if during the term of the
Collaboration the Executive Committee determines to extend the definition of
Target Product to such product.
1.20 "Technology" shall mean:
(a) the subject matter of any and all relevant patents and/or pending
patent applications, including, but not limited to, the information contained in
such patents and patent applications,
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<PAGE>
any divisions, continuations, and continuations-in-part based thereon, any
patents which may issue therefrom and any reissues, patents of addition or
importation; and
(b) any and all relevant inventions (whether or not patentable), ideas,
processes, formulas, technical information, trade secrets, developments,
discoveries, data, the subject matter of any and all copyrights, drawings,
techniques, documents, laboratory note books, pre-clinical and clinical case
reports and report forms, scientific and medical reports, models, and know-how,
including by way of example and in no way limiting the foregoing, any biological
materials and chemical compounds including but not limited to structural genes,
genetic sequences, promoters, enhancers, probes, linkage probes, vectors, hosts,
plasmids, peptides, polypeptides, transformed cell lines, transgenic animals,
proteins, biological modifiers, antigens, reagents, hybridomas, antibodies,
toxins, lectins, enzymes, lipids, hormones, viruses, cells or parts of cells,
cell lines, fragments of any of the foregoing, and any other biologically active
material or compound, whether or not occurring naturally or howsoever derived,
modified, conjugated, cross-linked, immobilized, reduced, purified or produced,
whether by recombinant DNA techniques and/or otherwise.
1.21 "United States" shall mean the United States of America and its
dependent territories and possessions.
1.22 "US License Agreement" shall mean that certain license agreement
of even date herewith by and between OraVax, Inc., as licensor, and the U.S.
Partnership, as licensee.
1.23 "U.S. Partnership" shall mean the partnership established by PMC
and OraVax to pursue the Collaboration in the United States.
2. LICENSE GRANT.
2.1 ORAVAX LICENSE TO THE SNC. Subject to all of the terms and
limitations of this Agreement, OraVax hereby grants to the SNC, a worldwide
license, except in the United States, under its Proprietary Rights to use the
Licensed Technology in the Field to research, develop, make, have made, market,
sell, distribute and use the Target Products worldwide, except in the United
States. The foregoing license is limited, and may be exercised solely as
provided herein; provided, however, that any such limitation is without
prejudice to the SNC's exercise of any rights it may now hold or hereafter
obtain independently in respect of any Technology other than the Licensed
Technology.
2.2 UNDERTAKINGS. Except as provided herein, the licensee granted under
Section 2.1 hereof shall be exclusive in the Field. The SNC undertakes that
during the term of the Collaboration it shall commercially exploit its interest
in the Licensed Technology within the Field worldwide, except in the United
States.
3. COMPENSATION.
3.1 LICENSE FEE. In consideration of the licenses granted hereunder,
Licensee shall pay to Licensor a license fee of []* on the later to occur
of []*
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
4
<PAGE>
[]*
3.2 MILESTONE FEES. Licensee shall, with the exception of clause
(vi) hereof, pay to Licensor the amounts specified below within []* following
the accomplishment by Licensee, of the corresponding event set forth below
(each, a "Milestone"):
(i) []*
(ii) []*
(iii) []*
(iv) []*
(v) []*
(vi) []*
The foregoing amounts shall be paid by Licensee only once.
3.3 ROYALTIES. Licensee shall pay Licensor a minimum royalty of []*
which shall be payable in any year when the SNC have any sales of Target
Products anywhere in the world (except in the United States), which shall be
paid with reasonable promptness upon receipt of an invoice following the close
of the year concerned.
3.4 TAXES. Licensee may withhold from any payments due the Licensor
under this Agreement the appropriate withholding taxes, if any, applicable to
such payments. Licensee shall remit the withheld taxes to the appropriate taxing
authorities, and shall provide to Licensor an official certificate of payments
of such taxes or any other documentation and evidence necessary to verify
payment thereof.
3.5 RECORDS, ACCOUNTING. If the Collaboration is terminated pursuant to
Section 11 hereof, PMC and OraVax and their successors and assigns shall keep
and maintain detailed and accurate books and records with regard to Net Sales,
royalties, payments received from sublicensees and payments due to the other and
the calculation thereof.
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
5
<PAGE>
4. ORAVAX' RETAINED RIGHTS. Except for the license granted to the SNC
under Section 2.1 hereof, and the license granted to the U.S. Partnership
pursuant to the U.S. License Agreement, OraVax retains all right, title and
interest to the Licensed Technology, subject to all the terms, conditions,
limitations and restrictions of this Agreement, the U.S License Agreement and
the Master Agreement. OraVax' retained rights include, but are not limited to,
(a) the right to use the Licensed Technology for research, development and
manufacturing the Target Products in the Field on behalf of the Collaboration,
and (b) the right to use and exploit the Licensed Technology outside the Field.
5. LIMITED RIGHT TO GRANT SUBLICENSES. During the term of the
Collaboration the SNC shall only be entitled to grant sublicenses to use the
Licensed Technology within the Field for the purposes and benefit of the
Collaboration.
6. THIRD PARTY AGREEMENTS. The SNC agrees to comply with all terms,
conditions and restrictions applicable to it imposed by the OraVax Technology
Agreements as the same exist as of the date hereof and any agreements with third
parties relating to any OraVax Independent Improvements.
7. IMPROVEMENTS; DISCLOSURE.
7.1 INDEPENDENT IMPROVEMENTS. Any and all Proprietary Rights to any
Independent Improvement conceived, discovered, developed, licensed or otherwise
acquired during the term of the Collaboration, shall, as between the Licensee
and OraVax, be owned by the party that expended the funding for the Independent
Improvement. Notwithstanding the foregoing, any OraVax Independent Improvement
during the term of the Collaboration shall automatically be included within the
license granted under Section 2.1 hereof and automatically included in any
sublicenses granted in accordance with this Agreement without any change or
adjustment to the payments due between the parties hereunder.
7.2 DISCLOSURE. OraVax and the Licensee agree to promptly disclose to
each other any Improvement which either party conceives, discovers, develops,
licenses or otherwise acquires rights to, during the term of the Collaboration;
provided, however, that if OraVax or the Licensee is offered or obtains
something which would otherwise be an Improvement from a third party but which
is subject to restrictions on disclosure and use, then such party shall notify
the other party of the existence and restrictions on the disclosure and use of
the Improvement and shall consult with the other party on a good faith basis as
to whether the parties need to jointly negotiate a license to obtain disclosure
and use of the Improvement for the purposes of the Collaboration; and, provided,
further, that except as set forth in the foregoing proviso, there shall be no
restrictions on the right of the Licensor to receive Improvements hereunder,
including, but not limited to, pursuant to Section 6 above.
8. SEVERABLE TECHNOLOGY. OraVax and PMC hereby agree that Severable
Technology is not subject to, or included in, any license granted under this
Agreement. Severable Technology shall be owned by the party that conceives,
discovers, develops, licenses or otherwise acquires the same.
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<PAGE>
9. CONFIDENTIALITY. The terms of this Agreement and all Licensed
Technology, Improvements, and all other information disclosed pursuant to this
Agreement shall be subject to the provisions of Article 21 of the Master
Agreement.
10. PATENT MATTERS. Any and all matters relating to patent prosecution
and protection of a party's Proprietary Rights with respect to the Licensed
Technology and Independent Improvements thereto shall be determined in
accordance with Section 7.5 of the Master Agreement.
11. TERM AND TERMINATION.
11.1 TERM. The term of this Agreement shall commence on the date hereof
and shall continue until the Partnership is terminated and dissolved as set
forth in the Master Agreement. In the event that the Partnership is dissolved
(i) both OraVax and PMC shall have co-exclusive rights to the Licensed
Technology, (ii) neither PMC nor OraVax shall have the right to grant
sublicenses of the Licensed Technology, and (iii) neither PMC nor OraVax shall
have the right, either on its own or pursuant to any agreement or arrangement
with a third party to manufacture, have manufactured, sell, have sold, market,
develop or distribute a product derived from the Licensed Technology without the
written consent of the other.
11.2 TERMINATION. This Agreement shall terminate and all rights granted
by Licensor hereunder shall revert to the Licensor in the event that (a) PMC,
either alone or in collaboration with a third party, owns or has worldwide
rights to a vaccine for the prevention, treatment or cure of hepatitis C in
humans that is in Phase II clinical trials, and (b) PMC refuses to permit the
Partnership (i) to develop and commercialize a Target Product either by
itself or in collaboration with a third party when it would be commercially
reasonable to do so or (ii) to sublicense the rights licensed hereunder to a
third party in a commercially reasonable transaction. This Agreement shall
also terminate and all rights granted by Licensor hereunder shall revert to
Licensor in the event that PMC fails to make a required capital contribution
necessary to permit the Partnership to make the payments set forth in Section
3.1 or 3.2 hereof.
11.3 INCORPORATION BY REFERENCE AND SURVIVAL. Any accrued rights to
payment and any cause of action or remedies for breach of this Agreement shall
survive termination. Section 7.5 (Patent Matters) and Articles 17 (Arbitration),
18 (Indemnification) and 21 (Confidentiality) of the Master Agreement are hereby
incorporated herein by reference and shall survive for the purposes hereof in
accordance herewith without regard to any termination of the Master Agreement.
Without limiting the generality of the foregoing, the parties agree that this
Agreement constitutes a "Future Agreement" within the meaning of the Master
Agreement.
11.4 TRANSFER OF TECHNOLOGY ON TERMINATION. Upon termination of this
Agreement, any documents, records, materials or other tangible manifestations of
the Licensed Technology shall be transferred, returned or retained in accordance
with the relevant provisions of the Master Agreement.
11.5 REMEDIES. Termination is not the sole remedy under this Agreement
and, whether or not termination is effected, all other remedies will remain
available.
- ----------
* This portion of the Exhibit has been omitted pursuant to a request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The Complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
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<PAGE>
12. ARBITRATION. Any and all disputes in relation to any aspect of this
Agreement shall be settled by final and binding arbitration pursuant to
applicable provisions set forth in Article 17 of the Master Agreement.
13. PROPRIETARY RIGHTS. As of the Effective Time: (a) OraVax or one or
more of its Affiliates owns or has rights to use and exploit all OraVax
Technology; (b) there have been no material claims made against OraVax or any of
its Affiliates asserting the invalidity, unenforceability of, or misuse of, any
of OraVax' Proprietary Rights to the OraVax Technology; (c) neither OraVax nor
any of its Affiliates has received a notice from a third party indicating that
any aspect of the OraVax Technology may conflict with the asserted rights of
others, or otherwise challenging OraVax' rights to use any of the OraVax
Technology; (d) to OraVax' best knowledge, the present use by OraVax or any of
its Affiliates of such OraVax Technology does not violate or infringe in any
material respect any such rights of others or constitute a material breach under
any agreement with a third party; (e) the OraVax Technology Agreements are the
only agreements to which OraVax or any of its Affiliates are a party pursuant to
which payments may be due in respect of OraVax Technology; (f) the agreements
listed and described on Annex A hereto are the only agreements to which OraVax
or any of its Affiliates is a party affecting OraVax' rights to use and exploit
all of the OraVax Technology; (g) OraVax is in full compliance in all material
respects with the terms and conditions of each of the OraVax Technology
Agreements; (h) each of the OraVax Technology Agreements constitutes the valid
and binding obligations of OraVax and each other party thereto and shall be
enforceable against OraVax and, against each other party thereto in accordance
with its terms (subject, however, to any limitations with respect to enforcement
which may be imposed in connection with bankruptcy, insolvency, reorganization,
moratorium or other laws affecting the enforcement of creditors' rights
generally, and except that no representation or warranty is made as to the
availability of any equitable remedy in connection with the enforcement of any
term thereof). None of the rights of OraVax or any of its Affiliates to such
OraVax Technology will be adversely affected by the execution, delivery or
performance of this Agreement. OraVax and its Affiliates have taken all action
reasonably necessary, using its current standard business practices, to protect
such OraVax Technology.
EXCEPT AS SPECIFICALLY PROVIDED FOR IN THIS SECTION 13, ORAVAX DISCLAIMS ALL
WARRANTIES RELATING TO THE LICENSED TECHNOLOGY, EXPRESS OR IMPLIED, INCLUDING,
BUT NOT LIMITED TO, ANY WARRANTIES AGAINST INFRINGEMENT OF THIRD PARTY RIGHTS,
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
14. CERTAIN COVENANTS RELATING TO ORAVAX TECHNOLOGY. OraVax hereby
covenants to indemnify and hold PMC and the SNC harmless against any and all
claims, costs and damages in the event that, at any time or from time to
time, the amount of any and all royalties and license or other fees which may
be payable under the OraVax Technology Agreements to the extent that any such
royalties exceed [ ]* of net sales.
OraVax covenants and agrees at all times during the
Collaboration, and thereafter so long as PMC or its Affiliates or successors and
assigns has any rights to any of the OraVax Technology, (i) to take all action
reasonably necessary to protect all of its rights to the OraVax Technology,
including, but not limited to, the OraVax Technology Agreements, (ii) to comply
- ----------------------
* This portion of the Exhibit has been omitted pursuant to a Request for
Confidential Treatment under Rule 406 of the Securities Act of 1933, as
amended. The complete Exhibit, including the portions for which confidential
treatment has been requested, has been filed separately with the Securities
and Exchange Commission.
8
<PAGE>
fully with the terms and conditions of each of the OraVax Technology Agreements
(including, but not limited to any royalty or license (or other) fee
obligations) and otherwise maintain such Agreements in full force and effect;
(provided that OraVax shall not be responsible for adverse effects on the OraVax
Technology Agreements to the extent caused, by the actions of PMC or its
Controlled Affiliates or their successors and assigns unless expressly licensed
or authorized by OraVax pursuant to the Master Agreement or any Closing or
Future Agreement); and (iii) to promptly furnish PMC with copies of any and all
written notices OraVax or any of its directors, officers, employees, agents or
representatives may at any time receive in connection with any of the OraVax
Technology Agreements.
15. INDEMNIFICATION. Each of OraVax and the Licensee shall defend
indemnify and hold harmless the other and their respective Affiliates to the
full extent provided in Article 18 of the Master Agreement.
16. ASSIGNMENT. The rights and obligations of the parties under this
Agreement may not be assigned or transferred without the prior written consent
of the other.
17. EXPORT REGULATIONS. The SNC hereby agrees to comply with all export
laws and restrictions and regulations of the Department of Commerce of the
United States or other United States, French or any other country's agency or
authority, and not to knowingly export, or allow the export or re-export of any
Technology, Target Product or any derivative or direct product thereof, in
violation of any such restrictions, laws or regulations, or, without all
required licenses and authorizations to Afghanistan, the People's Republic of
China or any Group Q, S, W, Y or Z country specified in the then current
Supplement No. 1 to Section 770 of the U.S. Export Administration Regulations
(or any successor supplement or regulations).
18. IMPORT REGULATIONS. This Agreement is subject to all of the United
States', France's (or any other country's, as appropriate) laws and regulations
controlling the import of drugs and biological products, technical data,
laboratory prototypes and other commodities and Technology.
19. NOTICES.
Any notice or other communication required or permitted hereunder shall
be in writing and shall be deemed given when so delivered in person, by
overnight courier, by facsimile transmission (with receipt confirmed by
telephone or by automatic transmission report) or two business days after being
sent by registered or certified mail (postage prepaid, return receipt
requested), as follows:
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<PAGE>
(a) if to Licensor, to:
OraVax, Inc.
38 Sidney Street
Cambridge, Massachusetts 02139
Attn: Lance Gordon
Telephone: (617) 494-1339
Facsimile: (617) 494-0924
with a copy to:
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
Attn: Michael Lytton, Esq.
Telephone: (617) 573-0100
Facsimile: (617) 227-4420
(b) if to Licensee, to:
Merieux OraVax S.N.C.
58 avenue Leclerc
69007 Lyon, France
Attn: Gerant
with a copy to:
Pasteur Merieux Serums & Vaccins S.A.
58, avenue Leclerc
69007 Lyon, France
Attn: Senior Vice President,
Legal and Corporate Affairs and
General Counsel
Telephone: 011.33.4.37.37.77.84
Facsimile: 011.33.4.37.37.70.61
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attn: L. Kevin O'Mara, Jr., Esq.
Telephone: (212) 872-1000
Facsimile: (212) 872-1002
Any party may by notice given in accordance with this Section 19 to the
other parties designate another address or person for receipt of notices
hereunder.
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<PAGE>
20. WAIVER. Any term or condition of this Agreement may be waived or
qualified at any time by either Party by a written instrument executed by such
Party. No omission, delay or failure on the part of any Party in exercising any
rights hereunder, and no partial or single exercise hereof, will constitute a
waiver of such rights or of any other rights hereunder.
21. MODIFICATIONS. This Agreement may be amended, modified or
supplemented only by a written instrument duly executed by both parties which
instrument shall specifically indicate that it is the desire of the parties to
amend, modify or supplement the Agreement.
22. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to its
conflict of law rules.
23. SEVERABILITY. If any provision of this Agreement is ultimately held
to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby, unless the absence of the invalidated provision
materially adversely affects the substantive rights of the parties. To the
extent permitted by applicable law, each Party waives any provision of law which
renders any provision hereof invalid, illegal or unenforceable in any respect.
In the event that any provision of this Agreement shall be held to be invalid,
illegal or unenforceable, the parties shall in such an instance use their best
efforts to replace the invalidated provision by a valid, legal and enforceable
provision which, insofar as practical, implements the purposes hereof.
24. AFFILIATES. Each of OraVax and PMC shall cause its respective
Controlled Affiliates to comply fully with the provisions of this Agreement to
the extent such provisions specifically relate, or are intended to specifically
relate, to such Controlled Affiliates, as though such Controlled Affiliates were
expressly named as joint obligors hereunder.
25. EXECUTION. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original.
26. HEADINGS. The Section headings in this Agreement are solely for the
convenience and reference of the Parties and are not intended to be descriptive
of the entire contents of, or to affect, any of the terms or provisions hereof.
[The remainder of this page intentionally left blank]
11
<PAGE>
IN WITNESS WHEREOF, this LICENSE AGREEMENT has been executed by each of
the parties on the date first above written.
ORAVAX, INC.
By:_________________________________
Name:
Title:
MERIEUX ORAVAX S.N.C.
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
<PAGE>
ANNEX D TO
EXHIBIT 10.10
AMENDMENT AGREEMENT
This Amendment Agreement (the "Amendment Agreement") is
entered into as of this ___ day of ________, 1999 by and between:
1. PASTEUR MERIEUX Serums & Vaccins S.A., a SOCIETE ANONYME
existing and organized under the laws of France, registered under number RCS
LYON B 349 505 370, whose registered head office is located at 58, avenue
Leclerc, 69007 Lyon, France (hereinafter referred to as "PMC");
AND
2. ORAVAX, Inc., a corporation existing and organized under
the laws of the State of Delaware, having its principal place of business at 38
Sidney Street, Cambridge, Massachusetts, United States of America (hereinafter
referred to as "OraVax").
Capitalized terms used but not defined herein shall have the
same meanings assigned to them in the Master Agreement dated March 31, 1995 as
amended by that certain Amendment Agreement dated November 2, 1998 (the "Master
Agreement").
WITNESSETH
WHEREAS, OraVax and PMC have entered into the Master Agreement
with respect to the development of products for the treatment and/or prevention
of Helicobacter pylori infections; and
WHEREAS, the Master Agreement provides that the parties may
extend the scope of the Collaboration to include products for the prevention of
other infections; and
WHEREAS, the Executive Committees of each of the Partnerships
have agreed to extend the scope of the Collaboration to include vaccines for the
prevention of Hepatitis C in humans and in connection therewith each of the
Partnerships has entered into license agreements with PMC for certain technology
relating to vaccines for the prevention of Hepatitis C (collectively, the
"Hepatitis C License Agreements"); and
WHEREAS, in connection with entering into the Hepatitis C
License Agreements, the parties desire to amend certain terms of the Master
Agreement to include vaccines for the prevention of Hepatitis C within the Field
of the Collaboration;
NOW, THEREFORE, in consideration of the mutual promises,
conditions, covenants and undertakings hereinafter set forth, the parties
hereto, intending to be legally bound, hereby agree as follows:
<PAGE>
1. Section 1.1 of the Master Agreement is hereby amended to
include vaccines for the prevention of hepatitis C in humans which utilize the
Technology set forth in the Hepatitis C License Agreements within the Field of
the Collaboration.
2. The definition of "OraVax Technology" in Section 1.2 of the
Master Agreement shall, for all purposes other than Article 5 of the Master
Agreement, be amended to include the Technology licensed to PMC from OraVax
relating to vaccines for the prevention of Hepatitis C in humans pursuant to
that certain OraVax / PMC Hepatitis C License Agreement dated as of the date
hereof.
3. The definition of "Target Products" in Section 1.2 of the
Master Agreement shall be amended to include products for the prevention,
treatment or cure of Hepatitis C in humans which utilizes the Technology
licensed to the Partnerships pursuant to the Hepatitis C License Agreements.
4. A new Section 7.3(c) is hereby added which reads in its
entirety as follows:
"(c) Notwithstanding the foregoing, the Parties agree that
Sections 7.3(a) and 7.3(b) hereof shall not apply to any
license given by OraVax to the Partnerships with respect
to hepatitis C."
5. A new Section 7.7 is hereby added which reads in its
entirety as follows:
"7.7 RESEARCH, DEVELOPMENT AND MANUFACTURE OF TARGET PRODUCTS.
In the event that the Program Committee determines that
PMC's vero cell technology is useful or necessary for the
research, development and/or manufacture of a Target Product,
PMC agrees to research, develop and/or manufacture such
Target Product using such vero cell technology on
commercially reasonable terms at no additional royalty to
the Partnerships. Notwithstanding the foregoing (but subject
to the obligation of PMC to apply such technology at no
additional cost), the Parties agree that PMC's vero cell
technology constitutes Severable Technology."
6. Except as expressly amended hereby, the Master Agreement
and all rights and obligations of the parties thereunder, shall remain in full
force and effect. This Amendment Agreement shall not be deemed to be a consent
to any waiver or modification of any other terms or provisions of the Master
Agreement.
<PAGE>
IN WITNESS WHEREOF, this Amendment Agreement has been executed
by each of the parties on the date first above written.
PASTEUR MERIEUX Serums & Vaccins S.A.
By: ___________________________________
Name:
Title:
ORAVAX, INC.
By: ___________________________________
Name:
Title:
<PAGE>
ANNEX E TO
EXHIBIT 10.10
MILESTONE DEFERRAL AGREEMENT
This Milestone Deferral Agreement (the "Milestone Deferral Agreement")
is entered into as of this ____ day of ______, 1999 by and between:
1. PASTEUR MERIEUX SERUMS & VACCINS S.A., a SOCIETE ANONYME existing
and organized under the laws of France, registered under number RCS LYON B 349
505 370, whose registered head office is located at 58, avenue Leclerc, 69007
Lyon, France (hereinafter referred to as "PMC");
2. ORAVAX, Inc., a corporation existing and organized under the laws of
the State of Delaware, having its principal place of business at 38 Sidney
Street, Cambridge, Massachusetts, United States of America (hereinafter referred
to as "OraVax");
3. MERIEUX ORAVAX S.N.C., the SOCIETE EN NOM COLLECTIF established by
OraVax and PMC under French law (hereinafter referred to as "SNC"); and
4. ORAVAX MERIEUX CO., a general partnership organized under the laws
of Massachusetts (hereinafter referred to as the "U.S. Partnership").
WITNESSETH
WHEREAS, PMC and OraVax have entered into a license agreement related
to vaccines against dengue viruses effective as of October 1, 1998 (the "Dengue
License");
WHEREAS, PMC and Peptide Therapeutics Limited ("Limited") have entered
into an agreement effective as of January 22, 1999 (the "Overview Agreement")
under which, among other things, Limited agrees, in accordance with the terms
and conditions thereof, to cause OraVax to enter into this Agreement and certain
license agreements;
WHEREAS, OraVax JVM, Inc. and Connaught Laboratories have entered into
an amendment effective as of January 22, 1999 to the Facility Agreement dated as
of November 2, 1998 (the "Loan Amendment").
NOW, THEREFORE, in consideration of the mutual promises, conditions,
covenants and undertakings hereinafter set forth, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. As used herein, the following terms shall have the following
meanings:
"Hepatitis C Licenses" means, collectively, the License Agreement
between OraVax and the U.S. Partnership dated as of the date hereof and the
License Agreement between OraVax and SNC dated as of the date hereof.
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<PAGE>
"JEV/TBE License" means the License Agreement between OraVax and PMC
dated as of the date hereof.
"Master Agreement" means the Master Agreement between OraVax and PMC
dated March 31, 1995 and amended November 2, 1998 and further amended as of the
date hereof.
2. As consideration for and an inducement to PMC to enter into the
JEV/TBE License and for SNC and the U.S. Partnership to enter into the
Hepatitis C Licenses and in consideration of the research funding, milestone
payments and royalties to be received by OraVax under the Dengue License, the
JEV/TBE License, the Hepatitis C Licenses and the Master Agreement and the
loan deferral under the Loan Amendment, the parties hereby agree that PMC or
SNC or the U.S. Partnership (as the case may be) may, at its sole option and
on written notice to OraVax, defer in the aggregate up to three million
United States dollars ($3,000,000) (the "Deferral Credit") in milestone
payments payable to OraVax under the Master Agreement, Dengue License,
JEV/TBE License and Hepatitis C Licenses. The amount of any milestone payment
in respect of any licensed product under any such Agreement deferred by PMC
or SNC or the U.S. Partnership (the "Product Deferral") shall be added to the
last four remaining milestones relating to such licensed product at a rate of
twenty-five (25%) of the Product Deferral per milestone.
3. Except as expressly provided hereunder, the Dengue License,
Hepatitis C Licenses, JEV/TBE License, Master Agreement and Loan Amendment and
all rights and obligations of the parties thereunder, shall remain in full force
and effect.
[Remainder of page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, this Milestone Deferral Agreement has been executed
by each of the parties on the date first above written.
PASTEUR MERIEUX Serums & Vaccins S.A.
By: ___________________________________
Name:
Title:
ORAVAX, Inc.
By: ___________________________________
Name:
Title:
MERIEUX ORAVAX S.N.C.
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
ORAVAX MERIEUX CO.
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
3
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANT
As independent chartered accountants, we hereby consent to the use of our report
dated 1 May 1998 and to all references to our firm included in this Registration
Statement.
/s/ ARTHUR ANDERSEN
Cambridge, England
6 April 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Amendment No. 3 to the registration
statement of Peptide Therapeutics Group plc on Form F-4 of our report, dated
March 1, 1999, on our audits of the consolidated financial statements of OraVax,
Inc. as of December 31, 1997 and 1998 and for each of the three years in the
period ended December 31, 1998.
We also consent to the inclusion in this Amendment No. 3 to the registration
statement of our report, dated March 1, 1999, on our audits of the combined
financial statements of OraVax Merieux Co. and Merieux OraVax Co. (both
development stage enterprises) as of December 31, 1997 and 1998 and for each of
the three years in the period ended December 31, 1998 and cumulative from
inception (March 31, 1995) through December 31, 1998.
We also consent to the references to our firm under the caption "Experts."
/s/ PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
April 7, 1999
