<PAGE>
As filed with the United States Securities and Exchange Commission on March 8,
2000
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
DENDREON CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 2834 22-3203193
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification No.)
Incorporation or Classification Code
Organization) Number)
3005 First Avenue
Seattle, Washington 98121
(206) 256-4545
(Address, including zip code and telephone number, including area code of
registrant's principal executive offices)
Christopher S. Henney, Ph.D., D.Sc.
President and Chief Executive Officer
3005 First Avenue
Seattle, Washington 98121
(206) 256-4545
(Name, address, including zip code and telephone number, including area code
of agent for service)
---------------
Copies to:
Alan C. Mendelson, Esq. Rodd M. Schreiber, Esq.
Julie M. Robinson, Esq. Skadden, Arps, Slate, Meagher & Flom
Cooley Godward LLP (Illinois)
Five Palo Alto Square 333 West Wacker Drive
3000 El Camino Real Chicago, Illinois 60606
Palo Alto, California 94306-2155 Tel: (312) 407-0700
Tel: (650) 843-5000 Fax: (312) 407-0411
Fax: (650) 857-0663
---------------
Approximate date of commencement of proposed sale to public: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<CAPTION>
Title of Each Class of Proposed Maximum Amount of
Securities to Be Registered Aggregate Offering Price (1) Registration Fee
- ------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.001 par
value...................... $100,000,000 $26,400
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
(1) Estimated pursuant to Rule 457(o) under the Securities Act solely for the
purpose of calculating the registration fee.
---------------
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 this
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. +
+Dendreon may not sell these securities until the registration statement filed +
+with the Securities and Exchange Commission is effective. This prospectus is +
+not an offer to sell these securities and it is not soliciting an offer to +
+buy these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION - MARCH 8, 2000
PROSPECTUS
- --------------------------------------------------------------------------------
Shares
Dendreon Corporation
Common Stock
- --------------------------------------------------------------------------------
Dendreon Corporation is offering shares of its common stock in an initial
public offering. Prior to this offering, there has been no public market for
Dendreon's common stock.
Dendreon discovers and develops immunologically based therapeutic products for
the treatment of cancer.
It is anticipated that the public offering price will be between $ and $
per share. Application has been made to include the common stock for quotation
in the Nasdaq National Market under the symbol "DNDN".
Kirin Brewery Co., Ltd., our collaborator in Asia, has agreed to purchase
shares of our common stock in a private placement concurrently with the
completion of this offering at the public offering price, with net proceeds to
Dendreon of $5.0 million.
<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public offering price................................ $ $
Underwriting discounts and commissions............... $ $
Proceeds, before expenses, to Dendreon............... $ $
</TABLE>
See "Risk Factors" on pages 8 to 17 for factors that should be considered
before investing in the shares of Dendreon.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
- --------------------------------------------------------------------------------
The underwriters may, under specific circumstances, purchase up to
additional shares from Dendreon at the public offering price, less underwriting
discounts and commissions. Delivery and payment for the shares will be on
, 2000.
Prudential Vector Healthcare
a unit of Prudential Securities
SG Cowen
Pacific Growth Equities, Inc.
, 2000
<PAGE>
DESCRIPTION OF ARTWORK
Inside Front Cover
Headline: Therapeutic Cancer Vaccine Approach
Illustration: A two-part illustration is pictured at the top of the page. The
first part of this illustration is entitled "Antigen Delivery Cassette" and
depicts the Antigen Delivery Cassette and its three component parts, labeled the
"Antigen", the "Antigen Processing Region" and the "Dendritic Cell Binding
Region". The second part of the illustration has six images. The first image
depicts the Antigen Delivery Cassette approaching a dendritic cell entitled
"Immature Dendritic Cell". The second image is entitled "Antigen Cassette
Binding" and depicts the Antigen Delivery Cassette attached to an Immature
Dendritic Cell. The third and fourth images are entitled "Antigen Processing"
and depicts the Antigen Delivery Cassette being processed by the dendritic cell.
The fifth image depicts a dendritic cell labeled "Mature Antigen-Presenting
Dendritic Cell" attaching to illustrations of three T-cells and is entitled "T-
cell Education and Activation". The sixth image entitled "Tumor Cell
Eradication" depicts three T-cells and a tumor cell with two T-cells attached to
it.
Illustration at bottom of page: A chart is pictured at the bottom of the page
which lists products in the left-hand column and the terms "Research",
"Preclinical", "Phase I", "Phase II", "Phase III" and "FDA Approved" in a row
across the top of six columns. Each product's development is illustrated by the
column location where a corresponding bar terminates. The products are separated
into three categories, which are each entitled "Therapeutic Vaccines",
"Therapeutic Antibodies" and "Cell Separation Products". The "Therapeutic
Vaccines" section includes "Provenge", with a bar extending to the column
entitled "Phase III", "APC8020", with a bar extending to the column entitled
"Phase II", "APC8024", "APC80NY" and "APC80TR" all of which have a bar extending
to the column entitled "Preclinical". The section entitled "Therapeutic
Antibodies" includes "Danton" and "Dantes", both of which have a bar extending
to the column entitled "Preclinical". The section entitled "Cell Separation
Products" includes "DACS SC Kit" with a bar extending to the column entitled
"FDA Approved".
1.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................. 4
Risk Factors........................ 8
Forward-Looking Statements.......... 17
Use of Proceeds..................... 18
Dividend Policy..................... 18
Dilution............................ 19
Capitalization...................... 20
Selected Financial Data............. 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 22
Business............................ 26
Management.......................... 43
Certain Relationships and Related
Transactions....................... 52
Principal Stockholders.............. 54
Description of Capital Stock........ 56
Shares Eligible for Future Sale..... 59
Underwriting........................ 61
Legal Matters....................... 62
Experts............................. 62
Where You Can Find Additional
Information........................ 63
Index to Financial Statements....... F-1
</TABLE>
- -------------------------------------------------------------------------------
Dendreon(TM), the Dendreon logo, Provenge(TM), Antigen Delivery Cassette(TM)
and DACS(R) are trademarks of Dendreon. This prospectus also includes
trademarks and tradenames of other companies.
- -------------------------------------------------------------------------------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. We are
not making an offer of these securities in any jurisdiction where the offer or
sale is not permitted. You should not assume that the information contained in
this prospectus is accurate as of any date other than the date on the front
cover of this prospectus.
3
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in the prospectus.
This summary does not contain all of the information that you should consider
before investing in our common stock. You should read the entire prospectus
carefully.
Dendreon
We discover and develop immunologically based therapeutic products for the
treatment of cancer. We combine our expertise in immunology and antigen
engineering with our proprietary cell separation technologies to develop
therapeutic vaccines that induce cell-mediated immunity, the body's key defense
against cancer. Our most advanced product, Provenge(TM), is a therapeutic
vaccine for the treatment of prostate cancer. We initiated our first Phase III
clinical trial for Provenge in January 2000 and anticipate initiating a second,
pivotal, Phase III clinical trial in April 2000. In addition, we are conducting
Phase II clinical trials of APC8020, our therapeutic vaccine for B-cell
malignancies, including multiple myeloma and amyloidosis. We have three
additional therapeutic vaccines in preclinical development for the treatment of
common malignancies, including breast, colorectal, lung and ovarian/uterine
cancers. We also intend to pursue the application of our technologies in the
fields of autoimmune diseases, allergies and infectious diseases. We plan to
retain commercialization rights for our products in the United States and
partner our products in other parts of the world. We are collaborating with
Kirin Brewery Co., Ltd. for the marketing and development of our products in
Asia.
Cancer and Cancer Therapy
The American Cancer Society estimates that doctors will diagnose
approximately 1.2 million new cases of cancer in the United States in 2000.
Cancer, the second leading cause of death in the United States, will result in
an estimated 552,000 deaths in 2000. Cancer costs are estimated at $107 billion
annually, including health care expenditures and lost productivity from illness
and death. Spending on cancer therapeutic drugs was $7.4 billion in the United
States in 1998. Cancer is characterized by abnormal cells that proliferate
uncontrollably and metastasize, or spread, throughout the body. To be
effective, cancer therapy must eliminate the cancer both at its site of origin
and at metastatic sites. Current treatments for cancer include surgery,
radiation, hormone therapy and chemotherapy. Treatments known as immunotherapy
are designed to stimulate the body's natural mechanism for fighting diseases.
Immunotherapy may overcome many of the limitations of current cancer therapies
by enabling the immune system to recognize and destroy cancerous cells. We
believe immunotherapy may be particularly useful for the treatment of residual
disease, the small tumor masses, including metastases, which may remain
following conventional therapy.
Our Therapeutic Cancer Vaccine Approach
The immune system protects against disease by recognizing specific chemical
structures known as antigens. In the presence of disease-related antigens, a
specialized class of cells known as dendritic cells are activated to take up
and process the antigen. These activated dendritic cells then sensitize another
class of cells known as lymphocytes, which seek out and eliminate diseased
cells. Tumors, however, create an environment that suppresses the ability of
dendritic cells to become activated. Our vaccines are based on our ability to
manipulate dendritic cells. Our proprietary cell separation technologies allow
us to isolate dendritic cells from the blood and activate them to process tumor
antigens. Our antigen engineering capabilities allow us to modify the target
antigen in our Antigen Delivery Cassette(TM) and augment the uptake and
processing of the antigen by dendritic cells, thereby increasing the potency of
the immune response.
Benefits of Our Approach
Our therapeutic vaccines may offer novel treatment alternatives for cancers
that currently are not adequately addressed. Benefits of our therapeutic
vaccines may include:
. Vigorous stimulation of cell-mediated immunity: The results of our
clinical trials to date have demonstrated that our vaccines have the
potential to produce cell-mediated immunity.
4
<PAGE>
. Minimal side effects: Our vaccines specifically target cancerous cells,
and the results of our clinical trials have shown them to be very well
tolerated by patients.
. Applicability to a wide variety of cancers: Our antigen identification,
antigen engineering and dendritic cell technologies enable us to create
proprietary vaccines for the potential treatment of a wide variety of
cancers.
. Single vaccine can treat multiple cancers: We identify novel antigens
that are shared by multiple types of cancer. We believe this approach
will allow us to develop single vaccines for the treatment of several
different tumors.
. Access broad patient population: We select antigens that are present on
a significant percentage of cancer patients' tumors. For example, our
prostate cancer vaccine antigen is found on approximately 95% of
prostate cancers.
. Cost-effective manufacturing process: We have developed a manufacturing
process that employs our proprietary cell separation systems that can
produce vaccines on a cost-effective basis.
. Simple, convenient therapy: Our vaccines are delivered as 30-minute
infusions in an outpatient procedure. Patients complete a course of
treatment in one month.
Our Therapeutic Vaccines
We are conducting a Phase III clinical trial for our lead product, Provenge,
for the treatment of patients with advanced prostate cancer. There are
currently over one million men with prostate cancer in the United States, with
180,000 new cases and 32,000 deaths estimated in 2000. There is currently no
treatment that increases long-term survival of patients with prostate cancer,
particularly if the cancer has metastasized. Our Phase I and Phase II clinical
trials suggest that Provenge will be safe and effective in treating patients
with advanced prostate cancer resistant to hormone therapy. Based upon
historical data, we would have expected that 50% of untreated patients at a
similar stage of disease as the patients in our trials would have experienced
disease progression at 12 weeks, 75% at 30 weeks, and 90% at one year. In our
trials, patients experienced a significant decrease in the rate of progression
of the disease: 53% had stabilized at 28 weeks, and 26% were stable for greater
than one year. In addition, less than two percent of Provenge infusions were
associated with significant side effects.
B-cell malignancies, which include multiple myeloma and amyloidosis, are
characterized by the abnormal production of immunoglobins, or antibodies, by
cancerous bone marrow plasma cells. It is estimated that in 2000, 13,600
individuals in the United States will be diagnosed with multiple myeloma and
over 11,000 individuals will die from the disease. Amyloidosis, a disease in
which plasma cells produce deposits of an immunoglobulin eventually resulting
in death from organ failure, afflicts approximately 2,500 individuals in the
United States annually. We are conducting several clinical trials of our
therapeutic vaccine, APC8020, in patients with multiple myeloma and
amyloidosis. In our Phase II clinical trial in multiple myeloma patients, six
of 13 patients have experienced major tumor reductions, including complete
disappearance of tumor in four of these patients. Only one of the 13 patients
had experienced disease progression at 40 weeks after starting treatment.
Treating physicians in this clinical trial did not report any side effects
associated with APC8020.
We have three vaccine products, APC8024, APC80NY and APC80TR, in preclinical
development for the treatment of breast, lung, colorectal and ovarian/uterine
cancers. We expect to enter clinical trials in 2000 with APC8024 for the
treatment of breast, ovarian and colorectal cancers. In addition, we have two
monoclonal antibodies in preclinical development, including Danton for the
treatment of numerous blood-borne tumors, and Dantes for the treatment of
autoimmune diseases.
About Us
We were incorporated in Delaware in August 1992. Our principal executive
offices are located at 3005 First Avenue, Seattle, Washington 98121, and our
telephone number is (206) 256-4545.
5
<PAGE>
The Offering
Shares offered by Dendreon............ shares
Total shares outstanding after this shares
offering..............................
Use of proceeds....................... To fund clinical trials, research,
preclinical and commercialization
activities for our therapeutic vaccine
products, to increase our dendritic
cell processing and antigen
manufacturing capacity and for general
corporate purposes, including working
capital. We may also use a portion of
the net proceeds to acquire
complementary technologies or products.
Proposed Nasdaq National Market DNDN
symbol................................
The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of March 1, 2000, and includes
shares to be issued to Kirin in a private placement concurrent with the
closing of this offering. However, it does not include, as of March 1, 2000,
the following:
. 1,187,213 shares of common stock available for future issuance under our
2000 Equity Incentive Plans and 1,741,689 shares subject to outstanding
options;
. 1,350,000 shares reserved for issuance under our 2000 Employee Stock
Purchase Plan;
. 484,127 shares of common stock issuable on exercise of outstanding
warrants; and
. up to shares that the underwriters may purchase if they exercise
their over-allotment option in full.
Unless otherwise noted, the information in this prospectus assumes:
. the mandatory conversion of all outstanding shares of our preferred stock
under the terms of our certificate of incorporation into the same number
of shares of common stock upon closing of this offering;
. the filing of our amended and restated certificate of incorporation; and
. the underwriters have not exercised their over-allotment option.
Risk Factors
You should consider the risk factors and the impact from various events
which could adversely affect our business before investing in our common stock.
6
<PAGE>
Summary Financial Information
The summary financial data should be read in conjunction with our financial
statements and the related notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere in this
prospectus.
The pro forma net loss per share presented below for the year ended December
31, 1999 assumes the conversion of all outstanding shares of preferred stock at
December 31, 1999 into common stock on a one-for-one basis. All preferred stock
will automatically convert into common stock upon the closing of this offering.
The pro forma balance sheet data presented below gives effect to the sale of
970,708 shares of Series E convertible preferred stock in February 2000 and the
conversion of all outstanding shares of preferred stock into 13,079,077 shares
of common stock. The pro forma as adjusted balance sheet data presented below
gives effect to the sale of shares of our common stock in this offering at
an assumed initial public offering price of $ per share, the application of
the net proceeds after deducting underwriting discounts and commissions and
estimated offering expenses, and the net proceeds from the sale of shares
of common stock to Kirin concurrent with the completion of this offering in a
private placement at the public offering price.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1998 1999
------------ ------------ --------------
(in thousands, except per share data)
<S> <C> <C> <C>
Statement of Operations Data:
Revenue.......................... $ 793 $ 1,849 $ 3,519
Total operating expenses......... 8,184 10,916 16,293
Loss from operations............. (7,391) (9,067) (12,774)
Net loss......................... (7,163) (9,349) (12,679)
Net loss attributable to common
stockholders.................... (7,163) (9,349) (12,964)
Net loss per common share--basic
and diluted..................... (23.51) (16.34) (15.08)
Pro forma basic and diluted net
loss per common share........... (1.20)
Shares used in computing basic
and deleted net loss per share.. 305 572 860
Pro forma shares used in
computing basic and diluted net
loss per share.................. 10,821
<CAPTION>
As of December 31, 1999
-------------------------------------------
Pro Forma
Actual Pro Forma As Adjusted
------------ ------------ --------------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and short-
term investments................ $ 13,813 $ 17,939
Working capital.................. 9,938 14,064
Total assets..................... 17,375 21,501
Long-term obligations, less
current portion................. 2,799 2,799
Total stockholders' equity....... 6,352 10,478
</TABLE>
7
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors, in addition to
the other information set forth in this prospectus, before purchasing shares
of our common stock. Each of these risk factors could adversely affect our
business, operating results and financial condition, as well as adversely
affect the value of an investment in our common stock. This investment
involves a high degree of risk.
Risks Related To Our Business
If we are not able to demonstrate the efficacy of our prostate cancer and
multiple myeloma vaccines in our clinical trials or if our clinical trials
are delayed, our business could be substantially impaired.
Our research and development programs are at an early stage. We are
currently enrolling patients in our first Phase III clinical trial involving
Provenge(TM), our prostate cancer vaccine. Clinical testing is a long,
expensive and uncertain process. A minimum of 18 months will likely elapse
before we learn the results of this prostate cancer vaccine clinical trial.
We have not yet sought FDA approval for our vaccine products, and we cannot
be sure that the data collected from our clinical trials will be sufficient to
support approval by the FDA. We cannot be sure that the clinical trials of our
products under development will be completed on schedule, or that the FDA will
ultimately approve any of our product candidates for commercial sale.
Furthermore, even if initially positive preclinical studies or clinical trial
results are achieved, as in our prostate cancer and multiple myeloma clinical
trials, it is possible that we will obtain different results in the later
stages of drug development. Our vaccines in later stages of clinical
development may fail to show the desired safety and efficacy despite having
progressed through initial clinical testing.
The clinical trials of any of our cancer vaccines could fail, which would
prevent us from commercializing our products. A setback in the development of
our prostate cancer and multiple myeloma vaccines could cause a decline in our
stock price and, moreover, could reflect adversely on our other immunotherapy
products. Our failure to develop safe, commercially viable cancer vaccines
would substantially impair our ability to generate revenues to sustain
operations and materially harm our business and financial condition.
Our therapeutic vaccines are novel and may not be effective.
No cancer vaccine using dendritic cell technologies has been approved for
marketing. Consequently, there is no precedent for the successful
commercialization of products based on our technologies. We cannot assure you
that any of our products will be successfully developed.
We have a history of operating losses, and we may never be profitable.
As of December 31, 1999, we had an accumulated deficit of $50.7 million.
These losses have resulted principally from costs incurred in our research and
development programs and from our general and administrative costs. We have
derived no significant revenues from product sales or royalties. We do not
expect to achieve significant product sales or royalty revenue for a number of
years, and are not able to predict when we might do so. We expect to incur
additional operating losses in the future. These losses may increase
significantly as we expand development and clinical trial efforts.
Our ability to achieve long-term profitability is dependent upon obtaining
regulatory approvals for our products and successfully commercializing our
products alone or with third parties. However, we cannot assure you that our
operations will be profitable even if any of our products under development
are commercialized.
8
<PAGE>
Our clinical trials could take longer to complete than we project.
Although for planning purposes we project the commencement, continuation
and completion of clinical trials, the actual timing of these events may be
subject to significant delays relating to various causes, including scheduling
conflicts with participating clinicians and clinical institutions, and the
rate of patient accruals. We cannot assure you that clinical trials involving
any of our products will commence or be completed as projected or that they
will be conducted successfully.
We have limited experience in conducting clinical trials. We rely on
academic institutions or clinical research organizations to conduct, supervise
or monitor some or all aspects of clinical trials involving our products. We
will have less control over the timing and other aspects of these clinical
trials than if we conducted them entirely on our own. Failure to commence or
complete, or delays in, any of our planned clinical trials could adversely
affect us.
If testing of a particular product does not yield successful results, then
we will be unable to commercialize that product.
If preclinical or clinical testing of one or more of our cancer vaccines or
other products does not yield successful results, the product will fail. To
achieve the results we need, we must demonstrate our products' safety and
efficacy in humans through extensive preclinical and clinical testing.
Numerous unforeseen events may arise during, or as a result of, the testing
process, including the following:
. results attained in early human clinical trials may not be indicative of
results that are obtained in later clinical trials;
. the results of preclinical studies may be inconclusive, or they may not
be indicative of results that will be obtained in human clinical trials;
. after reviewing test results, we or our collaborators may abandon
projects that we might previously have believed to be promising;
. we, our collaborators or regulators, may suspend or terminate clinical
trials if the participating subjects or patients are being exposed to
unacceptable health risks; and
. potential products may not have the desired effect or may have
undesirable side effects or other characteristics that preclude
regulatory approval or limit their commercial use if approved.
Clinical testing is very expensive and can take many years. The failure to
adequately demonstrate the safety and efficacy of a cancer vaccine under
development would delay or prevent regulatory approval of the vaccine, which
could adversely affect our profitability and credibility.
We do not yet have, and may never obtain, the regulatory approvals we need
to successfully market our cancer vaccines.
Our cancer vaccines have not been approved by applicable regulatory
authorities for commercialization. The process of obtaining FDA and other
required regulatory approvals, including foreign approvals, often takes many
years and can vary substantially based upon the type, complexity and novelty
of the products involved. We have had only limited experience in filing and
pursuing applications necessary to gain regulatory approvals. We cannot
guarantee that any of our products under development will be approved for
marketing by the FDA or foreign regulatory agencies. To date, the FDA and
foreign regulatory agencies have approved only a limited number of cancer
immunotherapeutics for commercial sale. This lack of experience may lengthen
the regulatory review process, increase our development costs and delay or
prevent commercialization.
Even if we obtain regulatory approval for some of our products, those
products may still face regulatory difficulties.
We cannot be certain that we will be able to obtain the labeling claims
necessary or desirable for the promotion of our products. We may also be
required to undertake post-marketing trials. In addition,
9
<PAGE>
identification of side effects after our vaccine is on the market, or the
occurrence of manufacturing problems, could cause subsequent withdrawal of
approval, reformulation of our vaccine, additional clinical trials, changes in
labeling of our vaccine, and additional marketing applications. If we receive
regulatory approval, we will be subject to ongoing FDA obligations and
continued regulatory review. Loss of previously received approvals would delay
or prevent product commercialization, which would adversely affect our
financial results.
Even if our cancer vaccines are approved, they might not be accepted in the
marketplace.
The commercial success of our cancer vaccines will depend upon their
acceptance by the medical community and third party payors as clinically
useful, cost effective and safe. Even if our products obtain regulatory
approval, we cannot assure you that they will achieve market acceptance of any
significance. If any of our products do not achieve market acceptance, we will
likely lose our entire investment in that product which may cause our stock
price to decline.
We lack sales and marketing experience and, as a result, we may experience
significant difficulties commercializing our products.
The commercial success of any of our products will depend upon the strength
of our sales and marketing efforts and the availability of third party
reimbursement. If we are unable to establish sales and marketing capabilities
or enter into agreements with pharmaceutical companies to sell and market our
products, we may experience difficulty generating revenues. We do not have a
sales organization and have no experience in the sales, marketing and
distribution of pharmaceutical products.
If Provenge is approved for commercial sale, we plan to market it in the
United States with our own sales force. Developing a sales force is expensive
and time consuming and could delay any product launch. We may not be able to
develop this capacity. If we are unable to establish our own sales and
marketing capability, we will need to enter into sales and marketing
agreements to market Provenge in the United States. We may not be able to
enter into any necessary agreements on acceptable terms, if at all.
We plan to enter into sales and marketing agreements for sales outside the
United States. If we are unable to establish successful distribution
relationships, we may be unable to generate significant revenue, if any, from
sales of our products outside the United States.
If we lose or are unable to secure collaborators, or if our collaborators,
including Kirin, do not apply adequate resources to their collaboration
with us, our product development and potential for profitability may
suffer.
We intend to enter into collaborations for one or more of the research,
development, manufacturing, marketing and other commercialization activities
relating to some of our products under development. We have entered into a
collaboration with Kirin relating to the development and commercialization of
products based on our dendritic cell technologies in Asia. As our
collaborator, Kirin funds testing, makes regulatory filings and may
manufacture and market our products in Asia. The amount and timing of
resources applied by Kirin or other potential collaborators to our joint
efforts are not within our control.
If any collaborator breaches or terminates its agreement with us, or fails
to conduct its collaborative activities in a timely manner, the
commercialization of our products under development could be slowed down or
blocked completely. We cannot assure you that Kirin or other potential
collaborators will not change their strategic focus, pursue alternative
technologies or develop alternative products, either on their own or in
collaboration with others, as a means for developing treatments for the
diseases targeted by our collaborative programs. Our revenues and earnings
also will be affected by the effectiveness of our collaborators in marketing
our products.
We cannot assure you that our collaborations with Kirin will continue or be
successful or that we will receive any further research funding, milestone or
royalty payments. We intend to continue to enter into new collaborative
agreements in the future. However, we cannot assure you that we will
successfully negotiate any additional collaborative arrangements or that any
of these relationships, if established, will be scientifically or
10
<PAGE>
commercially successful. Any additional collaborations would likely subject us
to some or all of the risks described above with respect to our collaboration
with Kirin. Disputes may arise between us and Kirin, and other potential
collaborators, as to a variety of matters, including financial or other
obligations under our agreements. These disputes may be both expensive and
time-consuming and may result in delays in the development and
commercialization of products.
We have limited manufacturing and cell processing capabilities, which could
adversely impact our ability to commercialize our products.
Our cancer vaccines and other products have never been manufactured on a
commercial scale, and there can be no assurance that our products can be
manufactured at a cost or in quantities necessary to make them commercially
viable. We intend to rely on third party contract manufacturers to produce
large quantities of materials needed for clinical trials and product
commercialization. There can be no assurance that third party manufacturers
will be able to meet our needs with respect to timing, quantity or quality. If
we are unable to contract for a sufficient supply of needed materials on
acceptable terms, or if we should encounter delays or difficulties in our
relationships with manufacturers, our clinical testing may be delayed, thereby
delaying the submission of products for regulatory approval or the market
introduction and subsequent sales of our products. Any such delay may have a
material adverse effect on our business, financial condition and results of
operations.
Moreover, we and any third-party manufacturers that we may use must
continually adhere to current Good Manufacturing Practices, or cGMP,
regulations enforced by the FDA through its facilities inspection program. If
our facilities or the facilities of these manufacturers cannot pass a pre-
approval plant inspection, the FDA premarket approval of our vaccines will not
be granted. In complying with cGMP and foreign regulatory requirements, we and
any of our third-party manufacturers will be obligated to expend time, money
and effort in production, record-keeping and quality control to assure that
our products meet applicable specifications and other requirements. If we or
any of our third-party manufacturers fail to comply with these requirements,
we may be subject to regulatory action.
We have constructed two facilities for cell processing, the manufacture of
antigens and final formulation of our cancer vaccines. We also use two, third-
party cell processing centers and plan to begin using a third this year. We
cannot assure you that these five facilities will be sufficient to meet our
initial needs for our prostate and multiple myeloma clinical trials.
Additionally, if we decide to manufacture our products in commercial
quantities ourselves, we will require substantial additional funds and will be
required to hire and train significant numbers of employees, construct
additional facilities and comply with applicable regulations for these
facilities, which are extensive. We cannot assure you that we will be able to
develop production facilities that both meet regulatory requirements and are
sufficient for all clinical trials or commercial use.
We are subject to extensive regulation, which can be costly, time consuming
and subject us to unanticipated delays.
All our potential products, cell processing and manufacturing activities,
are subject to comprehensive regulation by the FDA in the United States and by
comparable authorities in other countries. These national agencies and other
federal, state and local entities regulate, among other things, the
preclinical and clinical testing, safety, effectiveness, approval,
manufacture, labeling, marketing, export, storage, recordkeeping, advertising
and promotion of our products. Violations of regulatory requirements at any
stage, whether before or after marketing approval is obtained, may result in
fines, forced removal of a product from the market and other adverse
consequences.
Competition in our industry is intense and many of our competitors have
substantially greater managerial resources than we have.
Competition in the cancer vaccine, infectious disease, autoimmune disease
and allergy fields is intense and is accentuated by the rapid pace of
technological development. Research and discoveries by others may result in
breakthroughs which may render our products obsolete even before they generate
any revenue. There are
11
<PAGE>
products currently under development by others that could compete with the
products that we are developing. Many of our competitors have substantially
greater research and development capabilities and manufacturing, marketing,
financial and managerial resources than we do. Our competitors may:
. develop safer or more effective immunotherapeutics and other therapeutic
products;
. implement more effective approaches to sales and marketing; or
. establish superior proprietary positions.
More specifically, if we receive regulatory approvals, some of our
immunotherapeutics will compete with well-established, FDA approved therapies
that have generated substantial sales over a number of years.
We anticipate that we will face increased competition in the future as new
companies enter our markets and as scientific developments surrounding
immunotherapy and other cancer therapies continue to accelerate. If our
products receive marketing approval but cannot compete effectively in the
marketplace, our profitability and financial position would suffer.
We may require additional funding, and our future access to capital is
uncertain.
Developing cancer vaccines and conducting clinical trials for the vaccines
is expensive. We plan to continue to simultaneously conduct clinical trials and
preclinical research for many different cancer and autoimmune disease vaccines,
which is costly. Our future revenues may not be sufficient to support the
expenses of our operations and the conduct of our clinical trials and
preclinical research. We may need to raise additional capital:
. to fund operations;
. to continue the research and development of our therapeutic vaccines; and
. to commercialize our vaccines.
We believe that the net proceeds of this offering, together with the
proceeds from the sale of our common stock in a private placement concurrent
with this offering, our cash on hand and cash generated from our collaborative
arrangements will be sufficient to meet our projected operating and capital
requirements for at least the next 24 months. However, we may need additional
financing within this timeframe. 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 or all of our
development programs and some or all of our clinical trials. We also may be
forced to license technologies to others that we would prefer to develop
internally. If we raise additional funds by issuing equity securities, further
dilution to stockholders may result, and new investors could have rights
superior to holders of shares issued in this offering.
If we are unable to protect our proprietary rights, we may not be able to
compete effectively or operate profitably.
Our success is dependent in part on obtaining, maintaining and enforcing our
patents and other proprietary rights. The patent position of biotechnology and
pharmaceutical firms is highly uncertain and involves many complex legal and
technical issues. There is no clear policy involving the breadth of claims
allowed in patents or the degree of protection afforded under patents.
Accordingly, we cannot assure you that patent applications owned by or licensed
to us will result in patents being issued or that, if issued, the patents will
give us an advantage over competitors with similar technology.
We own or have licenses to numerous patents. However, the issuance of a
patent is not conclusive as to its validity or enforceability and we cannot be
certain as to how much protection, if any, will be given to our patents if we
attempt to enforce them and they are challenged in court. The validity or
enforceability of a patent after its issuance by the patent office can be
challenged in litigation. We cannot assure you that our patents will not be
successfully challenged. Moreover, the cost of litigation to uphold the
validity of patents and
12
<PAGE>
to prevent infringement can be substantial. If the outcome of litigation is
adverse to us, third parties may be able to use our patented invention without
payment to us. Moreover, we cannot assure you that our patents will not be
infringed or successfully avoided through design innovation. These lawsuits
are expensive and would consume time and other resources, even if we were
successful in stopping the violation of our patent rights. In addition, there
is a risk that a court would decide that our patents are not valid and that we
do not have the right to stop the other party from using the inventions. There
is also the risk that, even if the validity of our patents were upheld, a
court would refuse to stop the other party on the ground that its activities
are not covered by, that is, do not infringe, our patents.
In addition to the intellectual property rights described above, we also
rely on unpatented technology, trade secrets and confidential information. We
cannot assure you that others will not independently develop substantially
equivalent information and techniques or otherwise gain access to or disclose
our technology, or that we can effectively protect our rights in unpatented
technology, trade secrets and confidential information. We require each of our
employees, consultants and advisors to execute a confidentiality agreement at
the commencement of an employment or consulting relationship with us. We
cannot assure you, however, that these agreements will provide effective
protection of our information or, in the event of unauthorized use or
disclosure, provide adequate remedies.
We cannot guarantee that the use of our technologies will not conflict with
the rights of others.
There may be patent rights belonging to others that require us to alter our
products, pay licensing fees or cease activities. If our products conflict
with patent rights of others, they could bring legal actions against us
claiming damages and seeking to enjoin manufacturing and marketing of the
affected products. If these legal actions are successful, in addition to any
potential liability for damages, we could be required to obtain a license in
order to continue to manufacture or market the affected products. We cannot
assure you that we would prevail in any legal action or that any license
required under the patent would be made available on acceptable terms or at
all.
We may incur substantial costs as a result of litigation or other
proceedings relating to patent and other intellectual property rights.
The cost to us of any litigation or other proceeding relating to
intellectual property rights, even if resolved in our favor, could be
substantial. Some of our competitors may be better able to sustain the costs
of complex patent litigation because they have substantially greater
resources. Uncertainties resulting from the initiation and continuation of any
litigation could have a material adverse effect on our ability to continue our
operations.
Should third parties file patent applications, or be issued patents
claiming technology also claimed by us in pending applications, we may be
required to participate in interference proceedings in the United States
Patent and Trademark Office to determine priority of invention. We may be
required to participate in interference proceedings involving our issued
patents and pending applications. An unfavorable outcome in an interference
proceeding could require us to cease using the technology or to license rights
from prevailing third parties. There is no guarantee that any prevailing party
would offer us a license or that we could acquire any license made available
to us on commercially acceptable terms.
We are dependent on third parties to perform a variety of functions, and we
cannot assure you that these third parties will perform satisfactorily.
We rely in part on collaborators and other third parties to perform for us
or assist us with a variety of functions, including research and development,
manufacturing and clinical trials management. We are party to several
agreements which place substantial responsibility on third parties for
clinical development of our products. We also license from others technology
to enhance or supplement our antigen discovery, antigen
13
<PAGE>
engineering and dendritic cell technologies. We cannot assure you that we will
be able to maintain any of these relationships or establish new ones on
beneficial terms, that we can enter into these arrangements without undue
delays or expenditures, or that these arrangements will allow us successfully
to develop and commercialize our products.
We are dependent on single-source vendors for some of our components.
We currently depend on single-source vendors for some components of our cell
separation devices and buoyant density solution, including sterilization and
packaging. There are, in general, relatively few alternative sources of supply
for these products. While these vendors have produced our products with
acceptable quality, quantity and cost in the past, they may be unable or
unwilling to meet our future demands. Establishing additional or replacement
suppliers for these products could take a substantial amount of time. If we
have to switch to a replacement vendor, the manufacture and delivery of our
products could be interrupted for an extended period.
We may experience difficulties managing our growth.
We expect significant growth in all areas of our operations as we develop
and market our products. We will need to add personnel and expand our
capabilities, which may strain our existing managerial, operational, financial
and other resources. To compete effectively and manage our growth, we must:
. train, manage and motivate a growing employee base;
. accurately forecast demand for our products; and
. expand existing operational, financial and management information
systems.
Our failure to manage our growth effectively could harm our business.
If we lose key management and scientific personnel or cannot recruit
qualified employees, our business could suffer.
Our success depends, to a significant extent, upon the efforts and abilities
of Christopher S. Henney, Ph.D., D.Sc., our President and Chief Executive
Officer, and David Urdal, Ph.D., our Executive Vice President and Chief
Scientific Officer, and other members of senior management. The loss of the
services of one or more of our key employees could adversely effect us. We do
not maintain key person life insurance on any of our officers, employees or
consultants.
Competition for qualified employees among companies in the biotechnology and
biopharmaceutical industry is intense. Our future success depends upon our
ability to attract, retain and motivate highly skilled employees. In order to
commercialize our products successfully, we may be required to expand
substantially our workforce, particularly in the areas of manufacturing,
clinical trials management, regulatory affairs, business development and sales
and marketing. We cannot assure you that we will be successful in hiring or
retaining qualified personnel.
Health care reform and other changes in the health care industry, including
changes in reimbursement policies, could adversely affect our potential
profitability.
Recent proposals to change the health care system in the United States have
included measures that would limit or eliminate payments for medical procedures
and treatments or subject the pricing of pharmaceuticals to government control.
In addition, as a result of the trend towards managed health care in the United
States, as well as legislative proposals to reduce government insurance
programs, third-party payors are increasingly attempting to contain health care
costs by limiting both coverage and the level of reimbursement for new drug
products. If we or our collaborators succeed in bringing one or more of our
products to market, we cannot assure you that third-party payors will establish
and maintain price levels sufficient for us to realize an appropriate return on
our investment in product development. Significant changes in the health care
system in
14
<PAGE>
the United States or elsewhere, including changes resulting from adverse
trends in third-party reimbursement programs, could have a material adverse
effect on our profitability. Health care reforms could also have an adverse
effect on our ability to raise capital on favorable terms.
We are exposed to potential product liability claims, and it is uncertain
that insurance against these claims will be available to us at a reasonable
rate in the future.
Our business exposes us to potential product liability risks, which are
inherent in the testing, manufacturing, marketing and sale of pharmaceutical
products. We have clinical trial coverage and we intend to obtain product
liability coverage in the future. However, insurance coverage may not be
available to us at an acceptable cost, if at all. We cannot assure you that
insurance coverage will be adequate to satisfy any liability that may arise.
Regardless of merit or eventual outcome, product liability claims may result
in decreased demand for a product, injury to our reputation, withdrawal of
clinical trial volunteers and loss of revenues. Thus, whether or not we are
insured, a product liability claim or product recall could have an adverse
effect on our financial position.
We deal with hazardous materials and must comply with environmental laws
and regulations, which can be expensive and restrict how we do business.
Our research and development work and manufacturing processes involve the
use of hazardous materials, controlled substances and radioactive materials.
We are subject to federal, state and local laws and regulations governing the
use, manufacture, storage, handling and disposal of these materials and waste
products. Despite precautionary procedures that we implement for handling and
disposing of these materials, the risk of accidental contamination or injury
cannot be eliminated. In the event of a hazardous waste spill or other
accident, we could be liable for damages, penalties or other forms of censure.
Although we believe that we are in compliance in all material respects with
applicable environmental laws and regulations, we may be required to incur
significant costs to comply with environmental laws and regulations in the
future.
Risks Relating To This Offering
You may not be able to trade our common stock if an active trading market
does not develop.
Prior to this offering, there has not been a public market for our common
stock. We intend to include our common stock for quotation in the Nasdaq
National Market. We do not know the extent to which investor interest will
lead to the development of an active trading market for our common stock or
how our common stock will trade in the future. The public offering price,
determined by negotiations between us and the representatives of the
underwriters, is not necessarily indicative of the market price at which our
common stock will trade after this offering. You may not be able to resell
your shares at or above the initial public offering price.
Market volatility may affect our stock price and the value of your
investment may be subject to sudden decreases.
The trading price for our common stock may be highly volatile. The price at
which our common stock will trade depends upon a number of factors, including
our historical and anticipated operating results and general market and
economic conditions, some of which are beyond our control. Factors such as
fluctuations in our financial and operating results, the results of
preclinical and clinical trials, announcements of technological innovations or
new commercial products by us or our competitors, developments concerning
proprietary rights and publicity regarding actual or potential performance of
products under development by us or our competitors could also cause the
market price of our common stock to fluctuate substantially. In addition, the
stock market has from time to time experienced extreme price and volume
fluctuations. These broad market fluctuations may adversely affect the market
price of our common stock. Moreover, during periods of stock market price
volatility, share prices of many biotechnology companies have often fluctuated
in a manner not necessarily related to the companies' operating performance.
Accordingly, our common stock may be subject to greater price volatility than
the stock market as a whole.
15
<PAGE>
Our management will have broad discretion in allocating proceeds from this
offering, which it may not use effectively.
We intend to use the net proceeds of this offering to fund clinical trials,
research, preclinical development, and commercialization activities for our
therapeutic vaccine products, including working capital and for general
corporate purposes. We may also use a portion of the net proceeds to increase
our dendritic cell processing, antigen manufacturing or to acquire
complementary technologies or products. Accordingly, our management will retain
broad discretion as to the allocation of most of the proceeds of this offering.
The failure of management to apply these funds effectively could negatively
impact our business and prospects.
Executive officers, directors and principal stockholders will continue to
have substantial control over us after the offering, which could delay or
prevent a change in our corporate control favored by our other stockholders.
Following this offering, executive officers, directors and principal
stockholders will beneficially own % of our outstanding common stock or %
if the underwriters' over-allotment option is exercised in full. Accordingly,
these stockholders, individually and as a group, may be able to control us and
direct our officers and business, including any determination with respect to a
change in control, future issuances of our common stock or other securities,
declarations of dividends on the common stock and the election of our Board of
Directors.
It may be difficult for a third party to acquire us even if doing so would
be beneficial to our stockholders.
Provisions of our Certificate of Incorporation and Bylaws may make it more
difficult for a third party to acquire us and could discourage a third party
from acquiring us at a premium price. For example, our Certificate of
Incorporation authorizes our Board of Directors to issue up to 10,000,000
shares of preferred stock and to fix the price, rights, preferences, privileges
and restrictions, including voting rights, of those shares without any further
vote or action by the stockholders. The rights of the holders of common stock
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that may be issued in the future. The issuance of
preferred stock could affect adversely the voting power of the holders of our
common stock and the likelihood that they will receive payments upon
liquidation. We are also subject to provisions of Delaware law that could have
the effect of delaying, deferring or preventing a change in control of our
company. One of these provisions prevents us from engaging in a business
combination with any interested stockholder for a period of three years from
the date the person became an interested stockholder, unless specified
conditions are satisfied. These and other impediments to a third-party
acquisition or change of control could limit the price investors are willing to
pay in the future for shares of our common stock.
Future sales of common or preferred stock may have an adverse impact on the
market price of our common stock.
Sales of a substantial number of shares of our common stock in the public
market following this offering or the perception that such sales could occur
could cause the market price of our common stock to decline or adversely affect
our future ability to raise capital through an offering of equity securities.
The number of shares of common stock available for sale in the public market is
limited by restrictions under federal securities law and under lock-up
agreements that our stockholders have entered into with the underwriters and
with us. Our officers, directors and substantially all of our stockholders have
entered into lock-up agreements pursuant to which they have agreed not to offer
or sell any shares of common stock for a period of 180 days after the date of
this prospectus without the prior written consent of Prudential Securities
Incorporated. Prudential Securities may, at any time and without notice waive
any of the terms of these lock-up agreements.
16
<PAGE>
The following table indicates approximately when the shares of our common
stock that are not being sold in the offering but which were outstanding as of
, 2000 will be eligible for sale into the public market:
<TABLE>
<CAPTION>
Number
of
Shares Date of Availability for Resale Into Public Markets
------ ---------------------------------------------------
<C> <S>
180 days after the date of this prospectus due to a lock-up agreement
these stockholders have with Prudential Securities Incorporated
</TABLE>
If you purchase our common stock, you will incur immediate and substantial
dilution in the book value of your shares.
You will experience an immediate and substantial dilution of $ per share
in the net tangible book value per share of our common stock relative to the
initial public offering price. Assuming an initial public offering price of
$ per share of common stock, our pro forma net tangible book value as of
December 31, 1999, after giving effect to this offering, would be $ per
share. In addition, this dilution will be increased to the extent that holders
of outstanding options and warrants to purchase our common stock at prices
below our net tangible book value per share after this offering exercise such
options or warrants.
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements largely on our current expectations and projections
about future events and financial trends affecting the financial condition of
our business. These forward-looking statements are subject to a number of
risks, uncertainties and assumptions about Dendreon, including, among other
things:
. General economic and business conditions, both nationally and in our
markets;
. Our expectations and estimates concerning future financial performance
and financing plans;
. The impact of competition and technological change;
. Our relationships with our corporate collaborators;
. Our ability to enter into future collaboration agreements;
. Anticipated trends in our business;
. Existing and future regulations affecting our business; and
. Other risk factors set forth under "Risk Factors" in this prospectus.
In addition, in this prospectus, the words "believe," "may," "will,"
"estimate," "continue," "anticipate," "intend," "expect" and similar
expressions, as they relate to Dendreon, our business or our management, are
intended to identify forward-looking statements.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks and uncertainties, the forward-looking events and
circumstances discussed in this prospectus may not occur and actual results
could differ materially from those anticipated or implied in the forward-
looking statements.
17
<PAGE>
USE OF PROCEEDS
We estimate that our net proceeds from the sale of common stock in this
offering will be approximately $ million, or $ million if the
underwriters exercise their over-allotment option in full. "Net proceeds" are
what we expect to receive after paying the underwriters' discounts and
commissions and other expenses of the offering. For purposes of estimating net
proceeds, we are assuming an initial public offering price of $ per share.
We intend to use the net proceeds of this offering, together with the $5
million received in our private placement, to fund clinical trials, research,
preclinical and commercialization activities for our therapeutic vaccine
products, to increase our dendritic cell processing or antigen manufacturing
capacity and for general corporate purposes, including working capital. We may
also use a portion of the net proceeds to acquire complementary technologies or
products. We have not determined the amount of net proceeds that we will use
for each of these purposes.
We have discussions on an ongoing basis regarding potential acquisitions and
licensing opportunities that are complementary to our business. Although we may
use a portion of the net proceeds for this purpose, we currently have no
agreements or commitments in this regard. We reserve the right, at the sole
discretion of our Board of Directors, to reallocate our use of proceeds in
response to these and other factors.
Pending such uses, we may invest the net proceeds temporarily in short-term,
investment-grade, interest-bearing securities or guaranteed obligations of
United States government.
DIVIDEND POLICY
We have not declared or paid and do not anticipate declaring or paying any
dividends on our common stock in the foreseeable future. Any future
determination as to the declaration and payment of dividends will be at the
discretion of our Board of Directors and will depend on then existing
conditions, including our financial condition, result of operations,
contractual restrictions, capital requirements, business prospects, and any
other factors our Board of Directors deems relevant.
18
<PAGE>
DILUTION
Purchasers of our common stock in this offering will experience immediate
and substantial dilution in the pro forma net tangible book value of our common
stock from the initial public offering price. Pro forma net tangible book value
per share represents the amount of our total tangible assets less our total
liabilities, divided by the number of our shares of common stock outstanding
after giving effect to the sale of 970,708 shares of Series E convertible
preferred stock in February 2000, and assuming the conversion of all
outstanding shares of preferred stock into 13,079,077 shares of common stock
effective immediately prior to the closing of this offering. As of December 31,
1999, we had a pro forma net tangible book value of $10.5 million, or $0.74 per
share of common stock. After giving effect to the sale of shares of common
stock offered by us at an assumed initial public offering price of $ per
share and after the deduction of underwriting discounts and commissions and
estimated offering expenses payable by us, and to the sale of shares of
common stock to Kirin, at the public offering price, in a private placement
concurrent with the completion of this offering, our pro forma net tangible
book value as of December 31, 1999 would have been $ million or $ per
share. This represents an immediate increase in the pro forma net tangible book
value of $ per share to existing stockholders and an immediate and
substantial dilution of $ per share to new investors purchasing common stock
in this offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price......................... $
----
Pro forma net tangible book value as of December 31, 1999... $0.74
Increase attributable to new investors in the offering and
the concurrent private placement ..........................
-----
Pro forma net tangible book value after this offering and the
concurrent private placement.................................
----
Dilution in pro forma net tangible book value to new
investors.................................................... $
====
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1999, the differences between existing stockholders, Kirin's investment in the
concurrent private placement, and new investors in this offering with respect
to the number of shares of common stock purchased from us, the total
consideration paid to us and the average consideration paid per share, before
the deduction of underwriting discounts and commissions and estimated offering
expenses payable by us:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ------------------- Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 14,089,145 % $58,958,000 % $4.18
Kirin Brewery Co., Ltd. ......
New investors.................
---------- --- ----------- ---
Total....................... 100% $ 100%
========== === =========== ===
</TABLE>
This discussion and tables above are as of December 31, 1999 and exclude:
. 1,646,429 shares of common stock issuable on exercise of stock options at
a weighted average exercise price of $0.77 per share; and
. 484,127 shares of common stock issuable on exercise of warrants at a
weighted average exercise price of $4.09 per share.
The issuance of common stock in connection with the exercise of these
options will result in further dilution to new investors. See "Management--
Employee Benefit Plans" and Note 7 of the notes to financial statements.
19
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
. on an actual basis;
. on a pro forma basis to reflect the sale of 970,708 shares of Series E
convertible preferred stock in February 2000, the conversion of all
outstanding shares of convertible preferred stock into 13,079,077 shares
of common stock and the change in the authorized number of shares upon
the completion of this offering; and
. on a pro forma as adjusted basis to reflect the sale of shares of
common stock in this offering at an assumed initial public offering price
of $ per share, and the application of the net proceeds, after
deducting underwriting discounts and commissions and our estimated
offering expenses, and the sale of shares of common stock to Kirin
concurrent with the completion of this offering in a private placement at
the public offering price.
<TABLE>
<CAPTION>
As of December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Cash, cash equivalents and short-term
investments................................... $ 13,813 $ 17,939 $
======== ======== ====
Long-term obligations, less current portion.... $ 2,799 $ 2,799 $
Stockholders' equity:
Preferred stock, $.001 par value, 13,722,936
shares authorized, actual; 10,000,000 shares
authorized pro forma and pro forma as
adjusted; 12,108,369 shares issued and
outstanding, actual; no shares issued or
outstanding, pro forma and pro forma as
adjusted.................................... 12 -- --
Common stock, $.001 par value, 18,100,000
shares authorized, actual; 80,000,000 shares
authorized pro forma and pro forma as
adjusted; 1,010,068 shares issued and
outstanding, actual; 14,089,145 shares
issued and outstanding, pro forma;
shares issued and outstanding, pro forma
as adjusted................................. 1 14
Additional paid-in capital................... 58,838 62,963
Deferred stock-based compensation............ (1,795) (1,795)
Accumulated deficit.......................... (50,704) (50,704)
-------- -------- ----
Total stockholders' equity..................... 6,352 10,478
-------- -------- ----
Total capitalization........................... $ 9,151 $ 13,277 $
======== ======== ====
</TABLE>
The outstanding share information in the table is as of December 31, 1999
and excludes:
. 1,016,838 shares of common stock available for future issuance under our
equity incentive plans and 1,646,429 shares subject to outstanding
options as of December 31, 1999 at a weighted average exercise price of
$0.77 per share;
. 1,350,000 shares reserved for issuance under our 2000 Employee Stock
Purchase Plan; and
. 484,127 shares of common stock issuable on exercise of warrants
outstanding as of December 31, 1999 at a weighted average exercise price
of $4.09 per share.
20
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and our financial statements and the related notes appearing
elsewhere in this prospectus. The statement of operations data set forth below
for the years ended December 31, 1997, 1998 and 1999 and the balance sheet data
as of December 31, 1998 and 1999 have been derived from our audited financial
statements included elsewhere in this prospectus, which have been audited by
Ernst & Young LLP, independent auditors. The statement of operations data for
the years ended December 31, 1995 and 1996 and the balance sheet data as of
December 31, 1995, 1996 and 1997 have been derived from our audited financial
statements not included in this prospectus, which have been audited by Ernst &
Young LLP, independent auditors. The historical results do not necessarily
indicate the results you should expect in any future period.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue......................... $ 641 $ 474 $ 793 $ 1,849 $ 3,519
Operating expenses:
Research and development...... 4,082 5,093 5,290 7,967 9,771
General and administrative.... 1,749 2,209 2,894 2,841 5,717
Noncash stock-based
compensation................. -- -- -- 108 805
------- ------- ------- ------- --------
Total operating expenses........ 5,831 7,302 8,184 10,916 16,293
------- ------- ------- ------- --------
Loss from operations............ (5,190) (6,828) (7,391) (9,067) (12,774)
Interest income (expense), net.. (881) 112 228 318 95
------- ------- ------- ------- --------
Loss before income taxes........ (6,071) (6,716) (7,163) (8,749) (12,679)
Provision for income taxes...... -- -- -- 600 --
------- ------- ------- ------- --------
Net loss........................ (6,071) (6,716) (7,163) (9,349) (12,679)
Deemed dividend upon issuance of
convertible preferred stock.... -- -- -- -- (285)
------- ------- ------- ------- --------
Net loss attributable to common
stockholders................... $(6,071) $(6,716) $(7,163) $(9,349) $(12,964)
======= ======= ======= ======= ========
Basic and diluted net loss per
common share................... $(63.84) $(64.32) $(23.51) $(16.34) $ (15.08)
======= ======= ======= ======= ========
Shares used in computing basic
and diluted net loss per
share.......................... 95 104 305 572 860
======= ======= ======= ======= ========
Pro forma net loss per share.... $ (1.20)
========
Shares used in computing pro
forma net loss per share(1).... 10,821
========
<CAPTION>
As of December 31,
--------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and
short-term investments......... $ 116 $ 3,397 $ 8,223 $ 9,930 $ 13,813
Working capital................. (4,711) 2,692 7,471 6,665 9,938
Total assets.................... 1,429 4,840 9,910 12,038 17,375
Long-term obligations, less
current portion................ 496 171 -- 531 2,799
Total stockholders' equity
(deficit)...................... (4,209) 3,598 8,306 3,762 6,352
</TABLE>
- --------
(1) See note 8 of notes to financial statements for an explanation of the
determination of the number of weighted average shares used to compute pro
forma net loss per share.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
"Selected Financial Data" and the accompanying financial statements and the
related notes appearing elsewhere in this prospectus.
Overview
Since our inception in 1992, our activities have primarily been associated
with the development and testing of our cancer vaccines. Our business
activities have included:
. product research and development;
. development of our proprietary cell separation technology;
. development of our proprietary Antigen Delivery Cassette technology;
. regulatory and clinical affairs;
. establishing manufacturing capabilities; and
. intellectual property prosecution.
We have incurred significant losses since our inception. As of December 31,
1999, our accumulated deficit was $50.7 million. We have recognized revenues of
$7.3 million since inception. We have incurred net losses since inception as a
result of research and development and general and administrative expenses in
support of our operations. We anticipate incurring net losses over the next
several years as we complete our clinical trials, apply for regulatory
approvals, continue development of our technology and expand our operations.
Kirin is our collaborator for the marketing and development of our vaccines
in Asia. Under our agreements with Kirin, we have received $8.5 million in
license fees, option fees and funding to support our collaborative research
efforts, of which we have recognized $3.8 million through December 31, 1999.
Results of Operations
Year Ended December 31, 1999 Compared to the Year Ended December 31, 1998
Revenue. Revenue increased approximately 90% from $1.8 million in 1998 to
$3.5 million in 1999. Revenue in 1998 consisted of $1.6 million from
collaborative and license agreements and $237,000 of grant revenue. The year to
year increase was primarily due to $1.9 million received from Kirin under a
research and development agreement we entered into with Kirin in 1999. Revenue
in 1999 consisted of $3.3 million from collaborative and license agreements and
$261,000 of grant revenue.
Research and Development Expenses. Research and development expenses
increased approximately 23% from $8.0 million in 1998 to $9.8 million in 1999.
The increase in research and development expenses from year to year was due
primarily to product development expenses, including fees paid to third parties
associated with conducting clinical trials, additional personnel and personnel-
related expenses. Our research and development expenses consist primarily of
salaries and other personnel-related expenses, product development expenses,
facility costs, supplies and depreciation of equipment.
General and Administrative Expenses. General and administrative expenses
increased approximately 101% from $2.8 million in 1998 to $5.7 million in 1999.
This increase was primarily due to additional personnel, professional service
fees, the movement of our headquarters from Mountain View, California to
Seattle, Washington and the costs associated with maintaining our larger
facilities. Our general and administrative expenses consist primarily of
personnel costs for finance, human resources, business development, legal,
facilities, information technologies and general management, as well as
facility costs and professional fees, such as legal and accounting.
22
<PAGE>
Interest Income, Net. Interest income, net, decreased approximately 70% from
$318,000 in 1998 to $95,000 in 1999. This was primarily attributable to
interest expense associated with a loan we obtained in June 1999.
Year Ended December 31, 1998 Compared to the Year Ended December 31, 1997
Revenue. Revenue increased approximately 133% from $793,000 in 1997 to $1.8
million in 1998. This increase was primarily due to $1.0 million received from
Kirin.
Research and Development Expenses. Research and development expenses
increased approximately 51% from $5.3 million in 1997 to $8.0 million in 1998.
The increase in research and development expense from year to year was due
primarily to product development expenses and additional personnel.
General and Administrative Expenses. General and administrative expenses
were $2.9 million in 1997 and $2.8 million in 1998.
Interest Income, Net. Interest income, net, increased approximately 39% from
$228,000 in 1997 to $318,000 in 1998. This was primarily attributable to higher
average balances of cash, cash equivalents and short-term investments.
Revenue Recognition
We recognize revenue from research and development collaboration agreements
as earned upon achievement of the performance requirements of the agreements.
Payments that are received related to future performance are deferred and
recognized as revenue as the performance requirements are achieved. Non-
refundable, upfront payments received in connection with collaborative research
and development agreements are deferred and recognized on a straight-line basis
over the relevant periods specified in the agreement, generally the research
term. Revenue related to grant agreements is recognized as related research and
development expenses are incurred. As of December 31, 1999, we had deferred
revenues of approximately $5.2 million.
Net Operating Loss Carryforwards
At December 31, 1999, we had net operating loss carryforwards of
approximately $28.5 million to offset any future federal and state taxable
income. If not utilized, the tax net operating loss carryforwards will expire
at various dates beginning in 2009 through 2012. We also had research and
development tax credit carryforwards at December 31, 1999, of approximately
$1.2 million for federal income tax purposes. Utilization of the net operating
losses and credits may be subject to a substantial annual limitation due to the
change in the ownership provisions of the Internal Revenue Code of 1986, as
amended, and similar state provisions. The annual limitation may result in the
expiration of net operating losses and credits before utilization.
Stock-Based Compensation Expense
Stock-based compensation expense consists of the amortization of deferred
stock-based compensation resulting from the grant of stock options at exercise
prices subsequently deemed to be less than the fair value of the common stock
on the grant date. We recorded total deferred stock-based compensation of
$589,000 in 1998 and $2.1 million in 1999. These amounts were initially
recorded as a component of stockholders' equity and are being amortized by
charges to operations over the vesting period of the options using the graded
vesting method. We recorded amortization of deferred stock-based compensation
of $108,000 in 1998 and $805,000 in 1999. We recorded additional deferred
stock-based compensation of $2.4 million in January and February 2000.
23
<PAGE>
Including the deferred stock-based compensation associated with the January and
February 2000 grants, amortization of deferred stock-based compensation expense
is expected to be $2.2 million in 2000, $1.2 million in 2001, $626,000 in 2002,
and $231,000 in 2003.
Deemed Dividend Upon Issuance of Convertible Preferred Stock
We recorded a deemed dividend of $285,000 in 1999 and anticipate recording a
deemed dividend of $5.6 million for the issuance of Series E convertible
preferred stock issued in February 2000. The incremental fair value determined
on the date of issuance for each closing of Series E convertible preferred
stock is deemed to be the equivalent of a preferred stock dividend. We recorded
the deemed dividend at the date of issuance by offsetting charges and credits
to additional paid-in capital, without any effect on total stockholders'
equity. The amount increased the loss attributable to common stockholders in
the calculation of basic net loss per share for 1999.
Liquidity and Capital Resources
Cash, cash equivalents and short-term investments were $13.8 million at
December 31, 1999. We have financed our operations since inception through the
private placement of equity securities, revenue from collaborative
arrangements, interest income earned on cash and cash equivalents, equipment
lease line financings and loan facilities. Since January 1, 2000, we have
received proceeds of $4.1 million from private financing activities. In 1999,
we received net proceeds of $13.1 million from private financing activities. In
1998, we received net proceeds of $4.6 million from private financing
activities. To date, inflation has not had a material effect on our business.
Since our inception, investing activities, other than purchases and
maturities of short-term investments, have consisted primarily of purchases of
property and equipment. At December 31, 1999, our investment in equipment and
leasehold improvements was $3.8 million. We have an agreement with a financing
company under which we have financed purchases of $1.5 million of leasehold
improvements, laboratory, computer and office equipment. The lease terms are 48
months and bear interest at rates ranging from 10.8% to 12.0%. We also have a
tenant improvement allowance of $3.5 million from the lessor of our Seattle,
Washington facility. As of December 31, 1999, we have committed to the
expenditure of $2.4 million for laboratory and manufacturing space. The
improvement allowance bears interest at the rate of 12.5% and is repaid monthly
over the length of the original lease.
Net cash used in operating activities in 1999 was $12.1 million. Net cash
used in operating activities in 1998 was $2.9 million. Our collaborators paid
us a total of $6.0 million in nonrefundable upfront license fees in 1998, of
which $5.7 million was deferred at December 31, 1998. Expenditures in both
periods were a result of increased research and development expenses and
general and administrative expenses in support of our operations.
In June 1999, we obtained a loan in the amount of $3.0 million from a
financial lender. The loan bears interest at an annual rate of 13.3%. We make
monthly interest payments on this loan for six months and will make principal
and interest payments for 24 months thereafter.
Pursuant to our collaborative license agreement with Kirin, in March 2000 we
exercised our right to require Kirin to purchase $5.0 million of our common
stock. Accordingly, Kirin will purchase shares of our common stock in a private
placement concurrent with the closing of our initial public offering at the
initial public offering price.
We anticipate that the net proceeds from this offering, together with the
proceeds from Kirin, our cash on hand and cash generated from our collaborative
arrangements, will be sufficient to enable us to meet our anticipated
expenditures for at least the next 24 months, including, among other things:
. supporting our clinical trial efforts;
24
<PAGE>
. continuing internal research and development;
. development of sales and marketing capabilities; and
. development of manufacturing capabilities.
However, we may need additional financing in the future, which may not be
available to us.
Year 2000 Compliance
The impact of the Year 2000 on our technology systems to date has been
insignificant. We have obtained documentation from third party vendors as to
their Year 2000 compliance testing and recommendations. To date, we have not
experienced any significant impact on our operations as a result of Year 2000
issues with our third party vendors. The total cost of our Year 2000
remediation effort has not been material and is not expected to be material in
future periods.
Recent Accounting Pronouncements
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB
101). SAB 101 is based upon existing accounting rules and provided specific
guidance on how those accounting rules should be applied and specifically
addresses revenue recognition for non-refundable technology access fees in the
biotechnology industry. SAB 101 is effective for fiscal years beginning after
December 15, 1999. We have determined that SAB 101 will not have a material
impact on our financial position or results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which will be
effective for the year ending 2001. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument, including
certain derivative instruments imbedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement also requires that changes in the derivative's fair value be
recognized in earnings unless specific hedge accounting criteria are met. We
believe the adoption of SFAS 133 will not have a material effect on our
financial statements, since we currently do not hold derivative instruments or
engage in hedging activities.
Quantitative and Qualitative Disclosures About Market Risk
As of December 31, 1999, we had short-term investments of $6.7 million. Our
short-term investments will decline by an immaterial amount if market interest
rates increase, and therefore, our exposure to interest rate changes has been
immaterial. Declines of interest rates over time will, however, reduce our
interest income from our short-term investments. Our outstanding bank loan and
capital lease obligations are all at fixed interest rates and therefore have
minimal exposure to changes in interest rates.
25
<PAGE>
BUSINESS
Overview
We discover and develop immunologically based therapeutic products for the
treatment of cancer. We combine our expertise in immunology and antigen
engineering with our proprietary cell separation technologies to develop
therapeutic vaccines that induce cell-mediated immunity, the body's key defense
against cancer. Our most advanced product, Provenge(TM), is a therapeutic
vaccine for the treatment of prostate cancer. We initiated our first Phase III
clinical trial for Provenge in January 2000 and anticipate initiating a second,
pivotal, Phase III clinical trial in April 2000. In addition, we are conducting
Phase II clinical trials of APC8020, our therapeutic vaccine for B-cell
malignancies, including multiple myeloma and amyloidosis. We have three
additional therapeutic vaccines in preclinical development for the treatment of
common malignancies, including breast, colorectal, lung and ovarian/uterine
cancers. We also intend to pursue the application of our technologies in the
fields of autoimmune diseases, allergies and infectious diseases. We plan to
retain commercialization rights for our products in the United States and
partner our products in other parts of the world. We are collaborating with
Kirin Brewery Co., Ltd. for the marketing and development of our products in
Asia.
Industry Background
Prevalence of Cancer in the United States
The American Cancer Society estimates that doctors will diagnose
approximately 1.2 million new cases of cancer in the United States in 2000.
Cancer, the second leading cause of death in the United States, will result in
an estimated 552,000 deaths in 2000. Cancer costs are estimated at $107 billion
annually, including health care expenditures and lost productivity from illness
and death. Spending on cancer therapeutic drugs was $7.4 billion in the United
States in 1998. Several of the most common cancers and selected information
regarding them are presented below:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Type of Cancer Prevalence(1) New Cases(1) Deaths(1)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Breast................................. 1,081,000 184,000 41,000
Prostate............................... 1,002,000 180,000 32,000
Colorectal............................. 425,000 130,000 56,000
Lung................................... 187,000 164,000 157,000
B-cell Malignancies(2)................. N/A 76,000 39,000
Ovarian/Uterine........................ N/A 72,000 25,000
Bladder................................ N/A 53,000 12,000
Pancreatic............................. N/A 28,000 28,000
</TABLE>
- --------------------------------------------------------------------------------
(1) Projections for 2000 from the American Cancer Society and industry
sources.
(2) B-cell malignancies include multiple myeloma, Non-Hodgkin lymphoma and
Hodgkin's lymphoma.
N/A is not available.
Current Cancer Therapies
Cancer is characterized by abnormal cells that proliferate uncontrollably
and metastasize, or spread, throughout the body. These proliferating cells form
masses called tumors. As the tumors grow, they cause tissue and organ failure
and ultimately death.
To be effective, therapy must eliminate the cancer both at its site of
origin and at metastatic sites. Metastatic disease is often responsible for the
relapse and ultimate death of patients with cancer. Current treatments for
cancer include surgery, radiation, hormone therapy and chemotherapy. Surgery
and radiation therapy treat cancer at its origin but are limited because
certain tissues cannot be removed surgically and/or do
26
<PAGE>
not tolerate radiation. Moreover, cancers frequently metastasize early, and
surgery and radiation cannot control distant metastases. Chemotherapy and
hormone therapy are used to treat tumor metastases. However, these therapies
cause severe damage to normal tissue. Additionally, chemotherapy and hormone
therapy may shrink tumors but rarely eliminate them completely.
Treatments known as immunotherapy stimulate the body's natural mechanism for
fighting disease and may overcome many of the limitations of current cancer
therapies. Immunotherapy may be particularly useful for the treatment of
residual disease, the small tumor masses, including metastases, which
frequently remain following conventional therapy.
The Immune System
The immune system, the body's natural defense against disease, is composed
of a variety of specialized cells. These cells recognize specific chemical
structures, called antigens, that are found on disease-causing agents. Antigens
trigger an immune response, characterized by the proliferation of immune system
cells and the eventual removal of antigen from the body.
A specialized class of immune system cells, called dendritic cells, starts
the immune response by processing antigen and presenting it to other cells,
called lymphocytes. Lymphocytes proliferate in response to their interaction
with dendritic cells and eliminate the disease-causing agent. There are two
main categories of lymphocytes: B-lymphocytes, or B-cells, and T-lymphocytes,
or T-cells. Activation of B-cells leads to the production of specific
antibodies, which are primarily involved in preventing infectious diseases. T-
cells combat disease by killing antigen bearing cells directly. In this way, T-
cells eliminate cancers and virally infected tissue. T-cell immunity is also
known as cell-mediated immunity.
The immune system recognizes and generates a strong response to hundreds of
thousands of different antigens introduced from the environment. However, the
immune system generally does not recognize, nor does it respond to, similar
chemical structures produced by the body, called self-antigens. Because tumors
frequently display only self-antigens, they are often not recognized by the
immune system. Tumors may also actively suppress dendritic cell maturation.
Thus, the key to directing the immune system to fight cancers is to manipulate
dendritic cells to stimulate a vigorous cell-mediated immunity.
Our Therapeutic Cancer Vaccine Approach
We combine our expertise in antigen identification, antigen engineering and
dendritic cell processing to produce immunotherapeutic vaccines. Our ability
both to manipulate dendritic cells and to engineer antigens allows us to
develop vaccines that generate effective cell-mediated immune responses, the
key to eliminating cancer. We have vaccines in development for eight common
cancers. Our approach to therapeutic cancer vaccines is to:
. identify antigens on cancer cells which are suitable targets for cancer
therapy;
. create proprietary, genetically engineered, Antigen Delivery
Cassettes(TM) that will be optimally processed by dendritic cells;
. develop proprietary methods to isolate and activate dendritic cells; and
. use antigen-loaded dendritic cells to trigger cell-mediated immunity,
leading to tumor destruction.
Antigen Identification
Our objective is to identify antigens associated with as broad a population
of cancers as possible. We obtain antigens from several sources: our internal
discovery programs, public databases of genetic information and licenses from
third parties. Our internal antigen discovery programs begin by identifying
novel genes
27
<PAGE>
expressed in specific tissues or in malignant cells. We then evaluate the
expression of these genes in normal versus diseased tissue. Genes that are
found localized in diseased tissue are considered candidates for antigen
engineering. Likewise, genes from external sources that meet these criteria are
also considered. To date, we have identified genes for many antigens that meet
these criteria and have incorporated the antigens into our therapeutic vaccines
for eight common cancers.
Antigen Engineering
We engineer antigens to produce proprietary therapeutic vaccine products for
multiple cancers as well as other diseases. Our antigen engineering is designed
to trigger and maximize cell-mediated immunity by augmenting the uptake and
processing of the target antigen by the dendritic cell. We can control the
quality and quantity of the immune response that is generated by adding,
deleting or modifying selected sequences of the antigen gene, together with
inserting the modified antigen into our Antigen Delivery Cassette.
Our Antigen Delivery Cassette is a protein that has three components: a
dendritic cell targeting sequence, an antigen processing sequence and an
antigen sequence. The Antigen Delivery Cassette targets each engineered antigen
to dendritic cells and provides a common key to unlock the potential to process
antigen.
Image:
The title of the image is "Antigen Delivery Cassette". The image consists of
three component parts labeled the "Antigen," the "Antigen Processing Region"
and the "Dendritic Cell Binding Region."
The dendritic cell targeting sequence is common to all of our Antigen
Delivery Cassettes and has the capability to recognize the dendritic cell and
bind the cassette to the dendritic cell surface. Binding stimulates the
dendritic cell to engulf the cassette. The antigen processing sequence of the
cassette then promotes the processing of the antigen sequence. The antigen
sequence of the Antigen Delivery Cassette thus gains access to processing by
the dendritic cell, which would otherwise be denied to non-engineered antigen.
This process results in maximum cell-mediated immune responses.
Our Antigen Delivery Cassette technology provides us with a foundation on
which new proprietary antigens are built. We have synthesized Antigen Delivery
Cassettes for 14 different tumor targets and have identified more than 25
additional targets potentially suitable for engineering. An example of our
antigen engineering approach is the antigen HER2 used for production of
APC8024, our therapeutic vaccine for the treatment of breast, ovarian,
colorectal and pancreatic cancer. The gene encoding a protein called HER2 is
known to be associated with these cancers. Because HER2 is poorly recognized as
an antigen by the immune system, we created a series of Antigen Delivery
Cassettes, each with a distinct version of the modified HER2 gene sequence. We
then tested each of these cassettes in preclinical models and identified and
incorporated into our vaccine the one that generated the most potent cell-
mediated immune response.
Dendritic Cell Processing and Vaccine Production
Our vaccine manufacturing process incorporates two elements: the Antigen
Delivery Cassette and dendritic cells isolated from blood. To obtain dendritic
cells, we first remove white blood cells from a patient's blood through a
standard blood collection process called leukapheresis. Dendritic cells are
then separated from other white blood cells using our proprietary cell
separation devices. Our process avoids the inhibitory environment created by
tumors and fosters dendritic cell activation.
We incubate the dendritic cells with the appropriate Antigen Delivery
Cassette under controlled conditions in which we have optimized cassette
concentration and dendritic cell numbers. After 40 hours, the dendritic
28
<PAGE>
cells are optimally activated and are ready to be used as a vaccine. We subject
each vaccine to quality control testing, including purity, potency and
sterility testing. Our process requires less than three days from white blood
cell collection to vaccine administration.
Vaccine Delivery
Our vaccines are delivered as a 30-minute intravenous infusion given as an
outpatient procedure. A single vaccine infusion is sufficient to stimulate
cell-mediated immunity to the target antigen. Maximum stimulation requires
three infusions given at two-week intervals. Patients complete a course of
therapy in one month.
Benefits of Our Approach
Our therapeutic vaccine approach may offer novel treatment alternatives for
cancers that are inadequately addressed. Benefits of our therapeutic vaccines
may include:
. Vigorous stimulation of cell-mediated immunity: The results of our
clinical trials to date have demonstrated that our vaccines have the
potential to produce cell-mediated immunity, the body's key defense
against cancer. For example, in our Phase I/II prostate cancer trials,
Provenge stimulated cell-mediated immunity in all 70 patients tested. In
these trials, we observed a significant correlation between the strength
of the cell-mediated immunity and clinical benefit.
. Minimal side effects: Our vaccines specifically target cancerous cells
and have been very well tolerated. In over 400 doses of our vaccines
given to 180 patients to date, less than two percent of the infusions
resulted in any significant side effects.
. Applicability to a wide variety of cancers: Our antigen identification,
antigen engineering and dendritic cell technologies enable us to create
proprietary vaccines for the potential treatment of a wide variety of
cancers. Our efforts to date have led to the identification of numerous
product candidates, including our five most advanced therapeutic vaccines
for the treatment of many common cancers.
. Single vaccine can treat multiple cancers: We identify novel antigens
that are shared by multiple types of cancer. We believe this approach
will allow us to develop single vaccines for the treatment of several
different tumors. For example, our vaccines target antigens common to the
following cancers:
<TABLE>
<CAPTION>
Our
Cancers Vaccines That Address Multiple Cancers
---------------------------------------------------------
APC8024 APC80NY APC80TR
--------------------------------------------
<S> <C> <C> <C>
Breast X X X
Prostate X X X
Colorectal X X
Lung X X
Ovarian/Uterine X X
Bladder X
Pancreatic X
</TABLE>
. Access broad patient population: We employ a single, well-characterized,
genetically engineered antigen for each therapeutic vaccine. We select
antigens that are present on a significant percentage of
29
<PAGE>
cancer patients' tumors. For example, our prostate cancer vaccine antigen
is found on approximately 95% of prostate cancers. This approach
eliminates the need to extract an individual patient's tumor as a source
of antigen. As a result, our vaccines are applicable to a broader patient
population.
. Cost-effective cGMP manufacturing process: We have developed a
manufacturing process that employs our proprietary cell separation
systems and produces vaccines on a cost-effective basis. We have
standardized processes that enable us to establish cGMP-compliant cell
processing facilities worldwide.
. Simple, convenient therapy: Our treatment protocol employs techniques
that are standard in blood banking and transfusion medicine. Patients
undergo routine white blood cell collection and subsequently receive our
vaccines through a 30-minute, out-patient infusion. Patients complete a
course of treatment in one month.
Strategy
Our goal is to become a leader in the development and commercialization of
immunologically based therapeutic products for the treatment of cancer,
autoimmune diseases, allergies and infectious diseases. Key elements of our
strategy include the following:
Maximize Speed to Market of Lead Therapeutic Vaccine. We are focused on
bringing our prostate cancer vaccine, Provenge, to market. Considerable
corporate resources are devoted to the development of this vaccine.
Build a Large and Diverse Product Portfolio. Our internal development
efforts will continue to focus on utilizing our proprietary antigen
identification and engineering capabilities to expand our cancer vaccine and
therapeutic antibody product portfolio. In addition, we intend to accelerate
the development of a broader product portfolio by licensing or acquiring
complementary technologies, patents and product candidates.
Retain Key Commercialization Rights. We intend to retain commercialization
rights to our oncology products in the United States. Due to the concentrated
distribution channels for the United States oncology market, we plan to develop
a direct sales force to market our cancer vaccines in the United States.
Collaborate in Markets Outside of the United States. We believe
collaborations with established pharmaceutical companies will enable us to best
achieve the commercial potential of our products in markets outside the United
States, specifically in Asia and Europe. We have formed an alliance for the
Asian markets with Kirin, a significant marketer of immunological products in
Asia. Kirin has exclusive marketing rights in Asia for Provenge, as well as an
option to acquire exclusive marketing rights in Asia for our other dendritic
cell products. We also intend to establish a strategic collaboration for our
products in Europe.
Extend Our Technologies into Autoimmune Diseases, Allergies and Infectious
Diseases. Our therapeutic vaccine technology has potential applications in
areas beyond cancer. We intend to pursue the application of our technologies in
the fields of autoimmune diseases, allergies and infectious diseases. In these
areas, we plan to establish strategic collaborations for clinical development
and commercialization.
Leverage Our Proprietary Technologies. To obtain value for our proprietary
cell separation technology beyond our areas of interest, we plan to enter into
arrangements that allow our technology to be used by others in exchange for
fees and royalties. To date, we have entered into agreements with
BioTransplant, Inc. and Osiris Therapeutics, Inc.
30
<PAGE>
Products
The following table summarizes the target indications and status of our
product development programs:
OUR PRODUCTS AND PRODUCTS IN DEVELOPMENT
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Product Target Indication(s) Status(1)
---------------------------- --------------------------------- -------------------------
<C> <S> <C>
Therapeutic Vaccine Products
Provenge(TM) Prostate cancer Phase III
APC8020 Multiple myeloma Phase II
Amyloidosis
Other B-cell malignancies
APC8024 Breast cancer Preclinical; Phase I
clinical
Prostate cancer trials expected to
Colorectal cancer commence in 2000
Ovarian/Uterine cancer
Pancreatic cancer
APC80NY Breast cancer Preclinical; Phase I
clinical
Prostate cancer trials expected to
Lung cancer commence in 2001
Ovarian/Uterine cancer
Bladder cancer
APC80TR Breast cancer Preclinical
Prostate cancer
Colorectal cancer
Lung cancer
Therapeutic Antibody
Products
Danton(TM) Non-Hodgkin lymphoma Preclinical
Hodgkin's lymphoma
B-cell leukemias
Dantes(TM) Autoimmune diseases, including Preclinical
rheumatoid arthritis
Cell Separation Products
DACS(R)SC Kit Blood stem cell preparation for FDA Approved
transplantation
</TABLE>
(1) Preclinical means that a product is undergoing efficacy and safety
evaluation in disease models in preparation for clinical trials.
Phase I-III clinical trials denote safety and efficacy tests in humans as
follows:
Phase I: Evaluation of safety and dosing.
Phase II: Evaluation of safety and efficacy.
Phase III: Larger scale evaluation of safety and efficacy.
31
<PAGE>
Therapeutic Vaccine Products
Provenge for Prostate Cancer
There is currently no treatment that improves long-term survival of patients
with metastatic prostate cancer. We have completed Phase I and Phase II trials
of Provenge with advanced prostate cancer patients who were resistant to
hormone therapy. Our trials suggest that Provenge is safe and may be effective
in treating these patients. Historically, 50% of hormone refractory prostate
cancer, or HRPC, patients experience disease progression in 12 weeks, whereas
10, or 53%, of our patients had stable disease at 28 weeks and five, or 26%,
were stable for greater than one year. We began a Phase III clinical trial of
Provenge in January 2000 and plan to begin a second, pivotal, Phase III
clinical trial in April 2000.
Vaccine Description. Provenge is our product for treatment of prostate
cancer and is our most advanced vaccine product candidate. The antigen
component of Provenge is derived from the gene encoding a marker for prostate
cancer, prostatic acid phosphatase, which is found in approximately 95% of
prostate cancers. We have subjected prostatic acid phosphatase to our antigen
engineering process and have created a proprietary Antigen Delivery Cassette.
Target Market. Prostate cancer is the most common solid tumor malignancy in
men in the United States, with over one million currently diagnosed with the
disease. An estimated 180,000 new cases and 32,000 deaths in the United States
are expected in 2000, according to the American Cancer Society. The five-year
survival rate for patients with advanced prostate cancer is currently only 30%.
Current Treatment. Prostate cancer is treated initially with surgery or
radiation therapy, but approximately 70% of those treated will develop
metastases at some time in the course of their disease. Hormone therapy is
standard treatment for metastatic prostate cancer and achieves temporary tumor
control or regression in approximately 80% to 85% of patients. However, hormone
therapy causes serious side effects, including impotence and osteoporosis. In
addition, within two years the cancer grows, a condition called hormone
refractory prostate cancer, or HRPC. Half of the patients with HRPC will die
within 12 to 18 months of the onset of HRPC. Currently, the only FDA approved
treatments for HRPC are chemotherapy and radiopharmaceuticals, which can
alleviate cancer-related symptoms but cause severe side effects and do not
prolong survival. Most men have no symptoms when first diagnosed with HRPC. We
believe there is a need for new treatments that control prostate cancer without
the side effects of current treatments.
Vaccine Development. We began the first Phase III clinical trial of
Provenge in January 2000 and plan to begin a second, pivotal, Phase III
clinical trial in April 2000. These are double-blind, placebo-controlled trials
and are designed to demonstrate that Provenge is safe and effective for
treating HRPC. The trials will determine if Provenge delays disease progression
and its associated pain. Patients are eligible for the trials if they have HRPC
and do not have cancer-related symptoms, such as pain. We anticipate that the
initial results from these trials will be available by the end of 2001.
We treated 31 patients with Provenge in Phase I and Phase II clinical trials
that were performed in collaboration with clinical investigators at the
University of California, San Francisco. All patients had advanced prostate
cancer that was resistant to hormone therapy. Twelve of these patients were
treated in the Phase I dose ranging study. Nineteen patients participated in
the Phase II trial and received three infusions of Provenge, a full therapeutic
dose. Based upon historical data, we would have expected that 50% of untreated
patients at a similar stage of disease as the 19 patients treated in the Phase
II trial would have experienced disease progression at 12 weeks, 75% at 30
weeks, and 90% at one year. In our trials, we observed a significant decrease
in the rate of progression of the disease. At 28 weeks, 10 patients, or 53%,
had stabilized and five patients, or 26%, were stable for greater than one
year. Among those patients experiencing side effects, the most common side
effects of the treatment were low grade fever and minor muscle aches. In
addition less than two percent of Provenge infusions were associated with
clinically significant side effects. This trial suggests that Provenge is safe
and may be effective for the treatment of HRPC.
32
<PAGE>
In a dose-ranging study, we treated 29 patients in sequential Phase I and
Phase II clinical trials that were performed in collaboration with clinical
investigators at the Mayo Clinic. This trial tested the effectiveness of two
doses of Provenge followed by injections of the prostate antigen alone for
treatment of men with HRPC. All patients had advanced prostate cancer and most
had cancer-related pain symptoms. Provenge treatment resulted in decreased
levels of prostate specific antigen, or PSA, a marker of disease status, in six
of the 29 patients. One of these patients had widespread metastases in his
lymph nodes. After Provenge treatment, this patient experienced a complete
remission that has lasted for more than ten months. Most patients in this trial
did not experience any side effects from our treatment.
We are also performing a Phase I trial of different doses of Provenge for
the treatment of HRPC to support a regulatory filing in Asia. The trial is
being performed in collaboration with clinical investigators at the National
Cancer Center Hospital in Tokyo, Japan and investigators at Kirin. Treatment so
far has been shown to be safe, with low grade fevers being the only side
effect. One of the first four patients who have completed treatment has
experienced a partial remission, as evidenced by decreased tumor masses
detected by computerized axial tomography, or CT scans.
In addition to the treatment of HRPC, we expect that Provenge may also be
effective for treatment of earlier stage patients who have lower tumor volume.
In 1999, we began a Phase II clinical trial of Provenge for treatment of men
with relapsed prostate cancer who have not received hormone therapy. This
trial, which is being performed at University of California, San Francisco, is
designed to assess the effectiveness of Provenge for treatment of newly
relapsed prostate cancer. A second trial of Provenge will be designed to treat
men with newly diagnosed prostate cancer. These men will first undergo surgery
to remove the tumor in the prostate and then receive Provenge in an effort to
eliminate residual disease and metastases and thereby prevent recurrence. We
expect that these two trials will provide further evidence of Provenge's
effectiveness and will be the basis for future Phase III trials that seek
expanded labeling indications for this product.
APC8020 for B-cell Malignancies: Multiple Myeloma and Amyloidosis
B-cell malignancies, which include multiple myeloma and amyloidosis, are
characterized by the abnormal production of immunoglobins, or antibodies, by
cancerous bone marrow plasma cells. Existing therapies are not curative and
cause severe side effects. We are conducting several clinical trials of our
therapeutic vaccine for multiple myeloma and amyloidosis. Preliminary results
of our Phase II clinical trial treating multiple myeloma patients indicate that
six of 13 patients have experienced major tumor reductions and only one of the
13 patients has experienced disease progression, which occurred 40 weeks
subsequent to beginning treatment.
Vaccine Description. APC8020 is our vaccine for treatment of B-cell
malignancies, including multiple myeloma and amyloidosis. In contrast to our
other vaccines, APC8020 utilizes a patient-specific antigen, called M protein,
a unique immunoglobulin produced by a patient's tumor. We obtain M protein by
collecting a sample of a patient's blood.
Target Market. Multiple myeloma accounts for approximately 10% of cancers of
the blood. The American Cancer Society estimates that in 2000, 13,600
individuals in the United States will be diagnosed with multiple myeloma and
over 11,000 individuals will die from the disease. Amyloidosis is a disease
related to multiple myeloma, in which plasma cells produce an immunoglobulin
that accumulates in normal tissues including the heart, liver, kidneys and
nerves. The immunoglobulin deposits increase continually and eventually disrupt
normal organ functions, resulting in death from organ failure. Amyloidosis
afflicts approximately 2,500 individuals in the United States annually and is
fatal in most cases.
Current Treatment. Unlike most cancers that metastasize over time, multiple
myeloma is typically metastatic at the time of diagnosis. Chemotherapy is the
standard initial treatment for this disease. A number of chemotherapy drugs
cause a reduction in the volume of myeloma. However, standard doses of
chemotherapy rarely induce complete disappearance of myeloma even temporarily
and do not prolong survival. High dose chemotherapy with autologous stem cell
rescue, a type of bone marrow transplant, appears to prolong survival
33
<PAGE>
and is rapidly becoming standard treatment. This approach, however, causes
significant adverse side effects and does not cure patients. These patients,
however, are excellent candidates for immunotherapy because of low levels of
residual cancer cells located in the bone marrow.
Doctors treat amyloidosis with chemotherapy, but patients often have severe
side effects because of pre-existing organ damage due to the immunoglobulin
deposits. The goal of treatment is to stabilize the patient's condition, since
improvement of organ damage is rare even after aggressive therapy.
Vaccine Development. We are currently conducting a Phase II clinical trial
of APC8020, in collaboration with the Mayo Clinic, for treatment of patients
who have residual myeloma after high dose chemotherapy and stem cell
transplant. These patients have advanced resistant disease but have a low tumor
volume. M protein in the blood is used to monitor the patients' condition--the
lower the level of M protein, the lower the tumor volume. We plan to treat 30
patients in this trial and 13 have completed treatment so far. Among the
13 patients, six, or 46%, had major tumor reductions. Four of these six
patients had complete disappearance of M protein; the other two had a greater
than 75% reduction. We examined the bone marrow of three patients whose M
protein disappeared from the blood and in each case the tumor had also
disappeared from the marrow. To date, one of these patients underwent the most
sensitive test known for detecting myeloma, polymerase chain reaction testing.
This test was negative for the presence of tumor in the marrow. We are in the
process of performing the test on the remaining patients. Of the seven
remaining patients, six are stable and one had disease progression that
occurred 40 weeks after starting treatment. The treating physicians did not
report any side effects in this trial. The results of this trial suggest that
APC8020 is safe and provide preliminary evidence that it is effective for
treating multiple myeloma that is resistant to high dose chemotherapy.
We are also conducting a Phase II clinical trial of APC8020 in multiple
sites in the United States for treatment of patients with high tumor volume
resistant to standard therapy. Thirty-four patients have completed treatment in
this trial to date. All of these patients had previously failed standard
chemotherapy and half of the patients had previously received three or more
different chemotherapy combinations. Seventeen of these show signs of clinical
benefit from our treatment. Five of the patients had decreased M protein and 12
had stable M protein for at least 24 weeks after beginning treatment. Based
upon historical data, we would have expected 50% of similarly staged patients
to have had disease progression within eight to 12 weeks of beginning
treatment. Fewer than two percent of APC8020 infusions were associated with
serious side effects. We have extended this multicenter trial to confirm the
efficacy of APC8020 for treatment of patients with low tumor volume after stem
cell transplantation. We anticipate beginning an additional trial of APC8020
for multiple myeloma patients who have low tumor volume after standard dose
chemotherapy. If the results of these trials continue to demonstrate favorable
results, we anticipate beginning Phase III trials of APC8020 in 2001.
We have treated five patients with amyloidosis with APC8020, as part of the
Mayo Clinic multiple myeloma Phase II trial. Three of these patients have shown
evidence of significant clinical improvement even to damaged organs. None of
the patients had side effects from treatment. We are currently enrolling
additional amyloidosis patients in this trial.
APC8024 for Treatment of Multiple Cancers
Vaccine Description. APC8024 is our vaccine against tumors that have
increased levels of a protein called HER2 on their surface. We have identified
those portions of the HER2 molecule that stimulate the strongest cell-mediated
immune response and combined them with our Antigen Delivery Cassette. Our
preclinical studies indicate that our engineered antigen is superior to other
HER2 antigens at stimulating cell-mediated immunity and prolonging survival of
tumor-bearing animals. As a result, we believe our vaccine approach may be more
effective than antibodies to HER2 in treating a variety of cancers.
Target Market. Many cancers, including approximately 25% of breast,
ovarian/uterine, pancreatic and colorectal cancers, have HER2 on their
surfaces. It is estimated that these four cancers will account for 414,000 new
cases and 150,000 deaths in the United States in 2000.
34
<PAGE>
Current Treatment. Breast cancer is the most common malignancy among women
in the United States. Screening with mammography has resulted in diagnosis of
many cancers before they have metastasized, when surgery and/or radiation
therapy is often curative. It is not possible to determine which tumors have
metastasized, however, and most women receive chemotherapy in an effort to
prevent recurrence. Breast cancer that has recurred after initial therapy is
fatal in nearly all cases, and treatment is directed toward prolonging survival
and alleviating symptoms. Many drugs are effective for shrinking tumors to a
level that is optimal for immunotherapy. In addition, the FDA has approved the
antibody Herceptin for treatment of breast cancers that have HER2 on their
surface. Herceptin is usually given in combination with chemotherapy in an
effort to alleviate symptoms and prolong survival. Treatment with Herceptin has
not been shown to be curative.
Ovarian cancer is a silent killer that usually grows undetected until it has
spread throughout the abdomen. After detection, women are treated with
extensive surgery followed by chemotherapy. This aggressive treatment
frequently reduces tumor volume substantially but is not curative for most
patients. Once the cancer has recurred, the disease is usually fatal within two
years.
Pancreatic cancer grows in the abdomen undetected until it affects vital
organs, at which time surgery and radiation therapy are ineffective. More than
95% of patients with pancreatic cancer die of this disease. Chemotherapy, if
given, aims to control symptoms, but does not prolong survival.
Cancers involving the large intestine are called colorectal cancers. The FDA
has approved the immunotherapy drug Levamisole for prevention of recurrence of
colorectal cancer after initial surgery. Thus, colorectal cancer appears to be
sensitive to immunotherapy. Advanced colorectal cancer is resistant to
chemotherapy drugs and the only approved chemotherapy drugs simply alleviate
symptoms.
Vaccine Development. We are in the process of initiating two Phase I trials
to evaluate APC8024 for treatment of patients with tumors that have HER2 on
their surface. The two trials will examine different doses and schedules of
APC8024 for safety and ability to stimulate immunity. We plan to use the
results of these two trials to select one treatment regimen for Phase II trials
that will examine the effectiveness of APC8024 for treatment of specific
cancers.
APC80NY for Treatment of Multiple Cancers
APC80NY targets the NY-ESO protein that is present on many cancers,
including breast, prostate, lung, ovarian/uterine and bladder. It is estimated
that these cancers will account for 654,000 new cases and 267,000 deaths in the
United States in 2000. We licensed the NY-ESO antigen from the Ludwig Cancer
Institute, where scientists performed a series of preclinical studies that
demonstrated NY-ESO is an excellent immunotherapy target present in a wide
variety of tumors. We are currently engineering the NY-ESO antigen into our
Antigen Delivery Cassette. This involves identifying those regions of the
molecule that stimulate the strongest cell-mediated immunity and then combining
those regions to yield a protein that is most effectively presented by
dendritic cells. We expect to complete preclinical studies and begin Phase I
clinical trials of APC80NY in 2001.
APC80TR for Treatment of Multiple Cancers
APC80TR targets the Trp-P8 antigen that is present on 100% of prostate
cancers and approximately 71% of breast cancers, 93% of colorectal cancers and
80% of lung cancers. Trp-P8 is the first antigen generated from our internal
antigen discovery program. We plan to engineer the Trp-P8 antigen into our
Antigen Delivery Cassette. We will identify the cassette that stimulates the
strongest cell-mediated immunity and use this protein for our vaccine, APC80TR.
Therapeutic Antibody Products
Danton Antibody for Treatment of Cancer
Danton is our therapeutic antibody which targets a unique antigen present on
normal and malignant blood cells and causes death of only malignant cells.
Danton's target is present on numerous blood-borne tumors,
35
<PAGE>
such as Hodgkin's lymphoma, Non-Hodgkin lymphoma, and B-cell leukemias. It is
estimated that these tumors will account for 69,300 new cases and 43,500 deaths
in the United States in 2000. Current treatment for these cancers includes
chemotherapy, radiation, and high dose chemotherapy with stem cell
transplantation, all of which are highly toxic and only curative in a minority
of cases. Preclinical studies suggest that Danton can kill human cancer cells
without apparent toxicity or immune suppressive side effects. Furthermore,
cancer cells do not appear to develop resistance to this treatment over time.
Dantes Antibody for Treatment of Autoimmune Disease
Dantes is our therapeutic antibody that suppresses activities of the immune
system. Autoimmune diseases such as rheumatoid arthritis, systemic lupus
erythematosus, multiple sclerosis, myasthenia gravis and pemphigus vulgaris,
result from unwanted activities of the immune system. In the United States,
approximately 4.2 million people currently suffer from these diseases. Current
therapeutics include nonspecific immune suppression by corticosteroids,
methotrexate and other drugs. Although these treatments may reduce tissue
damage in some patients, they are not curative.
Dantes is specific for a well-known target for immunosuppression, HLA-DR.
Previously other companies have attempted to develop drugs that targeted HLA-
DR. Although those drugs were usually effective immunosuppressants, they failed
in preclinical studies due to unacceptable toxicity. We have observed that
immunosupression and toxicity are mediated by two separate parts of the
antibody molecule. We are developing Dantes to take advantage of this
observation. Dantes has shown significant immunosuppressive abilities in our
preclinical studies without producing toxicity.
Additional Vaccine Products
Autoimmune Diseases
Autoimmune diseases such as arthritis occur when immunoglobulins or T-cells
bind to self-antigens and damage the normal tissue. Our experience with
vaccines for treating immunoglobulin producing tumors such as multiple myeloma
suggests that our vaccine approach may be effective for treating autoimmune
diseases. APC8020 directs the immune response to destroy cancerous cells that
produce a specific immunoglobulin, or M protein. We believe the same vaccine
approach may be used to direct the immune response to destroy non-cancerous
cells that produce disease-causing immunoglobulin. We believe that eliminating
these cells could cure patients of this disease. T-cells have proteins on their
surface that are similar to immunoglobulins and that bind antigens causing
autoimmune disease. We believe that our vaccine approach may also be effective
for stimulating the immune response to destroy these T-cells.
Allergies
The trigger for an allergic reaction is the binding of an antigen such as
ragweed to an immunoglobulin. The resulting immune response is out of
proportion to the danger posed by the antigen and the excessive immune response
itself causes the disease. We believe that our therapeutic vaccine can direct
an immune response to destroy cells which produce allergy-causing
immunoglobulins.
Infectious Diseases
In chronic viral infections like AIDS, herpes and Hepatitis C, the virus
resides inside the cells. Antibodies are generally not effective for treating
these infections because antibodies cannot reach the cell interior. T-cells, in
contrast, are effective for destroying cells that are infected by a virus. Most
vaccines stimulate antibody responses rather than T-cell responses. This may
explain why vaccines have not been effective in treating chronic viral
infections. In a pilot study of our therapeutic vaccine approach in patients
with AIDS, we prepared vaccines using dendritic cells from healthy siblings of
the patients. We found that our vaccines stimulated a strong, cell-mediated
immune response to the AIDS virus.
36
<PAGE>
Cell Separation Products
We have developed proprietary cell separation technology which can be
tailored for specific cell types. This technology consists of two components:
specially engineered separation containers and buoyant density solutions. We
can blend our buoyant density solutions to match the buoyant density of a
particular cell type. By matching buoyant densities in this manner, we are able
to control whether or not a specific cell type floats or sinks in our device.
This allows us to isolate the desired cells easily, rapidly and without the
need for the biological reagents used in conventional cell separation
techniques.
In 1996, we obtained 510(k) clearance from the FDA on a family of our
separation devices. In 1999, we obtained pre-marketing approval, or a PMA, from
the FDA for our DACS(R)SC kit. This product uses our cell separation technology
to prepare stem cells for transplantation following high dose chemotherapy,
which is standard therapy for many blood cell malignancies, such as multiple
myeloma, lymphoma and leukemias. Stem cells, sometimes called hematopoietic
progenitor cells, are collected from the blood before chemotherapy and infused
afterwards to restore the destroyed marrow.
We also use our cell separation technology to isolate dendritic cells for
our cancer vaccines. For cell types outside of our interests, we license our
technology to third parties. For example, we currently have agreements to allow
BioTransplant and Osiris to use our technology to isolate cells for their
products.
Collaborations
Kirin Brewery Co., Ltd.
Kirin is our collaborator for the marketing and development of our vaccines
in Asia. We have granted Kirin an exclusive license to our proprietary
dendritic cell technology for the development and commercialization of our
products in Japan and other Asian countries. We also granted Kirin an option to
obtain an exclusive license to commercialize in these countries other products
we develop. In exchange, Kirin has granted us an option to obtain an exclusive
license to commercialize in North America any products developed by Kirin under
this agreement.
Additionally, we conduct collaborative research with Kirin intended to
create improvements in our dendritic cell technology and to develop new
products. By agreement, Kirin will own all rights in these improvements and
will exclusively license them to us. We also supply Kirin with devices,
reagents and some of our proprietary antigens. Kirin, in turn, supplies us with
some of its proprietary antigens and other items. We and Kirin have also agreed
to collaborate in the clinical development and commercialization in the
European Union of novel products jointly developed under our agreements and to
share equally in any profits.
In connection with these agreements, Kirin has paid us an upfront license
fee of $5.0 million and an option fee of $1.0 million for Provenge. We are also
entitled to royalties on sales, milestone payments, and product and option fees
from Kirin. Additionally, Kirin is obligated to support our research efforts.
We received from Kirin $1.3 million for research funding in 1999 and Kirin is
obligated to pay $2.3 million in 2000. We are obligated to pay royalties to
Kirin on products that we sell in North America, developed by or in
collaboration with Kirin under these agreements. We and Kirin are also
obligated to pay for items supplied by the other party at the fully-burdened
manufacturing cost plus a handling fee. During 1999, we received $1.0 million
for antigens and cell processing devices supplied to Kirin under this
arrangement. Kirin has the right to terminate these agreements without cause on
90 days written notice after January 1, 2002.
In addition, Kirin will purchase $5.0 million of our common stock at the
initial public offering price in a private placement simultaneous with the
completion of this offering.
BioTransplant, Inc.
In August 1996, we entered into an agreement with BioTransplant under which
we granted them a ten-year exclusive license to use our proprietary cell
separation technology for use in combination with solid organ
37
<PAGE>
transplantation. In return for this license, we received an up-front fee and
will receive royalties on sales. In addition, BioTransplant is obligated to
annual minimum purchase amounts and payments to maintain exclusivity. The term
of the agreement extends to 2006, but can be renewed by BioTransplant, on terms
acceptable to us, for two years.
Osiris Therapeutics, Inc.
In February 1997, we entered into an agreement with Osiris under which we
granted them a non-exclusive license to use our proprietary cell separation
technology for use in the separation of mesenchymal stem cells. In return for
this license, we received fees and will receive royalties on sales. The term of
the agreement extends to 2004 but can be extended by Osiris, on terms
acceptable to us, for two additional three-year terms.
Manufacturing
We manufacture the Antigen Delivery Cassettes used to conduct preclinical
and clinical trials. Our Antigen Delivery Cassettes are manufactured as
recombinant proteins using standard production methods in compliance with cGMP.
We intend to rely on third party contract manufacturers to produce larger
quantities of Antigen Delivery Cassettes for product commercialization.
We own and operate cell-processing centers in Mountain View, California and
Seattle, Washington. In addition, we use two third-party dendritic cell-
processing centers operated in conjunction with the Mayo Clinic in Rochester,
Minnesota and Kirin in Tokyo, Japan. We expect to open a fifth dendritic cell-
processing center in the second quarter of 2000 in conjunction with the
American Red Cross in Philadelphia, Pennsylvania.
The use of our single-use, proprietary cell separation devices has enabled
us to perform dendritic cell processing in simple, well-controlled
manufacturing facilities. Our cell-processing centers take advantage of pre-
fabricated clean room technology used widely in the electronics industry. We
can assemble and validate a pre-fabricated clean room in 30 days. Accordingly,
we can easily expand our cell-processing capacity.
We also manufacture cell separation devices that isolate cells from blood
and other bodily fluids. We rely on subcontractors to manufacture these devices
in full compliance with cGMP.
Marketing
We plan to market our products either directly or through co-marketing or
licensing agreements with established pharmaceutical companies. Due to the
concentrated distribution channels for the United States oncology market, we
plan to develop a direct sales force to market our cancer vaccines in the
United States. In market segments outside the United States and for products
with less concentrated distribution channels, like autoimmune diseases,
allergies and infectious diseases, we will seek strategic alliances with
leading pharmaceutical companies.
Intellectual Property
We protect our technology through United States and foreign patent filings,
trademarks and trade secrets. We have developed a strong patent estate, which
is composed of 47 issued patents and notices of allowance and an additional 72
pending patent applications worldwide. In addition, our issued and allowed
patents include patents that are directed to the solutions and devices by which
cells can be isolated and manipulated, including claims that apply specifically
to the isolation of dendritic cells, and claims on the use of antigen-pulsed
dendritic cells for immunotherapy, such as the use of idiotype-pulsed dendritic
cells to treat B-cell tumors. We have also received claims on a variety of
immunostimulatory antigen compositions. These include our Antigen Delivery
Cassette for use with a variety of tumor antigens and specifically, the
prostate antigen containing cassette. We intend to continue using our
scientific expertise to pursue and patent new developments with respect to
uses, compositions and factors to enhance our position in the cancer vaccine
field. However, the
38
<PAGE>
patent position of biopharmaceutical companies involves complex legal and
factual questions and, therefore, enforceability cannot be predicted with
certainty. Patents, if issued, may be challenged, invalidated or circumvented.
Thus, any patent that we own or license from third parties may not provide
adequate protection against competitors. Our pending patent applications, those
we may file in the future, or those we may license from third parties may not
result in issued patents. Also, patents may not provide us with adequate
proprietary protection or advantages against competitors with similar or
competing technologies. For example, we are aware of others that have had
patents issued to them in the dendritic cell field relating to methods to
isolate, culture or activate dendritic cells and relating to the treatment with
antigens of cancers such as prostate cancer.
We also rely on trade secrets and unpatentable know-how that we seek to
protect, in part, by confidentiality agreements. Our policy is to require our
officers, employees, consultants, contractors, manufacturers, outside
scientific collaborators and sponsored researchers and other advisors to
execute confidentiality agreements. These agreements provide that all
confidential information developed or made known to the individual during the
course of the individual's relationship with us be kept confidential and not
disclosed to third parties except in specific limited circumstances. We also
require signed confidentiality or material transfer agreements from companies
that are to receive our confidential data. In the case of employees,
consultants and contractors, confidentiality agreements with them generally
provide that all inventions conceived by the individual while rendering
services to us shall be assigned to us as our exclusive property. There can be
no assurance, however, that these agreements will not be breached, that we
would have adequate remedies for any breach, or that our trade secrets or
unpatentable know-how will not otherwise become known or be independently
developed by competitors.
Competition
The biotechnology and biopharmaceutical industries are characterized by
rapidly advancing technologies, intense competition and a strong emphasis on
proprietary products. Many entities, including pharmaceutical and biotechnology
companies, academic institutions and other research organizations are actively
engaged in the discovery, research and development of products that could
compete directly with our products under development. Many companies are also
developing alternative therapies that may compete with our products in the
fields of cancer, autoimmune diseases, allergies and infectious diseases. Some
of these companies are also developing vaccines or products based on dendritic
cells. Many of the entities developing and marketing competing products have
significantly greater financial resources and expertise in research and
development, manufacturing, preclinical testing, conducting clinical trials,
obtaining regulatory approvals and marketing. In addition, many of these
competitors have become more active in seeking licensing arrangements. Smaller
companies may also prove to be significant competitors, particularly through
collaborative arrangements with large, established companies.
Our ability to compete effectively will depend on our ability to advance
Provenge through Phase III clinical trials, as well as our ability to advance
our core technologies, license additional technology, maintain a proprietary
position in our technologies and products, obtain required government and other
public and private approvals on a timely basis, attract and retain key
personnel and enter into corporate partnerships that enable us and our
collaborators to develop effective products that can be manufactured cost-
effectively and marketed successfully. Competition among products approved for
sale will be based, among other things, upon efficacy, reliability, product
safety, price and patent position. See "Risk Factors--Competition in our
industry is intense."
Governmental Regulation
Governmental authorities in the United States and other countries
extensively regulate the preclinical and clinical testing, manufacturing,
labeling, storage, record-keeping, advertising, promotion, export, marketing
and distribution, among other things, of our immunotherapeutics. In the United
States, the FDA under the Federal Food, Drug, and Cosmetic Act, the Public
Health Service Act and other federal statutes and regulations subjects
pharmaceutical products to rigorous review. If we do not comply with applicable
requirements, we may be
39
<PAGE>
fined, our products may be recalled or seized, our production may be totally or
partially suspended, the government may refuse to approve our marketing
applications or allow us to distribute our products, and we may be criminally
prosecuted. The FDA also has the authority to revoke previously granted
marketing authorizations.
In order to obtain approval of a new product from the FDA, we must, among
other requirements, submit proof of safety and efficacy as well as detailed
information on the manufacture and composition of the product. In most cases,
this proof entails extensive laboratory tests, and preclinical and clinical
trials. This testing, the preparation of necessary applications and processing
of those applications by the FDA are expensive and typically take several years
to complete. We cannot assure that the FDA will act quickly or favorably in
reviewing these applications, and we may encounter significant difficulties or
costs in our efforts to obtain FDA approvals that could delay or preclude us
from marketing any products we may develop. The FDA may also require post-
marketing testing and surveillance to monitor the effects of approved products
or place conditions on any approvals that could restrict the commercial
applications of these products. Regulatory authorities may withdraw product
approvals if we fail to comply with regulatory standards or if we encounter
problems following initial marketing. With respect to patented products or
technologies, delays imposed by the governmental approval process may
materially reduce the period during which we will have the exclusive right to
exploit the products or technologies.
The first stage of the FDA approval process for a new biologic or drug
involves completion of preclinical studies and the submission of the results of
these studies, together with proposed clinical protocols, manufacturing
information, analytical data and other information to the FDA in an
investigational new drug application. This application must become effective
before human clinical trials may commence. The investigational new drug
application is automatically effective 30 days after receipt by the FDA, unless
before that time the FDA requests an extension to review the application, or
raises concerns or questions about the conduct of the trials as outlined in the
application. In the latter case, the sponsor of the application and the FDA
must resolve any outstanding concerns before clinical trials can proceed. We
cannot guarantee that submission of an investigational new drug application
will result in the FDA authorizing us to commence clinical trials in any given
case.
Preclinical studies involve laboratory evaluation of product characteristics
and animal studies to assess the efficacy and safety of the product. The FDA
regulates preclinical studies under a series of regulations called the current
Good Laboratory Practices regulations. If the sponsor violates these
regulations the FDA, in some cases, may invalidate the studies and require that
the sponsor replicate those studies.
After an investigational new drug application becomes effective, a sponsor
may commence human clinical trials. The sponsor typically conducts human
clinical trials in three sequential phases, but the phases may overlap. In
Phase I trials, the product is tested in a small number of patients or healthy
volunteers, primarily for safety at one or more doses. In Phase II, in addition
to safety, the sponsor evaluates the efficacy of the product in a patient
population somewhat larger than Phase I trials. Phase III trials typically
involve additional testing for safety and clinical efficacy in an expanded
population at geographically dispersed test sites. The sponsor must submit to
the FDA a clinical plan, or "protocol," accompanied by the approval of the
institution participating in the trials, prior to commencement of each clinical
trial. The FDA may order the temporary or permanent discontinuation of a
clinical trial at any time.
The sponsor must submit to the FDA the results of the preclinical and
clinical trials, together with, among other things, detailed information on the
manufacture and composition of the product, in the form of a new drug
application or, in the case of a biologic, a biologics license application. The
FDA is regulating our therapeutic vaccine products as biologics and, therefore,
we will be submitting biologics license applications to the FDA to obtain
approval of our products. In a process which generally takes several years, the
FDA reviews this application and, when and if it decides that adequate data is
available to show that the new compound is both safe and effective and that
other applicable requirements have been met, approves the drug or biologic for
40
<PAGE>
marketing. The amount of time taken for this approval process is a function of
a number of variables, including the quality of the submission and studies
presented, the potential contribution that the compound will make in improving
the treatment of the disease in question, and the workload at the FDA. We
cannot guarantee that any of our vaccines will successfully proceed through
this approval process or that the FDA will approve them in any specific period
of time, or at all.
Congress enacted the Food and Drug Administration Modernization Act of 1997,
in part, to ensure the availability of safe and effective drugs, biologics and
medical devices by expediting the FDA review process for new products. The
Modernization Act establishes a statutory program for the approval of fast
track products, including biologics. A fast track product is defined as a new
drug or biologic intended for the treatment of a serious or life-threatening
condition that demonstrates the potential to address unmet medical needs for
this condition. Under the fast track program, the sponsor of a new drug or
biologic may request the FDA to designate the drug or biologic as a fast track
product at any time during the clinical development of the product.
The Modernization Act specifies that the FDA must determine if the product
qualifies for fast track designation within 60 days of receipt of the sponsor's
request. The FDA can base approval of a marketing application for a fast track
product on an effect, on a clinical endpoint or on another endpoint that is
reasonably likely to predict clinical benefit. The FDA may subject approval of
an application for a fast track product to post-approval studies to validate
the surrogate endpoint or confirm the effect on the clinical endpoint and prior
review of all promotional materials. In addition, the FDA may withdraw its
approval of a fast track product on a number of grounds, including the
sponsor's failure to conduct any required post-approval study with due
diligence.
If a preliminary review of clinical data suggests that a fast track product
may be effective, the FDA may initiate review of sections of a marketing
application for a fast track product before the sponsor completes the
application. This rolling review is available if the applicant provides a
schedule for submission of remaining information and pays applicable user fees.
However, the time periods specified under the Prescription Drug User Fee Act
concerning timing goals to which the FDA has committed in reviewing an
application, do not begin until the sponsor submits the entire application.
We may request fast track designation and orphan drug status for our
vaccines. Orphan drug designation may be granted to those products developed to
treat diseases or conditions that affect fewer than 200,000 persons in the
United States. We believe that our target cancer patient populations meet these
criteria. Under the law, the developer of an orphan drug is guaranteed seven
years of market exclusivity following the approval of the product by FDA,
exemption from user fee payments to FDA, and a 50% tax credit for the amount of
money spent on human clinical trials. We cannot predict whether the FDA will
grant these designations, nor can we predict the ultimate impact, if any, of
the fast track process on the timing or likelihood of FDA approval of our
immunotherapeutics.
The FDA may, during its review of a new drug application or biologics
license application, ask for additional test data. If the FDA does ultimately
approve the product, it may require post-marketing testing, including
potentially expensive Phase IV studies, and surveillance to monitor the safety
and effectiveness of the drug. In addition, the FDA may in some circumstances
impose restrictions on the use of the drug, which may be difficult and
expensive to administer, and may require prior approval of promotional
materials.
Before approving a new drug application or biologics license application,
the FDA will also inspect the facilities at which the product is manufactured
and will not approve the product unless the manufacturing facilities are in
compliance with current Good Manufacturing Practices. In addition, the
manufacture, holding, and distribution of a product must be in compliance with
current Good Manufacturing Practices. Manufacturers must continue to expend
time, money and effort in the area of production and quality control and record
keeping and reporting to ensure full compliance with those requirements. The
labeling, advertising, promotion, marketing and distribution of a drug or
biologic product must be in compliance with FDA regulatory
41
<PAGE>
requirements. Failure to comply with applicable requirements can lead to the
FDA demanding that production and shipment cease, and, in some cases, that the
manufacturer recall products, or to FDA enforcement actions that can include
seizures, injunctions and criminal prosecution. These failures can also lead to
FDA withdrawal of approval to market the product.
We are also subject to regulation by the Occupational Safety and Health
Administration and the Environmental Protection Agency and to regulation under
the Toxic Substances Control Act, the Resource Conservation and Recovery Act
and other regulatory statutes, and may in the future be subject to other
federal, state or local regulations. Either or both of OSHA or the EPA may
promulgate regulations that may affect our research and development programs.
We are unable to predict whether any agency will adopt any regulation which
could have a material adverse effect on our operations.
Sales of pharmaceutical products outside the United States are subject to
foreign regulatory requirements that vary widely from country to country.
Whether or not we have obtained FDA approval, we must obtain approval of a
product by comparable regulatory authorities of foreign countries prior to the
commencement of marketing the product in those countries. The time required to
obtain this approval may be longer or shorter than that required for FDA
approval. The foreign regulatory approval process includes all the risks
associated with FDA regulation set forth above, as well as country-specific
regulations.
Employees
As of January 1, 2000, we had 72 full-time employees. None of our employees
are subject to a collective bargaining agreement, and we believe that our
relations with our employees are good.
Facilities
We lease approximately 70,650 square feet of laboratory, manufacturing and
office space in Seattle, Washington under a lease expiring December 2008. The
lease may be extended at our option for two five-year periods. We sublease
approximately 15,250 square feet of this facility under a lease expiring March
2004. We lease approximately 25,000 square feet of laboratory, manufacturing
and office space in Mountain View, California under a lease expiring June 2001.
This lease may be extended at our option for one five year period. We sublease
approximately 18,600 square feet of this facility under a lease expiring June
2001.
Legal Proceedings
We are not a party to any material legal proceedings.
42
<PAGE>
MANAGEMENT
Executive Officers and Directors
Our directors and executive officers, their positions and ages as of March
1, 2000 are listed below. No family relationships exist among any of our
directors or executive officers.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Christopher S. Henney, Ph.D., 59 President, Chief Executive Officer and
D.Sc. ........................ Director
T. Dennis George, J.D. ........ 62 Senior Vice President, Corporate Affairs,
General Counsel and Secretary
Martin A. Simonetti............ 42 Chief Financial Officer, Vice President,
Administration and Treasurer
David L. Urdal, Ph.D........... 50 Executive Vice President, Chief Scientific
Officer, and Vice Chairman of the Board
Frank H. Valone, M.D. ......... 50 Senior Vice President, Medical and
Regulatory Affairs, and Chief Medical
Officer
William Crouse (1)............. 57 Chairman of the Board
Gerardo Canet (2).............. 54 Director
Mark P. Carthy................. 39 Director
Timothy Harris, Ph.D. (1)...... 49 Director
Ruth Kunath.................... 47 Director
Lowell E. Sears (2)............ 49 Director
Ralph Shaw, J.D. (1)........... 61 Director
Douglas Watson (2)............. 55 Director
</TABLE>
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Christopher S. Henney, Ph.D., D.Sc., has served as our President, Chief
Executive Officer, and Director since May 1995. In 1989, Dr. Henney co-founded
ICOS Corporation, a publicly-held biotechnology company, where from 1989 to
1995, Dr. Henney served as Executive Vice President, Scientific Director and
Director. In 1981, Dr. Henney co-founded Immunex Corporation, a publicly-held
biotechnology company, where from 1981 to 1989, he held various positions,
including Director, Vice Chairman and Scientific Director. Dr. Henney was also
a former academic immunologist. Dr. Henney currently serves as a director of
Techne Corporation, Sonus Pharmaceuticals Inc., and Bionomics, Inc. Dr. Henney
received a B.Sc. with Honors, a Ph.D. in experimental pathology and a D.Sc. for
his contributions to immunology from the University of Birmingham, England.
T. Dennis George, J.D., has served as our Senior Vice President of Corporate
Affairs, General Counsel and Secretary since December 1999. From 1977 until
joining us, Mr. George was a partner in the law firm George, Hull, Porter &
Kohli, P.S. in Seattle, Washington. Mr. George is a member of the Washington
State, King County and American Bar Associations and is a former president of
the Federal Bar Association of the Western District of Washington. Mr. George
is admitted to the U.S. Supreme Court, U.S. Court of Appeals for the Ninth
Circuit and U.S. District Courts for the Western and Eastern Districts of
Washington. Mr. George received a B.S. with honors from Northern Michigan
University and a J.D. with honors from the University of Wisconsin Law School.
Martin A. Simonetti has served as our Chief Financial Officer, Vice
President, Administration and Treasurer since joining us in January 1999. From
1991 to 1998, Mr. Simonetti was employed at Amgen Inc., a pharmaceutical
company, where he held various positions, including Vice-President Operations
and Finance of Amgen BioPharma and their Director of Colorado Operations. From
1984 to 1991, Mr. Simonetti was employed at Genentech, Inc., a biotechnology
company, first as a scientist in their Medicinal and Analytical Chemistry
Department and later, after obtaining an M.B.A., as a financial analyst and
quality group controller.
43
<PAGE>
Mr. Simonetti received a B.S. and an M.S. in Nutrition from the University of
California, Davis and an M.B.A. from the University of Santa Clara.
David L. Urdal, Ph.D., has served as our Executive Vice President since
January 1999 and as our Chief Scientific Officer and Vice Chairman of our Board
of Directors since joining us in July 1995. From 1982 until July 1995, Dr.
Urdal held various positions with Immunex Corporation, including President of
Immunex Manufacturing Corporation, Vice President and Director of Development,
and head of the departments of biochemistry and membrane biochemistry. Dr.
Urdal received a B.S. and M.S. in Public Health and a Ph.D. in Biochemical
Oncology from the University of Washington.
Frank H. Valone, M.D., has served as our Senior Vice President, Medical and
Regulatory Affairs, since January 1999 and as our Chief Medical Officer since
1994. From 1991 until joining us, Dr. Valone was Associate Professor of
Medicine at Dartmouth-Hitchcock Medical Center, Norris Cotton Cancer Center.
From 1982 to 1991, Dr. Valone held various positions at the VA Medical Center
in San Francisco, including Chief of Hematology/Oncology. From 1984 to 1991,
Dr. Valone held faculty positions at the University of California, San
Francisco, including Associate Professor of Medicine. Prior to that time, Dr.
Valone served as an instructor in Medicine at Harvard Medical School and
instructor in Medical Oncology at the Dana Farber Cancer Institute. Dr. Valone
received a B.A. from Hamilton College and an M.D. from Harvard Medical School.
William Crouse has served as Chairman of our Board of Directors since April
1995 and as a Director since January 1994. Since 1994, Mr. Crouse has been
Managing Director of HealthCare Ventures LLC, the management company for
HealthCare Ventures III, L.P., HealthCare Ventures IV, and HealthCare Ventures
V, L.P., venture capital funds specializing in biotechnology. Prior to joining
HealthCare Ventures LLC, Mr. Crouse was Worldwide President of Ortho Diagnostic
Systems, Inc., a manufacturer of diagnostic tests and reagents, and a Vice
President of Johnson & Johnson International, from 1987 to 1993. Mr. Crouse
currently serves as a director of BioTransplant Inc. Mr. Crouse received a B.S.
in Finance and Economics from Lehigh University and an M.B.A. with Distinction
in Marketing Management from Pace University.
Gerardo Canet has served as one of our Directors since December 1996. Mr.
Canet has been President, Chief Executive Officer and chairman of the board of
IntegraMed America, Inc., a manager of reproductive fertility centers, since
1994. From 1989 to 1994, Mr. Canet held various executive management positions
with Curative Health Services, Inc., most recently as Executive Vice President
and President of its Wound Care Business Unit. From 1979 to 1989, Mr. Canet
held various management positions with Kimberly Quality Care, Inc., a provider
of home health care services, most recently as Executive Vice President and
Chief Operating Officer. Mr. Canet currently serves as a director of Curative
Health Services, Inc. Mr. Canet received a B.A. in Economics from Tufts
University and an M.B.A. from Suffolk University.
Mark P. Carthy has served as one of our Directors since March 2000. Mr.
Carthy has been an advisor for Morningside Ventures since October 1998,
currently advising Kummell Investments Limited, a Morningside Group affiliate,
on its venture capital portfolio. From April 1997 to October 1998, Mr. Carthy
was Chief Business Officer at Cubist Pharmaceuticals, a biotechnology company.
From January 1992 to April 1997, Mr. Carthy was the Senior Director of Business
Development for Vertex Pharmaceuticals Inc. Mr. Carthy currently serves as a
director of Variagenics, Inc. Mr. Carthy received a B.E. in Chemical
Engineering from the University College Dublin, an M.Sc. in Chemical
Engineering from the University of Missouri and an M.B.A. from the Harvard
Business School.
Timothy Harris, Ph.D., has served as one of our Directors since February
1999. Dr. Harris has been President and Chief Executive Officer of Structural
Genomix, a biotechnology company, since April 1999. From 1993 to January 1999,
Dr. Harris was Senior Vice President of Research and Development for Sequana
Therapeutics Inc., which became Axys Pharmaceuticals, Inc., a pharmaceutical
company, in 1998. Before joining Sequana, Dr. Harris was Director of
Biotechnology at Glaxo Group Research in England. Dr. Harris received a B.S.
and a Ph.D. in Virology from the University of Birmingham, England.
44
<PAGE>
Ruth Kunath has served as one of our Directors since December 1999. Ms.
Kunath has been biotechnology portfolio manager for Vulcan Ventures
Incorporated, a venture capital firm founded by Paul G. Allen to research and
implement his investments, since 1992. Prior to her employment at Vulcan
Ventures Incorporated, Ms. Kunath spent nine years managing Seattle Capital
Management Equity transactions and eight years as the Senior Portfolio Manager
for the healthcare sector of Bank of America Capital Management. Ms. Kunath
currently serves as a director of VaxGen, Inc. Ms. Kunath received a B.A. from
DePaul University and is a Certified Financial Analyst.
Lowell E. Sears has served as one of our Directors since November 1995.
Since 1994, Mr. Sears has been Chairman and Chief Executive Officer of Sears
Capital Management, Inc., a life sciences venture capital and portfolio
management company. Prior to founding Sears Capital Management, Inc., Mr. Sears
was Chief Financial Officer of Amgen Inc., from 1988 to 1994, and also served
as its Senior Vice President responsible for the Asia-Pacific region. Mr. Sears
currently serves as a director for Neose Technologies, Inc. and Techne
Corporation. Mr. Sears received a B.A. in economics from Claremont McKenna
College and an M.B.A. from Stanford University.
Ralph Shaw, J.D., has served as one of our Directors since March 1996. Since
January 1983, Mr. Shaw has been the general partner of Shaw Venture Partners, a
venture capital firm formed by Mr. Shaw and U.S. Bancorp in 1983. In 1980, Mr.
Shaw formed Shaw Management Company, an investment counseling firm. Mr. Shaw
currently serves as a director of Schnitzer Steel Industries, Inc. Mr. Shaw
received a B.A. in Public Accounting from Hofstra University and a J.D. from
New York University's School of Law.
Douglas Watson has served as one of our Directors since February 2000. Mr.
Watson is Chief Executive Officer of Pittencrieff Glen Associates, a consulting
firm which he founded in June 1999. From January 1997 to May 1999, Mr. Watson
served as President and Chief Executive Officer of Novartis Corporation, a
pharmaceutical company. From April 1996 to December 1996, Mr. Watson served as
President and Chief Executive Officer of Ciba-Geigy Corporation. From April
1986 to March 1996, Mr. Watson served as the President of Ciba Pharmaceuticals
Division. Mr. Watson's career spanned 33 years with Novartis, having joined
Geigy (UK) Ltd. in 1966. Mr. Watson currently serves as a director of Engelhard
Corporation, a supplier of environmental technologies and chemical products,
and Summit Bank Corporation. Mr. Watson received an M.A. in Pure Mathematics
from Churchill College, Cambridge University.
Board Composition
We currently have authorized ten directors. Upon the closing of this
offering, the terms of office of our directors will be divided into three
classes: Class I, whose term will expire at the annual meeting of stockholders
to be held in 2001; Class II, whose terms will expire at the annual meeting of
stockholders to be held in 2002; and Class III, whose term will expire at the
annual meeting of stockholders to be held in 2003. The Class I Directors are
Gerardo Canet, Mark Carthy and Ralph Shaw; the Class II Directors are William
Crouse, Timothy Harris and Ruth Kunath; and the Class III Directors are
Christopher Henney, Lowell Sears, David Urdal and Douglas Watson. At each
annual meeting of stockholders after the initial classification, the successors
to directors whose terms will then expire will be elected to serve from the
time of election and qualification until the third annual meeting following
election. In addition, our certificate of incorporation will provide that the
authorized number of directors may be changed only by resolution of our Board
of Directors. Any additional directorships resulting from an increase in the
number of directors will be distributed among the three classes so that, as
nearly as possible, each class will consist of one third of the directors. This
classification of our Board of Directors may have the effect of delaying or
preventing changes in control or management of Dendreon, although our directors
may be removed for cause by the affirmative vote of the holders of a majority
of our common stock.
45
<PAGE>
Board Committees
Audit Committee. Our audit committee consists of Gerardo Canet, Lowell Sears
and Douglas Watson. Lowell Sears serves as Chairman of our audit committee. The
audit committee:
. makes recommendations to our Board of Directors about the selection of
independent auditors;
. reviews the results and scope of the audit and other services provided by
our independent auditors; and
. reviews and evaluates our internal controls.
Compensation Committee. Our compensation committee consists of William
Crouse, Timothy Harris and Ralph Shaw. William Crouse serves as Chairman of our
compensation committee. The compensation committee:
. reviews and approves the compensation and benefits for our executive
officers;
. administers our stock option plans; and
. makes recommendations to our Board of Directors about compensation
matters.
Compensation Committee Interlocks and Insider Participation
Decisions about executive compensation are made by the compensation
committee. No member of our compensation committee has been an officer or
employee of ours at any time. None of our executive officers serves as a member
of the board of directors or compensation committee of any entity that has one
or more executive officers serving as a member of our board of directors or
compensation committee.
Executive Compensation
The following table sets forth all compensation awarded to, earned by, or
paid by us during the fiscal year ended December 31, 1999, to our chief
executive officer and president and all of our most highly compensated
executive officers whose salary and bonus for the fiscal year exceeded
$100,000. Collectively, these individuals are referred to as "Named Executive
Officers."
Summary Compensation Table
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation Award
--------------------- ---------------------
Name and Principal Securities Underlying All other
Position Salary($) Bonus($)(1) Options (#) Compensation($)
------------------ --------- ----------- --------------------- ---------------
<S> <C> <C> <C> <C>
Christopher S. Henney,
Ph.D., D.Sc. ......... $300,000 $100,000 59,500 --
President, Chief
Executive Officer and
Director
David L. Urdal,
Ph.D.,................ 240,000 50,000 35,700 --
Executive Vice
President, Chief
Scientific Officer and
Vice Chairman of the
Board
Frank H. Valone,
M.D. ................. 215,000 25,000 15,000 34,424(3)
Senior Vice President,
Clinical & Regulatory
Affairs, and Chief
Medical Officer
Martin A. Simonetti.... 175,000 20,000 80,000(2) 44,107(4)
Chief Financial
Officer, Vice
President,
Administration, and
Treasurer
</TABLE>
- --------
(1) Consists of bonus earned during fiscal 1999 and paid in January 2000.
(2) Represents options granted in January 1999 pursuant to commencement of
employment.
(3) Consists of temporary housing expenses.
(4) Consists of relocation expenses.
46
<PAGE>
The following table shows certain information regarding stock options
granted to our Named Executive Officers during fiscal 1999. No stock
appreciation rights were granted in fiscal 1999. All options granted to these
executive officers in the last fiscal year were granted under our equity
incentive plan. Each option has a ten-year term, subject to earlier termination
if the optionee's service with us terminates. Unless otherwise noted, options
vest at the rate of 25% on the anniversary of the vesting commencement date and
1/48th monthly thereafter in 36 equal installments. The percentage of total
options set forth below is based on options to purchase 605,200 shares of
common stock granted to employees during fiscal 1999. All options are granted
at the fair market value on the date of grant as determined by our Board of
Directors. Potential realizable values are net of exercise price, but before
associated taxes based on the terms of the option at the time of grant. The 5%
and 10% assumed annual rates of compounded stock price appreciation are
mandated by the Securities and Exchange Commission and do not represent our
estimate or projection of our future common stock price. Unless the market
price of the common stock appreciates over the option term, no value will be
realized from the option grants made to our Named Executive Officers. The
assumed 5% and 10% rates of stock appreciation are based on the assumed initial
public offering price of $ per share.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Number of Stock Price
Shares % of Total Appreciation for
Underlying Options Option Term(1)
Options Granted to Exercise Price Expiration ---------------------
Name Granted Employees Per Share($) Date 5% 10%
---- ---------- ---------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Christopher S. Henney,
Ph.D, D.Sc. ........... 59,500 9.8 $1.00 1/1/09 $ $
David L. Urdal, Ph.D.... 35,700 5.9 1.00 1/1/09
Frank H. Valone, M.D.... 15,000 2.5 1.00 1/1/09
Martin A. Simonetti..... 80,000 13.2 1.00 1/1/09
</TABLE>
- --------
(1) Potential realizable values are computed by multiplying the number of
shares of common stock subject to a given option by the assumed initial
public offering price of per share, assuming that the aggregate stock
value derived from that calculation compounds at the annual 5% or 10% rate
shown in the table for the entire ten-year term of the option and
subtracting from that result the aggregate option exercise price.
47
<PAGE>
Options Exercises and Holdings
The following table sets forth the number of shares of common stock acquired
upon the exercise of stock options by the Named Executive Officers during
fiscal 1999, and the number and value of the shares of common stock underlying
unexercised options held by the Named Executive Officers as of December 31,
1999. The value realized is based on the fair market value of the underlying
securities as of the date of exercise, minus the per share exercise price,
multiplied by the number of shares underlying the option. The value of
unexercised in-the-money options is based on the assumed initial public
offering price of $ per share less the exercise price, multiplied by the
number of shares underlying the option. All options were granted under our 1996
Equity Incentive Plan. Unless otherwise noted, these options generally vest at
the rate of 25% on the anniversary of the vesting commencement date and 1/48th
monthly thereafter in 36 equal installments.
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Shares Underlying Value of Unexercised In-the-
Number of Unexercised Options at Money Options at
Shares December 31, 1999 December 31, 1999
Acquired Value ------------------------------ ---------------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Christopher S. Henney,
Ph.D, D.Sc. (1)........ 191,842 $82,461 71,918 219,796 $ $
David L. Urdal,
Ph.D. (2).............. 84,155 0 -- 98,576
Frank H. Valone,
M.D. (3)............... 10,000 4,900 133,073 36,927
Martin A. Simonetti..... -- -- -- 80,000
</TABLE>
- --------
(1) Of Dr. Henney's options to purchase 291,714 shares of common stock as of
December 31, 1999, options to purchase 120,504 shares of common stock will
vest in 2001 or upon consummation of this offering, whichever occurs
first.
(2) Of Dr. Urdal's options to purchase 98,576 shares of common stock as of
December 31, 1999, options to purchase 40,168 shares of common stock will
vest in 2001 or upon consummation of this offering, whichever occurs
first.
(3) Of Dr. Valone's options to purchase 170,000 shares of common stock as of
December 31, 1999, options to purchase 58,750 shares of common stock
vested on the date of grant.
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
In October 1998, we entered into an employment letter agreement with Drs.
Henney and Urdal. This agreement provides that Dr. Henney will receive an
annual base salary of $300,000 and Dr. Urdal will receive an annual base salary
of $240,000. In addition, Dr. Henney was granted an option to purchase 40,000
shares of our common stock at an exercise price of $1.00 per share, which vests
monthly on a pro rata basis over four years, beginning May 1, 1998. Dr. Urdal
was granted an option to purchase 15,000 shares of our common stock at an
exercise price of $1.00 per share, which vests monthly on a pro rata basis over
four years, beginning July 1, 1998. Under the agreement, we reaffirmed the 1995
grant of options to purchase 189,756 shares of our common stock at an exercise
price of $0.51 per share to Dr. Henney and options to purchase 60,252 shares of
our common stock at an exercise price of $0.51 per share to Dr. Urdal. One-
third of these options granted in 1995 vested when we entered into a strategic
collaboration with Kirin Brewery Co., Ltd. in December 1998, and two-thirds of
these options will vest upon the consummation of this offering or 2001,
whichever occurs first. With the exception of these 1995 options, the agreement
further provides that the vesting of all stock options held by Drs. Henney and
Urdal, respectively, will accelerate by one year if Drs. Henney or Urdal are
terminated for any reason other than cause.
48
<PAGE>
Director Compensation
Directors, Dr. Harris and Messrs. Canet, Sears and Watson, each currently
receive $1,500 for every board meeting attended in person and $500 for each
committee meeting attended in person, as compensation for their services as
members of our Board of Directors and as members of committees of our Board.
They are also reimbursed for out-of-pocket expenses incurred in connection with
board and committee meeting attendance. Messrs. Carthy, Crouse, Shaw, Ms.
Kunath and directors who are our employees do not receive any cash compensation
for serving on our Board or committees of our Board.
Upon joining our Board in February 1999, Dr. Harris received options to
purchase 25,000 shares of our common stock at an exercise price of $1.00 per
share. In May 1999, Messrs. Canet and Sears each received an option to purchase
6,250 shares of our common stock at an exercise price of $1.00 per share. Upon
joining our Board, in January 2000 and February 2000, Ms. Kunath and Mr.
Watson, respectively, each received options to purchase 24,000 shares of our
common stock at an exercise price of $2.00 per share. In October 1995,
Mr. Sears was granted an option to purchase 7,500 shares of our common stock
pursuant to a consulting agreement between Mr. Sears and us. The consulting
agreement terminated pursuant to its terms in October 1999.
Upon adoption by our stockholders of our 2000 Equity Incentive Plan, Dr.
Harris and Messrs. Canet, Sears and Watson, and any newly elected directors,
will each receive automatic stock option grants for serving on our Board of
Directors. See "Management--Employee Benefit Plans."
Employee Benefit Plans
2000 Equity Incentive Plan
Our Board adopted, on March 1, 2000, and we expect that prior to the closing
of this offering our stockholders will approve our 2000 Equity Incentive Plan.
The 2000 Equity Incentive Plan is an amendment and restatement of our 1996
Equity Incentive Plan (the "1996 Plan"). A total of four million (4,000,000)
shares of common stock have been authorized for issuance under the 2000 Equity
Incentive Plan. Each year, the number of shares reserved for issuance under the
plan will automatically be increased by the least of (i) five percent (5%) of
the total number of shares of our common stock then outstanding, (ii) five
hundred thousand (500,000) shares, or (iii) a number to be determined by the
Board. Shares subject to stock awards that have expired or otherwise terminated
without having been exercised in full again become available for grant, but
exercised shares repurchased by us under a right of repurchase will not again
become available for grant.
The 2000 Equity Incentive Plan permits the grant of options to our
employees, directors and consultants. Options may be either incentive stock
options, within the meaning of Section 422 of the Internal Revenue Code, to
employees or nonstatutory stock options. In addition, the 2000 Equity Incentive
Plan permits the grant of stock bonuses and rights to purchase restricted
stock. No person may be granted options covering more than five hundred
thousand (500,000) shares of common stock in any calendar year.
The 2000 Equity Incentive Plan is administered by the Board or a committee
appointed by the Board. The Board has delegated the authority to administer the
2000 Equity Incentive Plan to the compensation committee. Subject to the
limitations set forth in the 2000 Equity Incentive Plan, the compensation
committee has the authority to select the eligible persons to whom award grants
are to be made, to designate the number of shares to be covered by each award,
to determine whether an option is to be an incentive stock option or a
nonstatutory stock option, to establish vesting schedules, to specify the
exercise price of options and the type of consideration to be paid upon
exercise and, subject to applicable restrictions, to specify other terms of
awards.
The maximum term of options granted under the 2000 Equity Incentive Plan is
ten years. Incentive stock options granted under the 2000 Equity Incentive Plan
generally are non-transferable. Nonstatutory stock options generally are non-
transferable, although the applicable option agreement may permit some
transfers. Options generally expire three months after the termination of an
optionholder's service. However, if an optionholder is
49
<PAGE>
permanently disabled or dies during his or her service, that person's options
generally may be exercised up to 12 months following disability or 18 months
following death.
The exercise price of options granted under the 2000 Equity Incentive Plan
is determined by the Board, committee or administrator in accordance with the
guidelines set forth in the 2000 Equity Incentive Plan. The exercise price of
an incentive stock option cannot be less than 100% of the fair market value of
the common stock on the date of the grant. The exercise price of a nonstatutory
stock option cannot be less than 85% of the fair market value of the common
stock on the date of grant.
Options granted under the 2000 Equity Incentive Plan vest at the rate
determined by the Board, committee or administrator and specified in the option
agreement. Typically, options granted under this plan vest over four years, at
the rate of 25% of the shares subject to the option vesting after one year from
the grant date and then vest monthly thereafter. The terms of any stock bonuses
or restricted stock purchase awards granted under the 2000 Equity Incentive
Plan will be determined by the Board, committee or administrator. The purchase
price of restricted stock under any restricted stock purchase agreement will
not be less than 85% of the fair market value of our common stock on the date
of grant. Stock bonuses and restricted stock purchase agreements awarded under
the 2000 Equity Incentive Plan are generally non-transferable, although the
applicable award agreement may permit some transfers.
Non-Employee Director Stock Option Grants. The 2000 Equity Incentive Plan
also provides for automatic stock option grants to non-employee directors
serving on the Board who were invited to join the Board other than in
connection with the director's investment in the company at the time of the
director's election to the Board. Each person who is elected or appointed for
the first time to be a non-employee director subsequent to the adoption of the
Equity Incentive Plan will be granted an initial grant on the date of his or
her election or appointment to the Board to purchase twenty-four thousand
(24,000) shares of our common stock.
The 2000 Equity Incentive Plan also provides that eligible non-employee
directors will automatically receive an annual grant to purchase six thousand
(6,000) shares of our common stock commencing, as applicable, on the fourth
anniversary of (i) the date of the initial grant to the director or (ii) the
initial election of the non-employee director to the Board. For purposes of the
annual grants, the initial election date for Messrs. Sears and Canet is May 6,
1996. Messrs. Crouse, Carthy and Shaw are not eligible for automatic grants
under the 2000 Equity Incentive Plan.
The non-employee director stock options will have a maximum term of ten
years and generally must be exercised prior to the earliest of 18 months
following the death of the non-employee director, 12 months from the
termination of service on the Board by the non-employee director due to a
disability, 3 months from the termination of the service of the non-employee
director for any other reason, or the expiration of the original term of the
stock option. Twenty-five percent of shares pursuant to each initial grant of a
non-employee director option vest one year from the date of grant and 1/48th of
the shares vest monthly thereafter. One hundred percent of the shares pursuant
to each annual grant of a non-employee director option vest one year from the
date of grant.
All options granted to non-employee directors will be granted at the fair
market value of the common stock on the date of grant.
Upon some types of changes in control in our ownership, all outstanding
stock awards under the 2000 Equity Incentive Plan must either be assumed or
substituted by the surviving entity. In the event the surviving entity does not
assume or substitute the stock awards, then the vesting and exercisability of
outstanding awards will accelerate prior to the change in control and the
awards will terminate to the extent they are not exercised prior to the change
in control. The stock options will not be transferable except as otherwise
provided in a stock option agreement to the extent permitted by federal
securities laws and regulations.
The Board may amend or terminate the 2000 Equity Incentive Plan at any time.
Amendments will generally be submitted for stockholder approval to the extent
required by applicable law.
50
<PAGE>
As of March 1, 2000, we had issued and outstanding under the 2000 Equity
Incentive Plan options to purchase 1,740,689 shares of common stock. The per
share exercise prices of these options range from $0.20 to $6.00. 1,187,213
shares remain available for grant under the 2000 Equity Incentive Plan.
2000 Employee Stock Purchase Plan
Effective upon the completion of this offering, we will implement the 2000
Employee Stock Purchase Plan, which was approved by the Board on March 1, 2000.
A total of one million three hundred fifty thousand (1,350,000) shares of
common stock have been reserved for issuance under this purchase plan. Each
year, the number of shares reserved for issuance under the purchase plan will
automatically be increased by the least of (i) one percent (1%) of the total
number of shares of our common stock then outstanding, (ii) four hundred
thousand (400,000) shares, or (iii) a number determined by the Board. The
purchase plan is intended to qualify as an employee stock purchase plan within
the meaning of section 423 of the Internal Revenue Code. Under the 2000
Employee Stock Purchase Plan, the Board or a committee comprised of at least
two members of the Board may authorize participation by eligible employees,
including officers, in periodic offerings following the commencement of the
purchase plan. The initial offering under the purchase plan will commence on
the effective date of this offering and terminate on July 31, 2002. It will
have purchase dates on January 31, 2001, July 31, 2001, January 31, 2002 and
July 31, 2002.
Unless otherwise determined by the Board of Directors, employees are
eligible to participate in the 2000 Employee Stock Purchase Plan only if they
are customarily employed by us or one of our subsidiaries designated by the
Board for at least twenty (20) hours per week and five (5) months per calendar
year and have completed at least ten (10) days of continued employment. The ten
(10) day continued employment requirement will be waived for the initial
offering. Employees who participate in an offering may have up to fifteen
percent (15%) of their eligible earnings withheld under the purchase plan. The
amount withheld is then used to purchase shares of the common stock on
specified dates determined by the Board. The price of common stock purchased
under the purchase plan will be equal to 85% of the lower of the fair market
value of the common stock at the commencement date of each offering period or
the relevant purchase date. Employees may end their participation in an
offering at any time during that offering, and their participation will end
automatically on termination of their employment with us or one of our
affiliates.
In the event of a merger, reorganization, consolidation or liquidation that
involves us, the Board has discretion to provide that each right to purchase
common stock will be assumed or an equivalent right substituted by the
successor corporation or the Board of Directors may provide for all sums
collected by payroll deductions to be applied to purchase stock immediately
prior to a merger or other transaction. The Board of Directors has the
authority to amend or terminate the purchase plan, provided, however, that no
action may adversely affect any outstanding rights to purchase common stock.
51
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following is a summary of certain related party transactions since
January 1997 to which we were or are a party or in which certain of our
executive officers, Directors or 5% stockholders have or had a direct or
indirect material interest. We believe that each of these agreements was made
on terms at least as fair to us as could have been obtained from unaffiliated
third parties.
Series C Preferred Stock
From June 1997 to and August 1997, we sold an aggregate of 3,308,179 shares
of Series C preferred stock at a price per share of $3.60 to a group of private
investors that include the following directors, officers and 5% stockholders:
<TABLE>
<CAPTION>
Shares of Series C
Purchaser Preferred Stock
--------- ------------------
<S> <C>
Kummell Investments Limited............................. 833,333
Affiliates of Sanderling Ventures....................... 694,444
New York Life Insurance Company......................... 555,555
Affiliates of HealthCare Ventures V, L.P. .............. 277,777
Vulcan Ventures Incorporated............................ 277,777
Shaw Venture Partners III, L.P. ........................ 138,889
The Sears Living Trust DTD 3/11/91...................... 13,888
</TABLE>
Ralph Shaw, one of our directors, is a general partner of Shaw Venture
Partners III, L.P. Lowell E. Sears, one of our directors, is the trustee of The
Sears Living Trust DTD 3/11/91.
Series D Preferred Stock
In July 1998, we sold an aggregate of 937,000 shares of Series D Preferred
Stock at a price per share of $5.00 to a group of private investors that
include the following directors, officers and 5% stockholders:
<TABLE>
<CAPTION>
Shares of Series D
Purchaser Preferred Stock
--------- ------------------
<S> <C>
Vulcan Ventures Incorporated............................ 200,000
New York Life Insurance Company......................... 120,000
Shaw Venture Partners III, L.P. ........................ 100,000
Kummell Investments Limited............................. 50,000
</TABLE>
Series E Preferred Stock
From September 1999 to February 2000, we sold an aggregate of 4,069,553
shares of Series E Preferred Stock at a price per share of $4.25 to a group of
private investors that include the following directors, officers and 5%
stockholders:
<TABLE>
<CAPTION>
Shares of Series E
Purchaser Preferred Stock
--------- ------------------
<S> <C>
Vulcan Ventures Incorporated............................ 2,352,950
Affiliates of HealthCare Ventures....................... 235,300
Kummell Investments Limited............................. 117,650
New York Life Insurance Company......................... 117,650
Affiliates of Sanderling Ventures....................... 117,650
Shaw Venture Partners III, L.P. ........................ 70,585
Sears Living Trust DTD 3/11/91.......................... 10,000
Martin A. & Mary Ann Simonetti.......................... 10,000
</TABLE>
52
<PAGE>
Other Transactions
In December 1996, we entered into an employment agreement with Christopher
S. Henney, Ph.D., D.Sc., our President and Chief Executive Officer. This
agreement terminated pursuant to its terms in April 1998. In December 1996, we
entered into an employment agreement with David L. Urdal, Ph.D., our Executive
Vice President, Chief Scientific Officer and Vice Chairman of our Board of
Directors. This agreement terminated pursuant to its terms in July 1998.
We have entered into compensation arrangements with some of our directors as
described in "Management--Director Compensation."
We have entered into employment arrangements with some of our executive
officers as described in "Management--Employment Agreements."
We have granted registration rights to all of the above stockholders as
described under "Description of Capital Stock--Registration Rights."
53
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of common stock as of March 1, 2000, and as adjusted to reflect the
completion of this offering, by (1) each person (or group of affiliated
persons) known by us to own beneficially more than five percent of the
outstanding shares of our common stock, (2) each of our directors and executive
officers, and (3) all of our directors and executive officers as a group.
Unless otherwise indicated, the address of each of the named individuals is c/o
Dendreon Corporation, 3005 First Avenue, Seattle, Washington 98121. Except as
otherwise indicated, and subject to applicable community property laws, the
persons named in the table have sole voting and investment power with respect
to all shares of common stock held by them. Beneficial ownership is determined
in accordance with the rules of the SEC. Shares of common stock subject to
options or warrants that are exercisable or will become exercisable within 60
days of March 1, 2000 are deemed outstanding for the purpose of computing the
percentage of ownership of the person or entity holding options or warrants but
are not treated as outstanding for the purpose of computing the percentage
ownership of any other person or entity. Percentage of shares beneficially
owned is based on 14,318,700 shares of common stock outstanding as of March 1,
2000, after giving effect to the conversion of all preferred stock into shares
of common stock on a one for one basis, and shares of common stock to be
outstanding upon the consummation of this offering including shares
to be issued to Kirin simultaneous with the closing of this offering.
<TABLE>
<CAPTION>
Shares Percentage Beneficially Owned
Beneficially ------------------------------
Name and Address Owned Before Offering After Offering
- ---------------- ------------ --------------- --------------
<S> <C> <C> <C>
5% Stockholders
Entities affiliated with
HealthCare Ventures LLC (1)...... 3,463,021 24.0% %
44 Nassau Street
Princeton, NJ 08542
Vulcan Ventures Incorporated (2).. 3,124,084 21.8
110-110th Avenue NE, Suite 550
Bellevue, WA 98004
Entities affiliated with
Sanderling Ventures.............. 1,105,450 7.7
2730 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Kummell Investments Limited (3)... 1,000,983 7.0
Suite 835A
Europort, Gibralter (via London)
New York Life Insurance Co. ...... 793,205 5.5
Venture Capital Group, Room 207
51 Madison Avenue
New York, NY 10010
Named Executive Officers and Directors
Christopher S. Henney, Ph.D.,
D.Sc. (4)........................ 246,185 1.7
T. Dennis George.................. -- *
Martin A. Simonetti (5)........... 35,000 *
David L. Urdal, Ph.D. (6)......... 264,873 1.8
Frank H. Valone (7)............... 170,448 1.2
William Crouse (1)................ 3,463,021 24.0
Gerardo Canet (8)................. 37,500 *
Mark P. Carthy (3)................ 1,000,983 7.0
Timothy Harris (9)................ 6,771 *
Ruth Kunath (2)................... 3,124,084 21.8
Lowell E. Sears (10).............. 134,600 *
Ralph Shaw (11)................... 610,164 4.3
Douglas Watson.................... -- *
All executive officers and
directors
as a group (13 persons) (12)...... 9,093,629 63.5
</TABLE>
54
<PAGE>
- --------
* Represents beneficial ownership of less than 1%.
(1) Includes 2,203,364 shares and warrants to purchase 76,944 shares held by
HealthCare Ventures III, L.P., 647,041 shares and warrants to purchase
22,595 shares held by HealthCare Ventures IV, L.P. and 513,077 shares held
by HealthCare Ventures V, L.P. Mr. William Crouse is the Managing Director
of HealthCare Ventures LLC, the management company for HealthCare Ventures
III, L.P., HealthCare Ventures IV, L.P., and HealthCare Ventures V, L.P.
Mr. Crouse disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest therein.
(2) Includes 3,124,084 shares held by Vulcan Ventures Incorporated. Ms. Ruth
Kunath manages the Vulcan Venture Biotechnology Portfolio as an employee
of Vulcan Ventures Incorporated. Ms. Kunath disclaims beneficial ownership
of these shares except to the extent of her pecuniary interest therein.
(3) Includes 1,000,983 shares held by Kummell Investments Limited. Kummell
Investments Limited is an affiliate of Morningside Group. Morningside
Ventures Inc. is an advisor of Morningside Group. Mr. Carthy is an advisor
for Morningside Ventures Inc. Mr. Carthy disclaims beneficial ownership of
these shares except to the extent of his pecuniary interest therein.
(4) Includes 2,699 shares issuable on exercise of outstanding options
exercisable within 60 days of March 1, 2000 and options to purchase
120,504 shares of common stock which will vest upon consummation of this
offering.
(5) Includes 1,667 shares issuable on exercise of outstanding options
exercisable within 60 days of March 1, 2000.
(6) Includes 193,799 shares held jointly with Shirley G. Urdal. Also includes
1,577 shares issuable on exercise of outstanding options exercisable
within 60 days of March 1, 2000 and options to purchase 40,168 shares
which will vest upon consummation of this offering.
(7) Includes: (a) 14,053 shares held by Judy Valone, Trustee for Frank H.
Valone III; (b) 14,346 shares held by Judy Valone, Trustee for Justin
Valone; (c) 13,470 shares held by Judy Valone, Trustee for Elizabeth L.
Valone; and (d) 85,782 shares issuable on exercise of outstanding options
exercisable within 60 days of March 1, 2000. As trustee for Frank H.
Valone III, Justin Valone and Elizabeth L. Valone, Ms. Judy Valone, the
spouse of Frank Valone, holds voting and dispositive power over all shares
held by the trusts.
(8) Includes 12,500 shares issuable on exercise of outstanding options
exercisable within 60 days of March 1, 2000.
(9) Includes 6,771 shares issuable on exercise of outstanding options
exercisable within 60 days of March 1, 2000.
(10) Includes 125,647 shares held by The Sears Living Trust DTD 3/11/91 and 477
shares issuable on exercise of outstanding options exercisable within 60
days of March 1, 2000. As the trustee of The Sears Living Trust DTD
3/11/91, Mr. Sears has voting and dispositive power over all shares held
by the trust.
(11) Includes 602,831 shares held by Shaw Venture Partners III, L.P. Mr. Ralph
Shaw is a general partner of Shaw Venture Partner III, L.P. Mr. Shaw
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest therein.
(12) Includes an aggregate of 272,145 shares of common stock issuable on
exercise of outstanding options exercisable upon completion of this
offering or within 60 days of March 1, 2000 and warrants to purchase in
aggregate of 99,539 shares.
55
<PAGE>
DESCRIPTION OF CAPITAL STOCK
On the closing of this offering, our authorized capital stock will consist
of 80,000,000 shares of common stock, $.001 par value, and 10,000,000 shares of
preferred stock, $.001 par value.
Common Stock
As of March 1, 2000, there were 14,318,700 shares of common stock
outstanding that were held of record by approximately 129 stockholders. There
will be shares of common stock outstanding after giving effect to the sale
of the shares of common stock to the public offered hereby and the sale of
shares of common stock to Kirin in a private placement concurrent with
the closing of this offering.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding preferred stock, the holders of common stock
are entitled to receive ratably all dividends, if any, as may be declared from
time to time by the Board of Directors out of funds legally available. In the
event of the liquidation, dissolution or winding up of Dendreon, the holders of
our common stock are entitled to share ratably in all assets remaining after
payment of liabilities, subject to prior distribution rights of preferred
stock, if any, then outstanding. The common stock has no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the common stock. All outstanding shares
of common stock are fully paid and nonassessable, and the shares of common
stock to be issued upon completion of this offering will be fully paid and
nonassessable.
Preferred Stock
On our closing of this offering, our certificate of incorporation will
authorize 10,000,000 shares of preferred stock. The Board of Directors has the
authority to issue the preferred stock in one or more series and to fix the
rights, preferences, privileges and restrictions thereof, including dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares
constituting any series or the designation of any series, without further vote
or action by the stockholders. The issuance of preferred stock may have the
effect of delaying, deferring or preventing a change in control of Dendreon
without further action by the stockholders. For example, the Board of Directors
could issue preferred stock that has the power to prevent a change of control
transaction. The issuance of preferred stock with voting and conversion rights
may adversely affect the voting power of the holders of common stock, including
the loss of voting control to others. We currently have no plans to issue any
preferred stock.
Warrants
Upon completion of this offering, we will have outstanding warrants to
purchase 484,127 shares of common stock. Some of these warrants were
exercisable for preferred stock, but upon the closing of the offering, they
will automatically become warrants to purchase shares of our common stock. The
numbers of shares, exercise prices and dates of these warrants are summarized
below:
<TABLE>
<CAPTION>
Number
of
Shares Exercise Price Expiration Date
------ -------------- ---------------
<S> <C> <C>
34,722 $ 3.60 August 14, 2004
250,000 $ 5.00 October 17, 2004
8,333 $ 3.60 December 11, 2004
7,500 $20.00 May 1, 2005
102,572 $ 0.20 December 31, 2005
3,000 $ 5.00 June 10, 2006
78,000 $ 5.00 August 3, 2006
</TABLE>
56
<PAGE>
Registration Rights
The holders of up to 13,079,077 shares of our preferred stock and holders of
warrants to purchase an aggregate of 110,072 shares of our common stock or
preferred stock will be entitled to registration rights as provided under the
terms of the Amended and Restated Stockholders' Agreement, dated September 3,
1999. This agreement provides demand registration rights to the holders of our
registrable securities. In addition, the holders of all registrable securities
are entitled under the agreement, subject to certain limitations, to require us
to include their registrable securities in future registration statements we
file.
In connection with a warrant issued to Fresenius AG to purchase 250,000
shares of our common stock, Fresenius AG is entitled to registration rights
under a Registration Rights and Shareholder's Agreement, dated October 18,
1999. Under this agreement, Fresenius can, subject to certain limitations,
require us to include their registrable securities in future registrations
statements we file.
Anti-takeover Effects of Provisions of Certificate of Incorporation and
Delaware Law
Certificate of Incorporation
On the closing of this offering, our certificate of incorporation will
provide that all stockholder actions must be effected at a duly called meeting
and not by a consent in writing. This provision could discourage potential
acquisition proposals and could delay or prevent a change of control of
Dendreon.
Anti-takeover provisions of Delaware law
We are subject to Section 203 of the Delaware General Corporation Law,
which, subject to various exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that the stockholder became an
interested stockholder, unless:
. prior to that date, the Board of Directors approved either the business
combination or the transaction that resulted in the stockholder becoming
an interested stockholder;
. upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding, for purposes of determining the
number of shares outstanding, those shares owned by (i) persons who are
directors and also officers and (ii) employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or
. on or subsequent to that date, the business combination is approved by
the Board of Directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder.
Section 203 defines business combination to include:
. any merger or consolidation involving the corporation and the interested
stockholder;
. any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving the interested stockholder;
. subject to various exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder;
. any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or series of
the corporation beneficially owned by the interested stockholder; or
57
<PAGE>
. the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation. In general, Section 203 defines an interested
stockholder as any entity or person beneficially owning 15% or more of
the outstanding voting stock of the corporation and any entity or person
affiliated with or controlling or controlled by such entity or person.
Limitation of Liability and Indemnification Matters
Our certificate of incorporation limits the liability of our directors to
the maximum extent permitted by Delaware law. Delaware law provides that a
director of a corporation will not be personally liable for monetary damages
for breach of that individual's fiduciary duties as a director except for
liability (A) for any breach of the director's duty of loyalty to the company
or to its stockholders, (B) for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law, (C) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in section 174 of the Delaware General Corporation Law or (D) for any
transaction from which a director derives an improper personal benefit.
Our bylaws provide that we must indemnify our directors and executive
officers and may indemnify our officers, employees and other agents to the
fullest extent not prohibited by law. We believe that indemnification under our
bylaws covers at least negligence on the part of an indemnified party. Our
bylaws also permit us to advance expenses incurred by an indemnified party in
connection with the defense of any action or proceeding arising out of his or
her status or service as a director, officer, employee or other agent of
Dendreon upon an undertaking by him or her to repay any advances if it is
ultimately determined that he or she is not entitled to indemnification.
We intend to enter into separate indemnification agreements with our
directors and officers. These agreements will require us to, among other
things, indemnify the director or officer against expenses, including
attorney's fees, judgements, fines and settlements paid by the individual in
connection with any action, suit or proceeding arising out of the individual's
status or service as a director or officer of Dendreon, other than liabilities
arising from willful misconduct or conduct that is knowingly fraudulent or
deliberately dishonest, and to advance expenses incurred by the individual in
connection with any proceeding against him or her individually with respect to
which he or she may be entitled to indemnification by us. We believe that our
certificate of incorporation and bylaw provisions and indemnification
agreements are necessary to attract and retain qualified persons as directors
and executive officers. We also maintain directors' and officers' liability
insurance.
At present we are not aware of any pending litigation or proceeding
involving any director, officer, employee or agent of Dendreon where
indemnification will be required or permitted. Furthermore, we are not aware of
any threatened litigation or proceeding that might result in a claim for
indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, executive officers or persons controlling
Dendreon, we have 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.
Transfer Agent
The transfer agent for the common stock is ChaseMellon Stockholder Services,
Seattle, Washington.
Listing
We intend to apply to include our common stock for quotation in the Nasdaq
National Market under the trading symbol "DNDN."
58
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. The market price of our common stock could drop due to sales of a large
number of shares of our common stock or the perception that such sales could
occur. These factors could also make it more difficult to raise funds through
future offerings of common stock.
After this offering, shares of common stock will be outstanding,
shares if the underwriters exercise their over-allotment option in full. Of
these shares, the shares sold in this offering, or the shares if the
underwriters exercise their over-allotment option in full, will be freely
tradable without restriction under the Securities Act except for any shares
purchased by our "affiliates" as defined in Rule 144 under the Securities Act.
The remaining shares are "restricted securities" within the meaning of Rule
144 under the Securities Act. The restricted securities generally may not be
sold unless they are registered under the Securities Act or are sold pursuant
to an exemption from registration, such as the exemption provided by Rule 144
under the Securities Act.
Our officers, directors and substantially all of our stockholders have
entered into lock-up agreements pursuant to which they have agreed not to offer
or sell any shares of common stock for a period of 180 days after the date of
this prospectus without the prior written consent of Prudential Securities on
behalf of the underwriter. Prudential Securities may, at any time and without
notice, waive any of the terms of these lock-up agreements.
The following table indicates approximately when the shares of our common
stock that are not being sold in the offering but which were outstanding as of
, 2000 will be eligible for sale into the public market:
<TABLE>
<CAPTION>
Number
of
Shares Date of Availability for Resale into Public Markets
------ ---------------------------------------------------
<C> <S>
180 days after the date of this prospectus due to a lock-up
agreement these stockholders have with Prudential Securities
Incorporated
</TABLE>
After the lock-up is released, restricted securities will be saleable under
Rules 144, 144(k) and 701.
In general, under Rule 144 as currently in effect, any person, including an
affiliate, who has beneficially owned shares for a period of at least one year
is entitled to sell, within any three-month period, a number of shares that
does not exceed the greater of:
. 1% of the then-outstanding shares of common stock,
. the average weekly trading volume in the common stock during the four
calendar weeks immediately preceding the date on which the notice of
such sale on Form 144 is filed with the Securities and Exchange
Commission.
Sales under Rule 144 are also subject to certain provisions relating to notice
and manner of sale and the availability of current public information about us.
In addition, a person who has not been one of our affiliates at any time during
the 90 days immediately preceding a sale, and who has beneficially owned the
shares for at least two years, would be entitled to sell such shares under Rule
144(k) without regard to the volume limitation and other conditions described
above. The foregoing summary of Rule 144 is not intended to be a complete
description.
59
<PAGE>
Rule 701 permits any of our employees, officers, directors or consultants
who purchased their shares under a compensatory stock or option plan or other
written agreement prior to the effective date of this offering to sell such
shares under Rule 144 without complying with the holding period, public
information, volume limitation or notice requirements of Rule 144. All holders
of Rule 701 shares may not sell their Rule 701 shares until 90 days after the
date of this prospectus. However, substantially all shares of our common stock
issued under Rule 701 are subject to lock-up agreements described above.
We intend to file, within 90 days of effective date of this offering, a
registration statement on Form S-8 to register all shares of common stock
issuable under our Employee Stock Purchase Plan and the 2000 Equity Incentive
Plan. The registration statement will become effective automatically upon
filing. Shares issued under the Employee Stock Purchase Plan and the 2000
Equity Incentive Plan, after the filing of a registration statement on Form S-
8, and unexercised options as of the offering, may be sold in the open market,
subject, in the case of certain holders, to the Rule 144 limitations applicable
to affiliates, the above-referenced lock-up agreements and vesting restrictions
imposed by us.
In addition, following this offering, the holders of 13,439,149 shares of
outstanding common stock, or their transferees, will have rights to require us
to register their shares for future sale.
60
<PAGE>
UNDERWRITING
We have entered into an underwriting agreement with the underwriters named
below for whom Prudential Securities Incorporated, SG Cowen Securities
Corporation and Pacific Growth Equities, Inc. are acting as representatives. We
are obligated to sell, and the underwriters are obligated to purchase, all of
the shares offered on the cover page of this prospectus, if any are purchased.
Subject to certain conditions of the underwriting agreement, each underwriter
has severally agreed to purchase the shares indicated opposite its name:
<TABLE>
<CAPTION>
Number
Underwriters of Shares
------------ ---------
<S> <C>
Prudential Securities Incorporated....................................
SG Cowen Securities Corporation.......................................
Pacific Growth Equities, Inc..........................................
----
Total...............................................................
====
</TABLE>
The underwriters may sell more shares than the total number of shares
offered on the cover page of this prospectus and they have, for a period of 30
days from the date of this prospectus, an over-allotment option to purchase up
to additional shares from us. If any additional shares are purchased, the
underwriters will severally purchase the shares in the same proportion as per
the table above.
The representatives of the underwriters have advised us that the shares will
be offered to the public at the offering price indicated on the cover page of
this prospectus. The underwriters may allow to selected dealers a concession
not in excess of $ per share and such dealers may reallow a concession not
in excess of $ per share to certain other dealers. After the shares are
released for sale to the public, the representatives may change the offering
price and the concessions. The representatives have informed us that the
underwriters do not intend to sell shares to any investor who has granted them
discretionary authority.
We have agreed to pay to the underwriters the following fees, assuming both
no exercise and full exercise of the underwriters' over-allotment option to
purchase additional shares:
<TABLE>
<CAPTION>
Total Fees
-------------------------------------------
Fee Without Exercise of Full Exercise of
Per Share Over-Allotment Option Over-Allotment Option
--------- --------------------- ---------------------
<S> <C> <C> <C>
Fees paid by us........... $ $ $
</TABLE>
In addition, we estimate that we will spend approximately $ in expenses
for this offering. We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act, or contribute to
payments that the underwriters may be required to make in respect of these
liabilities.
We, our officers and directors, and substantially all of our stockholders
have entered into lock-up agreements pursuant to which we and they have agreed
not to offer or sell any shares of common stock or securities convertible into
or exchangeable or exercisable for shares of common stock for a period of 180
days from the date of this prospectus without the prior written consent of
Prudential Securities, on behalf of the underwriters. Prudential Securities
may, at any time and without notice, waive the terms of these lock-up
agreements specified in the underwriting agreement.
61
<PAGE>
Prior to this offering, there has been no public market for our common
stock. The public offering price, negotiated among us and the representatives,
is based upon various factors such as our financial and operating history and
condition, our prospects, the prospects for the industry we are in and
prevailing market conditions.
Prudential Securities, on behalf of the underwriters, may engage in the
following activities in accordance with applicable securities rules:
. Over-allotments involving sales in excess of the offering size, creating
a short position. Prudential Securities may elect to reduce this short
position by exercising some or all of the over-allotment option.
. Stabilizing and short covering; stabilizing bids to purchase the shares
are permitted if they do not exceed a specified maximum price. After the
distribution of shares has been completed, short covering purchases in
the open market may also reduce the short position. These activities may
cause the price of the shares to be higher than would otherwise exist in
the open market.
. Penalty bids permitting the representatives to reclaim concessions from a
syndicate member for the shares purchased in the stabilizing or short
covering transactions.
Such activities, which may be commenced and discontinued at any time, may be
effected on the Nasdaq National Market, in the over-the-counter market or
otherwise.
Each underwriter has represented that it has complied and will comply with
all applicable laws and regulations in connection with the offer, sale or
delivery of the shares and related offering materials in the United Kingdom,
including:
. the Public Offers of Securities Regulations 1995,
. the Financial Services Act 1986, and
. the Financial Services Act 1986, (Investment Advertisements) (Exemptions)
Order 1996 (as amended).
We have asked the underwriters to reserve shares for sale at the same
offering price directly to our directors, officers, employees and other
business affiliates or related third parties. The number of shares available
for sale to the general public in the offering will be reduced to the extent
such persons purchase the reserved shares.
Prudential Securities Incorporated facilitates the marketing of new issues
online through its PrudentialSecurities.com division. Clients of Prudential
AdvisorSM, a full service brokerage firm program may view offering terms and a
prospectus online and place orders through their financial advisors.
LEGAL MATTERS
Certain matters with respect to the legality of the issuance of the common
stock offered hereby will be passed upon for us by Cooley Godward LLP, Palo
Alto, California. After giving effect to the conversion of all preferred stock,
an investment partnership of Cooley Godward LLP attorneys beneficially owns
24,962 shares of our common stock. Certain legal matters in connection with
this offering will be passed upon for the underwriters by Skadden, Arps, Slate,
Meagher & Flom (Illinois), Chicago, Illinois.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1998 and 1999, and for each of the three years in
the period ended December 31, 1999, as set forth in their report. We have
included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
62
<PAGE>
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities & Exchange Commission a registration
statement on Form S-1 under the Securities Act that registers the shares of our
common stock to be sold in this offering. The registration statement, including
the attached exhibits and schedules, contains additional relevant information
about us and our capital stock. The rules and regulations of the Commission
allow us to omit certain information included in the registration statement
from this document.
In addition, we file reports, proxy statements and other information with
the Commission under the Securities Exchange Act of 1934. You may read and copy
this information at the following public reference rooms of the Commission:
Washington, D.C. New York, New York Chicago, Illinois
450 Fifth Street, N.W., 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, NY 10048 Chicago, IL 60661-2511
You may also obtain copies of this information by mail from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. You may obtain information on the
operation of the public reference rooms by calling the Commission at 1-800-SEC-
0330.
The Commission also maintains an Internet website that contains reports,
proxy statements and other information about issuers, like Dendreon, who file
electronically with the Commission. The address of that site is
http://www.sec.gov.
We intend to furnish our stockholders with annual reports containing audited
consolidated financial statements, and make available to our stockholders
quarterly reports for the first three quarters of each year containing
unaudited interim consolidated financial information.
63
<PAGE>
DENDREON CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.......................... F-2
Balance Sheets............................................................. F-3
Statements of Operations................................................... F-4
Statements of Stockholders' Equity......................................... F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Dendreon Corporation
We have audited the accompanying balance sheets of Dendreon Corporation as
of December 31, 1998 and 1999, and the related statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dendreon Corporation as of
December 31, 1998 and 1999, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
February 18, 2000
Seattle, Washington
F-2
<PAGE>
DENDREON CORPORATION
BALANCE SHEETS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
December 31 Equity at
---------------- December 31,
1998 1999 1999
------- ------- -------------
(unaudited)
<S> <C> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents.................... $ 6,883 $ 7,085
Short-term investments....................... 3,047 6,728
Accounts receivable (net allowance of $25 in
1998 and none in 1999)...................... 319 833
Other current assets......................... 159 556
------- -------
Total current assets........................... 10,408 15,202
Property and equipment, net.................... 1,134 1,499
Deposits and other assets...................... 496 674
------- -------
Total assets................................... $12,038 $17,375
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable............................. $ 564 $ 377
Accrued liabilities.......................... 666 757
Accrued compensation......................... 361 505
Deferred revenue............................. 1,969 2,234
Current portion of long term debt............ -- 1,033
Current portion of capital lease
obligations................................. 183 358
------- -------
Total current liabilities...................... 3,743 5,264
Deferred revenue, less current portion......... 4,002 2,960
Long term debt, less current portion........... -- 1,967
Capital lease obligations, less current
portion....................................... 531 832
Commitments
Stockholders' equity:
Convertible preferred stock, $0.001 par
value; 13,722,936 shares authorized,
9,009,524 and 12,108,369 shares issued and
outstanding at December 31, 1998 and 1999,
respectively, (no shares outstanding pro
forma), aggregate liquidation preference of
$54,306..................................... 9 12 $ --
Common stock, $0.001 par value; 18,100,000
shares authorized, 631,348 and 1,010,068
shares issued and outstanding at
December 31, 1998 and 1999, respectively
(13,118,437 shares outstanding pro forma)... 1 1 13
Additional paid-in capital................... 42,258 58,838 58,838
Deferred stock-based compensation............ (481) (1,795) (1,795)
Accumulated deficit.......................... (38,025) (50,704) (50,704)
------- ------- -------
Total stockholders' equity..................... 3,762 6,352 $ 6,352
------- ------- =======
Total liabilities and stockholders' equity..... $12,038 $17,375
======= =======
</TABLE>
See accompanying notes.
F-3
<PAGE>
DENDREON CORPORATION
STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Revenue:
Collaborative and license revenue................ $ 260 $ 1,612 $ 3,258
Grant revenue.................................... 533 237 261
------- ------- --------
Total revenue..................................... 793 1,849 3,519
Operating expenses:
Research and development......................... 5,290 7,967 9,771
General and administrative....................... 2,894 2,841 5,717
Non-cash stock-based compensation ............... -- 108 805
------- ------- --------
Total operating expenses.......................... 8,184 10,916 16,293
------- ------- --------
Loss from operations.............................. (7,391) (9,067) (12,774)
Interest income, net.............................. 228 318 95
------- ------- --------
Loss before income taxes.......................... (7,163) (8,749) (12,679)
Provision for income taxes........................ -- 600 --
------- ------- --------
Net loss.......................................... (7,163) (9,349) (12,679)
Deemed dividend upon issuance of convertible
preferred stock.................................. -- -- (285)
------- ------- --------
Net loss attributable to common stockholders...... $(7,163) $(9,349) $(12,964)
======= ======= ========
Basic and diluted net loss per share.............. $(23.51) $(16.34) $ (15.08)
======= ======= ========
Shares used in computation of basic and diluted
net loss per share............................... 304,648 572,326 859,777
======= ======= ========
</TABLE>
See accompanying notes.
F-4
<PAGE>
DENDREON CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock Additional Deferred Total
----------------- ---------------- Paid-in Stock-Based Accumulated Stockholders'
Shares Amount Shares Amount Capital Compensation Deficit Equity
---------- ------ --------- ------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1997................... 4,764,345 $ 5 210,713 $-- $25,106 $ -- $(21,513) $ 3,598
Exercise of stock
options for cash...... -- -- 348,775 1 177 -- -- 178
Issuance of Series C
convertible preferred
stock for cash and
technology licenses at
$3.60 per share (net
of issuance costs of
$217)................. 3,308,179 3 -- -- 11,690 -- -- 11,693
Net loss............... -- -- -- -- -- -- (7,163) (7,163)
---------- --- --------- ---- ------- ------- -------- --------
Balance, December 31,
1997................... 8,072,524 8 559,488 1 36,973 -- (28,676) 8,306
Exercise of stock
options for cash...... -- -- 71,860 -- 47 -- -- 47
Issuance of Series D
convertible preferred
stock for cash at
$5.00 per share (net
of issuance costs of
$35).................. 937,000 1 -- -- 4,649 -- -- 4,650
Deferred stock-based
compensation.......... -- -- -- -- 589 (589) -- --
Amortization of
deferred stock-based
compensation.......... -- -- -- -- -- 108 -- 108
Net loss............... -- -- -- -- -- -- (9,349) (9,349)
---------- --- --------- ---- ------- ------- -------- --------
Balance, December 31,
1998................... 9,009,524 9 631,348 1 42,258 (481) (38,025) 3,762
Exercise of stock
options for cash...... -- -- 378,720 -- 217 -- -- 217
Issuance of Series E
convertible preferred
stock for cash at
$4.25 per share (net
of issuance costs of
$27).................. 3,098,845 3 -- -- 13,140 -- -- 13,143
Issuance of stock
warrants.............. -- -- -- -- 1,104 -- -- 1,104
Deferred stock-based
compensation.......... -- -- -- -- 2,119 (2,119) -- --
Amortization of
deferred stock-based
compensation.......... -- -- -- -- -- 805 -- 805
Net loss............... -- -- -- -- -- -- (12,679) (12,679)
---------- --- --------- ---- ------- ------- -------- --------
Balance, December 31,
1999................... 12,108,369 $12 1,010,068 $ 1 $58,838 $(1,795) $(50,704) $ 6,352
========== === ========= ==== ======= ======= ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
DENDREON CORPORATION
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss......................................... $(7,163) $(9,349) $(12,679)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation................................... 483 370 485
Non-cash stock-based compensation expense...... -- 108 805
Non-cash interest expense...................... -- -- 38
Non-cash research and development expense...... 270 -- 190
Changes in assets and liabilities:
Accounts receivable............................ (424) 213 (514)
Other current assets........................... (64) 49 (303)
Deposits and other assets...................... 45 (393) (79)
Deferred revenue............................... 264 5,707 (94)
Accounts payable............................... 254 112 (187)
Accrued liabilities and compensation........... 199 256 235
------- ------- --------
Net cash used in operating activities........ (6,136) (2,927) (12,103)
INVESTING ACTIVITIES:
Purchases of short-term investments.............. (7,461) -- (6,211)
Maturities of short-term investments............. -- 4,414 2,530
Purchases of property and equipment.............. (285) (658) (850)
------- ------- --------
Net cash provided by (used in) investing
activities.................................. (7,746) 3,756 (4,531)
FINANCING ACTIVITIES:
Proceeds from equipment financing arrangement.... -- 800 700
Proceeds from long term debt..................... -- -- 3,000
Payments on capital lease obligations............ (353) (205) (224)
Proceeds from sale of preferred stock............ 11,423 4,650 13,143
Proceeds from exercise of stock options.......... 177 47 217
------- ------- --------
Net cash provided by financing activities.... 11,247 5,292 16,836
------- ------- --------
Net increase (decrease) in cash and cash
equivalents....................................... (2,635) 6,121 202
Cash and cash equivalents at beginning of year..... 3,397 762 6,883
------- ------- --------
Cash and cash equivalents at end of year........... $ 762 $ 6,883 $ 7,085
======= ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest........... $ 47 $ 41 $ 308
======= ======= ========
Cash paid during the year for foreign income
taxes........................................... $ -- $ 600 $ --
======= ======= ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
1. Organization and Summary of Significant Accounting Policies
Organization
Dendreon Corporation (the Company) was founded in 1992 as a Delaware-based
corporation headquartered in Mountain View, California. The Company relocated
to Seattle, Washington in 1999.
The Company is engaged in research and development of immunologically-based
therapeutic products for the treatment of cancer. The Company combines
expertise in immunology and antigen engineering with its proprietary cell
separation technologies to develop therapeutic vaccines.
Cash, Cash Equivalents, and Short-Term Investments
The Company considers investments in highly liquid instruments purchased
with a remaining maturity of 90 days or less to be cash equivalents. The
Company's cash equivalents and short-term investments consist principally of
commercial paper, money market securities, and certificates of deposit.
The Company has classified its entire investment portfolio as available-for-
sale. Available-for-sale securities are carried at fair value with unrealized
gains and losses reported as a separate component of stockholders' equity.
Unrealized gains and losses at December 31, 1998 and 1999 are not material,
based on the short-term nature of the Company's investments.
The cost of securities sold is based on the specific identification method.
There were no gross realized gains or losses on available-for-sale securities.
Property and Equipment
Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets, which is
generally three to four years. Computers and equipment leased under capital
leases are amortized over the shorter of the useful lives of the related assets
or the lease term. Leasehold improvements are stated at cost and amortized
using the straight-line method over the remaining life of the lease or five
years, whichever is shorter.
Concentrations of Credit Risk
The Company is subject to concentration of credit risk, primarily from its
investments. Credit risk for investments is managed by purchase of investment
grade securities, A1/P1 for money market instruments and A or better for debt
instruments, and diversification of the investment portfolio among issuers and
maturities.
Revenue Recognition
Non-refundable, up-front payments received in connection with collaborative
research and development agreements are deferred and recognized on a straight-
line basis over the relevant periods specified in the agreement, generally the
research term.
Revenue related to collaborative research with the Company's corporate
collaborators is recognized as research services are performed over the related
funding periods for each agreement. Under these agreements, the Company is
required to perform research and development activities as agreed or specified
in each agreement. The payments received under research collaboration
agreements are not refundable if the research
F-7
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
1. Organization and Summary of Significant Accounting Policies (continued)
effort is not successful. Payments received in advance of the services provided
are deferred and recognized as revenue over the future performance periods.
Revenue related to grant agreements is recognized as related research and
development expenses are incurred.
Milestone and royalty payments are recognized in full at such time as the
specified milestone has been achieved. Revenue from product supply agreements
is recorded when the product is shipped or when all obligations under the
agreements are met.
Research and Development Expenses
Research and development expenses consist of costs incurred for proprietary
and collaborative research and development and costs incurred under product
supply agreements. These costs are expensed as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Stock-Based Compensation
The Company has elected to follow Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees," and related
interpretations, in accounting for employee stock options rather than the
alternative fair value accounting allowed by Statement of Financial Accounting
Standards (SFAS) No. 123 "Accounting for Stock-Based Compensation." Under APB
No. 25, compensation expense related to the Company's employee stock options is
measured based on the intrinsic value of the stock option. SFAS No. 123
requires companies that continue to follow APB No. 25 to provide pro forma
disclosure of the impact of applying the fair value method of SFAS No. 123. The
Company recognizes compensation expense for options granted to non-employees in
accordance with the provisions of SFAS No. 123 and the Emerging Issues Task
Force consensus Issue 96-18, "Accounting for Equity Instruments that are Issued
to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services," which require using a Black-Scholes option pricing model and
remeasuring such stock options to the current fair market value as the
underlying option vests.
Deferred stock-based compensation consists of amounts recorded when the
exercise price of an option or the sales price of restricted stock was lower
than the subsequently determined deemed fair value for financial reporting
purposes. Deferred stock-based compensation is amortized over the vesting
period of the underlying option.
Net Loss Per Share
Basic and diluted net loss per share of common stock are presented in
conformity with Statement of Financial Accounting Standards No. 128, "Earnings
Per Share" (FAS 128). The Company has not issued or granted shares for nominal
consideration, as defined in the Securities and Exchange Commission Staff
Accounting Bulletin No. 98. The calculation of basic and diluted net loss per
share has been detailed in Note 8.
F-8
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
1. Organization and Summary of Significant Accounting Policies (continued)
Fair Value of Financial Instruments
At December 31, 1999, the Company had the following financial instruments:
cash, cash equivalents, short-term investments, accounts receivable, accounts
payable, accrued liabilities, and long-term debt. The carrying value of cash,
cash equivalents, short-term investments, accounts receivable, accounts
payable, and accrued liabilities approximates their fair value based on the
liquidity of these financial instruments or based on their short-term nature.
The carrying value of debt approximates fair value based on the market interest
rates available to the Company for debt of similar risk and maturities.
Segment Reporting
As of January 1, 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131 establishes
annual and interim reporting standards for a company's operating segments and
related disclosures about products, services, geographic areas, and major
customers. The Company has determined that it operates in only one segment, and
thus, the adoption of this statement had no impact on the Company financial
statements.
Comprehensive Loss
As of January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and displaying
comprehensive income and its components in a full set of general purpose
financial statements and requires reclassification of financial statements for
earlier periods to be provided for comparative purposes. Total comprehensive
loss was not different than net loss.
Recent Accounting Pronouncements
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB
101). SAB 101 is based upon existing accounting rules and provided specific
guidance on how those accounting rules should be applied and specifically
addresses revenue recognition for non-refundable technology access fees in the
biotechnology industry. SAB 101 is effective for fiscal years beginning after
December 15, 1999. We have determined that SAB 101 will not have a material
impact on our financial position or results of operations.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which will be
effective for the year ending 2001. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument, including
certain derivative instruments imbedded in other contracts, be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
statement also requires that changes in the derivative's fair value be
recognized in earnings unless specific hedge accounting criteria are met. The
Company believes the adoption of SFAS 133 will not have a material effect on
the financial statements, since it currently does not hold derivative
instruments or engage in hedging activities.
2. Significant Agreements
In December 1998, the Company and Kirin Brewery Co., Ltd. (Kirin) entered
into a collaborative license agreement. The Company issued Kirin an exclusive
license to employ the Company's dendritic cell technology in the development of
therapeutic products for commercialization in Japan and certain other Asian
countries. The Company also granted Kirin an option to obtain an exclusive
license to commercialize in those countries,
F-9
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. Significant Agreements (continued)
other products developed by the Company. In exchange, Kirin has granted the
company an option to obtain an exclusive license to commercialize in North
America any products developed by Kirin under this agreement. The Company
received a nonrefundable, upfront fee of $5,000,000 on signing the agreement
for the license rights granted under the agreement. In February 1999, the
Company and Kirin also entered into a joint research agreement relating to
dendritic cell product development. Under the terms of the agreement, Kirin
will fund a minimum of $1,350,000 per year for up to five years. In July 1999,
the Company and Kirin entered into a manufacturing and supply agreement. Under
the agreement, each party may supply the other with antigens or other supplies.
In 1999, the Company recognized $576,000 under this agreement.
In December 1998, Kirin exercised an option under the agreement to receive
rights to the Company's prostate program. Kirin is solely responsible for the
development and clinical trials of the prostate program in Japan. Accordingly,
the Company recognized the $1 million option fee as revenue in 1998. The
Company will also receive royalties on sales of any products that utilize the
licensed technology.
Under the terms of the agreement, Kirin made a $2,000,000 equity investment
in the Company as part of the Series D offering (see Note 6). The Company has
the option, through December 31, 2000, to require Kirin to purchase up to
1,000,000 shares of preferred stock at the most recent offering price, but not
to exceed $5,000,000 in the aggregate.
During the years ended December 31, 1998 and 1999, the Company recognized
revenue of $1,083,000 and $2,915,000, respectively, related to the Kirin
agreements.
In March 1995, the Company entered into a one-year research agreement with
Stanford University (Stanford), in the field of cellular immunotherapy. The
agreement was subsequently extended through June 1997 under the same terms and
conditions as provided for in the original agreement. Under the terms of the
agreement, the Company performed specific research related to HIV-specific
allogenic cellular immunotherapy. In consideration, Stanford reimbursed the
Company for certain costs incurred in this effort. The Company recognized
revenue of $176,000 for the year ended December 31, 1997, related to this
agreement with associated costs approximating the amounts recognized as
revenue. In September 1996, the Company entered into two further research
agreements with Stanford University with initial terms of one year. The
agreements were extended through September 2000. Under the agreements, the
Company is being reimbursed for certain costs incurred in providing research
services to Stanford. During 1997, 1998, and 1999, the Company recognized
$357,000, $237,000, and $261,000 respectively, related to these agreements with
associated costs approximating the amounts recognized as revenue. At December
31, 1998 and 1999, the Company had receivables from Stanford amounting to
$78,000 and $65,000, respectively.
3. Property and Equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31
-------------
1998 1999
------ ------
(in
thousands)
<S> <C> <C>
Furniture and office equipment.............................. $ 167 $ 295
Laboratory and manufacturing equipment...................... 2,048 2,382
Computer equipment.......................................... 250 328
Leasehold improvements...................................... 733 746
------ ------
3,198 3,751
Less accumulated depreciation and amortization.............. 2,064 2,252
------ ------
$1,134 $1,499
====== ======
</TABLE>
F-10
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
3. Property and Equipment (continued)
Property and equipment include assets under capitalized leases of $1,188,000
and $1,500,000 at December 31, 1998 and 1999, respectively. Accumulated
amortization related to assets under capital leases was $490,000 and $412,000
at December 31, 1998 and 1999, respectively.
4. Employee Notes Receivable
The Company has made loans to certain employees in connection with
individual employment agreements. The loans bear interest at annual rates from
4.7% to 5.5% per year and are either forgiven over five years based on
continued employment, or due immediately upon each employee's termination.
During the years ended December 31, 1997, 1998, 1999, the Company recognized
$38,000, $31,000, and $24,000, respectively, as an expense associated with
these notes. The balance at December 31, 1998 and 1999 was $15,000 and
$105,000, respectively, and have been classified in deposits and other assets
on the balance sheet.
5. Long-Term Debt and Capital Lease Obligations
In December 1997, the Company entered into a $1,000,000 lease line agreement
with a term of four years. The lease line was extended to $3,000,000 in
December 1999. As of December 31, 1999, $1,500,000 was advanced under the
agreement December 31, 1999, and $1,500,000 was available under the agreement.
All of the assets leased under the agreement were sold and leased back by the
Company. No gains or losses were recognized as a result of the sale or
leaseback. The Company has the right to repurchase the leased assets at the end
of the lease term for 10% of the original equipment cost. In connection with
the original lease line in 1997, the Company issued a warrant to purchase 8,333
shares of common stock exercisable for ten years at a price of $3.60 per share.
In connection with the lease extension in 1999, the Company issued a warrant to
purchase 3,000 shares of common stock exercisable for seven years at a price of
$5.00 per share. Both warrants were valued using the Black-Scholes valuation
method and the resulting fair values were determined to be insignificant.
In June 1999, the Company obtained a term loan in an amount of $3,000,000
from a financial lender. The loan bears interest at an annual rate of 13.3% and
is collateralized by the Company's assets including receivables and equipment.
Interest-only payments shall be paid monthly for six months and 24 payments of
principal and interest are due monthly thereafter. In connection with the term
loan, the Company issued a warrant to purchase 78,000 shares of common stock at
an exercise price of $5.00. The warrant is exercisable for seven years from the
date of issuance. The Company has valued the warrant using the Black-Scholes
valuation method with the following assumptions: no dividend yield; expected
life of seven years; risk-free interest rate of 6.1%; and volatility of 0.75.
The fair value assigned to the warrant of $232,000 is being amortized using the
effective interest method, as additional interest expense over the term of the
loan.
F-11
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. Long-Term Debt and Capital Lease Obligations (continued)
Future principal payments under the term loan agreement and the future
minimum lease payments under capital lease obligations are as follows as of
December 31, 1999:
<TABLE>
<CAPTION>
Capital
Term Lease
Loan Obligations
------ ------------
(in thousands)
<S> <C> <C>
Year ending December 31:
2000.................................................. $1,033 $ 437
2001.................................................. 1,547 437
2002.................................................. 420 313
2003.................................................. -- 115
------ ------
Total payments......................................... 3,000 1,302
Less amount representing interest...................... -- 112
------ ------
Present value of payments.............................. 3,000 1,190
Less current portion of obligations.................... 1,033 358
------ ------
Long term portion of obligations....................... $1,967 $ 832
====== ======
</TABLE>
6. Stockholders' Equity
Convertible Preferred Stock
Convertible preferred stock designated and outstanding as of December 31,
1999 is as follows:
<TABLE>
<CAPTION>
Number of Shares
---------------------- Aggregate
Issued and Net Liquidation
Designated Outstanding Proceeds Preference
---------- ----------- -------- -----------
(in thousands, except share information)
<S> <C> <C> <C> <C>
Series A....................... 507,500 500,000 $ 9,964 $10,000
Series B....................... 4,264,375 4,264,345 14,459 14,542
Series C....................... 3,308,179 3,308,179 11,693 11,909
Series D....................... 937,000 937,000 4,650 4,685
Series E....................... 4,705,882 3,098,845 13,143 13,170
---------- ---------- ------- -------
13,722,936 12,108,369 $53,909 $54,306
========== ========== ======= =======
</TABLE>
In August 1999, the Company offered Series E preferred stock at a per-share
price of $4.25. Through December 31, 1999, 3,098,845 shares were issued, net of
$27,000 in issuance cost. The offering was completed in February 2000. An
additional 970,708 shares of preferred stock were issued for proceeds of
$4,126,000.
At the date of issuance, the Company believed the per share price of $4.25
represented the fair value of the preferred stock. The subsequently determined
deemed fair value of the Company's common stock was in excess of the fair value
of the preferred stock. Accordingly, the incremental fair value determined on
the date of issuance for each closing of Series E preferred stock, is deemed to
be the equivalent of a preferred stock divided. The Company recorded a deemed
dividend of $285,000 for the year ended December 31, 1999 by offsetting charges
and credits to additional paid-in capital, without any effect on total
stockholders' equity. The amount increased the loss attributable to common
stockholders in the calculation of basic net loss for the year
F-12
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. Stockholders' Equity (continued)
ended December 31, 1999. An additional deemed dividend upon the issuance of
Series E preferred stock of $5,582,000 will be recognized in 2000 for the
970,908 shares issued in February 2000.
Each share of Series A, B, C, D, and E preferred stock (preferred stock) is
entitled to voting rights equivalent to the number of shares of common stock
into which each share can be converted.
In the event of any voluntary or involuntary liquidation, the holders of
preferred stock will be entitled to receive, prior and in preference to any
distributions of any assets or surplus funds of the Company to the holders of
common stock, an amount equal to the original purchase price of the preferred
stock plus all declared and unpaid dividends, if any. If the assets and funds
to be distributed are insufficient to permit the payment of the full
preferential amounts to the preferred stockholders, the entire assets and funds
of the Company will be distributed ratably among the preferred stockholders in
proportion to the preferential amount each such stockholder is otherwise
entitled to receive.
In the event funds are sufficient to make a complete distribution to the
preferred stockholders as described above, the remaining assets of the Company
will be distributed to the holders of common stock and preferred stock pro rata
based on the number of shares of common stock held by each stockholder or the
number of shares of common stock into which shares of preferred stock are
convertible.
Shares are convertible, at the option of the holder, into one share of
common stock, subject to certain antidilution adjustments, of which there have
been none. Conversion is automatic upon the closing of an underwritten public
offering registered under the Securities Act of 1933, which results in gross
proceeds to the Company of not less than $15,000,000 and a market
capitalization for the outstanding shares of common stock immediately following
the offering of not less than $40,000,000. Conversion is required upon election
by a majority of the holders of preferred stock, voting as a single class.
Warrants
In 1997, the Company issued a warrant to purchase 34,722 shares of common
stock in connection with an agreement for financial services provided to the
Company. The warrant was exercisable at a price of $3.60 per share for a ten-
year period. The Company has valued the warrant issued in 1997 using the Black-
Scholes valuation method with the following assumptions: no dividend yields,
expected life of 10 years, risk-free interest rate of 6% and volatility of 0.5.
The value of the warrant was determined to be insignificant, and consequently,
no expense has been recorded.
In February 1998, the Company issued an exclusive license for its cell
collection and isolation technology for the use in the field of hematopoletic
stem cell reconstitution of cancer patients. The Company received a non-
refundable, up front fee of $1,000,000. The agreement was terminated in October
1999. In connection with the termination, the Company issued a warrant to
purchase 250,000 shares of the Company's common stock for nominal
consideration. The warrant is exercisable for five years and has been valued
using the Black-Scholes valuation method with the following assumptions: no
dividend yield; expected life of five years; risk-free interest rate of 6.1%;
and volatility of 0.75. As of the date of the termination, the Company had
recognized $317,000 in revenue under the agreement during 1998 and 1999. The
fair value assigned to the warrant of $873,000 has been offset against the
remaining deferred revenue of $683,000 and the remainder of $190,000 has been
charged to research and development expense.
Additional warrants for 102,572 shares of common stock and 7,500 shares of
Series A preferred stock were issued in 1995 and are still outstanding and
exercisable at December 31, 1999.
F-13
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. Stockholders' Equity (continued)
Stock Option Plans
In May 1996, the Company adopted a stock option plan (the 1996 Plan) and, as
of December 31, 1999, had reserved a total of 3,500,000 shares for issuance
thereunder. The options granted under the 1996 Plan may be either incentive
stock options or nonqualified stock options. Options granted under the 1996
Plan expire no later than 10 years from the date of grant. The option price
shall be at least 100% of the fair value on the date of grant for incentive
stock options, and no less than 85% of the fair value for nonqualified stock
options. If, at the time the Company grants an option, the optionee directly or
by attribution owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company, the option price shall be at
least 110% of the fair value and shall not be exercisable more than five years
after the date of grant. The options generally become exercisable in increments
over a period of four years from the date of grant, with the first increment
vesting after one year. Options may be granted with different vesting terms
from time to time.
A summary of the Company's stock option activity follows:
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------------------------------------------------
1997 1998 1999
------------------------- ------------------------- -------------------------
Shares Weighted- Shares Weighted- Shares Weighted-
Under Average Under Average Under Average
Option Exercise Price Option Exercise Price Option Exercise Price
--------- -------------- --------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding--beginning
of year................ 1,380,579 $0.51 1,291,029 $0.51 1,626,583 $0.61
Options granted......... 296,600 0.52 559,000 0.83 605,200 1.05
Options exercised....... (348,775) 0.51 (71,860) 0.58 (378,720) 0.60
Options forfeited....... (37,375) 0.51 (151,586) 0.61 (206,634) 0.68
--------- --------- ---------
Outstanding--end of
year................... 1,291,029 0.51 1,626,583 0.61 1,646,429 0.77
========= ========= =========
Exercisable at end of
year................... 544,514 $0.51 864,712 $0.55 730,236 $0.59
========= ========= =========
Weighted-average fair
value of options
granted during the
year................... $0.09 $2.21 $4.84
===== ===== =====
</TABLE>
At December 31, 1999, there were 1,016,838 shares available for future grant
under the 1996 Plan.
Information regarding the weighted-average remaining contractual life and
weighted-average exercise price of options outstanding and options exercisable
at December 31, 1999 for selected price ranges is as follows:
<TABLE>
<CAPTION>
Options
Options Outstanding Exercisable
----------------------------------- -----------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Contractual Exercise Exercise
Exercise Prices Shares Life (in years) Price Shares Price
--------------- --------- -------------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
$0.20............... 4,000 3.4 $0.20 4,000 $0.20
$0.51--$0.75........ 890,459 7.0 0.55 615,538 0.54
$0.80--$0.99........ 61,250 8.2 0.83 56,500 0.83
$1.00............... 660,720 9.1 1.00 54,198 1.00
$2.00............... 30,000 10.0 2.00 -- 0.00
--------- -------
1,646,429 7.9 0.77 730,236 0.59
========= =======
</TABLE>
F-14
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. Stockholders' Equity (continued)
At December 31, 1999, the Company had 7,477 options outstanding under a
prior stock option plan. The Company also had outstanding options to purchase
63,176 shares of common stock which were granted to founders in 1992 at $0.20
per share. These options were granted outside of the above plans.
During the years ended December 31, 1998 and 1999, in connection with the
grant of certain options to employees, the Company recorded deferred stock-
based compensation of $589,000 and $2,119,000, respectively, representing the
difference between the exercise price and the deemed fair value of the
Company's common stock for financial reporting purposes on the date such stock
options were granted. Deferred stock-based compensation is being amortized on a
graded vesting method. During the years ended December 31, 1998 and 1999, the
Company recorded non-cash deferred stock-based compensation expense of $108,000
and $805,000, respectively. Additional deferred stock-based compensation of
approximately $2,419,000 will be recorded based on the deemed fair value of
common stock options granted to employees during January and February 2000.
Pro Forma Information
Pro forma information regarding net loss is required by SFAS No. 123 as if
the Company had accounted for its employee stock options under the fair value
method. The fair value of the Company's options was estimated at the date of
grant using the minimum value method with the following assumptions for 1997,
1998, and 1999 and no dividend yields; expected lives of the options of four
years; and risk-free interest rates of 5.5%, 6.0%, and 6.1%, respectively.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The following
table illustrates what net loss would have been had the Company accounted for
its stock options under the provisions of FAS 123.
<TABLE>
<CAPTION>
Year Ended December 31
--------------------------
1997 1998 1999
------- ------- --------
(in thousands)
<S> <C> <C> <C>
Pro forma net loss attributable to common
stockholders............................... $(7,364) $(9,379) $(13,043)
======= ======= ========
Pro forma net loss per share................ $(24.17) $(16.39) $ (15.17)
======= ======= ========
</TABLE>
Common Stock Reserved
As of December 31, 1999, common stock was reserved as follows:
<TABLE>
<S> <C>
Preferred stock................................................. 13,722,936
Preferred stock warrants........................................ 7,500
Common stock warrants........................................... 476,627
Common stock options............................................ 2,733,920
----------
16,940,983
==========
</TABLE>
7. Income Taxes
As of December 31, 1999, the Company had federal and state net operating
loss carryforwards of approximately $28,524,000. The Company also had federal
research and development tax credit carryforwards of approximately $1,209,000.
The net operating loss and credit carryforwards will expire at various dates
beginning on 2009 through 2012, if not utilized.
F-15
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
7. Income Taxes (continued)
Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to the ownership change limitations provided
by the Internal Revenue Code of 1986. The annual limitation may result in the
expiration of net operating losses and credits before utilization.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets for financial reporting and the amount
used for income tax purposes. Significant components of the Company's deferred
tax assets are as follows:
<TABLE>
<CAPTION>
December 31,
------------------
1998 1999
-------- --------
(in thousands)
<S> <C> <C>
Net operating loss carryforwards....................... $ 8,236 $ 10,886
Deferred revenue....................................... 2,379 2,069
Research credits....................................... 723 1,209
Capitalized research and development................... 4,087 5,824
Other.................................................. 542 927
-------- --------
Total deferred tax assets.............................. 15,967 20,915
Valuation allowance.................................... (15,967) (20,915)
-------- --------
Net deferred tax assets................................ $ -- $ --
======== ========
</TABLE>
The net deferred tax asset has been fully offset by a valuation allowance.
The valuation allowance increased by $3,867,000 and $4,948,000 during the years
ended December 31, 1998 and 1999, respectively. Deferred tax assets relate
primarily to net operating loss carryforwards, research credits and capitalized
research and development costs.
8. Net Loss Per Share
In accordance with FAS 128, the Company has determined the basic and diluted
net loss per share using the weighted-average number of shares of common stock
outstanding during the period. Pro forma basic and diluted net loss per share
of common stock gives effect to the conversion of the convertible preferred
stock which will automatically convert to common stock immediately prior to the
completion of the Company's initial public offering from the original date of
issuance using the if-converted method.
The following table presents the calculation of basic, diluted, and pro
forma basic and diluted net loss per share:
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- ----------
(in thousands except share
information)
<S> <C> <C> <C>
Net loss attributable to common shareholders..... $(7,163) $(9,349) $ (12,964)
======= ======= ==========
Basic and diluted:
Weighted-average number of shares used for basic
and diluted per share amounts.................. 304,648 572,326 859,777
======= ======= ==========
Basic and diluted net loss per share............. $(23.51) $(16.34) $ (15.08)
======= ======= ==========
Pro forma (unaudited):
Shares used above............................... 859,777
Pro forma adjustment to reflect weighted effect
of assumed conversion of convertible preferred
stock.......................................... 9,960,945
----------
Shares used in computing pro forma basic and
diluted net loss per share..................... 10,820,722
==========
Pro forma basic and diluted net loss per share.. $ (1.20)
==========
</TABLE>
F-16
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
8. Net Loss Per Share (continued)
The Company has excluded all convertible preferred stock and outstanding
stock options from the calculation of diluted loss per common share because all
such securities are antidilutive for the periods presented. The total number of
shares excluded from the calculations of diluted net loss per common share,
prior to the application of the treasury stock method for options, was
9,516,680, 10,789,234, and 14,238,925 for the years ended December 31, 1997,
1998, and 1999, respectively.
9. Lease and Rental Commitments
In July 1993, the Company leased a facility in Mountain View, California
under a noncancelable operating lease. The lease term is eight years, and the
Company has the option to extend the lease term for one five-year period. Terms
of renewal are to be negotiated at the time of exercising the renewal option.
The Company has subleased a portion of this facility under a lease expiring in
June 2001.
In October 1998, the Company entered into a lease agreement for a facility
in Seattle, Washington under a noncancelable operating lease. The lease term is
ten years and the Company has the option to extend the lease term for two five-
year periods with the same terms and conditions except for rent, which adjusts
to market rate. The Company has subleased a portion of this facility under a
lease expiring March 2004. The lessor has also provided the Company a tenant
improvement allowance of up to $3.5 million. At December 31, 1999, the Company
had expended or committed $2.4 million, which will be repaid monthly over the
term of the lease, with interest at 12.5% per year.
Rent expense for the years ended December 31, 1997, 1998, and 1999 was
$495,000, $495,000, and $3,162,000, respectively.
Future minimum lease payments under noncancelable operating leases and
future minimum rentals to be received under noncancelable subleases at December
31, 1999, are as follows:
<TABLE>
<CAPTION>
Operating Noncancelable
Leases Subleases
--------- -------------
(in thousands)
<S> <C> <C>
Year ending December 31:
2000.............................................. $ 2,191 $ 844
2001.............................................. 2,108 605
2002.............................................. 1,872 394
2003.............................................. 1,872 404
2004.............................................. 1,872 101
Thereafter........................................ 8,478 --
------- ------
Total minimum lease payments....................... $18,393 $2,348
======= ======
</TABLE>
10. Related-Party Transactions
Two founders are providing consulting services to the Company. The Company
has the right to terminate these contracts at any time. The Company incurred
$150,000, $132,000 and $120,000 in consulting fees during the years ended
December 31, 1997, 1998, and 1999, respectively, under these agreements.
11. Employee Benefit Plans
The Company has a 401(k) plan for those employees who meet eligibility
requirements. Eligible employees may contribute up to 20% of their eligible
compensation, subject to IRS limitations. Company contributions to the plans
are discretionary as determined by the Board of Directors. There were no
employer contributions in 1997, 1998, or 1999.
F-17
<PAGE>
DENDREON CORPORATION
NOTES TO FINANCIAL STATEMENTS--(Continued)
11. Employee Benefit Plans (continued)
The Company started a Flexible Benefit Plan in December 1999 for eligible
employees to defer their pretax earnings to pay for certain kinds of benefits
and expenses. There were no significant expenses for the year ended December
31, 1999.
12. Subsequent Events (unaudited)
Initial Public Offering
On March 1, 2000, the board of directors authorized management of the
Company to file a registration statement with the Securities and Exchange
Commission permitting the Company to sell shares of its common stock to the
public. If the initial public offering is closed under the terms presently
anticipated, all of the outstanding preferred stock will automatically convert
into 12,108,369 shares of common stock. Unaudited pro forma stockholders'
equity, as adjusted for the assumed conversion of the preferred stock, is set
forth on the balance sheet.
On March 1, 2000, the board of directors changed the authorized shares of
common stock to 80,000,000 and of preferred stock to 10,000,000. This change in
authorized shares will be effective prior to the closing of the initial public
offering.
2000 Equity Incentive Plan
On March 1, 2000, the board of directors adopted the 2000 Equity Incentive
Plan (the 2000 Plan), which amends and restates the 1996 Plan. A total of
4,000,000 shares of common stock have been authorized and reserved for issuance
under the 2000 Plan, an increase of 500,000 shares over that previously
authorized under the 1996 Plan. Each year, the number of shares reserved for
issuance under the 2000 Plan will automatically be increased by the least of
(i) 5% of the total number of shares of the Company's common stock then
outstanding, (ii) 500,000 shares, or (iii) a number to be determined by the
Company's Board of Directors.
Employee Stock Purchase Plan
Effective upon the completion of the initial public offering, the Company
will implement the 2000 Employee Stock Purchase Plan (the Purchase Plan), which
was approved by the board of directors on March 1, 2000. A total of 1,350,000
shares of common stock have been reserved for issuance under the Purchase Plan.
Each year, the number of shares reserved for issuance under the Purchase Plan
will automatically be increased by the least of (i) 1% of the total number of
shares of the Company's common stock then outstanding, (ii) 400,000 shares, or
(iii) a number determined by the Company's Board of Directors.
The Purchase Plan permits eligible employees to purchase common stock at a
discount, but only through payroll deductions during defined offering periods.
The price at which common stock is purchased under the Purchase Plan is equal
to 85% of the lower of the fair market value of the common stock at the
commencement date of each offering period or the relevant purchase date.
F-18
<PAGE>
- -------------------------------------------------------------------------------
Until , all dealers effecting transactions in these securities, whether
or not participatingin this offering, may be required to deliver a prospectus.
This is in addition to the obligation of dealers todeliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
- -------------------------------------------------------------------------------
Dendreon Corporation
Prudential Vector Healthcare
a unit of Prudential Securities
SG Cowen
Pacific Growth Equities, Inc.
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
<TABLE>
<S> <C>
SEC registration fee............................................. $ 26,400
NASD fee......................................................... $ 10,500
Nasdaq National Market listing fee............................... $ 95,000
Printing and engraving expenses.................................. $ 250,000
Legal fees and expenses.......................................... $ 600,000
Accounting fees and expenses..................................... $ 300,000
Blue sky fees and expenses....................................... $ 5,000
Transfer agent fees.............................................. $ 10,000
Miscellaneous expenses........................................... $ 103,100
----------
Total.......................................................... $1,400,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933
(the "Act"). Dendreon's bylaws provides for mandatory indemnification of its
directors and officers and permissible indemnification of employees and other
agents to the maximum extent not prohibited by the Delaware General Corporation
Law. Dendreon's certificate of incorporation provides that, pursuant to
Delaware law, its directors shall not be liable for monetary damages for breach
of the directors' fiduciary duty as directors to Dendreon and its stockholders.
This provision in the certificate of incorporation does not eliminate the
directors' fiduciary duty, and in appropriate circumstances equitable remedies
such as injunctive or other forms of non-monetary relief will remain available
under Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to Dendreon for acts or
omissions not in good faith or involving intentional misconduct, for knowing
violations of law, for actions leading to improper personal benefit to the
director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws. Dendreon has entered
into indemnification agreements with its officers and directors, a form of
which is attached as Exhibit 10.1, hereto and incorporated herein by reference.
The indemnification agreements provide Dendreon's officers and directors with
further indemnification to the maximum extent permitted by the Delaware General
Corporation Law. We maintain liability insurance for its directors and
officers. Reference is also made to Section of the Underwriting Agreement
contained in Exhibit 1.1 hereto, indemnifying officers and directors of
Dendreon against certain liabilities and Section 9.8 of the Fourth Amended and
Restated Stockholders' Rights Agreement contained in Exhibit 10.15 hereto,
indemnifying certain of Dendreon's stockholders, including controlling
stockholders, against certain liabilities.
Item 15. Recent Sales of Unregistered Securities
(a) The following securities of the Registrant have been sold or issued by
the Registrant during the past three years without registration under the
Securities Act of 1933, as amended (the "Securities Act"). Securities issued
prior to September 4, 1997 were issued under the Registrant's former name
"Activated Cell Therapy, Inc."
(1) In June, July and August 1997, the Registrant issued and sold in a
private offering an aggregate of 3,308,179 shares of Series C Preferred
Stock at $3.60 per share to 30 investors, including Vulcan Ventures, Inc.,
affiliates of Sanderling Ventures, Kummell Investments Limited, HealthCare
Ventures, Shaw Venture Partners and other accredited investors. The net
aggregate cash consideration was $11,909,444.
II-1
<PAGE>
(2) In connection with the Series C Private Placement, 625 shares of the
Registrant's Series C Preferred Stock were issued to Shipley Raidy Capital
Partners, L.P. in satisfaction of finder's fees.
(3) In connection with the Series C Private Placement, a warrant to
purchase 34,722 shares of the Registrant's common stock at an exercise
price of $3.60 per share was issued to John F. Wong in satisfaction of
finder's fees.
(4) In December 1997, the Registrant issued a warrant to purchase 8,333
shares of the Registrant's common stock at an exercise price of $3.60 per
share to Transamerica Business Credit Corporation in connection with an
equipment lease agreement between the Registrant and Transamerica Business
Credit Corporation.
(5) In July 1998, the Registrant issued and sold in a private offering
an aggregate of 937,000 shares of Series D Preferred Stock at $5.00 per
share to eight investors, including Kirin Brewery Co., Ltd., Vulcan
Ventures, Inc., New York Life Insurance Company, Shaw Venture Partners and
other accredited investors. The net aggregate cash consideration was
$4,685,000.
(6) In March 1999, the Registrant issued a warrant to purchase 3000
shares of its common stock at an exercise price of $5.00 per share to
Transamerica Business Credit Corporation in connection with an equipment
lease agreement between the Registrant and Transamerica Business Credit
Corporation.
(7) In August 1999, the Registrant issued a warrant to purchase 78,000
shares of its common stock at an exercise price of $5.00 per share to TBCC
Funding Trust II in connection with a loan agreement between the Registrant
and Transamerica Business Credit Corporation.
(8) In October 1999, the Registrant issued a warrant to purchase 250,000
shares of its common stock at an exercise price of $5.00 per share to
Fresenius AG in connection with the termination of a license agreement
between the Registrant and Fresenius AG.
(9) From September 1999 to February 2000, the Registrant issued and sold
in a private offering an aggregate of 4,069,553 shares of Series E
Preferred Stock at $4.25 per share to 14 investors, including Vulcan
Ventures, Inc., HealthCare Ventures, Kummell Investments Limited, New York
Life Insurance Company, Sanderling Venture Partners, Shaw Venture Partners
and other accredited investors. The net aggregate cash consideration was
$17,295,600.
(10) From March 1, 1997 to March 1, 2000, the Registrant granted options
to purchase an aggregate of 1,500 shares of common stock at an exercise
price of $0.51 per share to its employees and officers, pursuant to its
1996 Equity Incentive Plan.
(11) From March 1, 1997 to March 1, 2000, the Registrant granted options
to purchase an aggregate of 46,500 shares of common stock at an exercise
price of $0.54 per share to its employees and officers and an aggregate of
20,000 shares of common stock at an exercise price of $0.54 per share to
its consultants and directors, pursuant to its 1996 Equity Incentive Plan.
(12) From March 1, 1997 to March 1, 2000, the Registrant granted options
to purchase an aggregate of 316,500 shares of common stock at an exercise
price of $0.75 per share to its employees and officers, pursuant to its
1996 Equity Incentive Plan.
(13) From March 1, 1997 to March 1, 2000, the Registrant granted options
to purchase an aggregate of 55,500 shares of common stock at an exercise
price of $0.83 per share to its employees and officers and an aggregate of
60,000 shares of common stock at an exercise price of $0.83 per share to
its consultants and directors, pursuant to its 1996 Equity Incentive Plan.
(14) From March 1, 1997 to March 1, 2000, the Registrant granted options
to purchase an aggregate of 659,200 shares of common stock at an exercise
price of $1.00 per share to its employees to its employees and officers and
an aggregate of 57,000 shares of common stock at an exercise price of $1.00
per share to its consultants and directors, pursuant to its 1996 Equity
Incentive Plan.
II-2
<PAGE>
(15) From March 1, 1997 to March 1, 2000, the Registrant granted options
to purchase an aggregate of 322,000 shares of common stock at an exercise
price of $2.00 per share to its employees and officers and an aggregate of
48,000 shares of common stock at an exercise price of $2.00 per share to
its consultants and directors, pursuant to its 1996 Equity Incentive Plan.
(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).
The sales and issuances of the above securities were deemed to be exempt
from registration under the Securities Act in reliance upon Section 4(2) of the
Securities Act or Regulation D promulgated thereunder, or Rule 701 promulgated
under Section 3(b) of the Securities Act as transactions by an issuer not
involving a public offering or transactions pursuant to compensation benefit
plans and contracts relating to compensation as provided under Rule 701. The
recipients of securities in each such transaction represented their intentions
to acquire the securities for investment only and not with a view to or for
sale in connection with any distribution thereof and appropriate legends were
affixed to the share certificates issued in such transactions. All recipients
had adequate access, through their relationships with us, to information about
Dendreon.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation filed with the
Delaware Secretary of State on September 3, 1999.
3.2 Form of Amended and Restated Certificate of Incorporation to be
effective on the closing of the offering made pursuant to the
Registration Statement.
3.3 Bylaws.
4.1* Specimen Common Stock certificate.
5.1* Opinion of Cooley Godward L.L.P.
10.1 Form of Indemnity Agreement between the Registrant and each of its
directors and certain of its officers.
10.2 2000 Equity Incentive Plan.
10.3 2000 Employee Stock Purchase Plan.
10.4 Fourth Amended and Restated Stockholders' Agreement, dated September
3, 1999, between the Registrant and certain holders of the
Registrant's securities.
10.5 Series D Preferred Stock Purchase Agreement, dated July 10, 1998.
10.6 Series E Preferred Stock Purchase Agreement, dated September 3, 1999.
10.7 Registration Rights and Shareholder's Agreement, dated October 18,
1999, between the Registrant and Fresenius AG.
10.8 Warrant to purchase 250,000 shares of common stock issued by the
Registrant to Fresenius AG, dated October 18, 1999.
10.9 Letter dated September 3, 1998 regarding employment arrangement of
Christopher S. Henney and David L. Urdal.
10.10 Lease Agreement, dated October 27, 1992 and commencing July 1, 1993,
between the Registrant and Vanni Business Park General Partnership.
10.11 Lease Agreement, dated July 31, 1998, between the Registrant and ARE-
3005 First Avenue, LLC.
10.12 Loan and Security Agreement, dated July 30, 1999, between the
Registrant and Transamerica Business Credit Corporation.
</TABLE>
II- 3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.13 Amended and Restated Master Lease Agreement, dated May 28, 1999,
between the Registrant and Transamerica Business Credit Corporation.
10.14 Second Amendment to Master Lease Agreement, dated January 31, 2000,
between the Registrant and Transamerica Business Credit Corporation.
10.15+ Collaborative License Agreement, dated December 10, 1998, between the
Registrant and Kirin Brewery Co., Ltd.
10.16+ Research and License Agreement, dated February 1, 1999, between the
Registrant and Kirin Brewery Co., Ltd.
10.17+ Manufacturing and Supply Agreement, dated July 27, 1999, between the
Registrant and Kirin Brewery Co., Ltd.
10.18+ Joint Commercialization Agreement, dated February 1, 2000, between the
Registrant and Kirin Brewery Co., Ltd.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Cooley Godward L.L.P. (see Exhibit 5.1).
24.1 Power of Attorney (contained on signature page).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment
+ Confidential treatment requested
(b) Financial statement schedule
All financial statement schedules not listed are omitted because they are
inapplicable or the requested information is shown in the financial statements
of the Registrant or the related notes to the financial statements.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes:
(1) That for purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) That for the purpose of determining any liability under the Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, Dendreon Corporation
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of Seattle, King County, State of Washington, on this
7th day of March, 2000.
Dendreon Corporation
/s/ Christopher S. Henney
By: _________________________________
Christopher S. Henney, Ph.D.,
D.Sc.
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Christopher S. Henney and Martin A.
Simonetti, his or her true and lawful attorneys-in-fact each acting alone, with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead in any and all capacities to sign any or all amendments
(including post-effective amendments) to this registration statement, and any
registration statement filed pursuant to Rule 462(b) under the Securities Act
in connection with the registration under the Securities Act of equity
securities of Dendreon Corporation and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact, or their substitutes, each acting
alone, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Christopher S. Henney President, Chief Executive March 7, 2000
______________________________________ Officer and Director
Christopher S. Henney, Ph.D., D.Sc. (Principal Executive
Officer)
/s/ Martin A. Simonetti Chief Financial Officer March 7, 2000
______________________________________ (Principal Financial and
Martin A. Simonetti Accounting Officer)
/s/ William Crouse Chairman of the Board of March 1, 2000
______________________________________ Directors
William Crouse
/s/ Gerardo Canet Director March 4, 2000
______________________________________
Gerardo Canet
/s/ Timothy Harris Director March 7, 2000
______________________________________
Timothy Harris, Ph.D.
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Ruth Kunath Director March 2, 2000
______________________________________
Ruth Kunath
/s/ Mark P. Carthy Director March 7, 2000
______________________________________
Mark P. Carthy
/s/ Lowell E. Sears Director March 7, 2000
______________________________________
Lowell E. Sears
/s/ Ralph Shaw Director March 7, 2000
______________________________________
Ralph Shaw
/s/ David L. Urdal Director March 7, 2000
______________________________________
David L. Urdal, Ph.D.
/s/ Douglas Watson Director March 1, 2000
______________________________________
Douglas Watson
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation filed with the
Delaware Secretary of State on September 3, 1999.
3.2 Form of Amended and Restated Certificate of Incorporation to be
effective on the closing of the offering made pursuant to the
Registration Statement.
3.3 Bylaws.
4.1* Specimen Common Stock certificate.
5.1* Opinion of Cooley Godward L.L.P.
10.1 Form of Indemnity Agreement between the Registrant and each of its
Directors and certain of its officers.
10.2 2000 Equity Incentive Plan.
10.3 2000 Employee Stock Purchase Plan.
10.4 Fourth Amended and Restated Stockholders' Agreement, dated September
3, 1999, between the Registrant and certain holders of the
Registrant's securities.
10.5 Series D Preferred Stock Purchase Agreement, dated July 10, 1998.
10.6 Series E Preferred Stock Purchase Agreement, dated September 3, 1999.
10.7 Registration Rights and Shareholder's Agreement, dated October 18,
1999, between the Registrant and Fresenius AG.
10.8 Warrant to purchase 250,000 shares of common stock issued by the
Registrant to Fresenius AG, dated October 18, 1999.
10.9 Letter dated September 3, 1998 regarding employment arrangement of
Christopher S. Henney and David L. Urdal.
10.10 Lease Agreement, dated October 27, 1992 and commencing July 1, 1993,
between the Registrant and Vanni Business Park General Partnership.
10.11 Lease Agreement, dated July 31, 1998, between the Registrant and ARE-
3005 First Avenue, LLC.
10.12 Loan and Security Agreement, dated July 30, 1999, between the
Registrant and Transamerica Business Credit Corporation.
10.13 Amended and Restated Master Lease Agreement, dated May 28, 1999,
between the Registrant and Transamerica Business Credit Corporation.
10.14 Second Amendment to Master Lease Agreement, dated January 31, 2000,
between the Registrant and Transamerica Business Credit Corporation.
10.15+ Collaborative License Agreement, dated December 10, 1998, between the
Registrant and Kirin Brewery Co., Ltd.
10.16+ Research and License Agreement, dated February 1, 1999, between the
Registrant and Kirin Brewery Co., Ltd.
10.17+ Manufacturing and Supply Agreement, dated July 27, 1999, between the
Registrant and Kirin Brewery Co., Ltd.
10.18+ Joint Commercialization Agreement, dated February 1, 2000, between the
Registrant and Kirin Brewery Co., Ltd.
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2* Consent of Cooley Godward L.L.P. (see Exhibit 5.1).
24.1 Power of Attorney (contained on signature page).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment
+ Confidential treatment requested
<PAGE>
EXHIBIT 3.1
Filed with Delaware Secretary of State
on September 3, 1999
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
DENDREON CORPORATION
(Pursuant to Section 245)
Christopher S. Henney, Ph.D. and Martin A. Simonetti hereby certify that:
ONE: The original name of this corporation is Activated Cell Therapy,
Inc. and the date of filing of the original Certificate of Incorporation of this
corporation with the Secretary of State of Delaware is August 14, 1992.
TWO: They are the duly elected and acting Chief Executive Officer and
President and Secretary, respectively, of Dendreon Corporation, a Delaware
corporation.
THREE: The Amended and Restated Certificate of Incorporation of this
corporation is hereby amended and restated to read as follows:
I.
The name of the Corporation is Dendreon Corporation (the "Corporation" or
the "Company").
II.
The registered agent and the address of the registered office in the State
of Delaware are:
The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
County of New Castle
III.
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the Delaware General Corporation
Law.
IV.
A. This Corporation is authorized to issue two classes of stock, to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares that the Corporation is authorized to issue is thirty-one million
eight hundred twenty-two thousand nine hundred thirty-six (31,822,936) shares.
Eighteen million one hundred thousand (18,100,000) shares shall be Common Stock,
each having a par value of one tenth of one cent ($0.001). Thirteen million
seven hundred twenty-two thousand nine hundred thirty-six (13,722,936) shares
shall be Preferred Stock, each having a par value of one tenth of one cent
($0.001).
B. Five hundred seven thousand five hundred (507,500) of the authorized
shares of Preferred Stock are hereby designated "Series A Preferred Stock" (the
"Series A Preferred").
1
<PAGE>
Four million two hundred sixty-four thousand three hundred seventy-five
(4,264,375) of the authorized shares of Preferred Stock are hereby designated
"Series B Preferred Stock" (the "Series B Preferred"). Three million three
hundred eight thousand one hundred seventy-nine (3,308,179) of the authorized
shares of Preferred Stock are hereby designated "Series C Preferred Stock" (the
"Series C Preferred"). Nine hundred thirty-seven thousand (937,000) of the
authorized shares of Preferred Stock are hereby designated "Series D Preferred
Stock" (the "Series D Preferred"). Four million seven hundred five thousand
eight hundred eighty-two (4,705,882) of the authorized shares of Preferred Stock
are hereby designated "Series E Preferred Stock" (the "Series E Preferred"). The
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred are referred to herein as "Preferred Stock".
C. The rights, preferences, privileges, restrictions and other matters
relating to the Preferred Stock are as follows:
1. Dividend Rights.
1.1 Holders of Preferred Stock, in preference to the holders of any
other stock of the Corporation ("Junior Stock"), shall be entitled to receive
dividends, when, as and if declared by the Board of Directors, but only out of
funds that are legally available therefor. Such dividends shall not be
cumulative and no right shall accrue to holders of shares of Preferred Stock by
reason of the fact that dividends on such shares are not declared in any prior
year, nor shall any undeclared or unpaid dividend bear or accrue interest.
1.2 So long as any shares of Preferred Stock shall be outstanding, no
dividend, whether in cash or property, shall be paid or declared, nor shall any
other distribution be made (whether in cash, shares of capital stock of the
corporation, or other property), on any Junior Stock until all declared but
unpaid dividends on the Preferred Stock shall have been paid or declared and set
apart. In the event dividends are paid on any share of Common Stock, an
additional dividend shall be paid with respect to all outstanding shares of
Preferred Stock in an amount for each such share of Preferred Stock equal to the
aggregate amount of such dividends for all shares of Common Stock into which
each such share of Preferred Stock could then be converted.
2. Voting Rights.
2.1 Except as otherwise provided herein or as required by law, the
Preferred Stock shall be voted equally with the shares of the Common Stock of
the Corporation and not as a separate class, at any annual or special meeting of
stockholders of the Corporation, and may act by written consent in the same
manner as the Common Stock, in either case upon the following basis: each holder
of shares of Preferred Stock shall be entitled to such number of votes as shall
be equal to the whole number of shares of Common Stock into which such holder's
aggregate number of shares of Preferred Stock are convertible (pursuant to
Section 4 hereof) immediately after the close of business on the record date
fixed for such meeting or the effective date of such written consent.
2.2 In addition to any other vote or consent required herein or by
law, so long as any Preferred Stock is outstanding, the vote or written consent
of the holders of a majority of the outstanding Preferred Stock which, if at
least two such holders of Preferred Stock remain, shall include at least two
holders of Preferred Stock one of which shall not be HealthCare
2
<PAGE>
Ventures III, L.P., HealthCare Ventures IV, L.P., Everest Trust or Hudson Trust
or any persons or entities that are or have been affiliated with such ventures
(collectively the "Ventures"), each of which owns at least 220,000 shares of
Preferred Stock (as adjusted for stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares), shall be necessary
for effecting or validating the following actions (collectively, the
"Supermajority Vote");
2.2.1 Any amendment, alteration, or repeal of any provision of the
Certificate of Incorporation or the Bylaws of the Corporation that affects
adversely the voting powers, preferences or other special rights or
qualifications, limitations or restrictions of the Preferred Stock;
2.2.2 Any reclassification of any shares of the Corporation's capital
stock as shares ranking senior to or on parity with the Preferred Stock with
respect to rights on liquidation, redemption or for the payment of any dividend
or distribution other than in liquidation;
2.2.3 Any amendment, alteration or repeal of any provision of the
Certificate of Incorporation of the Corporation;
2.2.4 Any change as a whole, by subdivision or combination in any
manner, in the number of shares of the Common Stock then outstanding into a
different number of shares, with or without par value, without making the
identical change as a whole in the number of shares of Preferred Stock then
outstanding;
2.2.5 Any authorization or any increase, whether by reclassification
or otherwise, in the authorized amount of any class of shares or series of
equity securities of the Corporation ranking on a parity with or prior to the
Preferred Stock in right of dividends, voting or liquidation preference or any
authorization or issuance of shares of Common Stock (except for shares of Common
Stock issued (1) pursuant to employee benefit plans approved by the Board of
Directors, (2) upon the conversion of any shares of Preferred Stock, or (3) upon
the exercise and/or conversion of any warrant outstanding on the Original Issue
Date);
2.2.6 Any agreement to sell, lease or otherwise dispose of all or
substantially all of the assets, property or business of the Corporation or any
subsidiary of the Corporation, or to merge or consolidate the Corporation or any
subsidiary of the Corporation with any person, or permit any other person to
merge into the Corporation or any subsidiary of the Corporation, or any other
reorganization, except for mergers, consolidations or reorganizations in which,
after giving effect to the merger, consolidation, or reorganization, the holders
of the Corporation's outstanding capital stock immediately preceding such merger
own at least fifty percent (50%) of the voting power of the surviving
corporation;
2.2.7 Any voluntary dissolution, liquidation or winding up of the
Corporation; or
2.2.8 Any redemption of, or payment of dividends with respect to,
Junior Stock (other than a repurchase approved by the Board of Directors of
Junior Stock pursuant to the exercise of any contractual or other legal rights
of the Company of first refusal or repurchase or the repurchase of shares of
Common Stock issued pursuant to any employee benefit plan of
3
<PAGE>
the Corporation for employees and others who render services to the Corporation,
in connection with the termination of services).
2.3 In addition to the voting rights above, the hiring or termination
of a Chief Executive Officer (a "CEO") requires the approval of (i) a majority
of the Corporation's Directors who were Directors of the Company on April 1,
1996 or Directors nominated by such Directors (or by such successor Directors),
or (ii) the vote or written consent of the holders of a majority of the
outstanding shares of Preferred Stock which, so long as at least two such
holders of Preferred Stock remain, shall include at least two holders of
Preferred Stock, one of which shall not be one of the Ventures, each of which
owns at least 140,000 shares of Preferred Stock (as adjusted for splits,
recapitalizations and the like). Notwithstanding the foregoing, the termination
of a CEO for "cause" or the hiring of a CEO in the event that such position has
been vacant for a period greater than nine consecutive months, shall only
require (1) the approval of a majority vote of the Board of Directors present at
a meeting at which a quorum is present or (ii) the majority vote or written
consent of the holders of outstanding Preferred Stock.
3. Liquidation Rights.
3.1 Upon any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, before any distribution or
payment shall be made to the holders of any Junior Stock, the holders of
Preferred Stock shall be entitled to be paid out of the assets of the
Corporation, in preference to the holders of Junior Stock, an amount per share
equal to the Original Issue Price for each such series of Preferred Stock (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) and all declared but unpaid dividends on
such shares to the date of such payment. The Original Issue Price of the Series
A Preferred, the Series B Preferred, the Series C Preferred, the Series D
Preferred and the Series E Preferred shall be $20.00, $3.41, $3.60, $5.00 and
$4.25 per share, respectively.
3.2 After the payment of the full liquidation preference of the
Preferred Stock as set forth in Section 1.3 above, the holders of the Common
Stock and the Preferred Stock shall receive the remaining assets. Such assets
shall be distributed ratably among such holders in proportion to the shares of
Common Stock held by them and which they have the right to acquire upon
conversion of shares of Preferred Stock held by them.
3.3 The following events shall be considered a liquidation under this
Section 3:
3.3.1 any merger or reorganization of the Corporation with or
into any other corporation or other entity or person in which transaction the
Corporation's stockholders immediately prior to such transaction own immediately
after such transaction less than 50% of the equity securities of the surviving
corporation or its parent; or
3.3.2 a sale, lease or other disposition of all or substantially
all of the assets of the Corporation.
3.4 If, upon any liquidation, distribution, or winding up, the assets
of the Corporation shall be insufficient to make payment in full to all holders
of Preferred Stock, then
4
<PAGE>
such assets shall be distributed among the holders of Preferred Stock at the
time outstanding, ratably in proportion to the full amounts to which they would
otherwise be respectively entitled.
3.5 Any securities to be delivered to the holders of the Preferred
Stock and Common Stock upon a merger, reorganization or sale of all or
substantially all of the assets of the Corporation shall be valued as follows:
3.5.1 if traded on a securities exchange, the value shall be
deemed to be the average of the closing prices of the securities on such
exchange over the 30-day period ending five (5) business days prior to the
closing;
3.5.2 if actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid prices over the 30-day period ending
five (5) business days prior to the closing; and
3.5.3 if there is no active public market, the value shall be
the fair market value thereof, as determined by the Corporation's Board of
Directors.
4. Conversion Rights.
The holders of the Preferred Stock shall have the following rights
with respect to the conversion of the Preferred Stock into shares of Common
Stock:
4.1 Optional Conversion. Subject to and in compliance with the
provisions of this Section 4, any shares of Preferred Stock may, at the option
of the holder, be converted at any time into fully-paid and nonassessable shares
of Common Stock. The number of shares of Common Stock to which a holder of
Series A Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the "Series A Conversion Rate" then in effect
(determined as provided in Section 4.2) by the number of shares of Series A
Preferred being converted. The number of shares of Common Stock to which a
holder of Series B Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the "Series B Conversion Rate" then in effect
(determined as provided in Section 4.2) by the number of shares of Series B
Preferred being converted. The number of shares of Common Stock to which a
holder of Series C Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the "Series C Conversion Rate" then in effect
(determined as provided in Section 4.2) by the number of shares of Series C
Preferred being converted. The number of shares of Common Stock to which a
holder of Series D Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the "Series D Conversion Rate" then in effect
(determined as provided in Section 4.2) by the number of shares of Series D
Preferred being converted. The number of shares of Common Stock to which a
holder of Series E Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the "Series E Conversion Rate" then in effect
(determined as provided in Section 4.2) by the number of shares of Series E
Preferred being converted.
4.2 Conversion Rate. The conversion rate in effect at any time for
conversion of the Series A Preferred (the "Series A Conversion Rate") shall be
the quotient obtained by dividing $3.41 by the "Series A Conversion Price,"
calculated as provided in Section 4.3. The conversion rate in effect at any time
for conversion of the Series B Preferred (the "Series B Conversion Rate") shall
be the quotient obtained by dividing $3.41 by the "Series B
5
<PAGE>
Conversion Price," calculated as provided in Section 4.3. The conversion rate in
effect at any time for conversion of the Series C Preferred (the "Series C
Conversion Rate") shall be the quotient obtained by dividing $3.60 by the
"Series C Conversion Price," calculated as provided in Section 4.3. The
conversion rate in effect at any time for conversion of the Series D Preferred
(the "Series D Conversion Rate") shall be the quotient obtained by dividing
$5.00 by the "Series D Conversion Price," calculated as provided in Section 4.3.
The conversion rate in effect at any time for conversion of the Series E
Preferred (the "Series E Conversion Rate") shall be the quotient obtained by
dividing $4.25 by the "Series E Conversion Price," calculated as provided in
Section 4.3.
4.3 Conversion Price. The conversion price for the Series A Preferred
shall initially be $3.41 (the "Series A Conversion Price"). The conversion price
of the Series B Preferred shall initially be $3.41 (the "Series B Conversion
Price"). The conversion price for the Series C Preferred shall initially be
$3.60 (the "Series C Conversion Price"). The conversion price for the Series D
Preferred shall initially be $5.00 (the "Series D Conversion Price"). The
conversion price for the Series E Preferred shall initially be $4.25 (the
"Series E Conversion Price"). Such initial Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price, Series D Conversion Price and
Series E Conversion Price (collectively, the "Conversion Prices") shall be
adjusted from time to time in accordance with this Section 4. All references to
the Conversion Prices herein shall mean the respective Conversion Prices as so
adjusted.
4.4 Mechanics of Conversion. Each holder of Preferred Stock who
desires to convert the same into shares of Common Stock pursuant to this Section
4 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Corporation or any transfer agent for the Preferred Stock, and
shall give written notice to the Corporation at such office that such holder
elects to convert the same. Such notice shall state the number of shares of
Preferred Stock being converted. Thereupon, the Corporation shall promptly issue
and deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay in cash or, to the extent sufficient funds are not then legally
available therefor, in Common Stock (at the Common Stock's fair market value
determined by the Board of Directors as of the date of such conversion), any
declared and unpaid dividends on the shares of Preferred Stock being converted.
Such conversion shall be deemed to have been made at the close of business on
the date of such surrender of the certificates representing the shares of
Preferred Stock to be converted, and the person entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder of such shares of Common Stock on such date.
4.5 Adjustments to Conversion Prices for Certain Diluting Issues.
4.5.1 Special Definitions. For purposes of this Section 4, the
following definitions apply:
4.5.1.1 "Options" shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
4.5.1.2 "Original Issue Date" shall mean the date on
which a share of Series E Preferred Stock was first issued.
6
<PAGE>
4.5.1.3 "Convertible Securities" shall mean any evidences
of indebtedness, shares (other than Common Stock and Series A Preferred, Series
B Preferred, Series C Preferred, Series D Preferred or Series E Preferred) or
other securities convertible into or exchangeable for Common Stock.
4.5.1.4 "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to Section 4.5.3, deemed to be
issued) by the Corporation after the Original Issue Date, other than shares of
Common Stock issued or issuable:
4.5.1.4.1 upon the exercise or conversion of
options or warrants to purchase Common Stock or Preferred Stock that are
outstanding on the Original Issue Date;
4.5.1.4.2 upon conversion of any shares of Series
A Preferred, Series B Preferred, Series C Preferred, Series D Preferred or
Series E Preferred;
4.5.1.4.3 to officers, directors or employees of,
or consultants to, the Corporation pursuant to any employee benefit plans or
agreements on terms approved by the Board of Directors;
4.5.1.4.4 to investors or to placement agents or
finders in connection with the Series E Preferred Stock financing approved by
the Company's Board of Directors;
4.5.1.4.5 pursuant to Restricted Stock Option
Agreements dated as of September 30, 1992 between the Corporation and Dr. Sam
Strober, Dr. Edgar G. Engleman and Dr. William Haseltine;
4.5.1.4.6 pursuant to any merger, consolidation or
reorganization of the Corporation with or into any other corporation or other
entity or person in which transaction the Corporation's stockholders immediately
prior to such transaction own immediately after such transaction directly or
indirectly more than 50% of the voting power of the surviving corporation;
4.5.1.4.7 as a dividend or distribution on the
shares excluded from the definition of Additional Shares of Common Stock by the
foregoing clauses 4.5.1.4.1 to 4.5.1.4.6 or this clause 4.5.1.4.7; or
4.5.1.4.8 for which adjustment of the Series A,
Series B, Series C, Series D or Series E Conversion Price is made pursuant to
Sections 4.6 through Section 4.8, inclusive.
4.5.1.5 "Qualified Public Offering" shall mean the
sale of the Corporation's Common Stock in an underwritten public offering
registered under the Securities Act of 1933, as amended (the "Act"), other than
a registration relating solely to a transaction under Rule 145 under such Act
(or any successor thereto) or to an employee benefit plan of the Corporation,
the aggregate gross offering proceeds (before underwriting discounts,
commissions and fees) of which are not less than $15,000,000 and resulting in a
market capitalization after the Qualified Public Offering (based on the
Qualified Public Offering price) of not less than $40,000,000.
7
<PAGE>
4.5.2 No Adjustment of Conversion Price. Any provision herein to
the contrary notwithstanding, no adjustment in the Series A Conversion Price,
Series B Conversion Price, Series C Conversion Price, Series D Conversion Price
or the Series E Conversion Price shall be made in respect of the issuance of
Additional Shares of Common Stock unless the consideration per share (determined
pursuant to Section 4.5.5 hereof) for an Additional Share of Common Stock issued
or deemed to be issued by the Corporation is less than the Series A Conversion
Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion
Price or the Series E Conversion Price, respectively, in effect on the date of,
and immediately prior to, such issue; provided, however, that no adjustment in
the Series D Conversion Price shall be made in respect of the issuance of any
shares of Series E Preferred or any shares of Common Stock issued or issuable
upon conversion of any shares of Series E Preferred.
4.5.3 Deemed Issue of Additional Shares of Common Stock. In the
event the Corporation at any time or from time to time after the Original Issue
Date shall issue any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities then entitled
to receive any such Options or Convertible Securities (other than Options or
Convertible Securities described in Sections 4.5.1.4.1, 4.5.1.4.3 or 4.5.1.4.5
above), then the maximum number of shares (as set forth in the instrument
relating thereto without regard to any provisions contained therein designed to
protect against dilution) of Common Stock issuable upon the exercise of such
Options or, in the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities and Options, shall be
deemed to be Additional Shares of Common Stock issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the close of
business on such record date, provided that in any such case in which Additional
Shares of Common Stock are deemed to be issued:
4.5.3.1 no further adjustments in the Conversion Price for the
Series A, B, C, D or E Preferred shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible Securities;
4.5.3.2 if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or decrease in
the consideration payable to the Corporation, or decrease or increase in the
number of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Series A Conversion Price, Series B Conversion Price,
Series C Conversion Price, Series D Conversion Price or Series E Conversion
Price computed upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective, be recomputed to
reflect such increase or decrease insofar as it affects such Options or the
rights of conversion or exchange under such Convertible Securities (provided,
however, that no such adjustment of the Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price, Series D Conversion Price or Series
E Conversion Price shall affect Common Stock previously issued upon conversion
of the Series A, B, C, D or E Preferred);
4.5.3.3 upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall not have
been exercised, the Series A Conversion Price, Series B Conversion Price, Series
C Conversion Price, Series D Conversion Price or Series E Conversion Price
computed upon the original issue thereof (or upon
8
<PAGE>
the occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed as if:
4.5.3.3.1 in the case of Convertible Securities or Options
for Common Stock, the only Additional Shares of Common Stock issued were the
shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Corporation for the issue of all such Options, whether or not exercised, plus
the consideration actually received by the Corporation upon such exercise, or
for the issue of all such Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if any, actually received by
the Corporation upon such conversion or exchange, and
4.5.3.3.2 in the case of Options for Convertible Securities
only the Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue of such Options, and the consideration
received by the Corporation for the Additional Shares of Common Stock deemed to
have been then issued was the consideration actually received by the Corporation
for the issue of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Corporation (determined
pursuant to Section 4.5.5) upon the issue of the Convertible Securities with
respect to which such Options were actually exercised;
4.5.3.4 no readjustment pursuant to clause 4.5.3.2 or 4.5.3.3
above shall have the effect of increasing the Series A Conversion Price, Series
B Conversion Price, Series C Conversion Price, Series D Conversion Price or
Series E Conversion Price to an amount which exceeds the lower of (a) the Series
A Conversion Price, Series B Conversion Price, Series C Conversion Price, Series
D Conversion Price or Series E Conversion Price, respectively, on the original
adjustment date, or (b) the Series A Conversion Price, Series B Conversion
Price, Series C Conversion Price, Series D Conversion Price or Series E
Conversion Price, respectively, that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date;
4.5.3.5 in the case of any Options that expire by their terms not
more than 30 days after the date of issue thereof, no adjustment of the Series A
Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D
Conversion Price or Series E Conversion Price shall be made until the expiration
or exercise of all such Options, whereupon such adjustment shall be made in the
same manner provided in 4.5.3.3 above.
4.5.4 Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common Stock. In the event the Corporation, at any time after the
Original Issue Date shall issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section 4.5.3)
without consideration or for a consideration per share less than the Conversion
Price with respect to any series of Preferred Stock in effect on the date of and
immediately prior to such issue, then and in such event, the Conversion Price
for such series of Preferred Stock shall be reduced, concurrently with such
issue, to a price (calculated to the nearest cent) determined by multiplying
such Conversion Price by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to such issue plus the
number of shares of Common Stock that the aggregate consideration received by
the Corporation for the total number of Additional Shares of Common
9
<PAGE>
Stock so issued would purchase at such Conversion Price in effect immediately
prior to such issuance, and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue plus the
number of such Additional Shares of Common Stock so issued. For the purpose of
the above calculation, the number of shares of Common Stock outstanding
immediately prior to such issue shall be calculated on a fully diluted basis, as
if all shares of Series A, B, C, D or E Preferred and all Convertible Securities
had been fully converted into shares of Common Stock immediately prior to such
issuance and any outstanding warrants, options or other rights for the purchase
of shares of stock or convertible securities (excluding options granted pursuant
to Restricted Stock Option Agreements dated as of September 30, 1992 between the
Corporation and Dr. Sam Strober, Dr. Edgar G. Engleman and Dr. William
Haseltine) had been fully exercised immediately prior to such issuance (and the
resulting securities fully converted into shares of Common Stock, if so
convertible) as of such date.
4.5.5 Determination of Consideration. For purposes of this
Section 4.5, the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
4.5.5.1 Cash and Property. Such consideration shall:
4.5.5.1.1 insofar as it consists of cash, be computed
at the aggregate amount of cash received by the Corporation excluding amounts
paid or payable for accrued interest or accrued dividends;
4.5.5.1.2 insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board; and
4.5.5.1.3 in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Corporation for consideration that covers both, be the proportion of such
consideration so received, computed as provided in clauses 4.5.5.1.1 and
4.5.5.1.2 above, as determined in good faith by the Board.
4.5.5.2 Options and Convertible Securities. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 4.5.3, relating to
Options and Convertible Securities, shall be determined by dividing;
4.5.5.2.1 the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein designed to protect against dilution) payable
to the Corporation upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities by
4.5.5.2.2 the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without regard to any
provision contained
10
<PAGE>
therein designed to protect against dilution) issuable upon the exercise of such
Options or conversion or exchange of such Convertible Securities.
4.6 Adjustment for Stock Splits and Combinations. If the Corporation
shall at any time or from time to time after the Original Issue Date effect a
subdivision of the outstanding Common Stock, the Conversion Prices in effect
immediately before that subdivision shall be proportionately decreased.
Conversely, if the Corporation shall at any time or from time to time after the
Original Issue Date combine the outstanding shares of Common Stock into a
smaller number of shares, the Conversion Prices in effect immediately before the
combination shall be proportionately increased. Any adjustment under this
Section 4.6 shall become effective at the close of business on the date the
subdivision or combination becomes effective.
4.7 Adjustment for Common Stock Dividends and Distributions. If the
Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in additional
shares of Common Stock, in each such event the Conversion Prices that are then
in effect shall be decreased as of the time of such issuance or, in the event
such record date is fixed, as of the close of business on such record date, by
multiplying the Conversion Prices then in effect by a fraction (i) the numerator
of which is the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date, and (ii) the denominator of which is the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date plus the number of shares
of Common Stock issuable in payment of such dividend or distribution; provided,
however, that if such record date is fixed and such dividend is not fully paid
or if such distribution is not fully made on the date fixed therefor, the
Conversion Prices shall be recomputed accordingly as of the close of business on
such record date and thereafter the Conversion Prices shall be adjusted pursuant
to this Section 4.7 to reflect the actual payment of such dividend or
distribution.
4.8 Adjustments for Other Dividends and Distributions. If the
Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in securities of
the Corporation other than shares of Common Stock, in each such event provision
shall be made so that the holders of the Preferred Stock shall receive upon
conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of other securities of the Corporation that
they would have received had their Preferred Stock been converted into Common
Stock on the date of such event and had they thereafter, during the period from
the date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments called for during such period under this Section 4 with
respect to the rights of the holders of the Preferred Stock or with respect to
such other securities by their terms.
4.9 Adjustment for Reclassification, Exchange and Substitution. If at
any time or from time to time after the Original Issue Date, the Common Stock
issuable upon the conversion of the Preferred Stock is changed into the same or
a different number of shares of any class or classes of stock or other
securities or property, whether by recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
or a reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Section 4 or in Section 3.3), in any such event each holder of
Preferred Stock shall have the right
11
<PAGE>
thereafter to convert such stock into the kind and amount of stock and other
securities and property receivable upon such recapitalization, reclassification
or other change by holders of the maximum number of shares of Common Stock into
which such shares of Preferred Stock could have been converted immediately prior
to such recapitalization, reclassification or change, all subject to further
adjustment as provided herein or with respect to such other securities or
property by the terms thereof.
4.10 Adjustment for Capital Reorganizations. If at any time or from
time to time after the Original Issue Date, there is a capital reorganization of
the Common Stock (other than a recapitalization, subdivision, combination,
reclassification, exchange or substitution of shares provided for elsewhere in
this Section 4 or in Section 3.3), as a part of such capital reorganization
provision shall be made so that the holders of the Preferred Stock shall
thereafter be entitled to receive upon conversion of the Preferred Stock the
number of shares of stock or other securities or property of the Corporation to
which a holder of the number of shares of Common Stock deliverable upon
conversion would have been entitled on such capital reorganization, subject to
adjustment in respect of such stock or securities by the terms thereof. In any
such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of
Preferred Stock after the capital reorganization to the end that the provisions
of this Section 4 (including adjustment of the Conversion Prices then in effect
and the number of shares issuable upon conversion of the Preferred Stock) shall
be applicable after that event and be as nearly equivalent as practicable.
4.11 Certificate of Adjustment. In each case of an adjustment or
readjustment of the Conversion Prices for the number of shares of Common Stock
or other securities issuable upon conversion of the Preferred Stock, if the
Preferred Stock is then convertible pursuant to this Section 4, the Corporation,
at its expense, shall compute such adjustment or readjustment in accordance with
the provisions hereof and prepare a certificate showing such adjustment or
readjustment, and shall mail such certificate, by first class mail, postage
prepaid, to each registered holder of Preferred Stock at the holder's address as
shown in the Corporation's books. The certificate shall set forth such
adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (i) such
adjustments and readjustments, (ii) the Conversion Prices, and (iii) the number
of shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of such holder's shares.
4.12 Notices of Record Date. Upon (i) any taking by the Corporation of
a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger or consolidation of the Corporation with or into any other
corporation, or any transfer of all or substantially all the assets of the
Corporation to any other person, or any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the Corporation shall mail to each
holder of Preferred Stock at least fifteen (15) days prior to the record date
specified therein a notice specifying (1) the date on which any such record is
to be taken for the purpose of such dividend or distribution and a description
of such dividend or distribution, (2) the date on which any such reorganization,
reclassification, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective, and (3) the date, if any, that is to
be fixed as to when the holders of record of Common Stock (or other securities)
shall be entitled to exchange their shares of Common Stock (or other securities)
for securities or other property
12
<PAGE>
deliverable upon such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up.
4.13 Automatic Conversion.
4.13.1 Each share of Preferred Stock shall automatically be
converted into shares of Common Stock, based on the then-effective Series A
Conversion Price, Series B Conversion Price, Series C Conversion Price, Series D
Conversion Price and Series E Conversion Price, as applicable, at any time upon
a Supermajority Vote, or immediately upon the closing of a Qualified Public
Offering. Upon such automatic conversion, any declared and unpaid dividends
shall be paid in accordance with the provisions of Section 4.4.
4.13.2 Upon the occurrence of the event specified in paragraph
4.13.1 above, the outstanding shares of Preferred Stock shall be converted
automatically without any further action by the holders of such shares and
whether or not the certificates representing such shares are surrendered to the
Corporation or its transfer agent; provided, however, that the Corporation shall
not be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless the certificates evidencing such shares of
Preferred Stock are either delivered to the Corporation or its transfer agent as
provided below, or the holder notifies the Corporation or its transfer agent
that such certificates have been lost, stolen or destroyed and executes an
agreement satisfactory to the Corporation to indemnify the Corporation from any
loss incurred by it in connection with such certificates. Upon the occurrence of
such automatic conversion of the Preferred Stock, the holders of Preferred Stock
shall surrender the certificates representing such shares at the office of the
Corporation or any transfer agent for the Preferred Stock. Thereupon, there
shall be issued and delivered to such holder promptly at such office and in its
name as shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Common Stock into which the shares of
Preferred Stock surrendered were convertible on the date on which such automatic
conversion occurred, and the Corporation shall promptly pay in cash or, at the
option of the Corporation, Common Stock (at the Common Stock's fair market value
determined by the Board as of the date of such conversion), or, at the option of
the Corporation, both, all declared and unpaid dividends on the shares of
Preferred Stock being converted, to and including the date of such conversion.
4.14 Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of Preferred Stock. All shares of Common Stock (including
fractions thereof) issuable upon conversion of more than one share of Preferred
Stock by a holder thereof shall be aggregated for purposes of determining
whether the conversion would result in the issuance of any fractional share. If,
after the aforementioned aggregation, the conversion would result in the
issuance of any fractional share, the Corporation shall, in lieu of issuing any
fractional share, pay cash equal to the product of such fraction multiplied by
the Common Stock's fair market value (as determined by the Board of Directors)
on the date of conversion.
4.15 Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Preferred Stock. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion
13
<PAGE>
of all then outstanding shares of the Preferred Stock, the Corporation will take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
4.16 Notices. Any notice required by the provisions of this Section 4
to be given to the holders of shares of the Preferred Stock shall be deemed
given upon the earlier of actual receipt or five (5) days after the same has
been deposited in the United States mail, by certified or registered mail,
return receipt requested, postage prepaid, and addressed to each holder of
record at the address of such holder appearing on the books of the Corporation.
4.17 Payment of Taxes. The Corporation will pay all taxes (other than
taxes based upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Preferred Stock, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Preferred Stock so
converted were registered.
4.18 No Dilution or Impairment. The Corporation shall not amend its
Certificate of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but shall at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Preferred Stock
against dilution or other impairment.
4.19 Adjustments after Record Date. In any case in which the
provisions of this Section 4 shall require that an adjustment shall become
effective immediately after a record date for an event, the Corporation may
defer until the occurrence of that event: (i) issuing to the holder of any share
of Preferred Stock converted after such record date and before the occurrence of
such event the additional shares of capital stock issuable upon such conversion
by reason of the adjustment required by such event over and above the shares of
capital stock issuable upon such conversion before giving effect to such
adjustment and (ii) paying to such holder any amount in cash in lieu of a
fractional share of capital stock pursuant to Section 4.14 above; provided,
however, that the Corporation shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares, in such case, upon the occurrence of the event requiring such
adjustment.
5. No Reissuance of Preferred Stock. No share or shares of Preferred Stock
acquired by the Corporation by reason of redemption, purchase, conversion or
otherwise shall be reissued, and all such shares shall acquire the status of
undesignated shares of Preferred Stock.
V.
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
14
<PAGE>
I. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
that shall constitute the whole Board of Directors shall be fixed by the Board
of Directors in the manner provided in the Bylaws.
A. The Board of Directors may from time to time make, amend, supplement
or repeal the Bylaws; provided, however, that the stockholders may change or
repeal any Bylaw adopted by the Board of Directors by the affirmative vote of
the holders of a majority of the voting power of all of the then outstanding
shares of the capital stock of the Corporation (considered for this purpose as
one class); and, provided further, that no amendment or supplement to the Bylaws
adopted by the Board of Directors shall vary or conflict with any amendment or
supplement thus adopted by the stockholders.
B. The directors of the Corporation need not be elected by written ballot
unless the Bylaws so provide or unless a stockholder demands election by written
ballot at the meeting and before voting begins.
C. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
VI.
A. A director of the corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall only be
prospective and shall not effect the rights under this Article VI in effect at
the time of the alleged occurrence of any action or omission to act giving rise
to liability.
VII.
No holder of shares of stock of the Corporation shall have any preemptive
or other right, except as such rights are expressly provided by contract, to
purchase or subscribe for or receive any shares of any class, or series thereof,
of stock of the Corporation, whether now or hereafter authorized, or any
warrants, options, bonds, debentures or other securities convertible into,
exchangeable for or carrying any right to purchase any share of any class, or
series thereof, of stock.
****
15
<PAGE>
FOUR: This Amended and Restated Certificate of Incorporation has been
duly approved by the Board of Directors of this Corporation.
FIVE: This Amended and Restated Certificate of Incorporation was
approved by the written consent of a majority of the outstanding capital stock
of the Corporation in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware and by a majority of each class
of stock entitled to vote thereon in accordance with Section 228 of the General
Corporation Law of the State of Delaware. The Corporation has two classes of
stock outstanding, Common Stock and Preferred Stock, and each class of stock is
entitled to vote with respect to the Amended and Restated Certificate of
Incorporation. The total number of outstanding shares of Common Stock of the
corporation is nine hundred sixty-one thousand nine hundred eleven (961,911) and
the total number of outstanding shares of Preferred Stock is nine million nine
thousand five hundred twenty-four (9,009,524).
In Witness Whereof, Dendreon Corporation has caused this Amended and
Restated Certificate of Incorporation to be signed by its Chief Executive
Officer and President and attested to by its Secretary this 3rd day of
August , 1999.
Dendreon Corporation
By: /s/ Christopher S. Henney
----------------------------------------
Christopher S. Henney, Ph.D.
Chief Executive Officer and President
ATTEST:
/s/ Martin A. Simonetti
- -----------------------
Martin Simonetti
Secretary
16
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DENDREON CORPORATION
Dendreon Corporation, a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
1. The original name of this corporation is Activated Cell Therapy, Inc
and the date of filing of the date of filing of its original Certificate of
Incorporation with the Secretary of State was August 14, 1992.
2. This Amended and Restated Certificate of Incorporation has been duly
adopted in accordance with Sections 228, 242 and 245 of the Delaware General
Corporation Law, the Board of Directors of the corporation having adopted
resolutions setting forth the proposed Amended and Restated Certificate of
Incorporation, declaring its advisability and directing that it be submitted to
the stockholders of the corporation for their approval; the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted having consented in writing to
the adoption thereof [; and written notice of such adoption by the stockholders
without a meeting by less than unanimous written consent having been given to
those stockholders from whom such written consent was not received.]
3. This Amended and Restated Certificate of Incorporation restates and
integrates and further amends the Certificate of Incorporation of this
corporation by amending and restating the text of the Certificate of
Incorporation in full to read as follows:
I.
The name of this corporation is Dendreon Corporation.
II.
The address of the registered office of the corporation in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, and
the name of the registered agent of the corporation in the State of Delaware at
such address is CT Corporations Systems.
III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
1
<PAGE>
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is eighty million
(90,000,000) shares. Seventy million (80,000,000) shares shall be Common Stock,
each having a par value of one-tenth of one cent ($0.001). Ten million
(10,000,000) shares shall be Preferred Stock, each having a par value of one-
tenth of one cent ($0.001).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law
("DGCL"), to fix or alter from time to time the designation, powers, preferences
and rights of the shares of each such series and the qualifications, limitations
or restrictions of any wholly unissued series of Preferred Stock, and to
establish from time to time the number of shares constituting any such series or
any of them; and to increase or decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be decreased in accordance with the foregoing sentence, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A.
1. Board of Directors. The management of the business and the
conduct of the affairs of the corporation shall be vested in its Board of
Directors. The number of directors which shall constitute the whole Board of
Directors shall be fixed exclusively by one or more resolutions adopted by the
Board of Directors.
2. Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, following the
closing of the initial public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "1933 Act"),
covering the offer and sale of Common Stock to the public (the "Initial Public
Offering"), the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the closing of the
Initial Public Offering, the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full
2
<PAGE>
term of three years. At the third annual meeting of stockholders following the
closing of the Initial Public Offering, the term of office of the Class III
directors shall expire and Class III directors shall be elected for a full term
of three years. At each succeeding annual meeting of stockholders, directors
shall be elected for a full term of three years to succeed the directors of the
class whose terms expire at such annual meeting. Notwithstanding the foregoing
provisions of this section, each director shall serve until his successor is
duly elected and qualified or until his death, resignation or removal. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
3. Removal of Directors.
a. Neither the Board of Directors nor any individual director
may be removed without cause.
b. Subject to any limitation imposed by law, any individual
director or directors may be removed with cause by the holders of a majority of
the voting power of the corporation entitled to vote at an election of
directors.
4. Vacancies.
a. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
b. If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
B.
1. Subject to paragraph (h) of Section 42 of the Bylaws, the Bylaws
may be altered or amended or new Bylaws adopted by the affirmative vote of at
least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of
the then-outstanding shares of the voting
3
<PAGE>
stock of the corporation entitled to vote. The Board of Directors shall also
have the power to adopt, amend or repeal Bylaws.
2. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws or by written consent of stockholders in accordance with the Bylaws
prior to the closing of the Initial Public Offering and following the closing of
the Initial Public Offering no action shall be taken by the stockholders by
written consent.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provision of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the voting stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI
and VII.
4
<PAGE>
In Witness Whereof, this Certificate has been subscribed this ____ day of
__________, 2000 by the undersigned who affirms that the statements made herein
are true and correct.
By:____________________________
Name:__________________________
Title:_________________________
5
<PAGE>
EXHIBIT 3.3
AMENDED AND RESTATED
BYLAWS
OF
Dendreon Corporation
(A DELAWARE CORPORATION)
<PAGE>
Table Of Contents
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I Offices................................................... 1
Section 1. Registered Office......................................... 1
Section 2. Other Offices............................................. 1
ARTICLE II Corporate Seal............................................ 1
Section 3. Corporate Seal............................................ 1
ARTICLE III Stockholders' Meetings.................................... 1
Section 4. Place Of Meetings......................................... 1
Section 5. Annual Meetings........................................... 1
Section 6. Special Meetings.......................................... 3
Section 7. Notice Of Meetings........................................ 4
Section 8. Quorum.................................................... 5
Section 9. Adjournment And Notice Of Adjourned Meetings.............. 5
Section 10. Voting Rights............................................. 5
Section 11. Joint Owners Of Stock..................................... 6
Section 12. List Of Stockholders...................................... 6
Section 13. Action Without Meeting.................................... 6
Section 14. Organization.............................................. 7
ARTICLE IV Directors................................................. 8
Section 15. Number And Term Of Office................................. 8
Section 16. Powers.................................................... 8
Section 17. Classes of Directors...................................... 8
Section 18. Vacancies................................................. 8
Section 19. Resignation............................................... 9
Section 20. Meetings.................................................. 9
Section 21. Quorum And Voting......................................... 10
Section 22. Action Without Meeting.................................... 10
Section 23. Fees And Compensation..................................... 11
Section 24. Committees................................................ 11
Section 25. Organization.............................................. 12
</TABLE>
i
<PAGE>
Table Of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE V Officers.................................................. 12
Section 26. Officers Designated....................................... 12
Section 27. Tenure And Duties Of Officers............................. 12
Section 28. Delegation Of Authority................................... 14
Section 29. Resignations.............................................. 14
Section 30. Removal................................................... 14
ARTICLE VI Execution Of Corporate Instruments And Voting Of
Securities Owned By The Corporation..................... 14
Section 31. Execution Of Corporate Instruments........................ 14
Section 32. Voting Of Securities Owned By The Corporation............. 14
ARTICLE VII Shares Of Stock........................................... 15
Section 33. Form And Execution Of Certificates........................ 15
Section 34. Lost Certificates......................................... 15
Section 35. Transfers................................................. 16
Section 36. Fixing Record Dates....................................... 16
Section 37. Registered Stockholders................................... 17
ARTICLE VIII Other Securities Of The Corporation....................... 17
Section 38. Execution Of Other Securities............................. 17
ARTICLE IX Dividends................................................. 18
Section 39. Declaration Of Dividends.................................. 18
Section 40. Dividend Reserve.......................................... 18
ARTICLE X Fiscal Year............................................... 18
Section 41. Fiscal Year............................................... 18
ARTICLE XI Indemnification........................................... 18
Section 42. Indemnification Of Directors, Officers, Employees
And Other Agents........................................ 18
ARTICLE XII Notices................................................... 21
Section 43. Notices................................................... 21
ARTICLE XIII Amendments................................................ 23
Section 44. Amendments................................................ 23
ARTICLE XIV Loans To Officers......................................... 23
Section 45. Loans To Officers......................................... 23
</TABLE>
ii
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
DENDREON CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be in the City of Wilmington, County of Orange.
Section 2. Other Offices. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
Section 3. Corporate Seal. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate Seal-
Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
Section 4. Place Of Meetings. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
Section 5. Annual Meetings.
(a) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors. Nominations of persons for election
to the Board of Directors of the corporation and the proposal of business to be
considered by the stockholders may be made at an annual meeting of stockholders:
(i) pursuant to the corporation's notice of meeting of stockholders; (ii) by or
at the direction of the Board of Directors; or (iii) by any stockholder of the
corporation who was a
1
<PAGE>
stockholder of record at the time of giving of notice provided for in the
following paragraph, who is entitled to vote at the meeting and who complied
with the notice procedures set forth in Section 5.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (iii) of Section 5(a) of these Bylaws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation, (ii) such other business must be a proper matter for
stockholder action under the Delaware General Corporation Law ("DGCL"), (iii) if
the stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the corporation with a Solicitation Notice (as
defined in this Section 5(b)), such stockholder or beneficial owner must, in the
case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposed to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (B) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (C) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the corporation's books,
2
<PAGE>
and of such beneficial owner, (ii) the class and number of shares of the
corporation which are owned beneficially and of record by such stockholder and
such beneficial owner, and (iii) whether either such stockholder or beneficial
owner intends to deliver a proxy statement and form of proxy to holders of, in
the case of the proposal, at least the percentage of the corporation's voting
shares required under applicable law to carry the proposal or, in the case of a
nomination or nominations, a sufficient number of holders of the corporation's
voting shares to elect such nominee or nominees (an affirmative statement of
such intent, a "Solicitation Notice").
(c) Notwithstanding anything in the second sentence of Section 5(b)
of these Bylaws to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the corporation at least one
hundred (100) days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 5 shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 5, in
order to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholders' meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
(f) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the 1934 Act.
Section 6. Special Meetings.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive
3
<PAGE>
Officer, or (iii) the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board of Directors for adoption).
(b) If a special meeting is properly called by any person or
persons other than the Board of Directors, the request shall be in writing,
specifying the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board of Directors, the
Chief Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly requesting the meeting may set the time and place of
the meeting and give the notice. Nothing contained in this paragraph (b) shall
be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
(c) Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by Section 5(b) of these Bylaws shall be delivered
to the Secretary at the principal executive offices of the corporation not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
Section 7. Notice Of Meetings. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of
4
<PAGE>
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Any stockholder so
waiving notice of such meeting shall be bound by the proceedings of any such
meeting in all respects as if due notice thereof had been given.
Section 8. Quorum. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes cast
by the holders of shares of such class or classes or series shall be the act of
such class or classes or series.
Section 9. Adjournment And Notice Of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote or execute consents shall have the right to do so either
in person or by an agent or agents authorized by a proxy granted in accordance
with
5
<PAGE>
Delaware law. An agent so appointed need not be a stockholder. No proxy shall be
voted after three (3) years from its date of creation unless the proxy provides
for a longer period.
Section 11. Joint Owners Of Stock. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the DGCL, Section 217(b). If the instrument filed with the
Secretary shows that any such tenancy is held in unequal interests, a majority
or even-split for the purpose of subsection (c) shall be a majority or even-
split in interest.
Section 12. List Of Stockholders. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
Section 13. Action Without Meeting.
(a) Unless otherwise provided in the Certificate of Incorporation,
any action required by statute to be taken at any annual or special meeting of
the stockholders, or any action which may be taken at any annual or special
meeting of the stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded.
6
<PAGE>
Delivery made to a corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing and who, if the action had been
taken at a meeting, would have been entitled to notice of the meeting if the
record date for such meeting had been the date that written consents signed by a
sufficient number of stockholders to take action were delivered to the
corporation as provided in Section 228(c) of the DGCL. If the action which is
consented to is such as would have required the filing of a certificate under
any section of the DGCL if such action had been voted on by stockholders at a
meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written consent has been given in accordance with Section 228
of the DGCL.
(d) Notwithstanding the foregoing, no such action by written
consent may be taken following the closing of the initial public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), covering the offer and sale of Common Stock
of the corporation (the "Initial Public Offering").
Section 14. Organization.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
7
<PAGE>
ARTICLE IV
DIRECTORS
Section 15. Number And Term Of Office. The authorized number of directors
of the corporation shall be fixed in accordance with the Certificate of
Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
Section 16. Powers. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
Section 17. Classes of Directors. Subject to the rights of the holders of
any series of Preferred Stock to elect additional directors under specified
circumstances, following the closing of the Initial Public Offering, the
directors shall be divided into three classes designated as Class I, Class II
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of three years. At the second
annual meeting of stockholders following the closing of the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the closing of the Initial Public Offering,
the term of office of the Class III directors shall expire and Class III
directors shall be elected for a full term of three years. At each succeeding
annual meeting of stockholders, directors shall be elected for a full term of
three years to succeed the directors of the class whose terms expire at such
annual meeting.
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
Section 18. Vacancies.
(a) Unless otherwise provided in the Certificate of Incorporation,
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by stockholders, be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum of the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
director for which the vacancy was created or occurred and until such director's
successor shall have been elected and qualified. A vacancy in the Board of
8
<PAGE>
Directors shall be deemed to exist under this Section 18 in the case of the
death, removal or resignation of any director.
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
Section 19. Resignation. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
Section 20. Meetings.
(a) Annual Meetings. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) Regular Meetings. Unless otherwise restricted by the
Certificate of Incorporation, regular meetings of the Board of Directors may be
held at any time or date and at any place within or without the State of
Delaware which has been designated by the Board of Directors and publicized
among all directors. No formal notice shall be required for regular meetings of
the Board of Directors.
(c) Special Meetings. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors.
(d) Telephone Meetings. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear
9
<PAGE>
each other, and participation in a meeting by such means shall constitute
presence in person at such meeting.
(e) Notice of Meetings. Notice of the time and place of all
meetings of the Board of Directors shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, facsimile, telegraph or telex, or by electronic
mail or other electronic means, during normal business hours, at least twenty-
four (24) hours before the date and time of the meeting, or sent in writing to
each director by first class mail, charges prepaid, at least three (3) days
before the date of the meeting. Notice of any meeting may be waived in writing
at any time before or after the meeting and will be waived by any director by
attendance thereat, except when the director attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
(f) Waiver of Notice. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
Section 21. Quorum And Voting.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 42 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time by the Board of Directors
in accordance with the Certificate of Incorporation; provided, however, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.
Section 22. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
10
<PAGE>
Section 23. Fees And Compensation. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
Section 24. Committees.
(a) Executive Committee. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or
repealing any bylaw of the corporation.
(b) Other Committees. The Board of Directors may, from time to
time, appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or more
members of the Board of Directors and shall have such powers and perform such
duties as may be prescribed by the resolution or resolutions creating such
committees, but in no event shall any such committee have the powers denied to
the Executive Committee in these Bylaws.
(c) Term. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to any requirements of any
outstanding series of preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) Meetings. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this
11
<PAGE>
Section 25 shall be held at such times and places as are determined by the Board
of Directors, or by any such committee, and when notice thereof has been given
to each member of such committee, no further notice of such regular meetings
need be given thereafter. Special meetings of any such committee may be held at
any place which has been determined from time to time by such committee, and may
be called by any director who is a member of such committee, upon written notice
to the members of such committee of the time and place of such special meeting
given in the manner provided for the giving of written notice to members of the
Board of Directors of the time and place of special meetings of the Board of
Directors. Notice of any special meeting of any committee may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends such special
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. A majority of the authorized number of members of any such committee
shall constitute a quorum for the transaction of business, and the act of a
majority of those present at any meeting at which a quorum is present shall be
the act of such committee.
Section 25. Organization. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President (if a director), or if the President is absent, the most
senior Vice President (if a director), or, in the absence of any such person, a
chairman of the meeting chosen by a majority of the directors present, shall
preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
ARTICLE V
OFFICERS
Section 26. Officers Designated. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the
officers of the corporation shall be fixed by or in the manner designated by the
Board of Directors.
Section 27. Tenure And Duties Of Officers.
(a) General. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.
12
<PAGE>
(b) Duties of Chairman of the Board of Directors. The Chairman of the Board
of Directors, when present, shall preside at all meetings of the stockholders
and the Board of Directors. The Chairman of the Board of Directors shall perform
other duties commonly incident to his office and shall also perform such other
duties and have such other powers, as the Board of Directors shall designate
from time to time. If there is no President, then the Chairman of the Board of
Directors shall also serve as the Chief Executive Officer of the corporation and
shall have the powers and duties prescribed in paragraph (c) of this Section 27.
(c) Duties of President. The President shall preside at all meetings of the
stockholders and at all meetings of the Board of Directors, unless the Chairman
of the Board of Directors has been appointed and is present. Unless some other
officer has been elected Chief Executive Officer of the corporation, the
President shall be the chief executive officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers, as the Board of
Directors shall designate from time to time.
(d) Duties of Vice Presidents. The Vice Presidents may assume and perform
the duties of the President in the absence or disability of the President or
whenever the office of President is vacant. The Vice Presidents shall perform
other duties commonly incident to their office and shall also perform such other
duties and have such other powers as the Board of Directors or the President
shall designate from time to time.
(e) Duties of Secretary. The Secretary shall attend all meetings of the
stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) Duties of Chief Financial Officer. The Chief Financial Officer shall
keep or cause to be kept the books of account of the corporation in a thorough
and proper manner and shall render statements of the financial affairs of the
corporation in such form and as often as required by the Board of Directors or
the President. The Chief Financial Officer, subject to the order of the Board of
Directors, shall have the custody of all funds and securities of the
corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant
13
<PAGE>
Controller shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors or the President shall designate from time to time.
Section 28. Delegation Of Authority. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
Section 29. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
Section 30. Removal. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE
CORPORATION
Section 31. Execution Of Corporate Instruments. The Board of Directors may,
in its discretion, determine the method and designate the signatory officer or
officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
Section 32. Voting Of Securities Owned By The Corporation. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such
14
<PAGE>
authorization, by the Chairman of the Board of Directors, the Chief Executive
Officer, the President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
Section 33. Form And Execution Of Certificates. Certificates for the shares
of stock of the corporation shall be in such form as is consistent with the
Certificate of Incorporation and applicable law. Every holder of stock in the
corporation shall be entitled to have a certificate signed by or in the name of
the corporation by the Chairman of the Board of Directors, or the President or
any Vice President and by the Treasurer or Assistant Treasurer or the Secretary
or Assistant Secretary, certifying the number of shares owned by him in the
corporation. Any or all of the signatures on the certificate may be facsimiles.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue. Each certificate shall state upon the face or
back thereof, in full or in summary, all of the powers, designations,
preferences, and rights, and the limitations or restrictions of the shares
authorized to be issued or shall, except as otherwise required by law, set forth
on the face or back a statement that the corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Within a reasonable time after the issuance or
transfer of uncertificated stock, the corporation shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to this section or otherwise required
by law or with respect to this section a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
Section 34. Lost Certificates. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
15
<PAGE>
Section 35. Transfers.
(a) Transfers of record of shares of stock of the corporation shall be
made only upon its books by the holders thereof, in person or by attorney duly
authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the DGCL.
Section 36. Fixing Record Dates.
(a) In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, the Board of Directors may fix, in advance, a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall, subject to
applicable law, not be more than sixty (60) nor less than ten (10) days before
the date of such meeting. If no record date is fixed by the Board of Directors,
the record date for determining stockholders entitled to notice of or to vote at
a meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or if notice is waived, at the close
of business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
(b) Prior to the Initial Public Offering, in order that the corporation may
determine the stockholders entitled to consent to corporate action in writing
without a meeting, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which date shall not be more than ten
(10) days after the date upon which the resolution fixing the record date is
adopted by the Board of Directors. Any stockholder of record seeking to have the
stockholders authorize or take corporate action by written consent shall, by
written notice to the Secretary, request the Board of Directors to fix a record
date. The Board of Directors shall promptly, but in all events within ten (10)
days after the date on which such a request is received, adopt a resolution
fixing the record date. If no record date has been fixed by the Board of
Directors within ten (10) days of the date on which such a request is received,
the record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the Board of
Directors is required by applicable law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the corporation by delivery to its registered office in the State
of Delaware, its principal place of business or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to
16
<PAGE>
corporate action in writing without a meeting shall be at the close of business
on the day on which the Board of Directors adopts the resolution taking such
prior action.
(c) In order that the corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted, and which record date shall be not more than sixty (60) days prior
to such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
Section 37. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
Section 38. Execution Of Other Securities. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 33), may be signed by the Chairman of the Board of Directors, the
President or any Vice President, or such other person as may be authorized by
the Board of Directors, and the corporate seal impressed thereon or a facsimile
of such seal imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Chief Financial Officer or Treasurer or an
Assistant Treasurer; provided, however, that where any such bond, debenture or
other corporate security shall be authenticated by the manual signature, or
where permissible facsimile signature, of a trustee under an indenture pursuant
to which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as aforesaid,
shall be signed by the Treasurer or an Assistant Treasurer of the corporation or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the corporation.
17
<PAGE>
ARTICLE IX
Dividends
Section 39. Declaration Of Dividends. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation
and applicable law, if any, may be declared by the Board of Directors pursuant
to law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation and applicable law.
Section 40. Dividend Reserve. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
Section 41. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
ARTICLE XI
Indemnification
Section 42. Indemnification Of Directors, Officers, Employees And Other
Agents.
(a) Directors And Officers. The corporation shall indemnify its
directors and officers to the fullest extent not prohibited by the DGCL or any
other applicable law; provided, however, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
officers; and, provided, further, that the corporation shall not be required to
indemnify any director or officer in connection with any proceeding (or part
thereof) initiated by such person unless (i) such indemnification is expressly
required to be made by law, (ii) the proceeding was authorized by the Board of
Directors of the corporation, (iii) such indemnification is provided by the
corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the DGCL or any other applicable law or (iv) such
indemnification is required to be made under subsection (d).
(b) Employees And Other Agents. The corporation shall have power to
indemnify its employees and other agents as set forth in the DGCL or any other
applicable law. The Board of Directors shall have the power to delegate the
determination of whether indemnification shall be given to any such person to
such officers or other persons as the Board of Directors shall determine.
18
<PAGE>
(c) Expenses. The corporation shall advance to any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer, of
the corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, prior to the final disposition of the proceeding, promptly
following request therefor, all expenses incurred by any director or officer in
connection with such proceeding upon receipt of an undertaking by or on behalf
of such person to repay said amounts if it should be determined ultimately that
such person is not entitled to be indemnified under this Section 42 or
otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Section 42, no advance shall be made by the corporation to
an officer of the corporation (except by reason of the fact that such officer is
or was a director of the corporation in which event this paragraph shall not
apply) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably and promptly
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding, or (ii) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, that the facts known
to the decision-making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to the best interests of the
corporation.
(d) Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and officers
under this Bylaw shall be deemed to be contractual rights and be effective to
the same extent and as if provided for in a contract between the corporation and
the director or officer. Any right to indemnification or advances granted by
this Section 42 to a director or officer shall be enforceable by or on behalf of
the person holding such right in any court of competent jurisdiction if (i) the
claim for indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting his claim. In
connection with any claim for indemnification, the corporation shall be entitled
to raise as a defense to any such action that the claimant has not met the
standards of conduct that make it permissible under the DGCL or any other
applicable law for the corporation to indemnify the claimant for the amount
claimed. In connection with any claim by an officer of the corporation (except
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such officer is or was a director of
the corporation) for advances, the corporation shall be entitled to raise a
defense as to any such action clear and convincing evidence that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation, or with respect to any
criminal action or proceeding that such person acted without reasonable cause to
believe that his conduct was lawful. Neither the failure of the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set
19
<PAGE>
forth in the DGCL or any other applicable law, nor an actual determination by
the corporation (including its Board of Directors, independent legal counsel or
its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that claimant
has not met the applicable standard of conduct. In any suit brought by a
director or officer to enforce a right to indemnification or to an advancement
of expenses hereunder, the burden of proving that the director or officer is not
entitled to be indemnified, or to such advancement of expenses, under this
Section 42 or otherwise shall be on the corporation.
(e) Non-Exclusivity of Rights. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any applicable statute, provision of the Certificate
of Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the DGCL, or by any other applicable law.
(f) Survival of Rights. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(g) Insurance. To the fullest extent permitted by the DGCL or any
other applicable law, the corporation, upon approval by the Board of Directors,
may purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Section 42.
(h) Amendments. Any repeal or modification of this Section 42 shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
(i) Saving Clause. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and officer to the full
extent not prohibited by any applicable portion of this Section 42 that shall
not have been invalidated, or by any other applicable law. If this Section 42
shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
officer to the full extent under any other applicable law.
(j) Certain Definitions. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
20
<PAGE>
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Section 42 with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(4) References to a "director," "officer," "employee," or
"agent" of the corporation shall include, without limitation, situations where
such person is serving at the request of the corporation as, respectively, a
director, executive officer, officer, employee, trustee or agent of another
corporation, partnership, joint venture, trust or other enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Section 42.
ARTICLE XII
NOTICES
Section 43. Notices.
(a) Notice To Stockholders. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent.
(b) Notice To Directors. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to
21
<PAGE>
such address as such director shall have filed in writing with the Secretary,
or, in the absence of such filing, to the last known post office address of such
director.
(c) Affidavit Of Mailing. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) Time Notices Deemed Given. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.
(e) Methods of Notice. It shall not be necessary that the same method
of giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(f) Failure To Receive Notice. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) Notice To Person With Whom Communication Is Unlawful. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the DGCL,
the certificate shall state, if such is the fact and if notice is required, that
notice was given to all persons entitled to receive notice except such persons
with whom communication is unlawful.
(h) Notice To Person With Undeliverable Address. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person
22
<PAGE>
shall not be required. Any action or meeting which shall be taken or held
without notice to such person shall have the same force and effect as if such
notice had been duly given. If any such person shall deliver to the corporation
a written notice setting forth his then current address, the requirement that
notice be given to such person shall be reinstated. In the event that the action
taken by the corporation is such as to require the filing of a certificate under
any provision of the DGCL, the certificate need not state that notice was not
given to persons to whom notice was not required to be given pursuant to this
paragraph.)
ARTICLE XIII
AMENDMENTS
Section 44. Amendments. Subject to paragraph (h) of Section 42 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
Section 45. Loans To Officers. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
23
<PAGE>
EXHIBIT 10.1
INDEMNITY AGREEMENT
This Agreement is made and entered into this ___ day of __________, 2000 by
and between Dendreon Corporation, a Delaware corporation (the "Corporation"),
and __________ ("Agent").
Recitals
Whereas, Agent performs a valuable service to the Corporation in __________
capacity as __________ of the Corporation;
Whereas, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
Whereas, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
Whereas, in order to induce Agent to continue to serve as __________ of the
Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent.
Now, Therefore, in consideration of Agent's continued service as __________
after the date hereof, the parties hereto agree as follows:
Agreement
1. Services to the Corporation. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as
__________ of the Corporation or as a director, officer or other fiduciary of an
affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of [his] ability so long as [he] is duly
elected and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such position
(subject to any contractual obligation that Agent may have assumed apart from
this Agreement) and that the Corporation or any affiliate shall have no
obligation under this Agreement to continue Agent in any such position.
2. Indemnity of Agent. The Corporation hereby agrees to hold harmless and
indemnify Agent to the fullest extent authorized or permitted by the provisions
of the Bylaws and the Code, as the same may be amended from time to time (but,
only to the extent that such
1
<PAGE>
amendment permits the Corporation to provide broader indemnification rights than
the Bylaws or the Code permitted prior to adoption of such amendment).
3. Additional Indemnity. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees), witness
fees, damages, judgments, fines and amounts paid in settlement and any other
amounts that Agent becomes legally obligated to pay because of any claim or
claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Agent by
the Corporation under the non-exclusivity provisions of the Code and Section 42
of the Bylaws.
4. Limitations on Additional Indemnity. No indemnity pursuant to Section
3 hereof shall be paid by the Corporation:
(a) on account of any claim against Agent solely for an accounting of
profits made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any federal, state or local
statutory law;
(b) on account of Agent's conduct that is established by a final
judgment as knowingly fraudulent or deliberately dishonest or that constituted
willful misconduct;
(c) on account of Agent's conduct that is established by a final
judgment as constituting a breach of Agent's duty of loyalty to the Corporation
or resulting in any personal profit or advantage to which Agent was not legally
entitled;
(d) for which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity clause,
bylaw or agreement, except in respect of any excess beyond payment under such
insurance, clause, bylaw or agreement;
(e) if indemnification is not lawful (and, in this respect, both the
Corporation and Agent have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
2
<PAGE>
(f) in connection with any proceeding (or part thereof) initiated by
Agent, or any proceeding by Agent against the Corporation or its directors,
officers, employees or other agents, unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the Corporation, (iii) such indemnification is provided by
the Corporation, in its sole discretion, pursuant to the powers vested in the
Corporation under the Code, or (iv) the proceeding is initiated pursuant to
Section 9 hereof.
5. Continuation of Indemnity. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. Partial Indemnification. Agent shall be entitled under this Agreement
to indemnification by the Corporation for a portion of the expenses (including
attorneys' fees), witness fees, damages, judgments, fines and amounts paid in
settlement and any other amounts that Agent becomes legally obligated to pay in
connection with any action, suit or proceeding referred to in Section 3 hereof
even if not entitled hereunder to indemnification for the total amount thereof,
and the Corporation shall indemnify Agent for the portion thereof to which Agent
is entitled.
7. Notification and Defense of Claim. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:
(a) the Corporation will be entitled to participate therein at its
own expense;
(b) except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Corporation, (ii)
Agent shall have reasonably concluded, and so notified the Corporation, that
there is an actual conflict of
3
<PAGE>
interest between the Corporation and Agent in the conduct of the defense of such
action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of Agent's separate counsel shall be at the expense of the Corporation. The
Corporation shall not be entitled to assume the defense of any action, suit or
proceeding brought by or on behalf of the Corporation or as to which Agent shall
have made the conclusion provided for in clause (ii) above; and
(c) the Corporation shall not be liable to indemnify Agent under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent, which shall not be unreasonably withheld. The
Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. Expenses. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.
9. Enforcement. Any right to indemnification or advances granted by this
Agreement to Agent shall be enforceable by or on behalf of Agent in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. Agent, in such enforcement action, if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting his claim. It shall be a defense to any action for which a claim for
indemnification is made under Section 3 hereof (other than an action brought to
enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Corporation (including its Board of Directors
or its stockholders) to have made a determination prior to the commencement of
such enforcement action that indemnification of Agent is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors or its stockholders) that such indemnification is improper
shall be a defense to the action or create a presumption that Agent is not
entitled to indemnification under this Agreement or otherwise.
10. Subrogation. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. Non-Exclusivity of Rights. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
4
<PAGE>
12. Survival of Rights.
(a) The rights conferred on Agent by this Agreement shall continue
after Agent has ceased to be a director, officer, employee or other agent of the
Corporation or to serve at the request of the Corporation as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and shall inure to the
benefit of Agent's heirs, executors and administrators.
(b) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. Separability. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
14. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
16. Identical Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute but one and the same Agreement. Only
one such counterpart need be produced to evidence the existence of this
Agreement.
17. Headings. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
18. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(a) If to Agent, at the address indicated on the signature page
hereof.
5
<PAGE>
(b) If to the Corporation, to:
Dendreon Corporation
3005 First Avenue
Seattle, Washington 98121
Attn: Chief Financial Officer
or to such other address as may have been furnished to Agent by the Corporation.
In Witness Whereof, the parties hereto have executed this Agreement on and
as of the day and year first above written.
Dendreon Corporation
By:___________________________________
Title:________________________________
Agent
______________________________________
Print Name:___________________________
Address:
______________________________________
______________________________________
6
<PAGE>
EXHIBIT 10.2
DENDREON CORPORATION
2000 EQUITY INCENTIVE PLAN
Adopted March 1, 2000
Approved By Stockholders _______________, 2000
Termination Date: _______________, 2010
1. Purposes.
(a) Amendment and Restatement of Dendreon Corporation 1996 Equity
Incentive Plan. The Plan initially was established as the Activated Cell
Therapy, Inc. 1996 Equity Incentive Plan (the "1996 Equity Incentive Plan"). The
1996 Equity Incentive Plan hereby is amended and restated in its entirety as the
2000 Equity Incentive Plan, effective as of the effective date of this amended
and restated plan, as determined by the Board. The terms of the 1996 Equity
Incentive Plan (other than the aggregate number of shares issuable thereunder)
shall remain in effect with respect to all outstanding Options granted pursuant
to the 1996 Equity Incentive Plan.
(b) Eligible Stock Award Recipients. The persons eligible to receive Stock
Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(c) Available Stock Awards. The purpose of the Plan is to provide a means
by which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of the
following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(d) General Purpose. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
1
<PAGE>
(d) "Committee" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).
(e) "Common Stock" means the common stock of the Company.
(f) "Company" means Dendreon Corporation, a Delaware corporation.
(g) "Consultant" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors who are not compensated by the Company for their services as Directors
or Directors who are merely paid a director's fee by the Company for their
services as Directors.
(h) "Continuous Service" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.
(i) "Covered Employee" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(j) "Director" means a member of the Board of Directors of the Company.
(k) "Disability" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(l) "Employee" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(n) "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no
2
<PAGE>
sales were reported) as quoted on such exchange or market (or the exchange or
market with the greatest volume of trading in the Common Stock) on the last
market trading day prior to the day of determination, as reported in The Wall
Street Journal or such other source as the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(o) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation (directly or indirectly) from the Company or its parent
or a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(q) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(r) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "Option" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
(t) "Option Agreement" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(u) "Optionholder" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(v) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury Regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
3
<PAGE>
(w) "Participant" means a person to whom a Stock Award is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding Stock
Award.
(x) "Plan" means this Dendreon Corporation 2000 Equity Incentive Plan.
(y) "Qualified Director" means a Non-Employee Director as of the date of
adoption of this Plan who has been invited to join the board other than in
connection with such Non-Employee Director's investment in the Company at the
time of such Non-Employee Director's election to the Board.
(z) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(aa) "Securities Act" means the Securities Act of 1933, as amended.
(bb) "Stock Award" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.
(cc) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of this Plan.
(dd) "Ten Percent Stockholder" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any of its Affiliates.
3. Administration.
(a) Administration by Board. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) Powers of Board. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what type or combination of types of Stock Award shall be
granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive Common Stock pursuant to a Stock Award; and the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such
person.
(ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in Section 13.
4
<PAGE>
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) Delegation to Committee.
(i) General. The Board may delegate administration of the Plan to a
Committee or Committees of one (1) or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
(ii) Committee Composition when Common Stock is Publicly Traded. At
such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more Non-
Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (2)
delegate to a committee of one or more members of the Board who are not Non-
Employee Directors the authority to grant Stock Awards to eligible persons who
are not then subject to Section 16 of the Exchange Act.
(d) Effect of Board's Decision. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.
4. Shares Subject to the Plan.
(a) Share Reserve. Subject to the provisions of Section 12 relating to
adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate four million
(4,000,000) shares (after giving effect to any reverse stock split effected on
or prior to the Effective Date and following adoption hereof, by way of
reincorporation of the Company or otherwise (the "Reverse Split")) of the Common
Stock plus plus an annual increase to be added on the first day of each calendar
year beginning with January 1, 2001 equal to the lesser of (i) five percent (5%)
of the Company's outstanding shares on such date (rounded to the nearest whole
share and calculated on a fully diluted basis, that is assuming the exercise of
all outstanding stock options and warrants to purchase common stock) or (ii)
five hundred thousand (500,000) shares. Notwithstanding the foregoing, the Board
may designate a smaller number of shares of Common Stock to be added to the
share reserve as
5
<PAGE>
of a particular January 1. This share reserve shall be comprised of (i) shares
subject to options granted under the 1996 Equity Incentive Plan which have been
exercised or are outstanding as of the Effective Date, plus (ii) the shares
available for grant under the 1996 Equity Incentive Plan as of the Effective
Date plus (iii) an additional approximately five hundred thousand (500,000)
shares (after giving effect to any Reverse Split on or prior to the Effective
Date) of common stock.
(b) Reversion of Shares to the Share Reserve. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the shares of Common Stock not acquired under such Stock
Award shall revert to and again become available for issuance under the Plan.
(c) Source of Shares. The shares of Common Stock subject to the Plan may
be unissued shares or reacquired shares, bought on the market or otherwise.
5. Eligibility.
(a) Eligibility for Specific Stock Awards. Incentive Stock Options may be
granted only to Employees. Stock Awards other than Incentive Stock Options may
be granted to Employees, Directors and Consultants.
(b) Ten Percent Stockholders. A Ten Percent Stockholder shall not be
granted an Incentive Stock Option unless the exercise price of such Option is at
least one hundred ten percent (110%) of the Fair Market Value of the Common
Stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.
(c) Section 162(m) Limitation. Subject to the provisions of Section 12
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than five hundred thousand
(500,000) shares of Common Stock during any calendar year.
(d) Consultants.
(i) A Consultant shall not be eligible for the grant of a Stock Award
if, at the time of grant, a Form S-8 Registration Statement under the Securities
Act ("Form S-8") is not available to register either the offer or the sale of
the Company's securities to such Consultant because of the nature of the
services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by the rules
governing the use of Form S-8, unless the Company determines both (i) that such
grant (A) shall be registered in another manner under the Securities Act (e.g.,
on a Form S-3 Registration Statement) or (B) does not require registration under
the Securities Act in order to comply with the requirements of the Securities
Act, if applicable, and (ii) that such grant complies with the securities laws
of all other relevant jurisdictions.
(ii) Form S-8 generally is available to consultants and advisors only
if (i) they are natural persons; (ii) they provide bona fide services to the
issuer, its parents, its majority-owned subsidiaries or majority-owned
subsidiaries of the issuer's parent; and (iii) the services
6
<PAGE>
are not in connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market for
the issuer's securities.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:
(a) Term. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Incentive Stock Option shall be exercisable after the
expiration of ten (10) years from the date it was granted.
(b) Exercise Price of an Incentive Stock Option. Subject to the provisions
of subsection 5(b) regarding Ten Percent Stockholders, the exercise price of
each Incentive Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value of the Common Stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Incentive Stock Option may
be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) Exercise Price of a Nonstatutory Stock Option. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the Common Stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(d) Consideration. The purchase price of Common Stock acquired pursuant to
an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
similar arrangement with the Optionholder or (3) in any other form of legal
consideration that may be acceptable to the Board. Unless otherwise specifically
provided in the Option, the purchase price of Common Stock acquired pursuant to
an Option that is paid by delivery to the Company of other Common Stock
acquired, directly or indirectly from the Company, shall be paid only by shares
of the Common Stock of the Company that have been held for more than six (6)
months (or such longer or shorter period of time required to avoid a charge to
earnings for financial accounting purposes). At any time that the Company is
incorporated in Delaware, payment of
7
<PAGE>
the Common Stock's "par value," as defined in the Delaware General Corporation
Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(e) Transferability of an Incentive Stock Option. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(f) Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock
Option shall be transferable to the extent provided in the Option Agreement. If
the Nonstatutory Stock Option does not provide for transferability, then the
Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of
the Optionholder only by the Optionholder. Notwithstanding the foregoing, the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.
(g) Vesting Generally. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.
(h) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionholder does not exercise his
or her Option within the time specified in the Option Agreement, the Option
shall terminate.
(i) Extension of Termination Date. An Optionholder's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionholder's Continuous Service (other than upon the Optionholder's death or
Disability) would be prohibited at any time solely because the issuance of
shares of Common Stock would violate the registration requirements under the
Securities Act, then the Option shall terminate on the earlier
8
<PAGE>
of (i) the expiration of the term of the Option set forth in subsection 6(a) or
(ii) the expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
(j) Disability of Optionholder. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement) or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination, the Optionholder does not
exercise his or her Option within the time specified herein, the Option shall
terminate.
(k) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
Option upon the Optionholder's death pursuant to subsection 6(e) or 6(f), but
only within the period ending on the earlier of (1) the date twelve (12) months
following the date of death (or such longer or shorter period specified in the
Option Agreement) or (2) the expiration of the term of such Option as set forth
in the Option Agreement. If, after death, the Option is not exercised within the
time specified herein, the Option shall terminate.
(l) Early Exercise. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares of Common Stock subject to the Option prior to the full vesting of
the Option. Any unvested shares of Common Stock so purchased may be subject to a
repurchase option in favor of the Company or to any other restriction the Board
determines to be appropriate. The Company will not exercise its repurchase
option until at least six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes) have
elapsed following exercise of the Option unless the Board otherwise specifically
provides in the Option.
(m) Re-Load Options.
(i) Without in any way limiting the authority of the Board to make or
not to make grants of Options hereunder, the Board shall have the authority (but
not an obligation) to include as part of any Option Agreement a provision
entitling the Optionholder to a further Option (a "Re-Load Option") in the event
the Optionholder exercises the Option evidenced by the Option Agreement, in
whole or in part, by surrendering other shares of Common Stock in accordance
with this Plan and the terms and conditions of the Option Agreement. Unless
otherwise specifically provided in the Option, the Optionholder shall not
surrender shares of Common Stock acquired, directly or indirectly from the
Company, unless such shares have been
9
<PAGE>
held for more than six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes).
(ii) Any such Re-Load Option shall (1) provide for a number of shares
of Common Stock equal to the number of shares of Common Stock surrendered as
part or all of the exercise price of such Option; (2) have an expiration date
which is the same as the expiration date of the Option the exercise of which
gave rise to such Re-Load Option; and (3) have an exercise price which is equal
to one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Re-Load Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option shall be subject to the same
exercise price and term provisions heretofore described for Options under the
Plan.
(iii) Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on the exercisability of Incentive Stock
Options described in subsection 11(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares of Common Stock under
subsection 4(a) and the "Section 162(m) Limitation" on the grants of Options
under subsection 5(c) and shall be subject to such other terms and conditions as
the Board may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
7. Non-Employee Director Stock Options.
Without any further action of the Board, each Non-Employee Director shall
be granted Nonstatutory Stock Options as described in subsections 7(a) and 7(b)
(collectively, "Non-Employee Director Options"). Each Non-Employee Director
Option shall include the substance of the terms set forth in subsections 7(c)
through 7(k).
(a) Initial Grants. Each person who is elected or appointed for the first
time to be a Non-Employee Director subsequent to the date of adoption of the
Plan automatically shall, upon the date of his or her initial election or
appointment to be a Non-Employee Director by the Board or stockholders of the
Company, be granted an Initial Grant to purchase Twenty Four Thousand (24,000)
shares of Common Stock on the terms and conditions set forth herein.
(b) Annual Grants. Each Qualified Director automatically shall be granted
an Annual Grant to purchase Six Thousand (6,000) shares of Common Stock on the
terms and conditions set forth herein, commencing, as applicable, on the fourth
anniversary of (i) the date of the Initial Grant to such Qualified Director or
(ii) the date of the initial election of such Qualified Director to the Board
(for purposes of this subsection 7(b)(ii), the initial election date for Lowell
E. Sears and Gerardo Canet shall be May 6, 1996).
(c) Term. Each Initial Grant of a Non-Employee Director Option shall have
a term of ten (10) years from the date it is granted. Each Annual Grant of a
Non-Employee Director Option shall have a term of five (5) years from the date
it is granted.
10
<PAGE>
(d) Exercise Price. The exercise price of each Non-Employee Director
Option shall be one hundred percent (100%) of the Fair Market Value of the stock
subject to the Non-Employee Director Option on the date of grant.
Notwithstanding the foregoing, a Non-Employee Director Option may be granted
with an exercise price lower than that set forth in the preceding sentence if
such Non-Employee Director Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(e) Vesting. Twenty-five percent (25%) of the shares pursuant to each
Initial Grant of a Non-Employee Director Option shall vest one year from the
date on which it is granted and 1/48th of the shares vest monthly thereafter
over the next three years. One hundred percent (100%) of the shares pursuant to
each Annual Grant of a Non-Employee Director Option shall vest one year from the
date on which it is granted.
(f) Consideration. The purchase price of stock acquired pursuant to a Non-
Employee Director Option may be paid, to the extent permitted by applicable
statutes and regulations, in any combination of (i) cash or check, (ii) delivery
to the Company of other Common Stock, (ii) deferred payment or (iv) any other
form of legal consideration that may be acceptable to the Board and provided in
the Non-Employee Director Option Agreement; provided, however, that at any time
that the Company is incorporated in Delaware, payment of the Common Stock's "par
value," as defined in the Delaware General Corporation Law, shall not be made by
deferred payment. In the case of any deferred payment arrangement, interest
shall be compounded at least annually and shall be charged at the minimum rate
of interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(g) Transferability. A Non-Employee Director Option shall not be
transferable except by will or by the laws of descent and distribution and shall
be exercisable during the lifetime of the Non-Employee Director only by the Non-
Employee Director. Notwithstanding the foregoing, the Non-Employee Director may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the Non-
Employee Director, shall thereafter be entitled to exercise the Non-Employee
Director Option.
(h) Termination of Continuous Service. In the event a Non-Employee
Director's Continuous Service terminates (other than upon the Non-Employee
Director's death or Disability), the Non-Employee Director may exercise his or
her Non-Employee Director Option (to the extent that the Non-Employee Director
was entitled to exercise it as of the date of termination) but only within such
period of time ending on the earlier of (i) the date three (3) months following
the termination of the Non-Employee Director's Continuous Service, or (ii) the
expiration of the term of the Non-Employee Director Option as set forth in the
Non-Employee Director Option Agreement. If, after termination, the Non-Employee
Director does not exercise his or her Non-Employee Director Option within the
time specified in the Non-Employee Director Option Agreement, the Non-Employee
Director Option shall terminate.
(i) Extension of Termination Date. If the exercise of the Non-Employee
Director Option following the termination of the Non-Employee Director's
Continuous Service (other
11
<PAGE>
than upon the Non-Employee Director's death or Disability) would be prohibited
at any time solely because the issuance of shares would violate the registration
requirements under the Securities Act, then the Non-Employee Director Option
shall terminate on the earlier of (i) the expiration of the term of the Non-
Employee Director Option set forth in subsection 7(c) or (ii) the expiration of
a period of three (3) months after the termination of the Non-Employee
Director's Continuous Service during which the exercise of the Non-Employee
Director Option would not violate such registration requirements.
(j) Disability of Non-Employee Director. In the event a Non-Employee
Director's Continuous Service terminates as a result of the Non-Employee
Director's Disability, the Non-Employee Director may exercise his or her Non-
Employee Director Option (to the extent that the Non-Employee Director was
entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination or (ii) the expiration of the term of the Non-
Employee Director Option as set forth in the Non-Employee Director Option
Agreement. If, after termination, the Non-Employee Director does not exercise
his or her Non-Employee Director Option within the time specified herein, the
Non-Employee Director Option shall terminate.
(k) Death of Non-Employee Director. In the event (i) a Non-Employee
Director's Continuous Service terminates as a result of the Non-Employee
Director's death or (ii) the Non-Employee Director dies within the three-month
period after the termination of the Non-Employee Director's Continuous Service
for a reason other than death, then the Non-Employee Director Option may be
exercised (to the extent the Non-Employee Director was entitled to exercise the
Non-Employee Director Option as of the date of death) by the Non-Employee
Director's estate, by a person who acquired the right to exercise the Non-
Employee Director Option by bequest or inheritance or by a person designated to
exercise the Non-Employee Director Option upon the Non-Employee Director's
death, but only within the period ending on the earlier of (1) the date eighteen
(18) months following the date of death or (2) the expiration of the term of
such Non-Employee Director Option as set forth in the Non-Employee Director
Option Agreement. If, after death, the Non-Employee Director Option is not
exercised within the time specified herein, the Non-Employee Director Option
shall terminate.
8. Provisions of Stock Awards other than Options.
(a) Stock Bonus Awards. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus agreements may change from time to time,
and the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:
(i) Consideration. A stock bonus may be awarded in consideration for
past services actually rendered to the Company or an Affiliate for its benefit.
(ii) Vesting. Shares of Common Stock awarded under the stock bonus
agreement may, but need not, be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the Board.
12
<PAGE>
(iii) Termination of Participant's Continuous Service. In the event a
Participant's Continuous Service terminates, the Company may reacquire any or
all of the shares of Common Stock held by the Participant which have not vested
as of the date of termination under the terms of the stock bonus agreement.
(iv) Transferability. Rights to acquire shares of Common Stock under the
stock bonus agreement shall be transferable by the Participant only upon such
terms and conditions as are set forth in the stock bonus agreement, as the Board
shall determine in its discretion, so long as Common Stock awarded under the
stock bonus agreement remains subject to the terms of the stock bonus agreement.
(b) Restricted Stock Awards. Each restricted stock purchase agreement shall
be in such form and shall contain such terms and conditions as the Board shall
deem appropriate. The terms and conditions of the restricted stock purchase
agreements may change from time to time, and the terms and conditions of
separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
(i) Purchase Price. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. The purchase price shall
not be less than eighty-five percent (85%) of the Common Stock's Fair Market
Value on the date such award is made or at the time the purchase is consummated.
(ii) Consideration. The purchase price of Common Stock acquired pursuant
to the restricted stock purchase agreement shall be paid either: (i) in cash at
the time of purchase; (ii) at the discretion of the Board, according to a
deferred payment or other similar arrangement with the Participant; or (iii) in
any other form of legal consideration that may be acceptable to the Board in its
discretion; provided, however, that at any time that the Company is incorporated
in Delaware, then payment of the Common Stock's "par value," as defined in the
Delaware General Corporation Law, shall not be made by deferred payment.
(iii) Vesting. Shares of Common Stock acquired under the restricted
stock purchase agreement may, but need not, be subject to a share repurchase
option in favor of the Company in accordance with a vesting schedule to be
determined by the Board.
(iv) Termination of Participant's Continuous Service. In the event a
Participant's Continuous Service terminates, the Company may repurchase or
otherwise reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.
(v) Transferability. Rights to acquire shares of Common Stock under the
restricted stock purchase agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the restricted stock
purchase agreement, as the Board shall determine in its discretion, so long as
Common Stock awarded under the restricted stock purchase agreement remains
subject to the terms of the restricted stock purchase agreement.
13
<PAGE>
9. Covenants of the Company.
(a) Availability of Shares. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) Securities Law Compliance. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of Common Stock
under the Plan, the Company shall be relieved from any liability for failure to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained.
10. Use of Proceeds from Stock.
Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.
11. Miscellaneous.
(a) Acceleration of Exercisability and Vesting. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) Stockholder Rights. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares of
Common Stock subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
(c) No Employment or other Service Rights. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, as applicable, and any applicable provisions of the
corporate law of the state in which the Company or the Affiliate is
incorporated, as the case may be.
(d) Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any
14
<PAGE>
calendar year (under all plans of the Company and its Affiliates) exceeds one
hundred thousand dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.
(e) Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the Participant's own
account and not with any present intention of selling or otherwise distributing
the Common Stock. The foregoing requirements, and any assurances given pursuant
to such requirements, shall be inoperative if (1) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Stock
Award has been registered under a then currently effective registration
statement under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Common Stock.
(f) Withholding Obligations. To the extent provided by the terms of a Stock
Award Agreement, the Participant may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of Common Stock
under a Stock Award by any of the following means (in addition to the Company's
right to withhold from any compensation paid to the Participant by the Company)
or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Stock Award, provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of Common Stock.
12. Adjustments upon Changes in Stock.
(a) Capitalization Adjustments. If any change is made in the Common Stock
subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person pursuant to subsection 5(c), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of securities
and price per share of Common Stock subject to such outstanding Stock Awards.
The
15
<PAGE>
Board shall make such adjustments, and its determination shall be final, binding
and conclusive. (The conversion of any convertible securities of the Company
shall not be treated as a transaction "without receipt of consideration" by the
Company.)
(b) Change in Control--Dissolution or Liquidation. In the event of a
dissolution or liquidation of the Company, then all outstanding Stock Awards
shall terminate immediately prior to such event.
(c) Change in Control--Asset Sale, Merger, Consolidation or Reverse Merger.
In the event of (i) a sale, lease or other disposition of all or substantially
all of the assets of the Company, (ii) a consolidation or merger of the Company
with or into any other corporation or other entity or person, or any other
corporate reorganization, in which the stockholders of the Company immediately
prior to such consolidation, merger or reorganization, own less than 50% of the
Company's outstanding voting power of the surviving entity (or its parent)
following the consolidation, merger or reorganization or (iii) any transaction
(or series of related transactions involving a person or entity, or a group of
affiliated persons or entities) in which in excess of fifty percent (50%) of the
Company's outstanding voting power is transferred, then any surviving
corporation or acquiring corporation shall assume any Stock Awards outstanding
under the Plan or shall substitute similar stock awards (including an award to
acquire the same consideration paid to the stockholders in the transaction
described in this subsection 12(c) for those outstanding under the Plan. In the
event any surviving corporation or acquiring corporation refuses to assume such
Stock Awards or to substitute similar stock awards for those outstanding under
the Plan, then with respect to Stock Awards held by Participants whose
Continuous Service has not terminated, the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full, and the Stock Awards shall terminate if not exercised (if
applicable) at or prior to such event. With respect to any other Stock Awards
outstanding under the Plan, such Stock Awards shall terminate if not exercised
(if applicable) prior to such event.
13. Amendment of the Plan and Stock Awards.
(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 12 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(b) Stockholder Approval. The Board may, in its sole discretion, submit any
other amendment to the Plan for stockholder approval, including, but not limited
to, amendments to the Plan intended to satisfy the requirements of Section
162(m) of the Code and the regulations thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) Contemplated Amendments. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the
16
<PAGE>
Code and the regulations promulgated thereunder relating to Incentive Stock
Options and/or to bring the Plan and/or Incentive Stock Options granted under it
into compliance therewith.
(d) No Impairment of Rights. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
(e) Amendment of Stock Awards. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
14. Termination or Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) No Impairment of Rights. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.
15. Effective Date of Plan.
The Plan shall become effective as determined by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.
16. Choice of Law.
The law of the State of Delaware shall govern all questions concerning the
construction, validity and interpretation of this Plan, without regard to such
state's conflict of laws rules.
17
<PAGE>
EXHIBIT 10.3
Dendreon Corporation
2000 Employee Stock Purchase Plan
Adopted by Board of Directors March 1, 2000
Approved by Stockholders _______________ , 2000
Termination Date: None
1. Purpose.
(a) The purpose of the Plan is to provide a means by which Employees of
the Company and certain designated Affiliates may be given an opportunity to
purchase Shares of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
such Employees, to secure and retain the services of new Employees and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and its Affiliates.
(c) The Company intends that the Rights to purchase Shares granted under
the Plan be considered options issued under an "employee stock purchase plan,"
as that term is defined in Section 423(b) of the Code.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f), respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the United States Internal Revenue Code of 1986, as
amended.
(d) "Committee" means a Committee appointed by the Board in accordance
with subparagraph 3(c) of the Plan.
(e) "Company" means Dendreon Corporation, a Delaware corporation.
(f) "Director" means a member of the Board.
(g) "Eligible Employee" means an Employee who meets the requirements set
forth in the Offering for eligibility to participate in the Offering.
- 1 -
<PAGE>
(h) "Employee" means any person, including Officers and Directors, employed
by the Company or an Affiliate of the Company. Neither service as a Director nor
payment of a director's fee shall be sufficient to constitute "employment" by
the Company or the Affiliate.
(i) "Employee Stock Purchase Plan" means a plan that grants rights intended
to be options issued under an "employee stock purchase plan," as that term is
defined in Section 423(b) of the Code.
(j) "Exchange Act" means the United States Securities Exchange Act of 1934,
as amended.
(k) "Fair Market Value" means the value of a security, as determined in good
faith by the Board. If the security is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, then,
except as otherwise provided in the Offering, the Fair Market Value of the
security shall be the closing sales price (rounded up where necessary to the
nearest whole cent) for such security (or the closing bid, if no sales were
reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in the relevant security of the Company) on the
trading day prior to the relevant determination date, as reported in The Wall
Street Journal or such other source as the Board deems reliable.
(l) "Non-Employee Director" means a Director who either (i) is not a current
Employee or Officer of the Company or its parent or subsidiary, does not receive
compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-
employee director" for purposes of Rule 16b-3.
(m) "Offering" means the grant of Rights to purchase Shares under the Plan
to Eligible Employees.
(n) "Offering Date" means a date selected by the Board for an Offering to
commence.
(o) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
- 2 -
<PAGE>
(p) "Participant" means an Eligible Employee who holds an outstanding
Right granted pursuant to the Plan or, if applicable, such other person who
holds an outstanding Right granted under the Plan.
(q) "Plan" means this 2000 Employee Stock Purchase Plan.
(r) "Purchase Date" means one or more dates established by the Board
during an Offering on which Rights granted under the Plan shall be exercised and
purchases of Shares carried out in accordance with such Offering.
(s) "Right" means an option to purchase Shares granted pursuant to the
Plan.
(t) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3 as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.
(u) "Securities Act" means the United States Securities Act of 1933, as
amended.
(v) "Share" means a share of the common stock of the Company.
3. Administration.
(a) The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in subparagraph 3(c).
Whether or not the Board has delegated administration, the Board shall have the
final power to determine all questions of policy and expediency that may arise
in the administration of the Plan.
(b) The Board (or the Committee) shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine when and how Rights to purchase Shares shall be
granted and the provisions of each Offering of such Rights (which need not be
identical).
(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and Rights granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan, in a manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 14.
(v) Generally, to exercise such powers and to perform such acts as
it deems necessary or expedient to promote the best interests of the Company and
its Affiliates and to carry out the intent that the Plan be treated as an
Employee Stock Purchase Plan.
- 3 -
<PAGE>
(c) The Board may delegate administration of the Plan to a Committee of the
Board composed of two (2) or more members, all of the members of which Committee
may be, in the discretion of the Board, Non-Employee Directors and/or Outside
Directors. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee of two
(2) or more Outside Directors any of the administrative powers the Committee is
authorized to exercise (and references in this Plan to the Board shall
thereafter be to the Committee or such a subcommittee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan.
4. Shares Subject to the Plan.
(a) Subject to the provisions of paragraph 13 relating to adjustments upon
changes in securities, the Shares that may be sold pursuant to Rights granted
under the Plan shall not exceed in the aggregate one million three hundred fifty
thousand (1,350,000) Shares. If any Right granted under the Plan shall for any
reason terminate without having been exercised, the Shares not purchased under
such Right shall again become available for the Plan.
(b) The aggregate number of Shares that may be sold pursuant to Rights
granted under the Plan as specified in paragraph 4(a) hereof automatically shall
be increased as follows:
(i) For a period of ten (10) years, on the first day of each calendar
year of the Company (the "Calculation Date"), commencing on January 1, 2001 and
ending on January 1, 2010, the aggregate number of Shares specified in paragraph
4(a) hereof shall be increased by the lesser of (1) that number of Shares equal
to one percent (1%) of the Diluted Shares Outstanding or (2) four hundred
thousand (400,000) shares; provided, however, that the Board of Directors may
provide for a lesser increase in the number of Shares in any year.
(ii) For purposes of paragraph 4(b)(i) hereof, "Diluted Shares
Outstanding" shall mean, as of any date, (1) the number of outstanding Shares on
such Calculation Date, plus (2) the number of Shares issuable upon such
Calculation Date assuming the conversion of all outstanding Preferred Stock and
convertible notes, plus (3) the additional number of dilutive Common Stock
equivalent shares outstanding as the result of any options or warrants
outstanding during the fiscal year, calculated using the treasury stock method.
(c) The Shares subject to the Plan may be unissued Shares or Shares that
have been bought on the open market at prevailing market prices or otherwise.
5. Grant of Rights; Offering.
(a) The Board may from time to time grant or provide for the grant of
Rights to purchase Shares of the Company under the Plan to Eligible Employees in
an Offering on an Offering Date or Dates selected by the Board. Each Offering
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate, which shall comply with
- 4 -
<PAGE>
the requirements of Section 423(b)(5) of the Code that all Employees granted
Rights to purchase Shares under the Plan shall have the same rights and
privileges. The terms and conditions of an Offering shall be incorporated by
reference into the Plan and treated as part of the Plan. The provisions of
separate Offerings need not be identical, but each Offering shall include
(through incorporation of the provisions of this Plan by reference in the
document comprising the Offering or otherwise) the period during which the
Offering shall be effective, which period shall not exceed twenty-seven (27)
months beginning with the Offering Date, and the substance of the provisions
contained in paragraphs 6 through 9, inclusive.
(b) If a Participant has more than one Right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (i) each agreement or notice delivered by that Participant will be
deemed to apply to all of his or her Rights under the Plan, and (ii) an earlier-
granted Right (or a Right with a lower exercise price, if two Rights have
identical grant dates) will be exercised to the fullest possible extent before a
later-granted Right (or a Right with a higher exercise price if two Rights have
identical grant dates) will be exercised.
6. Eligibility.
(a) Rights may be granted only to Employees of the Company or, as the Board
may designated as provided in subparagraph 3(b), to Employees of an Affiliate.
(i) Except as provided in subparagraph 6(b), an Employee shall not be
eligible to be granted Rights under the Plan unless, on the Offering Date, such
Employee has been in the employ of the Company or the Affiliate, as the case may
be, for such continuous period preceding such grant as the Board may require in
the Offering, but in no event shall the required period of continuous employment
be equal to or greater than two (2) years.
(ii) The Board may provide in an Offering that Employees whose customary
employment is twenty (20) hours or less per week shall not be eligible to
participate.
(iii) The Board may provide in an Offering that Employees whose
customary employment is for not more than five (5) months in any calendar year
shall not be eligible to participate.
(iv) The Board may provide in an Offering that Employees who are highly
compensated Employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
(b) The Board may provide that each person who, during the course of an
Offering, first becomes an Eligible Employee will, on a date or dates specified
in the Offering which coincides with the day on which such person becomes an
Eligible Employee or which occurs thereafter, receive a Right under that
Offering, which Right shall thereafter be deemed to be a part of that Offering.
Such Right shall have the same characteristics as any Rights originally granted
under that Offering, as described herein, except that:
- 5 -
<PAGE>
(i) the date on which such Right is granted shall be the "Offering Date"
of such Right for all purposes, including determination of the exercise price of
such Right;
(ii) the period of the Offering with respect to such Right shall begin
on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board may provide that if such person first becomes an
Eligible Employee within a specified period of time before the end of the
Offering, he or she will not receive any Right under that Offering.
(c) No Employee shall be eligible for the grant of any Rights under the
Plan if, immediately after any such Rights are granted, such Employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 6(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any Employee, and stock which such Employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such Employee.
(d) An Eligible Employee may be granted Rights under the Plan only if such
Rights, together with any other Rights granted under all Employee Stock Purchase
Plans of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such Eligible Employee's rights to purchase Shares of
the Company or any Affiliate to accrue at a rate which exceeds twenty five
thousand dollars ($25,000) of the fair market value of such Shares (determined
at the time such Rights are granted) for each calendar year in which such Rights
are outstanding at any time.
7. Rights; Purchase Price.
(a) On each Offering Date, each Eligible Employee, pursuant to an Offering
made under the Plan, shall be granted the Right to purchase up to the number of
Shares purchasable either:
(i) with a percentage designated by the Board not exceeding fifteen
percent (15%) of such Employee's Earnings (as defined by the Board in each
Offering) during the period which begins on the Offering Date (or such later
date as the Board determines for a particular Offering) and ends on the date
stated in the Offering, which date shall be no later than the end of the
Offering; or
(ii) with a maximum dollar amount designated by the Board that, as the
Board determines for a particular Offering, (1) shall be withheld, in whole or
in part, from such Employee's Earnings (as defined by the Board in each
Offering) during the period which begins on the Offering Date (or such later
date as the Board determines for a particular Offering) and ends on the date
stated in the Offering, which date shall be no later than the end of the
Offering and/or (2) shall be contributed, in whole or in part, by such Employee
during such period.
- 6 -
<PAGE>
(b) The Board shall establish one or more Purchase Dates during an Offering
on which Rights granted under the Plan shall be exercised and purchases of
Shares carried out in accordance with such Offering.
(c) In connection with each Offering made under the Plan, the Board may
specify a maximum amount of Shares that may be purchased by any Participant as
well as a maximum aggregate amount of Shares that may be purchased by all
Participants pursuant to such Offering. In addition, in connection with each
Offering that contains more than one Purchase Date, the Board may specify a
maximum aggregate amount of Shares which may be purchased by all Participants on
any given Purchase Date under the Offering. If the aggregate purchase of Shares
upon exercise of Rights granted under the Offering would exceed any such maximum
aggregate amount, the Board shall make a pro rata allocation of the Shares
available in as nearly a uniform manner as shall be practicable and as it shall
deem to be equitable.
(d) The purchase price of Shares acquired pursuant to Rights granted under
the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the Shares on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the Shares on the Purchase Date.
8. Participation; Withdrawal; Termination.
(a) An Eligible Employee may become a Participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board of such Employee's Earnings during the Offering (as
defined in each Offering). The payroll deductions made for each Participant
shall be credited to a bookkeeping account for such Participant under the Plan
and either may be deposited with the general funds of the Company or may be
deposited in a separate account in the name of, and for the benefit of, such
Participant with a financial institution designated by the Company. To the
extent provided in the Offering, a Participant may reduce (including to zero) or
increase such payroll deductions. To the extent provided in the Offering, a
Participant may begin such payroll deductions after the beginning of the
Offering. A Participant may make additional payments into his or her account
only if specifically provided for in the Offering and only if the Participant
has not already had the maximum permitted amount withheld during the Offering.
(b) At any time during an Offering, a Participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides. Such
withdrawal may be elected at any time prior to the end of the Offering except as
provided by the Board in the Offering. Upon such withdrawal from the Offering by
a Participant, the Company shall distribute to such Participant all of his or
her accumulated payroll deductions (reduced to the extent, if any, such
- 7 -
<PAGE>
deductions have been used to acquire Shares for the Participant) under the
Offering, without interest unless otherwise specified in the Offering, and such
Participant's interest in that Offering shall be automatically terminated. A
Participant's withdrawal from an Offering will have no effect upon such
Participant's eligibility to participate in any other Offerings under the Plan
but such Participant will be required to deliver a new participation agreement
in order to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating Employee's employment with the
Company or a designated Affiliate for any reason (subject to any post-employment
participation period required by law) or other lack of eligibility. The Company
shall distribute to such terminated Employee all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire Shares for the terminated Employee) under the Offering, without
interest unless otherwise specified in the Offering. If the accumulated payroll
deductions have been deposited with the Company's general funds, then the
distribution shall be made from the general funds of the Company, without
interest. If the accumulated payroll deductions have been deposited in a
separate account with a financial institution as provided in subparagraph 8(a),
then the distribution shall be made from the separate account, without interest
unless otherwise specified in the Offering.
(d) Rights granted under the Plan shall not be transferable by a
Participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 15 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such Rights
are granted.
9. Exercise.
(a) On each Purchase Date specified therefor in the relevant Offering, each
Participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of Shares up to the maximum amount of Shares
permitted pursuant to the terms of the Plan and the applicable Offering, at the
purchase price specified in the Offering. No fractional Shares shall be issued
upon the exercise of Rights granted under the Plan unless specifically provided
for in the Offering.
(b) Unless otherwise specifically provided in the Offering, the amount, if
any, of accumulated payroll deductions remaining in any Participant's account
after the purchase of Shares that is equal to the amount required to purchase
one or more whole Shares on the final Purchase Date of the Offering shall be
distributed in full to the Participant at the end of the Offering, without
interest. If the accumulated payroll deductions have been deposited with the
Company's general funds, then the distribution shall be made from the general
funds of the Company, without interest. If the accumulated payroll deductions
have been deposited in a separate account with a financial institution as
provided in subparagraph 8(a), then the distribution shall be made from the
separate account, without interest unless otherwise specified in the Offering.
- 8 -
<PAGE>
(c) No Rights granted under the Plan may be exercised to any extent unless
the Shares to be issued upon such exercise under the Plan (including Rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act and the Plan is in material compliance with all applicable
state, foreign and other securities and other laws applicable to the Plan. If on
a Purchase Date in any Offering hereunder the Plan is not so registered or in
such compliance, no Rights granted under the Plan or any Offering shall be
exercised on such Purchase Date, and the Purchase Date shall be delayed until
the Plan is subject to such an effective registration statement and such
compliance, except that the Purchase Date shall not be delayed more than twelve
(12) months and the Purchase Date shall in no event be more than twenty-seven
(27) months from the Offering Date. If, on the Purchase Date of any Offering
hereunder, as delayed to the maximum extent permissible, the Plan is not
registered and in such compliance, no Rights granted under the Plan or any
Offering shall be exercised and all payroll deductions accumulated during the
Offering (reduced to the extent, if any, such deductions have been used to
acquire Shares) shall be distributed to the Participants, without interest
unless otherwise specified in the Offering. If the accumulated payroll
deductions have been deposited with the Company's general funds, then the
distribution shall be made from the general funds of the Company, without
interest. If the accumulated payroll deductions have been deposited in a
separate account with a financial institution as provided in subparagraph 8(a),
then the distribution shall be made from the separate account, without interest
unless otherwise specified in the Offering.
10. Covenants of the Company.
(a) During the terms of the Rights granted under the Plan, the Company
shall ensure that the amount of Shares required to satisfy such Rights are
available.
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell Shares upon exercise of the
Rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of Shares under the Plan, the Company shall be relieved from any liability for
failure to issue and sell Shares upon exercise of such Rights unless and until
such authority is obtained.
11. Use of Proceeds from Shares.
Proceeds from the sale of Shares pursuant to Rights granted under the Plan
shall constitute general funds of the Company.
12. Rights as a Stockholder.
A Participant shall not be deemed to be the holder of, or to have any of the
rights of a holder with respect to, Shares subject to Rights granted under the
Plan unless and until the Participant's Shares acquired upon exercise of Rights
under the Plan are recorded in the books of the Company.
- 9 -
<PAGE>
13. Adjustments upon Changes in Securities.
(a) If any change is made in the Shares subject to the Plan, or subject to
any Right, without the receipt of consideration by the Company (through merger,
consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of Shares subject to the Plan pursuant to subparagraph 4(a), and the
outstanding Rights will be appropriately adjusted in the class(es), number of
Shares and purchase limits of such outstanding Rights. The Board shall make such
adjustments, and its determination shall be final, binding and conclusive. (The
conversion of any convertible securities of the Company shall not be treated as
a transaction that does not involve the receipt of consideration by the
Company.)
(b) In the event of: (i) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (ii) a merger or consolidation
in which the Company is not the surviving corporation; or (iii) a reverse merger
in which the Company is the surviving corporation but the Shares outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise, then: (1)
any surviving or acquiring corporation shall assume Rights outstanding under the
Plan or shall substitute similar rights (including a right to acquire the same
consideration paid to Stockholders in the transaction described in this
subparagraph 13(b)) for those outstanding under the Plan, or (2) in the event
any surviving or acquiring corporation refuses to assume such Rights or to
substitute similar rights for those outstanding under the Plan, then, as
determined by the Board in its sole discretion such Rights may continue in full
force and effect or the Participants' accumulated payroll deductions (exclusive
of any accumulated interest which cannot be applied toward the purchase of
Shares under the terms of the Offering) may be used to purchase Shares
immediately prior to the transaction described above under the ongoing Offering
and the Participants' Rights under the ongoing Offering thereafter terminated.
14. Amendment of the Plan.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 13 relating to adjustments upon changes
in securities and except as to minor amendments to benefit the administration of
the Plan, to take account of a change in legislation or to obtain or maintain
favorable tax, exchange control or regulatory treatment for Participants or the
Company or any Affiliate, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary for
the Plan to satisfy the requirements of Section 423 of the Code, Rule 16b-3
under the Exchange Act and any Nasdaq or other securities exchange listing
requirements. Currently under the Code, stockholder approval within twelve (12)
months before or after the adoption of the amendment is required where the
amendment will:
(i) Increase the amount of Shares reserved for Rights under the Plan;
- 10 -
<PAGE>
(ii) Modify the provisions as to eligibility for participation in the
Plan to the extent such modification requires stockholder approval in order for
the Plan to obtain employee stock purchase plan treatment under Section 423 of
the Code or to comply with the requirements of Rule 16b-3; or
(iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to obtain employee stock purchase
plan treatment under Section 423 of the Code or to comply with the requirements
of Rule 16b-3.
(b) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Employee Stock Purchase Plans
and/or to bring the Plan and/or Rights granted under it into compliance
therewith.
(c) Rights and obligations under any Rights granted before amendment of the
Plan shall not be impaired by any amendment of the Plan, except with the consent
of the person to whom such Rights were granted, or except as necessary to comply
with any laws or governmental regulations, or except as necessary to ensure that
the Plan and/or Rights granted under the Plan comply with the requirements of
Section 423 of the Code.
15. Designation of Beneficiary.
(a) A Participant may file a written designation of a beneficiary who is to
receive any Shares and/or cash, if any, from the Participant's account under the
Plan in the event of such Participant's death subsequent to the end of an
Offering but prior to delivery to the Participant of such Shares and cash. In
addition, a Participant may file a written designation of a beneficiary who is
to receive any cash from the Participant's account under the Plan in the event
of such Participant's death during an Offering.
(b) The Participant may change such designation of beneficiary at any time
by written notice. In the event of the death of a Participant and in the absence
of a beneficiary validly designated under the Plan who is living at the time of
such Participant's death, the Company shall deliver such Shares and/or cash to
the executor or administrator of the estate of the Participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its sole discretion, may deliver such Shares and/or cash to the
spouse or to any one or more dependents or relatives of the Participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
16. Termination or Suspension of the Plan.
(a) The Board in its discretion may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate at the time that all of
the Shares subject to the Plan's reserve, as increased and/or adjusted from time
to time, have been issued under the terms of the
- 11 -
<PAGE>
Plan. No Rights may be granted under the Plan while the Plan is suspended or
after it is terminated.
(b) Rights and obligations under any Rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person to whom such
Rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
Rights granted under the Plan comply with the requirements of Section 423 of the
Code.
17. Effective Date of Plan.
The Plan shall become effective as determined by the Board, but no Rights
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted by the Board, which date may be prior to the
effective date set by the Board.
- 12 -
<PAGE>
EXHIBIT 10.4
FOURTH AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
This Fourth Amended And Restated Stockholders' Agreement (the "Agreement"),
dated as of September 3, 1999, is by and among Dendreon Corporation, a Delaware
corporation (the "Company"), those stockholders of the Company set forth on
Exhibit A hereto and the purchasers of the Company's Series E Preferred Stock
set forth on Exhibit B hereto (the "Purchasers").
Recitals
Whereas, the Company and the Purchasers are entering into a Series E
Preferred Stock Purchase Agreement as of the date hereof (the "Stock Purchase
Agreement"), and in connection therewith, the Company is making certain
covenants with such Purchasers and has agreed to grant to such Purchasers
certain rights;
Whereas, the Company and certain of the parties hereto entered into an
Amended and Restated Stockholders' Agreement, dated July 10, 1998 (the
"Stockholders' Agreement"); and
Whereas, in order to induce further investment in the Company on the terms
and conditions contemplated in the Stock Purchase Agreement and in this
Agreement, the Company and the parties hereto have agreed to amend the covenants
and rights heretofore granted pursuant to the Stockholders' Agreement, as set
forth herein.
Now, Therefore, in consideration of the foregoing and of the respective
covenants and undertakings hereunder and pursuant to the Stock Purchase
Agreement, the parties hereto do hereby agree as follows:
SECTION 1. Definitions.
As used in this Agreement, the following terms shall have the following
respective meanings:
"Business Day" shall mean any day other than: (i) Saturday or Sunday, or
(ii) a day on which the New York Stock Exchange is closed.
"By-laws" shall mean the By-laws of the Company, as amended.
"Capital Stock" shall mean any: (i) shares of Common Stock, Preferred Stock
or any other equity security of the Company, (ii) debt securities convertible
into or exchangeable for any equity security of the Company or (iii) options,
warrants or other rights to subscribe for, purchase or otherwise acquire any
such equity security or debt security of the Company.
"Charter" shall mean the Certificate of Incorporation of the Company, as
restated and amended from time to time.
<PAGE>
"Commission" shall mean the Securities and Exchange Commission or any other
Federal agency administering the Securities Act at the applicable time.
"Common Shares" shall mean the issued and outstanding shares of the
Company's Common Stock, $0.001 par value.
"Common Stock" shall mean the Company's authorized Common Stock, $0.001 par
value.
"Common Stockholder" shall mean each Person who has purchased Common Stock
from the Company or who acquires Common Stock by Transfer or otherwise and who
becomes a party to this Agreement, other than Preferred Stockholders who acquire
Common Stock on conversion of the Preferred Shares.
"Defaulting Stockholder" shall have the meaning set forth in Section
4.2(h).
"Equity Securities" shall have the meaning set forth in Rule 3a 11-1 under
the Exchange Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and any successor statute and the rules and regulations thereunder, as shall be
in effect from time to time.
"Excluded Stock" shall mean: (a) the Option Shares; (b) Common Stock
issuable upon conversion of the Preferred Shares; (c) shares of Common Stock
issued to lenders, lessors or otherwise for purposes other than raising capital;
(d) Common Stock issued or issuable pursuant to Restricted Stock Option
Agreements between the Company and the Founders and between the Company and Dr.
William Haseltine; (e) Equity Securities issued by the Company pursuant to
license agreements for the Company's technology or the acquisition of another
corporation, partnership, joint venture, trust or other entity by merger,
consolidation, stock acquisition, reorganization, or otherwise, whereby the
Company, or its stockholders of record immediately prior to the effectiveness of
such transaction, directly or indirectly, own at least the majority of the
voting power of such other entity or the resulting or surviving corporation
immediately after such transaction; (f) Capital Stock issuable or issued upon
the exercise of outstanding options or warrants.
"Family" shall include any spouse, lineal ancestor or descendant, or
sibling.
"Five Percent Preferred Stockholder" shall mean: (a) the Investors, for so
long as they continue to own Preferred Shares, (b) Shaw Venture Partners, L.P.
("Shaw"), for so long as they continue to own Shares, (c) any transferee of
Preferred Stock of an Investor who is a member of such Investor's Group, and any
transferee of Shaw who is a member of Shaw's Group, for so long as such
transferee continues to own Preferred Shares, (d) Kummell Investments Limited
("Kummell"), for so long as it continues to own Shares, and (e) any other
Preferred Stockholder owning (either of record or beneficially), at any time, a
number of Preferred Shares equal to or exceeding five percent of the aggregate
number of Preferred Shares then outstanding.
2
<PAGE>
"Founders" shall mean Dr. Sam Strober and Dr. Edgar G. Engleman and each of
the persons to whom the shares subscribed for by such persons has been assigned
pursuant to certain Restricted Stock Agreements dated as of September 30, 1992.
"Founders Shares" shall mean the Common Shares issued to the Founders.
"Group" shall mean as to: (a) a Stockholder that is a limited partnership,
any and all of the venture capital limited partnerships now existing or
hereafter arising that are "affiliates" (as defined by Rule 405 promulgated
under the Securities Act), in whole or in part, of one or more general partners
or of one or more general partners of a general partner of such Stockholder and
any predecessor or successor partnership any limited and general partners of any
such partnership; (b) a Stockholder that is a trust, any of the beneficiaries,
settlors or grantors now existing or hereafter arising of, or any Person under
common control with, such trust; (c) a Stockholder that is a general
partnership, any of its partners or former partners in accordance with their
partnership interests; (d) a Stockholder that is a corporation, its stockholders
in accordance with their interests in the corporation; and (e) a Stockholder
that is a limited liability company, its members or former members in accordance
with their interests in the limited liability company .
"Investors" shall mean HealthCare Ventures III, L.P. ("HCV III") HealthCare
Ventures IV, L.P. ("HCV IV"), Everest Trust and Hudson Trust and members of
their respective Groups.
"New Securities" shall mean any Equity Securities of the Company,
including, but not limited to, shares of Common Stock of the Company, any
security that is convertible into or exercisable or exchangeable for Common
Stock, or any right, option or warrant to acquire any Common Stock of the
Company.
"Offer" shall have the meaning set forth in Section 4.2(a) hereof.
"Offered Shares" shall have the meaning set forth in Section 4.2(a) hereof.
"Option Shares" shall mean shares of Common Stock issued, available for
issuance or subject to options, warrants or rights granted or authorized to be
granted to employees and others who provide services to the Company pursuant to
any Stock Plan to the extent permitted under Section 6 hereof.
"Person" shall mean and include a natural person, a corporation, a
partnership, a trust, an unincorporated organization and a government or any
department, agency or political subdivision thereof.
"Preferred Shares" shall mean shares of the Company's Series A, Series B,
Series C, Series D and Series E Preferred Stock, $0.001 par value.
"Preferred Stockholder" shall mean: (a) any Person who purchased Series A,
Series B, Series C or Series D Preferred Stock in the Company pursuant to a
Stock Purchase Agreement dated October 27, 1992, March 25, 1994, December 8,
1994, January 26, 1996, June 20, 1997 or July 10, 1998, (b) each of the
Stockholders purchasing Preferred Shares from the Company
3
<PAGE>
pursuant to the Stock Purchase Agreement, and (c) any Person to whom there has
been a Transfer of Preferred Shares or Restricted Shares.
"Pro Rata Fraction" shall have the meaning set forth in Section 4.2(c).
"Proposed Transferee" shall have the meaning set forth in Section 4.2 (a).
"Public Offering" shall mean a distribution of New Securities in an
underwritten public offering to the general public pursuant to a registration
statement filed with and declared effective by the Commission pursuant to the
Securities Act.
"Purchasing Stockholder" shall have the meaning set forth in Section 4.2
(e).
"Qualified Public Offering" shall mean the Company's distribution of New
Securities in an underwritten public offering to the general public pursuant to
a registration statement filed with and declared effective by the Commission
pursuant to the Securities Act providing minimum gross proceeds (without
deduction for underwriting commissions or discounts or expenses of the offering)
to the Company of $15,000,000 and resulting in a market capitalization for the
outstanding shares of Common Stock immediately after the public offering (based
on the public offering price) of not less than $40,000,000.
"Registrable Securities" shall mean shares of Common Stock issued or
issuable upon conversion of: (a) the Preferred Shares; (b) up to 7,500 shares of
Common Stock, subject to adjustment for certain dilutive issuances, which may be
issued to MMC\GATX or its permitted assignees pursuant to the Warrant issued in
conjunction with the Company's Master Equipment Lease Agreement with MMC\GATX;
and (c) Common Stock issued or issuable to the Investors upon the exercise of
certain warrants held by each of them as a result of Loan Agreements entered
into by the Company, dated April 11, 1995, October 5, 1995, November 3, 1995 and
December 8, 1995; provided, however, that shares of Common Stock or other
securities shall only be treated as Registrable Securities if and so long as (i)
they have not been sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction and (ii) they could not
be sold pursuant to Rule 144 in any two consecutive three-month periods.
"Restricted Shares" shall mean the shares of Common Stock issued or
issuable upon the conversion of Preferred Shares.
"Restricted Stock Agreements" shall mean the Restricted Stock Agreements
between the Company and the Founders and between the Company and William
Haseltine.
"Restricted Stock Option Agreements" shall mean the Restricted Stock Option
Agreements between the Company and the Founders and between the Company and
William Haseltine.
"Securities Act" shall mean the Securities Act of 1933, as amended, and any
successor statute and the rules and regulations of the Commission thereunder, as
shall be in effect at the applicable time.
"Selling Stockholder" shall have the meaning set forth in Section 4.2(a).
4
<PAGE>
"Shares" shall mean and include all shares of voting capital stock of the
Company now owned or hereafter acquired by any Stockholder or transferee of such
Stockholder.
"Stockholder" shall mean each Person who has purchased Shares from the
Company or who acquires Shares upon conversion of the Preferred Stock, the
exercise of options, Transfer or otherwise and who is a party to this Agreement.
"Stock Plan" shall mean any equity incentive plan for officers, directors,
employees and others who render services to Company.
"Transfer" shall include any direct or indirect sale, assignment, transfer,
pledge, hypothecation or other disposition of any Shares or of any legal or
beneficial interest therein.
SECTION 2. Representations.
2.1 By the Company. The Company represents to each stockholder that:
(a) The execution, delivery and performance by the Company of this
Agreement and all transactions contemplated in this Agreement have been duly
authorized by all action required by law, its Charter, its By-laws or otherwise.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company
enforceable against it in accordance with its term, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally.
2.2 By the Stockholders. Each Stockholder, as to itself, himself or
herself, represents to the Company and the other Stockholders that:
(a) The execution, delivery and performance by such Stockholder of
this Agreement and all transactions contemplated in this Agreement have been
duly authorized by all action required by law, and by the certificate of
incorporation and by-laws, partnership agreement or other governing instrument
of such Stockholder.
(b) This Agreement has been duly executed and delivered by such
Stockholder and constitutes the legal, valid and binding obligation of such
Stockholder enforceable against it, him or her in accordance with its terms,
except: (i) as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, (ii) general principles of equity that
restrict the availability of equitable remedies, and (iii) to the extent that
the enforceability of the indemnification provisions of Section 9.8 of this
Agreement may be limited by applicable laws.
SECTION 3. Legend on Shares and Notice of Transfer.
3.1 Restrictive Legends.
5
<PAGE>
Each certificate evidencing Shares, and each certificate evidencing Shares
held by subsequent direct or indirect transferees of any such certificate, shall
(unless otherwise permitted by the provisions of Section 3.2 hereof) be stamped
or otherwise imprinted with legends in substantially the following form (in
addition to any legends which may be required by Regulation S of the Securities
Act and state blue sky laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAW. THESE SECURITIES MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION
THEREFROM UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE
STATE SECURITIES LAW.
THE TRANSFER AND VOTING OF THESE SECURITIES IS SUBJECT TO THE TERMS AND
CONDITIONS OF AN AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT DATED AS OF
SEPTEMBER 3, 1999 AMONG DENDREON CORPORATION, THE HOLDER OF RECORD OF THIS
CERTIFICATE AND CERTAIN OTHER SIGNATORIES THERETO, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, AND NO SALE, ASSIGNMENT, TRANSFER, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION OF SUCH SECURITIES SHALL BE VALID OR
EFFECTIVE EXCEPT IN ACCORDANCE WITH SUCH AGREEMENT AND UNTIL SUCH TERMS AND
CONDITIONS HAVE BEEN FULFILLED. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT
NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE
TO THE SECRETARY OF DENDREON CORPORATION.
3.2 Notice of Transfer.
(a) Each of the Stockholders, and any other holder of any Shares by
acceptance thereof, agrees that, prior to any Transfer of any Shares, such
holder will give written notice to the Company of such holder's intention to
effect such Transfer and to comply in all other respects with the provisions of
this Section 3.2. Each such notice shall contain (i) a statement setting forth
the intention of said holder's prospective transferee with respect to its
retention or disposition of said Shares, and (ii) unless waived by the Company,
an opinion, reasonably acceptable to the Company, of counsel for said holder
(who may be the inside or staff counsel employed by said holder), as to the
necessity or non-necessity for registration under the Securities Act and
applicable state securities laws in connection with such Transfer and stating
the factual and statutory bases relied upon by counsel. The following provisions
shall then apply:
(i) If the proposed Transfer of Shares may be effected without
registration or qualification under the Securities Act and any applicable state
securities laws, then the registered holder of such Shares shall be entitled to
Transfer such Shares in accordance with Section 4 hereof and the intended method
of disposition specified in the statement delivered by said holder to the
Company.
(ii) If the proposed Transfer of such Shares may not be effected
without registration under the Securities Act or registration or qualification
under any applicable
6
<PAGE>
state securities laws, the registered holder of such Shares shall not be
entitled to transfer such Shares until such registration or qualification is
effective or until an exception from the requirement for such registration or
qualification is available.
(b) Each certificate evidencing the Shares issued upon such transfer
(and each certificate evidencing any untransferred balance of such Shares) shall
bear the applicable legends set forth in Section 3.1 hereof unless: (i) the
Company shall have waived the requirement of such legend; or (ii) in the
reasonable opinion of counsel to the Company or of counsel reasonably acceptable
to the Company, such Transfer shall have been made in connection with an
effective registration statement filed pursuant to the Securities Act or in
compliance with the requirements of Rule 144 or Rule 144A (or any similar or
successor rule) promulgated under the Securities Act, and in compliance with
applicable state securities laws.
(c) Notwithstanding the provisions of subsections (a) and (b) above,
no such registration statement or opinion of counsel shall be necessary for a
transfer by a Stockholder to a member of such Stockholder's Group.
SECTION 4. Covenants of Stockholders.
4.1 Prohibited Transfers.
(a) Each Common Stockholder agrees that he, she or it shall not
Transfer any Common Shares without the prior written consent of the holders of a
majority of the outstanding Shares other than the Shares held by the
Transferring Stockholder, except as provided for in Section 4.2.
(b) Notwithstanding anything to the contrary contained herein, a
Common Stockholder may Transfer all or any of his Common Shares: (i) to any
member of his Family or to any trust for the exclusive benefit of the Common
Stockholder or any member of the Family of the Common Stockholder; provided that
any such transferee shall agree in writing with the Company, prior to and as a
condition precedent to such Transfer, to be bound by all of the provisions of
this Agreement and provided, further, that, in the case of a trust, the
interests in any such trusts shall be non-transferable, except in compliance
with this Agreement, (ii) in the case of Dr. William Haseltine, to a foundation
qualified pursuant to Section 501(C)(3) of the Internal Revenue Code of 1986, as
amended, which was organized by Dr. Haseltine or to which Dr. Haseltine is the
sole donor, provided, that any such foundation shall agree in writing with the
Company, prior to and as a condition precedent to such transfer, to be bound by
all of the provisions of this Agreement and provided, further, that the
interests in such foundation shall be non-transferable, and (iii) by will or the
laws of descent and distribution, in which event each such transferee shall be
bound by all of the provisions of this Agreement to the same extent as if such
transferee were the deceased Stockholder.
(c) If requested in writing by the managing underwriters, if any, of
the initial Public Offering of the Company's Common Stock, each Stockholder
agrees not to offer, sell, contract to sell or otherwise dispose of any Shares
except as part of such Public Offering within 30 days before or 180 days after
the effective date of the registration statement filed with respect
7
<PAGE>
to said Public Offering, and the Company hereby also so agrees; provided,
however, that this restriction will not apply to transfers permitted under
Section 4.1(b).
4.2 Right of First Refusal on Dispositions.
(a) If a Common Stockholder (for purposes of this Section 4, the
"Selling Stockholder") desires to sell all or any part of his shares pursuant to
a bona fide, arm's length offer from a creditworthy third party (the "Proposed
Transferee"), the Selling Stockholder shall submit a written offer (the "Offer")
to sell such Shares (the "Offered Shares") to the Five Percent Preferred
Stockholders and the Company, on terms and conditions, including price, not less
favorable to the Five Percent Preferred Stockholders and the Company than those
on which the Selling Stockholder proposes to sell the Offered Shares to the
Proposed Transferee. The Offer shall disclose the identity of the Proposed
Transferee, the number of Offered Shares proposed to be sold, the total number
of Shares owned by the Selling Stockholder, the terms and conditions, including
price, of the proposed sale, the address of the Selling Stockholder and any
other material facts relating to the proposed sale.
(b) If the Company desires to purchase all of the Offered Shares, the
Company shall communicate in writing its acceptance of its election to purchase
(an "Acceptance") to the Selling Stockholder and the Five Percent Preferred
Stockholders, which Acceptance shall be delivered in person or mailed to the
Selling Stockholder and the Five Percent Preferred Stockholders within 20 days
of the date the Offer was made.
(c) Subject to and in accordance with the priorities of rights
established in subsection (d) below, if the Company does not accept the Offer in
accordance with Section 4.2(b), each Five Percent Preferred Stockholder shall
have the right to purchase that number of Offered Shares as shall be equal to
the number of Offered Shares multiplied by a fraction, the numerator of which
shall be the number of Shares then owned by such Preferred Stockholder and the
denominator of which shall be the aggregate number of Shares then owned by all
of the Five Percent Preferred Stockholders (the "Pro Rata Fraction"). For the
purpose of calculating the Pro Rata Fraction, each Preferred Share shall be
deemed to represent the number of Common Shares into which the Preferred Share
is then convertible.
(d) Five Percent Preferred Stockholders shall have a right of
oversubscription such that if any Five Percent Preferred Stockholder fails to
accept the Offer as to its or his full Pro Rata Fraction, the other Five Percent
Preferred Stockholders shall, among them, have the right to purchase up to the
balance of the Offered Shares not so purchased. Such right of oversubscription
may be exercised by a Five Percent Preferred Stockholder by accepting the Offer
as to more than its or his Pro Rata Fraction. If, as a result thereof, such
oversubscriptions exceed the total number of Offered Shares available in respect
of such oversubscription privilege, the oversubscribing Five Percent Preferred
Stockholders shall be cut back with respect to their oversubscriptions so as to
sell the Offered Shares as nearly as possible in accordance with their
respective Pro Rata Fractions or as they may otherwise agree among themselves.
In all instances, the Five Percent Preferred Stockholders shall have the right
to purchase only such Offered Shares as are not purchased by the Company.
8
<PAGE>
(e) If a Five Percent Preferred Stockholder desires to purchase all
or any part of the Offered Shares, such Five Percent Preferred Stockholder (a
"Purchasing Stockholder") shall communicate in writing its or his Acceptance to
the Selling Stockholder, which Acceptance shall state the number of Offered
shares the Purchasing Stockholder desires to purchase and shall be delivered in
person or mailed to the Selling Stockholder at the address set forth in the
Offer, with a copy to the Company and the other Five Percent Preferred
Stockholders, within 30 days of the date the Offer was made.
(f) Sale of the Offered Shares pursuant to this Section 4.2 shall be
made at the offices of the Company no later than the thirtieth day following the
expiration of the 30-day period after the Offer is made (or if such thirtieth
day is not a Business Day, then on the next succeeding Business Day). Such sales
shall be effected by the Selling Stockholder's delivery to each Purchasing
Stockholder or the Company, as the case may be, of a certificate or certificates
evidencing the Offered Shares to be purchased by it or him, duly endorsed for
transfer to the Purchasing Stockholder or the Company, as the case may be, which
Offered Shares shall be delivered free and clear of all liens, charges, claims
and encumbrances of any nature whatsoever, against payment to the Selling
Stockholder of the purchase price therefor by the Company or such Purchasing
Stockholder, as the case may be. Payment for the Offered Shares shall be made as
provided in the Offer or by wire transfer or certified check.
(g) If the Purchasing Stockholders and the Company do not agree to
purchase all of the Offered Shares, then the Offered Shares may be sold by the
Selling Stockholder at any time within 120 days after the date the Offer was
made. Any such sale shall be to the Proposed Transferee, at not less than the
price and upon other terms and conditions, if any, not more favorable to the
Proposed Transferee than those specified in the Offer. Any Offered Shares not
sold within such 120-day period shall continue to be subject to the requirements
of a prior offer pursuant to this Section 4.2.
(h) If any Selling Stockholder becomes obligated to sell any shares
to any Purchasing Stockholder under this Agreement and fails to deliver such
Shares in accordance with the terms of this Agreement (a "Defaulting
Stockholder"), the Purchasing Stockholder may, at its or his option, in addition
to all other remedies it or he may have, send to the Defaulting Stockholder the
purchase price for such Shares as is herein specified. Thereupon, the Company,
upon written notice to the Defaulting Stockholder, shall: (i) cancel on its
books the certificate or certificates representing the Shares to be sold and
(ii) issue, in lieu thereof, in the name of the Purchasing Stockholder, a new
certificate or certificates representing such Shares, and thereupon all of the
Defaulting Stockholder's rights in and to such Shares shall terminate, except
for the right to receive payment of the purchase price therefor.
(i) Notwithstanding anything herein to the contrary, the Selling
Stockholder shall not be obligated to sell any Shares to the Company or the Five
Percent Preferred Stockholders, and will be free to sell all of the Shares to
the Proposed Transferee, if the Company and the Five Percent Preferred
Stockholders do not elect to buy all of the Shares specified in the Offer.
4.3 Right of Participation in Sales of Common Shares and Preferred Shares.
9
<PAGE>
(a) If a Selling Stockholder wishes to sell Common Shares to any
Person (including any sale to a Proposed Transferee or to the Company or a
Purchasing Stockholder pursuant to Section 4.2 but excluding Transfers pursuant
to Section 4.1(b)), then the Selling Stockholder shall, as a condition precedent
to such sale, permit each of the Five Percent Preferred Stockholders to sell
either to the Proposed Transferee or to other financially responsible purchasers
identified by the Selling Stockholder and reasonably acceptable to the Five
Percent Preferred Stockholders electing to be brought along pursuant to this
Section 4.3 (a), at the same price, on the same date and otherwise on the same
terms and conditions as those actually applicable to the Selling Stockholder in
such sale, a number of Common Shares (or Preferred Shares convertible into a
number of Common Shares) that bears the same proportion to the number of Common
Shares proposed to be sold by the Selling Stockholder (or Preferred Shares
convertible into a number of Common Shares) as the number of Common Shares held
by each Five Percent Preferred Stockholder (or Preferred Shares convertible into
a number of Common Shares) bears to the number of Common Shares then held (or
Preferred Shares convertible into a number of Common Shares) by all Five Percent
Preferred Stockholders immediately prior to such sale (excluding Transfers
pursuant to Section 4.1(b)).
(b) In the event any Five Percent Preferred Stockholder exercises his
rights to participate in a sale pursuant to Section 4.3, and the total number of
Shares to be sold by the Selling Stockholder who initiated the sale of shares of
Common Stock and those Five Percent Preferred Stockholders electing to
participate in such sale exceeds the number of shares of Common Stock the
prospective purchaser or purchasers thereof desire to acquire, the number of
shares of Common Stock that the Selling Stockholder and each such Five Percent
Preferred Stockholder shall be permitted to sell to such prospective purchaser
or purchasers shall be reduced, on a pro rata basis, based on the number of
shares of Common Stock each is permitted to offer to such purchaser or
purchasers pursuant to section 4.3(a).
(c) The obligations of Selling Stockholders to afford the Five
Percent Preferred Stockholders the rights referred to in this Section 4.3 will
be discharged if the Five Percent Preferred Stockholders are given written
notice simultaneously with the giving of the Offer required by Section 4.2(a),
and if such notice provides that each Five Percent Preferred Stockholder may
elect to avail himself of the rights set forth either in Section 4.2 or in
Section 4.3 by a written reply addressed to the Selling Stockholder and the
Company.
(d) Anything in this Agreement to the contrary notwithstanding, the
rights and obligations of Five Percent Preferred Stockholders under Section 4.3
shall not be assignable.
(e) Each Five Percent Preferred Stockholder wishing to participate in
any sale under Section 4.3 shall: (i) notify the Selling Stockholder and the
Company in writing of such intention within 20 days after the date the Offer was
made and (ii) not have the right to purchase Common Shares from the Selling
Stockholder pursuant to such Offer.
4.4 Election of Directors.
(a) Each of the Stockholders agrees to take such action, including
the voting of the Shares owned or controlled by such Stockholder: (x) at any
annual or special meeting of Stockholders of the Company called for the purpose
of voting on the election or removal of
10
<PAGE>
Directors; or (y) by consensual action of Stockholders with respect to the
election or removal of Directors, as may be necessary to cause the following:
(i) the Company shall be managed by a Board of Directors
consisting of no fewer than nine and no more than eleven members.
(ii) (A) two directors shall be persons selected by the holders
of a majority of the Common Stock held by Common Stockholders by vote or written
consent (the "Common Directors"). (B) The number of directors to be chosen by a
vote of a majority of the Preferred Stock held by the Investors (the "Preferred
Directors") shall be: (1) three for so long as the Investors, in the aggregate,
own no fewer than 750,000 Shares (on an as-converted to Common Stock basis); (2)
two for so long as the Investors, in the aggregate, own between 500,000 and
749,999 Shares (on an as-converted to Common Stock basis); (3) one for so long
as the Investors, in the aggregate, own between 250,000 and 499,999 Shares (on
an as-converted to Common Stock basis); and (4) none if the Investors, in the
aggregate, own fewer than 250,000 Shares (on an as-converted to Common Stock
basis). (C) One director shall be a person selected by Shaw for so long as Shaw
owns at least 50,000 Shares (on an as-converted to Common Stock basis). (D) In
addition to the directors chosen by Investors pursuant to Section B hereof, one
director shall be a person selected by Kummell for so long as Kummell owns at
least 300,000 Shares (on an as-converted to Common Stock basis), such director
to be reasonably acceptable to the Company. The foregoing numbers of Shares
shall be subject to adjustment for stock splits, adjustments, recapitalizations
and the like.
(iii) the removal, with or without cause, of any Preferred
Directors designated for removal by a vote of the majority of the Investors, if
the Investors shall be Stockholders, or by a majority of the Preferred
Stockholders if the Investors are not Stockholders, and the removal, with or
without cause of any Common Director designated for removal by a majority of the
Common Stockholders.
(iv) the removal, with or without cause, of the director
designated by Shaw if such director is designated for removal by a vote of the
majority of Shares held by Shaw, if Shaw shall be a Stockholder, or by a
majority of the Preferred Stockholders if Shaw is not a Stockholder.
(v) the removal, with or without cause, of the director
designated by Kummell if such director is designated for removal by a vote of
the majority of Shares held by Kummell.
(b) If at any time a vacancy is created on the Board of Directors by
reason of the death, removal or resignation of any director, such vacancy shall
be filled pursuant to Article IV, Section 18 of the By-laws of the Company.
(c) The Company agrees to take all action necessary to ensure that,
except as otherwise unanimously approved by the Company's Board of Directors,
(i) the directors of the Company's subsidiaries are identical to the directors
of the Company and (ii) the by-laws of all of the Company's subsidiaries are
substantially identical to the Company's By-laws.
11
<PAGE>
(d) No Stockholder shall grant any proxy or enter into or agree to be
bound by any voting agreement or voting trust with respect to voting any Shares,
except as provided herein. No Stockholder shall enter into any stockholder
agreement or arrangement of any kind with any Person with respect to any Shares
inconsistent with the provisions of this Agreement (whether or not such
agreements and arrangements are with other Stockholders or holders of Capital
Stock that are not bound by this agreement), including, but not limited to,
agreements or arrangements with respect to the acquisition, disposition or
voting of Shares, or act, for any reason, as a member of a Group or in concert
with any other Persons in connection with the acquisition, disposition or voting
of Shares in any manner which is inconsistent with the provisions of this
Agreement.
(e) Should the provisions of this Section 4.4 be construed to
constitute the granting of proxies, such proxies shall be deemed coupled with an
interest and, to the extent permitted by law, are irrevocable for the term of
this Agreement.
SECTION 5. Drag Along.
Anything in this Agreement to the contrary notwithstanding, in the event
that the Board of Directors by unanimous vote or unanimous written consent
approves a transaction pursuant to which any Person or Persons will acquire all
of the Shares of the Company, each of the Stockholders agrees to vote in favor
of the transaction and to offer to sell all of his or its Shares, and to sell
all of his or its shares, to such Person or Persons, upon the terms and
conditions for the transaction approved by the Board of Directors.
SECTION 6. Option Shares.
The Company may adopt a Stock Plan or Stock Plans providing for Option
Shares, or amend any such plan, on terms which are satisfactory to all of the
Preferred Directors.
SECTION 7. Rights to Purchase Additional Stock.
(a) Each of the Founders and each Five Percent Preferred Stockholder
shall have the right to subscribe to any and all issuances of Capital Stock of
the Company, other than issuances of Excluded Stock, in an amount equal to his
or its Proportional Share of the issuances to the extent set forth in this
Section 7. For purposes of determining the "Proportional Share" of the
securities to be issued to which each Founder and each Five Percent Preferred
Stockholder, as the case may be, is entitled to subscribe, the number of shares
of Common Stock or Common Stock then issuable upon conversion of Preferred
Shares (without giving effect to the proposed issuance of securities) held by
the subscribing Founder or the subscribing Five Percent Preferred Stockholder
shall be divided by the total number of shares of Common Stock outstanding prior
to the offering on a fully diluted basis (i.e., assuming that all the
outstanding Preferred Stock and any other outstanding security of the Company
convertible into or exercisable or exchangeable for shares of Common Stock
without the payment of consideration shall have been converted into or exercised
or exchanged for shares of Common Stock).
(b) In the event the Company shall propose to issue Capital Stock,
except for Excluded Stock, the Company shall give written notice (the "Notice")
to each Founder and each Five Percent Preferred Stockholder, which shall set
forth the number and kind or class of shares
12
<PAGE>
of Capital Stock proposed to be issued (the "Offered Securities") the terms and
conditions thereof and the price therefor. Such notice shall be given at least
20 days prior to the issuance of such Capital Stock. The Offer by its term shall
remain open and irrevocable for a period of 20 days from the date of its
delivery to such Founder or Five Percent Preferred Stockholder (the "20-Day
Period").
(c) The Founder or Five Percent Preferred Stockholder shall evidence
its acceptance of the Notice by delivering a written notice ("Notice of
Acceptance"), signed by the Founder or Five Percent Preferred Stockholder,
setting forth the number of Offered Securities which the Founder or Five Percent
Preferred Stockholder elects to purchase. The Notice of Acceptance must be
delivered to the Company prior to the end of the 20-Day Period.
(d) The Company shall have 90 days from the expiration of the 20-Day
Period to sell all or any part of the Offered Securities refused by the Founders
or the Five Percent Preferred Stockholders to any person(s), but only upon terms
and conditions which are in all material respects no more favorable to such
other person(s) than those set forth in the Notice.
(e) Upon the closing of the sale of Offered Securities to any third
party, each Founder or Five Percent Preferred Stockholder shall purchase from
the Company, and the Company shall issue and sell to such Founder or Five
Percent Preferred Stockholder, any Offered Securities for which such Founder or
Five Percent Preferred Stockholder tendered a Notice of Acceptance upon the
terms specified in the Notice.
(f) In each case, any Offered Securities not purchased either by the
Founders or the Five Percent Preferred Stockholders or by any other person in
accordance with this Section 7 may not be sold or otherwise disposed of until
they are again offered to the Founders and the Five Percent Preferred
Stockholders under the procedures specified in this Section 7.
(g) If the Capital Stock to be issued by the Company is to be issued
pursuant to a Public Offering, the Company may require that the Founders and the
Five Percent Preferred Stockholders make an election to either: (i) commit to
purchase shares of Capital Stock from the Company at the public offering price
at the closing of the Public Offering or (ii) waive their rights to subscribe
for additional shares of Common Stock to be issued in the Public Offering. Such
election shall be effective if made by a majority of Five Percent Preferred
Stockholders and shall be made sufficiently in advance of the filing of the
registration statement relating to the Public Offering as shall be reasonably
requested by the Company.
(h) The rights provided by this Section 7 may be assigned by any Five
Percent Preferred Stockholder which is a limited partnership or a trust to any
and all members of its Group, provided that all rights of any assignee to
purchase Offered Securities will be subject to receipt of appropriate
representations from such assignee as requested by the Company to ensure
compliance with all applicable securities laws.
(i) In order to complete the offering and sale of the Series E
Preferred Stock in a timely manner, the Founders and Five Percent Preferred
Stockholders hereby waive compliance by the Company with the notice requirements
as set forth in this Section 7 with
13
<PAGE>
respect to the sale and issuance of Series E Preferred Stock pursuant to the
Stock Purchase Agreement.
SECTION 8. Reporting of Public Information Under Rule 144.
(a) With a view to making available the benefits of Rule 144 under
the Securities Act (or any similar or successor rule which may at any time
permit the sale of Common Shares to the public without registration), at all
times after 90 days after any registration statement covering an offering of
securities of the Company under the Securities Act shall have become effective,
the Company agrees to:
(i) make and keep public information available, as those terms
are defined in Rule 144 under the Securities Act;
(ii) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(iii) furnish to each Preferred Stockholder promptly upon request
a written statement by the Company as to its compliance with the reporting
requirements of the Exchange Act, a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed by the
Company as such holder may reasonably request in availing itself of Rule 144 (or
any similar or successor rule).
(b) With a view to making available the benefits of Rule 144A (or any
similar or successor rule), the Company shall, upon request of a Stockholder,
make and keep available such information as is required pursuant to that rule.
SECTION 9. Registration Rights.
9.1 Demand Registration Rights. Upon written request by holders of
Registrable Securities representing in the aggregate at least 25 percent of the
total number of Registrable Securities that have not been registered under the
Securities Act, the Company shall use its best efforts to effect the
registration under the Securities Act and registration or qualification under
all applicable state securities laws of the Registrable Securities, as requested
by the holders of Registrable Securities, all as provided in the following
provisions of this Section 9. Holders of Registrable Securities may require the
Company to effect no more than two registrations under the Securities Act, in
the aggregate, upon the request of the holders of Registrable Securities
pursuant to this Section 9.1. Except as set forth in Section 9.6 below, any
registration which is not declared effective pursuant to the Securities Act or
which does not remain effective as required by Section 9.5(a) below shall not
constitute one of the two registrations which the Company is obligated to effect
pursuant to this Section 9.1. The Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 9.1, (a) in any particular jurisdiction in which the Company would
be required to execute a general consent to service of process in effecting such
registration, qualification or compliance, unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act, (b) prior to the earlier of: (i) January 31, 2002 or (ii) twelve months
after the effective date of the registration statement pertaining to the first
Public Offering
14
<PAGE>
of securities of the Company for its own account (the "Initial Public Offering")
(other than a registration relating solely to a Rule 145 transaction or a
registration relating solely to employee benefit plans), (c) during the 180 day
period commencing with the effective date of a Public Offering, (d) if at the
time of the request to register Registrable Securities the Company gives notice
within 30 days of such request that it is engaged or has fixed plans to engage
within 30 days of the time of the request in a Public Offering as to which the
Holders may include Registrable Securities pursuant to Section 9.3 hereof, (e)
where aggregate gross proceeds would be less than $10,000,000, or (f) for so
long as the Company has not previously registered its shares of Common Stock
pursuant to Section 13 or Section 15(d) of the Exchange Act, if the Company
shall furnish to the initiating holders a certificate signed by the President of
the Company stating that, in the good faith judgment of the Board of Directors
of the Company, it would not be in the best interests of the Company and its
stockholders for such registration statement to be filed and it is therefore
appropriate to defer the filing of such registration statement, in which case
the Company may direct that such request for registration be delayed for a
period not in excess of 120 days, such right to delay a request to be exercised
by the Company not more than once in any 12-month period.
9.2 Registration Requested by Holders. Whenever the Company shall be
requested, pursuant to Section 9.1 hereof, to effect the registration of any of
the Registrable Securities under the Securities Act (a "Request for
Registration"), the Company shall give notice of such proposed registration to
all holders of Registrable Securities at least 20 days before the Company files
a registration statement and thereupon shall, as expeditiously as possible after
such 20-day notice period, use its best efforts to effect the registration under
the Securities Act and under all applicable state securities laws of:
(a) all Registrable Securities which the Company has been requested
to register pursuant to the Request for Registration; and
(b) all other Registrable Securities which holders of Registrable
Securities have, within 20 days after the Company has given such notice,
requested the Company to register, all to the extent requisite to permit the
sale or other disposition by the holders of the Registrable Securities so to be
registered. If the holders of Registrable Securities who requested the
registration of Registrable Securities engage one or more underwriters to
distribute such Registrable Securities, the Company shall permit the managing
underwriter(s) and counsel to the underwriter(s) at the Company's expense to
visit and inspect any of the properties of the Company, examine its books, take
copies and extracts therefrom and discuss the affairs, finances and accounts of
the Company with its officers, employees and public accountants (and by this
provision the Company hereby authorizes said accountants to discuss with such
underwriter(s) and such counsel its affairs, finances and accounts), at
reasonable times and upon reasonable notice, with or without a representative of
the Company being present. The Company shall have the right to include in any
registration of Registrable Securities required pursuant to this Section 9.2
additional shares of its Common Stock ("Third Party Registrable Securities"),
provided that if any Registrable Securities to be so registered for sale are to
be distributed by or through underwriters, then all Registrable Securities to be
so registered for sale, and Third Party Registrable Securities, if any, shall be
included in such underwriting on the same terms and provided, further that if,
in the written opinion of the managing underwriter(s), the total amount of such
securities to be registered will exceed the maximum amount of the Company's
securities
15
<PAGE>
which can be marketed (i) at a price reasonably related to their then current
market value, or (ii) without otherwise materially and adversely affecting the
entire offering, then the Company shall exclude from such underwriting: (x)
first, the maximum number of Third Party Registrable Securities as is necessary
in the opinion of the managing underwriter(s) to reduce the size of the
offering; and (y) then, the minimum number of Registrable Securities, pro rata
to the extent practicable, on the basis of the number of Registrable Securities
requested to be registered, among the participating holders of Registrable
Securities, as is necessary to reduce the size of the offering.
9.3 "Piggyback" Registrations.
(a) If the Company at any time proposes other than in accordance with
a Request for Registration to register any of its securities under the
Securities Act on Form S-1, S-2 or S-3 or on any other form upon which the
Registrable Securities may be registered for sale to the general public, whether
for its own account or for the account of others, the Company will at each such
time give notice to all holders of Registrable Securities of such proposal at
least 20 days before the Company files a registration statement. Upon the
request of any holder of Registrable Securities given within 20 days after the
Company has given such notice, the Company will cause the Registrable Securities
which the Company has been requested to register by such holder of Registrable
Securities to be registered under the Securities Act, all to the extent
requisite to permit the sale or other disposition by such holder of the
Registrable Securities so registered.
(b) If securities are to be registered for sale under a registration
not initiated by a Request for Registration and are to be distributed for the
account of the Company by or through a firm of underwriters then any Registrable
Securities which the Company has been requested to register pursuant to clause
(a) of this section 9.3 shall also be included in such underwriting on the same
terms as other securities of the same class as the Registrable Securities
included in such underwriting, provided that if, in the written opinion of the
managing underwriter(s), the total amount of such securities to be so
registered, when added to the Registrable Securities and the securities held by
holders of securities other than the Registrable Securities, if any, will exceed
the maximum amount of the Company's securities which can be marketed at a price
reasonably related to their then current market value or without otherwise
materially and adversely affecting the entire offering, then (subject to clause
(e) of this Section 9.3) the Company shall exclude from such underwriting: (i)
first, the maximum number of securities, if any, other than Registrable
Securities, being sold for the account of persons other than the Company as is
necessary to reduce the size of the offering; and (ii) then, the minimum number
of Registrable Securities, pro rata to the extent practicable; on the basis of
the number of Registrable Securities requested to be registered among the
participating holders of Registrable Securities, as is necessary in the opinion
of the managing underwriter(s) to reduce the size of the offering.
(c) If securities are to be registered for sale under a registration
not initiated by a Request for Registration and are to be distributed for the
account of holders of Third Party Registrable Securities or holders (other than
the Company) of other securities of the Company other than Registrable
Securities by or through a firm of underwriters of recognized standing
16
<PAGE>
under underwriting terms appropriate for such transaction, then any Registrable
Securities which the Company has been requested to register pursuant to clause
(a) of this Section 9.3 shall also be included in such underwriting on the same
terms as other securities included in such underwriting, provided that if, in
the written opinion of the managing underwriter or underwriters, the total
amount of such securities to be so registered, when added to such Registrable
Securities, will exceed the maximum amount of the Company's securities which can
be marketed at a price reasonably related to their then current market value or
without otherwise materially and adversely affecting the entire offering, then
the Company shall exclude from such underwriting the number of Registrable
Securities and other securities, pro rata to the extent practicable, on the
basis of the number of securities requested to be registered, as is necessary to
in the opinion of the managing underwriter(s) to reduce the size of the
offering.
(d) The Company may exclude all Registrable Securities from
registration in connection with the Company's Initial Public Offering in its
sole discretion, whether or not such exclusion is required in the opinion of the
managing underwriter(s).
9.4 Registration on S-3. In case the Company shall receive from any
holder or holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 (or any successor to Form S-3) or
any similar short-form registration statement and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such holder or holders, the Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such holder's or
holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other holder or holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 9.4:
(i) if Form S-3 (or any successor or similar form) is not
available for such offering by the holders; or
(ii) if the holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than one million dollars ($1,000,000); or
(iii) if within thirty (30) days of receipt of a written request
to register Registrable Securities pursuant to this Section 9.4, the Company
gives notice to the holders of the Company's intention to make a public offering
within ninety (90) days;
(iv) if the Company shall furnish to the holders a certificate
signed by the Chairman of the Board of Directors of the Company stating that in
the good faith judgment
17
<PAGE>
of the Board of Directors of the Company, it would be seriously detrimental to
the Company and its stockholders for such Form S-3 registration to be effected
at such time, in which event the Company shall have the right to defer the
filing of the Form S-3 registration statement for a period of not more than
ninety (90) days after receipt of the request of the holder or holders under
this Section 9.4; provided, that such right to delay a request shall be
exercised by the Company not more than once in any twelve (12) month period;
(v) during the period starting with the date thirty (30) days
prior to the Company's estimated date of filing of, and ending on the date four
(4) months immediately following, the effective date of any registration
statement pertaining to securities of the Company (other than a registration of
securities in a Rule 145 transaction or with respect to any employee benefit
plan);
(vi) if the Company has already effected two (2) registrations
on Form S-3 for the holders pursuant to this Section 9.4; or
(vii) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
Subject to the foregoing, the Company shall file a Form S-3 registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the holders. Registrations effected pursuant to this Section 9.4 shall not
be counted as demands for registration or registrations effected pursuant to
Sections 9.1 or 9.3, respectively.
9.5 Company's Obligations in Registration. Whenever the Company is
obligated to effect the registration of any Registrable Securities under the
Securities Act, as expeditiously as possible the Company will use its best
efforts to:
(a) prepare and file with the Commission, a registration statement
with respect to such Registrable Securities and cause such registration
statement to become and remain effective, provided, that the Company shall not
be required to keep such registration statement effective, or to prepare and
file any amendments or supplements thereto, later than 150 days following the
date on which such registration statement becomes effective under the Securities
Act;
(b) subject to Section 9.5(a) hereof, prepare and file with the
Commission such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective and to comply with provisions of the Securities
Act with respect to the disposition of all Registrable Securities covered by
such registration statement whenever the holders of Registrable Securities
covered by such registration statement shall desire to dispose of the same;
(c) furnish to the holders of Registrable Securities for whom such
Registrable Securities are registered or are to be registered such numbers of
copies of a printed prospectus, including a preliminary prospectus and any
amendments or supplements thereto, in conformity with the requirements of the
Securities Act, and such other documents as such holders of
18
<PAGE>
Registrable Securities may reasonably request in order to facilitate the
disposition of such Registrable Securities;
(d) notify each holder of Registrable Securities, at any time when a
prospectus relating to the Registrable Securities covered by such registration
statement is required to be delivered under the Securities Act, of the Company's
becoming aware that the prospectus in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and at the request of any holder of Registrable
Securities, prepare and furnish to such holder any reasonable number of copies
of any supplement to or amendment of such prospectus necessary so that, as
thereafter delivered to any purchaser of the Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading;
(e) register or qualify the Registrable Securities covered by such
registration statement under such securities or blue sky laws of such
jurisdictions as the holders of Registrable Securities for whom such Registrable
Securities are registered or are to be registered shall reasonably request, and
do any and all other reasonable acts and things which may be necessary or
advisable to enable such holders of Registrable Securities to consummate the
disposition in such jurisdictions of such Registrable Securities;
(f) in the case of a Public Offering, use its reasonable best efforts
to furnish to the holders of Registrable Securities for whom such Registrable
Securities are registered or are to be registered an agreement satisfactory in
form and substance to them by the Company and each of its officers, directors
and holders of five percent or more of any class of capital stock, that during
the 30 days before and the 180 days after the effective date of any Public
Offering, the Company and such officers, directors and five percent security
holders shall not offer, sell, contract to sell or otherwise dispose of any
shares of capital stock or securities convertible into capital stock, except as
part of such Public Offering and except that gifts may be made to relatives or
their legal representatives upon the condition that the donees agree in writing
to be bound by the restrictions contained in this clause (f) of Section 9.5;
(g) in the case of a Public Offering, furnish to the holders of
Registrable Securities for whom such Registrable Securities are registered or
are to be registered at the closing of the sale of such Registrable Securities
by such holders of Registrable Securities a signed copy of: (i) an opinion or
opinions of counsel for the Company acceptable to such holders of Registrable
Securities in form and substance as is customarily given to underwriters in
public offerings, and (ii) a "cold comfort" letter from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accounts to underwriters in an
underwritten public offering, to the extent that such "cold comfort" letters are
then available to selling stockholders;
(h) otherwise use its efforts to comply with all applicable rules and
regulations of the Commission, and, if required, make available to its security
holders, as soon as reasonably practicable, an earning statement covering the
period of at least 12 months, but not more than eighteen months, beginning with
the first day of the Company's first calendar quarter
19
<PAGE>
after the effective date of the registration statement, which earning statement
shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(i) use its best efforts to cause all Registrable Securities
covered by such registration statement to be listed on the principal securities
exchange on which similar equity securities issued by the Company are then
listed, if the listing of such Registrable Securities is then permitted under
the rules of such exchange or, if similar equity securities are not listed, to
include the Registrable Securities on the National Association of Securities
Dealers Automated Quotation System;
(j) in connection with any Public Offering, enter into an
underwriting agreement with the underwriter(s) of such offering in the form
customary for such underwriter(s) for similar offerings, including such
representations and warranties by the Company, provisions regarding the delivery
of opinions of counsel for the Company and accountants' letters, provisions
regarding indemnification and contribution, and such other terms and conditions
as are at the time customarily contained in such underwriter's underwriting
agreements for similar offerings (and, at the request of any holder of
Registrable Securities that are to be distributed by such underwriter(s), any or
all (as requested by such holder) of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriter(s) shall also be made to and for the benefit of such holder); and
(k) permit any holder of Registrable Securities who, in the sole
judgment, exercised in good faith, of such holder, might be deemed to be a
controlling person of the Company, to participate in the preparation of such
registration statement and to require the insertion therein of material,
furnished to the Company in writing, that in the judgment of such holder, as
aforesaid, should be included.
9.6 Payment of Registration Expenses. The costs and expenses of all
registrations and qualifications under the Securities Act and of all other
actions which the Company is required to take or effect pursuant to this Section
9, shall be paid by the Company or holders of Third Party Registrable Securities
or other securities of the Company other than Registrable Securities, if any
(including, without limitation, all registration and filing fees, printing
expenses, auditing costs and expenses, and the reasonable fees and disbursements
of counsel for the Company and one special counsel for the holders of
Registrable Securities) and the holders of Registrable Securities shall pay only
the underwriting discounts and commissions and transfer taxes, if any, relating
to the Registrable Securities sold by them. The Company shall not be required to
pay for any expenses of any registration begun pursuant to Section 9.1 if the
registration request is subsequently withdrawn at the request of the holders of
a majority of the Registrable Securities to be registered (in which case all
participating holders shall bear such expenses), unless the holders of a
majority of the Preferred Shares agree to forfeit their right to one demand
registration pursuant to Section 9.1.
9.7 Information from Holders of Registrable Securities. Notices and
requests delivered by holders of Registrable Securities to the Company pursuant
to this Section 9 shall contain such information regarding the Registrable
Securities to be so registered and the intended method of disposition thereof as
shall reasonably be required in connection with the action to be taken. Each
holder of Registrable Securities hereby agrees to provide the Company, or its
agents
20
<PAGE>
or designees, with all information reasonably required in connection with the
registration under the Securities Act or any applicable state securities law of
any Registrable Securities.
9.8 Indemnification.
(a) In the event of any registration under the Securities Act of any
Registrable Securities pursuant to this Section 9, the Company shall indemnify
and hold harmless each holder of Registrable Securities disposing of such
Registrable Securities and each other person, if any, which controls (within the
meaning of the Securities Act) such holder of Registrable Securities and each
other person (including underwriters) who participates in the offering of such
Registrable Securities, against any losses, claims, damages or liabilities,
joint or several, to which such holder of Registrable Securities or controlling
person or participating person may become subject under the Securities Act or
otherwise, to the extent that such losses, claims, damages or liabilities (or
proceedings in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained, on the
effective date thereof, in any registration statement under which such
Registrable Securities were registered under the Securities Act, in any
preliminary prospectus or final prospectus contained therein, or in any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein (in the case of a prospectus, in the light of the circumstances under
which they were made) or necessary to make the statements therein not
misleading, and will reimburse such holder of Registrable Securities and each
such controlling person or participating person for any legal or any other
expenses reasonably incurred by such holder of Registrable Securities or such
controlling person or participating person in connection with investigating or
defending any such loss, claim, damage, liability or proceeding; provided, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, preliminary or final prospectus or amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by an instrument duly executed by such holder of Registrable
Securities or such controlling or participating person, as the case may be,
specifically for use in the preparation thereof. Each holder of Registrable
Securities will, if Registrable Securities held by such holder are included in a
registration under the Securities Act pursuant to this Section 9, severally but
not jointly, indemnify and hold harmless the Company and each person which
controls (within the meaning of the Securities Act) the Company and each other
person (including underwriters) who participates in the offering of such
Registrable Securities and each person which controls such person, against all
losses, claims, damages and liabilities to which the Company or such controlling
person or participating person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities arise out of
or are based upon any untrue statement of any material fact contained, on the
effective date thereof, in any registration statement under which such
Registrable Securities were registered under the Securities Act, or in any
preliminary prospectus or final prospectus contained therein, or in any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of a
prospectus, in the light of the circumstances under which they were made) not
misleading, to the extent that any such loss, claim, damage or liability arises
out of or is based upon any such statement or omission made in such registration
statement, preliminary or final prospectus or amendment or supplement
21
<PAGE>
in reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such holder of Registrable Securities
and stated to be specifically for use in connection with such registration. Each
indemnified party shall cooperate with each indemnifying party in defending any
loss, claim, damage, liability or proceeding.
(b) Indemnification similar to that specified in the preceding clause
of this Section 9.8 (with appropriate modifications) shall be given by the
Company and each holder of Registrable Securities with respect to any
registration or other qualification of securities under any state securities
laws.
(c) If the indemnification provided for in clause (a) and (b) of this
Section 9.8 is unavailable or insufficient to hold harmless an indemnified
party, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party referred to in clause (a) and (b) of this
Section 9.8 in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and the indemnified party on the other
hand in connection with statements or omissions which resulted in losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statements or omissions. The parties agree that
it would not be just and equitable if contributions pursuant to this clause were
to be determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in the
first sentence of this clause. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this clause shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any loss, claim, damage, liability or proceeding which is the
subject of this clause. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(d) Each indemnified party shall notify the indemnifying party in
writing within 10 days after its receipt of notice of the commencement of any
action against it in respect of which indemnity may be sought from the
indemnifying party pursuant to this Section 9.8. In case any such action shall
be brought against an indemnified party and it shall notify the indemnifying
party, the indemnifying party will be entitled to participate in the defense
with counsel reasonably satisfactory to such indemnified party. Each indemnified
party shall cooperate with each indemnifying party in defending any loss, claim,
damage, liability or proceeding.
(e) Notwithstanding clauses (a) through (c) of this Section 9.8, the
aggregate amount which may be recovered by the Company, controlling persons of
the Company or underwriters from each holder of Registrable Securities pursuant
to the indemnification and contribution provided for in this Section 9.8 shall
be limited to the total net proceeds for which the Registrable Securities were
sold by such holder of Registrable Securities.
22
<PAGE>
(f) Notwithstanding any of the foregoing, if, in connection with a
Public Offering of Registrable Securities, the Company, the selling stockholders
and the underwriter(s) enter into an underwriting agreement relating to such
Public Offering which contains provisions covering indemnification and
contribution among the parties, the indemnification and contribution provisions
of this Section 9.8 shall be deemed inoperative for purposes of such offering.
(g) The obligations of the Company and Stockholders under this
Section 9.8 shall survive completion of any offering of Registrable Securities
in a registration statement. No indemnifying party, in the defense of any such
claim or litigation, shall, except with the consent of each indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release of all liability in respect to such claim
or litigation.
9.9 Deliveries to Holders of Registrable Securities. The Company will use
its best efforts to promptly send by first-class mail, postage prepaid, to each
holder of Registrable Securities, at such holder's address appearing on the
Company's records, a copy of: (i) each registration statement filed by the
Company under the Securities Act and each amendment thereof and each exhibit and
schedule thereto and (ii) each order of the Securities and Exchange Commission
declaring any such registration statement to be effective.
SECTION 10. Duration of Agreement.
The rights and obligations of each Stockholder, except the rights and
obligations contained in Sections 3, 4.1(c), 8 and 9 hereof, and the covenants
hereunder to that Stockholder shall terminate as to each Stockholder upon the
closing of a Qualified Public Offering by the Company. The obligations
contained in Sections 3, 4.1(c), 8 and 9 shall survive indefinitely until, by
their respective terms, they are no longer applicable.
SECTION 11. Remedies.
In case any one or more of the covenants and/or agreements set forth in
this Agreement shall have been breached by any party hereto, the party or
parties entitled to the benefit of such covenants or agreements may proceed to
protect and enforce their rights either by suit in equity and/or by action at
law, including, but not limited to, an action for damages as a result of any
such breach; and/or an action for specific performance of any such covenant or
agreement contained in this Agreement and/or a temporary or permanent
injunction, in any case without showing any actual damage. The rights, powers
and remedies of the parties under this Agreement are cumulative and not
exclusive of any other right, power or remedy which such parties may have under
any other agreement or law. No single or partial assertion or exercise of any
right, power or remedy of a party, hereunder shall preclude any other or further
assertion or exercise thereof. Any purported Transfer in violation of the
provisions of this Agreement shall be void.
SECTION 12. Successors and Assigns.
Except as otherwise expressly provided herein, this Agreement shall bind
and inure to the benefit of the Company, each of the Stockholders and the
respective successors or heirs and
23
<PAGE>
personal representatives and permitted assigns of the Company and each of the
Stockholders. Each Stockholder agrees further that, except in connection with
Transfers by Stockholders pursuant to Section 4.2, such stockholder shall not
sell any Shares to any Person not a party to this Agreement unless such Person
becomes a party to this Agreement contemporaneously with such sale by executing
and delivering to the Company an agreement to be bound hereby, whereupon such
Person shall be deemed a Stockholder and shall have the same rights and
obligations as other Stockholders.
SECTION 13. Additional Stockholders.
The parties hereto acknowledge and agree that the Company may issue and
sell shares of Common Stock to Persons not presently a party to this Agreement,
provided, however, that: (i) all such sales are not made in violation of this
Agreement; and (ii) no shares of Common Stock shall be issued and sold to a
Person not presently a party to this Agreement unless and until such Person
becomes a party to this Agreement contemporaneously with such issuance and sale
by executing and delivering to the Company an agreement to be bound hereby,
whereupon such Person shall be deemed a Stockholder and shall have the same
rights and obligations as other Stockholders or agrees to be bound by and to
comply with provisions substantially identical to the provisions of Sections 3,
4.1, 4.2 and 5 hereof; provided, however, that the provisions of this section 13
shall not apply to Common Stock that is Excluded Stock.
SECTION 14. Entire Agreement.
This Agreement contains the entire agreement among the parties with respect
to the subject matter hereof and supersedes all prior Stockholders' agreements
and other prior and contemporaneous arrangements or understandings with respect
thereto. To the extent the provisions of this Agreement conflict with the
provisions contained in the Restricted Stock Agreements and the Restricted Stock
Option Agreements, provisions of this Agreement supersede such provisions of the
Restricted Stock Agreements and the Restricted Stock Option Agreements.
SECTION 15. Notices.
All notices, consents, and other communications under this Agreement shall
be in writing and shall be deemed to have been duly given: (a) when delivered by
hand, (b) one business day after the business day of transmission if sent by
telecopier (with receipt confirmed), provided that a copy is mailed by
registered mail, return receipt requested, or (c) one business day after the
business day of deposit with the carrier, if sent Express Mail, Federal Express
or other express delivery service (receipt requested), in each case to the
appropriate address telex numbers and telecopier numbers set forth below or in
Exhibit A hereto (or to such other addresses or telecopier numbers as a party
may designate by notice to the other parties):
If to the Company: Dendreon Corporation
3005 First Avenue
Seattle, Washington 98121
Facsimile No.: (206) 256-0571
Attention: Chief Executive Officer
24
<PAGE>
with a copy to: Cooley Godward LLP
3000 El Camino Real
Five Palo Alto Square
Palo Alto, CA 94306
Facsimile No: (650) 849-7400
Attention: Julie M. Robinson, Esq.
SECTION 16. Changes.
The terms and provisions of this Agreement may not be modified or amended,
or any of the provisions hereof waived, temporarily or permanently, except
pursuant to the written consent of: (i) the Company; (ii) the holders of a
majority of the voting power of the Shares; (iii) the holders of a majority of
the voting power of the Preferred Shares; (iv) the holders of a majority of the
voting power of the Founders Shares; and (v) with respect to Sections
4.4(a)(ii)(D) and 4.4(a)(v), of Kummell. Notwithstanding the foregoing, this
Agreement may be amended solely with the written consent of the Company to
include as additional parties hereto any purchasers of the Company's Series E
Preferred Stock in any subsequent Closing.
SECTION 17. Counterparts.
This Agreement may be executed in any number of counterparts and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
SECTION 18. Headings.
The headings of the various sections of this Agreement have been inserted
for convenience of reference only and shall not be deemed to be part of this
Agreement.
SECTION 19. Nouns and Pronouns.
Whenever the context may require, any pronouns used herein shall include
the corresponding masculine, feminine or neuter forms, and the singular form of
names and pronouns shall include the plural and vice-versa.
SECTION 20. Severability.
Any provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability. Such prohibition or unenforceability in
any one jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction.
SECTION 21. Governing Law; Jurisdiction.
This Agreement shall be governed by and construed under the laws of the
State of Delaware as applied to agreements among Delaware residents entered into
and to be performed entirely within Delaware.
25
<PAGE>
SECTION 22. Delays or Omissions.
It is agreed that no delay or omission to exercise any right, power, or
remedy accruing to any Stockholder upon any breach, default or noncompliance of
the Company under this Agreement shall impair any such right, power or remedy,
nor shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of any similar breach, default or
noncompliance thereafter occurring. It is further agreed that any waiver,
permit, consent or approval of any kind or character on any Stockholder's part
of any breach, default or noncompliance under this Agreement or any waiver on
such Stockholder's part of any provisions or conditions of this Agreement must
be in writing and shall be effective only to the extent specifically set forth
in such writing. All remedies, either under this Agreement, by law, or otherwise
afforded to Stockholders, shall be cumulative and not alternative.
26
<PAGE>
In Witness Whereof, the parties have executed this Agreement on the date
first above written, in the case of corporations, by their respective officers
thereunto duly authorized.
Dendreon Corporation
By: /s/ Martin A. Simonetti
-------------------------
Martin A. Simonetti
Chief Financial Officer
STOCKHOLDERS:
/s/ * set forth below is a schedule of
persons and entities who have signed and
are parties to this agreement
*
HealthCare Ventures III, L.P.
HealthCare Ventures IV, L.P.
Dr. Sam Strober
Dr. Edgar Engleman
Dr. William Haseltine
Erik N. Engleman
Jason Engleman
Edgar G. Engleman and Judith L. Engleman,
as Trustees for the Engleman Family Trust
Jason M. Strober
Elizabeth E. Strober
Everest Trust
Hudson Trust
Shaw Venture Partners III, L.P.
Vulcan Ventures Incorporated
Sanderling Venture Partners III, L.P.
[FOURTH AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT]
<PAGE>
Sanderling III Limited Partnership
Singapore Bio-Innovations Pte Ltd.
Refco Group, Ltd.
Sanderling III Biomedical, L.P.
Sanderling Ventures Management
Sanderling Venture Partners IV Co-
Investment Fund, L.P.
Soloman and Matilda Amon
Amon Investments, L.P.
HCA Enterprise Worldwide, LLC
Colin H. Owen
William F. Hamilton
Sears Living Trust DTD 3/11/91
GC&H Investments
Peter S. Garcia
Prithipal Singh
Bobby H. Singh
Clyde W. Shores
Jane R. Shores
Universite Libre De Bruxelles
Jacques Urbain
Kristianan Thielemans
Shipley Raidy Capital Partners, L.P.
Sanderling IV Biomedical
Co-investment Fund, L.P.
[FOURTH AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT]
<PAGE>
Health Care Ventures V, L.P.
Richard J. Bastiani UTA
Charles Schwab & Co. Inc.
IRA contributory DTD 01/08/86
Martin A. and Mary Ann Simonetti
Kummell Investments Limited
Kirin Brewery Company, Limited
Jerry Weisbach
Alexandria Real Estate Equities, L.P.
New York Life Insurance Co.
[FOURTH AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT]
<PAGE>
EXHIBIT A
List of Stockholders (Parties to the Stockholders' Agreement)
Investors
HealthCare Ventures III, L.P. ("HCV III")
c/o HealthCare Investment Corporation
44 Nassau Street
Princeton, New Jersey 08542-4506
Telecopier No.: (609) 430-9525
Attention: William Crouse
HealthCare Ventures IV, L.P. ("HCV IV")
c/o HealthCare Investment Corporation
44 Nassau Street
Princeton, New Jersey 08542-4506
Telecopier No.: (609) 430-9525
Attention: William Crouse
(copies of notices to HCV III or HCV IV should be sent to:
Bachner, Tally, Polevoy & Misher
380 Madison Avenue
New York, New York 10017
Telecopier No.: (212) 682-5729
Attention: Steven A. Fishman, Esq.)
Everest Trust:
c/o Rho Management Company, Inc.
767 Fifth Avenue -- 43rd Floor
New York, New York 10153
Telecopier No.: (212) 751-3613
Attention: Joshua Ruch
Hudson Trust:
c/o Summit Asset Management Co., Inc.
47 Hulfish Street, Suite 420
Princeton, New Jersey 08542
Telecopier No.: (609) 279-1892
Attention: Scott Ciccone
(copies of notices to Everest Trust or Hudson Trust should be sent to:
<PAGE>
Gregory F.W. Todd, Esq.
900 Third Avenue
New York, New York 10022
Telecopier No.: (212) 355-7674)
Founders
Dr. Samuel Strober, Jason Strober, or Elizabeth Strober
405 Minoca Drive
Portola Valley, CA 94611
Edgar, Jason or Eric Engleman or to the Engleman Family Trust:
c/o Dr. Ed Engleman
60 Lane Place
Atherton, CA 94027
Shaw
Shaw Venture Partners, L.P.
400 Southwest Sixth Avenue, Suite 1100
Portland, Oregon 97204-1636
Telecopier No.: (503) 227-2471
Attention: Ralph Shaw
Additional Stockholders
Dr. Haseltine:
c/o Human Genome Sciences, Inc.
6410 Key West Avenue
Rockville, MD 20850
<PAGE>
Kummell Investments Limited
Suite 835A, Europort
Gibraltar (via London)
Copies of all notices and correspondence to:
Alice Li
Springfield Financial Advisory Limited
22nd Floor, Hang Lung Centre
2-20 Paterson Street
Causeway Bay, Hong Kong
Tel: (852) 2576-6800
Telecopier No.: (852) 2881-5741
Stephanie Monaghan O'Brien
Springfield & Company
1188 Centre Street
Newton Centre, MA 02159
Tel: (617) 244-2800
Telecopier No.: (617) 244-2889
Universite Libre De Bruxelles
Department Recherche
Avenue F.D. Roosevelt 50
CP 161
B-1050 Bruxelles
Belgium
Telecopier No. 32-2-650 35 2-850 32 04
Attn: Jean-Louis Vanherweghem
Jacques Urbain
Universite Libre De Bruxelles
Department Recherche
Avenue F.D. Roosevelt 50
CP 161
B-1050 Bruxelles
Belgium
Telecopier No. 32-2-650 35 2-850 32 04
<PAGE>
Kristiaan Thielemans
Universite Libre De Bruxelles
Department Recherche
Avenue F.D. Roosevelt 50
CP 161
B-1050 Bruxelles
Belgium
Telecopier No.: 32-2-650 35 2-850 32 04
Shipley Raidy Capital Partners, L.P.
One Tower Bridge
Suite 1370
West Conshohocken, PA 19428
Telecopier No. (610) 828-4131
Attn: Kevin J. Raidy
Sanderling IV Biomedical Co-Investment Fund, L.P.
2730 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Telecopier No. (415) 854-3648
Attn: Fred A. Middleton
Sanderling Venture Partners IV Co-Investment Fund, L.P.
2730 Sand Hill Road, Suite 200
Menlo Park, CA 94025
Telecopier No.: (415) 854-3648
Attn: Fred A. Middleton
Health Care Ventures V, L.P ("HCV V")
c/o HealthCare Investment Corporation
44 Nassau Street
Princeton, New Jersey 08542-4506
Telecopier No.: (609) 430-9525
Attn: William Crouse
Copies of notices to HCV V should be sent to:
Bachner, Tally, Polevoy & Misher
380 Madison Avenue
New York, New York 10017
Telecopier No.: (212) 682-5729
Richard J. Bastiani UTA Charles Schwab & Co Inc
IRA Contributory DTD 01/08/86
18700 Serramonte Drive
Los Gatos, California 95030
Telecopier No. (408) 395-0214
Attn: Richard J. Bastiani
<PAGE>
Shaw Venture Partners, L.P.
400 Southwest Sixth Avenue, Suite 1100
Portland, Oregon 97204-1636
Telecopier No.: (503) 227-2471
Attention: Ralph Shaw
Kirin Brewery Company, Limited
26-1 Jingumae 6-chome
Shibuya-ku, Tokyo
150-8011
Telecopier No.: +81-3-3499-6152
Attention: Akihiro Shimosaka
Vulcan Ventures Incorporated
110 - 110th Avenue NE, Suite 550
Bellevue, WA 98004
Telecopier No.: (425) 453-1985
Attention: William D. Savoy
New York Life Insurance Company
51 Madison Avenue
New York, NY 10010
Telecopier No.: (212) 576-8080
Attention: Richard F. Drake
Alexandria Real Estate Equities, L.P.
135 North Los Robles Avenue, Suite 250
Pasadena, California 91101
Telecopier No.: (626) 578-0770
Attention: Joel S. Marcus
GC&H Investments
One Maritime Plaza, 20th Floor
San Francisco, CA 94111
Telecopier No.: (415) 951-3699
Attention: John L. Cardoza
Martin A. and Mary Ann Simonetti
4553 84th Avenue SE
Mercer Island, WA 98040
Sears Living Trust DTD 3/11/91
70 Cheyenne Point
Portola Valley, CA 94028-7623
Telecopier No.: (650) 851-5052
<PAGE>
Jerry A. Weisbach
1351 Glendaloch Circle
Ann Arbor, Michigan 48104
Telecopier No.: (734) 668-4160
Attention: Jerry A. Weisbach
<PAGE>
EXHIBIT B
Purchasers of the Company's Series E Preferred Stock
FIRST CLOSING:
Vulcan Ventures Inc.
GC&H Investments
Sears Living Trust Dtd. 3/11/91
Martin A. and Mary Ann Simonetti
SECOND CLOSING:
HealthCare Ventures V, L.P.
Sanderling Venture Partners IV Co-Investment Fund, L.P.
THIRD CLOSING:
Kummell Investments Limited
New York Life Insurance Company
FOURTH CLOSING:
Shaw Venture Partners III, L.P.
FIFTH CLOSING:
Leavitt Investments, LP
<PAGE>
EXHIBIT 10.5
DENDREON CORPORATION
SERIES D PREFERRED STOCK
PURCHASE AGREEMENT
July 10, 1998
<PAGE>
Table Of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
1. AGREEMENT TO SELL AND PURCHASE..................................... 1
1.1 Sale and Issuance of Shares............................... 1
1.2 Closing................................................... 1
1.3 Subsequent Sale of Shares................................. 2
1.4 Delivery.................................................. 2
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................... 2
2.1 Organization; Good Standing; Qualifications............... 2
2.2 Authorization............................................. 3
2.3 Valid Issuance of Preferred and Common Stock.............. 3
2.4 Governmental Consents..................................... 3
2.5 Capitalization and Voting Rights.......................... 4
2.6 Subsidiaries.............................................. 5
2.7 Financial Statements...................................... 5
2.8 Tax Returns, Payments and Elections....................... 5
2.9 Contracts and Other Commitments........................... 5
2.10 Registration Rights....................................... 6
2.11 Compliance With Other Instruments......................... 6
2.12 Litigation................................................ 6
2.13 Disclosure................................................ 7
2.14 Offering.................................................. 7
2.15 Proprietary Information and Inventions Agreements......... 7
2.16 Section 83(b) Elections................................... 7
2.17 Compliance with Applicable Securities Laws................ 7
2.18 Compliance with Laws...................................... 7
2.19 Patents, Trademarks, Etc.................................. 8
2.20 Title to and Condition of Properties...................... 8
2.21 Basic Financial Information And Reporting................. 8
3. REPRESENTATIONS AND WARRANTIES OF INVESTORS........................ 9
3.1 Authorization............................................. 9
3.2 Purchase Entirely for Own Account......................... 9
</TABLE>
i.
<PAGE>
Table Of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
3.3 Reliance Upon Investors' Representations....................... 10
3.4 Receipt of Information......................................... 10
3.5 Investment Experience.......................................... 10
3.6 Accredited Investor or Qualified Regulation S Purchaser........ 10
3.7 Restricted Securities.......................................... 12
3.8 Legends........................................................ 12
3.9 Public Sale.................................................... 13
3.10 Investor Location.............................................. 13
4. CONDITIONS OF INVESTORS' OBLIGATIONS AT CLOSING...................... 13
4.1 Representations and Warranties................................. 14
4.2 Performance.................................................... 14
4.3 Compliance Certificate......................................... 14
4.4 Qualifications................................................. 14
4.5 Stockholders' Agreement........................................ 14
4.6 Opinion of Company Counsel..................................... 14
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING................... 14
5.1 Representations and Warranties................................. 14
5.2 Qualifications................................................. 15
6. MISCELLANEOUS........................................................ 15
6.1 Entire Agreement............................................... 15
6.2 Survival of Warranties......................................... 15
6.3 Successors and Assigns......................................... 15
6.4 Governing Law.................................................. 15
6.5 Counterparts................................................... 15
6.6 Titles and Subtitles........................................... 16
6.7 Notices........................................................ 16
6.8 Payment of Fees and Expenses................................... 16
6.9 Amendments and Waivers......................................... 16
6.10 Severability................................................... 16
6.11 California Corporate Securities Law............................ 17
</TABLE>
ii.
<PAGE>
Table Of Contents
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
6.12 Effect of Amendment or Waiver............................. 17
6.13 Rights of Investors....................................... 17
6.14 Exculpation Among Investors............................... 17
6.15 Qualified Small Business Stock............................ 17
</TABLE>
Schedule 1 - First Closing Investors
Schedule 2 - Schedule of Exceptions
iii.
<PAGE>
DENDREON CORPORATION
SERIES D PREFERRED STOCK
PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of the 10th day
of July 1998, by and between Dendreon Corporation, a Delaware corporation (the
"Company"), and each of those persons and entities, severally and not jointly,
whose names are set forth on Schedule 1 attached hereto (which persons and
entities are hereinafter collectively referred to as "Investors" and each
individually as an "Investor").
Recitals
Whereas, the Company has authorized the sale and issuance of an aggregate
of two million thirty thousand (2,030,000) shares of its Series D Preferred
Stock (the "Shares");
Whereas, the Investors desire to purchase the Shares on the terms and
conditions set forth herein; and
Whereas, the Company desires to issue and sell the Shares to Investors on
the terms and conditions set forth herein.
Now, Therefore, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. Agreement to Sell and Purchase.
1.1 Sale and Issuance of Shares.
(a) The Company shall adopt and file with the Secretary of State
of Delaware prior to the Closing (as defined below) an Amended and Restated
Certificate of Incorporation in the form attached hereto as Exhibit A (the
---------
"Restated Certificate").
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase at the Closing and the
Company agrees to sell and issue to each Investor, severally and not jointly, at
the Closing that number of Shares set forth opposite each Investor's name on
Schedule 1 hereto at a price of $5.00 per share. The Shares will have the
rights, preferences and privileges set forth in the Restated Certificate.
1.2 Closing.
The first closing for the purchase and sale of the Shares shall
take place at the offices of Cooley Godward llp, Palo Alto, California, at 4:30
p.m., on July 10, 1998 (the "First Closing"), or at such other time and place as
the Company and Investors acquiring in the aggregate more than half the Shares
being sold pursuant hereto at such closing shall mutually agree, either orally
or in writing.
1.
<PAGE>
1.3 Subsequent Sale of Shares.
Subject to the terms and conditions of this Agreement, in the
event that not all of the authorized Shares are sold at the First Closing the
Company may sell in one or more additional Closings, on or before August 14,
1998 (each, a "Subsequent Closing"), any authorized but unissued Shares at the
same price per share as the Shares purchased and sold at the First Closing. Any
such investor at a Subsequent Closing shall then become an "Investor" under this
Agreement. At or prior to a Subsequent Closing, any such Investor shall execute
a counterpart copy of this Agreement and any related agreements or other
documents required to be executed hereunder, and shall thereupon become a party
to this Agreement, the Stockholders' Agreement (as defined below) and any
Ancillary Agreements (as defined below), and shall have the rights and
obligations of an Investor hereunder and thereunder. The First Closing and any
Subsequent Closing shall be referred to collectively herein as the "Closings"
and singularly as a "Closing."
1.4 Delivery.
At the Closing, the Company shall deliver to each Investor a
certificate representing the shares of Shares that such Investor is purchasing
against payment of the purchase price therefor by check, wire transfer,
cancellation of indebtedness, or such other form of payment as shall be mutually
agreed upon by such Investor and the Company. In the event that payment by an
Investor is made, in whole or in part, by cancellation or conversion of
indebtedness, then such Investor shall surrender to the Company for cancellation
at the Closing any evidence of such indebtedness or shall execute an instrument
of cancellation in form and substance acceptable to the Company. In addition,
the Company at the Closing shall deliver to any Investor choosing to pay any
part of the purchase price of the Shares by cancellation of indebtedness, a
check in the amount of any uncancelled interest accrued on such indebtedness
through the Closing, or the number of Shares such interest would purchase at the
purchase price of $5.00 per share, plus a check in lieu of any fractional share
in the amount of any remaining interest in an amount less than $5.00.
2. Representations and Warranties of the Company.
The Company hereby represents and warrants to each Investor that, on
the date of this Agreement, except as set forth in the Schedule of Exceptions
attached hereto as Schedule 2:
2.1 Organization; Good Standing; Qualifications.
The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware, has all requisite
corporate power and authority to own and operate its properties and assets and
to carry on its business as now conducted and as proposed to be conducted, to
execute and deliver this Agreement, the Third Amended and Restated Stockholders'
Agreement attached hereto as Exhibit B (the "Stockholders' Agreement"), and any
---------
other agreement to which the Company is a party the execution and delivery of
which is contemplated hereby (the "Ancillary Agreements"), to issue and sell the
Shares and the Common Stock issuable upon conversion thereof, and to carry out
the provisions of this Agreement, the Stockholders' Agreement, the Restated
Certificate and any
2.
<PAGE>
Ancillary Agreements. The Company is in possession of and operating in
compliance with all authorizations, licenses, permits, consents, certificates
and orders material to the conduct of its business, all of which are valid and
in full force and effect. The Company is duly qualified to transact business and
is in good standing in each jurisdiction in which the failure to qualify would
have a material adverse effect on its business, properties, prospects, or
financial condition.
2.2 Authorization.
All corporate action on the part of the Company, its officers,
directors and stockholders necessary for the authorization, execution and
delivery of this Agreement, the Stockholders' Agreement and any Ancillary
Agreement, the performance of all obligations of the Company hereunder and
thereunder at each Closing and the authorization, issuance (or reservation for
issuance), sale, and delivery of the Shares being sold hereunder and the Common
Stock issuable upon conversion thereof has been taken or will be taken prior to
each Closing, and this Agreement, the Stockholders' Agreement and any Ancillary
Agreements constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally; (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies; and (iii) to the extent the
indemnification provisions contained in the Stockholders' Agreement may be
limited by applicable federal or state securities law.
2.3 Valid Issuance of Preferred and Common Stock.
The Shares that are being purchased by the Investors hereunder,
when issued, sold, and delivered in accordance with the terms of this Agreement
for the consideration expressed herein, will be duly and validly issued, fully
paid, and nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Stockholders' Agreement
and under the Company's Bylaws (the "Bylaws") and applicable state and federal
securities laws. The Common Stock issuable upon conversion of the Shares
purchased under this Agreement has been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the Restated Certificate,
will be duly and validly issued, fully paid, and nonassessable and will be free
of restrictions on transfer other than restrictions on transfer under this
Agreement and the Stockholders' Agreement and under the Bylaws and applicable
state and federal securities laws.
2.4 Governmental Consents.
No consent, approval, qualification, order or authorization of,
or filing with, any local, state, or federal governmental authority is required
on the part of the Company in connection with the Company's valid execution,
delivery, or performance of this Agreement, the offer, sale or issuance of the
Shares by the Company or the issuance of Common Stock upon conversion of the
Shares, except (i) the filing of the Restated Certificate with the Secretary of
State of the State of Delaware, and (ii) such filings as have been made prior to
the Closing, and any notices of sale required to be filed with the Securities
and Exchange Commission under Regulation D of the Securities Act of 1933, as
amended (the "Securities Act"), or such post-
3.
<PAGE>
closing filings as may be required under applicable state securities laws, which
will be timely filed within the applicable periods therefor.
2.5 Capitalization and Voting Rights.
The authorized capital of the Company consists, or will consist
prior to the Closing, of:
(a) Preferred Stock. 10,110,054 shares of Preferred Stock, $.001
par value (the "Preferred Stock"), of which 507,500 shares have been designated
Series A Preferred Stock, 499,999 of which are issued and outstanding; 4,264,375
shares have been designated Series B Preferred Stock, 4,264,346 of which are
issued and outstanding; 3,308,179 shares have been designated Series C Preferred
Stock, 3,308,179 of which are issued and outstanding; and 2,030,000 shares have
been designated Series D Preferred Stock, none of which will be issued and
outstanding prior to the First Closing. The rights, privileges and preferences
of the Series A, Series B, Series C and Series D Preferred Stock will be as
stated in the Restated Certificate.
(b) Common Stock. 13,450,000 shares of common stock ("Common
Stock") $.001 par value, of which 562,668 shares are issued and outstanding.
(c) The outstanding shares of Common Stock have been issued in
accordance with the registration or qualification provisions of the Securities
Act and any relevant state securities laws or pursuant to valid exemptions
therefrom.
(d) There are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first refusal), or
agreements for the purchase or acquisition from the Company of any shares of its
capital stock except for (a) the conversion privileges of the Series A, Series
B, and Series C Preferred Stock outstanding or issuable pursuant to outstanding
warrants; (b) outstanding options to purchase 72,879 shares of the Company's
Common Stock pursuant to its 1993 Stock Option Plan (the "1993 Option Plan");
(c) outstanding options to purchase 1,692,805 shares of the Company's Common
Stock pursuant to its 1996 Equity Incentive Plan (the "1996 Plan"); (d)
outstanding warrants to purchase 145,627 shares of the Company's Common Stock;
(e) outstanding warrants to purchase 7,500 shares of the Company's Series A
Preferred Stock; (f) rights held by certain of the Company's stockholders
pursuant to the Second Amended and Restated Stockholders' Agreement, dated as of
August 15, 1997 (the "Stockholders' Agreement"); and (g) an agreement with a
finder providing for the issuance of warrants to purchase shares of the
Company's capital stock in connection with purchases of the Shares made by
Investors referred by such finder. The Company does not anticipate issuing any
additional options to purchase shares of its Common Stock pursuant to the 1993
Option Plan. The Company has reserved 2,500,000 shares of its Common Stock for
issuance under the 1996 Plan, of which 410,617 shares remain available for grant
as of the date hereof. The Company is not a party or subject to any agreement or
understanding, and, to the best of the Company's knowledge, there is no
agreement or understanding between any persons that affects or relates to the
voting or giving of written consents with respect to any security or the voting
by a director of the Company, except for the Stockholders' Agreement.
4.
<PAGE>
2.6 Subsidiaries.
The Company has no subsidiaries and does not otherwise own or
control, directly or indirectly, any other corporation, association, or other
business entity.
2.7 Financial Statements.
The Company has delivered to each Investor its audited financial
statements (balance sheet, statement of profit and loss, statement of
stockholders equity and statement of cash flows) for the fiscal year ended
December 31, 1997 and its unaudited financial statements (balance sheet,
statement of profit and loss, statement of stockholders equity and statement of
cash flows) for the three month period ended March 31, 1998 (collectively, the
"Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") (except that
the unaudited financial statements do not contain all footnotes required by
GAAP) applied on a consistent basis throughout the periods indicated. The
Financial Statements fairly present the financial condition and operating
results of the Company as of the dates, and for the periods, indicated therein,
subject, in the case of the unaudited financial statements, to normal year-end
audit adjustments, which adjustments the Company believes will not be material.
Except for spending in accordance with its current plan, since December 31,
1997, there has been no material adverse change in the operations or financial
condition of the Company.
2.8 Tax Returns, Payments and Elections.
All material tax returns required to be filed by the Company in
any jurisdiction (including foreign jurisdictions) have been timely filed, and
all material taxes, assessments, fees and other charges (including, without
limitation, withholding taxes, penalties and interest) due or claimed to be due
from the Company that are due and payable have been paid, other than those (i)
being contested in good faith and for which an adequate reserve or accrual has
been established or (ii) those currently payable without penalty or interest and
for which an adequate reserve or accrual has been established or extensions duly
filed. The Company knows of no actual or proposed additional tax assessments or
any reason for the imposition or proposal of any additional tax assessments for
any fiscal period against the Company that would, singly or in the aggregate,
reasonably be expected to have a material adverse effect on the Company. Neither
the Company's income nor franchise tax returns are under audit and no waivers of
the statute of limitations or extensions of time with respect to any tax returns
have been granted by the Company.
2.9 Contracts and Other Commitments.
The Company does not have any material contract, agreement,
lease, commitment written or oral, absolute or contingent, other than (i)
contracts for the purchase of supplies and services that were entered into in
the ordinary course of business and that do not involve more than $200,000, and
do not extend for more than one (1) year beyond the date hereof; and (ii)
contracts terminable at will by the Company on no more than thirty (30) days'
notice without cost or liability to the Company and that do not involve any
employment or consulting arrangement and are not material to the conduct of the
Company's business. For the
5.
<PAGE>
purpose of this paragraph, material employment and consulting contracts and
contracts with labor unions, and license agreements and any other agreements
relating to the acquisition or disposition of the Company's technology (other
than standard end-user license agreements) shall not be considered to be
contracts entered into in the ordinary course of business.
2.10 Registration Rights.
Except as provided in the Stockholders' Agreement, the Company is
not obligated to register under the Securities Act any of its presently
outstanding securities or any of its securities that may subsequently be issued.
2.11 Compliance With Other Instruments.
The Company is not in violation or default in any respect of any
provision of its Restated Certificate of Incorporation, as amended, or Bylaws or
in any material respect of any provision of any mortgage, indenture, agreement,
instrument, or contract to which it is a party or by which it is bound or, to
the best of its knowledge, of any federal or state judgment, order, writ,
decree, statute, rule, or regulation applicable to the Company. The execution,
delivery, and performance by the Company of this Agreement, the Stockholders'
Agreement and any Ancillary Agreement, and the consummation of the transactions
contemplated hereby and thereby will not result in any such violation or be in
material conflict with or constitute, with or without the passage of time or
giving of notice, either a material default under any such provision or an event
that results in the creation of any material lien, charge, or encumbrance upon
any assets of the Company or the suspension, revocation, impairment, forfeiture,
or nonrenewal of any material permit, license, authorization, or approval
applicable to the Company, its business or operations, or any of its assets or
properties.
2.12 Litigation.
There is no action, suit, proceeding, or investigation pending or
currently threatened against the Company that (i) questions the validity of this
Agreement, the Stockholders' Agreement and any Ancillary Agreement or the right
of the Company to enter into such agreements, or to consummate the transactions
contemplated hereby or thereby, or (ii) that might result, either individually
or in the aggregate, in any material adverse change in the assets, business,
properties, prospects, or financial condition of the Company, or in any material
change in the current equity ownership of the Company. The foregoing includes,
without limitation, any action, suit, proceeding, or investigation pending or
currently threatened involving the prior employment of any of the Company's
employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, their obligations under any agreements with prior employers, or
negotiations by the Company with potential backers of, or investors in, the
Company or its proposed business. The Company is not a party to, or to the best
of its knowledge, named in any order, writ, injunction, judgment, or decree of
any court, government agency, or instrumentality. There is no action, suit, or
proceeding by the Company currently pending or that the Company currently
intends to initiate.
6.
<PAGE>
2.13 Disclosure.
The Company has provided each Investor with all the information
reasonably available to it without undue expense that such Investor has
requested for deciding whether to purchase the Shares and all information that
the Company has and that it believes is reasonably necessary to enable such
Investor to make such decision. Neither this Agreement nor any other written
statements or certificates made or delivered pursuant to this Agreement contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements herein or therein not misleading.
2.14 Offering.
Subject in part to the truth and accuracy of each Investor's
representations set forth in this Agreement, the offer, sale and issuance of the
Shares as contemplated by this Agreement are exempt from the registration
requirements of the Securities Act, and neither the Company nor any authorized
agent acting on its behalf will take any action hereafter that would cause the
loss of such exemption.
2.15 Proprietary Information and Inventions Agreements.
Each employee and officer of the Company has executed a
Proprietary Information and Inventions Agreement substantially in the form
attached hereto as Exhibit D.
---------
2.16 Section 83(b) Elections.
To the best of the Company's knowledge, all individuals who have
purchased shares of the Company's Common Stock that are subject to vesting
restrictions have timely filed elections under Section 83(b) of the Internal
Revenue Code and any analogous provisions of applicable state tax laws.
2.17 Compliance with Applicable Securities Laws.
The Company will comply with the requirements of Regulation S
promulgated under the Securities Act and/or Regulation D promulgated under the
Securities Act, as applicable, and with Section 25102(f) of the California
Corporate Securities Law, as amended, and any other applicable state securities
laws in connection with the offer and sale of Shares to any Investor.
2.18 Compliance with Laws.
The Company has obtained all licenses, permits, franchises or
other governmental authorizations necessary for the ownership or operation of
its properties or the conduct of its business as currently conducted, except as
would not have a material adverse effect on the Company. The Company is not in
violation of any law applicable to the ownership or operation of its properties
or the conduct of its business, except as would not have a material adverse
effect on the Company.
7.
<PAGE>
2.19 Patents, Trademarks, Etc.
To the best of the Company's knowledge, the Company owns, or is
licensed under, and has the right to use, all patents, trademarks, trade names,
copyrights, technology, know how and processes (collectively, "Intellectual
Property") necessary for the conduct of its business as now conducted and as
proposed to be conducted. The consummation of the transactions contemplated by
this Agreement will not alter or impair any such rights. The Company has not
received any communications asserting the rights to use the Company's
Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement related thereto, nor has the Company
received any communications asserting that the use of such Intellectual Property
by the Company infringes on the rights of any person. No officer, director or
employee of the Company owns or holds, directly or indirectly, any interest in
the Company's Intellectual Property. Neither the Company nor, to the best of the
Company's knowledge, any of its employees, is in violation of any agreement or
commitment to any prior employer or any other person in regard to the ownership
of inventions or developments or the maintenance of confidentiality of trade
secrets.
2.20 Title to and Condition of Properties.
Except (i) as reflected in the Financial Statements (as defined
in paragraph 2.7), (ii) for liens for current taxes not yet delinquent, (iii)
for liens imposed by law and incurred in the ordinary course of business for
obligations not past due to carriers, warehousemen, laborers, materialmen and
the like, (iv) for liens in respect of pledges or deposits under workers'
compensation laws or similar legislation, or (v) for minor defects in title,
none of which, individually or in the aggregate, materially interferes with the
use of such property, the Company (a) has good and marketable title to all the
real or personal properties and other assets (tangible, intangible or mixed) it
purports to own, free and clear of all material liens, and (b) enjoys peaceful
and undisturbed possession under all material leases to which the Company is a
party as lessee. All material leases and other material agreements to which the
Company is a party are valid and binding and in full force and effect. No
default has occurred or is continuing under such leases and other agreements,
and no consent need be obtained (other than consents that will be obtained prior
to the Closing) from any person in respect of any such lease or agreement in
connection with the transactions contemplated by this Agreement, except to the
extent that any such defaults, or the failure to obtain any such consents, could
not, singly or in the aggregate, reasonably be expected to have a material
adverse effect on the Company. The properties used in the conduct of the
business of the Company are in good repair and working order, except to such
extent as would not, singly or in the aggregate, reasonably be expected to have
a material adverse effect on the Company. The Company maintains such insurance
as may be required by law and such other insurance, to such extent and against
such hazards and liabilities, as the Company believes is reasonably necessary.
2.21 Basic Financial Information And Reporting.
(a) As soon as practicable after the end of each fiscal year of
the Company, the Company will furnish each Investor a consolidated balance sheet
of the Company, as at the end of such fiscal year, and a consolidated statement
of income and a consolidated statement of cash flows of the Company, for such
year, all prepared in accordance with generally
8.
<PAGE>
accepted accounting principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail. Such financial statements shall be accompanied by a report
and opinion thereon by independent public accountants of national standing
selected by the Company's Board of Directors.
(b) The Company will furnish each Investor, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, a consolidated balance sheet of the
Company as of the end of each such quarterly period, and a consolidated
statement of income and a consolidated statement of cash flows of the Company
for such period and for the current fiscal year to date, prepared in accordance
with generally accepted accounting principles, with the exception that no notes
need be attached to such statements and year-end audit adjustments may not have
been made.
3. Representations and Warranties of Investors.
Each Investor hereby, severally and not jointly, represents and
warrants that:
3.1 Authorization.
Such Investor has full power and authority to enter into this
Agreement and that this Agreement constitutes a valid and legally binding
obligation of such Investor.
3.2 Purchase Entirely for Own Account.
(a) This Agreement is made with each Investor identified on
Schedule 1 as a Regulation D Investor (each a "Regulation D Investor") in
reliance upon such Investor's representation to the Company, which by such
Investor's execution of this Agreement such Investor hereby confirms, that the
Shares to be purchased by such Investor and the Common Stock issuable upon
conversion thereof (collectively, the "Regulation D Securities") will be
acquired for investment for such Investor's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that such Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, each Investor further represents that such Investor does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Regulation D Securities.
(b) This Agreement is made with each Investor identified on
Schedule 1 as a Regulation S Investor (each a "Regulation S Investor") in
reliance upon such Investor's representation to the Company, which by such
Investor's execution of this Agreement such Investor hereby confirms, that the
Shares to be purchased by such Investor and the Common Stock issuable upon
conversion thereof (collectively, the "Regulation S Securities") (the Regulation
D Securities and the Regulation S Securities being sometimes collectively
referred to herein as the "Securities") will be acquired for investment for such
Investor's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof in the United States or to a United
States resident, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, each Investor further represents that such Investor does not
have any
9.
<PAGE>
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person in the
United States or to a United States Resident, with respect to any of the
Regulation S Securities.
3.3 Reliance Upon Investors' Representations.
Each Investor understands that the Securities are not, and any
Common Stock acquired on conversion thereof at the time of issuance may not be,
registered under the Securities Act on the ground that the sale provided for in
this Agreement and the issuance of securities hereunder is exempt from
registration under the Securities Act pursuant to Section 4(2) thereof (in the
case of Regulation D Securities) or Regulation S thereunder (in the case of
Regulation S Securities), and that the Company's reliance on such exemptions is
predicated on the Investors' representations set forth herein. Each Regulation D
Investor realizes that the basis for the exemption may not be present if,
notwithstanding such representations, the Investor has in mind merely acquiring
the Regulation D Securities for a fixed or determinable period in the future,
for sale if the market rises, or for sale if the market does not rise. No
Regulation D Investor has any such intention.
3.4 Receipt of Information.
Each Investor believes such Investor has received all the
information such Investor considers necessary or appropriate for deciding
whether to purchase the Shares. Each Investor further represents that such
Investor has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of the Shares and the
business, properties, prospects, and financial condition of the Company and to
obtain such additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to such Investor
or to which such Investor had access. The foregoing, however, does not limit or
modify the representations and warranties of the Company in Section 2 of this
Agreement or the right of the Investors to rely thereon.
3.5 Investment Experience.
Each Investor represents that such Investor is experienced in
evaluating and investing in securities of companies in the early stages of
product research and development and acknowledges that such Investor is able to
fend for himself, herself or itself, can bear the economic risk of such
Investor's investment, and has such knowledge and experience in financial and
business matters that such Investor is capable of evaluating the merits and
risks of the investment in the Shares. If other than an individual, Investor
also represents that such Investor has not been organized for the purpose of
acquiring the Shares.
3.6 Accredited Investor or Qualified Regulation S Purchaser.
(a) The term "Accredited Investor" as used herein refers to:
(i) A person or entity who is a director or executive
officer of the Company;
10.
<PAGE>
(ii) Any bank as defined in Section 3(a)(2) of the
Securities Act, or any savings and loan association or other institution as
defined in Section 3(a)(5)(A) of the Securities Act whether acting in its
individual or fiduciary capacity; any broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934; any insurance Company
registered under the Investment Company Act of 1940 or a business development
Company as defined in Section 2(a)(48) of that Act; any Small Business
Investment Company licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan
established and maintained by a state, its political subdivisions, or any agency
or instrumentality of a state or its political subdivisions, for the benefit of
its employees, if such plan has total assets in excess of $5,000,000; any
employee benefit plan within the meaning of Title I of the Employee Retirement
Income Security Act of 1974, if the investment decision is made by a plan
fiduciary, as defined in Section 3(21) of such Act, which is either a bank,
savings and loan association, insurance Company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made solely be
persons that are accredited investors;
(iii) Any private business development Company as defined
in Section 202(a)(22) of the Investment Advisers Act of 1940;
(iv) Any organization described in Section 501(c)(3) of
the Internal Revenue Code, corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
(v) Any natural person whose individual net worth, or
joint net worth with that person's spouse, at the time of such person's purchase
exceeds $1,000,000;
(vi) Any natural person who had an individual income in
excess of $200,000 in each of the two most recent years or joint income with
that person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current year;
(vii) Any trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the securities offered, whose
purchase is directed by a person who has such knowledge and experience in
financial and business matters that such person is capable of evaluating the
merits and risks of the prospective investment; or
(viii) Any entity in which all of the equity owners are
accredited investors.
As used in this Section 3.6(a) , the term "net worth" means the excess of
total assets over total liabilities. For the purpose of determining a person's
net worth, the principal residence owned by an individual should be valued at
fair market value, including the cost of improvements, net of current
encumbrances. As used in this Section 3.6(a), "income" means actual economic
income, which may differ from adjusted gross income for income tax purposes.
Accordingly, each Investor should consider whether such Investor should add any
or all of the
11.
<PAGE>
following items to such Investor's adjusted gross income for income tax purposes
in order to reflect more accurately such Investor's actual economic income: any
amounts attributable to tax-exempt income received, losses claimed as a limited
partner in any limited partnership, deductions claimed for depletion,
contributions to an IRA or Keogh retirement plan, and alimony payments.
(b) The term "Qualified Regulation S Purchaser" as used herein
refers to a person or entity who is not a United States person, as such term is
defined in Rule 902 promulgated under the Securities Act.
(c) Each Regulation D Investor, as to such Investor, severally
and not jointly, further represents to the Company that such Investor is an
Accredited Investor.
(d) Each Regulation S Investor, as to such Investor, severally
and not jointly, further represents to the Company that such Investor is a
Qualified Regulation S Purchaser.
3.7 Restricted Securities.
Each Investor understands that the Shares (and any Common Stock
issued on conversion thereof) may not be sold, transferred, or otherwise
disposed of without registration under the Securities Act or an exemption
therefrom, and that in the absence of an effective registration statement
covering the Shares (or the Common Stock issued on conversion thereof) or an
available exemption from registration under the Securities Act, the Shares (and
any Common Stock issued on conversion thereof) must be held indefinitely. In
particular, each Investor is aware that the Shares (and any Common Stock issued
on conversion thereof) may not be sold pursuant to Rule 144 promulgated under
the Securities Act unless all of the conditions of that Rule are met. Among the
conditions for use of Rule 144 may be the availability of current information to
the public about the Company. Such information is not now available and the
Company has no present plans to make such information available.
3.8 Legends.
To the extent applicable, each certificate or other document
evidencing any of the Shares or any Common Stock issued upon conversion thereof
shall be endorsed with the legends set forth below:
(a) The following legend under the Securities Act:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS
AND UNTIL REGISTERED UNDER SUCH ACT, OR UNLESS THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED."
12.
<PAGE>
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER CONTAINED IN A STOCK
PURCHASE AGREEMENT BETWEEN THE HOLDER HEREOF OR SUCH
HOLDER'S PREDECESSOR AND DENDREON CORPORATION (THE
"COMPANY"). A COPY OF SUCH AGREEMENT IS AVAILABLE UPON
WRITTEN REQUEST FROM THE SECRETARY OF THE COMPANY.
(c) As to Regulation S Securities, the following legend under
the Securities Act:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED PURSUANT TO REGULATION S OF THE SECURITIES ACT OF
1933 AND MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED
OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE THEREWITH."
(d) Any legend required by applicable state securities or "blue
sky" laws.
3.9 Public Sale.
Each Investor agrees not to make, without the prior written
consent of the Company, any public offering or sale of the Shares, or any Common
Stock issued upon the conversion thereof, although permitted to do so pursuant
to rule 144(k) promulgated under the Securities Act, until the earlier of (i)
the date on which the Company effects its initial registered public offering
pursuant to the Securities Act, (ii) the date on which the Company becomes a
registered company pursuant to Section 12(g) of the Securities Exchange Act of
1934, as amended, or (iii) five years after the Closing of the sale of the
Shares to such Investor by the Company.
3.10 Investor Location.
If the Investor is an individual, then such Investor resides in
the state or city specified in the address for such Investor set forth on the
signature page hereto, unless otherwise indicated on such page; if the Investor
is a partnership, corporation, limited liability company or other entity, then
the office or offices of such Investor in which its investment decision was made
is located at the address or addresses of the Investor set forth on the
signature page hereto, unless otherwise indicated on such page.
4. Conditions of Investors' Obligations At Closing.
The obligations of each Investor under subparagraph 1.1(b) of this
Agreement are subject to the fulfillment on or before the Closing of each of the
following conditions, the waiver of which shall not be effective against any
Investor who does not consent in writing thereto:
13.
<PAGE>
4.1 Representations and Warranties.
The representations and warranties of the Company contained in
Section 2 shall be true on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Closing.
4.2 Performance.
The Company shall have performed and complied with all agreements,
obligations, and conditions contained in this Agreement that are required to be
performed or complied with by it on or before the Closing.
4.3 Compliance Certificate.
The Chief Executive Officer or Chief Financial Officer of the
Company shall deliver to each Investor at the Closing a certificate certifying
that the conditions specified in paragraphs 4.1, 4.2, 4.4 and 4.5 have been
fulfilled.
4.4 Qualifications.
All authorizations, approvals, or permits, if any, of any
governmental authority or regulatory body of the United States, of any state
therein, or of any foreign jurisdiction in which an Investor is located that are
required in connection with the lawful issuance and sale of the Shares pursuant
to this Agreement shall be duly obtained and effective as of the Closing.
4.5 Stockholders' Agreement.
The Third Amended and Restated Stockholders' Agreement
substantially in the form attached hereto as Exhibit B shall have been executed
---------
and delivered by the parties thereto.
4.6 Opinion of Company Counsel.
Each Investor shall have received from Company Counsel an opinion
in substantially the form attached hereto as Exhibit C.
---------
5. Conditions of The Company's Obligations at Closing.
The obligations of the Company to each Investor under this Agreement
are subject to the fulfillment on or before each Closing of each of the
following conditions by such Investor:
5.1 Representations and Warranties.
The representations and warranties of each Investor contained in
Section 3 shall be true on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Closing.
14.
<PAGE>
5.2 Qualifications.
All authorizations, approvals, or permits, if any, of any
governmental authority or regulatory body of the United States, of any state
therein, or of any foreign jurisdiction in which an Investor is located that are
required in connection with the lawful issuance and sale of the Shares pursuant
to this Agreement shall be duly obtained and effective as of the Closing.
6. Miscellaneous.
6.1 Entire Agreement.
This Agreement and the documents referred to herein constitute
the entire agreement among the parties and no party shall be liable or bound to
any other party in any manner by any warranties, representations, or covenants,
except as specifically set forth herein or therein.
6.2 Survival of Warranties.
The warranties, representations, and covenants of the Company and
the Investors contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing.
6.3 Successors and Assigns.
Except as otherwise provided herein, the terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including permitted transferees of any
Shares sold hereunder or any Common Stock issued upon conversion thereof).
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
6.4 Governing Law.
This Agreement shall be governed by and construed under the laws
of the State of California as applied to agreements among California residents
entered into and to be performed entirely within California.
6.5 Counterparts.
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.
15.
<PAGE>
6.6 Titles and Subtitles.
The titles and subtitles used in this Agreement are used for
convenience of reference only and are not to be considered in construing or
interpreting this Agreement.
6.7 Notices.
All notices and other communications required or permitted under
this Agreement shall be in writing and shall be mailed by first-class mail,
postage prepaid, sent by facsimile or delivered personally by hand or nationally
or internationally recognized courier (as the case may be) addressed to the
party to be notified at the address or facsimile number indicated for such
person on the signature page hereof, or at such other address or facsimile
number as such party may designate by ten (10) days' advance written notice to
the other parties hereto. All such notices and other written communications
shall be effective on the date of mailing, confirmed facsimile transfer or
delivery.
6.8 Payment of Fees and Expenses.
The Company and each Investor shall bear its, his or her own
expenses incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby. Investors acknowledge that in connection with
the sale of the Shares, Crandal Colburn Group ("CGC") will receive compensation
, to be paid by the Company, in the form of warrants to purchase an aggregate
number of shares of Series D Preferred Stock convertible into the number of
shares of the Company's Common Stock equal to five percent (5%) of the purchase
price of the Shares sold by the Company to certain Investors referred to the
Company by CGC, if any, at an exercise price of $5.00 per share. If any action
at law or in equity is necessary to enforce or interpret the terms of this
Agreement, the Stockholders' Agreement, any Ancillary Agreement or the Restated
Certificate, the prevailing party shall be entitled to reasonable attorneys'
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
6.9 Amendments and Waivers.
Any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the holders of more than 50% of the Common Stock not
previously sold to the public that is issued or issuable upon conversion of the
outstanding Shares. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any securities purchased under
this Agreement at the time outstanding (including securities into which such
securities have been converted), each future holder of all such securities, and
the Company.
6.10 Severability.
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
16.
<PAGE>
6.11 California Corporate Securities Law.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS
AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR
RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES PRIOR TO SUCH
QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM
QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
6.12 Effect of Amendment or Waiver.
Each Investor acknowledges that by the operation of paragraph
6.10 hereof the holders of more than fifty percent (50%) of the Common Stock not
previously sold to the public that is issued or issuable upon conversion of the
outstanding Shares will have the right and power to diminish or eliminate all
rights of such Investor under this Agreement.
6.13 Rights of Investors.
Each holder of Shares (and Common Stock issued upon conversion
thereof) shall have the absolute right to exercise or refrain from exercising
any right or rights that such holder may have by reason of this Agreement or any
Shares, including without limitation the right to consent to the waiver of any
obligation of the Company under this Agreement and to enter into an agreement
with the Company for the purpose of modifying this Agreement or any agreement
effecting any such modification, and such holder shall not incur any liability
to any other holder or holders of Shares (or Common Stock issued upon exercise
thereof) with respect to exercising or refraining from exercising any such right
or rights.
6.14 Exculpation Among Investors.
Each Investor acknowledges that such Investor is not relying upon
any person, firm, or corporation, other than the Company and its officers and
directors, in making this investment or decision to invest in the Company. Each
Investor agrees that no Investor nor the respective controlling persons,
officers, directors, partners, agents, or employees of any Investor shall be
liable for any action heretofore or hereafter taken or omitted to be taken by
any of them in connection with the Shares (and Common Stock issued upon
conversion thereof).
6.15 Qualified Small Business Stock.
The Company covenants that so long as any of the Shares that are
being purchased by the Investors hereunder, or the Common Stock into which such
shares are converted, are held by an Investor (or a transferee in whose hands
such Shares or Common Stock are eligible to qualify as Qualified Small Business
Stock as defined in Section 1202(c) of the Internal Revenue Code of 1986, as
amended (the "Code")), it will use reasonable efforts to
17.
<PAGE>
comply with any applicable filing or reporting requirements imposed by the Code
on issuers of Qualified Small Business Stock.
In Witness Whereof, the parties have executed this Agreement as of the date
first above written.
Dendreon Corporation
By: /s/ Peter S. Garcia
------------------------------------
Name: /s/ Peter S. Garcia
----------------------------------
Title: Chief Financial Officer
---------------------------------
Address: 291 North Bernardo
Mountain View, CA 94043
Facsimile No.: (650) 964-0337
18.
<PAGE>
*See Schedule 1.1
___________________________________________
Name of Investor
___________________________________________
Signature
___________________________________________
Name
___________________________________________
Title
Address: ________________________________
________________________________
________________________________
Facsimile: ________________________________
[SERIES D PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
SCHEDULE 1
----------
Vulcan Ventures
New York Life Insurance Company
Alexandria Real Estate
Kummel Investments
GC&H Investments
Jerry Weisbach
Kirin Brewery Company, Limited
Shaw Ventures
1.
<PAGE>
SCHEDULE 2
- ----------
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions is made and given pursuant to Section 2 of the
Agreement. The paragraph numbers in this Schedule of Exceptions correspond to
the paragraph numbers in the Agreement; however, any information disclosed
herein under any paragraph number shall be deemed to be disclosed and
incorporated into any other paragraph number under the Agreement where such
disclosure would be appropriate. The inclusion of any matter herein as part of
this Schedule should not be interpreted as indicating that the Company has
determined that such matter is necessarily material to the Investors. Any terms
defined in the Agreement shall have the same meaning when used in this Schedule
of Exceptions as when used in the Agreement unless the context otherwise
requires.
Section 2.9
-----------
1. Employment Offer Agreement, by and between the Company and Peter
Garcia, dated June 5, 1996.
2. Employment Agreement, by and between the Company and David L. Urdal,
dated December 2, 1996.
3. Employment Agreement, by and between the Company and Christopher S.
Henney, dated December 11, 1996.
4. Employment Agreement, by and between the Company and Richard Bastiani,
dated March 5, 1997.
5. Agreement for Consulting Services, by and between the Company and
Lowell E. Sears, dated October 30, 1995.
6. Employment Offer Letter, by and between the Company and Wim van
Schooten, dated October 11, 1993.
7. Employee Loan Agreement and related Promissory Note, by and between
the Company and Peter van Vlasselaer, dated July 16, 1993.
8. Employee Loan Agreement and related Promissory Note, by and between
the Company, Reiner Laus, M.D. and Sabine A.B. Laus, dated July 16,
1993.
9. License Agreement, by and between the Company and The Immune Response
Corporation, dated April 30, 1997.
10. Restricted Stock Agreement, by and between the Company and Dr. Edgar
G. Engleman, dated September 30, 1992.
11. Restricted Stock Agreement, by and between the Company and Dr. Sam
Strober, dated September 30, 1992.
2.
<PAGE>
12. Restricted Stock Option Agreement, by and between the Company and Dr.
Edgar G. Engleman, dated September 30, 1992.
13. Nonstatutory Stock Option Agreement, by and between the Company and
Lowell E. Sears, dated October 30, 1995.
14. Master Equipment Lease Agreement, by and between the Company and
MMC/GATX Partnership I, dated October 8, 1993.
15. Vanni Business Park Industrial Lease, by and between the Company and
Vanni Business Park General Partnership, dated October 27, 1992.
16. Agreement (Strober Technology), by and between the Company and The
Board of Trustees of the Leland Stanford Junior University, dated
September 1, 1992.
17. Agreement (Engleman Technology), by and between the Company and The
Board of Trustees of the Leland Stanford Junior University, dated
September 1, 1992.
18. Agreement, by and between the Company and The Board of Trustees of the
Leland Stanford Junior University, effective as of December 1, 1996.
19. Collaboration Agreement, by and between the Company and Trustees of
Leland Stanford Junior University, dated September 24, 1996.
20. Research Purchase Agreement, by and between the Company and Pharmacia
Biotech AB, effective as of August 27, 1996.
21. Resale Purchase Agreement, by and between the Company and Pharmacia
Biotech AB, effective as of August 27, 1996, and addendum thereto,
effective as of January 25, 1997.
22. Development and Supply Agreement, by and between the Company and
BioTransplant, Inc., effective as of August 22, 1996.
23. Supply Agreement, by and between the Company and Osiris Therapeutics,
Inc., effective as of February 28, 1997.
24. Clinical Trial Agreements, by and between the Company and MD Anderson
Cancer Center, dated January 1, 1996; University of Chicago, dated May
22, 1995; University of California San Francisco, dated March 13,
1997; Sacramento Center for Blood Research, dated March 20, 1997 and
May 1, 1998; Washington University, dated March 24, 1997; Stanford
University, dated April 1, 1996 and April 1, 1998; Marin Oncology
Associates, dated October 7, 1997; Mayo Foundation, dated November 19,
1997; Scripps Clinic, dated January 6, 1998; and San Diego Hospital
Association, dated April 15, 1998.
25. Amended and Restated Stockholders' Agreement, dated August 15, 1997.
3.
<PAGE>
26. Series A Preferred Stock Purchase Agreement, dated October 27, 1992.
27. Series B Preferred Stock Purchase Agreement, dated January 26, 1996.
28. Series C Preferred Stock Purchase Agreement, dated June 20, 1997.
29. Collaboration Agreement, by and between the Company and the Mayo
Foundation, dated July 10, 1997.
30. Letter Agreement, by and between the Company and New York Life
Insurance Company, dated July 29, 1997.
31. Consent and Waiver, by and between the Company, The University of
Brussels and The Immune Response Corporation, dated July 30, 1997.
32. Sales, Licensing and Technology Agreement between the Company and
Micra Scientific, Inc., dated August 20, 1997.
33. Consulting Agreements with Samuel Strober and Edward Engleman, both
dated October 27, 1997.
34. Master Lease Agreement, dated December 11, 1997, between the Company
and Transamerica Business Credit Corporation.
35. License Agreement between the Company and Fresenius AG, dated February
27, 1998.
36. License Agreement between the Company and Ludwig Institute for Cancer
Research, dated April 28, 1998.
37. [The Company currently is negotiating for the lease of real property
in Seattle, Washington with Alexander Real Estate.]
Section 2.19
------------
From time to time, the Company will be required to license Intellectual
Property in order to conduct its business. The Company is actively seeking
rights to in-process technology to license antigens and other technology
compatible with that of the Company.
Section 2.20
------------
In connection with the Master Equipment Lease Agreement between the Company
and MMC/GATX Partnership I ("MMC"), dated October 8, 1993, MMC has a
security interest in certain of the Company's specific equipment with
existing liens. In connection with the Master Lease Agreement between the
Company and Transamerica Business Credit Corporation ("Transamerica"),
dated December 11, 1997, Transamerica has a security interest in certain of
the Company's specific equipment.
4.
<PAGE>
EXHIBIT 10.6
DENDREON CORPORATION
SERIES E PREFERRED STOCK
PURCHASE AGREEMENT
September 3, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. AGREEMENT TO SELL AND PURCHASE........................................ 1
1.1 Sale and Issuance of Shares.................................. 1
1.2 Closing...................................................... 1
1.3 Subsequent Sale of Shares.................................... 2
1.4 Delivery..................................................... 2
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................... 2
2.1 Organization; Good Standing; Qualifications.................. 2
2.2 Authorization................................................ 3
2.3 Valid Issuance of Preferred and Common Stock................. 3
2.4 Governmental Consents........................................ 3
2.5 Capitalization and Voting Rights............................. 4
2.6 Subsidiaries................................................. 5
2.7 Financial Statements......................................... 5
2.8 Tax Returns, Payments and Elections.......................... 5
2.9 Contracts and Other Commitments.............................. 5
2.10 Registration Rights.......................................... 6
2.11 Compliance With Other Instruments............................ 6
2.12 Litigation................................................... 6
2.13 Disclosure................................................... 7
2.14 Offering..................................................... 7
2.15 Proprietary Information and Inventions Agreements............ 7
2.16 Section 83(b) Elections...................................... 7
2.17 Compliance with Applicable Securities Laws................... 7
2.18 Compliance with Laws......................................... 7
2.19 Patents, Trademarks, Etc..................................... 8
2.20 Title to and Condition of Properties......................... 8
2.21 Basic Financial Information And Reporting.................... 8
3. REPRESENTATIONS AND WARRANTIES OF INVESTORS........................... 9
3.1 Authorization................................................ 9
3.2 Purchase Entirely for Own Account............................ 9
</TABLE>
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
3.3 Reliance Upon Investors' Representations.................... 10
3.4 Receipt of Information...................................... 10
3.5 Investment Experience....................................... 10
3.6 Accredited Investor or Qualified Regulation S Purchaser..... 10
3.7 Restricted Securities....................................... 12
3.8 Legends..................................................... 12
3.9 Public Sale................................................. 13
3.10 Investor Location........................................... 13
4. CONDITIONS OF INVESTORS' OBLIGATIONS AT CLOSING...................... 13
4.1 Representations and Warranties.............................. 14
4.2 Performance................................................. 14
4.3 Compliance Certificate...................................... 14
4.4 Qualifications.............................................. 14
4.5 Stockholders' Agreement..................................... 14
4.6 Opinion of Company Counsel.................................. 14
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING................... 14
5.1 Representations and Warranties.............................. 14
5.2 Qualifications.............................................. 15
6. MISCELLANEOUS........................................................ 15
6.1 Entire Agreement............................................ 15
6.2 Survival of Warranties...................................... 15
6.3 Successors and Assigns...................................... 15
6.4 Governing Law............................................... 15
6.5 Counterparts................................................ 15
6.6 Titles and Subtitles........................................ 16
6.7 Notices..................................................... 16
6.8 Payment of Fees and Expenses................................ 16
6.9 Amendments and Waivers...................................... 16
6.10 Severability................................................ 16
</TABLE>
ii.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
6.11 California Corporate Securities Law......................... 16
6.12 Effect of Amendment or Waiver............................... 17
6.13 Rights of Investors......................................... 17
6.14 Exculpation Among Investors................................. 17
6.15 Qualified Small Business Stock.............................. 17
</TABLE>
Schedule 1 - First Closing Investors
Schedule 2 - Schedule of Exceptions
iii.
<PAGE>
DENDREON CORPORATION
SERIES E PREFERRED STOCK
PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of the 3rd day
of September 1999, by and between Dendreon Corporation, a Delaware corporation
(the "Company"), and each of those persons and entities, severally and not
jointly, whose names are set forth on Schedule 1 attached hereto (which persons
and entities are hereinafter collectively referred to as "Investors" and each
individually as an "Investor").
Recitals
Whereas, the Company has authorized the sale and issuance of an aggregate
of four million seven hundred five thousand eight hundred eighty-two (4,705,882)
shares of its Series E Preferred Stock (the "Shares");
Whereas, the Investors desire to purchase the Shares on the terms and
conditions set forth herein; and
Whereas, the Company desires to issue and sell the Shares to Investors on
the terms and conditions set forth herein.
Now, Therefore, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. Agreement to Sell and Purchase.
1.1 Sale and Issuance of Shares.
(a) The Company shall adopt and file with the Secretary of State
of Delaware prior to the Closing (as defined below) an Amended and Restated
Certificate of Incorporation in the form attached hereto as Exhibit A (the
---------
"Restated Certificate").
(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally and not jointly, to purchase at the Closing and the
Company agrees to sell and issue to each Investor, severally and not jointly, at
the Closing that number of Shares set forth opposite each Investor's name on
Schedule 1 hereto at a price of $4.25 per share. The Shares will have the
rights, preferences and privileges set forth in the Restated Certificate.
1.2 Closing.
The first closing for the purchase and sale of the Shares shall
take place at the offices of Cooley Godward llp, Palo Alto, California, at 4:30
p.m., on September 3, 1999 (the "First Closing"), or at such other time and
place as the Company and Investors acquiring in the aggregate more than half the
Shares being sold pursuant hereto at such closing shall mutually agree, either
orally or in writing.
1.
<PAGE>
1.3 Subsequent Sale of Shares.
Subject to the terms and conditions of this Agreement, in the
event that not all of the authorized Shares are sold at the First Closing the
Company may sell in one or more additional Closings, on or before December 31,
1999 (each, a "Subsequent Closing"), any authorized but unissued Shares at the
same price per share as the Shares purchased and sold at the First Closing. Any
such investor at a Subsequent Closing shall then become an "Investor" under this
Agreement. At or prior to a Subsequent Closing, any such Investor shall execute
a counterpart copy of this Agreement and any related agreements or other
documents required to be executed hereunder, and shall thereupon become a party
to this Agreement, the Stockholders' Agreement (as defined below) and any
Ancillary Agreements (as defined below), and shall have the rights and
obligations of an Investor hereunder and thereunder. The First Closing and any
Subsequent Closing shall be referred to collectively herein as the "Closings"
and singularly as a "Closing."
1.4 Delivery.
At the Closing, the Company shall deliver to each Investor a
certificate representing the Shares that such Investor is purchasing against
payment of the purchase price therefor by check, wire transfer, cancellation of
indebtedness, or such other form of payment as shall be mutually agreed upon by
such Investor and the Company. In the event that payment by an Investor is
made, in whole or in part, by cancellation or conversion of indebtedness, then
such Investor shall surrender to the Company for cancellation at the Closing any
evidence of such indebtedness or shall execute an instrument of cancellation in
form and substance acceptable to the Company. In addition, the Company at the
Closing shall deliver to any Investor choosing to pay any part of the purchase
price of the Shares by cancellation of indebtedness, a check in the amount of
any uncancelled interest accrued on such indebtedness through the Closing, or
the number of Shares such interest would purchase at the purchase price of $4.25
per share, plus a check in lieu of any fractional share in the amount of any
remaining interest in an amount less than $4.25.
2. Representations and Warranties of the Company.
The Company hereby represents and warrants to each Investor that, on
the date of this Agreement, except as set forth in the Schedule of Exceptions
attached hereto as Schedule 2:
2.1 Organization; Good Standing; Qualifications.
The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware, has all requisite
corporate power and authority to own and operate its properties and assets and
to carry on its business as now conducted and as proposed to be conducted, to
execute and deliver this Agreement, the Fourth Amended and Restated
Stockholders' Agreement attached hereto as Exhibit B (the "Stockholders'
---------
Agreement"), and any other agreement to which the Company is a party the
execution and delivery of which is contemplated hereby (the "Ancillary
Agreements"), to issue and sell the Shares and the Common Stock issuable upon
conversion thereof, and to carry out the provisions of this Agreement, the
Stockholders' Agreement, the Restated Certificate and any
2.
<PAGE>
Ancillary Agreements. The Company is in possession of and operating in
compliance with all authorizations, licenses, permits, consents, certificates
and orders material to the conduct of its business, all of which are valid and
in full force and effect. The Company is duly qualified to transact business and
is in good standing in each jurisdiction in which the failure to qualify would
have a material adverse effect on its business, properties, prospects, or
financial condition.
2.2 Authorization.
All corporate action on the part of the Company, its officers,
directors and stockholders necessary for the authorization, execution and
delivery of this Agreement, the Stockholders' Agreement and any Ancillary
Agreements, the performance of all obligations of the Company hereunder and
thereunder at each Closing and the authorization, issuance (or reservation for
issuance), sale, and delivery of the Shares being sold hereunder and the Common
Stock issuable upon conversion thereof has been taken or will be taken prior to
each Closing, and this Agreement, the Stockholders' Agreement and any Ancillary
Agreements constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally; (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies; and (iii) to the extent the
indemnification provisions contained in the Stockholders' Agreement may be
limited by applicable federal or state securities laws.
2.3 Valid Issuance of Preferred and Common Stock.
The Shares that are being purchased by the Investors hereunder,
when issued, sold, and delivered in accordance with the terms of this Agreement
for the consideration expressed herein, will be duly and validly issued, fully
paid, and nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Stockholders' Agreement
and under the Company's Bylaws (the "Bylaws") and applicable state and federal
securities laws. The Common Stock issuable upon conversion of the Shares
purchased under this Agreement has been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the Restated Certificate,
will be duly and validly issued, fully paid, and nonassessable and will be free
of restrictions on transfer other than restrictions on transfer under this
Agreement and the Stockholders' Agreement and under the Bylaws and applicable
state and federal securities laws.
2.4 Governmental Consents.
No consent, approval, qualification, order or authorization of,
or filing with, any local, state, or federal governmental authority is required
on the part of the Company in connection with the Company's valid execution,
delivery, or performance of this Agreement, the offer, sale or issuance of the
Shares by the Company or the issuance of Common Stock upon conversion of the
Shares, except (i) the filing of the Restated Certificate with the Secretary of
State of the State of Delaware, and (ii) such filings as have been made prior to
the Closing, and any notices of sale required to be filed with the Securities
and Exchange Commission under Regulation D of the Securities Act of 1933, as
amended (the "Securities Act"), or such post-
3.
<PAGE>
closing filings as may be required under applicable state securities laws, which
will be timely filed within the applicable periods therefor.
2.5 Capitalization and Voting Rights.
The authorized capital stock of the Company consists, or will
consist prior to the Closing, of:
(a) Preferred Stock. 13,722,936 shares of Preferred Stock, $.001
par value (the "Preferred Stock"), of which 507,500 shares have been designated
Series A Preferred Stock, 499,999 of which are issued and outstanding; 4,264,375
shares have been designated Series B Preferred Stock, 4,264,346 of which are
issued and outstanding; 3,308,179 shares have been designated Series C Preferred
Stock, 3,308,179 of which are issued and outstanding; 937,000 shares have been
designated Series D Preferred Stock, 937,000 of which are issued and
outstanding; and 4,705,882 shares have been designated Series E Preferred Stock,
none of which will be issued and outstanding prior to the First Closing. The
rights, privileges and preferences of the Series A, Series B, Series C, Series D
and Series E Preferred Stock will be as stated in the Restated Certificate.
(b) Common Stock. 18,100,000 shares of common stock ("Common
Stock") $.001 par value, of which 961,911 shares are issued and outstanding.
(c) The outstanding shares of Common Stock have been issued in
accordance with the registration or qualification provisions of the Securities
Act and any relevant state securities laws or pursuant to valid exemptions
therefrom.
(d) There are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first refusal), or
agreements for the purchase or acquisition from the Company of any shares of its
capital stock except for (a) the conversion privileges of the Series A, Series
B, Series C and Series D Preferred Stock outstanding or issuable pursuant to
outstanding warrants; (b) outstanding options to purchase 72,879 shares of the
Company's Common Stock pursuant to its 1993 Stock Option Plan (the "1993 Option
Plan"); (c) outstanding options to purchase 1,669,833 shares of the Company's
Common Stock pursuant to its 1996 Equity Incentive Plan (the "1996 Plan"); (d)
outstanding warrants to purchase 226,627 shares of the Company's Common Stock;
(e) outstanding warrants to purchase 7,500 shares of the Company's Series A
Preferred Stock; and (f) rights held by certain of the Company's stockholders
pursuant to the Third Amended and Restated Stockholders' Agreement, dated as of
July 10, 1998 (the " Prior Stockholders' Agreement"). The Company does not
anticipate issuing any additional options to purchase shares of its Common Stock
pursuant to the 1993 Option Plan. The Company has reserved 3,500,000 shares of
its Common Stock for issuance under the 1996 Plan, of which 1,024,978 shares
remain available for grant as of the date hereof. The Company is not a party or
subject to any agreement or understanding, and, to the best of the Company's
knowledge, there is no agreement or understanding between any persons that
affects or relates to the voting or giving of written consents with respect to
any security or the voting by a director of the Company, except for the
Stockholders' Agreement.
4.
<PAGE>
2.6 Subsidiaries.
The Company has no subsidiaries and does not otherwise own or
control, directly or indirectly, any other corporation, association, or other
business entity.
2.7 Financial Statements.
The Company has delivered to each Investor its audited financial
statements (balance sheet, statement of profit and loss, statement of
stockholders equity and statement of cash flows) for the fiscal year ended
December 31, 1998, its unaudited financial statements (balance sheet, statement
of profit and loss, statement of stockholders equity and statement of cash
flows) for the three month period ended March 31, 1999 and its unaudited
financial statements (balance sheet, statement of profit and loss, statement of
stockholders equity and statement of cash flows) for the three month period
ended June 30, 1999 (collectively, the "Financial Statements"). The Financial
Statements have been prepared in accordance with generally accepted accounting
principles ("GAAP") (except that the unaudited financial statements do not
contain all footnotes required by GAAP) applied on a consistent basis throughout
the periods indicated. The Financial Statements fairly present the financial
condition and operating results of the Company as of the dates, and for the
periods, indicated therein, subject, in the case of the unaudited financial
statements, to normal year-end audit adjustments, which adjustments the Company
believes will not be material. Except for spending in accordance with its
current plan, since December 31, 1998, there has been no material adverse change
in the operations or financial condition of the Company.
2.8 Tax Returns, Payments and Elections.
All material tax returns required to be filed by the Company in
any jurisdiction (including foreign jurisdictions) have been timely filed, and
all material taxes, assessments, fees and other charges (including, without
limitation, withholding taxes, penalties and interest) due or claimed to be due
from the Company that are due and payable have been paid, other than those (i)
being contested in good faith and for which an adequate reserve or accrual has
been established or (ii) those currently payable without penalty or interest and
for which an adequate reserve or accrual has been established or extensions duly
filed. The Company knows of no actual or proposed additional tax assessments or
any reason for the imposition or proposal of any additional tax assessments for
any fiscal period against the Company that would, singly or in the aggregate,
reasonably be expected to have a material adverse effect on the Company. Neither
the Company's income nor franchise tax returns are under audit and no waivers of
the statute of limitations or extensions of time with respect to any tax returns
have been granted by the Company.
2.9 Contracts and Other Commitments.
The Company does not have any material contract, agreement, lease
or commitment, written or oral, absolute or contingent, other than (i) contracts
for the purchase of supplies and services that were entered into in the ordinary
course of business and that do not involve more than $200,000, and do not extend
for more than one (1) year beyond the date hereof; and (ii) contracts terminable
at will by the Company on no more than thirty (30) days'
5.
<PAGE>
notice without cost or liability to the Company and that do not involve any
employment or consulting arrangement and are not material to the conduct of the
Company's business. For the purpose of this paragraph, material employment and
consulting contracts and contracts with labor unions, and license agreements and
any other agreements relating to the acquisition or disposition of the Company's
technology (other than standard end-user license agreements) shall not be
considered to be contracts entered into in the ordinary course of business.
2.10 Registration Rights.
Except as provided in the Stockholders' Agreement, the Company
is not obligated to register under the Securities Act any of its presently
outstanding securities or any of its securities that may subsequently be issued.
2.11 Compliance With Other Instruments.
The Company is not in violation or default in any respect of any
provision of its Restated Certificate or Bylaws or in any material respect of
any provision of any mortgage, indenture, agreement, instrument, or contract to
which it is a party or by which it is bound or, to the best of its knowledge, of
any federal or state judgment, order, writ, decree, statute, rule, or regulation
applicable to the Company. The execution, delivery, and performance by the
Company of this Agreement, the Stockholders' Agreement and any Ancillary
Agreements, and the consummation of the transactions contemplated hereby and
thereby will not result in any such violation or be in material conflict with or
constitute, with or without the passage of time or giving of notice, either a
material default under any such provision or an event that results in the
creation of any material lien, charge, or encumbrance upon any assets of the
Company or the suspension, revocation, impairment, forfeiture, or nonrenewal of
any material permit, license, authorization, or approval applicable to the
Company, its business or operations, or any of its assets or properties.
2.12 Litigation.
There is no action, suit, proceeding, or investigation pending
or currently threatened against the Company that (i) questions the validity of
this Agreement, the Stockholders' Agreement and any Ancillary Agreements or the
right of the Company to enter into such agreements, or to consummate the
transactions contemplated hereby or thereby, or (ii) that might result, either
individually or in the aggregate, in any material adverse change in the assets,
business, properties, prospects, or financial condition of the Company, or in
any material change in the current equity ownership of the Company. The
foregoing includes, without limitation, any action, suit, proceeding, or
investigation pending or currently threatened involving the prior employment of
any of the Company's employees, their use in connection with the Company's
business of any information or techniques allegedly proprietary to any of their
former employers, their obligations under any agreements with prior employers,
or negotiations by the Company with potential backers of, or investors in, the
Company or its proposed business. The Company is not a party to, or to the best
of its knowledge, named in any order, writ, injunction, judgment, or decree of
any court, government agency, or instrumentality. There is no action, suit, or
proceeding by the Company currently pending or that the Company currently
intends to initiate.
6.
<PAGE>
2.13 Disclosure.
The Company has provided each Investor with all the information
reasonably available to it without undue expense that such Investor has
requested for deciding whether to purchase the Shares and all information that
the Company has and that it believes is reasonably necessary to enable such
Investor to make such decision. Neither this Agreement nor any other written
statements or certificates made or delivered pursuant to this Agreement contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements herein or therein not misleading.
2.14 Offering.
Subject in part to the truth and accuracy of each Investor's
representations set forth in this Agreement, the offer, sale and issuance of the
Shares as contemplated by this Agreement are exempt from the registration
requirements of the Securities Act, and neither the Company nor any authorized
agent acting on its behalf will take any action hereafter that would cause the
loss of such exemption.
2.15 Proprietary Information and Inventions Agreements.
Each employee and officer of the Company has executed a
Proprietary Information and Inventions Agreement substantially in the form
attached hereto as Exhibit D.
---------
2.16 Section 83(b) Elections.
To the best of the Company's knowledge, all individuals who have
purchased shares of the Company's Common Stock that are subject to vesting
restrictions have timely filed elections under Section 83(b) of the Internal
Revenue Code and any analogous provisions of applicable state tax laws.
2.17 Compliance with Applicable Securities Laws.
The Company will comply with the requirements of Regulation S
promulgated under the Securities Act and/or Regulation D promulgated under the
Securities Act, as applicable, and with Section 25102(f) of the California
Corporate Securities Law, as amended, and any other applicable state securities
laws in connection with the offer and sale of Shares to any Investor.
2.18 Compliance with Laws.
The Company has obtained all licenses, permits, franchises or
other governmental authorizations necessary for the ownership or operation of
its properties or the conduct of its business as currently conducted, except as
would not have a material adverse effect on the Company. The Company is not in
violation of any law applicable to the ownership or operation of its properties
or the conduct of its business, except as would not have a material adverse
effect on the Company.
7.
<PAGE>
2.19 Patents, Trademarks, Etc.
To the best of the Company's knowledge, the Company owns, or is
licensed under, and has the right to use, all patents, trademarks, trade names,
copyrights, technology, know how and processes (collectively, "Intellectual
Property") necessary for the conduct of its business as now conducted and as
proposed to be conducted. The consummation of the transactions contemplated by
this Agreement will not alter or impair any such rights. The Company has not
received any communications asserting the rights to use the Company's
Intellectual Property or challenging or questioning the validity or
effectiveness of any license or agreement related thereto, nor has the Company
received any communications asserting that the use of such Intellectual Property
by the Company infringes on the rights of any person. No officer, director or
employee of the Company owns or holds, directly or indirectly, any interest in
the Company's Intellectual Property. Neither the Company nor, to the best of
the Company's knowledge, any of its employees, is in violation of any agreement
or commitment to any prior employer or any other person in regard to the
ownership of inventions or developments or the maintenance of confidentiality of
trade secrets.
2.20 Title to and Condition of Properties.
Except (i) as reflected in the Financial Statements (as defined
in paragraph 2.7), (ii) for liens for current taxes not yet delinquent, (iii)
for liens imposed by law and incurred in the ordinary course of business for
obligations not past due to carriers, warehousemen, laborers, materialmen and
the like, (iv) for liens in respect of pledges or deposits under workers'
compensation laws or similar legislation, or (v) for minor defects in title,
none of which, individually or in the aggregate, materially interferes with the
use of such property, the Company (a) has good and marketable title to all the
real or personal properties and other assets (tangible, intangible or mixed) it
purports to own, free and clear of all material liens, and (b) enjoys peaceful
and undisturbed possession under all material leases to which the Company is a
party as lessee. All material leases and other material agreements to which the
Company is a party are valid and binding and in full force and effect. No
default has occurred or is continuing under such leases and other agreements,
and no consent need be obtained (other than consents that will be obtained prior
to the Closing) from any person in respect of any such lease or agreement in
connection with the transactions contemplated by this Agreement, except to the
extent that any such defaults, or the failure to obtain any such consents, could
not, singly or in the aggregate, reasonably be expected to have a material
adverse effect on the Company. The properties used in the conduct of the
business of the Company are in good repair and working order, except to such
extent as would not, singly or in the aggregate, reasonably be expected to have
a material adverse effect on the Company. The Company maintains such insurance
as may be required by law and such other insurance, to such extent and against
such hazards and liabilities, as the Company believes is reasonably necessary.
2.21 Basic Financial Information And Reporting.
(a) As soon as practicable after the end of each fiscal year
of the Company, the Company will furnish each Investor a consolidated balance
sheet of the Company, as at the end of such fiscal year, and a consolidated
statement of income and a consolidated statement of cash flows of the Company,
for such year, all prepared in accordance with generally
8.
<PAGE>
accepted accounting principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail. Such financial statements shall be accompanied by a report
and opinion thereon by independent public accountants of national standing
selected by the Company's Board of Directors.
(b) The Company will furnish each Investor, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, a consolidated balance sheet of the
Company as of the end of each such quarterly period, and a consolidated
statement of income and a consolidated statement of cash flows of the Company
for such period and for the current fiscal year to date, prepared in accordance
with generally accepted accounting principles, with the exception that no notes
need be attached to such statements and year-end audit adjustments may not have
been made.
3. Representations and Warranties of Investors.
Each Investor hereby, severally and not jointly, represents and
warrants that:
3.1 Authorization.
Such Investor has full power and authority to enter into this
Agreement and that this Agreement constitutes a valid and legally binding
obligation of such Investor.
3.2 Purchase Entirely for Own Account.
(a) This Agreement is made with each Investor identified on
Schedule 1 as a Regulation D Investor (each a "Regulation D Investor") in
reliance upon such Investor's representation to the Company, which by such
Investor's execution of this Agreement such Investor hereby confirms, that the
Shares to be purchased by such Investor and the Common Stock issuable upon
conversion thereof (collectively, the "Regulation D Securities") will be
acquired for investment for such Investor's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that such Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, each Investor further represents that such Investor does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Regulation D Securities.
(b) This Agreement is made with each Investor identified on
Schedule 1 as a Regulation S Investor (each a "Regulation S Investor") in
reliance upon such Investor's representation to the Company, which by such
Investor's execution of this Agreement such Investor hereby confirms, that the
Shares to be purchased by such Investor and the Common Stock issuable upon
conversion thereof (collectively, the "Regulation S Securities") (the Regulation
D Securities and the Regulation S Securities being sometimes collectively
referred to herein as the "Securities") will be acquired for investment for such
Investor's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof in the United States or to a United
States resident, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, each Investor further represents that such Investor does not
have any
9.
<PAGE>
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person in the
United States or to a United States Resident, with respect to any of the
Regulation S Securities.
3.3 Reliance Upon Investors' Representations.
Each Investor understands that the Securities are not, and any
Common Stock acquired on conversion thereof at the time of issuance may not be,
registered under the Securities Act on the ground that the sale provided for in
this Agreement and the issuance of securities hereunder is exempt from
registration under the Securities Act pursuant to Section 4(2) thereof (in the
case of Regulation D Securities) or Regulation S thereunder (in the case of
Regulation S Securities), and that the Company's reliance on such exemptions is
predicated on the Investors' representations set forth herein. Each Regulation D
Investor realizes that the basis for the exemption may not be present if,
notwithstanding such representations, the Investor has in mind merely acquiring
the Regulation D Securities for a fixed or determinable period in the future,
for sale if the market rises, or for sale if the market does not rise. No
Regulation D Investor has any such intention.
3.4 Receipt of Information.
Each Investor believes such Investor has received all the
information such Investor considers necessary or appropriate for deciding
whether to purchase the Shares. Each Investor further represents that such
Investor has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of the Shares and the
business, properties, prospects, and financial condition of the Company and to
obtain such additional information (to the extent the Company possessed such
information or could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information furnished to such Investor
or to which such Investor had access. The foregoing, however, does not limit or
modify the representations and warranties of the Company in Section 2 of this
Agreement or the right of the Investors to rely thereon.
3.5 Investment Experience.
Each Investor represents that such Investor is experienced in
evaluating and investing in securities of companies in the early stages of
product research and development and acknowledges that such Investor is able to
fend for himself, herself or itself, can bear the economic risk of such
Investor's investment, and has such knowledge and experience in financial and
business matters that such Investor is capable of evaluating the merits and
risks of the investment in the Shares. If other than an individual, Investor
also represents that such Investor has not been organized for the purpose of
acquiring the Shares.
3.6 Accredited Investor or Qualified Regulation S Purchaser.
(a) The term "Accredited Investor" as used herein refers to:
(i) A person or entity who is a director or executive
officer of the Company;
10.
<PAGE>
(ii) Any bank as defined in Section 3(a)(2) of the
Securities Act, or any savings and loan association or other institution as
defined in Section 3(a)(5)(A) of the Securities Act whether acting in its
individual or fiduciary capacity; any broker or dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934; any insurance company as
defined in section 2(13) of the Act; any investment company registered under the
Investment Company Act of 1940 or a business development company as defined in
Section 2(a)(48) of that Act; any Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of the Small
Business Investment Act of 1958; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; any employee benefit plan within the meaning of
Title I of the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in Section 3(21) of
such Act, which is either a bank, savings and loan association, insurance
Company, or registered investment adviser, or if the employee benefit plan has
total assets in excess of $5,000,000 or, if a self-directed plan, with
investment decisions made solely by persons that are accredited investors;
(iii) Any private business development Company as
defined in Section 202(a)(22) of the Investment Advisers Act of 1940;
(iv) Any organization described in Section 501(c)(3) of
the Internal Revenue Code, corporation, Massachusetts or similar business trust,
or partnership, not formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000;
(v) Any natural person whose individual net worth, or
joint net worth with that person's spouse, at the time of such person's purchase
exceeds $1,000,000;
(vi) Any natural person who had an individual income in
excess of $200,000 in each of the two most recent years or joint income with
that person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current year;
(vii) Any trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a person who has such knowledge and
experience in financial and business matters that such person is capable of
evaluating the merits and risks of the prospective investment; or
(viii) Any entity in which all of the equity owners are
accredited investors.
As used in this Section 3.6(a), the term "net worth" means the excess of
total assets over total liabilities. For the purpose of determining a person's
net worth, the principal residence owned by an individual should be valued at
fair market value, including the cost of improvements, net of current
encumbrances. As used in this Section 3.6(a), "income" means actual economic
income, which may differ from adjusted gross income for income tax purposes.
Accordingly, each Investor should consider whether such Investor should add any
or all of the
11.
<PAGE>
following items to such Investor's adjusted gross income for income tax purposes
in order to reflect more accurately such Investor's actual economic income: any
amounts attributable to tax-exempt income received, losses claimed as a limited
partner in any limited partnership, deductions claimed for depletion,
contributions to an IRA or Keogh retirement plan, and alimony payments.
(b) The term "Qualified Regulation S Purchaser" as used herein
refers to a person or entity who is not a United States person, as such term is
defined in Rule 902 promulgated under the Securities Act.
(c) Each Regulation D Investor, as to such Investor, severally
and not jointly, further represents to the Company that such Investor is an
Accredited Investor.
(d) Each Regulation S Investor, as to such Investor, severally
and not jointly, further represents to the Company that such Investor is a
Qualified Regulation S Purchaser.
3.7 Restricted Securities.
Each Investor understands that the Shares (and any Common Stock
issued on conversion thereof) may not be sold, transferred, or otherwise
disposed of without registration under the Securities Act or an exemption
therefrom, and that in the absence of an effective registration statement
covering the Shares (or the Common Stock issued on conversion thereof) or an
available exemption from registration under the Securities Act, the Shares (and
any Common Stock issued on conversion thereof) must be held indefinitely. In
particular, each Investor is aware that the Shares (and any Common Stock issued
on conversion thereof) may not be sold pursuant to Rule 144 promulgated under
the Securities Act unless all of the conditions of that Rule are met. Among the
conditions for use of Rule 144 may be the availability of current information to
the public about the Company. Such information is not now available and the
Company has no present plans to make such information available.
3.8 Legends.
To the extent applicable, each certificate or other document
evidencing any of the Shares or any Common Stock issued upon conversion thereof
shall be endorsed with the legends set forth below:
(a) The following legend under the Securities Act:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER SUCH ACT, OR UNLESS THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER
EVIDENCE SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED."
12.
<PAGE>
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER CONTAINED IN A STOCK
PURCHASE AGREEMENT BETWEEN THE HOLDER HEREOF OR SUCH
HOLDER'S PREDECESSOR AND DENDREON CORPORATION (THE
"COMPANY"). A COPY OF SUCH AGREEMENT IS AVAILABLE UPON
WRITTEN REQUEST FROM THE SECRETARY OF THE COMPANY.
(c) As to Regulation S Securities, the following legend under
the Securities Act:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED PURSUANT TO REGULATION S OF THE SECURITIES ACT OF
1933 AND MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED
OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE THEREWITH."
(d) Any legend required by applicable state securities or "blue
sky" laws.
3.9 Public Sale.
Each Investor agrees not to make, without the prior written
consent of the Company, any public offering or sale of the Shares, or any Common
Stock issued upon the conversion thereof, although permitted to do so pursuant
to rule 144(k) promulgated under the Securities Act, until the earlier of (i)
the date on which the Company effects its initial registered public offering
pursuant to the Securities Act, (ii) the date on which the Company becomes a
registered company pursuant to Section 12(g) of the Securities Exchange Act of
1934, as amended, or (iii) five years after the Closing of the sale of the
Shares to such Investor by the Company.
3.10 Investor Location.
If the Investor is an individual, then such Investor resides in
the state or city specified in the address for such Investor set forth on the
signature page hereto, unless otherwise indicated on such page; if the Investor
is a partnership, corporation, limited liability company or other entity, then
the office or offices of such Investor in which its investment decision was made
is located at the address or addresses of the Investor set forth on the
signature page hereto, unless otherwise indicated on such page.
4. Conditions of Investors' Obligations At Closing.
The obligations of each Investor under subparagraph 1.1(b) of this
Agreement are subject to the fulfillment on or before the Closing of each of the
following conditions, the waiver of which shall not be effective against any
Investor who does not consent in writing thereto:
13.
<PAGE>
4.1 Representations and Warranties.
The representations and warranties of the Company contained in
Section 2 shall be true on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Closing.
4.2 Performance.
The Company shall have performed and complied with all
agreements, obligations, and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
4.3 Compliance Certificate.
The Chief Executive Officer or Chief Financial Officer of the
Company shall deliver to each Investor at the Closing a certificate certifying
that the conditions specified in paragraphs 4.1, 4.2, 4.4 and 4.5 have been
fulfilled.
4.4 Qualifications.
All authorizations, approvals, or permits, if any, of any
governmental authority or regulatory body of the United States, of any state
therein, or of any foreign jurisdiction in which an Investor is located that are
required in connection with the lawful issuance and sale of the Shares pursuant
to this Agreement shall be duly obtained and effective as of the Closing.
4.5 Stockholders' Agreement.
The Fourth Amended and Restated Stockholders' Agreement
substantially in the form attached hereto as Exhibit B shall have been executed
---------
and delivered by the parties thereto.
4.6 Opinion of Company Counsel.
Each Investor shall have received from Company Counsel an opinion
in substantially the form attached hereto as Exhibit C.
---------
5. Conditions of The Company's Obligations at Closing.
The obligations of the Company to each Investor under this Agreement
are subject to the fulfillment on or before each Closing of each of the
following conditions by such Investor:
5.1 Representations and Warranties.
The representations and warranties of each Investor contained in
Section 3 shall be true on and as of the Closing with the same effect as though
such representations and warranties had been made on and as of the date of the
Closing.
14.
<PAGE>
5.2 Qualifications.
All authorizations, approvals, or permits, if any, of any
governmental authority or regulatory body of the United States, of any state
therein, or of any foreign jurisdiction in which an Investor is located that are
required in connection with the lawful issuance and sale of the Shares pursuant
to this Agreement shall be duly obtained and effective as of the Closing.
6. Miscellaneous.
6.1 Entire Agreement.
This Agreement and the documents referred to herein constitute
the entire agreement among the parties and no party shall be liable or bound to
any other party in any manner by any warranties, representations, or covenants,
except as specifically set forth herein or therein.
6.2 Survival of Warranties.
The warranties, representations, and covenants of the Company and
the Investors contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing.
6.3 Successors and Assigns.
Except as otherwise provided herein, the terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including permitted transferees of any
Shares sold hereunder or any Common Stock issued upon conversion thereof).
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
6.4 Governing Law.
This Agreement shall be governed by and construed under the laws
of the State of California as applied to agreements among California residents
entered into and to be performed entirely within California.
6.5 Counterparts.
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.
15.
<PAGE>
6.6 Titles and Subtitles.
The titles and subtitles used in this Agreement are used for
convenience of reference only and are not to be considered in construing or
interpreting this Agreement.
6.7 Notices.
All notices and other communications required or permitted under
this Agreement shall be in writing and shall be mailed by first-class mail,
postage prepaid, sent by facsimile or delivered personally by hand or nationally
or internationally recognized courier (as the case may be) addressed to the
party to be notified at the address or facsimile number indicated for such
person on the signature page hereof, or at such other address or facsimile
number as such party may designate by ten (10) days' advance written notice to
the other parties hereto. All such notices and other written communications
shall be effective on the date of mailing, confirmed facsimile transfer or
delivery.
6.8 Payment of Fees and Expenses.
The Company and each Investor shall bear its, his or her own
expenses incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the Stockholders'
Agreement, any Ancillary Agreements or the Restated Certificate, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
6.9 Amendments and Waivers.
Any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the holders of more than 50% of the Common Stock not
previously sold to the public that is issued or issuable upon conversion of the
outstanding Shares. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any securities purchased under
this Agreement at the time outstanding (including securities into which such
securities have been converted), each future holder of all such securities, and
the Company.
6.10 Severability.
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
6.11 California Corporate Securities Law.
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS
AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
16.
<PAGE>
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH
SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
6.12 Effect of Amendment or Waiver.
Each Investor acknowledges that by the operation of paragraph 6.9
hereof the holders of more than fifty percent (50%) of the Common Stock not
previously sold to the public that is issued or issuable upon conversion of the
outstanding Shares will have the right and power to diminish or eliminate all
rights of such Investor under this Agreement.
6.13 Rights of Investors.
Each holder of Shares (and Common Stock issued upon conversion
thereof) shall have the absolute right to exercise or refrain from exercising
any right or rights that such holder may have by reason of this Agreement or any
Shares, including without limitation the right to consent to the waiver of any
obligation of the Company under this Agreement and to enter into an agreement
with the Company for the purpose of modifying this Agreement or any agreement
effecting any such modification, and such holder shall not incur any liability
to any other holder or holders of Shares (or Common Stock issued upon exercise
thereof) with respect to exercising or refraining from exercising any such right
or rights.
6.14 Exculpation Among Investors.
Each Investor acknowledges that such Investor is not relying upon
any person, firm, or corporation, other than the Company and its officers and
directors, in making this investment or decision to invest in the Company. Each
Investor agrees that no Investor nor the respective controlling persons,
officers, directors, partners, agents, or employees of any Investor shall be
liable for any action heretofore or hereafter taken or omitted to be taken by
any of them in connection with the Shares (and Common Stock issued upon
conversion thereof).
6.15 Qualified Small Business Stock.
The Company covenants that so long as any of the Shares that are
being purchased by the Investors hereunder, or the Common Stock into which such
shares are converted, are held by an Investor (or a transferee in whose hands
such Shares or Common Stock are eligible to qualify as Qualified Small Business
Stock as defined in Section 1202(c) of the Internal Revenue Code of 1986, as
amended (the "Code"), it will use reasonable efforts to comply with any
applicable filing or reporting requirements imposed by the Code on issuers of
Qualified Small Business Stock.
In Witness Whereof, the parties have executed this Agreement as of the date
first above written.
17.
<PAGE>
Dendreon Corporation
By: /s/ Martin A. Simonetti
--------------------------------------
Name: Martin A. Simonetti
------------------------------------
Title: Chief Financial Officer
-----------------------------------
Address: 3005 First Avenue
Seattle, WA 98121
Facsimile No.: (206) 256-0571
18.
<PAGE>
* See Schedule 1
________________________________________
Name of Investor
________________________________________
Signature
________________________________________
Name
________________________________________
Title
[SERIES E PREFERRED STOCK PURCHASE AGREEMENT]
<PAGE>
SCHEDULE 1
----------
Vulcan Ventures Inc.
GC&H Investments
Sears Living Trust Dtd 3/11/91
Martin A. & Mary Ann Simonetti
HealthCare Ventures V, L.P.
Sanderling Venture Partners IV Co-Investment Fund, L.P.
Kummell Investments Limited
New York Life Insurance Company
Shaw Venture Partners III, L.P.
Leavitt Investments, LP
China Development Industrial Bank
Johnson & Johnson Development Corporation
Pacific Wind LLC
Robert and Rebecca Forrester JT
1.
<PAGE>
SCHEDULE 2
- ----------
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions is made and given pursuant to Section 2 of the
Agreement. The paragraph numbers in this Schedule of Exceptions correspond to
the paragraph numbers in the Agreement; however, any information disclosed
herein under any paragraph number shall be deemed to be disclosed and
incorporated into any other paragraph number under the Agreement where such
disclosure would be appropriate. The inclusion of any matter herein as part of
this Schedule should not be interpreted as indicating that the Company has
determined that such matter is necessarily material to the Investors. Any terms
defined in the Agreement shall have the same meaning when used in this Schedule
of Exceptions as when used in the Agreement unless the context otherwise
requires.
Section 2.5
-----------
1. The Company is currently negotiating with Fresenius AG the issuance of
250,000 warrants to purchase the Company's Common Stock in connection
with the termination of the License Agreement between the Company and
Fresenius AG, dated February 27, 1998.
Section 2.9
-----------
1. Employment Agreement, by and between the Company and David L. Urdal,
dated December 2, 1996.
2. Employment Agreement, by and between the Company and Christopher S.
Henney, dated December 11, 1996.
3. Agreement for Consulting Services, by and between the Company and
Lowell E. Sears, dated October 30, 1995.
4. License Agreement, by and between the Company and The Immune Response
Corporation, dated April 30, 1997.
5. Restricted Stock Agreement, by and between the Company and Dr. Edgar
G. Engleman, dated September 30, 1992.
6. Restricted Stock Agreement, by and between the Company and Dr. Sam
Strober, dated September 30, 1992.
7. Restricted Stock Option Agreement, by and between the Company and Dr.
Edgar G. Engleman, dated September 30, 1992.
8. Nonstatutory Stock Option Agreement, by and between the Company and
Lowell E. Sears, dated October 30, 1995.
9. Vanni Business Park Industrial Lease, by and between the Company and
Vanni Business Park General Partnership, dated October 27, 1992.
2.
<PAGE>
10. Agreement (Strober Technology), by and between the Company and The
Board of Trustees of the Leland Stanford Junior University, dated
September 1, 1992.
11. Agreement (Engleman Technology), by and between the Company and The
Board of Trustees of the Leland Stanford Junior University, dated
September 1, 1992.
12. Agreement, by and between the Company and The Board of Trustees of the
Leland Stanford Junior University, effective as of December 1, 1996.
13. Collaborative Agreement for Development and Production, by and between
Dendreon Corporation and Protein Sciences Corporation, dated August
12, 1999.
14. Cell Processing Center Collaboration Agreement, by and between the
American National Red Cross and Dendreon Corporation, dated August 16,
1999.
15. Research and License Agreement, by and between Dendreon Corporation
and Kirin Brewery Co., Ltd., dated February 1, 1999.
16. Manufacturing and Supply Agreement, by and between Dendreon
Corporation and Kirin Brewery Co., Ltd., dated July 27, 1999.
17. Collaborative License Agreement, by and between Dendreon Corporation
and Kirin Brewery Co., Ltd., dated December 10, 1998.
18. Collaboration Agreement, by and between the Company and Trustees of
Leland Stanford Junior University, dated September 24, 1996.
19. Research Purchase Agreement, by and between the Company and Pharmacia
Biotech AB, effective as of August 27, 1996.
20. Resale Purchase Agreement, by and between the Company and Pharmacia
Biotech AB, effective as of August 27, 1996, and addendum thereto,
effective as of January 25, 1997.
21. Development and Supply Agreement, by and between the Company and
BioTransplant, Inc., effective as of August 22, 1996.
22. Supply Agreement, by and between the Company and Osiris Therapeutics,
Inc., effective as of February 28, 1997.
23. Clinical Trial Agreements, by and between the Company and MD Anderson
Cancer Center, dated January 1, 1996; University of Chicago, dated May
22, 1995; University of California San Francisco, dated March 13,
1997; Sacramento Center for Blood Research, dated March 20, 1997 and
May 1, 1998; Washington University, dated March 24, 1997; Stanford
University, dated April 1, 1996 and April 1, 1998; Marin Oncology
Associates, dated October 7, 1997; Mayo Foundation, dated November 19,
1997; Scripps Clinic, dated January 6, 1998; and San Diego Hospital
Association, dated April 15, 1998.
3.
<PAGE>
24. Amended and Restated Stockholders' Agreement, dated August 15, 1997.
25. Series A Preferred Stock Purchase Agreement, dated October 27,
1992.
26. Series B Preferred Stock Purchase Agreement, dated January 26,
1996.
27. Series C Preferred Stock Purchase Agreement, dated June 20,
1997.
28. Series D Preferred Stock Purchase Agreement, dated July 10,
1998.
29. Collaboration Agreement, by and between the Company and the Mayo
Foundation, dated July 10, 1997.
30. Letter Agreement, by and between the Company and New York Life
Insurance Company, dated July 29, 1997.
31. Consent and Waiver, by and between the Company, The University of
Brussels and The Immune Response Corporation, dated July 30, 1997.
32. Sales, Licensing and Technology Agreement between the Company and
Micra Scientific, Inc., dated August 20, 1997.
33. Consulting Agreements with Samuel Strober and Edward Engleman, both
dated October 27, 1997.
34. Loan and Security Agreement, dated July 30, 1999, between the Company
and Transamerica Business Credit Corporation in the amount of
$3,000,000.
35. License Agreement between the Company and Fresenius AG, dated February
27, 1998. The Company is negotiating a termination of this agreement
whereby the Company contemplates issuing 250,000 warrants to purchase
the Company's Common Stock.
36. License Agreement between the Company and Ludwig Institute for Cancer
Research, dated April 28, 1998.
37. Master Lease Agreement dated July 31, 1998 between the Company and
Alexander Real Estate for the lease of real property at 3005 First
Avenue, Seattle, Washington.
38. Home Purchase Loan by and between the Company and Madhusadan Peshwa,
dated March 26, 1999 in the amount of $25,000.
39. Home Purchase Loan by and between the Company and Reiner Laus, dated
May 3, 1999 in the amount of $80,000.
40. Equipment Lease Agreement between the Company and Transamerica
Business Credit Corporation, dated October 7, 1997 in the amount of
$1,000,000, amended and restated on April 19, 1999 for an additional
amount of $500,000. A total of
4.
<PAGE>
six draw-downs have taken place as of August 25, 1999 for a total
amount of $1,402,740.82.
41. Sub Lease Agreement dated March 19, 1999 between the Company and
Halosource for the lease of real property at 3005 First Avenue,
Seattle, Washington.
42. Sub Lease Agreement dated June 18, 1999 and amended July 27, 1999
between the Company and Aviron for the lease of real property at 291
North Bernardo Avenue, Mountain View, California.
Section 2.19
------------
From time to time, the Company will be required to license Intellectual
Property in order to conduct its business. The Company is actively seeking
rights to in-process technology to license antigens and other technology
compatible with that of the Company.
Section 2.20
------------
In connection with the Master Lease Agreement between the Company and
Transamerica Business Credit Corporation ("Transamerica"), dated December
11, 1997 and amended and restated on April 28, 1999 and May 28, 1999,
Transamerica has a security interest in certain of the Company's specific
equipment.
5.
<PAGE>
EXHIBIT 10.7
October 14. 1999
REGISTRATION RIGHTS
AND
SHAREHOLDER'S AGREEMENT
This Registration Rights and Shareholder's Agreement is entered into
as of the 18th day of October, 1999, by and among Dendreon Corporation, a
Delaware Corporation (the "Company") and Fresenius AG, a German Corporation
("Fresenius"). Fresenius is sometimes individually referred to herein as the
"Shareholder".
WITNESSETH:
Whereas, pursuant to that certain Warrant Purchase Agreement dated the
date hereof by and between the Company and Fresenius (the "Warrant Purchase
Agreement"), Fresenius has acquired a warrant to purchase up to 250,000 shares
of the Company's Common Stock (as defined in the Warrant Purchase Agreement);
and
Whereas, each of the parties considers the provisions contained herein
to be in the best interest of the Company;
Now, Therefore, in consideration of the premises and of the mutual
consents and obligations hereinafter set forth, the parties hereto hereby agree
as follows:
1. Registration Rights.
1.1 Definitions. For purposes of this Agreement:
(a) The term "Securities Act" means the Securities Act of
1933, as amended, or any other statute in effect from time to time corresponding
to such act.
(b) The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and the declaration or ordering
of effectiveness of such registration statement.
(c) The term "Registrable Securities" means (i) Common Stock
issued to the shareholders, and (ii) any securities of the Company issued as a
dividend or other distribution with respect to, or in exchange or in replacement
of, such Common Stock.
(d) The term "Initial Public Offering" means the first
underwritten public offering of the Company's securities pursuant to a
registration statement in compliance with the Securities Act on Form S-1 or any
successor form.
1.2 Company Registration. If at any time or from time to time
the Company proposes to register any of its Common Stock under the Securities
Act in connection with a public offering of such securities solely for cash and
shares of Common Stock held by persons
1.
<PAGE>
other than the Company are to be included in such registration other than in
connection with the initial public offering, the Company shall, each such time,
promptly give Fresenius written notice of such proposed registration. Upon the
written request of Fresenius given within twenty (20) days after mailing of any
such notice by the Company, the Company shall use its reasonable best efforts to
cause to be registered under the Securities Act all of the Registrable
Securities that Fresenius has requested be registered.
1.3 Registrations on Form S-3. If (i) the Company intends to
file a registration statement on Form S-3 (or any successor form to Form S-3
regardless of its designation) for a public-offering of shares of the
Registrable Securities, the reasonably anticipated aggregate price to the public
of which would exceed Five Hundred Thousand Dollars ($500,000) and (ii) the
Company is a registrant entitled to use Form S-3 to register such shares, then
the Company shall notify Fresenius of such request and shall use its reasonable
best efforts to cause to be registered on Form S-3 (or any successor form to
Form S-3) all of the Registrable Securities that Fresenius requests to be so
registered. Rights to registration under this paragraph 1.3 are in addition to,
and not in lieu of, rights to registration under paragraph 1.2.
1.4 Obligations of the Company. Whenever required under
paragraphs 1.2 or 1.3 to use its reasonable best efforts to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the Securities and Exchange
Commission ("SEC") a registration statement with respect to such Registrable
Securities and use its reasonable best efforts to cause such registration
statement to become and remain effective; provided, however, that in connection
with any proposed registration intended to permit an offering of any securities
from time to time (i.e., a so-called "shelf registration"), the Company shall in
no event be obligated to cause any such registration to remain effective for
more than ninety (90) days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition or all
securities covered by such registration statement.
(c) Furnish to the Shareholders and deliver as directed such
numbers of copies of a prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act, and such other documents
as they may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably appropriate for the
distribution of the securities covered by the registration statement, provided
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions, and further provided that (anything
in this Agreement to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the securities shall be qualified shall
require that expenses incurred in connection with the
2.
<PAGE>
qualification of the securities in that jurisdiction be borne by selling
shareholders, then such expenses shall be payable by the selling shareholders
pro rata, to the extent permitted by such jurisdiction.
1.5 Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 1
that Fresenius shall furnish to the Company such information regarding
Fresenius, the Registrable Securities held by it, and the intended method of
disposition of such securities as the Company shall reasonably request and as
shall be required in connection with the action to be taken by the Company.
1.6 Company Registration Expenses. In the case of any
registration effected pursuant to paragraphs 1.2 or 1.3, the Company shall bear
all registration and qualification fees and expenses (excluding underwriters'
discounts and commissions), including any additional costs and disbursements of
counsel for the Company that result from the inclusion of securities held by
Fresenius in such registration; provided, however, that Fresenius shall bear the
fees and costs of its own counsel.
1.7 Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required to include any of Fresenius's Registrable Securities in
such underwriting unless Fresenius accepts the terms of the underwriting as
agreed upon between the Company and the underwriters selected by the Company. If
the total amount of Registrable Securities that the Shareholder and other
shareholders of the Company with registration rights (the "Other Shareholders")
request to be included in an offering exceeds the amount of securities that the
underwriters reasonably believe compatible with the success of the offering,
there shall be included in such registration that number of Registrable
Securities which in the opinion of the underwriters can be sold, giving effect
to the rights of the Other Shareholders, and the securities so included shall be
apportioned pro rata among the selling shareholders according to the total
amount of Registrable Securities owned by said selling Shareholder.
1.8 Delay of Registration. Fresenius shall not have any right to
take any action to restrain, enjoin, or otherwise delay any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.9 Indemnification and Contribution. In the event any
Registrable Securities are included in a registration statement pursuant to this
Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless Fresenius, any underwriter (as defined in the
Securities Act) for it, and each person, if any, who controls Fresenius or
underwriter within the meaning of the Securities Exchange Act of 1934 (the "1934
Act") against any losses, claims, damages or liabilities, joint or several, to
which they may become subject under the Securities Act, the 1934 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based on any untrue or alleged untrue
statement of any material fact contained in such registration statement,
including any preliminary prospectus or final prospectus, or any amendments or
supplements thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the
3.
<PAGE>
statements therein not misleading or arise out of any violation by the Company
of any rule or regulation promulgated under the Securities Act or the 1934 Act
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration; and will reimburse Fresenius,
such underwriter, or such controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this paragraph 1.9(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld) nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in connection with such registration
statement, preliminary prospectus, final prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by Fresenius,
underwriter or controlling person.
(b) To the extent permitted by law, Fresenius will indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed the registration statement, each person, if any, who controls the
Company within the meaning of the Securities Act or the 1934 Act, and each agent
and any underwriter for the Company (within the meaning of the Securities Act or
the 1934 Act) against any losses, claims, damages or liabilities, joint or
several, to which the Company or any such director, officer, controlling person,
agent or underwriter may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any untrue statement or omission of any
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus, or any amendments or supplements
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or omission was made in such registration
statement, preliminary or final prospectus, or amendments or supplements
thereto, in reliance upon and in conformity with written information furnished
by such Shareholder expressly for use in connection with such registration; and
each such Shareholder will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, controlling person, agent
or underwriter in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the indemnity
agreement contained in this paragraph 1.9(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of such Shareholder (which consent
shall not be unreasonably withheld).
(c) Promptly after receipt by an indemnified party under
this paragraph of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against any indemnifying
party under this paragraph, notify the indemnifying party in writing of the
commencement thereof and (unless the interest of the indemnifying party
conflicts with that of the indemnified party) the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel
4.
<PAGE>
mutually satisfactory to the parties. The failure to notify an indemnifying
party promptly of the commencement of any such action, if prejudicial to his
ability to defend such action, shall relieve such indemnifying party, to the
extent that it is prejudiced thereby, of any liability to the indemnified party
under this paragraph, but the omission so to notify the indemnifying party will
not relieve it of any liability that it may have to any indemnified party
otherwise than under this paragraph.
(d) In order to provide for just and equitable contribution
to joint liability under the Securities Act in any case in which either (i)
Fresenius, or any controlling person of Fresenius, makes a claim for
indemnification pursuant to this paragraph 1.9 but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right or appeal)
that such indemnification may not be enforced in such case notwithstanding the
fact that this paragraph 1.9 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of Fresenius
or any such controlling person in circumstances for which indemnification is
provided under this paragraph 1.9; then, and in each such case, the Company and
Fresenius will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that Fresenius is responsible for the portion represented by
the percentage that the public offering price of its Registrable Securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, and the Company is
responsible for the remaining portion; provided, however, that, in any such
case, (A) Fresenius will not be required to contribute any amount in excess of
the public offering price of all such Registrable Securities offered by it
pursuant to such registration statement; and (B) no person or entity guilty of
fraudulent misrepresentation (within the meaning of Section 1l(f) of the
Securities Act) will be entitled to contribution from any person or entity who
was not guilty of such fraudulent misrepresentation.
1.10 Reports Under Securities Exchange Act of 1934. With a view
to making available to the Shareholder the benefits of Rule 144 promulgated
under the Securities Act and any other rule or regulation of the SEC that may at
any time permit the Shareholder to sell securities of the Company to the public
without registration, in the event that the Company becomes a reporting Company
under the 1934 Act, the Company agrees to use its best efforts to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144, at all times subsequent to ninety
(90) days after the effective date of the first registration statement covering
an underwritten public offering filed by the Company;
(b) file with the SEC in a timely manner all reports and
other documents required of the Company under the 1934 Act; and
(c) furnish to Fresenius upon request a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed by the Company with the SEC as may be reasonably requested in
availing Fresenius of any rule or regulation of the SEC permitting the selling
of any such securities without registration.
5.
<PAGE>
1.11 Lockup Agreement. In consideration for the Company agreeing
to its obligations under this Section 1, Fresenius agrees in connection with any
registration of the Company's Common Stock for sale to the general public that,
upon the request of the Company or the underwriters managing any underwritten
offering of the Company's securities, not to sell, make short sale of; loan,
grant any option for the purchase of, or otherwise dispose of any Registrable
Securities (other than those included in the registration) without the prior
written consent of the Company or such underwriters, as the case may be, for a
period from the effective date of such registration as the Company or the
underwriters may specify, but not longer than the shortest period with respect
to lockup arrangements applicable to any officer, director or five percent
shareholder of the Company who has registration rights.
2. "Drag-Along" Rights.
2.1 "Drag-Along" Rights. In the event that a majority of the
outstanding shares of the Company's Preferred or Common Stock receives a bona
fide written offer of purchase, the Company shall provide copies of such written
offer to Fresenius as soon as reasonably possible. If the holders of a majority
of the outstanding shares of Preferred or Common Stock agree to the terms and
conditions of the sale, then Fresenius shall likewise be bound to the same terms
and conditions and shall accept the offer and complete the transaction.
2.2 Termination of "Drag Along" Rights. The rights and
restrictions provided in Section 2.1 hereof shall terminate upon the completion
of the Company's Initial Public Offering.
3. Repurchase Obligation. The Company agrees that in the event the
holders of a majority of the outstanding shares of the company's Preferred Stock
or Common Stock, not including Fresenius, agree to enter into any transaction
that would result in the sale or exchange by such holders of a majority of the
outstanding shares of the Company's Preferred Stock or Common Stock, as the case
may be, the Company shall no later than 10 (ten) days prior to such transaction
provide a notice thereof to Fresenius. The notice shall set forth (a) the number
of shares of Preferred or Common Stock to be transferred, (b) the principal
terms of the transfer, including the minimum price at which the shares of
Preferred or Common Stock are intended to be transferred, (c) the identity of
the proposed purchaser, and (d) an offer to purchase on substantially the same
terms and conditions, a number of shares of Common Stock then held by Fresenius,
determined by multiplying the number of shares of Common Stock held by Fresenius
by a fraction, the numerator of which shall be the number of shares of Preferred
or Common Stock which such holders have agreed to transfer and the denominator
of which shall be the number of shares of Preferred or Common Stock outstanding
immediately prior to the transfer of any of the shares of Preferred or Common
Stock to the purchaser or, at the option of Fresenius, a lessor number of
shares. The foregoing rights shall terminate upon the completion of the
Company's Initial Public Offering.
4. Notices. All notices required or permitted to be given to the
Shareholder or the Company pursuant to any of the terms hereof shall be sent by
certified mail, return receipt requested, postage prepaid, addressed to the
Shareholder or the Company at the addresses set forth on the signature pages
hereto.
6.
<PAGE>
5. Entire Agreement. This Agreement contains the entire agreement of
the parties with respect to the subject matter hereof.
6. Amendments and Waivers. Any term of this Agreement may be
amended, and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Shareholder and the Company. Any
amendment or waiver effected in accordance with this Section shall be binding
upon each party to this Agreement, any person who may become a party, and the
Company.
7. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, their heirs, legal representatives,
successors and assigns.
8. Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
9. Applicable Law. This Agreement shall be governed by the laws of
the State of New York without regard to conflict or choice of law provisions.
In Witness Whereof, the parties have executed this Agreement as of the date
first above written.
Dendreon Corporation
By: /s/ Christopher S. Henney
-------------------------------
Name: Christopher S. Henney
-----------------------------
Title: President
----------------------------
3005 - 1st Avenue
Seattle, WA 98121-1010
USA
Fresenius Ag
By: /s/ illegible
-------------------------------
Name:_____________________________
Title:____________________________
Else-Kr6ner-StraBe 1
61346 Bad Homburg v.d.h.
Germany
7.
<PAGE>
EXHIBIT 10.8
WARRANT
between
DENDREON CORPORATION
and
FRESENIUS AG
Dated October 18, 1999
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS WARRANT AGREEMENT IS
RESTRICTED BY AGREEMENTS ON FILE AT THE OFFICES OF THE CORPORATION.
THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
1
<PAGE>
WARRANT TO PURCHASE SHARES OF COMMON STOCK OF DENDREON
CORPORATION
WARRANT (the "Warrant"), dated October 18, 1999, between DENDREON
CORPORATION, a Delaware Corporation (the "Company"), and FRESENIUS AG, a German
Corporation.
PREAMBLE
Fresenius AG (the "Initial Holder" and, with any subsequent holder
permitted pursuant to Section 5.4 of the Warrant Purchase Agreement between the
Company and Fresenius AG effective as of October 18, 1999, each a "Holder"), for
value received, may, subject to the terms set forth below, purchase from the
Company up to 250,000 fully paid and nonassessable shares of the Company's
Common Stock, par value $.001 per share (the "Stock"), at a price of $5.00 per
share of Stock (the "Stock Purchase Price"). The number of shares of Stock
purchasable upon the exercise of this Warrant is subject to adjustment as
provided in Section 9. This Warrant may be exercised at the times set forth in,
and subject to the conditions of, Section 1, but not later than 5:00 P.M. (New
York City time) on October 17, 2004 (the "Expiration Date"). This Warrant and
all rights hereunder, to the extent not exercised in the manner set forth
herein, shall terminate on the Expiration Date. Unless otherwise defined in
context or the context otherwise requires, capitalized terms used herein are
defined on Schedule 1 attached hereto, which Schedule is incorporated herein by
reference and made a part hereof.
This Warrant is subject to the following terms and conditions:
1. Exercise. This Warrant may be exercised prior to the Expiration Date
at any time or from time to time from and after the date of issuance of this
Warrant.
This Warrant may be exercised upon surrender to the Company at its
principal office in Seattle, Washington (or at such other location as the
Company may advise the Holder in writing) of this Warrant properly endorsed with
the Form of Exercise attached hereto completed in full and signed and payment
representing the aggregate Stock Purchase Price for the number of shares of
Stock for which this Warrant is being exercised.
2. Notice of Exercise. This Warrant shall be exercised by surrendering to
the Company, at its principal office, the certificate representing this Warrant
to be exercised, together with written notice of exercise duly completed and
signed, in the form of Attachment A hereto, which notice shall be accompanied by
payment to the Company of the Exercise Price, as set forth in Section 6, below.
Upon giving such notice and making such payment, the Company shall issue to the
Holder the shares of Common Stock to which the Holder is entitled hereunder.
3. Partial Exercise. If this Warrant should be exercised in part only,
the Company shall, upon surrender of this Warrant, simultaneously execute and
deliver a new warrant evidencing the rights of the Holder to purchase the
balance of the shares of Common Stock purchasable hereunder. Except as otherwise
set forth herein, the Holder shall have none of
2
<PAGE>
the rights of a stockholder in respect of the shares of Common Stock subject to
this Warrant until such shares are issued or transferred to the Holder.
4. Taxes. The Company shall pay all expenses, and any and all United
States federal, state and local taxes, issue tax and other charges that may be
payable in connection with the preparation, issue and delivery of stock
certificates in the name of Fresenius other than income taxes.
5. Minimum Exercise. Anything herein to the contrary notwithstanding,
this Warrant may not be exercised for fewer than the lesser of (i) 50,000 shares
of Common Stock or (ii) all remaining shares of Common Stock subject to this
Warrant.
6. Payment of Exercise Price.
(a) Cash. Payment of the Exercise Price shall be made by cash or
check of an amount equal to the exercise price per share of $5.00 multiplied by
the number of shares then being purchased.
(b) Net Exercise. In lieu of paying the Exercise Price as provided in
6(a) above, the Holder may elect to receive shares equal to the value (as
determined below) of the Warrant by indicating on the notice of exercise that
the Holder is making such election, in which event the Company shall issue to
Fresenius a number of shares (calculated to the nearest share) computed using
the following formula:
X= Y(A-B)
---------
A
X= the number of shares to be issued to Fesenius.
Y= the number of shares for which the Warrant is being exercised.
A= the current fair market value of one share of Common Stock.
B= the purchase price of one share of Common Stock under the
Warrant (initially $5.00).
As used herein, current fair market value of Common Stock shall mean, with
respect to each share of Common Stock: the average of the closing prices of the
Company's Common Stock sold on all securities exchanges on which the Common
Stock may at the time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day the Common Stock is
not so listed, the average of the representative bid and lowest asked price on
such day in the domestic over-the counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization. If at
any time the Common Stock is not listed on any securities exchange or not quoted
in the NASDAQ System or the over-the-counter market, the current fair market
value of the Common Stock shall be the highest price per share
3
<PAGE>
which the Company could obtain from an independent, willing buyer (not a current
employee or director) for shares of Common Stock sold by the Company, from
authorized but unissued shares, as determined by the Board of Directors in good
faith. In the event that the Holder does not agree with such determination, the
price shall be determined by the regular accountants of the Company utilizing
customary valuation principles.
7. Issuance. The shares of Stock purchased under this Warrant shall be
deemed to be issued to the Holder upon such Holder's exercise of this Warrant,
as the record owner of such shares as of the close of business on the date on
which this Warrant shall have been surrendered and payment made for such shares.
Certificates representing shares of Stock so purchased, together with any other
securities or property to which such Holder may be entitled upon such exercise,
shall be delivered to such Holder by the Company or its agent at the Company's
expense promptly after this Warrant has been exercised. Each certificate so
delivered shall be in such denomination as may be requested by such Holder and
shall be registered in the name of such Holder or such other name as shall be
designated by such Holder. If, upon exercise of this Warrant, fewer than all of
the shares of Stock available for purchase under this Warrant are purchased
prior to the Expiration Date, a new warrant substantially in the form and on the
terms of this Warrant shall be issued by the Company for the shares of Stock not
purchased upon exercise of this Warrant.
8. Shares to be Fully Paid; Reservation of Shares. All shares of Stock
issued upon the exercise of this Warrant shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof. During the period
within which this Warrant may be exercised, the Company shall at all times have
authorized and reserved for issuance a sufficient number of shares of authorized
but unissued Common Stock when and as required to provide for the exercise of
this Warrant. The Company shall ensure that such shares of Common Stock may be
issued as provided herein without violation of any law or regulation or of any
requirement of any domestic securities exchange or automated quotation system
upon which the Stock may be listed; provided, however, that the Company shall
not be required to effect a registration under federal or state securities laws
with respect to such issuance.
9.1 Adjustments. The number of shares of Stock deliverable upon the
exercise of the Warrant and the Stock Purchase Price shall be subject to the
following adjustments:
(a) If, at any time after the date hereof, the number of shares of
Common Stock outstanding is increased by a dividend payable in Common Stock or
by a subdivision or split-up of Common Stock, then, immediately following the
record date fixed for the determination of holders of Common Stock entitled to
receive such dividend, subdivision or split-up, the Stock Purchase Price shall
be appropriately decreased and the number of shares of Common Stock issuable
upon exercise of this Warrant shall be appropriately increased, in each case in
proportion to such increase in such outstanding shares.
(b) If, at any time after the date hereof, the Company makes, or fixes
a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other
4
<PAGE>
distribution payable in securities of the Company, and no equivalent
distribution is made for this Warrant, then and in each such event provision
shall be made so that the Holder of this Warrant shall receive, when and if this
Warrant is exercised, the amount of such securities which the Holder would have
received had the Holder exercised this Warrant on the date of such event.
9.2 Abandoned Distributions. If the Company shall take a record of the
holders of Common Stock for the purpose of entitling them to receive a dividend
or other distribution and thereafter and before the distribution to such
stockholders the Company legally abandons its plan to pay or deliver such
dividend or distribution, no adjustments shall be required by reason of the
taking of such record.
9.3 Merger, Consolidation, Etc. In case of any Transaction, this Warrant
shall be exercisable into, in lieu of the Stock issuable upon such exercise
prior to consummation of such Transaction, the kind and amount of shares of
stock and other securities and property receivable (including cash) upon the
consummation of such Transaction (the "Transaction Consideration") by a holder
of that number of shares of Stock into which this Warrant was exercisable
immediately prior to such Transaction (including, on a pro rata basis, the cash,
securities or property received by holders of Common Stock in any tender or
exchange offer that is a step in such Transaction). If securities or property
other than Stock shall be issuable or deliverable upon exercise as aforesaid,
all references in this Section 9.3 shall be deemed to apply, so far as
appropriate and nearly as may be, to such other securities or property.
9.4 Notice. If at any time or from time to time the Company shall pay any
stock dividend or make any other non-cash distribution to the holders of its
Common Stock, offer for subscription pro rata to the holders of its Common Stock
any additional shares of stock of any class or any other right, undergo any
capital reorganization or reclassification of the Common Stock or consolidation
or merger of the Company with or into another corporation, sell, lease or convey
to another corporation the property of the Company as an entirety or in
substantial portion or undergo a voluntary or involuntary dissolution,
liquidation or winding up of the Company, then, in any one or more of said
cases, the Company shall promptly give prior written notice thereof to the
Holder of this Warrant as of the date on which (a) the books of the Company
shall close or a record shall be taken for such stock dividend, distribution or
subscription rights or (b) such reorganization, reclassification, consolidation,
merger, sale, lease, conveyance, dissolution, liquidation or winding up shall
take place, as the case may be. Such notice shall also specify the date as of
which the holders of the Common Stock of record shall participate in said
dividend, distribution or subscription rights or shall be entitled to exchange
their Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, lease or
conveyance or participate in such dissolution, liquidation or winding up, as the
case may be.
9.5 Certificate of Adjustment. In each case of an adjustment or
readjustment of the number of shares of Stock or other securities issuable upon
exercise of this Warrant, the Company shall compute such adjustment or
readjustment in accordance with the provisions hereof, and shall promptly give
written notice thereof to the Holder in the manner set forth in Section 14
herein and shall prepare and file at its principal executive office and with any
transfer
5
<PAGE>
agent for this Warrant or the Stock, a certificate, signed by the Chief
Executive Officer or President or one of the Vice Presidents of the Company, and
by its Chief Financial Officer or Treasurer or any Assistant Treasurer, showing
such adjustment or readjustment. The certificate also shall set forth in detail
the facts upon which such adjustment or readjustment is based, including (1) the
event requiring the adjustment, (2) the method by which such adjustment was
calculated and (3) the type and amount, if any, of other property which at the
time would be received upon exercise of this Warrant.
10. No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon any Holder the
right to vote or to consent or to receive notice as a stockholder in respect of
meetings of stockholders for the election of directors of the Company or any
other matters or any rights whatsoever as a stockholder of the Company. No cash
dividends shall be payable in respect of this Warrant or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof and no enumeration herein of the rights or
privileges of any Holder shall give rise to any liability of any such Holder as
a stockholder of the Company, whether such liability is asserted by the Company
or by its creditors.
11. Restrictions on Transferability: Compliance With Securities Act.
11.1 Restrictions on Transferability. Neither this Warrant nor the
shares of Stock issued upon exercise of this Warrant shall be transferable
except upon the conditions specified in the Purchase Agreement and the
Registration Rights and Shareholder's Agreement, which conditions are intended
(among other things) to ensure compliance with the Securities Act and state
securities laws.
11.2 Restrictive Legend. This Warrant, each certificate representing
shares of Stock issued upon exercise of this Warrant, any subsequent warrants
delivered pursuant hereto and any other Stock issued in connection herewith upon
any stock split, stock dividend, recapitalization, merger, consolidation or
otherwise, shall be stamped or otherwise imprinted with legends to the following
effect:
"THE TRANSFER OF THESE SECURITIES IS RESTRICTED BY AGREEMENTS ON FILE AT
THE OFFICES OF THE CORPORATION."
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE COMPANY AND
ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED."
11.3 Ownership. Subject to Section 11.1, this Warrant may be
transferred by the Holder thereof upon surrender to the Company of this Warrant
accompanied by an Assignment in the form attached hereto or by such other
written instrument or instruments of
6
<PAGE>
transfer satisfactory to the Company. If the right to purchase all of the shares
of Stock covered by this Warrant are so transferred, the transferee shall
promptly receive a new warrant of like tenor and date evidencing the right to
purchase the same number of shares of Stock. If the right to purchase less than
all of the shares of Stock covered by Warrant are so transferred, the
transferring Holder shall promptly receive a new warrant covering the shares of
Stock with respect to which the right to purchase shall not have been so
transferred, and the Holder to whom the balance of such warrant is transferred
shall be entitled to receive a new warrant covering the remaining shares of
Stock. A warrant, if properly assigned, may be exercised by a new Holder without
first having a new warrant delivered.
12. Severability. Should any one or more of the provisions of this
Warrant be determined to be illegal or unenforceable, all other provisions of
this Warrant shall be given effect separately from the provision or provisions
determined to be illegal or unenforceable and shall not be affected thereby.
13. Notices. All notices, consents, requests, instructions, approvals and
other communications provided for herein shall be validly given, if in writing
and delivered personally, by confirmed telecopy or sent by registered or
certified mail or nationally recognized air courier service or overnight courier
service, postage prepaid:
(a) if to the Initial Holder, addressed to it in the manner set forth
in the Purchase Agreement, or at such other address as it shall have furnished
to the Company in writing;
(b) if to any other Holder, at the address that such Holder shall
have furnished to the Company in writing or, until any such other Holder so
furnishes to the Company an address, then to and at the address of the last
Holder of this Warrant who has furnished an address to the Company; and
(c) if to the Company, addressed to it in the manner set forth in the
Purchase Agreement, or at such other address as the Company shall have furnished
to each Holder in writing; and each such notice, request, consent, instruction,
approval and other communication shall for all purposes of this Warrant be
treated as being effective or having been given when delivered, if delivered
personally, or, if sent by mail, at the earlier of its actual receipt or three
(3) days after the same has been deposited in a regularly maintained receptacle
for the deposit of United States mail, addressed and postage prepaid as
aforesaid, or if sent by telecopier, when confirmed, or if sent by air courier,
two (2) days alter the same has been deposited with such air courier, or if sent
by overnight courier, one (1) day after the same has been deposited with such
overnight courier.
14. Amendments. This Warrant may not be amended, waived, changed,
modified or discharged except in writing signed by the party against which
enforcement is sought. No waiver by any party of the breach of any term or
provision contained in this Warrant, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any such
breach, or a waiver of the breach of any other term or covenant contained in
this Warrant.
7
<PAGE>
15. Successors and Assigns. All the terms and provisions of this Warrant
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors and assigns. Assignments by the
Holder shall be made and notified to the Company in the form attached hereto as
Attachment B.
16. Headings. Headings of the Sections and paragraphs of this Warrant
have been inserted for convenience of reference only and do not constitute a
part of this Warrant.
17. Governing Law. It is the intention of the parties that the internal
substantive laws, and not the laws of conflicts, of the State of New York should
govern the enforceability and validity of this Warrant, the construction of its
terms and the interpretation of the rights and duties of the parties.
18. Lost Warrant. Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant or any subsequent
warrant delivered pursuant hereto and, in the case of loss, theft or
destruction, upon delivery of an indemnity satisfactory to the Company, or, in
the case of mutilation, upon surrender thereof, the Company shall issue a new
warrant or warrants, as the case may be, of like tenor and date.
19. Jurisdiction. Each party to this Warrant hereby irrevocably agrees
that any legal action or proceeding arising out of or relating to this Warrant
or any agreements contemplated hereby may be brought in the courts of the State
of New York or of the United States of America for the Southern District of New
York and hereby expressly submits to the personal jurisdiction and venue of such
courts for the purposes thereof and expressly waives any claim of improper venue
and any claim that such courts are an inconvenient forum. Each party hereby
irrevocably consents to the service of process of any of the aforementioned
courts in any such suit, action or proceeding by the mailing of copies thereof
by registered or certified mail, postage prepaid, to the address set forth or
referred to in Section 13, such service to become effective 10 days after such
mailing.
IN WITNESS WHEREOF, the Company and the Initial Holder have caused this
Warrant to be executed and delivered as of the day and year first above written.
DENDREON CORPORATION
By: /s/ Christopher S. Henney
----------------------------
Name: Christopher S. Henney
--------------------------
Title: President
-------------------------
3005 First Avenue
Seattle, Washington 98121
U.S.A.
8
<PAGE>
FRESENIUS AG
By: /s/ Illegible
----------------------------
Name:__________________________
Title:_________________________
Else-Kroner-StraBe 1
61352 Bad Homburg v.d.h.
Germany
[Warrant Signature Page]
9
<PAGE>
DENDREON CORPORATION
Form of Exercise
The undersigned hereby elects to exercise its right to purchase,
represented by the within Warrant, _________ shares of Stock provided for
therein, and requests that certificates for such shares of Stock be issued in
the name of:
______________________________________________________________________________
(Please print name, address and social security number or other tax identifying
number)
______________________________________________________________________________
and, if said number of shares of Stock shall not be all the shares of Stock
purchasable thereunder, that a new warrant for the balance of the shares of
Stock purchasable under the within Warrant be executed and delivered to the
undersigned or its assignee as indicated below at the address below. The
undersigned hereby represents and warrants that all conditions contained in the
Warrant to the exercise of its right to purchase such shares of Stock have been
satisfied.
DATED: ______________ ___________________________
Signature of Holder
NAME OF
HOLDER OR
ASSIGNEE: ___________________________________________________________________
(Please print)
NOTE:
The signature above must correspond with the name exactly as it appears on the
face of the Warrant in every particular, without alteration or any change
whatever, unless the Warrant has been assigned.
ATTACHMENT A
10
<PAGE>
DENDREON CORPORATION
Form of Assignment
The undersigned hereby sells, assigns and transfers unto
_______________________________________________________________________________
(Name and address of assignee must be printed or typewritten)
________________________________________________________________________________
the right to purchase, represented by the within Warrant, __________ shares of
Stock provided for therein, and hereby irrevocably constitutes and appoints the
Company's Secretary to make such transfer. The undersigned requests that a new
warrant for such shares be executed and delivered to the assignee and, if said
number of shares of Stock shall not be all the shares of Stock purchasable under
the within Warrant, a new warrant agreement for the balance of the shares of
Stock purchasable thereunder be executed and delivered to the undersigned.
DATED: ________________ ___________________________________
Signature of Holder
NAME OF HOLDER: ________________________________________________________________
(Please print)
ADDRESS: _______________________________________________________________________
NAME OF
ASSIGNEE: ______________________________________________________________________
(Please print)
ADDRESS: _______________________________________________________________________
NOTE:
The signature of the Holder on this Assignment must correspond with the name
exactly as it appears upon the face of the within Warrant in every particular,
without alteration or any change whatever.
ATTACHMENT B
11
<PAGE>
SCHEDULE 1
DEFINITIONS
This Schedule 1 to that certain Warrant, dated as of October 18, 1999, issued by
Dendreon Corporation to Fresenius AG defines certain of the terms used therein
and is made a part thereof. Such terms shall be applicable to both the singular
and plural forms of any of the terms herein defined.
"Purchase Agreement" means that certain Warrant Purchase Agreement, dated
as of the date hereof between the Company and the Initial Holder.
"Securities Act" means the Securities Act of 1933, as amended, or any
subsequent similar Federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time. References to a particular section of the Securities Act
shall include a reference to the comparable section, if any, of any subsequent
similar Federal statute.
"Registration Rights and Shareholder's Agreement" means that certain
Registration Rights and Shareholder's Agreement, dated the date hereof, among
the Initial Holder and the Company.
"Transaction" means any consolidation or merger of the Company with or into
another corporation or any sale, lease or other conveyance to another
corporation of all or substantially all of the assets or property of the
Company.
"Warrant Shares" means the share or shares of Stock issued upon the
exercise of this Warrant.
12
<PAGE>
EXHIBIT 10.9
[DENDREON LETTERHEAD]
September 3, 1998
<TABLE>
<CAPTION>
<S> <C>
Mr. William W. Crouse Mr. Lowell Sears
Vice Chairman Chairman and CEO
HealthCare Ventures LLC Sears Capital Management
44 Nassau Street 70 Cheyanne Point
Princeton, NJ 08542-4511 Portola Valley, CA 94028-7623
</TABLE>
Re: Terms of Compensation for Henney and Urdal
Dear Bill and Lowell:
Thanks for your August 4, 1998 memorandum advising of the compensation
committee's decisions regarding the basic terms of compensation for me and for
David Urdal.
Now that these decisions have been made. I will implement them as follows:
Henney
To serve as Chief Executive Officer and a Director and member of the
Executive Committee of the Board of Directors.
Base salary is $300,000.00 annually, effective May 1, 1998.
As determined by the board of directors, target cash bonus of $100,000.00
by December 31, 1998.
Presently granted options to purchase 40,000 shares of the Company's common
stock at $1.00 per share, vesting monthly pro rata over four years, beginning
May 1, 1998, options to be exercised within ten years of vesting.
As determined by the board of directors, target bonus grant of options to
purchase the number of shares of the Company's outstanding shares of common
stock by December 31, 1998 at fair market value, as determined by the board of
directors at the time of the grant, to vest at the time of the grant and to be
exercised within ten years of vesting.
Urdal
To serve as Chief Scientific Officer and Chief Operating Officer, a
Director and Vice Chairman of the Board of Directors and a member of the
Executive Management Committee.
Base salary is $240,000.00 annually, effective July 1, 1998.
As determined by the board of directors, target cash bonus of $50,000.00 by
December 31, 1998.
Presently granted options to purchase 15,000 shares of the Company's common
stock at $1.00 per share, vesting monthly pro rata over four years, beginning
July 1, 1998, options to be exercised within ten years of vesting.
As determined by the board of directors, target bonus grant of options to
purchase the number of shares of the Company's common stock equal to .3% of the
Company's outstanding shares of common
<PAGE>
stock by December 31, 1998 at fair market value, as determined by the board of
directors at the time of the grant, to vest at the time of the grant and to be
exercised within ten years of vesting.
I have from Lowell a sample form of executive officers' change of control
severance plan which I am reviewing with the idea of proposing a change of
control plan for the Company's executive officers. It also seems in order for
the Company to have indemnity agreements with its executive officers, and I am
considering proposing that as well.
There is one provision from our earlier agreements that I believe it is
important to retain. This regards the acceleration in vesting by two years of
stock options if the appointments of Henney and/or Urdal are terminated for any
reason other than cause. I hope you would have no objection to retaining this
provision in our current understandings of employment.
Should you have any questions regarding the foregoing, please let us know.
Yours sincerely,
/s/ Christopher S. Henney, Ph.D., D.Sc.
Chief Executive Officer
<PAGE>
EXHIBIT 10.10
ACTIVATED CELL THERAPY, INC.
----------------------------
VANNI BUSINESS PARK INDUSTRIAL LEASE
------------------------------------
ARTICLE I
---------
PARTIES
-------
This Lease, dated, for reference purposes only, October 27, 1992, is made
by and between the Vanni Business Park General Partnership ("Lessor") and
ACTIVATED CELL THERAPY, INC., a Delaware corporation ("Lessee").
ARTICLE II
----------
Premises
--------
Lessor hereby leases to Lessee and Lessee leases from Lessor for the term,
at the rental, and upon all of the conditions set forth herein, that certain
real property situated in the County of Santa Clara, State of California,
commonly known as 291 North Bernardo Avenue, Building "F", Mountain View,
California 94043, and more particularly described in the site plan prepared by
Dennis Kobza & Associates, A.I.A., marked Exhibit "A" which is attached hereto
and incorporated herein. Said real property, including the land and all
improvements therein, is called "the Premises".
ARTICLE III
-----------
TERM
----
Section 3.1 Term. The term of this Lease shall be for eight (8)
----------- ----
years, commencing on the Commencement Date ("Commencement Date"). Lessor
understands that Lessee is in negotiations with the existing lessee on the
Premises, IDEC Pharmaceutical Corporation ("IDEC"), whereby Lessee would occupy
the Premises prior to the expiration of the term of IDEC's lease, and Lessor
shall attempt to accommodate Lessee to facilitate this early occupancy. In the
event that Lessee and IDEC reach an agreement, at Lessee's election it shall
either: (i) enter into a sublease with IDEC for the balance of the term of
IDEC's lease, in which event the Commencement Date of this Lease shall be
April 1, 1994; or (ii) request that Lessor terminate IDEC's lease and accelerate
the commencement of this Lease, in which event the Commencement Date shall be
the date on which Lessor delivers the Premises to Lessee in accordance with this
Lease.
Section 3.2 Option to Extend.
----------- ----------------
(a) Lessee is given the option to extend the Lease term for one
(1) five year period following expiration of the initial Lease term, which
option may be exercised only by written notice ("Option Notice") from Lessee to
Lessor given not less than one hundred eighty (180) days prior to the end of the
initial Lease term; provided, however, if Lessee is in material
1.
<PAGE>
default on the date of giving the Option Notice, the option Notice shall be
totally ineffective, or if Lessee is in material default on the date the
Extended Term is to commence, such Extended Term shall not commence and this
Lease shall expire at the end of the initial Lease term. In the event of an
Extended Term, the Extended Term shall be subject to all the terms and
conditions of this Lease excepting rent which shall be at 100% of the then fair
market rental value, as determined under subparagraph (b) below, but in no event
less than the monthly rent prevailing on the last month of the initial Lease
term.
(b) The parties shall agree on the fair market rental value of the
Premises for said Extended Term, including fair market periodic adjustments
thereto, during the first thirty (30) days of year five (5) of the Lease Term.
If the parties are able to agree on the fair market rental value for the
Extended Term, (including periodic adjustments thereto), then such agreed value
shall be the fair market-rental value for purposes of determining the rent for
the Extended Term.
In the event the parties are unable to agree on the fair market rental
value for the Premises (including periodic adjustments) within that time, then
at Lessee's written request, within ten (10) days of the expiration of that
thirty (30) day period, each party shall separately designate an appraiser to
make this determination. Within five (5) business days of their appointment, the
two designated appraisers shall jointly designate a third appraiser. The failure
of either party to appoint an appraiser within the time allowed shall be deemed
equivalent to appointing the appraiser appointed by the other party. No person
shall be appointed or designated an appraiser unless he is then a member of MAI.
Appraisal shall be on the basis of the Premises "as is" except for improvements
and fixtures which are the sole property of Lessee. If, within ten (10) business
days after the appointment of all appraisers, a majority of the appraisers
concur on the value of the then current fair market rental value for the
Premises, including fair market periodic adjustments thereto, that appraisal
shall be the accepted fair market rental value. If a majority of the appraisers
do not concur within that period, the determination of the appraiser whose
appraisal is neither highest nor lowest shall be the accepted fair market rental
value. The parties shall share the appraisal expenses equally.
Section 3.3 Delay in Possession. The parties agree that if for any
----------- -------------------
reason Lessor cannot deliver possession of the Premises to Lessee on or before
April 1, 1994, such failure shall not constitute a breach of this agreement by
Lessor, and shall not entitle Lessee to terminate this Lease. Lessee shall not
be obligated to pay rent, nor shall the Lease Term commence until possession of
the Premises is tendered to Lessee.
Section 3.4 Early Possession. If Lessee occupies the Premises prior to
----------- ----------------
the Commencement Date other than as a Sublessee of IDEC, such occupancy shall be
subject to all provisions hereof, and Lessee shall pay rent for such period at
the initial monthly rates set forth below; provided, however, that Lessee may
enter the Premises prior to commencement solely for the purpose of installing
fixtures or equipment or improvements without being required to pay rent.
Lessor agrees to attempt to locate three (3) offices in the Middlefield
Business Park for use by Lessee as office space by November l, 1992. In
addition, Lessor agrees to attempt to locate space in the Middlefield Business
Park for use by Lessee as one tissue culture lab by
2.
<PAGE>
January l, 1993, additional space for use as a second tissue culture lab by
March l, 1993, and additional space for use as a main lab by June 1, 1993.
However, Lessor does not and cannot guarantee such space to Lessee, and this
Lease shall not be contingent on Lessee's occupancy of any such space prior to
the Lease Commencement Date.
ARTICLE IV
----------
RENT: SPECIAL NET LEASE
-----------------------
Section 4.1 Base Rent. Upon the execution of this Lease, 'Lessee shall
----------- ---------
pay to Lessor the sum of $37,536.00 representing the first month's base rent.
Thereafter, beginning with the second month of the Lease, Lessee shall pay to
Lessor base rent for the Premises in advance, on the first day of each month
based on the following schedule of rents:
<TABLE>
<CAPTION>
Rent Per Square Monthly
Months Square Foot Footage BaseRent
- -------------------- ---------------------- ------------------------- ---------------------
<S> <C> <C> <C>
02-24 1.50 "NNN" 25,024 sq. ft. $37,536.00
25-48 1.60 "NNN" 25,024 sq. ft. $40,038.40
49-72 1.70 "NNN" 25,024 sq. ft. $42,540.80
73-96 1.80 "NNN" 25,024 sq. ft. $45,043.20
</TABLE>
Rent for any period during the term hereof which is for less than one month
shall be a pro rata portion of the monthly installment. Rent shall be payable in
lawful money of the United States to Lessor at the address stated herein or to
such other persons or at such other places as Lessor may designate in writing.
Section 4.2 Special Net Lease. This Lease is what is commonly called a
----------- -----------------
"Net, Net, Net Lease", it being understood that, commencing with the first month
of the Lease Term, the Lessor shall receive the rent set forth in Section 4.1
free and clear of any and all other impositions, taxes, liens, charges or
expenses of any nature except as otherwise provided in this agreement. In
addition to the rent reserved by Section 4.1, Lessee shall pay to the parties
respectively entitled thereto all insurance premiums, taxes, assessments,
operating charges, management fees, maintenance charges, and any other charges,
costs and expenses which arise or may be contemplated under any provisions of
this Lease for the entire Premises during the term hereof. All of such charges,
costs and expenses shall constitute additional rent, and upon the failure of
Lessee to pay any of such costs, charges or expenses, Lessor shall have the same
rights and remedies as otherwise provided in this Lease for the failure of
Lessee to pay rent. It is the intention of the parties hereto that this Lease
shall not be terminable for any reason by the Lessee, and that Lessee shall in
no event be entitled to any abatement of or reduction in rent payable under this
Lease, except as herein expressly provided. Any present or future law to the
contrary shall not alter this agreement of the parties.
3.
<PAGE>
ARTICLE V
---------
SECURITY DEPOSIT
----------------
Lessee shall deposit with Lessor, upon execution of this Lease, $45,043.20
as security for Lessee's faithful performance of Lessee's obligations hereunder.
If Lessee fails to pay rent or other charges due hereunder, or otherwise
defaults with respect to any provision of this Lease, Lessor may, without
waiving or releasing Lessee from any obligation under this Lease, and without
waiving Lessor's right to treat such failure as a default hereof, use, apply, or
retain all or any portion of said deposit for the payment of any rent or other
charge in default or for the payment of any other sum to which Lessor may become
obligated by reason of Lessee's default, or to compensate Lessor for any loss or
damage which Lessor may suffer thereby. If Lessor so uses or applies all or any
portion of said deposit, Lessee shall within ten (10) days after written demand
therefor deposit cash with Lessor in an amount sufficient to restore said
deposit to the full amount hereinabove stated and Lessee's failure to do so
shall be a material breach of this Lease. If Lessee performs all of Lessee's
obligations hereunder, said deposit shall be returned to Lessee (or, at Lessee's
option, to the last assignee, if any, of Lessee's interest 'hereunder) at the
expiration of the term hereof, including extension, and after Lessee has vacated
the Premises.
No trust relationship is created herein between Lessor and Lessee with
respect to said security deposit, and Lessor may commingle it, use it in
ordinary business, transfer or assign it, or use it in any combination of those
ways. In the event of termination of Lessor's interest in this Lease, Lessor
shall transfer said deposit to Lessor's successor in interest, whereupon if such
successor acknowledges receipt thereof and assumes all of Lessor's obligations
under this Lease, Lessee agrees to release Lessor from all liability for the
return of such deposit or the accounting therefor.
ARTICLE VI
----------
USE
---
Section 6.1 Use. The Premises shall be used and occupied for offices,
----------- ---
research and development, and any other legal use which is otherwise in
compliance with the reasonable rules and regulations that may be imposed by
Lessor from time to time on the Premises or on the business park. Lessee shall
not use nor permit the use of the Premises in any manner that will create waste
or a nuisance or unreasonably disturb any other tenants. Lessee's use of the
Premises is on a non-exclusive basis with respect to any other Lessees of the
business park.
Section 6.2 Compliance with Law.
----------- -------------------
(a) Lessor warrants to Lessee that, to the best of Lessor's
knowledge, the Premises, in its state existing on the Commencement Date, does
not violate any laws, permits, licenses, or covenants or restrictions of record,
or any applicable building code, regulation or ordinance in effect on such
Commencement Date.
(b) Except as provided in paragraph 6.2(a) or elsewhere in this
Lease, Lessee shall, at Lessee's expense, comply promptly with all applicable
statutes, ordinances, rules,
4.
<PAGE>
regulations, orders, covenants, and restrictions of record in effect during the
term or any part of the term hereof, regulating the use by Lessee of the
Premises.
Section 6.3 Condition of Premises.
----------- ---------------------
(a) Lessor shall deliver the Premises to Lessee clean and free
of debris on the Lease Commencement Date with the shell building completed and
Lessor further warrants to Lessee that such building shall be in good operating
condition on the Lease Commencement Date, that it was built in accordance with
the approved plans therefor, and in a workmanlike manner. In all other respects,
the Premises shall be delivered to Lessee in an "as is" condition.
Notwithstanding the foregoing, it is understood that Lessee may occupy the
Premises as successor-in-interest to IDEC with respect to certain improvements
made and fixtures added by IDEC on and to the Premises. Lessee shall be entitled
to the use and benefit of all such improvements and fixtures remaining on the
Premises upon IDEC's termination of occupancy.
(b) Except as otherwise provided in this Lease, Lessee hereby
accepts the Premises "as is" in their condition existing as of the Lease
Commencement Date, subject to all laws governing and regulating the use of the
Premises, and accepts this Lease subject thereto. Lessee acknowledges that
neither Lessor nor Lessor's agent has made any representation or warranty as to
the present or future suitability of the Premises for the conduct of Lessee's
business.
(c) Within thirty (30) days following the date on which this
Lease is executed by Lessor and Lessee, Lessor shall cause an environmental
consultant reasonably acceptable to Lessee to make an inspection of the Premises
for purposes of determining whether there are any hazardous or toxic materials
(as defined in Article VII) being used or which have been used on the Premises
in violation of any applicable law or ordinances or which, if so used by Lessee,
would place Lessee in breach of Article VII of this Lease. Such consultant shall
provide a written report of his findings to Lessor and Lessee upon completion of
his inspection. It is understood that Lessee shall have no liability to Landlord
or otherwise for any such violations existing on the Premises as of the date of
such inspection, or thereafter caused by IDEC. The costs of such inspection and
report shall be shared equally by Lessor and Lessee; provided, however, that
they shall endeavor to get the agreement of IDEC to share in such costs, in
which event the costs will be divided equally between the three.
ARTICLE VII
-----------
HAZARDOUS OR TOXIC MATERIALS
----------------------------
Lessee shall not emit, dump, dispose, or release on the Premises any Toxic
Materials, and Lessee shall not allow or permit any agent, vendor, or other
entity acting on Lessee's behalf to emit, dump, dispose, or release on the
Premises, any Toxic Materials. Lessee shall not bring, use, or store on the
Premises, or emit, dump, dispose, or release from the Premises, any Toxic
Materials in violation of any laws, regulations, ordinances, or statutes which
are now in existence or which may be enacted in the future. Lessee shall remain
in full and complete compliance with all laws, regulations, ordinances, and
statutes with respect to Toxic Materials, and Lessee shall
5.
<PAGE>
install and keep in good working order any monitoring devices that are necessary
to insure Lessee's full and complete compliance therewith.
Lessee shall indemnify and hold Lessor harmless from any claims,
liabilities, costs, or expenses incurred or suffered by Lessor arising from
Lessee's bringing, using, emitting, dumping, disposing, or releasing upon the
Premises, or generating or creating at or emitting, dumping, disposing, or
releasing from the Premises, any Toxic Materials, or arising from the bringing,
using, emitting, dumping, disposing, or releasing upon the Premises, or
generating or creating at or emitting, dumping, disposing, or releasing from the
Premises, any Toxic Materials by any agent, vendor, or other entity acting on
Lessee's behalf. Lessee's indemnification and hold harmless obligations as set
forth in this Article VII above include, without limitation, all of the
following: (i) claims, liabilities, costs or expenses resulting from or based
upon administrative, judicial (civil or criminal), or other action, legal or
equitable, brought by any private or public person under common law or any
Federal, State, County or Municipal law, ordinance or regulation, (ii) claims,
liabilities, costs, or expenses pertaining to the cleanup or containment of
Toxic Materials, the identification of the pollutants in the Toxic Materials,
the identification of the scope of any environmental contamination, the removal
of pollutants from soils, the provision of an alternative public drinking water
source, or the long term monitoring of ground water and surface waters, and
(iii) all costs of defending such claims. Lessee shall comply, at its sole cost,
with all laws pertaining to such Toxic Materials. Lessee's hold harmless and
indemnity obligations hereunder shall survive the expiration or termination of
this Lease.
For the purposes of this Article VII, "Toxic Materials" includes, without
limitation, any toxic or hazardous gaseous, liquid, or solid materials or waste,
or any material or substance having characteristics of ignitability,
corrosivity, reactivity, or extraction procedure toxicity or substances or
materials which are listed on any of the Environmental Protection Agency's lists
of hazardous wastes or which are identified in Sections 66680 through 66685 of
Title 22 of the California Code of Regulations as the same may be amended from
time to time.
Except as may be disclosed in the hazardous materials report delivered to
Lessee by Lessor, to the best knowledge of Lessor, there are no Toxic Materials
present on or about the Premises and no action, proceeding, or claim is pending
or threatened concerning the Premises concerning any Toxic Material or pursuant
to any environmental law.
ARTICLE VIII
------------
MAINTENANCE, REPAIRS AND ALTERATIONS
------------------------------------
Section 8.1 Maintenance - Premises. Throughout the term, Lessee agrees
----------- ----------------------
to keep and maintain all improvements and appurtenances in or serving the
Premises, excluding all sewer connections, plumbing, heating and cooling
appliances, and wiring, in the same order, condition and repair as they are in
on the Commencement Date, or may be put in during the term, reasonable use and
wear excepted. Lessee hereby expressly waives the provisions of any law
permitting repairs by a tenant at the expense of a landlord, including, without
limitation, all rights of Lessee under Sections 1941 and 1942 of the California
Civil Code. Lessee agrees to keep the Premises clean and in sanitary condition
as required by the health, sanitary and police ordinances and regulations of any
political subdivision having jurisdiction. Lessee further agrees
6.
<PAGE>
to keep the interior of the Premises, such as the windows, floors, walls, doors,
showcases and fixtures clean and neat in appearance and to remove all trash and
debris which may be found in or around the Premises. If Lessee refuses or
neglects to commence such repairs and/or maintenance required under this
agreement or does not diligently prosecute same to completion within thirty (30)
days of written notice thereof, then Lessor may enter the Premises and cause
such repairs and/or maintenance to be made. Lessee agrees that upon demand, it
shall pay to Lessor the cost of any such repairs, together with accrued interest
from the date of payment at the prime commercial lending rate then in effect at
Bank of America. Notwithstanding anything to the contrary above, Lessor may
elect to enter into a maintenance contract with a third party for the provision
of all or a part of Lessee's maintenance obligations as set forth in this
Paragraph. Upon such election, Lessee shall be relieved from its obligations to
perform only those maintenance obligations covered by the maintenance contract,
and Lessee shall bear its pro rata share, as set forth in Paragraph 8.2 below,
of the costs of such maintenance contract which shall be paid in advance on a
monthly basis with Lessee's rent payments.
Section 8.2 Maintenance - Common Areas. Lessor shall be responsible for
----------- --------------------------
maintaining in a safe, good, and clean condition, the common areas of the
Premises and the common areas of the business park as a whole. Lessee shall
have the obligation to notify Lessor, in writing, of any repairs or maintenance
to the common areas which may be required, and Lessor shall have a reasonable
time to make such repairs.
Lessee shall pay to Lessor, as additional rent, in the manner and at the
time provided below, Lessee's proportionate share, as defined below, of all
costs and expenses incurred by Lessor in the operation and maintenance of the
common areas of the business park during the term of this Lease. Such costs and
expenses shall include, without limiting the generality of the foregoing, all
maintenance, pest control, security, gardening, landscaping, cost of public
liability, property damage, vandalism and malicious mischief, earthquake, and
other insurance deemed necessary by the Landlord, real property taxes, property
management costs, including a management fee equal to three percent (3%) of the
monthly rent set forth in Section 4.1, painting, lighting, cleaning, trash
removal, depreciation of equipment, fire-protection, and similar items.
Lessee's proportionate share of such common area expenses shall be 10.28%.
Lessor shall bill Lessee monthly for Lessee's proportionate share of such
common area costs, which proportionate Share shall be based upon the previous
month's actual costs and expenses. Lessee shall pay such proportionate share
within 15 days of receipt of said billing statement from Lessor. Lessor agrees
to make its books and records pertaining to the common area costs available for
Lessee's inspection upon request.
Section 8.3 Alterations and Additions. No structural alterations or
----------- -------------------------
structural additions shall be made to the Premises by Lessee without the prior
written consent of Lessor which Lessor will not unreasonably withhold. Nothing
in this section shall restrict Lessee's right to make any non-structural
additions or alterations provided that Lessee complies with all applicable laws
and ordinances. Lessee shall be provided a building which shall include concrete
floor, walls, roof, electrical and plumbing stubs, and utility service
connections (hereinafter "shell improvements") plus tenant improvements as
provided in Section 8.4.
7.
<PAGE>
As a condition to giving its consent, Lessor may require that Lessee agree
to remove any such structural alterations or improvements at the expiration of
the term and to restore the Premises to their prior condition. As a further
condition to giving such consent, Lessor may require Lessee to provide Lessor,
at the Lessee's sole cost and expense, with a lien and completion bond in an
amount equal to one and one-half (1-1/2) times the estimated costs of such
improvements to insure Lessor against any liability for mechanics' and
materialmen's liens and to insure completion of the work. All changes,
alterations, or additions to be made to the Premises shall be under the
supervision of a competent architect or competent licensed structural engineer
and made in accordance with plans and specifications which have been furnished
to and approved by Lessor prior to commencement of work. If the written consent
of Lessor to any proposed alterations by Lessee shall be been obtained, Lessee
agrees to advise Lessor in writing of the date upon which such alterations will
commence in order to permit Lessor to post a notice of non-responsibility. All
such alterations, changes and additions shall be constructed in good and
workmanlike manner in accordance with all ordinances and laws relating thereto.
Any such structural changes, alterations or additions to or on the Premises
shall remain for the benefit of and become the property of Lessor, unless Lessor
requires the removal by giving Lessee written notice at least thirty (30) days
before the date the Lessee is to vacate the Premises.
Section 8.4 Tenant Improvements.
----------- -------------------
(a) Lessor shall not provide Lessee with any Tenant Improvement
allowance, and Lessor cannot and does not warrant that any of the Tenant
Improvements currently on the Premises that are the property of the current
lessee shall remain on the Premises at the commencement of this Lease. However,
Lessor shall not remove from the Premises prior to Lessee' occupancy thereof any
of the Tenant Improvements placed in the Premises by IDEC Pharmaceutical
corporation at IDEC's own expense as the current lessee. Lessor shall not
prohibit Lessee from purchasing from and/or otherwise negotiating with IDEC for
any such improvements on the Premises that Lessee wishes to remain on the
Premises.
(b) All changes, alterations or additions to be made to the
Premises pursuant to this section, shall be under the supervision of a competent
architect or competent licensed structural engineer and made in accordance with
plans and specifications which have been approved by Lessor prior to
commencement of work. All such alterations, changes, and additions shall be
constructed according to the approved plans, in a good and workmanlike manner,
and in compliance with all ordinances and laws relating thereto. Any such
structural changes, alterations or additions to or on the Premises shall remain
for the benefit of and become the property of Lessor.
Section 8.5 Plumbing. Lessee shall not use the plumbing facilities for
----------- --------
any purpose other than that for which they were constructed. The expense of any
breakage, stoppage or other damage relating to the plumbing and resulting from
the introduction by Lessee, its agents, employees, or invitees of foreign
substances into the plumbing facilities shall be borne by Lessee.
8.
<PAGE>
ARTICLE IX
----------
INSURANCE
---------
Section 9.1 Property/Rental Insurance - Premises. During the term,
----------- ------------------------------------
Lessor shall keep the Premises insured against loss or damage by fire and those
risks normally included in the term "all risk" including (a) flood coverage, (b)
earthquake coverage at the election of Lessor, (c) coverage for loss of rents
(provided that notwithstanding anything set forth herein to the contrary rent
shall abate at least to the extent of any rent insurance received by Lessor) and
(d) boiler and machinery coverage if the Lessor reasonably deems such coverage
necessary. Any deductibles shall be paid by Lessor if the deductible arises from
damage solely to the Premises. The amount of such insurance shall be not less
than one hundred percent (100%) of the replacement value of the Premises. Any
recovery received from said insurance policy shall be paid to Lessor.
Lessee, in addition to the rent and other charges provided herein, agrees
to pay to Lessor its pro rata share of the premiums for all such insurance,
which pro rata share is identical to that provided in Section 8.2, above. The
insurance premiums shall be paid in accordance with Article IV, within thirty
(30) days of Lessee's receipt of a copy of Lessor's statement therefor.
Section 9.2 Property Insurance--Fixtures and Inventory. During the
----------- ------------------------------------------
term, Lessee shall, at its sole expense, maintain insurance with "all risk"
coverage on any fixtures, leasehold improvements, furnishings, merchandise,
equipment, or personal property in or on the Premises, whether in place as of
the date hereof or installed hereafter, for the full replacement value thereof,
and Lessor shall not have any responsibility nor pay any costs for maintaining
any types of such insurance. Any deductibles shall be paid by Lessee.
Section 9.3 Lessor's Liability Insurance. During the term, Lessor may
----------- ----------------------------
maintain a policy or policies of comprehensive general liability insurance
insuring Lessor and Lessee (and such others as designated by Lessor) against
liability for bodily injury, death and property damage on or about the Premises,
with combined single limit coverage of not less than Two Million Dollars
($2,000,000).
Lessee, in addition to the rent and other charges provided herein, agrees
to pay to Lessor its pro rata share of the premiums for all such insurance,
which pro rata share is identical to that provided in Section 8.2, above. The
insurance premiums shall be paid in accordance with Article IV, within thirty
(30) days of Lessee's receipt of a copy of Lessor's statement therefor.
Section 9.4 Lessee's Liability Insurance. During the term, Lessee
----------- ----------------------------
shall, at its sole expense, maintain for the mutual benefit of Lessor and
Lessee, comprehensive general liability and property damage insurance against
claims for bodily injury, death or property damage occurring in or about the
Premises or arising out of the use or occupancy of the Premises, with combined
single limit coverage of not less than Two Million Dollars ($2,000,000). The
limits of such insurance shall not limit the liability of Lessee. Lessee shall
furnish to Lessor prior to the Commencement Date, and at least thirty (30) days
prior to the expiration date of any policy, certificates indicating that the
liability insurance required by Lessee above is in full force and effect; that
Lessor has been named as an additional insured; and that all such policies will
not be cancelled unless thirty (30) days' prior written notice of the proposed
cancellation has been given
9.
<PAGE>
to Lessor. The insurance shall be with insurers approved by Lessor and with
policies in form satisfactory to Lessor, provided however, that such approval
shall not be unreasonably withheld. Said policies shall provide that Lessor,
although an additional insured, may recover for any loss suffered by Lessor by
reason of Lessee's negligence and shall include a broad form liability
endorsement.
Section 9.5 Waiver of Subrogation. Lessor hereby releases Lessee, and
----------- ---------------------
Lessee hereby releases Lessor, and their respective officers, agents, employees
and servants, from any and all claims or demands of damages, loss, expense, or
injury to the Premises, or to the furnishings and fixtures and equipment, or
inventory or other property of either Lessor or Lessee in, or about or upon the
Premises, or claims for bodily injury or death which is caused by or results
from perils, events or happenings which are the subject of insurance and carried
by the respective parties and in force at the time of any such loss; provided,
however, that such waiver shall be effective only to the extent permitted by the
insurance covering such loss and to the extent such insurance is not prejudiced
thereby. Each party shall cause each insurance policy obtained by it to provide
that the insurance company waives all right of recovery by way of subrogation
against either party in connection with any damages covered by any policy.
Section 9.6 Indemnification. Except in the case of Lessor's own acts or
----------- ---------------
omission, Lessee will indemnify Lessor and save it harmless from and against any
and all claims, actions, damages, liability and expense in connection with loss
of life, personal injury and/or damage to property arising from or out of any
occurrence in, upon or at the Premises (other than those arising from the
construction of the Premises or Building or the Tenant Improvements), or the
occupancy or use by Lessee of the Premises or any part hereof, or caused wholly
or in part by acts or omissions of Lessee, its agents, contractors, employees,
servants, licensees, or concessionaires or by anyone permitted to be on the
Premises by Lessee. In case lessor shall be made a party to any such litigation
commenced by or against lessee, then lessee shall protect and hold Lessor
harmless from all claims, liabilities, costs and expenses, and shall pay all
costs, expenses and reasonable legal fees incurred by Lessor in connection with
such litigation.
Section 9.7 Plate Glass Replacement. Lessee shall replace at its sole
----------- -----------------------
expense, any and all plate glass and other glass in and about the Premises which
is damaged or broken by vandalism. If any plate glass or other glass in and
about the Premises is damaged or broken by causes other than vandalism, then
Lessor shall replace the same and Lessee shall reimburse Lessor an amount equal
to Lessor's cost of replacement, provided that such amount shall not exceed the
deductible then in effect o Lessor's insurance policy, if any, covering the
damaged glass. Nothing herein shall be construed to require Lessor to carry
plate glass insurance.
ARTICLE X
---------
DAMAGE OR DESTRUCTION
---------------------
Section 10.1 Right to Terminate on Destruction of Premises. Lessor and
------------ ---------------------------------------------
Lessee shall have the right to terminate this Lease if, during the term, the
Premises are damaged to an extent exceeding fifty percent (50%) of the then
reconstruction costs of the Premises as a whole. Lessor and Lessee shall also
have the right to terminate this Lease if any portion of the Premises is damaged
by a peril not required to be insured hereunder. In either case, Lessor and
Lessee
10.
<PAGE>
may elect to terminate as provided above by that written notice to Lessee or
Lessor delivered within sixty (60) days of the happening of such damage.
Section 10.2 Repairs by Lessor. If Lessor and Lessee shall not elect to
------------ -----------------
terminate this Lease pursuant to Section 10.1, Lessor shall, immediately upon
receipt of insurance proceeds paid in connection with such casualty, but in no
event later than one hundred eighty (180) days after such damage has occurred,
proceed to repair or rebuild the Premises, on the same plan and design as
existed immediately before such damage or destruction occurred and will proceed
expeditiously to complete such restoration, subject to such delays as may be
reasonably attributable to governmental restrictions or failure to obtain
materials or labor, or other causes beyond the control of Lessor. Lessee shall
be liable for the repair and replacement of all fixtures, leasehold
improvements, furnishings, merchandise, equipment and personal property not
covered by the property insurance described in Section 9.2.
Section 10.3 Reduction of Rent During Repairs. In the event Lessee is
------------ --------------------------------
able to continue to conduct its business during the making of repairs, the rent
then prevailing will be equitably reduced in the proportion that the square
footage of the unusable part of the Premises bears to the square footage of the
whole thereof for the period that repairs are being made. No rent shall be
payable while the Premises are wholly unusable due to casualty damage.
Section 10.4 Arbitration. Any controversy or claim arising out of or
------------ -----------
relating to this Article shall be settled by arbitration in accordance with the
rules of the American Arbitration Association as then in effect, and judgment
upon the award rendered by the arbitration may be entered in any court having
jurisdiction. The expenses of arbitration shall be borne by the parties as
allocated by the arbitrators. The party desiring arbitration shall serve notice
upon the other party, together with designation of the first party's arbitrator.
Section 10.5 Lessor's Overriding Right to Terminate. Notwithstanding
------------ --------------------------------------
anything to the contrary herein, during the last twelve (12) months of the Lease
Term and during an Extended Term, if any, if the discounted present value of the
rent due hereunder for the balance of the term, using as the discount rate the
prime commercial lending rate in effect at the Bank of America as of the date
Lessor is to commence repairs pursuant to Section 10.2 hereof, is less than the
cost of repairing the damage to the Premises, Lessor may at its option terminate
this lease upon thirty (30) days' written notice.
ARTICLE XI
----------
REAL PROPERTY TAXES
-------------------
Section 11.1 Payment of Taxes. Lessee shall pay the real property tax,
------------ ----------------
as defined in Section 11.2, applicable to the Premises during the term of this
Lease. All such payments shall be made at least twenty (20) days prior to the
delinquency date of such payment. If any such taxes paid by Lessee shall cover
any period of time prior to or after the expiration of the term hereof, Lessor
shall pay such taxes and Lessee shall reimburse Lessor therefor. Lessee's share
of such taxes shall be equitably prorated to cover only the period of time
within the tax fiscal year during which this Lease shall be in effect, and
Lessor shall reimburse Lessee to the extent required. If Lessee shall fail to
pay any such taxes, Lessor shall have the right to pay the same,
11.
<PAGE>
in which case Lessee shall repay such amount to Lessor with Lessee's next rent
installment together with interest at the prime commercial lending rate then in
effect at the Bank of America.
Section 11.2 Definition of "Real Property Tax". As used herein, the term
------------ ---------------------------------
"real property tax" shall include any form of real estate tax or assessment,
general, special, supplemental, ordinary or extraordinary, and any license fee,
commercial rental tax, improvement bond or bonds, levy or tax (other than
inheritance, personal income, corporate, franchise or estate taxes) imposed on
the Premises by any authority having the direct or indirect power to tax,
including any improvement district thereof, as against any legal or equitable
interest of Lessor in the Premises or in the real property of which the Premises
are a part, as against Lessor's right to rent or other income therefrom, and as
against Lessor's business of leasing the Premises.
Section 11.3 Joint Assessment. If the Premises are not separately
------------ ----------------
assessed, Lessee's liability shall be an equitable proportion of the real
property taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor in accordance with
Lessee's proportionate share of the total square footage of the business park.
Lessee shall reimburse Lessor said proportionate amount at least ten (10) days
prior to the delinquency date of the real property tax.
Section 11.4 Personal Property Taxes.
------------ -----------------------
(a) Lessee shall pay prior to delinquency all taxes assessed against
and levied upon trade fixtures, furnishings, equipment and all other personal
property of Lessee contained in the Premises or elsewhere. When possible,
Lessee shall cause said trade fixtures, furnishings, equipment and all other
personal property to be assessed and billed separately from the real property of
Lessor.
(b) If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee
within 10 days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
(c) If Lessee shall fail to pay any such taxes, Lessor shall have the
right to pay the same, in which case Lessee shall repay such amount to Lessor
with Lessee's next rent installment together with interest at the prime
commercial lending rate then charged by the Bank of America.
ARTICLE XII
-----------
UTILITIES AND JANITORIAL
------------------------
Lessee shall pay prior to delinquency throughout the term the cost of
water, gas, heating, cooling, sewer, telephone, electricity, garbage, air
conditioning and ventilation, janitorial service, and all other materials and
utilities supplied to the Premises. If any such services are not separately
metered to Lessee, Lessee shall pay a reasonable proportion of all charges which
are jointly metered, the determination to be made by Lessor in good faith, and
payment to be made by Lessee within fifteen (15) days of receipt of the
statement for such charges.
12.
<PAGE>
ARTICLE XIII
------------
ASSIGNMENT AND SUBLETTING
-------------------------
Section 13.1 Lessor's Consent Required. Lessee shall not voluntarily or
------------ -------------------------
by operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in this lease or in the Premises,
without Lessor's prior written consent which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder within
ten (10) days after Lessee's request and any attempted assignment, transfer,
mortgage, encumbrance, or subletting without such consent shall be void, and
shall constitute a breach of this lease.
Section 13.2 Lessee Affiliate. Lessee may assign or sublet the premises,
------------ ----------------
or any portion thereof, to any corporation which controls, is controlled by, or
is under common control with Lessee, or to any corporation resulting from the
merger or consolidation with Lessee, or to any person or entity which acquires
all, or substantially all of the assets of Lessee as a going concern of the
business that is being conducted on the Premises, provided that said assignee
assumes, in full, the obligations of Lessee under this Lease. Any such
assignment shall not, in any way, affect or limit the liability of Lessee under
the terms of this Lease.
Section 13.3 No Release of Lessee. Regardless of Lessor's consent, no
------------ --------------------
subletting or assignment shall release Lessee of Lessee's obligation or alter
the primary liability of Lessee to pay the rent and to perform all other
obligations to be performed by Lessee hereunder. The acceptance of rent by
Lessor from any other person shall not be deemed consent to any subsequent
assignment or subletting. In the event of default by any assignee of Lessee or
any successor of Lessee, in the performance of any of the terms hereof, Lessor
may proceed directly against Lessee without the necessity of exhausting remedies
against said assignee.
Section 13.4 Attorneys' Fees. In the event Lessee shall assign or sublet
------------ ---------------
the Premises or request the consent of Lessor to any assignment of subletting or
if Lessee shall request the consent of Lessor for any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable attorneys' fees incurred in connection
therewith.
Section 13.5 Excess Rent. In the event Lessor shall consent to a sublease
------------ -----------
or an assignment under the lease, Lessee shall pay to Lessor with its regularly
scheduled rent payments fifty percent (50%) of all sums collected by Lessee from
a sublessee or assignee which are/in excess of the rent then owing pursuant to
Article IV above and after subtracting all leasing commissions, reasonable
attorneys' fees and other costs, reasonable expenses and liabilities incurred by
Lessee in connection with the sublet or assignment. Lessor shall not share
compensation received by Lessee for its trade fixtures, goodwill, stock, or
property other than the Lease.
Section 13.6 No Impairment of Security. Lessee's written request to
------------ -------------------------
Lessor for consent to an assignment or subletting shall be accompanied by (a)
the name and legal composition of the proposed sublessee; (b) the nature of the
proposed sublessee's business to be carried on in the Premises; (c) the terms
and provisions of the proposed sublease; and (d) such financial and other
reasonable information as Lessor may request concerning the proposed sublessee.
Lessor's
13.
<PAGE>
consent shall not be deemed unreasonably withheld if consent is denied because
the prospective sublessee or assignee will impair Lessor's security.
ARTICLE XIV
-----------
DEFAULTS; REMEDIES
------------------
Section 14.1 Defaults. The occurrence of any one or more of the
------------ --------
following events shall constitute a material default and breach of this Lease by
Lessee:
(a) The abandonment of the Premises by Lessee;
(b) The failure by Lessee to make any payment of rent or any other
payment required to be made by Lessee hereunder, as and when due, where such
failure shall continue for a period of five (5) days after such payment is due.
In the event that Lessor serves Lessee with a Notice to Pay Rent or Quit
pursuant to applicable Unlawful Detainer statutes such Notice to Pay Rent or
Quit shall constitute notice under this Section;
(c) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by Lessee,
other than described in paragraph (b) above, where such failure shall continue
for a period of thirty (30) days after written notice hereof from Lessor to
Lessee; provided, however, that if the nature of Lessee's default is such that
more than 30 days are reasonably required for its cure, then Lessee shall not be
deemed to be in default if Lessee commences such cure within said 30 day period
and thereafter diligently prosecutes such cure to completion;
(d) (i) The making by Lessee of any general arrangement or assignment
for the benefit of creditors; (ii) Lessee becomes a "debtor" as defined in 11
U.S.C. Section 101 or any successor statute thereto; (iii) the taking or
suffering of any action by Lessee under any insolvency or bankruptcy act; (iv)
the appointment of a trustee or receiver to take possession of substantially all
of Lessee's assets located at the Premises or of Lessee's interest in this
Lease, or (v) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease. Provided, however, in the event that any provisions of
this Section 14.1(d) is contrary to any applicable law, such provision shall be
of no force or effect;
(e) The discovery by Lessor that any financial statement given to
Lessor by Lessee, any assignee of Lessee, any successor in interest of Lessee or
any guarantor of Lessee's obligation hereunder, and any of them, was materially
false.
Section 14.2 Remedies. In the event of any such material default or
------------ --------
breach by Lessee, Lessor may at any time thereafter, with or without notice or
demand and without limiting Lessor in the exercise of any right or remedy which
Lessor may have by reason of such default or breach:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession of the Premises to Lessor. In such event
Lessor shall be entitled to recover from
14.
<PAGE>
Lessee all damages incurred by Lessor by reason of Lessee's default including,
but not limited to, the cost of recovering possession of the Premises and
reasonable attorney's fees related thereto; the worth at the time of award
determined by the court having jurisdiction thereof of the amount by which the
unpaid rent for the balance of the term after the time of such award exceeds the
amount of such rental loss for the same period that Lessee proves could be
reasonably avoided.
(b) Maintain Lessee's right to possession in which case this Lease
shall continue in effect whether or not Lessee shall have abandoned the
Premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Lessor under
the laws or judicial decisions of the state of California. Unpaid installments
of rent and other unpaid monetary obligations of Lessee under the terms of this
Lease shall bear interest from the date due at the prime rate then charged by
Bank of America.
Section 14.3 Default by Lessor. Lessor shall not be in default unless
------------ -----------------
Lessor fails to perform obligations required of Lessor within a reasonable time,
but in no event later than thirty (30) days after written notice by Lessee to
Lessor and to the holder of any first mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to Lessee
in writing, specifying wherein Lessor has failed to perform such obligation;
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance then Lessor shall not be in
default if Lessor commences performance within such 30-day period and thereafter
diligently prosecutes the same to completion. In the event Lessor does not
commence performance within the thirty (30) day period provided herein, or does
not diligently prosecute the same to completion, Lessee may perform such
obligation and will be reimbursed for its expenses by Lessor together with
interest thereon at the prime commercial lending rate then charged by the Bank
of America, provided, however, that if the parties are in dispute as to what
constitutes Lessor's obligations under this agreement, any such dispute shall be
resolved by arbitration in a manner identical to that provided in Section 10.4
above.
Nothing herein shall be deemed applicable in the event of Lessor's delay in
delivery of the Premises. In that situation, all rights and remedies shall be
determined under Section 3.3 above.
Section 14.4 Late Charges. Lessee hereby acknowledges that late payment
------------ ------------
by Lessee to Lessor of rent and other sums due hereunder will cause Lessor to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Lessor by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Lessee shall
not be received by Lessor or Lessor's designated agent within five (5) days
after such amount is due and owing, Lessee shall pay to Lessor a late charge
equal to 10% of such overdue amount. The parties hereby agree that such late
charge represents a fair and reasonable estimate of the costs Lessor will incur
by reason of late payment by Lessee. Acceptance of any such late charge by
Lessor
15.
<PAGE>
shall in no event constitute a waiver of Lessee's default with respect to such
overdue amount, nor prevent Lessor from exercising any of the other rights and
remedies granted hereunder. In the event that a late charge is payable
hereunder, whether or not collected, for three (3) consecutive installments of
rent, then rent shall automatically become due and payable quarterly in advance,
rather than monthly, notwithstanding section 4.1 or any other provision of this
Lease to the contrary.
Section 14.5 Impounds. In the event that a late charge is payable
------------ --------
hereunder, whether or not collected, for three (3) installments of rent or any
other monetary obligation of Lessee under the terms of this Lease within a
twelve (12) month period, Lessee shall pay to Lessor, if Lessor shall so
request, in addition to any other payments required under this Lease, a monthly
advance installment, payable at the same time as the monthly rent, as estimated
by Lessor, for real property tax and insurance expenses on the Premises which
are payable by Lessee under the terms of this Lease. Such fund shall be
established to insure payment when due, before delinquency, of any or all such
real property taxes and insurance premiums. If the amounts paid to Lessor by
Lessee under the provisions of this paragraph are insufficient to discharge the
obligations of Lessee to pay such real property taxes and insurance premiums as
the same become due, Lessee shall pay to Lessor, within three (3) business days
after Lessor's demand, such additional sums necessary to pay such obligations.
All moneys paid to Lessor under this paragraph may be intermingled with other
moneys of Lessor and shall not bear interest. In the event of a default in the
obligations of Lessee to perform under this Lease, then any balance remaining
from funds paid to Lessor under the provisions of this paragraph may, at the
option of Lessor, be applied to the payment of any monetary default of Lessee in
lieu of being applied to the payment of real property tax and insurance
premiums.
ARTICLE XV
----------
CONDEMNATION OF PREMISES
------------------------
Section 15.1 Total Condemnation. If the entire Premises, whether by
------------ ------------------
exercise of governmental power or the sale or transfer by Lessor to any
condemnor under threat of condemnation or while proceedings for condemnation are
pending, at any time during the term, shall be taken by condemnation such that
there does not remain a portion suitable for occupation, this Lease shall then
terminate as of the date transfer of possession is required. Upon such
condemnation, all rent shall be paid up to the date transfer of possession is
required, and Lessee shall have no claim against Lessor for the value of the
unexpired term of this Lease.
Section 15.2 Partial Condemnation. If any portion of the Premises is
------------ --------------------
taken by condemnation during the term, whether by exercise of governmental power
or the sale or transfer by Lessor to a condemnor under threat of condemnation or
while proceedings for condemnation are pending, this Lease shall remain in full
force and effect except that in the event a partial taking leaves the Premises
unfit for normal and proper conduct of the business of Lessee, as reasonably
determined by Lessee, then Lessee shall have the right to terminate this Lease
effective upon the date transfer of possession is required. Moreover, Lessor
and Lessee shall have the right to terminate this Lease effective on the date
transfer of possession is required if more than thirty-three percent (33%) of
the total square footage of the Premises is taken by condemnation. Lessee and
Lessor may elect to exercise their respective rights to terminate this
16.
<PAGE>
Lease pursuant to this Section by serving written notice to the other within one
hundred twenty (120) days of their receipt of notice of condemnation. All rent
shall be paid up to the date of termination, and Lessee shall have no claim
against Lessor for the Lease value of any unexpired term of this Lease. If this
Lease shall not be cancelled, the rent after such partial taking shall be that
percentage of the adjusted base rent specified herein, equal to the percentage
which the square footage of the untaken part of the Premises, immediately after
the taking, bears to the square footage of the entire Premises immediately
before the taking. Any sums owing hereunder which are calculated on the basis of
Lessee's pro rata share (as set forth in Section 8.2) shall also be adjusted to
reflect the decreased square footage of the Premises due to the condemnation.
During the last twelve (12) months of the Lease Term and during the Extended
Term, if any, if Lessee's continued use of the Premises requires alterations and
repair by reason of a partial taking, all such alterations and repair shall be
made by Lessee at Lessee's expense.
Section 15.3 Award to Lessee. In the event of any condemnation, whether
------------ ---------------
total or partial, Lessee shall have the right to claim and recover from the
condemning authority such compensation as may be separately awarded or
recoverable by Lessee for loss of its business fixtures, or equipment belonging
to Lessee immediately prior to the condemnation or for the interruption of
Lessee's business, or its moving costs. The balance of any 15 condemnation
award shall belong to Lessor and Lessee shall have no further right to recover
from Lessor or the condemning authority for any additional claims arising out of
such taking.
ARTICLE XVI
-----------
ENTRY BY LESSOR
---------------
Lessee shall permit Lessor and its agent to enter the Premises at all
reasonable times for any of the following purposes: to inspect the Premises; to
maintain the building in which the Premises are located; to make such repairs,
alterations; and additions to the Premises as Lessor is obligated or may elect
to make; to show the Premises and post "To Lease" signs for the purposes of
reletting during the last ninety (90) days of the term; to show the Premises as
part of a prospective sale by Lessor or to post notices of non-responsibility.
Lessor shall have such right of entry without any rebate of rent to Lessee for
any loss of occupancy or quiet enjoyment of the Premises thereby occasioned.
ARTICLE XVII
------------
ESTOPPEL CERTIFICATE
--------------------
(a) Lessee shall at any time upon not less than fifteen (15) days'
prior written notice from Lessor execute, acknowledge and deliver to Lessor a
statement in writing (i) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect) and the
date to which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to Lessee's knowledge, any uncured defaults on
the part of Lessor hereunder, or specifying such defaults if any are claimed.
Any such statement may be conclusively relied upon by any prospective purchaser
or encumbrancer of the Premises.
17.
<PAGE>
(b) Lessee's failure to deliver such statement within such time shall
be conclusive upon Lessee (i) that this Lease is in full force and effect,
without modification except as may be represented by Lessor, (ii) that there are
no uncured defaults in Lessor's performance, and (iii) that not more than one
month's rent has been paid in advance; or such failure may be considered by
Lessor as a default by Lessee under this Lease.
ARTICLE XVIII
-------------
LESSOR'S LIABILITY
------------------
The term "Lessor" as used herein shall mean only the owner or owners at the
time in question of the fee title or a Lessee's interest in a ground lease of
the Premises. In the event of any transfer of such title or interest, and
provided such successor assumes all obligations of Lessor hereunder, Lessor
herein named (and in case of any subsequent transfers then the grantor) shall be
relieved from and after the date of such transfer of all liability as respects
Lessor's obligations thereafter to be performed, provided that any funds in the
hands of Lessor or the then grantor at the time of such transfer, in which
Lessee has an interest, shall be delivered to the grantee. The obligations
contained in this Lease to be performed by Lessor shall, subject as aforesaid,
be binding on Lessor's successors and assigns, only during their respective
periods of ownership.
ARTICLE XIX
-----------
EXPIRATION ON TERMINATION
-------------------------
Section 19.1 Surrender of Possession. Lessee agrees to deliver up and
------------ -----------------------
surrender to Lessor possession of the Premises and all improvements thereon, in
as good order and condition as when possession was taken by Lessee, excepting
only ordinary wear and tear or any permitted alterations. Upon termination of
this Lease, Lessor may reenter the Premises and remove all persons and property
therefrom. If Lessee shall fail to remove any effects which it is entitled to
remove from the Premises upon the termination of this Lease, for any cause
whatsoever, Lessor, at its option, may remove the same and store or dispose of
them, and Lessee agrees to pay to Lessor on demand any and all reasonable
expenses incurred in such removal and in making the Premises free from all dirt,
litter, and debris, including all storage and insurance charges. If the
Premises are not surrendered at the end of the Term, Lessee shall indemnify
Lessor against loss or liability resulting from delay by Lessee in so
surrendering the Premises, including, without limitation, actual damages for
lost rents.
Section 19.2 Holding Over. If Lessee, with or without Lessor's consent,
------------ ------------
remains in possession of the Premises after expiration of the term and if Lessor
and Lessee have not executed an express written agreement as to such holding
over, then such occupancy shall be a tenancy from month to month, at a monthly
rental equivalent to 200% of the monthly rental in effect immediately prior to
such expiration if the remainder in possession is without Lessor's consent, and
at a monthly rental equivalent to 125% of the monthly rental in effect
immediately prior to such expiration if the remainder in possession is with
Lessor's consent, such payments to be made as herein provided. In the event of
such holding over all of the terms of this Lease
18.
<PAGE>
including the payment of all charges owing hereunder other than rent shall
remain in force and effect on said month to month basis.
ARTICLE XX
----------
MISCELLANEOUS PROVISIONS
------------------------
Section 20.1 Severability. The invalidity of any provision of this
------------ ------------
Lease as determined by a court of competent jurisdiction, shall in no way affect
the validity of any other provision hereof.
Section 20.2 Interest on Past-due Obligations. Except as expressly herein
------------ --------------------------------
provided, any amount due to Lessor not paid when due shall bear interest at the
prime commercial lending rate then in effect at Bank of America. Payment of
such interest shall not excuse or cure any default by Lessee under this Lease.
Section 20.3 Time of Essence. Time is of the essence in the performance
------------ ---------------
of all obligations under this Lease.
Section 20.4 Additional Rent. Any monetary obligations of Lessee to
------------ ---------------
Lessor under the terms of this Lease shall be deemed to be rent.
Section 20.5 Incorporation of Prior Agreements; Amendments. This Lease
------------ ---------------------------------------------
contains all agreements of the parties with respect to any matter mentioned
herein. No prior agreement or understanding pertaining to any such matter shall
be effective. This Lease may be modified in writing only, signed by the parties
in interest at the time of the modification. Except as otherwise stated in this
Lease, Lessee hereby acknowledges that neither the Lessor nor any employees or
agents of the Lessor has made any oral or written warranties or representations
to Lessee relative to the condition or use by Lessee of said Premises and Lessee
acknowledges that Lessee assumes all responsibility regarding the Occupational
Safety Health Act, the legal use and adaptability of the Premises and the
compliance thereof with all applicable laws and regulations in effect during the
term of this Lease except as otherwise specifically stated in this Lease.
Section 20.6 Notices. Any notice required or permitted to be given
------------ -------
hereunder shall be in writing and may be given by personal delivery or by
facsimile, Federal Express, or certified mail, and if given personally or by
mail, shall be deemed sufficiently given if addressed to Lessee or to Lessor at
the address noted below the signature of the respective parties, as the case may
be. Either party may by notice to the other specify a different address for
notice purposes. A copy of all notices required or permitted to be given to
Lessor hereunder shall be concurrently transmitted to such party or parties at
such addresses as Lessor may from time to time hereafter designate by notice to
Lessee. Notice shall be considered effective either 72 hours after mailing or
upon actual receipt, whichever is earlier.
Section 20.7 Waivers. No waiver by Lessor of any provision hereof shall
------------ -------
be deemed a waiver of any other provision hereof or of any subsequent breach by
Lessee of the same or any other provisions. Lessor's consent to, or approval
of, any act shall not be deemed to render unnecessary the obtaining of Lessor's
consent to or approval of any subsequent act by Lessee. The acceptance of rent
hereunder by Lessor shall not be a waiver of any preceding breach by
19.
<PAGE>
Lessee of any provision hereof, other than the failure of Lessee to pay the
particular rent so accepted, regardless of Lessor's knowledge of such preceding
breach at the time of acceptance of such rent.
Section 20.8 Recording. Either Lessor or Lessee shall, upon request of
------------ ---------
the other, execute, acknowledge and deliver to the other a "short form"
memorandum of this Lease for recording purposes.
Section 20.9 Cumulative Remedies. No remedy or election hereunder shall
------------ -------------------
be deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
Section 20.10 Covenants and Conditions. Each provision of this Lease
------------- ------------------------
performable by Lessee or Lessor shall be deemed both a covenant and a condition.
Section 20.11 Binding Effect; Choice of Law; Venue. Subject to any
------------- ------------------------------------
provisions hereof restricting assignment or subletting by Lessee and subject to
the provisions of Article XVIII, this Lease shall bind the parties, their
personal representatives, successors and assigns. This Lease shall be governed
by the laws of the State of California. Venue for any action or proceeding
brought to enforce or defend this agreement, and for any other purpose
hereunder, shall be Santa Clara County.
Section 20.12 Subordination of Leasehold. Lessee agrees that this Lease
------------- --------------------------
is and shall be, at all times, subject and subordinate to the lien of any
mortgage or other encumbrances which Lessor may create against the Premises
including all renewals, replacements and extensions thereof; provided, however,
that regardless of any default under any such mortgage or encumbrance or any
sale of the Premises under such mortgage, so long as Lessee performs all
covenants and conditions of this Lease and continues to make all payments
hereunder, this Lease and Lessee's possession and rights hereunder shall not be
disturbed by the mortgagee or anyone claiming under or through such mortgagee.
Section 20.13 Attorneys' Fees. If either party herein brings an action to
------------- ---------------
enforce the terms hereof or declare rights 'hereunder, the prevailing party in
any such action, on trial or appeal, shall be entitled to reasonable attorneys'
fees to be paid by the losing party as fixed by the Court.
Section 20.14 Auctions. Lessee shall not conduct, nor permit to be
------------- --------
conducted, either voluntarily or involuntarily, any auction upon the Premises
without first having obtained Lessor's prior written consent. Notwithstanding
anything to the contrary in this Lease, Lessor shall not be obligated to
exercise any standard of reasonableness in determining whether to grant such
consent.
Section 20.15 Signs. Lessee shall not place any sign upon the Premises
------------- -----
without Lessor's prior written consent, which consent shall not be unreasonably
withheld; provided, however, that Lessee shall have the right to display its
name on the building "tombstone" in accordance with applicable law.
Section 20.16 Voluntary Surrender or Merger. The voluntary or other
------------- -----------------------------
surrender of this Lease by Lessee, or a mutual cancellation thereof, or a
termination by Lessor, shall not work a
20.
<PAGE>
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
of any or all of such subtenancies.
Section 20.17 Guarantor. In the event that there is a guarantor of this
------------- ---------
Lease, said guarantor shall have the same obligations as Lessee under this
Lease.
Section 20.18 Quiet Possession. Upon Lessee paying the rent for the
------------- ----------------
Premises and observing and performing all of the covenants, conditions and
provisions on Lessee's part to be observed and performed hereunder, Lessee shall
have quiet possession of the Premises for the entire term hereof subject to all
of the provisions of this Lease. The individuals executing this Lease on behalf
of Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
execution is binding upon all parties holding an ownership interest in the
Premises.
Section 20.19 Rules and Regulations. Lessee agrees that it will abide by,
------------- ---------------------
keep and observe all reasonable rules and regulations which Lessor may make from
time to time for the management, safety, care and cleanliness of the building
and grounds, the parking of vehicles and the preservation of good order therein
as well as for the convenience of other occupants and tenants of the building.
The continued violations of any such rules and regulations shall be deemed a
material breach of this Lease. Lessee, however, shall not be bound by any
future rules or regulations, unless it shall approve same, which approval shall
not be unreasonably withheld.
Section 20.20 Easements. Lessor reserves to itself the right, from time
------------- ---------
to time, to grant such easements, rights and dedications that Lessor deems
necessary or desirable, and to cause the recordation of Parcel Maps and
restrictions, so long as such easements, rights, dedications, Maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee shall sign any of the aforementioned documents upon three (3)
days written notice of Lessor and failure to do so shall constitute a material
breach of this Lease.
Section 20.21 Corporate Authority. Each individual executing this Lease
------------- -------------------
on behalf of a corporation represents and warrants that he is duly authorized to
execute and deliver this Lease on behalf of the corporation in accordance with a
duly adopted resolution of the Board of Directors of the corporation, and that
this Lease is binding upon said corporation in accordance with its terms.
Section 20.22 Delays for Cause. In any case where either party hereto is
------------- ----------------
required to do any act, delays caused by or resulting from Acts of God, war,
civil commotion, fire, flood or other casualty, labor difficulties, shortages of
labor, materials or equipment, government regulations, unusually severe weather,
or other causes beyond such party's reasonable control shall not be counted in
determining the time during which work shall be completed, whether such time be
designated by a fixed date, a fixed time or "a reasonable time", and such time
shall be deemed to be extended by the period of such delay.
Section 20.23 Square Footage. The parties agree that the leased Premise
------------- --------------
is approximately 25,024 square feet, said square footage being measured from the
face of the outside (concrete) walls and includes the covered docks and entry
ways.
21.
<PAGE>
Section 20.24 Brokers. Cornish and Carey Commercial represents both the
------------- -------
Lessor and the Lessee in this Lease, and both Parties agree thereto. Cornish
and Carey Commercial broker's commission shall be paid as agreed among itself
and the Lessor.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
The Parties hereto have executed this Lease at the place on the dates specified
immediately adjacent to their respective signatures.
Executed at Menlo Park, California, on October 27, 1992.
Lessor: Address:
VANNI BUSINESS PARK GENERAL c/o Jay Paul Company
PARTNERSHIP 5619 Scotts Valley Dr.
Suite 280
Scotts Valley, CA 95066
By: /s/ Jay Paul
-----------------------------------
Jay Paul, General Partner
Lessee:
ACTIVATED CELL THERAPY, INC., ________________________________
a Delaware corporation .
________________________________
By: /s/ Illegible
---------------------------------
22.
<PAGE>
EXHIBIT 10.11
LEASE
-----
THIS LEASE is made as of July 31, 1998 ("Effective Date"), by and
--------------
between ARE-3005 First Avenue, LLC, a Delaware limited liability company
("Landlord") and Dendreon Corporation, a Delaware corporation ("Tenant").
-------- ------
1. Lease of Premises
-----------------
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
upon the terms and conditions hereof, those certain premises (the "Demised
-------
Premises") within the building located at the address set forth below (the
- --------
"Building"), the site plan and legal description for which is attached hereto as
--------
Exhibit "A", together with certain rights appurtenant thereto as expressly given
- ----------
to Tenant herein. The real property upon which the Building is located and all
landscaping, parking facilities and other improvements and appurtenances related
thereto, are hereinafter collectively referred to as the "Project". All
-------
portions of the Project which are for the non-exclusive use of tenants of the
Building, including, without limitation, driveways, sidewalks, parking areas,
landscaped areas, service corridors, stairways, elevators, public restrooms and
Building lobbies, are hereinafter referred to as the "Project Common Areas".
--------------------
2. Basic Lease Provisions
---------------------------
2.1 For convenience of the parties, certain basic provisions of this Lease
are set forth herein. The provisions set forth herein are subject to the
remaining terms and conditions of this Lease and are to be interpreted in light
of such remaining terms and conditions.
2.1.1 Address of the Building:
3005 1st Avenue
Seattle, Washington 98121
2.1.2 (a) Rentable Area of Demised Premises: 70,647 sq. ft.
(b) Rentable Area of Building: 70,647 sq. ft.
(c) Rentable Area of Project: 111,622 sq. ft.
2.1.3 Basic Annual Rent:
January 1, 1999 through December 31, 2001 $1,695,528.00
January 1, 2002 through December 31, 2004 $1,872,145.50
January 1, 2005 through December 31, 2008 $2,119,410.00
2.1.4 Base Monthly Rental Installments of Basic Annual Rent:
January 1, 1999 through December 31, 2001 $141,294.00
January 1, 2002 through December 31, 2004 $156,012.12
January 1, 2005 through December 31, 2008 $176,617.50
<PAGE>
2.1.5 (a) Tenant's Pro Rata Share of Building Operating Expenses:
100%
(b) Tenant's Pro Rata Share of Project Operating Expenses:
63.29%
2.1.6 (a) Rent Commencement Date: As defined in Section 5.1 hereof.
(b) Term Commencement Date: As defined in Section 4.2 hereof.
(c) Term Expiration Date: 10 years from the Rent Commencement
Date (as defined in Section 5.1 hereof), subject to extension or earlier
termination as provided herein.
2.1.7 Security Deposit: $423,882.00 (three (3) months initial Base
Monthly Rental).
2.1.8 Permitted Use: Scientific research laboratories and related
office uses consistent with Article 10 hereof.
2.1.9 Address for Rent Payment:
135 N. Los Robles Avenue, Suite 250
Pasadena, CA 91101
Attention: Accounts Receivables
Address for Notices to Landlord:
135 N. Los Robles Avenue, Suite 250
Pasadena, CA 91101
Attention: General Counsel
With a copy to:
11440 West Bemardo Court, Suite 170
San Diego, CA 92127
Attention: Asset Management
2.1.10 Address for Notices to Tenant Prior to Term Commencement Date:
291 North Bemardo
Mountain view, California 94043
Address for Notices to Tenant after Term Commencement Date:
3005 1st Avenue
Seattle, Washington 98121
2.1.11 The following Exhibits are attached hereto and incorporated
herein: A, B, C, D, E, F, G and H.
<PAGE>
3. Term
----
3.1 This Lease shall take effect upon the Effective Date and, except as
specifically otherwise provide within this Lease, each of the provisions hereof
shall be binding upon and inure to the benefit of Landlord and Tenant, and each
of their respective successors and permitted assigns, from the Effective Date.
3.2 The term of this Lease (the "Term") will be that period from the Term
----
Commencement Date as defined in Section 4.2 below through the Term Expiration
Date, as such may be terminated or extended as provided herein.
4. Possession And Commencement Date
--------------------------------
4.1 Landlord shall use commercially reasonable efforts to tender
possession of the Demised Premises to Tenant on October 1, 1998 (the "Target
------
Term Commencement Date"). Tenant agrees that in the event Landlord fails to
- ----------------------
tender possession of the Demised Premises on or before the Target Term
Commencement Date despite Landlord's use of commercially reasonable efforts to
do so (and not as a subterfuge for avoiding this Lease), Landlord shall not be
liable to Tenant for any loss or damage resulting therefrom, and this Lease
shall not be void or voidable except in the event that Landlord is unable, after
taking commercially reasonable efforts, to tender possession of the Demised
Premises to Tenant on or before the date which is one hundred twenty (120) days
after the Target Term Commencement Date, in which case either Landlord or Tenant
may elect in writing to terminate this Lease. Tenant shall promptly construct or
cause to be constructed the Tenant Improvements (as hereinafter defined) in
accordance with the terms and conditions of this Lease and the exhibits hereto,
including, without limitation, Exhibit "B" attached hereto (the "Work Letter").
-----------
Subject to such terms and conditions, Tenant shall be allowed to construct a
Class 10,000 clean room on the fourth floor of the Demised Premises.
Notwithstanding anything to the contrary set forth herein, Tenant shall have
access to and the right to occupy the Demised Premises free of Basic Annual Rent
or Additional Rent from the Term Commencement Date until the Rent Commencement
Date, hereinafter defined.
4.2 The "Term Commencement Date" shall be October 1, 1998.
----------------------
4.3 Access to and possession of areas necessary for utilities, services,
safety and operation of the Building and the Project are reserved to Landlord,
except to the extent otherwise expressly provided herein. When Landlord or
Landlord's representatives are accessing such areas, Landlord shall use
reasonable efforts to minimize any interference with Tenant's business, a
representative of Tenant may accompany Landlord, and Landlord shall comply with
the reasonable security requirements of Tenant.
4.4 Tenant shall cause to be constructed the tenant improvements in the
Demised Premises (the "Tenant Improvements") pursuant to the Work Letter at a
-------------------
cost to Landlord not to exceed Three Million Five Hundred Thirty-two Thousand
Three Hundred Fifty Dollars ($3,532,350.00) (based upon fifty dollars ($50.00)
per square foot of Rentable Area) (the "Tenant Improvement Allowance") which
----------------------------
shall include the cost of construction, project management by Landlord (for
which Additional Rent in amount not to exceed three percent (3%) of the Tenant
Improvement Allowance may be charged), cost of space planning, architect,
<PAGE>
engineering and other related services, building permits and other planning and
inspection fees. If Landlord reasonably determines that the total cost of the
Tenant Improvements will exceed the Tenant Improvement Allowance, then Tenant
shall immediately, and as a condition to Landlord's obligation to expend or
disburse any portion of the Tenant Improvement Allowance, provide evidence to
Landlord of the availability of funds sufficient to pay such excess costs.
Tenant shall have until July 1, 2000 to expend the Tenant Improvement Allowance,
after which date Landlord's obligation to fund the Tenant Improvement Allowance
shall expire. Landlord shall make reasonable progress payments from the Tenant
Improvement Allowance; provided, however, that Landlord receives full and
complete lien releases as Landlord makes such payments from all general
contractors and major subcontractors and major suppliers to the fullest extent
available at law. Tenant shall be responsible in any event for ensuring that
the Tenant Improvements, when completed, are lien free.
4.5 Intentionally Omitted.
4.6 Landlord shall deliver the Demised Premises to Tenant on the Term
Commencement Date clean and free of debris. Landlord warrants to Tenant that the
Demised Premises delivered to Tenant on the Term Commencement Date shall be in
good operating condition on the date of such delivery.
5. Rent
5.1 Basic Annual Rent. Tenant agrees, commencing on January 1, 1999 (the
------------------
"Rent Commencement Date") to pay Landlord as Basic Annual Rent for the Demised
----------------------
Premises the sum set forth in Section 2.1.3. Basic Annual Rent shall be paid in
the equal monthly installments set forth in Section 2.1.4, each in advance on
the first day of each and every calendar month during the Term. Notwithstanding
anything to the contrary set forth herein, Tenant shall have no obligation to
pay Basic Annual Rent for any period prior to the Rent Commencement Date.
5.2 Additional Rent. In addition to Basic Annual Rent, Tenant agrees to
---------------
pay to Landlord as additional rent ("Additional Rent") at times hereinafter
---------------
specified in this Lease (i) Tenant's pro rata share, as set forth it Section
2.1.6 ("Tenant's Pro Rata Share"), of each of Building Operating Expenses and of
-----------------------
Project Operating Expenses, as provided in Article 7 and (ii) any other amounts
that Tenant assumes or agrees to pay under the provisions of this Lease that are
owed to Landlord, including, without limitation, any and all other sums that may
become due by reason of any default of Tenant or failure on Tenant's part to
comply with the agreements, terms, covenants and conditions of this Lease to be
performed by Tenant, after notice and lapse of applicable cure period.
Notwithstanding anything to the contrary set forth herein, Tenant shall have no
obligation to pay Additional Rent for any period prior to the Rent-Commencement
Date.
5.3 Improvement Rent. In addition to Annual Base Rent and Additional
----------------
Rent, Tenant further agrees to pay to Landlord the amount necessary
("Improvement Rent") to fully amortize the Outstanding Tenant Improvement
----------------
Allowance (as hereinafter defined) at a rate of twelve and one-half percent
(12.5%) over the period from the date such Tenant Improvements are substantially
completed to the Term Expiration Date (without extension for any exercise of the
Extension Right, as hereinafter defined). Improvement Rent shall be paid
monthly on the first of
<PAGE>
each calendar month during the Term. As used herein, "Outstanding Tenant
------------------
Improvement Allowance" shall mean the amount of the Tenant Improvement
- ---------------------
Allowance actually disbursed or incurred by Landlord from time to time, less any
portion thereof which has previously been amortized and repaid by Tenant
pursuant to this Section 5.3. Notwithstanding anything to the contrary set forth
herein, Tenant shall have no obligation to pay Improvement Rent prior to the
Term Commencement Date unless Tenant breaches this Lease or commits a Default
(as such term is hereinafter defined) hereunder and this Lease is terminated as
a result thereof, in which case the entire remaining unamortized Outstanding
Tenant Improvement Allowance shall immediately become due and payable and Tenant
shall pay the same.
5.4 Basic Annual Rent, Additional Rent and Improvement Rent shall
together be denominated "Rent". Rent shall be paid to Landlord, without
----
abatement, deduction, or offset, in lawful money of the United States of
America, at the office of Landlord as set forth in Section 2.1.9 or to such
other person or at such other place as Landlord may from time designate in
writing. In the event the Term commences or ends on a day other than the first
day of a calendar month, then the Rent for such fraction of a month shall be
prorated for such period on the basis of a thirty (30) day month and shall be
paid at the then current rate for such fractional month.
6. Intentionally Omitted.
7. Operating Expenses
------------------
7.1 As used herein, (i) the term "Building Operating Expenses" shall mean
---------------------------
those Operating Expenses related to the Building and any other area of the
Project with respect to which Tenant has exclusive use, and (ii) the term
"Project Operating Expenses" shall mean those Operating Expenses related to the
--------------------------
Project Common Areas. As used herein, "Operating Expenses", with respect to
------------------
Project Operating Expenses or Building Operating Expenses, as applicable, shall
include the following to the extent actually incurred by Landlord:
7.1.1 Government impositions, other than those set forth in Section
7.1.3 or expressly excluded in Section 7.1.2, not paid directly by Tenant,
including, without limitation, property tax costs consisting of real and
personal property taxes and assessments (including amounts due under any
improvement bond upon the Building or the Project, including the parcel or
parcels of real property upon which the Building or the Project are located or
assessments levied in lieu thereof) imposed by any governmental authority or
agency; any tax on or measured by gross rentals received from the rental of
space in the Building, or tax based on the square footage of the Demised
Premises, the Building or the Project as well as any utilities surcharges, or,
except as otherwise specifically set forth herein, any other costs levied,
assessed or imposed by, or at the direction of, or resulting from statutes or
regulations, or interpretations thereof, promulgated by any federal, state,
regional, municipal or local government authority in connection with the use or
occupancy by Tenant or its employees, agents, contractors or permitted
subtenants of the Building or the parking facilities serving the Building or the
Project; any tax on this transaction or any document to which Tenant is a party
creating or transferring an interest in the Demised Premises; any fee for a
business license required to be held by Landlord to operate the Building for the
purposes contemplated by this Lease; any expenses, including the reasonable cost
of attorneys or experts, reasonably incurred by Landlord in seeking a reduction
by the taxing authority of the applicable taxes.
<PAGE>
7.1.2 All other costs of any kind paid or incurred by Landlord in
connection with the operation and maintenance of the Building and the Project
including, by way of examples and not as a limitation upon the generality of the
foregoing, costs of repairs and replacements to the Building or the other
improvements within the Project as appropriate to maintain the Building or the
Project as required hereunder, including cost of funding such reasonable
reserves as Landlord, consistent with good business practice, may establish to
provide for future repairs and replacements, costs of utilities furnished to the
Project Common Areas; sewer fees; cable T.V.; trash collection; cleaning,
including windows; heating; ventilation; air-conditioning; maintenance of
landscape and grounds; maintenance of drives and parking areas; security
services and devices; building supplies; maintenance for and replacement of
equipment utilized for operation and maintenance of the Project: license, permit
and inspection fees; sales, use and excise taxes on goods and services purchased
by Landlord in connection with the operation, maintenance or repair of the
Project and Building systems and equipment; telephone, postage, stationary
supplies and other expenses incurred in connection with the operation,
maintenance, or repair of the Project; accounting, legal and other professional
fees and expenses incurred in connection with the Project; the cost of
furniture, draperies, carpeting, landscaping and other customary and ordinary
items of personal property provided by Landlord for use in Common Areas; the
costs of any capital repairs or improvements ("Capital Repairs") to the Building
---------------
or the Project Common Areas which can be amortized over a useful life in excess
of one year pursuant to the Internal Revenue Code and the regulations
promulgated therein (the "Code"), the cost of which Capital Repairs shall be
----
amortized over the useful life of the item in question (such useful life to be
the same as set forth in the Code but in no event greater than ten (10) years),
and only the annual amortized amount shall be included as part of Operating
Expenses; costs of complying with any applicable laws and regulations concerning
the generation, handling, storage or transportation of Hazardous Materials (as
hereinafter defined), except to the extent such costs are caused by the actions
of other tenants of the Project or by the actions of Landlord, and not including
the cost of the actual work of remediation or investigation; insurance premiums,
including premiums for public liability, property casualty, earthquake and
environmental coverages; portions of insured losses paid by Landlord as part of
the deductible portion of such losses by reason of insurance policy terms;
service contracts; costs of services of independent contractors retained to do
work of nature or type herein referenced; and costs of compensation (including
employment taxes and fringe benefits) of all persons who perform regular and
recurring duties connected with the day-to-day operation and maintenance of the
Project, its equipment, the adjacent walks, landscaped areas, drives, and
parking areas, including without limitation, janitors, floor waxers, window-
washers, watchmen, gardeners, sweepers, and handymen and costs of management
services (exclusive of Landlord's overhead and salaries and benefits of
Landlord's personnel, officers and executives), which costs of management
services shall be three percent (3%) of the Basic Annual Rent due from Tenant
(the "Management Fee").
--------------
7.1.3 Notwithstanding the foregoing, Operating Expenses shall not
include:
(a) any net income, franchise, capital stock, estate or
inheritance taxes or taxes which are the personal obligation of Landlord, Tenant
or of another tenant of the Project;
<PAGE>
(b) any leasing commissions or expenses which relate to
preparation of rental space for a tenant;
(c) expenses of initial development and construction,
including but not limited to, grading, paving, landscaping, and decorating (as
distinguished from maintenance repair and replacement of the foregoing);
(d) legal expenses relating to other tenants;
(e) costs or expenditures to the extent reimbursed by
payments received by Landlord;
(f) principal, interest or other amounts paid (but excluding
any amount paid as a result of any act or omission of Tenant) on loans to
Landlord or secured by mortgages or deeds of trust or pursuant to any ground
lease covering the Project or a portion thereof (provided interest upon a
government assessment or improvement bond payable in installments is an
Operating Expense under Section 7.1.1 above);
(g) fines, penalties and late charges unless incurred as a
result of any act or omission of Tenant;
(h) promotional and advertising expenses attributable to
marketing of other leaseable space in the Building other than Building signage;
(i) salaries of executive officers of Landlord and employees
of Landlord;
(j) depreciation claimed by Landlord for tax purposes
(provided this exclusion of "depreciation" is not intended to delete from
Operating Expenses actual costs of repairs and replacements and reasonable
reserves in regard thereto which are provided for in Section 7.1.2 above);
(k) any ground lease rental;
(l) costs, including permit, license and inspection costs,
incurred with respect to the installation of other tenants' or other occupants'
improvements in the Building or incurred in otherwise renovating or otherwise
improving, decorating, painting or redecorating vacant space for other tenants
or other occupants of the Building;
(m) depreciation, amortization and interest payments, except
as provided herein and except on materials, tools, supplies and other vendor-
type equipment purchased by Landlord to enable Landlord to supply services
Landlord might otherwise contract for with a third party where such
depreciation, amortization and interest payments would otherwise have been
included in the charge for such third party's services, all as determined in
accordance with generally accepted accounting principles, consistently applied,
and when depreciation or amortization is permitted or required, the item shall
be amortized over its reasonably anticipated useful life;
<PAGE>
(n) marketing costs, including, without limitation, leasing
commissions, attorneys' fees, space planning costs, and other costs and expenses
incurred in connection with lease, sublease and/or assignment negotiations and
transactions with present or prospective tenants or other occupants of the
Building or Project;
(o) expenses in connection with services or other benefits
which are not offered to Tenant or for which Tenant is charged for directly but
which are provided to another tenant or occupant of the Building;
(p) costs incurred by Landlord due to the violation by
Landlord or any tenant of the terms and conditions of any lease of space in the
Building, except to the extent contributed to by Tenant;
(q) overhead and profit increment paid to Landlord or to
subsidiaries or affiliates of Landlord for goods and/or services in or to the
Building or Project to the extent the same exceeds the costs of such goods
and/or services rendered by unaffiliated third parties on a competitive basis,
except for the Management Fee;
(r) interest, principal, points and fees on debts or
amortization on any mortgage or mortgages or any other debt instrument
encumbering the Building or the Project (except as otherwise permitted herein);
(s) Landlord's general corporate overhead and general and
administrative expenses, except for the Management Fee;
(t) tax penalties incurred as a result of Landlord's
negligence, inability or unwillingness to make payments and/or to file any tax
or informational returns when due, except to the extent contributed to by
Tenant;
(u) costs arising from the gross negligence or willful
misconduct or fault of other tenants or Landlord or its agents, representatives,
invitees or guests;
(v) costs for sculpture, paintings or other objects of art;
(w) costs (including in connection therewith all attorneys'
fees and costs of settlement judgments and payments in lieu thereof) arising
from claims, disputes or potential disputes in connection with potential or
actual claims, litigation or arbitrations pertaining to Landlord or the Building
or the Project, except to the extent relating to or regarding the Tenant or its
agents; and
(x) costs associated with the operation of the business of
the partnership or entity which constitutes Landlord as the same are
distinguished from the costs of operation of the Building, including partnership
accounting and legal matters, costs of defending any lawsuits with any mortgagee
(except as the actions of Tenant may be in issue), costs of selling,
syndicating, financing, mortgaging or hypothecating any of Landlord's interest
in the Building, costs of any disputes between Landlord and its employees (if
any) not engaged in Building operation, disputes of Landlord with Building
management, or outside fees paid in connection with disputes with other tenants.
<PAGE>
7.2 Tenant shall pay to Landlord on the first day of each calendar month
of the Term, as Additional Rent, Landlord's estimate of Tenant's Pro Rata Share
of Building Operating Expenses and Tenant's Pro Rata Share of Project Operating
Expenses for such month.
7.2.1 Within ninety (90) days after the conclusion of each calendar
year, (or such longer period as may be reasonably required) Landlord shall
furnish to Tenant a statement showing in reasonable detail the actual Operating
Expenses and Tenant's Pro Rata Share of Building Operating Expenses and Tenant's
Pro Rata Share of Project Operating Expenses for the previous calendar year.
Any additional sum due from Tenant to Landlord shall be immediately due and
payable within ten (10) days after any written request therefor. If the amounts
paid by Tenant pursuant to Section 7.2 exceed Tenant's Pro Rata Share of
Building Operating Expenses or Tenant's Pro Rata Share of Project Operating
Expenses for the previous calendar year, Landlord shall, at Landlord's option,
either (i) credit the excess amount to the next succeeding installments of
estimated Additional Rent, or (ii) pay the excess to Tenant within thirty (30)
days after delivery of such statements.
7.2.2 Any amount due under Section 7.2 for any period which is less
than a full month shall be prorated (based on a thirty (30) day month) for such
fractional month.
7.3 Landlord's annual statement shall be final and binding upon Tenant
unless Tenant, within sixty (60) days after Tenant's receipt thereof, shall
contest any item therein by giving written notice to Landlord, specifying each
item contested and the reason therefor. If, during such sixty (60) day period,
Tenant reasonably and in good faith questions or contests the correctness of
Landlord's statement of Tenant's Pro Rata Share of Building Operating Expenses
or Tenant's Pro Rata Share of Project Operating Expenses, Landlord will provide
Tenant with access to Landlord's books and records and such information as
Landlord reasonably determines to be responsive to Tenant's questions. In the
event that after Tenant's review of such information, Landlord and Tenant cannot
agree upon the amount of Tenant's Pro Rata Share of Building Operating Expenses
or Tenant's Pro Rata Share of Project Operating Expenses, then Tenant shall have
the right to have an independent public accounting firm selected from among the
ten (10) largest in the United States hired by Tenant (at Tenant's sole cost and
expense) and approved by Landlord (which approval shall not be unreasonably
withheld or delayed) audit and/or review such Landlord's books and records for
the year in question (the "Independent Review"). The results of any such
------------------
Independent Review shall be binding on Landlord and Tenant. If the Independent
Review shows that Tenant's Pro Rata Share of Building Operating Expenses or
Tenant's Pro Rata Share of Project Operating Expenses actually paid for the
calendar year in question exceeded Tenant's obligations for such calendar year,
Landlord shall at Landlord's option either (1) credit the excess amount to the
next succeeding installments of estimated Additional Rent or (2) pay the excess
to Tenant within thirty (30) days after delivery of such statement. If the
Independent Review shows that Tenant's payments of Tenant's Pro Rata Share of
Building Operating Expenses or Tenant's Pro Rata Share of Project Operating
Expenses for such calendar year were less than Tenant's obligation for the
calendar year, Tenant shall pay the deficiency to the Landlord within thirty
(30) days after delivery of such statement. If the Independent Review
determines that the total charged to Tenant in the annual statement exceeds the
correct total by more than seven and one-half percent (7.5%), then the costs
and expenses of the independent public accounting firm conducting the
Independent Review shall be paid by Landlord.
<PAGE>
7.4 Tenant shall not be responsible for Building Operating Expenses or
Project Operating Expenses attributable to the time period prior to the Rent
Commencement Date. The responsibility of Tenant for Tenant's Pro Rata Share of
Building Operating Expenses and Tenant's Pro Rata Share of Project Operating
Expenses shall continue to the latest of (i) the date of termination of the
Lease, (ii) the date Tenant has fully vacated the Demised Premises (including,
without limitation, the removal of all items required hereby to be removed and
the completion of all procedures necessary to fully release and terminate any
permits or licenses restricting the use of the Demised Premises in any manner),
or (iii) if Tenant's right to possession of the Demised Premises is terminated
due to the default of Tenant, the date of rental commencement of a replacement
tenant.
7.5 Building Operating Expenses and Project Operating Expenses for the
calendar year in which Tenant's obligation to share therein commences and in the
calendar year in which such obligation ceases, shall be prorated on a basis
reasonably determined by Landlord. Expenses such as taxes, assessments and
insurance premiums which are incurred for an extended time period shall be
prorated based upon time periods to which applicable so that the amounts
attributed to the Demised Premises relate in a reasonable manner to the time
period wherein Tenant has an obligation to share in Building Operating Expenses
and Project Operating Expenses. Notwithstanding anything set forth herein to the
contrary, if the Rent Commencement Date falls on a day other than the first day
of an insurance coverage period, tax fiscal year or other period to which an
Operating Expense is allocable or attributable, or if this Lease terminates on a
day other than the last day of an insurance coverage period, tax fiscal year or
other period to which an Operating Expense is allocable or attributable, then
the amount of the Operating Expenses payable by Tenant with respect to such
first or last partial insurance coverage period, tax fiscal year or other period
shall be prorated based on the ratio of the number of days during such insurance
coverage period, tax fiscal year or other period in which this Lease is in
effect to the total number of days in such insurance coverage period, tax fiscal
year or other period.
7.6 Notwithstanding anything set forth herein to the contrary, in the
event the Project is not one hundred percent (100%) occupied during any entire
year of the Term, an adjustment shall be made by Landlord in computing Tenant's
Pro Rata Share of Project Operating Expenses for such year so that Tenant's Pro
Rata Share of Project Operating Expenses shall be computed for such year as
though the Project had been one hundred percent (100%) occupied during such
entire year. Landlord further agrees that since one of the purposes of
Operating Expenses and the gross up provision is to require Tenant to pay for
the costs attributable to the Demised Premises, (i) Landlord will not collect or
be entitled to collect Operating Expenses from all of its tenants in an amount
which is in excess of one hundred percent (100%) of the Operating Expenses
actually paid by Landlord in connection with the operation of the Building and
the Project, and (ii) Landlord shall make no profit from Landlord's collections
of Operating Expenses. All assessments and premiums which are not specifically
charged to Tenant because of what Tenant has done, which can be paid by Landlord
in installments, shall be paid by Landlord in the maximum number of installments
permitted by law and not included as Operating Expenses except in the year in
which the assessment or premium installment is actually paid; provided, however,
that if the prevailing practice in comparable buildings is to pay such
assessments or premiums on an earlier basis, and Landlord pays on such basis,
such assessments or premiums shall be included in Operating Expenses as paid by
Landlord.
<PAGE>
7.7 The parties agree that statements in this Lease to the effect that
Landlord is to perform certain of its obligations hereunder at its own cost and
expense shall not be interpreted as excluding any cost from Building Operating
Expenses or Project Operating Expenses if such cost is an Operating Expense
pursuant to the terms of this Lease.
8. Rentable Area
-------------
8.1 As used herein, the terms "Rentable Area" shall be calculated in
-------------
accordance with the 1996 Standard Method for Measuring Floor Area in Office
Buildings as adopted by the Building Owners and Managers Association.
8.2 The Rentable Area of the Building is generally determined by making
separate calculations of Rentable Area applicable to each floor within the
Building and totaling the Rentable Area of all floors within the Building. The
Rentable Area of a floor is computed by measuring to the outside finished
surface of the permanent outer Building walls. The full area calculated as
before set forth is included as Rentable Area without deduction for columns and
projections or vertical penetrations which are defined as stairs, elevator
shafts, flues, pipe shafts, vertical ducts, and the like and their enclosing
walls.
8.3 The Rentable Area of the Project is the total of Rentable Area of all
buildings within the Project.
8.4 Review of allocations of Rentable Areas as between tenants of the
Project may be made as frequently as in Landlord's opinion appears appropriate
in order to facilitate an equitable apportionment of Project Operating Expenses.
Such review shall be performed by a licensed architect and the allocations
certified as true and correct by such licensed architect and Tenant shall be
bound by such certifications.
9. Security Deposit
----------------
9.1 Tenant has deposited with Landlord the sum set forth in Section 2.1.7
(the "Security Deposit") which Security Deposit shall be held by Landlord as
----------------
security for the performance by Tenant of all of the terms, covenants, and
conditions of this Lease to be kept and performed by Tenant during the Term. If
Tenant defaults with respect to any provision of this Lease, including, but not
limited to, any provision relating to the payment of Rent, Landlord may (but
shall not be required to) use, apply or retain all or any part of the Security
Deposit for the payment of any Rent or any other sum in default, or to
compensate Landlord for any other loss or damage which Landlord may suffer by
reason of Tenant's default. If any portion of the Security Deposit is so used
or applied, Tenant shall, within five (5) business days after Landlord's demand
therefor, deposit cash with Landlord in an amount sufficient to restore the
Security Deposit to its original amount, and Tenant's failure to do so shall be
a material breach of this Lease. Landlord shall not be required to keep the
Security Deposit separate from its general fund, and Tenant shall not be
entitled to any interest on the Security Deposit.
9.2 Intentionally Omitted.
<PAGE>
9.3 In the event of bankruptcy or other debtor-creditor proceedings
against Tenant, the Security Deposit shall be deemed to be applied first to the
payment of Rent and other charges due Landlord for all periods prior to the
filing of such proceedings.
9.4 Landlord may deliver the Security Deposit to any purchaser of
Landlord's interest in the Demised Premises, provided such purchaser assumes in
full in writing Landlord's obligations hereunder, and thereupon Landlord shall
be discharged from any further liability with respect to the Security Deposit.
This provision shall also apply to any subsequent transfers.
9.5 If Tenant shall fully perform every provision of this Lease to be
performed by Tenant, the Security Deposit, or any balance thereof, shall be
returned to Tenant (or, at Landlord's option, to the last assignee of Tenant's
interest hereunder) within ninety (90) days after the expiration or earlier
termination of this Lease.
10. Use
---
10.1 Tenant shall use the Demised Premises for the purpose set forth in
Section 2.1.8 and shall not use the Demised Premises, or permit or suffer the
Demised Premises to be used, for any other purpose without the prior written
consent of Landlord which may be withheld in Landlord's reasonable discretion;
provided, however, that if Tenant desires to reduce the laboratory space at the
Demised Premises from that initially approved by Landlord pursuant to this Lease
and the Work Letter, then Tenant must first provide Landlord with reasonable
financial assurances (such as an increased security deposit or acceptable letter
of credit) that Tenant will restore the Demised Premises and Tenant Improvements
at the end of the Term to the same condition as Landlord initially approved
pursuant to this Lease and the Work Letter, and Tenant must, in fact, perform
such restoration prior to the end of the Term.
10.2 Tenant shall not use or occupy the Demised Premises in violation of
any federal, state and local laws and regulations, zoning ordinances, or the
certificate of occupancy issued for the Building, and shall, upon five (5) days'
written notice from Landlord, discontinue any use of the Demised Premises which
is declared or claimed by any governmental authority having jurisdiction to be a
violation of law, regulation or zoning ordinance or of such certificate of
occupancy, or which violates a law, regulation or zoning ordinance or the
certificate of occupancy. Tenant shall comply with any order or directive of
any governmental authority having jurisdiction which shall, by reason of the
nature of Tenant's particular use or occupancy of the Demised Premises, impose
any duty upon Tenant or Landlord with respect to the Demised Premises or with
respect to Tenant's particular use or occupation thereof. Subject to Tenant's
obligations elsewhere under this Lease, Tenant shall not be responsible for
compliance with any laws, codes, rules, regulations, ordinances or other
governmental directives where such compliance is not related to Tenant's
particular use and occupancy of the Demised Premises, and Tenant shall be
obligated to make only those alterations in the Demised Premises that are
required by reason of Tenant's particular use of the Demised Premises which are
not generally applicable to the Project or other tenants in the Project.
10.3 Tenant shall not do or permit to be done anything which will
invalidate or increase the cost of any fire, environmental, extended coverage or
any other insurance policy covering the Building and Project and shall comply
with all rules, orders, regulations, and
<PAGE>
requirements of the insurers of the Building and Project and Tenant shall
promptly upon demand reimburse Landlord for any additional premium charged for
such policy to the extent caused by reason of Tenant's failure to comply with
the provisions of this Section 10.3.
10.4 No additional locks or bolts of any kind shall be placed upon any of
the doors or windows by Tenant nor shall any changes be made in existing locks
or the mechanism thereof without the prior written consent of Landlord, which
consent shall not be unreasonably withheld. Tenant must, upon termination of
this Lease return to Landlord all keys to offices and restrooms, either
furnished to, or otherwise procured by Tenant. In the event any key so
furnished is lost, Tenant shall pay to Landlord the cost of replacing the same
or of changing the lock or locks opened by such lost key if Landlord shall deem
it necessary to make such change.
10.5 No awnings or other projection shall be attached to any outside wall
of the Building. No curtains, blinds, shades or screens shall be attached to or
hung in, or used in connection with, any window or door of the Demised Premises
without Landlord's consent, not to be unreasonably withheld or delayed. Neither
the interior nor exterior of any windows shall be coated or otherwise
sunscreened without the express written consent of Landlord, nor shall any
bottles, parcels, or other articles be placed on the windowsills. No equipment,
furniture or other items of personal property shall be placed on any exterior
balcony without the express written consent of Landlord.
10.6 Tenant shall have the right to affix signage displaying Tenant's
corporate name and/or logo (the "Building Signage") on the Building as permitted
----------------
by code at Tenant's sole cost and expense with the prior written consent of
Landlord, which consent is not to be unreasonably withheld or delayed. No sign,
advertisement, or notice other than the Building Signage shall be exhibited,
painted or affixed by Tenant on any exterior part of the Demised Premises or the
Building without the prior written consent of Landlord, which consent shall not
be unreasonably withheld.
10.7 Tenant shall cause any office equipment or machinery to be installed
in the Demised Premises so as to reasonably prevent sounds or vibrations
therefrom from extending into the Project Common Areas. Further, no equipment
weighing five hundred (500) pounds, or greater, shall be placed upon the Demised
Premises without advance notice to and approval by Landlord. Placement of such
equipment, if approved by Landlord, shall be only at a location designed to
carry the weight of such equipment.
10.8 Tenant shall not do or permit anything to be done in or about the
Demised Premises which shall in any way obstruct or interfere with the rights of
other tenants or occupants of the Project, or injure or annoy them, or use or
allow the Demised Premises to be used for immoral, unlawful or objectionable
purpose, nor shall Tenant knowingly cause, maintain or permit any nuisance or
waste in, on, or about the Demised Premises, Building or Project.
10.9 Notwithstanding any other provision herein to the contrary, Tenant
shall be responsible for all liabilities, costs and expense arising out of or in
connection with the compliance of the Demised Premises with the Americans With
Disabilities Act, 42 U.S.C. (S) 12101, et seq. (together with regulations
promulgated pursuant thereto, "ADA") and Tenant
---
<PAGE>
shall indemnify, defend and hold harmless from and against any loss, cost,
liability or expense (including reasonable attorneys fees and disbursements)
arising out of any failure of the Demised Premises to comply with the ADA;
provided, however, that Landlord shall be responsible for the costs, if any, as
of the Term Commencement Date, of bringing into compliance with the ADA: (i) the
restrooms on the fourth floor of the Demised Premises; and (ii) only those other
items identified in the Mahlum & Nordfors McKinley Gordon Architectural Report
attached hereto as Exhibit "H" (the "Architectural Report") as possibly not
--------------------
being in compliance with the ADA, and then only to the extent required by
governmental authority.
11. Brokers
-------
11.1 Landlord and Tenant each represent and warrant to the other party that
it has had no dealings with any real estate broker or agent in connection with
the negotiation of this Lease other than Kidder, Mathews & Segner Inc.
("Kidder") and CB Commercial Real Estate Group ("CB", and together with Kidder,
------ --
"Brokers"), as has been disclosed in writing to Landlord and Tenant and that
-------
neither Landlord nor Tenant knows of any other real estate broker or agent who
is or might be entitled to a commission in connection with this Lease. Each of
the parties acknowledges that Kidder represents only Landlord and CB represents
only Tenant in connection with this transaction.
11.2 Landlord and Tenant each hereby indemnifies the other party and shall
defend, hold and save such party harmless from and against any and all claims
for any commissions or fees in connection with this Lease made by any broker or
finder having worked, or claiming to have worked, on behalf of the indemnifying
party, other than Brokers.
11.3 Landlord and Tenant each represent and warrant to the other that no
broker or agent has made any representation or warranty relied upon by it in its
decision to enter into this Lease other than as contained in this Lease.
11.4 Tenant acknowledges and agrees that the employment of brokers by
Landlord is for the purpose of solicitation of offers of lease from prospective
tenants and no authority is granted to any broker to furnish any representation
(written or oral) or warranty from Landlord unless expressly contained within
this Lease. Landlord in executing this Lease does so in reliance upon Tenant's
representations and warranties contained within this Article 11 hereof.
12. Holding Over
------------
12.1 If, with Landlord's express written consent, Tenant holds possession
of all or any part of the Demised Premises after the expiration or earlier
termination of the Term, Tenant shall become a tenant from month-to-month upon
the date of such expiration or earlier termination, and in such case Tenant
shall continue to pay Basic Annual Rent in the amount payable upon the date of
the expiration or earlier termination of this Lease, and all other provisions,
representations, covenants and agreements contained herein, other than with
respect to the Term and any extensions thereof shall remain in full force and
effect.
12.2 Notwithstanding the foregoing, if Tenant remains in possession of the
Demised Premises after the expiration or earlier termination of the Term without
the express written consent of Landlord, Tenant shall become a tenant at
sufferance upon the terms of this Lease
<PAGE>
except that the monthly rental shall be equal to one hundred fifty percent
(150%) of the Basic Annual Rent and Additional Rent in effect during the last
thirty (30) days of the Term. Tenant shall be responsible for all damages
suffered by Landlord resulting from or occasioned by Tenant's holding over.
12.3 Acceptance by Landlord of Rent after such expiration or earlier
termination shall not result in a renewal or reinstatement of this Lease.
12.4 The foregoing provisions of this Article 12 are in addition to and do
not affect Landlord's right to re-entry or any other rights of Landlord
hereunder or as otherwise provided by law.
13. Taxes On Tenant's Property
--------------------------
13.1 Tenant shall pay, prior to delinquency, any and all taxes levied
against any personal property or trade fixtures placed by Tenant in or about the
Demised Premises.
13.2 If any such taxes on Tenant's personal property or trade fixtures are
levied against Landlord or Landlord's property or, if the assessed valuation of
the Building is increased by the inclusion therein of a value attributable to
Tenant's personal property or trade fixtures, and if Landlord, after written
notice to Tenant, pays the taxes based upon such increase in the assessed
valued, then Tenant shall upon demand repay to Landlord the taxes so levied
against Landlord.
14. Condition Of Demised Premises
-----------------------------
Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation or warranty with respect to the condition of the Demised
Premises or the Building or Project, or with respect to the suitability for the
conduct of Tenant's business. The taking of possession of the Demised Premises
by Tenant shall, except as otherwise agreed in writing by Landlord and Tenant
and subject to any representations and warranties of Landlord or Tenant
contained herein, conclusively establish that the Demised Premises and Building
were at such time in good, sanitary and satisfactory condition and repair and in
substantially the same condition as described in the environmental report
attached hereto as Exhibit "C" as such report may be updated pursuant to the
-----------
next two sentences (the "Environmental Report"). The Environmental Report shall
--------------------
be updated with respect to the fourth floor of the Building at Landlord's sole
cost and expense within sixty (60) days of the current tenant's vacation of such
space, and may be updated prior to the Term Commencement Date with respect to
such other portions of the Building to be occupied by Tenant as Tenant in its
sole election and at its sole cost and expense may determine. Landlord and
Tenant shall, in a reasonably prompt manner, mutually select a qualified
environmental consultant to perform such update(s).
15. Common Areas And Parking Facilities
-----------------------------------
15.1 Tenant shall have the non-exclusive right, in common with others, to
use the Project Common Areas, subject to such reasonable and nondiscriminatory
rules and regulations as are hereafter promulgated by Landlord in its
discretion. Landlord agrees that the rules and regulations shall not be
changed, revised or enforced in any unreasonable way by Landlord, nor modified
or added to by Landlord in such a way as to unreasonably interfere with Tenant's
<PAGE>
permitted use of the Demised Premises set forth in this Lease. Landlord shall
not enforce the rules and regulations in a manner which shall unreasonably
interfere with the Permitted Use of the Demised Premises as set forth in Section
2.1.8 herein.
15.2 As an appurtenance to the Demised Premises, fifty (50) of the covered
parking stalls located on the Project shall be reserved to Tenant, such stalls
to be selected by Landlord. Tenant shall pay Landlord a monthly rate of ninety
dollars ($90) per stall (the "Parking Rate"). The Parking Rate may be adjusted
------------
as determined by Landlord at any time after the first year of the Term, not to
exceed an increase of five percent (5%) in any calendar year. Tenant
acknowledges that Landlord has previously assigned certain parking stalls to
another tenant of the Project, and that Tenant has the right to use only its
assigned parking stalls.
15.3 Tenant agrees not to unreasonably overburden the parking facilities
and agrees to cooperate with Landlord and other tenants in the use of parking
facilities. Landlord reserves the right to determine that parking facilities
are becoming overcrowded and to limit Tenant's use thereof. Upon such
determination, Landlord may reasonably allocate parking spaces among Tenant and
other tenants. In the alternative, if Landlord determines that Tenant's
customers, clients, or invitees appear to be using more than the number of
parking spaces that would otherwise be attributable to a reasonable number of
parking spaces for Tenant's use, Landlord may require Tenant and its employees
to obtain parking outside the Project for such unreasonable excess uses.
However, nothing in this Section 15.3 is intended to create an affirmative duty
on Landlord's part to monitor parking.
15.4 Landlord reserves the right to modify the Project Common Areas
including the right to add or remove exterior and interior landscaping. Landlord
agrees that the Project Common Areas shall not include any excess unimproved
land development, but shall only include improved areas available to serve a
completed building, where the area of the completed building is used to
determine Tenant's Pro Rata Share of Project Operating Expenses.
16. Utilities And Services
----------------------
16.1 Tenant shall pay for all water (including the cost to service, repair
and replace reverse osmosis, deionized and other treated water), gas, heat,
light, power, telephone and other utilities supplied to the Demised Premises,
together with any fees, surcharges and taxes thereon. All such utilities shall
be separately metered to Tenant as of the Term Commencement Date.
16.2 Landlord shall not be liable for, nor shall any eviction of Tenant
result from, the failure to furnish any such utility or service whether or not
such failure is caused by accident, breakage, repairs, strikes, lockouts or
other labor disturbances or labor disputes of any character, governmental
regulation, moratorium or other governmental action, inability despite the
exercise of reasonable diligence or by any other cause except the willful
misconduct or the gross negligence of Landlord. In the event of such failure,
Tenant shall not be entitled to any abatement or reduction of Rent, nor be
relieved from the operation of any covenant or agreement of this Lease.
<PAGE>
16.3 Tenant shall pay directly to the applicable utility or service
provider, prior to delinquency, for any separately metered utilities and
services which may be furnished to Tenant or the Demised Premises during the
Term.
16.4 Tenant shall not, without the prior written consent of Landlord, which
shall not be unreasonably withheld, use any device in the Demised Premises,
including, but without limitation, data processing machines, which will in any
way increase the amount of ventilation, air exchange, gas, steam, electricity or
water beyond that for which the Demised Premises are reasonably designed as of
the Term Commencement Date.
16.5 Provided that Landlord shall furnish Tenant with notice whenever
reasonably possible, Landlord reserves the right to stop service of the
elevator, plumbing, ventilation, air conditioning and electric systems, when
necessary, by reason of accident or emergency or for repairs, alterations or
improvements, in the good faith judgment of Landlord desirable or necessary to
be made, until said repairs, alterations or improvements shall have been
completed, and Landlord shall further have no responsibility or liability for
failure to supply elevator facilities, plumbing, ventilation, air conditioning
or electric service, when prevented from doing so by strike or accident, or by
laws, rules, order, ordinances, directions, regulations or requirements of any
federal, state, country or municipal authority or failure to deliver gas, oil or
other suitable fuel supply or inability by exercise of reasonable diligence to
obtain gas, oil or other suitable fuel. It is expressly understood and agreed
that any covenants on Landlord's part to furnish any service pursuant to any of
the terms, covenants, conditions, provisions or agreements of this Lease, or to
perform any act or thing for the benefit of Tenant, shall not be deemed breached
if Landlord is unable to furnish or perform the same by virtue of a strike or
labor trouble or any other cause whatsoever. Notwithstanding the foregoing,
Landlord, in exercising its rights hereunder, shall use commercially reasonable
efforts to minimize any disruption to or interference with the conduct of
Tenant's business.
17. Alterations
-----------
17.1 Other than the Tenant Improvements, Tenant shall make no alterations,
additions or improvements in or to the Demised Premises without Landlord's prior
written consent, which approval shall not be unreasonably withheld (provided,
--------
however, that in the event any proposed alteration, addition or improvement
- -------
affects (i) any structural portions of the Building including exterior walls,
roof, foundation and core of the Building, (ii) the exterior of the Building or
(iii) any Building systems, including elevator, plumbing, air conditioning,
heating electrical, security, life safety and power, then Landlord may withhold
its consent with respect thereto in its sole and absolute discretion), and then
only by architects, contractors, suppliers or mechanics approved by Landlord in
Landlord's reasonable discretion. In seeking Landlord's approval, Tenant shall
provide Landlord, at least fourteen (14) days in advance of any proposed
construction, with plans, specifications, bid proposals, work contracts and such
other information concerning the nature and cost of the alterations as may be
reasonably requested by Landlord. Notwithstanding the foregoing or anything to
the contrary in this Lease: (i) Tenant shall not be required to obtain
Landlord's consent to any non-structural alteration, addition or improvement
which costs less than $20,000 per project, each project to include on-going and
related work; (ii) if Landlord's consent is required and Landlord does not
notify Tenant in writing of its approval or disapproval within fifteen (15) days
following Tenant's request for approval, then Landlord shall be deemed
<PAGE>
to have disapproved the proposed alteration in question; (iii) all personal
property of Tenant installed in the Demised Premises at Tenant's expense shall
at all times remain Tenant's personal property, and Tenant shall be entitled to
all insurance and condemnation proceeds expressly awarded for Tenant's personal
property. Tenant shall not be required to remove any Tenant Improvements at the
expiration or earlier termination of this Lease nor any other alterations,
additions or improvements unless at the time that Landlord consented thereto,
Landlord notified Tenant that such removal would be required.
17.2 Tenant agrees that there shall be no construction of partitions or
other obstructions which might interfere with free access to mechanical
installation or service facilities of the Building or interfere with the moving
of Landlord's equipment to or from the enclosures containing said installations
or facilities.
17.3 Landlord and Tenant each agree that all work by either Landlord or
Tenant shall be accomplished in such a manner as to permit any fire sprinkler
system and fire water supply lines to remain fully operable at all times.
17.4 All such work shall be done at such times and in such manner as
Landlord may from time to time reasonably designate. Tenant covenants and
agrees that all work done by Tenant shall be performed in compliance with all
laws, rules, orders, ordinances, directions, regulations, and requirements of
all governmental agencies, offices, departments, bureaus and boards having
jurisdiction, and in full compliance with the rules, orders, directions,
regulations, and requirements of any applicable fire rating bureau. Tenant
shall provide Landlord with "as-built" plans showing any change in the Demised
Premises.
17.5 Before commencing any work, Tenant shall give Landlord at least
fifteen (15) days prior written notice of the proposed commencement of such work
and shall, if the cost of such alteration exceeds $50,000 and Landlord so
requests, secure at Tenant's own cost and expense a completion and lien
indemnity bond reasonably satisfactory to Landlord for said work.
17.6 All alterations, attached equipment, decorations, fixtures, trade
fixtures, additions and improvements, subject to Section 17.8, attached to or
built into the Demised Premises and paid for by Landlord by virtue of Landlord
providing the Tenant Improvement Allowance or otherwise, including (without
limiting the generality of the foregoing) all floor and wallcovering, built-in
cabinet work and paneling, sinks and related plumbing fixtures, exterior venting
fume hoods and walk-in freezers and refrigerators, clean rooms, climatized
rooms, ductwork, conduits, electrical panels and circuits, shall become the
property of Landlord upon the expiration or earlier termination of the term of
this Lease (the "Landlord Personal Property"), and shall remain upon and be
--------------------------
surrendered with the Demised Premises as a part thereof, and if paid for by
Tenant, such items may be removed by Tenant if agreed to by Landlord prior to
installation of such items; provided, however, that Tenant must restore any
damage caused by or occasioned as a result of such removal. Landlord may at any
time elect to cause Tenant to remove any of the aforementioned items from the
Demised Premises upon the expiration or earlier termination of this Lease, and,
if Landlord so elects, Tenant shall remove such alterations, attached equipment,
decorations, fixtures, trade fixtures, additions and improvements upon the
expiration or earlier termination of this Lease and restore any damage caused by
or occasioned as a result of such removal; provided, however, that prior to the
construction or attachment of any such property,
<PAGE>
Landlord shall advise Tenant in writing if such removal will be necessary upon
the expiration or earlier termination of the Lease if Tenant timely seeks such
advice from Landlord. Any property left at the Demised Premises upon the end of
the Term shall become the property of the Landlord. Tenant further agrees and
acknowledges that the Landlord Personal Property (as further described in
Exhibit "E" attached hereto and incorporated herein) is being provided to Tenant
- -----------
for Tenant's use during the Term of this Lease at no charge, without obligation
on the part of Landlord to maintain, repair or replace the same, and as an
accommodation to Tenant without representations or warranties of any kind and
that no portion of Rent is attributable to the use of the Landlord Personal
Property. Tenant shall return the Landlord Personal Property to Landlord at the
end of the Term of this Lease in the working condition in which it was received,
subject to reasonable wear and tear and casualty.
17.7 Tenant shall repair any damage to the Demised Premises caused by
Tenant's removal of any property from the Demised Premises. During any such
restoration period, Tenant shall pay Rent to Landlord as provided herein as if
said space were otherwise occupied by Tenant.
17.8 Except as to those items for which Tenant obtained Landlord's written
consent to remove, all business and trade fixtures, built-in machinery,
equipment, furniture and cabinets, together with all additions and accessories
thereto, installed in and upon the Demised Premises shall be and remain the
property of Landlord and shall not be moved by Tenant at any time during the
Term. If Tenant shall fail to remove all of its effects from the Demised
Premises prior to expiration or earlier termination of this Lease, then Landlord
may, at its option and with notice to Tenant, remove the same in any manner that
Landlord shall choose, and store said effects without liability to Tenant for
loss thereof or damage thereto, and Tenant agrees to pay Landlord upon demand
any expenses incurred to such removal and storage or Landlord may, at its
option, without notice, sell said property or any of the same, at private sale
and without legal process, for such price as Landlord may obtain and apply the
proceeds of such sale against any amounts due under this Lease from Tenant to
Landlord and against any expenses incident to the removal, storage and sale of
said personal property.
17.9 Notwithstanding any other provision of this Article 17 to the
contrary, in no event may Tenant remove any improvement from the Demised
Premises for which Landlord contributed payment, including, without limitation,
the Tenant Improvements made pursuant to the Work Letter without Landlord's
prior written consent, which may be withheld in Landlord's sole discretion.
17.10 Tenant shall pay to Landlord as Additional Rent an amount equal to
two percent (2%) of the cost to Tenant of all charges incurred by Tenant or its
contractors or agents in connection with any alterations, additions or
improvements to the Demised Premises, which Additional Rent shall not exceed
$10,000 per project. For purposes of payment of such sum, Tenant shall submit to
Landlord copies of all bills, invoices, and statements covering the costs of
such charges, which will be accompanied by payment to Landlord of the percentage
fee set forth above. Tenant shall reimburse Landlord for any extra expense
incurred by Landlord by reason of faulty work done by Tenant or its contractors,
or by reason of delays caused by such work, or by reason of inadequate cleanup.
<PAGE>
18. Repairs And Maintenance
-----------------------
18.1 Landlord shall perform Capital Repairs and shall repair and maintain
the Project Common Areas, including, without limitation, repair and maintenance
of landscaping, parking facilities, driveways, walkways, lighting, utilities,
snow removal, irrigation and storm water management systems (and the full or
amortized cost thereof allocated in accordance with the other terms and
conditions of this Lease, as applicable, shall be included as a part of
Operating Expenses), unless such Capital Repairs or maintenance or repairs are
required in whole or in part because of any act, neglect, fault of or omissions
of any duty by Tenant, its agents, servants, employees, contractors, guests or
invitees, in which case Tenant shall pay to Landlord the cost of such Capital
Repairs or maintenance and repairs to the extent such costs are incurred as a
result of any act, neglect, fault of or omission of any duty by Tenant, its
agents, servants, employees, contractors, guests or invitees and are not
reimbursed by insurance. For Capital Repairs with an estimated cost of greater
than one hundred thousand dollars ($100,000), Landlord shall obtain three bids
for the repair and provide copies thereof to Tenant. Tenant shall have the
right to approve or disapprove, in its reasonable discretion, Landlord's
selection of a contractor to perform the Capital Repairs.
18.2 Except for services of Landlord, if any, required by Section 18.1,
Tenant shall at Tenant's sole cost and expense keep the Demised Premises and
every part thereof in good condition and repair, damage thereto from ordinary
wear and tear and loss due to condemnation or casualty not occasioned by Tenant
or Tenant's agents, representatives or guests excepted. Tenant shall, upon the
expiration or earlier termination of this Lease, surrender the Demised Premises
to Landlord in as good as condition as when received, ordinary wear and tear
excepted. Other than as specifically set forth in the Work Letter, Landlord
shall have no obligation to alter, remodel, improve, repair, decorate or paint
the Demised Premises or any part thereof.
18.3 Landlord shall not be liable for any failure to make any repairs or to
perform any maintenance which is an obligation of Landlord unless such failure
shall persist for an unreasonable time after written notice of the need of such
repairs or maintenance is given to Landlord by Tenant. Tenant waives the rights
under any applicable law, statute or ordinance now or hereafter in effect to
make repairs at Landlord's expense. Notwithstanding anything herein to the
contrary, if Landlord fails to timely perform its maintenance and repair
obligations hereunder, and as a consequence, Tenant's use of the Demised
Premises is substantially impaired, Tenant shall have the right, upon twenty
(20) days advance written notice to Landlord, to cause such repair or
maintenance to be performed at Tenant's expense.
18.4 Repairs under this Article 18 which are obligations of Landlord are
subject to allocation among Tenant and other tenants as Operating Expenses.
18.5 This Article 18 relates to repairs and maintenance arising in ordinary
course of operation of the Building, the Project and any related facilities. In
the event of fire, earthquake, flood, vandalism, war, or similar cause of damage
or destruction, this Article 18 shall not be applicable and the provisions of
Article 22 shall apply and control.
<PAGE>
19. Liens
-----
19.1 Subject to the immediately succeeding sentence, Tenant shall keep the
Demised Premises, the Building, the Project and the real property upon which the
Building and the Project are situated free from any liens arising out of work
performed, materials furnished or obligations incurred by Tenant. Tenant further
covenants and agrees that any mechanic's lien filed against the Demised Premises
or against the Building or the Project for work claimed to have been done for,
or materials claimed to have been furnished to Tenant, will be discharged by
Tenant, by bond or otherwise, within ten (10) days after the filing thereof, at
the sole cost and expense of Tenant.
19.2 Should Tenant fail to discharge any lien of the nature described in
Section 19.1, Landlord may at Landlord's election, after notice to Tenant, pay
such claim or post a bond or otherwise provide security to eliminate the lien as
a claim against title and the cost thereof shall be immediately due from Tenant
as Additional Rent.
19.3 In the event Tenant shall lease or finance the acquisition of office
equipment, furnishings, or other personal property of a removable nature
utilized by Tenant in the operation of Tenant's business, Tenant warrants that
any Uniform Commercial Code Financing Statement executed by Tenant will upon its
face or by exhibit thereto indicate that such Financing Statement is applicable
only to removable personal property of Tenant located within the Demised
Premises. In no event shall the address of the Building be furnished on the
statement without qualifying language as to applicability of the lien only to
removable personal property, located in an identified suite held by Tenant.
Should any holder of a Financing Statement executed by Tenant record or place of
record a Financing Statement which appears to constitute a lien against any
interest of Landlord or against equipment which may be located other than within
the Demised Premises, Tenant shall within ten (10) days after filing such
Financing Statement (i) cause a copy of the Security Agreement or other
documents to which Financing Statement pertains to be furnished to Landlord to
facilitate Landlord's being in a position to show such lien is not applicable to
Landlord's interest, and (ii) cause Tenant's lender to amend any documents of
record so as to clarify that such lien is not applicable to any interest of
Landlord in the Building or the Project.
19.3.1 Notwithstanding anything herein to the contrary, Landlord
waives any and all right, title and interest Landlord now has, or hereafter may
have, whether statutory or otherwise, to Tenant's books and records and personal
property not attached or affixed to the Demised Premises (the "Collateral").
----------
Tenant acknowledges that the Collateral shall not include any of Landlord's
personal property and Landlord acknowledges that Landlord has no lien, right,
claim, interest or title in or to the Collateral. Landlord further agrees that
Tenant shall have the right, at its discretion, to mortgage, pledge, hypothecate
or grant a security interest in the Collateral as security for its obligations
under any equipment lease or other financing arrangement related to the conduct
of Tenant's business at the Demised Premises. The Collateral shall not become
the property of Landlord or a part of the realty and may be removed by Tenant at
any time and from time to time during the entire term of this Lease. Upon
request of Tenant or its assignees or any subtenant, Landlord shall execute and
deliver any reasonable real estate consent or waiver forms submitted by any
vendors, equipment lessors, chattel mortgagees or lenders of Tenant setting
forth that Landlord waives, in favor of the vendor, equipment lessor,
<PAGE>
chattel mortgagee or lender any superior lien, claim, interest or other right in
the specified Collateral. Such Collateral may be removed at any reasonable time
upon default under the terms of such chattel mortgage or other similar
documents, free and clear of any claim or lien of Landlord. Tenant shall
promptly repair any damage caused by the removal of such property, whether
effected by Tenant or Tenant's vendors, chattel mortgagees or equipment lessors.
20. Indemnification And Exculpation
-------------------------------
20.1 Tenant hereby indemnifies and agrees to defend and save Landlord
harmless from and against any and all demands, claims, liabilities, losses,
costs, expenses, actions, causes of action, damages or judgments, and all
reasonable expenses incurred in investigating or resisting the same (including,
without limitation, reasonable attorneys' fees, charges and disbursements), for
injury or death to person or injury to property occurring within or about the
Demised Premises or the Project, arising directly or indirectly out of Tenant's,
its employees, agents or guests use or occupancy of the Demised Premises or the
Project or a breach or default by Tenant in the performance of any of its
obligations hereunder, unless caused solely by the willful act or gross
negligence of the Landlord.
20.2 Landlord hereby indemnifies and agrees to defend and save Tenant
harmless from and against any and all demands, claims, liabilities, losses,
costs, expenses, actions, causes of action, damages or judgments, and all
reasonable expenses incurred in investigating or resisting the same (including,
without limitation, reasonable attorneys' fees, charges and disbursements), for
injury or death to person or injury to property occurring within or about the
Demised Premises or the Project, arising directly or indirectly out of breach by
Landlord in the performance of any of its obligations hereunder, unless caused
solely by the willful act or negligence of Tenant.
20.3 Landlord shall not be liable to Tenant and Tenant assumes all risk of
damage to personal property or scientific research, including loss of records
kept within the Demised Premises if the cause of such damage is of a nature
which, if Tenant had elected to maintain fire and theft insurance with extended
coverage and business records endorsement available on a commercially reasonable
basis, would be a loss subject to settlement by the insurance carrier,
including, but not limited to, damage or losses caused by fire, electrical
malfunctions, gas explosion, and water damage of any type, including, but not
limited to, broken water lines, malfunction of fire sprinkler system, roof
leakage or stoppages of lines unless and except if such loss is due to the
willful misconduct of Landlord after an unreasonable period of time following
the written notice by Tenant of need for a repair which Landlord is responsible
to make. Tenant further waives any claim for injury to Tenant's business or loss
of income relating to any such damage or destruction of personal property
including any loss of records.
20.4 Landlord shall not be liable for any damages arising from any act,
omission or neglect of any other tenant in the Building or the Project or of any
other third party.
20.5 Security devices and services, if any, while intended to deter crime
may not in given instances prevent theft or other criminal acts. Tenant
acknowledges and agrees that Landlord shall not be liable for injuries or losses
caused by criminal acts of third parties and the risk that any security device
or service may malfunction or otherwise be circumvented by a
<PAGE>
criminal is assumed by Tenant. Tenant shall at Tenant's cost obtain insurance
coverage to the extent Tenant desires protection against such criminal acts.
21. Insurance - Waiver Of Subrogation
---------------------------------
21.1 Landlord, as part of Operating Expenses, shall carry insurance upon
the Building, in an amount equal to full replacement cost (exclusive of the
costs of excavation, foundations, and footings, and without reference to
depreciation taken by Landlord upon its books or tax returns) or such greater
amount of insurance as Landlord's mortgage lender requires Landlord to maintain,
providing protection against any peril generally included within the
classification "Fire and Extended Coverage" together with insurance against
sprinkler damage (if applicable), vandalism and malicious mischief. Landlord,
subject to availability thereof and, as part of Operating Expenses, shall
further insure as Landlord deems appropriate coverage against flood,
environmental hazard and earthquake, loss or failure of building equipment,
rental loss during the period of repair or rebuild, workmen's compensation
insurance and fidelity bonds for employees employed to perform services.
Notwithstanding the foregoing, Landlord may, but shall not be deemed required
to, provide insurance as to any improvements installed by Tenant or which are in
addition to the standard improvements customarily furnished by Landlord without
regard to whether or not such are made a part of the Building.
21.2 Landlord, as part of Operating Expenses, shall further carry
commercial general insurance with a single loss limit of not less than Five
Million Dollars ($5,000,000.00) for death or bodily injury, or property damage
with respect to the Project.
21.3 Tenant at its own cost shall procure and continue in effect from the
Rent Commencement Date and continuing throughout the Term (and occupancy by
Tenant, if any, after the expiration or earlier termination of this Lease)
comprehensive commercial general insurance with limits of not less than Five
Million Dollars ($5,000,000.00) per occurrence for death or bodily injury and
not less than Five Million Dollars ($5,000,000.00) for property damage with
respect to the Demised Property.
21.4 The aforesaid insurance required of Tenant shall name Landlord, its
officers, employees and agents, as an additional insured. Said insurance shall
be with companies having a policyholder rating of not less than A+ and financial
category rating of at least Class IX in "Best's Insurance Guide." Tenant shall
obtain for Landlord from the insurance companies or cause the insurance
companies to furnish certificates of coverage to Landlord. No such policy shall
be cancelable or subject to reduction of coverage or other modification or
cancellation except after thirty (30) days prior written notice to Landlord from
the insurer. All such policies shall be written as primary policies, not
contributing with and not in excess of the coverage which Landlord may carry.
Tenant's policy may be a "blanket policy" which specifically provides that the
amount of insurance shall not be prejudiced by other losses covered by the
policy. Tenant shall, at least twenty (20) days prior to the expiration of such
policies, furnish Landlord with renewals or binders. Tenant agrees that if
Tenant does not take out and maintain such insurance, Landlord may (but shall
not be required to) after notice to Tenant procure said insurance on Tenant's
behalf and at its cost to be paid as Additional Rent.
<PAGE>
21.5 Tenant assumes the risk of damage to any fixtures, goods, inventory,
merchandise, equipment, and leasehold improvements, and Landlord shall not be
liable for injury to Tenant's business or any loss of income therefrom relative
to such damage all as more particularly heretofore set forth within this Lease,
except to the extent arising from or in connection with Landlord's willful
misconduct. Tenant at Tenant's cost shall carry such insurance as Tenant desires
for Tenant's protection with respect to personal property of Tenant or business
interruption.
21.6 In each instance where insurance is to name Landlord as additional
insured, Tenant shall upon written request of Landlord also designate and
furnish certificates so evidencing Landlord as additional insured to (i) any
lender of Landlord holding a security interest in the Building or real property
upon which the Building is situated, and (ii) any management company retained by
Landlord to manage the Building or the Project.
21.7 Landlord and Tenant each hereby release, relieve and waive any and
all rights of recovery against the other or against the officers, directors,
employees, agents, and representatives of the other, on account of loss or
damage arising out of, incident to or occasioned to such waiving party or its
property or the property of others under its control to the extent that such
loss or damage is insured against under any fire and extended coverage insurance
policy which either party may have in force at the time of such loss or damage
and whether due to the negligence of Landlord or Tenant or their respective
agents, employees, contractors and/or invitees; provided, however, that such
releases, relief and waivers shall be limited to the extent of the net insurance
proceeds actually paid to Landlord by the relevant insurance carriers. Such
waivers shall continue as long as their respective insurers so permit. Any
termination of such a waiver shall be by written notice of circumstances as
hereinafter set forth. Landlord and Tenant upon obtaining the policies of
insurance required or permitted under this Lease shall give notice to the
insurance carrier or carriers that the foregoing mutual waiver of subrogation is
contained in this Lease. If such policies shall not be obtainable with such
waiver or shall be so obtainable only at a premium over that chargeable without
such waiver, the party seeking such policy shall notify the other thereof, and
the latter shall have ten (10) days thereafter to either (i) procure such
insurance with companies reasonably satisfactory to the other party or (ii)
agree to pay such additional premium (in the Tenant's case, in the proportion
which the area of the Demised Premises bears to the insured area). If neither
(i) nor (ii) are done, this Section 21.7 shall have no effect during such time
as such policies shall not be obtainable or the party in whose favor a waiver of
subrogation is desired refuses to pay the additional premium. If such policies
shall at any time be unobtainable, but shall be subsequently obtainable, neither
party shall be subsequently liable for a failure to obtain such insurance until
a reasonable time after notification thereof by the other party. If the release
of either Landlord or Tenant, as set forth in the first sentence of this Section
21.7 shall contravene any law with respect to exculpatory agreements, the
liability of the party in question shall be deemed not released but shall be
secondary to the other's insurer.
21.8 Landlord may require insurance policy limits to be raised to conform
with requirements of Landlord's lender and/or to bring coverage limits to levels
then being required of new tenants within the Project.
<PAGE>
22. Damage Or Destruction
---------------------
22.1 In the event of a partial destruction of the Building by fire or
other perils covered by extended coverage insurance but not exceeding thirty-
three percent (33%) of the full insurable value thereof, where the damage
thereto is such that the Building may be repaired, reconstructed or restored
within a period of twelve (12) months from the date of the happening of such
casualty and Landlord will receive insurance proceeds sufficient to cover the
cost of such repairs (except for any deductible amount provided by Landlord's
policy, which deductible amount if paid by Landlord shall be an Operating
Expense), Landlord shall, at its expense, commence and proceed diligently with
the work of repair, reconstruction and restoration and this Lease shall continue
in full force and effect.
22.2 In the event of any damage to or destruction of the Building other
than as provided in Section 22.1, either Landlord or Tenant may elect to
terminate this Lease as of the date of destruction
22.3 If either Landlord or Tenant desire to terminate this Lease pursuant
to Section 22.1, it shall give written notice to the other of its election to
terminate this Lease within the sixty (60) day period following the date of
damage or destruction. Failure to give such notice shall be deemed an election
to continue this Lease in full force and effect.
22.4 Upon any termination of this Lease under any of the provisions of
this Article 22, the parties shall be released thereby without further
obligation to the other from the date possession of the Demised Premises is
surrendered to the Landlord except for items which have theretofore occurred.
22.5 In the event of repair, reconstruction and restoration as herein
provided, the rental provided to be paid under this Lease shall be abated
proportionately based on the extent to which Tenant's use of the Demised
Premises is impaired during the period from the date of destruction until
repair, reconstruction or restoration is substantially complete, unless Landlord
provides Tenant with other comparable space during the period of repair, which
in Tenant's reasonable opinion is suitable for the temporary conduct of Tenant's
business.
22.6 Notwithstanding anything to the contrary contained in this Article
22, should Landlord be delayed or prevented from completing the repair or
restoration of the damage to the Demised Premises after the occurrence of such
damage or destruction by reason of acts of God or war, governmental
restrictions, inability to procure the necessary labor or materials, strikes, or
other uses beyond the reasonable control of Landlord, the time for Landlord to
commence or complete repairs shall be extended, provided, at the election of
Landlord or Tenant, Landlord shall be relieved of its obligation to make such
repairs or restoration and Tenant shall be released from its obligations under
this Lease and each shall have the right to terminate this Lease as of the end
of sixteen (16) months from date of destruction, if repairs required to provide
Tenant use of the Demised Premises are not then substantially complete.
22.7 If Landlord is obligated to or elects to repair or restore as herein
provided, Landlord shall be obligated to make repairs or restoration only of
those portions of the Building and the Demised Premises which were originally
provided at Landlord's expense; the repair and
<PAGE>
restoration of items not provided at Landlord's expense shall be the obligation
of Tenant. In the event Tenant elected to upgrade certain improvements from the
standard normally provided by Landlord, Landlord shall, upon the need for
replacement due to an insured loss, provide only the standard Landlord
improvements unless Tenant shall elect to again upgrade and pay any additional
cost of such upgrades, except to the extent insurance proceeds, if received, are
adequate to provide such upgrades, in addition to providing for basic
reconstruction and standard improvements.
22.8 Notwithstanding anything to the contrary contained in this Article
22, Landlord shall not have any obligation whatsoever to repair, reconstruct or
restore the Demised Premises if insurance proceeds are not available or
sufficient therefor, or when the damage resulting from any casualty covered
under this Article 22 occurs during the last thirty-six (36) months of the Term,
unless Landlord provides Tenant with written notice of its intention not to
repair, reconstruct or restore the Demised Premises and within thirty (30) days
thereafter, Tenant irrevocably and unconditionally its Extension Right (as
hereinafter defined) pursuant to Article 42.
23. Eminent Domain
--------------
23.1 In the event the whole of the Demised Premises, or such part thereof
as shall substantially interfere with the Tenant's use and occupancy thereof,
shall be taken for any public or quasi-public purpose by any lawful power or
authority by exercise of the right of appropriation, condemnation or eminent
domain, or sold to prevent such taking, Tenant or Landlord may terminate this
Lease effective as of the date possession is required to be surrendered to said
authority.
23.2 In the event of a partial taking of the Building, the Project or of
drives, walkways, and parking areas serving the Building or the Project for any
public or quasi-public purpose by any lawful power or authority by exercise of
right of appropriation, condemnation, or eminent domain, or sold to prevent such
taking, then without regard as to whether any portion of the Demised Premises
occupied by Tenant was so taken, Landlord may elect to terminate this Lease as
of such taking if such taking is, in the sole opinion of Landlord, of a material
nature such as to make it uneconomical to continue use of the unappropriated
portion for purposes of office rentals or laboratory space.
23.3 Tenant shall be entitled to any award which is specifically awarded
as compensation for the taking of Tenant's personal property, which was
installed at Tenant's expense and for costs of Tenant moving to a new location.
Except as before set forth, any award for such taking shall belong to Landlord.
Nothing herein shall be deemed or construed to prevent Tenant from prosecuting
in any condemnation proceedings a separate claim for the value of any personal
property in the Demised Premises belonging to Tenant or for loss of Tenant's
business by reason of such condemnation.
23.4 If, upon any taking of the nature described in this Article 23, this
Lease continues in effect, the Landlord shall promptly proceed to restore the
Demised Premises, Building and the Project to substantially their same condition
prior to such partial taking. To the extent such restoration is not feasible, as
determined by Landlord in its reasonable discretion, the Rent shall
<PAGE>
be abated proportionately based upon the extent to which Tenant's use of the
Demised Premises has decreased on the basis of the percentage of the rental
value of the Demised Premises after such taking and the rental value of the
Demised Premises prior to such taking.
24. Defaults And Remedies
---------------------
24.1 Late payment by Tenant to Landlord of Rent and other sums due will
cause Landlord to incur costs not contemplated by this Lease, the exact amount
of which will be extremely difficult and impracticable to ascertain. Such costs
include, but are not limited to, processing and accounting charges and late
charges which may be imposed on Landlord by the terms of any mortgage or trust
deed covering the Demised Premises. Therefore, if any installment of Rent due
from Tenant is not received by Landlord within five (5) days after the date such
payment is due, Tenant shall pay to Landlord an additional sum of six percent
(6%) of the overdue Rent as a late charge. The parties agree that this late
charge represents a fair and reasonable estimate of the costs that Landlord will
incur by reason of late payment by Tenant. In addition to the late charge, Rent
not paid when due shall bear interest from the 5/th/ day after date due until
paid at the lesser of (i) twelve percent (12%) per annum or (ii) the maximum
rate permitted by law.
24.2 No payment by Tenant or receipt by Landlord of a lesser amount than
the Rent payment herein stipulated shall be deemed to be other than on account
of the Rent, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as Rent be deemed an accord and satisfaction,
and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such Rent or pursue any other remedy provided.
If at any time a dispute shall arise as to any amount or sum of money to be paid
by Tenant to Landlord, Tenant shall have the right to make payment "under
protest" and such payment shall not be regarded as a voluntary payment, and
there shall survive the right on the part of Tenant to institute suit for
recovery of the payment paid under protest.
24.3 If Tenant fails to pay any sum of money required to be paid by it
hereunder, or shall fail to perform any other act on its part to be performed
hereunder, Landlord may (but with notice to Tenant), without waiving or
releasing Tenant from any obligations of Tenant, but shall not be obligated to,
make such payment or perform such act. All sums so paid or incurred by Landlord,
together with interest thereon, from the date such sums were paid or incurred,
at the annual rate equal to twelve percent (12%) per annum or highest rate
permitted by law, whichever is less, shall be payable to Landlord on demand as
Additional Rent.
24.4 The occurrence of any one or more of the following events shall
constitute a "Default" hereunder by Tenant:
-------
24.4.1 The abandonment or vacation of the Demised Premises by
Tenant;
24.4.2 The failure by Tenant to timely make any payment of Rent or
cure any other monetary default, where such failure continues for five (5)
business days after notice from Landlord of such delinquency;
24.4.3 The failure by Tenant to observe or perform any obligation or
covenant contained herein (other than described in Section 24.4.1 and 24.4.2) to
be performed by Tenant,
<PAGE>
where such failure shall continue for a period of ten (10) business days after
written notice thereof from Landlord to Tenant. Such notice shall be in lieu of,
and not in addition to, any notice required under any applicable law, code or
statute; provided that if the nature of Tenant's default is such that it
reasonably requires more than ten (10) business days to cure, then Tenant shall
not be deemed to be in default if Tenant shall commence such cure within said
ten (10) business day period and thereafter diligently prosecute the same to
completion, provided, however, that such cure must in any event be completed
-------- -------
within one hundred twenty (120) days from the date of written notice or it shall
be a default hereunder;
24.4.4 Tenant makes an assignment for the benefit of creditors;
24.4.5 A receiver, trustee or custodian is appointed to, or does,
take title, possession or control of all, or substantially all, of Tenant's
assets;
24.4.6 Tenant files a voluntary petition under the Bankruptcy Code
(or any similar law) or an order for relief is entered against Tenant pursuant
to a voluntary or involuntary proceeding commenced under any chapter of the
Bankruptcy Code;
24.4.7 Any involuntary petition if filed against the Tenant under
any chapter of the Bankruptcy Code and is not dismissed within ninety (90) days;
or
24.4.8 Tenant's interest in this Lease is attached, executed upon,
or otherwise judicially seized and such action is not released within ninety
(90) days of the action.
Notices given under this Section 24.4 shall specify the alleged default and
shall demand that Tenant perform the provisions of this Lease or pay the Rent
that is in arrears, as the case may be, within the applicable period of time, or
quit the Demised Premises. No such notice shall be deemed a forfeiture or a
termination of this Lease unless Landlord elects otherwise in such notice.
24.5 In the event of a Default by Tenant, and at any time thereafter, with
or without notice or demand and without limiting Landlord in the exercise of any
right or remedy which Landlord may have, Landlord shall be entitled to terminate
Tenant's right to possession of the Demised Premises by any lawful means, in
which Tenant shall immediately surrender possession of the Demised Premises to
Landlord. In such event, Landlord shall have the right, after notice to Tenant,
to re-enter and remove all persons and property, and such property may be
removed and stored in a public warehouse or elsewhere at the cost of, and for
the account of Tenant, all without service of notice or resort to legal process
and without being deemed guilty of trespass, or becoming liable for any loss or
damage which may be occasioned thereby. In the event that Landlord shall elect
to so terminate Tenant's right to possession of the Demised Premises, then
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default, including:
24.5.1 The worth at the time of award of any unpaid Rent which had
been earned at the time of such termination; plus
<PAGE>
24.5.2 The worth at the time of award of the amount by which the
unpaid Rent which would have been earned after termination until the time of
award exceeds that portion of such rental loss which Tenant proves could have
been reasonably avoided; plus
24.5.3 The worth at the time of award of the amount by which the
unpaid Rent for the balance of the term after the time of award exceeds the
amount of such rental loss which Tenant proves could have been reasonably
avoided; plus
24.5.4 any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligation under
this Lease or which in the ordinary course of things would be likely to result
therefrom, including, but not limited to, the cost of restoring the Demised
Premises to the condition required under the terms of this Lease; plus
24.5.5 At the Landlord's election, such other amounts in addition to
or in lieu of the foregoing as may be permitted from time to time by applicable
law.
As used in Sections 24.5.1 and 24.5.2 above, "worth at the time of award" shall
be computed by allowing interest at the rate specified in Section 24.1. As used
in Section 24.5.3 above, the "worth at the time of the award" shall be computed
by taking the present value of such amount, by using the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award plus two (2)
percentage points.
24.6 If Landlord does not elect to terminate Tenant's right to possession
of the Demised Premises as provided in this Article 24, then Landlord may, from
time to time, recover all Rent as it becomes due under this Lease. At any time
thereafter, Landlord may elect to terminate Tenant's right to possession of the
Demised Premises and to recover damage to which Landlord is entitled.
24.7 In the event Landlord elects to terminate Tenant's right to
possession of the Demised Premises and relet the Demised Premises, it may
execute any new lease in its own name. Tenant hereunder shall have no right or
authority whatsoever to collect any Rent from such tenant. The proceeds of any
such reletting shall be applied as follows:
First, to the payment of any indebtedness other than Rent due
-----
hereunder from Tenant to Landlord, including, but not limited to, storage
charges or brokerage commissions owing from Tenant to Landlord as the
result of such reletting;
Second, to the payment of the costs and expenses of reletting the
------
Demised Premises, including alterations and repairs which Landlord deems
reasonably necessary and advisable and reasonable attorneys' fees, charges
and other third-party disbursements incurred by Landlord in connection with
the retaking of the Demised Premises and any reletting;
Third, to the payment of Rent and other charges due and unpaid
-----
hereunder; and
Fourth, to the payment of future Rent and other damages payable by
------
Tenant under this Lease.
<PAGE>
24.8 All rights, options, and remedies of Landlord contained in this Lease
shall be construed and held to be nonexclusive and cumulative. Landlord shall
have the right to pursue any one or all of such remedies or any other remedy or
relief which may be provided by law, whether or not stated in this Lease. No
waiver of any default of Tenant hereunder shall be implied from any acceptance
by Landlord of any Rent or other payments due hereunder or any omission by
Landlord to take any action on account of such default if such default persists
or is repeated, and no express waiver shall affect defaults other than as
specified in said waiver.
24.9 Termination of this Lease or Landlord's re-entry and termination of
Tenant's right to possession of the Demised Premises by Landlord shall not
relieve Tenant from any liability to Landlord which has theretofore accrued or
shall arise based upon events which occurred prior to the last to occur of (i)
the date of termination of Tenant's right to possession or (ii) the date
possession of Demised Premises is surrendered.
24.10 Landlord shall not be in default unless Landlord fails to perform
obligations required of Landlord within a reasonable time, but in no event shall
such failure to continue be for more than thirty (30) days after written notice
by Tenant specifying wherein Landlord has failed to perform such obligation;
provided, however, that if the nature of Landlord's obligation is such that more
- -------- -------
than thirty (30) days are required for performance, then Landlord shall not be
in default if Landlord commences performance within such thirty (30) day period
and thereafter diligently prosecutes the same to completion.
24.11 In the event of any default on the part of Landlord, Tenant will give
notice by registered or certified mail to any beneficiary of a deed of trust or
mortgagee of a mortgage covering the Demised Premises and to any landlord of any
lease of any building in which the Demised Premises is located whose address
shall have been furnished, and Tenant shall offer such beneficiary, mortgagee
and/or landlord a reasonable opportunity to cure the default, including time to
obtain possession of the Building by power of sale or a judicial action if such
should prove necessary to effect a cure, provided the Landlord shall have
furnished to Tenant in writing the names and addresses of all such persons who
are to receive such notices.
25. Assignment Or Subletting
------------------------
25.1 Except as hereinafter provided, Tenant shall not, either voluntarily
or by operation of law, directly or indirectly, sell, hypothecate, assign,
pledge, encumber or otherwise transfer this Lease or the Demised Premises or any
part thereof, or permit or suffer the Demised Premises or any part thereof to be
used or occupied as work space, storage space, mailing privileges, concession or
otherwise by anyone other than Tenant or Tenant's employees, without the prior
written consent of Landlord in each instance, which consent may be withheld in
Landlord's reasonable discretion.
25.2 Intentionally Omitted.
25.3 Intentionally Omitted.
25.4 Intentionally Omitted.
<PAGE>
25.5 Tenant shall have the right to sublease any portion of the Demised
Premises with Landlord's prior written consent, not to be unreasonably withheld
or delayed. In the event Tenant desires to assign, hypothecate or otherwise
transfer this Lease or sublet the Demised Premises, then at least thirty (30)
days, but not more than ninety (90) days, prior to the date when Tenant desires
the assignment or sublease to be effective (the "Assignment Date"), Tenant shall
---------------
give Landlord a notice (the "Assignment Notice") containing information
-----------------
(including references) concerning the character of the proposed assignee or
sublessee, the Assignment Date, any ownership or commercial relationship between
Tenant and the proposed assignee or sublessee, and the consideration and all
other material terms and conditions of the proposed assignment or sublease along
with such other information as Landlord may reasonably require, all in such
detail as Landlord shall reasonably require. Tenant shall also reimburse
Landlord for reasonable attorneys fees and other costs or overhead expenses
incurred by Landlord in reviewing Tenants request for such assignment.
25.6 Landlord in making its determination as to whether consent should
be given to a proposed assignment or sublease, may give consideration to the
financial strength of such successor (notwithstanding the assignor remaining
liable for Tenant's performance) and any change in use which such successor
proposes to make in use of Demised Premises. In no event shall Landlord be
deemed to be unreasonable for declining to consent to transfer to a successor of
poor reputation, lacking financial qualifications, or seeking change in use.
25.7 As conditions precedent to Landlord approving a request by Tenant
to Tenant's transfer of rights or subletting of the Demises Premises, Landlord
may require any or all of the following:
25.7.1 Tenant shall remain fully liable under this Lease during
the unexpired Term;
25.7.2 Tenant shall provide Landlord with evidence reasonably
satisfactory to Landlord that the value of Landlord's interest under this Lease
will not thereby be diminished or reduced. Such evidence shall include, but need
not be limited to, evidence respecting the relevant business experience and
financial responsibility and status of the third party concerned;
25.7.3 Tenant shall reimburse Landlord for Landlord's actual costs
and expenses, including, without limitation, reasonable attorneys' fees, charges
and disbursements incurred in connection with the review, processing and
documentation of such request;
25.7.4 If Tenant's transfer of rights or subletting of the Demised
Premises provides for the receipt by, on behalf or on account of Tenant of any
consideration of any kind whatsoever (including, but not by way of limitation, a
premium rental for a sublease or lump sum payment for an assignment) in excess
of the rental and other charges due Landlord under this Lease, Tenant shall pay
one-half of all of said excess to Landlord, provided that Tenant shall be
entitled to deduct therefrom the following costs incurred by Tenant to effect
such transfer or sublease: brokerage fees, advertising costs, cost of tenant
improvements completed within ninety (90) days after the commencement of the
transfer or sublease, reasonable attorneys' fees and rent concessions and
inducements. If said consideration consists of cash paid to Tenant, said payment
to Landlord shall be made upon receipt by Tenant of said cash payment;
<PAGE>
25.7.5 Written agreement from any third party concerned that in the
event Landlord gives such third party notice that Tenant is in default, or in
breach of any terms or conditions under this Lease, such third party shall
thereafter make all payments otherwise due Tenant directly to Landlord, which
payments will be received by Landlord without any liability on Landlord except
to credit such payment against those due under this Lease, and any such third
party shall agree to attorn to Landlord or its successors and assigns should
this Lease be terminated for any reason; provided, however, that in no event
-------- -------
shall Landlord or its successors or assigns be obligated to accept such
attornment;
25.7.6 Any such transfer and consent shall be effected on forms
reasonably approved by Landlord as to form and substance;
25.7.7 Tenant shall not then be in default hereunder in any respect
(except for payment of Rent or other sums due to Landlord);
25.7.8 Such third party's proposed use of the Demised Premises shall
be the same as Tenant's permitted use;
25.7.9 Except to the extent agreed to in writing by Landlord in its
sole and absolute discretion, Landlord shall not be bound by any provision of
any agreement pertaining to Tenant's transfer of rights or subletting of the
Demised Premises;
25.7.10 Any agreement pertaining to Tenant's transfer of this Lease
or subletting of any portion of the Demised Premises shall be in a form
acceptable to Landlord in Landlord's reasonable discretion, and any such
agreement shall not be modified or amended without Landlord's prior written
consent, which may be withheld in Landlord's reasonable discretion;
25.7.11 Tenant shall deliver to Landlord one original executed copy
of any and all written instruments evidencing or relating to Tenant's transfer
of rights or subletting of the Demised Premises; and
25.7.12 A list of Hazardous Materials, certified by the proposed
sublessee to be true and correct, which the proposed sublessee intends to use or
store in the Demised Premises. Additionally, Tenant shall deliver to Landlord,
on or before the date any proposed sublessee takes occupancy of the Demised
Premises, all of the items relating to Hazardous Materials of such proposed
sublessee.
25.8 Any sale, assignment, hypothecation or transfer of this Lease or
subletting of the Demised Premises that is not in compliance with the provisions
of this Article 25 shall be void and shall, at the option of Landlord, terminate
this Lease.
25.9 The consent by Landlord to an assignment or subletting shall not
relieve Tenant or any assignees of this Lease or sublessee of the Demised
Premises from obtaining the consent of Landlord to any further assignment or
subletting nor shall it release Tenant or any assignee or sublessee of Tenant
from full and primary liability under this Lease.
25.10 Notwithstanding any subletting or assignment, Tenant shall remain
fully and primarily liable for the payment of all Rent and other sums due, or to
become due hereunder, and
<PAGE>
for the full performance of all other terms, conditions, and covenants to be
kept and performed by Tenant, including during any extension of the Term hereof
pursuant to Article 42 hereof or the Extension Right. The acceptance of Rent or
any other sum due hereunder, or the acceptance of performance of any other term,
covenant, or condition thereof, from any other person or entity shall not be
deemed to be a waiver of any of the provisions of this Lease or a consent to any
subletting, assignment or other transfer of the Demised Premises.
25.11 If Tenant shall sublet the Demised Premises or any part, Tenant
hereby immediately and irrevocably assigns to Landlord, as security for Tenant's
obligations under this Lease, all rent from any subletting of all or a part of
the Demised Premises and Landlord as assignee and as attorney-in-fact for Tenant
solely for such limited purpose, or a receiver for Tenant appointed on
Landlord's application, may collect such rent and apply it toward Tenant's
obligations under this Lease; except that, until the occurrence of an act of
Default by Tenant, Tenant shall have the right to collect such rent.
25.12 Notwithstanding anything to the contrary contained in Article 25:
25.12.1 Tenant may, upon thirty (30) days' advance written notice to
Landlord, assign this Lease or sublet the Demised Premises, or any portion
thereof, without Landlord's consent, to any entity which controls, is controlled
by, or is in common control with Tenant; to any entity which results from a
reincorporation or a merger or consolidation with Tenant; or to any entity which
acquires substantially all of the stock or assets of Tenant, as a going concern
with respect to the business that is being conducted in the Demised Premises
(hereinafter each a "Permitted Transfer"); provided, however, that with respect
------------------
to each of the Permitted Transfers, Tenant shall continue to remain liable for
all obligations under this Lease, and provided that the assignee or sublessee
first executes, acknowledges and delivers to Landlord an agreement whereby the
assignee, or to the extent of the Demised Premises subleased, the sublessee, for
the term of the sublease, agrees to be bound by all of the covenants and
agreements in this Lease. In addition, a sale or transfer of the capital stock
of Tenant shall be deemed a Permitted Transfer if (i) such sale or transfer
occurs in connection with any bona fide financing or capitalization for the
benefit of Tenant, or (ii) Tenant becomes a publicly traded corporation.
Landlord shall have no right to terminate the Lease in connection with, and
shall have no right to any sums or other economic considerations resulting from
any Permitted Transfer except for reasonable attorneys fees and costs in
connection with reviewing the documentation of such Permitted Transfer, which
documentation Tenant agrees to timely provide to Landlord.
25.12.2 Tenant may allow any person or company which is a client or
customer of Tenant or which is providing service to Tenant or one of Tenant's
clients to occupy certain portions of the Demised Premises without such
occupancy being deemed an assignment or subleasing as long as no new demising
walls are constructed to accomplish such occupancy and as long as such
relationship was not created as a subterfuge to avoid the obligations set forth
in Article 25.
<PAGE>
26. Attorneys' Fees And Costs
-------------------------
26.1 Tenant shall be responsible for (i) all of Tenant's legal and related
costs and fees in connection with this Lease, and (ii) all of Landlord's legal
and related costs and fees if Landlord is required to consult and attorney
regarding the enforcement of this Lease.
26.2 If either party commences an action against the other party arising
out of or in connection with this Lease, the prevailing party shall be entitled
to have and recover from the non-prevailing party reasonable attorneys' fees,
charges and disbursements and costs of suit.
27. Bankruptcy
----------
27.1 In the event a debtor, trustee, or debtor in possession under the
Bankruptcy Code, or other person with similar rights, duties and powers under
any other law, proposes to cure any default under this Lease or to assume or
assign this Lease, and is obliged to provide adequate assurance to Landlord that
(i) a default will be cured, (ii) Landlord will be compensated for its damages
arising from any breach of this Lease, or (iii) future performance under this
Lease will occur, then adequate assurance shall include any or all of the
following, as designated by Landlord:
27.1.1 Those acts specified in the Bankruptcy Code or other law as
included within the meaning of adequate assurance, even if this Lease does not
concern a shopping center or other facility described in such laws;
27.1.2 A prompt cash payment to compensate Landlord for any monetary
defaults or actual damages arising directly from a breach of this Lease;
27.1.3 A cash deposit in an amount at least equal to the Security
Deposit as referenced in 2.1.8 originally required at time of execution of this
Lease.
27.1.4 The assumption or assignment of all of Tenant's interest and
obligations under this Lease.
28. Estoppel Certificate
--------------------
28.1 Tenant shall within ten (10) days of written notice from Landlord,
execute, acknowledge and deliver a statement in writing substantially in the
form attached to this Lease as Exhibit "F" with the blanks filled in and with
-----------
such other provisions as a lender or purchaser may reasonably request, and on
any other form reasonably requested by a proposed lender or purchaser, (i)
certifying that this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of such modification and certifying that this Lease
as so modified is in full force and effect) and the dates to which the rental
and other charges are paid in advanced, if any, (ii) acknowledging that there
are not, to Tenant's knowledge, any uncured defaults on the part of Landlord
hereunder, or specifying such defaults if any are claimed and (iii) setting
forth such further information with respect to this Lease or the Demised
Premises as may be requested thereon. Any such statement may be relied upon by
any prospective purchaser or encumbrancer of all or any portion of the real
property of which the Demised Premises are a part. Tenant's
<PAGE>
failure to deliver such statement within such time shall, at the option of
Landlord, constitute a Default under this Lease.
28.2 Landlord shall within ten (10) days of written notice from Tenant,
execute, acknowledge and deliver a statement in writing on a form reasonably
requested by a proposed assignee or sublessee (i) certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification and certifying that this Lease as so modified is in full force
and effect) and the dates to which the rental and other charges are paid in
advanced, if any, (ii) acknowledging that there are not, to Landlord's
knowledge, any uncured defaults on the part of Tenant hereunder, or specifying
such defaults if any are claimed and (iii) setting forth such further
information with respect to this Lease or the Demised Premises as may be
requested thereon. Any such statement may be relied upon by any permitted
assignee or permitted sublessee of all or any portion of the real property of
which the Demised Premises are a part.
29. Joint And Several Obligations
-----------------------------
29.1 If more than one person or entity executes this Lease as Tenant,
29.1.1 Each of them is jointly and severally liable for the keeping,
observing and performing of all of the terms, covenants, conditions, provisions
and agreements of this Lease to be kept, observed and performed by Tenant, and
29.1.2 The term "Tenant" as used in this Lease shall mean and
------
include each of them jointly and severally. The act of, notice from, notice to,
refund to, or the signature of, any one or more of them, with respect to the
tenancy of this Lease, including, but not limited to, any renewal, extension,
expiration, termination or modification of this Lease, shall be binding upon
each and all of the persons executing this Lease as Tenant with the same force
and effect as if each and all of them had so acted, so given or received such
notice or refund or so signed.
30. Definition Of Landlord; Limitation Of Landlord's Liability
----------------------------------------------------------
30.1 The term "Landlord" as used in this Lease, so far as covenants or
--------
obligations on the part of Landlord are concerned, shall be limited to mean and
include only Landlord or the successor-in-interest of Landlord under this Lease
at the time in question. In the event of any transfer, assignment or the
conveyance of Landlord's fee title or leasehold interest, the landlord herein
named (and in case of any subsequent transfers or conveyances, the then grantor)
shall be automatically freed and relieved from, and after the date of such
transfer, assignment or conveyance, of all liability for the performance of any
covenants or obligations contained in this Lease thereafter to be performed by
Landlord, provided such transferee assumes in full in writing Landlord's
obligations hereunder, and, without further agreement, the transferee of such
title or leasehold shall be deemed to have assumed and agreed to observe and
perform any and all obligations of Landlord hereunder during its ownership or
ground lease of the Demised Premises. Landlord may transfer its interest in the
Demised Premises or this Lease without the consent of Tenant and such transfer
or subsequent transfer shall not be deemed a violation on the part of Landlord
or the then grantor of any of the terms or conditions of this Lease.
<PAGE>
30.2 If Landlord is in default of this Lease, and as a consequence, Tenant
recovers a money judgment against Landlord, the judgment shall be satisfied only
out of the proceeds of sale received on execution of the judgment and levy
against the right, title and interest of Landlord in the Building and Project,
and out of rent or other income from such real property receivable by Landlord
or out of the consideration received by Landlord from the sale, financing,
refinancing, or other disposition of all or any part of Landlord's right, title,
and interest in the Building and Project.
30.3 Landlord shall not be personally liable for any deficiency. If
Landlord is a partnership, limited liability company or joint venture, the
members of such limited liability company or the partners of such partnership
shall not be personally liable and no member or partner of Landlord shall be
sued or named as a party in any suit or action or service of process be made
against any partner of Landlord except as may be necessary to secure
jurisdiction of the partnership, limited liability company or joint venture. If
Landlord is a corporation, the shareholders, directors, officers, employees,
and/or agents of such corporation shall not be personally liable and no
shareholder, director, officer, employee or agent of Landlord shall be sued or
named as a party in any suit or action or service of process made against any
shareholder, director, officer, employee or agent of Landlord. No partner,
member shareholder, director, employee, or agent of Landlord shall be required
to answer or otherwise plead to any service of process and no judgment will be
taken or writ of execution levied against any partner, member, shareholder,
director, employee or agent of Landlord.
30.4 Each of the covenants and agreements of this Article 30 shall be
applicable to any covenant or agreement either expressly contained in this Lease
or imposed by statute or by common law and shall survive the termination of this
Lease.
31. Project Control By Landlord
---------------------------
31.1 Landlord reserves full control over the Building and the Project to
the extent not inconsistent with or injurious to Tenant's enjoyment of the
Demised Premises. This reservation includes but is not limited to right of
Landlord to expand the Project, subdivide the Project, convert the Building and
or other buildings within the Project to condominium units, the right to grant
easements and licenses to others and the right to maintain or establish
ownership of the Building separate from fee title to the land on which the
Building is located.
31.2 Landlord further reserves the right to combine the Project with any
other project in the area of the Project and owned by Landlord or its
affiliates.
31.3 Tenant shall, should Landlord so request, promptly join with Landlord
in execution of such documents as may be reasonably appropriate to assist
Landlord to implement any such action, provided that Tenant need not execute any
document which is of nature wherein liability is created in Tenant or, if by
reason of the terms of such document, Tenant will be deprived of the quiet
enjoyment and use of the Demised Premises as granted by this Lease or its rights
or duties hereunder will be adversely and materially affected.
31.4 Landlord may, at any and all reasonable times during non-business
hours (or during business hours if Tenant so requests), and upon reasonable
advance notice (provided that
<PAGE>
no time restrictions shall apply or advance notice need be given if an emergency
necessitates an immediate entry), enter the Demised Premises to (a) inspect the
same and to determine whether Tenant is in compliance with its obligations
hereunder, (b) supply any service Landlord is required to provide hereunder, (c)
show the Demised Premises to prospective lenders, insurers, investors,
purchasers or, during the last year of the Term, tenants, (d) post notices of
nonresponsibility, (e) access the telephone equipment, electrical substation and
fire risers, and (f) alter, improve or repair any portion of the Building other
than the Demised Premises, but for which access to the Demised Premises is
necessary. In connection with any such alteration, improvement or repair,
Landlord may erect in the Demised Premises or elsewhere in the Building or the
Project scaffolding and other structures reasonably required for the work to be
performed. In no event shall Tenant's Rent abate as a result of any such entry
or work; provided, however, that all such work shall be done in such a manner
-------- -------
as to cause as little interference to Tenant as reasonably possible. Landlord
shall at all times retain a key with which to unlock all of the doors in the
Demised Premises. If an emergency necessitates immediate access to the Demised
Premises, Landlord may use whatever force is necessary to enter the Demised
Premises and any such entry to the Demised Premises shall not constitute a
forcible or unlawful entry to the Demised Premises, an unlawful detainer of the
Demised Premises, or an eviction of Tenant from the Demised Premises, or any
portion thereof.
32. Quiet Enjoyment
---------------
Landlord covenants and agrees that Tenant may peaceably and quietly enjoy
the Demised Premises without hindrance or disturbance, subject, nevertheless, to
the terms, conditions and covenants of this Lease.
33. Quitclaim Deed
--------------
Tenant shall execute and deliver to Landlord on the expiration or
termination of this Lease, immediately on Landlord's request, in recordable
form, a quitclaim deed to the Demised Premises or such other documentation
reasonably requested by Landlord evidencing termination of this Lease.
34. Intentionally Omitted.
35. Subordination And Attornment
----------------------------
35.1 Provided that Tenant receives a non-disturbance agreement from any
applicable mortgagee, beneficiary or landlord in substantially the same form as
Exhibit "G" attached hereto and with such other provisions as may be reasonably
- -----------
requested by a proposed lender (the "Nondisturbance Agreement"), Tenant shall,
------------------------
within ten (10) days of written notice from Landlord, execute, acknowledge and
deliver the Nondisturbance Agreement with the blanks filled in, and this Lease
shall be subject and subordinate to the lien of any mortgage, deed of trust, or
lease in which Landlord is tenant now or hereafter in force against the Project
or the Building and to all advances made or hereafter to be made upon the
security thereof without the necessity of the execution and delivery of any
further instruments on the part of Tenant to effectuate such subordination.
<PAGE>
35.2 Notwithstanding the foregoing, but subject to receipt of a
Nondisturbance Agreement, Tenant shall execute and deliver upon demand such
further instrument or instruments evidencing such subordination of this Lease to
the lien of any such mortgage or mortgages or deeds of trust or lease in which
Landlord is tenant as may be required by Landlord. However, if any such
mortgagee, beneficiary or Landlord under lease wherein Landlord is tenant so
elects, this Lease shall be deemed prior in lien to any such lease, mortgage, or
deed of trust upon or including the Demised Premises regardless of date and
Tenant will execute a statement in writing to such effect at Landlord's request.
If Tenant fails to execute any document required from Tenant under this Article
35 within ten (10) days after written request therefor, such failure shall be a
breach of and Default under this Lease.
35.3 In the event any proceedings are brought for foreclosure, or in the
event of the exercise of the power of sale under any mortgage or deed of trust
made by the Landlord covering the Demised Premises, the Tenant shall at the
election of the purchaser at such foreclosure or sale attorn to the purchaser
upon any such foreclosure or sale and recognize such purchaser as the Landlord
under this Lease, provided such party has assumed in full in writing Landlord's
obligations under this Lease.
36. Surrender
---------
36.1 No surrender of possession of any part of the Demised Premises shall
release Tenant from any of its obligations hereunder unless accepted by
Landlord.
36.2 The voluntary or other surrender of this Lease by Tenant shall not
work a merger, unless Landlord consents and shall, at the option of Landlord,
operate as an assignment to it of any or all subleases or subtenancies.
36.3 The voluntary or other surrender of any ground or underlying lease
that now exists or may hereafter be executed affecting the Building or the
Project, or a mutual cancellation, thereof, or of Landlord's interest therein,
shall not work a merger and shall, at the option of the successor of Landlord's
interest in the Building or Project, operate as an assignment of this Lease.
36.4 Upon the expiration or earlier termination of this Lease, Tenant
shall surrender the Demised Premises to Landlord broom clean and free of debris;
with all of Tenant's personal property and effects removed therefrom; with all
alterations, improvements and fixtures required by Landlord to be removed from
the Demised Premises actually removed and all damage as a result of or caused by
such removal repaired; and with all licenses, permits and similar items which
restrict or affect the used of the Demised Premises released and fully
terminated.
37. Waiver And Modification
-----------------------
No provision of this Lease may be modified, amended or added to except by
an agreement in writing. The waiver by Landlord or Tenant of any breach of any
term, covenant or condition herein contained shall not be deemed to be a waiver
of any subsequent breach of the same or any other term, covenant or condition
herein contained.
<PAGE>
38. Waiver of Jury Trial And Counterclaims
--------------------------------------
THE PARTIES HERETO SHALL AND THEY HEREBY DO WAIVE TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO
AGAINST THE OTHER ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE
OR OCCUPANCY OF THE DEMISED PREMISES, AND OR ANY CLAIM OF INJURY OR DAMAGE.
39. Intentionally Omitted.
40. Right To Expand
---------------
Tenant shall have the right, but not the obligation, to expand the Demised
Premises (the "Expansion Right") to include all the rentable premises at the
---------------
buildings located at 3000, 3010 and 3018 Western Avenue (collectively, the
"Expansion Space") leased to the University of Washington as of the Effective
- ----------------
Date pursuant to the terms of that certain Lease dated February, 13, 1998, by
and between the Board of Regents of the University of Washington and Landlord
(the "UW Lease"), upon the following terms and conditions:
--------
40.1 If, after the expiration or earlier termination of the term of the UW
Lease (and exercise or expiration of any applicable extension options in the UW
Lease), Landlord desires to lease all or any portion of the Expansion Space,
Landlord shall deliver to Tenant written notice (the "Expansion Notice") of the
----------------
availability of such portion of the Expansion Space, together with the terms and
conditions, including rent, on which Landlord is prepared to lease to Tenant
such portion of the Expansion Space. Tenant shall have thirty (30) days
following delivery of the Expansion Notice to deliver to Landlord written
notification of Tenant's exercise of the Expansion Right and agreement to lease
such portion of the Expansion Space upon the terms and conditions of the
Expansion Notice. In the event Tenant fails to timely deliver such notice, or
if Landlord and Tenant are unable to agree upon any of the terms of the lease
agreement for such portion of the Expansion Space after negotiating in good
faith for a period of thirty (30) days, Tenant shall be deemed to have waived
any right to lease such portion of the Expansion Space unless and until such
portion of the Expansion Space again becomes vacant following a tenancy, or, if
such portion of the Expansion Space is not thereafter leased by Landlord,
following the date which is one hundred eighty (180) days following the date of
delivery of the Expansion Notice for such Expansion Space.
40.2 Within ten (10) days after the proper exercise of the Expansion Right
and Landlord and Tenant agreeing upon the terms and conditions including rent
for the lease of the Expansion Space, Tenant and Landlord shall enter into a
written amendment to this Lease (the "Expansion Amendment") which shall provide,
-------------------
unless otherwise agreed in writing, (a) the commencement date of the Expansion
Space; (b) that the Demised Premises under this Lease shall be increased to
include the rentable square feet of the Expansion Space; (c) the new Basic
Annual Rent; (d) Tenant's new Pro Rata Share based upon the addition of the
Expansion Space to the Demised Premises; and (e) the proportionate increase to
the Security Deposit (which shall be payable upon execution of the Expansion
Amendment). In all other respects, this Lease shall remain in full force and
effect, and shall apply to the Expansion Space.
<PAGE>
40.3 Notwithstanding the above, the Expansion Right shall not be in effect
and may not be exercised by Tenant:
40.3.1 during any period of time that Tenant is in default under any
provision of this Lease; or
40.3.2 if Tenant has been in default under any provision of this Lease
three (3) or more times, whether or not the defaults are cured, during the five
(5) month period prior to the date on which Tenant seeks to exercise the
Expansion Right.
40.4 Tenant's rights in connection with the Expansion Right are and shall
be subject to and subordinate to any expansion or extension rights granted to
the tenant under the UW Lease.
40.5 Expansion Rights are personal to Dendreon and are not assignable
separate and apart from this Lease, except in the case of a Permitted Transfer,
provided that Dendreon shall be and remain liable for any lease of the Expansion
Space.
40.6 The Expansion Right shall terminate and be of no further force or
effect even after Tenant's due and timely exercise of the Expansion Right, if,
after such exercise, but prior to the commencement date of the Expansion Space,
Tenant fails to timely cure any default by Tenant under this Lease of which
Tenant is given written notice; or Tenant has defaulted three (3) or more times
during the period from the date of the exercise of the Expansion Right to the
date of the commencement of the Expansion Space, whether or not such defaults
are cured.
41. Hazardous Materials
-------------------
41.1 Prohibition/Compliance. Tenant shall not cause or permit any
----------------------
Hazardous Materials (as hereinafter defined) to be brought upon, kept or used in
or about the Demised Premises, the Building or the Project in violation of
applicable law by Tenant, its agents, employees, contractors or invitees. If
(i) Tenant breaches the obligation stated in the preceding sentence; (ii) the
presence of Hazardous Materials in, on, at, under, above or about the Demised
Premises, the Building or the land under the Building (except for Hazardous
Materials specifically described in the Environmental Report which shall be the
responsibility of Landlord) at any time results in contamination of the Demised
Premises, the Building, the Project or any adjacent property; (iii)
contamination of the Demised Premises, the Building, the Project or any adjacent
property by Hazardous Materials is otherwise caused by Tenant or its agents,
representatives or invitees during the term of this Lease or any extension or
renewal hereof or holding over hereunder, then Tenant hereby indemnifies and
shall defend and hold Landlord, its officers, directors, employees, agents and
contractors harmless from any and all claims, judgments, damages, penalties,
fines, costs, liabilities, or losses (including, without limitation, diminution
in value of the Demised Premises or any portion of the Building or the Project,
damages for the loss or restriction on use of rentable or usable space or of any
amenity of the Demised Premises, the Building or the Project, damages arising
from any adverse impact on marketing of space in the Demised Premises, the
Building or the Project, and sums paid in settlement of claims, attorneys' fees,
consultant fees and expert fees) which arise during or after the Lease term as a
result of such contamination. This indemnification of Landlord by Tenant
includes, without limitation, costs incurred in connection with any
investigation of site
<PAGE>
conditions or any cleanup, remedial, removal, or restoration work required by
any federal, state or local governmental agency or political subdivision because
of Hazardous Materials present in the air, soil or ground water above, on or
under the Demised Premises. Without limiting the foregoing, if the presence of
any Hazardous Materials on the Demised Premises, the Building, the Project or
any adjacent property, caused or permitted by Tenant or its agents,
representatives or invitees results in any contamination of the Demised
Premises, the Building, the Project or any adjacent property, Tenant shall
promptly take all actions at its sole expense as are necessary to return the
Demised Premises, the Building, the Project or any adjacent property, to the
condition existing prior to the time of such contamination, provided that
Landlord's approval of such action shall first be obtained, which approval shall
not unreasonably be withheld so long as such actions would not potentially have
any material adverse long-term or short-term effect on the Demised Premises, the
Building or the Project.
41.2 Business. Landlord acknowledges that it is not the intent of this
--------
Article 41 to prohibit Tenant from operating its business as described in
Section 2.1.8 above. Tenant may operate its business according to the custom of
the industry so long as the use or presence of Hazardous Materials is strictly
and properly monitored according to all applicable governmental requirements.
As a material inducement to Landlord to allow Tenant to use Hazardous Materials
in connection with its business, Tenant agrees to deliver to Landlord prior to
the Term Commencement Date a list identifying each type of Hazardous Materials
to be present on the Demised Premises and setting forth any and all governmental
approvals or permits required in connection with the presence of such Hazardous
Materials on the Demised Premises ("Hazardous Materials List"). Tenant shall
------------------------
deliver to Landlord an updated Hazardous Materials List at least once a year and
shall also deliver an updated list before any new Hazardous Materials is brought
onto the Demised Premises. Tenant shall deliver to Landlord true and correct
copies of the following documents (the "Documents") relating to the handling,
---------
storage, disposal and emission of Hazardous Materials prior to the Term
Commencement Date, or if unavailable at that time, concurrent with the receipt
from or submission to a governmental agency: permits; approvals; reports and
correspondence; storage and management plans, notice of violations of any laws;
plans relating to the installation of any storage tanks to be installed in or
under Building or the Project (provided, said installation of tanks shall only
be permitted after Landlord has given Tenant its written consent to do so, which
consent may be withheld in Landlord's sole and absolute discretion); and all
closure plans or any other documents required by any and all federal, state and
local governmental agencies and authorities for any storage tanks installed in,
on or under the Building or the Project for the closure of any such tanks.
Tenant is not required, however, to provide Landlord with any portion(s) of the
Documents containing information of a proprietary nature which, in and of
themselves, do not contain a reference to any Hazardous Materials or hazardous
activities. It is not the intent of this Section 41.2 to provide Landlord with
information which could be detrimental to Tenant's business should such
information become possessed by Tenant's competitors.
41.3 Termination of Lease/Withholding Approval of Assignment or Sublease.
-------------------------------------------------------------------
Notwithstanding the provisions of Section 41.1 above, if Tenant or any then
existing sublessee of Tenant, with respect to the Demised Premises or the
Project, or any proposed assignee or sublessee, with respect to any property, is
subject to an uncured enforcement order issued by any governmental authority in
connection with the use, disposal or storage of Hazardous Materials, Landlord
shall have the right, with respect to any such matter involving Tenant or an
existing
<PAGE>
sublessee of Tenant, to terminate this Lease in Landlord's sole and absolute
discretion, and, with respect to any such matter involving a proposed assignee
or sublessee, it shall not be unreasonable for Landlord to withhold its consent
to any proposed assignment or subletting.
41.4 Testing. At any time, and from time to time, prior to the expiration
-------
or earlier termination of the Term, Landlord shall have the right to conduct
appropriate tests of the Demised Premises, the Building and the Project to
demonstrate that contamination has occurred as a result of Tenant's use of the
Demised Premises; provided, however, if that no contamination or Hazardous
Materials are discovered through such tests, such testing shall be limited to
once per year. Tenant shall be solely responsible for and shall defend,
indemnify and hold the Landlord, its agents and contractors harmless from and
against any and all claims, costs and liabilities including actual attorneys'
fees, charges and disbursements, arising out of or in connection with any
removal, clean up, restoration and materials required hereunder to return the
Demised Premises and any other property of whatever nature to their condition
existing prior to the time of any such contamination. Tenant shall pay for the
cost of the tests of the Demised Premises.
41.5 Underground Tanks.
-----------------
41.5.1 Subject to Subsection 41.5.2 below, Landlord shall monitor the
underground or other storage tanks described in the Environmental Report (the
"Existing Tanks"), and maintain appropriate records, implement reporting
- --------- -----
procedures, properly close any underground storage tanks that it determines to
close, and take or cause to be taken all other steps (including, without
limitation, repairs) necessary or required under the Washington State
Underground Storage Tank Act, Chapter 90.76 R.C.W. and the regulations
promulgated thereunder at WAC Section 173-180-080 and all other laws, as they
now exist or may hereafter be adopted or amended.
41.5.2 If underground or other storage tanks storing Hazardous
Materials are placed on, under or about the Demised Premises or Project by
Tenant (the New Tanks") or if Tenant uses the Existing Tanks, then Tenant shall
----------
monitor such New Tanks and the Existing Tanks, and maintain appropriate records,
implement reporting procedures, properly close such underground storage tanks at
the end of the Term unless instructed otherwise by Landlord in writing, and take
or cause to be taken all other steps (including, without limitation, repairs)
necessary or required under the Washington State Underground Storage Tank Act,
Chapter 90.76 R.C.W. and the regulations promulgated thereunder at WAC Section
173-180-080, as they now exist or may hereafter be adopted or amended; provided,
however, that the cost of Tenant's obligations with respect to any Existing
Tanks it uses shall be shared equitably with other users of such Existing Tanks.
41.6 Tenant's Obligations. Tenant's obligations under this Article 41
--------------------
shall survive the expiration or earlier termination of the Lease. During any
period of time employed by Tenant or Landlord after the termination of this
Lease to complete the removal from the Demised Premises of any such Hazardous
Materials and the release and termination of any licenses or permits restricting
the use of the Demised Premises, Tenant shall continue to pay the full Rent in
accordance with this Lease, which Rent shall be prorated daily.
<PAGE>
41.7 Definition of "Hazardous Materials." As used herein, the term
----------------------------------
"Hazardous Materials" shall mean any substance, chemical, compound, product,
- --------------------
solid, gas, liquid, waste, byproduct, pollutant, contaminant, or material which
is hazardous or toxic, and includes, without limitation, (a) asbestos,
polychlorinated biphenyls, lead-based paints and petroleum (including crude oil
or any fraction thereof) and (b) any material classified or regulated as
"hazardous," "toxic" or "dangerous" pursuant to any Environmental Law. As used
herein, the term "Environmental Law" shall include, without limitation, the
-----------------
following: 42 U.S.C. Section 9601 et. seq., (the Comprehensive Environmental
Response Compensation and Liability Act), 42 U.S.C. Section 6901, et. seq.
(the Federal Resource Conservation and Recovery Act), 33 U.S.C. Section 1317
(the Federal Water Pollution Control Act), 15 U.S.C. Section 2601 et. seq.
(the Toxic Substances Control Act), the Washington Model Toxics Control Act, the
Washington Hazardous Waste Management Act, and any similar, implementing or
successor law, any amendment, rule, regulation, order, or directive issued
thereunder, and any comparable or analogous federal, state or local law or
ordinance with their respective implementing regulations.
42. Right To Extend Term.
--------------------
Tenant shall have the right to extend the Term of this Lease upon the
following terms and conditions:
42.1 Tenant shall have two (2) consecutive rights (each, an "Extension
---------
Right") to extend the term of this Lease for five (5) years each (each, an
- -----
"Extension Term") on the same terms and conditions as this Lease. During any
--------------
Extension Term, Basic Annual Rent shall be payable at the Market Rate (as
defined below), but in no event less than the Basic Annual Rent payable on the
date immediately preceding the commencement of such Extension Term. Basic
Annual Rent shall be adjusted on the commencement of each Extension Term and on
each one (1) year anniversary of the commencement of such Extension Term as
agreed by Landlord and Tenant. As used herein, "Market Rate" shall mean the
-----------
then market rental rate (and any adjustment schedule during the Extension Term)
as determined by Landlord and agreed to by Tenant, and shall include all
provisions for Additional Rent made in this Lease. If, on or before the date
which is one hundred twenty (120) days prior to the expiration of the initial
Term of this Lease, or the expiration of any Extension Term, Tenant has not
agreed with Landlord's determination of the Market Rate or if Landlord and
Tenant have not agreed upon any of the other terms of such subsequent Extension
Term after negotiating in good faith, Tenant shall be deemed to have waived any
right to extend, or further extend, the Term of this Lease and all of the
remaining Extension Rights shall terminate.
42.2 Extension Rights are personal to Dendreon and may not be assigned to
any transferee, assignee, or sublessee of or under this Lease except to a
corporate successor of Dendreon pursuant to a plan of merger, reorganization or
similar transaction, and such rights are not assignable separate and apart from
this Lease.
42.3 Extension Rights are conditional upon Tenant giving Landlord written
notice of its election to exercise each Extension Right at least nine (9) months
prior to the end of the expiration of the initial term of this Lease or the
expiration of any Extension Term.
<PAGE>
42.4 Notwithstanding anything set forth above to the contrary, Extension
Rights shall not be in effect and Tenant may not exercise any of the Extension
Rights:
42.4.1 during any period of time that Tenant is in default under any
provision of this Lease; or
42.4.2 if Tenant has been in default under any provision of this Lease
three (3) or more times, whether or not the defaults are cured, during the
twelve (12) month period immediately prior to the date that Tenant intends to
exercise an Extension Rights, whether or not the defaults are cured.
42.5 The period of time within which any Extension Rights may be exercised
shall not be extended or enlarged by reason of the Tenant's inability to
exercise the Expansion Rights because of the provisions of Section 42.4 above.
42.6 The Extension Rights shall terminate and be of no further force or
effect even after Tenant's due and timely exercise of an Extension Right, if,
after such exercise, but prior to the commencement date of an Extension Term,
(1) Tenant fails to timely cure any default by Tenant under this Lease; or (2)
Tenant has defaulted three (3) or more times during the period from the date of
the exercise of an Extension Right to the date of the commencement of the
Extension Term, whether or not such defaults are cured.
43. Intentionally Omitted.
---------------------
44. Intentionally Omitted.
---------------------
45. Architectural And Design Fees
-----------------------------
45.1 Within one (1) year from the Term Commencement Date, Landlord shall
pay or reimburse Tenant for Tenant's actual out-of-pocket expenses in connection
with architectural and design programming for the Demised Premises, up to a
maximum of $35,323.50. Landlord shall pay or reimburse any such amounts
requested by Tenant within thirty (30) days after a written request therefor.
46. Miscellaneous
-------------
46.1 Terms and Headings. Where applicable in this Lease, the singular
------------------
includes the plural and the masculine or neuter includes the masculine, feminine
and neuter. The article and section headings of this Lease are not a part of
this Lease and shall have no effect upon the construction or interpretation of
any part hereof.
46.2 Examination of Lease. Submission of this instrument for examination
--------------------
or signature by Tenant does not constitute a reservation of or option for lease,
and it is not effective as a lease or otherwise until execution by and delivery
to both Landlord and Tenant.
46.3 Time. Time is of the essence with respect to the performance of every
----
provision of this Lease in which time of performance is a factor.
<PAGE>
46.4 Covenants and Conditions. Each provision of this Lease performable by
------------------------
Tenant shall be deemed both a covenant and a condition.
46.5 Consents. Whenever consent or approval of either party is required,
--------
that party shall not unreasonably withhold such consent or approval, except as
may be expressly set forth to the contrary.
46.6 Entire Agreement. The terms of this Lease are intended by the parties
----------------
as a final expression of their agreement with respect to the terms as are
included herein, and may not be contradicted by evidence of any prior or
contemporaneous agreement. The Basic Lease Provisions, general provisions and
Exhibits all constitute a single document and are incorporated herein.
46.7 Severability. Any provision of this Lease which shall prove to be
------------
invalid, void, or illegal in no way affects, impairs or invalidates any other
provision hereof, and such other provisions shall remain in full force and
effect.
46.8 Recording. Landlord may, but shall not be obligated to, record a
---------
short form memorandum hereof without the consent of Tenant. Neither party shall
record this Lease. Tenant shall be responsible for the cost of recording any
Memorandum of Lease, including any transfer or other taxes incurred in
connection with said recordation.
46.9 Impartial Construction. The language in all parts of this Lease shall
----------------------
be in all cases construed as a whole according to its fair meaning and not
strictly for or against either Landlord or Tenant.
46.10 Inurement. Each of the covenants, conditions and agreements herein
---------
contained shall inure to the benefit of and shall apply to and be binding upon
the parties hereto and their respective heirs, legatees, devisees, executors,
administrators, successors, assigns, sublessees, or any person who may come into
possession of said Demised Premises or any part thereof in any manner
whatsoever. Nothing in this Section 46.10 contained shall in any way alter the
provisions against assignment or subletting in this Lease provided.
46.11 Notices. Any notice, consent, demand, bill, statement, or other
-------
communication required or permitted to be given hereunder must be in writing and
may be given by (i) personal delivery which shall be deemed given when received,
(ii) reputable overnight courier which shall be deemed given the business day
following the date on the courier's receipt of pick-up, subject to Force Majeure
Delays, addressed to Tenant at the Demised Premises, or to Tenant or Landlord at
the addresses shown in Sections 2.1.9 and 2.1.10 of the Basic Lease Provisions.
Either party may, by notice to the other given pursuant to this Section 46.11,
specify additional or different addresses for notice purposes.
46.12 Jurisdiction. This Lease shall be governed by, construed and enforced
------------
in accordance with the laws of the State of Washington.
46.13 Authority. That individual or those individuals signing this Lease
---------
guarantee, warrant and represent that said individual or individuals have the
power, authority and legal capacity to sign this Lease on behalf of and to bind
all entities, corporations, partnerships, joint
<PAGE>
venturers or other organizations and/or entities on whose behalf said individual
or individuals have signed.
In Witness Whereof, the parties hereto have executed this Lease as of the
date first above written.
LANDLORD:
ARE-3005 FIRST AVENUE, LLC, a
Delaware limited liability company
By: Alexandria Real Estate Equities, L.P., a
Delaware limited partnership, its sole
member
By: ARE-QRS Corp., a Maryland
Corporation, its general partner
By: /s/ Lynn Ann Shapiro
-------------------------------
Name: Lynn Anne Shapiro
Its: General Counsel
TENANT:
DENDREON CORPORATION, a Delaware
Corporation
By: /s/ Peter S. Garcia
-------------------------------------
Name: Peter S. Garcia
-----------------------------------
Its: Chief Financial Officer
------------------------------------
<PAGE>
EXHIBIT 10.12
Customer No. 1080
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT dated as of July 30, 1999, is made by
Dendreon Corporation (the "Borrower"), a Delaware corporation having its
principal place of business and chief executive office at 3005 First Avenue,
Seattle, Washington, 98121, in favor of Transamerica Business Credit
Corporation, a Delaware corporation (the "Lender"), having its principal office
at 9399 West Higgins Road, Suite 600, Rosemont, Illinois 60018 and having an
office at 76 Batterson Park Road, Farmington, Connecticut 06032.
WHEREAS, the Borrower has requested that the Lender make a Loan to the
Borrower; and
WHEREAS, the Lender has agreed to make such Loan on the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and to induce the
Lender to extend credit, the Borrower hereby agrees with the Lender as follows:
SECTION 1. DEFINITIONS.
-----------
As used herein, the following terms shall have the following meanings,
and shall be equally applicable to both the singular and plural forms of the
terms defined:
Agreement shall mean this Loan and Security Agreement together with
---------
all schedules and exhibits hereto, as amended, supplemented, or otherwise
modified from time to time.
Applicable Law shall mean the laws of the State of Illinois (or any
--------------
other jurisdiction whose laws are mandatorily applicable notwithstanding the
parties' choice of Illinois law) or the laws of the United States of America,
whichever laws allow the greater interest, as such laws now exist or may be
changed or amended or come into effect in the future.
Business Day shall mean any day other than a Saturday, Sunday, or
------------
public holiday or the equivalent for banks in New York City.
Cash Equivalents means (i) securities issued, guaranteed or insured by
----------------
the United States or any of its agencies with maturities of not more than one
year from the date acquired; (ii) certificates of deposit with maturities of not
more than one year from the date acquired, issued by any U.S. federal or state
chartered commercial bank of recognized standing which has capital and
unimpaired surplus in excess of $100,000,000; (iii) investments in money market
funds registered under the Investment Company Act of 1940; (iv) mutual funds, at
least 90% of the assets of which constitute Cash Equivalents of the kinds
described in clauses (i) - (iii) of this definition; and (v) other instruments,
commercial paper or investments acceptable to the Lender in its sole discretion.
Closing Date means the date first set forth above.
------------
Code shall have the meaning specified in Section 8(d).
----
1.
<PAGE>
Collateral shall have the meaning specified in Section 2.
----------
Collateral Access Agreement shall mean any landlord waiver, mortgagee
---------------------------
waiver, bailee letter, or similar acknowledgement of any warehouseman or
processor in possession of any Collateral.
Contingent Obligation means any direct, indirect, contingent or non-
---------------------
contingent guaranty or obligation for the indebtedness of another Person, except
endorsements in the ordinary course of business.
Effective Date shall mean the date on which all of the conditions
--------------
specified in Section 3.3 shall have been satisfied.
Event of Default shall mean any event specified in Section 7.
----------------
Financial Statements shall have the meaning specified in Section 6.1.
--------------------
GAAP shall mean generally accepted accounting principles in the United
----
States of America, as in effect from time to time.
Loans shall mean the loans and financial accommodations made by the
-----
Lender to the Borrower in accordance with the terms of this Agreement and any
Note delivered hereunder.
Loan Documents shall mean, collectively, this Agreement, the Notes,
--------------
and all other present and future documents, agreements, certificates,
instruments, and opinions delivered by the Borrower under, in connection with or
relating to this Agreement, or any other present or future instrument or
agreement between Lender and Borrower, as each of the same may be amended,
modified, extended, restated or supplemented from time to time.
Material Adverse Change shall mean, with respect to any Person, a
-----------------------
material adverse change in the business, operations, results of operations,
assets, liabilities, or financial condition of such Person taken as a whole.
Material Adverse Effect shall mean, with respect to any Person, a
-----------------------
material adverse effect on the business, operations, results of operations,
assets, liabilities, or financial condition of such Person taken as a whole.
Note shall mean each Promissory Note, in substantially the form
----
attached hereto, made by the Borrower in favor of the Lender, as amended,
supplemented, or otherwise modified from time to time.
Obligations shall mean and include all loans (including the Loans),
-----------
advances, debts, liabilities, obligations, covenants and duties owing by
Borrower to Lender of any kind or nature, present or future, whether or not
evidenced by the Note or any note, guaranty or other instrument, whether or not
arising under or in connection with, this Agreement, any other Loan Document or
any other present or future instrument or agreement, whether or not for the
payment of money, whether arising by reason of an extension of credit, opening,
guaranteeing or confirming of a letter of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment, purchase, discount or otherwise), whether absolute
or contingent, due or to become due, now due or hereafter arising and however
acquired (including without limitation all loans previously made by Lender to
Borrower). The term includes, without limitation, all interest (including
interest accruing on or after an bankruptcy, whether or not an allowed claim),
charges, expenses, commitment, facility, closing and collateral management fees,
letter of credit fees, reasonable attorneys' fees, taxes and any other sum
2.
<PAGE>
properly chargeable to Borrower under this Agreement, the other Loan Documents
or any other present or future agreement between Lender and Borrower.
Permitted Liens shall mean such of the following as to which no
---------------
enforcement, collection, execution, levy, or foreclosure proceeding shall have
been commenced: (a) liens for taxes, assessments, and other governmental charges
or levies or the claims or demands of landlords, carriers, warehousemen,
mechanics, laborers, materialmen, and other like Persons arising by operation of
law in the ordinary course of business for sums which are not yet due and
payable, or liens which are being contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate reserves are
maintained to the extent required by GAAP; (b) deposits or pledges to secure the
payment of worker's compensation, unemployment insurance, or other social
security benefits or obligations, public or statutory obligations, surety or
appeal bonds, bid or performance bonds, or other obligations of a like nature
incurred in the ordinary course of business; (c) licenses, restrictions, or
covenants for or on the use of the Collateral which do not materially impair
either the use of the Collateral in the operation of the business of the
Borrower or the value of the Collateral; (d) attachment or judgment liens that
do not constitute an Event of Default; and (e) a lien on any item of equipment
created substantially simultaneously with the acquisition of such equipment for
the purpose of financing such acquisition, provided that such lien shall attach
only to the equipment acquired.
Person shall mean any individual, sole proprietorship, partnership,
------
limited liability partnership, joint venture, trust, unincorporated
organization, association, corporation, limited liability company, institution,
entity, party, or government (including any division, agency, or department
thereof), and the successors, heirs, and assigns of each.
Receivable shall have the meaning set forth in Section 8(e).
----------
Schedule shall mean Schedule A hereto containing certain information
--------
pertaining to the Borrower.
Solvent means, with respect to any Person, that as of the date as to
-------
which such Person's solvency is measured:
(a) the fair saleable value of its assets is in excess of the total
amount of its liabilities (including contingent liabilities as valued in
accordance with GAAP) as they become absolute and matured;
(b) it has sufficient capital to conduct its business; and
(c) it is able generally to meet its debts as they mature.
Taxes shall have the meaning specified in Section 5.5.
-----
SECTION 2. CREATION OF SECURITY INTEREST; COLLATERAL. The Borrower hereby
-----------------------------------------
assigns and grants to the Lender a continuing general, lien on, and security
interest in, all the Borrower's right, title, and interest in and to the
collateral described in the next sentence (the "Collateral") to secure the
payment and performance of all the Obligations, subject only to Permitted Liens.
Collateral means Receivables, Investment Property, Inventory, Equipment, and
Other Property and all additions and accessions thereto and substitutions and
replacements therefor and improvements thereon, and all proceeds (whether cash
or other property) and products thereof, including, without limitation, all
proceeds of insurance coveting the same and all tort claims in connection
therewith, and all records, files, computer
3.
<PAGE>
programs and files, data and writings relating to the foregoing, and all
equipment containing the foregoing.
Equipment means all machinery, equipment, furniture, fixtures,
---------
conveyors, tools, materials, storage and handling equipment, hydraulic presses,
cutting equipment, computer equipment and hardware, including central processing
units, terminals, drives, memory units, printers, keyboards, screens,
peripherals and input or output devices, molds, dies, stamps, vehicles, and
other equipment of every kind and nature and wherever situated now or hereafter
owned by Borrower or in which Borrower may have any interest as lessee or
otherwise (to the extent of such interest), together with all additions and
accessions thereto, all replacements and all accessories and parts therefor, all
manuals, blueprints, know-how, warranties and records in connection therewith,
all rights against suppliers, warrantors, manufacturers, sellers or others in
connection therewith, and together with all substitutes for any of the
foregoing; and
Inventory means all present and future goods intended for sale, lease
---------
or other disposition by Borrower including, without limitation, all raw
materials, work in process, finished goods and other retail inventory, goods in
the possession of outside processors or other third parties, goods consigned to
Borrower to the extent of its interest therein as consignee, materials and
supplies of any kind, nature or description which are or might be used in
connection with the manufacture, packing, shipping, advertising, selling or
finishing of any such goods, and all documents of title or documents
representing the same; and
Investment Property means any and all investment property of Borrower,
-------------------
including all securities, whether certificated or uncertificated, security
entitlements, securities accounts, commodity contracts and commodity accounts,
and all financial assets held in any securities account or otherwise, wherever
located, and whether now existing or hereafter acquired or arising; and
Other Property means all present and future instruments, documents,
--------------
documents of title, securities, bonds, notes, promissory notes, drafts,
acceptances, letters of credit and rights to receive proceeds of letters of
credit, deposit accounts, chattel paper, certificates, insurance policies,
insurance proceeds, leases, computer tapes, causes of action, judgments, claims
against third parties, leasehold rights in any personal property, books,
ledgers, files and records, general intangibles (including without limitation,
all contract rights, tax refunds, rights to receive tax refunds, patents, patent
applications, copyrights (registered and unregistered), royalties, licenses,
permits, franchise rights, authorizations, customer lists, rights of
indemnification, contribution and subrogation, computer programs, discs and
software, trade secrets, computer service contracts, trademarks, trade names,
service marks and names, logos, goodwill, deposits, choses in action, designs,
blueprints, plans, know-how, telephone numbers and rights thereto, credits,
reserves, and all forms of obligations whatsoever now or hereafter owing to
Borrower), all property at any time in the possession or under the control of
Lender, and all security given by Borrower to Lender pursuant to any other loan
document or agreement; and
Receivables means all present and future accounts and accounts
-----------
receivable, together with all security therefor and guaranties thereof and all
rights and remedies relating thereto, including any right of stoppage in
transit.
SECTION 3. THE CREDIT FACILITY.
-------------------
SECTION 3.1. Borrowings. The Lender, subject to the terms and
conditions of this Agreement, agrees to make a Loan to Borrower in a single
drawdown, at Borrower's request, in a principal amount not to exceed $3,000,000.
Notwithstanding anything herein to the contrary, the Lender shall be obligated
to make such Loan only after the Lender, in its sole discretion, determines that
the
4.
<PAGE>
applicable conditions for borrowing contained in Sections 3.3 and 3.4 are
satisfied. The timing and financial scope of Lender's obligation to make Loans
hereunder are limited as set forth in a commitment letter executed by Lender and
Borrower, dated as of July 9, 1999 and attached hereto as Exhibit A (the
"Commitment Letter").
SECTION 3.2. Application of Proceeds. The Borrower shall use the
proceeds of the Loans for its general working capital purposes.
SECTION 3.3. Conditions to Loan.
(a) The obligation of the Lender to make the Loan is subject to the
Lender's receipt of the following, on or before the Closing Date, each dated the
date of the Loan or as of an earlier date acceptable to the Lender, in form and
substance satisfactory to the Lender and its counsel:
(i) completed requests for information (Form UCC-11) listing all
effective Uniform Commercial Code financing statements naming the Borrower as
debtor and all tax lien, judgment, and litigation searches for the Borrower as
the Lender shall deem necessary or desirable;
(ii) acknowledgment copies of Uniform Commercial Code financing
statements (naming the Lender as secured party and the Borrower as debtor), duly
fried in all jurisdictions that the Lender deems necessary or desirable to
perfect and protect the security interests created hereunder, and evidence that
all other filings, registrations and recordings have been made in the
appropriate governmental offices, and all other action has been taken, which
shall be necessary to create, in favor of the Lender, a perfected first priority
Lien on the Collateral;
(iii) a Note duly executed by the Borrower evidencing the amount of
such Loan;
(iv) an Intellectual Property Security Agreement, in form and
substance satisfactory to the Lender and its counsel, duly executed by the
Borrower, specifically identifying and granting to the Lender a security
interest in all of the Borrower's intellectual property;
(v) if requested by the Lender, a Collateral Access Agreement duly
executed by the lessor or mortgagee, as the case may be, of each premises where
the equipment Collateral is located;
(vi) a Notice of Security Interest, in form and substance
satisfactory to the Lender and its counsel, to each financial institution at
which any deposit accounts of Borrower are maintained;
(vii) the warrants described in the Commitment Letter, if any;
(viii) certificates of insurance required under Section 5.4 of this
Agreement together with loss payee endorsements for all such policies naming the
Lender as lender loss payee and as an additional insured;
(ix) a certificate of the Secretary or an Assistant Secretary of the
Borrower ("Secretary's Certificate") certifying (A) that attached to the
Secretary's Certificate is a true, complete, and accurate copy of the
resolutions of the Board of Directors of the Borrower (or a unanimous consent of
directors in lieu thereof) authorizing the execution, delivery, and performance
of this Agreement, the other Loan Documents, and the transactions contemplated
hereby and thereby, and that such resolutions have not been amended or modified
since the date of such certification and are in full force and effect; (B) the
incumbency, names, and true signatures of the officers of the Borrower
authorized to sign the
5.
<PAGE>
Loan Documents to which it is a party; (C) that attached to the Secretary's
Certificate is a true and correct copy of the Articles or Certificate of
Incorporation of the Company, as amended, which Articles or Certificate of
Incorporation have not been further modified, repealed or rescinded and are in
full force and effect; (D) that attached to the Secretary's Certificate of the
Borrower is a true and correct copy of the Bylaws, as amended, which Bylaws of
the Company have not been further modified, repealed or rescinded and are in
full force and effect; and (E) that attached to the Secretary's Certificate is a
valid Certificate of Good Standing issued by the Secretary of the State of the
Borrower's state of incorporation;
(xi) the opinion of counsel for the Borrower covering such matters
incident to the transactions contemplated by this Agreement as the Lender may
reasonably require;
(xii) evidence of the consent or authorization of, filing with or
other act by or in respect of any governmental agency or authority or any other
Person required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement, or the other Loan Documents or the
consummation of the transactions contemplated hereby or thereby; and
(xiii) such other documents, agreements and instruments as the Lender
deems necessary in its sole and absolute discretion in connection with the
transactions contemplated hereby.
(b) The security interests in the Collateral granted in favor of the
Lender under this Agreement shall have been duly perfected and shall constitute
first priority liens, except for Permitted Liens.
SECTION 3.4. Additional Conditions Precedent. The obligation of the
Lender to make the Loan is subject to the satisfaction of the following
additional conditions precedent:
(a) There shall be no pending or, to the knowledge of the Borrower after
due inquiry, threatened litigation, proceeding, inquiry, or other action (i)
seeking an injunction or other restraining order, damages, or other relief with
respect to the transactions contemplated by this Agreement or the other Loan
Documents or thereby or (ii) which affects or could affect the business,
prospects, operations, assets, liabilities, or condition (financial or
otherwise) of the Borrower, except, in the case of clause (ii), where such
litigation, proceeding, inquiry, or other action could not be expected to have a
Material Adverse Effect in the judgment of the Lender;
(b) all representations and warranties contained in this Agreement and the
other Loan Documents shall be true and correct on and as of the date of such
Loan as if then made, other than representations and warranties that expressly
relate solely to an earlier date, in which case they shall have been true and
correct as of such earlier date;
(c) no Event of Default or event which with the giving of notice or the
passage of time, or both, would constitute an Event of Default shall have
occurred and be continuing or would result from the making of the requested Loan
as of the date of such request; and
(d) the Borrower shall be deemed to have hereby reaffirmed and ratified
all security interests, liens, and other encumbrances heretofore granted by the
Borrower to the Lender.
SECTION 3.5. Interest Rate; Repayment. The interest rate applicable
to the Loan made by the Lender hereunder, and the repayment date for such Loan,
are as set forth in the Note evidencing such Loan.
6.
<PAGE>
SECTION 4. REPRESENTATIONS AND WARRANTIES.
------------------------------
SECTION 4.1. Good Standing; Qualified to do Business. The
Borrower (a) is duly organized, validly existing, and in good standing under the
laws of the State of its organization, (b) has the power and authority to own
its properties and assets and to transact the businesses in which it is
presently, or proposes to be, engaged, and (c) is duly qualified and authorized
to do business and is in good standing in every jurisdiction in which the
failure to be so qualified could have a Material Adverse Effect on (i) the
Borrower, (ii) the Borrower's ability to perform its obligations under the Loan
Documents, or (iii) the rights of the Lender hereunder.
SECTION 4.2. Due Execution, etc. The execution, delivery, and
performance by the Borrower of each of the Loan Documents to which it is a party
are within the powers of the Borrower, do not contravene the organizational
documents, if any, of the Borrower, and do not (a) violate any law or
regulation, or any order or decree of any court or governmental authority, (b)
conflict with or result in a breach of, or constitute a default under, any
material indenture, mortgage, or deed of trust or any material lease, agreement,
or other instrument binding on the Borrower or any of its properties, or (c)
require the consent, authorization by, or approval of or notice to or filing or
registration with any governmental authority or other Person, except as may be
set forth in the Schedule. This Agreement is, and each of the other Loan
Documents to which the Borrower is or will be a party, when delivered hereunder
or thereunder, will be, the legal, valid, and binding obligation of the Borrower
enforceable against the Borrower in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, or similar laws
affecting creditors' rights generally and by general principles of equity.
SECTION 4.3. Solvency; No Liens. The Borrower is Solvent and
will be Solvent upon the completion of all transactions contemplated to occur
hereunder (including, without limitation, the Loan to be made on the Effective
Date); the security interests granted herein constitute and shall at all times
constitute the first and only liens on the Collateral other than Permitted
Liens; and the Borrower is, or will be at the time additional Collateral is
acquired by it, the absolute owner of the Collateral with full right to pledge,
sell, consign, transfer, and create a security interest therein, free and clear
of any and all claims or liens in favor of any other Person other than Permitted
Liens.
SECTION 4.4. No Judgments, Litigation. No judgments are
outstanding against the Borrower nor is there now pending or, to the best of the
Borrower's knowledge, threatened any litigation, contested claim, or
governmental proceeding by or against the Borrower except judgments and pending
or threatened litigation, contested claims, and governmental proceedings which
would not, in the aggregate, have a Material Adverse Effect on the Borrower.
SECTION 4.5. No Defaults. The Borrower is not in default or has
not received a notice of default under any material contract, lease, or
commitment to which it is a party or by which it is bound. The Borrower knows of
no dispute regarding any contract, lease, or commitment which could have a
Material Adverse Effect on the Borrower.
SECTION 4.6. Collateral Locations. The address of the principal
place of business and chief executive office of Borrower is, and the books and
records of Borrower and all of its chattel paper and records relating to
Collateral are maintained exclusively in the possession of Borrower at, the
address of Borrower specified in the heading of this Agreement. Borrower has
places of business, and Collateral is located, only at such address and at the
addresses set forth in the Schedule and at any additional locations reported to
the Lender as provided in Section 5.7 as to which the Lender has taken all
necessary action to perfect and protect its security interests in the Collateral
at any such locations.
7.
<PAGE>
SECTION 4.7. Corporate and Trade Names; Federal Tax ID. During
the past five years, Borrower has not been known by or used any other corporate,
trade or fictitious name except for its name as set forth on the signature page
of this Agreement and the other names specified in the Schedule. The Borrower's
Federal Tax ID number is as set forth in the Schedule.
SECTION 4.8. No Events of Default. No Event of Default has
occurred and is continuing nor has any event occurred which, with the giving of
notice or the passage of time, or both, would constitute an Event of Default.
SECTION 4.9. No Limitation on Lender's Rights. Except as
permitted herein, none of the Collateral is subject to contractual obligations
that may restrict or inhibit the Lender's rights or abilities to sell or dispose
of the Collateral or any part thereof after the occurrence of an Event of
Default.
SECTION 4.10. Perfection and Priority of Security Interest. This
Agreement creates a valid and, upon completion of all required filings of
financing statements, perfected, and first priority and exclusive, security
interest in the Collateral, except for any Permitted Liens, securing the payment
of all the Obligations.
SECTION 4.11. Intellectual Property. Set forth in the Schedule
is a complete and accurate list of all patents, trademarks, trade names, service
marks and copyrights (registered and unregistered), and all applications
therefor and licenses thereof, of Borrower. Borrower owns or licenses all
material patents, trademarks, service-marks, logos, tradenames, trade secrets,
know-how, copyrights, or licenses and other rights with respect to any of the
foregoing, which are necessary or advisable for the operation of its business as
presently conducted or proposed to be conducted. To the best of its knowledge
after due inquiry, Borrower has not infringed any patent, trademark, service-
mark, tradename, copyright, license or other right owned by any other Person by
the sale or use of any product, process, method, substance, part or other
material presently contemplated to be sold or used, where such sale or use would
reasonably be expected to have a Material Adverse Effect and no claim or
litigation is pending, or to the best of Borrower's knowledge, threatened
against or affecting Borrower that contests its right to sell or use any such
product, process, method, substance, part or other material.
SECTION 4.12. Consents and Filings. No consent, authorization
or approval of, or filing with or other act by, any shareholders of Borrower or
any governmental authority or other Person is required in connection with the
execution, delivery, performance, validity or enforceability of this Agreement
or any other Loan Document, the consummation of the transactions contemplated
hereby or thereby or the continuing operations of Borrower following such
consummation, except (i) those that have been obtained or made, (ii) the filing
of financing statements under the Code and (iii) any necessary filings with U.S.
Copyright Office and the U.S. Patent and Trademark Office.
SECTION 4.13. Year 2000 Compliance. The Borrower has (i)
initiated a review and assessment of all areas within its business and
operations (including those affected by suppliers and vendors) that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Borrower (or its suppliers and vendors) may be unable
to recognize and perform properly date-sensitive functions involving certain
dates prior to and any date after December 31, 1999), (ii) developed a plan and
timeline for addressing the Year 2000 Problem on a timely basis, and (iii) to
date, implemented that plan in accordance with that timetable. The Borrower
reasonably believes that all computer applications (including those of its
suppliers and vendors) that are material to its business and operations will on
a timely basis be able to perform properly date-sensitive functions for all
dates before and after January 1, 2000 (that is, be "Year 2000 compliant"),
except to the extent that a failure to do so could not reasonably be expected to
have Material Adverse Effect.
8.
<PAGE>
SECTION 4.14. Taxes. Borrower has properly completed and timely
filed all income tax returns it is required to file, and all Taxes, assessments,
fees and other governmental charges for periods beginning prior to the date of
this Agreement have been timely paid (or, if not yet due or being disputed in
good faith, adequate reserves therefor have been established in accordance with
GAAP) and Borrower has no liability for Taxes in excess of the amounts so paid
or reserves so established. No deficiencies for Taxes have been claimed,
proposed or assessed by any taxing or other governmental agency or authority
against Borrower and no notice of any tax lien has been filed. There are no
pending or (to the best knowledge of Borrower) threatened audits, investigations
or claims for or relating to any liability for Taxes and there are no matters
under discussion with any governmental agency or authority which could result in
an additional material liability for Taxes.
SECTION 4.15. Financial Statements. Borrower has provided to
the Lender complete and accurate Financial Statements, which have been prepared
in accordance with GAAP (except for the absence of footnotes and subject to
normal year-end adjustments with respect to unaudited financial statements)
consistently applied throughout the periods involved and fairly present the
financial position and results of operations of Borrower for each of the periods
covered, subject, in the case of any quarterly financial statements, to normal
year-end adjustments and the absence of notes. Borrower has no Contingent
Obligation or liability for Taxes, unrealized losses, unusual forward or long-
term commitments or long-term leases, which is not reflected in such Financial
Statements or the footnotes thereto. Since the last date covered by such
Financial Statements, there has been no sale, transfer or other disposition by
Borrower of any material part of its business or property and no purchase or
other acquisition of any business or property (including any capital stock of
any other Person) material in relation to the financial condition of Borrower at
said date. Since said date, (i) there has been no change, occurrence,
development or event which has had or could reasonably be expected to have a
Material Adverse Effect and (ii) none of the capital stock of Borrower has been
redeemed, retired, purchased or otherwise acquired for value by Borrower.
SECTION 4.16. Accuracy and Completeness of Information. All
data, reports, and information heretofore, contemporaneously, or hereafter
furnished by or on behalf of the Borrower in writing to the Lender or for
purposes of or in connection with this Agreement or any other Loan Document, or
any transaction contemplated hereby or thereby, are or will be true and accurate
in all material respects on the date as of which such data, reports, and
information are dated or certified and not incomplete by omitting to state any
material fact necessary to make such data, reports, and information not
misleading at such time. There are no facts now known to the Borrower which
individually or in the aggregate would reasonably be expected to have a Material
Adverse Effect and which have not been specified herein, in the Financial
Statements, or in any certificate, opinion, or other written statement
previously furnished by the Borrower to the Lender.
SECTION 5. COVENANTS OF THE BORROWER.
SECTION 5.1. Existence, etc. The Borrower shall: (a) retain
its existence and its current yearly accounting cycle, (b) maintain in full
force and effect all licenses, bonds, franchises, leases, trademarks, patents,
contracts, and other rights necessary or desirable to the profitable conduct of
its business unless the failure to do so could not reasonably be expected to
have a Material Adverse Effect on the Borrower, (c) continue in, and limit its
operations to, the same general lines of business as those presently conducted
by it, and (d) comply with all applicable laws and regulations of any federal,
state, or local governmental authority, except for such laws and regulations the
violations of which would not, in the aggregate, have a Material Adverse Effect
on the Borrower.
9.
<PAGE>
SECTION 5.2. Notice to the Lender. As soon as possible, and in
any event within five days after the Borrower learns of the following, the
Borrower will give written notice to the Lender of the following:
(a) any proceeding instituted or threatened to be instituted by
or against the Borrower in any federal, state, local, or foreign court or before
any commission or other regulatory body (federal, state, local, or foreign)
involving a sum, together with the sum involved in all other similar
proceedings, in excess of $50,000 in the aggregate,
(b) any contract that is terminated or amended and which has had
or could reasonably be expected to have a Material Adverse Effect on the
Borrower,
(c) the occurrence of any Material Adverse Change with respect
to the Borrower;
(d) the occurrence of any Event of Default or event or condition
which, with notice or lapse of time or both, would constitute an Event of
Default, together with a statement of the action which the Borrower has taken or
proposes to take with respect thereto;
(e) of any discovery or determination by Borrower that any
computer application (including those of its suppliers and vendors) that is
material to its business and operations will not be Year 2000 compliant on a
timely basis, except to the extent that such failure could not reasonably be
expected to have a Material Adverse Effect;
(f) of any material damage to, the destruction of or any other
material loss to any Collateral owned or used by Borrower other than any such
Collateral with a net book value (individually or in the aggregate) less than
$10,000 or any condemnation, confiscation or other taking, in whole or in part,
or any event that otherwise diminishes so as to render impracticable or
unreasonable the use of such Collateral owned or used by Borrower together with
the amount of the damage, destruction, loss or diminution in value;
(g) of any copyright registration made by it, any rights
Borrower may obtain to any copyrightable works, new trademarks or any new
patentable inventions, and of any renewal or extension of any trademark
registration, or if it shall otherwise become entitled to the benefit of any
patent or patent application or trademark or trademark application; and
(h) of the opening of any new bank account or other deposit
account, and any new securities account.
SECTION 5.3. Maintenance of Books and Records. Borrower shall
(i) maintain books and records (including computer records) pertaining to the
Collateral in such detail, form and scope as is customary for companies in
similar businesses in similar situations and (ii) provide the Lender and its
agents access to the premises of Borrower at any time and from time to time,
during normal business hours and upon reasonable notice under the circumstances,
and at any time on and after the occurrence and during the existence of an Event
of Default, or event or condition which, with notice or lapse of time or both,
would constitute an Event of Default, for the purposes of (A) inspecting and
verifying the Collateral, (B) inspecting and copying (at Borrower's expense) any
and all records pertaining thereto, and (C) discussing the affairs, finances and
business of Borrower with any officer, employee or director of Borrower or with
Borrower's accountants. Borrower shall reimburse the Lender for the reasonable
travel and related expenses of the Lender's employees or, at the Lender's
option, of such outside accountants or examiners as may be retained by the
Lender to verify or inspect Collateral,
10.
<PAGE>
records or documents of Borrower on a regular basis or for a special inspection
if the Lender deems the same appropriate. If the Lender's own employees are
used, Borrower shall also pay therefor $600 per person per day (or such other
amount as shall represent the Lender's then current standard charge for the
same), or, if outside examiners or accountants are used, Borrower shall also pay
the Lender such reasonable sum as the Lender may be obligated to pay as fees
therefor.
SECTION 5.4. Insurance. Borrower shall maintain public
liability insurance, business interruption insurance, third party property
damage insurance and replacement value insurance on its assets (including the
Collateral) under such policies of insurance, with such insurance companies, in
such amounts and covering such risks as are at all times reasonably satisfactory
to the Lender in its commercially reasonable judgment, all of which policies
coveting the Collateral shall name the Lender as an additional insured and
lender loss payee in case of loss, and contain other provisions as the Lender
may reasonably require to protect fully the Lender's interest in the Collateral
and any payments to be made under such policies.
SECTION 5.5. Taxes. The Borrower will pay, when due, all taxes,
assessments, claims, and other charges ("Taxes") lawfully levied or assessed
against the Borrower or the Collateral other than taxes that are being
diligently contested in good faith by the Borrower by appropriate proceedings
promptly instituted and for which an adequate reserve is being maintained by the
Borrower in accordance with GAAP. If any Taxes remain unpaid after the date
fixed for the payment thereof, or if any lien shall be claimed therefor, then,
without notice to the Borrower, but on the Borrower's behalf, the Lender may pay
such Taxes, and the amount thereof shall be included in the Obligations.
SECTION 5.6. Borrower to Defend Collateral Against Claims; Fees
on Collateral. The Borrower will defend the Collateral against all claims and
demands of all Persons at any time claiming the same or any interest therein.
The Borrower will not permit any notice creating or otherwise relating to liens
on the Collateral or any portion thereof to exist or be on file in any public
office other than Permitted Liens. The Borrower shall promptly pay, when
payable, all transportation, storage, and warehousing charges and license fees,
registration fees, assessments, charges, permit fees, and taxes (municipal,
state, and federal) which may now or hereafter be imposed upon the ownership,
leasing, renting, possession, sale, or use of the Collateral, other than taxes
on or measured by the Lender's income and fees, assessments, charges, and taxes
which are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are maintained to the
extent required by GAAP.
SECTION 5.7. Change of Location, Structure, or Identity. The
Borrower will give Lender at least 30 days prior written notice of any change of
Borrower's chief executive office or of the opening of any additional place of
business. The Borrower will not move or permit the movement of any item of
Collateral from the locations specified in the Schedule, except that the
Borrower keep Collateral at other locations within the United States provided
that the Borrower has delivered to the Lender (i) prior written notice thereof
and (ii) duly executed financing statements and other agreements and instruments
(all in form and substance satisfactory to the Lender) necessary or, in the
opinion of the Lender, desirable to perfect and maintain in favor of the Lender
a first priority security interest in the Collateral. Notwithstanding anything
to the contrary in the immediately preceding sentence, the Borrower may keep any
Collateral consisting of motor vehicles or rolling stock at any location in the
United States provided that the Lender's security interest in any such
Collateral is conspicuously marked on the certificate of title thereof and the
Borrower has complied with the provisions of Section 5.9.
SECTION 5.8. Use of Collateral; Licenses; Repair. The
Collateral shall be operated by competent, qualified personnel in connection
with the Borrower's business purposes,
11.
<PAGE>
for the purpose for which the Collateral was designed and in accordance with
applicable operating instructions, laws, and government regulations, and the
Borrower shall use every reasonable precaution to prevent loss or damage to the
Collateral from fire and other hazards. The Borrower shall procure and maintain
in effect all orders, licenses, certificates, permits, approvals, and consents
required by federal, state, or local laws or by any governmental body, agency,
or authority in connection with the delivery, installation, use, and operation
of the Collateral.
SECTION 5.9. Further Assurances. The Borrower will, promptly
upon request by the Lender, execute and deliver or use its best efforts to
obtain any document required by the Lender (including, without limitation,
warehouseman or processor disclaimers, mortgagee waivers, landlord disclaimers,
or subordination agreements with respect to the Obligations and the Collateral),
give any notices, execute and file any financing statements, mortgages, or other
documents (all in form and substance satisfactory to the Lender), mark any
chattel paper, deliver any chattel paper or instruments to the Lender, and take
any other actions that are necessary or, in the opinion of the Lender, desirable
to perfect or continue the perfection and the first priority of the Lender's
security interest in the Collateral, to protect the Collateral against the
rights, claims, or interests of any Persons, or to effect the purposes of this
Agreement. The Borrower hereby authorizes the Lender to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Collateral without the signature of the Borrower where permitted
by law. A carbon, photographic, or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law. To the extent
required under this Agreement, the Borrower will pay all costs incurred in
connection with any of the foregoing.
SECTION 5.10. No Disposition of Collateral. The Borrower will
not in any way hypothecate or create or permit to exist any lien, security
interest, charge, or encumbrance on or other interest in any of the Collateral,
except for the lien and security interest granted hereby and Permitted Liens. In
the event the Collateral, or any part thereof, is sold, transferred, assigned,
exchanged, or otherwise disposed of in violation of this Agreement, the security
interest of the Lender shall continue in such Collateral or part thereof
notwithstanding such sale, transfer, assignment, exchange, or other disposition,
and the Borrower will hold the proceeds thereof in a separate account for the
benefit of the Lender. Following such a sale, the Borrower will transfer such
proceeds to the Lender in kind.
SECTION 5.11. No Limitation on Lender's Rights. The Borrower
will not enter into any contractual obligations which may restrict or inhibit
the Lender's rights or ability to sell or otherwise dispose of the Collateral or
any part thereof.
SECTION 5.12. Protection of Collateral. Upon notice to the
Borrower (provided that if an Event of Default has occurred and is continuing
the Lender need not give any notice), the Lender shall have the right at any
time to make any payments and do any other acts the Lender may deem necessary to
protect its security interests in the Collateral, including, without limitation,
the rights to satisfy, purchase, contest, or compromise any encumbrance, charge,
or lien which, in the reasonable judgment of the Lender, appears to be prior to
or superior to the security interests granted hereunder, and appear in, and
defend any action or proceeding purporting to affect its security interests in,
or the value of, any of the Collateral. The Borrower hereby agrees to reimburse
the Lender for all payments made and expenses incurred under this Agreement
including fees, expenses, and disbursements of attorneys and paralegals
(including the allocated costs of in-house counsel) acting for the Lender,
including any of the foregoing payments under, or acts taken to protect its
security interests in, any of the Collateral, which amounts shall be secured
under this Agreement, and agrees it shall be bound by any payment made or act
taken by the Lender hereunder absent the Lender's gross negligence or willful
misconduct. The Lender shall have no obligation to make any of the foregoing
payments or perform any of the foregoing acts.
12.
<PAGE>
SECTION 5.13. Delivery of Items. The Borrower will (a) promptly
(but in no event later than one Business Day) after its receipt thereof, deliver
to the Lender any documents or certificates of title issued with respect to any
property included in the Collateral, and any promissory notes, letters of credit
or instruments related to or otherwise in connection with any property included
in the Collateral, which in any such case come into the possession of the
Borrower, or shall cause the issuer thereof to deliver any of the same directly
to the Lender, in each case with any necessary endorsements in favor of the
Lender and (b) deliver to the Lender as soon as available copies of any and all
press releases and other similar communications issued by the Borrower.
SECTION 5.14. Solvency. The Borrower shall be and remain
Solvent at all times.
SECTION 5.15. Intellectual Property. Borrower shall do and cause
to be done all things necessary to preserve, maintain and keep in full force and
effect all of its registrations of trademarks, service marks and other marks,
trade names and other trade rights, patents, copyrights and other intellectual
property in accordance with prudent business practices, except to the extent
that the failure to preserve or maintain any of the foregoing would not
reasonably be expected to have a Material Adverse Effect. Without limiting the
generality of the foregoing, Borrower agrees Promptly, and in any event not
later than 30 days after the date hereof, to have any of its currently
unregistered copyrightable software, computer programs and other materials
registered with the U.S. Copyright Office in Washington, D.C. (the "Copyright
Office") and to promptly provide TBCC with evidence of such registration.
Borrower will, on an ongoing basis, promptly register any future unregistered
copyrightable software, computer programs and other materials with the Copyright
Office.
SECTION 5.16. Fundamental Changes. The Borrower shall not (a)
amend or modify its name, unless the Borrower delivers to the Lender thirty days
prior to any such proposed amendment or modification written notice of such
amendment or modification and within ten days before such amendment or
modification delivers executed Uniform Commercial Code financing statements (in
form and substance satisfactory to the Lender) or (b) merge or consolidate with
any other entity or make any material change in its capital structure, in each
case without the Lender's prior written consent which shall not be unreasonably
withheld.
SECTION 5.17. Contingent Obligations. Borrower will not,
directly or indirectly, incur, assume, or suffer to exist any Contingent
Obligation, excluding indemnities given in connection with this Agreement or the
other Loan Documents in favor of the Lender or in connection with the sale of
inventory or other asset dispositions permitted hereunder, except Contingent
Obligations and other similar third party credit support relating to obligations
of vendors and suppliers of Borrower in respect of transactions entered into in
the normal course of business, provided that the aggregate amount of any such
guarantees and other similar third party credit support shall not exceed
$100,000 at any time outstanding, and provided further that no Default or Event
of Default shall exist either immediately prior to or after giving effect to the
making of the foregoing guarantees or the entering into any third party credit
support transactions.
SECTION 5.18. Change in Nature of Business. Borrower will not at
any time make any material change in the lines of its business as carried on at
the date of this Agreement or enter into any new line of business; provided that
Borrower may enter businesses reasonably related or incidental to its current
lines of business.
SECTION 5.19. Sales of Assets. Borrower will not, directly or
indirectly, in any fiscal year, sell, transfer or otherwise dispose of any
assets, or grant any option or other right to purchase or otherwise acquire any
assets other than (i) equipment with an aggregate value of less
13.
<PAGE>
than $25,000 the proceeds of which shall be paid to the Lender and applied to
the Obligations, (ii) sales of inventory in the ordinary course of business and
(iii) licenses or sublicenses on a non-exclusive basis of intellectual property
in the ordinary course of Borrower's business.
SECTION 5.20. Loans to Other Persons. Borrower will not at any
time make loans or advance any credit (except to trade debtors in the ordinary
course of business) to any Person in excess of $25,000 in the aggregate at any
time for all such loans, except that Borrower may make cashless advances of
credit to senior members of Borrower's management team to purchase restricted
stock of Borrower.
SECTION 5.21. Dividends, Stock Redemptions. Borrower will not,
directly or indirectly, pay any dividends or distributions on, purchase, redeem
or retire any shares of any class of its capital stock or any warrants, options
or rights to purchase any such capital stock, whether now or hereafter
outstanding ("Stock"), or make any payment on account of or set apart assets for
a sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of its Stock, or make any other distribution in
respect thereof, either directly or indirectly, whether in cash or property or
in obligations of Borrower, except for dividends paid solely in stock of the
Borrower and repurchases of stock owned by employees, directors and consultants
of Borrower pursuant to terms of employment, consulting or other stock
restrictions agreements at such time as any such employee, director or
consultant terminates his or her affiliations with the Borrower, provided that
no Default or Event of Default shall exist either immediately prior to or after
giving effect to such repurchase, and provided further that the total amount
paid in connection therewith by Borrower shall not exceed $50,000 in any
consecutive 12-month period.
SECTION 5.22. Investments in Other Persons. Borrower will not,
directly or indirectly, at any time make or hold any Investment in any Person
(whether in cash, securities or other property of any kind) other than
investments in Cash Equivalents.
SECTION 5.23. Acquisition of Stock or Assets. Borrower will not
acquire or commit or agree to acquire all or any stock, securities or assets of
any other Person other than inventory and equipment acquired in the ordinary
course of business.
SECTION 5.24. Partnerships; Subsidiaries; Joint Ventures;
Management Contracts. Borrower will not at any time create any direct or
indirect Subsidiary, enter into any joint venture or similar arrangement (other
than joint ventures or strategic partnerships consisting of non-exclusive
licensing of technology or the providing of technical support) or become a
partner in any general or limited partnership or enter into any management
contract (other than an employment contract for the employment of an officer or
employee entered into in the regular course of Borrower's business) permitting
third party management rights with respect to Borrower's business.
SECTION 5.25. Right of First Refusal. In connection with any
proposed line of credit hereafter to be obtained by Borrower, Borrower agrees
that the Lender shall have a right of first refusal to provide such financing to
Borrower. Accordingly, the Lender shall have the right (but not the obligation)
to make a financing proposal for a line of credit for Borrower upon receiving
notice from Borrower of Borrower's intent to obtain such financing. Borrower
shall provide the Lender with advance notice of its intent to obtain such
financing. Thereafter, Borrower shall afford the Lender the opportunity to make
a financing proposal to Borrower, which Borrower agrees to evaluate in Good
Faith. If the Lender and Borrower shall not mutually agree upon the terms and
conditions of such financing within 45 days following Borrower's receipt of
notice, Borrower may obtain such financing from alternative sources.
14.
<PAGE>
SECTION 5.26. Limitation on Additional Debt. The Borrower shall
not incur additional indebtedness without the consent of the Lender.
Notwithstanding the foregoing, Borrower may incur indebtedness so long as such
indebtedness is only secured by specific items of equipment financed.
Notwithstanding the foregoing, Borrower may incur up to $2,000,000 in unsecured
indebtedness with Kirin Brewery so long as repayment does not occur during the
term of Lenders loan.
SECTION 5.27. Additional Requirements. The Borrower shall take
all such further actions and execute all such further documents and instruments
as the Lender may reasonably request.
SECTION 6. FINANCIAL STATEMENTS. Until the payment and
--------------------
satisfaction in full of all Obligations, the Borrower shall deliver to the
Lender the following financial information:
SECTION 6.1. Annual Financial Statements. As soon as available,
but not later than 90 days after the end of each fiscal year of the Borrower and
its consolidated subsidiaries, the consolidated balance sheet, income statement,
and statements of cash flows and shareholders equity for the Borrower and its
consolidated subsidiaries (the "Financial Statements") for such year, reported
on by independent certified public accountants without an adverse qualification;
and
SECTION 6.2. Quarterly Financial Statements. As soon as
available, but not later than 30 days after the end of each of the first three
fiscal quarters in any fiscal year of the Borrower and its consolidated
subsidiaries, the Financial Statements for such fiscal quarter, together with a
certification duly executed by a responsible officer of the Borrower that such
Financial Statements have been prepared in accordance with GAAP and are fairly
stated in all material respects (subject to normal year-end audit adjustments).
SECTION 7. EVENTS OF DEFAULT. The occurrence of any of the
-----------------
following events shall constitute an Event of Default hereunder:
(a) the Borrower shall fail to pay when due any principal,
interest, fee or other amount required to be paid by the Borrower under or in
connection with any Note and this Agreement;
(b) any representation or warranty made or deemed made by
the Borrower under or in connection with any Loan Document or any Financial
Statement shall prove to have been false or incorrect in any material respect
when made or deemed made;
(c) the Borrower shall fail to perform or observe (i) any of
the terms, covenants or agreements contained in Sections 5.4, 5.7, 5.10, 5.14 or
5.16 through 5.25 hereof or (ii) any other term, covenant, or agreement
contained in any Loan Document (other than the other Events of Default specified
in this Section 7) and such failure remains unremedied for the earlier of ten
days from (A) the date on which the Lender has given the Borrower written notice
of such failure and (B) the date on which the Borrower knew or should have known
of such failure;
(d) any defined "Event of Default" shall occur under any
other Loan Document; or Borrower or any Person shall deny or disaffirm its
obligations under any of the Loan Documents or any Liens granted in connection
therewith or shall otherwise challenge any of its obligations under any of the
Loan Documents; or any Liens granted in any of the Collateral shall be
determined to be void, voidable or invalid, are subordinated or are not given
the priority contemplated by this Agreement; or any Loan Document shall for any
reason cease to create a valid and perfected Lien on the Collateral purported to
be covered thereby, of first priority (except for Permitted Liens);
15.
<PAGE>
(e) dissolution, liquidation, winding up, or cessation of
the Borrower's business, failure of the Borrower generally to pay its debts as
they mature, admission in writing by the Borrower of its inability generally to
pay its debts as they mature, or calling of a meeting of the Borrower's
creditors for purposes of compromising any of the Borrower's debts;
(f) the commencement by or against the Borrower of any
bankruptcy, insolvency, arrangement, reorganization, receivership, or similar
proceedings under any federal or state law and, in the case of any such
involuntary proceeding, such proceeding remains undismissed or unstayed for
thirty days following the commencement thereof, or any action by the Borrower is
taken authorizing any such proceedings;
(g) an assignment for the benefit of creditors is made by
the Borrower, whether voluntary or involuntary, the appointment of a trustee,
custodian, receiver, or similar official for the Borrower or for any substantial
property of the Borrower, or any action by the Borrower authorizing any such
proceeding;
(h) the Borrower shall default in (i) the payment of
principal or interest on any indebtedness in excess of $100,000 (other than the
Obligations) beyond the period of grace, if any, provided in the instrument or
agreement under which such indebtedness was created, and such payment default
has not been cured within any applicable grace period unless such default has
been waived by such Person; or (ii) the observance or performance of any other
agreement or condition relating to any such indebtedness or contained in any
instrument or agreement relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such indebtedness to cause, with
the giving of notice if required, such indebtedness to become due prior to its
stated maturity, and such default has not been cured within any applicable grace
period unless such default has been waived by such Person; or (iii) any loan or
other agreement under which the Borrower has received financing from
Transamerica Corporation or any of its affiliates;
(i) the Borrower suffers or sustains a Material Adverse
Change;
(j) any tax lien, other than a Permitted Lien, is filed of
record against the Borrower and is not bonded or discharged within five Business
Days;
(k) any judgment or order for the payment of money in excess
of $50,000 and not otherwise covered by applicable insurance shall be rendered
against the Borrower and such judgment or order shall not be stayed, vacated,
bonded, or discharged within thirty days;
(1) any material covenant, agreement, or obligation, as
determined in the sole discretion of the Lender, made by the Borrower and
contained in or evidenced by any of the Loan Documents shall cease to be
enforceable, or shall be determined to be unenforceable, in accordance with its
terms; the Borrower shall deny or disaffirm the Obligations under any of the
Loan Documents or any liens granted in connection therewith; or any liens
granted on any of the Collateral in favor of the Lender shall be determined to
be void, voidable, or invalid, or shall not be given the priority contemplated
by this Agreement; or
(n) there is a change in more than 35% of the ownership of
any equity interests of the Borrower on the date hereof or more than 35% of such
interests become subject to any contractual, judicial, or statutory lien,
charge, security interest, or encumbrance.
SECTION 8. REMEDIES. If any Event of Default shall have
occurred and be continuing:
16.
<PAGE>
(a) The Lender may, without prejudice to any of its other
rights under any Loan Document or Applicable Law, declare all Obligations to be
immediately due and payable (except with respect to any Event of Default set
forth in Section 7(f) hereof, in which case all Obligations shall automatically
become immediately due and payable without necessity of any declaration) without
presentment, representation, demand of payment, or protest, which are hereby
expressly waived.
(b) The Lender may take possession of the Collateral and,
for that purpose may enter, with the aid and assistance of any person or
persons, any premises where the Collateral or any part hereof is, or may be
placed, and remove the same.
(c) The obligation of the Lender, if any, to make additional
Loans or financial accommodations of any kind to the Borrower shall immediately
terminate.
(d) The Lender may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein (or in any Loan
Document) or otherwise available to it, all the rights and remedies of a secured
party under the applicable Uniform Commercial Code (the "Code") whether or not
the Code applies to the affected Collateral and also may (i) require the
Borrower to, and the Borrower hereby agrees that it will at its expense and upon
request of the Lender forthwith, assemble all or part of the Collateral as
directed by the Lender and make it available to the Lender at a place to be
designated by the Lender that is reasonably convenient to both parties and (ii)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the Lender's
offices or elsewhere, for cash, on credit, or for future delivery, and upon such
other terms as the Lender may deem commercially reasonable.
(e) The Lender may accelerate or extend the time of payment,
compromise, issue credits, or bring suit on all accounts receivable
("Receivables") and other Collateral (in the name of Borrower or the Lender) and
otherwise administer and collect the Receivables and other Collateral.
(f) The Lender may collect, receive, dispose of and realize
upon any investment property Collateral, including withdrawal of any and all
funds from any securities accounts.
(g) The Lender may (i) settle or adjust disputes or claims
directly with account debtors for amounts and upon terms which it considers
advisable, and (ii) notify account debtors on the Receivables and other
Collateral that the Receivables and Collateral have been assigned to the Lender,
and that payments in respect thereof shall be made directly to the Lender. If an
Event of Default has occurred and is continuing, Borrower hereby irrevocably
authorizes and appoints the Lender, or any Person the Lender may designate, as
its attorney-in-fact, at Borrower's sole cost and expense, to exercise, all of
the following powers, which are coupled with an interest and are irrevocable,
until all of the Obligations have been indefeasibly paid and satisfied in full
in cash: (A) to receive, take, endorse, sign, assign and deliver, all in the
name of the Lender or Borrower, any and all checks, notes, drafts, and other
documents or instruments relating to the Collateral; (B) to receive, open and
dispose of all mail addressed to Borrower and to notify postal authorities to
change the address for delivery thereof to such address as the Lender may
designate; and (C) to take or bring, in the name of the Lender or Borrower, all
steps, actions, suits or proceedings deemed by the Lender necessary or desirable
to enforce or effect collection of Receivables and other Collateral or file and
sign Borrower's name on a proof of claim in bankruptcy or similar document
against any obligor of Borrower.
(h) The Borrower agrees that, to the extent notice of sale
shall be required by law, at least ten days' notice to the Borrower of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Lender shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
The Lender may
17.
<PAGE>
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Borrower recognizes that the
Lender may be unable to make a public sale of any or all of any investment
property Collateral, by reason of prohibitions contained in applicable
securities laws or otherwise, and expressly agrees that a private sale to a
restricted group of purchasers for investment and not with a view to any
distribution thereof shall be considered a commercially reasonable sale.
(i) Unless expressly prohibited by any licensor thereof, the
Lender is hereby granted a license to use all computer software programs, data
bases, processes, trademarks, tradenames and materials used by Borrower in
connection with its businesses or in connection with the Collateral.
(j) All cash proceeds received by the Lender in respect of
any sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Lender, be held by the Lender as
collateral for, or then or at any time thereafter applied in whole or in part by
the Lender against, all or any part of the Obligations in such order as the
Lender shall elect. Any surplus of such cash or cash proceeds held by the Lender
and remaining after the full and final payment of all the Obligations shall be
paid over to the Borrower or to such other Person to which the Lender may be
required under applicable law, or directed by a court of competent jurisdiction,
to make payment of such surplus.
SECTION 9. MISCELLANEOUS PROVISIONS.
SECTION 9.1. Notices. Except as otherwise provided herein, all
notices, approvals, consents, correspondence, or other communications required
or desired to be given hereunder shall be given in writing and shall be
delivered by overnight courier, hand delivery, or certified or registered mail,
postage prepaid, if to the Lender, then to at 76 Batterson Park Road,
Farmington, Connecticut 06032, with a copy to the Lender at Riverway II, West
Office Tower, 9399 West Higgins Road, Rosemont, Illinois 60018, and if to the
Borrower, then to 3005 First Avenue, Seattle, Washington, 98121, or such other
address as shall be designated by the Borrower or the Lender to the other party
in accordance herewith. All such notices and correspondence shall be effective
when received.
SECTION 9.2. Headings. The headings in this Agreement are for
purposes of reference only and shall not affect the meaning or construction of
any provision of this Agreement.
SECTION 9.3. Assignments and Participations. The Borrower shall
not have the right to assign any Note or this Agreement or any interest therein
unless the Lender shall have given the Borrower prior written consent and the
Borrower and its assignee shall have delivered assignment documentation in form
and substance satisfactory to the Lender in its sole discretion. The Lender may
assign (without the consent of Borrower) to one or more Persons all or a portion
of its rights and obligations under this Agreement and the other Loan Documents
(provided that such Person shall not be a direct or indirect competitor of the
Borrower). The Lender may sell participations in or to all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of any Loans); provided, however, that the Lender's obligations
under this Agreement shall remain unchanged. The Lender may, in connection with
any permitted assignment or participation or proposed assignment or
participation pursuant to this Agreement, disclose to the assignee or
participant or proposed assignee or participant any information relating to
Borrower furnished to the Lender by or on behalf of Borrower.
SECTION 9.4. Amendments, Waivers, and Consents. Any amendment
or waiver of any provision of this Agreement and any consent to any departure by
the
18.
<PAGE>
Borrower from any provision of this Agreement shall be effective only by a
writing signed by the Lender and shall bind and benefit the Borrower and the
Lender and their respective successors and assigns, subject, in the case of the
Borrower, to the first sentence of Section 9.3.
SECTION 9.5. Interpretation of Agreement. Time is of the
essence in each provision of this Agreement of which time is an element. All
terms not defined herein or in a Note shall have the meaning set forth in the
applicable Code, except where the context otherwise requires. To the extent a
term or provision of this Agreement conflicts with any Note, or any term or
provision thereof, and is not dealt with herein with more specificity, this
Agreement shall control with respect to the subject matter of such term or
provision. Acceptance of or acquiescence in a course of performance rendered
under this Agreement shall not be relevant in determining the meaning of this
Agreement even though the accepting or acquiescing party had knowledge of the
nature of the performance and opportunity for objection.
SECTION 9.6. Continuing Security Interest. This Agreement shall
create a continuing security interest in the Collateral and shall (i) remain in
full force and effect until the indefeasible payment in full of the Obligations,
(ii) be binding upon the Borrower and its successors and assigns and (iii)
inure, together with the rights and remedies of the Lender hereunder, to the
benefit of the Lender and its successors, transferees, and assigns.
SECTION 9.7. Reinstatement. To the extent permitted by law,
this Agreement and the rights and powers granted to the Lender hereunder and
under the Loan Documents shall continue to be effective or be reinstated if at
any time any amount received by the Lender in respect of the Obligations is
rescinded or must otherwise be restored or returned by the Lender upon the
insolvency, bankruptcy, dissolution, liquidation, or reorganization of the
Borrower or upon the appointment of any receiver, intervenor, conservator,
trustee, or similar official for the Borrower or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
SECTION 9.8. Survival of Provisions. All representations,
warranties, and covenants of the Borrower contained herein shall survive the
execution and delivery of this Agreement, and shall terminate only upon the full
and final payment and performance by the Borrower of the Obligations secured
hereby.
SECTION 9.9. Indemnification. The Borrower agrees to indemnify
and hold harmless the Lender and its directors, officers, agents, employees, and
counsel from and against any and all costs, expenses, claims, or liability
incurred by the Lender or such Person hereunder and under any other Loan
Document or in connection herewith or therewith, unless such claim or liability
shall be due to willful misconduct or gross negligence on the part of the Lender
or such Person. In addition and without limiting the generality of the
foregoing, Borrower shall, upon demand, pay to the Lender all reasonable costs
and expenses incurred by the Lender (including the reasonable fees and
disbursements of counsel and other professionals) in connection with the
preparation, execution, delivery, administration, modification and amendment of
the Loan Documents, and pay to the Lender all reasonable costs and expenses
(including the reasonable fees and disbursements of counsel and other
professionals) paid or incurred by the Lender in order to enforce or defend any
of its rights under or in respect of this Agreement, any other Loan Document or
any other document or instrument now or hereafter executed and delivered in
connection herewith, collect the Obligations or otherwise administer this
Agreement, foreclose or otherwise realize upon the Collateral or any part
thereof, prosecute actions against, or defend actions by, account debtors;
commence, intervene in, or defend any action or proceeding; initiate any
complaint to be relieved of the automatic stay in bankruptcy; file or prosecute
any probate claim, bankruptcy claim, third-party claim, or other claim; examine,
audit, copy, and inspect any of the Collateral or any of Borrower's books and
records; protect, obtain possession of, lease, dispose of, or
19.
<PAGE>
otherwise enforce the Lender's security interest in, the Collateral; and
otherwise represent the Lender in any litigation relating to Borrower.
SECTION 9.10. Counterparts; Signatures by Facsimile. This
Agreement may be executed in counterparts, each of which when so executed and
delivered shall be an original, but both of which shall together constitute one
and the same instrument. This Agreement and each of the other Loan Documents and
any notices given in connection herewith or therewith may be executed and
delivered by facsimile transmission all with the Same force and effect as if the
same was a fully executed and delivered original manual counterpart.
SECTION 9.11. Severability. In case any provision in or
obligation under this Agreement or any Note or any other Loan Document shall be
invalid, illegal, or unenforceable in any jurisdiction, the validity, legality,
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 9.12. Delays; Partial Exercise of Remedies. No delay or
omission of the Lender to exercise any right or remedy hereunder, whether before
or after the happening of any Event of Default, shall impair any such right or
shall operate as a waiver thereof or as a waiver of any such Event of Default.
No single or partial exercise by the Lender of any right or remedy shall
preclude any other or further exercise thereof, or preclude any other right or
remedy.
SECTION 9.13. Entire Agreement. The Borrower and the Lender
agree that this Agreement, the Schedule hereto, and the Commitment Letter are
the complete and exclusive statement and agreement between the parties with
respect to the subject matter hereof, superseding all proposals and prior
agreements, oral or written, and all other communications between the parties
with respect to the subject matter hereof. Should there exist any inconsistency
between the terms of the Commitment Letter and this Agreement, the terms of this
Agreement shall prevail.
SECTION 9.14. Setoff. In addition to and not in limitation of
all rights of offset that the Lender may have under Applicable Law, and whether
or not the Lender has made any demand or the Obligations of the Borrower have
matured, the Lender shall have the right to appropriate and apply to the payment
of the Obligations of the Borrower all deposits and other obligations then or
thereafter owing by the Lender to or for the credit or the account of the
Borrower.
SECTION 9.15. Joint and Several Liability. If Borrower consists
of more than one Person, their liability shall be joint and several, and the
compromise of any claim with, or the release of, any Borrower shall not
constitute a compromise with, or a release of, any other Borrower.
SECTION 9.16. Maximum Rate. Notwithstanding anything to the
contrary contained elsewhere in this Agreement or in any other Loan Document,
the parties hereto hereby agree that all agreements between them under this
Agreement and the other Loan Documents, whether now existing or hereafter
arising and whether written or oral, are expressly limited so that in no
contingency or event whatsoever shall the amount paid, or agreed to be paid, to
the Lender for the use, forbearance, or detention of the money loaned to
Borrower and evidenced hereby or thereby or for the performance or payment of
any covenant or obligation contained herein or therein, exceed the maximum non-
usurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Obligations, under
the laws of the State of Illinois (or the laws of any other jurisdiction whose
laws may be mandatorily applicable notwithstanding other provisions of this
Agreement and the other Loan Documents), or under applicable federal laws which
may presently or hereafter be in effect and which allow a higher maximum non-
usurious interest rate than under the laws of
20.
<PAGE>
the State of Illinois (or such other jurisdiction), in any case after taking
into account, to the extent permitted by applicable law, any and all relevant
payments or charges under this Agreement and the other Loan Documents executed
in connection herewith, and any available exemptions, exceptions and exclusions
(the "Highest Lawful Rate"). If due to any circumstance whatsoever, fulfillment
of any provisions of this Agreement or any of the other Loan Documents at the
time performance of such provision shall be due shall exceed the Highest Lawful
Rate, then, automatically, the obligation to be fulfilled shall be modified or
reduced to the extent necessary to limit such interest to the Highest Lawful
Rate, and if from any such circumstance the Lender should ever receive anything
of value deemed interest by applicable law which would exceed the Highest Lawful
Rate, such excessive interest shall be applied to the reduction of the principal
amount then outstanding hereunder or on account of any other then outstanding
Obligations and not to the payment of interest, or if such excessive interest
exceeds the principal unpaid balance then outstanding hereunder and such other
then outstanding Obligations, such excess shall be refunded to Borrower. All
sums paid or agreed to be paid to the Lender for the use, forbearance, or
detention of the Obligations and other indebtedness of Borrower to the Lender
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such indebtedness, until
payment in full thereof, so that the actual rate of interest on account of all
such indebtedness does not exceed the Highest Lawful Rate throughout the entire
term of such indebtedness. The terms and provisions of this Section shall
control every other provision of this Agreement, the other Loan Documents and
all other agreements between the parties hereto.
SECTION 9.17. WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER
IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 9.18. GOVERNING LAW. THE VALIDITY, INTERPRETATION, AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAW PRINCIPLES THEREOF.
SECTION 9.19. Venue; Service of Process. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS SITUATED IN COOK COUNTY, OR OF
THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES, IN CONNECTION
WITH ANY SUCH ACTION OR PROCEEDING, (a) ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND (b) THE RIGHT TO
INTERPOSE ANY NONCOMPULSORY SETOFF, COUNTERCLAIM, OR CROSS-CLAIM. THE BORROWER
IRREVOCABLY' CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS
FOR IT SPECIFIED IN SECTION 9.1 HEREOF. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
THE LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE
21.
<PAGE>
PROCEED AGAINST THE BORROWER IN ANY OTHER JURISDICTION, SUBJECT IN EACH INSTANCE
TO THE PROVISIONS HEREOF WITH RESPECT TO RIGHTS AND REMEDIES.
IN WITNESS WHEREOF, the undersigned Borrower has caused this
Agreement to be duly executed and delivered by its proper and duly authorized
officer as of the date first set forth above.
DENDREON CORPORATION
By: /s/ Martin A. Simonetti
-----------------------------
Name: Martin A. Simonetti
Title: CFO
Accepted as of the
____ day of July, 1999
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /s/ Gary P. Moro
-------------------------------------
Name: Gary P. Moro
Title: Senior Vice President
22.
<PAGE>
EXHIBIT 10.13
Customer No. 1080
AMENDED AND RESTATED
MASTER LEASE AGREEMENT
Lessor: TRANSAMERICA BUSINESS CREDIT CORPORATION
Riverway II
West Office Tower
West Higgins
Rosemont, Illinois 60018
Lessee: DENDREON CORPORATION
3005 First Avenue
Seattle, Washington 98121
The lessor pursuant to this Master Lease Agreement ("Agreement") dated as
of December 11, 1997, as amended and restated as of May 28, 1999, is
Transamerica Business Credit Corporation ("Lessor"). All equipment, together
with all present and future additions, parts, accessories, attachments,
substitutions, repairs, improvements, and replacements thereof or thereto, which
are the subject of a Lease (as defined in the next sentence) shall be referred
to as "Equipment." Simultaneous with the execution and delivery of this
Agreement, the parties are entering into one or more Lease Schedules (each, a
"Schedule") which refer to and incorporate by reference this Agreement, each of
which constitutes a lease (each, a "Lease") for the Equipment specified therein.
Additional details pertaining to each Lease are specified in the applicable
Schedule. Each Schedule that the parties hereafter enter into shall constitute a
Lease. Except as set forth in Paragraph 1 below, Lessor has no obligation to
enter into any additional leases with, or extend any future financing to,
Lessee.
1. LEASE. Subject to and upon all of the terms and conditions of this
Agreement and each Schedule, Lessor hereby agrees to lease to Lessee and Lessee
hereby agrees to lease from Lessor the Equipment for the Term (as defined in
Paragraph 2 below) thereof. The timing and financial scope of Lessor's
obligation to enter into Leases hereunder are limited as set forth in the
Commitment Letters executed by Lessor and Lessee, dated as of October 2, 1997
and April 14, 1999 and attached hereto as Exhibits A and B (collectively the
"Commitment Letters").
2. TERM. Each Lease shall be effective and the term of each Lease
("Term") shall commence on the commencement date which shall not be prior to
delivery, acceptance and funding of the Equipment and shall be specified in the
applicable Schedule and, unless sooner terminated (as hereinafter provided),
shall expire at the end of the term specified in such Schedule; provided,
however, that obligations due to be performed by Lessee during the Term shall
continue until they have been performed in full. Schedules will only be executed
after the delivery of the Equipment to Lessee or upon completion of deliveries
of items of such Equipment with aggregate cost of not less than $50,000.
3. RENT. Lessee shall pay as rent to Lessor, for use of the Equipment
during the Term or Renewal Term (as defined in Paragraph 8), rental payments
equal to the sum of all
1.
<PAGE>
rental payments including, without limitation, security deposits, advance rents,
and interim rents payable in the amounts and on the dates specified in the
applicable Schedule ("Rent"). If any Rent or other amount payable by Lessee is
not paid within five days after the day on which it becomes payable, Lessee will
pay on demand, as a late charge, an amount equal to 3% of such unpaid Rent or
other amount but only to the extent permitted by applicable law. All payments
provided for herein shall be payable to Lessor at its address specified above,
or at any other place designated by Lessor. The $5,000 Application Fee
previously paid by Lessee shall be applied pro rata toward the second month's
rent due under each Lease after deducting expenses under Paragraph 23.
4. LEASE NOT CANCELABLE; LESSEE'S OBLIGATIONS ABSOLUTE. No Lease may be
canceled or terminated except as expressly provided herein. So long as Lessor
has not wrongfully interfered with Lessee's quiet enjoyment of the Equipment,
Lessee's obligation to pay all Rent due or to become due hereunder shall be
absolute and unconditional and shall not be subject to any delay, reduction,
set-off, defense, counterclaim, or recoupment for any reason whatsoever,
including any failure of the Equipment or any representations by the
manufacturer or the vendor thereof. If the Equipment is unsatisfactory for any
reason, Lessee shall make any claim solely against the manufacturer or the
vendor thereof and shall, nevertheless, pay Lessor all Rent payable hereunder.
5. SELECTION AND USE OF EQUIPMENT. Lessee agrees that it shall be
responsible for the selection and use of, and results obtained from, the
Equipment and any other associated equipment or services.
6. WARRANTIES. LESSOR MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE DESIGN
OR CONDITION OF THE EQUIPMENT OR ITS MERCHANTABILITY, SUITABILITY, QUALITY, OR
FITNESS FOR A PARTICULAR PURPOSE, AND HEREBY DISCLAIMS ANY SUCH WARRANTY.
LESSEE-SPECIFICALLY WAIVES ALL RIGHTS TO MAKE A CLAIM AGAINST LESSOR FOR BREACH
OF ANY WARRANTY WHATSOEVER. LESSEE LEASES THE EQUIPMENT "AS IS." IN NO EVENT
SHALL LESSOR HAVE ANY LIABILITY, NOR SHALL LESSEE HAVE ANY REMEDY AGAINST
LESSOR, FOR ANY LIABILITY, CLAIM, LOSS, DAMAGE, OR EXPENSE CAUSED DIRECTLY OR
INDIRECTLY BY THE EQUIPMENT OR ANY DEFICIENCY OR DEFECT THEREOF OR THE
OPERATION, MAINTENANCE, OR REPAIR THEREOF OR ANY CONSEQUENTIAL DAMAGES AS THAT
TERM IS USED IN SECTION 2-719(3) OF THE MODEL UNIFORM COMMERCIAL CODE, AS
AMENDED FROM TIME TO TIME ("UCC"). Lessor grants to Lessee, for the sole purpose
of prosecuting a claim or otherwise receiving benefits under any warranty, the
benefits of any and all warranties made available by the manufacturer or the
veneer of the Equipment to the extent assignable.
7. DELIVERY. Lessor hereby appoints Lessee as Lessor's agent for the sole
and limited purpose of accepting delivery of the Equipment from each vendor
thereof. Lessee shall pay any and all delivery and installation charges. Lessor
shall not be liable to Lessee for any delay in, or failure of, delivery of the
Equipment.
2.
<PAGE>
8. RENEWAL. So long as no Event of Default or event which, with the
giving of notice, the passage of time, or both, would constitute an Event of
Default, shall have occurred and be continuing, or the Lessee shall not have
exercised its purchase option under Paragraph 9 hereof, each Lease will
automatically renew for a term specified in the applicable Schedule (the
"Renewal Term") on the terms and conditions of this Agreement. or as set forth
in such Schedule; provided, however, that Obligations due to be performed by the
Lessee during the Renewal Term shall continue until they have been performed in
full.
9. PURCHASE OPTION. So long as no Event of Default or event which, with
the giving of notice, the passage of time, or both, would constitute an Event of
Default, shall have occurred and be continuing, Lessee may, upon written notice
to Lessor received at least one hundred eighty days before the expiration of a
Term, purchase all, but not less than all, the Equipment covered by the
applicable Lease on the date specified therefor in the applicable Schedule
("Purchase Date"). The purchase price for such Equipment shall be its fair
market value as set forth in the applicable Schedule determined on an "In-place,
In-use" basis, as mutually agreed by Lessor and Lessee, or, if they cannot
agree, as determined by an independent appraiser selected by Lessor and approved
by Lessee, which approval will not be unreasonably delayed or withheld. Lessee
shall pay the cost of any such appraisal. So long as no Event of Default or
event which, with the giving of notice, the passage of time, or both, would
constitute an Event of Default shall have occurred and be continuing, Lessee
may, upon written notice to Lessor received at least one hundred eighty days
prior to the expiration of the Renewal Term, purchase all, but not less than
all, the Equipment covered by the applicable Schedule by the last date of the
Renewal Term (the "Alternative Purchase Date") at a purchase price equal to its
then fair market value on an "In-place, In-use" basis. On the Purchase Date or
the Alternative Purchase Date, as the case may be, for any Equipment, Lessee
shall pay to Lessor the purchase price, together with all sales and other taxes
applicable to the transfer of the Equipment and any other amount payable and
arising hereunder, in immediately available funds, whereupon Lessor shall
transfer to Lessee, without recourse or warranty of any kind, express or
implied, all of Lessor's right, title, and interest in and to-such Equipment on
an "As Is, Where Is" basis and file a UCC-3 termination statement.
10. OWNERSHIP; INSPECTION; MARKING; FINANCING STATEMENTS. Except for
tenant improvements, Lessee shall affix to the Equipment any labels supplied by
Lessor indicating ownership of such Equipment. The Equipment is and shall be the
sole property of Lessor. Lessee shall have no right, title, or interest therein,
except as lessee under a Lease. The Equipment is and shall at all times be and
remain personal property and shall not become a fixture. Lessee shall obtain and
record such instruments and take such steps as may be necessary to prevent any
person from acquiring any rights in the Equipment by reason of the Equipment
being claimed or deemed to be real property. Upon request by Lessor, Lessee
shall obtain and deliver to Lessor valid and effective waivers, in recordable
form, by the owners, landlords, and mortgagees of the real property upon which
the Equipment is located or certificates of Lessee that it is the owner of such
real property or that such real property is neither leased nor mortgaged. Lessee
shall make the Equipment and its maintenance records available for inspection by
Lessor at reasonable times and upon reasonable notice. Lessee shall execute and
deliver to Lessor for filing any UCC financing statements or similar documents
Lessor may reasonably request.
3.
<PAGE>
11. EQUIPMENT USE. Lessee agrees that the Equipment will be operated by
competent, qualified personnel in connection with Lessee's business for the
purpose for which the Equipment was designed and in accordance with applicable
operating instructions, laws, and government regulations, and that Lessee shall
use all reasonable precautions to prevent loss or damage to the Equipment from
fire and other hazards. Lessee shall procure and maintain in effect all orders,
licenses, certificates, permits, approvals, and consents required by federal,
state, or local laws or by any governmental body, agency, or authority in
connection with the delivery, installation, use, and operation of the Equipment.
12. MAINTENANCE. Lessee, at its sole cost and expense, shall keep the
Equipment in a suitable, environment as specified by the manufacturer's
guidelines or the equivalent, shall meet all recertification requirements, and
shall maintain the Equipment in its original condition and working order,
ordinary wear and tear excepted. At the reasonable request of Lessor, Lessee
shall furnish all proof of maintenance.
13. ALTERATION; MODIFICATIONS; PARTS. Lessee may alter or modify the
Equipment only with the prior written consent of Lessor. Any alteration shall be
removed and the Equipment restored to its normal, unaltered condition at
Lessee's expense (without damaging the Equipment's originally intended function
or its value) prior to its return to Lessor. Any part installed in connection
with warranty or maintenance service or which cannot be removed in accordance
with the preceding sentence shall be the property of Lessor.
14. RETURN OF EQUIPMENT. Except for Equipment that has suffered a Casualty
Loss (as defined in Paragraph 15 below) and is not required to be repaired
pursuant to Paragraph 15 below or Equipment purchased by Lessee pursuant to
Paragraph 9 above, upon the expiration of the Renewal Term of a Lease, or upon
demand by Lessor pursuant to Paragraph 22 below, Lessee shall contact Lessor for
shipping instructions and, at Lessee's own risk, immediately return the
Equipment, freight prepaid, to a location in the continental United States
specified by Lessor. At the time of such return to Lessor, the Equipment shall
(i) be in the operating order, repair, and condition as required by or specified
in the original specifications and warranties of each manufacturer and vendor
thereof, ordinary wear and tear excepted, (ii) meet all recertification
requirements, and (iii) be capable of being promptly assembled and operated by a
third party purchaser or third party lessee without further repair, replacement,
alterations, or improvements, and in accordance and compliance with any and all
statutes, laws, ordinances, roles, and regulations of any governmental authority
or any political subdivision thereof applicable to the use and operation of the
Equipment. Except as otherwise provided under Paragraph 9 hereof, at least sixty
days before the expiration of the Renewal Term, Lessee shall give Lessor notice
of its intent to return the Equipment at the end of such Renewal Term. During
the sixty-day period prior to the end of a Term or the Renewal Term, Lessor and
its prospective purchasers or lessees shall have, upon not less than two
business days' prior notice to Lessee and during normal business hours, or at
any time and without prior notice upon the occurrence and continuance of an
Event of Default, the right of access to the premises on which the Equipment is
located to inspect the Equipment, and Lessee shall cooperate in all other
respects with Lessor's remarketing of the Equipment. The provisions of this
Paragraph 14 are of the essence of the Lease, and upon application to any court
of equity having jurisdiction in the premises, Lessor shall be entitled to a
decree against Lessee requiring specific performance of the covenants of Lessee
set forth in this Paragraph 14. If Lessee fails to return the Equipment
4.
<PAGE>
when required, the terms and conditions of the Lease shall continue to be
applicable and Lessee shall continue to pay Rent until the Equipment is received
by Lessor.
15. CASUALTY INSURANCE; LOSS OR DAMAGE. Lessee will maintain, at its own
expense, liability and property damage insurance relating to the Equipment,
insuring against such risks as are customarily insured against on the type of
equipment leased hereunder by businesses in which Lessee is engaged in such
amounts, in such form, and with insurers satisfactory to Lessor; provided,
however, that the amount of insurance against damage or loss shall not be less
than the greater of (a) the replacement value of the Equipment and (b) the
stipulated loss value of the Equipment specified in the applicable Schedule
("Stipulated Loss Value"). Each liability insurance policy shall provide
coverage (including, without limitation, personal injury coverage) of not less
than $1,000,000 for each occurrence, and shall name Lessor as an additional
insured; and each property damage policy shall name Lessor as sole loss payee
and all policies shall contain a clause requiring the insurer to give Lessor at
least thirty days' prior written notice of any alteration in the terms or
cancellation of the policy. Lessee shall furnish to Lessor a copy of each
insurance policy (with endorsements) or other evidence satisfactory to Lessor
that the required insurance coverage is in effect; provided, however, Lessor
shall have no duty to ascertain the existence of or to examine the insurance
policies to advise Lessee if the insurance coverage does not comply with the
requirements of this Paragraph. If Lessee fails to insure the Equipment as
required, Lessor shall have the right but not the obligation to obtain such
insurance, and the cost of the insurance shall be for the account of Lessee due
as part of the next due Rent. Lessee consents to Lessor's release, upon its
failure to obtain appropriate insurance coverage, of any and all information
necessary to obtain insurance with respect to the Equipment or Lessor's interest
therein.
Until the Equipment is returned to and received by Lessor as provided in
Paragraph 14 above, Lessee shall bear the entire risk of theft or destruction
of, or damage to, the Equipment including, without limitation, any condemnation,
seizure, or requisition of title or use ("Casualty Loss"). No Casualty Loss
shall relieve Lessee from its obligations to pay Rent except as provided in
clause (b) below. When any Casualty Loss occurs, Lessee shall immediately notify
Lessor and, at the option of Lessor, shall promptly (a) place such Equipment in
good repair and working order; or (b) pay Lessor an amount equal to the
Stipulated Loss Value of such Equipment and all other amounts (excluding Rent)
payable by Lessee hereunder, together with a late charge on such amounts at a
rate per annum equal to the rate imputed in the Rent payments hereunder (as
reasonably determined by Lessor) from the date of the Casualty Loss through the
date of payment of such amounts, whereupon Lessor shall transfer to Lessee,
without recourse or warranty (express or implied), all of Lessor's interest, if
any, in and to such Equipment on an- "AS IS, WHERE IS" basis. The proceeds of
any insurance payable with respect to the Equipment shall be applied, at the
option of Lessee, either towards (i) repair of the Equipment or (ii) payment of
any of Lessee's obligations hereunder. Lessee hereby appoints Lessor as Lessee's
attorney-in--fact to make claim for, receive payment of, and execute and endorse
all documents, checks or drafts issued with respect to any Casualty Loss under
any insurance policy relating to the Equipment.
16. TAXES. Lessee shall pay when due (subject to Lessee's right to contest
in good faith), and indemnify and hold Lessor harmless from, all sales, use,
excise, and other taxes, charges, and fees (including, without limitation,
income, franchise, business and occupation,
5.
<PAGE>
gross receipts, licensing, registration, titling, personal property, stamp and
interest equalization taxes, levies, imposts, duties, charges, or withholdings
of any nature), and any fines, penalties, or interest thereon, imposed or levied
by any governmental body, agency, or tax authority upon or in connection with
the Equipment, its purchase, ownership, delivery, leasing, possession, use, or
relocation of the Equipment or otherwise in connection with the transactions
contemplated by each Lease or the Rent thereunder, excluding taxes on or
measured by the net income of Lessor. Upon request, Lessee will provide proof of
payment. Unless Lessor elects otherwise, Lessor will pay all property taxes on
the Equipment for which Lessee shall reimburse Lessor promptly upon request.
Lessee shall timely prepare and file all reports and returns which are required
to be made with respect to any obligation of Lessee under this Paragraph 16.
Lessee shall, to the extent permitted by law, cause all billings of such fees,
taxes, levies, imposts, duties, withholdings, and governmental charges to be
made to Lessor in care of Lessee. Upon request, Lessee will provide Lessor with
copies of all such billings.
17. LESSOR'S PAYMENT. If Lessee fails to perform its obligations under
Paragraph 15 or 16 above, or Paragraph 23 below, Lessor shall have the right to
substitute performance, in which case Lessee shall immediately reimburse Lessor
therefor.
18. GENERAL INDEMNITY. Each Lease is a net lease. Therefore, Lessee shall
indemnify Lessor and its successors and assigns against, and hold Lessor and its
successors and assigns harmless from, any and all claims, actions, damages,
obligations, liabilities, and all costs and expenses, including, without
limitation, legal fees incurred by Lessor or its successors and assigns arising
out of each Lease including, without limitation, the purchase, ownership,
delivery, lease, possession, maintenance, condition, use, or return of the
Equipment, or arising by operation of law, except that Lessee shall not be
liable for any claims, actions, damages, obligations, and costs and expenses
determined to have occurred as a result of the gross negligence or willful
misconduct of Lessor or its successors and assigns. Lessee agrees that upon
written notice by Lessor of the assertion of any claim, action, damage,
obligation, liability, or lien, Lessee shall assume full responsibility for the
defense thereof, provided that Lessor's failure to give such notice shall not
limit or otherwise affect its rights hereunder. Any payment pursuant to this
Paragraph (except for any payment of Rent) shall be of such amount as shall be
necessary so that, after payment of any taxes required to be paid thereon by
Lessor, including taxes on or measured by the net income of Lessor, the balance
will equal the amount due hereunder. The provisions of this Paragraph with
regard to matters arising during a Lease shall survive the expiration or
termination of such Lease.
19. ASSIGNMENT BY LESSEE. Lessee shall not, without the prior written
consent of Lessor, (a) assign, transfer, pledge, or otherwise dispose of any
Lease or Equipment, or any interest therein; (b) sublease or lend any Equipment
or permit it to be used by anyone other than Lessee and its employees; or (c)
move any Equipment from the location specified for it in the applicable
Schedule, except that Lessee may move Equipment to another location within the
United States provided that Lessee has delivered to Lessor (A) prior written
notice thereof and (B) duly executed financing statements and other agreements
and instruments (all in form and substance satisfactory to Lessor) necessary or,
in the opinion of the Lessor, desirable to protect Lessor's interest in such
Equipment. Notwithstanding anything to the contrary in the immediately preceding
sentence, Lessee may keep any Equipment consisting of motor vehicles or rolling
stock at any location in the United States.
6.
<PAGE>
20. ASSIGNMENT BY LESSOR. Lessor may assign its interest or grant a
security interest in any Lease and the Equipment individually or together, in
whole or in part. If Lessee is given written notice of any such assignment, it
shall immediately make all payments of Rent and other amounts hereunder directly
to such assignee. Each such assignee shall have all of the rights of Lessor
under each Lease assigned to it. Lessee shall not. assert against any such
assignee any set-off, defense, or counterclaim that Lessee may have against
Lessor or any other person. Notwithstanding any assignment by Lessor, Lessor
shall not be relieved of its obligations under any Lease, but in no event shall
Lessor be liable for any act or omission of its assignee.
21. DEFAULT; NO WAIVER. Lessee or any guarantor of any or all of the
obligations of Lessee hereunder (together with Lessee, the "Lease Parties")
shall be in default under each Lease upon the occurrence of any of the following
events (each, an "Event of Default"): (a) Lessee fails to pay within five days
of when due any amount required to be paid by Lessee under or in connection with
any Lease; (b) any of the Lease Parties fails to perform in any material respect
any other provision under or in connection with a Lease or violates in any
material respect any of the covenants or agreements of such Lease Party under or
in connection with a Lease and such breach is not cured within 10 days after
notice thereof or after Lessee has actual knowledge thereof; (c) any
representation made or financial information delivered or furnished by any of
the Lease Parties under or in connection with a Lease shall prove to have been
inaccurate in any material respect when made; (d) any of the Lease Parties makes
an assignment for the benefit of creditors, whether voluntary or involuntary, or
consents to the appointment of a trustee or receiver, or if either shall be
appointed for any of the Lease Parties or for a substantial part of its property
without its consent and, in the case of any such involuntary proceeding, such
proceeding remains undismissed or unstayed for forty-five days following the
commencement thereof; (e) any petition or proceeding is filed by or against any
of the Lease Parties under any Federal or State bankruptcy or insolvency code or
similar law and, in the case of any such involuntary petition or proceeding,
such petition or proceeding remains undismissed or unstayed for forty-five days
following the filing or commencement thereof, or any of the Lease Parties takes
any action authorizing any such petition or proceeding; (f) any of the Lease
Parties fails to pay when due any indebtedness for borrowed money or under
conditional sales or installment sales contracts or similar agreements, leases,
or obligations evidenced by bonds, debentures, notes, or other similar
agreements or instruments to any creditor (including Lessor under any other
agreement) in an amount in excess of $100,000 after any and all applicable cure
periods therefor shall have elapsed; (g) any judgment shall be rendered against
any of the Lease Parties which shall remain unpaid or unstayed for a period of
sixty days; (h) any of the Lease Parties shall dissolve, liquidate, wind up or
cease its business, sell or otherwise dispose of all or substantially all of its
assets, or make any material change in its lines of business; (i) any of the
Lease Parties shall amend or modify its name, unless such Lease Party delivers
to Lessor, thirty days prior to any such proposed amendment or modification,
written notice of such amendment or modification and within ten days before such
amendment or modification delivers executed financing statements (in form and
substance satisfactory to the Lessor), provided that Lessee shall have 10
business days after notice to cure any default under this subparagraph (i); (j)
any of the Lease Parties shall merge or consolidate with any other entity or
make any material change in its capital structure, in each case without Lessor's
prior written consent, which shall not be unreasonably withheld; (k) any of the
Lease Parties shall suffer any loss or suspension of any material license,
permit or other right or asset necessary to the profitable conduct of its
business,
7.
<PAGE>
fail generally to pay its debts as they mature, or call a meeting for purposes
of compromising its debts; (1) any of the Lease Parties shall deny or disaffirm
its obligations hereunder or under any of the documents delivered in connection
herewith; (m) there is a change, which change results from a single transaction
or series of related transactions, but not from the sale of newly issued
securities to investors, in more than 35% of the ownership of any equity
interests of any of the Lease Parties on the date hereof or more than 35% of
such interests become subject to any contractual, judicial or statutory lien,
charge, security interest, or encumbrance; or (n) any of the Lease Parties
suffers a material adverse change in the business, prospects, operations,
results of operations, assets, liabilities, or condition (financial or
otherwise).
22. REMEDIES. Upon the occurrence and continuation of an Event of Default,
Lessor shall have the right, in its sole discretion, to exercise any one or more
of the following remedies: (a) terminate each Lease; (b) declare any and all
Rent and other amounts then due and any and all Rent and other amounts to become
due under each Lease (collectively, the "Lease Obligations") immediately due and
payable; (c) take possession of any or all items of Equipment, wherever located,
without demand, notice, court order, or other process of law, and without
liability for entry to Lessee's premises, for damage to Lessee's property, or
otherwise; (d) demand that Lessee immediately return any or all Equipment to
Lessor in accordance with Paragraph 14 above, and, for each day that Lessee
shall fail to return any item of Equipment, Lessor may demand an amount equal to
the Rent payable for such Equipment in accordance with Paragraph 14 above; (e)
lease, sell, or otherwise dispose of the Equipment in a commercially reasonable
manner, with or without notice and on public or private bid; (f) recover the
following..-amounts from the Lessee (as damages, including reimbursement of
costs and expenses, liquidated for all purposes and not as a penalty): (i) all
costs and expenses of Lessor reimbursable to it hereunder, including, without
limitation, expenses of disposition of the Equipment, legal fees, and all other
amounts specified in Paragraph 23 below; (ii) an amount equal to the sum of (A)
any accrued and unpaid Rent through the later of (1) the date of the applicable
default, (2) the date that Lessor has obtained possession of the Equipment, or
(3) such other date as Lessee has made an effective tender of possession of the
Equipment to Lessor (the "Default Date") and (B) if Lessor resells or re-lets
the Equipment, Rent at the periodic rate provided for in each Lease for the
additional period that it takes Lessor to resell or re-let all of the Equipment;
(iii) the present value of all future Rent reserved in the Leases and contracted
to be paid over the unexpired Term of the Leases discounted at seven percent
compound interest; (iv) the reversionary value of the Equipment as of the
expiration of the Term of the applicable Lease as set forth on the applicable
Schedule discounted at seven percent compound interest; and (v) any indebtedness
for Lessee's indemnity under Paragraph 18 above, plus a late charge at the rate
specified in Paragraph 3 above, less the amount received by Lessor, if any, upon
sale or re-let of the Equipment; and (g) exercise any other right or remedy to
recover damages or enforce the terms of the Leases. Upon the occurrence and
continuance of an Event of Default, or an event which with the giving of notice
or the passage of time, or both, would result in an Event of Default, Lessor
shall have the right, whether or not Lessor has made any demand or the
obligations of Lessee hereunder have matured, to appropriate and apply to the
payment of the obligations of Lessee hereunder all security deposits and other
deposits (general or special, time or demand, provisional or final) now or
hereafter held by and other indebtedness or property now or hereafter owing by
Lessor to Lessee. Lessor may pursue any other rights or remedies available at
law or in equity, including, without limitation, rights or remedies seeking
damages, specific-performance, and injunctive relief. Any failure of Lessor to
require strict performance
8.
<PAGE>
by Lessee, or any waiver by Lessor of any provision hereunder or under any
Schedule, shall not be construed as a consent or waiver of any other breach of
the same or of any other provision. Any amendment or waiver of any provision
hereof or under any Schedule or consent to any departure by Lessee herefrom or
therefrom shall be in writing and signed by Lessor.
No right or remedy is exclusive of any other provided herein or permitted
by law or equity. All such rights and remedies shall be cumulative and may be
enforced concurrently or individually from time to time.
23. LESSOR'S EXPENSE. Lessee shall pay Lessor on demand all costs and
expenses (including reasonable legal fees and expenses) incurred in connection
with the preparation, execution and delivery of this Agreement and any other
agreements and transactions contemplated hereby, which expenses shall not exceed
$3,500 without the written consent of Lessee and all costs and expenses in
protecting and enforcing Lessor's rights and interests in each Lease and the
equipment, including, without limitation, legal, collection, and remarketing
fees and expenses incurred by Lessor in enforcing the terms, conditions, or
provisions of each Lease or upon the occurrence and continuation of an Event of
Default.
24. LESSEE'S WAIVERS. To the extent permitted by applicable law, Lessee
hereby waives any and all rights and remedies conferred upon a lessee by
Sections 2A-508 through 2A-522 of the UCC. To the extent permitted by applicable
law, Lessee also hereby waives any rights now or hereafter conferred by statute
or otherwise which may require Lessor to sell, lease, or otherwise use any
Equipment in mitigation of Lessor's damages as set forth in Paragraph 22 above
or which may otherwise limit or modify any of Lessor's rights or remedies under
Paragraph 22, except that Lessee shall have the right to require Lessor to
convey to Lessee, without representation, warranty or recourse, all of Lessor's
rights, title and interest in and to the Equipment upon Lessor's receipt,
following an event of default and the exercise of the Lessor's remedies, of the
amounts specified in Paragraph 22(f).
25. NOTICES; ADMINISTRATION. Except as otherwise provided herein, all
notices, approvals, consents, correspondence, or other communications required
or desired to be given hereunder shall be given in writing and shall be
delivered by overnight courier, hand delivery, or certified or registered mail,
postage prepaid, if to Lessor, then to Transamerica Technology Finance Division,
76 Batterson Park Road, Farmington, Connecticut 06032, Attention: Assistant Vice
President, Lease Administration, with a copy to Lessor at Riverway II, West
Office Tower, 9399 West Higgins Road, Rosemont, Illinois 60018, Attention: Legal
Department, if to Lessee, then to Dendreon Corporation, 3005 First Avenue,
Seattle, Washington, 98121, Attention: Chief Financial Officer or such other
address as shall be designated by Lessee or Lessor to the other party. All such-
notices and correspondence shall be effective when received.
26. REPRESENTATIONS. Lessee represents and warrants to Lessor that (a)
Lessee is duly organized, validly existing, and in good standing under the laws
of the State of its incorporation; (b) the execution, delivery, and performance
by Lessee of this Agreement are within Lessee's powers, have been duly
authorized by all necessary action, and do not and will not contravene (i)
Lessee's organizational documents or (ii) any law, regulation, rule, or
contractual restriction binding on or affecting Lessee; (c) no authorization or
approval or other
9.
<PAGE>
action by, and no notice to or fling with, any governmental authority or
regulatory body is required for the due execution, delivery, and performance by
Lessee of this Agreement; (d) each Lease constitutes the legal, valid, and
binding obligations of Lessee enforceable against Lessee in accordance with its
terms; (e) to Lessee's knowledge, the cost of each item of Equipment does not
exceed the fair and usual price for such type of equipment purchased in like
quantity and reflects all discounts, rebates, and allowances for the Equipment
(including, without limitation, discounts for advertising, prompt payment,
testing, or other services) given to the Lessee by the manufacturer, supplier,
or any other person; and (f) all information supplied by Lessee to Lessor in
connection herewith is correct and does not omit any material statement
necessary to insure that the information supplied is not misleading.
27. FURTHER ASSURANCES. Lessee, upon the request of Lessor, will execute,
acknowledge, record, or file, as the case may be, such further documents and do
such further acts as may be reasonably necessary, desirable, or proper to carry
out more effectively the purposes of this Agreement. Lessee hereby appoints
Lessor as its attorney-in-fact to execute on behalf of Lessee and authorizes
Lessor to file without Lessee's signature any UCC financing statements and
amendments Lessor deems advisable.
28. FINANCIAL STATEMENTS. Lessee shall deliver to Lessor: (a) as soon as
available, but not later than 120 days after the end of each fiscal year of
Lessee and its consolidated subsidiaries, the consolidated balance sheet, income
statement, and statements of cash flows and shareholders equity for Lessee and
its consolidated subsidiaries (the "Financial Statements") for such year,
reported on by independent certified public accountants without an adverse
qualification; and (b) as soon as available, but not later than 60 days after
the end of each of the first three fiscal quarters in any fiscal year of Lessee
and its consolidated subsidiaries, the Financial Statements for such fiscal
quarter, together with a certification duly executed by a responsible officer of
Lessee that such Financial Statements have been prepared in accordance with
generally accepted accounting principles and are fairly stated in all material
respects (subject to normal year-end audit adjustments). Lessee shall also
deliver to Lessor as soon as available copies of all press releases and other
similar communications issued by Lessee.
29. CONSENT TO JURISDICTION. Lessee irrevocably submits to the
jurisdiction of any Illinois state or federal court sitting in Illinois for any
action or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby, and Lessee irrevocably agrees that all claims
in respect of any such action or proceeding may be heard and determined in such
Illinois state or federal court.
30. WAIVER OF JURY TRIAL. LESSEE AND LESSOR IRREVOCABLY WAIVE ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACIIONS CONTEMPLATED HEREBY.
31. FINANCE LEASE. Lessee and Lessor agree that each Lease is a "Finance
Lease" as defined by Section 2A-103(g) of the UCC. Lessee acknowledges that
Lessee has reviewed and approved each written Supply Contract (as defined by UCC
2A-103(y)) covering Equipment purchased from each "Supplier" (as defined by UCC
2A-103(x)) thereof.
10.
<PAGE>
32. NO AGENCY. Lessee acknowledges and agrees that neither the
manufacturer or supplier, nor any salesman, representative, or other agent of
the manufacturer or supplier, is an agent of Lessor. No salesman,
representative, or agent of the manufacturer or supplier is authorized to waive
or alter any term or condition of this Agreement or any Schedule and no
representation as to the Equipment or any other matter by the manufacturer or
supplier shall in any way affect Lessee's duty to pay Rent and perform its other
obligations as set forth in this Agreement or any Schedule.
33. SPECIAL TAX INDEMNIFICATION. Lessee acknowledges that Lessor, in
determining the Rent due hereunder, has assumed that certain tax benefits as are
provided to an owner of property under the Internal Revenue Code of 1986, as
amended (the "Code"), and under applicable state tax law, including, without
limitation, depreciation deductions under Section 168(b) of the Code, and
deductions under Section 163 of the Code in an amount at least equal to the
amount of interest paid or accrued by Lessor with respect to any indebtedness
incurred by Lessor in financing its purchase of the Equipment, are available to
Lessor as a result of the lease of the Equipment. In the event Lessor is unable
to obtain such tax benefits as a result of an act or omission of Lessee, is
required to include in income any amount other than the Rent, or is required to
recognize income in respect of the Rent earlier than anticipated pursuant to
this Agreement, Lessee shall pay Lessor additional rent ("Additional Rent") in a
lump sum in an amount needed to provide Lessor with the same after-tax yield and
after-tax cash flow as would have been realized by Lessor had Lessor (i) been
able to obtain such tax benefits, (ii) not been required to include any amount
in income other than the Rent, and (iii) not been required to recognize income
in respect of the Rent earlier than anticipated pursuant to this Agreement. The
Additional Rent shall be computed by Lessor, which computation shall be binding
on Lessee. The Additional Rent shall be due immediately upon written notice by
Lessor to Lessee of Lessor's inability to obtain tax benefits, the inclusion of
any amount in income other than the Rent or the recognition of income in respect
of the Rent earlier than anticipated pursuant to this Agreement. The provisions
of this Paragraph 33 shall survive the termination of this Agreement.
34. GOVERNING LAW; SEVERABILITY. EACH LEASE SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF. IF ANY PROVISION SHALL BE HELD TO BE INVALID OR UNENFORCEABLE, THE
VALIDITY AND ENFORCEABILITY OF THE REMAINING PROVISIONS SHALL NOT IN ANY WAY BE
AFFECTED OR IMPAIRED.
LESSEE ACKNOWLEDGES THAT LESSEE HAS READ THIS AGREEMENT AND THE SCHEDULE
HERETO, UNDERSTANDS THEM, AND AGREES TO BE BOUND BY THEIR TERMS AND CONDITIONS.
FURTHER, LESSEE AND LESSOR AGREE THAT THIS AGREEMENT, THE SCHEDULES DELIVERED
AND SIGNED BY LESSEE IN CONNECTION HEREWITH FROM TIME TO TIME, AND THE
COMMITMENT LETTER ARE THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT
BETWEEN THE PARTIES, SUPERSEDING ALL PROPOSALS OR PRIOR AGREEMENTS, ORAL OR
WRITTEN, AND ALL OTHER COMMUNICATIONS BETWEEN THE PARTIES RELATING TO THE
SUBJECT MATTER HEREOF. SHOULD THERE EXIST ANY INCONSISTENCY BETWEEN THE TERMS OF
THE COMMITMENT LETTER AND THIS AGREEMENT, THE TERMS OF THIS AGREEMENT SHALL
PREVAIL.
11.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed by their duly authorized officers as of the date
first written above.
Dendreon Corporation
By: /s/ Martin A. Simonetti
------------------------------------
Name: Martin A. Simonetti
-----------------------------------
Title:
----------------------------------
Federal Tax ID:
-------------------------
Transamerica Business Credit Corporation
By:
------------------------------------
Name:
Title:
12.
<PAGE>
Exhibit A
October 2, 1997
Mr. Peter S. Garcia
Chief Financial Officer
Dendreon Corporation
291 North Bernardo Avenue
Mountain View, CA 94043
Dear Pete:
Transamerica Business Credit Corporation - Technology Finance Division
("Lessor") is pleased to offer this commitment (this "Commitment") to lease the
equipment described below to Dendreon Corporation. This Commitment supersedes
all prior correspondence, commitments, and oral or other communications relating
to leasing arrangements between Lessor and Lessee.
The outline of this commitment is as follows:
Lessee: Dendreon Corporation
Lessor: Transamerica Business Credit Corporation -
Technology Finance Division
Equipment: Laboratory equipment, office equipment, computer
hardware and software and tenant improvements (all
equipment subject to Lessor's approval prior to
funding), including without limitation, all
additions, improvements, replacements, repairs,
appurtenances, substitutions, and attachments
thereto and all proceeds thereof ("Equipment").
Equipment to be leased hereunder may include
equipment purchased by Lessee since
January 1, 1997 (sale/leaseback).
Equipment Cost: Not to exceed $1,000,000, of which up to $300,000
may be used for tenant improvements and software.
Equipment Location: Mountain View, CA (or other location acceptable to
the Lessor). Anticipated Delivery:
Anticipated Delivery: Q1-1997 to Q4-1998.
Lease Term Commencement: Upon delivery of the Equipment or upon each
completion of deliveries of items of Equipment
with aggregate cost of not less than $50,000, but
no later than December 31, 1998.
Term: From each Lease Term Commencement until 48 months
from the first day of the month next following or
coincident with
1.
<PAGE>
that Lease Term Commencement.
Monthly Rent: Monthly Rent equal to 2.4425% of Equipment Cost
will be payable monthly in advance. The first
month's rent will be payable upon signing the
lease.
Adjustment to The Lessor will increase or decrease the Monthly
Monthly Lease Payments: Lease Payments as of the date of each Lease Term
Commencement proportionally to the change in the
weekly average of the interest rates of the like-
term U.S. Treasury Securities from the week ending
August 29, 1997 to the week preceding the date of
each Lease Term Commencement, as published in the
Wall Street Journal. As of the date of each Lease
Term Commencement, the Monthly Lease Payments will
be fixed for the term. A schedule of the actual
Monthly Lease Payments will be provided by the
Lessor following each Lease Term Commencement.
Net Lease: The lease will be a net lease under which the
Lessee will be responsible for maintenance,
insurance, taxes, and all other costs and
expenses.
Taxes: Sales or use taxes will be added to the Equipment
Cost or collected on the gross rentals, as
appropriate.
Insurance: Prior to any delivery of Equipment, the Lessee
will furnish confirmation of insurance acceptable
to the Lessor covering the Equipment including
primary, all risk, physical damage, property
damage and bodily injury with appropriate loss
payee endorsement in favor of the Lessor.
Conditions Precedent to 1. No material adverse change in the financial
Each Lease Term condition, operation or prospects of the
Commencement: Lessee prior to funding. The Lessor reserves
the right to rescind any unused portion of
its commitment in the event of a material
adverse change in the financial condition,
operation or prospects of the Lessee.
2. Completion of the documentation and final
terms of the proposed financing satisfactory
to Lessor and Lessor's counsel.
3. Results of all due diligence, including lien,
judgment and tax searches and other matters
Lessor may reasonably request shall be
satisfactory to Lessor and Lessor's counsel.
4. Receipt by Lessor of duly executed Lease
documentation in form and substance
satisfactory to Lessor and its counsel.
2.
<PAGE>
5. Lessor shall receive title and a valid and
perfected first priority lien and security
interest in all Equipment acquired through
the use of this Commitment and Lessor shall
have received satisfactory evidence that
there are no liens on any Equipment except as
expressly permitted herein.
Purchase Option: The Lessee will have the option to purchase all
(but not less than all) the Equipment at the
expiration of the term of the lease for ten
percent (10%) of Equipment Cost, plus applicable
sales and other taxes
Automatic Renewal: In the event the Lessee does not exercise the
Purchase Option described above, the lease will
automatically renew for a term of one year with
Monthly Rentals equal to 1.00% of Equipment Cost
payable monthly in advance. At the expiration of
the renewal period, the Lessee will have the
option to purchase all (but not less than all) the
Equipment for $1.00.
Warrant Coverage:- As consideration for Lessor's commitment to enter
into this equipment Lease in accordance with the
terms outlined herein, the Lessee will issue to
Lessor warrants to purchase 8,333 shares of the
Lessee's common stock at an exercise price of
$3.60 per share. The warrants will be exercisable
for a period of seven years and Lessor will have
the option to exercise the Warrants without
payment of the exercise price and receive only
that number of shares which represents the value
of the difference between the fair market value of
the shares and the exercise price (i.e., "net
issuance" or "cashless exercise").
Additional Covenants: There will be no actual or threatened conflict
with, or violation of, any regulatory statute,
standard or rule relating to the lessee, its
present or future operations, or the Equipment.
The Lessee will be required to provide quarterly
financial information. All information supplied by
the Lessee will be correct and will not omit any
statement necessary to make the information
supplied not be misleading. There will be no
material breach of the representations and
warranties of the Lessee in the lease. The
representations will include that the Equipment
Cost of each item of the Equipment does not exceed
the fair and usual price for like quantity
purchased of such item and reflects all discounts,
rebates and allowances for the Equipment given to
Lessee any affiliate of Lessee by the
manufacturer, supplier or anyone else including,
without limitation, discounts for advertising,
prompt payment, testing
3.
<PAGE>
or other services.
No financial covenants will be required in
connection with this transaction.
Fees and Expenses: The Lessee will be responsible for the Lessor's
reasonable expenses in connection with the
transaction. Such expenses shall not exceed $3,500
without the prior written consent of the Lessee.
Law: This letter and the proposed Lease are intended to
be governed by and construed in accordance with
Illinois law without regard to its conflict of law
provisions.
Indemnity: Lessee agrees to indemnify and to hold harmless
Lessor, and its officers, directors and employees
against all claims, damages, liabilities and
expenses which may be incurred by or asserted
against any such person in connection with or
arising out of this letter and the transactions
contemplated hereby, other than claims, damages,
liability, and expense resulting from such
person's gross negligence or willful misconduct.
Confidentiality This letter is delivered to you with the
understanding that neither it nor its substance
shall be disclosed publicly or privately to any
third person except those who are in a
confidential relationship to you (such as your
legal Counsel and accountants), or where the same
is required by law and then only on the basis that
it not be further disclosed, which conditions
Lessee and its agents agree to be bound by upon
acceptance of this letter.
Without limiting the generality of the foregoing,
none of such persons shall use or refer to Lessor
or to any affiliate name in any disclosures made
in connection with any of the transactions without
Lessor's prior written consent. Upon completion of
the initial takedown by Lessor and Lessee, the
Lessee will no longer be required to obtain
Lessor's prior written consent to disclose the
transaction contemplated hereby. In addition, the
Lesser agrees to provide camera ready artwork of
typestyles and logos of the Lessee for use in
promotional material by the Lessor.
Conditions of Acceptance: This Commitment Letter is intended to be a summary
of the most important elements of the agreement to
enter into a leasing transaction with Lessee, and
it is subject to all requirements and conditions
contained in Lease documentation
4.
<PAGE>
proposed by Lessor or its counsel in the course of
closing the Lease described herein. Not every
provision that imposes duties, obligations,
burdens, or limitations on Lessee is contained
herein, but shall be contained in the final Lease
documentation satisfactory to Lessor and its
counsel.
EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY SUIT, ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATED TO THIS LETTER OR THE
TRANSACTION DESCRIBED IN THIS LETTER.
Application Fee: The $10,000 Application Fee previously paid by
Lessee shall be first applied to the costs and
expenses of the Lessor in connection with the
transaction (not to exceed $3,500), and any
remainder shall be applied pro-rata to the second
month's rent due under each Lease.
Commitment Expiration: This commitment shall expire on October 10, 1997
unless prior thereto either extended in writing by
the Lessor or accepted as provided below by the
Lessee.
Should you have any questions, please call me. If you wish to accept this
Commitment, please so indicate by signing and returning the enclosed duplicate
copy of this letter to me by October 10, 1997.
Yours truly,
Transamerica Business Credit
Corporation - Technology
Finance Division
By: /s/ Gerald A. Michaud
------------------------
Gerald A. Michaud
Senior Vice President - Marketing
Accepted this 7/th/ day of October, 1997
Dendreon Corporation
By: /s/ Peter A. Garcia
-------------------
Its Chief Financial Officer
5.
<PAGE>
Exhibit B
April 14, 1999
Martin A. Simonetti
Chief Financial Officer
Dendreon Corporation
3005 First Avenue
Seattle, Washington 98121
Dear Martin:
Transamerica Business Credit Corporation - Technology Finance Division
("Lessor") is pleased to offer this commitment (this "Commitment") to lease the
equipment described below to Dendreon Corporation ("Lessee"). Except with
respect to the transactions described in a commitment letter dated
October 2, 1997 (the "Prior Commitment"), this Commitment supersedes all prior
correspondence, proposals, and oral or other communications relating to leasing
arrangements between Lessor and Lessee.
The outline of this offer is as follows:
Lessor: Transamerica Business Credit Corporation -
Technology Finance Division
Lessee: Dendreon Corporation
Equipment Cost: Not to exceed $500,000 in the aggregate (in
addition to Prior Commitment).
Equipment: Laboratory and Office Equipment, including but
limited to all additions, accessions,
improvements, replacements and attachments thereto
and proceeds (including insurance proceeds)
thereof (the "Equipment"). All Equipment subject
to Lessee approval prior to funding.
Location of Equipment: Seattle, Washington and Mountain View, California:
Draw-Down Expiration: No Leases will be funded after December 31, 1999.
Lease Term Commencement: Each Lease Term will commence upon delivery of the
equipment or upon each delivery of items of
equipment having an aggregate cost of not less
than $50,000 and will continue through 48 months
from the first day of the month next following or
coincident with commencement of that Lease Term.
Payment Term: Monthly Rent equal to 2.4425% of Equipment Cost
will be payable monthly in advance. The first
month's rent will be
1.
<PAGE>
payable upon signing the lease.
Monthly Rent: Monthly Rent equal to 2.4425% of Equipment Cost
will be payable monthly in advance. The first
month's rent will be payable upon signing the
lease.
The Lessor will increase or decrease the Monthly
Lease Payments as of the date of each Lease Term
Commencement proportionally to the change in the
weekly average of the interest rates of the like-
term U.S. Treasury Securities from the week ending
August 29, 1997 (6.17%) to the week preceding the
date of each Lease Term Commencement, as published
in the Wall Street Journal. As of the date of each
Lease Term Commencement, the Monthly Lease
Payments will be fixed for the term. A schedule of
the actual Monthly Lease Payments will be provided
by the Lessor following each Lease Term
Commencement.
Purchase Option: The Lessee will have the option to purchase all
(but not less than all) the Equipment at the
expiration of the term of the lease for ten
percent (10%) of Equipment Cost, plus applicable
sales and other taxes.
Automatic Renewal: In the event the Lessee does not exercise the
Purchase Option described above, the lease will
automatically renew for a term of one year with
Monthly Rentals equal to 1.00% of Equipment Cost
payable monthly in advance. At the expiration of
the renewal period, the Lessee will have the
option to purchase all (but not less than all) the
Equipment for $1.00.
Interim Rent: Interim Rent will accrue from the date each Lease
term commences until the next following first day
of a month (unless the Lease Term commences on the
first day of a moth). Interim Rent will be
calculated at the daily equivalent of the
currently adjusted Monthly Rent.
Warrant Coverage:- As an inducement to the Lessor to enter into this
Equipment Lease, the Lessee will issue to Lessor
warrants to purchase 3,000 shares of the Lessee's
common stock at an exercise price of $5.00 per
share. The warrants will be exercisable for a
period of seven years and Lessor will have the
option to exercise the Warrants without payment of
the exercise price and receive only that number of
shares which represents the value of the
difference between the fair market value of the
shares and the exercise price (i.e., "net
issuance" or "cashless exercise").
2.
<PAGE>
Net Lease: The Leases will be a net lease under which the
Lessee will be responsible for maintenance,
insurance, taxes, and all other costs and
expenses.
Taxes: Sales or use taxes will be added to the Equipment
Cost or collected on the gross rentals, as
appropriate.
Insurance: Prior to any delivery of Equipment, the Lessee
will furnish confirmation of insurance acceptable
to the Lessor covering the Equipment including
primary, all risk, physical damage, property
damage and bodily injury with appropriate loss
payee endorsement in favor of the Lessor.
Conditions Precedent to 1. No material adverse change in the financial
Each Lease Term condition, operation or prospects of the
Commencement: Lessee prior to funding. The Lessor reserves
the right to rescind any unused portion of
its commitment in the event of a material
adverse change in the financial condition,
operation or prospects of the Lessee.
2. Completion of the documentation and final
terms of the proposed financing satisfactory
to Lessor and Lessor's counsel.
3. Results of all due diligence, including lien,
judgment and tax searches and other matters
Lessor may reasonably request shall be
satisfactory to Lessor and Lessor's counsel.
4. Receipt by Lessor of duly executed Lease
documentation in form and substance
satisfactory to Lessor and its counsel.
5. Lessor shall receive title and a valid and
perfected first priority lien and security
interest in all Equipment acquired through
the use of this Commitment and Lessor shall
have received satisfactory evidence that
there are no liens on any Equipment except as
expressly permitted herein.
Additional Covenants: There will be no actual or threatened conflict
with, or violation of, any regulatory statute,
standard or rule relating to the lessee, its
present or future operations, or the Equipment.
All information supplied by the Lessee will be
correct and will not omit any statement necessary
to make the information supplied not be
misleading. There will be no material breach of
the representations and warranties of the Lessee
in the lease. The representations will include
that the Equipment Cost of each item of the
Equipment does not exceed the fair and usual
3.
<PAGE>
price for like quantity purchased of such item and
reflects all discounts, rebates and allowances for
the Equipment given to Lessee any affiliate of
Lessee by the manufacturer, supplier or anyone
else including, without limitation, discounts for
advertising, prompt payment, testing or other
services.
Expenses: All costs and expenses incurred by the Lessor in
connection with the underwriting and closing of
the Leases will be paid by the Lessee whether or
not any Leases are consummated and funds are
advanced by the Lessor. Such expenses shall not
exceed $1,000 without the consent of the Lessee.
Law: This letter and the proposed Lease are intended to
be governed by and construed in accordance with
Illinois law without regard to its conflict of law
provisions.
Indemnity-: Lessee agrees to indemnify and to hold harmless
Lessor, and its officers, directors and employees
against all claims, damages, liabilities and
expenses which may be incurred by or asserted
against any such person in connection with or
arising out of this letter and the transactions
contemplated hereby, other than claims, damages,
liability, and expense resulting from such
person's gross negligence or willful misconduct.
Confidentiality This letter is delivered to you with the
understanding that neither it nor its substance
shall be disclosed publicly or privately to any
third person except those who are in a
confidential relationship to you (such as your
legal Counsel and accountants), or where the same
is required by law and then only on the basis that
it not be further disclosed, which conditions
Lessee and its agents agree to be bound by upon
acceptance of this letter.
Without limiting the generality of the foregoing,
none of such persons shall use or refer to Lessor
or to any affiliate name in any disclosures made
in connection with any of the transactions without
Lessor's prior written consent.
Upon completion of the initial takedown by Lessor
and Lessee, the Lessee will no longer be required
to obtain Lessor's prior written consent to
disclose the transaction contemplated hereby. In
addition, the Lesser agrees to provide camera
ready artwork of typestyles and logos of the
Lessee for use in promotional material by the
Lessor.
Conditions of Acceptance: This Commitment Letter is intended to be a summary
of the most important elements of the agreement to
enter into a
4.
<PAGE>
leasing transaction with Lessee, and it is subject
to all requirements and conditions contained in
Lease documentation proposed by Lessor or its
counsel in the course of closing the Lease
described herein. Not every provision that imposes
duties, obligations, burdens, or limitations on
Lessee is contained herein, but shall be contained
in the final Lease documentation satisfactory to
Lessor and its counsel.
EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY SUIT, ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATED TO THIS LETTER OR THE
TRANSACTION DESCRIBED IN THIS LETTER.
Application Fee: The $5,000 Application Fee previously paid by
Lessee shall be first applied to the costs and
expenses of the Lessor in connection with the
transaction, and any remainder shall be applied
pro-rata (based on the amount of each funding to
the total amount of this commitment) to the second
month's rent due under each Lease.
Commitment Expiration: This commitment shall expire on April 21, 1999
unless prior thereto either extended in writing by
the Lessor or accepted as provided below by the
Lessee.
Should you have any questions, please call me. If you wish to accept this
Commitment, please so indicate by signing and returning the enclosed duplicate
copy of this letter to me by April 21, 1999.
Yours truly,
Transamerica Business Credit
Corporation - Technology
Finance Division
By: /s/ Gerald A. Michaud
------------------------
Gerald A. Michaud
Senior Vice President - Marketing
Accepted this 7/th/ day of October, 1997
Dendreon Corporation
By: /s/ Martin A. Simonetti
-----------------------
Its Chief Financial Officer
5.
<PAGE>
EXHIBIT 10.14
SECOND AMENDMENT TO MASTER
LEASE AGREEMENT
THIS SECOND AMENDMENT to MASTER LEASE AGREEMENT (the "Amendment"),
dated as of January 31, 2000, by and between Dendreon Corporation (the
"Lessee"), a Delaware Corporation, having its principal place of business and
chief executive office at 3005 First Avenue, Seattle, Washington 98121, and
TRANSAMERICA BUSINESS CREDIT CORPORATION (the "Lessor"), a Delaware Corporation,
having its principal office at Riverway II, West Office Tower, 9399 West Higgins
Road, Rosemont, Illinois, 60018.
WITNESSETH:
WHEREAS, the Lessee and the Lender are parties to a Master Lease
Agreement, dated as of December 11, 1997 as amended and restated on May 28, 1999
(as amended, the "Lease Agreement"; capitalized terms used herein shall have the
meanings assigned to such terms in the Lease Agreement unless otherwise defined
herein); and
WHEREAS, the parties hereto desire to amend the Lease Agreement in the
manner set forth herein.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the Lessee and Lender hereby agree as follows:
1. Amendment to Lease Agreement. Effective as of the date this
Amendment is fully executed by the Lender and Lessee hereof, and subject to the
satisfaction of the Lessee of conditions as determined by Lender, the Lease
Agreement is hereby amended as follows:
(a) The paragraph entitled "Lease" is hereby deleted in its
entirety and the following is inserted in lieu thereof:
1. LEASE. Subject to and upon all of the terms and
conditions of this Agreement and each Schedule, Lessor hereby agrees to lease to
Lessee and Lessee hereby agrees to lease from Lessor the Equipment for the Term
(as defined in Paragraph 2 below) thereof. The timing and financial scope of
Lessor's obligation to enter into Leases hereunder are limited as set forth in
the Commitment Letters executed by Lessor and Lessee, dated as of October 2,
1997, April 14, 1999 and December 30, 1999 and attached hereto as Exhibit A,
Exhibit B and Exhibit C (collectively the "Commitment Letters").
2. Representations and Warranties of the Lessee. The Lessee
represents and warrants as follows:
(a). Since May 28, 1999, there has occurred no development, event
or change that has had or could reasonably be expected to have a Material
Adverse Effect.
(b). No Default or Event of Default has occurred and is
continuing.
1.
<PAGE>
(c). The representations and warranties of such Lessee contained
in Section 26 of the Lease Agreement are true and correct in all material
respects on the date hereof as though made on and as of the date hereof, except
to the extent that such representation and warranties expressly relate solely to
an earlier date (in which case such representations and warranties were true and
correct on and as of such earlier date).
(d). This Amendment constitutes the legal, valid and binding
obligation of such Lessee, enforceable against the Lessee in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency and
other laws affecting creditors' rights generally and by general principles of
equity.
3. Expenses. The Lessee shall pay for all of the reasonable costs
and expenses incurred by the Lender in connection with the transactions
contemplated by the Amendment, including, without limitation, the reasonable
fees and expenses of counsel to the Lender.
4. Miscellaneous.
(a). Except as expressly amended herein, all of the terms and
provisions of the Lease Agreement and the other Lease Documents are ratified and
confirmed in all respects and shall remain in full force and effect.
(b). Upon the effectiveness of the Amendment, all references in
the Lease Documents to the Lease Agreement shall mean the Lease Agreement as
amended by this Amendment and all references to the Lease Agreement to the "this
Agreement", "hereof", "herein", or similar terms, shall mean and refer to the
Lease Agreement as amended by this Amendment.
(c). The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as an amendment to or
waiver of any right, power or remedy of the Lender under any of the Lease
Documents, or constitute an amendment or waiver of any provision of any of the
Lease Documents.
(d). This Amendment may be executed by the parties hereto
individually or in combination, in one or more counterparts, each of which shall
be an original and all of which shall constitute one and the same agreement.
This Amendment may be executed and delivered by telecopier with the same force
and effect as if the same were a fully executed and delivered original manual
counterpart.
(e) This Amendment shall constitute a Lease Document.
5. Governing Law. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS WITHOUT
GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
2.
<PAGE>
Exhibit A to Second Amendment
See Exhibit A to Amended and Restated Master Lease Agreement
3.
<PAGE>
Exhibit B to Second Amendment
See Exhibit B to Amended and Restated Master Lease Agreement
<PAGE>
Exhibit C
[TRANSAMERICA BUSINESS CREDIT LETTERHEAD]
December 30, 1999
Martin Simonetti
Chief Financial Officer
Dendreon Corporation
3005 First Avenue
Seattle, WA 98121
Dear Martin:
Transamerica Business Credit Corporation - Technology Finance Division
("Lessor") is pleased to offer this commitment (this "Commitment") to lease the
equipment described below to Dendreon Corporation ("Lessee"). Except with
respect to the transactions described in commitment letters dated as of October
2, 1997, April 14, 1999 and July 9, 1999 (collectively referred to as the "Prior
Commitments"), this Commitment supercedes all prior correspondence, proposals,
and oral or other communications relating to leasing arrangements between Lessor
and Lessee.
The outline of this offer is as follows:
Lessor: Transamerica Business Credit Corporation -Technology
Finance Division and/or its affiliates, successors or
assigns.
Lessee: Dendreon Corporation
Equipment Cost: Not to exceed $1,500,000 in the aggregate (in
addition to the Prior Commitments). The availability
under the Prior Commitments must be completely drawn-
down prior to any funding under this Commitment.
Equipment: Various laboratory, office equipment and computer
equipment and related soft costs (the "Equipment").
All Equipment subject to Lessor approval prior to
funding.
Location of Equipment: Seattle, WA
Availability and $1,000,000 will be available immediately upon the
Draw Down Expiration: closing of this transaction with the remaining
$500,000 available upon the closing of an additional
equity financing of not less than $8,000,000 or a
corporate agreement which provides no less than
$8,000,000 in "up-front" cash proceeds. No Leases
will be
<PAGE>
funded after September 30, 2000.
Lease Term: Each Lease Term will commence upon delivery of the
equipment or upon each delivery of items of equipment
having an aggregate cost of not less than $50,000,
and will continue through 48 months from the first
day of the month next following or coincident with
commencement of that Lease Term.
Payment Terms: Month Rent equal to 2.52% of Equipment Cost will be
payable monthly in advance. The first month's rent
will be payable upon signing the lease.
Adjustment to The Lessor will increase or decrease the Monthly
Payment Terms Lease Payment as of the date of each Lease Term
Commencement proportionally to the change in the
weekly average of the interest rates of the four-year
U.S. Treasury Securities from the week ending
November 12, 1999 (5.87%) to the week preceding the
date of each Lease Term Commencement, as published in
the Wall Street Journal. As of the date of each Lease
Term Commencement, the Monthly Lease Payments will be
fixed for the term. A schedule of the actual Monthly
Lease Payments will be provided by the Lessor
following each Lease Term Commencement.
Purchase Options: The Lessee will have the option to purchase all (but
not less than all) the Equipment at the expiration of
the term of the lease for ten percent (10%) of
Equipment Cost, plus applicable sales and other
taxes.
Automatic Renewal: In the event the Lessee does not exercise the
Purchase Option described above, the lease will
automatically renew for a term of one year with
Monthly Rentals equal to 1.00% of Equipment Cost
payable monthly in advance. At the expiration of the
renewal period, the Lessee will have the option to
purchase all (but not less than all) the Equipment
for $1.00.
Interim Rent: Interim Rent will accrue from the date each Lease
Term commences until the next following first day of
a month (unless the Lease Term commences on the first
day of a month). Interim Rent will be calculated at
the daily equivalent of the currently adjusted
Monthly Rent.
Net Lease: The Leases will be net leases under which the Lessee
will be responsible for maintenance, insurance, taxes
and all other costs and expenses.
Taxes: Sales or use taxes will be added to the Equipment
Cost or
2.
<PAGE>
collected on the gross rentals, as
appropriate.
Insurance: Prior to any delivery of equipment, the Lessee will
furnish confirmation of insurance acceptable to the
Lessor covering the Equipment including primary, all
risk, physical damage, property damage and bodily
injury with appropriate loss payee and additional
insured endorsements in favor of the Lessor.
Conditions Precedent 1. No material adverse change in the financial
to Each Lease Term condition, operation or prospects of the Lessee
Commencement: prior to funding. The Lessor reserves the right
to rescind any unused portion of its commitment
in the event of a material adverse change in the
financial condition, operation or prospects of
the Lessee.
2. Completion of the documentation and final terms
of the proposed financing satisfactory to Lessor
and Lessor's counsel.
3. Results of all due diligence, including lien,
judgment and tax searches and other matters
Lessor may reasonably request shall be
satisfactory to Lessor and Lessor's counsel.
4. Receipt by Lessor of duly executed Lease
documentation in form and substance satisfactory
to Lessor and its counsel.
5. Lessor shall receive title and a valid and
perfected first priority lien and security
interest in all Collateral acquired through the
use of this Commitment and Lessor shall have
received satisfactory evidence that there are no
liens on any Collateral except as expressly
permitted herein.
6. Satisfactory updated reference from Vulcan
Ventures.
Additional Covenants: There will be no actual or threatened conflict with,
or violation of, any regulatory statute standard or
rule relating to the Lessee, its present or future
operations, or the Collateral.
Lessee will be required to provide quarterly
financial information. All information supplied by
the Lessee will be correct and will not omit any
statement necessary to make the information supplied
not be misleading. There will be no material breach
of the representations and warranties of the Lessee
in the Loan.
Expenses: All costs and expenses incurred by the Lessor in
connection with the underwriting and closing of the
Leases will be paid by the Lessee whether or not any
Leases are consummated and funds are advanced by the
Lessor.
Law: This letter and the proposed Lease are intended to be
governed by and construed in accordance with Illinois
law without regard to its conflict of law provisions.
3.
<PAGE>
Indemnity: Lessee agrees to indemnify and to hold harmless
Lessor, and its officers, directors and employees
against all claims, damages, liabilities and expenses
which may be incurred by or asserted against any such
person in connection with or arising out of this
letter and the transactions contemplated hereby,
other than claims, damages, liability, and expense
resulting from such person's gross negligence or
willful misconduct.
Confidentiality: This letter is delivered to you with the
understanding that neither it nor its substance shall
be disclosed publicly or privately to any third
person except those who are in confidential
relationship to you (such as your legal counsel and
accountants), or where the same is required by law
and then only on the basis that it not be further
disclosed, which conditions Lessee and its agents
agree to be bound by upon acceptance of this letter.
Without limiting the generality of the foregoing,
none of such persons shall use or refer to Lessor or
to any affiliate name in any disclosures made in
connection with any of the transactions without
Lessor's prior written consent.
Upon completion of the initial takedown by Lessor and
Lessee, the Lessee will no longer be required to
obtain Lessor's prior written consent to disclose the
transaction contemplated hereby. In addition, the
Lessee agrees to provide camera ready artwork of
typestyles and logos of the Lessee for use in
promotional material by the Lessor and Lessee, upon
request by of Lessor, agrees to issue a press release
relating to the proposed financing.
Conditions of This Commitment Letter is intended to be a summary of
Acceptance: the most important elements of the agreement to enter
into a leasing transaction with Lessee, and it is
subject to all requirements and conditions contained
in Lease documentation proposed by Lessor or its
counsel in the course of closing the Lease described
herein. Not every provision that imposes duties,
obligations, burdens, or limitations on Lessee is
contained herein, but shall be contained in the final
Lease documentation satisfactory to Lessor and its
counsel.
EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES ALL RIGHT TO TRAIL BY JURY IN
ANY SUIT, ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATED TO THIS LETTER OR THE TRANSACITON
DESCRIBED IN
4.
<PAGE>
THIS LETTER.
Application Fee: The $15,000 Application Fee previously paid by the
Borrower will be first applied to the reasonable
costs and expenses of the Lender in connection with
the transaction, and any remainder shall be applied
pro rata (based on the amount of each funding to the
total amount of this Commitment) to the second
month's payment due under the Loan.
Commitment Expiration: This Commitment shall expire on January 7, 2000
unless prior thereto either extended in writing by
the Lender or accepted as provided below by the
Borrower.
Should you have any questions, please call me. If you wish to accept this
Commitment, please so indicate by signing and returning the enclosed duplicate
copy of this letter to me by January 7, 2000.
Yours truly,
TRANSAMERICA BUSINESS CREDIT CORP -
TECHNOLOGY FINANCE DIVISION
By /s/ Gerald A. Michaud
--------------------------------
Gerald A. Michaud
Senior Vice President - Marketing
Accepted this 4/th/ day of January, 2000.
DENDREON CORPORATION
By /s/ Martin A. Simonetti
-------------------------------
Chief Financial Officer
5.
<PAGE>
Exhibit 10.15
COLLABORATIVE LICENSE AGREEMENT
BETWEEN
DENDREON CORPORATION
AND
KIRIN BREWERY CO., LTD.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1 DEFINITIONS....................................................... 2
1.1 "Affiliate"....................................................... 2
1.2 "Controlled"...................................................... 2
1.3 "Dendreon Antigen"................................................ 2
1.4 "Dendreon Improvement"............................................ 2
1.5 "Dendreon Know-How"............................................... 3
1.6 "Dendreon Patents"................................................ 3
1.7 "Dendreon Product"................................................ 3
1.8 "Dendreon Technology"............................................. 3
1.9 "Dendreon Territory".............................................. 3
1.10 "Dendritic Cell".................................................. 3
1.11 "Drug Approval Application"....................................... 4
1.12 "Field"........................................................... 4
1.13 "FTE"............................................................. 4
1.14 "Fully Burdened Manufacturing Costs".............................. 4
1.15 "Information"..................................................... 4
1.16 "Joint Territory"................................................. 4
1.17 "Kirin Antigen"................................................... 4
1.18 "Kirin/Dendreon Term Sheet"....................................... 5
1.19 "Kirin Improvements".............................................. 5
1.20 "Kirin Know-How".................................................. 5
1.21 "Kirin Patents"................................................... 5
1.22 "Kirin Product"................................................... 5
1.23 "Kirin Technology"................................................ 5
1.24 "Kirin Territory"................................................. 5
1.25 "Licensed Dendreon Product"....................................... 6
1.26 "Licensed Kirin Product".......................................... 6
</TABLE>
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1.27 "Net Revenue"..................................................... 6
1.28 "NHI Price"....................................................... 6
1.29 "North America"................................................... 6
1.30 "Patent".......................................................... 7
1.31 "Patent Costs".................................................... 7
1.32 "Phase II"........................................................ 7
1.33 "Product"......................................................... 7
1.34 "Reagent"......................................................... 7
1.35 "Reasonable Efforts".............................................. 7
1.36 "Regulatory Approval"............................................. 7
1.37 "Separation Devices".............................................. 8
1.38 "Single Treatment"................................................ 8
1.39 "Sublicensee"..................................................... 8
1.40 "Steering Committee".............................................. 8
1.41 "Third Party Royalties"........................................... 8
1.42 "Third Party"..................................................... 8
ARTICLE 2 LICENSES AND RELATED RIGHTS....................................... 8
2.1 Licenses Granted to Kirin......................................... 8
2.2 Licenses Granted to Dendreon...................................... 10
2.3 Kirin Option to License Dendreon Products......................... 10
2.4 Dendreon Option to License Kirin Products......................... 12
2.5 Notice of Development............................................. 14
2.6 Trademark Rights.................................................. 14
ARTICLE 3 MANAGEMENT........................................................ 17
3.1 The Steering Committee............................................ 17
3.2 Steering Committee Meetings....................................... 18
3.3 Decision-Making and Issue Resolution.............................. 19
</TABLE>
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
ii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
3.4 Research Efforts and Expenses..................................... 19
3.5 Other Research.................................................... 19
ARTICLE 4 DEVELOPMENT AND MARKETING IN THE JOINT TERRITORY.................. 19
4.1 Collaborative Development and Marketing........................... 19
ARTICLE 5 FEES AND ROYALTIES................................................ 20
5.1 Technology Transfer Fee........................................... 20
5.2 Royalties on Sales of Kirin Products.............................. 20
5.3 Royalties on Sales of Licensed Dendreon Products.................. 21
5.4 Royalties on Dendreon Sales of Licensed Kirin Products............ 22
5.5 Kirin Milestone Payments.......................................... 22
5.6 Dendreon Milestone Payments....................................... 22
5.7 Payment of Royalties.............................................. 23
5.8 Royalty Structure and Marketing Strategy.......................... 23
ARTICLE 6 EQUITY INVESTMENT BY KIRIN........................................ 24
6.1 Stock Purchase at IPO............................................. 24
6.2 Put Right......................................................... 24
6.3 No Double Purchase................................................ 25
ARTICLE 7 CONFIDENTIALITY................................................... 25
7.1 Confidentiality; Exceptions....................................... 25
7.2 Authorized Disclosure............................................. 26
7.3 Survival.......................................................... 26
ARTICLE 8 INTELLECTUAL PROPERTY............................................. 26
8.1 Ownership......................................................... 26
8.2 Prosecution and Maintenance of Patents by Dendreon; Abandonment... 26
8.3 Prosecution and Maintenance of Patents by Kirin; Abandonment...... 27
8.4 Defense and Settlement of Third Party Claims...................... 27
8.5 Third Party Royalties............................................. 27
</TABLE>
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
iii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
8.6 Enforcement of Patent Rights...................................... 28
ARTICLE 9 REPRESENTATIONS AND WARRANTIES.................................... 29
9.1 Representations and Warranties.................................... 29
ARTICLE 10 REPORTS, RECORDS AND SAMPLES...................................... 29
10.1 Sharing of Information............................................ 29
10.2 Records of Net Revenue............................................ 30
10.3 Materials......................................................... 30
10.4 Publicity Review.................................................. 30
10.5 Publications...................................................... 30
ARTICLE 11 TERM AND TERMINATION.............................................. 31
11.1 Term.............................................................. 31
11.2 Termination for Breach............................................ 31
11.3 Surviving Rights.................................................. 32
11.4 Non-exclusive Licenses after Expiration........................... 32
ARTICLE 12 INDEMNIFICATION................................................... 32
12.1 Indemnification in Kirin Territory................................ 32
12.2 Indemnification in the Dendreon Territory......................... 33
ARTICLE 13 MISCELLANEOUS..................................................... 33
13.1 Assignment........................................................ 33
13.2 Retained Rights................................................... 33
13.3 Force Majeure..................................................... 33
13.4 Further Actions................................................... 34
13.5 No Trademark Rights............................................... 34
13.6 Notices........................................................... 34
13.7 Dispute Resolution................................................ 35
13.8 Waiver............................................................ 35
13.9 Severability...................................................... 35
</TABLE>
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
iv
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
13.10 Ambiguities....................................................... 36
13.11 Entire Agreement.................................................. 36
13.12 Headings.......................................................... 36
</TABLE>
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
v
<PAGE>
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
Exhibit 10.15
COLLABORATIVE LICENSE AGREEMENT
This Collaborative License Agreement (the "Agreement") is made and entered
into effective as of December, 1998 (the "Effective Date") by and between
Dendreon Corporation, a Delaware corporation having its principal place of
business at 291 North Bernardo Avenue, Mountain View, California, U.S.A.
("Dendreon"), and Kirin Brewery Co., Ltd., a corporation organized and existing
under the laws of Japan having its principal place of business at 10-1, Shinkawa
2-chome, Chuo-ku, Tokyo, Japan ("Kirin"). Dendreon and Kirin may be referred to
herein collectively as the "Parties" or individually as a "Party."
RECITALS
A. Dendreon has developed and owns certain proprietary technology relating
to the isolation and activation of dendritic and other antigen-presenting cells
with antigens of interest for use in human therapies, and Kirin possesses
research, development and marketing capabilities for pharmaceutical and other
medical products.
B. Kirin desires to obtain from Dendreon a license to such Dendreon
technology to develop and commercialize, in Japan and certain other Asian
countries, activated, including without limitation antigen-activated, dendritic
and other antigen-presenting cell products based on such technology, and an
option to obtain the exclusive license to commercialize in such countries
certain Dendreon antigen-presenting cell products that have or will enter into
clinical development during the term of this Agreement.
C. Dendreon desires to obtain from Kirin an option to obtain the exclusive
license to commercialize in North America any Kirin products that are developed
by Kirin under this Agreement based on the Dendreon technology.
1
<PAGE>
D. With regard to the research collaboration set forth in the
Kirin/Dendreon Term Sheet, Dendreon and Kirin will enter into a Research and
License Agreement consistent with the Kirin/Dendreon Term Sheet.
E. In addition, Dendreon and Kirin will enter into a Manufacturing and
Supply Agreement consistent with the Kirin/Dendreon Term Sheet, which will
establish the terms and conditions for the Parties' purchase and supply of
certain separation devices, reagents and proprietary antigens.
NOW, THEREFORE, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
The following terms shall have the following meanings as used in this Agreement:
1.1 "Affiliate" means, with respect to a particular Party, a person,
corporation or other entity that, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with such
Party. For the purposes of this definition, "control" means the direct or
indirect ownership by a Party of at least fifty percent (50%) of the outstanding
voting securities of the controlled entity; provided, that in any country where
the law does not permit foreign equity ownership of at least fifty percent
(50%), then with respect to corporations organized under such country's laws,
"control" shall mean the direct or indirect ownership by a Party of outstanding
voting securities of such corporation at the maximum amount permitted by the law
of such country.
1.2 "Controlled" means, with respect to a particular item, material, or
intellectual property right, that a Party owns or has a license under such item,
material or intellectual property right and has the ability to grant to the
other Party access to and/or a license or sublicense under such item, material
or intellectual property right as provided for herein without violating the
terms of any agreement or other arrangement with, or the rights of, any Third
Party.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
2
<PAGE>
1.3 "Dendreon Antigen" means an antigen that is claimed by a patent or
is otherwise covered by intellectual property rights that are Controlled by
Dendreon.
1.4 "Dendreon Improvement" means any improvement to platform
technologies in the Dendreon Know-How that relates to the Field and is made and
Controlled by Dendreon during the Agreement and prior to approval of the first
Kirin Product in Japan, or if later, the termination of the Research Program.
1.5 "Dendreon Know-How" means all Information that (a) is Controlled by
Dendreon on the Effective Date, and (b) relates to Dendritic Cell separation and
enrichment, antigens, antigen engineering for delivery of antigen to Dendritic
Cells, Dendritic Cell activation or loading with antigen and/or infusion of such
activated or loaded Dendritic Cells for use in human therapies, which includes,
without limitation, the Information summarized on Exhibit A, as amended from
time to time by Dendreon.
1.6 "Dendreon Patents" means the Patents and Patent applications that
(a) are Controlled by Dendreon during the term of the Agreement, and (b) claim
an invention in the Dendreon Know-How or Dendreon Improvements. Such Patents
existing as of the Effective Date are listed on Exhibit B, and Dendreon will use
reasonable efforts to amend such Exhibit B from time to time to reflect any
changes.
1.7 "Dendreon Product" means: (a) any therapeutic product comprising
Dendritic Cells that have been activated or loaded with a specific antigen,
engineered antigen or antigen gene, (including without limitation Dendreon
Antigen), for use in human therapy by infusion into a patient, which product has
been developed by Dendreon based on the Dendreon Technology; or (b) any service
provided by or on behalf of Dendreon to a patient that utilizes the Dendreon
Technology and involves isolation or preparation of Dendritic Cells, activation
or loading with specific antigen, engineered antigen or antigen gene, (including
without limitation Dendreon Antigen), and infusion of such activated or antigen
loaded Dendritic Cells into a patient. Further, the Parties may agree in writing
to amend and extend the definition of Dendreon Product as provided in Section
5.8.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
3
<PAGE>
1.8 "Dendreon Technology" means the Dendreon Know-How, the Dendreon
Improvements and the Dendreon Patents, either collectively or any part thereof.
1.9 "Dendreon Territory" means all countries of the world and all
territories and possessions thereof, excluding all countries, territories and
possessions within the Kirin Territory and the Joint Territory.
1.10 "Dendritic Cell" means a human dendritic cell or other antigen-
presenting cell or other cells from which dendritic cells can be derived.
1.11 "Drug Approval Application" means an application for Regulatory
Approval required before commercial sale or use of a Product as a drug in a
regulatory jurisdiction.
1.12 "Field" means the discovery, development, manufacture, use and sale
of products that generally utilize Dendritic Cell separation, antigen
engineering, and antigen or antigen gene delivery to Dendritic Cells for use in
human therapies that are based on, comprise, utilize or are derived from the
Dendreon Technology. The foregoing products may have applications for other
human medical uses, and if Kirin demonstrates to Dendreon's reasonable
satisfaction that such other uses exist, then the Parties agree to negotiate in
good faith an amendment to the Agreement that extends the Field to cover such
additional uses, including such additional amendments as may be needed to
properly cover such products for royalty purposes.
1.13 "FTE" means work hours equivalent to the work performed by one full-
time employee working for one year (including normal vacation).
1.14 "Information" means any and all information and data of any kind,
including without limitation techniques, inventions, practices, methods,
knowledge, know-how, skill, experience, test data (including pharmacological,
toxicological and clinical test data), analytical and quality control data,
marketing, cost, sales and manufacturing data and descriptions, compositions,
and assays.
1.15 "Joint Territory" means the countries that are members of the
European Union, as such union is constituted at the applicable time.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
4
<PAGE>
1.16 "Kirin Antigen" means an antigen that is claimed by a patent or is
otherwise covered by intellectual property rights that are Controlled by Kirin.
1.17 "Kirin/Dendreon Term Sheet" means that certain Term Sheet executed
by the Parties and dated as of June 30, 1998.
1.18 "Kirin Improvements" means all Information developed by or on behalf
of Kirin that (a) is Controlled by Kirin during the term of the Agreement and
prior to approval of the first Kirin Product in Japan, or if later, the
termination of the Research Program, and (b) comprises improvements or
modifications to platform technologies in the Dendreon Technology or their use.
1.19 "Kirin Know-How" means all Information developed by or Controlled by
or on behalf of Kirin that relates directly to a Kirin Product or its
manufacture or use, but excluding the Kirin Improvements.
1.20 "Kirin Patents" means all Patents and Patent applications that claim
any inventions in the Kirin Improvements or the Kirin Know-How, which Patents
shall be listed on Exhibit C promptly after filing, and Kirin will use
reasonable efforts to amend such Exhibit C from time to time to reflect any
changes.
1.21 "Kirin Product" means: (a) any therapeutic product developed by or
on behalf of Kirin based on, derived from or incorporating the Dendreon
Technology that comprises Dendritic Cells that have been activated or loaded
with a specific antigen, engineered antigen or antigen gene, (including without
limitation a Kirin Antigen), for use in human therapy by infusion into a
patient; or (b) any service provided by or on behalf of Kirin to a patient that
involves isolation or preparation of Dendritic Cells, activation or loading of a
specific antigen, engineered antigen or antigen gene, (including without
limitation a Kirin Antigen), and infusion of such activated or antigen loaded
Dendritic Cells into a patient, wherein such service is based on, utilizes,
comprises or is derived from the Dendreon Technology. The Parties may agree in
writing to amend and extend the definition of Kirin Product as provided in
Section 5.8.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
5
<PAGE>
1.22 "Kirin Technology" means the Kirin Improvements, Kirin Know-How and
Kirin Patents, either collectively or any part thereof.
1.23 "Kirin Territory" means Japan, Australia, New Zealand, People's
Republic of China (including Hong Kong and Macao), Taiwan, South Korea, North
Korea, Mongolia, Vietnam, Laos, Cambodia, Thailand, Myanmar, Philippines,
Brunei, Singapore, Indonesia and Malaysia.
1.24 "Licensed Dendreon Product" shall have the meaning set forth in
Section 2.3(b).
1.25 "Licensed Kirin Product" shall have the meaning set forth in Section
2.4(b).
1.26 "Net Revenue" means the total revenue received by a Party for sale
or other disposition of a Product by such Party or an Affiliate or Sublicensee
of such Party to a Third Party less the following to the extent actually
incurred or allowed with respect to such sale or disposition: (i) reasonable
costs paid, if any, by the Party to a Third Party on account of apheresis
performed as part of or in association with the Product; (ii) discounts,
including cash discounts, or rebates, retroactive price reductions or allowances
actually allowed or granted from the billed amount; (iii) credits or allowances
actually granted upon claims, rejections or returns of Products, including
recalls, regardless of the Party requesting such; (iv) freight, postage,
shipping and insurance charges paid for delivery of Product, to the extent
billed; and (v) taxes, duties or other governmental charges levied on or
measured by the billing amount when included in billing, as adjusted for rebates
and refunds; provided, however, that with respect to sales of a particular Kirin
Product or Licensed Dendreon Product by Kirin or its Affiliate or Sublicensee in
Japan, the "total revenue received", as set forth above in the first line of
this definition, shall not in any event be less than the NHI Price established
for insurance reimbursement of Single Treatment, less the average amount charged
by the particular hospital purchaser of such Product for the same number of
apheresis services and infusion services needed for and performed for Single
Treatment where such averages are calculated including all apheresis services or
infusion services, as applicable, that were performed for any purpose during the
applicable period.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
6
<PAGE>
1.27 "NHI Price" means the maximum sale price for a particular
pharmaceutical or medical price as established by the Japanese National Ministry
of Health and Welfare.
1.28 "North America" means the United States and all possessions and
territories thereof, Canada, Greenland, Mexico, Guatemala, Costa Rica, Belize,
Nicaragua, Honduras, El Salvador, Panama, Haiti, the Dominican Republic, the
Bahamas, Cuba and the British Virgin Islands.
1.29 "Patent" means (i) a valid and enforceable patent, including any
extension, registration, confirmation, reissue, re-examination or renewal
thereof; and (ii) to the extent valid and enforceable rights are granted by a
governmental authority thereunder, a patent application.
1.30 "Patent Costs" means the fees and expenses paid to outside legal
counsel and other Third Parties, and filing and maintenance expenses, incurred
in connection with the establishment, maintenance of rights under Patents
applicable to Products including the costs of patent interference proceedings.
1.31 "Phase II" means that portion of a clinical development program that
provides for additional assessment of safety and preliminary assessment of
efficacy of a product in human volunteers or patients, which is intended to
gather information to support the pivotal human clinical trials using such
product in a particular country. Any such clinical development program shall be
performed in accordance with the U.S.A. Federal Food, Drug and Cosmetic Act and
applicable regulations promulgated thereunder (including without limitation 21
CFR Part 312), as amended from time to time, or the comparable foreign laws and
regulations in the applicable country.
1.32 "Product" means a Kirin Product or a Dendreon Product.
1.33 "Reagent" means, with respect to a particular Licensed Dendreon
Product, any proprietary reagent of Dendreon (excluding any reagents contained
in a Separation Device) that is required for commercial manufacture and/or use
of such Licensed Dendreon Product.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
7
<PAGE>
1.34 "Reasonable Efforts" shall mean efforts and resources commonly used
in the research-based pharmaceutical industry for the research, development and
commercialization of a product at a similar stage in its product life taking
into account the establishment of the product in the marketplace, the
competitiveness of the marketplace, the proprietary position of the product, the
regulatory structure involved, the profitability of the product and other
relevant factors.
1.35 "Regulatory Approval" means any approvals, licenses, registrations
or authorizations of any federal, state or local regulatory agency, department,
bureau or other government entity, necessary for the manufacture, use, storage,
import, transport or sale of Products in a regulatory jurisdiction.
1.36 "Separation Devices" means any Dendreon device, including all
containers and proprietary reagents comprising such device, that is intended for
use by Dendreon and its licensees for the isolation and purification of
Dendritic Cells for use in human therapy by activation or loading with specific
antigen, engineered antigen or antigen gene, and infusion into a patient.
1.37 "Single Treatment" means a single course of treatment of a patient
involving isolation of such patient's Dendritic Cells, or other preparation of
appropriate Dendritic Cells, activation or loading with specific antigen,
engineered antigen or antigen gene, and infusion of such Dendritic Cells into a
patient (which may involve multiple infusions over several months), as
determined by the Steering Committee.
1.38 "Sublicensee" shall mean any Third Party expressly licensed by a
Party to make and sell one or more Products. A Sublicensee shall not include
distributors or sales agents that do no more than purchase and resell finished
Products on behalf of a Party.
1.39 "Steering Committee" shall have the meaning set forth in Section
3.1.
1.40 "Third Party Royalties" means royalties payable to a Third Party in
respect of the sale of Kirin Products or Dendreon Products other than royalties
payable with respect to licenses entered into prior to the Effective Date.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
8
<PAGE>
1.41 "Third Party" means any entity other than Dendreon or Kirin or an
Affiliate of Dendreon or Kirin.
ARTICLE 2
LICENSES AND RELATED RIGHTS
2.1 Licenses Granted to Kirin.
(a) Subject to the terms of this Agreement, Dendreon hereby
grants to Kirin an exclusive license to use the Dendreon Technology to develop,
use, make, have made, sell and offer for sale Kirin Products in the Kirin
Territory. Kirin may grant sublicenses to its Affiliates under the license
rights granted by Dendreon in the foregoing license for any permitted purpose
without Dendreon's prior written approval and may grant sublicenses under such
rights to Third Parties solely for sale (but not therapeutic development) of
Kirin Products in the Kirin Territory without Dendreon's prior written approval.
Additionally, Kirin and its Affiliates may conduct clinical development of
particular Kirin Products in the Dendreon Territory and Joint Territory so long
as Kirin obtains Dendreon's prior written approval of the location and clinical
study protocol of any such clinical work or study of each such Kirin Product,
such approval not to be unreasonably withheld, and such work is intended to
generate data to be used in obtaining Regulatory Approval of such Kirin Product
for manufacturing, marketing and sale in the Kirin Territory.
(b) Subject to the terms of this Agreement (including without
limitation Section 2.4 and Article 5), Dendreon hereby grants to Kirin an
exclusive (except in the Joint Territory) license under the Dendreon Technology,
with the right to sublicense, to make, have made, use, sell and offer for sale
any Kirin Product created that contains a Kirin Antigen. The foregoing license
grant shall apply in countries where there is a patent or other intellectual
property right Controlled by Kirin covering such Kirin Antigen. Specifically
excluded from the license rights granted under this subsection (b) are any
rights to make, have made, use, import, sell and offer for sale in North America
any Kirin Product for which Dendreon has exercised the Dendreon Option pursuant
to Section 2.4.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
9
<PAGE>
(c) Subject to the terms of this Agreement, Dendreon hereby
grants to Kirin an exclusive license to use the Dendreon Technology to use,
make, have made, import, sell and offer for sale Licensed Dendreon Products
solely in the Kirin Territory. Kirin may grant sublicenses under the license
rights granted by Dendreon in the foregoing to its Affiliates and to Third
Parties solely for sale of Licensed Dendreon Products in the Kirin Territory
without Dendreon's prior written approval. Additionally, Kirin and its
Affiliates may conduct clinical development of specific Licensed Dendreon
Products in the Dendreon Territory and Joint Territory so long as Kirin obtains
Dendreon's prior written approval of the location and clinical study protocol of
any such clinical work or study of a Licensed Dendreon Product, such approval
not to be unreasonably withheld, and such work is intended to generate data to
be used in obtaining Regulatory Approval of such Licensed Dendreon Product for
marketing and sale in the Kirin Territory.
(d) Subject to the terms of this Agreement, Dendreon grants to
Kirin a non-exclusive license to use the Dendreon Technology to make, have made,
use, sell and offer for sale Kirin Products in the countries in the world
outside of the Kirin Territory, North America and the Joint Territory; provided,
however, that Kirin and Dendreon shall mutually agree in writing upon any
Sublicensees of Kirin under the foregoing rights to sell the Kirin Products in
any such countries or territories, such agreement not to be unreasonably
withheld.
(e) Subject to the terms of Section 5.8, and except as
otherwise provided in the Manufacturing and Supply Agreement, the license rights
granted in the subsections (a) through (d) above are subject to the following
express limitation (and to all other obligations and limitations in the
Agreement): Kirin obtains no license or rights to make or to practice any of the
Dendreon Technology to make Separation Devices, Reagents or any other devices or
products for use in the isolation or purification of Dendritic Cells or any
other cells. Kirin may purchase Separation Devices and Reagents only under the
terms of the Manufacturing and Supply Agreement. Kirin may use Separation
Devices to isolate Dendritic Cells only as part of preparing a Kirin Product or
Licensed Dendreon Product or performing a service comprising a Kirin Product or
Licensed Dendreon Product.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
10
<PAGE>
2.2 Licenses Granted to Dendreon.
(a) Subject to the terms of this Agreement, Kirin hereby grants to
Dendreon an exclusive license in the Dendreon Territory, with the right to
sublicense, under the Kirin Improvements and the Kirin Patents that claim such
Kirin Improvements to develop, make, have made, use, import and sell Dendreon
Products.
(b) Subject to the terms of this Agreement, Kirin hereby grants to
Dendreon an exclusive license under the Kirin Technology to use, make, have
made, import, sell and offer for sale Licensed Kirin Products in North America.
Dendreon may grant sublicenses under the license rights granted by Kirin in the
foregoing to its Affiliates and to Third Parties solely for the sale of Licensed
Kirin Products in North America.
2.3 Kirin Option to License Dendreon Products.
(a) Subject to the terms of this Section 2.3 and Article 5, Dendreon
hereby grants to Kirin an exclusive option (the "Kirin Option") to obtain an
exclusive license, with the right to sublicense, to conduct clinical development
on and to commercialize specific Dendreon Products in the Kirin Territory. The
Kirin Option is exercisable by Kirin, with respect to any particular Dendreon
Product in clinical development by Dendreon or its Afiliate, at any time
following the commencement of such clinical development, but no later than one
hundred ten (110) days after Dendreon delivers to Kirin a report on early Phase
II clinical trial data for such Dendreon Product (the "Kirin Option Period").
The report shall be available within thirty (30) days after completion of early
Phase II clinical trials for such Dendreon Product. To exercise the Kirin Option
for a particular Dendreon Product in development, Kirin shall provide Dendreon
written notice of Kirin's election prior to the expiration of the applicable
Kirin Option Period. Notwithstanding the above, Kirin shall have the right to
negotiate for an extension of the Kirin Option Period applicable to a particular
Dendreon Product. In consideration of any such extension, if any, the Parties
will negotiate in good faith compensation to be paid to Dendreon.
(b) If Kirin properly exercises the Kirin Option for a particular
Dendreon Product, then such Dendreon Product shall thereafter be deemed a
"Licensed Dendreon Product" for
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
11
<PAGE>
purposes of this Agreement. Kirin shall be entitled, subject to compliance with
the other terms of the Agreement, to exercise the license rights granted under
Section 2.1(c) with respect to such Licensed Dendreon Product. Kirin shall use
Reasonable Efforts to develop and obtain Regulatory Approval in the Kirin
Territory for each Licensed Dendreon Product. Kirin shall pay all the
development and registration costs for all such Licensed Dendreon Products in
the Kirin Territory. Kirin shall use Reasonable Efforts to market and sell in
the Kirin Territory all Licensed Dendreon Products for which Regulatory Approval
in the Kirin Territory has been obtained.
(c) For each Dendreon Product in development during the term of the
Agreement, Dendreon agrees that it shall not grant any rights, interests, or
options to any Third Parties for the commercialization of such Dendreon Product
in the Kirin Territory until the earlier of: (i) the expiration of the Kirin
Option Period applicable to such Dendreon Product without Kirin having exercised
such Kirin Option; or (ii) Kirin's failure to use Reasonable Efforts to develop
and market such Dendreon Product in the Kirin Territory at any time commencing
one hundred eighty (180) days after Kirin's exercise of the Kirin Option; or
(iii) termination of the Agreement. If Kirin fails to exercise the Kirin Option
as to a particular Dendreon Product, Dendreon shall have the right to develop
and commercialize such Dendreon Product in the Kirin Territory. Further, if
Kirin fails to use Reasonable Efforts to develop and market a Licensed Dendreon
Product in the Kirin Territory at any time commencing one hundred eighty (180)
days after Kirin's exercise of the Kirin Option, Dendreon shall have the right
to develop and commercialize such Licensed Dendreon Product in the Kirin
Territory upon ninety (90) days notice from Dendreon; provided, however, that if
Kirin initiates Reasonable Efforts to develop and market such Licensed Dendreon
Product in the Kirin Territory within the ninety (90) day notice period and
continues thereafter to use Reasonable Efforts to develop and market such
Licensed Dendreon Product in the Kirin Territory, then Dendreon shall not obtain
such rights unless and until Kirin does not continue using such Reasonable
Efforts. Dendreon's right to commercialize Dendreon Products for which the Kirin
Option has expired shall be subject to the following: If Kirin has any ongoing
or current research, development or commercial project involving Dendritic Cell-
based therapy for the same tumor type as is the subject of treatment by such
Dendreon Product, and the goal of such project is the creation of a Kirin
Product, and Kirin has
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
12
<PAGE>
previously identified such project to Dendreon prior to Dendreon's disclosure of
such Dendreon Product to Kirin, or has demonstrated the existence of such
project to Dendreon's reasonable satisfaction based on official notebook data
entries created prior to such disclosure, then Dendreon agrees not to develop
and market such Dendreon Product in the Kirin Territory, nor to grant to a Third
Party a license to develop and market such Dendreon Product in the Kirin
Territory, without obtaining Kirin's prior written consent. For clarity, the
requirement that Kirin use Reasonable Efforts in developing and commercializing
Licensed Dendreon Products does not necessarily require that Kirin expend such
efforts in every country in the Kirin Territory, so long as such efforts are
expended in each country where it is economically reasonable to do so.
2.4 Dendreon Option to License Kirin Products.
(a) Subject to the terms of this Section 2.4 and Article 5, Kirin
hereby grants to Dendreon an exclusive option (the "Dendreon Option") to obtain
an exclusive license, with the right to sublicense, to commercialize specific
Kirin Products in North America. The Dendreon Option is exercisable by Dendreon,
with respect to any particular Kirin Product in clinical development, at any
time following the commencement of such clinical development, but no later than
one hundred ten (110) days after Kirin delivers to Dendreon a report on early
Phase II clinical trial data for such Kirin Product (the "Dendreon Option
Period"). The report shall be available thirty (30) days after completion of
early Phase II clinical trials for such Kirin Product. To exercise the Dendreon
Option for a particular Kirin Product in development, Dendreon shall provide
Kirin written notice of Dendreon's election prior to the expiration of the
applicable Dendreon Option Period. Notwithstanding the above, Dendreon shall
have the right to negotiate for an extension of the Dendreon Option Period
applicable to a particular Kirin Product. In consideration of any such
extension, if any, the Parties will negotiate in good faith compensation to be
paid to Kirin.
(b) If Dendreon properly exercises the Dendreon Option for a
particular Kirin Product, then such Kirin Product shall thereafter be deemed a
"Licensed Kirin Product" for purposes of this Agreement. Dendreon shall be
entitled, subject to compliance with the other terms of the Agreement, to
exercise the license rights granted under Section 2.2(b) with respect
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
13
<PAGE>
to such Licensed Kirin Product. Dendreon shall pay all the development and
registration costs for all such Licensed Kirin Products in North America.
(c) For each Kirin Product in development during the term of the
Agreement, Kirin agrees that it shall not grant any rights, interests, or
options to any Third Parties for the commercialization of such Kirin Product in
North America until the earlier of: (i) the expiration of the Dendreon Option
Period applicable to such Kirin Product without Dendreon having exercised such
option; (ii) Dendreon's failure to use Reasonable Efforts to develop and market
such Kirin Product in North America at any time commencing one hundred eighty
(180) days after Dendreon's exercise of the Dendreon Option; or (iii)
termination of the Agreement. If Dendreon fails to exercise the Dendreon Option
as to a particular Kirin Product, Kirin shall have the right to develop and
commercialize such Kirin Product in North America. Further, if Dendreon fails to
use Reasonable Efforts to develop and market the respective Licensed Kirin
Product in North America at any time commencing one hundred eighty (180) days
after Dendreon's exercise of the Dendreon Option, Kirin shall thereafter have
the right to develop and commercialize such Kirin Product in North America, upon
ninety (90) days notice from Kirin; provided, however, that if Dendreon
initiates Reasonable Efforts to develop and market such Licensed Kirin Product
in North America within the ninety (90) day notice period and continues
thereafter to use Reasonable Efforts to develop and market such Licensed Kirin
Product in the North America, then Kirin shall not obtain such rights unless and
until Dendreon does not continue using Reasonable Efforts. Kirin's right to
commercialize Kirin Products for which the Dendreon Option has expired shall be
subject to the following: If Dendreon has any ongoing or current research,
development or commercial project involving Dendritic Cell-based therapy for the
same tumor type as is the subject of treatment by such Kirin Product, and the
goal of such project is the creation of a Dendreon Product, and Dendreon has
previously identified such project to Kirin prior to Kirin's disclosure of such
Kirin Product to Dendreon, or has demonstrated the existence of such project to
Dendreon's reasonable satisfaction based on official laboratory notebook data
entries created prior to such disclosure, then Kirin agrees not to develop and
market such Kirin Product in North America, nor to grant to a Third Party a
license to develop and market such Kirin Product in North America, without
obtaining Dendreon's prior written consent. For clarity, the requirement that
Dendreon use Reasonable Efforts in developing
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
14
<PAGE>
and commercializing Licensed Kirin Products does not necessarily require that
Dendreon expend such efforts in every country in North America, so long as such
efforts are expended in each country where it is economically reasonable to do
so.
2.5 Notice of Development. Upon reasonable request by Dendreon, Kirin
will provide Dendreon with Information regarding the Kirin Products that are in
clinical trials prior to Phase II. Upon reasonable request by Kirin, Dendreon
will provide Kirin with Information regarding the Dendreon Products that are in
clinical trials prior to Phase II.
2.6 Trademark Rights.
(a) License Grants.
(i) License to Dendreon. Subject to the limitations set forth
below, Kirin grants to Dendreon a non-exclusive, royalty-free license, with the
right to sublicense, to use any and all marks Kirin has adopted for use with
Kirin Products (the "Kirin Licensed Marks"), solely in connection with the
promotion and sale of Licensed Kirin Products in North America. Dendreon shall
not use Kirin Licensed Marks in connection with any other products or in any
other activities without prior written approval of Kirin.
(ii) License to Kirin. Subject to the limitations set forth
below, Dendreon grants to Kirin a non-exclusive, royalty-free license, with the
right to sublicense, to use any and all marks Dendreon has adopted for use with
the Dendreon Products (the "Dendreon Licensed Marks"), solely in connection with
the promotion and sale of Licensed Dendreon Products and Kirin Products in the
Kirin Territory. Kirin shall not use Dendreon Licensed Marks in connection with
any other products or activities without prior written approval of Dendreon.
(b) Additional Marks. The Parties may wish to extend this Agreement
to cover additional marks, including without limitation any marks for products
resulting from the Collaboration Program, which either Party may acquire and
desire to license to the other Party. The Parties agree that in such event, a
letter from either Party to the other Party specifying such additional marks
shall be sufficient to extend the applicable license granted herein, and all the
terms and conditions thereof, to such additional marks for the permitted
purposes.
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
15
<PAGE>
(c) Form of Use. Dendreon, its Affiliates and Sublicensees shall
use Kirin Licensed Marks only in the form(s) approved in writing by Kirin and
shall include where appropriate the designations (R) and (TM) and a statement
that Kirin Licensed Marks are the trademarks of Kirin Brewery Co., and other
proprietary notices as reasonably required by Kirin from time-to-time.
Similarly, Kirin, its Affiliates and Sublicensees shall use Dendreon Licensed
Marks only in the form(s) set forth on Exhibit D hereto or otherwise approved in
writing by Dendreon and shall include where appropriate the designations (R) and
(TM) and a statement that Dendreon Licensed Marks are the trademarks of Dendreon
Corporation, and other proprietary notices as reasonably required by Dendreon
from time-to-time. The Parties agree to comply with all applicable laws and
regulations pertaining to the proper use and designation of trademarks.
(d) Ownership of Licensed Marks.
(i) Ownership. Each Party acknowledges that it has no interest
in the other Party's Licensed Marks other than the license granted under this
Agreement and that each Party is, and will continue to be, the sole and
exclusive owner of all right, title and interest in its respective Licensed
Marks.
(ii) No Contest. Each Party agrees that it will not contest,
oppose or challenge the other Party's ownership of its Licensed Marks. Each
Party agrees that it will do nothing to impair the other Party's ownership or
rights in its Licensed Marks. In particular, neither Party will register or
attempt to register the other Party's Licensed Marks in any jurisdiction nor
oppose the other's registration of its Licensed Marks, alone or with other words
or designs, in any jurisdiction. If either Party uses, registers or applies to
register a licensed mark that violates its obligations under this section, such
Party agrees, at the other's request, to abandon the use of such mark and any
application or registration for such mark.
(iii) Adverse Use. Each Party shall notify the other Party of
any adverse use by a Third Party of the other Party's Licensed Marks or of a
mark or name confusingly similar to the other's Licensed Marks and agrees to
take no action with respect thereto except with the other's prior written
authorization. The Party that owns any infringed Licensed Marks may thereupon
take such action as it in its sole discretion deems advisable for
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
16
<PAGE>
the protection of its rights in and to its Licensed Marks, including allowing
the licensed Party to bring and prosecute a claim against such Third Party at
the licensed Party's expense. Each Party further agrees to provide full
cooperation with any legal or equitable action by the other Party to protect the
other's rights, title and interest in its Licensed Marks.
(e) Quality Control.
(i) Kirin's Obligations. The nature and quality of all goods
sold by Kirin, its Affiliates and Sublicensees in connection with Dendreon
Licensed Marks and all advertising and promotional uses and all other related
uses of Dendreon Licensed Marks by Kirin, its Affiliates and Sublicensees shall
conform to Dendreon's standards. Kirin further agrees to provide samples of
advertising and other promotional material bearing Dendreon Licensed Marks to
Dendreon for approval at least thirty (30) days before such materials are to be
distributed, displayed or otherwise used. Kirin, its Affiliates and Sublicensees
will not distribute, display or otherwise use such materials without Dendreon's
prior written approval, which approval shall not be unreasonably withheld.
(ii) Dendreon's Obligations. The nature and quality of all goods
sold by Dendreon, its Affiliates and Sublicensees in connection with Dendreon's
use of Kirin Licensed Marks and all advertising and promotional uses and all
other related uses of Kirin Licensed Marks by Dendreon, its Affiliates and
Sublicensees shall conform to Kirin's standards. Dendreon further agrees to
provide samples of advertising and other promotional material bearing Kirin
Licensed Marks to Kirin for approval at least thirty (30) days before such
materials are to be distributed, displayed or otherwise used. Dendreon, its
Affiliates and Sublicensees will not distribute, display or otherwise use such
materials without Kirin's prior written approval, which approval shall not be
unreasonably withheld.
(f) Confusingly Similar and/or Combination Marks.
(i) Kirin's Obligations. Kirin agrees that Kirin, its
Affiliates and Sublicensees will not adopt or use any other trademarks, words,
symbols, letters, designs or marks (i) in combination with Dendreon Licensed
Marks in a manner that would create
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
17
<PAGE>
combination marks or (ii) that would be confusingly similar to Dendreon Licensed
Marks, provided, however, that Kirin, its Affiliates and Sublicensees may use
Dendreon Licensed Marks with other marks or names if such other marks or names
are sufficiently separated from Dendreon Licensed Marks and sufficiently
distinctive to avoid the consumer impression that such other marks or their
owners are associated with Dendreon.
(ii) Dendreon's Obligations. Dendreon agrees that Dendreon, its
Affiliates and Sublicensees will not adopt or use any other trademarks, words,
symbols, letters, designs or marks (i) in combination with Kirin Licensed Marks
in a manner that would create combination marks or (ii) that would be
confusingly similar to Kirin Licensed Marks, provided, however, that Dendreon,
its Affiliates and Sublicensees may use Kirin Licensed Marks with other marks or
names if such other marks or names are sufficiently separated from Kirin
Licensed Marks and sufficiently distinctive to avoid the consumer impression
that such other marks or their owners are associated with Kirin.
ARTICLE 3
MANAGEMENT
3.1 The Steering Committee. Dendreon and Kirin agree to form, as of the
Effective Date, a committee to facilitate the research and development of Kirin
Products and Dendreon Products ("the Steering Committee"). The Steering
Committee shall be comprised of four (4) individuals, two (2) being Dendreon
employees appointed and replaced by Dendreon at its discretion and two (2) being
Kirin employees appointed and replaced by Kirin at its discretion. The size and
composition of the Steering Committee may be by mutual agreement of the Parties.
The Parties shall form the Steering Committee within twenty (20) days after the
Effective Date. The Steering Committee shall have the following authority and
obligations:
(a) To encourage and facilitate the ongoing cooperation of the
Parties in conducting the research and development of Kirin Products and
Dendreon Products;
(b) To establish and implement specific plans for accomplishing the
tasks and goals of the Parties as set forth in the Agreement;
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
18
<PAGE>
(c) To coordinate the communication, information exchange and
efforts of the Parties with respect to all matters under this Agreement; and
(d) To discuss and resolve, if possible, any issues or disputes that
arise under the Agrement.
3.2 Steering Committee Meetings. The Steering Committee shall act at
meetings held regularly with all members present, according to the following:
(a) The Steering Committee meetings shall take place at such times
and places as shall be determined by the Steering Committee but no less
frequently than once per six (6) months; it is expected that the meetings will
alternate between appropriate offices of each Party, or at such other convenient
locations as agreed;
(b) If requested by a Party, the Steering Committee may conduct a
particular meeting by telephone or video conference or other acceptable
electronic means, provided that all Steering Committee members attend such
meeting and can hear and communicate with all other members, and any decisions
made during such meeting are recorded in writing and confirmed by signature of
at least one of the Steering Committee members from each of the Parties;
(c) A Party may bring a reasonable number of additional
representatives, in a non-voting capacity, to attend appropriate Steering
Committee meetings, provided that such attendance is helpful to the Steering
Committee carrying out its tasks and obligations;
(d) Prior to each meeting, the designated chair of the Steering
Committee (which may vary during the term) shall circulate an agenda for the
meeting, and the Steering Committee shall keep minutes reflecting matters
discussed and the actions taken at the meeting, a copy of which shall be
provided to each Party; and
(e) The Steering Committee may act on a specific issue or matter
without a meeting if the Steering Committee members all agree as to such action
and such agreement is set forth in a written consent signed by all the members
of the Steering Committee.
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
19
<PAGE>
3.3 Decision-Making and Issue Resolution. All decisions of or actions
taken by the Steering Committee shall be by unanimous approval of all the
members of the Steering Committee or such subcommittee, and voting on any
matters shall be reflected in the minutes of the meeting at which the vote was
taken. If the Steering Committee fails to reach unanimous agreement on an issue
or matter needing resolution, the matter shall be referred for good faith
discussion and resolution by the appropriate senior executive officer of each
Party.
3.4 Research Efforts and Expenses. Each of the Parties will maintain
scientific staff, laboratories, offices and other facilities necessary to carry
out the tasks and obligations assigned to it pursuant to this Agreement. Each
party shall use Reasonable Efforts to conduct and complete such tasks and
obligations. Kirin will bear all of its own expenses incurred in connection
with research and development of Kirin Products and Licensed Dendreon Products
by Kirin in the Kirin Territory or in North America pursuant to Section 2.4(c).
Dendreon shall bear all of its own expenses incurred in connection with research
and development of Dendreon Products and Licensed Kirin Products by Dendreon in
the Dendreon Territory or in the Kirin Territory, pursuant to Section 2.3(c).
3.5 Other Research. Kirin acknowledges and agrees that nothing in this
Agreement shall prevent or otherwise hinder Dendreon from conducting, and
Dendreon shall retain full rights to conduct, its own independent research and
development work with respect to Dendreon Technology or any aspect thereof for
any use or purpose outside the Kirin Territory or any use or purpose outside the
Field in the Kirin Territory, and including conducting such research and
development work with or on behalf of Third Party partners.
ARTICLE 4
DEVELOPMENT AND MARKETING IN THE JOINT TERRITORY
4.1 Collaborative Development and Marketing. The Parties agree jointly to
conduct clinical development of, and to commercialize in the Joint Territory,
all Kirin Products and any Collaboration Products (as such term is defined in
the Research and License Agreement) that result from the Research Program. Such
collaborative clinical development and marketing shall be conducted pursuant to
a Commercialization Agreement to be negotiated and agreed to and
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
20
<PAGE>
signed by the Parties, which agreement shall be consistent with the applicable
provisions of the Kirin/Dendreon Term Sheet and with the summary terms set forth
below, and will contain, in addition, such other reasonable and typical terms as
are consistent with similar agreements in the industry and the following terms:
Under the terms of such agreement, Dendreon and Kirin shall share equally in all
the costs of conducting clinical development of such Kirin Products and
Collaboration Products in the Joint Territory and shall share equally the
marketing profits from sales of such Kirin Products and Collaboration Products
in the Joint Territory, with "marketing profit" understood to mean the total
revenue derived from such sales less the actual costs directly attributable to
the manufacture, marketing and sale of such products. The details of such joint
clinical development and marketing arrangement shall be set forth in a
Commercialization Agreement consistent with the foregoing.
ARTICLE 5
FEES AND ROYALTIES
5.1 Technology Transfer Fee. Kirin shall pay Dendreon a non-refundable
technology transfer fee in the amount of [ * ] U.S. dollars [ * ], payable in
accordance with the following schedule:
(a) [ * ] dollars [ * ] in cash on the Effective Date.
(b) [ * ] dollars [ * ] in cash within [ * ] of the [ * ] of the
[ * ] for the [ * ]. For purposes of this Section, [ * ] means [ * ] on which
[ * ] in [ * ] to [ * ] the [ * ].
The foregoing technology transfer fee payments are inclusive of such
withholding taxes as are finally ascertained to be due and payable by Kirin on
account of Dendreon and shall be made by wire transfer to an account designated
by Dendreon for such purpose.
5.2 Royalties on Sales of Kirin Products.
(a) Subject to subsection (b) below, Kirin shall pay Dendreon
royalties on sales of Kirin Products by or on behalf of Kirin or its Affiliates
or Sublicensees in any country excluding the Joint Territory, as follows:
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
21
<PAGE>
(i) Kirin shall pay royalties equal to [ * ] of the Net
Revenue based on sales of Kirin Products in such countries by Kirin and its
Affiliates and Sublicensees (except as otherwise provided in subclause (ii)
below);
(ii) for so long as China or another country in the Kirin
Territory imposes an upper limit on royalties transferable outside of China or
such other country, Kirin shall pay royalties on the Net Revenue based on sales
of the Kirin Products sold in such countries equal to the greater of: (A) [ * ]
of any such upper limit; or (B) [ * ] of such Net Revenue; provided that the
royalty payable under this Section 5.2(a)(ii) shall not exceed [ * ] of such Net
Revenue for any particular royalty accounting period.
(b) For each particular Kirin Product, Kirin shall pay the royalties
specified above, on a country by country basis, until the later of the
expiration of ten (10) years from the first commercial launch of such Kirin
Product in such country or the last to expire of the Patents with claims
covering such Kirin Product or its manufacture or use in such country. The
foregoing royalty payments are inclusive of such withholding taxes as are
finally ascertained to be due and payable by Kirin on account of Dendreon, and
shall be made by wire transfer to an account designated by Dendreon for such
purpose.
5.3 Royalties on Sales of Licensed Dendreon Products.
(a) Subject to subsection (b) below, Kirin shall pay Dendreon
royalties on sales of Licensed Dendreon Products in the Kirin Territory as
follows:
(i) Kirin shall pay a royalty equal to [ * ] of the Net
Revenue based on sales of Licensed Dendreon Products sold in the Kirin Territory
by Kirin or its Affiliates or Sublicensees (except as otherwise provided in
subclause (ii) below);
(ii) for so long as China or any other country in the Kirin
Territory imposes an upper limit on royalties transferable outside of China or
such other country, Kirin shall pay Dendreon a royalty based on the Net Revenue
for Licensed Dendreon Products sold in such countries equal to the greater of:
(A) [ * ] of any such upper limit; or (B) [ * ] of such Net
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
22
<PAGE>
Revenue; provided that the royalty payable under this Section 5.3(a)(ii) shall
not exceed [ * ] of such Net Revenue for any particular royalty accounting
period.
(b) Kirin shall pay the royalties specified above, on a country by
country basis until the later of the expiration of ten (10) years from the first
commercial launch of the first Dendreon Product in such country or the last to
expire of the Patents with claims covering any Dendreon Product in such country.
The foregoing royalty payments are inclusive of such withholding taxes as are
finally ascertained to be due and payable by Kirin on account of Dendreon, and
shall be made by wire transfer to an account designated by Dendreon for such
purpose.
5.4 Royalties on Dendreon Sales of Licensed Kirin Products . Dendreon shall
pay Kirin a royalty equal to [ * ] of the Net Revenue based on sales of Licensed
Kirin Products sold by Dendreon, its Affiliates or any of its Sublicensees in
North America. With respect to each such Licensed Kirin Product, Dendreon shall
pay the royalties specified above on a country by country and product by product
basis until the later of the expiration of ten (10) years from the first
commercial launch of such Licensed Kirin Product in such country or the last to
expire of the Patents with claims covering such Licensed Kirin Product in such
country. The foregoing royalty payments are inclusive of such withholding taxes
as are finally ascertained to be due and payable by Dendreon on account of
Kirin, and shall be made by wire transfer to an account designated by Kirin for
such purpose.
5.5 Kirin Milestone Payments. Kirin shall make to Dendreon the following
non-refundable milestone payments on a product by product basis for each
Licensed Dendreon Product for which Kirin has exercised the Kirin Option:
Within [ * ] of the [ * ] of the [ * ] [ * ]
Within [ * ] of the [ * ] of [ * ] [ * ]
Within [ * ] of [ * ] [ * ]
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
23
<PAGE>
The foregoing milestone payments are inclusive of such withholding taxes as are
finally ascertained to be due and payable by Kirin on account of Dendreon and
shall be made by wire transfer to an account designated by Dendreon for such
purpose.
5.6 Dendreon Milestone Payments. Dendreon shall make to Kirin the
following non-refundable milestone payments on a product by product basis for
each Licensed Kirin Product for which Dendreon has exercised the Dendreon
Option:
Within [ * ] of the [ * ] of the [ * ] [ * ]
Within [ * ] of the [ * ] of [ * ] the [ * ] [ * ]
Within [ * ] of [ * ] the [ * ] [ * ]
The foregoing payments are inclusive of such withholding taxes as are finally
ascertained to be due and payable by Dendreon on account of Kirin and shall be
made by wire transfer to an account designated by Kirin for such purpose.
5.7 Payment of Royalties. Royalty obligations hereunder shall accrue at
the time of sale of the applicable Product, and all such royalties that have
accrued during a particular calendar quarter shall be paid quarterly within
sixty (60) days after the end of such calendar quarter. Such royalties shall be
calculated on the basis of Net Revenue in the local currency of each country,
and converted into U.S. Dollars and paid in U.S. Dollars on the basis of the
average currency exchange rate for the applicable calendar quarter quoted by the
Tokyo Mitsubishi Bank (or its successor) for currency exchanges in excess of one
million U.S. dollars ($1,000,000). Each royalty payment shall be accompanied by
a statement of such royalties showing the Net Revenue for the applicable
royalty-bearing Products, on a country by country and product by product basis.
If a Party receives a refund or rebate for taxes it paid on behalf of the other
Party, the Party receiving such refund or rebate shall promptly remit it to the
other Party.
5.8 Royalty Structure and Marketing Strategy. The terms of this Agreement
permit Kirin to market and sell Kirin Products and Licensed Dendreon Products to
hospitals and other similar health-care provider organizations as services or as
products comprising Dendritic
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
24
<PAGE>
Cells activated or loaded with specific antigen, engineered antigen or antigen
gene, including without limitation a Kirin Antigen. Kirin shall not, and
covenants not to, sell Separation Devices, Reagents or Dendreon Antigens to
Third Parties except as permitted in this Agreement. The Parties agree to
discuss alternative marketing strategies for Kirin Products and Licensed
Dendreon Products when commercially reasonable to do so. At such time, the
Parties also shall agree on any needed adjustment to the royalty calculation
mechanism established for sales of such Kirin Products and Dendreon Products,
including appropriate amendments to the definitions of such terms under Article
1. For example, if the Parties agree that Kirin may sell devices and reagents
(including specific antigens) for use by a Third Party in isolating and
activating Dendritic Cells, then such definitions may be amended to include the
concept that a Dendreon Product or Kirin Product includes any set of products
that are developed by the applicable Party and are intended for use in preparing
a product meeting the criteria in subsection 1.7(a) or 1.22(a), as applicable,
or in performing a service as set forth in subsection 1.7(b) or 1.22(b), as
applicable. Any change to the current marketing strategy, and any adjustment to
the royalty calculation mechanism related thereto, must be set forth in writing
and signed by an authorized representative of each Party. Neither Party shall
have any obligation to make changes to the marketing strategy already
established in this Agreement.
ARTICLE 6
EQUITY INVESTMENT BY KIRIN
6.1 Stock Purchase at IPO. In further consideration for the license
granted by Dendreon to Kirin under the Agreement, in addition to Kirin's
purchase of two million dollars ($2,000,000) worth of Series D preferred shares
of Dendreon on July 31, 1998, Kirin agrees to purchase from Dendreon, in a
private placement, five million dollars ($5,000,000) worth of unregistered
Dendreon common stock at the time of Dendreon's initial public offering (IPO),
with the price per share for such purchase equal to the price of the sale of
Dendreon's stock to the public in such IPO, provided that an initial public
offering of Dendreon shares of common stock is completed by January 1, 2000.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
25
<PAGE>
6.2 Put Right. In the event that Dendreon has not completed an IPO by
January 1, 2000, then Dendreon will thereafter have the right, at its sole
option but only until January 1, 2001, to require Kirin to purchase up to one
million (1,000,000) shares of Dendreon preferred stock at a per share purchase
price to be negotiated by the Parties in good faith reflecting the fair value of
such stock, but in any event not less than the per share purchase price of the
most recent private sale of Dendreon preferred stock in excess of an aggregate
of one million dollars ($1,000,000) of preferred stock, and provided that the
total amount of the purchase price for such stock shall not exceed five million
dollars ($5,000,000). Dendreon shall exercise such right in writing to Kirin
prior to January 1, 2001, and upon such exercise the Parties shall negotiate the
purchase price in good faith and close the purchase of the capital stock as soon
as reasonably practicable, but in no event longer than sixty (60) days from the
date that Dendreon exercised such option. Dendreon may not exercise such right
after January 1, 2001, unless otherwise agreed to by the Parties in writing.
6.3 No Double Purchase. For clarity, it is agreed that, under the terms
of this Article 6, Kirin is required to purchase Dendreon stock only under
Section 6.1 in a private placement in conjunction with the IPO, or under Section
6.2 after exercise of the Dendreon's put right therein, but shall not be
required to purchase Dendreon stock under both such Sections.
ARTICLE 7
CONFIDENTIALITY
7.1 Confidentiality; Exceptions. Except to the extent expressly
authorized by this Agreement or otherwise agreed in writing, the Parties agree
that, for the term of this Agreement and for ten (10) years thereafter, the
receiving Party shall keep confidential and shall not publish or otherwise
disclose to a Third Party or use for any purpose other than as provided for in
this Agreement any Information and materials furnished to it by the other Party
pursuant to this Agreement (collectively, "Confidential Information"), except to
the extent that it can be established by the receiving Party by competent proof
that such Confidential Information:
(a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the other Party;
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
26
<PAGE>
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;
(c) became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or omission of
the receiving Party in breach of this Agreement; or
(d) was disclosed to the receiving Party, other than under an
obligation of confidentiality, by a Third Party who had no obligation to the
disclosing Party not to disclose such information to others.
7.2 Authorized Disclosure. Each Party may disclose the other's
Confidential Information to the extent such disclosure is reasonably necessary
in filing or prosecuting patent applications, prosecuting or defending
litigation, complying with applicable governmental regulations or conducting
preclinical or clinical trials, provided that if a Party is required by law or
regulation to make any such disclosure of the other Party's Confidential
Information it will except where impracticable for necessary disclosures, for
example in the event of medical emergency, give reasonable advance notice to the
other Party of such disclosure requirement and, except to the extent
inappropriate in the case of patent applications, will use its best efforts to
secure confidential treatment of such Confidential Information required to be
disclosed.
7.3 Survival. This Article 7 shall survive the termination or expiration
of this Agreement for a period of ten (10) years.
ARTICLE 8
INTELLECTUAL PROPERTY
8.1 Ownership. Each Party shall solely own Patents for any inventions
made solely by that Party's employees or consultants in the course of performing
any work under this Agreement. The law of inventorship of the United States
shall apply to any inventions whether made inside or outside the United States
by either of the Parties.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
27
<PAGE>
8.2 Prosecution and Maintenance of Patents by Dendreon; Abandonment.
Dendreon shall have the responsibility to file, prosecute and maintain the
Dendreon Patents in the world and shall bear all expenses associated therewith.
All decisions regarding prosecution of the Dendreon Patents in the world will be
at Dendreon's sole discretion and responsibility. Dendreon agrees to keep Kirin
informed of the course of patent prosecution or other proceedings relating to
the Dendreon Patents in the Kirin Territory in the Field. In the event Dendreon
elects not to prosecute a Dendreon Patent application filed or to abandon an
issued Dendreon Patent in the Kirin Territory in the Field, Dendreon shall
notify Kirin not less than two (2) months before any relevant deadline, and
thereafter Kirin shall have the right to pursue, at its expense and sole
discretion, prosecution of such Dendreon Patent application or maintenance of
such issued Patent. In such event, Dendreon shall promptly assign its rights
therein to Kirin.
8.3 Prosecution and Maintenance of Patents by Kirin; Abandonment. Kirin
shall have the responsibility to file, prosecute and maintain the Kirin Patents
in the world and shall bear all expenses associated therewith. All decisions
regarding prosecution of the Kirin Patents in the world will be at Kirin's sole
discretion and responsibility. Kirin agrees to keep Dendreon informed of the
course of patent prosecution or other proceedings relating to the Kirin Patents
in North America in the Field. In the event Kirin elects not to prosecute a
Kirin Patent application filed, or to abandon an issued Kirin Patent in North
America in the Field, Kirin shall notify Dendreon not less than two (2) months
before any relevant deadline, and thereafter Dendreon shall have the right to
pursue, at its expense and in its sole discretion, prosecution of such Kirin
Patent application or maintenance of such issued Patent. In such event, Kirin
shall promptly assign its rights therein to Dendreon.
8.4 Defense and Settlement of Third Party Claims. If a Third Party files
a claim, suit or action against a Party claiming that a Patent or other
intellectual property right owned by such Third Party is infringed by the
development, use, marketing, distribution or sale of a Kirin Product or Dendreon
Product, and such claim, suit or action (a "Claim") arises out of such Party's
practice in the Field pursuant to this Agreement, the Party against whom the
Third Party has filed such Claim ("Defending Party") will have the right to
defend against any such Claim. The other Party will assist in the defense of any
such Claim as reasonably requested by the
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
28
<PAGE>
Defending Party and at the Defending Party's expense and may retain separate
counsel at its own expense. The Defending Party shall not settle any such Claim
without the prior express written consent of the other Party, which consent
shall not be unreasonably withheld or delayed, if such settlement would impose
on such other Party the obligation to pay any damages or would adversely affect
such Party's rights.
8.5 Third Party Royalties. In the event that a Party is required to
obtain a license under a Third Party patent that covers or claims the
manufacture, use or sale of a Kirin Product or Dendreon Product in order to
practice a Dendreon Patent or Kirin Patent to sell a Kirin Product or Dendreon
Product as permitted under the licenses in Article 2, provided, that such Party
shall disclose the relevant portions of such license under such Third Party
patent to the other Party in English and, if any, the extent of any alleged
infringement, such Party shall be entitled to deduct [ * ] of any royalties
owing to such Third Party based on the sale of such Kirin Products or Dendreon
Products under such license from amounts owing to the other Party, subject to a
maximum royalty reduction of [ * ] of the amounts that otherwise would be owed
by such Party under Article 5 hereof.
8.6 Enforcement of Patent Rights
(a) If any Dendreon Patent or Kirin Patent in the Field is infringed
by a Third Party, the Party to this Agreement first having knowledge of such
infringement shall promptly notify the other in writing. The notice shall set
forth the facts of such infringement in reasonable detail.
(b) Dendreon shall have the right, but not the obligation to
institute, prosecute and control any action or proceeding with respect to
infringement of Dendreon Patents in the Dendreon Territory, Kirin Patents in
North America and patents abandoned by Kirin pursuant to Section 8.3.
(c) Kirin shall have the right, but not the obligation, to institute,
prosecute and control any action or proceeding with respect to infringement of
Dendreon Patents in the Kirin
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
29
<PAGE>
Territory, Kirin Patents in the Kirin Territory and the rest of the world except
North America and the Joint Territory, and patents abandoned by Dendreon
pursuant to Section 8.2.
(d) If a Party given the right to enforce a Kirin Patent or Dendreon
Patent pursuant to Section 8.6(b) or Section 8.6(c) fails to bring an action or
proceeding against a suspected infringer within a period of ninety (90) days
after having knowledge of such infringement in the Field, the other Party shall
have the right to bring and control an action against such infringer by counsel
of its own choice, and the non-enforcing Party shall have the right to be
represented in any such action by counsel of its own choice at its own expense.
(e) The Party controlling an action involving any infringement in the
Field shall consider in good faith the interests of the other Party in so doing,
and shall not settle or consent to an adverse judgment in any such action which
would have a material adverse effect on the rights or interests of the other
Party without the prior express written consent of such other Party. If one
Party brings any such action or proceeding, the other Party agrees to be joined
as a Party plaintiff if necessary to prosecute the action and to give the first
Party reasonable assistance and authority to file and prosecute the suit. In
each case relating to infringement within the Field, each Party shall bear the
costs of its enforcement of the Patent rights discussed in this section and
retain for its own account any amounts received from Third Parties; provided,
however, that any such recovery shall be deemed Net Revenue of the infringed
Product, subject to the royalty provisions of Article 5.
(f) The Parties shall consult regarding the institution, prosecution
and control of any action or proceeding with respect to infringement outside the
Field of any of the Dendreon Patents or Kirin Patents. In the absence of
Agreement with respect to infringement outside the Field, the Party owning the
infringed Kirin Patent or Dendreon Patent may proceed in such manner as the law
permits.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
30
<PAGE>
ARTICLE 9
REPRESENTATIONS AND WARRANTIES
9.1 Representations and Warranties. Each of the Parties hereby
represents and warrants as follows:
(a) This Agreement is a legal and valid obligation binding upon such
Party and enforceable in accordance with its terms. The execution, delivery and
performance of the Agreement by such Party does not conflict with any agreement,
instrument or understanding, oral or written, to which it is a Party or by which
it is bound, nor violate any law or regulation of any court, governmental body
or administrative or other agency having jurisdiction over it.
(b) Such Party has not, and during the term of the Agreement will
not, grant any right to any Third Party relating to its respective technology in
the Field licensed to the other Party hereunder which would conflict with such
rights granted to the other Party.
ARTICLE 10
REPORTS, RECORDS AND SAMPLES
10.1 Sharing of Information. Commencing on the Effective Date and
continuing during the term of this Agreement, each Party will make available and
disclose to the other Party the Information Controlled by such Party that
reasonably relates to such other Party's activities under this Agreement in the
Field. In particular, Dendreon will disclose to Kirin on a regular basis the
Dendreon Technology and provide reasonable assistance to Kirin (at Kirin's
request and expense) in transferring such Dendreon Technology for use in
developing Kirin Products and for use in commercializing the Licensed Dendreon
Products in the Kirin Territory. Similarly, Kirin will disclose to Dendreon on a
regular basis the Kirin Technology and provide reasonable assistance to Dendreon
(at Dendreon's request and expense) in transferring such Kirin Technology for
use in developing Dendreon Products and for use in commercializing the Licensed
Kirin Products in North America. In addition, both Parties will disclose to each
other any non-clinical and clinical regulatory information which relates to such
other Party's activities under this Agreement in the Field.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
31
<PAGE>
10.2 Records of Net Revenue. Each Party will maintain complete and
accurate records of Net Revenue which are relevant to payments to be made under
this Agreement. Such records shall be open during reasonable business hours, for
a period of three (3) years from creation of individual records, for examination
at the other Party's expense, and not more often than once each year and upon
not less than thirty (30) days advance notice, by a certified public accountant
selected by the other Party and acceptable to the Party keeping the records for
the sole purpose of verifying for the inspecting Party the correctness of
calculations or payments made under this Agreement.
10.3 Materials. The Parties intend to maintain an open and extensive
exchange of biological, chemical and other tangible materials during the course
of the Agreement. Information obtained by the other Party in the testing of
such materials will be promptly disclosed to the Party providing the sample, and
all such Information will be considered Information to be protected by both
Parties under the restrictions of Article 7.
10.4 Publicity Review. If either Party is required by law or regulation
to make a public disclosure or announcement concerning this Agreement or the
subject matter thereof, such Party shall give reasonable prior advance notice of
the proposed text of such disclosure or announcement to the other Party for its
review and comment. The terms of this Agreement may also be disclosed to Third
Parties with the consent of the other Party, which consent shall not be
unreasonably withheld so long as such disclosure is made under a binder of
confidentiality.
10.5 Publications. Each Party agrees that it shall not publish or
present the results of studies carried out pursuant to this Agreement without
the opportunity for prior review by the other Party. Each Party shall provide to
the other the opportunity to review any proposed abstracts, manuscripts or
presentations (including information to be presented verbally) which relate to
the Field at least thirty (30) days prior to their intended submission for
publication and such submitting Party agrees, upon written request from the
other Party, not to submit such abstract or manuscript for publication or to
make such presentation until the other Party is given a reasonable period of
time to secure patent protection for any material in such publication or
presentation which it believes is patentable.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
32
<PAGE>
10.6 Adverse Event Reporting. In the event that either Party, its
Affiliates or Sublicensees obtains, directly or indirectly, information and data
on the side effects or toxicity of a Product during the development, marketing
and distribution of any of the Products hereunder, such Party shall disclose, as
soon as reasonably practicable, such information and data to the other Party.
Either Party, its Affiliates and Sublicensees shall notify the other Party as
soon as reasonably practicable of any complaints or reports of adverse events
associated with the Products which are serious, new or unexpected events, or
events with increased frequency. All other adverse events associated with
Products shall be reported by either Party to the other Party in summary format
at least quarterly. At the request of either Party, the other Party shall
cooperate in the investigation and respond to any Product complaints which may
relate to the role of the informed Party in the development or manufacture of
the Products. Each Party shall be responsible for all reporting of adverse
events to regulatory authorities in its respective territory.
ARTICLE 11
TERM AND TERMINATION
11.1 Term. This Agreement shall commence on the Effective Date and,
unless sooner terminated as provided herein, shall continue in effect until the
expiration of all of the payment obligations of Kirin and Dendreon under the
Agreement.
11.2 Termination for Breach. If either Party materially breaches this
Agreement at any time, which breach is not cured within thirty (30) days of
written notice thereof if such breach is caused by the failure of a Party to
meet its financial obligations under this Agreement, or within ninety (90) days
of written notice thereof for any other material breach of this Agreement, from
the non-breaching Party specifying in detail the nature of the breach, the
breaching Party's licenses granted in this Agreement shall terminate and the
non-breaching Party shall have the exclusive, royalty-free right under the
breaching Party's Technology, Patents and Licensed Marks to make, have made, use
and sell Products it already had developed or sold, in those countries in which
it already had developed or sold such Products. The breaching Party will assist
the non-breaching Party in every proper way to effect the license granted above.
The breaching Party shall further deliver to the non-breaching Party such
relevant tangible materials
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
33
<PAGE>
embodying such Technology, Patents and Licensed Marks as may be necessary or
useful to the exercise of the non-breaching Party of the license hereunder.
11.3 Surviving Rights. The obligations and rights of the Parties under
Articles 7, 8 and 12, and Sections 2.6(c)-(f), 10.4, 10.5, 13.6 and 13.7 of this
Agreement will survive termination.
11.4 Non-exclusive Licenses after Expiration. Upon the expiration of the
Agreement under Section 11.1, Kirin shall retain a non-exclusive, royalty-free
license to use the Dendreon Technology and Dendreon Licensed Marks to make, have
made, use offer for sale and sell in the Kirin Territory the Kirin Products and
Licensed Dendreon Products that Kirin was selling as of the date of such
expiration, and Dendreon shall retain a non-exclusive, royalty-free license to
use the Kirin Technology and Kirin Licensed Marks to make, have made, use, offer
for sale and sell in North America the Dendreon Products and Licensed Kirin
Products that Dendreon was selling as of the date of such expiration.
11.5 Termination Without Cause. On or after January 1, 2002, Kirin may
terminate this Agreement without cause upon ninety (90) days prior written
notice to Dendreon. At such time, all licenses granted to Kirin under this
Agreement shall terminate, and Kirin shall covenant not to use any Information
or materials of any kind related to, made or derived from the Dendreon
Technology or Dendreon Licensed Marks after such termination. Kirin also shall
return to Dendreon all Information and materials of any kind related to, made or
derived from the Dendreon Technology or Dendreon Licensed Marks upon such
termination. Kirin's licenses to Dendreon under this Agreement shall survive
any such termination. Dendreon's royalty obligations to Kirin shall survive any
such termination and shall terminate as provided in Article 5.
ARTICLE 12
INDEMNIFICATION
12.1 Indemnification in Kirin Territory. Kirin shall indemnify, defend
and hold Dendreon harmless from and against any and all liability, damage, loss,
cost (including
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
34
<PAGE>
reasonable attorneys' fees) and expense resulting from any infringement, claim
of bodily injury or property damage (a) relating to the development,
manufacture, use, distribution or sale of any Product by Kirin, its Affiliates,
Sublicensees, employees or agents or (b) due to the negligence or willful
misconduct of Kirin or its Affiliates, Sublicensees, employees or agents.
12.2 Indemnification in the Dendreon Territory. Dendreon shall indemnify
and hold Kirin harmless from and against any and all liability, damage, loss,
cost (including reasonable attorneys' fees) and expense resulting from any
infringement, claim of bodily injury or property damage (a) relating to the
development, manufacture, use, distribution or sale of any Product by Dendreon,
its Affiliates, Sublicensees, employees or agents or (b) due to the negligence
or willful misconduct of Dendreon or its Affiliates, Sublicensees, employees or
agents.
ARTICLE 13
MISCELLANEOUS
13.1 Assignment. Neither Party shall assign any of its rights and
obligations hereunder except (i) as incident to the merger, consolidation,
reorganization or acquisition of stock affecting actual voting control or of
substantially all of the assets of the assigning Party or (ii) to an Affiliate;
provided, however, that in no event shall either Party's rights and obligations
hereunder be assigned without prior written notice to the other Party. In any
case, neither Party may make an assignment of its assets which renders it unable
to perform its material obligations hereunder. This Agreement shall be binding
upon and inure to the benefit of the Parties hereto and their permitted
successors and assigns.
13.2 Retained Rights. Nothing in this Agreement shall limit in any
respect the right of either Party to conduct research and development with
respect to, and market products outside of, the Field using such Party's
Technology, but no license to use the other Party's technology to do so is
granted herein expressly or by implication.
13.3 Force Majeure. Neither Party shall lose any rights hereunder or be
liable to the other Party for damages or losses on account of failure of
performance by the defaulting Party if
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
35
<PAGE>
the failure is occasioned by government action, war, fire, explosion, flood,
strike, lockout, embargo, act of God, or any other similar cause beyond the
control of the defaulting Party, provided that the Party claiming force majeure
has exerted all reasonable efforts to avoid or remedy such force majeure;
provided, however, in no event shall a Party be required to settle any labor
dispute or disturbance.
13.4 Further Actions. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
13.5 No Trademark Rights. Except as otherwise provided herein, no right,
express or implied, is granted by the Agreement to use in any manner the name
"Dendreon" or "Kirin" or any other trade name or trademark of the other Party in
connection with the performance of the Agreement.
13.6 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by facsimile
transmission (receipt verified), telexed, mailed by registered or certified mail
(return receipt requested), postage prepaid, or sent by express courier service,
to the Parties at the following addresses (or at such other address for a Party
as shall be specified by like notice; provided, that notices of a change of
address shall be effective only upon receipt thereof):
If to Dendreon, addressed to:
Dendreon Corporation
291 North Bernardo Avenue
Mountain View, CA 94043
Attention: C. S. Henney
Telephone: (650) 964-6744
Telecopy: (650) 964-0337
With copy to:
Cooley Godward LLP
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
36
<PAGE>
Five Palo Alto Square, 4th Floor
Palo Alto, CA 94306
Attention: Barclay J. Kamb, Esq.
Telephone: (650) 843-5052
Telecopy: (650) 857-0663
If to Kirin, addressed to:
Kirin Brewery Co., Ltd.
26-1, Jingumae 6-chome
Shibuya-ku
Tokyo 150-8011, Japan
Attention: Akihiro Shimosaka
Research and Product Development Department
Pharmaceutical Division
Telephone: (03) 5485-6805
Telecopy: (03) 3499-6152
13.7 Dispute Resolution. If any dispute, controversy or claim arises out
of or in connection with this Agreement, the Parties shall use reasonable
efforts to settle it by friendly negotiation within sixty (60) days of notice
from one Party to the other of such dispute, controversy or claim, before
pursuing any other remedies available to them. If either Party fails or refuses
to participate in such negotiations, or if, in any event, the dispute,
controversy or claim is not resolved to the satisfaction of both Parties within
the sixty (60) day period, any such dispute, controversy or claim shall be
settled by arbitration. Any such arbitration shall be conducted in accordance
with the Japan-American Trade Arbitration Agreement of September 16, 1952. The
Parties agree that any such arbitration shall be conducted in the English
language in a location within the United States selected by the Party that did
not initiate such arbitration, and the Agreement shall be governed by and
construed in accordance with the laws of the State of California and the United
States of America. The arbitrators shall include one independent, un-affiliated
nominee selected by each Party and a third neutral arbitrator selected by such
nominees. The Parties agree that any arbitration panel shall include members
knowledgeable as to the evaluation of biopharmaceutical technology. Judgment
upon the award rendered may be entered in the highest state or federal court or
forum, state or federal, having jurisdiction; provided, however, that the
provisions of this Section 13.7 shall not apply to any dispute or
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
37
<PAGE>
controversy as to which any treaty or law prohibits such arbitration. The
prevailing Party shall be entitled to reasonable attorney's fees and costs to be
fixed by the arbitrators.
13.8 Waiver. Except as specifically provided for herein, the waiver from
time to time by either of the Parties of any of their rights or their failure to
exercise any remedy shall not operate or be construed as a continuing waiver of
same or of any other of such Party's rights or remedies provided in this
Agreement.
13.9 Severability. If any term, covenant or condition of this Agreement
or the application thereof to any Party or circumstance shall, to any extent, be
held to be invalid or unenforceable, then the remainder of this Agreement, or
the application of such term, covenant or condition to Parties or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this Agreement shall be
valid and be enforced to the fullest extent permitted by law.
13.10 Ambiguities. Ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed to have
authored the ambiguous provision.
13.11 Entire Agreement. This Agreement sets forth all the covenants,
promises, agreements, warranties, representations, conditions and understandings
between the Parties hereto with regard to the subject matter discussed herein
and supersedes and terminates all prior agreements and understanding between the
Parties with regard to the subject matter discussed herein. There are no
covenants, promises, agreements, warranties, representations conditions or
understandings, either oral or written, between the Parties with regard to the
subject matter discussed herein other than as set forth in this Agreement;
provided that the Parties agree that the Kirin/Dendreon Term Sheet provides
terms for a collaboration program, to be set forth in a Research and License
Agreement to be negotiated and executed by the Parties consistent with such
terms, for joint development and commercialization in the Joint Territory, to be
set forth in a Commercialization Agreement to be negotiated and executed by the
Parties consistent with such terms, and for the manufacture and supply of
products, to be set forth in a Manufacturing and Supply Agreement to be
negotiated and executed by the Parties consistent with such terms.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
38
<PAGE>
No subsequent alteration, amendment, change or addition to this Agreement shall
be binding upon the Parties hereto unless reduced to writing and signed by the
respective authorized officers of the Parties.
13.12 Headings. The Section and Paragraph headings contained herein are
for the purposes of convenience only and are not intended to define or limit the
contents of the Section or Paragraphs to which they apply.
IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals by their proper officers as of the date and year first above written.
DENDREON CORPORATION KIRIN BREWERY CO., LTD.
<TABLE>
<CAPTION>
<S> <C> <C>
By: /s/ Christopher S. Henney By: /s/ Koichiro Aramaki
------------------------------------- -------------------------------------
Title: Chief Executive Officer 12/7/98 Title: President, Pharm. Div. 12/10/98
------------------------------------ --------------------------------------
</TABLE>
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
39
<PAGE>
EXHIBIT A
DENDREON KNOW-HOW
Dendreon "Know-How" would also relate to information (clinical protocols, Batch
Record, SOP's, Release Specifications, minutes from meetings, and other Dendreon
documents) that was discussed and memorialized at previous Kirin-Dendreon
Meetings. Dendreon "Know-How" would include information such as the following:
[*]
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
1.
<PAGE>
EXHIBIT B
DENDREON PATENTS
[ * ]
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
1.
<PAGE>
EXHIBIT C
KIRIN PATENTS
None as of the Effective Date.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
1.
<PAGE>
EXHIBIT D
TRADEMARK RIGHTS
1. Kirin Licensed Marks
The following trademarks are the subject of the foregoing license:
Word Marks:
Stylized Marks:
2. Kirin Trademark Applications
Mark Application No. Application Date
- ---- --------------- ----------------
3. Dendreon Licensed Marks
The following trademarks are the subject of the foregoing license:
Word Marks:
Stylized Marks:
4. Dendreon Trademark Registrations and Applications
Mark Registration No. Registration Date
- ---- ---------------- -----------------
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
1.
<PAGE>
5. Forms of Authorized Use of Kirin Trademarks
6. Forms of Authorized Use of Dendreon Trademarks
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
2.
<PAGE>
EXHIBIT 10.16
RESEARCH AND LICENSE AGREEMENT
BETWEEN
DENDREON CORPORATION
AND
KIRIN BREWERY CO., LTD.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 1 DEFINITIONS.................................... 1
1.1 "Affiliate".................................... 1
1.2 "Collaboration Discoveries".................... 2
1.3 "Collaboration Patent"......................... 2
1.4 "Collaboration Product"........................ 2
1.5 "Collaboration Technology"..................... 2
1.6 "Controlled"................................... 2
1.7 "Dendreon Technology".......................... 2
1.8 "Dendreon Territory"........................... 2
1.9 "Dendritic Cell"............................... 2
1.10 "Field"........................................ 2
1.11 "FTE".......................................... 2
1.12 "Information".................................. 3
1.13 "Joint Research Committee" or "JRC"............ 3
1.14 "Joint Territory".............................. 3
1.15 "Kirin/Dendreon Term Sheet".................... 3
1.16 "Kirin Technology"............................. 3
1.17 "Kirin Territory".............................. 3
1.18 "License Agreement"............................ 3
1.19 "Net Revenue".................................. 3
1.20 "Patent"....................................... 3
1.21 "Reasonable Efforts"........................... 3
1.22 "Regulatory Approval".......................... 4
1.23 "Research Plan"................................ 4
1.24 "Research Program"............................. 4
1.25 "Research Term"................................ 4
1.26 "Start Date"................................... 4
1.27 "Sublicensee".................................. 4
1.28 "Third Party".................................. 4
</TABLE>
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
1
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 2 COLLABORATIVE RESEARCH......................... 4
2.1 Collaborative Research......................... 4
2.2 Joint Research Committee....................... 5
2.3 JRC Meetings................................... 5
2.4 Decision-Making and Issue Resolution........... 6
2.5 Research Plan.................................. 6
2.6 Research Efforts and Expenses.................. 7
2.7 Other Research................................. 7
ARTICLE 3 LICENSES AND RIGHTS............................ 7
3.1 Research License to Kirin...................... 7
3.2 Research License to Dendreon................... 8
3.3 Commercial License to Dendreon................. 8
3.4 Sublicenses to Third Parties................... 8
ARTICLE 4 DEVELOPMENT AND COMMERCIALIZATION.............. 8
4.1 Kirin Territory................................ 8
4.2 Dendreon Territory............................. 9
4.3 Joint Territory................................ 9
ARTICLE 5 FEES AND ROYALTIES............................. 9
5.1 Sales of Collaboration Products by Kirin....... 9
5.2 Sales of Collaboration Products by Dendreon.... 9
5.3 Royalty Reduction.............................. 10
5.4 Payment of Royalties........................... 10
5.5 Manner of Payment.............................. 10
5.6 Reports........................................ 10
5.7 Records and Audit.............................. 10
5.8 Withholding of Taxes........................... 11
ARTICLE 6 CONFIDENTIALITY................................ 11
6.1 Confidentiality................................ 11
6.2 Exceptions..................................... 11
</TABLE>
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
2
<PAGE>
<TABLE>
<S> <C> <C>
6.3 Authorized Disclosure.......................... 12
6.4 Survival....................................... 12
ARTICLE 7 INTELLECTUAL PROPERTY.......................... 12
7.1 Ownership...................................... 12
7.2 Kirin Responsibility for Patent Filings........ 12
7.3 Enforcement Rights............................. 12
7.4 Third Party Patent Rights...................... 13
7.5 Third Party Claims in the Kirin Territory...... 13
7.6 Third Party Claims in the Dendreon Territory... 13
7.7 Third Party Royalties.......................... 13
ARTICLE 8 REPRESENTATIONS AND WARRANTIES................. 14
ARTICLE 9 REPORTS, RECORDS AND SAMPLES................... 14
9.1 Sharing of Information......................... 14
9.2 Materials...................................... 14
9.3 Publicity Review............................... 15
9.4 Publications................................... 15
ARTICLE 10 TERM AND TERMINATION........................... 15
10.1 Term........................................... 15
10.2 Termination for Breach......................... 15
10.3 Surviving Rights............................... 16
ARTICLE 11 INDEMNIFICATION................................ 16
11.1 Indemnification in Kirin Territory............. 16
11.2 Indemnification in the Dendreon Territory...... 16
ARTICLE 12 MISCELLANEOUS.................................. 16
12.1 Assignment..................................... 16
12.2 Retained Rights................................ 17
12.3 Force Majeure.................................. 17
12.4 Further Actions................................ 17
12.5 No Trademark Rights............................ 17
</TABLE>
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
3
<PAGE>
<TABLE>
<S> <C> <C>
12.6 Notices........................................ 17
12.7 Dispute Resolution............................. 18
12.8 Waiver......................................... 18
12.9 Severability................................... 19
12.10 Ambiguities.................................... 19
12.11 Entire Agreement............................... 19
12.12 Headings....................................... 19
</TABLE>
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
4
<PAGE>
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.16
RESEARCH AND LICENSE AGREEMENT
THIS RESEARCH AND LICENSE AGREEMENT (the "Agreement") is made and entered
into effective as of February 1, 1999 (the "Effective Date") by and between
DENDREON CORPORATION, a Delaware corporation having its principal place of
business at 3005 1st Avenue, Seattle, Washington, U.S.A. ("Dendreon"), and KIRIN
BREWERY CO., LTD., a corporation organized and existing under the laws of Japan
having its principal place of business at 10-1, Shinkawa 2-chome, Chuo-ku,
Tokyo, Japan ("Kirin"). Dendreon and Kirin may be referred to herein
collectively as the "Parties" or individually as a "Party."
RECITALS
A. In regard to Dendreon Technology (as defined below) and utilization
thereof for human immunotherapy, Kirin and Dendreon entered into on June 30,
1998 the Kirin/Dendreon Term Sheet, as hereinafter defined. Further, on
December 10, 1998, Kirin and Dendreon entered into the Collaborative License
Agreement (hereinafter defined as the "License Agreement") granting certain
licenses and other rights to Kirin Products and Dendreon Products, as defined
therein.
B. Kirin and Dendreon desire to conduct certain collaborative research
with the goal of creating improvements to the underlying Dendreon dendritic cell
technology, discovering new immunotherapy targets, and/or developing new
dendritic cell-based immunotherapy products for use to prevent or treat
diseases.
C. Kirin desires to obtain the rights to develop and commercialize
products based on the results of such collaborative research in the Kirin
Territory, and Dendreon desires to obtain the rights to develop and
commercialize such products in the Dendreon Territory.
NOW, THEREFORE, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
The following capitalized terms shall have the following meanings when used
in this Agreement:
1.1 "Affiliate" means, with respect to a particular Party, a person,
corporation or other entity that, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with such
Party. For the purposes of this definition, "control" means the direct or
indirect ownership by a Party of at least fifty percent (50%) of the outstanding
voting securities of the controlled entity; provided, that in any country where
the law does not permit foreign equity ownership of at least fifty percent
(50%), then with respect to
1
<PAGE>
corporations organized under such country's laws, "control" shall mean the
direct or indirect ownership by a Party of outstanding voting securities of such
corporation at the maximum amount permitted by the law of such country.
1.2 "Collaboration Discoveries" means any Information that is created,
developed or discovered pursuant to a Party's activities under the Research
Program. It is agreed that the all Dendreon Technology and Kirin Technology is
excluded from the definition of "Collaboration Discoveries."
1.3 "Collaboration Patent" means any Patent or application for a Patent
that claims an invention in Collaboration Discoveries.
1.4 "Collaboration Product" means any commercial product that comprises
or contains, or is developed or manufactured based on or utilizing or is derived
from, the Collaboration Technology or any part thereof, but excluding all Kirin
Products and Dendreon Products (as such terms are defined in the License
Agreement).
1.5 "Collaboration Technology" means the Collaboration Discoveries and
Collaboration Patents, either collectively or any part thereof.
1.6 "Controlled" means, with respect to a particular item, material, or
intellectual property right, that a Party owns or has a license under such item,
material or intellectual property right and has the ability to grant to the
other Party access to and/or a license or sublicense under such item, material
or intellectual property right as provided for herein without violating the
terms of any agreement or other arrangement with, or the rights of, any Third
Party.
1.7 "Dendreon Technology" means the Dendreon Know-How, the Dendreon
Improvements and the Dendreon Patents, either collectively or any part thereof,
as such terms are defined in the License Agreement.
1.8 "Dendreon Territory" means all countries of the world and all
territories and possessions thereof, excluding all countries, territories and
possessions within the Kirin Territory and the Joint Territory.
1.9 "Dendritic Cell" means a human dendritic cell or other antigen-
presenting cell or other cells from which dendritic cells can be derived.
1.10 "Field" means the discovery, development, manufacture, use and sale
of products that generally utilize Dendritic Cell separation, antigen
engineering, and antigen or antigen gene delivery to Dendritic Cells for use in
human therapies that are based on, comprise, utilize or are derived from the
Dendreon Technology. The foregoing products may have applications for other
human medical uses, and if Kirin demonstrates to Dendreon's reasonable
satisfaction that such other uses exist, then the Parties agree to negotiate in
good faith an amendment to the Agreement that extends the Field to cover such
additional uses, including such additional amendments as may be needed to
properly cover such products for royalty purposes.
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
2
<PAGE>
1.11 "FTE" means work hours equivalent to the work performed by one full-
time employee working for one year (including normal vacation).
1.12 "Information" means any and all information and data of any kind,
including without limitation techniques, inventions, practices, methods,
knowledge, know-how, skill, experience, test data (including pharmacological,
toxicological and clinical test data), analytical and quality control data,
marketing, cost, sales and manufacturing data and descriptions, compositions,
and assays.
1.13 "Joint Research Committee" or "JRC" means the committee formed by
the Parties to direct and manage the Research Program, as provided in Section
2.2.
1.14 "Joint Territory" means the countries that are members of the
European Union, as such union is constituted at the applicable time.
1.15 "Kirin/Dendreon Term Sheet" means that certain Term Sheet executed
by the Parties and dated as of June 30, 1998.
1.16 "Kirin Technology" means the Kirin Improvements, Kirin Know-How and
Kirin Patents, either collectively or any part thereof, as such terms are
defined in the License Agreement.
1.17 "Kirin Territory" means Japan, Australia, New Zealand, the Peoples
Republic of China (including Hong Kong and Macao), Taiwan, South Korea, North
Korea, Mongolia, Vietnam, Laos, Cambodia, Thailand, Myanmar, Philippines,
Brunei, Singapore, Indonesia and Malaysia.
1.18 "License Agreement" means the Collaborative License Agreement by and
between the Parties dated December 10, 1998.
1.19 "Net Revenue" means the total revenue received by a Party for sale
or other disposition of a Collaboration Product by such Party or an Affiliate or
Sublicensee of such Party to a Third Party less the following to the extent
actually incurred or allowed with respect to such sale or disposition: (i)
reasonable costs paid by the Party to a Third Party on account of apheresis
performed as part of or in association with the Collaboration Product; (ii)
discounts, including cash discounts, or rebates, retroactive price reductions or
allowances actually allowed or granted from the billed amount; (iii) credits or
allowances actually granted upon claims, rejections or returns of Collaboration
Products, including recalls, regardless of the Party requesting such; (iv)
freight, postage, shipping and insurance charges paid for delivery of
Collaboration Product, to the extent billed; and (v) taxes, duties or other
governmental charges levied on or measured by the billing amount when included
in billing, as adjusted for rebates and refunds.
1.20 "Patent" means (i) a valid and enforceable patent, including any
extension, registration, confirmation, reissue, re-examination or renewal
thereof; and (ii) to the extent valid and enforceable rights are granted by a
governmental authority thereunder, a patent application.
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
3
<PAGE>
1.21 "Reasonable Efforts" shall mean efforts and resources commonly used
in the research-based pharmaceutical industry for the research, development and
commercialization of a product at a similar stage in its product life taking
into account the establishment of the product in the marketplace, the
competitiveness of the marketplace, the proprietary position of the product, the
regulatory structure involved, the profitability of the product and other
relevant factors.
1.22 "Regulatory Approval" means any approvals, licenses, registrations
or authorizations of any federal, state or local regulatory agency, department,
bureau or other government entity, necessary for the manufacture, use, storage,
import, transport or sale, of products in a regulatory jurisdiction.
1.23 "Research Plan" means the plan established by the JRC setting forth
in reasonable detail the goals and activities to be undertaken in the Research
Program, performed by the Parties pursuant to Section 2.1.
1.24 "Research Program" means the cooperative research conducted by
Dendreon, in collaboration with Kirin, under this Agreement pursuant to the
Research Plan.
1.25 "Research Term" means the period commencing on the Start Date and
ending on the anniversary thereof, as determined and agreed by the JRC as
provided in Section 2.2.
1.26 "Start Date" means the date, established by mutual agreement of the
Parties, on which the Research Program shall commence, as provided in Sections
2.1 and 2.2.
1.27 "Sublicensee" shall mean any Third Party expressly licensed by a
Party to make and sell one or more Collaboration Products. A Sublicensee shall
not include distributors or sales agents that do no more than purchase and
resell finished Products on behal f of a Party.
1.28 "Third Party" means any entity other than Dendreon or Kirin or an
Affiliate of Dendreon or Kirin.
ARTICLE 2
COLLABORATIVE RESEARCH
2.1 Collaborative Research. Dendreon and Kirin agree that, commencing on
the Start Date as established by mutual agreement, they will conduct a Research
Program on a collaborative basis, with the general goal of developing specific
improvements or extensions to certain of the Dendreon Technology as agreed by
the Parties. The specific scope of the Research Program shall be set forth in
detail in the Research Plan established by the Joint Research Committee, as
provided below. The specific work undertaken by the Parties in the Research
Program shall be governed by the Research Plan and shall be managed and directed
by the JRC. The Research Program shall commence on the Start Date, as provided
in Section 2.2, and terminate at the expiration of the Research Term, unless the
Agreement is earlier terminated as provided in Article 10.
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
4
<PAGE>
2.2 Joint Research Committee. The Research Program will be managed and
directed by the Joint Research Committee, which shall be comprised of four (4)
individuals, two (2) being Dendreon employees appointed and replaced by Dendreon
at its discretion and two (2) being Kirin employees appointed and replaced by
Kirin at its discretion. The size and composition of the JRC may be modified by
mutual agreement of the Parties. The Parties shall form the JRC within twenty
(20) days after the Effective Date of this Agreement. The JRC shall determine,
prior to the Start Date, the length of the Research Term, which shall not exceed
five (5) years without written consent of the Parties, and shall be subject to
early termination as provided in Section 10.1. The JRC shall have the following
authority and obligations:
(a) To encourage and facilitate the ongoing cooperation and
collaboration of the Parties in conducting the Research Program;
(b) To establish, and amend as appropriate, the Research Plan as
discussed further in Section 2.5, which shall govern the specific research tasks
and goals of the Research Program;
(c) To establish and implement specific plans for accomplishing the
tasks and goals of the Research Plan;
(d) To allocate tasks and coordinate activities of the Parties
required to perform the Research Program;
(e) To evaluate the results of the Research Program and discuss
information related to the Research Program, and to amend the Research Plan as
appropriate; and
(f) To ensure that there is appropriate scientific management of the
Research Program.
(g) manage and expedite the progress of Collaboration Products
through the Research Program to development stages.
2.3 JRC Meetings. The JRC shall act at meetings held regularly with all
members present, according to the following:
(a) JRC meetings shall take place at such times and places as shall
be determined by the JRC at least twice a year; it is expected that the meetings
will alternate between appropriate offices of each Party, or at such other
convenient locations as agreed;
(b) If requested by a Party, the JRC may conduct a particular
meeting by telephone or video conference or other acceptable electronic means,
provided that all JRC members attend such meeting and can hear and communicate
with all other members, and any decisions made during such meeting are recorded
in writing and confirmed by signature of at least one of the JRC members from
each of the Parties;
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
5
<PAGE>
(c) A Party may bring a reasonable number of additional
representatives, in a non-voting capacity, to attend appropriate JRC meetings,
provided that such attendance is helpful to the JRC carrying out its tasks and
obligations;
(d) Prior to each meeting, the designated chair of the JRC (which
may vary during the term) shall circulate an agenda for the meeting, and the JRC
shall keep minutes reflecting matters discussed and the actions taken at the
meeting, a copy of which shall be provided to each Party;
(e) The JRC may act on a specific issue or matter without a meeting
if the JRC members all agree as to such action and such agreement is set forth
in a written consent signed by all the members of the JRC;
(f) The JRC may form and subsequently disband subcommittees to
perform such tasks, within the authority of the JRC and on the JRC's behalf, as
are specifically delegated by the JRC. For example, the JRC could create a
subcommittee to address specific technical issues in the Research Plan. Any such
subcommittee shall have appropriate representation of each Party and may include
representatives of a Party who are not members of the JRC. All such
subcommittees shall act only by unanimous agreement of their members at meetings
as determined by the subcommittee. The subcommittees shall report all matters
discussed and actions taken promptly to the JRC in writing. At the request of
either Party at any time, any such subcommittee shall be dissolved and its
powers and functions returned to the Research Committee.
2.4 Decision-Making and Issue Resolution. All decisions of or actions
taken by the JRC or any subcommittee thereof shall be by unanimous approval of
all the members of the JRC or such subcommittee, and voting on any matters shall
be reflected in the minutes of the meeting at which the vote was taken. If the
JRC fails to reach unanimous agreement on an issue or matter needing resolution,
the matter shall be referred for good faith discussion and resolution by the
appropriate senior executive officer of each Parties. If a subcommittee fails to
reach unanimous agreement, the matter shall be referred for further review and
resolution by the JRC.
2.5 Research Plan. Promptly after its formation pursuant to Section 2.2,
the JRC shall develop the initial Research Plan, which shall be provided to each
Party for review and approval. The approved Research Plan shall then govern the
initial work of the Parties under the Research Program and shall establish the
number of FTEs at Dendreon dedicated to conducting the Research Program, which
number shall be six (6) FTEs. The JRC will periodically review the Research Plan
in light of the results of the Research Program and modify, amend or adjust the
Research Plan as needed, provided that such modifications or amendments may not
expand the scope of the Research Program unless agreed by the senior management
of each Party. The Research Plan shall specify, among other things, the
particular Dendreon Technology that shall be the subject of the Research
Program, the specific scope and goals of the research and development work to be
undertaken, the scientific direction and research milestones, and shall give a
general allocation between the Parties of the research responsibilities within
such plan for the research.
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
6
<PAGE>
2.6 Research Efforts and Expenses. Each of the Parties will maintain
scientific staff, laboratories, offices and other facilities necessary to carry
out the Research Program tasks and obligations assigned to it by the JRC. Each
party shall use Reasonable Efforts to conduct and complete such tasks and
obligations and otherwise to achieve the goals of the Research Program. Kirin
will bear all of its own expenses incurred in connection with the Research
Program, including travel expenses. In addition, Kirin will provide to Dendreon
funding to support the Research Program work at Dendreon. Such funding shall be
at an FTE rate, based on the total number of FTEs allocated under the Research
Plan to conduct work at Dendreon on the Research Program, providing that such
funding will be for a total of six (6) FTEs, unless otherwise agreed by the JRC.
The FTE rate initially shall be [ * ] per year per FTE; such rate will be
adjusted upward or downward, commencing on the first January 1 after the Start
Date, and every January 1 thereafter, an amount reflecting any changes (from the
last date the FTE rate was set) in the consumer price index for urban wage
earners in the Seattle region. Kirin shall provide such funding in advance at
the beginning of each calendar quarter during the Research Program. Dendreon
will provide Kirin a summary accounting of its FTE allocation to conduct the
Research Program, within sixty (60) days of the end of each year during the
Research Term. At least thirty (30) days prior to the beginning of each year
during the Research Term, Dendreon shall submit to Kirin a detailed budget which
is consistent with the budget described in the Research Plan approved by the
JRC. Dendreon shall provide Kirin with a detailed quarterly progress report
within thirty (30) days after the end of each calendar quarter.
2.7 Other Research. Dendreon acknowledges and agrees that the specific
research and development work set forth in the Research Plan should be conducted
solely by Dendreon and Kirin. Kirin acknowledges and agrees that nothing in
this Agreement shall prevent or otherwise hinder Dendreon from conducting, and
Dendreon shall retain full rights to conduct, its own independent research and
development work with respect to Dendreon Technology or any aspect thereof for
any use or purpose, and including conducting such research and development work
with or on behalf of third party partners. Dendreon acknowledges and agrees
that nothing in this Agreement shall prevent or otherwise hinder Kirin from
conducting research and development work with respect to Dendreon Technology or
any aspect thereof as permitted in the License Agreement, and including
conducting such research and development work with or on behalf of its
Affiliates in the Kirin Territory to the extent and as permitted in the License
Agreement.
ARTICLE 3
LICENSES AND RIGHTS
3.1 Research License to Kirin.
(a) Subject to the terms of this Agreement, Dendreon hereby grants
to Kirin a non-exclusive (subject to the following restriction) license under
the Dendreon Technology that is the subject of the Research Program solely to
conduct the Research Program activities assigned to Kirin under the Research
Plan. Dendreon further agrees that during the term of the Research
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
7
<PAGE>
Program Dendreon will not license to any Third Party any Dendreon Technology for
use in pursuing any research activity that is expressly the subject of the
Research Program.
(b) The license granted in Section 3.1(a) is subject to the
following express limitation (and to all other obligations and limitations in
the Agreement): Kirin obtains no license or rights to use the Dendreon
Technology to research or develop devices for use in the isolation or
purification of dendritic or any other cells, or to practice the Dendreon
Technology for any purpose except as expressly permitted in Section 3.1(a).
3.2 Research License to Dendreon.
(a) Subject to the terms of this Agreement, Kirin hereby grants to
Dendreon a non-exclusive (subject to the following restriction) license under
any applicable Kirin know-how and Patent rights solely to conduct the Research
Program activities assigned to Dendreon under the Research Plan. Kirin further
agrees that during the term of the Research Program Kirin will not license to
any Third Party any Kirin Technology for use in pursuing any research activity
that is expressly the subject of the Research Program.
(b) The license granted in Section 3.2(a) is subject to the
following express limitation (and to all other obligations and limitations in
the Agreement): Dendreon obtains no license or rights to use the Kirin know-how
or Patent rights for any purpose except as expressly permitted in Section
3.2(a).
3.3 Commercial License to Dendreon. Subject to the terms of this
Agreement, Kirin hereby grants to Dendreon the exclusive license in the Dendreon
Territory under the Collaboration Technology to research, develop, make, have
made, use, sell, offer for sale and import Collaboration Products and Dendreon
Products in the Dendreon Territory.
3.4 Sublicenses to Third Parties.
(a) Kirin shall have the right to grant sublicenses under the
Collaboration Technology (i) to its Affiliates to develop, make, have made, use,
sell, offer for sale and import Collaboration Products and Kirin Products in the
Kirin Territory without Dendreon's prior written approval, and (ii) to Third
Parties solely for sale (but not therapeutic development) of Collaboration
Products and Kirin Products incorporating Collaboration Technology in the Kirin
Territory without Dendreon's prior written approval. Kirin and its Affiliates
may conduct clinical development of particular Collaboration Products and Kirin
Products incorporating Collaboration Technology in the Dendreon Territory and
the Joint Territory so long as Kirin obtains Dendreon's prior written approval
of the location and clinical study protocol of any such clinical work or study
of each such Collaboration Product or Kirin Product, such approval not to be
unreasonably withheld, and such work is intended to generate data to be used in
obtaining Regulatory Approval of such Collaboration Product or Kirin Product for
manufacturing, marketing and sale in the Kirin Territory.
(b) Dendreon shall have the right to grant sublicenses under the
Collaboration Technology (i) to its Affiliates to develop, make, have made, use,
sell, offer for sale and import
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
8
<PAGE>
Collaboration Products and Dendreon Products in the Dendreon Territory without
Kirin's prior written approval, and (ii) to Third Parties solely for sale (but
not therapeutic development) of Collaboration Products and Dendreon Products
incorporating Collaboration Technology in the Dendreon Territory without Kirin's
prior written approval. Dendreon and its Affiliates may conduct clinical
development of particular Collaboration Products and Dendreon Products
incorporating Collaboration Technology in the Kirin Territory and the Joint
Territory so long as Dendreon obtains Kirin's prior written approval of the
location and clinical study protocol of a any such clinical work or study of
each such Collaboration Product or Dendreon Product, such approval not to be
unreasonably withheld, and such work is intended to generate data to be used in
obtaining Regulatory Approval of such Collaboration Product or Dendreon Product
for manufacturing, marketing and sale in the Dendreon Territory.
ARTICLE 4
DEVELOPMENT AND COMMERCIALIZATION
4.1 Kirin Territory. Kirin shall have the exclusive right to utilize the
Collaboration Technology to develop Collaboration Products for use and sale in
the Kirin Territory and to commercialize the Collaboration Products in the Kirin
Territory. Kirin agrees to use Reasonable Efforts to develop such Collaboration
Products and to market and sell in the Kirin Territory such Collaboration
Products developed by Kirin.
4.2 Dendreon Territory. Dendreon shall have the exclusive right to
utilize the Collaboration Technology to develop and commercialize Collaboration
Products in the Dendreon Territory, pursuant to the license and sublicense
rights granted by Kirin in Sections 3.3 and 3.4(b). Dendreon agrees to use
Reasonable Efforts to develop such Collaboration Products and to market and sell
in the Dendreon Territory such Collaboration Products developed by Dendreon.
4.3 Joint Territory. Development and commercialization of Collaboration
Products in the Joint Territory shall be conducted solely as provided in the
Commercialization Agreement, and neither Party may develop or sell Collaboration
Products in such countries except as provided in such agreement.
ARTICLE 5
FEES AND ROYALTIES
5.1 Sales of Collaboration Products by Kirin. Kirin shall pay Dendreon a
royalty equal to [ * ] of the Net Revenue of Collaboration Products sold by
Kirin, its Affiliates, licensees and Sublicensees in the Kirin Territory. For
each particular Collaboration Product, Kirin shall pay the royalties specified
above, on a country by country basis, until the later of the expiration of ten
(10) years from the first commercial launch of such Collaboration Product in
such country or the last to expire of the Patents with claims covering such
Collaboration Product or its manufacture or use in such country. For clarity,
it is understood that for any product that is
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
9
<PAGE>
claimed by patented Collaboration Discoveries and that also meets the definition
of a Kirin Product or a Dendreon Product, Kirin shall pay royalties on its sales
of such products as provided in Article 7 of the License Agreement, as
applicable, and shall not owe any additional royalties hereunder on account of
the patented Collaboration Discoveries in such products.
5.2 Sales of Collaboration Products by Dendreon. Dendreon will pay Kirin
a royalty equal to [ * ] of the Net Revenue of Collaboration Products sold by
Dendreon, its Affiliates, licensees and Sublicensees in the Dendreon Territory.
For each particular Collaboration Product, Dendreon shall pay the royalties
specified above, on a country by country basis, until the later of the
expiration of ten (10) years from the first commercial launch of such
Collaboration Product in such country or the last to expire of the Patents with
claims covering such Collaboration Product or its manufacture or use in such
country. For clarity, it is understood that for any product that is claimed by
patented Collaboration Discoveries and also meets the definition of a Kirin
Product, the sole and total royalty owed to Kirin by Dendreon based on the sale
of such product by Dendreon shall be as determined in the License Agreement for
Dendreon's sale of Kirin Products, and Dendreon shall not owe Kirin any
additional royalties hereunder based on such sales.
5.3 Royalty Reduction. If Kirin or Dendreon, as applicable, sells a
particular Collaboration Product that does not meet the definition of a Kirin
Product or a Dendreon Product in a country where, at the time of sale, there is
no issued Collaboration Patent that claims such Collaboration Product or its
manufacture or use, then the amount of royalty owed by such Party to the other
Party under Section 5.1 or 5.2 (as applicable) shall be reduced by [ * ] with
respect to such sale.
5.4 Payment of Royalties. Royalties under this Article 5 shall accrue
upon the sale of the particular Collaboration Product (deemed to occur on the
earlier of transfer of title or invoice date), and royalties that have accrued
during a particular calendar quarter shall be paid by the Party owing such
royalties within sixty (60) days after the end of each such calendar quarter.
Such royalties shall be calculated on the basis of Net Revenue in the local
currency of each country, and converted into U.S. Dollars and paid in U.S.
Dollars on the basis of the average currency exchange rate for the applicable
calendar quarter quoted by Tokyo Mitsubishi Bank (or its successor) for currency
exchange in excess of one million U.S. dollars ($1,000,000).
5.5 Manner of Payment. Remittance of payments under this Article 5 will
be made by means of wire or electronic transfer to the receiving Party's account
in a bank to be designated by such Party in writing.
5.6 Reports. All amounts payable under this Agreement shall be
accompanied by a report listing the gross selling price of each Collaboration
Product sold during such period on a product-by-product and country-by-country
basis, and the calculation of Net Revenue based on such sales, including all
other information necessary to determine the appropriate amount of such royalty
payments, and any additional information or reports required under the
Agreement.
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
10
<PAGE>
5.7 Records and Audit. For a period of three (3) years after the royalty
period to which the records relate, each Party shall keep complete and accurate
records pertaining to the sale or other disposition of the Collaboration
Products commercialized by it, in sufficient detail to permit the other Party to
confirm the accuracy of all payments due hereunder. A Party entitled to
payments hereunder shall have the right to cause an independent, certified
public accountant reasonably acceptable to the other Party (and who has executed
a confidentiality agreement with the Party to be audited) to audit such records
to confirm the Net Revenue and royalty payments; provided, however, that such
auditor shall not disclose the audited Party's confidential information to the
other Party, except to the extent such disclosure is necessary to verify the
amount of royalties and other payments due under this Agreement. In no event
may such accountant disclose the names of specific customers, price lists, or
the prices charged to specific customers. A copy of any report provided by such
accountant shall be provided to the audited Party at the time that it is
provided to the auditing Party. Such audits may be exercised once a year,
within three (3) years after the royalty period to which such records relate,
upon a mutually acceptable date(s) and upon not less than thirty (30) days
advance notice, and shall be conducted during normal business hours. Any
amounts shown to be owing by such audits shall be paid immediately with interest
in the amount of one percent (1%) per month (or the maximum amount permitted by
law, if less) from the date first owed until paid. The auditing Party shall
bear the full cost of such audit unless such audit discloses that royalties
actually paid by the audited Party are more than five percent (5%) less from the
amount of royalties and/or other payments actually owed. In such case, the
audited Party shall bear the full cost of such audit. The terms of this Section
5.7 shall survive any termination or expiration of this Agreement for a period
of two (2) years.
5.8 Withholding of Taxes. All turnover, income and other taxes levied on
account of the royalties and other payments accruing or made to a Party under
this Agreement shall be paid by such Party. If provision is made in law or
regulation for withholding of taxes of any type, levies or other charges with
respect to any royalty or other amounts payable under this Agreement by a Party
to the other Party, then such paying Party shall be entitled to deduct such tax,
levy or charge from the royalty or other payment to be made by such Party and
pay such tax, levy or charge to the proper taxing authority. A receipt of
payment of the tax, levy or charge secured shall be promptly delivered to the
other Party, together with copies of all pertinent communications from or with
such governmental authorities with respect thereto. Such paying Party agrees to
cooperate with the other Party in any effort in claiming any exemption from such
deductions or withholdings under any double taxation or similar agreement or
treaty from time to time in force and in minimizing the amount required to be so
withheld or deducted, such cooperation to consist of providing receipts of
payment of such withheld tax or other documents reasonably available to the
paying Party.
ARTICLE 6
CONFIDENTIALITY
6.1 Confidentiality. Except to the extent expressly authorized by this
Agreement or otherwise agreed in writing, the Parties agree that, for the term
of this Agreement and for ten (10)
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
11
<PAGE>
years thereafter, the receiving Party shall keep confidential and shall not
publish or otherwise disclose or use for any purpose other than as provided for
in this Agreement any Information or materials furnished to it by the other
Party pursuant to this Agreement (collectively, "Confidential Information"),
except as otherwise provided below.
6.2 Exceptions. The obligations in Section 6.1 shall not apply to any
Information or materials to the extent that the receiving Party can establish by
competent proof that such Information or materials:
(a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the other Party;
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;
(c) became generally available to the public or otherwise part of
the public domain after its disclosure and other than through any act or
omission of the receiving Party in breach of this Agreement; or
(d) was disclosed to the receiving Party, other than under an
obligation of confidentiality, by a Third Party who had no obligation to the
disclosing Party not to disclose such information to others.
6.3 Authorized Disclosure. Each Party may disclose the other's
Confidential Information to the extent such disclosure is reasonably necessary
in filing or prosecuting patent applications, prosecuting or defending
litigation, complying with applicable governmental regulations or conducting
preclinical or clinical trials, provided that if a Party is required by law or
regulation to make any such disclosure of the other Party's Confidential
Information it will except where impracticable for necessary disclosures, for
example in the event of medical emergency, give reasonable advance notice to the
other Party of such disclosure requirement and, except to the extent
inappropriate in the case of patent applications, will use its best efforts to
secure confidential treatment of such Confidential Information required to be
disclosed.
6.4 Survival. This Article 6 shall survive the termination or expiration
of this Agreement for a period of ten (10) years.
ARTICLE 7
INTELLECTUAL PROPERTY
7.1 Ownership. Subject to the terms of this Agreement and the
Commercialization Agreement, Kirin shall own the entire right, title and
interest in and to the Collaboration Technology throughout the world, and
Dendreon agrees to assign to Kirin its entire interest in the Collaboration
Technology, subject to the rights granted in Sections 3.3, 3.4(b) and 4.2.
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
12
<PAGE>
7.2 Kirin Responsibility for Patent Filings. Kirin will use Reasonable
Efforts to file, prosecute, issue and maintain Collaboration Patents. In each
event, Kirin will confer with Dendreon, and make Reasonable Efforts to adopt
Dendreon's suggestions, regarding the prosecution of such Patents. Upon Kirin's
reasonable request and at its sole expense, Dendreon will make Reasonable
Efforts to assist Kirin in the filing of any Collaboration Patent. As soon as
practical subsequent to filing, Kirin will provide Dendreon with an English
language translation of any filing. In addition, Kirin will copy Dendreon with
any official action and Kirin submissions in such Patents, including an English
translation summary thereof. If Kirin fails to file, prosecute, issue or
maintain a particular Collaboration Patent in the Dendreon Territory within
sixty (60) days of receipt of a request from Dendreon that Kirin take such
action, Dendreon shall have the right to file, prosecute, issue or maintain such
Collaboration Patent in the Dendreon Territory.
7.3 Enforcement Rights. With respect to infringement of any of the
Collaboration Patents in the Kirin Territory, Kirin shall have the initial
right, but not the obligation, to institute, prosecute and control any action or
proceeding with respect to such infringement in the Kirin Territory. Kirin
shall bear the costs of such patent enforcement within the Kirin Territory and
shall retain for its own account any amounts recovered from Third Parties.
Dendreon shall have the right, but not the obligation, to institute, prosecute
and control any action or proceeding with respect to infringement in the
Dendreon Territory. Dendreon shall bear the costs of patent enforcement within
the Dendreon Territory and retain for its own account any amounts recovered from
Third Parties. The Party first having knowledge of any infringement of the
Collaboration Patents shall promptly notify the other Party in writing. The
notice shall set forth the facts of such infringement in reasonable detail. If
a Party having the right to enforce a Collaboration Patent pursuant to this
Section 7.3 fails to bring an action or proceeding against a suspected infringer
within a period of ninety (90) days after having knowledge of such infringement
in the Field, the other Party shall have the right to bring and control an
action against such infringer by counsel of its own choice. If one Party brings
any such action or proceeding, the other Party agrees to be joined as a Party
plaintiff if necessary to prosecute the action and to give the first Party
reasonable assistance and authority to file and prosecute the suit. The Party
controlling a suit hereunder shall, at the other Party's expense, retain any and
all recovery from such suit. The Party controlling a suit hereunder shall not
settle or consent to an adverse judgment in any such action which would have a
material adverse effect on the rights or interests of the other Party without
the prior express written consent of the other Party.
7.4 Third Party Patent Rights. Except as otherwise provided in this
Agreement or the Commercialization Agreement, neither Party makes any warranty
with respect to the validity, perfection or dominance of any Collaboration
Patent or other proprietary right or with respect to the absence of rights of
Third Parties which may be infringed by the manufacture or sale of any
Collaboration Product.
7.5 Third Party Claims in the Kirin Territory. If a Third Party asserts
that a patent, trademark or other intangible right owned by it is infringed by
any Collaboration Product in the Kirin Territory, Kirin will be solely
responsible for defending against any such assertions at its cost and expense.
Each Party will give prompt written notice to the other of any such
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
13
<PAGE>
claim. Dendreon will assist in the defense of any such claim as reasonably
requested by Kirin, at Kirin's expense, and may retain separate counsel at its
own expense. Prior to settling any such claim, Kirin shall consider in good
faith any rights and interests of Dendreon that may be adversely affected by
such settlement and shall use good faith efforts to minimize such affect.
7.6 Third Party Claims in the Dendreon Territory. If a Third Party
asserts that a patent, trademark or other intangible right owned by it is
infringed by any Collaboration Product in the Dendreon Territory, Dendreon will
be solely responsible for defending against any such assertions at its cost and
expense. Each Party will give prompt written notice to the other of any such
claim. Kirin will assist in the defense of any such claim as reasonably
requested by Dendreon, at Dendreon's expense, and may retain separate counsel at
its own expense. Prior to settling any such claim, Dendreon shall consider in
good faith any rights and interests of Kirin that may be adversely affected by
such settlement and shall use good faith efforts to minimize such affect.
7.7 Third Party Royalties. In the event that a Party is required to
obtain a license under a Third Party patent that covers or claims the
manufacture, use or sale of a Collaboration Product in order to practice a
Collaboration Patent to sell such Collaboration Product as permitted in this
Agreement, then provided that such Party shall disclose the relevant portions of
such license under such Third Party patent to the other Party in English and, if
any, the extent of any alleged infringement, such Party shall be entitled to
deduct [ * ] of any royalties owing to such Third Party based on the sale of
such Collaboration Products under such license from amounts owing to the other
Party, subject to a maximum royalty reduction of [ * ] of the amounts that
otherwise would be owed by such Party under this Agreement.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
8.1 Each of the Parties hereby represents and warrants as follows:
(a) This Agreement is a legal and valid obligation binding upon such
Party and enforceable in accordance with its terms. The execution, delivery and
performance of the Agreement by such Party does not conflict with any agreement,
instrument or understanding, oral or written, to which it is a Party or by which
it is bound, nor violate any law or regulation of any court, governmental body
or administrative or other agency having jurisdiction over it.
(b) Such Party has not, and during the term of the Agreement will
not, grant any right to any Third Party relating to its respective technology in
the Field licensed to the other Party hereunder which would conflict with such
rights granted to the other Party under Article 3.
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
14
<PAGE>
ARTICLE 9
REPORTS, RECORDS AND SAMPLES
9.1 Sharing of Information. Dendreon and Kirin will make available and
disclose to each other all Information resulting from or arising out of the work
conducted under the Research Program during the Research Term. All discoveries
or inventions made by either Party resulting from or arising out of the Research
Program will be promptly disclosed to the other, with significant discoveries or
advances being communicated as soon as practical after such information is
obtained or its significance is appreciated. The Parties will exchange at least
monthly verbal or written reports in English presenting a meaningful summary of
research done under this Agreement. In addition to any presentations made to
the JRC, each Party will make regular presentations to the other of its research
under this Agreement, and additionally on an informal basis, to inform the other
Party of the work done under this Agreement.
9.2 Materials. The Parties intend to maintain an open and extensive
exchange of research materials that relate to the Research Program during the
course of the Research Program. Information obtained by the other Party in the
testing of such materials will be promptly disclosed to the Party providing the
sample, and all such Information will be considered Information to be protected
by both Parties under the restrictions of Article 6. ANY MATERIALS EXCHANGED
BETWEEN THE PARTIES ARE SUPPLIED TO THE RECEIVING PARTY WITH NO WARRANTIES OF
ANY KIND, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR THAT THEY ARE FREE FROM THE RIGHTFUL CLAIM
OF ANY THIRD PARTY, BY WAY OF INFRINGEMENT OR THE LIKE. NEITHER PARTY MAKES ANY
REPRESENTATION OR WARRANTY THAT THE USE OF ANY MATERIALS PROVIDED HEREUNDER WILL
NOT INFRINGE ANY PATENT OR PROPRIETARY RIGHTS OF ANY THIRD PARTIES.
9.3 Publicity Review. If either Party is required by law or regulation
to make a public disclosure or announcement concerning the Research Program or
this Agreement or the subject matter thereof, such Party shall give reasonable
prior advance notice of the proposed text of such disclosure or announcement to
the other Party for its review and comment. The terms of this Agreement may also
be disclosed to: (i) Third Parties with the consent of the other Party, which
consent shall not be unreasonably withheld, so long as such disclosure is made
under a binder of confidentiality, and (ii) investors, potential investors,
underwriters and potential underwriters of Dendreon or Kirin, so long as such
disclosure is made under a binder of confidentiality.
9.4 Publications. Each Party agrees that it shall not publish or present
the results of studies carried out as part of the Research Program without the
opportunity for prior review by the other Party. Each Party shall provide to the
other the opportunity to review any proposed abstracts, manuscripts or
presentations (including information to be presented verbally) which relate to
Collaboration Technology or Collaboration Products at least thirty (30) days
prior to their intended submission for publication and such submitting Party
agrees, upon written request
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
15
<PAGE>
from the other Party, not to submit such abstract or manuscript for publication
or to make such presentation until the other Party is given a reasonable period
of time to secure patent protection for any material in such publication or
presentation which it believes is patentable.
ARTICLE 10
TERM AND TERMINATION
10.1 Term. This Agreement shall commence as of the Effective Date and,
unless sooner terminated as provided in this Article 10, shall continue in
effect until the latest of: (a) the expiration of the last to expire of the
Collaboration Patents, or (b) the date on which the Parties are no longer
obligated to pay royalties to each other under Article 5. In the event that,
commencing after the 3rd anniversary of the Start Date, Kirin decides in Kirin's
sole discretion that the Research Program does not make adequate progress, Kirin
may terminate the Agreement with six (6) months prior written notice to
Dendreon. In the case of termination by Kirin as stipulated in the preceding
sentence, Kirin shall own the entire right, title and interest in and to the
Collaboration Technology throughout the world, which was created, developed or
discovered before such termination, and Articles 4, 5, 6, 7 and 11, and Sections
3.3, 3.4, 9.4, 12.6 and 12.7 of the Agreement will survive such termination.
10.2 Termination for Breach. If either Party materially breaches this
Agreement at any time, which breach is not cured within thirty (30) days of
written notice thereof if such breach is caused by the failure of a Party to
meet its financial obligations under this Agreement, or within ninety (90) days
of written notice thereof for any other material breach of this Agreement, from
the non-breaching Party specifying in detail the nature of the breach, the non-
breaching Party may terminate the Agreement, provided that:
(a) if Dendreon terminates for Kirin's uncured breach, Kirin's
obligations under Sections 5.1 shall survive termination, and Kirin is deemed to
have automatically granted to Dendreon an exclusive, fully-paid, irrevocable,
sublicensable, perpetual license in the Dendreon Territory under the
Collaboration Technology for any and all purposes, provided that Kirin retains
the right granted in Section 7.1 of the Agreement; and
(b) if Kirin terminates for Dendreon's uncured breach: (i) Kirin's
obligations under Section 5.1 shall survive termination, (ii) Dendreon shall
cease development and commercialization of all Collaboration Products, (iii) the
rights and licenses granted to Dendreon in Section 3.2(a) and 4.2 shall
terminate and revert to Kirin, and (iv) Kirin may thereafter practice the
Collaboration Technology throughout the world.
10.3 Surviving Rights. In addition to survival of Sections and Articles
as provided elsewhere in the Agreement, the obligations and rights of the
Parties under Articles 6, 7 and 11 and Sections 9.4, 12.6 and 12.7 of this
Agreement will survive any termination.
ARTICLE 11
INDEMNIFICATION
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
16
<PAGE>
11.1 Indemnification in Kirin Territory. Kirin shall indemnify, defend
and hold Dendreon harmless from and against any and all liability, damage, loss,
cost (including reasonable attorneys' fees) and expense resulting from any claim
of infringement, bodily injury or property damage (a) relating to the
development, manufacture, use, distribution or sale of any Collaboration Product
in the Kirin Territory, or (b) due to the negligence or willful misconduct of
Kirin or its employees or agents.
11.2 Indemnification in the Dendreon Territory. Dendreon shall
indemnify, defend and hold Kirin harmless from and against any and all
liability, damage, loss, cost (including reasonable attorneys' fees) and expense
resulting from any claim of infringement, bodily injury or property damage (a)
relating to the development, manufacture, use, distribution or sale of any
Collaboration Product in the Dendreon Territory, or (b) due to the negligence or
willful misconduct of Dendreon or its employees or agents.
ARTICLE 12
MISCELLANEOUS
12.1 Assignment. Neither Party shall assign any of its rights and
obligations hereunder except (i) as incident to the merger, consolidation,
reorganization or acquisition of stock affecting actual voting control or of
substantially all of the assets of the assigning Party or (ii) to an Affiliate;
provided, however, that in no event shall either Party's rights and obligations
hereunder be assigned without prior written notice to the other Party. In any
case, neither Party may make an assignment of its assets which renders it unable
to perform its material obligations hereunder. This Agreement shall be binding
upon and inure to the benefit of the Parties hereto and their permitted
successors and assigns.
12.2 Retained Rights. Nothing in this Agreement shall limit in any
respect the right of either Party to conduct research and development with
respect to and market products outside the Field using such Party's Technology,
but no license to use the other Party's technology to do so is granted herein
expressly or by implication.
12.3 Force Majeure. Neither Party shall lose any rights hereunder or be
liable to the other Party for damages or losses on account of failure of
performance by the defaulting Party if the failure is occasioned by government
action, war, fire, explosion, flood, strike, lockout, embargo, act of God, or
any other similar cause beyond the control of the defaulting Party, provided
that the Party claiming force majeure has exerted all Reasonable Efforts to
avoid or remedy such force majeure; provided, however, in no event shall a Party
be required to settle any labor dispute or disturbance.
12.4 Further Actions. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
17
<PAGE>
12.5 No Trademark Rights. Except as otherwise provided herein, no right,
express or implied, is granted by the Agreement to use in any manner the name
"Dendreon" or "Kirin" or any other trade name or trademark of the other Party in
connection with the performance of the Agreement.
12.6 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by facsimile
transmission (receipt verified), telexed, mailed by registered or certified mail
(return receipt requested), postage prepaid, or sent by express courier service,
to the Parties at the following addresses (or at such other address for a Party
as shall be specified by like notice; provided, that notices of a change of
address shall be effective only upon receipt thereof):
If to Dendreon, addressed to:
Dendreon Corporation
3005 1st Avenue
Seattle, Washington 98121-1010
U.S.A.
Attention: Christopher Henney, CEO
Telephone: (206) 256-4545
Telecopy: (206) 256-0571
With copy to:
Cooley Godward llp
Five Palo Alto Square, 4th Floor
Palo Alto, CA 94306
Attention: Barclay James Kamb, Esq.
Telephone: (650) 843-5052
Telecopy: (650) 857-0663
If to Kirin, addressed to:
Kirin Brewery Co., Ltd.
26-1, Jingumae 6-chome
Shibuya-ku
Tokyo 150-8011, Japan
Attention: Akihiro Shimosaka
Research and Product Development Department
Pharmaceutical Division
Telephone: (03) 5485-6805
Telecopy: (03) 3499-6152
12.7 Dispute Resolution. If any dispute, controversy or claim arises
out of or in connection with this Agreement, the Parties shall use reasonable
efforts to settle it by friendly negotiation within sixty (60) days of notice
from one Party to the other of such dispute,
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
18
<PAGE>
controversy or claim, before pursuing any other remedies available to them. If
either Party fails or refuses to participate in such negotiations, or if, in any
event, the dispute, controversy or claim is not resolved to the satisfaction of
both Parties within the sixty (60) day period, any such dispute, controversy or
claim shall be settled by arbitration. Any such arbitration shall be conducted
in accordance with the Japan-American Trade Arbitration Agreement of September
16, 1952. The Parties agree that any such arbitration shall be conducted in the
English language in a location within the United States selected by the Party
that did not initiate such arbitration, and the Agreement shall be governed by
and construed in accordance with the laws of the State of California and the
United States of America. The arbitrators shall include one independent, un-
affiliated nominee selected by each Party and a third neutral arbitrator
selected by such nominees. The Parties agree that any arbitration panel shall
include members knowledgeable as to the evaluation of biopharmaceutical
technology. Judgment upon the award rendered may be entered in the highest state
or federal court or forum, state or federal, having jurisdiction; provided,
however, that the provisions of this Section 12.7 shall not apply to any dispute
or controversy as to which any treaty or law prohibits such arbitration. The
prevailing Party shall be entitled to reasonable attorney's fees and costs to be
fixed by the arbitrators.
12.8 Waiver. Except as specifically provided for herein, the waiver from
time to time by either of the Parties of any of their rights or their failure to
exercise any remedy shall not operate or be construed as a continuing waiver of
same or of any other of such Party's rights or remedies provided in this
Agreement.
12.9 Severability. If any term, covenant or condition of this Agreement
or the application thereof to any Party or circumstance shall, to any extent, be
held to be invalid or unenforceable, then the remainder of this Agreement, or
the application of such term, covenant or condition to Parties or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this Agreement shall be
valid and be enforced to the fullest extent permitted by law.
12.10 Ambiguities. Ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed to have
authored the ambiguous provision.
12.11 Entire Agreement. This Agreement and any agreements referenced
herein, set forth all the covenants, promises, agreements, warranties,
representations, conditions and understandings between the Parties hereto and
supersedes and terminates all prior agreements and understanding between the
Parties. There are no covenants, promises, agreements, warranties,
representations conditions or understandings, either oral or written, between
the Parties other than as set forth herein and therein. No subsequent
alteration, amendment, change or addition to this Agreement shall be binding
upon the Parties hereto unless reduced to writing and signed by the respective
authorized officers of the Parties.
12.12 Headings. The Section and Paragraph headings contained herein are
for the purposes of convenience only and are not intended to define or limit the
contents of the Section or Paragraphs to which they apply.
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
19
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals by their proper officers as of the date and year first above written.
DENDREON CORPORATION KIRIN BREWERY CO., LTD.
By: /s/ Christopher S. Henney By: /s/ Koichiro Aramaki
------------------------- -----------------------------------
Title: President Title: President, Pharm. Div.
----------------------- ---------------------------------
[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
20
<PAGE>
EXHIBIT 10.17
MANUFACTURING AND SUPPLY AGREEMENT
BETWEEN
DENDREON CORPORATION
AND
KIRIN BREWERY CO., LTD.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 1 DEFINITIONS......................................... 1
1.1 "Affiliate"......................................... 2
1.2 "Back-Up License"................................... 2
1.3 "Business Day"...................................... 2
1.4 "Collaborative License Agreement"................... 2
1.5 "Component" or "Components"......................... 2
1.6 "Controlled"........................................ 2
1.7 "Dendreon Antigen".................................. 2
1.8 "Dendreon Component" or "Dendreon Components"....... 2
1.9 "Dendreon Product".................................. 2
1.10 "Dendreon Technology"............................... 3
1.11 "Dendritic Cell".................................... 3
1.12 "Fully-Burdened Manufacturing Costs"................ 3
1.13 "Information"....................................... 3
1.14 "Kirin Antigen"..................................... 3
1.15 "Kirin Component" or "Kirin Components"............. 3
1.16 "Kirin Product"..................................... 3
1.17 "Licensed Dendreon Product"......................... 3
1.18 "Licensed Kirin Product"............................ 3
1.19 "Manufacturing Know-How"............................ 4
1.20 "Manufacturing Plan"................................ 4
1.21 "Net Revenue"....................................... 4
1.22 "Patent"............................................ 4
1.23 "Product"........................................... 4
1.24 "Purchaser"......................................... 4
1.25 "Reagent"........................................... 4
1.26 "Reasonable Efforts"................................ 4
1.27 "Research and License Agreement".................... 5
1.28 "Regulatory Approval"............................... 5
1.29 "Separation Devices"................................ 5
1.30 "Steering Committee"................................ 5
1.31 "Sublicensee"....................................... 5
</TABLE>
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
i
<PAGE>
<TABLE>
<S> <C> <C>
1.32 "Supplier".......................................... 5
1.33 "Supplier Patent"................................... 5
1.34 "Third Party"....................................... 5
ARTICLE 2 SUPPLY FOR CLINICAL DEVELOPMENT..................... 5
2.1 Supply for Clinical Development..................... 5
2.2 Forecasts........................................... 6
2.3 Order Placement Procedure........................... 6
2.4 Delivery and Risk of Loss........................... 7
2.5 Acceptance and Rejection............................ 7
2.6 Manufacturing Modifications......................... 8
2.7 Restrictions on Sale................................ 8
2.8 Use of Separation Devices by Kirin Collaborators.... 8
ARTICLE 3 COMMERCIAL SUPPLY................................... 9
3.1 Commercial Supply................................... 9
3.2 Preparation......................................... 9
3.3 Forecasts........................................... 9
3.4 Order Placement Procedure........................... 9
3.5 Inventory........................................... 10
3.6 Amendments.......................................... 10
3.7 Resolution of Supply Problems....................... 11
3.8 Acceptance and Rejection............................ 12
ARTICLE 4 REGULATORY REQUIREMENTS............................. 13
4.1 Manufacturing Facilities, Equipment and Licenses.... 13
4.2 Manufacturing Regulatory Matters.................... 13
4.3 Product Recall Procedures........................... 14
4.4 Documentation....................................... 15
ARTICLE 5 FINANCIAL OBLIGATIONS............................... 15
5.1 Purchase Prices..................................... 15
5.2 Audit............................................... 16
5.3 Financing the Development of Dendreon Products...... 16
ARTICLE 6 CONFIDENTIALITY..................................... 17
6.1 Confidentiality; Exceptions......................... 17
</TABLE>
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
ii
<PAGE>
<TABLE>
<S> <C> <C>
6.2 Authorized Disclosure............................... 17
6.3 Survival............................................ 17
ARTICLE 7 INTELLECTUAL PROPERTY............................... 18
ARTICLE 8 REPRESENTATIONS AND WARRANTIES...................... 18
8.1 General............................................. 18
8.2 Component Warranty.................................. 18
8.3 Warranty Disclaimer................................. 19
ARTICLE 9 TERM AND TERMINATION................................ 19
9.1 Term................................................ 19
9.2 Termination......................................... 19
9.3 Surviving Obligations............................... 19
9.4 Termination Without Cause........................... 19
ARTICLE 10 INDEMNIFICATION..................................... 19
10.1 Indemnification by Dendreon......................... 20
10.2 Indemnification by Kirin............................ 20
10.3 Indemnity Procedure................................. 21
ARTICLE 11 MISCELLANEOUS....................................... 21
11.1 Assignment.......................................... 21
11.2 Retained Rights..................................... 21
11.3 Force Majeure....................................... 21
11.4 Further Actions..................................... 22
11.5 No Trademark Rights................................. 22
11.6 Notices............................................. 22
11.7 Dispute Resolution.................................. 23
11.8 Waiver.............................................. 23
11.9 Severability........................................ 23
11.10 Ambiguities......................................... 23
11.11 Entire Agreement.................................... 23
11.12 Headings............................................ 23
</TABLE>
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
iii
<PAGE>
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.17
MANUFACTURING AND SUPPLY AGREEMENT
This Manufacturing and Supply Agreement (the "Agreement") is made and
entered into effective as of July 27, 1999 (the "Effective Date") by and between
Dendreon Corporation, a Delaware corporation having its principal place of
business at 3005 1st Avenue, Seattle, Washington, U.S.A. ("Dendreon"), and Kirin
Brewery Co., Ltd., a corporation organized and existing under the laws of Japan
having its principal place of business at 10-1, Shinkawa 2-chome, Chuo-ku,
Tokyo, Japan ("Kirin"). Dendreon and Kirin may be referred to herein
collectively as the "Parties" or individually as a "Party."
RECITALS
A. Dendreon has developed and owns certain proprietary technology relating
to the manufacture of devices, reagents and proprietary antigens necessary for
Dendreon Products and Kirin Products.
B. Kirin has developed and owns certain proprietary technology relating to
the manufacture of certain proprietary antigens and other proprietary components
necessary for Kirin Products and Dendreon Products.
C. Kirin desires to purchase from Dendreon certain of its devices,
reagents and certain of its proprietary antigens from Dendreon for use in
clinical trials and commercialization of Kirin Products and Licensed Dendreon
Products, and Dendreon is willing to supply Kirin with such devices, reagents
and antigens for such uses.
D. Dendreon desires to purchase from Kirin certain components necessary
for making Licensed Kirin Products for use in clinical trials and
commercialization of Licensed Kirin Products and Dendreon Products, and Kirin is
willing to provide Dendreon with Kirin proprietary antigens and other Kirin
proprietary components and certain Dendreon Components, if applicable, necessary
for Licensed Kirin Products and Dendreon Products for such use.
E. The Parties contemplate that Dendreon may supply Kirin with commercial
quantities of devices, reagents and Dendreon proprietary antigens, and Kirin may
supply Dendreon with commercial quantities of Kirin proprietary antigens and
other Kirin proprietary components, in the event marketing approval is obtained
for any Products, in which case the Parties shall negotiate appropriate
amendments to this Agreement.
F. The Parties contemplate that Dendreon may license Kirin to manufacture
devices, reagents and Dendreon proprietary antigens, and Kirin may license
Dendreon to manufacture Kirin components, necessary for making Products.
Now, therefore, the Parties agree as follows:
<PAGE>
ARTICLE 1
DEFINITIONS
The following capitalized terms shall have the following meanings when used in
this Agreement.
1.1 "Affiliate" means, with respect to a particular Party, a person,
corporation or other entity that, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with such
Party. For the purposes of this definition, "control" means the direct or
indirect ownership by a Party of at least fifty percent (50%) of the outstanding
voting securities of the controlled entity; provided, that in any country where
the law does not permit foreign equity ownership of at least fifty percent
(50%), then with respect to corporations organized under such country's laws,
"control" shall mean the direct or indirect ownership by a Party of outstanding
voting securities of such corporation at the maximum amount permitted by the law
of such country.
1.2 "Back-Up License" shall have the meaning set forth in Section 3.7(c).
1.3 "Business Day" means any day that is not a Saturday, Sunday or other
day on which (a) banks in the State of Washington are authorized or required to
close for the purposes of any action to be taken by or any notice to be provided
to Dendreon, or (b) the banks in Japan are authorized or required to close for
the purposes of any action to be taken by or any notice to be provided to Kirin.
1.4 "Collaborative License Agreement" mean the Agreement by and between
the Parties dated December 10, 1998.
1.5 "Component" or "Components" shall mean either a Kirin Component or a
Dendreon Component, depending upon the context of the applicable Section and the
Party to which such section then applies.
1.6 "Controlled" means, with respect to a particular item, material, or
intellectual property right, that a Party owns or has a license under such item,
material or intellectual property right and has the ability to grant to the
other Party access to and/or a license or sublicense under such item, material
or intellectual property right without violating the terms of any agreement or
other arrangement with, or the rights of, any Third Party.
1.7 "Dendreon Antigen" means an antigen that is claimed by a patent or is
otherwise covered by intellectual property rights that are Controlled by
Dendreon.
1.8 "Dendreon Component" or "Dendreon Components" mean a Separation
Device, Reagent or Dendreon Antigen, or any combination thereof, other than a
combination which comprises a Dendreon Product.
1.9 "Dendreon Product" means: (a) any therapeutic product comprising
Dendritic Cells that have been activated or loaded with a specific antigen,
engineered antigen or antigen gene, (including without limitation Dendreon
Antigen), for use in human therapy by infusion into a patient, which product has
been developed by Dendreon based on the Dendreon Technology; or (b) any service
provided by or on behalf of Dendreon to a patient that utilizes the
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
2
<PAGE>
Dendreon Technology and involves isolation or preparation of Dendritic Cells,
activation or loading with specific antigen, engineered antigen or antigen gene,
(including without limitation Dendreon Antigen), and infusion of such activated
or antigen loaded Dendritic Cells into a patient. Further, the Parties may agree
in writing to amend and extend the definition of Dendreon Product as provided in
Section 5.8 of the Collaborative License Agreement.
1.10 "Dendreon Technology" means the Dendreon Know-How, the Dendreon
Improvements and the Dendreon Patents, (as such terms are defined in the
Collaborative License Agreement) either collectively or any part thereof.
1.11 "Dendritic Cell" means a human dendritic cell or other antigen-
presenting cell or other cells from which dendritic cells can be derived.
1.12 "Fully-Burdened Manufacturing Costs" means the actual fully burdened
costs and expenses of manufacturing a particular Component, including without
limitation the costs of all raw materials and labor (including all allocable
benefits) used or consumed in such manufacture, Third Party contract
manufacturing costs, packaging costs and expenses, all quality assurance and
quality control related expenses, all overhead amounts allocable to such
manufacturing (including without limitation appropriately amortized capital
equipment costs), all royalty amounts payable by Supplier to any Third Party
based upon the manufacture of such Component, and all amounts related to failed
production units or yield losses, all the foregoing as calculated in accordance
with (i) U.S. generally accepted accounting principles consistently applied for
manufacture of Components by Dendreon and (ii) Japan's generally accepted
accounting principles consistently applied for manufacture of Components by
Kirin.
1.13 "Information" means any and all information and data of any kind,
including without limitation techniques, inventions, practices, methods,
knowledge, know-how, skill, experience, test data (including pharmacological,
toxicological and clinical test data), analytical and quality control data,
marketing, cost, sales and manufacturing data and descriptions, compositions,
and assays.
1.14 "Kirin Antigen" means an antigen that is claimed by a patent or is
otherwise covered by intellectual property rights that are Controlled by Kirin.
1.15 "Kirin Component" or "Kirin Components" shall mean any Kirin Antigen
or any other Kirin proprietary component of a Kirin Product, and any combination
thereof, that Dendreon is either unable to prepare or generally does not prepare
for Kirin or for itself.
1.16 "Kirin Product" means: (a) any therapeutic product developed by or on
behalf of Kirin based on, derived from or incorporating the Dendreon Technology
that comprises Dendritic Cells that have been activated or loaded with a
specific antigen, engineered antigen or antigen gene, (including without
limitation a Kirin Antigen), for use in human therapy by infusion into a
patient; or (b) any service provided by or on behalf of Kirin to a patient that
involves isolation or preparation of Dendritic Cells, activation or loading of a
specific antigen, engineered antigen or antigen gene, (including without
limitation a Kirin Antigen), and infusion of such activated or antigen loaded
Dendritic Cells into a patient, wherein such service is based on, utilizes,
comprises or is derived from the Dendreon Technology. The Parties may agree in
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
3
<PAGE>
writing to amend and extend the definition of Kirin Product as provided in
Section 5.8 of the Collaborative License Agreement.
1.17 "Licensed Dendreon Product" shall have the meaning set forth in
Section 2.3(b) of the Collaborative License Agreement.
1.18 "Licensed Kirin Product" shall have the meaning set forth in Section
2.4(b) of the Collaborative License Agreement.
1.19 "Manufacturing Know-How" means all Information other than Patents
necessary for the manufacture of a Kirin Antigen or Dendreon Antigen which is
subject to the Back-Up License.
1.20 "Manufacturing Plan" shall mean the plan prepared by the Supplier
and delivered to the Purchaser for its review and approval, in good faith, which
plan details the Supplier's manufacturing plan for achieving manufacture of the
Components at levels at least equal to the Purchaser's forecasted orders for the
first year after commercial launch of the first Kirin Product or Dendreon
Product, as applicable.
1.21 "Net Revenue" means the total revenue received by a Party for sale
or other disposition of a Product by such Party or an Affiliate or Sublicensee
of such Party to a Third Party less the following to the extent actually
incurred or allowed with respect to such sale or disposition: (i) reasonable
costs paid, if any, by the Party to a Third Party on account of apheresis
performed as part of or in association with the Product; (ii) discounts,
including cash discounts, or rebates, retroactive price reductions or allowances
actually allowed or granted from the billed amount; (iii) credits or allowances
actually granted upon claims, rejections or returns of Products, including
recalls, regardless of the Party requesting such; (iv) freight, postage,
shipping and insurance charges paid for delivery of Product, to the extent
billed; and (v) taxes, duties or other governmental charges levied on or
measured by the billing amount when included in billing, as adjusted for rebates
and refunds; provided, however, that with respect to sales of a particular Kirin
Product or Licensed Dendreon Product by Kirin or its Affiliate or Sublicensee in
Japan, the "total revenue received", as set forth above in the first line of
this definition, shall not in any event be less than the NHI Price established
for insurance reimbursement of Single Treatment (as defined in the Collaborative
License Agreement), less the average amount charged by the particular hospital
purchaser of such Product for the same number of apheresis services and infusion
services needed for and performed for Single Treatment (as defined in the
Collaborative License Agreement) where such averages are calculated including
all apheresis services or infusion services, as applicable, that were performed
for any purpose during the applicable period.
1.22 "Patent" means (i) a valid and enforceable patent, including any
extension, registration, confirmation, reissue, re-examination or renewal
thereof; and (ii) to the extent valid and enforceable rights are granted by a
governmental authority thereunder, a patent application.
1.23 "Product" means a Kirin Product or a Dendreon Product.
1.24 "Purchaser" shall mean the Party purchasing Components from the
other Party to the Agreement, as applicable, in the applicable section.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
4
<PAGE>
1.25 "Reagent" means, with respect to a particular Licensed Dendreon
Product, any proprietary reagent of Dendreon (excluding any reagents contained
in a Separation Device) that is required for commercial manufacture and/or use
of such Licensed Dendreon Product.
1.26 "Reasonable Efforts" shall mean efforts and resources commonly used
in the research-based pharmaceutical industry for the research, development and
commercialization of a product at a similar stage in its product life taking
into account the establishment of the product in the marketplace, the
competitiveness of the marketplace, the proprietary position of the product, the
regulatory structure involved, the profitability of the product and other
relevant factors.
1.27 "Research and License Agreement" shall mean the Research and License
Agreement by and between the Parties dated as of February 1, 1999.
1.28 "Regulatory Approval" means any approvals, licenses, registrations
or authorizations of any federal, state or local regulatory agency, department,
bureau or other government entity, necessary for the manufacture, use, storage,
import, transport or sale of Products in a regulatory jurisdiction.
1.29 "Separation Devices" means any Dendreon device, including all
containers and proprietary reagents comprising such device, that is intended for
use by Dendreon and its licensees for the isolation and purification of
Dendritic Cells for use in human therapy by activation or loading with specific
antigen, engineered antigen or antigen gene, and infusion into a patient.
1.30 "Steering Committee" shall have the meaning set forth in Section 3.1
of the Collaborative License Agreement.
1.31 "Sublicensee" shall mean any Third Party expressly licensed by a
Party to make and sell one or more Products. A Sublicensee shall not include
distributors or sales agents that do no more than purchase and resell finished
Products on behalf of a Party.
1.32 "Supplier" shall mean the Party supplying Components to the other
Party to the Agreement, its Affiliates or Sublicensees, as applicable, in the
applicable section.
1.33 "Supplier Patent" shall mean any Patent Controlled by the Supplier
during the term of the Agreement.
1.34 "Third Party" means any entity other than Dendreon or Kirin or an
Affiliate of Dendreon or Kirin.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
5
<PAGE>
ARTICLE 2
SUPPLY FOR CLINICAL DEVELOPMENT
2.1 Supply for Clinical Development.
(a) Subject to the terms of this Agreement and the Collaborative
License Agreement, Kirin agrees to purchase from Dendreon, and Dendreon agrees
to sell to Kirin, such Separation Devices and Reagents as Kirin requires to
conduct clinical development of Kirin Products and/or Licensed Dendreon Products
in the Kirin Territory.
(b) Subject to the terms of this Agreement and the Collaborative
License Agreement, Kirin agrees to purchase from Dendreon, and Dendreon agrees
to sell to Kirin, such quantities of Dendreon Antigen as Kirin requires to
conduct clinical development of Licensed Dendreon Products in the Kirin
Territory, to the extent such Dendreon Antigen is reasonably available to
Dendreon.
(c) Subject to the terms of this Agreement and the Collaborative
License Agreement, Dendreon agrees to purchase from Kirin, and Kirin agrees to
sell to Dendreon, such quantities of Kirin Components as Dendreon requires to
conduct clinical development of Licensed Kirin products and Dendreon Products in
the Dendreon Territory, to the extent such Kirin Components are reasonably
available to Kirin.
2.2 Forecasts. A reasonable period prior to the first expected order
hereunder by the Purchaser of Components (at least six (6) months if possible),
Purchaser shall provide the Supplier with a good faith written estimate of its
expected requirements, on a per quarter basis, for all such Components for the
first two (2) years after such first order. Commencing three (3) months before
the first expected order, Purchaser shall provide Supplier with quarterly
rolling twelve (12) month forecasts for its expected orders for Components to be
ordered during each quarter during such period, with detail on each specific
Component and quantities to be ordered. An updated forecast will be provided to
Supplier within the first three (3) Business Days of each subsequent calendar
quarter. In each such forecast provided to Supplier as required herein (after
the first such rolling forecast), the forecast for the calendar quarter in which
such forecast is delivered shall constitute a binding commitment of Purchaser
and/or its Affiliates to submit purchase orders for not less than one hundred
percent (100%) of the amounts listed in such forecast during such quarter.
Further, such binding forecast for such quarter may not deviate by more than
twenty-five percent (25%) from the amount forecasted to be ordered during such
quarter in the most recent previous forecast provided to Supplier.
2.3 Order Placement Procedure. The Purchaser shall place orders for
Components to be supplied under the Agreement on Purchaser's standard English-
language purchase order form, specifying the quantity of each type of Component
ordered and the requested delivery date, which shall not in any event be longer
than one hundred and twenty (120) days from the date of such purchase order;
provided, however, that if due to complications and lead time for a particular
Component (such as antigen) the Supplier of such Component requires a delivery
lead time for manufacture of such Component greater than one hundred twenty days
(120) from the date of such purchase order, the Parties shall negotiate in good
faith a reasonable delivery date for such Component, not to be greater than one
hundred and eighty (180) days from the date of
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
6
<PAGE>
the purchase order. Supplier shall not be obligated to deliver Components
ordered prior to sixty (60) days after the applicable order is placed; however,
Supplier agrees that it will use Reasonable Efforts to meet any earlier delivery
date reasonably requested by Purchaser. To the extent any purchase order,
invoice or acknowledgment form used by Supplier or Purchaser contains any
provisions additional or contrary to the provisions of this Agreement, such
additional or contrary provision shall have no force or effect and the terms of
this Agreement shall control. In addition, all such orders shall comply with the
other requirements of this Article 2. The total amount of Components ordered by
Purchaser during a particular calendar quarter shall not in any event be less
than one hundred percent (100%) of the amount of each such Component that was
forecasted to be ordered for such quarter in the most recent forecast provided
to Supplier, as set forth in Section 2.2 above, unless Supplier otherwise agrees
in writing. In addition, Supplier shall not be obligated to supply any amounts
in such order that are in excess of one hundred ten percent (110%) of the amount
of the particular Component that was forecasted in the most recent binding
forecast to be ordered for such quarter; however, Supplier agrees that it will
use Reasonable Efforts to supply such additional amounts. The Supplier shall use
Reasonable Efforts to deliver the Components ordered in compliance with this
Article 2. The Supplier shall immediately notify Purchaser in writing if
Supplier determines that Supplier will not be able to supply a material amount
of the most recent orders and/or forecasts of orders for any Component. Shipment
and delivery of Components ordered hereunder shall be in accordance with Section
2.4.
2.4 Delivery and Risk of Loss.
(a) Delivery of Dendreon Components ordered hereunder by Kirin shall
be by FCA Dendreon's actual manufacturing facility for such Components. "FCA"
shall be construed in accordance with INCOTERMS 1990 of the International
Chamber of Commerce. At Kirin's request and cost, Dendreon shall arrange
shipping to specified Kirin locations. Delivered Dendreon Components shall be
appropriately packaged by Dendreon, at Dendreon's expense, for export shipment.
(b) Delivery of Kirin Components (and any Dendreon Components, if
applicable) ordered hereunder by Dendreon shall be by FCA Kirin's actual
manufacturing facility for such Components. "FCA" shall be construed in
accordance with INCOTERMS 1990 of the International Chamber of Commerce. At
Dendreon's request and cost, Kirin shall arrange shipping to specified Dendreon
locations. Delivered Kirin Components shall be appropriately packaged by Kirin,
at Kirin's expense, for export shipment.
2.5 Acceptance and Rejection. Purchaser shall have the right to test at
its expense, using testing procedures agreed upon by the Parties and set forth
in the specifications for the applicable Component, a portion of each shipment
of Components to confirm that such shipment meets the applicable specifications.
Where it is required by local regulations, further testing on importation in
accordance with the applicable specifications shall be carried out by Purchaser.
If Purchaser rejects in whole or in part any nonconforming shipment of
Components, Purchaser shall provide Supplier written notice of such rejection no
later than thirty (30) days after receipt of such shipment of Components. If
Purchaser fails to provide Supplier with such notice of rejection within such
thirty (30) day inspection period, Purchaser shall be deemed to have accepted
the applicable shipment of Components. If Supplier agrees with Purchaser's
determination that a shipment of Components does not comply with applicable
specifications,
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
7
<PAGE>
Supplier shall use Reasonable Efforts to replace the nonconforming Components,
at no additional cost to Purchaser. If Supplier reasonably disputes Purchaser's
conclusion that such Components do not meet the applicable specifications,
Supplier shall use Reasonable Efforts to replace such shipment of Components to
Purchaser, at Purchaser's expense. If Supplier disagrees with Purchaser's
determination that the rejected shipment did not meet the applicable
specifications, a sample of the rejected shipment shall be submitted to an
independent, qualified Third Party laboratory that is mutually acceptable and
selected by the Parties promptly in good faith. Such laboratory shall determine
whether the rejected Components meet the applicable specifications, and such
laboratory's determination shall be final and determinative for purposes of this
Agreement. The Party against whom the laboratory rules shall bear all costs of
the laboratory testing. If the laboratory rules that the shipment of Components
failed to meet the applicable specifications, then at Purchaser's choice, the
price paid by Purchaser for such nonconforming shipment shall be reimbursed to
Purchaser (provided Purchaser paid for such shipment) or Components meeting the
applicable specifications shall be shipped. If the laboratory rules that the
Components do not meet the applicable specifications, and if Supplier is unable
to produce conforming Components, any sums actually paid therefore shall be
refunded to Purchaser with interest. At such time, the Parties will discuss in
good faith potential solutions to the supply problem. If the laboratory rules
the rejected shipment of Components met the applicable specifications, then
Purchaser shall accept such shipment (including all costs of shipping and
insurance). Shipments of Components not meeting the applicable specifications
may, at Supplier's option and expense, be returned to Supplier or destroyed by
Purchaser. If Supplier has acknowledged in writing that it is unable to produce
conforming Components, any sums actually paid therefor will be refunded. The
remedy of replacement or refund is available only if such nonconformance was not
caused by Purchaser's misuse, unauthorized modifications, neglect, improper
testing or improper storage, including without limitation storage at
inappropriate temperatures, of such shipment of Components.
2.6 Manufacturing Modifications. If the laws of a country require
Supplier's established specifications for a particular Component or Components
to be modified in order for Purchaser to obtain Regulatory Approval of a Product
in such country, Purchaser will submit the matter to the Steering Committee for
discussion and proposed resolution. The Parties agree to negotiate in good faith
any proposed modifications to the specifications for such Component or
Components for such Products proposed by the Steering Committee. Any such
resolution of the Steering Committee must be agreed in writing by the Parties.
2.7 Restrictions on Sale. Kirin and its Affiliates shall not resell the
Separation Devices purchased pursuant to this Article 2 except as part of a
Kirin Product or a Licensed Dendreon Product, and shall not use Separation
Devices, Reagents or Dendreon Antigen for any purpose other than those purposes
permitted in this Agreement, the Collaborative License Agreement or the Research
and License Agreement. Dendreon shall retain all rights to manufacture or have
manufactured the Separation Devices, Reagents and Dendreon Antigens. Dendreon
and its Affiliates shall not use Kirin Antigen for any purpose other than those
purposes permitted in this Agreement, the Collaborative License Agreement or the
Research and License Agreement.
2.8 Use of Separation Devices by Kirin Collaborators. With Dendreon's
prior written approval, which may be withheld for any reason, Kirin may provide
certain academic or medical doctor collaborators with a limited number of
Separation Devices solely for use by such
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
8
<PAGE>
individuals in research and development purposes in the Field; provided,
however, that before any such delivery Kirin shall require such collaborator:
(i) to be appropriately trained in the use of the Separation Devices, (ii) to
share the results of any and all research and development performed using the
Separation Devices with Kirin and Dendreon; (iii) not to sell, distribute or
otherwise provide such Separation Devices to Third Parties; and (iv) unless such
antigen is within the public domain, to grant Dendreon an option to license any
specific antigen, engineered antigen or antigen gene used or developed in
conjunction with the use of the Separation Devices. Except as explicitly
provided in this Agreement, Kirin obtains no license or rights to make or to
practice any of the Dendreon Technology to make Separation Devices, Reagents or
any other devices or products for use in the isolation or purification of
Dendritic Cells or any other cells. Notwithstanding anything else in this
Agreement, Kirin may use Separation Devices to isolate Dendritic Cells only as
part of preparing a Kirin Product or Licensed Dendreon Product or performing a
service comprising a Kirin Product or Licensed Dendreon Product, or with
Dendreon's prior written consent, as provided in this Section 2.8.
ARTICLE 3
COMMERCIAL SUPPLY
3.1 Commercial Supply. Subject to the other terms of this Agreement,
Dendreon agrees to provide Kirin, its Affiliates and Sublicensees with their
commercial requirements of Separation Devices, Reagents and Dendreon Antigens
necessary for use in manufacturing or using Kirin Products or Licensed Dendreon
Products for which Regulatory Approval has been obtained in the Kirin Territory.
3.2 Preparation. At such time after the Effective Date that Supplier has
prepared the Manufacturing Plan, but no later than one hundred and twenty (120)
days before the commercial launch of the first Kirin Product or Dendreon
Product, as applicable, Supplier shall provide to Purchaser such Information in
Supplier's control relating to lead times Supplier requires to achieve
manufacture of Components on a commercial scale hereunder, necessary to
determine appropriate procedures and mechanisms for providing to Supplier
forecasts of Purchaser's, its Affiliates' and Sublicensees' requirements for
Components to be ordered and purchased hereunder, and for ordering such
requirements. The Purchaser shall review such Information promptly after
receipt, and appropriate representatives from Purchaser and Supplier shall then
meet to determine the appropriate forecasting, ordering and inventory mechanisms
that will be used by the Parties for ordering and supplying the commercial
requirements of Components hereunder. Such forecasting, ordering and inventory
mechanisms shall be consistent with the terms of this Article 3 and shall be set
forth in a writing, and upon mutual execution of such writing by the Parties,
such mechanisms (the "Supply Procedures") shall become part of this Agreement.
3.3 Forecasts. With respect to the forecasting mechanism, such Supply
Procedures shall provide: (a) that within an agreed period of time prior to the
first expected Regulatory Approval of a Product, Purchaser shall provide a good
faith estimate of its expected requirements, on a per quarter basis, for each
particular Component which is part of such Product to be ordered, for an agreed
period before and an agreed period after the launch of such Product; (b) as of
an agreed time before the first expected Regulatory Approval of a particular
Product, Purchaser shall provide Supplier a rolling twelve (12) month forecast
for Purchaser's expected
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
9
<PAGE>
orders for each particular Component during each month during such twelve (12)
month period; (c) Purchaser shall provide Supplier updated forecasts for
expected orders of Components at agreed intervals of time; (d) that in each
forecast provided, the forecasted orders for an agreed time period for each
forecasted Component shall constitute binding orders by Purchaser for such
Components, to be placed during such agreed time period; and (e) that forecasted
orders for each Component in a particular forecast delivered to Supplier may not
deviate by more than twenty-five percent (25%) from the forecast for orders for
such Components in the most recent previous forecast submitted to Supplier. The
Parties further agree that if a Party determines that the foregoing forecasting
mechanisms are inappropriate given the then-existing manufacturing and supply
circumstances for any Component, the Parties will discuss and agree in good
faith on appropriate written amendments to the forecasting mechanisms for such
Component.
3.4 Order Placement Procedure. With respect to the ordering mechanism,
such Supply Procedures shall provide: (a) that Purchaser shall place orders for
Components to be supplied under the Agreement on Purchaser's standard purchase
order form, specifying the quantity of each specific Component ordered and the
requested delivery date, which shall not in any event be sooner or later than
agreed time period(s) from the date of such purchase order; (b) that to the
extent any purchase order, invoice or acknowledgment form used by Purchaser
contains any provisions additional or contrary to the provisions of this
Agreement, such additional or contrary provision shall have no force or effect
and the terms of this Agreement shall control; (c) that Supplier shall not be
obligated to supply any amounts of a particular Component in such order more
than an agreed percentage of the unit quantity of such Component specified in
the binding forecast for the applicable time period; (d) that Purchaser's orders
for a Component may not be less than an agreed percentage of the binding
forecast for such Component for the applicable time period; and (e) that
Supplier will use Reasonable Efforts to provide additional amounts of a
particular Component beyond the foregoing limitation on Supplier's obligation to
supply, upon Purchaser's reasonable request, but consistent with Supplier's
other business obligations.
3.5 Inventory. The Supply Procedures shall also establish an inventory
mechanism for Components, which shall provide that: (a) within an agreed period
of time after the commercial launch of a particular Product, Supplier shall use
Reasonable Efforts to maintain an inventory of the Components in such Product at
least equal to the written forecast for purchases of such Product to be made
during an agreed number of months in the most recent forecast provided to
Supplier by Purchaser under the forecasting mechanism of the Supply Procedures;
(b) Purchaser shall maintain an inventory of all Components in accordance with
Purchaser's normal practices, and shall give Supplier quarterly updates of the
extent of such inventory; (c) Supplier's inventory of Components maintained
under such inventory mechanism shall only be permitted to fall below the levels
established in subsection (a) above in the event that Purchaser submits orders
in excess of the forecasted amounts or Supplier experiences manufacturing or
supply problems with respect to the Components; and (d) Supplier shall use
Reasonable Efforts in accordance with Supplier's normal practices to promptly
replenish any inventory of Components that is depleted in satisfying purchases
of such Component by Purchaser hereunder.
3.6 Amendments. The Parties further agree that if the foregoing
forecasting, ordering or inventory mechanisms established in the Supply
Procedures are determined by the Parties, in good faith cooperation and giving
reasonable consideration to each Party's economic and business needs, to be
inappropriate given the experience of the Parties and the then-existing
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
10
<PAGE>
manufacturing and supply circumstances regarding Components hereunder, the
Parties will discuss in good faith appropriate amendments to the applicable
mechanisms in the Supply Procedures.
3.7 Resolution of Supply Problems.
(a) If Supplier determines that Supplier will not be able to supply to
Purchaser a material amount of the most recent orders and/or binding forecasts
of orders for a particular Component submitted by Purchaser in accordance with
the applicable Supply Procedures, Supplier shall immediately notify Purchaser in
writing of such determination, which notice shall provide Purchaser with the
details on the extent of the expected shortfall of supply, the causes of such
inability to supply, and Supplier's proposed solution to the problem. Upon such
notice of a supply problem, or in any event upon Supplier's failure to satisfy,
within the delivery time frame specified by Purchaser consistent with the Supply
Procedures, a portion of the Components ordered by Purchaser in compliance with
this Agreement, (provided that such supply problem or failure cannot be
satisfied or addressed by Purchaser's and Supplier's existing inventories for
such Components and will cause an interruption in the supply of such Components
by Purchaser or its Affiliates to the commercial market for more than thirty
(30) days), Purchaser and Supplier will immediately meet and work together, in
good faith, to identify an appropriate resolution to the supply problem. The
Parties will discuss all appropriate means of resolving the problem, including
without limitation establishing an alternative source of supply for the affected
Components, creating a back-up manufacturing facility, or permitting Purchaser
to manufacture an agreed amount of Components to cover the shortfall in supply,
with Supplier continuing to supply an agreed amount of such Components. Any
agreed resolution to the supply problem will be set forth in a writing executed
by both Parties.
(b) If the Parties cannot reach agreement on an appropriate resolution
to the supply problem within ten (10) days of commencing such discussions under
subsection (a) above, senior management representatives of the Parties will
immediately meet to discuss in good faith the problem in an effort to reach
agreement on such resolution. As part of such discussions, Supplier shall make a
firm commitment of the amount of the affected Components that Supplier will be
able to supply, on a monthly basis, during the period when such supply problem
with respect to such Components is expected to continue. Any agreed resolution
by the Parties to the supply problem will be set forth in a writing executed by
both Parties. If, despite good faith efforts, the senior management officials
are unable to reach agreement on the resolution of such supply problem within
twenty (20) days of their commencing such discussions, then at either Party's
immediate written request, the problem will be governed by the terms of Section
11.7 if it affects Components other than Kirin Antigen or Dendreon Antigen, and
by the terms of Section 3.7(c) if it affects Kirin Antigen or Dendreon Antigen.
(c) If there is a material supply problem with respect to Kirin
Antigen or Dendreon Antigen subject to the provisions of subsections 3.7(a) and
(b) above, and (i) the Parties have failed to reach agreement on the resolution
of such problem within the time frames set forth above by the end of the twenty
(20) day period as provided under subsection (b), or (ii) Supplier has failed to
meet to discuss the problems as required above, then at Purchaser's written
request provided to Supplier no more than sixty (60) days after the foregoing
conditions have been met, Supplier shall grant to Purchaser a co-exclusive
license as to Kirin Antigen or Dendreon Antigen, as applicable, (the "Back-Up
License"), under the relevant Supplier Patents
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
11
<PAGE>
and Manufacturing Know-how, as necessary to permit Purchaser to make or have
made such Kirin Antigen or Dendreon Antigen that is the subject of such supply
problem that was not resolved by the Parties, solely for sale in accordance with
the terms of this Agreement, the Collaborative License Agreement and the
Research and License Agreement, and solely in quantities to meet the amounts of
Purchaser's and its Affiliates' and sublicensees' (if any), and Supplier's and
its Affiliates' and sublicensees' (if any), if applicable, requirements for such
Kirin Antigen or Dendreon Antigen above the amounts of such Kirin Antigen or
Dendreon Antigen that Supplier remains able and willing to supply on a timely
basis under this Article 3. Purchaser covenants, represents and warrants that
Purchaser shall not exercise the Back-Up License unless and until the conditions
specified in the first sentence of this Section 3.7(c) have been completely
satisfied and shall not use or practice the licensed Supplier Patents and
Manufacturing Know-how for any purpose except as expressly permitted in the
foregoing. Immediately upon Purchaser's written request hereunder to obtain the
Back-Up License, Supplier shall transfer to Purchaser copies of all information,
including technical information, that is Controlled by Supplier, relates to the
manufacture of the Kirin Antigen or Dendreon Antigen that is the subject of the
Back-Up License and is reasonably necessary to enable Purchaser to manufacture
such Kirin Antigen or Dendreon Antigen. Thereafter, but only during the period
when Purchaser is permitted hereunder to exercise the Back-Up License, Purchaser
shall be permitted access to and a right of reference to any Regulatory
Approvals held in Supplier's name for the Kirin Antigen or Dendreon Antigen that
is the subject of such Back-Up License. Supplier shall provide Purchaser
reasonable assistance, at Purchaser's request and Purchaser's expense, with
respect to understanding such manufacturing information and practicing the Back-
Up License.
(i) At such time as Supplier is reasonably able to meet all of
Purchaser's forecasted orders for Kirin Antigen or Dendreon Antigen, as
applicable, the Back-Up License granted under this Section 3.7(c) shall
terminate with respect to such Kirin Antigen or Dendreon Antigen, and Purchaser
shall immediately cease to exercise and practice the Back-Up License, provided
that Purchaser shall retain all rights under this Section 3.7 with respect to
any subsequent supply problem as to any Kirin Antigen or Dendreon Antigen, as
applicable.
(ii) Purchaser will pay Supplier a royalty of [ * ] of the Net
Revenue of Kirin Products or Dendreon Products (as applicable) manufactured by
or on behalf of Purchaser pursuant to exercise of the Back-Up License and sold
by Purchaser or its Affiliate or sublicensee. Nothing in the foregoing shall
limit or affect in any way Purchaser's obligations to make the payments set
forth in this Agreement to the full extent required on all Components supplied
to Purchaser by Supplier.
3.8 Acceptance and Rejection. Purchaser shall have the right to test at
its expense, using testing procedures agreed upon by the Parties and set forth
in the specifications for the applicable Component, a portion of each shipment
of Components to confirm that such shipment meets the applicable specifications.
Where it is required by local regulations, further testing on importation in
accordance with the applicable specifications shall be carried out by Purchaser.
If Purchaser rejects in whole or in part any nonconforming shipment of
Components, Purchaser shall immediately provide Supplier written notice of such
rejection. If Supplier agrees with Purchaser's determination that a shipment of
Components does not comply with applicable specifications, Supplier shall use
Reasonable
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
12
<PAGE>
Efforts to replace the nonconforming Components, at no additional cost to
Purchaser. If Supplier reasonably disputes Purchaser's conclusion that such
Components do not meet the applicable specifications, Supplier shall use
Reasonable Efforts to replace such shipment of Components to Purchaser, at
Purchaser's expense. If Supplier disagrees with Purchaser's determination that
the rejected shipment did not meet the applicable specifications, a sample of
the rejected shipment shall be submitted to an independent, qualified Third
Party laboratory that is mutually acceptable and selected by the Parties
promptly in good faith. Such laboratory shall determine whether the rejected
Components (as applicable) meet the applicable specifications, and such
laboratory's determination shall be final and determinative for purposes of this
Agreement. The Party against whom the laboratory rules shall bear all costs of
the laboratory testing. If the laboratory rules that the shipment of Components
failed to meet the applicable specifications, at Purchaser's choice, the price
paid by Purchaser for such nonconforming shipment shall be reimbursed to
Purchaser (provided Purchaser paid for such shipment) or Components meeting the
applicable specifications shall be shipped to Purchaser by Supplier. If the
laboratory rules the rejected shipment of Components met the applicable
specifications, then Purchaser shall accept such shipment (including all costs
of shipping and insurance). Shipments of Components not meeting the applicable
specifications may, at Supplier's option and expense, be returned to Supplier or
destroyed by Purchaser. If Supplier has acknowledged in writing that it is
unable to produce conforming Components, any sums actually paid therefor will be
refunded with interest, and the supply problem will be resolved in accordance
with Section 3.7. The remedy of replacement or refund is available only if such
nonconformance was not caused by Purchaser's misuse, unauthorized modifications,
neglect, improper testing or improper storage, including without limitation
storage at inappropriate temperatures, of such shipment of Components.
3.9 Kirin Manufacture of Dendreon Components. Kirin agrees to provide
Dendreon, its Affiliates and Sublicensees with their commercial requirements of
Kirin Components necessary for Licensed Kirin Products for which Regulatory
Approval has been obtained, pursuant to the terms of this Article 3. In
addition, if so requested by Dendreon, Kirin may negotiate with Dendreon for the
manufacture and supply by Kirin to Dendreon of certain Separation Devices,
Reagents and/or Dendreon Antigens at a transfer price in an amount in U.S.
dollars equal to Kirin's Fully-Burdened Manufacturing Costs for such Separation
Devices, Reagents and/or Dendreon Antigens plus a handling fee of [ * ], with
any manufacture and supply to be governed by the terms of this Agreement and any
additional terms negotiated by the Parties. The Parties also agree to amend the
terms of the Agreement to reflect such agreed terms for the manufacture and
supply by Kirin of Separation Devices, Reagents and/or Dendreon Antigens, if
any.
ARTICLE 4
REGULATORY REQUIREMENTS
4.1 Manufacturing Facilities, Equipment and Licenses. Supplier shall, at
Supplier's expense, acquire or cause to be acquired all equipment and licenses,
including, without limitation, all necessary plant equipment and facilities
licenses, necessary to enable the manufacture and testing of the Components as
required hereunder. Supplier shall obtain and maintain all necessary Regulatory
Approvals. Purchaser, its Affiliates and Sublicensees shall obtain any required
importation licenses or approvals for importation of Dendreon Products and Kirin
Products, and the Components necessary for such Kirin Products and Dendreon
Products, as applicable for sale in any given country. Supplier shall cooperate
reasonably with Purchaser, at Purchaser's reasonable request and expense, to
obtain such licenses or approvals.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
13
<PAGE>
4.2 Manufacturing Regulatory Matters.
(a) Supplier will be responsible for any reporting of matters
regarding the manufacture of Components, as applicable, to the FDA and other
relevant regulatory authorities, in accordance with pertinent laws and
regulations. Supplier shall notify Purchaser of any such matter if significant
or serious and promptly furnish complete copies of such reports to Purchaser in
the English language. Supplier also shall advise Purchaser of any occurrence or
information which arises out of Supplier's manufacturing activities which has
adverse regulatory compliance and/or reporting consequences concerning a
Component.
(b) Supplier shall be responsible for handling and responding to any
appropriate governmental agency inspections with respect to manufacturing of
Components during the term of this Agreement. Supplier shall provide to
Purchaser any information requested by any governmental agency in connection
with any governmental inspection related to Components. Supplier shall use
reasonable efforts to promptly advise Purchaser of any requests by any
governmental agency for such inspections with respect to manufacturing of
Components.
(c) Any changes by Supplier to the manufacturing process for
Components that may require approval by the FDA or other authorities or
amendment of existing Regulatory Approvals shall require the prior written
approval of Purchaser, not to be unreasonably withheld or delayed.
(d) Supplier certifies it did not and will not use in any capacity
the services of any person, including any firm or individual, debarred or
subject to debarment under the Generic Drug Enforcement Act of 1992, amending
the Food Drug and Cosmetic Act at 21 USC 335a. Supplier agrees to notify
Purchaser immediately in the event any person providing services to Supplier
under the scope of the work of this Agreement is debarred or becomes subject to
debarment.
(e) For the limited purpose of permitting a quality and compliance
audit, Supplier shall grant to authorized representatives of Purchaser upon
reasonable notice and not more than once per year, unless a substantial and
reasonable need for an additional audit can be shown, access to areas of
Supplier's plants and each of Supplier's Third Party supply contractor's plants,
and to those technical records made by Supplier that only relate solely to
Quality Assurance testing and regulatory compliance monitoring for manufacturing
of Components, at such times as Components are being manufactured, solely for
the purpose of Purchaser determining that such manufacture is in compliance with
regulatory requirements. Purchaser shall provide Supplier at least thirty (30)
Business Days notice in writing of its desire to have such access. Supplier
shall promptly respond to Purchaser's request and the Parties shall agree on the
time of and procedures for the audit. All such inspections shall be subject to
confidentiality obligations.
4.3 Product Recall Procedures. The Parties shall immediately inform each
other in writing of all Information relating to: (a) any incident relating to a
Product and/or any Product or Component that is the subject of recall, market
withdrawal or correction; or (b) any Components that may require, whether based
on manufacturing defect, tampering, or otherwise, a recall, field alert, product
withdrawal or field correction arising from any defect in any such Component
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
14
<PAGE>
provided under this Agreement. The Parties then shall meet and discuss the
situation in good faith to determine if a recall, field alert, product
withdrawal, or field correction is necessary. In the event that either
Purchaser or Supplier decides that a recall, field alert, product withdrawal, or
field correction is necessary due to any defect or other problem in any
Component, the Parties shall cooperate and use Reasonable Efforts in effecting
any such required recall, market withdrawal or correction. Payment of costs and
expenses associated with recalls, market withdrawals, market corrections and the
costs associated with replacement of the recalled or withdrawn Products or
Components shall be borne by the Party whose negligent or defective
manufacturing, processing, testing, packing or storage necessitated such recall,
market withdrawal or market correction.
4.4 Documentation. Supplier shall keep complete, accurate and authentic
accounts, notes, data and records of the work performed under this Agreement.
Each Party shall maintain complete and adequate records pertaining to the
methods and facilities used by it for the manufacture, processing, testing,
packing, labeling, holding and distribution of Components in accordance with the
applicable regulations in the United States and other countries so that the
Components may be used in Dendreon Products and Kirin Products to be used in
human therapies.
ARTICLE 5
FINANCIAL OBLIGATIONS
5.1 Purchase Prices.
(a) Per Kirin's purchase of particular Dendreon Components hereunder,
Kirin shall pay Dendreon for the purchase of such Dendreon Components a transfer
price in an amount in U.S. Dollars equal to Dendreon's Fully-Burdened
Manufacturing Costs of such Dendreon Components plus a handling fee of [ * ];
provided, however, that for Dendreon Components that are purchased by Kirin for
use in a Dendreon Product for which the costs of manufacturing development
(including process development) was supported by Kirin pursuant to Section 5.3,
Kirin shall pay Dendreon a transfer price in an amount in U.S. Dollars equal to
Dendreon's Fully-Burdened Manufacturing Costs of such Dendreon Components for
such Dendreon Product plus a handling fee of [ * ]. Kirin shall pay Dendreon [ *
] of the transfer price for a particular order of Dendreon Components within
thirty (30) days of placing its order for such Dendreon Components, and [ * ] of
such transfer price within thirty (30) days of delivery of such Dendreon
Components, pursuant to Section 2.4.
(b) Per Dendreon's purchase of particular Kirin Components, Dendreon
shall pay Kirin for the purchase of such Kirin Components a transfer price in an
amount in U.S. Dollars equal to Kirin's Fully-Burdened Manufacturing Costs of
such Kirin Components plus a handling fee of [ * ]. Dendreon shall pay Kirin [ *
] of the transfer price for a particular order of Kirin Components within thirty
(30) days of placing its order for such Kirin Components, and [ * ] of such
transfer price within thirty (30) days of delivery of such Kirin Components,
pursuant to Section 2.4.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
15
<PAGE>
5.2 Audit.
(a) Upon the written request of a Party (the "Auditing Party"), and
not more than once in each calendar year, the other Party (the "Audited Party")
shall permit an independent certified public accounting firm of nationally
recognized standing selected by the Auditing Party, and reasonably acceptable to
the Audited Party, at the Auditing Party's expense, to have access during normal
business hours, and upon reasonable prior written notice, to such of the records
of the Audited Party as may be reasonably necessary to verify the accuracy of
the reports of the Audited Party's Fully-Burdened Manufacturing Costs for
Components hereunder for any calendar year ending not more than thirty-six (36)
months prior to the date of such request. The accounting firm shall disclose to
the Auditing Party and the Audited Party only whether such reports are correct
or incorrect and the specific details concerning any discrepancies. No other
information shall be provided to the Auditing Party.
(b) If such accounting firm concludes that the Audited Party
overstated its Fully-Burdened Manufacturing Costs for a particular Component or
Components during such period, the Audited Party shall reimburse the Auditing
Party the difference between what the Auditing Party paid and what was actually
owed, with interest from the date originally due at the prime rate, as published
in The Wall Street Journal (Eastern U.S. Edition) on the last business day
preceding such date, within thirty (30) days after the date the Auditing Party
delivers to the Audited Party such accounting firm's written report. If the
amount of the difference is greater than five percent (5%) of the total amount
owed, then the Audited Party shall in addition reimburse the Auditing Party for
all costs related to such audit.
(c) The Auditing Party shall treat all information subject to review
under this Section 5.2 in accordance with the confidentiality provisions of
Article 6 of this Agreement, and shall cause its accounting firm to enter into
an acceptable confidentiality agreement with the Audited Party obligating such
firm to retain all such financial information in confidence pursuant to such
confidentiality agreement.
(d) If the Audited Party in good faith disputes the conclusion of the
accounting firm under subsection (b) above that the Audited Party overstated its
Fully-Burdened Manufacturing Costs for a particular Component or Components, or
any specific aspect of the conclusion, then the Audited Party shall inform the
Auditing Party by written notice within thirty (30) days of receiving a copy of
the audit containing such conclusion, specifying in detail the reasons for the
Audited Party's disputing such conclusion. The Parties shall promptly thereafter
meet and negotiate in good faith a resolution to such dispute. In the event that
the Parties are unable to resolve such dispute within sixty (60) days after such
Audited Party notice, the matter shall be resolved in a manner consistent with
the procedures set forth in Section 11.7.
5.3 Financing the Development of Dendreon Products. As set forth below,
Kirin shall have the option, but not the obligation, to provide financial
support for the development of Dendreon Products which Dendreon desires Kirin to
financially support and which are to be supplied to Kirin hereunder. To
exercise its option to support those certain Dendreon Products, Kirin shall
notify Dendreon in writing, within thirty (30) days of Kirin's receipt of
written notice from Dendreon that Dendreon is developing such a Dendreon
Product, that Kirin agrees to pay Dendreon for all of its scale-up and other
development costs related to the development of the Dendreon Components for such
Dendreon Product up to a total of [ * ] for such Dendreon
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
16
<PAGE>
Product. All payments due to Dendreon pursuant to this Section 5.3 shall be made
by Kirin within thirty (30) days of receipt of Dendreon's invoice therefor. The
foregoing option shall be exercised, if at all, on a product-by-product basis as
to each Dendreon Product for which Dendreon provides Kirin the applicable
notice.
ARTICLE 6
CONFIDENTIALITY
6.1 Confidentiality; Exceptions. Except to the extent expressly
authorized by this Agreement or otherwise agreed in writing, the Parties agree
that, for the term of this Agreement and for ten (10) years thereafter, the
receiving Party shall keep confidential and shall not publish or otherwise
disclose to a Third Party or use for any purpose other than as provided for in
this Agreement any Information and materials furnished to it by the other Party
pursuant to this Agreement (collectively, "Confidential Information"), except to
the extent that it can be established by the receiving Party by competent proof
that such Confidential Information:
(a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the other Party;
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;
(c) became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or omission of
the receiving Party in breach of this Agreement; or
(d) was disclosed to the receiving Party, other than under an
obligation of confidentiality, by a Third Party who had no obligation to the
disclosing Party not to disclose such information to others.
6.2 Authorized Disclosure. Each Party may disclose the other's
Confidential Information to the extent such disclosure is reasonably necessary
in filing or prosecuting patent applications, prosecuting or defending
litigation, complying with applicable governmental regulations or conducting
pre-clinical or clinical trials, provided that if a Party is required by law or
regulation to make any such disclosure of the other Party's Confidential
Information it will except where impracticable for necessary disclosures, for
example in the event of medical emergency, give reasonable advance notice to the
other Party of such disclosure requirement and, except to the extent
inappropriate in the case of patent applications, will use its best efforts to
secure confidential treatment of such Confidential Information required to be
disclosed.
6.3 Survival. This Article 6 shall survive the termination or expiration
of this Agreement for a period of ten (10) years.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
17
<PAGE>
ARTICLE 7
INTELLECTUAL PROPERTY
Unless specifically and expressly granted herein, no licenses or rights
under either Party's intellectual property rights are implied or granted in this
Agreement. Each Party shall retain full ownership of all its inventions and
intellectual property. The prosecution of any patents, patent applications and
any and all other intellectual property rights associated with the manufacture
and supply of Components shall be governed by the terms of the Collaborative
License Agreement.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
8.1 General. Each of the Parties hereby represents and warrants: (a) the
Agreement is a legal and valid obligation binding upon such Party and
enforceable in accordance with its terms; (b) the execution, delivery and
performance of the Agreement by such Party does not conflict with any agreement,
instrument or understanding, oral or written, to which it is a Party or by which
it is bound; and (c) the Agreement does not violate any law or regulation of any
court, governmental body or administrative or other agency having jurisdiction
over it.
8.2 Component Warranty.
(a) Dendreon warrants to Kirin, for a period of twelve (12) months
from delivery for Separation Devices and Reagent, a period of nine (9) months
from delivery for recombinant antigen PA 2024 and a period of six (6) months
from delivery for Dendreon Antigen other than recombinant antigen PA 2024, that
the Separation Devices, Reagent and Dendreon Antigen, as applicable, supplied by
Dendreon to Kirin shall: (i) be manufactured in accordance with current Good
Manufacturing Practices (for medical devices and drugs as promulgated and
amended by the FDA); and (ii) conform with applicable Dendreon specifications at
the time of delivery by Dendreon. The preceding warranty specifically excludes,
and Dendreon shall not be liable for, any action or omission by Kirin or any
other entity, specifically including any failure to store or transport Dendreon
Components (after Dendreon's delivery pursuant to Section 2.4(a)) in accordance
with applicable specifications, which results in the damage or destruction of
Dendreon Components after Dendreon has delivered the Dendreon Components to
Kirin pursuant to Section 2.4. Kirin's sole remedy for breach of the foregoing
warranty as to a particular Dendreon Component shall be repair, replacement or
refund of the purchase price paid by Kirin, at Dendreon's sole option.
(b) Kirin warrants to Dendreon, for a period of twelve (12) months
from delivery, pursuant to Section 2.4, for any Kirin Components other than
Kirin Antigen, and a period of six (6) months from delivery for Kirin Antigen,
that the Kirin Components supplied by Kirin to Dendreon shall: (i) be
manufactured in accordance with current Good Manufacturing Practices (for
medical devices and drugs as promulgated and amended by the FDA); and (ii)
conform with applicable Kirin specifications at the time of delivery by Kirin.
The preceding warranty specifically excludes, and Kirin shall not be liable for,
any action or omission by Dendreon or any other entity, specifically including
any failure to store or transport Kirin
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
18
<PAGE>
Components (after Kirin's delivery purusnat to Section 2.4(b)) in accordance
with applicable specifications, which results in the damage or destruction of
Kirin Components after Kirin has delivered the Kirin Components to Dendreon
pursuant to Section 2.4. Dendreon's sole remedy for breach of the foregoing
warranty as to a particular Kirin Component shall be repair, replacement or
refund of the purchase price paid by Dendreon, at Kirin's sole option.
8.3 Warranty Disclaimer. THE EXPRESS WARRANTIES IN THIS ARTICLE 8 ARE IN
LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION,
THE WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NONINFRINGEMENT.
ARTICLE 9
TERM AND TERMINATION
9.1 Term. This Agreement shall commence on the Effective Date and, unless
sooner terminated as provided herein, shall continue in effect until the
expiration or termination of the Collaborative License Agreement, unless
extended upon the mutual, written agreement of the Parties.
9.2 Termination.
(a) If either Party materially breaches this Agreement at any time,
which breach is not cured within thirty (30) days of written notice thereof if
such breach is caused by the failure of a Party to meet its financial
obligations under this Agreement, or within ninety (90) days of written notice
thereof for any other material breach of this Agreement, from the non-breaching
Party specifying in detail the nature of the breach, the non-breaching Party
shall have the right to terminate the Agreement.
(b) Either Party may terminate this Agreement, effective immediately
upon the giving of written notice, if the other Party shall file a petition for
bankruptcy, or shall be adjudicated a bankrupt or insolvent, or shall take
advantage of the insolvency laws of any state of the United States or of any
country, or shall make an assignment for the benefit of creditors, or shall have
a receiver appointed, whether by private instrument or by court officer, for its
property which is not dismissed within sixty (60) days, or become subject to an
involuntary petition for bankruptcy which in not dismissed within sixty (60)
days.
9.3 Surviving Obligations. Termination or expiration of this Agreement
shall not (a) affect any other rights of either Party which may have accrued up
to the date of such termination or expiration, or (b) relieve Purchaser of its
obligation to pay to Supplier sums due in respect of Components delivered and
accepted prior to termination or expiration of this Agreement. The provisions of
Articles 6, 7 and 10, and Sections 4.4, 5.2 and 11.6 of this Agreement shall
survive termination or expiration of this Agreement.
9.4 Termination Without Cause. This Agreement may be terminated at any
time upon mutual, written agreement of the Parties.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
19
<PAGE>
ARTICLE 10
INDEMNIFICATION
10.1 Indemnification by Dendreon.
(a) Subject to compliance with Section 10.3, Dendreon agrees to
indemnify, defend and hold harmless Kirin, its Affiliates, and their respective
officers, directors, shareholders, representatives, agents and employees (the
"Kirin Indemnitees"), from and against any and all losses, liabilities, damages,
costs, fees and expenses, including reasonable legal costs and attorneys' fees
("Losses") resulting from a Third Party claim, suit or action based upon: (i)
death or injury to any person or damage to any property to the extent caused by
the defective or negligent manufacture of a Component or Product manufactured by
or on behalf of Dendreon and sold to Kirin and its Affiliates hereunder (the
"Defective Manufacturing Claim"); (ii) death or injury to any person or damage
to any property to the extent caused by the defective or negligent marketing or
promotion of a Product by Dendreon or its Affiliates hereunder (a "Defective
Marketing Claim"); (iii) harm or damage attributable to or caused by the acts or
omissions of Dendreon or its Affiliates or their respective officers, directors,
representatives, agents or employees; or (iv) breach of any representation or
warranty of Dendreon set forth in Article 8.
(b) Dendreon shall have no obligation under this Section 10.1 with
respect to any Losses resulting from: (i) the negligent or intentionally
wrongful act or omission of Kirin, its Affiliates or their respective officers,
directors, representatives, agents or employees; (ii) the improper storage,
transportation, marketing, training, or handling of a Component or Product by
any person or entity other than Dendreon, its Affiliates or their respective
officers, directors, representatives, agents or employees; (iii) the improper
use of a Component or Product by any person or entity other than Dendreon, its
Affiliates or their respective officers, directors, agents or employees; or (iv)
any claims based upon death or injury to any person or damage to any property
caused by a Component or Product that is attributable to or caused by acts or
omissions of Kirin or its sublicensees or their respective Affiliates or their
respective officers, directors, representatives, agents or employees. With
respect to any Third Party claim, suit or action based upon death or injury to
any person or damage to any property based on use of a Product, Dendreon agrees
to provide Kirin, at Kirin's expense, with reasonable assistance in Kirin's
defense of such claim, suit or action.
10.2 Indemnification by Kirin.
(a) Subject to compliance with Section 10.3, Kirin agrees to
indemnify and defend Dendreon, its Affiliates, and their respective officers,
directors, shareholders, representatives, agents and employees (the "Dendreon
Indemnitees"), from and against any and all Losses (as defined in Section 10.1)
resulting from a Third Party claim, suit or action based upon: (i) a Defective
Manufacturing Claim (as defined in Section 10.1); (ii) a Defective Marketing
Claim (as defined in Section 10.1); (iii) harm or damage attributable to or
caused by the acts or omissions of Kirin or its Affiliates or their respective
officers, directors, representatives, agents or employees; or (iv) breach of any
representation or warranty of Kirin in Article 8.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
20
<PAGE>
(b) Kirin shall have no obligation under this Section 10.2 with
respect to any Losses resulting from: (i) the negligent or intentionally
wrongful act or omission of Dendreon, its Affiliates or their respective
officers, directors, representatives, agents or employees; (ii) the improper
storage, transportation, marketing, training, or handling of a Component or
Product by entities or persons other than Kirin or its sublicensees or their
respective Affiliates, or their respective officers, directors, representatives,
agents or employees; (iii) the improper use of a Product or Component, unless
caused by Kirin or its sublicensees or their respective Affiliates, or their
respective officers, directors, representatives, agents or employees; or (iv)
any claims based upon death or injury to any person or damage to any property
caused by a Component or Product that is attributable to or caused by acts or
omissions of Dendreon or its sublicensees or their respective Affiliates or
their respective officers, directors, representatives, agents or employees. With
respect to any Third Party claim, suit or action based upon death or injury to
any person or damage to any property based on use of a Product, Kirin agrees to
provide Dendreon, at Dendreon's expense, with reasonable assistance in
Dendreon's defense of such claim, suit or action.
10.3 Indemnity Procedure. In the event that a Party is seeking
indemnification under Section 10.1 or 10.2, it shall inform the other Party (the
"Indemnifying Party") of a claim as soon as reasonably practicable after it
receives notice of the claim, shall permit the Indemnifying Party to assume
direction and control of the defense of the claim (including the right to settle
the claim solely for monetary consideration), and, at the Indemnifying Party's
expense, shall cooperate as reasonably requested in the defense of the claim.
The Indemnified Party shall have the right to retain its own counsel, subject to
the approval of any such outside counsel by the Indemnifying Party, with the
fees and expenses to be paid by the Indemnifying Party if representation of such
Party by the counsel retained by Indemnifying Party would be inappropriate due
to actual or potential differing interests between such indemnitee and any other
Party represented by such counsel in such proceedings. The Indemnifying Party
may not settle such action or claim, or otherwise consent to an adverse judgment
in such action or claim, without the express written consent of the Indemnified
Party if such settlement or adverse judgment diminishes the rights or interests
of the Indemnified Party.
ARTICLE 11
MISCELLANEOUS
11.1 Assignment. Neither Party shall assign any of its rights and
obligations hereunder except (i) as incident to the merger, consolidation,
reorganization or acquisition of stock affecting actual voting control or of
substantially all of the assets of the assigning Party; or (ii) to an Affiliate;
provided, however, that in no event shall either Party's rights and obligations
hereunder be assigned without prior written notice to the other Party. In any
case, neither Party may make an assignment of its assets which renders it unable
to perform its material obligations hereunder. This Agreement shall be binding
upon and inure to the benefit of the Parties hereto and their permitted
successors and assigns.
11.2 Retained Rights. Nothing in this Agreement shall limit in any
respect the right of either Party to conduct research and development with
respect to, and market products outside of, the Field using such Party's
Technology, but no license to use the other Party's technology to do so is
granted herein expressly or by implication.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
21
<PAGE>
11.3 Force Majeure. Neither Party shall lose any rights hereunder or be
liable to the other Party for damages or losses on account of failure of
performance by the defaulting Party if the failure is occasioned by government
action, war, fire, explosion, flood, strike, lockout, embargo, act of God, or
any other similar cause beyond the control of the defaulting Party, provided
that the Party claiming force majeure has exerted all reasonable efforts to
avoid or remedy such force majeure; provided, however, in no event shall a Party
be required to settle any labor dispute or disturbance.
11.4 Further Actions. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
11.5 No Trademark Rights. Except as otherwise provided in the
Collaborative License Agreement, no right, express or implied, is granted by the
Agreement to use in any manner the name "Dendreon" or "Kirin" or any other trade
name or trademark of the other Party in connection with the performance of the
Agreement.
11.6 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by facsimile
transmission (receipt verified), telexed, mailed by registered or certified mail
(return receipt requested), postage prepaid, or sent by express courier service,
to the Parties at the following addresses (or at such other address for a Party
as shall be specified by like notice; provided, that notices of a change of
address shall be effective only upon receipt thereof):
If to Dendreon, addressed to:
Dendreon Corporation
3005 1st Avenue
Seattle, WA 98121-1010
Attention: C. S. Henney
Telephone:(206) 256-4545
Telecopy: (206) 256-0571
With copy to:
Cooley Godward llp
Five Palo Alto Square, 4th Floor
Palo Alto, CA 94306
Attention: Barclay James Kamb, Esq.
Telephone: (650) 843-5052
Telecopy: (650) 857-0663
If to Kirin, addressed to:
Kirin Brewery Co., Ltd.
26-1, Jingumae 6-chome
Shibuya-ku
Tokyo 150-8011, Japan
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
22
<PAGE>
Attention: Akihiro Shimosaka
Research and Product Development Department
Telephone: (03) 5485-6805
Telecopy: (03) 3499-6152
11.7 Dispute Resolution. If any dispute, controversy or claim arises out
of or in connection with this Agreement, the Parties shall use reasonable
efforts to settle it by friendly negotiation within sixty (60) days of notice
from one Party to the other of such dispute, controversy or claim, before
pursuing any other remedies available to them. If either Party fails or refuses
to participate in such negotiations, or if, in any event, the dispute,
controversy or claim is not resolved to the satisfaction of both Parties within
the sixty (60) day period, any such dispute, controversy or claim shall be
settled by arbitration. Any such arbitration shall be conducted in accordance
with the Japan-American Trade Arbitration Agreement of September 16, 1952. The
Parties agree that any such arbitration shall be conducted in the English
language in a location within the United States selected by the Party that did
not initiate such arbitration, and the Agreement shall be governed by and
construed in accordance with the laws of the State of California and the United
States of America. The arbitrators shall include one independent, un-affiliated
nominee selected by each Party and a third neutral arbitrator selected by such
nominees. The Parties agree that any arbitration panel shall include members
knowledgeable as to the evaluation of biopharmaceutical technology. Judgment
upon the award rendered may be entered in the highest state or federal court or
forum, state or federal, having jurisdiction; provided, however, that the
provisions of this Section 11.7 shall not apply to any dispute or controversy as
to which any treaty or law prohibits such arbitration. The prevailing Party
shall be entitled to reasonable attorney's fees and costs to be fixed by the
arbitrators.
11.8 Waiver. Except as specifically provided for herein, the waiver from
time to time by either of the Parties of any of their rights or their failure to
exercise any remedy shall not operate or be construed as a continuing waiver of
same or of any other of such Party's rights or remedies provided in this
Agreement.
11.9 Severability. If any term, covenant or condition of this Agreement
or the application thereof to any Party or circumstance shall, to any extent, be
held to be invalid or unenforceable, then the remainder of this Agreement, or
the application of such term, covenant or condition to Parties or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this Agreement shall be
valid and be enforced to the fullest extent permitted by law.
11.10 Ambiguities. Ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed to have
authored the ambiguous provision.
11.11 Entire Agreement. This Agreement sets forth all the covenants,
promises, agreements, warranties, representations, conditions and understandings
between the Parties hereto with regard to the subject matter discussed herein
and supersedes and terminates all prior agreements and understanding between the
Parties with regard to the subject matter discussed herein. There are no
covenants, promises, agreements, warranties, representations conditions or
understandings, either oral or written, between the Parties with regard to the
subject matter discussed herein other than as set forth in this Agreement.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
23
<PAGE>
11.12 Headings. The Section and Paragraph headings contained herein are
for the purposes of convenience only and are not intended to define or limit the
contents of the Section or Paragraphs to which they apply.
In Witness Whereof, the Parties have executed this Agreement in duplicate
originals by their proper officers as of the date and year first above written.
DENDREON CORPORATION KIRIN BREWERY CO., LTD.
By: /s/ Christopher S. Henney By: /s/ Koichiro Aramaki
------------------------- -------------------------------------
Managing Director
Title: President & CEO Title: President of Pharmaceutical
--------------- ----------------------------
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
24
<PAGE>
EXHIBIT A
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
<PAGE>
EXHIBIT 10.18
Joint Commercialization Agreement
Between
Dendreon Corporation
And
Kirin Brewery Co. Ltd.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1 DEFINITIONS........................................................... 1
1.1 "Active Party"........................................................ 1
1.2 "Affiliate"........................................................... 1
1.3 "Allowable Expenses".................................................. 1
1.4 "Collaboration Discoveries"........................................... 2
1.5 "Collaboration Patent"................................................ 2
1.6 "Collaboration Product"............................................... 2
1.7 "Collaboration Technology"............................................ 2
1.8 "Commercialization Budget"............................................ 2
1.9 "Commercialization Plan".............................................. 2
1.10 "Controlled".......................................................... 2
1.11 "Dendreon Antigen".................................................... 2
1.12 "Dendreon Improvement"................................................ 2
1.13 "Dendreon Know-How"................................................... 2
1.14 "Dendreon Patents".................................................... 2
1.15 "Dendreon Product".................................................... 3
1.16 "Dendritic Cell"...................................................... 3
1.17 "Development Budget".................................................. 3
1.18 "Development Plan".................................................... 3
1.19 "Drug Approval Application"........................................... 3
1.20 "Field"............................................................... 3
1.21 "Inactive Party"...................................................... 3
1.22 "Information"......................................................... 3
1.23 "Joint Commercialization Committee" or "JCC".......................... 3
1.24 "Joint Development Committee" or "JDC"................................ 3
1.25 "Joint Territory"..................................................... 4
1.26 "Kirin Antigen"....................................................... 4
1.27 "Kirin Improvements".................................................. 4
1.28 "Kirin Know-How"...................................................... 4
1.29 "Kirin Patents"....................................................... 4
</TABLE>
[ * ] = Certain confidential information contained in this document, marked
by brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1.30 "Kirin Product"....................................................... 4
1.31 "Marketing Profits"................................................... 4
1.32 "Net Revenue"......................................................... 4
1.33 "Patent".............................................................. 4
1.34 "Patent Costs"........................................................ 5
1.35 "Pre-Reconciliation Profit"........................................... 5
1.36 "Product"............................................................. 5
1.37 "Reasonable Efforts".................................................. 5
1.38 "Regulatory Approval"................................................. 5
1.39 "Separation Devices".................................................. 5
1.40 "Sublicensee"......................................................... 5
1.41 "Sublicense Revenues"................................................. 5
1.42 "Third Party"......................................................... 5
1.43 "Third Party Royalties"............................................... 5
ARTICLE 2 JOINT DEVELOPMENT..................................................... 6
2.1 Overview.............................................................. 6
2.2 Joint Development Committee........................................... 6
2.3 JDC Meetings.......................................................... 6
2.4 Decision-Making and Issue Resolution.................................. 6
2.5 Joint Development..................................................... 6
2.6 Development Plans and Budgets......................................... 7
2.7 Costs of Joint Development............................................ 7
2.8 Reimbursement of Development Costs.................................... 8
2.9 Audit Rights.......................................................... 8
2.10 Manufacture and Supply................................................ 8
ARTICLE 3 JOINT COMMERCIALIZATION............................................... 8
3.1 Overview.............................................................. 8
3.2 Joint Commercialization Committee..................................... 9
3.3 JCC Meetings.......................................................... 9
3.4 Decision-Making and Issue Resolution.................................. 9
</TABLE>
[ * ] = Certain confidential information contained in this document, marked
by brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
ii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
3.5 Commercialization Program............................................. 9
3.6 Sublicensees.......................................................... 9
ARTICLE 4 RIGHTS AND LICENSES................................................... 10
4.1 Commercial License to Dendreon........................................ 10
4.2 Commercial License to Kirin........................................... 10
4.3 License Limitations and Covenants..................................... 10
4.4 Restrictions on Sale.................................................. 10
4.5 Use of Separation Devices by Kirin Collaborators...................... 10
ARTICLE 5 PROFIT SHARING........................................................ 11
5.1 Share of Marketing Profits............................................ 11
5.2 Calculation of Marketing Profits...................................... 11
5.3 Reconciliation Payments............................................... 12
5.4 Term of Profit Sharing................................................ 12
ARTICLE 6 SINGLE PARTY DEVELOPMENT AND COMMERCIALIZATION........................ 13
6.1 Single Party Development and Commercialization........................ 13
6.2 Royalties............................................................. 13
6.3 Recovery of Investments............................................... 13
6.4 Royalty Reduction..................................................... 14
6.5 Payment of Royalties.................................................. 14
6.6 Manner of Payment..................................................... 14
6.7 Reports............................................................... 14
6.8 Withholding of Taxes.................................................. 14
ARTICLE 7 CONFIDENTIALITY....................................................... 15
7.1 Confidentiality; Exceptions........................................... 15
7.2 Authorized Disclosure................................................. 15
7.3 Survival.............................................................. 15
ARTICLE 8 INTELLECTUAL PROPERTY................................................. 16
8.1 Ownership and Patent Prosecution...................................... 16
8.2 Patent Infringement in the Joint Territory............................ 16
8.3 Defense and Settlement of Third Party Claims in the Joint Territory... 16
</TABLE>
[ * ] = Certain confidential information contained in this document, marked
by brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
iii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 9 REPRESENTATIONS AND WARRANTIES........................................ 17
ARTICLE 10 REPORTS, RECORDS AND SAMPLES.......................................... 17
10.1 Sharing of Information................................................ 17
10.2 Records and Audit..................................................... 17
10.3 Materials............................................................. 18
10.4 Publicity Review...................................................... 18
10.5 Publications.......................................................... 18
ARTICLE 11 TERM AND TERMINATION.................................................. 19
11.1 Term.................................................................. 19
11.2 Termination of Joint Development and/or Joint Commercialization....... 19
11.3 Termination for Breach................................................ 19
11.4 Surviving Rights...................................................... 19
ARTICLE 12 INDEMNIFICATION....................................................... 19
12.1 Indemnification by Kirin.............................................. 19
12.2 Indemnification by Dendreon........................................... 19
ARTICLE 13 MISCELLANEOUS......................................................... 20
13.1 Assignment............................................................ 20
13.2 Retained Rights....................................................... 20
13.3 Force Majeure......................................................... 20
13.4 Further Actions....................................................... 20
13.5 No Trademark Rights................................................... 20
13.6 Notices............................................................... 20
13.7 Dispute Resolution.................................................... 21
13.8 Waiver................................................................ 22
13.9 Severability.......................................................... 22
13.10 Ambiguities........................................................... 22
13.11 Entire Agreement...................................................... 22
13.12 Headings.............................................................. 22
</TABLE>
[ * ] = Certain confidential information contained in this document, marked
by brackets, has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
iv
<PAGE>
Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
Exhibit 10.18
JOINT COMMERCIALIZATION AGREEMENT
This Joint Commercialization Agreement (the "Agreement") is made and
entered into effective as of February 1, 2000 (the "Effective Date") by and
between Dendreon Corporation, a Delaware corporation having its principal place
of business at 3005 1st Avenue, Seattle, Washington, U.S.A. ("Dendreon"), and
Kirin Brewery Co., Ltd., a corporation organized under Japanese laws having its
principal place of business at 10-1, Shinkawa 2-chome, Chuo-ku, Tokyo, Japan
("Kirin"). Dendreon and Kirin may be referred to herein collectively as the
"Parties" or individually as a "Party."
Recitals
A. Kirin and Dendreon entered into a Collaborative License Agreement on
December 10, 1998 (hereinafter defined as the "License Agreement").
B. Kirin and Dendreon entered into a Research and License Agreement on
February 1, 1999 (hereinafter defined as the "Research and License Agreement"),
pursuant to which the Parties agreed to conduct collaborative research to create
improvements to Dendreon's dendritic cell technology and develop new dendritic
cell-based immunotherapy products.
C. Pursuant to the terms of the License Agreement and the Research and
License Agreement, the Parties desire to collaborate in the joint clinical
development and commercialization of Kirin Products and Collaboration Products
(as defined below) in the European Union.
Now, Therefore, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
The following capitalized terms shall have the following meanings when used
in this Agreement:
1.1 "Active Party" shall have the meaning set forth in Section 6.1.
1.2 "Affiliate" means, with respect to a particular Party, a person,
corporation or other entity that, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with such
Party. For the purposes of this definition, "control" means the direct or
indirect ownership by a Party of at least fifty percent (50%) of the outstanding
voting securities of the controlled entity; provided, that in any country where
the law does not permit foreign equity ownership of at least fifty percent
(50%), then with respect to corporations organized under such country's laws,
"control" shall mean the direct or indirect
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
1
<PAGE>
ownership by a Party of outstanding voting securities of such corporation at the
maximum amount permitted by the law of such country.
1.3 "Allowable Expenses" means, with respect to a particular Kirin
Product or Collaboration Product sold in the Joint Territory, the costs and
expenses associated with such Product that the Parties have agreed in either the
applicable Development Budget or the applicable Commercialization Budget shall
be deducted from Net Revenue for the purposes of calculating the Marketing
Profits for such Product.
1.4 "Collaboration Discoveries" means any Information that is created,
developed or discovered pursuant to a Party's activities under the Research
Program (as defined in the Research and License Agreement). It is agreed that
all Dendreon Technology and Kirin Technology are excluded from the definition of
"Collaboration Discoveries."
1.5 "Collaboration Patent" means any Patent or application for a Patent
that claims an invention in Collaboration Discoveries, which Patents shall be
listed on Exhibit A promptly after filing, and Kirin shall use reasonable
efforts to amend such Exhibit A from time to time to reflect any changes.
1.6 "Collaboration Product" means any commercial product that comprises
or contains, or is developed or manufactured based on or utilizing or is derived
from, the Collaboration Technology or any part thereof, but excluding all Kirin
Products and Dendreon Products (as such terms are defined in the License
Agreement).
1.7 "Collaboration Technology" means the Collaboration Discoveries and
Collaboration Patents, either collectively or any part thereof.
1.8 "Commercialization Budget" shall have the meaning set forth in
Section 3.5.
1.9 "Commercialization Plan" means, with respect to a particular
Collaboration Product or Kirin Product, the plan prepared by the JCC and
approved by the Parties, pursuant to Section 3.5, setting forth the detailed
plan and Commercialization Budget for the Parties' joint efforts to market,
promote and sell such product in the Joint Territory.
1.10 "Controlled" means, with respect to a particular item, material, or
intellectual property right, that a Party owns or has a license under such item,
material or intellectual property right and has the ability to grant to the
other Party access to and/or a license or sublicense under such item, material
or intellectual property right as provided for herein without violating the
terms of any agreement or other arrangement with, or the rights of, any Third
Party.
1.11 "Dendreon Antigen" means an antigen that is claimed by a patent or
is otherwise covered by intellectual property rights that are Controlled by
Dendreon.
1.12 "Dendreon Improvement" shall have the meaning assigned to such term
in the License Agreement.
1.13 "Dendreon Know-How" shall have the meaning assigned to such term in
the License Agreement.
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
2
<PAGE>
1.14 "Dendreon Patents" shall have the meaning assigned to such term in
the License Agreement.
1.15 "Dendreon Product" means: (a) any therapeutic product comprising
Dendritic Cells that have been activated or loaded with a specific antigen,
engineered antigen or antigen gene, (including without limitation Dendreon
Antigen), for use in human therapy by infusion into a patient, which product has
been developed by Dendreon based on the Dendreon Technology; or (b) any service
provided by or on behalf of Dendreon to a patient that utilizes the Dendreon
Technology and involves isolation or preparation of Dendritic Cells, activation
or loading with specific antigen, engineered antigen or antigen gene, (including
without limitation Dendreon Antigen), and infusion of such activated or antigen
loaded Dendritic Cells into a patient.
1.16 "Dendritic Cell" means a human dendritic cell or other antigen-
presenting cell or other cells from which dendritic cells can be derived.
1.17 "Development Budget" shall have the meaning assigned to such term in
Section 2.6.
1.18 "Development Plan" means, with respect to a particular Collaboration
Product or Kirin Product, the plan prepared by the JDC and approved by the
Parties, pursuant to Section 3.6, setting forth the detailed plan, Development
Budget and process for the Parties' collaborative and joint efforts to conduct
clinical development of, and seek Regulatory Approval for, such Product in the
Joint Territory.
1.19 "Drug Approval Application" means an application for Regulatory
Approval required before commercial sale or use of a Product as a drug in a
regulatory jurisdiction.
1.20 "Field" means the development, manufacture, use and sale of products
that generally utilize dendritic cell separation, antigen engineering, and
antigen delivery to dendritic cells, for use in human therapies and that are
based on, comprise, utilize or are derived from the Kirin Technology or the
Collaboration Technology.
1.21 "Inactive Party" shall have the meaning set forth in Section 6.1.
1.22 "Information" means any and all information and data of any kind,
including without limitation techniques, inventions, practices, methods,
knowledge, know-how, skill, experience, test data (including pharmacological,
toxicological and clinical test data), analytical and quality control data,
marketing, cost, sales and manufacturing data and descriptions, compositions,
and assays.
1.23 "Joint Commercialization Committee" or "JCC" means the committee
established by the Parties pursuant to Section 3.3 to manage, direct and oversee
the joint commercialization by the Parties of Collaboration Products and Kirin
Products in the Joint Territory.
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
3
<PAGE>
1.24 "Joint Development Committee" or "JDC" means the committee
established by the Parties pursuant to Section 2.2 to manage, direct and oversee
the joint development by the Parties of Collaboration Products and Kirin
Products in the Joint Territory.
1.25 "Joint Territory" means the countries that are members of the
European Union, as such union is constituted at the applicable time.
1.26 "Kirin Antigen" means an antigen that is claimed by a patent or is
otherwise covered by intellectual property rights that are Controlled by Kirin.
1.27 "Kirin Improvements" shall have the meaning assigned to such term in
the License Agreement.
1.28 "Kirin Know-How" shall have the meaning assigned to such term in the
License Agreement.
1.29 "Kirin Patents" shall have the meaning assigned to such term in the
License Agreement.
1.30 "Kirin Product" means: (a) any therapeutic product developed by or
on behalf of Kirin based on, derived from or incorporating the Dendreon
Technology that comprises Dendritic Cells that have been activated or loaded
with a specific antigen, engineered antigen or antigen gene, (including without
limitation a Kirin Antigen), for use in human therapy by infusion into a
patient; or (b) any service provided by or on behalf of Kirin to a patient that
involves isolation or preparation of Dendritic Cells, activation or loading of a
specific antigen, engineered antigen or antigen gene, (including without
limitation a Kirin Antigen), and infusion of such activated or antigen loaded
Dendritic Cells into a patient, wherein such service is based on, utilizes,
comprises or is derived from the Dendreon Technology.
1.31 "Marketing Profits" means, with respect to a particular Kirin
Product or Collaboration Product sold in the Joint Territory, an amount equal
to: (i) the Net Revenue for such Kirin Product or Collaboration Product in the
Joint Territory less all Allowable Expenses incurred by the Parties with respect
to such Kirin Product or Collaboration Product, plus (ii) Sublicense Revenues.
1.32 "Net Revenue" means the total revenue received by a Party for sale
or other disposition of a Product by such Party or an Affiliate or Sublicensee
of such Party to a Third Party less the following to the extent actually
incurred or allowed with respect to such sale or disposition: (i) reasonable
costs paid, if any, by the Party to a Third Party on account of apheresis
performed as part of or in association with the Product; (ii) discounts,
including cash discounts, or rebates, retroactive price reductions or allowances
actually allowed or granted from the billed amount; (iii) credits or allowances
actually granted upon claims, rejections or returns of Products, including
recalls, regardless of the Party requesting such; (iv) freight, postage,
shipping and insurance charges paid for delivery of Product, to the extent
billed; and (v) taxes, duties or other governmental charges levied on or
measured by the billing amount when included in billing, as adjusted for rebates
and refunds.
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
4
<PAGE>
1.33 "Patent" means (i) a valid and enforceable patent, including any
extension, registration, confirmation, reissue, re-examination or renewal
thereof; and (ii) to the extent valid and enforceable rights are granted by a
governmental authority thereunder, a patent application.
1.34 "Patent Costs" means the fees and expenses paid to outside legal
counsel and other Third Parties, and filing and maintenance expenses, incurred
in connection with the establishment, maintenance of rights under Patents
applicable to Products including the costs of patent interference proceedings.
1.35 "Pre-Reconciliation Profit" shall have the meaning assigned to it in
Section 5.2(c).
1.36 "Product" means a Collaboration Product or a Kirin Product.
1.37 "Reasonable Efforts" shall mean efforts and resources commonly used
in the research-based pharmaceutical industry for the research, development and
commercialization of a product at a similar stage in its product life taking
into account the establishment of the product in the marketplace, the
competitiveness of the marketplace, the proprietary position of the product, the
regulatory structure involved, the profitability of the product and other
relevant factors.
1.38 "Regulatory Approval" means any approvals, licenses, registrations
or authorizations of any federal, state or local regulatory agency, department,
bureau or other government entity, necessary for the manufacture, use, storage,
import, transport or sale of Products in a regulatory jurisdiction.
1.39 "Separation Devices" means any Dendreon device, including all
containers and proprietary reagents comprising such device, that is intended for
use by Dendreon and its licensees for the isolation and purification of
Dendritic Cells for use in human therapy by activation or loading with specific
antigen, engineered antigen or antigen gene, and infusion into a patient.
1.40 "Sublicensee" shall mean any Third Party expressly licensed by a
Party to make and sell one or more Products. A Sublicensee shall not include
distributors or sales agents that do no more than purchase and resell finished
Products on behalf of a Party.
1.41 "Sublicense Revenues" means all revenues received by either Party
from Third Parties from sublicensing of the manufacture, use and sale of Kirin
Products or Collaboration Products for sale in the Joint Territory.
1.42 "Third Party" means any entity other than Dendreon or Kirin or an
Affiliate of Dendreon or Kirin.
1.43 "Third Party Royalties" means all royalties payable by either of the
Parties to Third Parties in respect of the manufacture, use or sale of Kirin
Products or Collaboration Products in the Joint Territory.
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
5
<PAGE>
ARTICLE 2
JOINT DEVELOPMENT
2.1 Overview. Dendreon and Kirin agree that they will jointly develop
Kirin Products and Collaboration Products in the Joint Territory pursuant to the
terms of this Agreement. All such joint development efforts of the Parties, or
either Party, shall be in accordance with the Development Plan for each Kirin
Product or Collaboration Product. Except as otherwise provided in this
Agreement, each Party agrees that neither Party may clinically develop a Kirin
Product or Collaboration Product for sale or distribution in the Joint
Territory, or license any Third Party to do so, except jointly with the other
Party pursuant to this Agreement. However, as discussed further in Article 6, it
is agreed that, if one Party determines that it does not wish to proceed with
such joint development of a particular Product, the other Party shall be
permitted to do so on its own pursuant to the terms of Article 6.
2.2 Joint Development Committee. The Parties shall form a Joint
Development Committee for the development of such Kirin Product or Collaboration
Product, comprised of six (6) members, with three (3) members being appointed
and replaced by Dendreon and three (3) members being appointed and replaced by
Kirin. The Parties may subsequently agree to change the size of the JDC, as
appropriate to meet the needs of the Parties in managing the joint efforts under
this Agreement. The JDC shall (a) prepare the Development Plan for the Kirin
Product or Collaboration Product, and modify or amend it as appropriate, based
on the results of the development efforts on such product, during the
development process; and (b) perform such other duties and obligations as the
Parties specifically delegate to it in writing by mutual written agreement of
the Parties.
2.3 JDC Meetings. JDC meetings shall take place at such mutually
convenient times and places as determined by the JDC, with the expectation that
meetings will alternate between appropriate offices of each Party. The JDC shall
determine the frequency of its meetings and how such meetings will be conducted
and recorded.
2.4 Decision-Making and Issue Resolution. All decisions of the Joint
Development Committee shall be unanimous by the members of such committee. If
the JDC fails to reach unanimous agreement on an issue needing resolution, the
matter shall be referred for good faith discussion and resolution by a senior
executive officer designated by each Party for such purpose.
2.5 Joint Development. For each Product selected by the Parties for joint
development hereunder by mutual written agreement, Dendreon and Kirin agree that
they will jointly conduct, or have conducted, all the clinical and other
development work in the Joint Territory on such Product in accordance with the
Development Plan developed by the JMC for such Product. Each Party agrees not to
incur any expenses or costs in excess of the Development Budget (as defined
below) within such Development Plan except as mutually agreed in writing by the
Parties.
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
6
<PAGE>
2.6 Development Plans and Budgets. Promptly after the selection of a
particular Product for development by the Parties, the JDC shall prepare and
provide to each Party for final approval a development plan for such Product in
the Joint Territory (the "Development Plan"). The Development Plan shall
include all needed details regarding the clinical development and other work to
be undertaken to develop such Product in the Joint Territory, including an
allocation of all such work as appropriate to each Party (or to selected Third
Party contractors, as agreed), and shall establish a budget (the "Development
Budget") for all costs and expenses to be incurred by each Party in conducting
the work allocated to it under such Development Plan. Each Party shall
diligently review the proposed Development Plan and shall either approve the
plan or provide the JDC any requested changes and comments. If a Party provides
such requested changes or comment to a proposed Development Plan, the JDC shall
promptly thereafter prepare a revised draft of the Development Plan,
accommodating such changes and comments, and resubmit such revised Development
Plan for approval by the Parties as provided above. Once the Parties have
agreed on the Development Plan proposed by the JDC, such Development Plan shall
be effective and shall control and govern the Parties' development effort in the
Joint Territory with respect to the applicable Product, subject to any
subsequent amendments or modifications to such Development Plan as provided
below. From time to time during the development of such Product, the JDC shall
review the Development Plan in light of the results of the development work and
any other relevant Information and shall amend or modify the Development Plan as
appropriate, provided that the JDC may not increase the applicable Development
Budget without the written approval of each Party. At least sixty (60) days
prior to January 1 of any year in which the Parties are developing a particular
Product hereunder, the JDC shall review the applicable Development Budget for
such Products and shall submit a revised and updated Development Budget for the
coming calendar year to each of the Parties for approval as provided above.
Upon such approval, the Development Budget shall be effective for the
development of such Product in the Joint Territory during such calendar year,
subject further to amendment of the applicable Development Plan.
2.7 Costs of Joint Development. All Development Costs incurred or
expended by a Party hereunder in conducting the joint development work on a
Product hereunder allocated to it under the applicable Development Plan shall
initially be borne by the Party incurring such costs and expenses, subject to
reimbursement as provided herein. Each Party shall calculate and maintain
records of all the Development Costs incurred or expended by the Party during
its performance of development on a Product, in accordance with generally
accepted accounting procedures consistently applied throughout such Party's
organization and such other procedures to be agreed upon between the Parties.
Each Party shall report quarterly to the other on the Development Costs it has
incurred in each calendar quarter, on a Product-by-Product basis, and the
purpose (referencing the activities within the applicable Development Plan) for
which such costs were incurred or expended, with such reports to be submitted
within sixty (60) days after the end of each of the first three (3) calendar
quarters and ninety (90) days after the end of the calendar year. The Parties
shall seek to resolve promptly and in good faith any questions or issues related
to such accounting statements, and in any event within ninety (90) days
following receipt.
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
7
<PAGE>
2.8 Reimbursement of Development Costs.
(a) For each particular calendar quarter during which Development
Costs are incurred hereunder, Party shall review the Development Costs report
submitted by the other Party and compare such submission to the applicable
Development Budgets. The Parties will then meet, via designated senior officers
from each Party with financial accounting responsibility, to discuss the reports
and reach agreement on the total amount of Development Costs that each Party may
properly apply to the joint development work hereunder. It is understood and
agreed that a Party will not be entitled to obtain credit or reimbursement for
any Development Costs incurred by the Party in excess of the amount set forth in
the applicable Development Budget for accomplishing the relevant task or
objective. If such officers cannot reach agreement promptly, the matter will be
submitted to senior executive officers of each Party for prompt resolution, with
the understanding the each Party will provide access to any Information relating
to the development work undertaken by such Party, and the actual calculation of
costs and expenses incurred therefor, with respect to Products during such
calendar quarter for which such Party seeks reimbursement or credit hereunder
for the related Development Costs.
(b) Once the Parties have agreed on the total amount of Development
Costs incurred or expended during a particular calendar quarter that are
creditable or reimbursable by the Parties as provided in subsection (a) above,
such total shall be divided in half and such amount compared to the total
reimbursable Development Costs incurred by each Party during such quarter (as
agreed above). The Party that bore less than its one-half share of the total
costs shall reimburse the other Party for such difference, in cash, within sixty
(60) days of such determination, subject to subsection (c) below.
2.9 Audit Rights. Each Party shall have the right to have an independent
accounting firm audit the other Party's relevant records to determine the
accuracy of the Development Costs reported by such other Party under Section 2.7
above. Such audit right shall be exercised under terms similar to the audit
provisions set forth in Section 10.2 below.
2.10 Manufacture and Supply. The Parties shall agree in good faith upon
commercially reasonable terms for the manufacture and supply of clinical
supplies of Collaboration Products and Kirin Products in the Joint Territory on
a Product-by-Product basis.
ARTICLE 3
JOINT COMMERCIALIZATION
3.1 Overview. Dendreon and Kirin agree that they will jointly
commercialize Kirin Products and Collaboration Products in the Joint Territory
pursuant to the terms of this Agreement; provided, however, that if the Parties
cannot agree on whether a particular Product should be commercialized in the
Joint Territory, the Party who wishes to commercialize such Product may do so
pursuant to the terms of Article 6. All such joint commercialization efforts of
the Parties, or either Party, shall be consistent with the applicable
Commercialization Plan for
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
8
<PAGE>
each Kirin Product or Collaboration Product. Except as otherwise provided in
this Agreement, each Party agrees that neither Party may clinically develop a
Kirin Product or Collaboration Product for sale or distribution in the Joint
Territory, or license any Third Party to do so, except jointly with the other
Party pursuant to this Agreement.
3.2 Joint Commercialization Committee. Promptly after the Effective Date,
the Parties shall form the Joint Commercialization Committee, comprised of six
(6) members, with three (3) members being appointed and replaced by Dendreon and
three (3) members being appointed and replaced by Kirin. The Parties may
subsequently agree to change the size of the JCC, as appropriate to meet the
needs of the Parties in managing the joint efforts under this Agreement. The
JCC shall (a) prepare the Commercialization Plan for each Kirin Product or
Collaboration Product, and modify or amend it as appropriate, based on the
results of the commercialization efforts on such product, during the development
process; and (b) perform such other duties and obligations as the Parties
specifically delegate to it in writing by mutual written agreement of the
Parties.
3.3 JCC Meetings. JCC meetings shall take place at such mutually
convenient times and places as determined by the JCC, with the expectation that
meetings will alternate between appropriate offices of each Party. The JCC shall
determine the frequency of its meetings and how such meetings will be conducted
and recorded.
3.4 Decision-Making and Issue Resolution. All decisions of the Joint
Development Committee shall be unanimous by the members of such committee. If
the JCC fails to reach unanimous agreement on an issue needing resolution, the
matter shall be referred for good faith discussion and resolution by a senior
executive officer delegated by each Party for such purpose.
3.5 Commercialization Program. The Joint Commercialization Committee
shall develop and maintain a detailed commercialization plan for each Product
which sets forth all the programs and actions to be taken for the
commercialization of such Product in the Joint Territory (the "Commercialization
Plan"). The initial Commercialization Plan with respect to a Product shall be
prepared, reviewed and approved as soon as practicable after the JCC determines
that such Product is sufficiently likely to achieve Regulatory Approval in the
Joint Territory to justify commencing pre-launch activities for such Product in
the Joint Territory. Each Commercialization Plan shall include at a minimum the
following Information: (a) a comprehensive marketing, sales, pricing,
manufacturing, distribution and licensing strategy for the applicable Product in
the Joint Territory, including the efforts allocated to each Party to conduct
such marketing, promotion and sales and any proposed arrangements with Third
Parties to be utilized or proposed to be agreed upon, and (b) market forecasts,
in units of product and local currency, and competitive analysis for the
applicable Product in the Joint Territory, and (c) a budget for the Allowable
Expenses that each Party may incur in such marketing and sales efforts with
respect to the Product allocated to such Party under the Commercialization Plan
(the "Commercialization Budget"). The Commercialization Plan shall be submitted
to Dendreon and Kirin for approval and shall be updated and approved on an
annual basis, prior to sixty (60) days before the end of each calendar year.
3.6 Sublicensees. In territories within the Joint Territory where one
Party has been allocated under the applicable Commercialization Plan the sole
responsibility for
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
9
<PAGE>
commercializing a Product, such Party may sublicense to one or more third
parties any or all of such commercialization activities with respect to such
Product. In all territories within the Joint Territory where the
commercialization efforts for a Product are allocated to both Parties under the
applicable Commercialization Plan, a Party shall have the right to sublicense or
contract with third parties to perform the commercialization efforts allocated
to such Party only with the prior written approval of the other Party, such
approval not to be unreasonably withheld or delayed. All amounts received by the
Parties for sublicensing any rights to develop and/or commercialize any Product
in the Joint Territory shall be deemed to be Sublicense Fees.
ARTICLE 4
RIGHTS AND LICENSES
4.1 Commercial License to Dendreon. Subject to the terms of this
Agreement, Kirin hereby grants to Dendreon a sole and co-exclusive license
(i.e., exclusive as to all parties except as to Kirin), with the right to grant
sublicenses under the Kirin Technology and the Collaboration Technology solely
to clinically develop, make, have made, use, sell, offer for sale and import
Kirin Products and Collaboration Products in the Joint Territory as permitted
under this Agreement.
4.2 Commercial License to Kirin. Subject to the terms of this Agreement,
Dendreon hereby grants to Kirin a sole and co-exclusive license (i.e., exclusive
as to all parties except as to Dendreon), with the right to grant sublicenses
under the Dendreon Technology solely to clinically develop, make, have made,
use, sell, offer for sale and import Kirin Products in the Joint Territory as
permitted under this Agreement.
4.3 License Limitations and Covenants. Each Party covenants and agrees
that it shall not use or practice the intellectual property rights of the other
Party licensed under this Agreement except as expressly permitted by this
Agreement. Except for the rights specifically granted in this Agreement, each
Party expressly reserves all rights Controlled by it or its Affiliates to all
products and intellectual property rights, and reserves the right to utilize or
allow Third Parties to utilize such products and intellectual property rights in
any manner consistent with the terms of this Agreement.
4.4 Restrictions on Sale. Kirin and its Affiliates shall not resell
Separation Devices purchased pursuant to this Agreement except as part of a
Kirin Product or a Collaboration Product, and shall not use Separation Devices
for any purpose other than those purposes permitted in this Agreement, the
License Agreement or the Research and License Agreement. Dendreon shall retain
all rights to manufacture or have manufactured the Separation Devices. Dendreon
and its Affiliates shall not use Kirin Antigen for any purpose other than those
purposes permitted in this Agreement, the License Agreement or the Research and
License Agreement.
4.5 Use of Separation Devices by Kirin Collaborators. With Dendreon's
prior written approval, which may be withheld for any reason, Kirin may provide
certain academic or medical doctor collaborators with a limited number of
Separation Devices solely for use by such individuals in research and
development purposes in the Field; provided, however, that before any such
delivery Kirin shall require such collaborator: (i) to be appropriately trained
in the use
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
10
<PAGE>
of the Separation Devices, (ii) to share the results of any and all research and
development performed using the Separation Devices with Kirin and Dendreon;
(iii) not to sell, distribute or otherwise provide such Separation Devices to
Third Parties; and (iv) unless such antigen is within the public domain, to
grant Dendreon an option to license any specific antigen, engineered antigen or
antigen gene used or developed in conjunction with the use of the Separation
Devices. Unless otherwise agreed in writing by the Parties, Kirin obtains no
license or rights under this Agreement to make or to practice any of the
Dendreon Technology to make Separation Devices or any other devices or products
for use in the isolation or purification of Dendritic Cells or any other cells.
Notwithstanding anything else in this Agreement, Kirin may use Separation
Devices to isolate Dendritic Cells only as part of preparing a Kirin Product or
Collaboration Product or performing a service comprising a Kirin Product or
Collaboration Product, or with Dendreon's prior written consent, as provided in
Section 4.5.
ARTICLE 5
PROFIT SHARING
5.1 Share of Marketing Profits. During the term of this Agreement,
Dendreon and Kirin each shall be entitled to receive and retain fifty percent
(50%) of the Marketing Profits realized from the sale or other commercialization
of Kirin Products and Collaboration Products in the Joint Territory, as
calculated in Section 5.2.
5.2 Calculation of Marketing Profits.
(a) All Allowable Expenses incurred or expended by a Party hereunder
in conducting the commercialization work for a Product in accordance with the
applicable Commercialization Plan shall initially be borne by the Party
incurring such costs and expenses, subject to reimbursement as provided herein.
Each Party shall calculate and maintain records of all the Allowable Expenses
incurred or expended by the Party during its performance of such
commercialization efforts on a Product and of all Net Revenues and Sublicense
Revenues received by the Party hereunder, in accordance with generally accepted
accounting procedures consistently applied throughout such Party's organization
and such other procedures to be agreed upon between the Parties. Each Party
shall report quarterly to the other on the Allowable Expenses it has incurred or
expended in each calendar quarter and all Net Revenues and Sublicense Revenues
received by the Party in such quarter, on a Product-by-Product basis, and the
purpose (referencing the activities within the applicable Commercialization
Plan) for which such costs were incurred or expended, with such reports to be
submitted within sixty (60) days after the end of each of the first three (3)
calendar quarters and ninety (90) days after the end of the calendar year. The
Parties shall seek to resolve promptly and in good faith any questions or issues
related to such accounting statements, and in any event within ninety (90) days
following receipt.
(b) For each particular calendar quarter during which Allowable
Expenses are incurred hereunder, each Party shall review the Allowable Expenses
report submitted by the other Party and compare such submission to the
Commercialization Plan for the applicable Product. The Parties will then meet,
via designated senior officers from each Party with financial accounting
responsibility, to discuss the reports and reach agreement on the total
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
11
<PAGE>
amount of Allowable Expenses that each Party may properly apply to the
calculation Marketing Profit. If such officers cannot reach agreement promptly,
the matter will be submitted to senior executive officers of each Party for
prompt resolution, with the understanding the each Party will provide access to
any Information relating to the commercialization work undertaken by such Party,
and the actual calculation of costs and expenses incurred therefor, with respect
to Products during such calendar quarter for which such Party seeks
reimbursement or credit.
(c) Once the Parties have agreed on the total amount of Allowable
Expenses incurred or expended during a particular calendar quarter that are
creditable or reimbursable by the Parties as provided in Section 5.2(b) above,
such amount shall be subtracted from the total Net Revenues and Sublicense Fees
received by the Parties for all applicable Products during such quarter, and the
remainder shall be deemed the total "Marketing Profit" for such quarter. In
addition, the Parties shall determine the profit of each Party, prior to
reconciliation as set forth in Section 5.3, by subtracting the amount of
Allowable Expenses incurred or expended by such Party during a particular
calendar quarter that are creditable or reimbursable by the Parties as provided
in Section 5.2(b), from the total Net Revenues and Sublicense Fees for all
applicable Products during such quarter that were collected and retained by such
Party, and the remainder shall be deemed such Party's "Pre-Reconciliation
Profit" for such quarter.
(d) For the calculation of Marketing Profits and Pre-Reconciliation
Profits hereunder for a particular quarter, all amounts of Allowable Expenses
incurred or expenses during such quarter in currencies other than U.S. Dollars,
and all amounts of Net Revenues and Sublicense Fees received in currencies other
than U.S. Dollars, shall be converted to the U.S. Dollars equivalent for
purposes of making such calculations, with such conversion effected by using the
currency exchange rate into U.S. Dollars as quoted in the Wall Street Journal on
the last business day of such quarter.
5.3 Reconciliation Payments. To the extent that one Party's Pre-
Reconciliation Profit (as calculated in Section 6.2(c)) for a particular quarter
exceeds one-half of the Marketing Profit for such quarter, such Party shall pay
the amount (in U.S. Dollars) of such excess to the other Party within thirty
(30) days of the Parties' having determined such amounts, so that each Party
retains one-half of the Marketing Profit for such quarter, after calculating all
Allowable Expenses and Net Revenues for such quarter.
5.4 Term of Profit Sharing. The Parties obligation to share Marketing
Profits hereunder shall expire with respect to a particular Product being sold
or otherwise commercialized in a country of the Joint Territory on the later to
occur of: (a) the expiration of the last to expire of the Collaboration Patents,
Dendreon Patents or Kirin Patents covering such Product in such country, or (b)
the date on which such Collaboration Product or Kirin Product ceases to be
promoted, marketed or sold in such country under the trademark for it designated
by the Parties pursuant to the applicable Development Plan or Commercialization
Plan. Upon the expiration of such sharing obligation pursuant to the foregoing,
each Party shall have the right to commercialize such Product in such country,
without obligation to the other Party, and the license rights granted under
Article 4 with respect to such Product in such country shall be automatically
deemed to be non-exclusive, fully-paid, perpetual and irrevocable licenses as to
such Product in such country.
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
12
<PAGE>
ARTICLE 6
SINGLE PARTY DEVELOPMENT AND COMMERCIALIZATION
6.1 Single Party Development and Commercialization. Subject to the terms
of this Article 6, if the Parties cannot agree on whether to clinically develop
or commercialize a particular Product in the Joint Territory pursuant to
Sections 2.1 or 3.1, or if a Party decides to terminate its clinical development
activities or commercialization activities with regard to a particular Product
pursuant to Section 11.2, the Party which wants to proceed with or continue such
clinical development or commercialization (the "Active Party") may do so, at its
discretion, without the financial support or involvement of the other Party (the
"Inactive Party"). If a Party becomes an Inactive Party, the Active Party shall
have a perpetual, royalty-free right to use any data jointly obtained by the
Parties relating to the Product(s) for which the other Party became an Inactive
Party, to develop and commercialize such particular Products in the Joint
Territory.
6.2 Royalties. The Active Party shall pay the Inactive Party a royalty on
the sales of Products as follows:
(a) for Kirin Products
(i) Where Dendreon is the Active Party, a royalty equal to
[ * ] of the Net Revenue based on sales of the Kirin Product sold by Dendreon,
its Affiliates or any of its Sublicensees in the Joint Territory; or
(ii) Where Kirin is the Active Party, a royalty equal to [ * ]
of the Net Revenue based on sales of the Kirin Product sold by Kirin, its
Affiliates or any of its Sublicensees in the Joint Territory.
(b) for Collaboration Products
(i) Where Dendreon is the Active Party, a royalty equal to
[ * ] of the Net Revenue based on sales of the Collaboration Product sold by
Dendreon, its Affiliates or any of its Sublicensees in the Joint Territory; or
(ii) Where Kirin is the Active Party, a royalty equal to [ * ]
of the Net Revenue based on sales of the Collaboration Product sold by Kirin,
its Affiliates or any of its Sublicensees in the Joint Territory.
6.3 Recovery of Investments. If a Party becomes the Inactive Party
pursuant to Section 11.2, the Active Party shall pay the Inactive Party, in
addition to the royalties set forth in Section 6.2, a royalty equal to [ * ] of
the Net Revenue based upon sales of the applicable Product sold by the Active
Party, its Affiliates, or any of its Sublicensees in the Joint Territory, until
such time as the sum of the royalties paid to the Inactive Party pursuant to
this Section 6.3 is equal to the sum of any costs and expenses made by the
Inactive Party in accordance with the applicable Development Budget or
Commercialization Budget for the applicable Product prior to such Party's
inactivity.
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
13
<PAGE>
6.4 Royalty Reduction.
(a) If Kirin or Dendreon, as applicable, sells a particular
Collaboration Product in a country where, at the time of sale, there is no
issued Collaboration Patent that claims such Collaboration Product or its
manufacture or use, then the amount of royalty owed by such Party to the other
Party under Section 6.2 shall be reduced by [ * ] with respect to such sale.
(b) If Kirin or Dendreon, as applicable, sells a Kirin Product in a
country where, at the time of sale, there is no issued Dendreon Patent or Kirin
Patent that claims such Kirin Product or its manufacture or use, then the amount
of royalty owed by such Party to the other Party under Section 6.2 shall be
reduced by [ * ] with respect to such sale.
6.5 Payment of Royalties. Royalties under this Article 6 shall accrue
upon the sale of the particular Collaboration Product or Kirin Product (deemed
to occur on the earlier of transfer of title or invoice date), and royalties
that have accrued during a particular calendar quarter shall be paid by the
Party owing such royalties within sixty (60) days after the end of each such
calendar quarter. Such royalties shall be calculated on the basis of Net Revenue
in the local currency of each country, and converted into U.S. Dollars and paid
in U.S. Dollars on the basis of the average currency exchange rate for the
applicable calendar quarter quoted by Tokyo Mitsubishi Bank (or its successor)
for currency exchange in excess of one million U.S. dollars ($1,000,000).
6.6 Manner of Payment. Remittance of payments under this Article 6 will
be made by means of wire or electronic transfer to the receiving Party's account
in a bank to be designated by such Party in writing.
6.7 Reports. All amounts payable under this Agreement shall be
accompanied by a report listing the gross selling price of each Collaboration
Product or Kirin Product sold during such period on a product-by-product and
country-by-country basis, and the calculation of Net Revenue based on such
sales, including all other information necessary to determine the appropriate
amount of such royalty payments, and any additional information or reports
required under the Agreement.
6.8 Withholding of Taxes. All turnover, income and other taxes levied on
account of the royalties accruing or made to a Party under this Article 6 shall
be paid by such Party. If provision is made in law or regulation for withholding
of taxes of any type, levies or other charges with respect to any royalty
payable under this Article 6 by a Party to the other Party, then such paying
Party shall be entitled to deduct such tax, levy or charge from the royalty or
other payment to be made by such Party and pay such tax, levy or charge to the
proper taxing authority. A receipt of payment of the tax, levy or charge secured
shall be promptly delivered to the other Party, together with copies of all
pertinent communications from or with such governmental authorities with respect
thereto. Such paying Party agrees to cooperate with the other Party in any
effort in claiming any exemption from such deductions or withholdings under any
double taxation or similar agreement or treaty from time to time in force and in
minimizing the amount required to be so withheld or deducted, such cooperation
to consist of providing receipts of payment of such withheld tax or other
documents reasonably available to the paying Party.
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
14
<PAGE>
ARTICLE 7
CONFIDENTIALITY
7.1 Confidentiality; Exceptions. Except to the extent expressly
authorized by this Agreement or otherwise agreed in writing, the Parties agree
that, for the term of this Agreement and for ten (10) years thereafter, the
receiving Party shall keep confidential and shall not publish or otherwise
disclose or use for any purpose other than as provided for in this Agreement any
Information and other information and materials furnished to it by the other
Party pursuant to this Agreement (collectively, "Confidential Information").
However, the foregoing obligations of non-use and non-disclosure shall not apply
to any Information or materials to the extent that the receiving Party can
establish by competent proof that such Information or materials:
(a) was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the other Party;
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;
(c) became generally available to the public or otherwise part of
the public domain after its disclosure and other than through any act or
omission of the receiving Party in breach of this Agreement; or
(d) was disclosed to the receiving Party, other than under an
obligation of confidentiality, by a Third Party who had no obligation to the
disclosing Party not to disclose such information to others.
7.2 Authorized Disclosure. Each Party may disclose the other's
Confidential Information to the extent such disclosure is reasonably necessary
in filing or prosecuting patent applications, prosecuting or defending
litigation, complying with applicable govern-mental regulations or conducting
preclinical or clinical trials, provided that if a Party is required by law or
regulation to make any such disclosure of the other Party's Confidential
Information, it will except where impracticable for necessary disclosures, for
example in the event of medical emergency, give reasonable advance notice to the
other Party of such disclosure requirement and, except to the extent
inappropriate in the case of patent applications, will use commercially
reasonable efforts to secure confidential treatment of such Confidential
Information required to be disclosed.
7.3 Survival. This Article 7 shall survive the termination or expiration
of this Agreement for a period of five (5) years.
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
15
<PAGE>
ARTICLE 8
INTELLECTUAL PROPERTY
8.1 Ownership and Patent Prosecution. Unless specifically and expressly
granted herein, no licenses or rights under either Party's intellectual property
rights are implied or granted in this Agreement. Each Party shall retain full
ownership of all its inventions and intellectual property. The prosecution of
any Patents, patent applications and any and all other intellectual property
rights associated with the clinical development and commercialization of Kirin
Products and Collaboration Products shall be governed by the terms of the
License Agreement and the Research and License Agreement.
8.2 Patent Infringement in the Joint Territory. If either Party believes
that a Third Party is infringing a Kirin Patent, Dendreon Patent or
Collaboration Patent in the Joint Territory which claims a Kirin Product or
Collaboration Product being developed, marketed or sold in the Joint Territory,
such Party shall give the other Party prompt notice of such belief and all
Information supporting such belief. The Parties will use good faith efforts to
coordinate and cooperate in any such action, negotiation and/or settlement of
the alleged infringement. The costs of such Patent enforcement shall be deemed
to be Allowable Expenses of the Parties, and all amounts recovered from the
Third Party infringer based on such actions, negotiation or settlement shall be
deemed to be "Sublicense Fees" received in the calendar quarter in which such
amounts are paid.
8.3 Defense and Settlement of Third Party Claims in the Joint Territory.
If a Third Party makes a claim or allegation against a Party (or both Parties)
that a Patent, trademark, trade secret or other intangible right owned or
licensed by it is infringed or misappropriated by the manufacture, use or sale
of any Collaboration Product or Kirin Product in the Joint Territory, the
Parties shall immediately meet to discuss the matter and shall establish a plan
for a common defense of such claim or allegation. The Parties shall cooperate
and provide each other all reasonable assistance in defending against any such
claims, provided that each Party shall have the right to defend itself. The
costs and expenses of each Party in defending against any such action (including
without limitation the amount of any judgment, award, decree or settlement
actually paid to such Third Party by a Party) will be deemed to be Allowable
Expenses of the Party paying such amounts in the calendar quarter paid, to the
extent that such costs and expenses relate directly to defense or settlement of
claims or allegations concerning Products made, used and sold in the Joint
Territory under this Agreement. If there is an opportunity to settle or
otherwise resolve any such infringement or misappropriation claim or allegation
via taking a license from such Third Party, the Party that becomes aware of such
opportunity shall immediately discuss such opportunity with the other Party and
the Parties shall discuss in good faith whether and how to negotiate and enter
into a license with such Third Party. It is understood and agreed that a Party,
in negotiating and entering into any such license, may not negotiate terms for
such a license that cover rights outside the Joint Territory unless such terms
do not differentiate between Products in the Joint Territory and products sold
by such Party outside the Joint Territory in a manner that may be unfair to the
other Party. If any such a Third Party license is taken, all amounts paid to
such Third Party under such license to the extent directly relating to or
allocable to the manufacture, use or sale of Products in the Joint Territory
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
16
<PAGE>
under this Agreement shall be deemed to be Allowable Expenses of the Party
making such payments, in the calendar quarter such payments are made.
ARTICLE 9
REPRESENTATIONS AND WARRANTIES
Each of the Parties hereby represents and warrants to the other Party as
follows:
9.1 This Agreement is a legal and valid obligation binding upon such
Party and enforceable in accordance with its terms.
9.2 The execution, delivery and performance of the Agreement by such
Party does not conflict with any agreement, instrument or understanding, oral or
written, to which it is a Party or by which it is bound, nor violate any law or
regulation of any court, governmental body or administrative or other agency
having jurisdiction over it.
9.3 Such Party has not granted any right to any Third Party relating to
such Party's respective intellectual property rights licensed hereunder in the
Field which would conflict with the rights granted to the other Party hereunder.
ARTICLE 10
REPORTS, RECORDS AND SAMPLES
10.1 Sharing of Information. Dendreon and Kirin will make available and
disclose to each other all Information known by Dendreon and Kirin concerning
the development and commercialization of Kirin Products and Collaboration
Products in the Joint Territory during the term of this Agreement. The Parties
will exchange at least monthly verbal or written reports in English presenting a
meaningful summary of the development and commercialization done under this
Agreement. Each Party will make regular presentations to the other of its
activities under this Agreement, other than within the Joint Management
Committee (or any applicable subcommittee), and additionally on an informal
basis, to inform the other Party of the work done under this Agreement.
10.2 Records and Audit. For a period of three (3) years after the royalty
period to which the records relate, each Party shall keep complete and accurate
records pertaining to the sale or other disposition of the Collaboration
Products or Kirin Products commercialized by it, in sufficient detail to permit
the other Party to confirm the accuracy of all payments due hereunder. A Party
entitled to payments hereunder shall have the right to cause an independent,
certified public accountant reasonably acceptable to the other Party (and who
has executed a confidentiality agreement with the Party to be audited) to audit
such records to confirm the Net Revenue, Sublicense Fees, Allowable Expenses and
royalty payments; provided, however, that such auditor shall not disclose the
audited Party's confidential information to the other Party, except to the
extent such disclosure is necessary to verify the amount of royalties and other
payments due under this Agreement. In no event may such accountant disclose the
names of specific customers, price lists, or the prices charged to specific
customers. A copy of any report
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
17
<PAGE>
provided by such accountant shall be provided to the audited Party at the time
that it is provided to the auditing Party. Such audits may be exercised once a
year, within three (3) years after the royalty or other payment period to which
such records relate, upon a mutually acceptable date(s) and upon not less than
thirty (30) days advance notice, and shall be conducted during normal business
hours. Any amounts shown to be owing by such audits shall be paid immediately
with interest in the amount of one percent (1%) per month (or the maximum amount
permitted by law, if less) from the date first owed until paid. The auditing
Party shall bear the full cost of such audit unless such audit discloses that
royalties actually paid by the audited Party are more than five percent (5%)
less from the amount of royalties and/or other payments actually owed. In such
case, the audited Party shall bear the full cost of such audit. The terms of
this Section 10.2 shall survive any termination or expiration of this Agreement
for a period of two (2) years.
10.3 Materials. The Parties intend to maintain an open and extensive
exchange of research materials that relate to Kirin Products and Collaboration
Products being developed or commercialized in the Joint Territory during the
course of the collaboration hereunder. Information obtained by the other Party
in the testing of such materials will be promptly disclosed to the Party
providing the sample, and all such Information will be considered Information to
be protected by both Parties under the restrictions of Article 7. ANY MATERIALS
EXCHANGED BETWEEN THE PARTIES ARE SUPPLIED WITH NO WARRANTIES OF ANY KIND,
EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR THAT THEY ARE FREE FROM THE RIGHTFUL CLAIM OF ANY THIRD
PARTY, BY WAY OF INFRINGEMENT OR THE LIKE. NEITHER PARTY MAKES ANY
REPRESENTATIONS THAT THE USE OF THE MATERIALS WILL NOT INFRINGE ANY PATENT OR
PROPRIETARY RIGHTS OF ANY THIRD PARTIES.
10.4 Publicity Review. If either Party is required by law or regulation
to make a public disclosure or announcement concerning any activities conducted
pursuant to or arising out of this Agreement or the subject matter thereof, such
Party shall give reasonable prior advance notice of the proposed text of such
disclosure or announcement to the other Party for its review and comment. The
terms of this Agreement may also be disclosed to: (i) Third Parties with the
consent of the other Party, which consent shall not be unreasonably withheld so
long as such disclosure is made under a binder of confidentiality, and (ii)
investors, potential investors, underwriters and potential underwriters of
Dendreon, so long as such disclosure is made under a binder of confidentiality.
10.5 Publications. Each Party agrees that it shall not publish or present
the results of studies carried out as part of the development of any Kirin
Product or Collaboration Product under this Agreement without the opportunity
for prior review by the other Party. Each Party shall provide to the other the
opportunity to review any proposed abstracts, manuscripts or presentations
(including information to be presented verbally) which relate to the Field at
least thirty (30) days prior to their intended submission for publication and
such submitting Party agrees, upon written request from the other Party, not to
submit such abstract or manuscript for publication or to make such presentation
until the other Party is given a reasonable period of time to secure patent
protection for any material in such publication or presentation which it
believes is patentable.
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
18
<PAGE>
ARTICLE 11
TERM AND TERMINATION
11.1 Term. This Agreement shall commence as of the Effective Date and,
unless sooner terminated as provided herein, shall continue in effect until the
latest of (i) the expiration of the last to expire of the Kirin Patents,
Dendreon Patents or Collaboration Patents in the Joint Territory which claim
Kirin Products or Collaboration Products, or (ii) the date on which the Parties
are no longer obligated to share Marketing Profits for any Kirin Product or
Collaboration Product pursuant to Article 5, or pay royalties pursuant to
Article 6.
11.2 Termination of Joint Development and/or Joint Commercialization.
Upon ninety (90) days written notice to the other Party, a Party may terminate,
in its sole discretion, its development and/or commercialization obligations
with regard to a particular Product. Upon any such termination, the terms of
Article 6 shall apply, and the Active Party shall have no further obligations to
the Inactive Party with regard to such Product, except as set forth therein.
11.3 Termination for Breach. If either Party materially breaches this
Agreement and such breach is not cured within sixty (60) days of written notice
thereof from the non-breaching Party, the breaching Party's licenses granted in
this Agreement shall terminate and the non-breaching Party shall retain an
exclusive, royalty-free right under the Dendreon Technology, Kirin Technology
and Collaboration Technology to make, have made, use and sell Kirin Products and
Collaboration Products developed or sold in the Joint Territory prior to the
breach of the Agreement. The breaching Party will assist the non-breaching
Party in every proper way to effect the license granted above. The breaching
Party shall further deliver to the non-breaching Party such relevant tangible
materials embodying such Dendreon Technology, Kirin Technology and Collaboration
Technology as may be necessary or useful to the exercise of the non-breaching
Party of the license hereunder.
11.4 Surviving Rights. The obligations and rights of the Parties under
Articles 7, 8, and 12 and Sections 10.4, 10.5, 13.6 and 13.7 of this Agreement
will survive termination for the period set forth therein, and if none is
provided, perpetually.
ARTICLE 12
INDEMNIFICATION
12.1 Indemnification by Kirin. Kirin shall indemnify, defend and hold
Dendreon harmless from and against any and all liability, damage, loss, cost
(including reasonable attorneys' fees) and expense resulting from any claim of
bodily injury or property damage (a) relating to the development, manufacture,
use, distribution or sale of any Kirin Product or Collaboration Product by
Kirin, its Affiliates, Sublicensees, employees or agents in the Joint Territory,
or (b) due to the negligence or willful misconduct of Kirin or its Affiliates,
Sublicensees, employees or agents.
12.2 Indemnification by Dendreon. Dendreon shall indemnify and hold Kirin
harmless from and against any and all liability, damage, loss, cost (including
reasonable
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
19
<PAGE>
attorneys' fees) and expense resulting from any claim of bodily injury or
property damage (a) relating to the development, manufacture, use, distribution
or sale of any Kirin Product or Collaboration Product by Dendreon, its
Affiliates, Sublicensees, employees or agents in the Joint Territory, or (b) due
to the negligence or willful misconduct of Dendreon or its Affiliates,
Sublicensees, employees or agents.
ARTICLE 13
MISCELLANEOUS
13.1 Assignment. Neither Party shall assign any of its rights and
obligations hereunder except (i) as incident to the merger, consolidation,
reorganization or acquisition of stock affecting actual voting control or of
substantially all of the assets of the assigning Party; or (ii) to an Affiliate;
provided, however, that in no event shall either Party's rights and obligations
hereunder be assigned without prior written notice to the other Party. In any
case, neither Party may make an assignment of its assets which renders it unable
to perform its material obligations hereunder. This Agreement shall be binding
upon and inure to the benefit of the Parties hereto and their permitted
successors and assigns.
13.2 Retained Rights. Nothing in this Agreement shall limit in any
respect the right of either Party to conduct research and development outside
the Field and to develop and market products outside the Field using such
Party's technology, but no license to use the other Party's technology to do so
is granted herein expressly or by implication. Further, Dendreon retains the
right, independent of this Agreement, to develop and market Dendreon Products in
the Joint Territory, or to license others to do so.
13.3 Force Majeure. Neither Party shall lose any rights hereunder or be
liable to the other Party for damages or losses on account of failure of
performance by the defaulting Party if the failure is occasioned by government
action, war, fire, explosion, flood, strike, lockout, embargo, act of God, or
any other similar cause beyond the control of the defaulting Party, provided
that the Party claiming force majeure has exerted all reasonable efforts to
avoid or remedy such force majeure; provided, however, in no event shall a Party
be required to settle any labor dispute or disturbance.
13.4 Further Actions. Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.
13.5 No Trademark Rights. Except as explicitly provided herein or as
otherwise provided in the License Agreement, no right, express or implied, is
granted by the Agreement to use in any manner the name "Dendreon" or "Kirin" or
any other trade name or trademark of the other Party in connection with the
performance of the Agreement.
13.6 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by facsimile
transmission (receipt verified), telexed, mailed by registered or certified mail
(return receipt requested), postage prepaid, or sent by express courier service,
to the Parties at the following addresses (or at such other address for a
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
20
<PAGE>
Party as shall be specified by like notice; provided, that notices of a change
of address shall be effective only upon receipt thereof):
If to Dendreon, addressed to:
Dendreon Corporation
3005 1st Avenue
Seattle, WA 98121-1010
Attention: C. S. Henney
Telephone: (206) 256-4545
Telecopy: (206) 256-0571
With copy to:
Cooley Godward LLP
Five Palo Alto Square, 4th Floor
Palo Alto, CA 94306
Attention: Barclay James Kamb, Esq.
Telephone: (650) 843-5052
Telecopy: (650) 857-0663
If to Kirin, addressed to:
Kirin Brewery Co., Ltd.
26-1, Jingumae 6-chome
Shibuya-ku
Tokyo 150-8011, Japan
Attention: Akihiro Shimosaka
Research and Product Development Department
Telephone: (03) 5485-6805
Telecopy: (03) 3499-6152
13.7 Dispute Resolution. If any dispute, controversy or claim arises out
of or in connection with this Agreement, the Parties shall use reasonable
efforts to settle it by friendly negotiation within sixty (60) days of notice
from one Party to the other of such dispute, controversy or claim, before
pursuing any other remedies available to them. If either Party fails or refuses
to participate in such negotiations, or if, in any event, the dispute,
controversy or claim is not resolved to the satisfaction of both Parties within
the sixty (60) day period, any such dispute, controversy or claim shall be
settled by arbitration. Any such arbitration shall be conducted in accordance
with the Japan-American Trade Arbitration Agreement of September 16, 1952. The
Parties agree that any such arbitration shall be conducted in the English
language in a location within the United States selected by the Party that did
not initiate such arbitration, and the Agreement shall be governed by and
construed in accordance with the laws of the State of California and the United
States of America. The arbitrators shall include one independent, un-affiliated
nominee selected by each Party and a third neutral arbitrator selected by such
nominees. The Parties agree that any arbitration panel shall include members
knowledgeable as
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
21
<PAGE>
to the evaluation of biopharmaceutical technology. Judgment upon the award
rendered may be entered in the highest state or federal court or forum, state or
federal, having jurisdiction; provided, however, that the provisions of this
Section 13.7 shall not apply to any dispute or controversy as to which any
treaty or law prohibits such arbitration. The prevailing Party shall be
entitled to reasonable attorney's fees and costs to be fixed by the arbitrators.
13.8 Waiver. Except as specifically provided for herein, the waiver from
time to time by either of the Parties of any of their rights or their failure to
exercise any remedy shall not operate or be construed as a continuing waiver of
same or of any other of such Party's rights or remedies provided in this
Agreement.
13.9 Severability. If any term, covenant or condition of this Agreement
or the application thereof to any Party or circumstance shall, to any extent, be
held to be invalid or unenforceable, then the remainder of this Agreement, or
the application of such term, covenant or condition to Parties or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this Agreement shall be
valid and be enforced to the fullest extent permitted by law.
13.10 Ambiguities. Ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed to have
authored the ambiguous provision.
13.11 Entire Agreement. This Agreement and any agreements referenced
herein set forth all the covenants, promises, agreements, warranties,
representations, conditions and understandings between the Parties hereto with
regard to the subject matter discussed herein and supersedes and terminates all
prior agreements and understanding between the Parties with regard to the
subject matter discussed herein. There are no covenants, promises, agreements,
warranties, representations conditions or understandings, either oral or
written, between the Parties with regard to the subject matter discussed herein
other than as set forth in this Agreement or any agreements referenced herein.
13.12 Headings. The Section and Paragraph headings contained herein are
for the purposes of convenience only and are not intended to define or limit the
contents of the Section or Paragraphs to which they apply.
In Witness Whereof, the Parties have executed this Agreement in duplicate
originals by their proper officers as of the date and year first above written.
DENDREON CORPORATION KIRIN BREWERY CO., LTD.
By: /s/ David L. Urdal By: /s/ Akihiro Shimosaka
------------------------ ----------------------------
General Manager
Title: Executive Vice President Title: Licensing Department
------------------------ ----------------------------
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
22
<PAGE>
Exhibit A
Collaboration Patents
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
23
<PAGE>
Exhibit 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Selected
Financial Data" and "Experts" and to the use of our report dated February 18,
2000, in the Registration Statement (Form S-1) and related Prospectus of
Dendreon Corporation for the registration of shares of its common stock.
Ernst & Young LLP
Seattle, Washington
March 7, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM S-1
REGISTRATION STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1999 JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<CASH> 7,085 6,883 762
<SECURITIES> 6,728 3,047 7,461
<RECEIVABLES> 833 344 532
<ALLOWANCES> 0 25 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 15,202 10,408 8,963
<PP&E> 3,751 3,198 2,563
<DEPRECIATION> 2,252 2,064 1,718
<TOTAL-ASSETS> 17,375 12,038 9,910
<CURRENT-LIABILITIES> 5,264 3,743 1,492
<BONDS> 0 0 0
0 0 0
12 9 8
<COMMON> 1 1 1
<OTHER-SE> 6,339 3,752 8,297
<TOTAL-LIABILITY-AND-EQUITY> 17,375 12,038 9,910
<SALES> 0 0 0
<TOTAL-REVENUES> 3,519 1,849 793
<CGS> 0 0 0
<TOTAL-COSTS> 16,293 10,916 8,184
<OTHER-EXPENSES> 0 2 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 347 40 47
<INCOME-PRETAX> (12,679) (8,749) (7,163)
<INCOME-TAX> 0 600 0
<INCOME-CONTINUING> (12,679) (9,349) (7,163)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (12,679) (9,349) (7,163)
<EPS-BASIC> (15.08) (16.34) (23.51)
<EPS-DILUTED> (15.08) (16.34) (23.51)
</TABLE>
