<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For Quarter Ended: FEBRUARY 28, 1998
Commission File No: 0-10824
GENOME THERAPEUTICS CORP.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-2297484
- ------------------------------ -------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NO.)
100 BEAVER STREET; WALTHAM, MASSACHUSETTS 02154
- ----------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER: (781) 398-2300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK 18,276,212
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$.10 PAR VALUE Outstanding April 13, 1998
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Genome Therapeutics Corp. and Subsidiaries
Index to Financial Information (Unaudited) and Other Information
Page
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Part I
Financial Information (Unaudited):
Consolidated Condensed Balance Sheets as of 3
August 31, 1997 and February 28, 1998
Consolidated Condensed Statements of Operations 4
for the 26 week period ended March 1, 1997
and February 28,1998
Consolidated Statements of Cash Flows for the 5
26 week period ended March 1, 1997
and February 28,1998
Notes to Consolidated Condensed Financial 6-12
Statements for the 26 week period ended
March 1, 1997 and February 28,1998
Management's Discussion and Analysis of Financial 13-19
Conditions and Results of Operations
Part II
Other Information:
Other Information 20
Signature 21
2
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GENOME THERAPEUTICS CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
August 31, February 28,
1997 1998
(Unaudited)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 8,602,698 $12,849,230
Marketable securities 34,814,601 24,319,140
Interest receivable 1,280,611 1,131,367
Accounts receivable 55,142 177,549
Unbilled costs and fees 140,320 184,399
Note receivable from officer 160,000 160,000
Prepaid expenses and other current assets 408,240 453,455
----------- -----------
Total current assets 45,461,612 39,275,140
Equipment and leasehold improvements, at cost:
Laboratory and scientific equipment 11,855,630 13,539,653
Leasehold improvements 1,964,981 2,392,929
Equipment and furniture 792,342 1,327,439
Construction-in-progress 1,111,526 4,603,661
----------- -----------
15,724,479 21,863,682
Less accumulated depreciation
and amortization 5,352,999 6,844,266
----------- -----------
10,371,480 15,019,416
Restricted cash 301,500 301,500
Long-term marketable securities 4,124,798 3,872,658
Other assets 428,989 450,861
----------- -----------
Total assets $60,688,379 $58,919,575
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 1,288,391 $ 1,207,849
Accrued expenses 2,373,788 2,624,111
Deferred revenue 2,335,695 4,068,301
Current maturities of long-term obligations 3,595,120 4,850,790
----------- -----------
Total current liabilities 9,592,994 12,751,051
----------- -----------
Long-term obligations, net of current maturities 7,149,188 9,269,701
Shareholders' equity 43,946,197 36,898,823
----------- -----------
Total liabilities and shareholders' equity $60,688,379 $58,919,575
=========== ===========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
3
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GENOME THERAPEUTICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Thirteen Weeks Ended Twenty-six Weeks Ended
March 1, February 28, March 1, February 28,
1997 1998 1997 1998
(Unaudited) (Unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Collaborative research, licenses, subscription fees and royalties $ 4,787,798 $ 3,861,532 $ 6,828,835 $ 7,857,474
Government research 1,336,153 202,232 3,310,563 463,603
Interest income 756,678 649,495 1,529,758 1,328,986
----------- ----------- ----------- -----------
Total revenues 6,880,629 4,713,259 11,669,156 9,650,063
----------- ----------- ----------- -----------
Costs and Expenses:
Research and development 4,660,664 7,840,057 8,538,954 14,470,972
Cost of government research 1,429,670 202,232 3,277,316 463,603
General, selling and administrative 859,026 1,112,809 1,590,057 2,134,946
Interest expense 145,553 289,376 271,479 538,987
----------- ----------- ----------- -----------
Total costs and expenses 7,094,913 9,444,474 13,677,806 17,608,508
----------- ----------- ----------- -----------
Net loss ($214,284) ($4,731,215) ($2,008,650) ($7,958,445)
=========== =========== =========== ===========
Basic/diluted net loss per common share ($0.01) ($0.26) ($0.11) ($0.44)
=========== =========== =========== ===========
Basic/diluted weighted average number of common and common
equivalent shares outstanding: 17,566,018 18,215,285 17,521,094 18,135,581
=========== =========== =========== ===========
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
4
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GENOME THERAPEUTICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Twenty-six Weeks Ended
March 1, February 28,
1997 1998
(Unaudited)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss ($2,008,650) ($7,958,445)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 981,286 1,582,412
Loss on disposal of fixed assets 0 94,309
Deferred compensation 37,050 58,220
Changes in assets and liabilities:
Interest receivable 65,402 149,244
Accounts receivable 902,541 (122,407)
Unbilled costs and fees (182,823) (44,079)
Prepaid expenses and other current assets 150,847 (45,215)
Accounts payable (429,694) (80,542)
Accrued expenses (79,143) 250,323
Deferred contract revenue 1,424,434 1,732,606
----------- ------------
Total adjustments 2,869,900 3,574,871
----------- ------------
Net cash provided by (used in) operating activities 861,250 (4,383,574)
----------- ------------
Cash Flows from Investing Activities:
Purchases of marketable securities (8,105,018) (14,528,524)
Proceeds from sale of marketable securities 13,349,000 25,276,125
Increase in restricted cash (200,000) 0
Purchases of equipment and leasehold improvements (409,128) (4,553,714)
Increase in other assets (56,064) (21,872)
----------- ------------
Net cash provided by investing activities 4,578,790 6,172,015
----------- ------------
Cash Flows from Financing Activities:
Proceeds from exercise of stock options and warrants 592,339 852,851
Proceeds from long-term obligations 0 3,500,000
Payments on long-term obligations (1,345,943) (1,894,760)
----------- ------------
Net cash provided by (used in) financing activities (753,604) 2,458,091
----------- ------------
Net Increase in Cash and Cash Equivalents 4,686,436 4,246,532
Cash and Cash Equivalents, at beginning of period 10,679,287 8,602,698
----------- ------------
Cash and Cash Equivalents, at end of period $15,365,723 $ 12,849,230
=========== ============
Supplemental Disclosure of Cash Flow Information:
Taxes paid during period $ 23,798 $ 13,500
=========== ============
Interest paid during period $ 271,479 $ 538,988
=========== ============
Supplemental Disclosure of Non-cash Investing Activities:
Property and equipment acquired under capital leases $ 3,725,508 $ 1,770,943
=========== ============
</TABLE>
See Notes to Consolidated Condensed Financial Statements.
5
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. In the opinion of management, the
unaudited consolidated condensed financial statements have been prepared on the
same basis as the audited consolidated financial statements and include all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of interim period results. Certain information and footnote
disclosures normally included in the financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The Company believes, however, that its
disclosures are adequate to make the information presented not misleading. The
results of operations for the 26 week period ended February 28, 1998 are not
necessarily indicative of the results to be expected for the full fiscal year.
The accompanying consolidated condensed financial statements should be read in
conjunction with the Company's Form 10-K which was filed with the Securities and
Exchange Commission on November 28, 1997.
2. REVENUE RECOGNITION
Research and contract revenues are derived from collaborative agreements with
pharmaceutical companies, as well as government grants and contract
arrangements. Research revenues are recognized as earned under government
grants, which consist of cost-plus-fixed-fee contracts and fixed-price
contracts. Revenues are recognized under collaborative agreements as earned.
Milestone payments from collaborative research and development arrangements are
recognized when they are achieved. License fees are recognized as earned.
Unbilled costs and fees represent revenue recognized prior to billing. Deferred
revenue represents cash amounts received prior to revenue recognition.
Subscription fee revenues from the PathoGenome(TM) database are recognized
ratably over the access period of the subscription agreement.
3. NET LOSS PER COMMON SHARE
In February 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 128 "Earnings Per Share" which establishes new standards for calculating
and presenting earnings per share. This standard is effective for financial
statements for periods ending after December 15, 1997, with earlier application
not permitted. These condensed financial statements have been prepared and
presented based on the new standard. Prior period amounts have been restated to
conform to the current year presentation. Basic net loss per share is computed
by dividing net loss by the weighted average number of common shares
outstanding during the period. Diluted net loss per share for the periods
presented is the same as basic net loss per share as the inclusion of the
potential common stock equivalents would be antidilutive.
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4. CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES
The Company applies SFAS No. 115, Accounting for Certain Investments in Debt and
Equity Securities. At February 28, 1998, the Company's cash equivalents and
marketable securities are classified as held-to-maturity, as the Company has the
positive intent and ability to hold these securities to maturity. Cash
equivalents are short-term, highly liquid investments with original maturities
of less than three months. Marketable securities are investment securities with
original maturities of greater than three months. Cash equivalents are carried
at cost, which approximates market value, and consist of money market funds,
repurchase agreements and debt securities. Marketable securities are recorded at
amortized cost, which approximates market value. The Company has not recorded
any realized holding gains or losses on its marketable securities. Marketable
securities consist of commercial paper and U.S. Government debt securities. The
Company has $301,500 in restricted cash at August 31, 1997 and February 28, 1998
in connection with certain long-term obligations (See Note 6).
5. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
6. LONG-TERM OBLIGATIONS
On February 28, 1997, the Company entered into an equipment line of credit under
which it can finance up to $6,000,000 of laboratory, computer and office
equipment. Borrowings are payable in 48 monthly installments at a variable
interest rate of prime (8.5% as of February 28, 1998) plus one-quarter of one
percent. At any time during the term of this agreement, the Company may elect to
convert to a fixed rate loan at the prevailing interest rate. The Company is
required to maintain certain restricted cash balances, as defined (see Note 4).
In addition, the Company is required to maintain certain financial ratios
pertaining to minimum cash balances, tangible net worth and debt service
coverage. The Company has approximately $1,149,000 available under this
equipment line of credit at February 28, 1998.
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On March 9, 1998, subsequent to quarter-end, the company modified the above
financing arrangement by increasing the equipment line of credit by $4,300,000
from $6,000,000 to $10,300,000. The new equipment line of credit will be
utilized to finance laboratory, computer and office equipment over the next
thirteen months. Borrowings are payable in 15 quarterly installments commencing
March 31, 1999. All other terms and conditions remained the same. Including the
amendment, the Company has 5,449,000 available under the line of credit.
On July 31, 1997, the Company entered into a financing arrangement under which
it can finance up to $6,000,000 of laboratory and office renovations at its
Beaver Street facility. The principal amount of the loan will be repaid over 48
consecutive months commencing July 1, 1998 at the prevailing 12 month Eurodollar
rate (12-month Eurodollar rate was 6.125% as of February 28, 1998) plus one and
a half percent. The Company is required to maintain certain financial ratios
pertaining to minimum cash balances, debt to net worth and tangible net worth.
At February 28, 1998, the Company borrowed the full amount under this
arrangement; of which approximately $599,000 has not been utilized to finance
the Company's purchases, and is included in cash and cash equivalents. The
Company is required to maintain certain restricted cash balances, upon the
occurrence of certain events, as defined.
The Company had entered into other capital lease arrangements under which it
financed approximately $9,725,000 of certain laboratory, computer and office
equipment. These leases are payable in 36 monthly installments. The interest
rates range from 7.52% to 11.42%. The Company is required to maintain certain
restricted cash balances, as defined (see Note 4). In addition, the Company is
required to maintain certain financial ratios pertaining to minimum cash
balances, tangible net worth, debt to tangible net worth and debt service
coverage. The Company has approximately $511,000 available under one of these
capital lease agreements at February 28, 1998.
7. COLLABORATIVE AGREEMENTS
SCHERING-PLOUGH
In December 1995, the Company entered into a collaboration and license agreement
with Schering Corporation and Schering-Plough Ltd. (collectively,
"Schering-Plough") providing for the use by Schering-Plough of the Company's
Staph. aureus genomic database. The Company is sequencing to identify new gene
targets for development of antibiotics effective against drug-resistant
infectious organisms. As part of this agreement, the Company granted
Schering-Plough exclusive access to certain of the Company's genomic sequence
databases. The Company also granted Schering-Plough a nonexclusive license to
use the Company's bioinformatics systems for Schering-Plough's internal use in
connection with the genomic databases licensed to Schering-Plough under the
agreement and other genomic databases Schering-Plough develops or acquires. The
Company also agreed to undertake certain research efforts to identify
bacteria-specific genes essential to microbial survival and to develop
biological assays to be used by Schering-Plough in
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screening natural product and compound libraries to identify antibiotics with
new mechanisms of action.
Under the agreement, Schering-Plough agreed to pay the Company a minimum of
$13.3 million for an up-front payment, research funding and milestone payments.
Subject to the achievement of additional product development milestones and
Schering-Plough's election to extend the research collaboration, Schering-Plough
has agreed to pay the Company up to an additional $30.2 million in research
funding and milestone payments. On January 26, 1998 Schering-Plough elected to
extend the research program to the full term of the agreement which ends on
March 31, 2000.
The agreement grants Schering-Plough exclusive worldwide rights to make, use and
sell pharmaceutical and vaccine products based on the genomic sequence databases
licensed to Schering-Plough by the Company and on the technology developed in
the course of the research program. The Company has also granted Schering-Plough
a right of first negotiation if during the term of the research plan the Company
desires to enter into a collaboration with a third party with respect to the
development or sale of any compounds that are targeted against, as their primary
indication, Staph. aureus, which is the principal subject of the Company's
agreement with Schering-Plough. The Company will be entitled to receive
royalties on Schering-Plough's sale of therapeutic products and vaccines
developed using the technology licensed from the Company. Subject to certain
limitations, the Company retained the rights to make, use and sell diagnostic
products developed based on the Company's genomic database licensed to
Schering-Plough or the technology developed in the course of the research
program.
For the 13 week periods ended February 28, 1998 and March 1, 1997, the Company
recorded revenue of $575,000 and $934,000, respectively, under this agreement,
which consisted of sponsored research funding.
For the 26 week period ended February 28, 1998, the Company recorded revenue of
$1,912,000 under this agreement, which consisted of sponsored research funding
and milestone payments . For the 26 week period ended March 1, 1997, the Company
recorded revenue of $1,751,000 under this agreement, which consisted of
sponsored research funding. The Company recorded $356,000 and $18,000 as
deferred revenue at February 28, 1998 and August 31, 1997, respectively.
In December 1996, the Company entered into its second research collaboration and
license agreement with Schering-Plough. This agreement calls for the use of
genomics to discover new therapeutics for treating asthma. As part of the
agreement, the Company will employ its high-throughput positional cloning,
bioinformatics, and genomics sequencing capabilities to identify genes and
associated proteins that can be utilized by Schering-Plough to develop new
pharmaceuticals. Under this agreement, the Company has granted Schering-Plough
exclusive access to (i) certain gene sequence databases made available under
this research program, (ii) information made available to the Company under
certain third party research agreements, (iii) an exclusive worldwide right and
license to make, use and sell pharmaceutical and vaccine products
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based on the rights to develop and commercialize diagnostic products that may
result from this collaboration.
Under the agreement, Schering-Plough has agreed to pay an initial license fee
and an expense allowance to the Company. Schering-Plough is also required to
fund a research program for a minimum number of years with an option to extend.
In addition, upon completion of certain scientific developments, Schering-Plough
will make milestone payments to the Company, as well as pay royalties to the
Company based on sales of therapeutics product developed from this
collaboration. If all milestones are met and the research program continues for
its full term, total payments to the Company will be approximately $67 million,
excluding royalties. Of the total potential payments, approximately $22.5
million represents license fees and research payments, and $44.5 million
represents milestone payments based on achievement of research and product
development milestones.
For the 13 week period ended February 28, 1998, the Company recorded revenue of
$1,799,000 under this agreement, which consisted of sponsored research funding,
subcontract activity and a milestone payment. For the 13 week period ended
March 1, 1997, the Company recorded revenue of $2,818,000 under this agreement,
which consisted of sponsored research funding, license fee, expense allowance
and subcontract activity.
For the 26 week period ended February 28, 1998, the Company recorded revenue of
$2,951,000 under this agreement, which consisted of sponsored research funding,
subcontract activity and a milestone payment. For the 26 week period ended
March 1, 1997, the Company recorded revenue of $2,818,000 under this agreement,
which consisted of sponsored research funding, license fee, expense allowance
and subcontract activity. The Company recorded $1,040,000 and $1,400,000 as
deferred revenue at February 28, 1998 and August 31, 1997, respectively.
In September 1997, the Company entered into its third research collaboration and
license agreement with Schering-Plough to use genomics to discover and develop
new pharmaceutical products for treating fungal infections.
Under the agreement, the Company will employ its bioinformatics, high-throughput
sequencing and functional genomics capabilities to identify and validate genes
and associated proteins as drug discovery targets that can be utilized by
Schering-Plough to develop novel antifungal treatments. Schering-Plough will
receive exclusive access to the genomic information developed in the
collaboration related to two fungal pathogens, Candida albicans and Aspergillus
fumigatus . Schering-Plough will also receive exclusive worldwide right to make,
use and sell products based on the technology developed in the course of the
research program. In return, Schering-Plough has agreed to fund a research
program for a minimum number of years with an option to extend. If all
milestones are met and the research program continues for its full term, total
payments to the Company will approximate $30.7 million, excluding royalties. Of
the total potential payment, approximately $7.7 million represents license fees
and research
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payments and $23 million represents milestone payments based on achievement of
research and product development milestones. Additionally, the Company entered
into a database subscription agreement with Schering-Plough (See Database
Subscriptions).
For the 13 and 26 week periods ended February 28, 1998, the Company recorded
revenue of $570,000 and $1,007,000, respectively, under this agreement, which
consisted of sponsored research funding. The Company recorded $752,000 as
deferred revenue at February 28, 1998.
ASTRA AB
In August 1995, the Company entered into a collaboration agreement with Astra
Hassle AB ("Astra") to develop pharmaceutical, vaccine and diagnostic products
effective against gastrointestinal infection or any other disease caused by H.
pylori. The Company granted Astra exclusive access to the Company's H. pylori
genomic sequence database and exclusive worldwide rights to make, use and sell
products based on the Company's H. pylori technology. The agreement also
provides for a four-year research collaboration to further develop and annotate
the Company's H. pylori genomic sequence database, identify therapeutic and
vaccine targets and develop appropriate biological assays. This research is
being directed by a Joint Management Committee and a Joint Research Committee,
each consisting of representative from both parties.
Under this agreement, Astra agreed to pay the Company a minimum of approximately
$11 million and, subject to the achievement of certain product development
milestones, up to approximately $22 million ( and possibly a greater amount if
more than one product is developed under the agreement) in license fees, expense
allowances, research funding and milestone payments. Of such fees, $500,000 is
credited against any future royalties payable to the Company by Astra under the
agreement. Astra is obligated to provide funding for the research program for a
minimum of two and one-half years. On July 21, 1997, Astra elected to extend the
research program to at least September 1998.
The Company will also be entitled to receive royalties on Astra's sale of any
products (i) protected by claims of patents licensed exclusively to Astra by the
Company pursuant to the agreement, or (ii) the discovery of which was enabled in
a significant manner by the genomic database licensed to Astra by the Company.
The Company has the right, under certain circumstances, to convert Astra's
license to a nonexclusive license in the event Astra is not actively pursuing
commercialization of the technology.
For the 13 week period ended February 28, 1998, the Company recorded revenue of
$359,000 under this agreement, which consisted of sponsored research funding.
For the 13 week period ended March 1, 1997, the Company recorded revenue of
$1,035,000 under this agreement, which consisted of sponsored research funding
and a milestone payment.
For the 26 week period ended February 28, 1998, the Company recorded revenue of
$1,069,000 under this agreement, which consisted of sponsored research funding
and a
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milestone payment. For the 26 week period ended March 1, 1997, the Company
recorded revenue of $1,642,000 under this agreement, which consisted of
sponsored research funding and a milestone payment. The Company recorded
$501,000 and $503,000 as deferred revenue at February 28, 1998 and August 31,
1997, respectively.
8. DATABASE SUBSCRIPTIONS
In May 1997, the Company entered into a license agreement with Bayer AG,
("Bayer") to provide Bayer with a nonexclusive access to the Company's
proprietary genome sequence database, PathoGenome(TM) and associated information
relating to microbial organisms. The subscription agreement calls for the
Company to provide Bayer with periodic data updates, analysis tools and software
support. Under the agreement, Bayer has agreed to pay a license fee, annual
subscription fees and royalties on any molecules developed as a result of access
to the information provided by the PathoGenome(TM) database. The Company retains
all rights associated with protein therapeutic, diagnostic and vaccine use of
bacterial genes or gene products.
In September 1997, the Company entered into license agreements with
Bristol-Myers Squibb and Schering-Plough to provide both companies with
nonexclusive access to the Company's proprietary genome sequence database,
PathoGenome(TM) and associated information relating to microbial organisms. The
subscription agreements call for the Company to provide both Bristol-Myers
Squibb and Schering-Plough with periodic data updates, analysis tools and
software support. Under the agreements, Bristol-Myers Squibb and Schering-Plough
have agreed to pay annual subscription fees and royalties on any molecules
developed as a result of access to the information provided by the
PathoGenome(TM) database. The Company retains all rights associated with protein
therapeutic, diagnostic and vaccine use of bacterial genes or gene products.
For the 13 and 26 week periods ended February 28, 1998, the Company recognized
revenue of $543,000 and $918,000, respectively, under these agreements which
consisted of subscription fees. The Company recorded deferred revenue of
$1,417,000 under these agreements at February 28, 1998.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Genome Therapeutics Corp. ("the Company") is a leader in the field of
genomics-based drug discovery--the identification and functional
characterization of genes. The Company has over ten years of experience in
positional cloning, having served as one of the primary researchers under genome
programs sponsored by the United States government, and has developed numerous
techniques and tools that are widely used in this field. The Company's
commercial gene discovery strategy capitalizes on its pioneering work in
genomics by applying its high-throughput sequencing technology and positional
cloning, its experience and skills in functional genomics and its bioinformatics
capabilities. The two areas of focus are: the discovery and characterization of
(i) genes of pathogens that are responsible for many serious diseases and (ii)
human disease genes. The Company believes that its genomic discoveries may lead
to the development of novel therapeutics, vaccines, and diagnostic products by
it and its strategic partners. The Company has entered into several corporate
collaborations in connection with its pathogen and human gene discovery
programs.
The Company does not anticipate revenues from product sales on a sustained basis
until such time that products based on the Company's research efforts are
commercialized, if any. The Company's product development strategy is to form
collaborations with pharmaceutical and biotechnology companies generating
revenues from licensing fees, sponsored research and milestone payments.
Additionally, the Company will sell nonexclusive access to its proprietary
genome sequence database, PathoGenome(TM). These collaborations are expected to
result in the discovery and commercialization of novel therapeutics, vaccines
and diagnostics, generating royalty payments to the Company from product sales
downstream. In order for a product to be commercialized based on the Company's
research, it will be necessary for the collaborators to conduct preclinical
tests and clinical trials, obtain regulatory clearances and make manufacturing,
distribution and marketing arrangements. Accordingly, the Company does not
expect to receive royalties based upon product revenues for many years.
For the past several years, the Company's primary sources of revenue have been
government research grants and contracts and collaborative agreements with
pharmaceutical company partners. As of February 28, 1998, the Company had signed
four collaborative agreements. The Company entered into corporate collaborations
with Astra Hassle AB ("Astra") relating to H. Pylori in August 1995 and with
Schering Corporation and Schering-Plough, Ltd. (collectively, "Schering-Plough")
in December 1995 providing for the use by Schering-Plough of the Company's
Staph. aureus genomic database to identify new gene targets for the development
of novel antibiotics. In December 1996, the Company entered into its second
research collaboration with Schering-Plough to identify genes and associated
proteins that can be utilized by Schering-Plough to develop new pharmaceuticals
for treating asthma. In September
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1997, the Company entered into its third research collaboration with
Schering-Plough to use genomics to discover and develop new pharmaceutical
products for treating fungal infections.
In May 1997, the Company introduced its proprietary genome sequence database,
PathoGenome(TM) and sold its first subscription to Bayer AG ("Bayer"). Under the
agreement, Bayer will receive nonexclusive access to the Company's
PathoGenome(TM) database and associated information relating to microbial
organisms. In September 1997, the Company sold two additional subscriptions to
its PathoGenome(TM) database to Bristol-Myers Squibb and Schering-Plough.
As of February 28, 1998, the Company had outstanding approximately $2,147,000 of
government research grants and contracts under which services were yet to be
performed. These grants and contracts call for services to be performed over the
next 24 months. The Company's government research grants and contracts are
typically funded annually and are subject to appropriation by the United States
Congress each year. Funding may be discontinued or reduced at any time by
Congress. As of February 28, 1998, the funded portion of these grants and
contracts was $1,997,000. For the 26 week periods ended March 1, 1997 and
February 28, 1998, revenue recognized pursuant to United States government
research grants and research contracts accounted for approximately 28% and 5%,
respectively, of the Company's total revenues.
The Company has incurred significant losses, since inception, with an
accumulated deficit of approximately $52,514,000 at February 28, 1998. The
Company's results of operations have fluctuated from period to period and may
continue to fluctuate in the future based upon the timing and composition of
funding under existing and new collaborative agreements and government research
grants and contracts. The Company is subject to risks common to companies in its
industry including unproven technology and business strategy, availability of,
and competition for, family resources, reliance upon collaborative partners and
others, history of operating losses, need for future capital, competition,
patent and proprietary rights, dependence on key personnel, uncertainty of
regulatory approval, uncertainty of pharmaceutical pricing, health care reform
and related matters, product liability exposure, and volatility of the Company's
stock price.
14
<PAGE> 15
RESULTS OF OPERATIONS
THIRTEEN WEEK PERIOD ENDED MARCH 1, 1997 AND FEBRUARY 28, 1998
REVENUE
Total revenues decreased 31% from $6,881,000 for the 13 week period ended March
1, 1997 to $4,713,000 for the 13 week period ended February 28, 1998.
Collaborative research, licenses, subscription fees and royalties decreased 19%
from $4,788,000 for the 13 week period ended March 1, 1997 to $3,862,000 for the
13 week period ended February 28, 1998. The decrease in collaborative research,
licenses, subscription fees and royalties was primarily attributable to a
license fee received in the prior year under the Company's collaboration
agreement with Schering-Plough for treating asthma which began in December 1996.
The decrease in collaborative research, licenses, subscription fees and
royalties was partially offset by an increase in sponsored research revenue
received this year under the Company's collaboration research agreements with
Schering-Plough for treating both asthma and fungal infections. Additionally,
the decrease was partially offset by subscription fee revenue earned this year
under the Company's license agreements with Bayer, Bristol-Myers Squibb and
Schering-Plough providing each company with nonexclusive access to the Company's
proprietary genome sequence database, PathoGenome(TM) and associated information
relating to microbial organisms.
Government research revenue decreased 85% from $1,336,000 for the 13 week period
ended March 1, 1997 to $202,000 for the 13 week period ended February 28, 1998.
The decrease in government research revenue was primarily attributable to a
shift in personnel from government research programs to company-sponsored
research and development programs, in particular, the microbial genetic database
program, PathoGenome(TM). Revenue derived from government research grants and
contracts is generally based upon direct cost such as labor, laboratory
supplies, as well as an allocation for reimbursement of a portion of overhead
expenses.
Interest income decreased 14% from $757,000 for the 13 week period ended
March 1, 1997 to $649,000 for the 13 week period ended February 28, 1998
reflecting a decrease in funds available for investment.
COST AND EXPENSES
Total cost and expenses increased 33% from $7,095,000 for the 13 week period
ended March 1, 1997 to $9,444,000 for the 13 week period ended February 28,
1998. Research and development expenses, which include company-sponsored
research and development and research funded pursuant to arrangements with the
Company's corporate collaborators, increased 68% from $4,661,000 for the 13 week
period ended March 1, 1997 to $7,840,000 for the 13 week period ended
February 28, 1998. The increase in research and development expenses was
primarily attributable to increases in
15
<PAGE> 16
both personnel and laboratory expenses associated with the Company's expansion
of its pathogen, microbial genetic database, human gene discovery and functional
genomics research programs. The increase consisted primarily of increases in
payroll and related expenses, laboratory supplies and overhead expenses.
The cost of government research decreased 86% from $1,430,000 for the 13 week
period ended March 1, 1997 to $202,000 for the 13 week period ended February 28,
1998. The decrease in cost of government research was primarily attributable to
the decrease in government research revenues. Cost of government research, as a
percentage of government research revenue, was 107% and 100% for the 13 week
periods ended March 1, 1997 and February 28, 1998, respectively.
Selling, general and administrative expenses increased 30% from $859,000 for the
13 week period ended March 1, 1997 to $1,113,000 for the 13 week period ended
February 28, 1998. The increase in selling, general and administrative expenses
was primarily due to increases in payroll and related expenses and consulting
fees.
Interest expense increased 99% from $146,000 for the 13 week period ended
March 1, 1997 to $289,000 for the 13 week period ended February 28, 1998. The
increase in interest expense was attributable to increases in the Company's
outstanding balance under its long-term obligations.
TWENTY-SIX WEEK PERIOD ENDED MARCH 1, 1997 AND FEBRUARY 28, 1998
REVENUE
Total revenues decreased 17% from $11,669,000 for the 26 week period ended
March 1, 1997 to $9,650,000 for the 26 week period ended February 28, 1998.
Collaborative research, licenses, subscription fees and royalties increased 15%
from $6,829,000 for the 26 week period ended March 1, 1997 to $7,857,000 for the
26 week period ended February 28, 1998. The increase in collaborative research,
licenses, subscription fees and royalties was primarily attributable to higher
milestone payments and sponsored research revenues received this year under the
Company's collaboration research agreements with Astra and Schering-Plough, as
well as subscription fee revenue earned this year under the Company's license
agreements with Bayer, Bristol-Myers Squibb and Schering-Plough providing each
company with nonexclusive access to the Company's proprietary genome sequence
database, PathoGenome(TM) and associated information relating to microbial
organisms.
Government research revenue decreased 86% from $3,311,000 for the 26 week period
ended March 1, 1997 to $464,000 for the 26 week period ended February 28, 1998.
The decrease in government research revenue was primarily attributable to a
shift in personnel from government research programs to company-sponsored
research and development programs, in particular, the microbial genetic database
program, PathoGenome(TM).
16
<PAGE> 17
Interest income decreased 13% from $1,530,000 for the 26 week period ended
March 1, 1997 to $1,329,000 for the 26 week period ended February 28, 1998
reflecting a decrease in funds available for investment.
COST AND EXPENSES
Total cost and expenses increased 29% from $13,678,000 for the 26 week period
ended March 1, 1997 to $17,609,000 for the 26 week period ended February 28,
1998. Research and development expenses, which include company-sponsored
research and development and research funded pursuant to arrangements with the
Company's corporate collaborators, increased 69% from $8,539,000 for the 26 week
period ended March 1, 1997 to $14,471,000 for the 26 week period ended
February 28, 1998. The increase in research and development expenses was
primarily attributable to increases in both personnel and laboratory expenses
associated with the Company's expansion of its pathogen, microbial genetic
database, human gene discovery and functional genomics research programs. The
increase consisted primarily of increases in payroll and related expenses,
laboratory supplies and overhead expenses.
The cost of government research decreased 86% from $3,277,000 for the 26 week
period ended March 1, 1997 to $464,000 for the 26 week period ended February 28,
1998. The decrease in cost of government research was primarily attributable to
the decrease in government research revenues. Cost of government research, as a
percentage of government research revenue, was 99% and 100% for the 26 week
periods ended March 1, 1997 and February 28, 1998, respectively.
Selling, general and administrative expenses increased 34% from $1,590,000 for
the 26 week period ended March 1, 1997 to $2,135,000 for the 26 week period
ended February 28, 1998. The increase in selling, general and administrative
expenses was primarily due to increases in payroll and related expenses and
consulting fees.
Interest expense increased 99% from $271,000 for the 26 week period ended
March 1, 1998 to $539,000 for the 26 week period ended February 28, 1998. The
increase in interest expense for was attributable to increases in the Company's
outstanding balance under its long-term obligations.
LIQUIDITY AND CAPITAL RESOURCES
Since September 1, 1992, the Company's primary sources of cash have been revenue
from government research grants and contracts, revenue from collaborative
research agreements, borrowings under equipment lending facilities and capital
leases and proceeds from sale of equity securities.
17
<PAGE> 18
In fiscal 1995, the Company received net proceeds of approximately $2,403,000
from the private sale of common stock and warrants and the exercise of stock
options. In fiscal 1996, the Company closed a public offering of 3,000,000
shares of its common stock at $13.00 per share, resulting in proceeds of
approximately $36,007,000, net of issuance costs. The Company also sold an
additional 450,000 shares of its common stock in the underwriter's
over-allotment, resulting in proceeds of $5,515,000, net of issuance costs.
As of February 28, 1998, the Company had cash, cash equivalents, restricted cash
and long and short-term marketable securities of approximately $41,343,000. The
Company has various arrangements under which it can finance certain office and
laboratory equipment and leasehold improvements. Under these arrangements, the
Company is required to maintain certain financial ratios, including minimum
levels of tangible net worth, total indebtedness to tangible net worth, maximum
loss, debt service coverage and minimum restricted cash balances. On March 9,
1998, subsequent to quarter-end, the Company modified one of the finance
arrangements to make available an additional $4,300,000 in order to finance
certain laboratory, computer and office equipment. Borrowings are payable in 15
quarterly installments commencing March 31, 1999. All other terms and conditions
remained the same. Including the amendment, the Company had $5,960,000 available
under these arrangements for future borrowings. Additionally, the Company
received a $6,000,000 advance to finance office and laboratory renovations at
its Beaver Street facility of which approximately $599,000 had not been expended
at February 28, 1998.
The Company's operating activities provided cash of approximately $861,000 for
the 26 week period ended March 1, 1997. The Company's operating activities used
cash of approximately $4,384,000 for the 26 week period ended February 28, 1998
primarily to fund operating losses.
For the 26 week periods ended March 1, 1997 and February 28, 1998, the Company's
investing activities provided cash of approximately $4,579,000 and $6,172,000,
respectively, from the sale of marketable securities, partially offset by
purchases of marketable securities, and property and equipment.
Financing activities used cash of approximately $754,000 for the 26 week period
ended March 1, 1997 primarily for payments of capital lease obligations,
partially offset by the exercise of stock options. Financing activities provided
cash of approximately $2,458,000 for the 26 week period ended February 28, 1998
primarily from proceeds from long-term obligations and exercise of stock
options, net of payments of long-term obligations.
18
<PAGE> 19
Capital expenditures totaled $1,771,000 for the 26 week period ended
February 28, 1998 consisting of laboratory, computer and office equipment. The
Company currently estimates that it will acquire an additional $3,229,000 in
capital equipment in fiscal 1998 consisting of primarily computer and laboratory
equipment which it intends to finance under existing and new financing
arrangements. The Company is also in the process of consolidating its operations
at its Beaver Street facility at an estimated cost of $6,700,000 which consists
of office and laboratory renovations. As of February 28, 1998, the Company had
incurred approximately $5,401,000 of capital improvements consisting of $847,000
during fiscal 1997 and $4,554,000 during the 26 week period ended
February 28,1998. The Company plans to spend an additional $1,299,000 during
fiscal 1998 on this renovation project. The Company plans to utilize existing
and new capital lease and equipment financing arrangements to finance
substantially all of these capital improvements.
At August 31, 1997, the Company had net operating loss and tax credit
carryforwards of approximately $49,065,000 and $1,128,000, respectively. These
losses and tax credits are available to reduce federal taxable income and
federal income taxes, respectively, in future years, if any. These losses and
tax credits are subject to review and possible adjustment by the Internal
Revenue Service and may be limited in the event of certain cumulative changes in
ownership interests of significant shareholders over a three-year period in
excess of 50%. The Company does not believe it has experienced a cumulative
ownership change in excess of 50%. However, there can be no assurance that
ownership changes will not occur in future periods which will limit the
Company's ability to utilize the losses and tax credits.
The Company believes that its existing capital resources are adequate to meet
its cash requirements for the foreseeable future. There is no assurance,
however, that changes in the Company's plans or events affecting the Company's
operations will not result in accelerated or unexpected expenditures.
The Company may seek additional funding through public or private financing and
expects additional funding through collaborative or other arrangements with
corporate partners. There can be no assurance, however, that additional
financing will be available from any of these sources or will be available on
terms acceptable to the Company.
Statements in this Form 10-Q that are not strictly historical are "forward
looking" statements as defined in the Private Securities Litigation Reform Act
of 1995. The actual results may differ from those projected in the forward
looking statement due to risks and uncertainties that exist in the Company's
operations and business environment, described more fully in the Company's
Annual Report on Forms 10-K for the year ended August 31, 1997, filed with the
Securities and Exchange Commission.
19
<PAGE> 20
PART II
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
See Insert A
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS:
10.41 Collaboration and License Agreement between the Company and
Schering Corporation, dated as of September 22, 1997.(25)*
10.42 Collaboration and License Agreement between the Company and
Schering-Plough Ltd., dated as of September 22, 1997.(25)*
* Confidential treatment requested with respect to a portion of this
Exhibit.
(25) Filed within.
b) REPORTS ON FORM 8-K
None.
20
<PAGE> 21
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized who also serves in the capacity of principal financial
officer.
Genome Therapeutics Corp.
/s/ Fenel M. Eloi
-----------------------------
Fenel M. Eloi
(Principal Financial Officer)
Date: April 14, 1998
21
<PAGE> 22
INSERT A
The Company's Special Meeting in lieu of an Annual Meeting was held on
January 26, 1998. At the meeting, shareholders took the following actions:
1) Election of Directors
Shares Voted
Name Of Nominee For Withhold Authority
--------------- ------------ ------------------
Robert J. Hennessey 15,885,902 203,803
Philip J. Leder 15,885,942 203,763
Lawrence Levy 15,820,040 269,665
Donald J. McCarren 15,829,782 259,923
Steven M. Rauscher 15,887,192 202,513
2) To approve the Company's 1997 Stock Option Plan.
For Against Abstain No Voting
--------- ------- ------- ---------
8,239,127 941,520 136,815 6,772,243
3) To approve of the Company's 1997 Directors' Deferred Stock Plan.
For Against Abstain No Voting
--------- ------- ------- ---------
8,715,412 439,757 162,293 6,772,243
4) To ratify the selection of Arthur Andersen LLP as the Company's auditors for
the fiscal year ending August 31, 1998.
For Against Abstain No Voting
---------- ------- ------- ---------
15,962,185 71,859 55,661 0
22
<PAGE> 1
Exhibit 10.41
Confidential information
omitted and filed
separately with the
Commission
COLLABORATION AND LICENSE AGREEMENT
BETWEEN
GENOME THERAPEUTICS CORPORATION
AND
SCHERING CORPORATION
dated as of September 22, 1997
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS...................................................... 2
1.1. " * DATABASE"........................................... 2
1.2. "AFFILIATE"........................................................ 2
1.3. " * DATABASE"............................................ 2
1.4. "CONTRACT YEAR".................................................... 2
1.5. "DEVELOPMENT CANDIDATE"............................................ 2
1.6. "DIAGNOSTIC PRODUCT"............................................... 2
1.7. "EFFECTIVE DATE"................................................... 2
1.8. "ENABLED BY GTC"................................................... 2
1.9. " * "............................ 3
1.10. "EVENT OF DEFAULT"................................................. 3
1.11. "FDA".............................................................. 3
1.12. "FIRST COMMERCIAL SALE"............................................ 3
1.13. "GENE PATENT RIGHTS"............................................... 3
1.14. "GTC DATABASES".................................................... 3
1.15. "GTC SOFTWARE"..................................................... 3
1.16. "GTC TECHNOLOGY"................................................... 3
1.17. "IND".............................................................. 3
1.18. "INITIAL RESEARCH COLLABORATION TERM".............................. 4
1.19. "LEAD COMPOUND".................................................... 4
1.20. "MAJOR MARKET COUNTRY"............................................. 4
1.21. "NDA".............................................................. 4
1.22. " * "....................................................... 4
1.23. "1995 COLLABORATION"............................................... 5
1.24. "OVERALL RESEARCH PLAN"............................................ 5
1.25. "PATHOGENOME(TM) DATABASE"......................................... 5
1.26. "PATHOGENOME(TM) DATABASE AGREEMENT"............................... 6
1.27. "PLANT PRODUCT".................................................... 6
1.28. "PRODUCT".......................................................... 6
1.29. "PRODUCT PATENT RIGHTS"............................................ 6
1.30. "RESEARCH COLLABORATION"........................................... 6
1.31. "SC ASSAY TECHNOLOGY".............................................. 6
1.32. "SP"............................................................... 6
1.33. "SP AGREEMENT"..................................................... 6
1.34. "THIRD PARTY"...................................................... 6
1.35. "VACCINE PRODUCT".................................................. 7
1.36. "VALID CLAIM"...................................................... 7
ARTICLE 2. SCOPE AND STRUCTURE OF THE COLLABORATION.......................... 7
(i)
* Confidential Treatment Requested
<PAGE> 3
2.1. GENERAL; EFFECTIVENESS AND EFFECTIVE DATE.......................... 7
2.2. ACKNOWLEDGMENT OF OTHER COLLABORATIONS............................. 7
2.3. SUBSCRIPTION TO THE PATHOGENOME(TM) DATABASE; INCLUSION
OF DATA IN PATHOGENOME(TM) DATABASE................................ 7
ARTICLE 3. LICENSE GRANTS; MARKETING RIGHTS.................................. 8
3.1. GRANT OF RIGHTS BY GTC TO SC....................................... 8
3.1.1. EXCLUSIVE GRANT FOR GTC DATABASES AND PRODUCT PATENT RIGHTS. 8
3.1.2. NON-EXCLUSIVE GRANT FOR GTC TECHNOLOGY AND GTC SOFTWARE..... 8
3.1.3. SUBLICENSES................................................. 8
3.2. GRANT OF RIGHTS BY SC TO GTC....................................... 9
3.2.1. GRANT OF RIGHTS TO SC ASSAY TECHNOLOGY...................... 9
3.2.2. GRANT OF GENE PATENT RIGHTS. .............................. 9
3.3. * ............................................. 9
3.4. NO GRANT OF OTHER TECHNOLOGY OR PATENT RIGHTS...................... 9
ARTICLE 4. CONDUCT OF THE RESEARCH COLLABORATION............................. 9
4.1. OBLIGATIONS OF THE PARTIES......................................... 9
4.1.1. REASONABLE EFFORTS.......................................... 9
4.1.2. DELIVERIES BY GTC........................................... 10
4.2. ACCESS TO DATA, INFORMATION EXCHANGE AND REPORTS................... 10
4.3. ELECTRONIC ACCESS TO SCIENTIFIC DATA............................... 10
4.4. TERM OF RESEARCH COLLABORATION; LEVEL OF EFFORT BY GTC SCIENTISTS.. 10
4.5. AVAILABILITY OF EMPLOYEES.......................................... 11
4.6. JOINT RESEARCH COMMITTEE........................................... 11
4.6.1. RESEARCH PLAN............................................... 11
4.6.2. ANNUAL RESEARCH PLANS....................................... 11
4.6.3. PERIODIC REVIEWS............................................ 12
4.6.4. MEMBERSHIP OF JOINT RESEARCH COMMITTEE...................... 12
4.6.5. JOINT RESEARCH COMMITTEE MEETINGS........................... 12
4.6.6. DECISION MAKING............................................. 12
4.7. JOINT PATENT COMMITTEE............................................. 13
ARTICLE 5. DEVELOPMENT AND MARKETING DUE DILIGENCE........................... 13
5.1. DILIGENT DISCOVERY EFFORTS......................................... 13
5.2. DILIGENT DEVELOPMENT EFFORTS....................................... 13
5.3. DILIGENT MARKETING AND DISTRIBUTION EFFORTS........................ 14
5.4. REPORTS............................................................ 14
ARTICLE 6. PAYMENTS.......................................................... 14
6.1. LICENSE FEE........................................................ 14
6.2. MILESTONE PAYMENTS................................................. 14
(ii)
* Confidential Treatment Requested
<PAGE> 4
6.2.1. * PAYMENTS............................................. 15
6.2.2. * PAYMENTS............................................. 15
6.3. RESEARCH FUNDING................................................... 16
6.3.1. FUNDING DURING THE INITIAL RESEARCH COLLABORATION TERM...... 16
6.3.2. FUNDING AFTER THE INITIAL RESEARCH COLLABORATION TERM....... 16
6.3.3. ADDITIONAL EXPENDITURES..................................... 17
6.4. ROYALTIES PAYABLE BY SC AND ITS AFFILIATES AND SUBLICENSEES........ 17
6.4.1. GENERAL..................................................... 17
6.4.2. ROYALTIES ON NET SALES OF THE PRODUCTS...................... 17
6.4.3. SUBLICENSES................................................. 18
6.4.4. * THIRD PARTY ROYALTIES...................... 18
6.4.5. ROYALTY REPORTS, EXCHANGE RATES............................. 18
6.4.6. AUDITS...................................................... 19
6.4.7. ROYALTY PAYMENT TERMS....................................... 19
6.5. WITHHOLDING TAXES.................................................. 19
6.6. BLOCKED CURRENCY................................................... 20
6.7. ADDITIONAL PAYMENT OBLIGATIONS..................................... 20
6.8. INTEREST ON LATE PAYMENTS.......................................... 20
6.9. MANNER OF PAYMENT.................................................. 20
ARTICLE 7. INTELLECTUAL PROPERTY............................................. 20
7.1. OWNERSHIP OF INTELLECTUAL PROPERTY................................. 20
7.2. FILING, PROSECUTION AND MAINTENANCE OF PRODUCT PATENT
RIGHTS AND GENE PATENT RIGHTS...................................... 20
7.2.1. PROSECUTION AND MAINTENANCE OF PRODUCT PATENT
RIGHTS AND GENE PATENT RIGHTS............................... 20
7.2.2. ABANDONMENT; FAILURE TO PAY................................. 21
7.2.3. COOPERATION................................................. 21
7.3. INFRINGEMENT BY OTHERS; PROSECUTION BY SC.......................... 21
7.4. INFRINGEMENT BY OTHERS; PROSECUTION BY GTC......................... 21
7.5. COOPERATION IN INFRINGEMENT ACTIONS................................ 22
7.6. TRADEMARKS......................................................... 22
ARTICLE 8. CONFIDENTIALITY................................................... 22
8.1. NONDISCLOSURE OBLIGATIONS.......................................... 22
8.1.1. GENERAL..................................................... 22
8.1.2. LIMITATIONS................................................. 23
8.2. SAMPLES............................................................ 23
8.3. INJUNCTIVE RELIEF.................................................. 23
ARTICLE 9. REPRESENTATIONS AND WARRANTIES.................................... 24
9.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF GTC................... 24
(iii)
* Confidential Treatment Requested
<PAGE> 5
9.2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SC.................... 25
9.3. VALIDITY AND SCOPE................................................. 25
9.4. WARRANTY DISCLAIMER................................................ 25
9.5. LIMITED LIABILITY.................................................. 25
ARTICLE 10. INDEMNITY........................................................ 26
10.1. SC INDEMNITY OBLIGATIONS........................................... 26
10.2. LIMITATION ON SC INDEMNITY OBLIGATIONS............................. 26
10.3. PROCEDURE.......................................................... 26
10.4. INSURANCE.......................................................... 27
ARTICLE 11. EXPIRATION AND TERMINATION....................................... 27
11.1. EXPIRATION......................................................... 27
11.1.1. TERM OF RESEARCH COLLABORATION............................. 27
11.1.2. TERM OF AGREEMENT.......................................... 27
11.2. EVENTS OF DEFAULT.................................................. 27
11.2.1. DEFAULT BY EITHER PARTY.................................... 27
11.2.2. DEFAULT BY SC.............................................. 27
11.3. EFFECT OF AN EVENT OF DEFAULT...................................... 28
11.3.1. REMEDIES AVAILABLE TO GTC.................................. 28
11.3.2. REMEDIES AVAILABLE TO SC................................... 29
11.4. * ................................................. 29
11.5. EFFECT OF EXPIRATION OR TERMINATION OF RESEARCH COLLABORATION...... 29
11.6. EFFECT OF EXPIRATION OR TERMINATION OF AGREEMENT................... 30
11.6.1. SURVIVAL OF PROVISIONS UPON EXPIRATION..................... 30
11.6.2. SURVIVAL OF PROVISIONS UPON TERMINATION.................... 30
ARTICLE 12. PROVISIONS FOR INSOLVENCY........................................ 30
12.1. GENERAL............................................................ 30
12.2. REJECTION OF AGREEMENT IN TITLE 11................................. 30
12.3. ADDITIONAL RIGHTS.................................................. 31
12.4. EFFECT ON SP AGREEMENT............................................. 31
ARTICLE 13. MISCELLANEOUS.................................................... 31
13.1. FORCE MAJEURE...................................................... 31
13.2. ASSIGNMENT......................................................... 31
13.3. SEVERABILITY....................................................... 32
13.4. NOTICES............................................................ 32
13.5 APPLICABLE LAW..................................................... 33
13.6. DISPUTE RESOLUTION................................................. 33
13.7. ENTIRE AGREEMENT................................................... 34
(iv)
* Confidential Treatment Requested
<PAGE> 6
13.8 PUBLICITY.......................................................... 34
13.9 HEADINGS........................................................... 34
13.10 INDEPENDENT CONTRACTORS............................................ 34
13.11 AGREEMENT NOT TO SOLICIT EMPLOYEES................................. 34
13.12 EXPORTS............................................................ 34
13.13 WAIVER............................................................. 35
13.14 COUNTERPARTS....................................................... 35
EXHIBIT A *
EXHIBIT B Form of Material Transfer Agreement
EXHIBIT C Arbitration Procedures
EXHIBIT D *
(v)
* Confidential Treatment Requested
<PAGE> 7
COLLABORATION AND LICENSE AGREEMENT
THIS COLLABORATION AND LICENSE AGREEMENT (the "Agreement") is dated as
of September 22, 1997 and is made by and among GENOME THERAPEUTICS CORPORATION,
a Massachusetts corporation having its principal place of business at 100 Beaver
Street, Waltham, Massachusetts 02154 U.S.A. ("GTC"), and SCHERING CORPORATION, a
New Jersey corporation having its principal place of business at 2000 Galloping
Hill Road, Kenilworth, New Jersey 07033 ("SC"). GTC and SC are sometimes
referred to herein individually as a party and collectively as the parties.
R E C I T A L S
WHEREAS, GTC and SC are parties to a Collaboration and License
Agreement dated as of December 6, 1995 (the "1995 Collaboration") relating, in
part, to the identification of essential genes in * which
the parties believe may yield data relating to genes in *
and *
WHEREAS, GTC has compiled and is compiling a PathoGenome(TM) Database
containing certain genomic sequence information (including information relating
to * * and GTC has granted and will
continue to grant non-exclusive rights of access to subscribers to the
PathoGenome(TM) Database;
WHEREAS, GTC has expertise in hybridization, high-throughput
sequencing, the development and utilization of the software tools necessary to
assemble, annotate, process, search, manipulate and analyze the genomic sequence
information it generates in its research programs (GTC's "bioinformatics"
capability) and assay development;
WHEREAS, SC is interested in using data from the 1995 Collaboration
relating to essential genes in * and obtaining access to
information on * * to be included in
the PathoGenome(TM) Database and to GTC's hybridization, high-throughput
sequencing, bioinformatics capability and assay development by entering into a
collaboration with GTC to identify homologous essential genes in *
* for the development, manufacture and sale of novel human
and animal therapeutic pharmaceuticals against infectious fungi; and
WHEREAS, GTC is willing to grant SC such access and enter into such a
collaboration upon the terms and conditions set forth below;
* Confidential Treatment Requested
<PAGE> 8
NOW THEREFORE, in consideration of the premises and of the covenants
herein contained, the parties hereto mutually agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the terms defined in this Article 1
shall have the meanings specified below:
1.1 " * DATABASE" shall mean GTC's * DNA
sequence database developed pursuant to this Agreement consisting of sequence
information arising out of the use of information from the 1995 Collaboration
and other information not included in the PathoGenome(TM) Database and any and
all electronic and hard copy data related thereto.
1.2 "AFFILIATE" shall mean any corporation or other entity which
directly or indirectly controls, is controlled by or is under common control
with a party to this Agreement. A corporation or other entity shall be regarded
as in control of another corporation or entity if it owns or directly or
indirectly controls more than fifty percent (50%) of the outstanding voting
stock or other ownership interest of the other corporation or entity, or if it
possesses, directly or indirectly, the power to manage, direct or cause the
direction of the management and policies of the corporation or other entity or
the power to elect or appoint fifty percent (50%) or more of the members of the
governing body of the corporation or other entity. Any such other relationship
as in fact results in actual control over the management, business and affairs
of a corporation or other entity shall also be deemed to constitute control.
1.3 " * DATABASE" shall mean GTC's * DNA
sequence database developed pursuant to this Agreement consisting of sequence
information arising out of the use of information from the 1995 Collaboration
and other information not included in the PathoGenome(TM) Database and any and
all electronic and hard copy data related thereto.
1.4 "CONTRACT YEAR" shall mean each twelve (12) month period
starting on (i) the Effective Date in the case of the first Contract Year and
(ii) the anniversary of the Effective Date for each subsequent Contract Year.
1.5 "DEVELOPMENT CANDIDATE" shall mean any compound developed as a
result of the Research Collaboration, (i) designated by the Schering-Plough
Research Institute Project Assessment Committee or its successor for full
clinical development or (ii) with respect to which SC, its Affiliates,
sublicensees or designees have initiated an in vivo toxicology program necessary
to obtain approval for use of such compound in human clinical trials.
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1.6 "DIAGNOSTIC PRODUCT" shall mean any device, product, process,
substance, composition or service intended to predict, detect, identify or
monitor a disease or determine the presence of a pathologic condition in humans
or animals (whether related to fungal infections or not).
1.7 "EFFECTIVE DATE" shall have the meaning set forth in
Section 2.1.
1.8 "ENABLED BY GTC" shall mean that the use of information in the
GTC Databases, GTC Technology or GTC Software, which was, at the time of its
initial use by SC, not in the public domain, materially contributed to the
relevant discovery or development.
1.9 " * " shall mean GTC's intellectual property relating
to * and * essential genes which is developed under the
Research Collaboration.
1.10 "EVENT OF DEFAULT" shall have the meanings set forth in
Section 11.2 hereof.
1.11 "FDA" shall mean the United States Food and Drug Administration.
1.12 "FIRST COMMERCIAL SALE" of a Product in a country shall mean the
first for profit sale for use or consumption by the general public of a Product
in such country after the required marketing and pricing or pricing
reimbursement approvals for such country have been obtained.
1.13 "GENE PATENT RIGHTS" shall mean (a) the United States and
foreign patent applications filed covering * and * genes in the GTC
Databases (including components thereof), (b) any United States patents and
foreign patents issuing from such patent applications and (c) any continuations,
continuations-in-part directed to subject matter specifically described in such
patent applications, divisionals, patents of addition, renewals, registrations,
confirmations, reexaminations, reissues, extensions or provisional applications
of any of the foregoing.
1.14 "GTC DATABASES" shall mean the * Database and *
Database.
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1.15 "GTC SOFTWARE" shall mean software and components thereof, and
any associated documentation, whether existing on the Effective Date or
developed by GTC during the Research Collaboration, which is owned or controlled
by, or licensed (with the right to sublicense) to, GTC and which is necessary or
useful to pursue searches in the GTC Databases and/or to interpret or analyze
the data contained in the GTC Databases, EXCLUDING, HOWEVER, any software used
in the creation of, as opposed to providing access to and interpretation or
analysis of, the GTC Databases.
1.16 "GTC TECHNOLOGY" shall mean and include all proprietary
materials (excluding Products), procedures, processes, technical information,
know-how, data, formulae, expertise and trade secrets discovered or developed by
GTC during the course of the Research Program and owned or controlled by GTC,
including any screening assays developed or acquired by GTC during the course of
the Research Program, EXCLUDING, HOWEVER, the SC Assay Technology, the GTC
Databases, the GTC Software and GTC's patented sequencing technology and the
procedures, processes, technical information, know-how, data, formulae,
expertise and trade secrets related thereto.
1.17 "IND" shall mean an investigational new drug application or its
equivalent filed with the FDA and necessary for beginning clinical trials in
humans, or any comparable application filed with the regulatory authorities of a
country other than the United States prior to beginning clinical trials in
humans in that country, with respect to Products.
1.18 "INITIAL RESEARCH COLLABORATION TERM" shall have the meaning set
forth in Section 4.4.
1.19 "LEAD COMPOUND" shall mean an isolated compound arising from
synthesis or which is a natural product (i.e., from a biological source),
therapy or modality developed as a result of the Research Collaboration with
respect to which SC, its Affiliates, sublicensees or designees have initiated a
program of medicinal chemistry optimization with a goal of developing Products.
1.20 "MAJOR MARKET COUNTRY" shall mean one or more of (i) the United
States, (ii) Japan or (iii) at least two (2) countries selected from France,
Italy, Germany, and the United Kingdom.
1.21 "NDA" shall mean a new drug application or product license
application or its equivalent filed with the FDA after completion of human
clinical trials to obtain marketing approval for a Product, or any comparable
application filed with the regulatory authorities of a country other than the
United States, including, where applicable, any applications for pricing or
price reimbursement.
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1.22 *
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*
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*
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*
1.23 "1995 COLLABORATION" shall have the meaning set forth in the
first recital of this Agreement.
1.24 "OVERALL RESEARCH PLAN" shall mean the research plan agreed upon
by the Joint Research Committee pursuant to Section 4.6.1 hereof, as it may be
subsequently amended, improved or modified from time to time, the draft of which
is attached hereto as EXHIBIT A (the "Draft Overall Research Plan").
1.25 "PATHOGENOME(TM) DATABASE" shall have the meaning set forth in
the PathoGenome(TM) Database Agreement.
1.26 "PATHOGENOME(TM) DATABASE AGREEMENT" shall mean the
PathoGenome(TM) Database License Agreement between GTC and SC described in
Section 2.3 hereof.
1.27 "PLANT PRODUCT" shall mean any device, product, process,
substance, composition or service related to plants.
1.28 "PRODUCT" shall mean any pharmaceutical product used to treat
human or animal disease (whether related to * or * or not)
which (i) contains a component which is covered by one or more Valid Claims
included within the Product Patent Rights or (ii) contains a component whose
discovery or development was Enabled by GTC, but shall not include any
Diagnostic Product, Plant Product or Vaccine Product.
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1.29 "PRODUCT PATENT RIGHTS" shall mean (a) the United States and
foreign patent applications filed covering Products (including components
thereof) or biological targets discovered and/or developed based upon the
Research Collaboration or during the course of SC's performance of its
development obligations under Article 5 of this Agreement, (b) any United States
patents and foreign patents issuing from such patent applications and (c) any
continuations, continuations-in-part directed to subject matter specifically
described in such patent applications, divisionals, patents of addition,
renewals, registrations, confirmations, reexaminations, reissues, extensions or
provisional applications of any of the foregoing. Product Patent Rights shall
not include any of the foregoing to the extent that they are specifically
directed to and cover Diagnostic Products, Plant Products or Vaccine Products.
1.30 "RESEARCH COLLABORATION" shall mean the period of time during
which GTC alone or GTC and SC shall perform the work described under the
Research Plan, which period may be extended pursuant to the terms of this
Agreement. The first day of the Research Collaboration shall be the Effective
Date. As used herein, the Research Collaboration shall not include any work
performed by GTC or SC pursuant to the PathoGenome(TM) Database Agreement, the
1995 Collaboration, or any other agreement between GTC and SC.
1.31 "SC ASSAY TECHNOLOGY" shall mean and include all genomic-based
screening assays for anti-infectives discovered and initially reduced to
practice or acquired by SC before or during the course of the Research Program,
including all proprietary materials (excluding Products), procedures, processes,
technical information, know-how, data, formulae, expertise and trade secrets
associated therewith.
1.32 "SP" shall mean Schering-Plough Ltd., a Swiss corporation having
its principal place of business at Toepferstrasse 5, CH-6004 Lucerne,
Switzerland.
1.33 "SP AGREEMENT" shall mean the Collaboration and License
Agreement dated as of the date hereof between GTC and SP.
1.34 "THIRD PARTY" shall mean any entity other than GTC or SC and
their respective Affiliates.
1.35 "VACCINE PRODUCT" shall mean any infectious agent or component
thereof administered to humans or animals in order to elicit a protective or
therapeutic immune response against an infectious agent including, without
limitation, nucleic acid, a synthetic or recombinantly produced product encoding
corresponding antigens or epitopes and monoclonal antibodies made against
recombinant antigen for passive or post-exposure prophylaxis.
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1.36 "VALID CLAIM" shall mean a claim of a patent application or a
patent which has not been held permanently revoked, unenforceable or invalid by
a decision of a court or other governmental agency of competent jurisdiction,
and which is not subject to appeal.
2. SCOPE AND STRUCTURE OF THE COLLABORATION
2.1 GENERAL; EFFECTIVENESS AND EFFECTIVE DATE. GTC and SC wish to
establish a collaborative alliance to discover and develop Products effective
against infectious fungi. During the course of this collaboration, GTC and SC
shall communicate regularly and shall assume different rights and
responsibilities for the development of Products, all as more specifically
described below. The effectiveness of this Agreement is expressly conditioned
upon the Board of Directors of Schering-Plough Corporation approving this
Agreement, and the Effective Date shall be the date of such approval. The
parties shall execute a letter acknowledging the Effective Date, which letter
shall be appended to this Agreement.
2.2 ACKNOWLEDGMENT OF OTHER COLLABORATIONS. SC acknowledges that GTC
is currently engaged in certain research collaborations with Third Parties and
intends to enter into additional research collaborations in the future. GTC
agrees that, *
*
*
*
*
*
*
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2.3 SUBSCRIPTION TO THE PATHOGENOME(TM) DATABASE; INCLUSION OF DATA
IN PATHOGENOME(TM) DATABASE. SC acknowledges that GTC has compiled and is
compiling a PathoGenome(TM) Database containing certain genomic sequence
information (including information relating to * ) and that GTC has granted
and will continue to grant non-exclusive rights of access to subscribers to the
PathoGenome(TM) Database. *
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
3. LICENSE GRANTS; MARKETING RIGHTS
3.1 GRANT OF RIGHTS BY GTC TO SC.
3.1.1 EXCLUSIVE GRANT FOR GTC DATABASES AND PRODUCT PATENT
RIGHTS. Subject to the terms of this Agreement, GTC hereby grants to SC the
right of exclusive access to the GTC Databases and the exclusive worldwide right
and license under the Product Patent Rights and Essential Gene Intellectual
Property to research, develop, use, manufacture, have manufactured, market,
promote, import, export, sell and have sold Products. The rights granted to SC
in this Subsection 3.1.1. shall survive the termination or expiration of the
Research Collaboration and continue for the entire term of this Agreement.
3.1.2 NON-EXCLUSIVE GRANT FOR GTC TECHNOLOGY AND GTC SOFTWARE.
Subject to the terms of this Agreement, GTC hereby grants to SC (i) the
non-exclusive right and license to use the GTC Technology to research, develop,
use, manufacture, have manufactured, market, promote, import, export, sell and
have sold Products and (ii) the non-exclusive right and license to use the GTC
Software for the purpose of obtaining access to, pursuing searches in, and/or
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interpreting or analyzing the data contained in the GTC Databases and other
genomic databases which may be or become available to SC, provided, however,
that to the extent that the GTC Software incorporates or requires the use of
software licensed by GTC from a Third Party, SC shall be responsible for
obtaining any necessary license and paying all fees and charges associated with
SC's use of any such software licensed from a Third Party. The rights granted to
SC in this Subsection 3.1.2 shall survive the termination of the Research
Collaboration and continue for the entire term of this Agreement. SC agrees to
use the GTC Software only for the internal purposes of SC and its Affiliates,
and agrees not to use the GTC Software for processing data for Third Parties or
to make the GTC Software available to Third Parties. SC agrees that all copies
of the GTC Software will be treated as confidential Information of GTC and
agrees to establish reasonable security measures to prevent copies of the GTC
Software from being made available to Third Parties.
3.1.3 SUBLICENSES. SC shall have the right to grant sublicenses
under (i) the GTC Databases, Essential Gene Intellectual Property and Product
Patent Rights to Affiliates of SC and, with the prior written consent of GTC
which shall not be unreasonably withheld, to Third Parties and (ii) under GTC
Technology and GTC Software to Affiliates of SC, provided, however, that in
either case each Third Party sublicensee shall execute a written agreement
pursuant to which it assumes the applicable obligations of SC hereunder.
3.2 GRANT OF RIGHTS BY SC TO GTC.
3.2.1 GRANT OF RIGHTS TO SC ASSAY TECHNOLOGY. Subject to the
terms of this Agreement, SC hereby grants to GTC the perpetual, non-exclusive,
royalty-free right and license to use the SC Assay Technology for GTC's internal
research programs; provided, however, that GTC shall have no right to use the SC
Assay Technology in research collaborations with Third Parties, to grant
sublicenses with respect to the SC Assay Technology or to sell or otherwise
transfer any interest in the SC Assay Technology to any Third Party.
3.2.2 GRANT OF GENE PATENT RIGHTS. SC hereby grants to GTC the
perpetual, exclusive, royalty-free, worldwide right and license under the Gene
Patent Rights to research, develop, use, manufacture, have manufactured, market,
promote, import, export, sell and have sold Diagnostic Products, Vaccine
Products and Plant Products.
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3.3 *
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3.4 NO GRANT OF OTHER TECHNOLOGY OR PATENT RIGHTS. Except as
otherwise expressly provided in this Agreement, under no circumstances shall a
party hereto, as a result of this Agreement, obtain any ownership interest in or
other right to any technology, know-how, patents, patent applications, genomic
sequence data, products, or biological materials of the other party, including
items owned, controlled or developed by the other party, or transferred by the
other party to said party, at any time pursuant to this Agreement. Any
compounds, technology or know-how derived, developed or acquired by either party
independent of the * and * Databases and/or the Research
Collaboration shall be the property of such party.
4. CONDUCT OF THE RESEARCH COLLABORATION
4.1 OBLIGATIONS OF THE PARTIES.
4.1.1 REASONABLE EFFORTS. During the Research Collaboration and
thereafter, each of the parties agrees to use its respective commercially
reasonable efforts to perform its obligations under the Overall Research Plan,
each Annual Research Plan and this Agreement in a timely manner.
4.1.2 DELIVERIES BY GTC. *
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4.2 ACCESS TO DATA, INFORMATION EXCHANGE AND REPORTS. SC will have
direct access to raw sequence data that form part of the GTC Databases and to
other work resulting from the Research Collaboration including, but not limited
to, hybridization results, clones containing * and * genes,
targeted sequencing data, comparative sequence data, gene expression and protein
expression data, molecular genetic methodologies and technologies, protein
purification procedures and biochemical assay methodologies. Except for
electronic access via a computer network pursuant to Section 4.3 hereof, SC's
access shall be during normal business hours and upon reasonable notice,
granting SC treatment and priority not less favorable than granted to GTC's
other collaborators.
During the Research Collaboration and thereafter, each party shall keep
the other informed as to its progress related to the development of Products by
either party or its Affiliates or sublicensees in connection with the Research
Collaboration. In a timely manner during the Research Collaboration, each party
shall provide the other party with a reasonably detailed report which shall
describe the reporting party's progress with respect to its efforts under this
Agreement.
4.3 ELECTRONIC ACCESS TO SCIENTIFIC DATA. To the extent practicable,
SC's access to scientific data contemplated by Section 4.2 will at all times be,
at the expense of SC, via electronic computer network with twenty-four (24)
hours accessibility except for downtime required to maintain or otherwise
service the database and under unforeseen circumstances; provided, however, that
SC shall take such measures to insure the security of such computer link as GTC
shall reasonably request, including, without limitation, restricting access
thereto and regulating the information communicated pursuant thereto for
purposes of maintaining confidentiality. In addition to electronic access via a
computer network, SC shall be entitled to install and maintain for the term of
this Agreement electronic copies of the GTC Databases and any updates thereto on
computers maintained by SC at SC facilities; provided, however, that prior to
any such installation GTC and SC shall agreed upon reasonable security measures
to be instituted by SC to protect the GTC Databases from access by Third
Parties.
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4.4 TERM OF RESEARCH COLLABORATION; LEVEL OF EFFORT BY GTC
SCIENTISTS.
*
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4.5 AVAILABILITY OF EMPLOYEES. GTC agrees to make its employees
reasonably available at their places of employment to consult with SC on issues
arising during the Research Collaboration.
4.6 JOINT RESEARCH COMMITTEE.
4.6.1 RESEARCH PLAN. Within sixty (60) days after the Effective
Date, a joint committee comprised of three (3) named representatives of each
party (the "Joint Research Committee") shall be appointed and shall agree upon
an overall written plan for the research and development to be conducted by the
parties during the Research Collaboration (the "Overall Research Plan"). The
Overall Research Plan shall be consistent with the scope, scale and direction of
Draft Overall Research Plan attached hereto as EXHIBIT A and shall establish:
(i) the scope of the Research Collaboration;
(ii) the research objectives, work plan activities and time
schedules with respect to identification of novel and
essential fungal genomic targets; and
(iii) the responsibilities of each party with respect to the
work to be performed under the Research Collaboration.
The Overall Research Plan may be revised and updated from time to time as agreed
upon by the
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Joint Research Committee.
4.6.2 ANNUAL RESEARCH PLANS. Within sixty (60) days after the
Effective Date, the Joint Research Committee shall agree upon a written plan for
the specific activities to be conducted in connection with the Research
Collaboration during the remainder of the first Contract Year (the "Annual
Research Plan"). Thereafter, by October 1 of each year during the Research
Collaboration beginning with October 1, 1998, GTC shall submit to the Joint
Research Committee a written proposed Annual Research Plan consistent with the
Overall Research Plan for the following Contract Year. The Joint Research
Committee shall review each such proposal as soon as practicable and shall
approve no later than December 15 of such year the final Annual Research Plan
for the next succeeding Contract Year.
4.6.3 PERIODIC REVIEWS. The Joint Research Committee shall
review the Overall Research Plan on an ongoing basis and may make changes to the
Annual Research Plan then in effect; provided, however, the Annual Research Plan
then in effect shall not be modified except as agreed in writing by the Joint
Research Committee.
4.6.4 MEMBERSHIP OF JOINT RESEARCH COMMITTEE. The Joint Research
Committee shall be comprised of three (3) representatives from each of SC and
GTC, with each party's members to be selected by that party. GTC and SC may
replace one or more of its representatives on the Joint Research Committee at
any time upon written notice to the other party. Unless the parties otherwise
agree, the chairmanship of the Joint Research Committee shall rotate at the end
of each Contract Year between a representative of GTC and a representative of
SC, with a representative of GTC serving as chairman during the first Contract
Year. From time to time the Joint Research Committee may establish subcommittees
to oversee particular projects or activities, and such subcommittees will be
constituted as the Joint Research Committee shall agree.
4.6.5 JOINT RESEARCH COMMITTEE MEETINGS. The Joint Research
Committee shall meet six (6) times per year at regular intervals during the term
of the Research Collaboration, or more often as agreed upon by both parties, at
such locations as the parties may agree upon. Regularly scheduled meetings or
special meetings of the Joint Research Committee may be in such form (e.g. in
person, by telephone or by video conference) as the members of the Joint
Research Committee shall agree. At such meetings, the Joint Research Committee
shall formulate and review the objectives of the Research Collaboration as
expressed in the Overall Research Plan, monitor the progress of the Annual
Research Plan toward those objectives and take such other actions as may be
specified under this Agreement or as the parties may deem appropriate. With the
consent of both parties, other representatives of GTC or SC or their respective
Affiliates or, in the case of SC and its Affiliates, their sublicensees, may
attend the meetings of the Joint Research Committee as nonvoting observers. Each
party shall be responsible for all expenses of its representatives on the Joint
Research Committee. The Joint Research Committee
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shall keep accurate minutes of its deliberations which shall record all proposed
decisions and all actions recommended or taken and which shall be countersigned
by one representative of each party. All records of the Joint Research Committee
shall be available to both parties.
4.6.6 DECISION MAKING. Any approval, determination or other
action agreed to by all members of the Joint Research Committee or their
respective designees present at the relevant Joint Research Committee meeting
shall be the approval, determination or other action of the entire Joint
Research Committee, provided that, at least one (1) representative of each party
must be present. Except as otherwise agreed, all decisions require the approval
of all of the representatives of each party, regardless of the number of such
representatives present. The Joint Research Committee may, however, delegate to
one party or to a specific representative the authority to make certain
decisions. In the event of a dispute within the Joint Research Committee, if the
members of the Joint Research Committee are unable to resolve such dispute after
engaging in good faith negotiations for thirty (30) days, then such dispute
shall be resolved in accordance with Section 13.6 hereof.
4.7 JOINT PATENT COMMITTEE. A joint committee comprised of one (1)
named representative of each party (the "Joint Patent Committee") shall be
appointed and shall meet as needed. A party may change its representative to the
Joint Patent Committee at any time. Members of the Joint Patent Committee may be
represented at any meeting by another member of the Joint Patent Committee, or
by a deputy. Additional members of the Joint Patent Committee may be appointed
on an ad hoc basis upon the mutual consent of the parties. The Joint Patent
Committee shall formulate and supervise the execution of an intellectual
property protection strategy with regard to all matters in connection with the
Research Collaboration. In any instance in which GTC informs SC in writing that
it objects to the filing of any patent application by SC, the filing of such
application shall be subject to the prior written approval of the Joint Patent
Committee. The policies and procedures set forth in Section 4.6.6 shall apply to
the Joint Patent Committee and references to the Joint Research Committee made
therein shall be deemed to refer to the Joint Patent Committee for purposes of
this Section 4.7.
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5. DEVELOPMENT AND MARKETING DUE DILIGENCE
5.1 DILIGENT DISCOVERY EFFORTS. SC agrees, at its own expense, to
use diligent efforts to use the GTC Databases, GTC Technology and GTC Software
to discover Lead Compounds. Such diligent efforts shall be comparable to those
efforts used by SC for other SC discovery programs with comparable commercial
potential, value and development status. Without limiting the foregoing, SC will
at a minimum *
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5.2 DILIGENT DEVELOPMENT EFFORTS. SC agrees, at its own expense, to
use diligent efforts to develop and commercialize, either directly or through
its Affiliates or permitted sublicensees, the Lead Compounds and Development
Candidates selected by it pursuant to Section 5.1. Such diligent efforts shall
be comparable to those efforts used by SC for other Lead Compounds and
Development Candidates (each as defined in Article 1 hereof except for
references therein to the Research Collaboration or Products) with comparable
commercial potential, value and development status and shall include the active
conduct of in vivo toxicology trials necessary to obtain approval for use of
such compound in human clinical trials or the active conduct of human clinical
trials for at least * under either this Agreement or the
PathoGenome(TM) Database Agreement. The selection of Lead Compounds and
Development Compounds for development and commercialization shall be in the sole
discretion of SC. SC, its Affiliates and permitted sublicensees may, but shall
have no obligation under this Agreement to, develop and commercialize more than
* at any one time during the term of this Agreement. If SC
discontinues development * * , SC will resume the
diligent screening or development efforts described in Section 5.1 or in this
Section 5.2, as the case may be, by selecting * * , as
the case may be, and maintaining at least * under active pre-clinical or
clinical development. Such diligent development efforts will continue until
approvals for commercial sale and pricing and/or pricing reimbursement, as
necessary, have been obtained by either of SC or SP for at least * in
each Major Market Country where obtaining such approvals is commercially
reasonable.
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5.3 DILIGENT MARKETING AND DISTRIBUTION EFFORTS. SC shall have the
exclusive worldwide right to market and distribute the Products. Upon receipt of
approvals for commercial sale and pricing or pricing reimbursement, if
applicable, of a Product in any country, SC agrees, at its own expense, to use
diligent efforts to launch, promote, market and sell such Product in the United
States, its territories and possessions, as well as in other countries. Such
efforts shall be comparable to those efforts used by SC to promote its own
products of similar commercial potential, value and development status in the
United States, its territories and possessions or a comparable country, as the
case may be. Both parties recognize that extenuating circumstances may arise
that warrant a delay in launching a Product in a particular country, including
but not limited to unfavorable pricing, pricing reimbursement or labelling of
the Product in such country. The parties agree that such extenuating
circumstances shall be considered in connection with any determination
concerning whether SC has fulfilled its obligation to use diligent efforts to
launch, promote, market and sell such Product in such country.
5.4 REPORTS. After the expiration or termination of the Research
Collaboration, SC shall provide GTC with reasonably detailed reports which shall
describe SC's progress with respect to its development, commercialization and
marketing efforts under this Agreement. Such reports shall be furnished
semi-annually for a period of five (5) years after the expiration or termination
of the Research Collaboration and, thereafter, annually until the termination or
expiration of this Agreement.
6. PAYMENTS
6.1 LICENSE FEE. *
6.2 MILESTONE PAYMENTS. SC shall pay to GTC the milestone payments
described below as and when the corresponding milestones are achieved:
6.2.1 * PAYMENTS. SC shall pay the following
milestone payments to GTC within ten (10) business days of receipt by SC of a
written confirmation from the Joint Research Committee that the corresponding
milestone has been achieved. The Joint Research Committee shall deliver its
written confirmation to SC or deliver to GTC a written statement describing in
detail any respect in which the milestone has not been achieved within thirty
(30) days following receipt by the Joint Research Committee of a written
statement from GTC claiming the accomplishment of the corresponding milestone
supported by adequate documents providing reasonable detail concerning the
accomplishment of such milestone. The milestone payments set forth under this
Section 6.2.1 shall be payable * during the term of this Agreement.
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=============================================================
Milestone Payment
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* *
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6.2.2. * Payments. SC will immediately notify GTC upon
the accomplishment of the following milestones and, within thirty (30) days
following the accomplishment of each milestone, SC shall make the corresponding
milestone payment. Each milestone payment set forth in this Section 6.2.2 shall
be made * * pursuant to this Agreement
or, alternatively, with respect to the * and *
under this Agreement, provided that, the * of any such payments shall not be
owed to GTC until a * * * Under
no circumstances will SC be required to make any milestone payments set forth
below more than * .
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Milestone Payment
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6.3 RESEARCH FUNDING.
6.3.1 FUNDING DURING THE INITIAL RESEARCH COLLABORATION TERM.
During the Initial Research Collaboration Term, SC will pay GTC *
*
*
*
*
*
*
*
*
*
* Such payments shall be made in accordance with
the procedure set forth in Section 6.3.2.
6.3.2 FUNDING AFTER THE INITIAL RESEARCH COLLABORATION TERM.
After the completion of the Initial Research Collaboration Term, SC will
reimburse GTC
*
*
*
*
*
*
*
*
* Debit balances shall reduce the estimated
payment to be made by SC for work under the Research Collaboration in the next
quarter and credit balances shall be paid by SC to GTC within fifteen (15)
business days after the receipt of GTC's written report.
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6.3.3 ADDITIONAL EXPENDITURES. In the event that the scope,
scale or direction of the Research Collaboration as described in the draft
Overall Research Plan attached hereto as EXHIBIT A changes after the Effective
Date, any additional expenditures required to be made by GTC to support the
Research Collaboration shall be funded by SC; provided, that all changes in the
scope, scale or direction of the Research Collaboration which may trigger
additional funding by SC shall be approved in advance by the Joint Research
Committee. If such additional payments relate to items of capital equipment or
Third Party software which are reasonably anticipated to be used by GTC to a
greater extent outside the Research Collaboration than within the Research
Collaboration, then GTC and SC shall negotiate in good faith regarding the
allocation of such costs between GTC and SC; provided, however, that each of SC
and GTC cannot be required to contribute to such costs without its prior written
consent. Any payments which become due under this Subsection shall be made
quarterly in advance.
6.4 ROYALTIES PAYABLE BY SC AND ITS AFFILIATES AND SUBLICENSEES.
6.4.1 GENERAL. GTC and SC agree that the payment of royalties
and milestones by SC and its Affiliates and sublicensees under the various
agreements between the parties based on sales of therapeutic pharmaceuticals
against infectious fungi shall be as set forth in EXHIBIT D. All references in
this Agreement to the payment of royalties hereunder shall apply only to Net
Sales of Products which correspond to the appropriate section of EXHIBIT D.
Following the First Commercial Sale of any Product, SC will pay, on a
* basis, a royalty in the amounts set forth below on Net
Sales of the Products during the previous quarter.
6.4.2 ROYALTIES ON NET SALES OF THE PRODUCTS. In consideration
of the licenses granted to SC, SC shall pay to GTC a royalty in the amount of
*
*
*
*
*
*
*
*
*
In the event that a Product comprises a Lead Compound or derivatives or
analogues thereof initially discovered to have activity against a GTC-identified
target during the first *
*
*
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The parties acknowledge and agree that, for purposes of this Agreement,
"worldwide cumulative Net Sales" shall be the aggregate of (i) cumulative Net
Sales of a Product by SC, its affiliates or sublicensees under this Agreement
and (ii) cumulative Net Sales of a Product by SP, its affiliates or sublicensees
under the SP Agreement.
6.4.3 SUBLICENSES. SC shall (i) with respect to any sublicenses
by SC which include a grant of rights to use the GTC Database and Product Patent
Rights for research and development and/or for commercialization activities
other than marketing promotion or distribution of products, pay to GTC
* * received by SC from any Third Party to which a
sublicense is granted hereunder in connection therewith which is not based upon
Net Sales of the Products by such Third Party in such country and (ii)(A) with
respect to any sublicense hereunder to any Third Party to make, have made, use,
or sell Products in any country, pay to GTC royalties on Net Sales of the
Products sold by such Third Party in such country or (B) provide in such
sublicense that such sublicensee shall pay to GTC royalties on Net Sales of the
Products sold by such sublicensee in such country, in either case at the royalty
rate set forth in Section 6.4 that would be applicable had such sales been made
by SC, and provided that in either case, SC shall remain liable for the timely
payment of all such royalties. Notwithstanding the foregoing, SC's obligations
under Section 6.4.3(i) shall not include any consideration received by SC in
return for rights to any other technologies and/or services, and/or products
which are not Products, granted by SC under such sublicenses, to the extent that
such consideration is reasonably allocable to such rights.
6.4.4 * THIRD PARTY ROYALTIES. If SC is
required to pay royalties and/or lump sum license fees to Third Parties for
rights under patents necessary to make or sell the Products, *
*
*
*
*
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6.4.5 ROYALTY REPORTS, EXCHANGE RATES. During the term of this
Agreement following the First Commercial Sale of any Product, SC shall within
sixty (60) days after each calendar quarter furnish to GTC a written quarterly
report showing:
*
*
*
*
*
*
*
*
*
*
*
*
* If no royalty or payment is due for any royalty
period hereunder, SC shall so report. SC shall keep complete and accurate
records in sufficient detail to properly reflect all * and
to enable the royalties payable hereunder to be determined.
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6.4.6 AUDITS. Upon the written request of GTC, SC shall permit
an independent certified public accountant selected by GTC and acceptable to SC,
which acceptance shall not be unreasonably withheld, to have access during
normal business hours to such records of SC as may be reasonably necessary to
verify the accuracy of the royalty reports described herein, in respect of any
fiscal year ending not more than twenty-four (24) months prior to the date of
such request. GTC and SC shall use commercially reasonable efforts to schedule
all such verifications within forty-five (45) days after GTC makes its written
request. All such verifications shall be conducted at GTC's expense and not more
than once in each calendar year. Subject to SC's rights under Section 13.6, in
the event GTC's independent certified public accountant concludes that
additional royalties were owed to GTC during such period, the additional royalty
shall be paid by SC within thirty (30) days of the date GTC delivers to SC such
independent certified public accountant's written report so concluding. In the
event GTC's independent certified public accountant concludes that there was an
overpayment of royalties to GTC during such period, the overpayment less the
reasonable fees and expenses charged by such representative shall be repaid by
GTC within thirty (30) days of the date GTC received such independent certified
public accountant's written report so concluding. The fees charged by such
independent certified public accountant shall be paid by GTC unless the audit
discloses an underpayment of the royalties payable by SC for the audited period
of more than * * in which case SC shall pay
the reasonable fees and expenses charged by such representative. SC shall
include in each Third Party sublicense granted by it pursuant to this Agreement
a provision requiring the sublicensee to make reports to SC, to keep and
maintain records of sales made pursuant to such sublicense and to grant access
to such records by GTC's independent certified public accountant to the same
extent required of SC under this Agreement. GTC agrees that all information
subject to review under this Section 6.4.6 or under any sublicense agreement is
confidential and that GTC shall cause its independent certified public
accountant to enter into a confidentiality agreement with SC obligating such
accountant to retain all such information in confidence. GTC's independent
certified public accountant shall only report to GTC as to the computation of
the royalties and other payments due to GTC under this Agreement and shall not
disclose to GTC any other information of SC or its sublicensees.
6.4.7 ROYALTY PAYMENT TERMS. Royalties shown to have accrued by
each royalty report provided for under this Agreement shall be due sixty (60)
days after the end of each calendar quarter. Payment of royalties in whole or in
part may be made in advance of such due date. Royalties determined to be owing
with respect to any prior quarter shall be added, together with interest thereon
accruing under this Agreement from the date of the report for the quarter for
which such amounts are owing, to the next quarterly payment hereunder.
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6.5 WITHHOLDING TAXES. SC shall deduct any withholding taxes only
from royalty payments agreed upon under this Agreement and pay them to the
proper tax authorities required by applicable laws. SC shall not deduct any
other withholding or any other governmental charges from the payments agreed
upon under this Agreement, including but not limited to any such taxes or
charges incurred as a result of an assignment or sublicense by SC to any
Affiliate or any Third Party, except as noted above. SC shall maintain official
receipts of payment of any withholding taxes and forward these receipts to GTC
within sixty (60) days. The parties will exercise diligent efforts to ensure
that any withholding taxes imposed are reduced as far as possible under the
provisions of any treaties applicable to any payment made hereunder.
6.6 BLOCKED CURRENCY. If transfer of amounts payable hereunder to
United States dollars is subject to administrative authorization, SC shall
promptly file the transfer application with the competent authorities supported
by all requisite documentation, and use its reasonable efforts to obtain such
authorization and effect the remittance within the applicable period set forth
under this Article 6; provided, however, that nothing in this Section 6.6 shall
relieve SC from its obligation to pay any amounts payable hereunder within the
applicable period set forth under this Article 6.
6.7 ADDITIONAL PAYMENT OBLIGATIONS. The parties acknowledge that
SC's payment obligations as set forth in Article 6 of this Agreement are in
addition to the payment obligations of SP set forth in Article 6 of the SP
Agreement.
6.8 INTEREST ON LATE PAYMENTS. Any payments by SC to GTC that are
not paid on or before thirty (30) days after the date such payments are due
under this Agreement shall bear interest, to the extent permitted by applicable
law, at one and one half percent (1.5%) per month, calculated on the total
number of days payment is delinquent; provided, however, that interest shall not
accrue pursuant to this Section 6.8 on any amounts payable under this Agreement
with respect to which payment is disputed in good faith; provided further that
interest shall accrue pursuant to this Section 6.8 once such dispute has been
resolved if payment is not made promptly thereafter.
6.9 MANNER OF PAYMENT. Payments to be made by SC to GTC under this
Agreement shall be payable in United States dollars and shall be paid by bank
wire transfer in immediately available funds to such bank account in the
Commonwealth of Massachusetts as is designated in writing by GTC from time to
time.
7. INTELLECTUAL PROPERTY
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7.1 OWNERSHIP OF INTELLECTUAL PROPERTY. Subject to the rights and
licenses granted under this Agreement (i) GTC shall retain ownership of the GTC
Databases, the GTC Technology and the GTC Software and (ii) SC shall retain
ownership of the SC Assay Technology, Product Patent Rights and Gene Patent
Rights.
7.2 FILING, PROSECUTION AND MAINTENANCE OF PRODUCT PATENT RIGHTS AND
GENE PATENT RIGHTS.
7.2.1 PROSECUTION AND MAINTENANCE OF PRODUCT PATENT RIGHTS AND
GENE PATENT RIGHTS. SC shall be responsible for the filing, prosecution
(including oppositions) and maintenance of the Product Patent Rights and Gene
Patent Rights at its expense in its own name. SC shall consult with GTC and keep
GTC fully informed of important issues relating to the preparation, filing,
prosecution and maintenance of such patent applications and the patents related
thereto, including SC's patent strategy with respect to both existing and future
patent applications, patents and patent extensions, and shall furnish to GTC
copies of documents relevant to such preparation or filing (such copies of
documents with respect to initial patent filings to be furnished to GTC
sufficiently prior to filing such document or making any payment due thereunder
to allow for review and comment by GTC, and SC shall seriously consider all GTC
comments on such initial patent filings) and, upon GTC's request, copies of
documents relevant to such prosecution or maintenance; and provided, further,
that in any instance in which GTC informs SC in writing that it objects to the
filing of any patent application by SC, the filing of such application shall be
subject to the prior written approval of the Joint Patent Committee pursuant to
Section 4.7 hereof. If SC elects not to continue to seek or maintain patent
protection on any patent or patent application included in the Product Patent
Rights or Gene Patent Rights in any country, GTC shall have the right, at its
option and expense, with the reasonable assistance of SC to file, prosecute
(including oppositions) and maintain such patent applications and patents;
provided, however, that the rights of the parties with respect to any such
Product Patent Rights or Gene Patent Rights shall in all other respects be as
described in this Agreement. SC will advise GTC of all decisions taken with
respect to any such election in a timely manner in order to allow GTC to protect
its rights under this Section 7.2.1.
7.2.2 ABANDONMENT; FAILURE TO PAY. SC agrees that it will not
abandon the prosecution of any patent applications included within the Product
Patent Rights or Gene Patent Rights nor shall it fail to make any payment or
fail to take any other action necessary to maintain a patent under the Product
Patent Rights or Gene Patent Rights unless it has notified GTC in sufficient
time for GTC to assume such prosecution or make such payment.
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7.2.3 COOPERATION. Each party shall make available to the other
party (or to the other party's authorized attorneys, agents or representatives),
its employees, agents or consultants to the extent reasonably necessary or
appropriate to enable the appropriate party to file, prosecute and maintain
patent applications and resulting patents as set forth in this Section 7.2 for
periods of time reasonably sufficient for such party to obtain the assistance it
needs from such personnel. Where appropriate, each party shall sign or cause to
have signed all documents relating to said patent applications or patents at no
charge to the other party.
7.3 INFRINGEMENT BY OTHERS; PROSECUTION BY SC. GTC and SC shall each
promptly notify the other in writing of any alleged or threatened infringement
of patents or patent applications included in the Product Patent Rights or Gene
Patent Rights of which they become aware, and the parties shall consult
concerning the action to be taken. SC shall have the right, but not the
obligation, to prosecute at its own expense any such infringement. Any recovery
or damages derived from such action shall be used (i) first to reimburse SC for
all legal expenses relating to the suit and (ii) second to pay GTC the royalty
it would have been entitled to receive had the sale of such infringing products
been sales of Products licensed by SC hereunder. * *
7.4 INFRINGEMENT BY OTHERS; PROSECUTION BY GTC. If, within six (6)
months after SC first becomes aware of any infringement of the Product Patent
Rights or Gene Patent Rights, SC fails to cause such infringement to terminate
or to bring a suit or action to compel termination, GTC shall have the right,
but not the obligation, to bring such suit or action to compel termination at
the sole expense of GTC. In such event, GTC shall have the right, if SC is a
legally indispensable party, to bring such suit or action in the name of SC. Any
recovery or damages in such suit shall be retained by GTC.
SC shall have the right, prior to the commencement of the trial of any
suit or action brought by GTC, to join any such suit or action and, in such
event, shall pay one-half of the entire cost of such suit or action. Provided
that SC has joined in the action and shared the costs thereof as stated in the
preceding sentence, no settlement, consent judgment or other voluntary final
disposition of the suit may be entered into without the consent of SC, which
consent shall not unreasonably be withheld. Any recovery or damages derived from
such action shall be used (i) first to reimburse GTC for all legal expenses
relating to the suit and (ii) second to pay GTC the royalty it would have been
entitled to receive *
*
*
*
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7.5 COOPERATION IN INFRINGEMENT ACTIONS. In any infringement suit which
either party may institute to enforce the Product Patent Rights or Gene Patent
Rights pursuant to this Agreement, the other party hereto shall, at the request
of the party initiating such suit, cooperate in all respects and, to the extent
possible, have its employees testify when requested and make available relevant
records, papers, information, samples and the like. GTC's cooperation in any
suit initiated by SC shall be at SC's expense. SC's cooperation in any suit
initiated by GTC shall be at GTC's expense.
7.6 TRADEMARKS. SC shall be free to use and to register in any
trademark office in the world any trademark for use with Products it desires in
its sole discretion. SC shall own all right, title and interest in and to any
such trademark in its own name or that of its designated Affiliate during and
after the term of this Agreement.
8. CONFIDENTIALITY
8.1 NONDISCLOSURE OBLIGATIONS.
8.1.1 GENERAL. Except as otherwise provided in this Article 8,
during the term of this Agreement and for a period of ten (10) years thereafter,
the parties shall maintain in confidence and use only for purposes specifically
authorized under this Agreement (i) GTC Databases, (ii) the SC Assay Technology,
(iii) any other information and data received from the other party resulting
from or related to the Research Collaboration and the Products and (iv) all
information and data not described in clauses (i), (ii) or (iii) but supplied by
the other party under this Agreement marked "Confidential." For purposes of this
Article 8, information and data described in clauses (i), (ii), (iii) or (iv)
shall be referred to as "Information."
8.1.2 LIMITATIONS. To the extent it is reasonably necessary or
appropriate to fulfill its obligations or exercise its rights under this
Agreement: (i) a party may disclose Information it is otherwise obligated under
this Section 8.1 not to disclose to its Affiliates, sublicensees, consultants,
outside contractors and clinical investigators, on a need-to-know basis and on
condition that such entities or persons agree to non-use obligations essentially
the same as those set forth herein and to keep the Information confidential for
the same time periods and to the same extent as such party is required to keep
the Information confidential; and (ii) a party or its sublicensees may disclose
such Information to government or other regulatory authorities to the extent
that such disclosure is reasonably necessary to obtain patents or authorizations
to conduct clinical trials of, and to commercially market, Products pursuant to
this Agreement. The obligation not to disclose Information shall not apply to
any part of such Information that: (i) is or becomes part of the public domain
other than by unauthorized acts of the party obligated not to disclose such
Information or its Affiliates or sublicensees; (ii) can be shown by written
documents to have been disclosed to the receiving party or its Affiliates or
sublicensees by a
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<PAGE> 35
Third Party, provided such Information was not obtained by such Third Party
directly or indirectly from the other party to this Agreement pursuant to a
confidentiality agreement; (iii) prior to disclosure under this Agreement, was
already in the possession of the receiving party or its Affiliates or
sublicensees, provided such Information was not obtained directly or indirectly
from the other party to this Agreement pursuant to a confidentiality agreement;
(iv) can be shown by written documents to have been independently developed by
the receiving party or its Affiliates without breach of any of the provisions of
this Agreement; or (v) is disclosed by the receiving party pursuant to
interrogatories, requests for information or documents, subpoena, civil
investigative demand issued by a court or governmental agency or as otherwise
required by law, provided, however, that the receiving party notifies the other
party immediately upon receipt thereof, giving such other party sufficient
advance notice to permit it to seek a protective order or other similar order
with respect to such Information and provided, further, that the disclosing
party furnishes only that portion of the Information which it is advised by
counsel is legally required whether or not a protective order or other similar
order is obtained by the other party.
8.2 SAMPLES. Samples of genes, other biological targets, antigens or
compounds identified, sequenced, synthesized, purified or developed in the
course of the Research Collaboration shall not be supplied or sent by either
party to any Third Party, other than to regulatory agencies or for use in
clinical trials, unless such release is approved by a member of the Joint
Research Committee from the other party and protected by an appropriate
materials transfer agreement substantially similar to the form of Material
Transfer Agreement attached hereto as EXHIBIT B. Samples of materials other than
those described above provided by one party (the "supplying party") to the other
party (the "receiving party") in the course of the Research Collaboration shall
not be supplied or sent by the receiving party to any Third Party, other than to
regulatory agencies or for use in clinical trials, without the written consent
of the supplying party.
8.3 INJUNCTIVE RELIEF. The parties hereto understand and agree that
remedies at law may be inadequate to protect against any breach of any of the
provisions of this Article 8 by either party or their employees, agents,
officers or directors or any other person acting in concert with it or on its
behalf. Accordingly, each party shall be entitled to the granting of injunctive
relief by a court of competent jurisdiction against any action that constitutes
any such breach of this Article 8.
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9. REPRESENTATIONS AND WARRANTIES
9.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF GTC. GTC represents
and warrants to and covenants with SC that:
9.1.1 GTC is a corporation duly organized, validly existing and
in corporate good standing under the laws of Massachusetts;
9.1.2 GTC has the legal right, authority and power to enter into
this Agreement, and to extend the rights and licenses granted to SC in this
Agreement;
9.1.3 GTC has taken all necessary action to authorize the
execution, delivery and performance of this Agreement;
9.1.4 upon the execution and delivery of this Agreement, this
Agreement shall constitute a valid and binding obligation of GTC enforceable in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law);
9.1.5 the performance of its obligations under this Agreement
will not conflict with its charter documents or result in a breach of any
agreements, contracts or other arrangements to which it is a party;
9.1.6 to the best of GTC's knowledge but without independent
investigation, the performance of GTC's obligations under this Agreement,
including without limitation the delivery of the GTC Databases, will not
infringe any Valid Claims of any issued patent;
9.1.7 GTC will not during the term of this Agreement enter into
any agreements, contracts or other arrangements that would be inconsistent with
its obligations under this Agreement; and
9.1.8 GTC will not during the term of this Agreement knowingly
and voluntarily take any actions which are reasonably likely to diminish its
rights under the GTC Software, the GTC Technology or the GTC Databases,
including without limitation by not committing or permitting any acts or
omissions which would cause the breach of any agreements between GTC and Third
Parties which provide for intellectual property rights applicable to the
development, manufacture, use or sale of the Products. GTC is currently in
compliance in all material respect with any such agreements with Third Parties
and agrees to promptly provide SC with notice of any alleged breach of such
agreements.
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9.2 REPRESENTATIONS, WARRANTIES AND COVENANTS OF SC. SC represents
and warrants to and covenants with GTC that:
9.2.1 SC is a corporation duly organized, validly existing and
in corporate good standing under the laws of New Jersey;
9.2.2 SC has the legal right, authority and power to enter into
this Agreement, and to extend the rights and licenses granted to GTC in this
Agreement;
9.2.3 subject only to receipt of the requisite approval of the
Board of Directors of Schering-Plough Corporation (which receipt shall be
evidenced by the execution by SC of the letter described in Section 2.1), SC has
taken all necessary action to authorize the execution, delivery and performance
of this Agreement;
9.2.4 upon the execution and delivery of this Agreement and
approval of this Agreement by the Board of Directors of Schering-Plough
Corporation, this Agreement shall constitute a valid and binding obligation of
SC enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law);
9.2.5 the performance of its obligations under this Agreement
will not conflict with SC's charter documents or result in a breach of any
agreements, contracts or other arrangements to which it is a party; and
9.2.6 SC will not after the Effective Date enter into any
agreements, contracts or other arrangements that would be inconsistent with its
obligations under this Agreement.
9.3 VALIDITY AND SCOPE. Nothing in this Agreement shall be construed
as a warranty or representation by either party as to the validity or scope of
any GTC Technology, GTC Databases, GTC Software, Product Patent Rights or Gene
Patent Rights.
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9.4 WARRANTY DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
THIS AGREEMENT, NEITHER PARTY MAKES ANY WARRANTY WITH RESPECT TO ANY GTC
TECHNOLOGY, GTC DATABASES, GTC SOFTWARE, PRODUCT PATENT RIGHTS, GENE PATENT
RIGHTS, GOODS, SERVICES OR OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY
DISCLAIMS WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NONINFRINGEMENT WITH RESPECT TO ANY AND ALL OF THE FOREGOING.
9.5 LIMITED LIABILITY. NOTWITHSTANDING ANYTHING ELSE IN THIS
AGREEMENT OR OTHERWISE TO THE CONTRARY, NEITHER GTC NOR SC WILL BE LIABLE WITH
RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE,
STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR (I) ANY PUNITIVE,
EXEMPLARY, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS OR (II) COST OF
PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES.
10. INDEMNITY
10.1 SC INDEMNITY OBLIGATIONS. SC agrees to defend, indemnify and
hold GTC, its Affiliates and their respective employees and agents harmless from
all claims, losses, damages or expenses arising as a result of: (a) actual or
asserted violations of any applicable law or regulation by SC, its Affiliates or
sublicensees by virtue of which the Products manufactured, distributed or sold
hereunder shall be alleged or determined to be adulterated, misbranded,
mislabeled or otherwise not in compliance with any applicable law or regulation;
(b) claims for bodily injury, death or property damage attributable to the
manufacture, distribution, sale or use of the Products by SC, its Affiliates or
sublicensees; or (c) a Product recall ordered by a governmental agency or
required by a confirmed Product failure as reasonably determined by the parties
hereto.
10.2 LIMITATION ON SC INDEMNITY OBLIGATIONS. GTC, its Affiliates and
their respective employees and agents shall not be entitled to the indemnities
set forth in Section 10.1 where the claim, loss, damage or expense for which
indemnification is sought was caused by a grossly negligent act or intentional
act of misconduct or omission by GTC, its directors, officers, employees or
authorized agents.
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10.3 PROCEDURE. If GTC or any of its Affiliates or their respective
employees or agents (the "Indemnitee") intends to claim indemnification under
this Article 10, the Indemnitee shall promptly notify the other party (the
"Indemnitor") of any loss, claim, damage, liability or action in respect of
which the Indemnitee intends to claim such indemnification, and the Indemnitor
shall assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an Indemnitee shall have the right to retain
its own counsel, with the fees and expenses to be paid by the Indemnitor, if
representation of such Indemnitee by the counsel retained by the Indemnitor
would be inappropriate due to actual or potential differing interests between
such Indemnitee and any other party represented by such counsel in such
proceedings. The indemnity agreement in this Article 10 shall not apply to
amounts paid in settlement of any loss, claim, damage, liability or action if
such settlement is effected without the consent of the Indemnitor, which consent
shall not be withheld unreasonably. The failure to deliver notice to the
Indemnitor within a reasonable time after the commencement of any such action,
if prejudicial to its ability to defend such action, shall relieve such
Indemnitor of any liability to the Indemnitee under this Article 10, but the
omission so to deliver notice to the Indemnitor will not relieve it of any
liability that it may have to any Indemnitee otherwise than under this Article
10. The Indemnitee under this Article 10, its employees and agents, shall
cooperate fully with the Indemnitor and its legal representatives in the
investigation of any action, claim or liability covered by this indemnification.
The Indemnitor shall additionally be liable to pay the reasonable legal costs
and attorneys' fees incurred by the Indemnitee in establishing its claim for
indemnity.
10.4 INSURANCE. SC shall maintain appropriate product liability
insurance with respect to development, manufacture and sales of the Products by
SC in such amount as SC customarily maintains with respect to sales of its other
products. SC shall maintain such insurance for so long as it continues to
manufacture or sell the Products, and thereafter for so long as SC maintains
insurance for itself covering such manufacture or sales.
11. EXPIRATION AND TERMINATION
11.1 EXPIRATION.
11.1.1 TERM OF RESEARCH COLLABORATION. Unless this Agreement is
sooner terminated in accordance with the provisions of this Article 11, the term
of the Research Collaboration shall expire * ; provided,
however, that SC may, in its discretion, elect to extend the Research
Collaboration for an additional * *
* . SC shall deliver written notice to GTC at least
* prior to the expiration of the Initial Research
Collaboration Term definitively stating whether SC intends to exercise its
option to extend the term of the Research Collaboration. In any event, GTC may,
in its discretion, engage in an orderly wind-down of the Research Collaboration,
including the reassignment of the scientists devoted thereto, during the last
* thereof.
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11.1.2 TERM OF AGREEMENT. Unless this Agreement is sooner
terminated in accordance with the provisions of this Article 11, this Agreement
shall expire and the licenses granted by GTC to SC hereunder shall become fully
paid, on a Product by Product and country by country basis, *
of the relevant Product in the relevant country or, if later, upon the last to
expire of any Valid Claim included in the Product Patent Rights with respect to
such Product in such country. Notwithstanding the foregoing, this Agreement
shall in any event terminate on the thirty-fifth (35th) anniversary of the date
hereof.
11.2 EVENTS OF DEFAULT.
11.2.1 DEFAULT BY EITHER PARTY. An Event of Default shall have
occurred upon (i) the occurrence of a material breach (other than a material
breach described in clause (ii) hereof or in Section 11.2.2 below) if the
breaching party fails to remedy such breach within ninety (90) days after
written notice thereof by the non-breaching party, or (ii) the bankruptcy,
insolvency, dissolution or winding up of a party.
11.2.2 DEFAULT BY SC. An Event of Default shall have occurred
if:
(i) SC fails to make payments due hereunder, sixty (60) days
after GTC delivers written notice thereof to SC specifying such failure
and its claim of right to terminate, unless SC makes such payments plus
interest within such sixty (60) day period;
(ii) SC fails to achieve the milestones set forth in
Section 5.1 hereof, or fails to diligently develop and commercialize
the Lead Compounds and Development Candidates selected by it as
required by Section 5.2 hereof, and does not cure such breach within
ninety (90) days after GTC delivers written notice thereof to SC
specifying such failure; or
(iii) SC fails to market each approved Product in the United
States as required by Section 5.3 hereof and does not cure such breach
within ninety (90) days after GTC delivers written notice thereof to SC
specifying such failure.
11.3 EFFECT OF AN EVENT OF DEFAULT.
11.3.1 REMEDIES AVAILABLE TO GTC.
(a) UPON BREACH OF A MATERIAL TERM. In the event that an Event
of Default described in Section 11.2.1, Section 11.2.2(i) or Section 11.2.2(ii)
occurs relating to SC and SC fails to cure such default during any applicable
cure period, GTC shall have the right, at its
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<PAGE> 41
option exercisable in its sole discretion, in addition to any other rights or
remedies available to it at law or in equity, to either (i) to terminate this
Agreement upon notice thereof to SC, in which case (A) the licenses granted to
SC pursuant to Article 3 shall terminate, (B) any and all Information and
materials provided by GTC pursuant to this Agreement shall be promptly returned
by SC to GTC, (C) SC shall promptly deliver to GTC all preclinical and clinical
data relating to Products owned or controlled by SC and necessary or useful to
the development or commercialization of such Products, (D) if SC has obtained
any regulatory approvals in any country for the Products, then SC shall, to the
extent legally permissible, take all additional action reasonably necessary to
assign all of its right, title and interest in and transfer possession and
control to GTC of such regulatory approvals, (E) if SC has filed Product Patent
Rights in relating to any Product, then SC shall take all action reasonably
necessary to exclusively license all of its right, title and interest in, and
transfer possession and control to GTC of, such Product Patent Rights, (F) SC
will grant GTC licenses on reasonable and customary terms to be negotiated in
good faith by the parties for any technology or know-how developed by SC or its
Third Party manufacturer, if any, relating to the manufacture of the Products
and (G) if SC has marketed the Products in any country, SC will assign to GTC
all of its right, title and interest in any trademark under which SC shall have
marketed the Products in such country together with the goodwill associated
therewith or (ii) (Y) terminate only Articles 2, 4, 5 and 7, including the
Research Collaboration (if not earlier expired pursuant to Section 11.1 hereof),
and Sections 6.1 and 6.3 hereof and (Z) convert the licenses granted by GTC to
SC pursuant to Article 3 hereof into non-exclusive licenses.
(b) UPON BREACH OF MARKETING DUE DILIGENCE OBLIGATIONS. In
the event that an Event of Default described in Section 11.2.2(iii) occurs
relating SC's obligation to market each approved Product in the United States,
then GTC shall have the right, at its option exercisable in its sole discretion,
in addition to any other rights or remedies available to it at law or in equity,
to terminate the licenses granted to SC pursuant to Article 3 as to such Product
in the United States, in which case (i) the licenses granted to SC pursuant to
Article 3 shall terminate as to such Product (A) in the United States and (B) in
all other countries in which either SC or SP is not at the time of such
termination using diligent efforts to market such Product (collectively, the
"Terminated Countries"), (ii) if SC or SP has filed Product Patent Rights in any
Terminated Country with respect to such Product, then SC shall, to the extent
legally permissible, take all action reasonably necessary to exclusively license
all of its right, title and interest in, and transfer possession and control to
GTC of, such Product Patent Rights (or an undivided interest therein if such
Product Patent Rights also cover Products as to which SC retains its license
rights under this Agreement), (iii) if SC has obtained any regulatory approvals
for such Products in any Terminated Country, then SC shall, to the extent
legally permissible, take all additional action reasonably necessary to assign
all of its right, title and interest in, and transfer possession and control to
GTC of, such regulatory approvals and (iv) SC will assign to GTC all of its
right, title and interest in any trademark under which SC shall have registered
for use with such Product in such Terminated Country together with the goodwill
associated therewith. In the event that SC
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<PAGE> 42
and SP fail to market the Products in all Major Market Countries pursuant to
Section 5.3 hereof and Section 5.3 of the SP Agreement, then the provisions of
Section 11.3.1(a) shall apply.
(c) * . In the event that GTC exercises its
rights under Section 11.3.1 and utilizes the preclinical and clinical data,
regulatory approvals, Product Patent Rights, manufacturing technology or
know-how or trademarks obtained by it to develop and commercialize Products,
either directly or through one or more corporate partners, then *
* , and upon the other terms and conditions,
* * ; provided, however, *
*
*
*
11.3.2 REMEDIES AVAILABLE TO SC. In the event that GTC
materially breaches its obligations pursuant to Section 11.2.1, and GTC fails to
cure such breach within the applicable cure period, then SC shall have the
right, at its option exercisable in its sole discretion, to seek any rights or
remedies available to it at law or in equity, subject to the limitations set
forth in Section 9.5 and Section 13.6 hereof.
11.4 *
*
11.5 EFFECT OF EXPIRATION OR TERMINATION OF RESEARCH COLLABORATION.
Upon the expiration or termination of the Research Collaboration, GTC's
obligation to provide updates to the GTC Databases, the GTC Technology and the
GTC Software shall terminate but all licenses to SC to continue to use the GTC
Databases, the GTC Technology and the GTC Software as they exist on the
termination of the Research Collaboration shall continue in full force and
effect for the remaining term of the Agreement.
11.6 EFFECT OF EXPIRATION OR TERMINATION OF AGREEMENT. The expiration
or termination of this Agreement shall not relieve the parties of any obligation
accruing prior to such expiration or termination.
11.6.1 SURVIVAL OF PROVISIONS UPON EXPIRATION. The provisions of
Articles 7, 8, 10 and 11 and Sections 9.4, 9.5, 13.6 and 13.11 hereof shall
survive the expiration of this Agreement.
11.6.2 SURVIVAL OF PROVISIONS UPON TERMINATION. The provisions
of Articles 7, 8, 10 and 11 and Sections 9.4, 9.5, 13.6 and 13.11 hereof shall
survive the termination of this Agreement; provided, however, that GTC shall
have no obligation to maintain the confidentiality
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<PAGE> 43
of the GTC Databases in the event that this Agreement is terminated due to
breach by SC. The provisions of Article 6 hereof shall survive the termination
of this Agreement until such time as the Agreement would have expired with
respect to any Product in any country pursuant to Section 11.1.2 hereof had it
not been earlier terminated.
12. PROVISIONS FOR INSOLVENCY
12.1 GENERAL. All rights and licenses granted under or pursuant to
this Agreement by GTC to SC are, for all purposes of Section 365(n) of Title 11
of the U.S. Code ("Title 11"), licenses of rights to intellectual property as
defined in Title 11. GTC agrees during the term of this Agreement to maintain
and preserve any current copies of all such intellectual property which are in
existence and in its possession as of the commencement of a case under Title 11
by or against GTC. If a case is commenced by or against GTC under Title 11, then
GTC (in any capacity, including debtor-in-possession) and its successors and
assigns (including, without limitation, a Title 11 Trustee) shall, as SC may
elect in a written request, immediately upon such request (A) (i) perform all of
the obligations provided in this Agreement to be performed by GTC, or (ii)
provide to SC copies of all such intellectual property (including all
embodiments thereof) held by GTC and such successors and assigns as of the
commencement of a case under Title 11 by or against GTC and from time to time
thereafter, and (B) not interfere with the rights of SC as provided in this
Agreement, or any agreement supplementary hereto, to such intellectual property
(including all such embodiments thereof), including any right of SC to obtain
such intellectual property (or such embodiment) from any other entity.
12.2 REJECTION OF AGREEMENT IN TITLE 11. If a Title 11 case is
commenced by or against GTC and this Agreement is rejected as provided in Title
11 and SC elects to retain its rights hereunder as provided in Title 11, then
GTC (in any capacity, including debtor-in-possession) and its successors and
assigns (including, without limitation, a Title 11 Trustee shall provide to SC
copies of all such intellectual property (including all embodiments thereof)
held by GTC and such successors and assigns immediately upon SC's written
request therefor. Whenever GTC or any of its successors or assigns provides to
SC any of the intellectual property licensed hereunder (or any embodiment
thereof) pursuant to this Article 12, SC shall have the right to perform the
obligations of GTC hereunder with respect to such intellectual property, but
neither such provision nor such performance by SC shall release GTC from any
such obligation or liability for failing to perform it; provided, however, that
in such event SC shall not be entitled to compel specific performance by GTC
under this Agreement except to the extent of enforcing the exclusivity of the
license granted hereunder.
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<PAGE> 44
12.3 ADDITIONAL RIGHTS. All rights, powers, remedies, obligations and
conditions of SC provided herein are in addition to and not in substitution for
any and all other rights, powers, remedies, obligations and conditions of GTC or
SC now or hereafter existing at law or in equity (including, without limitation,
Title 11) in the event of the commencement of a Title 11 case by or against GTC.
SC, in addition to the rights, power and remedies expressly provided herein,
shall be subject to all obligations and conditions, and shall be entitled to
exercise all other such rights and powers and resort to all other such remedies
as may now or hereafter exist at law or in equity (including, without
limitation, Title 11) in such event. The parties agree that they intend the
foregoing rights and obligations of SC to apply to the maximum extent permitted
by law, including without limitation for purposes of Title 11, (i) the right of
access to any intellectual property (including all embodiments thereof) of GTC,
or any third party with whom GTC contracts to perform an obligation of GTC under
this Agreement, and in, the case of the third party, which is necessary for the
development, registration and manufacture of a Product, and (ii) the right to
contract directly with any third party described in clause (i) in this sentence
to complete the contracted work.
12.4 EFFECT ON SP AGREEMENT. The parties acknowledge and agree that
the occurrence of any event or series of events which gives effect to any of
SC's rights under Sections 12.1, 12.2 and/or 12.3 of this Agreement shall have
the same effect with respect to SP's rights under the corresponding provisions
of the SP Agreement.
13. MISCELLANEOUS
13.1 FORCE MAJEURE. Neither party shall be held liable or responsible
to the other party nor be deemed to have defaulted under or breached this
Agreement for failure or delay in fulfilling or performing any term of this
Agreement when such failure or delay is caused by or results from causes beyond
the reasonable control of the affected party, including but not limited to fire,
floods, embargoes, war, acts of war (whether war is declared or not),
insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority or the other party; provided, however, that the party so
affected shall use reasonable commercial efforts to avoid or remove such causes
of nonperformance, and shall continue performance hereunder with reasonable
dispatch whenever such causes are removed. Either party shall provide the other
party with prompt written notice of any delay or failure to perform that occurs
by reason of force majeure. The parties shall mutually seek a resolution of the
delay or the failure to perform as noted above.
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<PAGE> 45
13.2 ASSIGNMENT. This Agreement may not be assigned or otherwise
transferred by either party without the consent of the other party; provided,
however, that either GTC or SC may, without such consent, assign its rights and
obligations under this Agreement (i) to any Affiliate, all or substantially all
of the equity interest of which is owned and controlled by such party or its
direct or indirect parent corporation, or (ii) in connection with a merger,
consolidation or sale of substantially all of such party's assets to an
unrelated Third Party; provided, however, that such party's rights and
obligations under this Agreement shall be assumed by its successor in interest
in any such transaction and shall not be transferred separate from all or
substantially all of its other business assets, including those business assets
that are the subject of this Agreement. Any purported assignment in violation of
the preceding sentence shall be void. Any permitted assignee shall assume all
obligations of its assignor under this Agreement.
13.3 SEVERABILITY. Each party hereby agrees that it does not intend
to violate any public policy, statutory or common laws, rules, regulations,
treaty or decision of any government agency or executive body thereof of any
country or community or association of countries. Should one or more provisions
of this Agreement be or become invalid, the parties hereto shall substitute, by
mutual consent, valid provisions for such invalid provisions which valid
provisions in their economic effect are sufficiently similar to the invalid
provisions that it can be reasonably assumed that the parties would have entered
into this Agreement with such valid provisions. In case such valid provisions
cannot be agreed upon, the invalidity of one or several provisions of this
Agreement shall not affect the validity of this Agreement as a whole, unless the
invalid provisions are of such essential importance to this Agreement that it is
to be reasonably assumed that the parties would not have entered into this
Agreement without the invalid provisions.
13.4 NOTICES. Any consent, notice or report required or permitted to
be given or made under this Agreement by one of the parties hereto to the other
shall be in writing, delivered personally or by facsimile (and promptly
confirmed by telephone, personal delivery or courier) or courier, postage
prepaid (where applicable), addressed to such other party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addressor and shall be effective upon receipt by the
addressee.
If to GTC: Genome Therapeutics Corporation
100 Beaver Street
Waltham, Massachusetts 02154
Attention: Senior Vice President, Strategic
Planning/Business Development
Telephone: 1-617-398-2300
FAX: 1-617-893-8277
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<PAGE> 46
with a copy to: Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
Attention: Michael Lytton, Esq.
Telephone: 1-617-573-0100
FAX:1-617-227-4420
If to SC: Schering Corporation
2000 Galloping Hill Road
Kenilworth, New Jersey 07033
Attention: Vice President, Business Development
Telephone: 1-908-298-4030
FAX: 1-908-298-5379
with a copy to: Schering Corporation
2000 Galloping Hill Road
Kenilworth, New Jersey 07033
Attention: Legal Director Licensing
Telephone: 1-908-298-5150
FAX: 1-908-298-2739
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<PAGE> 47
13.5 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts,
without giving effect to the choice of laws provisions thereof.
13.6 DISPUTE RESOLUTION.
13.6.1 The parties hereby agree that they will attempt in good
faith to resolve any controversy or claim arising out of or relating to this
Agreement promptly by negotiations. If a controversy or claim should arise
hereunder, the members of the Joint Research Committee or the Joint Patent
Committee, as applicable, will confer at least once and will attempt to resolve
the matter. If any such matter arises under Section 4.6 or Section 4.7 hereof
and has not been resolved within thirty (30) days, the matter shall be referred
to the Chief Scientific Officer (or the equivalent position) of GTC and the
President of the Schering-Plough Research Institute (or the equivalent position)
of SC (the "Representatives"). If the matter has not been resolved within thirty
(30) days by the Representatives, or if the matter arises under other provisions
of this Agreement, then the matter shall be referred to the Chief Executive
Officers of GTC and SC or their respective designees. If the matter has not been
resolved within thirty (30) days of the first meeting of the Chief Executive
Officers of the parties (which period may be extended by mutual agreement)
concerning such matter, subject to rights to injunctive relief and specific
performance, and unless otherwise specifically provided for herein, any
controversy or claim arising out of or relating to this Agreement, or the breach
thereof, will be settled as set forth in Section 13.6.2.
13.6.2 All disputes arising in connection with this Agreement
shall be finally settled under the Commercial Arbitration Rules of the American
Arbitration Association by a single arbitrator appointed in accordance with said
Rules and the terms set forth in EXHIBIT C. Notwithstanding the above, either
party has the right to bring suit in a court of competent jurisdiction against
the other party for (i) any breach of such other party's duties of
confidentiality pursuant to Article 8 of this Agreement and (ii) any
infringement of its own proprietary rights by the other party. Judgment upon the
arbitrator's award may be entered in any court of competent jurisdiction. The
award of the arbitrator may include compensatory damages against either party,
but under no circumstances will the arbitrator be authorized to, nor shall he,
award punitive damages or multiple damages against either party. The parties
agree not to institute any litigation or proceedings against each other in
connection with this Agreement except as provided in this Section 13.6.
13.7 ENTIRE AGREEMENT. This Agreement, together with the exhibits
hereto, contains the entire understanding of the parties with respect to the
subject matter hereof. All express or implied agreements and understandings,
either oral or written, heretofore made are expressly merged in and made a part
of this Agreement. This Agreement may be amended, or any term hereof modified,
only by a written instrument duly executed by both parties hereto.
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<PAGE> 48
13.8 PUBLICITY. GTC and SC each agree not to disclose the existence
of, or any terms or conditions of, this Agreement, or any results arising from
the Research Collaboration, to any Third Party without consulting the other
party prior to such disclosure. Notwithstanding the foregoing, prior to
execution of this Agreement, GTC and SC shall agree upon the substance of
information that can be used as a routine reference in the usual course of
business to describe the terms of this transaction, and GTC and SC may disclose
such information, as modified by mutual agreement from time to time, without
consulting the other party.
13.9 HEADINGS. The captions to the several Articles and Sections
hereof are not a part of this Agreement, but are merely guides or labels to
assist in locating and reading the several Articles and Sections hereof.
13.10 INDEPENDENT CONTRACTORS. It is expressly agreed that GTC and SC
shall be independent contractors and that the relationship between the two
parties shall not constitute a partnership, joint venture or agency. Neither GTC
nor SC shall have the authority to make any statements, representations or
commitments of any kind, or to take any action, which shall be binding on the
other, without the prior consent of the other party to do so.
13.11 AGREEMENT NOT TO SOLICIT EMPLOYEES. During the term of this
Agreement and for a period of * following the expiration or termination of this
Agreement pursuant to Article 11, GTC and SC agree not to seek to persuade or
induce any employee of the other company to discontinue his or her employment
with that company in order to become employed by or associated with any
business, enterprise or effort that is associated with its own business;
*
*
*
13.12 EXPORTS. The parties acknowledge that the export of technical
data, materials or products is subject to the exporting party receiving any
necessary export licenses and that the parties cannot be responsible for any
delays attributable to export controls which are beyond the reasonable control
of either party. GTC and SC agree not to export or re-export, directly or
indirectly, any information, technical data, the direct product of such data,
samples or equipment received or generated under this Agreement in violation of
any applicable export control laws or governmental regulations. GTC and SC agree
to obtain similar covenants from their licensees, sublicensees and contractors
with respect to the subject matter of this Section.
13.13 WAIVER. The waiver by either party hereto of any right hereunder
or the failure to perform or of a breach by the other party shall not be deemed
a waiver of any other right hereunder or of any other breach or failure by said
other party whether of a similar nature or otherwise.
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13.14 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.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officer to execute and deliver this Agreement as of the date first set forth
above.
GENOME THERAPEUTICS CORPORATION
By: /s/ Christopher T. Kelly
___________________________
Title: Senior Vice President
________________________
Strategic Planning/Business Development
SCHERING CORPORATION
By: /s/ David Poorvin, Ph.D.
___________________________
Title: Vice President
________________________
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<PAGE> 1
Exhibit 10.42
Confidential information
omitted and filed
separately with the
commission
COLLABORATION AND LICENSE AGREEMENT
BETWEEN
GENOME THERAPEUTICS CORPORATION
AND
SCHERING-PLOUGH LTD.
dated as of September 22, 1997
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS...................................................... 2
1.1. " * DATABASE"......................................... 2
1.2. "AFFILIATE"...................................................... 2
1.3. " * DATABASE".......................................... 2
1.4. "CONTRACT YEAR".................................................. 2
1.5. "DEVELOPMENT CANDIDATE".......................................... 2
1.6. "DIAGNOSTIC PRODUCT"............................................. 2
1.7. "EFFECTIVE DATE"................................................. 2
1.8. "ENABLED BY GTC"................................................. 2
1.9. " * ".......................... 3
1.10. "EVENT OF DEFAULT"............................................... 3
1.11. "FDA"............................................................ 3
1.12. "FIRST COMMERCIAL SALE".......................................... 3
1.13. "GENE PATENT RIGHTS"............................................. 3
1.14. "GTC DATABASES".................................................. 3
1.15. "GTC SOFTWARE"................................................... 3
1.16. "GTC TECHNOLOGY"................................................. 3
1.17. "IND"............................................................ 3
1.18. "INITIAL RESEARCH COLLABORATION TERM"............................ 4
1.19. "LEAD COMPOUND".................................................. 4
1.20. "MAJOR MARKET COUNTRY............................................ 4
1.21. "NDA"............................................................ 4
1.22. " * "..................................................... 4
1.23. "1995 COLLABORATION"............................................. 5
1.24. "OVERALL RESEARCH PLAN".......................................... 5
1.25. "PATHOGENOMETM DATABASE"......................................... 5
1.26. "PATHOGENOMETM DATABASE AGREEMENT"............................... 6
1.27. "PLANT PRODUCT".................................................. 6
1.28. "PRODUCT"........................................................ 6
1.29. "PRODUCT PATENT RIGHTS".......................................... 6
1.30. "RESEARCH COLLABORATION"......................................... 6
1.31. "SP ASSAY TECHNOLOGY"............................................ 6
1.32. "SC"............................................................. 6
1.33. "SC AGREEMENT"................................................... 6
1.34. "THIRD PARTY".................................................... 6
1.35. "VACCINE PRODUCT"................................................ 7
1.36. "VALID CLAIM".................................................... 7
ARTICLE 2. SCOPE AND STRUCTURE OF THE COLLABORATION......................... 7
(i)
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<PAGE> 3
2.1. GENERAL; EFFECTIVENESS AND EFFECTIVE DATE........................ 7
2.2. ACKNOWLEDGMENT OF OTHER COLLABORATIONS........................... 7
2.3. SUBSCRIPTION TO THE PATHOGENOME(TM) DATABASE;
INCLUSION OF DATA IN PATHOGENOME(TM) DATABASE.................... 7
ARTICLE 3. LICENSE GRANTS; MARKETING RIGHTS................................. 8
3.1. GRANT OF RIGHTS BY GTC TO SP..................................... 8
3.1.1. EXCLUSIVE GRANT FOR GTC DATABASES AND
PRODUCT PATENT RIGHTS..................................... 8
3.1.2. NON-EXCLUSIVE GRANT FOR GTC TECHNOLOGY AND
GTC SOFTWARE.............................................. 8
3.1.3. SUBLICENSES............................................... 8
3.2. GRANT OF RIGHTS BY SP TO GTC..................................... 9
3.2.1. GRANT OF RIGHTS TO SP ASSAY TECHNOLOGY.................... 9
3.2.2. GRANT OF GENE PATENT RIGHTS. ............................ 9
3.3. * ........................................... 9
3.4. NO GRANT OF OTHER TECHNOLOGY OR PATENT RIGHTS.................... 9
ARTICLE 4. CONDUCT OF THE RESEARCH COLLABORATION............................ 9
4.1. OBLIGATIONS OF THE PARTIES....................................... 9
4.1.1. REASONABLE EFFORTS........................................ 9
4.1.2. DELIVERIES BY GTC......................................... 10
4.2. ACCESS TO DATA, INFORMATION EXCHANGE AND REPORTS................. 10
4.3. ELECTRONIC ACCESS TO SCIENTIFIC DATA............................. 10
4.4. TERM OF RESEARCH COLLABORATION;
LEVEL OF EFFORT BY GTC SCIENTISTS................................ 10
4.5. AVAILABILITY OF EMPLOYEES........................................ 11
4.6. JOINT RESEARCH COMMITTEE......................................... 11
4.6.1. RESEARCH PLAN............................................. 11
4.6.2. ANNUAL RESEARCH PLANS..................................... 11
4.6.3. PERIODIC REVIEWS.......................................... 12
4.6.4. MEMBERSHIP OF JOINT RESEARCH COMMITTEE.................... 12
4.6.5. JOINT RESEARCH COMMITTEE MEETINGS......................... 12
4.6.6. DECISION MAKING........................................... 12
4.7. JOINT PATENT COMMITTEE........................................... 13
ARTICLE 5. DEVELOPMENT AND MARKETING DUE DILIGENCE.......................... 13
5.1. DILIGENT DISCOVERY EFFORTS....................................... 13
5.2. DILIGENT DEVELOPMENT EFFORTS..................................... 13
5.3. DILIGENT MARKETING AND DISTRIBUTION EFFORTS...................... 14
5.4. REPORTS.......................................................... 14
ARTICLE 6. PAYMENTS......................................................... 14
6.1. LICENSE FEE...................................................... 14
6.2. MILESTONE PAYMENTS............................................... 15
(ii)
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<PAGE> 4
6.2.1. * PAYMENTS........................................... 15
6.2.2. * PAYMENTS.......................................... 15
6.3. RESEARCH FUNDING................................................. 16
6.3.1. FUNDING DURING THE INITIAL RESEARCH COLLABORATION TERM.... 16
6.3.2. FUNDING AFTER THE INITIAL RESEARCH COLLABORATION TERM..... 16
6.3.3. ADDITIONAL EXPENDITURES................................... 17
6.4. ROYALTIES PAYABLE BY SP AND ITS AFFILIATES AND SUBLICENSEES...... 17
6.4.1. GENERAL................................................... 17
6.4.2. ROYALTIES ON NET SALES OF THE PRODUCTS.................... 17
6.4.3. SUBLICENSES............................................... 18
6.4.4. * THIRD PARTY ROYALTIES.................... 18
6.4.5. ROYALTY REPORTS, EXCHANGE RATES........................... 18
6.4.6. AUDITS.................................................... 19
6.4.7. ROYALTY PAYMENT TERMS..................................... 19
6.5. WITHHOLDING TAXES................................................ 19
6.6. BLOCKED CURRENCY................................................. 20
6.7. ADDITIONAL PAYMENT OBLIGATIONS................................... 20
6.8. INTEREST ON LATE PAYMENTS........................................ 20
6.9. MANNER OF PAYMENT................................................ 20
ARTICLE 7. INTELLECTUAL PROPERTY............................................ 20
7.1. OWNERSHIP OF INTELLECTUAL PROPERTY............................... 20
7.2. FILING, PROSECUTION AND MAINTENANCE OF PRODUCT PATENT
RIGHTS AND GENE PATENT RIGHTS.................................... 20
7.2.1. PROSECUTION AND MAINTENANCE OF PRODUCT PATENT
RIGHTS AND GENE PATENT RIGHTS............................. 21
7.2.2. ABANDONMENT; FAILURE TO PAY............................... 21
7.2.3. COOPERATION............................................... 21
7.3. INFRINGEMENT BY OTHERS; PROSECUTION BY SP........................ 21
7.4. INFRINGEMENT BY OTHERS; PROSECUTION BY GTC....................... 22
7.5. COOPERATION IN INFRINGEMENT ACTIONS.............................. 22
7.6. TRADEMARKS....................................................... 22
ARTICLE 8. CONFIDENTIALITY.................................................. 22
8.1. NONDISCLOSURE OBLIGATIONS........................................ 22
8.1.1. GENERAL................................................... 22
8.1.2. LIMITATIONS............................................... 23
8.2. SAMPLES.......................................................... 23
8.3. INJUNCTIVE RELIEF................................................ 23
ARTICLE 9. REPRESENTATIONS AND WARRANTIES................................... 24
9.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF GTC................. 24
(iii)
* Confidential Treatment Requested
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9.2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SP.................. 25
9.3. VALIDITY AND SCOPE............................................... 25
9.4. WARRANTY DISCLAIMER.............................................. 25
9.5. LIMITED LIABILITY................................................ 25
ARTICLE 10. INDEMNITY........................................................ 26
10.1. SP INDEMNITY OBLIGATIONS......................................... 26
10.2. LIMITATION ON SP INDEMNITY OBLIGATIONS........................... 26
10.3. PROCEDURE........................................................ 26
10.4. INSURANCE........................................................ 26
ARTICLE 11. EXPIRATION AND TERMINATION....................................... 27
11.1. EXPIRATION....................................................... 27
11.1.1. TERM OF RESEARCH COLLABORATION........................... 27
11.1.2. TERM OF AGREEMENT........................................ 27
11.2. EVENTS OF DEFAULT................................................ 27
11.2.1. DEFAULT BY EITHER PARTY.................................. 27
11.2.2. DEFAULT BY SP............................................ 27
11.3. EFFECT OF AN EVENT OF DEFAULT.................................... 28
11.3.1. REMEDIES AVAILABLE TO GTC................................ 28
11.3.2. REMEDIES AVAILABLE TO SP................................. 29
11.4. * ............................................... 29
11.5. EFFECT OF EXPIRATION OR TERMINATION OF RESEARCH COLLABORATION.... 29
11.6. EFFECT OF EXPIRATION OR TERMINATION OF AGREEMENT................. 29
11.6.1. SURVIVAL OF PROVISIONS UPON EXPIRATION................... 30
11.6.2. SURVIVAL OF PROVISIONS UPON TERMINATION.................. 30
ARTICLE 12. PROVISIONS FOR INSOLVENCY........................................ 30
12.1. GENERAL.......................................................... 30
12.2. REJECTION OF AGREEMENT IN TITLE 11............................... 30
12.3. ADDITIONAL RIGHTS................................................ 31
12.4. EFFECT ON SC AGREEMENT........................................... 31
ARTICLE 13. MISCELLANEOUS.................................................... 31
13.1. FORCE MAJEURE.................................................... 31
13.2. ASSIGNMENT....................................................... 31
13.3. SEVERABILITY..................................................... 32
13.4. NOTICES.......................................................... 32
13.5. RELATIONSHIP TO SC AGREEMENT; CONTROLLING PROVISIONS............. 33
13.6. APPLICABLE LAW................................................... 33
13.7. DISPUTE RESOLUTION............................................... 33
13.8. ENTIRE AGREEMENT................................................. 34
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13.9. PUBLICITY........................................................ 34
13.10. HEADINGS......................................................... 34
13.11. INDEPENDENT CONTRACTORS.......................................... 34
13.12. AGREEMENT NOT TO SOLICIT EMPLOYEES............................... 34
13.13. EXPORTS.......................................................... 34
13.14. WAIVER........................................................... 35
13.15. COUNTERPARTS..................................................... 35
EXHIBIT A *
EXHIBIT B Form of Material Transfer Agreement
EXHIBIT C Arbitration Procedures
EXHIBIT D *
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COLLABORATION AND LICENSE AGREEMENT
THIS COLLABORATION AND LICENSE AGREEMENT (the "Agreement") is dated as
of September 22, 1997 and is made by and among GENOME THERAPEUTICS CORPORATION,
a Massachusetts corporation having its principal place of business at 100 Beaver
Street, Waltham, Massachusetts 02154 U.S.A. ("GTC"), and SCHERING-PLOUGH LTD., a
Swiss corporation having its principal place of business at Toepferstrasse 5,
CH-6004 Lucerne, Switzerland ("SP"). GTC and SP are sometimes referred to herein
individually as a party and collectively as the parties.
R E C I T A L S
WHEREAS, GTC and SP are parties to a Collaboration and License
Agreement dated as of December 6, 1995 (the "1995 Collaboration") relating, in
part, to the identification of essential genes in * which
the parties believe may yield data relating to genes in *
and *
WHEREAS, GTC has compiled and is compiling a PathoGenome(TM) Database
containing certain genomic sequence information (including information relating
to * and GTC has granted and will continue to grant
non-exclusive rights of access to subscribers to the PathoGenome(TM) Databas
WHEREAS, GTC has expertise in hybridization, high-throughput
sequencing, the development and utilization of the software tools necessary to
assemble, annotate, process, search, manipulate and analyze the genomic sequence
information it generates in its research programs (GTC's "bioinformatics"
capability) and assay development;
WHEREAS, SP is interested in using data from the 1995 Collaboration
relating to essential genes in * and obtaining
access to information on * to be included in the
PathoGenome(TM) Database and to GTC's hybridization, high-throughput sequencing,
bioinformatics capability and assay development by entering into a collaboration
with GTC to identify homologous essential genes in *
for the development, manufacture and sale of novel human and animal therapeutic
pharmaceuticals against infectious fungi; and
WHEREAS, GTC is willing to grant SP such access and enter into such a
collaboration upon the terms and conditions set forth below;
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NOW THEREFORE, in consideration of the premises and of the covenants
herein contained, the parties hereto mutually agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the terms defined in this Article 1
shall have the meanings specified below:
1.1 " * DATABASE" shall mean GTC's *
DNA sequence database developed pursuant to this Agreement consisting of
sequence information arising out of the use of information from the 1995
Collaboration and other information not included in the PathoGenome(TM) Database
and any and all electronic and hard copy data related thereto.
1.2 "AFFILIATE" shall mean any corporation or other entity which
directly or indirectly controls, is controlled by or is under common control
with a party to this Agreement. A corporation or other entity shall be regarded
as in control of another corporation or entity if it owns or directly or
indirectly controls more than fifty percent (50%) of the outstanding voting
stock or other ownership interest of the other corporation or entity, or if it
possesses, directly or indirectly, the power to manage, direct or cause the
direction of the management and policies of the corporation or other entity or
the power to elect or appoint fifty percent (50%) or more of the members of the
governing body of the corporation or other entity. Any such other relationship
as in fact results in actual control over the management, business and affairs
of a corporation or other entity shall also be deemed to constitute control.
1.3 " * DATABASE" shall mean GTC's *
DNA sequence database developed pursuant to this Agreement consisting of
sequence information arising out of the use of information from the 1995
Collaboration and other information not included in the PathoGenome(TM) Database
and any and all electronic and hard copy data related thereto.
1.4 "CONTRACT YEAR" shall mean each twelve (12) month period starting
on (i) the Effective Date in the case of the first Contract Year and (ii) the
anniversary of the Effective Date for each subsequent Contract Year.
1.5 "DEVELOPMENT CANDIDATE" shall mean any compound developed as a
result of the Research Collaboration, (i) designated by the Schering-Plough
Research Institute Project Assessment Committee or its successor for full
clinical development or (ii) with respect to which SP, its Affiliates,
sublicensees or designees have initiated an in vivo toxicology program necessary
to obtain approval for use of such compound in human clinical trials.
1.6 "DIAGNOSTIC PRODUCT" shall mean any device, product, process,
substance,
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composition or service intended to predict, detect, identify or monitor a
disease or determine the presence of a pathologic condition in humans or animals
(whether related to fungal infections or not).
1.7 "EFFECTIVE DATE" shall have the meaning set forth in
Section 2.1.
1.8 "ENABLED BY GTC" shall mean that the use of information in the
GTC Databases, GTC Technology or GTC Software, which was, at the time of its
initial use by SP, not in the public domain, materially contributed to the
relevant discovery or development.
1.9 " * " shall mean GTC's intellectual property
relating to * and * essential genes
which is developed under the Research Collaboration.
1.10 "EVENT OF DEFAULT" shall have the meanings set forth in Section
11.2 hereof.
1.11 "FDA" shall mean the United States Food and Drug Administration.
1.12 "FIRST COMMERCIAL SALE" of a Product in a country shall mean the
first for profit sale for use or consumption by the general public of a Product
in such country after the required marketing and pricing or pricing
reimbursement approvals for such country have been obtained.
1.13 "GENE PATENT RIGHTS" shall mean (a) the United States and
foreign patent applications filed covering * and *
genes in the GTC Databases (including components thereof), (b) any United States
patents and foreign patents issuing from such patent applications and (c) any
continuations, continuations-in-part directed to subject matter specifically
described in such patent applications, divisionals, patents of addition,
renewals, registrations, confirmations, reexaminations, reissues, extensions or
provisional applications of any of the foregoing.
1.14 "GTC DATABASES" shall mean the * Database and
* Database.
1.15 "GTC SOFTWARE" shall mean software and components thereof, and
any associated documentation, whether existing on the Effective Date or
developed by GTC during the Research Collaboration, which is owned or controlled
by, or licensed (with the right to sublicense) to, GTC and which is necessary or
useful to pursue searches in the GTC Databases and/or to interpret or analyze
the data contained in the GTC Databases, EXCLUDING, HOWEVER, any software used
in the creation of, as opposed to providing access to and interpretation or
analysis of, the GTC Databases.
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1.16 "GTC TECHNOLOGY" shall mean and include all proprietary
materials (excluding Products), procedures, processes, technical information,
know-how, data, formulae, expertise and trade secrets discovered or developed by
GTC during the course of the Research Program and owned or controlled by GTC,
including any screening assays developed or acquired by GTC during the course of
the Research Program, EXCLUDING, HOWEVER, the SP Assay Technology, the GTC
Databases, the GTC Software and GTC's patented sequencing technology and the
procedures, processes, technical information, know-how, data, formulae,
expertise and trade secrets related thereto.
1.17 "IND" shall mean an investigational new drug application or its
equivalent filed with the FDA and necessary for beginning clinical trials in
humans, or any comparable application filed with the regulatory authorities of a
country other than the United States prior to beginning clinical trials in
humans in that country, with respect to Products.
1.18 "INITIAL RESEARCH COLLABORATION TERM" shall have the meaning set
forth in Section 4.4.
1.19 "LEAD COMPOUND" shall mean an isolated compound arising from
synthesis or which is a natural product (i.e., from a biological source),
therapy or modality developed as a result of the Research Collaboration with
respect to which SP, its Affiliates, sublicensees or designees have initiated a
program of medicinal chemistry optimization with a goal of developing Products.
1.20 "MAJOR MARKET COUNTRY" shall mean one or more of (i) the United
States, (ii) Japan or (iii) at least two (2) countries selected from France,
Italy, Germany, and the United Kingdom.
1.21 "NDA" shall mean a new drug application or product license
application or its equivalent filed with the FDA after completion of human
clinical trials to obtain marketing approval for a Product, or any comparable
application filed with the regulatory authorities of a country other than the
United States, including, where applicable, any applications for pricing or
price reimbursement.
1.22 *
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*
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*
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*
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1.23 "1995 COLLABORATION" shall have the meaning set forth in the
first recital of this Agreement.
1.24 "OVERALL RESEARCH PLAN" shall mean the research plan agreed upon
by the Joint Research Committee pursuant to Section 4.6.1 hereof, as it may be
subsequently amended, improved or modified from time to time, the draft of which
is attached hereto as EXHIBIT A (the "Draft Overall Research Plan").
1.25 "PATHOGENOME(TM) DATABASE" shall have the meaning set forth in
the PathoGenome(TM) Database Agreement.
1.26 "PATHOGENOME(TM) DATABASE AGREEMENT" shall mean the
PathoGenome(TM) Database License Agreement between GTC and SP described in
Section 2.3 hereof.
1.27 "PLANT PRODUCT" shall mean any device, product, process,
substance, composition or service related to plants.
1.28 "PRODUCT" shall mean any pharmaceutical product used to treat
human or animal disease (whether related to * or *
or not) which (i) contains a component which is covered by one or more Valid
Claims included within the Product Patent Rights or (ii) contains a component
whose discovery or development was Enabled by GTC, but shall not include any
Diagnostic Product, Plant Product or Vaccine Product.
1.29 "PRODUCT PATENT RIGHTS" shall mean (a) the United States and
foreign patent applications filed covering Products (including components
thereof) or biological targets discovered and/or developed based upon the
Research Collaboration or during the course of SP's performance of its
development obligations under Article 5 of this Agreement, (b) any United States
patents and foreign patents issuing from such patent applications and (c) any
continuations, continuations-in-part directed to subject matter specifically
described in such patent applications, divisionals, patents of addition,
renewals, registrations, confirmations, reexaminations, reissues, extensions or
provisional applications of any of the foregoing. Product
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Patent Rights shall not include any of the foregoing to the extent that they are
specifically directed to and cover Diagnostic Products, Plant Products or
Vaccine Products.
1.30 "RESEARCH COLLABORATION" shall mean the period of time during
which GTC alone or GTC and SP shall perform the work described under the
Research Plan, which period may be extended pursuant to the terms of this
Agreement. The first day of the Research Collaboration shall be the Effective
Date. As used herein, the Research Collaboration shall not include any work
performed by GTC or SP pursuant to the PathoGenome(TM) Database Agreement, the
1995 Collaboration, or any other agreement between GTC and SP.
1.31 "SP ASSAY TECHNOLOGY" shall mean and include all genomic-based
screening assays for anti-infectives discovered and initially reduced to
practice or acquired by SP before or during the course of the Research Program,
including all proprietary materials (excluding Products), procedures, processes,
technical information, know-how, data, formulae, expertise and trade secrets
associated therewith.
1.32 "SC" shall mean Schering Corporation, a New Jersey corporation
having its principal place of business at 2000 Galloping Hill Road, Kenilworth,
New Jersey U.S.A.
1.33 "SC AGREEMENT" shall mean the Collaboration Agreement dated as
of the date hereof between GTC and SC.
1.34 "THIRD PARTY" shall mean any entity other than GTC or SP and
their respective Affiliates.
1.35 "VACCINE PRODUCT" shall mean any infectious agent or component
thereof administered to humans or animals in order to elicit a protective or
therapeutic immune response against an infectious agent including, without
limitation, nucleic acid, a synthetic or recombinantly produced product encoding
corresponding antigens or epitopes and monoclonal antibodies made against
recombinant antigen for passive or post-exposure prophylaxis.
1.36 "VALID CLAIM" shall mean a claim of a patent application or a
patent which has not been held permanently revoked, unenforceable or invalid by
a decision of a court or other governmental agency of competent jurisdiction,
and which is not subject to appeal.
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2. SCOPE AND STRUCTURE OF THE COLLABORATION
2.1 GENERAL; EFFECTIVENESS AND EFFECTIVE DATE. GTC and SP wish to
establish a collaborative alliance to discover and develop Products effective
against infectious fungi. During the course of this collaboration, GTC and SP
shall communicate regularly and shall assume different rights and
responsibilities for the development of Products, all as more specifically
described below. The effectiveness of this Agreement is expressly conditioned
upon the Board of Directors of Schering-Plough Corporation approving this
Agreement, and the Effective Date shall be the date of such approval. The
parties shall execute a letter acknowledging the Effective Date, which letter
shall be appended to this Agreement.
2.2 ACKNOWLEDGMENT OF OTHER COLLABORATIONS. SP acknowledges that GTC
is currently engaged in certain research collaborations with Third Parties and
intends to enter into additional research collaborations in the future. GTC
agrees that, *
*
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2.3 SUBSCRIPTION TO THE PATHOGENOMETM DATABASE; INCLUSION OF DATA IN
PATHOGENOME(TM) DATABASE. SP acknowledges that GTC has compiled and is compiling
a PathoGenome(TM) Database containing certain genomic sequence information
(including information relating to * ) and that GTC has granted and will
continue to grant non-exclusive rights of access to subscribers to the
PathoGenome(TM) Database. *
*
*
*
*
*
*
*
*
*
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*
*
3. LICENSE GRANTS; MARKETING RIGHTS
3.1 GRANT OF RIGHTS BY GTC TO SP.
3.1.1 EXCLUSIVE GRANT FOR GTC DATABASES AND PRODUCT PATENT
RIGHTS. Subject to the terms of this Agreement, GTC hereby grants to SP the
right of exclusive access to the GTC Databases and the exclusive worldwide right
and license under the Product Patent Rights and Essential Gene Intellectual
Property to research, develop, use, manufacture, have manufactured, market,
promote, import, export, sell and have sold Products. The rights granted to SP
in this Subsection 3.1.1. shall survive the termination or expiration of the
Research Collaboration and continue for the entire term of this Agreement.
3.1.2 NON-EXCLUSIVE GRANT FOR GTC TECHNOLOGY AND GTC SOFTWARE.
Subject to the terms of this Agreement, GTC hereby grants to SP (i) the
non-exclusive right and license to use the GTC Technology to research, develop,
use, manufacture, have manufactured, market, promote, import, export, sell and
have sold Products and (ii) the non-exclusive right and license to use the GTC
Software for the purpose of obtaining access to, pursuing searches in, and/or
interpreting or analyzing the data contained in the GTC Databases and other
genomic databases which may be or become available to SP, provided, however,
that to the extent that the GTC Software incorporates or requires the use of
software licensed by GTC from a Third Party, SP shall be responsible for
obtaining any necessary license and paying all fees and charges associated with
SP's use of any such software licensed from a Third Party. The rights granted to
SP in this Subsection 3.1.2 shall survive the termination of the Research
Collaboration and continue for the entire term of this Agreement. SP agrees to
use the GTC Software only for the internal purposes of SP and its Affiliates,
and agrees not to use the GTC Software for processing data for Third Parties or
to make the GTC Software available to Third Parties. SP agrees that all copies
of the GTC Software will be treated as confidential Information of GTC and
agrees to establish reasonable security measures to prevent copies of the GTC
Software from being made available to Third Parties.
3.1.3 SUBLICENSES. SP shall have the right to grant sublicenses
under (i) the GTC Databases, Essential Gene Intellectual Property and Product
Patent Rights to Affiliates of SP and, with the prior written consent of GTC
which shall not be unreasonably withheld, to Third Parties and (ii) under GTC
Technology and GTC Software to Affiliates of SP, provided, however, that in
either case each Third Party sublicensee shall execute a written agreement
pursuant to which it assumes the applicable obligations of SP hereunder.
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3.2 GRANT OF RIGHTS BY SP TO GTC.
3.2.1 GRANT OF RIGHTS TO SP ASSAY TECHNOLOGY. Subject to the
terms of this Agreement, SP hereby grants to GTC the perpetual, non-exclusive,
royalty-free right and license to use the SP Assay Technology for GTC's internal
research programs; provided, however, that GTC shall have no right to use the SP
Assay Technology in research collaborations with Third Parties, to grant
sublicenses with respect to the SP Assay Technology or to sell or otherwise
transfer any interest in the SP Assay Technology to any Third Party.
3.2.2 GRANT OF GENE PATENT RIGHTS. SP hereby grants to GTC the
perpetual, exclusive, royalty-free, worldwide right and license under the Gene
Patent Rights to research, develop, use, manufacture, have manufactured, market,
promote, import, export, sell and have sold Diagnostic Products, Vaccine
Products and Plant Products.
3.3 *
*
*
*
*
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*
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*
*
3.4 NO GRANT OF OTHER TECHNOLOGY OR PATENT RIGHTS. Except as
otherwise expressly provided in this Agreement, under no circumstances shall a
party hereto, as a result of this Agreement, obtain any ownership interest in or
other right to any technology, know-how, patents, patent applications, genomic
sequence data, products, or biological materials of the other party, including
items owned, controlled or developed by the other party, or transferred by the
other party to said party, at any time pursuant to this Agreement. Any
compounds, technology or know-how derived, developed or acquired by either party
independent of the * and * Databases
and/or the Research Collaboration shall be the property of such party.
4. CONDUCT OF THE RESEARCH COLLABORATION
4.1 OBLIGATIONS OF THE PARTIES.
4.1.1 REASONABLE EFFORTS. During the Research Collaboration and
thereafter,
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each of the parties agrees to use its respective commercially reasonable efforts
to perform its obligations under the Overall Research Plan, each Annual Research
Plan and this Agreement in a timely manner.
4.1.2 DELIVERIES BY GTC. *
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4.2 ACCESS TO DATA, INFORMATION EXCHANGE AND REPORTS. SP will have
direct access to raw sequence data that form part of the GTC Databases and to
other work resulting from the Research Collaboration including, but not limited
to, hybridization results, clones containing * and *
genes, targeted sequencing data, comparative sequence data, gene expression and
protein expression data, molecular genetic methodologies and technologies,
protein purification procedures and biochemical assay methodologies. Except for
electronic access via a computer network pursuant to Section 4.3 hereof, SP's
access shall be during normal business hours and upon reasonable notice,
granting SP treatment and priority not less favorable than granted to GTC's
other collaborators.
During the Research Collaboration and thereafter, each party shall keep
the other informed as to its progress related to the development of Products by
either party or its Affiliates or sublicensees in connection with the Research
Collaboration. In a timely manner during the Research Collaboration, each party
shall provide the other party with a reasonably detailed report which shall
describe the reporting party's progress with respect to its efforts under this
Agreement.
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4.3 ELECTRONIC ACCESS TO SCIENTIFIC DATA. To the extent practicable,
SP's access to scientific data contemplated by Section 4.2 will at all times be,
at the expense of SP, via electronic computer network with twenty-four (24)
hours accessibility except for downtime required to maintain or otherwise
service the database and under unforeseen circumstances; provided, however, that
SP shall take such measures to insure the security of such computer link as GTC
shall reasonably request, including, without limitation, restricting access
thereto and regulating the information communicated pursuant thereto for
purposes of maintaining confidentiality. In addition to electronic access via a
computer network, SP shall be entitled to install and maintain for the term of
this Agreement electronic copies of the GTC Databases and any updates thereto on
computers maintained by SP at SP facilities; provided, however, that prior to
any such installation GTC and SP shall agreed upon reasonable security measures
to be instituted by SP to protect the GTC Databases from access by Third
Parties.
4.4 TERM OF RESEARCH COLLABORATION;
LEVEL OF EFFORT BY GTC SCIENTISTS.
*
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4.5 AVAILABILITY OF EMPLOYEES. GTC agrees to make its employees
reasonably available at their places of employment to consult with SP on issues
arising during the Research Collaboration.
4.6 JOINT RESEARCH COMMITTEE.
4.6.1 RESEARCH PLAN. Within sixty (60) days after the Effective
Date, a joint committee comprised of three (3) named representatives of each
party (the "Joint Research
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Committee") shall be appointed and shall agree upon an overall written plan for
the research and development to be conducted by the parties during the Research
Collaboration (the "Overall Research Plan"). The Overall Research Plan shall be
consistent with the scope, scale and direction of Draft Overall Research Plan
attached hereto as EXHIBIT A and shall establish:
(i) the scope of the Research Collaboration;
(ii) the research objectives, work plan activities and time
schedules with respect to identification of novel and
essential fungal genomic targets; and
(iii) the responsibilities of each party with respect to the
work to be performed under the Research Collaboration.
The Overall Research Plan may be revised and updated from time to time as agreed
upon by the Joint Research Committee.
4.6.2 ANNUAL RESEARCH PLANS. Within sixty (60) days after the
Effective Date, the Joint Research Committee shall agree upon a written plan for
the specific activities to be conducted in connection with the Research
Collaboration during the remainder of the first Contract Year (the "Annual
Research Plan"). Thereafter, by October 1 of each year during the Research
Collaboration beginning with October 1, 1998, GTC shall submit to the Joint
Research Committee a written proposed Annual Research Plan consistent with the
Overall Research Plan for the following Contract Year. The Joint Research
Committee shall review each such proposal as soon as practicable and shall
approve no later than December 15 of such year the final Annual Research Plan
for the next succeeding Contract Year.
4.6.3 PERIODIC REVIEWS. The Joint Research Committee shall
review the Overall Research Plan on an ongoing basis and may make changes to the
Annual Research Plan then in effect; provided, however, the Annual Research Plan
then in effect shall not be modified except as agreed in writing by the Joint
Research Committee.
4.6.4 MEMBERSHIP OF JOINT RESEARCH COMMITTEE. The Joint Research
Committee shall be comprised of three (3) representatives from each of SP and
GTC, with each party's members to be selected by that party. GTC and SP may
replace one or more of its representatives on the Joint Research Committee at
any time upon written notice to the other party. Unless the parties otherwise
agree, the chairmanship of the Joint Research Committee shall rotate at the end
of each Contract Year between a representative of GTC and a representative of
SP, with a representative of GTC serving as chairman during the first Contract
Year. From time to time the Joint Research Committee may establish subcommittees
to oversee particular projects or activities, and such subcommittees will be
constituted as the Joint Research Committee shall agree.
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4.6.5 JOINT RESEARCH COMMITTEE MEETINGS. The Joint Research
Committee shall meet six (6) times per year at regular intervals during the term
of the Research Collaboration, or more often as agreed upon by both parties, at
such locations as the parties may agree upon. Regularly scheduled meetings or
special meetings of the Joint Research Committee may be in such form (e.g. in
person, by telephone or by video conference) as the members of the Joint
Research Committee shall agree. At such meetings, the Joint Research Committee
shall formulate and review the objectives of the Research Collaboration as
expressed in the Overall Research Plan, monitor the progress of the Annual
Research Plan toward those objectives and take such other actions as may be
specified under this Agreement or as the parties may deem appropriate. With the
consent of both parties, other representatives of GTC or SP or their respective
Affiliates or, in the case of SP and its Affiliates, their sublicensees, may
attend the meetings of the Joint Research Committee as nonvoting observers. Each
party shall be responsible for all expenses of its representatives on the Joint
Research Committee. The Joint Research Committee shall keep accurate minutes of
its deliberations which shall record all proposed decisions and all actions
recommended or taken and which shall be countersigned by one representative of
each party. All records of the Joint Research Committee shall be available to
both parties.
4.6.6 DECISION MAKING. Any approval, determination or other
action agreed to by all members of the Joint Research Committee or their
respective designees present at the relevant Joint Research Committee meeting
shall be the approval, determination or other action of the entire Joint
Research Committee, provided that, at least one (1) representative of each party
must be present. Except as otherwise agreed, all decisions require the approval
of all of the representatives of each party, regardless of the number of such
representatives present. The Joint Research Committee may, however, delegate to
one party or to a specific representative the authority to make certain
decisions. In the event of a dispute within the Joint Research Committee, if the
members of the Joint Research Committee are unable to resolve such dispute after
engaging in good faith negotiations for thirty (30) days, then such dispute
shall be resolved in accordance with Section 13.6 hereof.
4.7 JOINT PATENT COMMITTEE. A joint committee comprised of one (1)
named representative of each party (the "Joint Patent Committee") shall be
appointed and shall meet as needed. A party may change its representative to the
Joint Patent Committee at any time. Members of the Joint Patent Committee may be
represented at any meeting by another member of the Joint Patent Committee, or
by a deputy. Additional members of the Joint Patent Committee may be appointed
on an ad hoc basis upon the mutual consent of the parties. The Joint Patent
Committee shall formulate and supervise the execution of an intellectual
property protection strategy with regard to all matters in connection with the
Research Collaboration. In any instance in which GTC informs SP in writing that
it objects to the filing of any patent application by SP, the filing of such
application shall be subject to the prior written approval of
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<PAGE> 21
the Joint Patent Committee. The policies and procedures set forth in Section
4.6.6 shall apply to the Joint Patent Committee and references to the Joint
Research Committee made therein shall be deemed to refer to the Joint Patent
Committee for purposes of this Section 4.7.
5. DEVELOPMENT AND MARKETING DUE DILIGENCE
5.1 DILIGENT DISCOVERY EFFORTS. SP agrees, at its own expense, to use
diligent efforts to use the GTC Databases, GTC Technology and GTC Software to
discover Lead Compounds. Such diligent efforts shall be comparable to those
efforts used by SP for other SP discovery programs with comparable commercial
potential, value and development status. Without limiting the foregoing, SP will
at a minimum *
*
*
*
*
*
*
*
*
*
*
5.2 DILIGENT DEVELOPMENT EFFORTS. SP agrees, at its own expense, to
use diligent efforts to develop and commercialize, either directly or through
its Affiliates or permitted sublicensees, the Lead Compounds and Development
Candidates selected by it pursuant to Section 5.1. Such diligent efforts shall
be comparable to those efforts used by SP for other Lead Compounds and
Development Candidates (each as defined in Article 1 hereof except for
references therein to the Research Collaboration or Products) with comparable
commercial potential, value and development status and shall include the active
conduct of in vivo toxicology trials necessary to obtain approval for use of
such compound in human clinical trials or the active conduct of human clinical
trials for at least * under either this Agreement or the
PathoGenome(TM) Database Agreement. The selection of Lead Compounds and
Development Compounds for development and commercialization shall be in the sole
discretion of SP. SP, its Affiliates and permitted sublicensees may, but shall
have no obligation under this Agreement to, develop and commercialize more than
* at any one time during the term of this Agreement. If SP
discontinues development of * * , SP will resume
the diligent screening or development efforts described in Section 5.1 or in
this Section 5.2, as the case may be, by selecting * ,
as the case may be, and maintaining at least * under
active pre-clinical or clinical
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development. Such diligent development efforts will continue until approvals for
commercial sale and pricing and/or pricing reimbursement, as necessary, have
been obtained by either of SP or SC for at least * in each
Major Market Country where obtaining such approvals is commercially reasonable.
5.3 DILIGENT MARKETING AND DISTRIBUTION EFFORTS. SP shall have the
exclusive worldwide right to market and distribute the Products. Upon receipt of
approvals for commercial sale and pricing or pricing reimbursement, if
applicable, of a Product in any country, SP agrees, at its own expense, to use
diligent efforts to launch, promote, market and sell such Product in each Major
Market Country other than the United States, its territories and possessions, as
well as in other countries. Such efforts shall be comparable to those efforts
used by SP to promote its own products of similar commercial potential, value
and development status in a Major Market Country other than the United States,
its territories and possessions or a comparable country, as the case may be.
Both parties recognize that extenuating circumstances may arise that warrant a
delay in launching a Product in a particular country, including but not limited
to unfavorable pricing, pricing reimbursement or labelling of the Product in
such country. The parties agree that such extenuating circumstances shall be
considered in connection with any determination concerning whether SP has
fulfilled its obligation to use diligent efforts to launch, promote, market and
sell such Product in such country.
5.4 REPORTS. After the expiration or termination of the Research
Collaboration, SP shall provide GTC with reasonably detailed reports which shall
describe SP's progress with respect to its development, commercialization and
marketing efforts under this Agreement. Such reports shall be furnished
semi-annually for a period of five (5) years after the expiration or termination
of the Research Collaboration and, thereafter, annually until the termination or
expiration of this Agreement.
6. PAYMENTS
6.1 LICENSE FEE. *
*
6.2 MILESTONE PAYMENTS. SP shall pay to GTC the milestone payments
described below as and when the corresponding milestones are achieved:
6.2.1 * PAYMENTS. SP shall pay the following
milestone payments to GTC within ten (10) business days of receipt by SP of a
written confirmation from the Joint Research Committee that the corresponding
milestone has been achieved. The Joint Research Committee shall deliver its
written confirmation to SP or deliver to GTC a written statement describing in
detail any respect in which the milestone has not been achieved within thirty
(30)
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days following receipt by the Joint Research Committee of a written statement
from GTC claiming the accomplishment of the corresponding milestone supported by
adequate documents providing reasonable detail concerning the accomplishment of
such milestone. The milestone payments set forth under this Section 6.2.1 shall
be payable * during the term of this Agreement.
=============================================================
Milestone Payment
=============================================================
* *
-------------------------------------------------------------
* *
-------------------------------------------------------------
* *
=============================================================
6.2.2 * PAYMENTS. SP will immediately notify GTC
upon the accomplishment of the following milestones and, within thirty (30) days
following the accomplishment of each milestone, SP shall make the corresponding
milestone payment. Each milestone payment set forth in this Section 6.2.2 shall
be made * * pursuant to this Agreement or, alternatively,
with respect to the * and *
under this Agreement, provided that, the * of any such payments
shall not be owed to GTC until a *
*
* Under no circumstances will SP be
required to make any milestone payments set forth below more than * .
=============================================================
Milestone Payment
=============================================================
* *
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-------------------------------------------------------------
* *
-------------------------------------------------------------
* *
-------------------------------------------------------------
* *
-------------------------------------------------------------
* *
-------------------------------------------------------------
* *
-------------------------------------------------------------
* *
=============================================================
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6.3 RESEARCH FUNDING.
6.3.1 FUNDING DURING THE INITIAL RESEARCH COLLABORATION TERM.
During the Initial Research Collaboration Term, SP will pay GTC *
*
*
*
*
*
*
*
*
*
*
*
* Such payments shall be made in accordance with the
procedure set forth in Section 6.3.2.
6.3.2 FUNDING AFTER THE INITIAL RESEARCH COLLABORATION TERM.
After the completion of the Initial Research Collaboration Term, SP will
reimburse GTC *
*
*
*
*
*
*
*
*
*
*
*
* Debit balances shall reduce the
estimated payment to be made by SP for work under the Research Collaboration in
the next quarter and credit balances shall be paid by SP to GTC within fifteen
(15) business days after the receipt of GTC's written report.
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6.3.3 ADDITIONAL EXPENDITURES. In the event that the scope,
scale or direction of the Research Collaboration as described in the draft
Overall Research Plan attached hereto as EXHIBIT A changes after the Effective
Date, any additional expenditures required to be made by GTC to support the
Research Collaboration shall be funded by SP; provided, that all changes in the
scope, scale or direction of the Research Collaboration which may trigger
additional funding by SP shall be approved in advance by the Joint Research
Committee. If such additional payments relate to items of capital equipment or
Third Party software which are reasonably anticipated to be used by GTC to a
greater extent outside the Research Collaboration than within the Research
Collaboration, then GTC and SP shall negotiate in good faith regarding the
allocation of such costs between GTC and SP; provided, however, that each of SP
and GTC cannot be required to contribute to such costs without its prior written
consent. Any payments which become due under this Subsection shall be made
quarterly in advance.
6.4 ROYALTIES PAYABLE BY SP AND ITS AFFILIATES AND SUBLICENSEES.
6.4.1 GENERAL. GTC and SP agree that the payment of royalties
and milestones by SP and its Affiliates and sublicensees under the various
agreements between the parties based on sales of therapeutic pharmaceuticals
against infectious fungi shall be as set forth in EXHIBIT D. All references in
this Agreement to the payment of royalties hereunder shall apply only to Net
Sales of Products which correspond to the appropriate section of EXHIBIT D.
Following the First Commercial Sale of any Product, SP will pay, on a *
basis, a royalty in the amounts set forth below on Net Sales of the Products
during the previous quarter.
6.4.2 ROYALTIES ON NET SALES OF THE PRODUCTS. In consideration
of the licenses granted to SP, SP shall pay to GTC a royalty in the amount of
*
*
*
*
*
*
*
*
*
*
*
In the event that a Product comprises a Lead Compound or derivatives or
analogues thereof initially discovered to have activity against a GTC-identified
target during the first *
*
*
*
*
*
*
*
*
*
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The parties acknowledge and agree that, for purposes of this
Agreement, "worldwide cumulative Net Sales" shall be the aggregate of (i)
cumulative Net Sales of a Product by SP, its affiliates or sublicensees under
this Agreement and (ii) cumulative Net Sales of a Product by SC, its affiliates
or sublicensees under the SC Agreement.
6.4.3 SUBLICENSES. SP shall (i) with respect to any sublicenses
by SP which include a grant of rights to use the GTC Database and Product Patent
Rights for research and development and/or for commercialization activities
other than marketing promotion or distribution of products, pay to GTC
* * received by SP from any Third Party to which a
sublicense is granted hereunder in connection therewith which is not based upon
Net Sales of the Products by such Third Party in such country and (ii)(A) with
respect to any sublicense hereunder to any Third Party to make, have made, use,
or sell Products in any country, pay to GTC royalties on Net Sales of the
Products sold by such Third Party in such country or (B) provide in such
sublicense that such sublicensee shall pay to GTC royalties on Net Sales of the
Products sold by such sublicensee in such country, in either case at the royalty
rate set forth in Section 6.4 that would be applicable had such sales been made
by SP, and provided that in either case, SP shall remain liable for the timely
payment of all such royalties. Notwithstanding the foregoing, SP's obligations
under Section 6.4.3(i) shall not include any consideration received by SP in
return for rights to any other technologies and/or services, and/or products
which are not Products, granted by SP under such sublicenses, to the extent that
such consideration is reasonably allocable to such rights.
6.4.4 * THIRD PARTY ROYALTIES. If SP is required
to pay royalties and/or lump sum license fees to Third Parties for rights under
patents necessary to make or sell the Products, *
*
*
*
*
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6.4.5 ROYALTY REPORTS, EXCHANGE RATES. During the term of this
Agreement following the First Commercial Sale of any Product, SP shall within
sixty (60) days after each calendar quarter furnish to GTC a written quarterly
report showing: *
*
*
*
*
*
*
*
*
*
*
*
* If no royalty or payment is due for any royalty period
hereunder, SP shall so report. SP shall keep complete and accurate records in
sufficient detail to properly reflect at * and to enable the
royalties payable hereunder to be determined.
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6.4.6 AUDITS. Upon the written request of GTC, SP shall permit
an independent certified public accountant selected by GTC and acceptable to SP,
which acceptance shall not be unreasonably withheld, to have access during
normal business hours to such records of SP as may be reasonably necessary to
verify the accuracy of the royalty reports described herein, in respect of any
fiscal year ending not more than twenty-four (24) months prior to the date of
such request. GTC and SP shall use commercially reasonable efforts to schedule
all such verifications within forty-five (45) days after GTC makes its written
request. All such verifications shall be conducted at GTC's expense and not more
than once in each calendar year. Subject to SP's rights under Section 13.6, in
the event GTC's independent certified public accountant concludes that
additional royalties were owed to GTC during such period, the additional royalty
shall be paid by SP within thirty (30) days of the date GTC delivers to SP such
independent certified public accountant's written report so concluding. In the
event GTC's independent certified public accountant concludes that there was an
overpayment of royalties to GTC during such period, the overpayment less the
reasonable fees and expenses charged by such representative shall be repaid by
GTC within thirty (30) days of the date GTC received such independent certified
public accountant's written report so concluding. The fees charged by such
independent certified public accountant shall be paid by GTC unless the audit
discloses an underpayment of the royalties payable by SP for the audited period
of more than * in which case SP shall pay the reasonable fees and
expenses charged by such representative. SP shall include in each Third Party
sublicense granted by it pursuant to this Agreement a provision requiring the
sublicensee to make reports to SP, to keep and maintain records of sales made
pursuant to such sublicense and to grant access to such records by GTC's
independent certified public accountant to the same extent required of SP under
this Agreement. GTC agrees that all information subject to review under this
Section 6.4.6 or under any sublicense agreement is confidential and that GTC
shall cause its independent certified public accountant to enter into a
confidentiality agreement with SP obligating such accountant to retain all such
information in confidence. GTC's independent certified public accountant shall
only report to GTC as to the computation of the royalties and other payments due
to GTC under this Agreement and shall not disclose to GTC any other information
of SP or its sublicensees.
6.4.7 ROYALTY PAYMENT TERMS. Royalties shown to have accrued by
each royalty report provided for under this Agreement shall be due sixty (60)
days after the end of each calendar quarter. Payment of royalties in whole or in
part may be made in advance of such due date. Royalties determined to be owing
with respect to any prior quarter shall be added, together with interest thereon
accruing under this Agreement from the date of the report for the quarter for
which such amounts are owing, to the next quarterly payment hereunder.
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6.5 WITHHOLDING TAXES. SP shall deduct any withholding taxes only
from royalty payments agreed upon under this Agreement and pay them to the
proper tax authorities required by applicable laws. SP shall not deduct any
other withholding or any other governmental charges from the payments agreed
upon under this Agreement, including but not limited to any such taxes or
charges incurred as a result of an assignment or sublicense by SP to any
Affiliate or any Third Party, except as noted above. SP shall maintain official
receipts of payment of any withholding taxes and forward these receipts to GTC
within sixty (60) days. The parties will exercise diligent efforts to ensure
that any withholding taxes imposed are reduced as far as possible under the
provisions of any treaties applicable to any payment made hereunder.
6.6 BLOCKED CURRENCY. If transfer of amounts payable hereunder to
United States dollars is subject to administrative authorization, SP shall
promptly file the transfer application with the competent authorities supported
by all requisite documentation, and use its reasonable efforts to obtain such
authorization and effect the remittance within the applicable period set forth
under this Article 6; provided, however, that nothing in this Section 6.6 shall
relieve SP from its obligation to pay any amounts payable hereunder within the
applicable period set forth under this Article 6.
6.7 ADDITIONAL PAYMENT OBLIGATIONS. The parties acknowledge that SP's
payment obligations as set forth in Article 6 of this Agreement are in addition
to the payment obligations of SC set forth in Article 6 of the SC Agreement.
6.8 INTEREST ON LATE PAYMENTS. Any payments by SP to GTC that are not
paid on or before thirty (30) days after the date such payments are due under
this Agreement shall bear interest, to the extent permitted by applicable law,
at one and one half percent (1.5%) per month, calculated on the total number of
days payment is delinquent; provided, however, that interest shall not accrue
pursuant to this Section 6.8 on any amounts payable under this Agreement with
respect to which payment is disputed in good faith; provided further that
interest shall accrue pursuant to this Section 6.8 once such dispute has been
resolved if payment is not made promptly thereafter.
6.9 MANNER OF PAYMENT. Payments to be made by SP to GTC under this
Agreement shall be payable in United States dollars and shall be paid by bank
wire transfer in immediately available funds to such bank account in the
Commonwealth of Massachusetts as is designated in writing by GTC from time to
time.
7. INTELLECTUAL PROPERTY
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<PAGE> 31
7.1 OWNERSHIP OF INTELLECTUAL PROPERTY. Subject to the rights and
licenses granted under this Agreement (i) GTC shall retain ownership of the GTC
Databases, the GTC Technology and the GTC Software and (ii) SP shall retain
ownership of the SP Assay Technology, Product Patent Rights and Gene Patent
Rights.
7.2 FILING, PROSECUTION AND MAINTENANCE OF PRODUCT PATENT RIGHTS AND
GENE PATENT RIGHTS.
7.2.1 PROSECUTION AND MAINTENANCE OF PRODUCT PATENT RIGHTS AND
GENE PATENT RIGHTS. SP shall be responsible for the filing, prosecution
(including oppositions) and maintenance of the Product Patent Rights and Gene
Patent Rights at its expense in its own name. SP shall consult with GTC and keep
GTC fully informed of important issues relating to the preparation, filing,
prosecution and maintenance of such patent applications and the patents related
thereto, including SP's patent strategy with respect to both existing and future
patent applications, patents and patent extensions, and shall furnish to GTC
copies of documents relevant to such preparation or filing (such copies of
documents with respect to initial patent filings to be furnished to GTC
sufficiently prior to filing such document or making any payment due thereunder
to allow for review and comment by GTC, and SP shall seriously consider all GTC
comments on such initial patent filings) and, upon GTC's request, copies of
documents relevant to such prosecution or maintenance; and provided, further,
that in any instance in which GTC informs SP in writing that it objects to the
filing of any patent application by SP, the filing of such application shall be
subject to the prior written approval of the Joint Patent Committee pursuant to
Section 4.7 hereof. If SP elects not to continue to seek or maintain patent
protection on any patent or patent application included in the Product Patent
Rights or Gene Patent Rights in any country, GTC shall have the right, at its
option and expense, with the reasonable assistance of SP to file, prosecute
(including oppositions) and maintain such patent applications and patents;
provided, however, that the rights of the parties with respect to any such
Product Patent Rights or Gene Patent Rights shall in all other respects be as
described in this Agreement. SP will advise GTC of all decisions taken with
respect to any such election in a timely manner in order to allow GTC to protect
its rights under this Section 7.2.1.
7.2.2 ABANDONMENT; FAILURE TO PAY. SP agrees that it will not
abandon the prosecution of any patent applications included within the Product
Patent Rights or Gene Patent Rights nor shall it fail to make any payment or
fail to take any other action necessary to maintain a patent under the Product
Patent Rights or Gene Patent Rights unless it has notified GTC in sufficient
time for GTC to assume such prosecution or make such payment.
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<PAGE> 32
7.2.3 COOPERATION. Each party shall make available to the other
party (or to the other party's authorized attorneys, agents or representatives),
its employees, agents or consultants to the extent reasonably necessary or
appropriate to enable the appropriate party to file, prosecute and maintain
patent applications and resulting patents as set forth in this Section 7.2 for
periods of time reasonably sufficient for such party to obtain the assistance it
needs from such personnel. Where appropriate, each party shall sign or cause to
have signed all documents relating to said patent applications or patents at no
charge to the other party.
7.3 INFRINGEMENT BY OTHERS; PROSECUTION BY SP. GTC and SP shall each
promptly notify the other in writing of any alleged or threatened infringement
of patents or patent applications included in the Product Patent Rights or Gene
Patent Rights of which they become aware, and the parties shall consult
concerning the action to be taken. SP shall have the right, but not the
obligation, to prosecute at its own expense any such infringement. Any recovery
or damages derived from such action shall be used (i) first to reimburse SP for
all legal expenses relating to the suit and (ii) second to pay GTC the royalty
it would have been entitled to receive had the sale of such infringing products
been sales of Products licensed by SP hereunder. * *
7.4 INFRINGEMENT BY OTHERS; PROSECUTION BY GTC. If, within six (6)
months after SP first becomes aware of any infringement of the Product Patent
Rights or Gene Patent Rights, SP fails to cause such infringement to terminate
or to bring a suit or action to compel termination, GTC shall have the right,
but not the obligation, to bring such suit or action to compel termination at
the sole expense of GTC. In such event, GTC shall have the right, if SP is a
legally indispensable party, to bring such suit or action in the name of SP. Any
recovery or damages in such suit shall be retained by GTC.
SP shall have the right, prior to the commencement of the trial of any
suit or action brought by GTC, to join any such suit or action and, in such
event, shall pay one-half of the entire cost of such suit or action. Provided
that SP has joined in the action and shared the costs thereof as stated in the
preceding sentence, no settlement, consent judgment or other voluntary final
disposition of the suit may be entered into without the consent of SP, which
consent shall not unreasonably be withheld. Any recovery or damages derived from
such action shall be used (i) first to reimburse GTC for all legal expenses
relating to the suit and (ii) second to pay GTC the royalty it would have been
entitled to receive *
*
*
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7.5 COOPERATION IN INFRINGEMENT ACTIONS. In any infringement suit
which either party may institute to enforce the Product Patent Rights or Gene
Patent Rights pursuant to this Agreement, the other party hereto shall, at the
request of the party initiating such suit, cooperate in all respects and, to the
extent possible, have its employees testify when requested and make available
relevant records, papers, information, samples and the like. GTC's cooperation
in any suit initiated by SP shall be at SP's expense. SP's cooperation in any
suit initiated by GTC shall be at GTC's expense.
7.6 TRADEMARKS. SP shall be free to use and to register in any
trademark office in the world any trademark for use with Products it desires in
its sole discretion. SP shall own all right, title and interest in and to any
such trademark in its own name or that of its designated Affiliate during and
after the term of this Agreement.
8. CONFIDENTIALITY
8.1 NONDISCLOSURE OBLIGATIONS.
8.1.1 GENERAL. Except as otherwise provided in this Article 8,
during the term of this Agreement and for a period of ten (10) years thereafter,
the parties shall maintain in confidence and use only for purposes specifically
authorized under this Agreement (i) GTC Databases, (ii) the SP Assay Technology,
(iii) any other information and data received from the other party resulting
from or related to the Research Collaboration and the Products and (iv) all
information and data not described in clauses (i), (ii) or (iii) but supplied by
the other party under this Agreement marked "Confidential." For purposes of this
Article 8, information and data described in clauses (i), (ii), (iii) or (iv)
shall be referred to as "Information."
8.1.2 LIMITATIONS. To the extent it is reasonably necessary or
appropriate to fulfill its obligations or exercise its rights under this
Agreement: (i) a party may disclose Information it is otherwise obligated under
this Section 8.1 not to disclose to its Affiliates, sublicensees, consultants,
outside contractors and clinical investigators, on a need-to-know basis and on
condition that such entities or persons agree to non-use obligations essentially
the same as those set forth herein and to keep the Information confidential for
the same time periods and to the same extent as such party is required to keep
the Information confidential; and (ii) a party or its sublicensees may disclose
such Information to government or other regulatory authorities to the extent
that such disclosure is reasonably necessary to obtain patents or authorizations
to conduct clinical trials of, and to commercially market, Products pursuant to
this Agreement. The obligation not to disclose Information shall not apply to
any part of such Information that: (i) is or becomes part of the public domain
other than by unauthorized acts of the party obligated not to disclose such
Information or its Affiliates or sublicensees; (ii) can be shown by written
documents to have been disclosed to the receiving party or its Affiliates or
sublicensees by a
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<PAGE> 34
Third Party, provided such Information was not obtained by such Third Party
directly or indirectly from the other party to this Agreement pursuant to a
confidentiality agreement; (iii) prior to disclosure under this Agreement, was
already in the possession of the receiving party or its Affiliates or
sublicensees, provided such Information was not obtained directly or indirectly
from the other party to this Agreement pursuant to a confidentiality agreement;
(iv) can be shown by written documents to have been independently developed by
the receiving party or its Affiliates without breach of any of the provisions of
this Agreement; or (v) is disclosed by the receiving party pursuant to
interrogatories, requests for information or documents, subpoena, civil
investigative demand issued by a court or governmental agency or as otherwise
required by law, provided, however, that the receiving party notifies the other
party immediately upon receipt thereof, giving such other party sufficient
advance notice to permit it to seek a protective order or other similar order
with respect to such Information and provided, further, that the disclosing
party furnishes only that portion of the Information which it is advised by
counsel is legally required whether or not a protective order or other similar
order is obtained by the other party.
8.2 SAMPLES. Samples of genes, other biological targets, antigens or
compounds identified, sequenced, synthesized, purified or developed in the
course of the Research Collaboration shall not be supplied or sent by either
party to any Third Party, other than to regulatory agencies or for use in
clinical trials, unless such release is approved by a member of the Joint
Research Committee from the other party and protected by an appropriate
materials transfer agreement substantially similar to the form of Material
Transfer Agreement attached hereto as EXHIBIT B. Samples of materials other than
those described above provided by one party (the "supplying party") to the other
party (the "receiving party") in the course of the Research Collaboration shall
not be supplied or sent by the receiving party to any Third Party, other than to
regulatory agencies or for use in clinical trials, without the written consent
of the supplying party.
8.3 INJUNCTIVE RELIEF. The parties hereto understand and agree that
remedies at law may be inadequate to protect against any breach of any of the
provisions of this Article 8 by either party or their employees, agents,
officers or directors or any other person acting in concert with it or on its
behalf. Accordingly, each party shall be entitled to the granting of injunctive
relief by a court of competent jurisdiction against any action that constitutes
any such breach of this Article 8.
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9. REPRESENTATIONS AND WARRANTIES
9.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF GTC. GTC represents
and warrants to and covenants with SP that:
9.1.1 GTC is a corporation duly organized, validly existing and
in corporate good standing under the laws of Massachusetts;
9.1.2 GTC has the legal right, authority and power to enter into
this Agreement, and to extend the rights and licenses granted to SP in this
Agreement;
9.1.3 GTC has taken all necessary action to authorize the
execution, delivery and performance of this Agreement;
9.1.4 upon the execution and delivery of this Agreement, this
Agreement shall constitute a valid and binding obligation of GTC enforceable in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law);
9.1.5 the performance of its obligations under this Agreement
will not conflict with its charter documents or result in a breach of any
agreements, contracts or other arrangements to which it is a party;
9.1.6 to the best of GTC's knowledge but without independent
investigation, the performance of GTC's obligations under this Agreement,
including without limitation the delivery of the GTC Databases, will not
infringe any Valid Claims of any issued patent;
9.1.7 GTC will not during the term of this Agreement enter into
any agreements, contracts or other arrangements that would be inconsistent with
its obligations under this Agreement; and
9.1.8 GTC will not during the term of this Agreement knowingly
and voluntarily take any actions which are reasonably likely to diminish its
rights under the GTC Software, the GTC Technology or the GTC Databases,
including without limitation by not committing or permitting any acts or
omissions which would cause the breach of any agreements between GTC and Third
Parties which provide for intellectual property rights applicable to the
development, manufacture, use or sale of the Products. GTC is currently in
compliance in all material respect with any such agreements with Third Parties
and agrees to promptly provide SP with notice of any alleged breach of such
agreements.
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9.2 REPRESENTATIONS, WARRANTIES AND COVENANTS OF SP. SP represents
and warrants to and covenants with GTC that:
9.2.1 SP is a corporation duly organized, validly existing and
in corporate good standing under the laws of Switzerland;
9.2.2 SP has the legal right, authority and power to enter into
this Agreement, and to extend the rights and licenses granted to GTC in this
Agreement;
9.2.3 subject only to receipt of the requisite approval of the
Board of Directors of Schering-Plough Corporation (which receipt shall be
evidenced by the execution by SP of the letter described in Section 2.1), SP has
taken all necessary action to authorize the execution, delivery and performance
of this Agreement;
9.2.4 upon the execution and delivery of this Agreement and
approval of this Agreement by the Board of Directors of Schering-Plough
Corporation, this Agreement shall constitute a valid and binding obligation of
SP enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law);
9.2.5 the performance of its obligations under this Agreement
will not conflict with SP's charter documents or result in a breach of any
agreements, contracts or other arrangements to which it is a party; and
9.2.6 SP will not after the Effective Date enter into any
agreements, contracts or other arrangements that would be inconsistent with its
obligations under this Agreement.
9.3 VALIDITY AND SCOPE. Nothing in this Agreement shall be construed
as a warranty or representation by either party as to the validity or scope of
any GTC Technology, GTC Databases, GTC Software, Product Patent Rights or Gene
Patent Rights.
9.4 WARRANTY DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
THIS AGREEMENT, NEITHER PARTY MAKES ANY WARRANTY WITH RESPECT TO ANY GTC
TECHNOLOGY, GTC DATABASES, GTC SOFTWARE, PRODUCT PATENT RIGHTS, GENE PATENT
RIGHTS, GOODS, SERVICES OR OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY
DISCLAIMS WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NONINFRINGEMENT WITH RESPECT TO ANY AND ALL OF THE FOREGOING.
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<PAGE> 37
9.5 LIMITED LIABILITY. NOTWITHSTANDING ANYTHING ELSE IN THIS
AGREEMENT OR OTHERWISE TO THE CONTRARY, NEITHER GTC NOR SP WILL BE LIABLE WITH
RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE,
STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR (I) ANY PUNITIVE,
EXEMPLARY, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS OR (II) COST OF
PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES.
10. INDEMNITY
10.1 SP INDEMNITY OBLIGATIONS. SP agrees to defend, indemnify and
hold GTC, its Affiliates and their respective employees and agents harmless from
all claims, losses, damages or expenses arising as a result of: (a) actual or
asserted violations of any applicable law or regulation by SP, its Affiliates or
sublicensees by virtue of which the Products manufactured, distributed or sold
hereunder shall be alleged or determined to be adulterated, misbranded,
mislabeled or otherwise not in compliance with any applicable law or regulation;
(b) claims for bodily injury, death or property damage attributable to the
manufacture, distribution, sale or use of the Products by SP, its Affiliates or
sublicensees; or (c) a Product recall ordered by a governmental agency or
required by a confirmed Product failure as reasonably determined by the parties
hereto.
10.2 LIMITATION ON SP INDEMNITY OBLIGATIONS. GTC, its Affiliates and
their respective employees and agents shall not be entitled to the indemnities
set forth in Section 10.1 where the claim, loss, damage or expense for which
indemnification is sought was caused by a grossly negligent act or intentional
act of misconduct or omission by GTC, its directors, officers, employees or
authorized agents.
10.3 PROCEDURE. If GTC or any of its Affiliates or their respective
employees or agents (the "Indemnitee") intends to claim indemnification under
this Article 10, the Indemnitee shall promptly notify the other party (the
"Indemnitor") of any loss, claim, damage, liability or action in respect of
which the Indemnitee intends to claim such indemnification, and the Indemnitor
shall assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an Indemnitee shall have the right to retain
its own counsel, with the fees and expenses to be paid by the Indemnitor, if
representation of such Indemnitee by the counsel retained by the Indemnitor
would be inappropriate due to actual or potential differing interests between
such Indemnitee and any other party represented by such counsel in such
proceedings. The indemnity agreement in this Article 10 shall not apply to
amounts paid in settlement of any loss, claim, damage, liability or action if
such settlement is effected without the consent of the Indemnitor, which consent
shall not be withheld unreasonably. The failure to deliver notice to the
Indemnitor within a reasonable time after the commencement of any such action,
if prejudicial
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<PAGE> 38
to its ability to defend such action, shall relieve such Indemnitor of any
liability to the Indemnitee under this Article 10, but the omission so to
deliver notice to the Indemnitor will not relieve it of any liability that it
may have to any Indemnitee otherwise than under this Article 10. The Indemnitee
under this Article 10, its employees and agents, shall cooperate fully with the
Indemnitor and its legal representatives in the investigation of any action,
claim or liability covered by this indemnification. The Indemnitor shall
additionally be liable to pay the reasonable legal costs and attorneys' fees
incurred by the Indemnitee in establishing its claim for indemnity.
10.4 INSURANCE. SP shall maintain appropriate product liability
insurance with respect to development, manufacture and sales of the Products by
SP in such amount as SP customarily maintains with respect to sales of its other
products. SP shall maintain such insurance for so long as it continues to
manufacture or sell the Products, and thereafter for so long as SP maintains
insurance for itself covering such manufacture or sales.
11. EXPIRATION AND TERMINATION
11.1 EXPIRATION.
11.1.1 TERM OF RESEARCH COLLABORATION. Unless this Agreement is
sooner terminated in accordance with the provisions of this Article 11, the term
of the Research Collaboration shall expire * ; provided,
however, that SP may, in its discretion, elect to extend the Research
Collaboration for an additional * * SP
shall deliver written notice to GTC at least * prior to
the expiration of the Initial Research Collaboration Term definitively stating
whether SP intends to exercise its option to extend the term of the Research
Collaboration. In any event, GTC may, in its discretion, engage in an orderly
wind-down of the Research Collaboration, including the reassignment of the
scientists devoted thereto, during the last * thereof.
11.1.2 TERM OF AGREEMENT. Unless this Agreement is sooner
terminated in accordance with the provisions of this Article 11, this Agreement
shall expire and the licenses granted by GTC to SP hereunder shall become fully
paid, on a Product by Product and country by country basis, *
of the relevant Product in the relevant country or, if later, upon the last to
expire of any Valid Claim included in the Product Patent Rights with respect to
such Product in such country. Notwithstanding the foregoing, this Agreement
shall in any event terminate on the thirty-fifth (35th) anniversary of the date
hereof.
11.2 EVENTS OF DEFAULT.
11.2.1 DEFAULT BY EITHER PARTY. An Event of Default shall have
occurred upon (i) the occurrence of a material breach (other than a material
breach described in clause (ii) hereof
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* Confidential Treatment Requested
<PAGE> 39
or in Section 11.2.2 below) if the breaching party fails to remedy such breach
within ninety (90) days after written notice thereof by the non-breaching party,
or (ii) the bankruptcy, insolvency, dissolution or winding up of a party.
11.2.2 DEFAULT BY SP. An Event of Default shall have occurred
if:
(i) SP fails to make payments due hereunder, sixty (60) days
after GTC delivers written notice thereof to SP specifying such failure
and its claim of right to terminate, unless SP makes such payments plus
interest within such sixty (60) day period;
(ii) SP fails to achieve the milestones set forth in
Section 5.1 hereof, or fails to diligently develop and commercialize
the Lead Compounds and Development Candidates selected by it as
required by Section 5.2 hereof, and does not cure such breach within
ninety (90) days after GTC delivers written notice thereof to SP
specifying such failure; or
(iii) SP fails to market each approved Product in the Major
Market Countries as required by Section 5.3 hereof and does not cure
such breach within ninety (90) days after GTC delivers written notice
thereof to SP specifying such failure.
11.3 EFFECT OF AN EVENT OF DEFAULT.
11.3.1 REMEDIES AVAILABLE TO GTC.
(a) UPON BREACH OF A MATERIAL TERM. In the event that an Event
of Default described in Section 11.2.1, Section 11.2.2(i) or Section 11.2.2(ii)
occurs relating to SP and SP fails to cure such default during any applicable
cure period, GTC shall have the right, at its option exercisable in its sole
discretion, in addition to any other rights or remedies available to it at law
or in equity, to either (i) to terminate this Agreement upon notice thereof to
SP, in which case (A) the licenses granted to SP pursuant to Article 3 shall
terminate, (B) any and all Information and materials provided by GTC pursuant to
this Agreement shall be promptly returned by SP to GTC, (C) SP shall promptly
deliver to GTC all preclinical and clinical data relating to Products owned or
controlled by SP and necessary or useful to the development or commercialization
of such Products, (D) if SP has obtained any regulatory approvals in any country
for the Products, then SP shall, to the extent legally permissible, take all
additional action reasonably necessary to assign all of its right, title and
interest in and transfer possession and control to GTC of such regulatory
approvals, (E) if SP has filed Product Patent Rights in relating to any Product,
then SP shall take all action reasonably necessary to exclusively license all of
its right, title and interest in, and transfer possession and control to GTC of,
such Product Patent Rights, (F) SP will grant GTC licenses on reasonable and
customary terms to be negotiated
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<PAGE> 40
in good faith by the parties for any technology or know-how developed by SP or
its Third Party manufacturer, if any, relating to the manufacture of the
Products and (G) if SP has marketed the Products in any country, SP will assign
to GTC all of its right, title and interest in any trademark under which SP
shall have marketed the Products in such country together with the goodwill
associated therewith or (ii) (Y) terminate only Articles 2, 4, 5 and 7,
including the Research Collaboration (if not earlier expired pursuant to Section
11.1 hereof), and Sections 6.1 and 6.3 hereof and (Z) convert the licenses
granted by GTC to SP pursuant to Article 3 hereof into non-exclusive licenses.
(b) UPON BREACH OF MARKETING DUE DILIGENCE OBLIGATIONS. In the
event that an Event of Default described in Section 11.2.2(iii) occurs relating
SP's obligation to market each approved Product in each of the Major Market
Countries as required by Section 5.3, then GTC shall have the right, at its
option exercisable in its sole discretion, in addition to any other rights or
remedies available to it at law or in equity, to terminate the licenses granted
to SP pursuant to Article 3 as to such Product in the Major Market Country with
respect to which the Event of Default occurred, in which case (i) the licenses
granted to SP pursuant to Article 3 shall terminate as to such Product (A) in
the Major Market Country with respect to which the Event of Default occurred and
(B) in all other countries in which either SP or SC is not at the time of such
termination using diligent efforts to market such Product (collectively, the
"Terminated Countries"), (ii) if SP or SC has filed Product Patent Rights in any
Terminated Country with respect to such Product, then SP shall, to the extent
legally permissible, take all action reasonably necessary to exclusively license
all of its right, title and interest in, and transfer possession and control to
GTC of, such Product Patent Rights (or an undivided interest therein if such
Product Patent Rights also cover Products as to which SP retains its license
rights under this Agreement), (iii) if SP has obtained any regulatory approvals
for such Products in any Terminated Country, then SP shall, to the extent
legally permissible, take all additional action reasonably necessary to assign
all of its right, title and interest in, and transfer possession and control to
GTC of, such regulatory approvals and (iv) SP will assign to GTC all of its
right, title and interest in any trademark under which SP shall have registered
for use with such Product in such Terminated Country together with the goodwill
associated therewith. In the event that SP and SC fails to market the Products
in all Major Market Countries pursuant to Section 5.3 hereof and Section 5.3 of
the SC Agreement, then the provisions of Section 11.3.1(a) shall apply.
(c) * In the event that GTC exercises its rights
under Section 11.3.1 and utilizes the preclinical and clinical data, regulatory
approvals, Product Patent Rights, manufacturing technology or know-how or
trademarks obtained by it to develop and commercialize Products, either directly
or through one or more corporate partners, then *
* , and upon the other terms and conditions,
* * ; provided, however *
*
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* Confidential Treatment Requested
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*
*
11.3.2 REMEDIES AVAILABLE TO SP. In the event that GTC
materially breaches its obligations pursuant to Section 11.2.1, and GTC fails to
cure such breach within the applicable cure period, then SP shall have the
right, at its option exercisable in its sole discretion, to seek any rights or
remedies available to it at law or in equity, subject to the limitations set
forth in Section 9.5 and Section 13.6 hereof.
11.4 *
*
11.5 EFFECT OF EXPIRATION OR TERMINATION OF RESEARCH COLLABORATION.
Upon the expiration or termination of the Research Collaboration, GTC's
obligation to provide updates to the GTC Databases, the GTC Technology and the
GTC Software shall terminate but all licenses to SP to continue to use the GTC
Databases, the GTC Technology and the GTC Software as they exist on the
termination of the Research Collaboration shall continue in full force and
effect for the remaining term of the Agreement.
11.6 EFFECT OF EXPIRATION OR TERMINATION OF AGREEMENT. The expiration
or termination of this Agreement shall not relieve the parties of any obligation
accruing prior to such expiration or termination.
11.6.1 SURVIVAL OF PROVISIONS UPON EXPIRATION. The provisions of
Articles 7, 8, 10 and 11 and Sections 9.4, 9.5, 13.6 and 13.11 hereof shall
survive the expiration of this Agreement.
11.6.2 SURVIVAL OF PROVISIONS UPON TERMINATION. The provisions
of Articles 7, 8, 10 and 11 and Sections 9.4, 9.5, 13.6 and 13.11 hereof shall
survive the termination of this Agreement; provided, however, that GTC shall
have no obligation to maintain the confidentiality of the GTC Databases in the
event that this Agreement is terminated due to breach by SP. The provisions of
Article 6 hereof shall survive the termination of this Agreement until such time
as the Agreement would have expired with respect to any Product in any country
pursuant to Section 11.1.2 hereof had it not been earlier terminated.
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<PAGE> 42
12. PROVISIONS FOR INSOLVENCY
12.1 GENERAL. All rights and licenses granted under or pursuant to
this Agreement by GTC to SP are, for all purposes of Section 365(n) of Title 11
of the U.S. Code ("Title 11"), licenses of rights to intellectual property as
defined in Title 11. GTC agrees during the term of this Agreement to maintain
and preserve any current copies of all such intellectual property which are in
existence and in its possession as of the commencement of a case under Title 11
by or against GTC. If a case is commenced by or against GTC under Title 11, then
GTC (in any capacity, including debtor-in-possession) and its successors and
assigns (including, without limitation, a Title 11 Trustee) shall, as SP may
elect in a written request, immediately upon such request (A) (i) perform all of
the obligations provided in this Agreement to be performed by GTC, or (ii)
provide to SP copies of all such intellectual property (including all
embodiments thereof) held by GTC and such successors and assigns as of the
commencement of a case under Title 11 by or against GTC and from time to time
thereafter, and (B) not interfere with the rights of SP as provided in this
Agreement, or any agreement supplementary hereto, to such intellectual property
(including all such embodiments thereof), including any right of SP to obtain
such intellectual property (or such embodiment) from any other entity.
12.2 REJECTION OF AGREEMENT IN TITLE 11. If a Title 11 case is
commenced by or against GTC and this Agreement is rejected as provided in Title
11 and SP elects to retain its rights hereunder as provided in Title 11, then
GTC (in any capacity, including debtor-in-possession) and its successors and
assigns (including, without limitation, a Title 11 Trustee shall provide to SP
copies of all such intellectual property (including all embodiments thereof)
held by GTC and such successors and assigns immediately upon SP's written
request therefor. Whenever GTC or any of its successors or assigns provides to
SP any of the intellectual property licensed hereunder (or any embodiment
thereof) pursuant to this Article 12, SP shall have the right to perform the
obligations of GTC hereunder with respect to such intellectual property, but
neither such provision nor such performance by SP shall release GTC from any
such obligation or liability for failing to perform it; provided, however, that
in such event SP shall not be entitled to compel specific performance by GTC
under this Agreement except to the extent of enforcing the exclusivity of the
license granted hereunder.
12.3 ADDITIONAL RIGHTS. All rights, powers, remedies, obligations and
conditions of SP provided herein are in addition to and not in substitution for
any and all other rights, powers, remedies, obligations and conditions of GTC or
SP now or hereafter existing at law or in equity (including, without limitation,
Title 11) in the event of the commencement of a Title 11 case by or against GTC.
SP, in addition to the rights, power and remedies expressly provided herein,
shall be subject to all obligations and conditions, and shall be entitled to
exercise all other such rights and powers and resort to all other such remedies
as may now or hereafter exist at law or in equity (including, without
limitation, Title 11) in such event. The parties agree that they intend
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<PAGE> 43
the foregoing rights and obligations of SP to apply to the maximum extent
permitted by law, including without limitation for purposes of Title 11, (i) the
right of access to any intellectual property (including all embodiments thereof)
of GTC, or any third party with whom GTC contracts to perform an obligation of
GTC under this Agreement, and in, the case of the third party, which is
necessary for the development, registration and manufacture of a Product, and
(ii) the right to contract directly with any third party described in clause (i)
in this sentence to complete the contracted work.
12.4 EFFECT ON SC AGREEMENT. The parties acknowledge and agree that
the occurrence of any event or series of events which gives effect to any of
SP's rights under Sections 12.1, 12.2 and/or 12.3 of this Agreement shall have
the same effect with respect to SC's rights under the corresponding provisions
of the SC Agreement.
13. MISCELLANEOUS
13.1 FORCE MAJEURE. Neither party shall be held liable or responsible
to the other party nor be deemed to have defaulted under or breached this
Agreement for failure or delay in fulfilling or performing any term of this
Agreement when such failure or delay is caused by or results from causes beyond
the reasonable control of the affected party, including but not limited to fire,
floods, embargoes, war, acts of war (whether war is declared or not),
insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority or the other party; provided, however, that the party so
affected shall use reasonable commercial efforts to avoid or remove such causes
of nonperformance, and shall continue performance hereunder with reasonable
dispatch whenever such causes are removed. Either party shall provide the other
party with prompt written notice of any delay or failure to perform that occurs
by reason of force majeure. The parties shall mutually seek a resolution of the
delay or the failure to perform as noted above.
13.2 ASSIGNMENT. This Agreement may not be assigned or otherwise
transferred by either party without the consent of the other party; provided,
however, that either GTC or SP may, without such consent, assign its rights and
obligations under this Agreement (i) to any Affiliate, all or substantially all
of the equity interest of which is owned and controlled by such party or its
direct or indirect parent corporation, or (ii) in connection with a merger,
consolidation or sale of substantially all of such party's assets to an
unrelated Third Party; provided, however, that such party's rights and
obligations under this Agreement shall be assumed by its successor in interest
in any such transaction and shall not be transferred separate from all or
substantially all of its other business assets, including those business assets
that are the subject of this Agreement. Any purported assignment in violation of
the preceding sentence shall be void. Any permitted assignee shall assume all
obligations of its assignor under this Agreement.
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<PAGE> 44
13.3 SEVERABILITY. Each party hereby agrees that it does not intend
to violate any public policy, statutory or common laws, rules, regulations,
treaty or decision of any government agency or executive body thereof of any
country or community or association of countries. Should one or more provisions
of this Agreement be or become invalid, the parties hereto shall substitute, by
mutual consent, valid provisions for such invalid provisions which valid
provisions in their economic effect are sufficiently similar to the invalid
provisions that it can be reasonably assumed that the parties would have entered
into this Agreement with such valid provisions. In case such valid provisions
cannot be agreed upon, the invalidity of one or several provisions of this
Agreement shall not affect the validity of this Agreement as a whole, unless the
invalid provisions are of such essential importance to this Agreement that it is
to be reasonably assumed that the parties would not have entered into this
Agreement without the invalid provisions.
13.4 NOTICES. Any consent, notice or report required or permitted to
be given or made under this Agreement by one of the parties hereto to the other
shall be in writing, delivered personally or by facsimile (and promptly
confirmed by telephone, personal delivery or courier) or courier, postage
prepaid (where applicable), addressed to such other party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addressor and shall be effective upon receipt by the
addressee.
If to GTC: Genome Therapeutics Corporation
100 Beaver Street
Waltham, Massachusetts 02154
Attention: Senior Vice President, Strategic
Planning/Business Development
Telephone: 1-617-398-2300
FAX: 1-617-893-8277
with a copy to: Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
Attention: Michael Lytton, Esq.
Telephone: 1-617-573-0100
FAX: 1-617-227-4420
If to SP: Schering Corporation
2000 Galloping Hill Road
Kenilworth, New Jersey 07033
Attention: Vice President, Business Development
Telephone: 1-908-298-4030
FAX: 1-908-298-5379
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<PAGE> 45
with a copy to: Schering Corporation
2000 Galloping Hill Road
Kenilworth, New Jersey 07033
Attention: Legal Director Licensing
Telephone: 1-908-298-5150
FAX: 1-908-298-2739
13.5 RELATIONSHIP TO SC AGREEMENT; CONTROLLING PROVISIONS. The
parties acknowledge that this Agreement and the SC Agreement are intended to
operate together as a single worldwide agreement governing the rights and
obligations of GTC, SC and SC. For purposes of clarity and avoidance of doubt,
the parties agree that Article 4 and Sections 5.1 and 5.2 of this Agreement
shall operate together with, and not in addition to, the corresponding
provisions of the SC Agreement. The parties further agree that SP's rights and
obligations under Article 7 of this Agreement shall be exercised and performed
by the employees and/or agents of SC having responsibility for SC's rights and
obligations under Article 7 of the SC Agreement, and that all such activities
will be performed in a coordinated manner between SP and SC.
13.6 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts,
without giving effect to the choice of laws provisions thereof.
13.7 DISPUTE RESOLUTION.
13.7.1 The parties hereby agree that they will attempt in good
faith to resolve any controversy or claim arising out of or relating to this
Agreement promptly by negotiations. If a controversy or claim should arise
hereunder, the members of the Joint Research Committee or the Joint Patent
Committee, as applicable, will confer at least once and will attempt to resolve
the matter. If any such matter arises under Section 4.6 or Section 4.7 hereof
and has not been resolved within thirty (30) days, the matter shall be referred
to the Chief Scientific Officer (or the equivalent position) of GTC and the
President of the Schering-Plough Research Institute (or the equivalent position)
of SP (the "Representatives"). If the matter has not been resolved within thirty
(30) days by the Representatives, or if the matter arises under other provisions
of this Agreement, then the matter shall be referred to the Chief Executive
Officers of GTC and SP or their respective designees. If the matter has not been
resolved within thirty (30) days of the first meeting of the Chief Executive
Officers of the parties (which period may be extended by mutual agreement)
concerning such matter, subject to rights to injunctive relief and specific
performance, and unless otherwise specifically provided for herein, any
controversy or claim arising out of or relating to this Agreement, or the breach
thereof, will be settled as set forth in Section 13.7.2.
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<PAGE> 46
13.7.2 All disputes arising in connection with this Agreement
shall be finally settled under the Commercial Arbitration Rules of the American
Arbitration Association by a single arbitrator appointed in accordance with said
Rules and the terms set forth in EXHIBIT C. Notwithstanding the above, either
party has the right to bring suit in a court of competent jurisdiction against
the other party for (i) any breach of such other party's duties of
confidentiality pursuant to Article 8 of this Agreement and (ii) any
infringement of its own proprietary rights by the other party. Judgment upon the
arbitrator's award may be entered in any court of competent jurisdiction. The
award of the arbitrator may include compensatory damages against either party,
but under no circumstances will the arbitrator be authorized to, nor shall he,
award punitive damages or multiple damages against either party. The parties
agree not to institute any litigation or proceedings against each other in
connection with this Agreement except as provided in this Section 13.7.
13.8 ENTIRE AGREEMENT. This Agreement, together with the exhibits
hereto, contains the entire understanding of the parties with respect to the
subject matter hereof. All express or implied agreements and understandings,
either oral or written, heretofore made are expressly merged in and made a part
of this Agreement. This Agreement may be amended, or any term hereof modified,
only by a written instrument duly executed by both parties hereto.
13.9 PUBLICITY. GTC and SP each agree not to disclose the existence
of, or any terms or conditions of, this Agreement, or any results arising from
the Research Collaboration, to any Third Party without consulting the other
party prior to such disclosure. Notwithstanding the foregoing, prior to
execution of this Agreement, GTC and SP shall agree upon the substance of
information that can be used as a routine reference in the usual course of
business to describe the terms of this transaction, and GTC and SP may disclose
such information, as modified by mutual agreement from time to time, without
consulting the other party.
13.10 HEADINGS. The captions to the several Articles and Sections
hereof are not a part of this Agreement, but are merely guides or labels to
assist in locating and reading the several Articles and Sections hereof.
13.11 INDEPENDENT CONTRACTORS. It is expressly agreed that GTC and SP
shall be independent contractors and that the relationship between the two
parties shall not constitute a partnership, joint venture or agency. Neither GTC
nor SP shall have the authority to make any statements, representations or
commitments of any kind, or to take any action, which shall be binding on the
other, without the prior consent of the other party to do so.
13.12 AGREEMENT NOT TO SOLICIT EMPLOYEES. During the term of this
Agreement and for a period of * following the expiration or
termination of this Agreement pursuant to Article 11, GTC and SP agree not to
seek to persuade or induce any employee of the other company to discontinue his
or her employment with that company in order to become employed
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<PAGE> 47
by or associated with any business, enterprise or effort that is associated with
its own business;
*
*
*
13.13 EXPORTS. The parties acknowledge that the export of technical
data, materials or products is subject to the exporting party receiving any
necessary export licenses and that the parties cannot be responsible for any
delays attributable to export controls which are beyond the reasonable control
of either party. GTC and SP agree not to export or re-export, directly or
indirectly, any information, technical data, the direct product of such data,
samples or equipment received or generated under this Agreement in violation of
any applicable export control laws or governmental regulations. GTC and SP agree
to obtain similar covenants from their licensees, sublicensees and contractors
with respect to the subject matter of this Section.
13.14 WAIVER. The waiver by either party hereto of any right hereunder
or the failure to perform or of a breach by the other party shall not be deemed
a waiver of any other right hereunder or of any other breach or failure by said
other party whether of a similar nature or otherwise.
13.15 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.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officer to execute and deliver this Agreement as of the date first set forth
above.
GENOME THERAPEUTICS CORPORATION
By: /s/ Christopher T. Kelly
___________________________
Title: Senior Vice President
________________________
Strategic Planning/Business Development
SCHERING-PLOUGH LTD.
By: /s/ David Poorvin, Ph.D.
___________________________
Title: Procurer
________________________
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